Monroe Federal Bancorp (MFBI) S-1IPO registration

As filed with the Securities and Exchange Commission on June 13, 2024

Registration No. 333-________

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM S-1

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933

Monroe Federal Bancorp, Inc.

(Exact Name of Registrant as Specified in Its Charter)

24 East Main Street

Tipp City, Ohio 45371

(937) 667-8461

(Address, Including Zip Code, and Telephone Number, Including Area Code, of Registrant’s Principal Executive Offices)

Lewis R. Renollet

President and Chief Executive Officer

Monroe Federal Bancorp, Inc.

24 East Main Street

Tipp City, Ohio 45371

(937) 667-8461

(Address, Including Zip Code, and Telephone Number, Including Area Code, of Agent for Service)

Copies to:

Approximate date of commencement of proposed sale to the public: As soon as practicable after this registration statement becomes effective.

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box: x

If this Form is filed to register additional shares for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering: ¨

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering: ¨

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering: ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act:

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 Securities Act: ¨

The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the registration statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.

PROSPECTUS

Monroe Federal Bancorp, Inc.

(Proposed Holding Company for Monroe Federal Savings and Loan Association)

Up to 690,000 Shares of Common Stock

(Subject to Increase to up to 793,500 Shares)

Monroe Federal Bancorp, Inc., referred to as “Monroe Federal Bancorp” throughout this prospectus, is offering shares of its common stock for sale in connection with the conversion of Monroe Federal Savings and Loan Association, referred to as “Monroe Federal” throughout this prospectus, from the mutual form of organization to the stock form of organization. There is currently no market for our common stock. We expect our common stock to be quoted on the OTCQB Market operated by OTC Markets Group upon the completion of the conversion and stock offering. We are an “emerging growth company” as defined in the Jumpstart Our Business Startups Act of 2012, referred to as the “JOBS Act” throughout this prospectus.

The shares of common stock are first being offered for sale in a subscription offering in priority order to depositors of Monroe Federal with at least $50.00 on deposit as of the close of business on March 31, 2023, to tax-qualified employee benefit plans of Monroe Federal, to depositors of Monroe Federal with at least $50.00 on deposit as of the close of business on June 30, 2024, and to depositors and borrowers of Monroe Federal as of the close of business on _________, 2024. Shares not purchased in the subscription offering may be offered for sale to the general public in a community offering, with a preference given to natural persons (including trusts of natural persons) residing in Miami and Montgomery Counties in Ohio. Any shares of common stock not purchased in the subscription offering or the community offering may be offered for sale to the public through a syndicate of broker-dealers, referred to as the “syndicated community offering” throughout this prospectus. The syndicated community offering, if held, may commence before the subscription offering and the community offering (including any extensions) have expired. However, no shares purchased in the subscription offering or the community offering will be issued until any syndicated community offering is completed. We may sell up to 793,500 shares of common stock because of demand for the shares of common stock or changes in market conditions, without resoliciting subscribers. We must sell a minimum of 510,000 shares to complete the conversion and stock offering.

The minimum purchase order is 25 shares. Generally, no person or entity, or persons or entities acting through a single qualifying account held jointly, may purchase more than 15,000 shares ($150,000) of common stock, and no person or entity, together with associates or persons acting in concert with such person or entity, may purchase more than 20,000 shares ($200,000) of common stock, in all categories of the stock offering combined.

The subscription offering will expire at 5:00 p.m., Eastern time, on September ____, 2024. We expect that the community offering, if held, will expire at the same time. We may extend the expiration date of the subscription offering and any community offering without notice to you until __________, 2024, or longer if the Office of the Comptroller of the Currency, referred to as the “OCC” throughout this prospectus, approves a later date. No single extension may exceed 90 days and the stock offering must be completed by ___________, 2026. Once submitted, orders are irrevocable unless the subscription offering and/or the community offering are terminated or extended, with regulatory approval, beyond __________, 2024, or the number of shares of common stock to be sold is increased to more than 793,500 shares or decreased to less than 510,000 shares. If the subscription offering and any community offering are extended beyond __________, 2024, all subscribers will be notified and given the opportunity to confirm, change or cancel their orders. If you do not respond to the notice of extension, we will promptly return your funds with interest or cancel your deposit account withdrawal authorization. If the number of shares to be sold in the stock offering is increased to more than 793,500 shares or decreased to less than 510,000 shares, we will resolicit subscribers, and all funds delivered to us to purchase shares of common stock in the subscription offering and any community offering will be returned promptly with interest. Funds received in the subscription offering and any community offering will be held in a segregated account at Monroe Federal and will earn interest at 0.04% per annum until completion or termination of the conversion and stock offering.

Performance Trust Capital Partners, LLC, referred to as “Performance Trust” throughout this prospectus, will assist us in selling our shares of common stock on a best efforts basis in the subscription offering and any community offering, and will serve as sole manager for any syndicated community offering. Performance Trust is not required to purchase any shares of common stock we are offering for sale.

OFFERING SUMMARY

Price: $10.00 per share

This investment involves a degree of risk, including the possible loss of principal.

See “Risk Factors” beginning on page 13.

These securities are not deposits or savings accounts and are not insured or guaranteed by the Federal Deposit Insurance Corporation or any other governmental agency. None of the Securities and Exchange Commission, the Office of the Comptroller of the Currency, the Board of Governors of the Federal Reserve System or any state securities regulator has approved or disapproved of these securities or determined if this prospectus is accurate or complete. Any representation to the contrary is a criminal offense.

For assistance, contact the Stock Information Center at _______________.

The date of this prospectus is August ____, 2024.

[MAP]

TABLE OF CONTENTS

Page

SUMMARY

The following summary provides material information about Monroe Federal’s mutual-to-stock conversion and the related offering of common stock by Monroe Federal Bancorp. It may not contain all of the information that is important to you. For additional information, you should read this entire document carefully, including the consolidated financial statements and the related notes and the section entitled “Risk Factors,” before making an investment decision.

Monroe Federal Bancorp, Inc.

Monroe Federal Bancorp, a newly formed Maryland corporation, is offering for sale shares of its common stock in connection with the conversion of Monroe Federal from a mutual savings bank (meaning it has no stockholders) to a stock savings bank. As a mutual savings bank, all depositors and borrowers are members of and have voting rights in Monroe Federal as to all matters requiring a vote of members. The following diagram depicts Monroe Federal’s current organizational structure:

Upon completion of the conversion and stock offering, Monroe Federal Bancorp will be 100% owned by its stockholders and Monroe Federal will be 100% owned by Monroe Federal Bancorp. Monroe Federal will cease to have members and its former members will no longer have voting rights in Monroe Federal. All voting rights in Monroe Federal will be vested in Monroe Federal Bancorp as the sole stockholder of Monroe Federal. Monroe Federal Bancorp’s stockholders will possess exclusive voting rights with respect to Monroe Federal Bancorp common stock. The following diagram depicts Monroe Federal Bancorp’s and Monroe Federal’s organizational structure after the completion of the conversion and stock offering:

Monroe Federal Bancorp was incorporated on May 21, 2024, and has not engaged in any business to date. Upon completion of the conversion and stock offering, it will register as a savings and loan holding company and will be subject to comprehensive regulation and examination by the Board of Governors of the Federal Reserve System, referred to as the “Federal Reserve Board” throughout this prospectus.

Monroe Federal Bancorp’s principal office is located at 24 East Main Street, Tipp City, Ohio 45371, and the telephone number at that address is (937) 667-8461.

Monroe Federal Savings and Loan Association

Originally chartered in 1875, Monroe Federal is a federally-chartered mutual savings association with its main office in Tipp City, Ohio. In addition to the main office, we conduct our operations from three branch offices located in Tipp City, Dayton, and Vandalia, Ohio. Tipp City is located on Interstate 75 approximately 25 miles north of Dayton, Ohio. Vandalia is also located on Interstate 75 approximately 12 miles north of Dayton, Ohio.

We consider Miami and Montgomery Counties, and contiguous areas, to be our primary market area for loan originations and deposit gathering. Wright-Patterson Air Force Base, home of the 88^th Air Base Wing, located outside Dayton, is a major employer in our primary market area.

Our business consists primarily of accepting deposits from the general public and investing those deposits, together with funds generated from operations, primarily in one- to four-family residential mortgage loans and, to a lesser extent, commercial real estate loans, both secured by properties located in our primary market area. To a significantly lesser extent, we also originate multi-family mortgage loans, construction and land development loans, commercial and industrial loans, home equity loans and lines of credit, and consumer loans. Historically, we have not sold loans we have originated. Following the conversion and stock offering, we plan to develop the infrastructure necessary to sell one- to four-family residential mortgage loans, particularly longer term one- to four-family residential mortgage loans, to help mitigate our interest rate risk exposure. We expect to hire up to three additional employees for this purpose, which is expected to increase our noninterest expenses in future periods.

Our primary revenue source is interest income earned on loans and investments. Noninterest income is not a significant revenue source.

At March 31, 2024, we had total assets of $155.3 million, total deposits of $142.1 million and total equity of $8.6 million. We had net income of $60,000 and $388,000 for the fiscal years ended March 31, 2024 and 2023, respectively.

We are subject to comprehensive regulation and examination by the OCC, our primary federal regulator.

Our main office is located at 24 East Main Street, Tipp City, Ohio 45371, and the telephone number at that address is (937) 667-8461. Our website address is www.monroefederal.com. Information on our website is not incorporated into this prospectus and should not be considered part of this prospectus.

Business Strategy

Our principal objective is to build long-term value for our stockholders by operating a profitable community financial institution dedicated to meeting the banking needs of our customers and community. Highlights of our current business strategy include:

We have no current plans or intentions regarding any branching activities.

Commercial real estate loans have higher inherent credit risk than one- to four-family residential mortgage loans. See “Risk Factors – Risks Related to Our Lending Activities – Our commercial real estate loans involve credit risks that could adversely affect our financial condition and results of operations” and “Business of Monroe Federal – Loan Underwriting Risks.”

We expect the strategies outlined above to guide our investment of the net proceeds of the stock offering. We intend to continue to pursue these business strategies after the conversion and the stock offering, subject to any changes necessitated by future market conditions and other factors.

See “Business of Monroe Federal” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Business Strategy” for a further discussion of our business strategy.

Reasons for the Conversion and Stock Offering

Consistent with our business strategy, our primary reasons for converting to stock form and raising additional capital through the stock offering are:

At March 31, 2024, Monroe Federal was considered “well capitalized” for regulatory purposes. The proceeds from the stock offering will further improve our capital position to support expected future growth and profitability.

See “The Conversion and Stock Offering” for a more complete discussion of our reasons for conducting the conversion and stock offering.

Terms of the Stock Offering

Monroe Federal Bancorp is offering for sale between 510,000 shares and 690,000 shares of common stock to eligible depositors and borrowers of Monroe Federal and to Monroe Federal’s tax-qualified employee benefit plans in a subscription offering. To the extent shares remain available, we may offer shares for sale in a community offering, with a preference given to natural persons (and trusts of natural persons) residing in Miami and Montgomery Counties in Ohio. We may also offer for sale shares of common stock not purchased in the subscription offering or in any community offering to the general public in a syndicated community offering. The number of shares of common stock to be sold may be increased to up to 793,500 shares as a result of demand for the shares of common stock in the stock offering or changes in market conditions. Unless the number of shares of common stock offered for sale is increased to more than 793,500 shares or decreased to fewer than 510,000 shares, or the stock offering is extended beyond _________, 2024, subscribers will not have the opportunity to change or cancel their stock orders once submitted. If the stock offering is extended beyond ________, 2024, we will resolicit subscribers and you will have the opportunity to confirm, change or cancel your order within a specified period of time. If you do not respond during that period of time, your stock order will be cancelled and your deposit account withdrawal authorizations will be cancelled or your funds submitted will be returned promptly with interest at 0.04% per annum. If the number of shares offered for sale is increased to more than 793,500 shares or decreased to less than 510,000 shares, all subscribers’ stock orders will be cancelled, their deposit account withdrawal authorizations will be cancelled and funds delivered for the purchase of shares of common stock in the stock offering will be returned promptly with interest at 0.04% per annum. We will give these subscribers an opportunity to place new orders for a specified period of time.

The shares of common stock are being offered for sale at a purchase price of $10.00 per share. All investors will pay the same purchase price per share. Investors will not be charged a commission to purchase shares of common stock in the stock offering. Performance Trust, our marketing agent for the stock offering, will use its best efforts to assist us in selling shares of our common stock but is not obligated to purchase any shares of common stock in the stock offering.

Important Risks in Owning Monroe Federal Bancorp’s Common Stock

Before you order shares of our common stock, you should read the “Risk Factors” section beginning on page 13 of this prospectus.

How We Determined the Offering Range and the $10.00 per Share Purchase Price

The amount of common stock Monroe Federal Bancorp is offering for sale is based on an independent appraisal of the estimated pro forma market value of Monroe Federal Bancorp, assuming the conversion and stock offering is completed. Feldman Financial Advisors, Inc., referred to as “Feldman Financial” throughout this prospectus, our independent appraiser, has estimated that, as of May 24, 2024, this market value was $6.0 million. Based on OCC regulations, this market value forms the midpoint of a valuation range with a minimum of $5.1 million and a maximum of $6.9 million. Based on this valuation and the $10.00 per share purchase price, the number of shares of common stock being offered for sale in the stock offering ranges from a minimum of 510,000 shares to a maximum of 690,000 shares. We may sell up to 793,500 shares of common stock because of demand for the shares or changes in market conditions without resoliciting subscribers. The $10.00 per share purchase price was selected primarily because it is the price most commonly used in mutual-to-stock conversions of financial institutions.

The independent appraisal is based in part on Monroe Federal’s financial condition and results of operations, the pro forma effect of the additional capital raised by the sale of shares of common stock in the stock offering and an analysis of a peer group of 10 publicly traded thrift holding companies with total assets ranging from $256.8 million to $905.0 million as of March 31, 2024, that Feldman Financial considered comparable to Monroe Federal Bancorp. In selecting the peer group, Feldman Financial considered certain key criteria such as asset size, stock exchange listing, market capitalization, capital level, profitability and other financial characteristics, operating strategy, and market area. Because of the regulatory appraisal guidelines and the limited number of publicly traded savings institutions and thrift holding companies, the selection process by Feldman Financial resulted in each of the peer group companies having total assets greater than Monroe Federal’s asset size. The peer group also exhibited higher capital levels than Monroe Federal. Feldman Financial believed that the peer group’s similar operating fundamentals and business strategies with regard to Monroe Federal provided a meaningful basis of comparison for valuation pricing purposes. When preparing the independent appraisal, Feldman Financial made downward adjustments for financial condition, liquidity of the stock issue, and marketing of the stock issue. The downward adjustment for financial condition was mainly related to Monroe Federal’s significantly lower ratio of equity to assets. The downward adjustment for market area reflected the less favorable demographic measures for Monroe Federal’s primary market area regarding unemployment rates, population growth and household income levels compared to the primary market areas of the peer group companies. The downward adjustment for the liquidity of the issue took into consideration the lower number of shares to be outstanding and the lower market capitalization expected in comparison to the peer group companies. The downward adjustment for marketing of the issue was based on the risk and uncertainty related to a new offering in the current environment of market volatility. For additional information, including the list of peer group companies, see “The Conversion and Stock Offering – Determination of Share Price and Number of Shares to be Issued.”

The following table presents a summary of selected pricing ratios for the peer group companies and for Monroe Federal Bancorp (on a pro forma basis) utilized by Feldman Financial in its independent appraisal. See “The Conversion and Stock Offering – Determination of Share Price and Number of Shares to be Issued” for information regarding the peer group companies. These ratios are based on Monroe Federal Bancorp’s book value, tangible book value and core earnings at and for the 12 months ended March 31, 2024. The peer group ratios are based on financial data as of March 31, 2024, and stock prices as of May 24, 2024. Compared to the average pricing of the peer group, our pro forma pricing ratios at the midpoint of the offering range indicated a premium of 41.8% on a price-to-core earnings basis and a discount of 33.6% on a price-to-tangible book value basis.

The independent appraisal does not indicate trading market value. Do not assume or expect that our valuation as indicated in the appraisal means that after the conversion and stock offering the shares of our common stock will trade at or above the $10.00 per share purchase price. Furthermore, Feldman Financial used the pricing ratios presented in the appraisal to estimate our pro forma appraised value for regulatory purposes and not to compare the relative value of shares of our common stock with the value of the common stock of the institutions in the peer group. The value of the common stock of any company may be affected by a number of factors such as financial performance, asset size and market location.

For a more complete discussion of the amount of common stock we are offering for sale and the independent appraisal, see “The Conversion and Stock Offering – Determination of Share Price and Number of Shares to be Issued.”

How We Intend to Use the Proceeds from the Stock Offering

Monroe Federal will receive from Monroe Federal Bancorp a capital contribution equal to at least 50% of the net proceeds of the stock offering. Based on this formula, we anticipate that Monroe Federal Bancorp will invest in Monroe Federal approximately $1.9 million, $2.3 million, $2.8 million and $3.3 million at the minimum, midpoint, maximum, and adjusted maximum of the offering range, respectively, of the net proceeds from the stock offering. From the remaining funds, Monroe Federal Bancorp intends to loan funds to Monroe Federal’s employee stock ownership plan to fund the plan’s purchase of shares of common stock in the stock offering and retain the remainder of the net proceeds from the stock offering. Assuming we sell 600,000 shares of common stock in the stock offering at the midpoint of the offering range, resulting in net proceeds of $4.6 million, based on the above formula, we anticipate that Monroe Federal Bancorp will invest $2.3 million in Monroe Federal, loan $420,000 to Monroe Federal’s employee stock ownership plan to fund its purchase of shares of common stock in the stock offering and retain the remaining $1.9 million of net proceeds.

Monroe Federal Bancorp may use the funds that it retains to repurchase shares of common stock (subject to compliance with regulatory requirements), to pay cash dividends, for investments, or for other general corporate purposes. Monroe Federal intends to invest the net proceeds it receives from Monroe Federal Bancorp to fund new loans, enhance existing products and services, invest in securities, or for general corporate purposes.

For more information, see “How We Intend to Use the Proceeds from the Stock Offering.”

Persons Who May Order Shares of Common Stock in the Stock Offering

We are offering the shares of common stock in a subscription offering in the following order of priority:

Shares of common stock not purchased in the subscription offering may be offered for sale in a community offering, with a preference given to natural persons (and trusts of natural persons) residing in Miami and Montgomery Counties in Ohio. If held, the community offering may begin concurrently with, during or after the subscription offering. We also may offer for sale shares of common stock not purchased in the subscription offering or in any community offering to the general public through a syndicated community offering, which will be managed by Performance Trust. We have the right to accept or reject, in our sole discretion, orders received in any community offering or any syndicated community offering. Any determination to accept or reject stock orders in any community offering or any syndicated community offering will be based on the facts and circumstances available to management at the time of the determination.

If we receive orders for more shares than we are offering for sale, we may not be able to fill your order, in full or in part. Shares will be allocated first to categories in the subscription offering. A detailed description of the subscription offering, the community offering and the syndicated community offering, as well as a discussion regarding allocation procedures, can be found in the section of this prospectus entitled “The Conversion and Stock Offering.”

Limits on How Much Common Stock You May Purchase

The minimum number of shares of common stock that may be purchased is 25.

Generally, no person or entity, or persons or entities acting through a single qualifying account held jointly, may purchase more than the greater of: (i) 15,000 shares ($150,000) of common stock; (ii) 0.10% of the total number of shares of common stock issued in the stock offering; or (iii) 15 times the number of shares offered multiplied by a fraction of which the numerator is the depositor’s total deposit balance (as of the eligibility record date or supplemental eligibility record date, as applicable) and the denominator is the aggregate of all deposits (as of the eligibility record date or supplemental eligibility record date, as applicable), subject to the overall purchase limitations. If any of the following persons or entities purchase shares of common stock, their purchases, in all categories of the stock offering combined, when combined with your purchases, cannot exceed 20,000 shares ($200,000) of common stock:

Unless we determine otherwise, persons or entities having the same address and persons or entities exercising subscription rights through qualifying accounts registered to the same address at any of the subscription offering eligibility dates will be subject to the overall purchase limitation of 20,000 shares ($200,000). See the detailed definitions of “associate” and “acting in concert” in the section of this prospectus entitled “The Conversion and Stock Offering – Limitations on Common Stock Purchases.”

OCC regulations provide that such purchase limitation may be further increased to 9.99%, provided that orders for shares of common stock exceeding 5.0% of the shares of common stock sold in the stock offering do not exceed in the aggregate 10.0% of the number of shares of the common stock sold in the stock offering. Any request to purchase additional shares of common stock in the event the purchase limitation is so increased will be determined by our board of directors in its sole discretion.

Subject to OCC approval and OCC regulations, we may increase or decrease the purchase limitations at any time. See the detailed description of the purchase limitations in the section of this prospectus entitled “The Conversion and Stock Offering – Limitations on Common Stock Purchases.”

How You May Purchase Shares of Common Stock in the Subscription Offering and in any Community Offering

In the subscription offering and any community offering, you may pay for your shares only by:

By law, Monroe Federal is prohibited from lending funds to anyone to purchase shares of common stock in the stock offering. Additionally, you may not use any type of third party check to pay for shares of common stock. Wire transfers will not be accepted. You may not submit a Monroe Federal line of credit check for payment. You may not designate withdrawal from a Monroe Federal account with check-writing privileges; rather, submit a check. If you request a direct withdrawal from an account with check-writing privileges, we reserve the right to interpret that as your authorization to treat those funds as if we had received a check for the designated amount, and may immediately withdraw the amount from your checking account(s). You may not authorize direct withdrawal from a Monroe Federal IRA. See “—Using Individual Retirement Account Funds to Purchase Shares of Common Stock.”

You may subscribe for shares of common stock in the subscription offering and any community offering by returning a signed and completed original stock order form, together with full payment payable to Monroe Federal Bancorp, Inc. or authorization to withdraw funds from one or more of your Monroe Federal deposit accounts, provided that the stock order form is received before 5:00 p.m., Eastern time, on _________, 2024, which is the expiration of the subscription offering period. You may return your stock order form by (1) overnight delivery to the address indicated on the stock order form for this purpose; (2) in-person delivery to Monroe Federal’s main office located at 24 East Main Street in Tipp City; or (3) regular mail using the stock order reply envelope provided. In-person delivery of stock order forms will be accepted only at Monroe Federal’s main office. Do not return your stock order form to any other Monroe Federal office. The Stock Information Center is open Monday through Friday between 10:00 a.m. and 5:00 p.m., Eastern time, excluding bank holidays. Please do not mail stock order forms to any of Monroe Federal’s offices.

See “The Conversion and Stock Offering – Procedure for Purchasing Shares in the Subscription Offering and any Community Offering.”

Using Individual Retirement Account Funds to Purchase Shares of Common Stock

You may be able to subscribe for shares of common stock using funds in your Monroe Federal IRA or other retirement account. If you wish to use some or all of the funds in your Monroe Federal IRA or other retirement account, the applicable funds must be first transferred to a self-directed account maintained by an independent custodian or trustee, such as a brokerage firm, and the purchase must be made through that account. If you do not have such an account, you will need to establish one before placing your stock order. An annual administrative fee may be payable to the independent custodian or trustee. Because individual circumstances differ and the processing of retirement fund orders takes additional time, we recommend that you contact our Stock Information Center as soon as possible, but no less than two weeks before the September ____, 2024 offering deadline, for assistance with purchases using funds in your IRA or other retirement account you may have at Monroe Federal or elsewhere. Whether you may use such funds to purchase shares in the stock offering may depend on timing constraints and, possibly, limitations imposed by the institution where the funds are held.

For a complete description of how to use IRA funds to purchase shares in the stock offering, see “The Conversion and Stock Offering – Procedure for Purchasing Shares in the Subscription Offering and any Community Offering – Using Individual Retirement Account Funds.”

Purchases by Executive Officers and Directors

We expect our directors and executive officers, together with their associates, to subscribe for 142,700 shares ($1,427,000) of common stock in the stock offering, representing 28.0% of shares to be outstanding based on the sale of stock at the minimum of the offering range. However, there can be no assurance that any individual director or executive officer, or the directors and executive officers as a group, will purchase any specific number of shares of our common stock. They will pay the same $10.00 per share purchase price that all other persons who purchase shares of common stock in the stock offering will pay. Our directors and executive officers are subject to the same minimum purchase requirements and purchase limitations as other participants in the stock offering as set forth under “– Limits on How Much Common Stock You May Purchase.” Purchases by our directors and executive officers and their associates will be included in determining whether the required minimum number of shares have been subscribed for in the stock offering. For more information, see “Subscriptions by Directors and Executive Officers.”

Deadline for Submitting Orders for Shares of Common Stock in the Subscription Offering and any Community Offering

The deadline for submitting orders to purchase shares of common stock in the subscription offering and in any community offering is 5:00 p.m., Eastern time, on September ____, 2024, unless we extend this deadline. If you wish to purchase shares of common stock, a properly completed and signed original stock order form, together with full payment, must be received (not postmarked) by 5:00 p.m., Eastern time, on September ____, 2024. Although we will make reasonable attempts to provide this prospectus and offering materials to holders of subscription rights, the subscription offering and all subscription rights will expire at 5:00 p.m., Eastern time, on September ____, 2024, whether or not we have been able to locate each person entitled to subscription rights. See “The Conversion and Stock Offering – Procedures for Purchasing Shares in the Subscription Offering and any Community Offering – Expiration Date.”

You May Not Sell or Transfer Your Subscription Rights

Applicable regulations prohibit you from selling or transferring your subscription rights. If you order shares of common stock in the subscription offering, you will be required to certify that you are purchasing the common stock for yourself and that you have no agreement or understanding to sell or transfer your subscription rights or the shares that you are purchasing. We intend to take legal action, including reporting persons to federal or state agencies, against anyone who we believe has sold or transferred his or her subscription rights. We will not accept your order if we have reason to believe you have sold or transferred your subscription rights. On the stock order form, you cannot add the names of others for joint stock registration unless they are also named on your qualifying deposit or loan accounts. Taking this action may jeopardize your subscription rights. In addition, the stock order form requires that you list all deposit and/or loan accounts, giving all names on each account and the account number at the applicable eligibility date. Failure to provide this information, or providing incomplete or incorrect information, may result in a loss of part or all of your share allocation.

Steps We May Take if We Do Not Receive Orders for the Minimum Number of Shares

If we do not receive valid orders for at least 510,000 shares of common stock, we may take additional steps in order to issue the minimum number of shares of common stock in the offering range. Specifically, we may:

If we extend the stock offering beyond _________, 2024, we will resolicit subscribers and you will have the opportunity to confirm, change or cancel your order within a specified period of time. If you do not respond during that period of time, your stock order will be cancelled and your deposit account withdrawal authorizations will be cancelled or your funds submitted will be returned promptly with interest at 0.04% per annum from the date the stock order was processed.

If one or more purchase limitations are increased we will not resolicit all subscribers, however, subscribers in the subscription offering who ordered the maximum amount and who indicated a desire to be resolicited on the stock order form will be given the opportunity to increase their subscriptions up to the newly applicable purchase limit. We may increase the individual or aggregate purchase limitations to an amount generally not to exceed 5.0% of the common stock sold in the stock offering. See “The Conversion and Stock Offering – Limitations on Common Stock Purchases.”

Conditions to Completion of the Conversion and Stock Offering

Monroe Federal’s board of directors has approved the plan of conversion. In addition, the OCC has conditionally approved the plan of conversion and the Federal Reserve Board has conditionally approved Monroe Federal Bancorp’s application to become the savings and loan holding company of Monroe Federal. We cannot complete the conversion and stock offering unless:

Any approval by the OCC or the Federal Reserve Board does not constitute a recommendation or endorsement of the plan of conversion.

Our Dividend Policy

Following completion of the conversion and stock offering, our board of directors will be authorized to declare dividends on our common stock, subject to statutory and regulatory requirements. However, no decision has been made with respect to the amount, if any, and timing of any dividend payments. The payment and amount of any dividend payments will depend upon a number of factors, including the following: regulatory capital requirements; our financial condition and results of operations; our other uses of funds for the long-term value of stockholders; tax considerations; statutory and regulatory limitations; and general economic conditions. See “Our Dividend Policy” for additional information.

Market for Common Stock

We anticipate that the common stock sold in the stock offering will be quoted on the OTCQB Market operated by OTC Markets Group upon the completion of the conversion and stock offering. See ”Market for the Common Stock.”

Delivery of Shares of Stock

All shares of Monroe Federal Bancorp common stock sold in the conversion and stock offering will be issued in book entry form and held electronically on the books of our transfer agent. Stock certificates will not be issued. A statement reflecting ownership of shares of common stock sold in the conversion and stock offering will be mailed by our transfer agent to the persons entitled thereto at the address noted by them on their stock order form as soon as practicable following consummation of the conversion and stock offering. Shares of common stock sold in any syndicated community offering may be delivered electronically through The Depository Trust Company. We expect trading in the common stock to begin on the business day of or on the business day immediately following the completion of the conversion and stock offering. Until a statement reflecting ownership of shares of common stock is available and delivered to purchasers, it is possible that purchasers may not be able to sell the shares of common stock that they have purchased, even though trading in the common stock will have begun. Your ability to sell the shares of common stock before receiving your statement will depend on arrangements you may make with a brokerage firm.

Possible Change in the Offering Range

Feldman Financial will update its independent appraisal before we complete the conversion and stock offering. If, as a result of demand for the shares or changes in market conditions, Feldman Financial determines that our pro forma market value has increased, we may sell up to 793,500 shares in the conversion and stock offering without further notice to you. If our pro forma market value at that time is either below $5.1 million or above $7.9 million, then, after consulting with the OCC, we may:

If we set a new offering range, we will promptly return funds, with interest at 0.04% per annum, received in the stock offering, cancel deposit account withdrawal authorizations and commence a resolicitation. In a resolicitation, we will notify subscribers of their right to place a new stock order for a specified period of time.

Possible Termination of the Conversion and Stock Offering

We may terminate the conversion and stock offering at any time before the special meeting of members of Monroe Federal that has been called to vote on the plan of conversion, and at any time after member approval with the concurrence of the OCC. If we terminate the conversion and stock offering, we will promptly return funds and cancel deposit withdrawal authorizations, as described above.

Benefits to Management and Potential Dilution to Stockholders Resulting from the Conversion and Stock Offering

We expect Monroe Federal’s employee stock ownership plan, which is a tax-qualified retirement plan for the benefit of all of our employees being established in connection with the conversion and stock offering, to purchase up to 7% of the shares of common stock that we sell in the stock offering. If we receive orders for more shares of common stock than the maximum of the offering range, the employee stock ownership plan will have first priority to purchase shares over this maximum, up to a total of 7% of the shares of common stock that we sell in the stock offering. This would reduce the number of shares available for allocation to eligible depositors of Monroe Federal. For further information, see “Management – Executive Compensation – Employee Stock Ownership Plan.”

Purchases by the employee stock ownership plan in the stock offering will be included in determining whether the required minimum number of shares have been sold in the stock offering. Subject to market conditions and receipt of regulatory approval, the employee stock ownership plan may instead elect to purchase shares of common stock in the open market following the completion of the stock offering to fill all or a portion of its intended subscription.

We also intend to implement a stock-based benefit plan no earlier than six months after completion of the conversion and stock offering. Stockholder approval of this plan will be required, and the stock-based benefit plan cannot be implemented until at least six months after the completion of the conversion and stock offering according to applicable OCC regulations. If adopted within 12 months following the completion of the conversion and stock offering, and provided that following the completion of the conversion and stock offering Monroe Federal has at least a 10% tangible capital to assets ratio, the OCC conversion regulations would allow for the stock-based benefit plan to reserve a number of shares of common stock equal to not more than 4% of the number of shares sold in the conversion and stock offering, or up to 27,600 shares of common stock at the maximum of the offering range, for restricted stock awards to key employees and directors, at no cost to the recipients. If adopted within 12 months following the completion of the conversion and stock offering, the stock-based benefit plan will also reserve a number of shares equal to not more than 10% of the number of shares of common stock sold in the conversion and stock offering, or up to 69,000 shares of common stock at the maximum of the offering range, for the exercise of stock options granted to key employees and directors. If the stock-based benefit plan is adopted after one year from the date of the completion of the conversion and stock offering, the 4% and 10% limitations described above will no longer apply, and we may adopt a stock-based benefit plan encompassing more than 96,600 shares of common stock assuming the maximum of the offering range. We have not yet determined whether we will present this plan for stockholder approval within 12 months following the completion of the conversion and stock offering or whether we will present this plan for stockholder approval more than 12 months after the completion of the conversion and stock offering.

The following table summarizes the number of shares of common stock and aggregate dollar value of grants (valuing each share granted at the offering price of $10.00) that would be available under a stock-based benefit plan if such plan is adopted within one year following the completion of the conversion and stock offering and Monroe Federal has less than a 10% tangible capital to assets ratio at that time. The table shows the dilution to stockholders if all these shares are issued from authorized but unissued shares, instead of shares purchased in the open market. The table also sets forth the number of shares of common stock to be acquired by the employee stock ownership plan for allocation to all employees. A portion of the stock grants shown in the table below may be made to non-management employees.

Income Tax Consequences

Monroe Federal Bancorp and Monroe Federal have received an opinion from their counsel, Luse Gorman, PC, regarding the material federal income tax consequences of the conversion and stock offering, including an opinion that it is more likely than not that the fair market value of the nontransferable subscription rights to purchase the common stock will be zero and, accordingly, no gain or loss will be recognized by depositors and borrowers of Monroe Federal upon the distribution to them of the nontransferable subscription rights to purchase the common stock and no taxable income will be realized by them as a result of the exercise of the nontransferable subscription rights. Monroe Federal Bancorp and Monroe Federal have also received an opinion of Wipfli LLP, tax advisors to Monroe Federal Bancorp and Monroe Federal, regarding the material Ohio state income tax consequences of the conversion and stock offering. As a general matter, the conversion and stock offering will not be a taxable transaction for purposes of federal or state income taxes to Monroe Federal Bancorp, Monroe Federal, or persons eligible to subscribe for shares of common stock in the subscription offering. For additional information, see “Taxation.”

How You Can Obtain Additional Information – Stock Information Center

Our banking personnel may not, by law, assist with investment-related questions about the stock offering. If you have questions regarding the conversion and stock offering, call our Stock Information Center at _____________. The Stock Information Center is accepting telephone calls Monday through Friday between 10:00 a.m. and 5:00 p.m., Eastern time, excluding bank holidays.

RISK FACTORS

You should carefully consider the following risk factors, in addition to all other information in this prospectus, in evaluating an investment in the shares of common stock.

Risks Related to Our Lending Activities

Our concentration of residential mortgage loans exposes us to increased lending risks.

As of March 31, 2024, one- to four-family residential mortgage loans totaled $69.2 million or 63.4% of our loan portfolio. We intend to continue to originate one- to four-family residential mortgage loans. One- to four-family residential mortgage lending is generally sensitive to regional and local economic conditions that significantly impact the ability of borrowers to meet their loan payment obligations, making loss levels difficult to predict. Declines in real estate values could cause some of our residential mortgages to be inadequately collateralized, which would expose us to a greater risk of loss if we seek to recover on defaulted loans by selling the real estate collateral.

Our “subprime” residential mortgage loans expose us to increased credit risk that could adversely affect our financial condition and results of operations.

As of March 31, 2024, subprime loans totaled $1.5 million or 2.2% of our one- to four-family residential mortgage loan portfolio. Subprime loans are generally defined as loans made to borrowers with credit scores of less than 620. Subprime loans expose us to higher delinquency risk and default risk and a higher potential for losses than loans made to borrowers with favorable credit scores and credit histories.

Our commercial real estate loans involve credit risks that could adversely affect our financial condition and results of operations.

At March 31, 2024, commercial real estate loans totaled $24.0 million or 22.0% of our loan portfolio. Given their larger balances and the complexity of the underlying collateral, commercial real estate loans generally have more risk than the one- to four-family residential real estate loans we originate. Because the repayment of commercial real estate loans depends on the successful management and operation of the borrower’s properties or related businesses, their repayment can be affected by adverse conditions in the local real estate market or economy. A downturn in the real estate market or the local economy could adversely impact the value of properties securing the loan or the revenues from the borrower’s business, thereby increasing the risk of non-performing loans. As our commercial real estate loan portfolio increases, the corresponding risks and potential for losses from these loans may also increase.

Our construction and land development loans involve credit risks that could adversely affect our financial condition and results of operations.

At March 31, 2024, construction and land development loans totaled $3.1 million or 2.8% of our loan portfolio. Construction lending involves additional risks when compared with permanent finance lending because funds are advanced upon the security of the project, which is of uncertain value before its completion. Because of the uncertainties inherent in estimating construction costs, as well as the market value of the completed project and the effects of governmental regulation of real property, it is relatively difficult to accurately evaluate the total funds required to complete a project and the related loan-to-value ratio. In addition, generally during the term of a construction loan, interest may be funded by the borrower or disbursed from an interest reserve set aside from the construction loan budget. These loans often involve the disbursement of substantial funds with repayment substantially dependent on the success of the ultimate project and the ability of the borrower to sell or lease the property or obtain permanent take-out financing, rather than the ability of the borrower or guarantor to repay principal and interest. If the appraised value of a completed project proves to be overstated, we may have inadequate security for the repayment of the loan upon completion of construction of the project and may incur a loss. Land development loans have substantially similar risks to speculative construction loans. As our construction and land loan portfolio increases, the corresponding risks and potential for losses from these loans may also increase.

Our commercial and industrial loans involve credit risks that could adversely affect our financial condition and results of operations.

At March 31, 2024, commercial and industrial loans totaled $4.9 million or 4.5% of our loan portfolio. Unlike residential real estate loans, which generally are made on the basis of the borrower’s ability to make repayment from his or her employment or other income, and which are secured by real property whose value tends to be more easily ascertainable, commercial and industrial loans are of higher risk and typically are made on the basis of the borrower’s ability to make repayment from the cash flows of the borrower’s business, and the collateral securing these loans may fluctuate in value. Further, any collateral securing commercial and industrial loans may depreciate over time, may be difficult to appraise and may fluctuate in value. As a result, the availability of funds for the repayment of commercial loans may depend substantially on the success of the business itself.

Our consumer loans involve credit risks that could adversely affect our financial condition and results of operations.

At March 31, 2024, consumer loans totaled $1.8 million or 1.6% of our loan portfolio. Consumer loans may entail greater risk than residential real estate loans, particularly in the case of consumer loans that are unsecured or secured by assets that depreciate rapidly. Repossessed collateral for a defaulted consumer loan may not provide an adequate source of repayment for the outstanding loan and a small remaining deficiency often does not warrant further substantial collection efforts against the borrower. Consumer loan collections depend on the borrower’s continuing financial stability, and therefore are likely to be adversely affected by various factors, including job loss, divorce, illness or personal bankruptcy. Furthermore, the application of various federal and state laws, including federal and state bankruptcy and insolvency laws, may limit the amount that can be recovered on such loans.

If our allowance for credit losses is not sufficient to cover actual loan losses, our earnings could decrease.

We make various assumptions and judgments about the collectability of our loan portfolio, including the creditworthiness of our borrowers and the value of the real estate and other assets serving as collateral for the repayment of many of our loans. In determining the amount of the allowance for credit losses, we review our loans and estimate lifetime credit losses in loans as of the balance sheet date using relevant available information, from both internal and external sources, relating to past events, current conditions, and reasonable and supportable forecasts. If our assumptions or the results of our analyses are incorrect, our allowance for credit losses may not be sufficient to cover losses inherent in our loan portfolio, resulting in additions to our allowance. In addition, our emphasis on loan growth and on increasing our portfolio of commercial and industrial loans, as well as any future credit deterioration, could require us to increase our allowance for credit losses in the future. Material additions to our allowance for credit losses would materially decrease our net income.

Effective April 1, 2023, the Current Expected Credit Loss accounting standard, referred to as “CECL” throughout this prospectus, became effective for Monroe Federal and many other financial institutions. CECL requires financial institutions to determine periodic estimates of lifetime expected credit losses on loans and recognize the expected credit losses as allowances for credit losses. CECL required us to change the prior method of providing allowances for loan losses that are incurred or probable, which requires us to increase the types of data we need to collect and review to determine the appropriate level of the allowance for credit losses. Using loan data as of April 1, 2023, the adoption of CECL required us to increase the allowance for credit losses on loans and unfunded commitments by $361,000, or 56.2%, from $642,000 as of March 31, 2023, to $1.0 million as of April 1, 2023.

In addition, bank regulators periodically review our allowance for credit losses and, as a result of such reviews, we may decide to increase our provision for credit losses or recognize further loan charge-offs. Any increase in our allowance for credit losses or loan charge-offs as a result of such review or otherwise may have a material adverse effect on our financial condition and results of operations.

We are subject to environmental liability risk associated with lending activities or properties we own.

A significant portion of our loan portfolio is secured by real estate, and we could become subject to environmental liabilities with respect to one or more of these properties, or with respect to properties that we own in operating our business. During the ordinary course of business, we may foreclose on and take title to properties securing defaulted loans and, in doing so, there is a risk that hazardous or toxic substances could be found on these properties. If hazardous conditions or toxic substances are found on these properties, we may be liable for remediation costs, as well as for personal injury and property damage, civil fines and criminal penalties regardless of when the hazardous conditions or toxic substances first affected any particular property. Environmental laws may require us to incur substantial expenses to address unknown liabilities and may materially reduce the affected property’s value or limit our ability to use or sell the affected property. In addition, future laws or more stringent interpretations or enforcement policies with respect to existing laws may increase our exposure to environmental liability. Our policies, which require us to perform an environmental review before initiating any foreclosure action on non-residential real property, may not be sufficient to detect all potential environmental hazards. The remediation costs and any other financial liabilities associated with an environmental hazard could have a material adverse effect on us.

Risks Related to Market Interest Rates

Prevailing high market interest rates and the inverted yield curve have reduced our profits and asset values.

Net income is the amount by which net interest income and non-interest income exceed non-interest expense and the provision for credit losses. Net interest income makes up a majority of our income and is based on the difference between:

Like many savings institutions, our interest-bearing liabilities generally have shorter contractual maturities than our interest-earning assets, a substantial portion of which are fixed-rate loans. Furthermore, the rates we earn on our other interest-earning assets and the rates we pay on our interest-bearing liabilities are generally fixed for a contractual period of time. This imbalance can create significant earnings volatility because market interest rates change over time. Generally, in a period of rising interest rates, the interest income we earn on our interest-earning assets may not increase as rapidly as the interest we pay on deposits and other interest-bearing liabilities. Conversely, in a period of declining interest rates, the interest income we earn on our interest-earning assets may decrease more rapidly than the interest we pay on our interest-bearing liabilities, as borrowers prepay mortgage loans and as mortgage-backed securities and callable investment securities are called, requiring us to reinvest those cash flows at lower, prevailing interest rates.

The prevailing interest rate environment, coupled with the prevailing inverted yield curve, has had an adverse effect on our net interest margin and net interest spread and, therefore, earnings. An inverted yield curve is where short-term market interest rates (which are typically the interest rates at which we and other financial institutions borrow funds and incur interest expense) are higher than long-term market interest rates (which are typically the rates at which we and other financial institutions lend funds and earn interest income). As a result of the prevailing interest environment and inverted yield curve, we have experienced a shift in deposits from lower-cost interest-bearing demand accounts, savings accounts, and money market accounts to higher-cost certificates of deposit, which has increased total interest expense by $1.1 million, from $918,000 for the fiscal year ended March 31, 2023, to $2.0 million for the fiscal year ended March 31, 2024, and has contributed to net interest margin contraction and net interest spread contraction. In comparison, total interest income increased by only $906,000, from $4.8 million for the fiscal year ended March 31, 2023, to $5.7 million for the fiscal year ended March 31, 2024. Primarily as a result of these circumstances, our net interest margin decreased from 2.75% for the fiscal year ended March 31, 2023, to 2.54% for the fiscal year ended March 31, 2024, and our net interest spread decreased from 2.67% for the fiscal year ended March 31, 2023, to 2.39% for the fiscal year ended March 31, 2024, which were the primary contributors to the decrease in net income from $388,000 for the fiscal year ended March 31, 2023, to $60,000 for the fiscal year ended March 31, 2024.

Changes in the level of interest rates may also affect the value of our assets, including the value of our available-for-sale investment securities, which generally decreases when market interest rates rise and increases when market interest rates decline, and ultimately affect our earnings. During the fiscal year ended March 31, 2024, we incurred $5,900 in net unrealized gains on available-for-sale investment securities caused by decreases in market interest rates during the period. During the fiscal year ended March 31, 2023, we incurred $2.6 million in net unrealized losses on available-for-sale investment securities caused by increases in market interest rates during the period.

We monitor interest rate risk through the use of simulation models, including estimates of the amounts by which the fair value of our assets and liabilities (our economic value of equity, or “EVE”) and our net interest income would change in the event of a range of assumed changes in market interest rates. At March 31, 2024, in the event of an instantaneous 200 basis point increase in interest rates, we estimate that we would experience a 20.67% decrease in EVE and a 1.35% decrease in net interest income. For further discussion of how changes in interest rates could impact us, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Management of Market Risk.”

Risks Related to Economic Conditions

We may be adversely affected by weakness in the U.S. housing market.

The U.S. housing market continues to be negatively affected by higher mortgage interest rates, including 30-year fixed-rate mortgage rates that more than doubled from 2021. This has negatively affected demand in some cases and the underlying real estate collateral. The rising interest rate environment has negatively impacted and, until the interest rate environment improves, is expected to continue to negatively impact multiple aspects of our business, as increases in mortgage rates (as well as prolonged periods of high mortgage rates) generally have an adverse impact on home sale transaction volume, housing affordability, and refinancing volumes. We believe the high mortgage rate environment is a key contributor to declines in residential real estate home sale transaction volume, as potential home sellers choose to stay with their lower rate mortgage loan rather than sell their home and obtain a higher rate mortgage loan to fund the purchase of another home and potential home buyers choose to rent rather than purchase a home. If existing home sale transactions continue to be at depressed levels or decline further (due to the high mortgage rate environment or otherwise), we would also expect to continue to experience decreased refinancing activity.

Inflation can have an adverse impact on our business and on our customers.

Inflation risk is the risk that the value of assets or income from investments will be worth less in the future as inflation decreases the value of money. Recently, there have been market indicators of a pronounced rise in inflation and the Federal Reserve Board has raised certain benchmark interest rates in an effort to combat inflation. As inflation increases, the value of our investment securities, particularly those with longer maturities, would decrease, although this effect can be less pronounced for floating rate instruments. In addition, inflation increases the cost of goods and services we use in our business operations, such as electricity and other utilities, which increases our noninterest expenses. Furthermore, our customers are also affected by inflation and the rising costs of goods and services used in their households and businesses, which could have a negative impact on their ability to repay their loans with us.

Inflation also has had a negative effect on the demand for mortgage loans, including construction loans, in our market area. Inflation has led to a rising market interest rate environment and higher loan interest rates, making mortgage loan debt more expensive and thereby depressing loan demand. The rising market interest rate environment has also depressed the market for existing home sales because homeowners are reluctant to forego their lower interest rate mortgage loans upon a sale and having to obtain a higher rate mortgage loan to finance a new home purchase. Inflation has also increased building construction costs, which has had a negative effect on demand for construction loans.

We have a high concentration of loans secured by real estate in our market area. Adverse economic conditions, both generally and in our market area, could adversely affect our financial condition and results of operations.

Because we have relatively few loans secured by real estate outside of our market area, we have a greater risk of loan defaults and losses in the event of a further economic downturn in our market area, as adverse economic conditions may have a negative effect on the ability of our borrowers to make timely payments of their loans. A return of recessionary conditions and/or negative developments in the domestic and international credit markets may significantly affect the markets in which we do business, the value of our loans, investments, and collateral securing our loans, and our ongoing operations, costs and profitability. Any of these negative events may result in higher than expected loan delinquencies, increase our levels of nonperforming and classified assets, and reduce demand for our products and services, which may cause us to incur losses and may adversely affect our capital, liquidity and financial condition. According to published data, our market area has not experienced any material declines in real estate values during the last year or any material increase in the number of foreclosure proceedings.

A worsening of economic conditions could reduce demand for our products and services and/or increase our level of non-performing loans, which could adversely affect our financial condition and results of operations.

Unlike larger financial institutions that are more geographically diversified, our profitability depends primarily on the general economic conditions in our primary market area. We believe the current general economic conditions in our primary market area are healthy and stable. Over the last year our primary market area has not experienced any material decline in real estate values or a material increase in the number of foreclosures. In addition to local economic conditions, which could have a significant impact on ability of our borrowers to repay their loans and on the value of the collateral securing their loans, deterioration in general economic conditions could result in the following consequences, any of which could have a material adverse effect on our business, financial condition, liquidity and results of operations:

Moreover, a significant decline in general, regional or local economic conditions, caused by inflation, recession, tariffs and international trade disputes, acts of terrorism, an outbreak of hostilities or other international or domestic calamities, unemployment or other factors beyond our control could further impact these local economic conditions and could further negatively affect the financial results of our banking operations. In addition, deflationary pressures, while possibly lowering our operating costs, could have a significant negative effect on our borrowers, especially our business borrowers, and the values of underlying collateral securing loans, which could negatively affect our financial performance.

Risks Related to Competitive Matters

Strong competition within our market area may limit our growth and profitability.

Competition for loans and deposits in the banking and financial services industry is intense. We compete with commercial banks, savings institutions, mortgage brokerage firms, credit unions, finance companies, mutual funds, insurance companies, brokerage and investment banking firms, and unregulated or less regulated non-banking entities. Many of these competitors are substantially larger than us and have substantially greater resources and higher lending limits than we have and offer certain services that we do not or cannot provide. In addition, some of our competitors offer loans with lower interest rates and/or more attractive terms than loans we offer and/or offer deposit products with higher interest rates and/or more attractive terms than the deposit products we offer. Competition also makes it increasingly difficult and costly to attract and retain qualified employees. We expect competition to increase in the future as a result of legislative, regulatory and technological changes and the continuing trend of consolidation in the financial services industry. Our profitability depends upon our continued ability to successfully compete for business and qualified employees in our market area. The greater resources and deposit and loan products offered by some of our competitors may limit our ability to increase our interest-earning assets. See “Business of Monroe Federal – Competition.”

Our small size makes it more difficult for us to compete.

Our small asset size makes it more difficult to compete with other financial institutions that are larger and can more easily afford to invest in the marketing and technologies needed to attract and retain customers. Because our principal source of income is the net interest income we earn on our loans and investments after deducting interest paid on deposits and other sources of funds, our ability to generate the revenues needed to cover our expenses and finance such investments is limited by the size of our loan and investment portfolios. Accordingly, we are not always able to offer new products and services as quickly as our competitors. Our lower earnings may also make it more difficult to offer competitive salaries and benefits. In addition, our smaller customer base may make it difficult to generate meaningful non-interest income from such activities as securities and insurance brokerage. Finally, as a smaller institution, we are disproportionately affected by the continually increasing costs of compliance with new banking and other regulations.

Risks Related to Operational Matters

Our funding sources may prove insufficient to meet our liquidity needs and support our future growth.

We must maintain sufficient funds to meet the needs of depositors and borrowers. As a part of our liquidity management, we primarily use advances from the Federal Home Loan Bank of Cincinnati as a funding source to supplement funds received from deposit growth and repayments and maturities of loans and investments. As we continue to grow and to meet liquidity needs, we may have to depend more on advances from the Federal Home Loan Bank of Cincinnati. In addition to our ability to obtain advances from the Federal Home Loan Bank of Cincinnati, additional funding sources include an established line of credit with a correspondent bank and borrowing capacity through the Federal Reserve Bank of Cleveland, as well as Federal funds purchased and brokered certificates of deposit. Adverse operating results or changes in industry conditions could lead to difficulty or an inability to access these additional funding sources. Our financial flexibility will be severely constrained if we are unable to maintain our access to funding or if adequate financing at acceptable interest rates is not available to meet liquidity needs and support future growth. If we are required to rely more heavily on more expensive funding sources to accommodate liquidity needs or support future growth, our revenues may not increase proportionately to cover our interest costs. In this case, our operating margins and profitability would be adversely affected.

At March 31, 2024, a commercial depositor maintained a $21.1 million interest-bearing demand account with us, which represented 14.8% of total deposits at that date. Because of the nature of the depositor’s business, the account balance fluctuates significantly and we need to have sufficient available funds to meet withdrawals from this account, which can be significant over a short period of time, or if the depositor were to close the account. Depending on our liquidity position at any given time we may need to resort to higher cost funds, such as advances from the Federal Home Loan Bank of Cincinnati, to fund withdrawals from this deposit account. At March 31, 2024, we paid interest on this deposit account at a weighted average rate of 0.02% per annum. In contrast, at March 31, 2024, we paid interest on advances from the Federal Home Loan Bank of Cincinnati at a weighted average rate of 4.43% per annum.

We plan to develop the infrastructure needed to sell one- to four-family residential mortgage loans, which will increase our noninterest expenses.

Historically, we have not sold loans we have originated. Following the conversion and stock offering, we plan to develop the infrastructure necessary to sell one- to four-family residential mortgage loans, particularly longer term one- to four-family residential mortgage loans to help mitigate our interest rate risk exposure. We expect to hire up to three additional employees for this purpose, which is expected to increase our noninterest expenses in future periods.

We face significant operational risks because of our reliance on technology. Our information technology systems may be subject to failure, interruption or security breaches.

Information technology systems are critical to our business. Our business requires us to collect, process, transmit and store significant amounts of confidential information regarding our customers, employees and our own business, operations, plans and business strategies. We use various technology systems to manage our customer relationships, general ledger, securities investments, deposits, and loans. Our computer systems, data management and internal processes, as well as those of third parties, are integral to our performance. Our operational risks include the risk of malfeasance by employees or persons outside our company, errors relating to transaction processing and technology, systems failures or interruptions, breaches of our internal control systems and compliance requirements, and business continuation and disaster recovery. There have been increasing efforts by third parties to breach data security at financial institutions. Such attacks include computer viruses, malicious or destructive code, phishing attacks, denial of service or information or other security breaches that could result in the unauthorized release, gathering, monitoring, misuse, loss or destruction of confidential, proprietary and other information, damages to systems, or other material disruptions to network access or business operations. Although we take protective measures and believe that we have not experienced any of the data breaches described above, the security of our computer systems, software, and networks may be vulnerable to breaches, unauthorized access, misuse, computer viruses, or other malicious code and cyber-attacks that could have an impact on information security. Because the techniques used to cause security breaches change frequently, we may be unable to proactively address these techniques or to implement adequate preventative measures.

If there is a breakdown in our internal control systems, improper operation of systems or improper employee actions, or a breach of our security systems, including if confidential or proprietary information were to be mishandled, misused or lost, we could suffer financial loss, loss of customers and damage to our reputation, and face regulatory action or civil litigation. Any of these events could have a material adverse effect on our financial condition and results of operations. Insurance coverage may not be available for such losses, or where available, such losses may exceed insurance limits.

In addition, we outsource a majority of our data processing requirements to third-party providers. Accordingly, our operations are exposed to risk that these vendors will not perform according to our contractual agreements with them, or we also could be adversely affected if such an agreement is not renewed by the third-party vendor or is renewed on terms less favorable to us. If our third-party providers encounter difficulties, or if we have difficulty communicating with those service providers, our ability to adequately process and account for transactions could be affected, and our business operations could be adversely affected, which could have a material adverse effect on our financial condition and results of operations. Threats to information security also exist in the processing of customer information through various other vendors and their personnel. To our knowledge, the services and programs provided to us by third parties have not experienced any material security breaches. However, the existence of cyber-attacks or security breaches at third parties with access to our data, such as vendors, may not be disclosed to us in a timely manner.

Our Board of Directors relies to a large degree on management and outside consultants in overseeing cybersecurity risk management.

Monroe Federal has a standing Officers Committee, consisting of the President and Chief Executive Officer and other executive officers including the Chief Information and Security Officer. The committee oversees cybersecurity risk management, in addition to other areas of Monroe Federal’s operations. The committee meets monthly, or more frequently if needed, and reports to Monroe Federal’s board of directors quarterly. Monroe Federal also engages outside consultants to support its cybersecurity efforts. Aside from the President and Chief Executive Officer, who is also a director of Monroe Federal, the other directors of Monroe Federal do not have significant experience in cybersecurity risk management in other business entities comparable to Monroe Federal.

We depend on our management team to implement our business strategy and execute successful operations and we could be harmed by the loss of their services.

We depend on the services of the members of our senior management team who direct our strategy and operations. Our executive officers and lending personnel possess substantial expertise, extensive knowledge of our markets and key business relationships. Our loss of these persons, or our inability to hire additional qualified personnel, could impact our ability to implement our business strategy and could have a material adverse effect on our results of operations and our ability to compete in our markets. We do not maintain “key-person” life insurance on any member of our senior management team. See “Management.”

We are a community bank and our ability to maintain our reputation is critical to the success of our business. The failure to do so may materially adversely affect our performance.

We are a community bank, and our reputation is one of the most valuable components of our business. A key factor in implementing our business strategy is our reputation for customer service and knowledge of local markets to expand our presence by capturing new business opportunities from existing and prospective customers in our market area and contiguous areas. Threats to our reputation can come from many sources, including adverse sentiment about financial institutions generally, unethical practices, employee misconduct, failure to deliver minimum standards of service or quality, compliance deficiencies, cybersecurity incidents and questionable or fraudulent activities of our customers. Negative publicity regarding our business, employees, or customers, with or without merit, may result in the loss of customers and employees, costly litigation and increased governmental regulation, all of which could adversely affect our business and operating results.

We are subject to litigation risk, and any pending or potential litigation may have an adverse effect on our business, financial condition and results of operations.

Although we are not a party to any material pending or potential legal proceedings, pending or potential legal proceedings can pose significant financial and other risks to our organization. Prosecuting or defending against a lawsuit or other legal proceeding is often costly. Legal issues, such as lawsuits, unenforceable contracts, and adverse judgments, can potentially disrupt our operations, potentially materially reduce our earnings, capital and liquidity, and otherwise materially and adversely affect our business, financial condition and results of operations. See “Business of Monroe Federal – Legal Proceedings.”

Risks Related to Laws and Regulations

Changes in laws and regulations and the cost of regulatory compliance with new laws and regulations may adversely affect our operations and/or increase our costs of operations.

Monroe Federal is subject to extensive regulation, supervision and examination by the OCC. Monroe Federal Bancorp will be subject to extensive regulation, supervision and examination by the Federal Reserve Board. Such regulation and supervision govern the activities in which an institution and its holding company may engage and is intended primarily for the protection of the federal deposit insurance fund and Monroe Federal’s depositors rather than the protection of Monroe Federal Bancorp’s stockholders. Regulatory authorities have extensive discretion in their supervisory and enforcement activities, including the imposition of restrictions on our operations, the classification of our assets and determination of the adequacy of the level of our allowance for credit losses. These regulations, along with existing tax, accounting, securities, insurance and monetary laws, rules, standards, policies, and interpretations, control the methods by which financial institutions conduct business, implement strategic initiatives and tax compliance, and govern financial reporting and disclosures. Any change in such regulation and oversight, whether in the form of regulatory policy, regulations, legislation or supervisory action, may have a material impact on our operations. Further, changes in accounting standards can be both difficult to predict and involve judgment and discretion in their interpretation by us and our independent accounting firm. These changes could materially impact, potentially even retroactively, how we report our financial condition and results of operations.

Non-compliance with the USA PATRIOT Act, Bank Secrecy Act, or other laws and regulations could result in fines or sanctions.

The USA PATRIOT and Bank Secrecy Acts require financial institutions to develop programs to prevent financial institutions from being used for money laundering and terrorist activities. If such activities are suspected, financial institutions are obligated to file suspicious activity reports with the U.S. Treasury’s Office of Financial Crimes Enforcement Network. These rules require financial institutions to establish procedures for identifying and verifying the identity of customers seeking to open new financial accounts. Failure to comply with these regulations could result in fines or sanctions, including restrictions on pursuing any acquisitions or establishing or acquiring new branches. The policies and procedures we have adopted that are designed to assist in compliance with these laws and regulations may not be effective in preventing violations of these laws and regulations. Furthermore, these rules and regulations continue to evolve and expand. We have not been subject to fines or other penalties, or have suffered business or reputational harm, as a result of money laundering activities in the past.

Monetary policies and regulations of the Federal Reserve Board could adversely affect our business, financial condition and results of operations.

In addition to being affected by general economic conditions, our earnings and growth are affected by the policies of the Federal Reserve Board. An important function of the Federal Reserve Board is to regulate the money supply and credit conditions. Among the instruments used by the Federal Reserve Board to implement these objectives are open market purchases and sales of U.S. government securities, adjustments of the discount rate and changes in banks’ reserve requirements against bank deposits. These instruments are used in varying combinations to influence overall economic growth and the distribution of credit, bank loans, investments and deposits. Their use also affects interest rates charged on loans or paid on deposits. The monetary policies and regulations of the Federal Reserve Board have had a significant effect on the operating results of financial institutions in the past and are expected to continue to do so in the future. The effects of such policies upon our business, financial condition and results of operations cannot be predicted.

We are an emerging growth company, and any decision on our part to comply only with certain reduced reporting and disclosure requirements applicable to emerging growth companies could make our common stock less attractive to investors.

Monroe Federal Bancorp qualifies as an “emerging growth company” under the JOBS Act. For as long as it continues to be an emerging growth company, it may choose to take advantage of exemptions from various reporting requirements applicable to public companies that are not available to companies that are not emerging growth companies, including, but not limited to, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a non-binding advisory vote on executive compensation. As an emerging growth company, Monroe Federal Bancorp also will not be subject to Section 404(b) of the Sarbanes-Oxley Act of 2002, which would require that our independent auditors audit our internal control over financial reporting. In addition, as an emerging growth company, we have elected to take advantage of the extended transition periods for adopting new or revised financial accounting standards until the date they are required to be adopted by private companies (however, if any new or revised financial accounting standards would not apply to private companies, we would not be able to delay their adoption). Accordingly, our financial statements may not be comparable to those of public companies that adopt new or revised financial accounting standards as of an earlier date. Investors may find our common stock less attractive since we have chosen to rely on these exemptions. If some investors find our common stock less attractive as a result of any choices to reduce future disclosure, there may be a less active trading market for our common stock and the price of our common stock may be more volatile.

We are also a smaller reporting company, and even if we no longer qualify as an emerging growth company, any decision on our part to comply only with certain reduced reporting and disclosure requirements applicable to smaller reporting companies could make our common stock less attractive to investors.

In addition to qualifying as an emerging growth company, Monroe Federal Bancorp qualifies as a “smaller reporting company” under the federal securities laws. For as long as it continues to be a smaller reporting company, it may choose to take advantage of exemptions from various reporting requirements applicable to public companies that are not available to companies that are not smaller reporting companies, including, but not limited to, reduced financial disclosure obligations and reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements. If some investors find our common stock less attractive as a result of any choices to reduce future disclosure, there may be a less active trading market for our common stock and the price of our common stock may be more volatile.

Risks Related to Accounting Matters

Changes in management’s estimates and assumptions may have a material impact on our consolidated financial statements and our financial condition or operating results.

In preparing this prospectus, as well as in preparing the periodic reports Monroe Federal Bancorp will be required to file under the Securities Exchange Act of 1934, as amended, upon the completion of the conversion and stock offering, including Monroe Federal Bancorp’s consolidated financial statements, our management is and will be required under applicable rules and regulations to make estimates and assumptions as of a specified date. These estimates and assumptions are based on management’s best estimates and experience as of that date and are subject to substantial risk and uncertainty. Materially different results may occur as circumstances change and additional information becomes known. Areas requiring significant estimates and assumptions by management include our evaluation of the adequacy of our allowance for credit losses, the valuation of deferred tax assets, and the fair value of financial instruments.

Changes in accounting standards could affect reported earnings.

The bodies responsible for establishing accounting standards, including the Financial Accounting Standards Board, the Securities and Exchange Commission and other regulatory bodies, periodically change the financial accounting and reporting guidance that governs the preparation of our financial statements. These changes can be hard to predict and can materially impact how we record and report our consolidated financial condition and results of operations. In some cases, we could be required to apply new or revised guidance retroactively.

Risks Related to the Stock Offering

We do not have strong earnings. We expect our return on equity to be low following the conversion and stock offering, which could negatively affect the trading price of our shares of common stock.

Net income divided by average stockholders’ equity, known as “return on equity,” is a ratio many investors use to compare the relative performance of financial institutions. Our return on average equity was 0.73% for the fiscal year ended March 31, 2024. Our average equity to average assets ratio was 5.38% for the fiscal year ended March 31, 2024. Our total equity was $8.6 million at March 31, 2024. Assuming the completion of the conversion and stock offering, our pro forma consolidated stockholders’ equity at March 31, 2024, is estimated at between $11.8 million at the minimum of the offering range and $14.3 million at the adjusted maximum of the offering range. We expect our return on equity to be lower than our peers unless and until we are able to leverage our capital including the additional capital from the conversion and stock offering. Our return on equity also will be negatively affected by added expenses associated with our employee stock ownership plan and the stock-based benefit plans we intend to adopt after the completion of the conversion and stock offering. Our ability to increase earnings organically is relatively limited primarily given our small size. Unless and until we can increase our earnings and leverage our capital including the capital raised in the stock offering, we expect that our return on equity will be low, which may reduce the trading price of our shares of common stock.

The future price of our shares of common stock may be less than the $10.00 purchase price per share in the stock offering.

If you purchase shares of common stock in the stock offering, you may not be able to sell them later at or above the $10.00 purchase price. In many cases, shares of common stock issued by newly converted savings institutions have traded below the initial offering price. The aggregate purchase price of the shares of common stock sold in the stock offering will be based on an independent appraisal. The independent appraisal is not intended, and should not be construed, as a recommendation of any kind as to the advisability of purchasing shares of common stock. The independent appraisal is based on certain estimates, assumptions and projections, all of which are subject to change from time to time. After the shares begin trading, the trading price of our common stock will be determined by the marketplace, and may be influenced by many factors, including prevailing market interest rates, the overall performance of the economy, changes in federal tax laws, new regulations, investor perceptions of Monroe Federal Bancorp and the outlook for the financial services industry in general. Price fluctuations in our common stock may be unrelated to our operating performance.

There will be a limited trading market in our common stock, which could hinder your ability to sell our common stock and may lower the market price of the stock.

We have never issued stock and, therefore, there is no current trading market for the shares of common stock. Upon completion of the conversion and stock offering, we expect our common stock will be quoted on the OTCQB Market. We expect that our “public float,” which is the total number of our outstanding shares of common stock less the number of shares held by our employee stock ownership plan and by our directors and executive officers, and which is used as a measure of shares available for trading, will be limited. The limited trading market could also result in a wider spread between the “bid” and “ask” prices for the common stock, which could make it more difficult to sell a large number of shares at one time and could mean a sale of a large number of shares at one time could depress the market price.

You may not be able to sell your shares of common stock until you have received a statement reflecting ownership of shares, which will affect your ability to take advantage of any changes in the stock price immediately following the stock offering.

A statement reflecting ownership of the shares of common stock you purchased in the stock offering may not be delivered to you for several days after the completion of the conversion and stock offering and the commencement of trading in the common stock. Your ability to sell the shares of common stock before receiving your ownership statement will depend on arrangements you may make with a brokerage firm, and you may be unable to sell your shares of common stock until you have received your ownership statement. As a result, you may not be able to take advantage of any changes in the price of the common stock price once trading commences following the completion of the conversion and stock offering.

A significant percentage of our common stock will be held by our directors and executive officers and benefit plans.

We expect that our directors and executive officers, together with their associates, will subscribe for 142,700 shares of common stock in the stock offering. In addition, we intend to establish an employee stock ownership plan that will purchase 7.0% of the shares sold in the stock offering. As a result, upon consummation of the conversion and stock offering, an aggregate of up to 178,400 shares, or 35.0%, and 191,000 shares, or 27.7%, of our outstanding common stock would be held by our directors and executive officers and their associates and by our employee stock ownership plan based on the minimum and maximum of the offering range, respectively. Further, additional shares would be held by management following the implementation of an equity incentive plan, which we intend to implement no earlier than six months following the completion of the conversion and stock offering following the receipt of stockholder approval. The articles of incorporation and bylaws of Monroe Federal Bancorp contain supermajority voting provisions that require that the holders of at least 80% of Monroe Federal Bancorp’s outstanding shares of voting stock approve certain actions including, but not limited to, the amendment of certain provisions of Monroe Federal Bancorp’s articles of incorporation and bylaws. If our directors and executive officers and their associates and benefit plans hold more than 20% of our outstanding common stock following the completion of the conversion and stock offering, the shares held by these individuals and benefit plans could be voted in a manner that would ensure that the 80% supermajority needed to approve such action could not be attained. For more information on the restrictions included in the articles of incorporation and bylaws of Monroe Federal Bancorp, see “Restrictions on Acquisition of Monroe Federal Bancorp.”

Our failure to effectively deploy the net proceeds may have an adverse effect on our financial performance.

We intend to contribute between $1.9 million and $2.8 million of the net proceeds of the stock offering (or $3.3 million at the adjusted maximum of the offering range) to Monroe Federal. We may use the remaining net proceeds to invest in short-term investments and for general corporate purposes, including repurchasing shares of our common stock and paying dividends. We also expect to use a portion of the net proceeds we retain to fund a loan to our employee stock ownership plan to purchase shares of common stock in the stock offering. Monroe Federal may use the net proceeds it receives to fund new loans, expand its retail banking franchise by establishing or acquiring new branches or for other general corporate purposes. However, except for funding the loan to the employee stock ownership plan, we have not allocated specific amounts of the net proceeds for any of these purposes, and we will have broad discretion in determining the amount of the net proceeds we apply to different uses and when we apply or reinvest such proceeds. Also, certain of these uses, such as establishing or acquiring new branches, may require the approval of our bank regulators. We have not established a timetable for investing the net proceeds, and we cannot predict how long we will require to invest the net proceeds. Our failure to reinvest these funds effectively would reduce our profitability and may adversely affect the value of our common stock.

The cost of additional finance and accounting systems, procedures, compliance and controls in order to satisfy our new public company reporting requirements will increase our expenses.

As a result of the completion of the conversion and stock offering, we will become a public reporting company. We expect that the obligations of being a public company, including the substantial public reporting obligations, will require significant expenditures and place additional demands on our management team. We have made, and will continue to make, changes to our internal controls and procedures for financial reporting and accounting systems to meet our reporting obligations as a stand-alone public company. However, the measures we take may not be sufficient to satisfy our obligations as a public company. The Sarbanes-Oxley Act of 2002 requires annual management assessments of the effectiveness of our internal control over financial reporting, starting with the second annual report that we would expect to file with the Securities and Exchange Commission. Any failure to achieve and maintain an effective internal control environment could have a material adverse effect on our business and stock price. In addition, we may need to hire additional compliance, accounting and financial staff with appropriate public company experience and technical knowledge, and we may not be able to do so in a timely fashion. As a result, we may need to rely on outside consultants to provide these services for us until qualified personnel are hired. These obligations will increase our operating expenses and could divert our management’s attention from our operations.

Our stock-based benefit plans will increase our expenses and reduce our income.

We intend to adopt one or more new stock-based benefit plans after the conversion and stock offering, subject to stockholder approval, which will increase our annual compensation and benefit expenses related to the stock options and stock awards granted to participants under the new stock-based benefit plans. The actual amount of these new stock-related compensation and benefit expenses will depend on the number of options and stock awards granted under the plans, the fair market value of our stock or options on the date of grant, the vesting period, and other factors which we cannot predict at this time. If we adopt stock-based benefit plans within 12 months following the conversion and stock offering and assuming Monroe Federal’s tangible capital ratio is less than 10% at the time of adoption (Monroe Federal’s tangible capital ratio was less than 10% at March 31, 2024), the shares of common stock reserved for issuance pursuant to awards of restricted stock and grants of options under such plans would be limited to 3% and 10%, respectively, of the number of shares of our common stock sold in the stock offering. If we adopt stock-based benefit plans more than 12 months after the completion of the conversion and stock offering, we may adopt plans that allow for greater amounts of awards and options and, therefore, we could award restricted shares of common stock or grant options in excess of these amounts, which would further increase costs.

In addition, we will recognize expense for our employee stock ownership plan when shares are committed to be released to participants’ accounts, and we will recognize expense for restricted stock awards and stock options over the vesting period of awards made to recipients. The expense in the first year following the conversion and stock offering for our employee stock ownership plan and for our new stock-based benefit plans, assuming such plans had been implemented at the beginning of the year, is estimated to be approximately $144,000 ($125,000 after-tax based on an effective tax rate of 21.0% and assuming that 25% of stock options are incentive stock options, which are tax deductible) at the adjusted maximum of the offering range as set forth in the pro forma financial information under “Pro Forma Data,” assuming the $10.00 per share purchase price as fair market value. Actual expenses, however, may be higher or lower, depending on the price of our common stock. For further information, see “Management – Benefits to be Considered Following Completion of the Conversion and Stock Offering.”

The implementation of stock-based benefit plans may dilute your ownership interest. Historically, stockholders have approved these stock-based benefit plans.

We intend to adopt one or more new stock-based benefit plans following the conversion and stock offering. These plans may be funded either through open market purchases of our common stock or from the issuance of authorized but unissued shares of common stock. Our ability to repurchase shares of our common stock to fund these plans will be subject to many factors, including applicable regulatory restrictions on stock repurchases, the availability of stock in the market, the trading price of our stock, our capital levels, alternative uses for our capital and our financial performance. While we currently intend to fund the new stock-based benefit plans through open market purchases, stockholders would experience a 9.09% dilution in ownership interest if newly issued shares of our common stock are used to fund stock options in an amount equal to 10% of the number of shares sold in the stock offering, and all such stock options are exercised, and a 2.91% dilution in ownership interest if newly issued shares of our common stock are used to fund shares of restricted common stock in an amount equal to 3% of the number of shares sold in the stock offering. Such dilution would also reduce earnings per share. If we adopt the plans more than 12 months following the conversion and stock offering, new stock-based benefit plans would not be subject to these percentage size limitations and stockholders could experience even greater dilution.

The implementation of new stock-based benefit plans is subject to stockholder approval. Historically, the overwhelming majority of stock-based benefit plans adopted by savings institutions and their holding companies following a mutual-to-stock conversion have been approved by stockholders.

We have not determined when we will adopt one or more new stock-based benefit plans. Stock-based benefit plans adopted more than 12 months following the completion of the conversion may exceed regulatory restrictions on the size of stock-based benefit plans adopted within 12 months, which would further increase our costs.

If we adopt stock-based benefit plans more than 12 months following the completion of the conversion and stock offering, then grants of shares of common stock or stock options under our proposed stock-based benefit plans may exceed 4% and 10%, respectively, of the number of shares of common stock sold in the stock offering. Stock-based benefit plans that provide for awards in excess of these amounts would increase our costs beyond the amounts estimated in “—Our stock-based benefit plans will increase our expenses and reduce our income.” Stock-based benefit plans that provide for awards in excess of these amounts could also result in dilution to stockholders in excess of that described in “—The implementation of stock-based benefit plans may dilute your ownership interest. Historically, stockholders have approved these stock-based benefit plans.” Although the implementation of stock-based benefit plans would be subject to stockholder approval, the timing of the implementation of such plans will be at the discretion of our board of directors.

Our stock value may be negatively affected by applicable regulations that restrict stock repurchases.

Applicable regulations generally restrict us from repurchasing our shares of common stock during the first year following the completion of the conversion and stock offering. Stock repurchases are a capital management tool that can enhance the value of a company’s stock, and our inability to repurchase our shares of common stock during the first year following the stock offering may negatively affect our stock price.

Various factors may make takeover attempts more difficult to achieve.

Certain provisions of our articles of incorporation and bylaws and federal banking laws, including regulatory approval requirements, could make it more difficult for a third party to acquire control of Monroe Federal Bancorp without our board of directors’ approval. Under regulations applicable to the conversion, for a period of three years following completion of the conversion, no person may offer to acquire or acquire beneficial ownership of more than 10% of our outstanding shares of common stock without prior approval of the Federal Reserve Board. Under federal law, subject to certain exemptions, a person, entity or group must notify the Federal Reserve Board and receive the Federal Reserve Board’s non-objection before acquiring control of a bank holding company or a savings and loan holding company. There also are provisions in our articles of incorporation and bylaws that we may use to delay or block a takeover attempt, including a provision that prohibits any person from voting more than 10% of our outstanding shares of common stock. Furthermore, shares of restricted stock and stock options that we may grant to employees and directors, stock ownership by our management and directors and other factors may make it more difficult for companies or persons to acquire control of Monroe Federal Bancorp without the consent of our board of directors, and may increase the cost of an acquisition. Taken together, these statutory or regulatory provisions and provisions in our articles of incorporation and bylaws could result in our being less attractive to a potential acquirer and therefore could adversely affect the market price of our common stock. For additional information, see “Restrictions on Acquisition of Monroe Federal Bancorp” and “Management – Benefits to be Considered Following Completion of the Conversion and Stock Offering.”

Our articles of incorporation provide that, subject to limited exception, state and federal courts in the State of Maryland are the sole and exclusive forum for certain stockholder litigation matters, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers, and other employees.

The articles of incorporation of Monroe Federal Bancorp provide that, unless Monroe Federal Bancorp consents in writing to the selection of an alternative forum, the sole and exclusive forum for (i) any derivative action or proceeding brought on behalf of Monroe Federal Bancorp, (ii) any action asserting a claim of breach of a fiduciary duty owed by any director, officer or other employee of Monroe Federal Bancorp to Monroe Federal Bancorp or its stockholders, (iii) any action asserting a claim arising pursuant to any provision of the Maryland General Corporation Law, or (iv) any action asserting a claim governed by the internal affairs doctrine will be conducted in a state or federal court located within the State of Maryland, in all cases subject to the court’s having personal jurisdiction over the indispensable parties named as defendants. This exclusive forum provision does not apply to claims arising under the federal securities laws. This exclusive forum provision may limit a stockholder’s ability to bring a claim in a judicial forum it finds favorable for disputes with Monroe Federal Bancorp and its directors, officers, and other employees or may cause a stockholder to incur additional expense by having to bring a claim in a judicial forum that is distant from where the stockholder resides, or both. In addition, if a court were to find this exclusive forum provision to be inapplicable or unenforceable in a particular action, we may incur additional costs associated with resolving the action in another jurisdiction, which could have a material adverse effect on our financial condition and results of operations.

You may not revoke your decision to purchase Monroe Federal Bancorp common stock in the subscription offering or in any community offering after you send us your stock order form.

Funds submitted or automatic withdrawals authorized in connection with the purchase of shares of common stock in the subscription offering and in any community offering will be held by us until the completion or termination of the conversion and stock offering, including any extension of the expiration date and consummation of any syndicated community offering. Because the completion of the conversion and stock offering will be subject to regulatory approvals and an update of the independent appraisal, among other factors, there may be one or more delays in completing the conversion and stock offering. Orders submitted in the subscription offering and in any community offering are irrevocable, and purchasers will have no access to their funds unless the stock offering is terminated, or extended beyond __________, 2024, or the number of shares to be sold in the stock offering is decreased to fewer than 510,000 shares or increased to more than 793,500 shares.

The distribution of subscription rights could have adverse income tax consequences.

If the subscription rights granted in connection with the stock offering are deemed to have an ascertainable value, receipt of such rights may be taxable in an amount equal to such value. Whether subscription rights are considered to have ascertainable value is an inherently factual determination. We have received an opinion of counsel that it is more likely than not that such rights have no value; however, such opinion is not binding on the Internal Revenue Service.

SELECTED FINANCIAL AND OTHER DATA OF MONROE FEDERAL

The following tables set forth selected historical financial and other data of Monroe Federal at the dates and for the periods indicated. The information at and for the fiscal years ended March 31, 2024 and 2023 is derived in part from, and should be read together with, the audited financial statements and related notes beginning at page F-1 of this prospectus.

FORWARD-LOOKING STATEMENTS

This prospectus contains forward-looking statements, which can be identified by the use of words such as “estimate,” “project,” “believe,” “intend,” “anticipate,” “assume,” “plan,” “seek,” “expect,” “will,” “may,” “should,” “indicate,” “would,” “believe,” “contemplate,” “continue,” “target” and words of similar meaning. These forward-looking statements include, but are not limited to:

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 prospectus.

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:

Because of these and a wide variety of other uncertainties, our actual future results may be materially different from the results indicated by these forward-looking statements. See “Risk Factors” beginning on page 13.

HOW WE INTEND TO USE THE PROCEEDS FROM THE STOCK OFFERING

Although we cannot determine what the actual net proceeds from the sale of the shares of common stock in the stock offering will be until the stock offering is completed, we anticipate that the net proceeds will be between $3.7 million and $5.5 million, or $6.5 million if the offering range is increased by 15%.

We intend to distribute the net proceeds as follows:

Payments for shares of common stock made through withdrawals from deposit accounts at Monroe Federal will not result in the receipt of new funds for investment but will reduce Monroe Federal’s deposits. The net proceeds may vary because total offering expenses may be more or less than our estimates. For example, our expenses would increase if there were a syndicated community offering to sell shares of common stock not purchased in the subscription offering and any community offering.

Monroe Federal Bancorp intends to loan funds to the employee stock ownership plan to purchase shares of common stock in the stock offering. It may also use the net proceeds it retains:

Except for the loan to the employee stock ownership plan, Monroe Federal Bancorp has not quantified its plans for use of the net proceeds of the stock offering for each of the foregoing purposes. Initially, we intend to invest a substantial portion of the net proceeds in investment grade securities, including securities issued by U.S. Government agencies and mortgage-backed securities issued by U.S. Government agencies and U.S. Government-sponsored enterprises.

See “Our Dividend Policy” for a discussion of our expected dividend policy. Under applicable OCC regulations, we may not repurchase shares of our common stock during the first year following the completion of the conversion and stock offering, except when extraordinary circumstances exist and with prior regulatory approval, or except to fund management recognition plans (which would require notification to the OCC) or tax-qualified employee stock benefit plans.

Monroe Federal will receive a capital contribution from Monroe Federal Bancorp equal to at least 50% of the net offering proceeds. Based on this formula, we anticipate that Monroe Federal Bancorp will contribute to Monroe Federal $1.9 million, $2.3 million, $2.8 million and $3.3 million of the net offering proceeds at the minimum, midpoint, maximum, and adjusted maximum of the offering range, respectively.

Monroe Federal may use the net proceeds it receives from the stock offering:

Monroe Federal has not quantified its plans for use of the net proceeds of the stock offering for each of the foregoing purposes. Initially, a substantial portion of the net proceeds will be invested in securities issued by U.S. Government agencies and mortgage-backed securities issued by U.S. Government agencies and U.S. Government-sponsored enterprises. The use of the proceeds outlined above may change based on many factors, including, but not limited to, changes in interest rates, equity markets, laws and regulations affecting the financial services industry, our relative position in the financial services industry, the attractiveness of opportunities to expand our operations through establishing or acquiring branches, our ability to receive regulatory approval for any such expansion activities, and overall market conditions.

We expect our return on equity to decrease upon the completion of the conversion and stock offering until we are able to reinvest effectively the additional capital raised in the stock offering. See “Risk Factors – Risks Related to the Stock Offering – Our failure to effectively deploy the net proceeds may have an adverse effect on our financial performance.”

OUR DIVIDEND POLICY

Following the completion of the conversion and stock offering, Monroe Federal Bancorp’s board of directors will have the authority to declare dividends on our shares of common stock, subject to statutory and regulatory requirements. However, no decision has been made with respect to the payment of dividends. In determining whether to pay a cash dividend and the amount of such cash dividend, the board of directors is expected to take into account a number of factors, including capital requirements, our financial condition and results of operations, other uses of funds for the long-term value of stockholders, tax considerations, statutory and regulatory limitations and general economic conditions. No assurances can be given that any dividends will be paid or that, if paid, will not be reduced or eliminated in the future. Special cash dividends, stock dividends or returns of capital, to the extent permitted by regulations and policies of the OCC, may be paid in addition to, or in lieu of, regular cash dividends.

Monroe Federal Bancorp expects to file a consolidated federal income tax return with Monroe Federal. Accordingly, it is anticipated that any cash distributions that we make to our stockholders would be treated as cash dividends and not as a non-taxable return of capital for federal and state income tax purposes. Additionally, according to OCC regulations, during the three-year period following the stock offering, we will not take any action to declare an extraordinary dividend to stockholders that would be treated by recipients as a tax-free return of capital for federal income tax purposes.

Monroe Federal Bancorp’s articles of incorporation authorize the issuance of preferred stock. No shares of preferred stock will be issued in the conversion and stock offering. If we issue preferred stock in the future, the holders thereof may have a priority over the holders of our shares of common stock with respect to the payment of dividends. For a further discussion concerning the payment of dividends on our shares of common stock, see “Description of Capital Stock of Monroe Federal Bancorp – Common Stock.” Any dividends we may declare and pay will depend, in part, upon receipt of dividends from Monroe Federal, because dividends from Monroe Federal will be our primary source of income. OCC regulations impose limitations on dividends and other capital distributions by savings institutions like Monroe Federal. See “Regulation and Supervision – Federal Banking Regulation – Capital Distributions.”

Any payment of dividends by Monroe Federal to Monroe Federal Bancorp that would be deemed to be drawn out of Monroe Federal’s bad debt reserves, if any, would require Monroe Federal to pay taxes at the then-current tax rate on the amount of earnings deemed to be removed from the reserves for such distribution. Monroe Federal does not intend to make any distribution to us that would create such a federal tax liability. See “Taxation.”

MARKET FOR THE COMMON STOCK

Monroe Federal Bancorp is a newly formed company and has never issued capital stock. Monroe Federal, as a mutual institution, is not authorized to issue capital stock. Monroe Federal Bancorp expects that its common stock will be quoted on the OTCQB Market operated by OTC Markets Group upon the completion of the conversion and stock offering.

The development of an active trading market depends on the existence of willing buyers and sellers, the presence of which is not within our control, or that of any market maker. The number of active buyers and sellers of the shares of common stock at any particular time may be limited. Furthermore, we cannot assure you that, if you purchase shares of common stock, you will be able to sell them at or above $10.00 per share purchase price. Purchasers of common stock in this stock offering should have long-term investment intent and should recognize that there will be a limited trading market in the common stock. This may make it difficult to sell the common stock after the stock offering and may have an adverse impact on the price at which the common stock can be sold.

HISTORICAL AND PRO FORMA REGULATORY CAPITAL COMPLIANCE

At March 31, 2024, Monroe Federal exceeded all of the applicable regulatory capital requirements and was considered “well capitalized.” The following table sets forth its historical equity capital and regulatory capital at March 31, 2024, and its pro forma equity capital and regulatory capital after giving effect to the sale of shares of common stock at $10.00 per share. The table assumes Monroe Federal receives from Monroe Federal Bancorp $1.9 million, $2.3 million, $2.8 million and $3.3 million at the minimum, midpoint, maximum, and adjusted maximum of the offering range, respectively. See “How We Intend to Use the Proceeds from the Stock Offering.”

CAPITALIZATION

The following table presents Monroe Federal’s historical capitalization at March 31, 2024, and Monroe Federal Bancorp’s pro forma consolidated capitalization at the same date after giving effect to the conversion and stock offering, based upon the assumptions set forth under the section entitled “Pro Forma Data.”

PRO FORMA DATA

The following table summarize historical data of Monroe Federal and pro forma data of Monroe Federal Bancorp at and for the fiscal year ended March 31, 2024. This information is based on assumptions set forth below and in the footnotes to the table, and should not be used as a basis for projections of the market value of the shares of Monroe Federal Bancorp common stock following the conversion and stock offering.

The net proceeds in the tables are based upon the following assumptions:

Pro forma earnings on net proceeds have been calculated assuming the stock has been sold at the beginning of the period and the net proceeds have been invested at a yield of 4.21%, which is the yield on the five-year U.S. Treasury Note rate as of March 31, 2024. In light of current market interest rates, we consider this rate to reflect the pro forma reinvestment rate more accurately than the arithmetic average of the weighted average yield earned on our interest-earning assets and the weighted average rate paid on our deposits, which is the reinvestment rate generally required by OCC regulations. The pro forma after-tax yield on the net offering proceeds is assumed to be 3.33%, based on an effective tax rate of 21.0%.

We calculated historical and pro forma per share amounts by dividing historical and pro forma amounts of consolidated net income and stockholders’ equity by the indicated number of shares of common stock. We adjusted the earnings figures to give effect to the shares of common stock purchased by the employee stock ownership plan. We computed per share amounts for the period as if the shares of common stock were outstanding at the beginning of the period, but we did not adjust per share historical or pro forma stockholders’ equity to reflect the earnings on the estimated net proceeds.

The pro forma tables give effect to the implementation of a stock-based benefit plan. Subject to the receipt of stockholder approval, we have assumed that the stock-based benefit plan will acquire for restricted stock awards a number of shares of common stock equal to 3% of the number of shares of common stock sold in the stock offering at the same price for which they were sold in the stock offering. We assume that shares of common stock are granted under the plan in awards that vest over a five-year period.

We have also assumed that the stock-based benefit plan will grant options to acquire shares of common stock equal to 10% of our outstanding shares of common stock. In preparing the table below, we assumed that stockholder approval was obtained, that the exercise price of the stock options and the market price of the stock at the date of grant were $10.00 per share and that the stock options have a term of ten years and vested over five years. We applied the Black-Scholes option pricing model to estimate a grant-date fair value of $4.30 for each option. In addition to the terms of the options described above, the Black-Scholes option pricing model assumed an estimated volatility rate of 21.43% for the shares of common stock, a dividend yield of zero percent, an expected option life of 10 years, and a risk-free interest rate of 4.20%. Finally, we assumed that 25% of the stock options were non-qualified options granted to directors, resulting in a tax benefit (at an assumed tax rate of 21.0%) for a deduction equal to the grant date fair value of the options.

We may reserve shares for the exercise of stock options and the grant of stock awards under a stock-based benefit plan in excess of 10% and 3%, respectively, of our total outstanding shares if the stock-based benefit plan is adopted more than one year following the conversion and stock offering. In addition, we may grant options and award shares that vest more rapidly than over a five-year period if the stock-based benefit plan is adopted more than one year following the conversion and stock offering.

As discussed under “How We Intend to Use the Proceeds from the Stock Offering,” Monroe Federal Bancorp intends to contribute to Monroe Federal $1.9 million, $2.3 million, $2.8 million and $3.3 million of the net offering proceeds at the minimum, midpoint, maximum, and adjusted maximum of the offering range, respectively. Monroe Federal Bancorp will retain the remainder of the net offering proceeds and use a portion to make a loan to the employee stock ownership plan, and retain the remainder for future use.

The pro forma table does not give effect to: (i) withdrawals from deposit accounts at Monroe Federal to purchase shares of common stock in the stock offering; (ii) Monroe Federal Bancorp’s consolidated results of operations after the conversion and stock offering; or (iii) changes in the market price of the shares of common stock after the conversion and stock offering.

The following pro forma information may not represent the financial effects of the conversion and stock offering at the date on which the conversion and stock offering actually occurs and you should not use the table to indicate future results of operations. Pro forma stockholders’ equity represents the difference between the stated amount of our assets and liabilities, computed according to GAAP. We did not increase or decrease stockholders’ equity to reflect the difference between the carrying value of loans and other assets and their market value. Pro forma stockholders’ equity is not intended to represent the fair market value of the shares of common stock and may be different than the amounts that would be available for distribution to stockholders if we liquidated. Pro forma stockholders’ equity does not give effect to the impact of intangible assets, bad debt reserve or the liquidation account we will establish in connection with the conversion and stock offering in the unlikely event we are liquidated.

(footnotes on following page)

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This discussion and analysis reflects our financial statements and other relevant statistical data, and is intended to enhance your understanding of our financial condition and results of operations. The information in this section has been derived from Monroe Federal’s financial statements, which appear beginning on page F-1 of this prospectus. You should read the information in this section in conjunction with the business and financial information regarding Monroe Federal Bancorp and Monroe Federal provided in this prospectus.

Overview

After the completion of the conversion and stock offering, Monroe Federal Bancorp will conduct its operations primarily through Monroe Federal. Monroe Federal’s business consists primarily of accepting deposits from the general public and investing those deposits, together with funds generated from operations, in residential real estate loans and, to a lesser extent, commercial real estate loans. To a significantly lesser extent, we also originate multi-family mortgage loans, construction and land development loans, commercial and industrial loans, home equity loans and lines of credit, and consumer loans. We also invest in securities, which have historically consisted primarily of U.S. government and agency securities, mortgage-backed securities and obligations issued by U.S. government sponsored enterprises, and state and municipal securities. We offer a variety of deposit accounts including checking accounts, savings accounts and certificate of deposit accounts. Monroe Federal is subject to comprehensive regulation and examination by the OCC.

Our results of operations depend primarily on our net interest income. Net interest income is the difference between the interest income we earn on our interest-earning assets and the interest we pay on our interest-bearing liabilities. Our results of operations also are affected by our provisions for loan losses, non-interest income and non-interest expense. Non-interest income currently consists primarily of service charges on deposit accounts, other service charges and fees, and income from bank owned life insurance. Non-interest expense currently consists primarily of expenses related to salaries and employee benefits, occupancy and equipment, data processing, contract services, director fees, FDIC deposit insurance premiums, and other expenses.

We invest in bank owned life insurance to provide us with a funding source to offset some costs of our benefit plan obligations. Bank owned life insurance provides us with non-interest income that is nontaxable. Federal regulations generally limit our investment in bank owned life insurance to 25% of our Tier 1 capital plus our allowance for credit losses. At March 31, 2024, our investment in bank owned life insurance was $3.5 million, which was within this investment limit.

Our results of operations also may be affected significantly by general and local economic and competitive conditions, changes in market interest rates, governmental policies and actions of regulatory authorities.

Business Strategy

Our principal objective is to build long-term value for our stockholders by operating a profitable community-oriented financial institution dedicated to meeting the banking needs of our customers by emphasizing personalized and efficient customer service. Highlights of our current business strategy include:

Commercial real estate loans and commercial and industrial loans have higher credit risk than one- to four-family residential mortgage loans. See “Risk Factors – Risks Related to Our Lending Activities – Our commercial real estate loans involve credit risks that could adversely affect our financial condition and results of operations” and “ – Our commercial and industrial loans involve credit risks that could adversely affect our financial condition and results of operations” and “Business of Monroe Federal – Loan Underwriting Risks.”

We expect these strategies to guide our investment of the net proceeds of the stock offering. We intend to continue to pursue these business strategies after the conversion and stock offering, subject to changes necessitated by future market conditions, regulatory restrictions and other factors.

Anticipated Increase in Noninterest Expense

Following the completion of the conversion and stock offering, our noninterest expense is expected to increase because of the increased costs associated with operating as a public company and the increased compensation expenses associated with the purchase of shares of common stock by our employee stock ownership plan and the possible implementation of a stock-based benefit plan, if approved by our stockholders, no earlier than six months after the completion of the conversion and stock offering. See “Summary – Benefits to Management and Potential Dilution to Stockholders Resulting from the Conversion and Stock Offering;” “Risk Factors – Risks Related to the Stock Offering – Our stock-based benefit plans will increase our expenses and reduce our income;” and “Management – Benefits to be Considered Following Completion of the Conversion and Stock Offering.”

Historically, we have not sold loans we have originated. Following the conversion and stock offering, we plan to develop the infrastructure necessary to sell one- to four-family residential mortgage loans, particularly longer term one- to four-family residential mortgage loans to help mitigate our interest rate risk exposure. We expect to hire up to three additional employees for this purpose, which is expected to increase our noninterest expenses in future periods.

Critical Accounting Policies and Use of Critical Accounting Estimates

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

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

The following represent our critical accounting policies:

Allowance for Credit Losses. The allowance for credit losses is the estimated amount considered necessary to cover inherent, but unconfirmed, credit losses in the loan portfolio at the balance sheet date. The allowance is established through the provision for credit losses which is charged against income. In determining the allowance for credit losses, management makes significant estimates and has identified this policy as one of our most critical accounting policies.

Management performs a quarterly evaluation of the allowance for credit losses on loans and unfunded commitments. Consideration is given to a variety of factors in establishing this estimate including, but not limited to, current economic conditions, delinquency statistics, geographic and industry concentrations, the adequacy of the underlying collateral, the financial strength of the borrower, results of internal loan reviews and other relevant factors. This evaluation is inherently subjective as it requires material estimates that may be susceptible to significant change.

The allowance for credit losses is evaluated following the accounting guidance in Accounting Standards Update (ASU) No. 2016-13 Financial Instruments – Credit Losses (Topic 326) for the fiscal year ended March 31, 2024. ASC 326 replaced the incurred loss impairment methodology with a new CECL methodology that reflects expected credit losses over the lives of the credit instruments and requires consideration of a broader range of information to estimate credit losses. ASC 326 requires an estimate of all expected credit losses for loans based on historical experience, current conditions, and reasonable and supportable forecasts.

Before April 1, 2023, the analysis of the allowance for credit losses had two components, specific and general allowances. The specific percentage allowance was for unconfirmed losses related to loans that were determined to be impaired. Impairment was measured by determining the present value of expected future cash flows or, for collateral-dependent loans, the fair value of the collateral adjusted for market conditions and selling expenses. If the fair value of the loan was less than the loan’s carrying value, a charge was recorded for the difference. The general allowance, which was for loans reviewed collectively, was determined by segregating the remaining loans by type of loan, risk weighting (if applicable) and payment history. We also analyzed historical loss experience, delinquency trends, general economic conditions and geographic and industry concentrations. This analysis established historical loss percentages and qualitative factors that were applied to the loan groups to determine the amount of the allowance for credit losses necessary for loans that were reviewed collectively. The qualitative component was critical in determining the allowance for credit losses as certain trends may indicate the need for changes to the allowance for credit losses based on factors beyond the historical loss history. Not incorporating a qualitative component could misstate the allowance for credit losses.

Actual loan losses may be significantly more than the allowances we have established which could result in a material negative effect on our financial results.

Deferred Tax Assets. We use the asset and liability method of accounting for income taxes. Under this method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Deferred tax assets are reduced by a valuation allowance when it is more likely than not that some portion of the deferred tax asset will not be realized. We exercise significant judgment in evaluating the amount and timing of recognition of the resulting tax liabilities and assets. These judgments require us to make projections of future taxable income. The judgments and estimates we make in determining our deferred tax assets, which are inherently subjective, are reviewed on a continual basis as regulatory and business factors change. Determining the proper valuation allowance for deferred taxes is critical in properly valuing the deferred tax asset and the related recognition of income tax expense or benefit. Any reduction in estimated future taxable income may require us to record a valuation allowance against our deferred tax assets.

Fair Value Measurements. The fair value of a financial instrument is defined as the amount at which the instrument could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale. We estimate the fair value of a financial instrument and any related asset impairment using a variety of valuation methods. Where financial instruments are actively traded and have quoted market prices, quoted market prices are used for fair value. When the financial instruments are not actively traded, other observable market inputs, such as quoted prices of securities with similar characteristics, may be used, if available, to determine fair value. When observable market prices do not exist, we estimate fair value. These estimates are subjective in nature and imprecision in estimating these factors can impact the amount of gain or loss recorded. For further information see note 11 to the notes to financial statements.

Comparison of Financial Condition at March 31, 2024 and March 31, 2023

Total Assets. Total assets were $155.3 million at March 31, 2024, an increase of $3.9 million, or 2.6%, from $151.4 million at March 31, 2023. The increase was primarily comprised of an increase in cash and cash equivalents of $7.7 million, which was partially offset by a decrease in investment securities of $2.9 million and a decrease in loans of $783,000.

Cash and Cash Equivalents. Cash and cash equivalents increased by $7.7 million, or 262.7%, to $10.6 million at March 31, 2024 from $2.9 million at March 31, 2023. The increase was due primarily to an increase in deposits during the fiscal year ended March 31, 2024.

Available-for-Sale Investment Securities. Available-for-sale investment securities decreased $2.9 million, or 10.3%, to $25.2 million at March 31, 2024, from $28.1 million at March 31, 2023. During the fiscal year ended March 31, 2024, calls, maturities and repayments of securities totaled $2.7 million and the unrealized loss on securities remained unchanged at $5.5 million. The yield on investment securities was 1.65% for the fiscal year ended March 31, 2024, compared to 1.59% for the fiscal year ended March 31, 2023, reflecting the increase in market interest rates.

Net Loans. Net loans decreased by $783,000, or 0.7%, to $107.9 million at March 31, 2024 from $108.7 million at March 31, 2023. During the fiscal year ended March 31, 2024, loan originations totaled $19.3 million, comprised primarily of $6.0 million secured by one-to-four family residential real estate, $5.0 million of construction and land loans, $2.7 million of loans secured by commercial real estate and $2.4 million of commercial and industrial loans. Consumer loans originated totaled $925,000, the majority of which were automobile loans. In addition, we originated $2.3 million of home equity lines of credit.

During the fiscal year ended March 31, 2024, residential real estate loans increased $8.8 million, or 14.5%, to a total of $69.2 million at March 31, 2024 and home equity lines of credit increased $979,000, or 30.5%, to $4.2 million at March 31, 2024, while construction and land loans decreased $6.5 million, or 67.8%, to $3.1 million at March 31, 2024, and commercial real estate loans decreased $3.0 million, or 11.2%, to $24.0 million at March 31, 2024.

The decrease in loan balances was due primarily to the slowing of loan demand caused by the increase in market interest rates, combined with management’s decision to not aggressively pursue loan growth given the increase in funding costs.

Our strategy includes growing the loan portfolio, continuing to focus primarily on owner-occupied one-to-four family residential real estate loans and commercial real estate loans.

Deposits. Deposits increased by $14.8 million, or 11.6%, to $142.1 million at March 31, 2024 from $127.3 million at March 31, 2023. Core deposits (defined as all deposits other than certificates of deposit) increased $7.5 million, or 8.1%, to $99.7 million at March 31, 2024, from $92.2 million at March 31, 2023. Certificates of deposit increased $7.3 million, or 21.0%, to $42.4 million at March 31, 2024, from $35.1 million at March 31, 2023. The increase in core deposits was due primarily to an increase in the balance of an interest bearing demand account with a commercial customer with a significant deposit relationship. The balance in this account may fluctuate significantly due to the nature of the customer’s business. See “Risk Factors – Risks Related to Operational Matters – Our funding sources may prove insufficient to meet our liquidity needs and support our future growth.” The increase in certificates of deposit was due primarily to account specials offered with interest rates below the Federal Home Loan Bank advance rate to fulfill liquidity needs.

During the fiscal year ended March 31, 2024, management continued its strategy of pursuing growth in demand accounts and other low cost core deposits in part by enhancing products and services offered and increased marketing. Management intends to continue its efforts to increase core deposits, with an emphasis on growth in consumer and business demand deposits.

Borrowings. Borrowings totaled $3.0 million at March 31, 2024, a decrease of $10.4 million, or 77.6%, from the $13.4 million balance at March 31, 2023. Advances from the Federal Home Loan Bank totaled $3.0 million at March 31, 2024, a decrease of $9.5 million, or 76.0%, from the $12.5 million balance at March 31, 2023. Federal funds purchased were $865,000 at March 31, 2023. There were no federal funds purchased outstanding at March 31, 2024. The decrease in borrowings was due primarily to the growth in deposits, which provided funds used to repay borrowings. Federal Home Loan Bank advances totaling $2.0 million at March 31, 2024, are scheduled to mature within one year from March 31, 2024.

Total Equity. Total equity decreased $221,000, or 2.5%, to $8.6 million at March 31, 2024, from $8.8 million at March 31, 2023. The decrease was due primarily to the adoption of CECL on April 1, 2023, which resulted in a net charge to equity of $285,000, which was partially offset by net income of $60,000 and a $5,000 increase to equity through the accumulated other comprehensive loss.

Average Balances and Yields. The following table sets forth average balance sheets, average yields and rates, and other information for the periods indicated. No tax-equivalent yield adjustments have been made, as the effects are immaterial. Average balances are calculated using daily average balances. Non-accrual loans are included in average balances only. Average yields include the effect of deferred fees, discounts, and premiums that are amortized or accreted to interest income or interest expense. Net deferred loan fees/costs are immaterial.

Rate/Volume Analysis

The following table presents the effects of changing rates and volumes on our net interest income for the periods indicated. The rate column shows the effects attributable to changes in rate (changes in rate multiplied by prior volume). The volume column shows the effects attributable to changes in volume (changes in volume multiplied by prior rate). The total column represents the sum of the prior columns. Changes attributable to both rate and volume, which cannot be segregated, have been allocated proportionately based on the changes due to rate and the changes due to volume. There were no out-of-period items or adjustments required to be excluded from the table below.

Comparison of Operating Results for the Fiscal Years Ended March 31, 2024 and 2023.

General. Net income for the fiscal year ended March 31, 2024, was $60,000, a decrease of $328,000, or 84.6%, compared to $388,000 for the fiscal year ended March 31, 2023. The decrease in net income was primarily due to a $151,000 decrease in net interest income and a $486,000 increase in noninterest expenses, which were partially offset by a $204,000 decrease in the provision for credit losses, a $17,000 increase in noninterest income, and an $88,000 decrease in income taxes.

Interest Income. Interest income increased $906,000, or 18.9%, to $5.7 million for the fiscal year ended March 31, 2024 from $4.8 million for the fiscal year ended March 31, 2023. This increase was attributable to an $881,000, or 21.4%, increase in interest on loans receivable and a $48,000, or 40.8%, increase in interest on interest-bearing deposits and other assets.

The average balance of loans increased by $9.3 million, or 9.1%, during the fiscal year ended March 31, 2024, compared to the average balance for the fiscal year ended March 31, 2023, while the average yield on loans increased to 4.49% for the fiscal year ended March 31, 2024, from 4.04% for the fiscal year ended March 31, 2023. The increase in average yield on loans reflects the increase in market interest rates year-to-year. The increase in market interest rates has provided higher yields on newly originated loans, as well as on adjustable-rate loans, which have adjusted upward.

The average balance of investment securities decreased $2.8 million to $32.3 million for the fiscal year ended March 31, 2024, from $35.1 million for the fiscal year ended March 31, 2023, while the average yield on investment securities increased to 1.65% for the fiscal year ended March 31, 2024, from 1.59% for the fiscal year ended March 31, 2023.

Interest income on other interest-bearing deposits, comprised primarily of overnight deposits and stock in the Federal Home Loan Bank, increased $48,000, or 40.8%, for the fiscal year ended March 31, 2024, due to an increase in the average yield to 5.52% for the fiscal year ended March 31, 2024, from 3.38% for the fiscal year ended March 31, 2023, partially offset by a decrease in the average balance of $493,000. The increase in average yield was due to the increase in market interest rates.

Interest Expense. Total interest expense increased $1.1 million, or 115.2%, to $2.0 million for the fiscal year ended March 31, 2024, from $918,000 for the fiscal year ended March 31, 2023. Interest expense on deposits increased $929,000, or 142.2%, due primarily to an increase in the average cost of deposits to 1.28% for the fiscal year ended March 31, 2024, from 0.57% for the fiscal year ended March 31, 2023, and an increase of $8.6 million, or 7.5%, in the average balance of interest-bearing deposits to $124.0 million for the fiscal year ended March 31, 2024 from $115.4 million for the fiscal year ended March 31, 2023.

Interest expense on borrowings increased $128,000, or 48.4%, to $392,000 for the fiscal year ended March 31, 2024, compared to $264,000 for the fiscal year ended March 31, 2023. The increase was due to an increase in the weighted-average rate to 4.96% for the fiscal year ended March 31, 2024, which was partially offset by a $1.5 million decrease in the average balance outstanding, to $7.9 million for the fiscal year ended March 31, 2024 from $9.4 million for the fiscal year ended March 31, 2023.

Net Interest Income. Net interest income decreased $151,000, or 3.9%, to $3.7 million for the fiscal year ended March 31, 2024 compared to $3.9 million for the fiscal year ended March 31, 2023. The decrease reflected a decrease in the interest rate spread to 2.39% for the fiscal year ended March 31, 2024, from 2.67% for the fiscal year ended March 31, 2023, while the average net interest earning assets decreased $1.2 million year-to-year. The net interest margin decreased to 2.54% for the fiscal year ended March 31, 2024, from 2.75% for the fiscal year ended March 31, 2023, due to increases in market interest rates. The interest rate spread and net interest margin were impacted by a series of interest rate increases in the economy during 2023 and 2022, as well as the migration of deposits from lower yielding savings accounts and money market accounts to higher yielding certificates of deposit. The average balance of certificates of deposit increased from $26.5 million for the fiscal year ended March 31, 2023 (with an average rate of 1.95%), to $38.6 million for the fiscal year ended March 31, 2024 (with an average rate of 3.45%). The average balance of savings accounts decreased from $26.9 million for the fiscal year ended March 31, 2023, to $21.8 million for the fiscal year ended March 31, 2024. The average balance of money market accounts decreased from $34.7 million for the fiscal year ended March 31, 2023, to $30.0 million for the fiscal year ended March 31, 2024.

Provision for (Recovery of) Credit Losses. Based on an analysis of the factors described in “Critical Accounting Policies – Allowance for Credit Losses,” management recorded a recovery of credit losses of $144,000 for the fiscal year ended March 31, 2024, a decrease of $204,000 from the $60,000 provision for credit losses recorded for the fiscal year ended March 31, 2023. The credit provision for the fiscal year ended March 31, 2024, was comprised of a $101,000 credit provision on loans and a $42,000 credit provision on off-balance sheet commitments. The allowance for credit losses on loans was $856,000 at March 31, 2024, and $642,000 at March 31, 2023, which represented 0.79% of total loans at March 31, 2024, and 0.59% of total loans at March 31, 2023. The credit provision for credit losses for the fiscal year ended March 31, 2024, was due primarily to the low balances of nonperforming loans, delinquent loans and net charge-offs.

There were no nonperforming loans at March 31, 2024, compared to nonperforming loans of $636,000 at March 31, 2023. Classified loans totaled $67,000 at March 31, 2024, compared to $634,000 at March 31, 2023, and total loans past due greater than 30 days were $231,000 and $73,000 at those respective dates.

Noninterest Income. Noninterest income totaled $344,000 for the fiscal year ended March 31, 2024, an increase of $17,000, or 5.3%, from $327,000 for the fiscal year ended March 31, 2023. The increase was due primarily to a $27,000 increase in service fees on deposits, partially offset by a $10,000, or 53.0%, decrease in late charges and fees on loans. The increase in service fees on deposits was due primarily to increases in returned check fees and fees on debit card transactions. The decrease in late charges and fees on loans included a $12,000 nonrecurring fee amount earned on Paycheck Protection Program loan fees during the fiscal year ended March 31, 2023.

Noninterest Expense. Noninterest expense increased $486,000, or 13.1%, to $4.2 million for the fiscal year ended March 31, 2024, compared to $3.7 million for the fiscal year ended March 31, 2023. The increase was due primarily to a $173,000, or 9.1%, increase in salaries and employee benefits, a $177,000, or 46.4%, increase in occupancy and equipment, a $61,000, or 12.9%, increase in data processing fees, and a $43,000, or 65.0%, increase in federal deposit insurance premiums.

The increase in salaries and employee benefits was due primarily to an increase in staffing related to the new branch office opened in March 2023 and normal annual merit increases. The increase in occupancy and equipment expense was due primarily to costs associated with the opening of the new branch office. The increase in data processing was due to growth in loans and deposits and the opening of the new branch. The increase in federal deposit insurance premiums was due primarily to the growth in deposits and a higher assessment rate year-to-year.

Provision (Benefit) for Income Taxes. Income taxes decreased by $88,000, or 224.8%, to a benefit of $49,000 for the fiscal year ended March 31, 2024, compared to a provision of $39,000 for the fiscal year ended March 31, 2023. The decrease in income taxes was due primarily to a $416,000, or 97.4%, decrease in pre-tax income.

Management of Market Risk

General. Our most significant form of market risk is interest rate risk because, as a financial institution, the majority of our assets and liabilities are sensitive to changes in interest rates. Therefore, a principal part of our operations is to manage interest rate risk and limit the exposure of our financial condition and results of operations to changes in market interest rates. All directors participate in discussions during the regular board meetings evaluating the interest rate risk inherent in our assets and liabilities, and the level of risk that is appropriate. These discussions take into consideration our business strategy, operating environment, capital, liquidity and performance objectives consistent with the policy and guidelines approved by them.

Our asset/liability management strategy attempts to manage the impact of changes in interest rates on net interest income, our primary source of earnings. Among the techniques we are using to manage interest rate risk are:

By following these strategies, we believe that we are better positioned to react to increases and decreases in market interest rates.

Historically, we have not sold loans we have originated. Following the conversion and stock offering, we plan to develop the infrastructure necessary to sell one- to four-family residential mortgage loans, particularly longer term one- to four-family residential mortgage loans to further help mitigate our interest rate risk exposure.