Monroe Federal Bancorp 10Q 2025 Q2 Quarterly report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

☒Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended September 30, 2024

☐Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from to

Commission File No. 000-56702

Monroe Federal Bancorp, Inc.

(Exact Name of Registrant as Specified in Its Charter)


Maryland	99-3587922
(State or Other Jurisdiction of Incorporation or Organization)	(I.R.S. Employer Identification Number)

24 East Main Street, Tipp City, Ohio	45371
(Address of Principal Executive Offices)	(Zip Code)

(937) 667-8461

(Registrant’s Telephone Number, Including Area Code)

N/A

(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)

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


Title of each class	Trading symbol(s)	Name of Each Exchange on Which Registered

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such requirements for the past 90 days. YES ☒ NO ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the Registrant was required to submit such files). YES ☒ NO ☐

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


Large accelerated filer ☐	Accelerated filer ☐
Non-accelerated filer ☒	Smaller reporting company	☒
	Emerging growth company	☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

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

526,438 shares of the registrant’s common stock, par value $0.01 per share, were issued and outstanding as of November 13, 2024.

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Monroe Federal Bancorp, Inc.

Form 10-Q

Index


		Page

Part I. – Financial Information		4

Item 1.	Financial Statements	4

	Balance Sheets as of September 30, 2024 (unaudited) and March 31, 2024	4

	Statements of Operations for the Three and Six Months Ended September 30, 2024 and 2023 (unaudited)	5

	Statements of Comprehensive Income (Loss) for the Three and Six Months Ended September 30, 2024 and 2023 (unaudited)	6

	Statements of Changes in Equity for the Three and Six Months Ended September 30, 2024 and 2023 (unaudited)	7

	Statements of Cash Flows for the Six Months Ended September 30, 2024 and 2023 (unaudited)	8

	Notes to Financial Statements (unaudited)	9

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	35

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	49

Item 4.	Controls and Procedures	49

Part II. – Other Information		50

Item 1.	Legal Proceedings	50

Item 1A.	Risk Factors	50

Item 2.	Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities	50

Item 3.	Defaults Upon Senior Securities	50

Item 4.	Mine Safety Disclosures	50

Item 5.	Other Information	50

Item 6.	Exhibits	50

	Signature Page	52

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EXPLANATORY NOTE

Monroe Federal Bancorp, Inc. (the “Company,” “we” or “us”) was incorporated on May 21, 2024, to serve as the savings and loan holding company for Monroe Federal Savings and Loan Association (“Monroe Federal” or the “Association”) upon the consummation of the Association’s conversion from the mutual form of organization to the stock form of organization. As of September 30, 2024, the conversion had not yet been consummated, and the Company had no assets or liabilities and had not conducted any business activities other than organizational activities. Accordingly, the financial statements and related notes and the other financial information contained in this report relate primarily to the Association. The conversion was consummated effective October 23, 2024.

The unaudited financial statements and other financial information contained in this report should be read in conjunction with the Association’s audited financial statements and related notes as of and for each of the years ended March 31, 2024 and 2023, contained in the Company’s definitive prospectus dated August 9, 2024, filed with the Securities and Exchange Commission.

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Part I — Financial Information

Item 1. Financial Statements

MONROE FEDERAL SAVINGS & LOAN ASSOCIATION

Balance Sheets


	September 30,		March 31,
		2024		2024
		(Unaudited)
Assets
Cash and due from banks	$	1,808,600	$	2,981,089
Interest-bearing deposits in other financial institutions		236,195		7,529,609
Federal funds sold		—		107,000
Cash and cash equivalents		2,044,795		10,617,698

Available-for-sale securities		24,706,332		25,181,361
Loans receivable		109,453,872		108,724,627
Allowance for credit losses		(875,318)		(855,455)
Net loans		108,578,554		107,869,172

Premises and equipment		5,236,245		5,339,998
Restricted stock		901,700		515,000
Bank owned life insurance		3,546,281		3,491,015
Accrued interest receivable		492,335		483,027
Net deferred federal income taxes		1,109,042		1,328,523
Other assets		1,293,781		511,468
Total assets	$	147,909,065	$	155,337,262

Liabilities and Equity
Liabilities
Deposits
Demand	$	40,054,572	$	48,459,382
Savings and money market		49,935,024		51,227,399
Time		34,367,392		42,405,531
Total deposits		124,356,988		142,092,312
Advances from the Federal Home Loan Bank		9,925,000		3,000,000
Stock subscription proceeds in escrow		3,099,058		—
Advances by borrowers for taxes and insurance		295,000		329,730
Directors plan liability		581,721		762,416
Accrued interest payable and other liabilities		567,155		588,099
Total liabilities		138,824,922		146,772,557

Equity
Retained earnings		12,715,954		12,917,702
Accumulated other comprehensive loss		(3,631,811)		(4,352,997)
Total equity		9,084,143		8,564,705
Total liabilities and equity	$	147,909,065	$	155,337,262

The accompanying notes are an integral part of these financial statements.

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MONROE FEDERAL SAVINGS & LOAN ASSOCIATION

Statements of Operations

(Unaudited)


	Three Months Ended				Six Months Ended
	September 30,				September 30,
	2024		2023		2024		2023
Interest income
Loans	$	1,314,949	$	1,252,620	$	2,590,593	$	2,468,247
Investment securities		125,394		134,540		250,268		271,399
Interest-bearing deposits and other		23,786		40,762		112,192		86,302

Total interest income		1,464,129		1,427,922		2,953,053		2,825,948

Interest expense
Deposits		468,255		380,584		934,367		702,309
Borrowings		151,930		127,259		192,831		236,670

Total interest expense		620,185		507,843		1,127,198		938,979

Net interest income		843,944		920,079		1,825,855		1,886,969

Provision for (recovery of) credit losses		(14,724)		(6,768)		17,225		(6,768)

Net interest income after provision for (recovery of) credit losses		858,668		926,847		1,808,630		1,893,737

Noninterest income
Service fees on deposits		42,017		44,275		88,526		88,477
Late charges and fees on loans		3,181		2,137		4,863		4,739
Loan servicing fees		4,081		3,590		8,140		7,110
Increase in cash surrender value of bank owned life insurance		28,064		25,132		55,266		49,340
Other income		7,595		11,550		16,289		23,755

Total noninterest income		84,938		86,684		173,084		173,421

Noninterest expense
Salaries and employee benefits		552,845		485,798		1,104,586		1,010,928
Directors fees		30,500		30,197		61,000		59,897
Occupancy and equipment		134,250		132,850		276,639		265,315
Data processing fees		136,688		131,324		261,335		260,611
Franchise taxes		18,000		15,876		34,916		40,626
FDIC insurance premiums		19,494		21,301		45,136		38,602
Professional services		40,767		38,590		213,876		80,949
Advertising		17,093		22,279		42,983		50,195
Other		113,753		113,558		219,667		229,961

Total noninterest expense		1,063,390		991,773		2,260,138		2,037,084

(Loss) Income before income taxes		(119,784)		21,758		(278,424)		30,074

Provision (benefit) for income taxes		(33,866)		(8,644)		(76,676)		(20,013)

Net (loss) income	$	(85,918)	$	30,402	$	(201,748)	$	50,087

The accompanying notes are an integral part of these financial statements.

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MONROE FEDERAL SAVINGS LOAN ASSOCIATION

Statements of Comprehensive Income (Loss)

(Unaudited)


	Three Months Ended				Six Months Ended
	September 30,				September 30,
	2024		2023		2024		2023
Net (loss) income	$	(85,918)	$	30,402	$	(201,748)	$	50,087

Other comprehensive income (loss):
Net unrealized gains (losses) on available-for-sale securities		1,051,592		(1,241,363)		912,894		(1,712,076)

Tax (expense) benefit		(220,834)		260,687		(191,708)		359,536

Other comprehensive income (loss)		830,758		(980,676)		721,186		(1,352,540)

Comprehensive income (loss)	$	744,840	$	(950,274)	$	519,438	$	(1,302,453)

The accompanying notes are an integral part of these financial statements.

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MONROE FEDERAL SAVINGS & LOAN ASSOCIATION

Statements of Changes in Equity

(Unaudited)


			Accumulated
			Other
	Retained		Comprehensive
For the three months ended September 30, 2023 and September 30, 2024	Earnings		Income (Loss)		Total
Balance at June 30, 2023	$	12,877,618	$	(4,729,530)	$	8,148,088

Net income		30,402		—		30,402

Other comprehensive loss		—		(980,676)		(980,676)

Balance at September 30, 2023	$	12,908,020	$	(5,710,206)	$	7,197,814

Balance at June 30, 2024	$	12,801,872	$	(4,462,569)	$	8,339,303

Net loss		(85,918)		—		(85,918)

Other comprehensive income		—		830,758		830,758

Balance at September 30, 2024	$	12,715,954	$	(3,631,811)	$	9,084,143

For the six months ended September 30, 2023 and September 30, 2024
Balance at April 1, 2023	$	13,143,241	$	(4,357,666)	$	8,785,575

Effect of change in accounting principle - ASC 326		(285,308)				(285,308)

Net income		50,087		—		50,087

Other comprehensive loss		—		(1,352,540)		(1,352,540)

Balance at September 30, 2023	$	12,908,020	$	(5,710,206)	$	7,197,814

Balance at April 1, 2024	$	12,917,702	$	(4,352,997)	$	8,564,705

Net loss		(201,748)		—		(201,748)

Other comprehensive income		—		721,186		721,186

Balance at September 30, 2024	$	12,715,954	$	(3,631,811)	$	9,084,143

The accompanying notes are an integral part of these financial statements.

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MONROE FEDERAL SAVINGS & LOAN ASSOCIATION

Statements of Cash Flows

(Unaudited)


	Six Months Ended
	September 30,
	2024		2023
Operating Activities
Net (loss) income	$	(201,748)	$	50,087
Items not requiring (providing) cash:
Depreciation and amortization		128,803		125,923
Amortization of premiums and discounts		79,595		90,356
Amortization of deferred loan fees		(15,243)		(47,601)
Provision (Benefit) for deferred income taxes		27,773		(21,537)
Provision for (recovery of) credit losses		17,225		(6,768)
Increase in cash surrender value of bank owned life insurance		(55,266)		(49,340)
Changes in:
Accrued interest receivable		(9,308)		(29,405)
Other assets		(782,313)		18,516
Accrued interest payable and other liabilities		(201,345)		(562,029)

Net cash used in operating activities		(1,011,827)		(431,798)

Investing Activities
Proceeds from calls, maturities and paydowns of available-for-sale securities		1,308,328		1,205,124
Net change in loans		(711,658)		(1,872,788)
Purchase of premises and equipment		(25,050)		(93,936)
Purchase of restricted stock		(386,700)		(186,000)
Proceeds from redemption of restricted stock		—		194,400

Net cash provided by (used in) investing activities		184,920		(753,200)

Financing Activities
Net (decrease) increase in deposit accounts		(17,735,324)		3,812,602
Net decrease in federal funds purchased		—		(739,000)
Proceeds from Federal Home Loan Bank advances		27,349,000		13,775,000
Repayment of Federal Home Loan Bank advances		(20,424,000)		(14,750,000)
Proceeds from stock subscriptions in escrow		3,099,058		—
Increase in advances from borrowers for taxes and insurance		(34,730)		(8,632)

Net cash (used in) provided by financing activities		(7,745,996)		2,089,970

(Decrease) Increase in Cash and Cash Equivalents		(8,572,903)		904,972

Cash and Cash Equivalents, Beginning of Period		10,617,698		2,927,788

Cash and Cash Equivalents, End of Period	$	2,044,795	$	3,832,760

Supplemental Disclosure of Cash Flow Information
Cash paid during the period for:
Interest on deposits and borrowings	$	591,598	$	498,699
Income taxes paid		—		45,000

Supplemental Disclosure of Noncash Investing Activities
Transfers from loans to assets acquired through foreclosure	$	—	$	12,481

The accompanying notes are an integral part of these financial statements.

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Monroe Federal Savings and Loan Association

Notes to Financial Statements

September 30, 2024 and 2023

Note 1:Nature of Operations and Summary of Significant Accounting Policies

Nature of Operations and Basis of Presentation

Monroe Federal Savings and Loan Association (the “Company”) is a federally chartered mutual thrift engaged primarily in the business of providing a variety of deposit and lending services to individual customers in western Ohio. Its primary deposit products are checking, savings, and term certificate accounts, and its primary lending products are residential and commercial mortgages, commercial, home equity lines of credit and installment loans. Its operations are conducted through its four office locations in Tipp City, Vandalia and Dayton, Ohio. The Company faces competition from other financial institutions and is subject to the regulation of certain federal agencies and undergoes periodic examinations by those regulatory authorities.

The financial statements included herein as of September 30, 2024, and for the interim three- and six-month periods ended September 30, 2024 and 2023 are unaudited. The unaudited interim financial statements and the notes thereto have been prepared in accordance with generally accepted accounting principles in the United States (“GAAP”) and in the opinion of management, contains all normal recurring adjustments necessary to present fairly the financial position, results of operations, changes in equity and cash flows as of and for the periods presented. Such adjustments are the only adjustments contained in the financial statements The results of operations for the three- and six – months ended September 30, 2024 are not necessarily indicative of the results of operations for the full fiscal year.

The accompanying unaudited financial statements and related notes should be read in conjunction with the audited annual financial statements and the notes thereto included in the prospectus dated August 9, 2024, as filed by Monroe Federal Bancorp, Inc. with the Securities and Exchange Commission on August 19, 2024.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Material estimates that are particularly susceptible to significant change relate to the determination of the allowance for credit losses, valuation of real estate acquired in connection with foreclosures or in satisfaction of loans, valuation of deferred tax assets and fair values of financial instruments.

Allowance for Credit Losses

The allowance for credit losses (ACL) is a valuation allowance for expected credit losses. The allowance for credit losses is established through a provision for credit losses charged to income. Loan losses are charged against the allowance when management believes the uncollectibility of a loan balance is confirmed. Subsequent recoveries, if any, are credited to the allowance.

The Company adopted Accounting Standards Update (ASU) No. 2016-13 Financial Instruments—Credit Losses (Topic 326) using the modified retrospective method for financial assets measured at amortized cost and off-balance-sheet credit exposures. ASC 326 replaced the incurred loss impairment methodology with a new “current expected credit loss” (CECL) methodology that reflects expected credit losses over the lives of the credit instruments and requires consideration of a broader range of information to estimate credit losses. ASC 326 requires an estimate of all expected credit losses for financial assets measured at amortized cost, including loans and held-to-maturity debt securities, based on historical experience, current conditions, and reasonable and supportable forecasts.

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Monroe Federal Savings and Loan Association

Notes to Financial Statements

September 30, 2024 and 2023

Available-for-sale securities

ASC 326 also made changes to the accounting for credit losses on available-for-sale debt securities. For available for sale securities in an unrealized loss position, the Company first assesses whether it intends to sell, or it is more likely than not that it will be required to sell the security before recovery of its amortized cost basis. If either of the criteria regarding intent or requirement to sell is met, the security’s amortized cost basis is written down to fair value through income.

For securities available for sale that do not meet the above criteria, the Company evaluates whether the decline in fair value has resulted from credit losses or other factors. In making this assessment, the Company considers the extent to which fair value is less than amortized cost and adverse conditions related to the security, among other factors. If this assessment indicates that a credit loss exists, the present value of cash flows expected to be collected from the security are compared to the amortized cost basis of the security.

If the present value of the cash flows expected to be collected is less than the amortized cost basis, a credit loss exists and an allowance for credit losses is recorded for the credit loss, limited by the amount that the fair value is less than the amortized cost. Any impairment that has not been recorded through an allowance for credit losses is recognized in other comprehensive income, net of tax. The Company elected to use zero loss estimates for securities issued by U.S. government entities and agencies. These securities are either explicitly or implicitly guaranteed by the U.S. government, are highly rated by major agencies and have a long history of no credit losses.

Loans

The ACL is a valuation allowance that is deducted from the loans’ amortized cost basis to present the net amount expected to be collected on the loans. Management’s determination of the adequacy of the ACL is based on the assessment of the expected credit losses on loans over the expected life of the loan. The ACL is increased by provision expense and decreased by charge-offs, net of recoveries of amounts previously charged off and expected to be charged off. Accrued interest receivable on loans totaled $360,114 and $348,007 at September 30, 2024 and March 31, 2024, respectively. The Company made the policy election to exclude accrued interest receivable on loans from the estimate of credit losses.

Management estimates the ACL balance using relevant available information from both internal and external sources, relating to past events, current conditions and reasonable and supportable forecasts. Historical credit loss experience of the Company is paired with economic forecasts to provide the basis for the quantitatively modeled estimates of expected credit losses. The Company adjusts its quantitative model, as necessary, to reflect conditions not already considered by the quantitative model. These adjustments are commonly known as the qualitative factors.

The ACL is measured on a collective (pool) basis when similar risk characteristics exist. The Company uses publicly available data, based on regulatory filings of larger banks, to derive initial proxy expected lifetime loss rates. Reasonable and supportable forecasts are incorporated into the development of these proxy loss rates, which generally revert back to historical and qualitative loss considerations after 12-24 months. The loss rates are adjusted, if necessary, based on management’s assessment of certain criteria, including economic and business conditions, that may affect the Company’s loan portfolio, to arrive at factors that best represent the estimated credit risk in the loan portfolio.

Loans that do not share risk characteristics are evaluated on an individual basis. Loans evaluated individually are not also included in the collective evaluation. When management determines that foreclosure is probable, expected credit losses are based on the fair value of the collateral at the reporting date, adjusted for selling costs as appropriate.

Expected credit losses are estimated over the contractual term of the loans, adjusted for expected prepayments when appropriate. The contractual term excludes expected extensions, renewals and modifications unless either of the following applies: management has a reasonable expectation at the reporting date that a loan modification will be

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Monroe Federal Savings and Loan Association

Notes to Financial Statements

September 30, 2024 and 2023

executed with an individual borrower or the extension or renewal options are included in the original or modified contract at the reporting date and are not unconditionally cancellable by the Company.

A loan for which the terms have been modified, resulting in a concession and for which the borrower is experiencing financial difficulties, is considered within the determination of the ACL using the same method as all other loans held for investment, except when the value of a concession cannot be measured using a method other than the discounted cash flow method. When the value of a concession is measured using the discounted cash flow method, the ACL is determined by discounting the expected future cash flows at the original interest rate of the loan.

Unfunded Commitments

The Company estimates expected credit losses over the contractual period in which the Company is exposed to credit risk via a contractual obligation to extend credit, unless that obligation is unconditionally cancellable by the Company. The ACL on unfunded commitments is adjusted through the provision for credit loss expense. The estimate includes consideration of the likelihood that funding will occur and an estimate of expected credit losses on commitments expected to be funded over its estimated life consistent with the related ACL methodology. The ACL on unfunded commitments totaled $55,797 and $56,091 at September 30, 2024 and March 31, 2024 , respectively, and is included in other liabilities on the balance sheet.

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Monroe Federal Savings and Loan Association

Notes to Financial Statements

September 30, 2024 and 2023

The following table illustrates the impact of adopting ASC 326:


	April 1, 2023
			Adoption
	Pre-Adoption		Impact		As Reported
Assets
Real estate loans:
Residential	$	360,908	$	11,949	$	372,857
Multi-family		13,350		(13,350)		—
Commercial		166,345		137,324		303,669
Construction and land		43,631		94,031		137,662
Home equity line of credit (HELOC)		16,034		(16,034)		—
Commercial and industrial		34,110		23,741		57,851
Consumer		7,958		24,833		32,791
Total ACL on loans		642,336		262,494		904,830
Liabilities
ACL for off-balance sheet exposure		—		98,654		98,654
	$	642,336	$	361,148	$	1,003,484

The Company has evaluated multi-family real estate loans and home equity line of credit loans within, and under similar risk characteristics as, the residential loan category, upon adoption of the CECL methodology.

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Monroe Federal Savings and Loan Association

Notes to Financial Statements

September 30, 2024 and 2023

Note 2:Investment Securities

The amortized cost and fair values, together with gross unrealized gains and losses on securities are as follows:


			Gross		Gross
	Amortized		Unrealized		Unrealized		Fair
	Cost		Gains		Losses		Value
Available-for-sale Securities:
September 30, 2024
U.S. Government agencies	$	3,250,868	$	—	$	(467,549)	$	2,783,319
Mortgage-backed Government Sponsored Enterprises (GSEs)		12,121,645		3		(1,835,083)		10,286,565
State and political subdivisions		13,184,185		—		(2,227,067)		10,957,118
Time deposits		746,864		—		(67,534)		679,330
	$	29,303,562	$	3	$	(4,597,233)	$	24,706,332


			Gross		Gross
	Amortized		Unrealized		Unrealized		Fair
	Cost		Gains		Losses		Value
Available-for-sale Securities:
March 31, 2024
U.S. Government agencies	$	3,250,909	$	—	$	(590,612)	$	2,660,297
Mortgage-backed Government Sponsored Enterprises (GSEs)		12,949,053		—		(2,231,211)		10,717,842
State and political subdivisions		13,244,761		—		(2,587,679)		10,657,082
Time deposits		1,246,762		—		(100,622)		1,146,140

	$	30,691,485	$	—	$	(5,510,124)	$	25,181,361

The amortized cost and fair value of available-for-sale securities at September 30, 2024, by contractual maturity, are shown below. Expected maturities may differ from contractual maturities because issuers may have the right to call or prepay obligations with or without call or prepayment penalties:


	Amortized		Fair
	Cost		Value
September 30, 2024
Within one year	$	—	$	—
One to five years		1,047,852		954,879
Five to ten years		5,099,520		4,461,825
After ten years		11,034,545		9,003,063
		17,181,917		14,419,767
Mortgage-backed GSEs		12,121,645		10,286,565

Totals	$	29,303,562	$	24,706,332

The carrying value of securities pledged as collateral, to secure public deposits and for other purposes, was approximately $6,799,000 and $1,051,000 at September 30, 2024 and March 31, 2024, respectively.

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Monroe Federal Savings and Loan Association

Notes to Financial Statements

September 30, 2024 and 2023

Certain investments in debt securities are reported in the financial statements at an amount less than their historical cost. Based on evaluation of available evidence, including recent changes in market interest rates and information obtained from regulatory filings, management believes the declines in fair value for these securities are not credit related.

Should the fair value decline of any of these securities be attributed to credit-related reasons, the cost basis of the investment will be reduced and the resulting loss recognized in net income in the period identified.

The following table shows the number of securities and aggregate fair value depreciation at September 30, 2024 and March 31, 2024.


	September 30, 2024			March 31, 2024
	Number of	Aggregate		Number of	Aggregate
Description of Securities	securities	Depreciation		securities	Depreciation
Available for sale
U.S. Government agencies	9	(14.4)	%	9	(18.2)	%
Mortgage-backed Government Sponsored Enterprises (GSEs)	41	(15.1)	%	42	(17.2)	%
State and political subdivisions	35	(16.9)	%	35	(19.5)	%
Time deposits	3	(9.0)	%	5	(8.1)	%

Total	88	(15.7)	%	91	(18.0)	%

The following tables show the Company’s investments’ gross unrealized losses and fair value of the Company’s investments with unrealized losses, aggregated by investment class and length of time that individual securities have been in a continuous unrealized loss position at September 30, 2024 and March 31, 2024.


	September 30, 2024
	Less than 12 Months				12 Months or More				Total
	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
Description of Securities	Value		Losses		Value		Losses		Value		Losses
Available for sale
U.S. Government agencies	$	—	$	—	$	2,783,319	$	(467,549)	$	2,783,319	$	(467,549)
Mortgage-backed Government Sponsored Enterprises (GSEs)		—		—		10,284,569		(1,835,083)		10,284,569		(1,835,083)
State and political subdivisions		—		—		10,957,118		(2,227,067)		10,957,118		(2,227,067)
Time deposits		—		—		679,330		(67,534)		679,330		(67,534)

Total portfolio	$	—	$	—	$	24,704,336	$	(4,597,233)	$	24,704,336	$	(4,597,233)


	March 31, 2024
	Less than 12 Months				12 Months or More				Total
	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
Description of Securities	Value		Losses		Value		Losses		Value		Losses
Available for sale
U.S. Government agencies	$	—	$	—	$	2,660,297	$	(590,612)	$	2,660,297	$	(590,612)
Mortgage-backed Government Sponsored Enterprises (GSEs)		—		—		10,717,842		(2,231,211)		10,717,842		(2,231,211)
State and political subdivisions		—		—		10,657,082		(2,587,679)		10,657,082		(2,587,679)
Time deposits		—		—		1,146,140		(100,622)		1,146,140		(100,622)

Total portfolio	$	—	$	—	$	25,181,361	$	(5,510,124)	$	25,181,361	$	(5,510,124)

Table of Contents

Monroe Federal Savings and Loan Association

Notes to Financial Statements

September 30, 2024 and 2023

U.S. Government Agencies and State and Political Subdivisions

Unrealized losses on these securities have not been recognized because the issuers’ bonds are of high credit quality, values have only been impacted by changes in interest rates since the securities were purchased, and the Company has the intent and ability to hold the securities for the foreseeable future. The fair value is expected to recover as the bonds approach the maturity date. Because the decline in market value was attributable to changes in interest rates, and not credit quality, and because the Company typically does not intend to sell the investments and it is not more likely than not the Company will be required to sell the investments before recovery of their amortized cost basis, which may be maturity, the Company determined that no credit loss provisions were required.

Mortgage-backed GSEs

The unrealized losses on the Company’s investment in residential mortgage-backed government sponsored enterprises were caused primarily by changes in interest rates. The Company expects to recover the amortized cost basis over the term of the securities. Because the decline in market value is attributable to changes in interest rates, and not credit quality, and because the Company typically does not intend to sell the investments and it is not more likely than not the Company will be required to sell the investments before recovery of their amortized cost basis, which may be maturity, the Company determined that no credit loss provisions were required.

Time Deposits

The unrealized losses on the Company’s investment in time deposits were caused primarily by changes in interest rates. The Company expects to recover the amortized cost basis over the term of the deposits. Because the decline in market value is attributable to changes in interest rates, and not credit quality, and because the Company typically does not intend to sell the deposits and it is not more likely than not the Company will be required to sell the deposits before recovery of their amortized cost basis, which may be maturity, the Company determined that no credit loss provisions were required.

Table of Contents

Monroe Federal Savings and Loan Association

Notes to Financial Statements

September 30, 2024 and 2023

Note 3:Loans and Allowance for Credit Losses

Categories of loans were as follows:


	September 30,		March 31,
	2024		2024
Real estate loans:
Residential	$	70,415,955	$	69,160,096
Multi-family		1,515,361		1,909,791
Commercial		23,662,445		24,001,533
Construction and land		3,986,985		3,087,855
Home equity line of credit (HELOC)		4,140,359		4,191,076
Commercial and industrial		4,429,054		4,889,602
Consumer		1,611,224		1,792,888

Total loans		109,761,383		109,032,841

Less:
Net deferred loan fees		307,511		308,214
Allowance for credit losses		875,318		855,455

Net loans	$	108,578,554	$	107,869,172

Loan participations where the Company serves as lead lender and services the participation interests for other participating lenders are not included in the accompanying balance sheets. The unpaid principal balances of these loans were approximately $6,633,000 and $6,506,000 at September 30, 2024 and March 31, 2024, respectively.

Risk characteristics of each loan portfolio segment are described as follows:

Residential Real Estate

These loans include first liens and junior liens on 1-4 family residential real estate and are generally owner-owner occupied. The Company generally establishes a maximum loan-to-value and requires private mortgage insurance if that ratio is exceeded. The main risks for these loans are changes in the value of the collateral and stability of the local economic environment and its impact on the borrowers’ employment. Management specifically considers unemployment and changes in real estate values in the Company’s market area.

Multi-family Real Estate

These loans include loans on residential real estate secured by property with five or more units. The main risks are changes in the value of the collateral, ability of borrowers to collect rents, vacancy and changes in the tenants’ employment status. Management specifically considers unemployment and changes in real estate values in the Company’s market area.

Table of Contents

Monroe Federal Savings and Loan Association

Notes to Financial Statements

September 30, 2024 and 2023

Commercial Real Estate

These loans are secured by both owner-occupied and non-owner-occupied commercial real estate with diverse characteristics and geographic location almost entirely in the Company’s market area. The main risks are changes in the value of the collateral and ability of borrowers to successfully conduct their business operations. Management generally avoids financing single purpose projects unless other underwriting factors are present to mitigate risks. Management specifically considers unemployment and changes in real estate values in the Company’s market area.

Construction and Land Real Estate

These loans include construction loans for 1-4 family residential and commercial properties (both owner and non-owner occupied) and first liens on land. The main risks for construction loans include uncertainties in estimating costs of construction and in estimating the market value of the completed project. The main risks for land loans are changes in the value of the collateral and stability of the local economic environment. Management specifically considers unemployment and changes in real estate values in the Company’s market area.

HELOC

These loans are generally secured by subordinate interests in owner-occupied 1-4 family residences. The main risks for these loans are changes in the value of the collateral and stability of the local economic environment and its impact on the borrowers’ employment. Management specifically considers unemployment and changes in real estate values in the Company’s market area.

Commercial and Industrial

The commercial and industrial portfolio includes loans to commercial customers for use in financing working capital needs, equipment purchases and expansions. The loans in this category are repaid primarily from the cash flow of a borrower’s principal business operation. Credit risk in these loans is driven by creditworthiness of the borrower and the economic conditions that impact the cash flow stability from business operations.

Consumer Loans

These loans include vehicle loans, share loans and unsecured loans. The main risks for these loans are the depreciation of the collateral values (vehicles) and the financial condition of the borrowers. Major employment changes are specifically considered by management.

Table of Contents

Monroe Federal Savings and Loan Association

Notes to Financial Statements

September 30, 2024 and 2023

The following tables present the activity in the allowance for credit losses based on portfolio segment for the three months and six months ended September 30, 2024 and September 30, 2023:


	Three Months Ended September 30, 2024
			Provision
			for
	Balance		(recovery of)						Balance
	June 30, 2024		credit losses		Charge-offs		Recoveries		September 30, 2024
Loans:
Real estate loans:
Residential	$	375,091	$	523	$	—	$	—	$	375,614
Multi-family		8,013		(940)		—		—		7,073
Commercial		337,171		(6,373)		—		—		330,798
Construction and land		49,630		11,511		—		—		61,141
Home equity line of credit (HELOC)		22,451		(3,126)		—		—		19,325
Commercial and industrial		40,625		5,641		—		721		46,987
Consumer		37,837		(3,757)		—		300		34,380

Total loans		870,818		3,479		—		1,021		875,318

Off-balance sheet commitments		74,000		(18,203)		—		—		55,797

Total allowance for credit losses	$	944,818	$	(14,724)	$	—	$	1,021	$	931,115


	Three Months Ended September 30, 2023
			Provision
			for
			(recovery
	Balance		of)						Balance
	June 30, 2023		credit losses		Charge-offs		Recoveries		September 30, 2023
Real estate loans:
Residential	$	386,880	$	15,990	$	—	$	—	$	402,870
Multi-family		—		—		—		—		—
Commercial		308,664		25,575		—		4,735		338,974
Construction and land		122,304		(34,485)		—		—		87,819
Home equity line of credit (HELOC)		—		—		—		—		—
Commercial and industrial		50,843		(5,932)		—		960		45,871
Consumer		38,050		5,840		500		380		43,770

Total loans	$	906,741	$	6,988	$	500	$	6,075	$	919,305

Off-balance sheet commitments		98,654		(13,756)		—		—		84,898

Total allowance for credit losses	$	1,005,395	$	(6,768)	$	500	$	6,075	$	1,004,203

Table of Contents

Monroe Federal Savings and Loan Association

Notes to Financial Statements

September 30, 2024 and 2023


	Six Months Ended September 30, 2024
			Provision
			for
	Balance		(recovery of)						Balance
	March 31, 2024		credit losses		Charge-offs		Recoveries		September 30, 2024
Loans:
Real estate loans:
Residential	$	394,445	$	(18,831)	$	—	$	—	$	375,614
Multi-family		—		7,073		—		—		7,073
Commercial		333,596		(2,798)		—		—		330,798
Construction and land		46,672		14,469		—		—		61,141
Home equity line of credit (HELOC)		—		19,325		—		—		19,325
Commercial and industrial		41,764		3,579		—		1,644		46,987
Consumer		38,978		(5,298)		—		700		34,380

Total loans		855,455		17,519		—		2,344		875,318

Off-balance sheet commitments		56,091		(294)		—		—		55,797

Total allowance for credit losses	$	911,546	$	17,225	$	—	$	2,344	$	931,115


	Six Months Ended September 30, 2023
					Provision
					for
			Effect of		(recovery
	Balance		adoption of		of)						Balance
	March 31, 2023		ASC 326		credit losses		Charge-offs		Recoveries		September 30, 2023
Real estate loans:
Residential	$	360,908	$	11,949	$	30,013	$	—	$	—	$	402,870
Multi-family		13,350		(13,350)		—		—		—		—
Commercial		166,345		137,324		24,570		—		10,735		338,974
Construction and land		43,631		94,031		(49,843)		—		—		87,819
Home equity line of credit (HELOC)		16,034		(16,034)		—		—		—		—
Commercial and industrial		34,110		23,741		(13,901)		—		1,921		45,871
Consumer		7,958		24,833		16,149		5,551		382		43,771

Total loans		642,336		262,494		6,988		5,551		13,038		919,305

Off-balance sheet commitments		—		98,654		(13,756)		—		—		84,898

Total allowance for credit losses	$	642,336	$	361,148	$	(6,768)	$	5,551	$	13,038	$	1,004,203

Table of Contents

Monroe Federal Savings and Loan Association

Notes to Financial Statements

September 30, 2024 and 2023

The following tables present a breakdown of the allowance for credit losses and the recorded investment in loans by segment, disaggregated based on the evaluation method as of September 30, 2024 and March 31, 2024.


	Allowance for credit losses				Loans
	Ending balance, evaluated for credit losses				Ending balance, evaluated for credit losses
	Individually		Collectively		Individually		Collectively
September 30, 2024
Real estate loans:
Residential	$	48,167	$	327,447	$	410,450	$	70,005,505
Multi-family		936		6,137		52,732		1,462,629
Commercial		3,581		327,217		538,983		23,123,462
Construction and land		—		61,141		—		3,986,985
Home equity line of credit (HELOC)		—		19,325		—		4,140,359
Commercial and industrial		8,067		38,920		416,019		4,013,035
Consumer		—		34,380		—		1,611,224

Total loans	$	60,751	$	814,567	$	1,418,184	$	108,343,199


	Allowance for credit losses				Loans
	Ending balance, evaluated for credit losses				Ending balance, evaluated for credit losses
	Individually		Collectively		Individually		Collectively
March 31, 2024
Real estate loans:
Residential	$	37,008	$	357,437	$	561,319	$	68,598,777
Multi-family		—		—		—		1,909,791
Commercial		10,198		323,398		587,295		23,414,238
Construction and land		—		46,672		—		3,087,855
Home equity line of credit (HELOC)		—		—		—		4,191,076
Commercial and industrial		—		41,764		449,386		4,440,216
Consumer		—		38,978		—		1,792,888

Total loans	$	47,206	$	808,249	$	1,598,000	$	107,434,841

The Company has adopted a standard loan grading system for all loans, as follows:

Pass. Loans of sufficient quality, which generally are protected by the current net worth and paying capacity of the obligor or by the value of the asset or underlying collateral.

Special Mention. Loans have potential weaknesses that deserve management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the asset or in the Company’s credit position at some future date.

Substandard. Loans which are inadequately protected by the current sound worth and paying capacity of the obligor or of the collateral pledged, if any. Loans so classified must have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the Company will sustain some loss if the deficiencies are not corrected. Usually, this classification includes all 90 days or more, non-accrual, and past due loans.

Doubtful. Loans which have all the weaknesses inherent in those classified substandard with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable.

Table of Contents

Monroe Federal Savings and Loan Association

Notes to Financial Statements

September 30, 2024 and 2023

Loss Loans considered uncollectible and of such little value that continuance as an asset without the establishment of a specific reserve is not warranted.

Information regarding the credit quality indicators most closely monitored for other than residential real estate loans and consumer loans, by class as of September 30, 2024 and March 31, 2024, follows:


	Term Loans Amortized Cost Basis by Origination Year
	For the Six Months Ended September 30, 2024
		2025		2024		2023		2022		2021		Prior		Total
Multi-family
Risk rating:
Pass	$	—	$	—	$	—	$	221,732	$	254,708	$	1,038,921	$	1,515,361
Special Mention		—		—		—		—		—		—		—
Substandard		—		—		—		—		—		—		—
Doubtful		—		—		—		—		—		—		—
Total	$	—	$	—	$	—	$	221,732	$	254,708	$	1,038,921	$	1,515,361

Current period gross charge-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—

Commercial real estate
Risk rating:
Pass	$	331,738	$	2,647,316	$	3,718,029	$	6,603,029	$	1,355,067	$	8,638,259	$	23,293,438
Special Mention		—		—		—		—		—		369,007		369,007
Substandard		—		—		—		—		—		—		—
Doubtful		—		—		—		—		—		—		—
Total	$	331,738	$	2,647,316	$	3,718,029	$	6,603,029	$	1,355,067	$	9,007,266	$	23,662,445

Current period gross charge-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—

Construction and land
Risk rating:
Pass	$	645,958		2,956,588	$	384,439	$	—	$	—	$	—	$	3,986,985
Special Mention		—		—		—		—		—		—		—
Substandard		—		—		—		—		—		—		—
Doubtful		—		—		—		—		—		—		—
Total	$	645,958	$	2,956,588	$	384,439	$	—	$	—	$	—	$	3,986,985

Current period gross charge-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—

Commercial and industrial
Risk rating:
Pass	$	122,136	$	936,037	$	284,511	$	82,263	$	251,926	$	2,336,162	$	4,013,035
Special Mention		52,211		—		250,000		—		—		113,808		416,019
Substandard		—		—		—		—		—		—		—
Doubtful		—		—		—		—		—		—		—
Total	$	174,347	$	936,037	$	534,511	$	82,263	$	251,926	$	2,449,970	$	4,429,054

Current period gross charge-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—

Table of Contents

Monroe Federal Savings and Loan Association

Notes to Financial Statements

September 30, 2024 and 2023

The Company monitors the credit risk profile by payment activity for residential, home equity and consumer loan classes. Loans past due 90 days or more and loans on nonaccrual status are considered nonperforming. Nonperforming loans are reviewed monthly. The following table presents the amortized cost in residential, home equity and consumer loans based on payment activity:


	Term Loans Amortized Cost Basis by Origination Year
	For the Six Months Ended September 30, 2024
	2025		2024		2023		2022		2021		Prior		Total
Residential real estate
Payment performance
Performing	$	2,996,778	$	5,992,686	$	15,467,099	$	23,543,976	$	9,932,500	$	12,285,027	$	70,218,066
Nonperforming		—		—		—		—		131,784		66,105		197,889
Total	$	2,996,778	$	5,992,686	$	15,467,099	$	23,543,976	$	10,064,284	$	12,351,132	$	70,415,955

Current period gross charge-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—

Home Equity
Payment performance
Performing	$	319,258	$	1,066,722	$	1,672,512	$	202,171	$	178,237	$	678,581	$	4,117,481
Nonperforming		—		—		—		—		22,878		—		22,878
Total	$	319,258	$	1,066,722	$	1,672,512	$	202,171	$	201,115	$	678,581	$	4,140,359

Current period gross charge-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—

Consumer
Payment performance
Performing	$	241,951	$	630,737	$	491,452	$	161,628	$	8,667	$	76,789	$	1,611,224
Nonperforming		—		—		—		—		—		—		—
Total	$	241,951	$	630,737	$	491,452	$	161,628	$	8,667	$	76,789	$	1,611,224

Current period gross charge-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—

Table of Contents

Monroe Federal Savings and Loan Association

Notes to Financial Statements

September 30, 2024 and 2023


	Term Loans Amortized Cost Basis by Origination Year
	As of March 31, 2024
		2024		2023		2022		2021		2020		Prior		Total
Multi-family
Risk rating:
Pass	$	—	$	—	$	226,337	$	263,765	$	352,634	$	1,067,055	$	1,909,791
Special Mention		—		—		—		—		—		—		—
Substandard		—		—		—		—		—		—		—
Doubtful		—		—		—		—		—		—		—
Total	$	—	$	—	$	226,337	$	263,765	$	352,634	$	1,067,055	$	1,909,791

Current period gross charge-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—

Commercial real estate
Risk rating:
Pass	$	2,684,218	$	3,796,346	$	6,733,297	$	1,411,061	$	2,017,296	$	6,951,510	$	23,593,728
Special Mention		—		—		—		—		—		407,805		407,805
Substandard		—		—		—		—		—		—		—
Doubtful		—		—		—		—		—		—		—
Total	$	2,684,218	$	3,796,346	$	6,733,297	$	1,411,061	$	2,017,296	$	7,359,315	$	24,001,533

Current period gross charge-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—

Construction and land
Risk rating:
Pass	$	2,521,518	$	503,750	$	—	$	—	$	62,587	$	—	$	3,087,855
Special Mention		—		—		—		—		—		—		—
Substandard		—		—		—		—		—		—		—
Doubtful		—		—		—		—		—		—		—
Total	$	2,521,518	$	503,750	$	—	$	—	$	62,587	$	—	$	3,087,855

Current period gross charge-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—

Commercial and industrial
Risk rating:
Pass	$	1,116,530	$	321,234	$	41,517	$	310,621	$	2,314,123	$	336,191	$	4,440,216
Special Mention		—		250,000		—		37,114		—		162,272		449,386
Substandard		—		—		—		—		—		—		—
Doubtful		—		—		—		—		—		—		—
Total	$	1,116,530	$	571,234	$	41,517	$	347,735	$	2,314,123	$	498,463	$	4,889,602

Current period gross charge-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—

Table of Contents

Monroe Federal Savings and Loan Association

Notes to Financial Statements

September 30, 2024 and 2023


	Term Loans Amortized Cost Basis by Origination Year
	For the Year Ended March 31, 2024
	2024		2023		2022		2021		2020		Prior		Total
Residential real estate
Payment performance
Performing	$	5,066,684		16,011,420	$	24,329,104	$	10,659,716	$	2,980,257	$	10,112,915	$	69,160,096
Nonperforming		—		—		—		—		—		—		—
Total	$	5,066,684	$	16,011,420	$	24,329,104	$	10,659,716	$	2,980,257	$	10,112,915	$	69,160,096

Current period gross charge-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—

Home Equity
Payment performance
Performing	$	998,457	$	1,870,198	$	202,789	$	198,098	$	94,262	$	827,272	$	4,191,076
Nonperforming		—		—		—		—		—		—		—
Total	$	998,457	$	1,870,198	$	202,789	$	198,098	$	94,262	$	827,272	$	4,191,076

Current period gross charge-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—

Consumer
Payment performance
Performing	$	818,884	$	655,684	$	197,152	$	16,455	$	52,012	$	52,701	$	1,792,888
Nonperforming		—		—		—		—		—		—		—
Total	$	818,884	$	655,684	$	197,152	$	16,455	$	52,012	$	52,701	$	1,792,888

Current period gross charge-offs	$	—	$	—	$	5,551	$	—	$	—	$	—	$	5,551

The Company evaluates the loan risk grading system definitions on an ongoing basis. No significant changes were made during the three and six months ended September 30, 2024 and the year ended March 31, 2024.

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Monroe Federal Savings and Loan Association

Notes to Financial Statements

September 30, 2024 and 2023

The following tables present the Company’s loan portfolio aging analysis of the recorded investment in loans as of September 30, 2024 and March 31, 2024:


	September 30, 2024
					90 Days								Total Loans >
	30-59 Days		60-89 Days		or Greater		Total				Total Loans		90 Days &
	Past Due		Past Due		Past Due		Past Due		Current		Receivable		Accruing
Real estate loans:
Residential	$	1,017,477	$	131,784	$	66,105	$	1,215,366	$	69,200,589	$	70,415,955	$	—
Multi-family		—		—		—		—		1,515,361		1,515,361		—
Commercial		—		—		—		—		23,662,445		23,662,445		—
Construction and land		52,047		—		—		52,047		3,934,938		3,986,985		—
Home equity line of credit (HELOC)		93,061		93,796		22,878		209,735		3,930,624		4,140,359		—
Commercial and industrial		—		—		16,446		16,446		4,412,608		4,429,054		—
Consumer		141,211		—		—		141,211		1,470,013		1,611,224		—

Total	$	1,303,796	$	225,580	$	105,429	$	1,634,805	$	108,126,578	$	109,761,383	$	—


	March 31, 2024
					90 Days								Total Loans >
	30-59 Days		60-89 Days		or Greater		Total				Total Loans		90 Days &
	Past Due		Past Due		Past Due		Past Due		Current		Receivable		Accruing
Real estate loans:
Residential	$	198,028	$	—	$	—	$	198,028	$	68,962,068	$	69,160,096	$	—
Multi-family		—		—		—		—		1,909,791		1,909,791		—
Commercial		—		—		—		—		24,001,533		24,001,533		—
Construction and land		—		—		—		—		3,087,855		3,087,855		—
Home equity line of credit (HELOC)		19,975		—		—		19,975		4,171,101		4,191,076		—
Commercial and industrial		—		—		—		—		4,889,602		4,889,602		—
Consumer		13,208		—		—		13,208		1,779,680		1,792,888		—

Total	$	231,211	$	—	$	—	$	231,211	$	108,801,630	$	109,032,841	$	—

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Monroe Federal Savings and Loan Association

Notes to Financial Statements

September 30, 2024 and 2023

The following table presents the amortized cost basis and collateral type of collateral dependent loans by class as of September 30, 2024 and March 31, 2024:


	Real		Business
September 30, 2024	estate		assets		Total
Real estate loans:
Residential	$	—	$	—	$	—
Multi-family		—		—		—
Commercial		369,007		—		369,007
Construction and land		—		—		—
Home equity line of credit (HELOC)		—		—		—
Commercial and industrial		—		416,019		416,019
Consumer		—		—		—

	$	369,007	$	416,019	$	785,026

	Real		Business
March 31, 2024	estate		assets		Total
Real estate loans:
Residential	$	—	$	—	$	—
Multi-family		—		—		—
Commercial		407,805		—		407,805
Construction and land		—		—		—
Home equity line of credit (HELOC)		—		—		—
Commercial and industrial		—		449,386		449,386
Consumer		—		—		—

	$	407,805	$	449,386	$	857,191

Nonaccrual loans were as follows at September 30, 2024:


		Nonaccrual Loans	Nonaccrual Loans
	Without an		With an		Total
	Allowance		Allowance		Nonaccrual Loans
Real estate loans
Residential	$	197,890		$	197,890
Home equity line of credit (HELOC)		22,878			22,878
Commercial and industrial		16,447			16,447

Total nonaccrual loans	$	237,215		$	237,215

The Company had no nonaccrual loans at March 31, 2024.

There was one commercial and industrial loan in the amount of $52,000, or 1.2% of total commercial and industrial loans, modified for a borrower experiencing financial difficulties during the three months ended September 30, 2024 This modification increased the loan balance from $30,000 to $52,000 and extended the loan term by 3 years. The loan is performing at September 30, 2024. No loans were modified during the three month or six month period ended September 30, 2023.

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Monroe Federal Savings and Loan Association

Notes to Financial Statements

September 30, 2024 and 2023

Note 4:Time Deposits

Time deposits in denominations of $250,000 or more were approximately $6,406,000 and $10,304,000 at September 30, 2024 and March 31, 2024, respectively.

At September 30, 2024, the scheduled maturities of time deposits were as follows:


	September 30,
	2024
Within one year	$	25,092,179
One year to two years		6,963,313
Two years to three years		577,940
Three years to four years		309,645
Four years to five years		597,730
Thereafter		826,585

	$	34,367,392

At September 30, 2024 and March 31, 2024, the Company had one significant customer deposit account with a total deposit balance of approximately $11,804,000 and $21,092,000, respectively.

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Monroe Federal Savings and Loan Association

Notes to Financial Statements

September 30, 2024 and 2023

Note 5:Borrowings

Federal Home Loan Bank (FHLB) advances consisted of the following as of September 30, 2024 and March 31, 2024:


	September 30, 2024				March 31, 2024
	Interest				Interest
	Rate		Amount		Rate		Amount
Scheduled to mature year ending March 31,
2025					1.64	%	$	1,000,000
2025	4.96	%	$	8,925,000	5.75			1,000,000
2026	5.40			1,000,000	5.90			1,000,000
			$	9,925,000			$	3,000,000

The Company has made a collateral pledge to the FHLB consisting of all shares of FHLB stock owned by the Company and a blanket pledge of approximately $70,466,000 and $67,719,000 of its qualifying mortgage assets as of September 30, 2024 and March 31, 2024, respectively. Based on this collateral, the Company was eligible to borrow up to a total of approximately $35,667,000 and $44,887,000 as of September 30, 2024 and March 31, 2024, respectively.

Maturities of FHLB advances were as follows at September 30, 2024:


	September 30,
	2024
Within one year	$	9,925,000
One year to two years		—

	$	9,925,000

The Company had an available line of credit with the Federal Reserve Bank totaling $7.4 million and $9.0 million at September 30, 2024 and March 31, 2024, respectively. The line of credit was collateralized by a pledge of certain commercial loans totaling $15,690,000 and $19,203,000 as of September 30, 2024 and March 31, 2024, respectively. The Company had no outstanding borrowings on this line at September 30, 2024 and March 31, 2024.

The Company also has an available line of credit with United Bankers Bank totaling $4,285,000 and $4,365,000 at September 30, 2024 and March 31, 2024, respectively. The Company had no outstanding borrowings on this line at September 30, 2024 and March 31, 2024.

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Monroe Federal Savings and Loan Association

Notes to Financial Statements

September 30, 2024 and 2023

Note 6:Regulatory Matters

The Company is subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the Company’s financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Company must meet specific capital guidelines that involve quantitative measures of the Company’s assets, liabilities and certain off-balance-sheet items as calculated under U.S. GAAP reporting requirements and regulatory capital standards. The Company’s capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings and other factors. Furthermore, the Company’s regulators could require adjustments to regulatory capital not reflected in these financial statements.

Quantitative measures established by regulatory reporting standards to ensure capital adequacy require the Company to maintain minimum amounts and ratios (set forth in the table below) of total and Tier I capital (as defined) to risk-weighted assets (as defined), common equity Tier I capital (as defined) to total risk-weighted assets (as defined) and of Tier I capital (as defined) to average assets (as defined). Management believes, as of September 30, 2024 and March 31, 2024, that the Company met all capital adequacy requirements to which it is subject.

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Monroe Federal Savings and Loan Association

Notes to Financial Statements

September 30, 2024 and 2023

The Company’s actual and required capital amounts and ratios as of September 30, 2024 and March 31, 2024 were as follows:


									To Be Well Capitalized
									Under
					For Capital Adequacy				Prompt Corrective Action
	Actual				Purposes				Provisions
	Amount		Ratio		Amount		Ratio		Amount		Ratio

	(Dollars in thousands)
As of September 30, 2024
Total Capital
(to Risk-Weighted Assets)	$	13,648	13.9	%	$	7,841	8.0	%	$	9,801	10.0	%

Tier 1 Capital
(to Risk-Weighted Assets)	$	12,859	13.1	%	$	5,880	6.0	%	$	7,841	8.0	%

Common Equity Tier I Capital
(to Risk-Weighted Assets)	$	12,859	13.1	%	$	4,410	4.5	%	$	6,370	6.5	%

Tier I Capital
(to Average Total Assets)	$	12,859	8.5	%	$	6,022	4.0	%	$	7,528	5.0	%

									To Be Well Capitalized
									Under
					For Capital Adequacy				Prompt Corrective Action
	Actual				Purposes				Provisions
	Amount		Ratio		Amount		Ratio		Amount		Ratio

	(Dollars in thousands)
As of March 31, 2024
Total Capital
(to Risk-Weighted Assets)	$	13,829	15.0	%	$	7,380	8.0	%	$	9,226	10.0	%

Tier 1 Capital
(to Risk-Weighted Assets)	$	13,132	14.2	%	$	5,535	6.0	%	$	7,380	8.0	%

Common Equity Tier I Capital
(to Risk-Weighted Assets)	$	13,132	14.2	%	$	4,151	4.5	%	$	5,997	6.5	%

Tier I Capital
(to Average Total Assets)	$	13,132	8.7	%	$	6,056	4.0	%	$	7,570	5.0	%

As of September 30, 2024 and March 31, 2024 the most recent notification from the regulators categorized the Company as well capitalized under the regulatory framework for prompt corrective action. There are no conditions or events since that notification that management believes have changed the Company’s category.

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Monroe Federal Savings and Loan Association

Notes to Financial Statements

September 30, 2024 and 2023

Note 7:Disclosures about Fair Value of Assets and Liabilities

Fair value is the exchange price that would be received to sell an asset or paid to transfer a liability (exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants at the measurement date. Fair value measurements must maximize the use of observable inputs and minimize the use of unobservable inputs. There is a hierarchy of three levels of inputs that may be used to measure fair value:

Level 1

Quoted prices (unadjusted) for identical assets or liabilities in active markets that the entity has the ability to access as of the measurement date.

Level 2

Significant other observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.

Level 3

Significant unobservable inputs that reflect an entity’s own assumptions about the assumptions that market participants would use in pricing an asset or liability.

Recurring Measurements

The following table presents the fair value measurements of assets recognized in the accompanying balance sheets measured at fair value on a recurring basis and the level within the fair value hierarchy in which the fair value measurements fall at September 30, 2024 and March 31, 2024:


			Fair Value Measurements Using
			Quoted Prices in				Significant
			Active Markets for		Significant Other		Unobservable
	Fair		Identical Assets		Observable Inputs		Inputs
	Value		(Level 1)		(Level 2)		(Level 3)
September 30, 2024
U.S. Government agencies	$	2,783,319	$	—	$	2,783,319	$	—
Mortgage-backed Government Sponsored Enterprises (GSEs)		10,286,565		—		10,286,565		—
State and political subdivisions		10,957,118		—		10,957,118		—
Time deposits		679,330		—		679,330		—

March 31, 2024
U.S. Government agencies	$	2,660,297	$	—	$	2,660,297	$	—
Mortgage-backed Government Sponsored Enterprises (GSEs)		10,717,842		—		10,717,842		—
State and political subdivisions		10,657,082		—		10,657,082		—
Time deposits		1,146,140		—		1,146,140		—

Following is a description of the valuation methodologies used for assets measured at fair value on a recurring basis and recognized in the accompanying balance sheets, as well as the general classification of such assets pursuant to the valuation hierarchy. There are no liabilities measured at fair value on a recurring basis. There have been no significant changes in the valuation techniques during the six months ended September 30, 2024 and the year ended March 31, 2024.

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Monroe Federal Savings and Loan Association

Notes to Financial Statements

September 30, 2024 and 2023

Available-for-sale Securities

Where quoted market prices are available in an active market, securities are classified within Level 1 of the valuation hierarchy. If quoted market prices are not available, then fair values are estimated by using quoted prices of securities with similar characteristics or independent asset pricing services and pricing models, the inputs of which are market-based or independently sourced market parameters, including, but not limited to, yield curves, interest rates, volatilities, prepayments, defaults, cumulative loss projections and cash flows. Such securities are classified in Level 2 of the valuation hierarchy. In certain cases where Level 1 or Level 2 are not available, securities are classified within Level 3 of the hierarchy. The Company had no Level 3 securities.

Nonrecurring Measurements

The following table presents the fair value measurements of assets recognized in the accompanying balance sheet measured at fair value on a nonrecurring basis and the level within the fair value hierarchy in which the fair value measurements fall at September 30, 2024.


			Fair Value Measurements Using
	Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
September 30, 2024
Collateral dependent loans	$	44,144	$	—	$	—	$	44,144


	Fair Value		Valuation Technique	Unobservable Inputs	Range (Weighted-average)
September 30, 2024
Collateral dependent loans	$	44,144	Estimated sales price	Adjustments for discounts to reflect current market conditions	20% - 50% (46%)

The Company had no assets recognized in the accompanying balance sheets measured at fair value on a nonrecurring basis at March 31, 2024.

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Monroe Federal Savings and Loan Association

Notes to Financial Statements

September 30, 2024 and 2023

The estimated fair values of the Company’s financial instruments not carried at fair value on the balance sheets as of September 30, 2024 and March 31, 2024 are as follows:


	Carrying		Fair		Fair Value Measurements Using
	Value		Value		Level 1		Level 2		Level 3
September 30, 2024
Financial assets:
Cash and cash equivalents	$	2,044,795	$	2,044,795		2,044,795	$	—	$	—
Loans, net		108,578,554		103,329,000		—		—		103,329,000
Restricted stock		901,700		901,700		—		901,700		—
Bank owned life insurance		3,546,281		3,546,281		3,546,281		—		—
Accrued interest receivable		492,335		492,335		492,335		—		—

Financial liabilities:
Deposits		124,356,988		124,076,596		89,989,596		—		34,087,000
FHLB advances		9,925,000		9,969,000		—		—		9,969,000
Accrued interest payable		53,832		53,832		—		53,832		—


	Carrying		Fair		Fair Value Measurements Using
	Value		Value		Level 1		Level 2		Level 3
March 31, 2024
Financial assets:
Cash and cash equivalents	$	10,617,698	$	10,617,698	$	10,617,698	$	—	$	—
Loans, net		107,869,172		99,786,000		—		—		99,786,000
Restricted stock		515,000		515,000		—		515,000		—
Bank owned life insurance		3,491,015		3,491,015		3,491,015		—		—
Accrued interest receivable		483,027		483,027		483,027		—		—

Financial liabilities:
Deposits		142,092,312		141,311,781		99,686,781		—		41,625,000
FHLB advances		3,000,000		2,993,000		—		—		2,993,000
Accrued interest payable		25,245		25,245		—		25,245		—

Limitations: Fair value estimates are made at a specific point in time, based on relevant market information and information about the financial instrument. These estimates do not reflect any premium or discount that could result from offering for sale at one time the Company’s entire holdings of a particular financial instrument. Fair value estimates may not be realizable in an immediate settlement of the instrument. In some instances, there are no quoted market prices for the Company’s various financial instruments, in which case fair values may be based on estimates using present value or other valuation techniques, or based on judgments regarding future expected loss experience, current economic conditions, risk characteristic of the financial instruments, or other factors.

Those techniques are significantly affected by the assumptions used, including the discount rate and estimate of future cash flows. Subsequent changes in assumptions could significantly affect the estimates.

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Monroe Federal Savings and Loan Association

Notes to Financial Statements

September 30, 2024 and 2023

Note 8 – Subsequent Events

Plan of Conversion and Change in Corporate Form

On June 10, 2024 the Board of Directors of the Company adopted a plan of conversion (Plan). The Plan was approved by the Office of the Comptroller of the Currency and by the affirmative vote of a majority of the total votes eligible to be cast by the voting members of the Company at a special meeting of members. The Plan sets forth that the Company proposed to convert from the mutual form of ownership to the stock form of ownership with the establishment of a stock holding company (Monroe Federal Bancorp, Inc.), as parent of the Company. The Company converted to the stock form of ownership, followed by the issuance of all of the Company’s outstanding stock to Monroe Federal Bancorp, Inc.

The conversion and stock offering were completed effective October 23, 2024, with the issuance of 526,438 shares of Monroe Federal Bancorp, Inc. common stock. The costs of issuing the common stock were deferred and deducted from the sales proceeds of the offering. The Company had incurred $704,150 in deferred conversion costs as of September 30, 2024.

At the completion of the conversion to stock form, the Company established a liquidation account in the amount of the Company’s net worth reported in the Company’s latest balance sheet contained in the final prospectus. The liquidation account will be maintained for the benefit of eligible savings account holders who maintain deposit accounts in the Company after conversion.

The conversion will be accounted for as a change in corporate form with the historic basis of the Company’s assets, liabilities and equity unchanged as a result.

Monroe Federal Bancorp, Inc.is an emerging growth company, and, 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 other public companies but not to “emerging growth companies.” Monroe Federal Bancorp, Inc. intends to use the extended transition period to delay adoption of new or revised accounting pronouncements applicable to public companies until such pronouncements are made applicable to private companies. Accordingly, its financial statements may not be comparable to the financial statements of public companies that comply with such new or revised accounting standards.

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

Management’s discussion and analysis is intended to enhance your understanding of our financial condition and results of operations. The financial information in this section is derived from the accompanying unaudited financial statements. You should read the financial information in this section in conjunction with the business and financial information contained in this report and in the Company’s definitive prospectus dated August 9, 2024, filed with the Securities and Exchange Commission.

Cautionary Note Regarding Forward-Looking Statements

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

●

statements of our goals, intentions and expectations;

●

statements regarding our business plans, prospects, growth and operating strategies;

●

statements regarding the asset quality of our loan and investment portfolios; and

●

estimates of our risks and future costs and benefits.

These forward-looking statements are based on our current beliefs and expectations and are inherently subject to significant business, economic and competitive uncertainties and contingencies, many of which are beyond our control. In addition, these forward-looking statements are subject to assumptions with respect to future business strategies and decisions that are subject to change.

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

●

general economic conditions, either nationally or in our market area, which are worse than expected;

●

changes in the level and direction of loan delinquencies and write-offs and changes in estimates of the adequacy of the allowance for credit losses;

●

our ability to access cost-effective funding;

●

our ability to maintain adequate liquidity, primarily through deposits;

●

fluctuations in real estate values and in the conditions of the residential real estate and commercial real estate markets;

●

demand for loans and deposits in our market area;

●

our ability to implement and change our business strategies;

●

competition among depository and other financial institutions;

●

inflation and changes in the interest rate environment that reduce our margins and yields, the fair value of our financial instruments, or our level of loan originations, or increase the level of defaults, losses and prepayments within our loan portfolio;

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●

adverse changes in the securities markets;

●

changes in laws or government regulations or policies affecting financial institutions, including changes in regulatory fees, capital requirements and insurance premiums;

●

changes in the quality or composition of our loan or investment portfolios;

●

technological changes that may be more difficult or expensive than expected;

●

the inability of third-party providers to perform as expected;

●

a failure or breach of our operational or information security systems or infrastructure, including cyberattacks;

●

our ability to manage market risk, credit risk and operational risk;

●

our ability to enter new markets successfully and capitalize on growth opportunities;

●

changes in consumer spending, borrowing and savings habits;

●

changes in accounting policies and practices, as may be adopted by the bank regulatory agencies, the Financial Accounting Standards Board, the Securities and Exchange Commission or the Public Company Accounting Oversight Board;

●

our ability to retain key employees; and

●

changes in the financial condition, results of operations or future prospects of issuers of securities that we own.

Because of these and a wide variety of other uncertainties, our actual future results may be materially different from the results indicated by these forward-looking statements. Except as required by applicable law or regulation, we assume no obligation and disclaims any obligation to update any forward-looking statements.

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.

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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 current expected credit loss (CECL) methodology that reflects expected credit losses over the lives of the credit instruments and requires consideration of a broader range of information to estimate credit losses. ASC 326 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

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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.

Comparison of Financial Condition at September 30, 2024 and March 31, 2024

Total Assets. Total assets were $147.9 million at September 30, 2024, a decrease of $7.4 million, or 4.8%, from March 31, 2024. The decrease was primarily comprised of a decrease in cash and cash equivalents of $8.6 million and a decrease in available for sale investment securities of $475,000, which were partially offset by an increase in net loans of $709,000.

Cash and Cash Equivalents. Cash and cash equivalents decreased by $8.6 million, or 80.7%, to $2.0 million at September 30, 2024 from $10.6 million at March 31, 2024. The decrease was due primarily to a decrease in deposits during the six months ended September 30, 2024.

Investment Securities. Investment securities available for sale decreased $475,000, or 1.9%, to $24.7 million at September 30, 2024, from $25.2 million at March 31, 2024. The decrease was primarily attributable to calls, maturities and repayments of securities totaling $1.3 million during the six months ended September 30, 2024, which was partially offset by a decrease in the level of unrealized losses on securities of $913,000. The improvement in the unrealized losses on securities was due to the 50 basis point decrease in the Federal funds rate by the Federal Reserve Board in September 2024.

Net Loans. Net loans increased by $709,000, or 0.7%, to $108.6 million at September 30, 2024 from $107.9 million at March 31, 2024. During the six months ended September 30, 2024, loan originations totaled $7.4 million, comprised primarily of $3.8 million of loans secured by one- to four-family residential real estate, $1.5 million of construction and land loans, $1.2 million home equity loans, $523,000 of commercial real estate loans and $180,000 of commercial and industrial loans. Consumer loan originations totaled $253,000, the majority of which were auto loans.

During the six months ended September 30, 2024, residential real estate loans increased $1.3 million, or 1.8%, to a total of $70.4 million at September 30, 2024 and construction and land loans increased $899,000, or 29.1%, to $4.0 million at September 30, 2024. These increases were partially offset by a decrease in multi-family loans of $394,000, or 20.7%, to $1.5 million at September 30, 2024, a decrease in commercial real estate loans of $339,000, or 1.4%, to $23.7 million at September 30, 2024 and a decrease in commercial and industrial loans of $461,000, or 9.4%, to $4.4 million at September 30, 2024.

The Bank’s overall loan growth has been achieved amid strong competition for one- to four-family residential mortgage loans and commercial loans in our market area.

The Bank’s strategy includes maintaining 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 decreased by $17.7 million, or 12.5%, to $124.4 million at September 30, 2024 from $142.1 million at March 31, 2024. Core deposits decreased $9.7 million, or 9.7%, to $90.0 million at September 30, 2024 from $99.7 million at March 31, 2024. Certificates of deposit decreased $8.0 million, or 19.0%, to $34.4 million at September 30, 2024 from $42.4 million at March 31, 2024. The decrease in core deposits was due primarily to a $9.3 million decrease in the account held by a significant commercial customer whose account balances can tend to fluctuate routinely in the normal course of business. The decrease in certificates of deposit was due primarily to outflows of higher rate accounts as management elected not to compete on interest rates during the period.

During the six months ended September 30, 2024, management continued its strategy of pursuing growth in demand accounts and other lower cost core deposits, in part by enhancing products and services offered and increased marketing. Management intends to continue its efforts to increase core deposits, with an emphasis on growth in consumer and business demand deposits.

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Advances from the Federal Home Loan Bank. Advances from the Federal Home Loan Bank totaled $9.9 million at September 30, 2024, an increase of $6.9 million, or 230.8%, from the $3.0 million balance at March 31, 2024. The additional borrowings were obtained primarily to fund deposit outflows during the period. Advances totaling $8.9 million are scheduled to mature within three months from September 30, 2024.

Equity. Equity increased $519,000, or 6.1%, to $9.1 million at September 30, 2024, from $8.6 million at March 31, 2024. The increase was due primarily to a $721,000 decrease in the accumulated other comprehensive loss, which was partially offset by the $202,000 net loss for the six months ended September 30, 2024.

Average Balances and Yields. The following table sets forth average balance sheets, average yields and rates, and other information for the periods indicated. No tax-equivalent yield adjustments have been made, as the effects are immaterial. Average balances are calculated using daily average balances. Non-accrual loans are included in average balances only. The average balance of available-for-sale securities does not include unrealized losses during the periods. Average yields include the effect of deferred fees, discounts, and premiums that are amortized or accreted to interest income or interest expense. Net deferred loan fees/costs are immaterial.



	For the Three Months Ended September 30,
	2024							2023
	Average							Average
	Outstanding					Average		Outstanding					Average
	Balance			Interest		Yield/Rate		Balance			Interest		Yield/Rate


Interest-earning assets:
Interest-bearing deposits and other	$	2,047		$	24	4.69	%	$	2,910		$	41	5.64	%
Available-for-sale securities		29,808			125	1.68			32,614			134	1.66
Loans		109,719			1,315	4.79			111,654			1,253	4.49
Total interest-earning assets		141,574			1,464	4.14			147,178			1,428	3.88
Noninterest earning assets		8,003							6,484
Allowance for credit losses		(872)							(909)
Total assets	$	148,705						$	152,753

Interest-bearing liabilities:
Interest-bearing demand accounts	$	33,684			2	0.02	%	$	32,751			2	0.02	%
Savings accounts		19,234			6	0.12			22,284			4	0.07
Money market accounts		28,912			101	1.40			30,108			55	0.73
Certificates of deposit		36,278			359	3.96			37,924			320	3.38
Total interest-bearing deposits		118,108			468	1.58			123,067			381	1.24
Federal funds purchased		11,168			151	5.41			9,750			126	5.17
Federal Home Loan Bank advances		70			1	5.71			82			1	4.88
Total interest-bearing liabilities		129,346			620	1.92			132,899			508	1.53
Noninterest-bearing demand deposits		8,274							9,150
Other noninterest-bearing liabilities		2,711							2,449
Total liabilities		140,331							144,498
Total equity		8,374							8,255
Total liabilities and equity		148,705							152,753
Net interest income				$	844						$	920
Net interest rate spread (1)						2.22	%						2.35	%
Net interest-earning assets (2)	$	12,228						$	14,279
Net interest margin (3)						2.38	%						2.50	%
Average interest-earning assets to interest-bearing liabilities		109.45	%						110.74	%

(1)Net interest rate spread represents the difference between the weighted average yield on interest-earning assets and the weighted average rate of interest-bearing liabilities.

(2)Net interest-earning assets represent total interest-earning assets less total interest-bearing liabilities.

(3)Net interest margin represents net interest income divided by average total interest-earning assets.

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	For the Six Months Ended September 30,
	2024							2023
	Average							Average
	Outstanding					Average		Outstanding					Average
	Balance			Interest		Yield/Rate		Balance			Interest		Yield/Rate


Interest-earning assets:
Interest-bearing deposits and other	$	3,699		$	112	6.06	%	$	3,128		$	86	5.50	%
Available-for-sale securities		30,160			250	1.66			32,905			272	1.65
Loans		109,462			2,591	4.73			111,369			2,468	4.43
Total interest-earning assets		143,321			2,953	4.12			147,402			2,826	3.83
Noninterest earning assets		7,578							6,722
Allowance for credit losses		(864)							(953)
Total assets	$	150,035						$	153,171

Interest-bearing liabilities:
Interest-bearing demand accounts	$	36,613			4	0.02	%	$	32,719			3	0.02	%
Savings accounts		18,987			9	0.09			23,479			10	0.09
Money market accounts		29,202			172	1.18			30,177			100	0.66
Certificates of deposit		38,073			749	3.93			37,030			589	3.18
Total interest-bearing deposits		122,875			934	1.52			123,405			702	1.14
Federal funds purchased		7,373			191	5.18			9,536			232	4.87
Federal Home Loan Bank advances		55			2	7.27			167			5	5.99
Total interest-bearing liabilities		130,303			1,127	1.73			133,108			939	1.41
Noninterest-bearing demand deposits		8,211							9,203
Other noninterest-bearing liabilities		3,019							2,493
Total liabilities		141,533							144,804
Total equity		8,502							8,367
Total liabilities and equity		150,035							153,171
Net interest income				$	1,826						$	1,887
Net interest rate spread ⁽¹⁾						2.39	%						2.42	%
Net interest-earning assets ⁽²⁾	$	13,018						$	14,294
Net interest margin ⁽³⁾						2.55	%						2.56	%
Average interest-earning assets to interest-bearing liabilities		109.99	%						110.74	%

(1)Net interest rate spread represents the difference between the weighted average yield on interest-earning assets and the weighted average rate of interest-bearing liabilities.

(2)Net interest-earning assets represent total interest-earning assets less total interest-bearing liabilities.

(3)Net interest margin represents net interest income divided by average total interest-earning assets.

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


	Three Months Ended September 30,
	2024 vs. 2023
			Total
	Increase (decrease) due to		Increase
	Volume	Rate	(Decrease)

	(In thousands)
Interest-earning assets:
Other interest-earning assets	($ 11)	($ 6)	($ 17)
Investment securities	(12)	3	(9)
Loans	(21)	83	62
Total interest-earning assets	(44)	80	36

Interest-bearing liabilities:
Interest-bearing demand	-	-	-
Savings accounts	(1)	3	2
Money market	(2)	48	46
Certificates of deposit	(14)	53	39
Total deposits	(17)	104	87
Federal Home Loan Bank advances	19	6	25
Federal funds purchased	-	-	-
Total interest-bearing liabilities	2	110	112

Change in net interest income	($ 46)	($ 30)	($ 76)


	Six Months Ended September 30,
	2024 vs. 2023
	Increase (Decrease)				Total
	Due to:				Increase
	Volume		Rate		(Decrease)

	(In thousands)
Interest-earning assets:
Loans, net	$	17	$	9	$	26
Available-for-sale securities		(23)		1		(22)
Other interest-earning assets		(43)		166		123
Total interest-earning assets		(49)		176		127

Interest-bearing liabilities:
Interest-bearing demand accounts		—		1		1
Savings accounts		(2)		1		(1)
Money market accounts		(3)		75		72
Certificates of deposit		17		143		160
Total deposits		12		220		232
Federal funds purchased		(56)		15		(41)
Federal Home Loan Bank advances		(4)		1		(3)
Total interest-bearing liabilities		(48)		236		188

Change in net interest income	$	(1)	$	(60)	$	(61)

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Comparison of Operating Results for the Three Months Ended September 30, 2024 and 2023

General. The Company reported a net loss for the three months ended September 30, 2024 of $86,000, a decrease of $116,000 compared to net income of $30,000 for the three months ended September 30, 2023. The decrease in net income was primarily due to a $76,000 decrease in net interest income and a $72,000 increase in noninterest expenses, which were partially offset by an $8,000 increase in the recovery of credit losses and a $25,000 increase in the income tax benefit.

Interest Income. Interest income increased $36,000, or 2.5%, to $1.5 million for the three months ended September 30, 2024 compared to the three months ended September 30, 2023. This increase was attributable to a $62,000, or 4.9%, increase in interest on loans receivable, which was partially offset by a $9,000, or 6.7%, decrease in interest on investment securities and a $17,000, or 41.5%, decrease in interest on interest-bearing deposits and other assets.

The average yield on loans increased by 30 basis points to 4.79% for the three months ended September 30, 2024 from 4.49% for the three months ended September 30, 2023, while the average balance of loans decreased by $1.9 million, or 1.7%, during the three months ended September 30, 2024 compared to the average balance for the three months ended September 30, 2023. The increase in average yield on loans reflects the increase in the overall interest rate environment period-to-period. The increases in interest rates have provided higher yields on newly originated loans, as well as the Company’s adjustable-rate loans, which have adjusted upward and should continue to rise provided the higher interest rate environment persists.

The average balance of investment securities decreased $2.8 million, or 8.6%, to $29.8 million for the three months ended September 30, 2024 from $32.6 million for the three months ended September 30, 2023, while the average yield on investment securities increased by four basis points to 1.68% for the three months ended September 30, 2024 from 1.64% for the three months ended September 30, 2023.

Interest income on other interest-bearing deposits, comprised primarily of overnight deposits and stock in the Federal Home Loan Bank, decreased $17,000, or 41.5%, for the three months ended September 30, 2024, due to a decrease in the average yield of 95 basis points, to 4.69% for the three months ended September 30, 2024 from 5.64% for the three months ended September 30, 2023, and a decrease in the average balance of $863,000, or 29.7%.

Interest Expense. Total interest expense increased $112,000, or 22.0%, to $620,000 for the three months ended September 30, 2024 from $508,000 for the three months ended September 30, 2023. Interest expense on deposits increased $87,000, or 22.8%, due primarily to an increase of 34 basis points in the average cost of deposits to 1.58% for the three months ended September 30, 2024 from 1.24% for the three months ended September 30, 2023, which was partially offset by a decrease of $5.0 million, or 4.0%, in the average balance of interest-bearing deposits to $118.1 million for the three months ended September 30, 2024 from $123.1 million for the three months ended September 30, 2023.

Interest expense on borrowings increased $25,000, or 19.7%, to $152,000 for the three months ended September 30, 2024, compared to $127,000 for the three months ended September 30, 2023. The increase was due to a $1.4 million, or 14.3%, increase in the average balance outstanding, to $11.2 million for the three months ended September 30, 2024 from $9.8 million for the three months ended September 30, 2023, and a 24 basis point increase in the weighted-average rate, to 5.41% for the three months ended September 30, 2024 compared to 5.17% for the three months ended September 30, 2023.

Net Interest Income. Net interest income decreased $76,000, or 8.3%, to $844,000 for the three months ended September 30, 2024 compared to $920,000 for the three months ended September 30, 2023. The decrease reflected a decrease in the interest rate spread to 2.22% for the three months ended September 30, 2024 from 2.35% for the three months ended September 30, 2023, while the average net interest earning assets decreased $2.1 million period-to-period. The net interest margin decreased to 2.38% for the three months ended September 30, 2024 from 2.50% for the three months ended September 30, 2023. The interest rate spread and net interest margin were impacted by a series of interest

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rate increases in the economy during 2023 and 2022 and to a lesser extent, a recent 50 basis point reduction in the federal funds rate by the Federal Reserve Board.

Provision for (Recovery of) Credit Losses. The Company recorded a recovery of credit losses of $15,000 for the three months ended September 30, 2024, an increase of $8,000 compared to a recovery of $7,000 recorded for the three months ended September 30, 2023. The allowance for credit losses on loans was $875,000 at September 30, 2024, an increase of $20,000, or 2.3%, over the $855,000 total at March 31, 2024. The allowance for credit losses on off-balance sheet commitments was $56,000 at September 30, 2024 and March 31, 2024. The decrease in the overall allowance for credit losses was comprised of a $15,000 recovery of credit losses and $1,000 in loan recoveries during the period. The allowance for credit losses on loans represented 0.80% of total loans at September 30, 2024, and 0.79% at March 31, 2024.

The determination over the adequacy of the allowance for credit losses included consideration of the balances of nonperforming loans, delinquent loans and net charge-offs in both periods. The Company’s nonperforming loans totaled $237,000 at September 30, 2024, compared to nonperforming loans of $605,000 at September 30, 2023. Classified loans totaled $174,000 at September 30, 2024, compared to $605,000 at September 30, 2023, and total loans past due greater than 30 days were $1.6 million and $783,000 at those respective dates.

The allowance for credit losses reflects the estimate management believes to be appropriate to cover incurred probable losses which were inherent in the loan portfolio at September 30, 2024 and 2023. While management believes the estimates and assumptions used in the determination of the adequacy of the allowance are reasonable, such estimates and assumptions could be proven incorrect in the future, and the actual amount of future provisions may exceed the amount of past provisions, and the increase in future provisions that may be required may adversely impact the Company’s financial condition and results of operations. In addition, bank regulatory agencies periodically review the allowance for credit losses and may require an increase in the provision for credit losses or the recognition of loan charge-offs, based on judgments different than those of management.

Noninterest Income. Noninterest income totaled $85,000 for the three months ended September 30, 2024, a decrease of $2,000, or 2.0%, from $87,000 for the three months ended September 30, 2023. The decrease was attributable primarily to a $4,000, or 34.2%, decrease in other income, which was due primarily to a decrease in rental income, which was partially offset by a $3,000, or 11.7%, increase in the cash surrender value of life insurance.

Noninterest Expense. Noninterest expense increased $72,000, or 7.2%, to $1.1 million for the three months ended September 30, 2024, compared to $992,000 for the three months ended September 30, 2023. The increase was due primarily to a $67,000, or 13.8%, increase in salaries and employee benefits and a $5,000, or 4.1%, increase in data processing fees, which were partially offset by a $5,000, or 23.3%, decrease in advertising.

The increase in salaries and employee benefits was due primarily to an increase in staffing related to the new branch office and normal merit increases year-to-year.

Noninterest expense can be expected to increase because of costs associated with operating as a public company and increased compensation costs related to possible implementation of one or more stock-based benefit plans, if approved by our stockholders.

Income Taxes. The Company’s income tax benefit provision increased by $25,000, or 291.8%, to a total of $34,000 for the three months ended September 30, 2024, compared to a benefit provision of $9,000 the three months ended September 30, 2023. The increase in the income tax benefit provision was due primarily to a $142,000 decrease in pretax income. The tax benefit provision and effective tax rates reflect the Company’s nontaxable interest income in each period.

Comparison of Operating Results for the Six Months Ended September 30, 2024 and 2023

General. The Company reported a net loss for the six months ended September 30, 2024 of $202,000, a decrease of $252,000 compared to net income of $50,000 for the six months ended September 30, 2023. The decrease in net

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income was primarily due to a $61,000 decrease in net interest income, a $24,000 increase in the provision for credit losses and a $223,000 increase in noninterest expenses, which were partially offset by and a $57,000 increase in the income tax benefit.

Interest Income Interest income increased $127,000, or 4.5%, to $3.0 million for the six months ended September 30, 2024 compared to the six months ended September 30, 2023. This increase was attributable to a $123,000, or 5.0%, increase in interest on loans receivable and a $26,000, or 30.2%, increase in interest on interest-bearing deposits and other assets, which were partially offset by a $22,000, or 8.1%, decrease in interest on investment securities.

The average yield on loans increased by 30 basis points to 4.73% for the six months ended September 30, 2024 from 4.43% for the six months ended September 30, 2023, while the average balance of loans decreased by $1.9 million, or 1.7%, during the six months ended September 30, 2024 compared to the average balance for the six months ended September 30, 2023. The increase in average yield on loans reflects the increase in the overall interest rate environment period-to-period. The increases in interest rates have provided higher yields on newly originated loans, as well as the Company’s adjustable-rate loans, which have adjusted upward and should continue to rise provided the higher interest rate environment persists.

The average balance of investment securities decreased $2.7 million to $30.2 million for the six months ended September 30, 2024 from $32.9 million for the six months ended September 30, 2023, while the average yield on investment securities increased by one basis point to 1.66% for the six months ended September 30, 2024 from 1.65% for the six months ended September 30, 2023.

Interest income on other interest-bearing deposits, comprised primarily of overnight deposits and stock in the Federal Home Loan Bank, increased $26,000, or 30.2%, for the six months ended September 30, 2024, due to an increase in the average yield of 56 basis points, to 6.06% for the six months ended September 30, 2024 from 5.50% for the six months ended September 30, 2023, and an increase in the average balance of $571,000, or 18.3%. The increase in average yield was due to the increase in interest rates in the overall economy period-to-period.

Interest Expense Total interest expense increased $188,000, or 20.0%, to $1.1 million for the six months ended September 30, 2024 from $939,000 for the six months ended September 30, 2023. Interest expense on deposits increased $232,000, or 33.0%, due primarily to an increase of 38 basis points in the average cost of deposits to 1.52% for the six months ended September 30, 2024 from 1.14% for the six months ended September 30, 2023, which was partially offset by a decrease of $534,000, or 0.4%, in the average balance of interest-bearing deposits to $122.9 million for the six months ended September 30, 2024 from $123.4 million for the six months ended September 30, 2023.

Interest expense on borrowings decreased $44,000, or 18.6%, to $193,000 for the six months ended September 30, 2024, compared to $237,000 for the six months ended September 30, 2023. The decrease was due to a $2.3 million, or 23.4%, decrease in the average balance outstanding, to $7.4 million for the six months ended September 30, 2024 from $9.7 million for the six months ended September 30, 2023, which was partially offset by a 33 basis point increase in the weighted-average rate, to 5.20% for the six months ended September 30, 2024 compared to 4.89% for the six months ended September 30, 2023.

Net Interest Income. Net interest income decreased $61,000, or 3.2%, to $1.8 million for the six months ended September 30, 2024 compared to $1.9 million for the six months ended September 30, 2023. The decrease reflected a decrease in the interest rate spread to 2.39% for the six months ended September 30, 2024 from 2.42% for the six months ended September 30, 2023, while the average net interest earning assets decreased $1.3 million period-to-period. The net interest margin decreased to 2.55% for the six months ended September 30, 2024 from 2.56% for the six months ended September 30, 2023. The interest rate spread and net interest margin were impacted by a series of interest rate increases in the economy during 2023 and 2022, and to a lesser extent, a recent 50 basis point reduction in the federal funds rate by the Federal Reserve Board.

Provision for Credit Losses. The provision for credit losses totaled $17,000 for the six months ended September 30, 2024, compared to a recovery recorded for the six months ended September 30, 2023. The allowance for

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credit losses on loans was $875,000 at September 30, 2024, an increase of $20,000, or 2.3%, over the $855,000 total at March 31, 2024. The allowance for credit losses on off-balance sheet commitments was $56,000 at both September 30, 2024 and March 31, 2024. The increase in the overall allowance for credit losses was comprised of a $17,000 recovery of credit losses and $2,000 in loan recoveries during the period. The allowance for credit losses on loans represented 0.80% of total loans at September 30, 2024, and 0.79% at March 31, 2024.

Non-Interest Income. Noninterest income totaled $173,000 for both the six months ended September 30, 2024 and 2023. A $7,000, or 31.4%, decrease in other income, due primarily to a decrease in rental income, was partially offset by a $6,000, or 12.0%, increase in the cash surrender value of life insurance.

Noninterest Expense. Noninterest expense increased $223,000, or 11.0%, to $2.3 million for the six months ended September 30, 2024, compared to $2.0 million for the six months ended September 30, 2023. The increase was due primarily to a $133,000, or 164.2%, increase in professional fees, a $94,000, or 9.3%, increase in salaries and employee benefits.

The increase in professional services expense was due primarily to an increase in audit fees as the Company’s financial statements were reaudited in connection with the planned mutual-to-stock conversion transaction. The increase in salaries and employee benefits was due primarily to an increase in staffing related to the new branch office and normal merit increases year-to-year.

Provision (Benefit) for Income Taxes. The Company’s income tax benefit provision increased by $57,000, or 283.1%, to a total of $77,000 for the six months ended September 30, 2024, compared to a benefit provision of $20,000 the six months ended September 30, 2023. The increase in the income tax benefit provision was due primarily to a $308,000 decrease in pretax income. The tax benefit provision and effective tax rates reflect the Company’s nontaxable interest income in each period.

Management of Market Risk

General. Our most significant form of market risk is interest rate risk because, as a financial institution, the majority of our assets and liabilities are sensitive to changes in interest rates. Therefore, a principal part of our operations is to manage interest rate risk and limit the exposure of our financial condition and results of operations to changes in market interest rates. The board of directors establishes policies and guidelines for managing interest rate risk. All directors participate in discussions during the regular board meetings evaluating the interest rate risk inherent in our assets and liabilities, and the level of risk that is appropriate. These discussions take into consideration our business

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strategy, operating environment, capital, liquidity and performance objectives consistent with the policy and guidelines approved by them.

The board of directors delegates the responsibility for interest rate risk management to the asset/liability management committee consisting of the Company’s executive officers. The asset/liability management committee provides quarterly reports to the board of directors. If an exception to the interest rate risk policy tolerance limits arise, the asset/liability management committee documents and communicates it to the board of directors at its next scheduled meeting along with a recommended course of action to address the exception consistent with established policy and guidelines.

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

●

maintaining capital levels that exceed the thresholds for well-capitalized status under federal regulations;

●

maintaining a high level of liquidity;

●

growing our core deposit accounts;

●

managing our investment securities portfolio so as to reduce the average maturity and effective life of the portfolio; and

●

continuing to diversify our loan portfolio by adding more commercial real estate loans and commercial and industrial loans, which typically have shorter maturities and/or balloon payments.

●

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

We maintain a significant deposit account with a commercial customer. The asset/liability management committee monitors the status of the account at its monthly meeting and the account is segregated as a separate line item on the deposit reports reviewed by the committee. Furthermore, there is regular verbal communication between senior management and the depositor regarding any expected changes in the depositor’s business that could result in material inflows and outflow from the account in the short-term so that we may proactively manage any risks due to expected fluctuations in the account balance.

We maintain uninsured deposits that exceed the Federal Deposit Insurance Corporation insurance limit. Senior management reviews uninsured deposit balances monthly to manage any risks due to fluctuations in the balances of uninsured deposits. We do not maintain any internal policy limits on concentrations in uninsured deposits in total or by type of depositor. We may accept brokered deposits up to an internal policy limit of 15% of total assets from brokers approved by the board of directors. Before a broker is approved by the board of directors, we conduct financial analysis and due diligence on the broker. We had no brokered deposits at June 30, 2024.

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.

We have not engaged in hedging activities, such as engaging in futures or options. We do not anticipate entering into similar transactions in the future.

Economic Value of Equity. We compute amounts by which the net present value of our assets and liabilities (economic value of equity or “EVE”) would change in the event of a range of assumed changes in market interest rates. This model uses a discounted cash flow analysis and an option-based pricing approach to measure the interest rate sensitivity of net portfolio value. The model estimates the economic value of each type of asset, liability and off-balance

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sheet contract under the assumptions that the United States Treasury yield curve increases instantaneously by 100, 200 and 300 basis point increments or decreases instantaneously by 100, 200 and 300 basis point increments, with changes in interest rates representing immediate and permanent, parallel shifts in the yield curve.

The following table sets forth, as of September 30, 2024, the calculation of the estimated changes in our EVE that would result from the designated immediate changes in the United States Treasury yield curve. The estimated changes presented in the table are within the policy limits established by our board of directors except that the decrease in EVE at the positive 200 and 300 basis point levels exceeded policy limits.


At September 30, 2024
							EVE as a Percentage of
							Present
							Value of Assets ⁽³⁾
			Estimated Increase
			(Decrease) in						Increase
			EVE						(Decrease)
Change in Interest	Estimated								(basis
Rates (basis points) ⁽¹⁾	EVE ⁽²⁾		Amount		Percent		EVE Ratio ⁽⁴⁾		points)

			(Dollars in thousands)
300	$	10,916	$	(6,761)	(38.25)	%	8.56	%	(374)
200	$	13,401	$	(4,276)	(24.19)	%	10.09	%	(221)
100	$	15,991	$	(1,686)	(9.54)	%	11.57	%	(73)
Level	$	17,677		—		%	12.30	%	—
(100)	$	18,806	$	1,129	6.39	%	12.63	%	33
(200)	$	18,965	$	1,288	7.28	%	12.36	%	6
(300)	$	17,982	$	305	1.73	%	11.45	%	(85)

(1)	Assumes an immediate uniform change in interest rates at all maturities. One basis point equals 0.01%.

(2)	EVE is the discounted present value of expected cash flows from assets, liabilities and off-balance sheet contracts.

(3)	Present value of assets represents the discounted present value of incoming cash flows on interest-earning assets.

(4)	EVE Ratio represents EVE divided by the present value of assets.

The table above indicates that at September 30, 2024, we would have experienced a 24.2% decrease in EVE in the event of an instantaneous parallel 200 basis point increase in market interest rates and a 7.3% increase in EVE in the event of an instantaneous 200 basis point decrease in market interest rates.

Change in Net Interest Income. The table sets forth, as of September 30, 2024, the calculation of the estimated changes in our net interest income that would result from the designated immediate changes in the United States Treasury yield curve. All estimated changes presented in the table are within the policy limits established by the Company’s board of directors.


At September 30, 2024
Change in Interest Rates	Net Interest Income Year 1
(basis points) ⁽¹⁾	Forecast		Year 1 Change from Level
		(Dollars in thousands)
300	$	3,461	(3.57)	%
200	$	3,546	(1.19)	%
100	$	3,626	1.04	%
Level	$	3,589	—
(100)	$	3,549	(1.09)	%
(200)	$	3,478	(3.09)	%
(300)	$	3,308	(7.82)	%

(1)	Assumes an immediate uniform change in interest rates at all maturities. One basis point equals 0.01%.

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The table above indicates that as of September 30, 2024, we would have experienced a 1.2% decrease in net interest income in the event of an instantaneous parallel 200 basis point increase in market interest rates and a 3.1% decrease in net interest income in the event of an instantaneous 200 basis point decrease in market interest rate.

Certain shortcomings are inherent in the methodologies used in the above interest rate risk measurement. Modeling changes in EVE and NII require making certain assumptions that may or may not reflect the manner in which actual yields and costs respond to changes in market interest rates. For instance, the EVE and NII tables presented above assume that the composition of our interest-sensitive assets and liabilities existing at the beginning of a period remains constant over the period being measured and assumes that a particular change in interest rates is reflected uniformly across the yield curve regardless of the duration or repricing of specific assets and liabilities. However, the shape of the yield curve changes constantly and the value and pricing of our assets and liabilities, including our deposits, may not closely correlate with changes in market interest rates. Accordingly, although the EVE and NII tables may provide an indication of our interest rate risk exposure at a particular point in time and in the context of a particular yield curve, such measurements are not intended to and do not provide a precise forecast of the effect of changes in market interest rates on EVE and NII and will differ from actual results.

EVE and net interest NII calculations also may not reflect the fair values of financial instruments. For example, decreases in market interest rates can increase the fair values of our loans, deposits and borrowings.

Liquidity and Capital Resources

Liquidity describes our ability to meet the financial obligations that arise in the ordinary course of business. Liquidity is primarily needed to meet the borrowing and deposit withdrawal requirements of our customers and to fund current and planned expenditures.

Our primary sources of funds are deposits, principal and interest payments on loans and securities, and proceeds from maturities of securities. We also have the ability to borrow from the Federal Home Loan Bank of Cincinnati, the Federal Reserve Bank of Cleveland and a correspondent bank. At September 30, 2024, we had the ability to borrow up to $35.7 million from the Federal Home Loan Bank of Cincinnati under a collateral pledge facility. At September 30, 2024, we had $9.9 million of outstanding advances under this facility. At September 30, 2024, we had no outstanding borrowings from the Federal Reserve Bank of Cleveland but had the capacity to borrow up to $7.4 million. At September 30, 2024, we had no outstanding borrowings from the correspondent bank but had the capacity to borrow up to $4.3 million.

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

Our cash flows are comprised of three primary classifications: cash flows from operating activities, cash flows from investing activities, and cash flows from financing activities. For the six months ended September 30, 2024, cash flows from operating, investing, and financing activities resulted in a net decrease in cash and cash equivalents of $8.6 million. Net cash used in providing by investing activities amounted to $185,000, net cash used in financing activities amounted to $7.7 million, and net cash used in operating activities amounted to $1.0 million.

We believe we maintain a strong liquidity position, and are committed to maintaining it. We monitor our liquidity position on a daily basis. We anticipate that we will have sufficient funds to meet our current funding commitments. Based on our deposit retention experience and current pricing strategy, we anticipate that a significant portion of maturing time deposits will be retained.

At September 30, 2024, the Company was categorized as well-capitalized under regulatory capital guidelines. Management is not aware of any conditions or events since the most recent notification that would change our category. For further information, see note 6 to the notes to financial statements.

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Off-Balance Sheet Arrangements. At September 30, 2024, we had $15.7 million of outstanding commitments, consisting of $1.9 million in commitments to originate loans and $13.8 million of undisbursed funds on previously originated loans. At September 30, 2024, certificates of deposit that are scheduled to mature on or before September 30, 2025, totaled $25.1 million. Management expects that a substantial portion of the maturing certificates of deposit will be renewed. However, if a substantial portion of these deposits is not retained, we may utilize Federal Home Loan Bank of Cincinnati advances or raise interest rates on deposits to attract new accounts, which may result in higher levels of interest expense.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

The information in Item 2 under “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Management of Market Risk” is incorporated in this Item 3 by reference.

Item 4. Controls and Procedures

An evaluation was performed under the supervision and with the participation of the Company’s management, including the Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) promulgated under the Securities and Exchange Act of 1934, as amended) as of September 30, 2024. Based on that evaluation, the Company’s management, including the Chief Executive Officer and Chief Financial Officer, concluded that the Company’s disclosure controls and procedures were effective.

During the quarter ended September 30, 2024, there have been no changes in the Company’s internal controls over financial reporting that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

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Part II — Other Information

Item 1. Legal Proceedings

Monroe Federal Bancorp, Inc. is not subject to any pending legal proceedings. The Company is subject to various legal actions arising in the normal course of business. In the opinion of management, the resolution of these legal actions is not expected to have a material adverse effect on the Monroe Federal Bancorp, Inc’s or the Company’s financial condition or results of operations.

Item 1A. Risk Factors

Not applicable, as the Company is a smaller reporting company.

Item 2. Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities

Effective October 23, 2024, Monroe Federal Bancorp, Inc. (“Monroe Federal Bancorp”) completed its initial public stock offering in connection with the Company’s conversion from the mutual form of organization to the stock form of organization. Monroe Federal Bancorp sold 526,438 shares of its common stock at $10.00 per share pursuant to a Registration Statement on Form S-1, as amended (SEC File No. 333-280165), which was declared effective by the Securities and Exchange Commission on August 9, 2024. The stock offering resulted in gross offering proceeds of $5.3 million and net offering proceeds (after payment of offering expenses) of approximately $3.9 million. From the net offering proceeds, the Company lent $368,510 to the Company’s employee stock ownership plan (which used those funds to purchase 36,851 shares of Monroe Federal Bancorp common stock in the stock offering), invested $1.9 million in the Company as a capital contribution, and retained the remaining $1.6 million for general corporate purposes. Performance Trust Capital Partners, LLC served as Monroe Federal Bancorp’s marketing agent in connection with the stock offering.

Item 3. Defaults Upon Senior Securities

Not applicable.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

During the three months ended September 30, 2024, none of the Company’s directors or executive officers adopted or terminated any contract, instruction or written plan for the purchase or sale of the Company’s securities that was intended to satisfy the affirmative defense conditions of SEC Rule 10b5-1(c) or any “non-Rule 10b5-1 trading arrangement“ (as such term is defined in Item 408 of SEC Regulation S-K).

Item 6. Exhibits

3.1	Articles of Incorporation of Monroe Federal Bancorp, Inc. ⁽¹⁾

3.2	Bylaws of Monroe Federal Bancorp, Inc. ⁽²⁾

31.1	Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2	Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32.1	Certification of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

32.2	Certification of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

101	The following materials for the quarter ended September 30, 2024, formatted in Inline XBRL (Extensible Business Reporting Language): (i) Balance Sheets, (ii) Statements of Income, (iii) Statements of Comprehensive (Loss) Income, (iv) Statements of Changes in Equity Capital, (v) Statements of Cash Flows, and (vi) Notes to Financial Statements

104	Cover Page Interactive Data File (embedded within the Inline XBRL document and included in Exhibit 101)

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(1)	Incorporated by reference to Exhibit 3.1 to the Company’s Registration Statement on Form S-1, as amended (Commission File No. 333-280165), initially filed on June 13, 2024.

(2)	Incorporated by reference to Exhibit 3.2 to the Company’s Registration Statement on Form S-1, as amended (Commission File No. 333-280165), initially filed on June 13, 2024.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.


	MONROE FEDERAL BANCORP, INC.

		/s/ Lewis R. Renollet
Date: November 14, 2024		Lewis R. Renollet
		President and Chief Executive Officer (Duly Authorized Representative and Principal Executive Officer)

Date: November 14, 2024		/s/ Lisa M. Bird
		Lisa M. Bird
		Chief Financial Officer and Treasurer (Principal Financial and Accounting Officer

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Monroe Federal Bancorp (MFBI) 10-Q2025 Q2 Quarterly report

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