MBBC

Marathon Bancorp, Inc. (MBBC) - Q1 2026 Summary

Business Context and Reporting Period

This Form 10-Q covers the quarterly period ended September 30, 2025 (Q1 of fiscal year 2026). Marathon Bancorp, Inc. is the holding company for Marathon Bank, a Wisconsin stock savings bank operating five facilities in Marathon, Ozaukee, and Waukesha Counties. The Company completed a conversion from a mutual holding company to a stock holding company on April 21, 2025, and its common stock trades on the Nasdaq Capital Market under the symbol "MBBC."

Key Financial Metrics

Material Changes vs. Prior Period

• Profitability Surge: Net income increased by 154% ($269,000) compared to the prior year quarter, driven primarily by a $533,000 increase in net interest income.
• Net Interest Income Growth: NII rose 37.5% due to a 59 basis point increase in the average yield on loans (to 5.25%) and a 12.3% increase in average loan balances. The Net Interest Margin expanded to 3.49% from 2.85%.
• Asset Growth: Total assets increased $7.2 million (3.0%) quarter-over-quarter, with gross loans growing $5.5 million, primarily in multi-family real estate and one-to-four-family residential portfolios.
• Deposit Expansion: Total deposits grew $6.5 million (3.7%) quarter-over-quarter, with significant increases in demand, NOW, money market, and savings accounts.
• Provision Recovery: The Company recorded a recovery of credit losses of $40,000, compared to a $155,000 recovery in the prior year. The decrease in recovery was attributed to loan portfolio growth.

Outlook, Risks, and Contingencies

• Asset Quality: Non-performing assets totaled $1.186 million (0.48% of total assets), consisting of $190,013 in non-accrual loans (two one-to-four-family residential loans) and $996,373 in foreclosed assets (OREO). There were no classified assets (substandard, doubtful, or loss) as of September 30, 2025.
• Foreclosed Asset Contingency: The Company accepted an offer in August 2025 to sell a foreclosed construction property for $1.1 million. The sale is subject to due diligence and had not closed as of November 12, 2025. A valuation allowance provision of $378,767 was recorded in the prior fiscal year related to this asset.
• Liquidity: The Company maintains strong liquidity with $15.5 million in cash and cash equivalents. It has $58.4 million available borrowing capacity at the Federal Home Loan Bank (FHLB) and $17.0 million available at the Federal Reserve Bank.
• Capital Adequacy: The Bank is classified as "well capitalized" under regulatory frameworks, with a Tier I Capital to Average Assets ratio of 15.04% (minimum required 9.0% for well-capitalized status under the Community Bank Leverage Ratio).
• Risk Factors: Management highlights risks related to interest rate fluctuations, economic conditions in Wisconsin, real estate market values, and the ability to manage credit risk and operational costs.

Investor Verification Checklist

• Closing of OREO Sale: Verify the status and closing date of the $1.1 million sale of the foreclosed construction property.
• Loan Yield Sustainability: Assess the sustainability of the 5.25% loan yield in the context of future interest rate environments and competitive pricing.
• Deposit Composition: Monitor the shift from fixed-rate certificates of deposit to variable-rate transaction accounts to ensure funding stability.
• ESOP Loan Repayment: Review the repayment schedule of the $2.1 million ESOP term loan, which impacts cash flow and equity release.
• Non-Accrual Concentration: Track the two non-accrual residential loans ($190k total) to ensure they remain fully secured and do not deteriorate further.