Business Context and Reporting Period
Company: Marathon Bancorp, Inc. (Marathon Bank)
Filing Type: Form 10-Q (Quarterly Report)
Reporting Period: Three and six months ended December 31, 2024 (Fiscal Year 2025 Q2)
Business Overview: A Wisconsin-chartered stock savings bank operating as a subsidiary of Marathon Bancorp, Inc. The bank operates five facilities primarily in Marathon and Ozaukee Counties, Wisconsin. It offers demand deposits, savings, certificates of deposit, and various lending products including commercial real estate, residential, and consumer loans.
Key Financial Metrics
| Metric | Six Months Ended Dec 31, 2024 | Six Months Ended Dec 31, 2023 | Three Months Ended Dec 31, 2024 | Three Months Ended Dec 31, 2023 |
|---|---|---|---|---|
| Net Income | $226,034 | $358,297 | $51,127 | $272,100 |
| Net Interest Income | $2,826,191 | $3,049,167 | $1,406,097 | $1,485,847 |
| Non-Interest Income | $373,535 | $404,752 | $180,301 | $176,513 |
| Non-Interest Expenses | $3,078,574 | $3,017,340 | $1,525,752 | $1,554,457 |
| Provision for Credit Losses | ($147,000) Recovery | ($94,000) Recovery | $8,000 Provision | ($135,000) Recovery |
| Total Assets (Dec 31, 2024) | $217,931,479 | $219,234,013 (Jun 30, 2024) | N/A | |
| Total Loans (Dec 31, 2024) | $178,615,000 | $185,292,000 (Jun 30, 2024) | ||
| Total Deposits (Dec 31, 2024) | $173,417,252 | $172,980,754 (Jun 30, 2024) | N/A | |
| Stockholders' Equity (Dec 31, 2024) | $31,684,919 | $31,294,784 (Jun 30, 2024) | ||
| Net Interest Margin (Six Months) | 2.84% | 2.80% | 2.85% (Three Months) | 2.76% (Three Months) |
Material Changes vs. Prior Period
- Net Income Decline: Net income for the six months ended December 31, 2024, decreased by $132,000 (36.9%) compared to the prior year period. The three-month period saw a sharper decline of $221,000 (81.2%).
- Provision for Credit Losses: A significant driver of the income variance was the provision for credit losses. The company recorded a recovery of $147,000 for the six months ended Dec 31, 2024, compared to a recovery of $94,000 in the prior year. For the quarter, the company recorded a provision of $8,000, reversing a recovery of $135,000 in the prior year quarter.
- Net Interest Income: Decreased by $223,000 (7.3%) for the six-month period, primarily due to a $18.6 million decrease in average loan balances, partially offset by a 19 basis point increase in average loan yields.
- Loan Portfolio: Gross loans decreased by $6.7 million (3.6%) from June 30, 2024, to December 31, 2024. Notable decreases occurred in commercial real estate ($3.7M), multi-family real estate ($1.0M), and construction loans (fully paid down/converted).
- Non-Interest Expenses: Increased by $62,000 (2.1%) for the six-month period, driven by higher salaries and employee benefits and occupancy costs related to a new branch opening in Brookfield, Wisconsin in January 2024.
- Tax Expense: Income tax expense decreased by $130,000 for the six-month period due to a change in Wisconsin tax law regarding commercial and agricultural loan interest, which eliminated state deferred tax assets in the prior year.
Guidance, Outlook, Risks, and Unusual Items
- Second-Step Conversion: On December 10, 2024, the Mutual Holding Company adopted a Plan of Conversion to reorganize from a two-tier mutual holding company structure to a fully-public stock holding company structure. This requires regulatory approval and approval by depositors and stockholders.
- Asset Quality: There were no non-accrual loans as of December 31, 2024. Total non-performing assets consisted solely of $1.4 million in foreclosed assets (Real Estate Owned), unchanged from June 30, 2024. Management expects a small recovery from litigation settlement regarding this property in the quarter ending March 31, 2025.
- Capital Position: The Bank is classified as "well capitalized" under regulatory frameworks. It opted into the Community Bank Leverage Ratio (CBLR) framework, with a Tier I Capital to Average Assets ratio of 13.64% as of December 31, 2024.
- Liquidity: Cash and cash equivalents increased by $5.7 million to $16.2 million. The bank maintains a $75.7 million line of credit with the Federal Home Loan Bank (FHLB) with $10.0 million outstanding.
- Risks: Key risks include interest rate fluctuations affecting net interest margins, general economic conditions in the local market, and the ability to access cost-effective funding. The company notes that forward-looking statements are subject to uncertainties regarding inflation, loan delinquencies, and regulatory changes.
Investor Verification Checklist
- Conversion Plan Status: Verify the progress and regulatory approval status of the "second-step" conversion to a fully-public stock holding company.
- Loan Portfolio Concentration: Review the composition of the loan portfolio, specifically the high concentration in commercial real estate (approx. 39.5% of total loans) and multi-family real estate.
- Foreclosed Asset Resolution: Monitor the resolution of the $1.4 million foreclosed construction asset and the expected litigation recovery in Q1 2025.
- Deposit Stability: Assess the impact of the shift from non-interest bearing to interest-bearing deposits and the maturity of brokered certificates of deposit on future funding costs.
- Expense Management: Track the ongoing impact of the new Brookfield branch on operating expenses versus revenue generation.