S-1: Marathon Bancorp Announces Second-Step Conversion and Stock Offering

Marathon Bancorp is set to convert from a mutual holding company to a stock holding company, offering shares of common stock to eligible depositors and the public.

Summary

• Marathon Bancorp is converting from a mutual holding company to a stock holding company.
• The conversion involves the merger of Marathon MHC into Marathon Bancorp.
• Existing public stockholders will exchange their shares for new shares based on an exchange ratio.
• The company is offering shares of common stock at $10.00 per share.
• A minimum of 1,402,142 shares must be sold to complete the offering.
• The 401(k) plan participants can invest up to 427,710 shares at $10.00 per share.
• The market value of the 401(k) plan assets was approximately $4,277,101 as of December 31, 2023.
• The market value of the company was estimated at $28.7 million, with a range of $24.4 million to $33.0 million ($37.9 million at the adjusted maximum).
• The exchange ratio will range from 1.1368 to 1.5381 (1.7688 at the adjusted maximum) new shares for each existing share.
• The company intends to contribute at least 50% of the net proceeds to Marathon Bank.
• The company intends to loan $1.3 million to its employee stock ownership plan.
• The company intends to retain the remaining net proceeds for general corporate purposes.
• The subscription offering will expire at 4:30 p.m., Central Time, on [expiration date].
• The offering must be completed by [final extension date].

Sentiment

Score: 5

Explanation: The document presents a mix of positive and negative aspects. The conversion and offering are intended to strengthen the company, but there are also risks and uncertainties associated with the transaction and the company's operations.

Positives

• The conversion will provide the company with additional capital to support growth.
• The conversion will improve the liquidity of the company's shares.
• The conversion will facilitate future mergers and acquisitions.
• The conversion will facilitate the company's ability to pay dividends to public stockholders.
• The conversion will give the company greater flexibility to access the capital markets.

Negatives

• The market value of the common stock received in the share exchange may be less than the market value of the common stock exchanged.
• The company may not be able to effectively deploy the net proceeds from the offering.
• The company's return on equity may be low following the offering.
• The company's stock-based benefit plans will increase expenses and reduce income.
• The implementation of stock-based benefit plans may dilute stockholders ownership interest.

Risks

• The company has a substantial amount of commercial real estate and multifamily real estate loans, which involve credit risks.
• The company's non-owner-occupied real estate loans may expose it to increased credit risk.
• The company's loan participations may have a higher risk of loss.
• A downturn in the local real estate market could negatively impact the company's profitability.
• The company's allowance for credit losses may not be sufficient to cover actual credit losses.
• The level of the company's commercial real estate loan portfolio may subject it to additional regulatory scrutiny.
• The company's historical emphasis on residential mortgage loans exposes it to lending risks.
• The company is subject to environmental liability risk associated with lending activities or properties it owns.
• The company's financial condition and results of operations could be negatively affected if it fails to grow or fails to manage its growth effectively.
• The company depends on its management team and other key personnel.
• Future changes in interest rates could negatively affect the company's operating results and asset values.
• Changes in the valuation of the company's securities portfolio may reduce profits and capital levels.
• Inflation can have an adverse impact on the company's business and on its customers.
• Certain events involving the failure of financial institutions may adversely affect the company's business, and the market price of its common stock.
• The company's inability to generate core deposits may cause it to rely more heavily on wholesale funding strategies.
• Changes in laws and regulations and the cost of regulatory compliance may adversely affect the company's operations.
• Non-compliance with the USA PATRIOT Act, Bank Secrecy Act, or other laws and regulations could result in fines or sanctions.
• The company is subject to the Community Reinvestment Act (CRA) and fair lending laws.
• Monetary policies and regulations of the Federal Reserve Board could adversely affect the company's business.
• The Federal Reserve Board may require the company to commit capital resources to support Marathon Bank.
• The company may be required to raise additional capital in the future.
• The company is an emerging growth company, and any decision on its part to comply only with certain reduced reporting and disclosure requirements applicable to emerging growth companies could make its common stock less attractive to investors.
• Strong competition within the company's market area may limit its growth and profitability.
• The company's asset size may make it more difficult for it to compete.
• The company faces significant operational risks because of its reliance on technology.
• The company relies on third party vendors, which could expose it to additional cybersecurity risks.
• The company may be subject to risks and losses resulting from fraudulent activities.
• Changes in management's estimates and assumptions may have a material impact on the company's consolidated financial statements.
• Changes in accounting standards could affect reported earnings.
• The company's ability to maintain its reputation may materially adversely affect its performance.
• Societal responses to climate change could adversely affect the company's business and performance.
• Legal and regulatory proceedings and related matters could adversely affect the company.
• Severe weather, acts of terrorism, geopolitical and other external events could impact the company's ability to conduct business.
• The future price of the company's shares of common stock may be less than the $10.00 purchase price per share in the offering.
• There may be a limited trading market in the company's shares of common stock.
• The company's return on equity may be low following the offering.
• The company's stock-based benefit plans will increase its expenses and reduce its income.
• The implementation of stock-based benefit plans may dilute stockholders ownership interest.
• Various factors may make takeover attempts more difficult to achieve.
• The company's articles of incorporation provide that state and federal courts located in the State of Maryland will be the exclusive forum for substantially all disputes between the company and its stockholders.
• You may not revoke your order to purchase common stock in the subscription or community offerings after you send the company your order form.
• You may not be able to sell your shares of common stock until you have received a statement reflecting ownership of shares.

Future Outlook

The company expects to continue its focus on originating commercial real estate and multifamily real estate loans, increase its share of lower-cost core deposit growth, and manage credit risk to maintain a low level of non-performing assets.

Management Comments

• The company believes that its community orientation and personalized service distinguishes it from larger banks.
• The company intends to continue to be a significant oneto four-family residential mortgage lender in its market areas subject to market conditions and the interest rate environment.

Industry Context

The announcement is part of a broader trend of mutual holding companies converting to stock form to access capital markets and enhance their strategic flexibility.

Comparison to Industry Standards

• The company's pro forma pricing ratios at the midpoint of the offering range indicated a discount of 18.9% on a price-to-book value basis and a discount of 20.2% on a price-to-tangible book value basis compared to the average pricing of the peer group.
• The peer group consists of 10 publicly traded savings and loan holding companies, including 1895 Bancorp of Wisconsin, Inc., BV Financial, Inc., Catalyst Bancorp, Inc., Central Plains Bancshares, Inc., Home Federal Bancorp, Inc. of Louisiana, IF Bancorp, Inc., Magyar Bancorp, Inc., NSTS Bancorp, Inc., PB Bankshares, Inc., and Texas Community Bancshares, Inc.
• The company's pro forma pricing ratios at the super maximum of the offering range indicated a discount of 2.88% on a price-to-book value basis and a discount of 4.48% on a price-to-tangible book value basis compared to the average pricing of the peer group.

Stakeholder Impact

• Eligible depositors of Marathon Bank will have the opportunity to purchase shares of common stock in the subscription offering.
• Public stockholders of Marathon Bancorp will exchange their shares for new shares of common stock.
• Employees of Marathon Bank will have the opportunity to participate in the employee stock ownership plan.
• The conversion will provide the company with additional capital to support growth and expansion.

Next Steps

• Stockholders of Marathon Bancorp will vote on the Plan of Conversion at a special meeting.
• Members of Marathon MHC will vote on the Plan of Conversion at a special meeting.
• The company will complete the subscription offering.
• The company may complete a community offering.
• The company may complete a syndicated offering.

Key Dates

Keywords

mutual holding company, stock holding company, conversion, stock offering, common stock, subscription rights, community offering, financial institution, Marathon Bancorp, Marathon Bank, liquidation account, employee stock ownership plan, capital markets, mergers and acquisitions, dividends