10-Q: Marathon Bancorp Reports 154% Net Income Surge

Marathon Bancorp, Inc. announced a significant 154% increase in net income for the quarter ended September 30, 2025, driven by strong net interest income growth and strategic loan expansion.

Summary

• Net income for the three months ended September 30, 2025, increased by 154.0% to $444,293, up from $174,907 in the prior year period.
• Net interest income grew by 37.5% to $2.0 million, compared to $1.4 million for the same period in 2024.
• Total assets increased by $7.2 million, or 3.0%, reaching $246.0 million as of September 30, 2025.
• Gross loans expanded by $5.5 million, or 2.7%, to $208.0 million, primarily in multi-family real estate and one-to-four-family residential loans.
• Total deposits increased by $6.5 million, or 3.7%, to $181.7 million, with notable growth in demand, NOW, money market, and savings accounts.
• The net interest margin improved by 64 basis points to 3.49% for the quarter.
• The allowance for credit losses was $1.7 million, representing 0.80% of loans outstanding at September 30, 2025.
• Non-performing assets increased to $1.186 million from $1.063 million at June 30, 2025, with non-accrual loans at $190,013.
• The Bank remains 'well capitalized' under regulatory frameworks, with a Tier I Capital to Average Assets ratio of 15.04%.

Sentiment

Score: 8

Explanation: The company demonstrated strong financial performance with significant growth in net income and net interest income, coupled with healthy loan and deposit expansion. Capital ratios remain robust, and strategic initiatives like the conversion to a stock holding company have been successfully executed. While non-performing assets saw a slight increase, overall asset quality is well-managed. These factors indicate a positive outlook and strong operational health.

Positives

• Net income increased by 154.0% to $444,293 for the three months ended September 30, 2025, demonstrating strong profitability growth.
• Net interest income rose by 37.5% to $2.0 million, driven by a 24.4% increase in total interest income.
• Net interest margin improved significantly by 64 basis points to 3.49%, reflecting effective asset-liability management.
• The loan portfolio grew by 2.7% to $208.0 million, with strategic growth in multi-family real estate (6.1%) and one-to-four-family residential loans (4.6%).
• Total deposits increased by 3.7% to $181.7 million, indicating successful customer relationship management and funding growth.
• The Bank maintains a strong capital position, categorized as 'well capitalized' by the FDIC and exceeding Wisconsin's minimum net worth requirements with 15.63% of total assets.
• A recovery of credit losses of $40,000 was recorded, attributed to stabilizing economic conditions and increased prepayments.

Negatives

• Total non-interest income slightly decreased by 1.6% to $190,000 for the three months ended September 30, 2025.
• Total non-interest expenses increased by 5.3% to $1.635 million, primarily due to higher salaries and employee benefits associated with a new branch.
• Non-performing assets increased by $123,000 to $1.186 million at September 30, 2025, from $1.063 million at June 30, 2025.
• Non-accrual loans increased to $190,013 at September 30, 2025, from $66,645 at June 30, 2025, primarily in one-to-four-family residential loans.
• The allowance for credit losses as a percentage of total loans outstanding decreased to 0.80% from 0.92% in the prior year, despite loan growth.

Risks

• Inflation, tariffs, and changes in the interest rate environment could reduce margins, yields, mortgage banking revenues, fair value of financial instruments, or loan originations, or increase defaults and losses.
• General economic conditions, nationally or in market areas, that are worse than expected could adversely affect operations.
• Events involving the failure of other financial institutions may negatively impact the business and stock price.
• 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, pose financial risks.
• The ability to access cost-effective funding is crucial for liquidity and growth.
• Fluctuations in real estate values and both residential and commercial real estate market conditions could impact collateral values and loan performance.
• Competition among depository and other financial institutions may affect market share and profitability.
• Adverse changes in the securities or secondary mortgage markets, including the ability to sell loans, could impact non-interest income.
• Changes in laws, government regulations, or policies affecting financial institutions, including regulatory fees and capital requirements, could increase compliance costs or restrict operations.
• Technological changes may be more difficult or expensive to implement than expected, impacting operational efficiency.
• A failure or breach of operational or security systems or infrastructure, including cyberattacks, could lead to financial losses and reputational damage.
• Inability to sell foreclosed assets at an amount equal to or greater than the carrying amount could result in further losses.

Future Outlook

Management anticipates sufficient funds to meet current funding commitments and expects a substantial portion of maturing time deposits to be retained. The recovery of credit losses is linked to projected future economic conditions in the market area stabilizing over the next two years and an increase in prepayments. The Company is evaluating new accounting pronouncements (ASU 2024-03 and ASU 2023-09) for their potential impact on future disclosures and financial statements.

Management Comments

• The increase in net income was primarily attributable to an increase in net interest income of $533,000.
• The increase in multi-family real estate loans and one-to-four-family residential loans was due to a strategic decision to grow both of these portfolios.
• The increase in demand, NOW, money market and savings deposits was due to the Company’s increased focus on relationship management by obtaining customers deposit balances when granting loans to new customers.
• The increase in the average yield on the loan portfolio was the result of higher interest rates on new loan originations, while the increase in the average balance was primarily related to new loan growth.
• The decrease in recovery of credit losses was primarily related to an increase in the loan portfolio for the three months ended September 30, 2025, and was also related to projected future economic conditions in our market area stabilizing over the next two years, an increase in prepayments, and continuous recoveries of two legacy charge-offs.
• The increase in non-interest expenses was primarily related to an increase in salaries and benefits associated with the new branch opened in Brookfield, Wisconsin in January 2024.
• We are committed to maintaining a strong liquidity position and anticipate having sufficient funds to meet current funding commitments.

Industry Context

Marathon Bancorp's strong net interest income growth and improved net interest margin reflect a banking sector navigating a dynamic interest rate environment, successfully capitalizing on higher interest rates for new loan originations while managing deposit costs. The strategic focus on relationship management for deposit growth aligns with broader community banking trends to secure stable funding. The Bank's 'well capitalized' status and compliance with regulatory frameworks, including the CBLR, demonstrate resilience and adherence to industry standards amidst ongoing economic uncertainties.

Comparison to Industry Standards

• The Bank's Tier I Capital to Average Assets ratio of 15.04% at September 30, 2025, significantly exceeds the 9.0% minimum required for a 'well capitalized' designation under the Community Bank Leverage Ratio (CBLR) framework.
• The Bank's net worth of $36,758,119, combined with a general loan loss reserve of $1,668,782, totals 15.63% of total assets, surpassing the Wisconsin state-chartered savings bank requirement of at least 6.0% of total assets.

Corporate Governance

Legal Proceedings

• The Company is not currently a named party in any legal proceeding that would have a material effect on its financial condition or results of operations.

Related Party Transactions

• In connection with the conversion, the Company provided a term loan to the Employee Stock Ownership Plan (ESOP) to finance the ESOP's purchase of 135,472 shares of common stock. This new loan, combined with an existing ESOP loan, resulted in a total term loan to the ESOP of $2.1 million, repayable in annual installments over 25 years.

Stakeholder Impact

• Shareholders: Benefited from a significant increase in net income and basic earnings per share, as well as the successful conversion to a stock holding company and Nasdaq listing, potentially enhancing liquidity and valuation.
• Employees: Impacted by ESOP share releases, stock-based compensation, and increased salaries and benefits due to new branch operations.
• Customers: Experienced an increased focus on relationship management, contributing to growth in demand, NOW, money market, and savings deposits, and continued access to various loan products.
• Regulators: The Bank's 'well capitalized' status and adherence to state and federal capital requirements demonstrate sound financial management and compliance.

Next Steps

• The accepted offer to sell a foreclosed property for $1.1 million is subject to customary due diligence and has not closed as of November 12, 2025.
• FHLB advances have call dates beginning in December 2025, October 2025, and November 2025, which may lead to replacement funding at prevailing interest rates.
• The ESOP loan will continue to be repaid in annual installments through 2049.
• The Company is evaluating the impact of ASU 2024-03 on its disclosures, with effective dates for fiscal years beginning after December 15, 2026, and interim periods after December 15, 2027.
• The amendments from ASU 2023-09, effective for annual periods beginning after December 15, 2024, are not expected to have a material impact on consolidated financial statements.

Key Dates

Recommendation

Marathon Bancorp demonstrated exceptional financial performance with a 154% increase in net income and robust net interest income growth. The significant improvement in net interest margin, coupled with strategic loan and deposit growth, indicates effective management in a dynamic interest rate environment. The Bank maintains a 'well capitalized' status, exceeding regulatory requirements, and has successfully completed its conversion to a stock holding company, enhancing its market presence. While non-performing assets saw a slight increase, the overall asset quality remains strong with a high allowance for credit losses. These factors collectively point to a healthy and growing institution with strong fundamentals and strategic execution.

Keywords

Marathon Bancorp, MBBC, SEC Filing, 10-Q, Quarterly Report, Financial Results, Net Income, Net Interest Income, Loan Growth, Deposit Growth, Net Interest Margin, Asset Quality, Banking, Community Bank, Wisconsin, Financial Performance, Capital Ratios, Stock Holding Company, ESOP