# Marathon Bancorp, Inc.: Form 10-K for the period ended Jun 30, 2022

- Company: [Marathon Bancorp, Inc.](/companies/mbbc.md) (CIK 1835385)
- Form: 10-K
- Filed: 2022-09-28
- Accepted by EDGAR: Sep 28, 2022, 10:26 ET
- Period: 2022-06-30
- Accession: 0001558370-22-014665
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/1835385/000155837022014665/mara-20220630x10k.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1835385/000155837022014665/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2022-06-30.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Interest expense | 12 months, 2021-07-01 to 2022-06-30 | $947.8k | us-gaap:InterestExpense |
| Income tax | 12 months, 2021-07-01 to 2022-06-30 | $437.4k | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 12 months, 2021-07-01 to 2022-06-30 | $1.3m | us-gaap:NetIncomeLoss |
| Diluted EPS | 12 months, 2021-07-01 to 2022-06-30 | $0.62 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 12 months, 2021-07-01 to 2022-06-30 | $0.62 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 12 months, 2021-07-01 to 2022-06-30 | 2,145,095 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 12 months, 2021-07-01 to 2022-06-30 | $825.5k | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 12 months, 2021-07-01 to 2022-06-30 | $34.1k | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Total assets | at 2022-06-30 | $220.0m | us-gaap:Assets |
| Total liabilities | at 2022-06-30 | $189.3m | us-gaap:Liabilities |
| Shareholders' equity | at 2022-06-30 | $30.7m | us-gaap:StockholdersEquity |

## Business

As filed, 126,299 characters.

### BUSINESS OF MARATHON BANCORP, INC.

Marathon Bancorp, Inc. (the “Company” or “Marathon Bancorp”), a Maryland corporation, was formed in December 2020 to serve as the mid-tier holding company for Marathon Bank (the “Bank”) upon the completion of the Bank’s mutual holding company reorganization and offering.

On April 14, 2021, the Bank completed its reorganization into the mutual holding company structure and the related stock offering of the Company, the Bank’s new holding company. As a result of the reorganization, the Bank became a wholly-owned subsidiary of the Company, the Company issued and sold 45.0% of its outstanding shares in its stock offering to the public, and the Company issued 55.0% of its outstanding shares to Marathon MHC, which is the Company’s mutual holding company. A total of 1,003,274 shares of common stock were sold in the stock offering to depositors of the Bank and other members of the public, including the Bank’s employee stock ownership plan at a price of $10.00 per share. A total of 1,226,223 shares of common stock were issued to Marathon MHC. Gross offering proceeds totaled $10.0 million. The Company’s common stock is quoted on the OTC Pink Marketplace under the trading symbol MBBC.

Marathon Bancorp, as the holding company of Marathon Bank, is authorized to pursue other business activities permitted by applicable laws and regulations for bank holding companies, which may include the acquisition of banking and financial services companies. The Company is subject to comprehensive regulation and examination by the Board of Governors of the Federal Reserve System ( the “Federal Reserve Board”) and the Wisconsin Department of Financial Institutions (the “WDFI”).

Our cash flow depends on earnings from the investment of the net proceeds we retained, and any dividends received from Marathon Bank. Currently, Marathon Bancorp does not own nor lease any property, but instead uses the premises, equipment and furniture of Marathon Bank. At the present time, we employ only persons who are officers of Marathon Bank to serve as officers of Marathon Bancorp. We also use the support staff of Marathon Bank from time to time. These persons are not separately compensated by Marathon Bancorp. Marathon Bancorp may hire additional employees, as appropriate, to the extent it expands its business in the future.

The Company files interim, quarterly and annual reports with the Securities and Exchange Commission (the “SEC”). The SEC maintains an Internet site (www.sec.gov) that contains reports, proxy and information statements and other information regarding issuers such as the Company that file electronically with the SEC. All filed SEC reports and interim filings can also be obtained from the Company’s website www.marathonbancorp.com on the “Investor Relations” page, without charge from the Company.

### BUSINESS OF MARATHON MHC

Marathon MHC was formed as a Wisconsin-chartered mutual holding company and will at all times own a majority of the outstanding shares of Marathon Bancorp’s common stock. Persons who had membership rights in Marathon Bank as of the date of the reorganization will continue to have membership rights; however, these membership rights will be in Marathon MHC.

Marathon MHC’s principal assets are the common stock of Marathon Bancorp it received in the reorganization and offering and $100,000 cash in initial capitalization, which was contributed by Marathon Bank. Presently, it is expected that the only business activity of Marathon MHC will be to own a majority of Marathon Bancorp’s common stock. Marathon MHC will be authorized, however, to engage in any other business activities that are permissible for mutual holding companies under state and federal law, including investing in loans and securities. Marathon MHC is subject to comprehensive regulation and examination by the Federal Reserve Board and the WDFI.

Marathon MHC does not own nor lease any property, but instead uses the premises, equipment and furniture of Marathon Bank. Marathon MHC currently employs only persons who are officers of Marathon Bank to serve as officers of Marathon MHC. Those persons are not separately compensated by Marathon MHC. The directors of Marathon MHC consist of the current directors of Marathon Bank.

### BUSINESS OF MARATHON BANK

### General

Marathon Bank is a Wisconsin-chartered savings bank headquartered in Wausau, Wisconsin. The Bank is subject to comprehensive regulation and examination by the Federal Deposit Insurance Corporation (“FDIC”) and the WDFI. Founded in 1902, we conduct our business from our main office and three branch offices, which are located in Marathon and Ozaukee Counties, Wisconsin. Our primary market area for deposits includes the communities in which we maintain our banking office locations, while our primary lending market area is broader and includes select businesses and customers in Southeastern Wisconsin. We are a community-oriented bank offering a variety of financial products and services to meet the needs of our customers. We believe that our community orientation and personalized service distinguishes us from larger banks that operate in our market area.

From our founding until 2014, we operated as a traditional thrift institution, offering primarily residential mortgage loans and savings accounts. In February 2014, we hired our current president and chief executive officer, Nicholas W. Zillges, and since this time we have strengthened and modernized our operations through upgrades to our credit, underwriting, information technology and compliance operations. Under the leadership of Mr. Zillges, we have begun the process of developing a commercial real estate lending infrastructure, with a particular focus on expanding into Southeastern Wisconsin, including the Milwaukee metropolitan area, to diversify our balance sheet, which included reducing our investment portfolio and using those funds to grow our commercial loan portfolio. As part of our effort to expand into Southeastern Wisconsin, in 2018 we opened a new branch in Mequon, Wisconsin. Additionally, consistent with our strategy to grow our commercial loan operations, we have enhanced our suite of deposit products, including remote deposit capture, commercial cash management and mobile deposits in order to accommodate business customers, and thereby grow our core deposits. While we have developed our commercial real estate platform in recent years, we also remain committed to our local community and intend to continue to be a significant one- to four-family residential mortgage lender in our market areas.

Our business consists primarily of taking deposits from the general public and investing those deposits, together with funds generated from operations, in commercial and multifamily real estate loans, one- to four-family residential real estate loans and, to a lesser extent, commercial and industrial loans, construction loans and consumer loans. Subject to market conditions, we expect to continue our focus on originating more commercial real estate and multifamily real estate loans in an effort to further diversify our overall loan portfolio, increase the overall yield earned on our loans and assist in managing interest rate risk. We also invest in debt securities, which have historically consisted of mortgage-backed securities issued by U.S. government sponsored enterprises, municipal securities, corporate debt securities and U.S. government and agency securities. We offer a variety of deposit accounts, including checking accounts, savings accounts, money market accounts and certificate of deposit accounts. We borrow funds, primarily from the Federal Home Loan Bank of Chicago, to fund our operations as necessary.

At June 30, 2022, we had total consolidated assets of $220.0 million, total deposits of $188.1 million and total stockholders’ equity of $30.7 million. Our executive office is located at 500 Scott Street, Wausau, Wisconsin 53226, and our telephone number at this address is (715) 845-7331. Our website address is www.marathonbank.com. Information on our website is not and should not be considered a part of this Form 10-K.

### Market Area

We conduct our business from our main office and three branch offices, which are located in Marathon and Ozaukee Counties, Wisconsin. Our primary market area is broadly defined as the Wausau, Wisconsin metropolitan area, including Marathon and Ozaukee Counties. In recent years, we have expanded our operations into Southeastern Wisconsin, primarily Milwaukee and Waukesha counties. We expect further growth in the Southeastern Wisconsin market area, including the Milwaukee metropolitan area. The following discusses the demographics of the counties in which we operate.

Marathon County’s total population for 2022 is estimated at 136,505, approximately 1.83% growth since 2010. Marathon County’s population growth is projected to be 0.77% between 2021 and 2026. A relatively high percentage of Marathon County’s non-farm, non-government workforce is in the education, healthcare and social services sector, estimated at over 25% of the labor force. Other significant employer industries in the county include wholesale/retail trade and finance/insurance/real estate. Median household income in Marathon County for 2022 is estimated to be $63,029.

Ozaukee County’s total population for 2022 is estimated at 89,707, which is expected to grow 1.54% between 2021 and 2026. Education, healthcare and social services industry represents over 25% of the labor force. Other significant employer industries in Ozaukee County include retail trade and services. Median household income in Ozaukee County for 2022 is estimated to be $84,394.

Milwaukee County’s total population for 2022 is estimated at 941,997, approximately 0.66% decrease since 2010 and is projected to decrease 0.14% through 2026. Milwaukee County’s most significant employers are in the education, healthcare and social assistance, services, retail trade and finance/insurance/real estate industries. Median household income in Milwaukee County for 2022 is estimated to be $52,260.

Waukesha County’s total population for 2022 is estimated at 409,226, approximately 4.92% growth since 2010 and is projected to grow 1.76% by 2026. The most significant employers in Waukesha county are in the education, health care and social services, wholesale/retail trade, services and finance/insurance/real estate industries. Waukesha County has the highest median household income of any of Marathon Bank’s market area counties for 2022, estimated to be $88,985.

Unemployment rates as of June 30, 2022 and June 30, 2021 are set forth in the following table.

| ​ ​ Region | ​ ​ June 2022 | ​ ​ June 2021 |
| --- | ---: | ---: |
| United States | 3.6% | 5.9% |
| Wisconsin | 2.9% | 3.9% |
| Marathon County | 3.0% | 3.5% |
| Ozaukee County | 3.0% | 3.9% |
| Milwaukee County | 4.7% | 6.7% |
| Waukesha County | 3.0% | 3.8% |

Major employers in Marathon Bank’s market area are United Medical Resources, Aspirus, Columbia-St. Mary’s hospital, Aurora Health Care, Ascension Wisconsin, GE Healthcare Technologies, Kroger Co. and Kohl’s.

### Competition

We face competition within our market area both in making loans and attracting deposits. Our market area has a concentration of financial institutions that include large money center and regional banks, community banks and credit unions. We also face competition from savings institutions, mortgage banking firms, consumer finance companies and credit unions and, with respect to deposits, from money market funds, brokerage firms, mutual funds and insurance companies. We also compete with fintech and internet banking companies. Some of our competitors offer products and services that we currently do not offer, such as trust services and private banking. As of June 30, 2022 (the most recent date for which data is available), our market share of deposits represented 3.68% of FDIC-insured deposits in Marathon County, ranking us eighth in market share of deposits out of 18 institutions operating in the county. In addition, as of that date, our market share of deposits represented 0.89% of FDIC-insured deposits in Ozaukee County, ranking us 14th in market share of deposits out of 15 institutions operating in the county.

### Lending Activities

***General.*** Our lending activity consists of originating commercial and multifamily real estate loans, one- to four-family residential real estate loans and, to a lesser extent, commercial and industrial loans, construction loans and consumer loans. Subject to market conditions, we intend to increase originations of commercial real estate loans and multifamily real estate loans in order to increase the overall yield earned on our loans and manage interest rate risk.

We generally sell the fixed-rate conforming one- to four-family residential real estate loans that we originate, generally on a servicing-retained basis, while holding in our portfolio adjustable-rate one- to four-family residential real estate loans in order to manage the duration and time to repricing of our loan portfolio.

***Loan Portfolio Composition.*** The following table sets forth the composition of our loan portfolio by type of loan at the dates indicated.

*(Dollars in thousands)*

| ​ ​ ​ ​ ​ Real Estate | ​ ​ ​ ​ ​ | ​ ​ At June 30, 2022 Amount ​ ​ ​ | ​ ​ | ​ Percent ​ | ​ ​ ​ | ​ ​ 2021 Amount ​ ​ | ​ ​ | ​ Percent ​ | ​ ​ ​ ​ ​ ​ |
| --- | --- | --- | --- | ---: | --- | --- | --- | ---: | --- |
| One- to four-family residential real estate (1) | ​ | $51,891 | ​ | 27.6% | ​ | $48,405 | ​ | 33.0% | ​ |
| Multifamily | ​ | ​ 33,945 | ​ | 18.1% | ​ | ​ 17,268 | ​ | 11.8% | ​ |
| Commercial | ​ | ​ 80,603 | ​ | 42.9% | ​ | ​ 52,148 | ​ | 35.5% | ​ |
| Construction | ​ | ​ 10,582 | ​ | 5.6% | ​ | ​ 7,985 | ​ | 5.4% | ​ |
| Commercial and industrial | ​ | ​ 8,779 | ​ | 4.7% | ​ | ​ 8,899 | ​ | 6.1% | ​ |
| Paycheck Protection Program Loans | ​ | ​ — | ​ | 0.0% | ​ | ​ 10,379 | ​ | 7.1% | ​ |
| Consumer | ​ | ​ 2,100 | ​ | 1.1% | ​ | ​ 1,789 | ​ | 1.2% | ​ |
| Total loans | ​ | ​ 187,900 | ​ | 100.0% | ​ | ​ 146,873 | ​ | 100.0% | ​ |
| Less: | ​ | ​ ​ | ​ | ​ | ​ | ​ ​ | ​ | ​ | ​ |
| Deferred loan fees | ​ | ​ 75 | ​ | ​ | ​ | ​ 518 | ​ | ​ | ​ |
| Allowance for losses | ​ | ​ 2,195 | ​ | ​ | ​ | ​ 2,186 | ​ | ​ | ​ |
| Total loans, net | ​ | $185,630 | ​ | ​ | ​ | $144,169 | ​ | ​ | ​ |

(1) Includes loans held for sale of $78,000 and $131,000 at June 30, 2022 and June 30, 2021, respectively.

***Contractual Maturities.*** The following tables set forth the contractual maturities of our total loan portfolio at June 30, 2022. Demand loans, loans having no stated repayment schedule or maturity, and overdraft loans are reported as being due in one year or less. The tables present contractual maturities and do not reflect repricing or the effect of prepayments. Actual maturities may differ. Excludes loans held for sale.

*(In thousands)*

| ​ ​ ​ ​ ​ Amounts due in: | ​ ​ ​ ​ ​ | ​ ​ ​ ​ Commercial Real Estate ​ ​ ​ | ​ ​ ​ ​ | ​ ​ ​ ​ Commercial and Industrial ​ ​ | ​ ​ ​ ​ | ​ ​ ​ ​ ​ ​ Construction ​ ​ | ​ ​ ​ ​ | ​ ​ One- to Four- Family Residential ​ ​ |
| --- | --- | --- | --- | --- | --- | --- | --- | --- |
| One year or less | ​ | $2,659 | ​ | $82 | ​ | $1,773 | ​ | $72 |
| More than one to five years | ​ | ​ 67,515 | ​ | ​ 4,760 | ​ | ​ 7,017 | ​ | ​ 13,151 |
| More than five to 15 years | ​ | ​ 10,158 | ​ | ​ 3,937 | ​ | ​ 292 | ​ | ​ 5,741 |
| More than 15 years | ​ | ​ 271 | ​ | ​ — | ​ | ​ 1,500 | ​ | ​ 32,849 |
| Total | ​ | $80,603 | ​ | $8,779 | ​ | $10,582 | ​ | $51,813 |

*(In thousands)*

| ​ ​ ​ ​ Amounts due in: | ​ ​ ​ ​ | ​ ​ Multifamily Real Estate ​ ​ ​ | ​ ​ ​ | ​ ​ ​ ​ Consumer ​ ​ | ​ ​ ​ | ​ ​ Payroll Protection Program ​ ​ | ​ ​ ​ | ​ ​ ​ ​ Total ​ ​ |
| --- | --- | --- | --- | --- | --- | --- | --- | --- |
| One year or less | ​ | $— | ​ | $452 | ​ | $— | ​ | $5,038 |
| More than one to five years | ​ | ​ 32,447 | ​ | ​ 1,525 | ​ | ​ — | ​ | ​ 126,415 |
| More than five to 15 years | ​ | ​ 1,498 | ​ | ​ 81 | ​ | ​ — | ​ | ​ 21,707 |
| More than 15 years | ​ | ​ — | ​ | ​ 42 | ​ | ​ — | ​ | ​ 34,662 |
| Total | ​ | $33,945 | ​ | $2,100 | ​ | $— | ​ | $187,822 |

The following table sets forth our fixed and adjustable-rate loans at June 30, 2022 that are contractually due after June 30, 2023. Our balloon loans are included as fixed-rate loans for purposes of this table.

*(In thousands)*

| ​ ​ ​ ​ Real estate loans: | ​ ​ ​ ​ | ​ ​ ​ Due After June 30, 2023 Fixed ​ ​ ​ | ​ ​ | ​ ​ Adjustable ​ ​ | ​ ​ | ​ ​ Total ​ ​ |
| --- | --- | --- | --- | --- | --- | ---: |
| One- to four-family residential | ​ | $16,267 | ​ | $35,474 | ​ | $51,741 |
| Multifamily | ​ | ​ 33,896 | ​ | ​ 49 | ​ | $33,945 |
| Commercial | ​ | ​ 75,878 | ​ | ​ 2,066 | ​ | $77,944 |
| Construction | ​ | ​ 8,809 | ​ | ​ — | ​ | $8,809 |
| Commercial and industrial loans | ​ | ​ 8,607 | ​ | ​ 89 | ​ | $8,696 |
| Consumer | ​ | ​ 482 | ​ | ​ 1,167 | ​ | $1,649 |
| Payroll Protection Program Loans | ​ | ​ — | ​ | ​ — | ​ | $— |
| Total loans | ​ | $143,939 | ​ | $38,845 | ​ | $182,784 |

***Commercial Real Estate Lending.*** Consistent with our strategy to diversify our loan portfolio and increase our yield, we are focused on increasing our origination of commercial real estate loans. At June 30, 2022, we had $80.6 million in commercial real estate loans, representing 42.9% of our total loan portfolio. Our commercial real estate loans are generally secured by office and industrial buildings, warehouses, small retail facilities and other special purpose commercial properties, primarily in Southeastern Wisconsin. At June 30, 2022, $72.7 million of our commercial real estate portfolio was secured by non-owner-occupied commercial real estate.

Our commercial real estate loans generally are fixed rate, have initial terms of five years and amortization periods of up to 20 years, with a balloon payment due at the end of the initial term. The maximum loan-to-value ratio of our commercial real estate loans is generally 75% of the lower of cost or appraised value of the property securing the loan.

At June 30, 2022, the average loan size of our commercial real estate loans was $970,000, and the largest of such loans was a $3.3 million loan secured by a commercial retail rental property. This loan was performing in accordance with its repayment terms at June 30, 2022.

We consider a number of factors in originating commercial real estate loans. We evaluate the qualifications and financial condition of the borrower, including project-level and global cash flows, credit history, and management expertise, as well as the value and condition of the property securing the loan. When evaluating the qualifications of the borrower, we consider the financial resources of the borrower, the borrower’s experience in owning or managing similar property and the borrower’s payment history with us and other financial institutions. In evaluating the property securing the loan, the factors we consider include the net operating income of the mortgaged property before debt service and depreciation, the ratio of the loan amount to the appraised value of the mortgaged property and the debt service coverage ratio (the ratio of net operating income to debt service). We generally require a debt service ratio of at least 1.25x. All commercial real estate loans of $500,000 or more are appraised by outside independent appraisers.

Personal guarantees are generally obtained from the principals of commercial real estate loans. We require property and casualty insurance and flood insurance if the property is determined to be in a flood zone area.

***Multifamily Real Estate Loans.*** At June 30, 2022, multifamily real estate loans were $33.9 million, or 18.1%, of our total loan portfolio, which was partly due to our purchases of participation interests in multifamily real estate loans totaling $5.6 million. Our multifamily real estate loans are generally secured by properties consisting of five or more rental units in our market area. Our multifamily real estate loans generally have fixed rates, initial terms of five years and amortization periods of up to 20 years, with a balloon payment due at the end of the initial term. Virtually all of our multifamily real estate loans are secured by properties located within our primary lending markets in Wisconsin.

At June 30, 2022, the average loan size of our multifamily real estate loans was $1.1 million and the largest of such loans was a $3.5 million loan secured by multiple non-owner-occupied rental properties. This loan was performing in accordance with its repayment terms at June 30, 2022.

In underwriting multifamily real estate loans, we consider a number of factors, which include the projected net cash flow to the loan’s debt service requirement (generally requiring a minimum of 125%), the age and condition of the collateral, the financial resources and income level of the borrower and the borrower’s experience in owning or managing similar properties. Multifamily real estate loans are generally originated in amounts up to 80% of the appraised value or the purchase price of the property securing the loan, whichever is lower. When circumstances warrant, guarantees are obtained from multifamily real estate customers. In addition, the borrower’s and guarantor’s financial information on such loans is monitored on an ongoing basis by requiring periodic financial statement updates. Underwriting for our multifamily loan participations is the same as for those internally originated.

***One- to Four-Family Residential Real Estate Lending.*** At June 30, 2022, we had $51.9 million of loans secured by one- to four-family residential real estate, representing 27.6% of our total loan portfolio, which included $78,000 of residential mortgages held for sale. We originate both fixed-rate and adjustable-rate one- to four-family residential real estate loans. At June 30, 2022, 33.0% of our one- to four-family residential real estate loans were fixed-rate loans, and 67.0% of such loans were adjustable-rate loans. At June 30, 2022, $2.4 million of our loans secured by one- to four-family residential real estate were in a junior lien position.

Our fixed-rate one- to four-family residential real estate loans typically have terms of 10 to 30 years and are generally underwritten according to Fannie Mae guidelines when the loan balance meets such guidelines, and we refer to loans that conform to such guidelines as “conforming loans.” We generally originate both fixed- and adjustable-rate mortgage loans in amounts up to the maximum conforming loan limits as established by the Federal Housing Finance Agency, which as of June 30, 2022 was $647,200 for single-family homes in our market area. We typically sell our conforming fixed-rate one- to four-family residential real estate loans to government-sponsored enterprises such as Freddie Mac and Fannie Mae and through the Federal Home Loan Bank’s Mortgage Partnership Finance Program. We service all the loans that we sell. We also originate loans above the lending limit for conforming loans, which are referred to as “jumbo loans.” We retain a majority of our jumbo loans in our loan portfolio. Jumbo loans that we originate may be fixed- or adjustable-rate loans and typically have 10 to 30 year terms with maximum loan-to-value ratios of 80%. At June 30, 2022, we had $26.0 million in jumbo loans, which represented 50.2% of our one- to four-family residential real estate loans. Our average loan size for jumbo loans was $1.2 million at June 30, 2022. Virtually all of our one- to four-family residential real estate loans are secured by properties located in Marathon County, Wisconsin.

Our adjustable-rate one- to four-family residential real estate loans carry terms to maturity ranging up to 30 years and generally have fixed rates for initial terms of five years, although we also offer terms of three or seven years. Generally, our adjustable rate one- to four-family residential real estate loans are not adjusted based on an index but are adjusted from time-to-time internally at the discretion of Marathon Bank. The maximum amount by which the initial interest rate may be increased is up to 1.0% per year during the adjustment period, with a lifetime interest rate cap of 15% over the initial interest rate of the loan. We typically hold in our loan portfolio our adjustable-rate one- to four-family residential real estate loans.

We generally limit the loan-to-value ratios of our mortgage loans without private mortgage insurance to 80% of the sales price or appraised value, whichever is lower. Loans where the borrower obtains private mortgage insurance may be made with loan-to-value ratios up to 100%.

We generally do not offer “interest only” mortgage loans on permanent one- to four-family residential real estate loans (where the borrower pays interest for an initial period, after which the loan converts to a fully amortizing loan). We also do not offer loans that provide for negative amortization of principal, such as “Option ARM” loans, where the borrower can pay less than the interest owed on the loan, resulting in an increased principal balance during the life of the loan. We do not have a “subprime lending” program for one- to four-family residential real estate loans (i.e., loans that generally target borrowers with weakened credit histories).

Generally, residential mortgage loans that we originate include “due-on-sale” clauses, which give us the right to declare a loan immediately due and payable in the event that, among other things, the borrower sells or otherwise disposes of the real property subject to the mortgage and the loan is not repaid. All borrowers are required to obtain title insurance for the benefit of Marathon Bank. We also require homeowner’s insurance and fire and casualty insurance and, where circumstances warrant, flood insurance on properties securing real estate loans.

***Commercial and Industrial Loans.*** At June 30, 2022, we had $8.8 million of commercial and industrial loans, representing 4.7% of our total portfolio, which included no Paycheck Protection Program (“PPP”) loans as of June 30, 2022 compared to $10.4 million of PPP loans as of June 30, 2021. These loans are generally originated to small businesses and medical providers in our primary market areas. Our commercial and industrial loans are generally used by the borrowers for working capital purposes or for acquiring equipment or inventory. To the extent these loans are secured, they are primarily secured by business assets other than real estate, such as business equipment, inventory and accounts receivable. Our commercial and industrial loans are generally lines of credit with terms of one to two years. Our commercial and industrial lines of credit are generally priced on an adjustable-rate basis tied to *The Wall Street Journal* Prime Rate. We generally obtain personal guarantees with commercial and industrial loans.

At June 30, 2022, the average loan size of our commercial and industrial loans was $92,000, and our largest outstanding commercial and industrial loan balance was a $1.2 million loan to a commercial concrete contractor. This loan was performing in accordance with its repayment terms at June 30, 2022.

When making commercial and industrial loans, we consider the financial statements of the borrower, our lending history with the borrower, the debt service capabilities of the borrower, the projected cash flows of the business and the value of the collateral, accounts receivable, inventory and equipment. Depending on the collateral used to secure the loans, commercial and industrial loans are made in amounts generally of up to 75% of the value of the collateral securing the loan. At June 30, 2022, $5.1 million of commercial and industrial loans were unsecured.

Commercial and industrial loans as of June 30, 2021 also included loans originated under the PPP, a specialized low-interest (1%) forgivable loan program funded by the U.S. Treasury Department and administered by the SBA. Although we were not already a qualified SBA lender, we enrolled in the PPP by completing the required documentation which enabled us to originate PPP loans. We subsequently became approved as a qualified SBA lender. The SBA guarantees 100% of the PPP loans made to eligible borrowers. The entire principal amount of the borrower’s PPP loan, including any accrued interest, is eligible to be reduced by the loan forgiveness amount under the PPP so long as employee and compensation levels of the business are maintained and the loan proceeds are used for other qualifying expenses. We originated 109 PPP loans totaling $10.4 million primarily between January and May of 2021. The PPP program ended in May 2021. During the year ended June 30, 2022, all of our PPP loans were forgiven by the SBA leaving us with no balance as of June 30, 2022.

***Construction Loans.*** At June 30, 2022, construction loans totaled $10.6 million, or 5.6% of our total loan portfolio which was partly due to our purchases of participation interests in constructions loans totaling $3.5 million. We also have undrawn amounts on construction loans totaling $1.5 million at June 30, 2022. Most of these loans are with local developers for the construction of commercial real estate developments and are secured by properties located in our primary market areas. Because our construction loan originations are with select customers, the terms of our construction loan originations are not based on standardized terms and instead are individually negotiated.

***Consumer Lending.*** To a much lesser extent, we offer a variety of consumer loans to individuals who reside or work in our market area, including home equity lines of credit, new and used automobile loans, and loans secured by certificates of deposit. At June 30, 2022, our consumer loan portfolio totaled $2.1 million, or 1.1% of our total loan portfolio. At June 30, 2022, we had $141,000 in unsecured consumer loans.

At June 30, 2022, home equity lines of credit (which we categorize as consumer loans) totaled $1.0 million in outstanding balances. The underwriting standards utilized for home equity lines of credit include a determination of the applicant’s credit history, an assessment of the applicant’s ability to meet existing obligations and payments on the proposed loan and the value of the collateral securing the loan. Home equity lines of credit are offered with an aggregate loan-to-value ratio up to 80%. Our home equity lines of credit are generally 10-year balloon loans. Our home equity lines of credit have adjustable rates of interest which are indexed to the Prime Rate, as reported in *The Wall Street Journal.*

### Loan Underwriting Risks

***Commercial Real Estate and Multifamily Real Estate Loans.*** Loans secured by commercial and multifamily real estate generally have larger balances and involve a greater degree of risk than one- to four-family residential real estate loans. The primary concerns in commercial and multifamily real estate lending are the borrower’s creditworthiness and the feasibility and cash flow potential of the project. Payments on loans secured by income properties often depend on successful operation and management of the properties. As a result, repayment of such loans may be subject, to a greater extent than residential real estate loans, to adverse conditions in the real estate market or the economy. To monitor cash flows on income properties, we require borrowers and loan guarantors to provide annual financial statements on commercial real estate loans. In reaching a decision on whether to make a commercial or multifamily real estate loan, we consider and review a global cash flow analysis of the borrower and consider the net operating income of the property, the borrower’s expertise, credit history and profitability, and the value of the underlying property. A Phase I environmental site assessment is obtained when the possibility exists that hazardous materials may have existed on the site, or the site may have been impacted by adjoining properties that handled hazardous materials.

If we foreclose on a commercial or multifamily real estate loan, the marketing and liquidation period to convert the real estate asset to cash can be lengthy with substantial holding costs. In addition, vacancies, deferred maintenance, repairs and market stigma can result in prospective buyers expecting sale price concessions to offset their real or perceived economic losses for the time it takes them to return the property to profitability. Depending on the individual circumstances, initial charge-offs and subsequent losses on commercial and multifamily real estate loans can be unpredictable and substantial.

***One- to Four-Family Non-Owner Occupied Residential Real Estate Loans.*** One- to four-family non-owner occupied residential real estate loans are subject to some of the same risks as our commercial real estate and multifamily real estate loans, in that they depend on the borrower’s creditworthiness and the feasibility and cash flow potential of the project. Such loans are also subject to similar risks with respect to foreclosures and subsequent operations of the property and resale.

***Construction, Land and Development Loans.*** Our construction loans are based upon estimates of costs and values associated with the completed project. Underwriting is focused on the borrowers’ financial strength, credit history and demonstrated ability to produce a quality product and effectively market and manage their operations.

Construction lending involves additional risks when compared with permanent lending because funds are advanced upon the security of the project, which is of uncertain value prior to its completion. Because of the uncertainties inherent in estimating construction costs, as well as the market value of the completed project and the effects of governmental regulation of real property, it is relatively difficult to evaluate accurately the total funds required to complete a project and the related loan-to-value ratio. In addition, generally during the term of a construction loan, interest may be funded by the borrower or disbursed from an interest reserve set aside from the construction loan budget. These loans often involve the disbursement of substantial funds with repayment primarily dependent on the success of the ultimate project and the ability of the borrower to sell or lease the property or obtain permanent take-out financing, rather than the ability of the borrower or guarantor to repay principal and interest. If the appraised value of a completed project proves to be overstated, we may have inadequate security for the repayment of the loan upon completion of construction of the project and may incur a loss.

***Commercial and Industrial Loans.*** Commercial and industrial loans generally have greater credit risk than residential real estate loans. Unlike residential real estate loans, which generally are made on the basis of the borrower’s ability to make repayment from his or her employment or other income, and which are secured by real property whose value tends to be more easily ascertainable, commercial and industrial loans generally are made on the basis of the borrower’s ability to repay the loan from the cash flow of the borrower’s business. As a result, the availability of funds for the repayment of commercial and industrial loans may depend substantially on the success of the business itself. Further, any collateral securing the loans may depreciate over time, may be difficult to appraise and may fluctuate in value. We try to minimize these risks through our underwriting standards.

***Consumer Loans.*** Consumer loans other than home equity loans generally have greater risk compared to longer-term loans secured by improved, owner-occupied real estate, particularly consumer loans that are secured by rapidly depreciable assets, such as automobiles. In these cases, any repossessed collateral for a defaulted loan may not provide an adequate source of repayment of the outstanding loan balance. As a result, consumer loan collections are primarily dependent on the borrower’s continuing financial stability and thus are more likely to be adversely affected by job loss, divorce, illness or personal bankruptcy.

***Balloon Loans.*** Although balloon mortgage loans may reduce to an extent our vulnerability to changes in market interest rates because they may reprice at the end of the term, subject to renegotiation of rate and terms at maturity, the ability of the borrower to renew or repay the loan and the marketability of the underlying collateral may be adversely affected if real estate values decline prior to the expiration of the term of the loan or in a rising interest rate environment.

***Adjustable-Rate Loans.*** Although adjustable-rate mortgage loans may reduce to an extent our vulnerability to changes in market interest rates because they periodically re-price, as interest rates increase the required payments due from the borrower also increase (subject to rate caps), increasing the potential for default by the borrower. At the same time, the ability of the borrower to repay the loan and the marketability of the underlying collateral may be adversely affected by higher interest rates. Upward adjustments of the contractual interest rate are also limited by our maximum periodic and lifetime rate adjustments. Moreover, the interest rates on most of our adjustable-rate loans do not adjust for up to five years after origination. As a result, the effectiveness of adjustable-rate mortgage loans in compensating for changes in general interest rates may be limited during periods of rapidly rising interest rates.

### Originations, Purchases and Sales of Loans

Residential lending activities are conducted by salaried and commissioned loan personnel operating at our main and branch office locations. Loans we originate are underwritten pursuant to our policies and procedures. Loans originated with the intent for sale are also underwritten pursuant to secondary market guidelines. Our ability to originate fixed-rate loans, adjustable-rate loans or balloon loans depends on relative customer demand for such loans, which can be affected by current and expected future levels of market interest rates. We originate residential real estate loans through our loan originators, marketing efforts, our customer base, walk-in customers and referrals from real estate brokers, builders, accountants and financial advisors.

Commercial lending activities are conducted by salaried commercial lenders operating primarily out of our main location. All loans originated by us are underwritten pursuant to our policies and procedures. Our commercial loans are typically fixed-rate balloon loans with terms of typically five years, with loan rates dependent on current and expected future levels of market interest rates. Commercial and multifamily lending are sourced primarily through loan originator contacts, networking and marketing efforts, our customer base and referrals from real estate brokers, accountants and financial advisors.

We currently sell a significant majority of the conforming fixed-rate one- to four-family residential real estate loans we originate on the secondary market. We typically sell our conforming fixed-rate one- to four-family residential real estate loans to Fannie Mae, Freddie Mac and through the Federal Home Loan Bank’s Mortgage Partnership Finance Program. We service all the loans that we sell. During the year ended June 30, 2022, we originated $16.8 million of one- to four-family residential real estate loans and sold $17.1 million, and during the year ended June 30, 2021, we originated $50.6 million of one- to four-family residential real estate loans and sold $51.7 million. We recognize, at the time of sale, the cash gain or loss on the sale of the loans based on the difference between the net cash proceeds received and the carrying value of the loans sold.

We purchase loan participations secured by properties primarily within the state of Wisconsin in loans in which we are not the lead lender. In these circumstances, we follow our customary loan underwriting and approval policies. At June 30, 2022, the outstanding balances of our loan participations where we are not the lead lender totaled $19.3 million, or 10.2% of our loan portfolio, of which $9.0 million were commercial real estate loans, $5.6 million were multifamily real estate loans, $3.5 million were construction loans and $1.2 million were commercial and industrial loans. All such loans were performing in accordance with their original repayment terms. We also have participated out portions of loans that exceeded our loans-to-one borrower legal lending limit and for risk diversification. At June 30, 2022, we had participated out portions of eight loans with an aggregate amount of $8.7 million. Historically, we have not purchased whole loans.

### Loan Approval Procedures and Authority

Pursuant to applicable law, the aggregate amount of loans that we are permitted to make to any one borrower or a group of related borrowers is generally limited to 20% of our capital. This limit may be increased to 50% of capital for loans secured by certain assets. At June 30, 2022, based on the 20% limitation, our loans-to-one-borrower limit was approximately $5.8 million. At June 30, 2022, our largest loan relationship with one borrower was for $5.6 million, which was secured by commercial real estate properties, with the underlying loans performing in accordance with their original terms on that date.

Our lending is subject to written underwriting standards and origination procedures. Decisions on loan applications are made on the basis of detailed applications submitted by the prospective borrower, credit histories that we obtain, and property valuations (consistent with our appraisal policy) prepared by outside independent licensed appraisers approved by our board of directors as well as internal evaluations, where permitted by regulations. The loan applications are designed primarily to determine the borrower’s ability to repay the requested loan, and the more significant items on the application are verified through use of credit reports, bank statements and tax returns.

All loan approval amounts are based on the aggregate loans, including total balances of outstanding loans and the proposed loan to the individual borrower and any related entity. Our president and chief executive officer has individual authorization to approve loans up to $500,000. Our chief credit officer has individual authorization to approve loans up to $100,000. Our Loan Committee, which consists of at least two board members and our chief executive officer and chief credit officer can approve loans up to $1.0 million in the aggregate. Loans in excess of $1.0 million require the approval of our full board of directors.

### Delinquencies and Asset Quality

***Delinquency Procedures.*** When a loan payment becomes 10 days past due, we contact the customer by mailing a late notice, and loan officers may contact their customers. If a loan payment becomes 45 days past due, we mail an additional late notice and a loan-specific letter written by a collection representative, and we also place telephone calls to the borrower. These loan collection efforts continue until a loan becomes 90 days past due, at which point we would refer the loan for foreclosure proceedings unless management determines that it is in the best interest of Marathon Bank to work further with the borrower to arrange a workout plan. The foreclosure process would begin when a loan becomes 120 days delinquent. From time to time we may accept deeds in lieu of foreclosure.

***Loans Past Due and Non-Performing Assets.*** Loans are reviewed on a regular basis. Management determines that a loan is impaired or non-performing when it is probable at least a portion of the loan will not be collected in accordance with the original terms due to a deterioration in the financial condition of the borrower or the value of the underlying collateral if the loan is collateral dependent. When a loan is determined to be impaired, the measurement of the loan in the allowance for loan losses is based on present value of expected future cash flows, except that all collateral-dependent loans are measured for impairment based on the fair value of the collateral. Non-accrual loans are loans for which collectability is questionable and, therefore, interest on such loans will no longer be recognized on an accrual basis. All loans that become 90 days or more delinquent are placed on non-accrual status unless the loan is well secured and in the process of collection. When loans are placed on non-accrual status, unpaid accrued interest is fully reversed, and further income is recognized only to the extent received on a cash basis or cost recovery method.

When we acquire real estate as a result of foreclosure, the real estate is classified as real estate owned. The real estate owned is recorded at the lower of carrying amount or fair value, less estimated costs to sell. Soon after acquisition, we order a new appraisal to determine the current market value of the property. Any excess of the recorded value of the loan satisfied over the market value of the property is charged against the allowance for loan losses, or, if the existing allowance is inadequate, charged to expense of the current period. After acquisition, all costs incurred in maintaining the property are expensed. Costs relating to the development and improvement of the property, however, are capitalized to the extent of estimated fair value less estimated costs to sell.

A loan is classified as a troubled debt restructuring if, for economic or legal reasons related to the borrower’s financial difficulties, we grant a concession to the borrower that we would not otherwise consider. This usually includes a modification of loan terms, such as a reduction of the interest rate to below market terms, capitalizing past due interest or extending the maturity date and possibly a partial forgiveness of the principal amount due. Interest income on restructured loans is accrued after the borrower demonstrates the ability to pay under the restructured terms through a sustained period of repayment performance, which is generally six consecutive months.

The CARES Act, in addition to providing financial assistance to both businesses and consumers, created a forbearance program for federally-backed mortgage loans, protected borrowers from negative credit reporting due to loan accommodations related to the national emergency, and provided financial institutions the option to temporarily suspend certain requirements under U.S. GAAP related to troubled debt restructurings for a limited period of time to account for the effects of COVID-19. The Federal banking regulatory agencies have likewise issued guidance encouraging financial institutions to work prudently with borrowers who are, or may be, unable to meet their contractual payment obligations because of the effects of COVID-19. That guidance, with concurrence of the Financial Accounting Standards Board, and provisions of the CARES Act allowed modifications made on a good faith basis in response to COVID-19 to borrowers who were generally current with their payments prior to any relief, to not be treated as troubled debt restructurings. Modifications included payment deferrals, fee waivers, extensions of repayment term, or other delays in payment. We have worked with our customers affected by COVID-19 and accommodated a significant amount of loan modifications across our loan portfolios. All modifications have returned to their normal payment status and we do not anticipate any additional modifications going forward.

***Delinquent Loans.*** The following table sets forth our loan delinquencies, including non-accrual loans, by type and amount at the dates indicated. The table below excludes loans deferred pursuant to COVID-19 modifications.

*(In thousands)*

| ​ ​ ​ ​ ​ ​ ​ Real estate loans: | ​ ​ ​ ​ ​ ​ ​ | ​ ​ At June 30, 2022 30-59 Days Past Due ​ ​ | ​ ​ ​ ​ | ​ ​ 60-89 Days Past Due ​ ​ | ​ ​ ​ ​ | ​ ​ 90 Days or More Past Due ​ ​ | ​ ​ ​ ​ ​ | ​ ​ 2021 30-59 Days Past Due ​ ​ | ​ ​ ​ ​ | ​ ​ 60-89 Days Past Due ​ ​ | ​ ​ ​ ​ | ​ ​ 90 Days or More Past Due ​ ​ |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| One- to four-family residential | ​ | $70 | ​ | $— | ​ | $115 | ​ | $30 | ​ | $4 | ​ | $178 |
| Multifamily | ​ | ​ — | ​ | ​ — | ​ | ​ — | ​ | ​ — | ​ | ​ — | ​ | ​ — |
| Commercial | ​ | ​ — | ​ | ​ — | ​ | ​ — | ​ | ​ — | ​ | ​ — | ​ | ​ — |
| Construction | ​ | ​ — | ​ | ​ — | ​ | ​ — | ​ | ​ — | ​ | ​ — | ​ | ​ — |
| Commercial and industrial loans | ​ | ​ — | ​ | ​ — | ​ | ​ — | ​ | ​ — | ​ | ​ — | ​ | ​ — |
| Paycheck Protection Program loans | ​ | ​ — | ​ | ​ — | ​ | ​ — | ​ | ​ — | ​ | ​ — | ​ | ​ — |
| Consumer loans | ​ | ​ — | ​ | ​ — | ​ | ​ — | ​ | ​ 15 | ​ | ​ ​ | ​ | ​ ​ |
| Total | ​ | $70 | ​ | $— | ​ | $115 | ​ | $45 | ​ | $4 | ​ | $178 |

***Non-Performing Assets.*** The following table sets forth information regarding our non-performing assets. Non-accrual loans include non-accruing troubled debt restructurings of $0 and $91,000 as of June 30, 2022 and 2021, respectively. Troubled debt restructurings include loans for which either a portion of interest or principal has been forgiven, or loans modified at interest rates materially less than current market rates.

*(Dollars in thousands)*

| ​ ​ ​ ​ Non-accrual loans: Real estate loans: | ​ ​ ​ ​ ​ | ​ ​ At June 30, 2022 ​ ​ ​ ​ ​ | ​ ​ ​ | ​ ​ 2021 ​ ​ ​ ​ | ​ ​ ​ ​ ​ ​ |
| --- | --- | --- | --- | --- | --- |
| One- to four-family residential | ​ | $64 | ​ | $178 | ​ |
| Multifamily | ​ | ​ — | ​ | ​ — | ​ |
| Commercial | ​ | ​ — | ​ | ​ — | ​ |
| Construction | ​ | ​ — | ​ | ​ — | ​ |
| Commercial and industrial loans | ​ | ​ — | ​ | ​ — | ​ |
| Consumer loans | ​ | ​ — | ​ | ​ — | ​ |
| Total non-accrual loans | ​ | ​ 64 | ​ | ​ 178 | ​ |
| ​ | ​ | ​ ​ | ​ | ​ ​ | ​ |
| Accruing loans past due 90 days or more | ​ | ​ 51 | ​ | ​ — | ​ |
| ​ | ​ | ​ ​ | ​ | ​ ​ | ​ |
| Real estate owned: | ​ | ​ ​ | ​ | ​ ​ | ​ |
| One- to four-family residential | ​ | ​ — | ​ | ​ — | ​ |
| Multifamily | ​ | ​ — | ​ | ​ — | ​ |
| Commercial | ​ | ​ — | ​ | ​ — | ​ |
| Construction | ​ | ​ — | ​ | ​ — | ​ |
| Commercial and industrial | ​ | ​ — | ​ | ​ — | ​ |
| Consumer loans | ​ | ​ — | ​ | ​ — | ​ |
| Total real estate owned | ​ | ​ — | ​ | ​ — | ​ |
| ​ | ​ | ​ ​ | ​ | ​ ​ | ​ |
| Total non-performing assets | ​ | $115 | ​ | $178 | ​ |
| ​ | ​ | ​ ​ | ​ | ​ ​ | ​ |
| Total accruing troubled debt restructured loans | ​ | $130 | ​ | $468 | ​ |
| Total non-performing loans to total loans | ​ | ​ 0.06% | ​ | ​ 0.12% | ​ |
| Total non-performing loans to total assets | ​ | ​ 0.05% | ​ | ​ 0.08% | ​ |
| Total non-performing assets to total assets | ​ | ​ 0.05% | ​ | ​ 0.08% | ​ |

***Classified Assets.*** Federal regulations provide for the classification of loans and other assets, such as debt and equity securities considered to be of lesser quality, as “substandard,” “doubtful” or “loss.” An asset is considered “substandard” if it is inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. “Substandard” assets include those characterized by the “distinct possibility” that the insured institution will sustain “some loss” if the deficiencies are not corrected. Assets classified as “doubtful” have all of the weaknesses inherent in those classified “substandard,” with the added characteristic that the weaknesses present make “collection or liquidation in full,” on the basis of currently existing facts, conditions, and values, “highly questionable and improbable.” Assets classified as “loss” are those considered “uncollectible” and of such little value that their continuance as assets without the establishment of a specific loss allowance is not warranted. Assets which do not currently expose the insured institution to sufficient risk to warrant classification in one of the aforementioned categories but possess weaknesses are designated as “special mention” or “Watch” by our management.

When an insured institution classifies problem assets as either substandard or doubtful, it may establish general allowances in an amount deemed prudent by management to cover probable accrued losses. General allowances represent loss allowances which have been established to cover probable accrued losses associated with lending activities, but which, unlike specific allowances, have not been allocated to particular problem assets. When an insured institution classifies problem assets as “loss,” it is required either to establish a specific allowance for losses equal to 100% of that portion of the asset so classified or to charge-off such amount. An institution’s determination as to the classification of its assets and the amount of its valuation allowances is subject to review by the regulatory authorities, which may require the establishment of additional general or specific loss allowances.

On the basis of our review of our loans our classified and special mention or watch loans at the dates indicated were as follows:

*(In thousands)*

| ​ ​ ​ ​ ​ Classification of Loans: | ​ ​ ​ ​ ​ | ​ ​ At June 30, 2022 ​ ​ ​ ​ | ​ ​ ​ | ​ ​ 2021 ​ ​ ​ ​ |
| --- | --- | ---: | --- | ---: |
| Substandard | ​ | $— | ​ | $— |
| Doubtful | ​ | ​ — | ​ | ​ — |
| Loss | ​ | ​ — | ​ | ​ — |
| Total Classified Assets | ​ | $— | ​ | $— |
| Special Mention/Watch | ​ | $1,389 | ​ | $5,257 |

During the year ended June 30, 2022, we upgraded $3.4 million in commercial real estate loans and $1.6 million in commercial and industrial loans from watch to pass credit relationships due to improved cash flow position of these loans and their compliance with all scheduled loan payments over the previous six months. Additionally, $242,000 in commercial real estate loans previously rated watch were paid off in full by the respective borrower.

### Allowance for Loan Losses

The allowance for loan losses established as losses is estimated to have occurred through a provision for loan losses charged to earnings. Loan losses are charged against the allowance when management believes the uncollectability of a loan balance is confirmed. Subsequent recoveries, if any, are credited to the allowance.

The allowance for loan losses is evaluated on a regular basis by management and is based upon management’s periodic review of the collectability of the loans in light of historical experience, the nature and volume of the loan portfolio, adverse situations that may affect the borrower’s ability to repay, estimated value of any underlying collateral, and prevailing economic conditions. This evaluation is inherently subjective as it requires estimates that are susceptible to significant revision as more information becomes available.

The allowance consists of allocated and general components. The allocated component relates to loans that are classified as impaired. For those loans that are classified as impaired, an allowance is established when the discounted cash flows (or collateral value or observable market price) of the impaired loan is lower than the carrying value of that loan. General components cover non-impaired loans and are based on historical loss rates for each portfolio segment, adjusted for the effects of qualitative or environmental factors that are likely to cause estimated credit losses as of the evaluation date to differ from the portfolio segment’s historical loss experience. Qualitative factors include consideration of the following: changes in lending policies and procedures; changes in economic conditions, changes in the nature and volume of the portfolio; changes in the experience, ability, and depth of lending management and other relevant staff; changes in the volume and severity of past due, nonaccrual and other adversely graded loans; changes in the loan review system; changes in the value of the underlying collateral for collateral-dependent loans; concentrations of credit; and the effect of other external factors such as competition and legal and regulatory requirements. At June 30, 2022 and 2021, the qualitative loan portfolio risk factors were slightly reduced in all loan categories except commercial real estate which we believe exhibits the most credit risk related to local and national economic conditions as well as industry conditions and concentrations.

A loan is considered impaired when, based on current information and events, it is probable that we will be unable to collect the scheduled payments of principal and interest when due according to the contractual terms of the loan agreement. Factors considered by management in determining impairment include payment status, collateral value, and the probability of collecting scheduled principal and interest payments when due. Loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired. Management determines the significance of payment delays and payment shortfalls on a case-by-case basis, taking into consideration all of the circumstances surrounding the loan and the borrower, including the length of the delay, the reason for the delay, the borrower’s prior payment record, and the amount of the shortfall in relation to the principal and interest owed. Impairment is measured on a loan-by-loan basis for commercial and commercial real estate loans by either the present value of expected future cash flows discounted at the loan’s effective interest rate, the loan’s observable market price, or the fair value of the collateral if the loan is collateral dependent.

In addition, the WDFI and the FDIC periodically review our allowance for loan losses and as a result of such reviews, we may have to adjust our allowance for loan losses or recognize further loan charge-offs.

The following table sets forth activity in our allowance for loan losses for the years indicated.

*(Dollars in thousands)*

| ​ ​ ​ ​ ​ | ​ ​ ​ | ​ ​ For the Years Ended June 30, 2022 | ​ | ​ ​ 2021 |
| --- | --- | --- | --- | --- |
| Allowance at beginning of year | ​ | $2,186 | ​ | $1,700 |
| Provision for loan losses | ​ | ​ — | ​ | ​ — |
| ​ | ​ | ​ ​ | ​ | ​ ​ |
| Charge offs: | ​ | ​ ​ | ​ | ​ ​ |
| Real estate loans: | ​ | ​ ​ | ​ | ​ ​ |
| One- to four-family residential | ​ | ​ — | ​ | ​ — |
| Multifamily | ​ | ​ — | ​ | ​ — |
| Commercial | ​ | ​ — | ​ | ​ — |
| Construction | ​ | ​ — | ​ | ​ — |
| Commercial and industrial loans | ​ | ​ — | ​ | ​ — |
| Paycheck Protection Program loans | ​ | ​ — | ​ | ​ — |
| Consumer loans | ​ | ​ — | ​ | ​ — |
| Total charge-offs | ​ | ​ — | ​ | ​ — |
| ​ | ​ | ​ ​ | ​ | ​ ​ |
| Recoveries: | ​ | ​ ​ | ​ | ​ ​ |
| Real estate loans: | ​ | ​ ​ | ​ | ​ ​ |
| One- to four-family residential | ​ | ​ — | ​ | ​ 1 |
| Multifamily | ​ | ​ — | ​ | ​ — |
| Commercial | ​ | ​ — | ​ | ​ 65 |
| Construction | ​ | ​ — | ​ | ​ 73 |
| Commercial and industrial loans | ​ | ​ — | ​ | ​ 341 |
| Paycheck Protection Program loans | ​ | ​ — | ​ | ​ — |
| Consumer loans | ​ | ​ 9 | ​ | ​ 6 |
| Total recoveries | ​ | ​ 9 | ​ | ​ 486 |
| ​ | ​ | ​ ​ | ​ | ​ ​ |
| Net (charge-offs) recoveries | ​ | ​ 9 | ​ | ​ 486 |
| ​ | ​ | ​ ​ | ​ | ​ ​ |
| Allowance at end of year | ​ | $2,195 | ​ | $2,186 |
| ​ | ​ | ​ ​ | ​ | ​ ​ |
| Allowance to non-performing loans | ​ | ​ 1908.7% | ​ | ​ 1228.1% |
| Allowance to total loans outstanding at the end of the year | ​ | ​ 1.17% | ​ | ​ 1.49% |
| Net recoveries to average loans outstanding during the year | ​ | ​ 0.01% | ​ | ​ 0.38% |
| ​ | ​ | ​ ​ | ​ | ​ ​ |
| Net recoveries to average loans outstanding during the year | ​ | ​ ​ | ​ | ​ ​ |
| ​ | ​ | ​ ​ | ​ | ​ ​ |
| Real estate loans: | ​ | ​ ​ | ​ | ​ ​ |
| One- to four-family residential | ​ | ​ — | ​ | ​ — |
| Multifamily | ​ | ​ — | ​ | ​ — |
| Commercial | ​ | ​ — | ​ | ​ 0.05% |
| Construction | ​ | ​ — | ​ | ​ 0.06% |
| Commercial and industrial loans | ​ | ​ — | ​ | ​ 0.27% |
| Paycheck Protection Program loans | ​ | ​ — | ​ | ​ — |
| Consumer loans | ​ | ​ 0.01% | ​ | ​ — |
| Total net recoveries to average loans outstanding during the year | ​ | ​ 0.01% | ​ | ​ 0.38% |
| ​ | ​ | ​ ​ | ​ | ​ ​ |

***Allocation of Allowance for Loan Losses.*** The following table sets forth the allowance for loan losses allocated by loan category and the percent of the allowance in each category to the total allocated allowance at the dates indicated. The allowance for loan losses allocated to each category is not necessarily indicative of future losses in any particular category and does not restrict the use of the allowance to absorb losses in other categories.

*(Dollars in thousands)*

| ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Real estate loans: | ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ | ​ ​ ​ At June 30, ​ 2022 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Amount ​ ​ | ​ ​ ​ ​ ​ ​ ​ | ​ Percent of Allowance in Category to Total Allocated Allowance ​ | ​ ​ ​ ​ ​ ​ ​ | ​ ​ Percent of Loans in Each Category to Total Loans ​ | ​ ​ ​ ​ ​ ​ ​ ​ | ​ ​ ​ 2021 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Amount ​ ​ | ​ ​ ​ ​ ​ ​ ​ | ​ Percent of Allowance in Category to Total Allocated Allowance ​ | ​ ​ ​ ​ ​ ​ ​ | ​ ​ Percent of Loans in Each Category to Total Loans ​ | ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ |
| --- | --- | --- | --- | ---: | --- | ---: | --- | --- | --- | ---: | --- | ---: | --- |
| One- to four-family residential | ​ | $264 | ​ | 12.0% | ​ | 27.6% | ​ | $409 | ​ | 18.7% | ​ | 33.0% | ​ |
| Multifamily | ​ | ​ 233 | ​ | 10.6% | ​ | 18.1% | ​ | ​ 134 | ​ | 6.1% | ​ | 11.8% | ​ |
| Commercial | ​ | ​ 1,592 | ​ | 72.5% | ​ | 42.9% | ​ | ​ 1,036 | ​ | 47.4% | ​ | 35.5% | ​ |
| Construction | ​ | ​ 55 | ​ | 2.5% | ​ | 5.6% | ​ | ​ 60 | ​ | 2.7% | ​ | 5.4% | ​ |
| Commercial and industrial loans | ​ | ​ 33 | ​ | 1.5% | ​ | 4.7% | ​ | ​ 158 | ​ | 7.2% | ​ | 6.1% | ​ |
| Paycheck Protection Program loans | ​ | ​ — | ​ | 0.0% | ​ | 0.0% | ​ | ​ — | ​ | 0.0% | ​ | 7.1% | ​ |
| Consumer | ​ | ​ — | ​ | 0.0% | ​ | 1.1% | ​ | ​ 5 | ​ | 0.2% | ​ | 1.1% | ​ |
| Total allocated allowance | ​ | ​ 2,177 | ​ | 99.2% | ​ | 100.0% | ​ | ​ 1,802 | ​ | 82.4% | ​ | 100.0% | ​ |
| Unallocated | ​ | ​ 18 | ​ | 0.8% | ​ | - | ​ | ​ 384 | ​ | 17.6% | ​ | - | ​ |
| Total allowance for loan losses | ​ | $2,195 | ​ | 100.0% | ​ | 100.0% | ​ | $2,186 | ​ | 100.0% | ​ | 100.0% | ​ |

The change in the allowance for loan loss balances from commercial and industrial, one-to-four-family residential and the unallocated allowance component to commercial real estate was primarily related to the improved cash flow position of certain loans and their compliance with all scheduled loan payments over the previous twelve months and the growth in the commercial real estate portfolio.

### Investment Activities

***General***. Our board of directors is responsible for approving and overseeing our investment policy. The investment policy is reviewed at least annually by management and any changes to the policy are recommended to the board of directors and are subject to its approval. This policy dictates that investment decisions be made based on the safety of the investment, regulatory standards, liquidity requirements, potential returns and consistency with our interest rate risk management strategy. Our investment/asset liability management committee, which consists of our President and Chief Executive Officer, Chief Financial Officer, Chief Administrative Officer and Chief Credit Officer and the board of directors, oversees our investing activities and strategies. All transactions are formally reviewed by the board of directors at least monthly.

Our current investment policy authorizes us to invest in debt securities issued by the U.S. government and its agencies or government sponsored enterprises. The policy also permits investments in mortgage-backed securities, including pass-through securities, issued and guaranteed by Fannie Mae, Freddie Mac and Ginnie Mae, as well as investments in federal funds and deposits in other insured institutions. In addition, management is authorized to invest in investment grade state and municipal obligations and corporate debt obligations within regulatory parameters. We do not engage in any investment hedging activities or trading activities, nor do we purchase any high-risk mortgage derivative products, corporate junk bonds, and certain types of structured notes.

Debt and equity securities investment accounting guidance requires that, at the time of purchase, we designate a security as held to maturity, available for sale, or trading, depending on our ability and intent. At all dates below, we had a portfolio of debt securities held to maturity at amortized cost and a portfolio of debt securities available for sale which is reported at fair value.

***Corporate Debt Securities.*** At June 30, 2022, we had corporate debt securities totaling $6.8 million, which constituted 61.1% of our securities portfolio. All of our corporate debt securities are investment grade and have maturities not in excess of ten years. These securities generally provide slightly higher yields than U.S. government and agency securities and mortgage-backed securities.

***State and Political Subdivision (“Municipal”) Securities.*** At June 30, 2022, we had municipal securities totaling $1.1 million, which constituted 9.6% of our securities portfolio. These securities often provide slightly higher after-tax yields than U.S. government and agency securities and mortgage-backed securities, but are not as liquid as other investments, so we typically maintain investments in municipal securities, to the extent appropriate, for generating returns in our investment portfolio.

***Mortgage-Backed Securities***. At June 30, 2022, we had mortgage-backed securities totaling $3.3 million, which constituted 29.3% of our securities portfolio, including $1.2 million of agency collateralized mortgage obligations (CMOs). Of the $2.1 million of non-CMO mortgage-backed securities, $74,000 were commercial-backed and $2.0 million were residential mortgage-backed securities. Mortgage-backed securities are securities issued in the secondary market that are collateralized by pools of mortgages. Certain types of mortgage-backed securities are commonly referred to as “pass-through” certificates because the principal and interest of the underlying loans is “passed through” to investors, net of certain costs, including servicing and guarantee fees. Residential mortgage-backed securities typically are collateralized by pools of one- to four-family or multifamily mortgages, although we invest primarily in mortgage-backed securities backed by one- to four-family mortgages. Commercial mortgage-backed securities typically are collateralized by pools of commercial mortgage loans. The issuers of such securities pool and resell the participation interests in the form of securities to investors such as Marathon Bank. The interest rate of the security is lower than the interest rates of the underlying loans to allow for payment of servicing and guaranty fees. All of our mortgage-backed securities are either backed by Ginnie Mae, a U.S. government agency, the Small Business Administration or government-sponsored enterprises, such as Fannie Mae and Freddie Mac.

Residential and commercial mortgage-backed securities issued by U.S. government agencies and government-sponsored enterprises are more liquid than individual mortgage loans because there is an active trading market for such securities. In addition, residential and commercial mortgage-backed securities may be used to collateralize our borrowings. Investments in residential and commercial mortgage-backed securities involve a risk that actual payments will be greater or less than the prepayment rate estimated at the time of purchase, which may require adjustments to the amortization of any premium or accretion of any discount relating to such interests, thereby affecting the net yield on our securities. Current prepayment speeds determine whether prepayment estimates require modification that could cause amortization or accretion adjustments.

***Other Securities.*** We held common stock of the Federal Home Loan Bank of Chicago in connection with our borrowing activities totaling $323,000 and $262,000 at June 30, 2022 and 2021, respectively. The Federal Home Loan Bank of Chicago common stock is carried at cost. We may be required to purchase additional Federal Home Loan Bank of Chicago stock if we increase borrowings in the future.

***Portfolio Maturities and Yields.*** The composition and maturities of the debt securities held to maturity portfolio at June 30, 2022, are summarized in the following table. Maturities are based on the final contractual payment dates, and do not reflect the effect of scheduled principal repayments, prepayments, or early redemptions that may occur. All of our debt securities in this table at June 30, 2022, were taxable securities. Please refer to Note 3 to the financial statements for the composition and maturities of the debt securities available for sale portfolio at June 30, 2022.

*(Dollars in thousands)*

| ​ ​ ​ ​ ​ ​ ​ Debt securities held to maturity: | ​ ​ ​ ​ ​ ​ ​ | ​ ​ ​ ​ One Year or Less ​ Amortized Cost ​ ​ ​ | ​ ​ ​ ​ | ​ Weighted Average Yield ​ | ​ ​ ​ ​ ​ ​ | ​ ​ More than One Year through Five Years ​ ​ Amortized Cost ​ ​ | ​ ​ ​ ​ | ​ Weighted Average Yield ​ | ​ ​ ​ ​ ​ ​ | ​ ​ More than Five Years through Ten Years ​ ​ Amortized Cost ​ ​ | ​ ​ ​ ​ | ​ Weighted Average Yield ​ | ​ ​ ​ ​ ​ ​ | ​ ​ ​ ​ More than Ten Years ​ ​ ​ Amortized Cost ​ ​ | ​ ​ ​ ​ | ​ Weighted Average Yield ​ | ​ ​ ​ ​ ​ ​ | ​ ​ ​ ​ Total ​ ​ Amortized Cost ​ ​ | ​ ​ ​ ​ ​ | ​ ​ ​ ​ ​ ​ Fair Value ​ ​ | ​ ​ ​ ​ ​ | ​ ​ ​ ​ ​ Weighted ​ Average ​ Yield ​ ​ ​ ​ |
| --- | --- | ---: | --- | ---: | --- | ---: | --- | ---: | --- | ---: | --- | ---: | --- | ---: | --- | ---: | --- | ---: | --- | ---: | --- | ---: |
| Mortgage-backed securities | ​ | $— | ​ | — | ​ | $442 | ​ | 2.84% | ​ | $— | ​ | — | ​ | $90 | ​ | 3.28% | ​ | $532 | ​ | $419 | ​ | 2.91% |
| Total | ​ | $— | ​ | — | ​ | $442 | ​ | 2.84% | ​ | $— | ​ | — | ​ | $90 | ​ | 3.28% | ​ | $532 | ​ | $419 | ​ | 2.91% |

### Sources of Funds

***General.*** Deposits have traditionally been our primary source of funds for use in lending and investment activities. We also use borrowings to supplement cash flow needs, lengthen the maturities of liabilities for interest rate risk purposes and to manage the cost of funds, and have increased our use of borrowings in recent periods. In addition, we receive funds from scheduled loan payments, investment maturities, loan prepayments, retained earnings and income on earning assets. While scheduled loan payments and income on earning assets are relatively stable sources of funds, deposit inflows and outflows can vary widely and are influenced by prevailing interest rates, market conditions and levels of competition.

***Deposits.*** Our deposits are generated primarily from residents within our primary market area. We offer a selection of deposit accounts, including non-interest-bearing checking accounts, interest-bearing checking accounts, money market accounts, savings accounts and certificates of deposit. Deposit account terms vary, with the principal differences being the minimum balance required, the amount of time the funds must remain on deposit and the interest rate. At June 30, 2022, we had $19.8 million in brokered deposits. At June 30, 2022, our core deposits, which are deposits other than certificates of deposit, were $128.1 million, representing 68.1% of total deposits.

Interest rates, maturity terms, service fees and withdrawal penalties are established on a periodic basis. Deposit rates and terms are based primarily on current operating strategies and market rates, liquidity requirements, rates paid by competitors and growth goals. The flow of deposits is influenced significantly by general economic conditions, changes in interest rates and competition. The variety of deposit accounts that we offer allows us to be competitive in generating deposits and to respond with flexibility to changes in our customers’ demands. Our ability to gather deposits is impacted by the competitive market in which we operate, which includes numerous financial institutions of varying sizes offering a wide range of products. We believe that deposits are a stable source of funds, but our ability to attract and maintain deposits at favorable rates will be affected by market conditions, including competition and prevailing interest rates.

The following table sets forth the distribution of total deposits by account type at the dates indicated.

*(Dollars in thousands)*

| ​ ​ ​ ​ ​ | ​ ​ ​ ​ | ​ ​ At June 30, 2022 Amount | ​ | ​ Percent | ​ ​ | ​ ​ 2021 Amount | ​ | ​ Percent | ​ ​ ​ ​ ​ |
| --- | --- | --- | --- | ---: | --- | --- | --- | ---: | --- |
| Non-interest-bearing demand accounts | ​ | $23,698 | ​ | 12.60% | ​ | $23,633 | ​ | 13.74% | ​ |
| Demand, NOW and money market accounts | ​ | ​ 57,797 | ​ | 30.73% | ​ | ​ 44,400 | ​ | 25.82% | ​ |
| Savings deposits | ​ | ​ 46,602 | ​ | 24.78% | ​ | ​ 44,689 | ​ | 25.99% | ​ |
| Certificates of deposit | ​ | ​ 60,003 | ​ | 31.90% | ​ | ​ 59,234 | ​ | 34.45% | ​ |
| Total | ​ | $188,100 | ​ | 100.00% | ​ | $171,956 | ​ | 100.00% | ​ |

As of June 30, 2022, the aggregate amount of uninsured deposits (deposits in amounts greater than or equal to $250,000, which is the maximum amount for federal deposit insurance) was $46.7 million, of which $3.4 million was the aggregate amount of our uninsured certificates of deposit. As of June 30, 2021, the aggregate amount of uninsured deposits was $36.3 million, of which $4.6 million was the aggregate amount of our uninsured certificates of deposit. The following table sets forth the maturity of these certificates as of June 30, 2022.

*(In thousands)*

| ​ ​ ​ Maturity Period: | ​ ​ ​ | ​ ​ June 30, 2022 ​ ​ |
| --- | --- | --- |
| Three months or less | ​ | $350 |
| Over three months through six months | ​ | ​ — |
| Over six months through twelve months | ​ | ​ 1,633 |
| Over twelve months | ​ | ​ 1,444 |
| Total | ​ | $3,427 |

***Borrowings.*** As of June 30, 2022, we had a master contract agreement with the Federal Home Loan Bank of Chicago pursuant to which we could borrow up to $77.4 million subject to providing additional collateral. At June 30, 2022 and 2021, we had no Federal Home Loan Bank of Chicago advances.

As of June 30, 2022, we had no borrowings from the Federal Reserve Bank of Chicago under the Federal Reserve PPP Liquidity Facility authorized under section 13(3) of the Federal Reserve Act, which was intended to facilitate lending by banks to small businesses under the PPP while maintaining strong liquidity to meet cash flow needs. As of June 30, 2021, we had $10.4 million of these borrowings. These borrowings were secured by our PPP loans totaling $10.4 million at June 30, 2021. These borrowings had a fixed interest rate of 0.35% and a maturity date equal to the maturity date of the related PPP loans.

### Personnel and Human Capital Resources

As of June 30, 2022, we had 35 full-time equivalent employees. Our employees are not represented by any collective bargaining group. Management believes that we have good working relations with our employees. We believe our ability to attract and retain employees is a key to our success. Accordingly, we strive to offer competitive salaries and employee benefits to all employees and monitor salaries in our market areas. In addition, we are committed to developing our staff through continuing education and specialty education within banking, which may include using universities that offer banking management programs, when applicable.

### TAXATION

Marathon Bank, Marathon MHC and Marathon Bancorp are subject to federal and state income taxation in the same general manner as other corporations, with some exceptions discussed below. The following discussion of federal and state taxation is intended only to summarize material income tax matters and is not a comprehensive description of the tax rules applicable to Marathon MHC, Marathon Bancorp and Marathon Bank.

Our federal and state tax returns have not been audited for the past five years.

### Federal Taxation

***Method of Accounting.*** For federal income tax purposes, Marathon Bank currently reports its income and expenses on the accrual method of accounting and uses a tax year ending June 30 for filing its federal income tax returns. Marathon Bancorp and Marathon Bank intend to file a consolidated federal income tax return beginning with the taxable year ended June 30, 2022. The Small Business Protection Act of 1996 eliminated the use of the mutual savings bank bad debt reserve method of calculating the tax return bad debt deduction. For taxable years beginning after 1995, Marathon Bank has been subject to the same bad debt reserve rules as commercial banks. It currently utilizes the specific charge-off method under Section 582(a) of the Internal Revenue Code.

***Net Operating Loss Carryovers.*** For losses originated in taxable years beginning before 2018, a financial institution may generally carry back federal net operating losses to the preceding two taxable years and forward to the succeeding 20 taxable years. At June 30, 2022, the Company had approximately $1.1 million of federal net operating loss carryforwards.

***Capital Loss Carryovers.*** A corporation cannot recognize capital losses in excess of capital gains generated. Generally, a financial institution may carry back capital losses to the preceding three taxable years and forward to the succeeding five taxable years. Any capital loss carryback or carryover is treated as a short-term capital loss for the year to which it is carried. As such, it is grouped with any other capital losses for the year to which it is carried and is used to offset any capital gains. Any unutilized loss carryforward remaining after the five-year carryover period is not deductible. At June 30, 2022, the Company had no capital loss carryovers.

***Corporate Dividends.*** Marathon Bancorp may generally exclude from its income 100% of dividends received from Marathon Bank as a member of the same affiliated group of corporations.

### State Taxation

As a Maryland business corporation, Marathon Bancorp is required to file an annual report with and pay franchise taxes to the state of Maryland.

Marathon MHC, Marathon Bancorp and Marathon Bank are subject to the Wisconsin corporate franchise (income) tax. The State of Wisconsin imposes a corporate franchise tax of 7.9% on the combined taxable income of the members of a consolidated income tax group.

In general, Wisconsin net business losses may be carried forward to the succeeding 20 taxable years. At June 30, 2022, the Company had no Wisconsin net operating loss carryforwards.

### REGULATION AND SUPERVISION

### General

As a state savings bank, Marathon Bank is subject to examination, supervision and regulation, primarily by the WDFI and by the FDIC. The state and federal systems of regulation and supervision establish a comprehensive framework of activities in which Marathon Bank may engage and is intended primarily for the protection of depositors and the FDIC’s Deposit Insurance Fund, and not for the protection of security holders.

Marathon Bank is also regulated to a lesser extent by the Federal Reserve Board. In addition, Marathon Bank is a member of and owns stock in the Federal Home Loan Bank of Chicago, which is one of the 11 regional banks in the Federal Home Loan Bank System.

As bank holding companies, Marathon Bancorp, Inc. and Marathon MHC are subject to examination and supervision by, and be required to file certain reports with, the Federal Reserve Board. Marathon Bancorp, Inc. is subject to the rules and regulations of the Securities and Exchange Commission under the federal securities laws, and certain state securities laws.

Set forth below are certain material regulatory requirements that are applicable to Marathon Bank and Marathon Bancorp, Inc. This description of statutes and regulations is not intended to be a complete description of such statutes and regulations and their effects on Marathon Bank and Marathon Bancorp, Inc. Any change in these laws or regulations, whether by Congress or the applicable regulatory agencies, could have a material adverse impact on Marathon Bancorp, Inc., Marathon Bank and their operations.

### Intrastate and Interstate Merger and Branching Activities

***Wisconsin Law and Regulation***. Any Wisconsin savings bank meeting certain requirements may, upon approval of the WDFI, establish one or more branch offices in the state of Wisconsin and the states of Illinois, Indiana, Iowa, Kentucky, Michigan, Minnesota, Missouri, and Ohio. In addition, upon WDFI approval, a Wisconsin savings bank may establish a branch office in any other state as the result of a merger or consolidation.

***Federal Law and Regulation***. The Interstate Banking Act permits the federal banking agencies to, under certain circumstances, approve merger transactions between banks located in different states, regardless of whether the merger would be prohibited under state law. The Interstate Banking Act, as amended, authorizes de novo branching into another state at locations at which banks chartered by the host state could establish a branch. Mergers and the establishment of branches require the prior approval of the FDIC.

### Loans and Investments

***Wisconsin Law and Regulation.*** Under Wisconsin law and regulation, Marathon Bank is authorized to make, invest in, sell, purchase, participate or otherwise deal in mortgage loans or interests in mortgage loans without geographic restriction, including loans made on the security of residential and commercial property. Wisconsin savings banks also may lend funds on a secured or unsecured basis for business, commercial or agricultural purposes, provided the total of all such loans does not exceed 20% of the savings bank’s total assets, unless the WDFI authorizes a greater amount. Loans are subject to certain other limitations, including percentage restrictions based on total assets.

Wisconsin savings banks may invest funds in certain types of debt and equity securities, including obligations of federal, state and local governments and agencies. Subject to prior approval of the WDFI, compliance with capital requirements and certain other restrictions, Wisconsin savings banks may invest in residential housing development projects. Wisconsin savings banks may also invest in service corporations or subsidiaries with the prior approval of the WDFI, subject to certain restrictions.

Wisconsin savings banks may make loans and extensions of credit, both direct and indirect, to one borrower in amounts up to 20% of the savings bank’s capital plus an additional 5% for loans fully secured by readily marketable collateral. In addition, and notwithstanding the 20% of capital and additional 5% of capital limitations set forth above, Wisconsin savings banks may make loans to one borrower, or a related group of borrowers, for any purpose in an amount not to exceed $500,000, or to develop domestic residential housing units in an amount not to exceed the lesser of $30 million or 30% of the savings bank’s capital, subject to certain conditions. At June 30, 2022, Marathon Bank did not have any loans which exceeded the “loans-to-one borrower” limitations.

***Federal Law and Regulation***. FDIC regulations also govern the equity investments of Marathon Bank and, notwithstanding Wisconsin law and regulations, such regulations prohibit Marathon Bank from making certain equity investments and generally limit Marathon Bank’s equity investments to those that are permissible for national banks and their subsidiaries. Also, under FDIC regulations, Marathon Bank must obtain prior FDIC approval before directly, or indirectly through a majority-owned subsidiary, engaging “as principal” in any activity that is not permissible for a national bank unless certain exceptions apply. The activity regulations provide that state banks that meet applicable minimum capital requirements and other specified criteria would be permitted to engage in certain activities that are not permissible for national banks, including certain real estate and securities activities conducted through subsidiaries. The FDIC will not approve an activity that it determines presents a significant risk to the FDIC insurance fund. The current activities of Marathon Bank and its subsidiaries are permissible under applicable federal regulations.

### Lending Standards

***Wisconsin Law and Regulation.*** Wisconsin law and regulations issued by the WDFI impose on Wisconsin savings banks certain fairness in lending requirements and prohibit savings banks from discriminating against a loan applicant based upon the applicant’s physical condition, developmental disability, sex, marital status, race, color, creed, national origin, religion or ancestry.

***Federal Law and Regulation***. The federal banking agencies have adopted uniform regulations prescribing standards for extensions of credit that are secured by liens on interests in real estate or made for the purpose of financing the construction of a building or other improvements to real estate. Under the joint regulations adopted by the federal banking agencies, all insured depository institutions, such as Marathon Bank, must adopt and maintain written policies that establish appropriate limits and standards for extensions of credit that are secured by liens or interests in real estate or are made for the purpose of financing permanent improvements to real estate. These policies must establish loan portfolio diversification standards, prudent underwriting standards (including loan-to-value limits) that are clear and measurable, loan administration procedures, and loan documentation, approval and reporting requirements. The real estate lending policies must reflect consideration of the Interagency Guidelines for Real Estate Lending Policies (the “Interagency Guidelines”) that have been adopted by the federal bank regulators.

The Interagency Guidelines, among other things, require a depository institution to establish internal loan-to-value limits for real estate loans that are not in excess of the following supervisory limits:

- for loans secured by raw land, 65% of the value of the collateral;
- for land development loans (i.e., loans for the purpose of improving unimproved property prior to the erection of structures), the supervisory loan-to-value limit is 75%;
- for loans for the construction of commercial, over four-family or other non-residential property, the supervisory limit is 80%;
- for loans for the construction of one- to four-family properties, the supervisory limit is 85%; and
- for loans secured by other improved property (e.g., farmland, completed commercial property and other income-producing property, including non-owner occupied, one- to four-family property), the supervisory limit is 85%.

Although no supervisory loan-to-value limit has been established for permanent mortgages on owner-occupied, one- to four-family or home equity loans, the Interagency Guidelines state that for any such loan with a loan-to-value ratio that equals or exceeds 90% at origination, an institution should require appropriate credit enhancement in the form of either mortgage insurance or readily marketable collateral.

### Deposits

***Wisconsin Law and Regulation.*** Under Wisconsin law, Marathon Bank is permitted to establish deposit accounts and accept deposits. Marathon Bank’s board of directors, or its designee, determines the rate and amount of interest to be paid on or credited to deposit accounts subject to FDIC limitations.

### Deposit Insurance

***Wisconsin Law and Regulation.*** Under Wisconsin law, Marathon Bank is required to obtain and maintain insurance on its deposits from a deposit insurance corporation. The deposits of Marathon Bank are insured up to the applicable limits by the FDIC.

***Federal Law and Regulation.*** Marathon Bank is a member of the Deposit Insurance Fund, which is administered by the FDIC. Marathon Bank’s deposit accounts are insured by the FDIC, generally up to a maximum of $250,000 per depositor.

The FDIC imposes deposit insurance assessments against all insured depository institutions. An institution’s assessment rate depends upon the perceived risk of the institution to the Deposit Insurance Fund, with institutions deemed less risky paying lower rates. Currently, assessments for institutions of less than $10 billion of total assets are based on financial measures and supervisory ratings derived from statistical models estimating the probability of failure within three years. Assessment rates (inclusive of possible adjustments) currently range from 1.5 to 30 basis points of each institution’s total assets less tangible capital. The FDIC may increase or decrease the range of assessments uniformly, except that no adjustment can deviate more than two basis points from the base assessment rate without notice and comment rulemaking.

The FDIC has the authority to increase insurance assessments. A significant increase in insurance premiums would have an adverse effect on the operating expenses and results of operations of Marathon Bank. We cannot predict what deposit insurance assessment rates will be in the future.

Insurance of deposits may be terminated by the FDIC upon a finding that an institution has engaged in unsafe or unsound practices, is in an unsafe or unsound condition to continue operations or has violated any applicable law, regulation, rule, order or condition imposed by the FDIC. We do not know of any practice, condition or violation that might lead to termination of deposit insurance at Marathon Bank.

### Capital Requirements

***Wisconsin Law and Regulation***. Wisconsin savings banks are required to maintain a minimum net worth ratio of 6% and must maintain total capital necessary to ensure the continuation of insurance of deposit accounts by the FDIC. If the WDFI determines that the financial condition, history, management or earning prospects of a savings bank are not adequate, the WDFI may require a higher minimum capital level for the savings bank. If a Wisconsin savings bank’s capital ratio falls below the required level, the WDFI may direct the savings bank to adhere to a specific written plan established by the WDFI to correct the savings bank’s capital deficiency, as well as a number of other restrictions on the savings bank’s operations, including a prohibition on the payment of dividends. At June 30, 2022 and 2021, Marathon Bank’s net worth ratio, as calculated under Wisconsin law, was 13.15% and 13.12%, respectively.

***Federal Law and Regulation***. Federal regulations require FDIC insured depository institutions to meet several minimum capital standards: a common equity Tier 1 capital to risk-based assets ratio of 4.5%, a Tier 1 capital to risk-based assets ratio of 6.0%, a total capital to risk-based assets of 8.0%, and a 4.0% Tier 1 capital to total assets leverage ratio.

Common equity Tier 1 capital is generally defined as common stockholders’ equity and retained earnings. Tier 1 capital is generally defined as common equity Tier 1 and additional Tier 1 capital. Additional Tier 1 capital includes certain noncumulative perpetual preferred stock and related surplus and minority interests in equity accounts of consolidated subsidiaries. Total capital includes Tier 1 capital (common equity Tier 1 capital plus additional Tier 1 capital) and Tier 2 capital. Tier 2 capital is comprised of capital instruments and related surplus, meeting specified requirements, and may include cumulative preferred stock and long-term perpetual preferred stock, mandatory convertible securities, intermediate preferred stock and subordinated debt. Also included in Tier 2 capital is the allowance for loan and lease losses limited to a maximum of 1.25% of risk-weighted assets and, for institutions that have exercised an opt-out election regarding the treatment of Accumulated Other Comprehensive Income (“AOCI”), up to 45% of net unrealized gains on available-for-sale equity securities with readily determinable fair market values. Institutions that have not exercised the AOCI opt-out have AOCI incorporated into common equity Tier 1 capital (including unrealized gains and losses on available-for-sale-securities). Marathon Bank exercised its AOCI opt-out election. Calculation of all types of regulatory capital is subject to deductions and adjustments specified in the regulations.

In determining the amount of risk-weighted assets for purposes of calculating risk-based capital ratios, all assets, including certain off-balance sheet assets (e.g., recourse obligations, direct credit substitutes, residual interests) are multiplied by a risk weight factor assigned by the regulations based on the risks believed inherent in the type of asset. Higher levels of capital are required for asset categories believed to present greater risk. For example, a risk weight of 0% is assigned to cash and U.S. government securities, a risk weight of 50% is generally assigned to prudently underwritten first lien one- to four-family residential real estate loans, a risk weight of 100% is assigned to commercial and consumer loans, a risk weight of 150% is assigned to certain past due loans and a risk weight of between 0% to 600% is assigned to permissible equity interests, depending on certain specified factors.

In addition to establishing the minimum regulatory capital requirements, the regulations limit capital distributions and certain discretionary bonus payments to management if the institution does not hold a “capital conservation buffer” consisting of 2.5% of common equity Tier 1 capital to risk-weighted asset above the amount necessary to meet its minimum risk-based capital requirements.

In assessing an institution’s capital adequacy, the FDIC takes into consideration, not only these numeric factors, but qualitative factors as well, including the bank’s exposure to interest rate risk. The FDIC has the authority to establish higher capital requirements for individual institutions where deemed necessary due to a determination that an institution’s capital level is, or is likely to become, inadequate in light of particular circumstances. Marathon Bank exceeds all regulatory capital requirements and is deemed “well capitalized” for regulatory capital purposes as of June 30, 2022 and 2021.

The Economic Growth, Regulatory Relief and Consumer Protection Act, enacted in 2018, required the federal banking agencies, including the FDIC, to establish for institutions with assets of less than $10 billion a “community bank leverage ratio” of between 8 to 10% (Tier 1 capital to average total consolidated assets). Institutions with capital meeting or exceeding the ratio and otherwise complying with the specified requirements (including off-balance sheet exposures of 25% or less of total assets and trading assets and liabilities of 5% or less of total assets) and electing the alternative framework are considered to comply with the applicable regulatory capital requirements, including the risk-based requirements.

The community bank leverage ratio was established at 8.5% for calendar 2021 and 9% thereafter. A qualifying institution may opt in and out of the community bank leverage ratio framework on its quarterly call report. An institution that temporarily ceases to meet any qualifying criteria is provided with a two-quarter grace period to again achieve compliance provided that the institution’s leverage ratio falls no more than one percentage point below the applicable community bank leverage ratio requirement. Failure to meet the qualifying criteria within the grace period or maintain the required leverage ratio requires the institution to comply with the generally applicable capital requirements.

As of June 30, 2022, Marathon Bank elected to use the community bank leverage ratio.

### Safety and Soundness Standards

Each federal banking agency, including the FDIC, has adopted guidelines establishing general standards relating to internal controls, internal audit systems, loan documentation, credit underwriting, interest rate exposure, asset growth, asset quality, earnings and compensation, fees and benefits, and information security. In general, the guidelines require, among other things, appropriate systems and practices to identify and manage the risks and exposures specified in the guidelines. The guidelines prohibit excessive compensation as an unsafe and unsound practice and describe compensation as excessive when the amounts paid are unreasonable or disproportionate to the services performed by an executive officer, employee, director, or principal shareholder.

### Prompt Corrective Regulatory Action

Federal bank regulatory authorities are required to take “prompt corrective action” with respect to institutions that do not meet minimum capital requirements. For these purposes, the statute establishes five capital categories: well capitalized, adequately capitalized, undercapitalized, significantly undercapitalized, and critically undercapitalized.

Under the regulations, a bank is deemed to be (i) “well capitalized” if it has total risk-based capital of 10.0% or more, has a Tier 1 risk-based capital ratio of 8.0% or more, has a Tier 1 leverage capital ratio of 5.0% or more and a common equity Tier 1 ratio of 6.5% or more, and is not subject to any written capital order or directive; (ii) “adequately capitalized” if it has a total risk-based capital ratio of 8.0% or more, a Tier 1 risk-based capital ratio of 6.0% or more, a Tier 1 leveraged capital ratio of 4.0% or more and a common equity Tier 1 ratio of 4.5% or more, and does not meet the definition of “well capitalized”; (iii) “undercapitalized” if it has a total risk-based capital ratio that is less than 8.0%, a Tier 1 risk-based capital ratio that is less than 6.0%, a Tier 1 leverage capital ratio that is less than 4.0% or a common equity Tier 1 ratio of less than 4.5%; (iv) “significantly undercapitalized” if it has a total risk-based capital ratio that is less than 6.0% and a Tier 1 risk-based capital ratio that is less than 4.0% or a common equity Tier 1 ratio of less than 3.0%; and (v) “critically undercapitalized” if it has a ratio of tangible equity to total assets that is equal to or less than 2.0%.

The previously referenced final rule establishing an elective “community bank leverage ratio” regulatory capital framework provides that a qualifying institution whose capital meets or exceeds the community bank leverage ratio and opts to use that framework will be considered “well capitalized” for purposes of prompt corrective action.

Federal law and regulations also specify circumstances under which a federal banking agency may reclassify a well-capitalized institution as adequately capitalized and may require an institution classified as less than well capitalized to comply with supervisory actions as if it were in the next lower category (except that the FDIC may not reclassify a significantly undercapitalized institution as critically undercapitalized).

The FDIC may order savings banks that have insufficient capital to take corrective actions. For example, a savings bank that is categorized as “undercapitalized” is subject to growth limitations and is required to submit a capital restoration plan, and a holding company that controls such a savings bank is required to guarantee that the savings bank complies with the restoration plan. A “significantly undercapitalized” savings bank may be subject to additional restrictions. Savings banks deemed by the FDIC to be “critically undercapitalized” would be subject to the appointment of a receiver or conservator.

As noted above, Marathon Bank is considered “well capitalized” for regulatory capital purposes as of June 30, 2022 and 2021.

### Dividends

Under Wisconsin law and applicable regulations, a Wisconsin savings bank that meets its regulatory capital requirements may declare dividends on capital stock based upon net profits, provided that its paid-in surplus equals its capital stock. In addition, prior WDFI approval is required before dividends exceeding 50% of net profits for any calendar year may be declared and before a stock dividend may be declared out of retained earnings.

The FDIC has the authority to prohibit Marathon Bank from paying dividends if, in its opinion, the payment of dividends would constitute an unsafe or unsound practice in light of the financial condition of Marathon Bank. Institutions may not pay dividends if they would be “undercapitalized” following payment of the dividend within the meaning of the prompt corrective action regulations.

### Liquidity and Reserves

***Wisconsin Law and Regulation.*** Under WDFI regulations, all Wisconsin savings banks are required to maintain a certain amount of their assets as liquid assets, consisting of cash and certain types of investments. The exact amount of assets a savings bank is required to maintain as liquid assets is set by the WDFI, but generally ranges from 4% to 15% of the savings bank’s average daily balance of net withdrawable accounts plus short-term borrowings (the “Required Liquidity Ratio”). At June 30, 2022, Marathon Bank’s Required Liquidity Ratio was 8%, and Marathon Bank was in compliance with this requirement. In addition, 50% of the liquid assets maintained by a Wisconsin savings bank must consist of “primary liquid assets,” which are defined to include securities issued by the U.S. Government, U.S. Government agencies or the state of Wisconsin or a subdivision thereof, and cash. At June 30, 2022, Marathon Bank was in compliance with this requirement.

***Federal Law and Regulation***. The Federal Reserve Board currently has no reserve requirement for Marathon Bank.

### Transactions with Affiliates and Insiders

***Wisconsin Law and Regulation***. Under Wisconsin law, a savings bank may not make a loan to a person owning 10% or more of its stock, an affiliated person (including a director, officer, the spouse of either and a member of the immediate family of such person who is living in the same residence), agent, or attorney of the savings bank, either individually or as an agent or partner of another, except as provided under the rules of the WDFI and regulations of the FDIC. In addition, unless the prior approval of the WDFI is obtained, a savings bank may not purchase, lease or acquire a site for an office building or an interest in real estate from an affiliated person, including a stockholder owning more than 10% of its capital stock, or from any firm, corporation, entity or family in which an affiliated person or 10% stockholder has a direct or indirect interest.

***Federal Law and Regulation.*** Sections 23A and 23B of the Federal Reserve Act govern transactions between an insured savings bank, such as Marathon Bank, and any of its affiliates, including Marathon Bancorp, Inc. The Federal Reserve Board has adopted Regulation W, which comprehensively implements and interprets Sections 23A and 23B, in part by codifying prior Federal Reserve Board interpretations under Sections 23A and 23B.

An affiliate of a savings bank is any company or entity that controls, is controlled by or is under common control with the savings bank. A subsidiary of a savings bank that is not also a depository institution or a “financial subsidiary” under federal law is not treated as an affiliate of the savings bank for the purposes of Sections 23A and 23B; however, the FDIC has the discretion to treat subsidiaries of a savings bank as affiliates on a case-by-case basis. Sections 23A and 23B limit the extent to which a savings bank or its subsidiaries may engage in “covered transactions” with any one affiliate to an amount equal to 10% of the savings bank’s capital stock and surplus, and limit all such transactions with all affiliates to an amount equal to 20% of such capital stock and surplus. The term “covered transaction” includes the making of loans, purchase of assets, issuance of guarantees and other similar types of transactions. Most loans and other extensions of credit by a savings bank to any of its affiliates must be secured by collateral in amounts ranging from 100% to 130% of the loan amounts, depending on the type of collateral. In addition, any affiliate transactions by a savings bank must be on terms that are substantially the same, or at least as favorable, to the savings bank as those that would be provided to a non-affiliate, and be consistent with safe and sound banking practices.

A savings bank’s loans to its executive officers, directors, any owner of more than 10% of its stock (each, an insider) and any of certain entities affiliated with any such person (an insider’s related interest) are subject to the conditions and limitations imposed by Section 22(h) of the Federal Reserve Act and the Federal Reserve Board’s Regulation O thereunder. Under these restrictions, the aggregate amount of the loans to any insider and the insider’s related interests may not exceed the loans-to-one-borrower limit applicable to national banks (which is generally 15% of capital and surplus). Aggregate loans by a savings bank to its insiders and insiders’ related interests in the aggregate may not exceed the savings bank’s unimpaired capital and unimpaired surplus. With certain exceptions, loans to an executive officer, other than loans for the education of the officer’s children and certain loans secured by the officer’s primary residence, may not exceed the greater of $25,000 or 2.5% of the savings bank’s unimpaired capital and unimpaired surplus, but in no event more than $100,000. Regulation O also requires that any proposed loan to an insider or a related interest of that insider be approved in advance by a majority of the board of directors of the savings bank, with any interested director not participating in the voting, if such loan, when aggregated with any existing loans to that insider and the insider’s related interests, would exceed either $500,000 or the greater of $25,000 or 5% of the savings bank’s unimpaired capital and surplus. Generally, such loans must be made on substantially the same terms as, and follow credit underwriting procedures that are no less stringent than, those that are prevailing at the time for comparable transactions with other persons and must not present more than a normal risk of collectability.

### Anti-tying Restrictions

Wisconsin savings banks, such as Marathon Bank, are subject to the prohibitions on certain tying arrangements. Subject to certain exceptions, a savings bank is prohibited from extending credit to or offering any other service to a customer, or fixing or varying the consideration for such extension of credit or service, on the condition that such customer obtain some additional service from the institution or certain of its affiliates or not obtain services of a competitor of the institution.

### Examinations and Assessments

Marathon Bank is required to file periodic reports with and is subject to periodic examinations by the WDFI and the FDIC. Federal regulations require annual on-site examinations for all depository institutions except certain well-capitalized and highly rated institutions with assets of less than $3 billion, which are examined every 18 months. Marathon Bank is required to pay examination fees and annual assessments to fund its supervision.

### Customer Privacy

Under Wisconsin and federal law and regulations, savings banks, such as Marathon Bank, are required to develop and maintain privacy policies relating to information on its customers, restrict access to and establish procedures to protect customer data. Applicable privacy regulations further restrict the sharing of non-public customer data with non-affiliated parties if the customer requests.

### Community Reinvestment Act

Under the Community Reinvestment Act, Marathon Bank has a continuing and affirmative obligation consistent with its safe and sound operation to help meet the credit needs of its entire community, including low- and moderate-income neighborhoods. The Community Reinvestment Act does not establish specific lending requirements or programs for financial institutions nor does it limit an institution’s discretion to develop the types of products and services that it believes are best suited to its particular community, consistent with the Community Reinvestment Act. The Community Reinvestment Act requires the FDIC, in connection with its examination of Marathon Bank, to assess Marathon Bank’s record of meeting the credit needs of its community and to take that record into account in the FDIC’s evaluation of certain applications by Marathon Bank. For example, the regulations specify that a bank’s Community

Reinvestment Act performance will be considered in its expansion (e.g., branching or merger) proposals and may be the basis for approving, denying or conditioning the approval of an application. As of the date of its most recent regulatory examination, Marathon Bank was rated “satisfactory” with respect to its Community Reinvestment Act compliance.

On May 5, 2022, the FDIC, Federal Reserve Board and Office of the Comptroller of the Currency released a notice of proposed rulemaking to “strengthen and modernize” the CRA regulations and framework.

### Federal Home Loan Bank System

The Federal Home Loan Bank System, consisting of 11 Federal Home Loan Banks, is under the jurisdiction of the Federal Housing Finance Board. The designated duties of the Federal Housing Finance Board are to supervise the Federal Home Loan Banks; ensure that the Federal Home Loan Banks carry out their housing finance mission; ensure that the Federal Home Loan Banks remain adequately capitalized and able to raise funds in the capital markets; and ensure that the Federal Home Loan Banks operate in a safe and sound manner.

Marathon Bank, as a member of the Federal Home Loan Bank of Chicago, is required to acquire and hold shares of capital stock in the Federal Home Loan Bank of Chicago in specified amounts. Marathon Bank is in compliance with this requirement with an investment in Federal Home Loan Bank of Chicago stock of $323,000 at June 30, 2022.

Among other benefits, the Federal Home Loan Banks provide a central credit facility primarily for member institutions. It is funded primarily from proceeds derived from the sale of consolidated obligations of the Federal Home Loan Bank System. It makes advances to members in accordance with policies and procedures established by the Federal Housing Finance Board and the board of directors of the Federal Home Loan Bank of Chicago. At June 30, 2022, Marathon Bank had no advances from the Federal Home Loan Bank of Chicago.

### Other Regulations

Interest and other charges collected or contracted for by Marathon Bank are subject to state usury laws and federal laws concerning interest rates. Marathon Bank’s operations are also subject to federal laws applicable to credit transactions, such as the:

- Truth-In-Lending Act, governing disclosures of credit terms to consumer borrowers;
- Home Mortgage Disclosure Act, requiring financial institutions to provide information to enable the public and public officials to determine whether a financial institution is fulfilling its obligation to help meet the housing needs of the community it serves;
- Equal Credit Opportunity Act, prohibiting discrimination on the basis of race, creed or other prohibited factors in extending credit;
- Fair Credit Reporting Act, governing the use and provision of information to credit reporting agencies;
- Fair Debt Collection Act, governing the manner in which consumer debts may be collected by collection agencies;
- Truth in Savings Act; and
- rules and regulations of the various federal agencies charged with the responsibility of implementing such federal laws.

The operations of Marathon Bank also are subject to the:

- Right to Financial Privacy Act, which imposes a duty to maintain confidentiality of consumer financial records and prescribes procedures for complying with administrative subpoenas of financial records;
- Electronic Funds Transfer Act and Regulation E promulgated thereunder, which govern automatic deposits to and withdrawals from deposit accounts and customers’ rights and liabilities arising from the use of automated teller machines and other electronic banking services;
- Check Clearing for the 21st Century Act (also known as “Check 21”), which gives “substitute checks,” such as digital check images and copies made from that image, the same legal standing as the original paper check; and
- The USA PATRIOT Act, which requires depository institutions to, among other things, establish broadened anti-money laundering compliance programs, and due diligence policies and controls to ensure the detection and reporting of money laundering. Such required compliance programs are intended to supplement existing compliance requirements that also apply to financial institutions under the Bank Secrecy Act and the Office of Foreign Assets Control regulations.

### Holding Company Regulation

***General.*** Marathon Bancorp, Inc. and Marathon MHC are bank holding companies within the meaning of the Bank Holding Company of 1956. As such, Marathon Bancorp, Inc. and Marathon MHC are registered with the Federal Reserve Board and subject to the regulation, examination, supervision and reporting requirements applicable to bank holding companies. In addition, the Federal Reserve Board has enforcement authority over Marathon Bancorp, Inc., Marathon MHC and its non-savings institution subsidiaries. Among other things, this authority permits the Federal Reserve Board to restrict or prohibit activities that are determined to be a serious risk to the subsidiary savings institution. Acquisitions of additional banks or savings institutions generally require the prior approval of the Federal Reserve Board.

***Permissible Activities.*** A bank holding company is generally prohibited from engaging in non-banking activities, or acquiring direct or indirect control of more than 5% of the voting securities of any company engaged in non-banking activities. One of the principal exceptions to this prohibition is for activities found by the Federal Reserve Board to be so closely related to banking or managing or controlling banks as to be a proper incident thereto. Some of the principal activities that the Federal Reserve Board has determined by regulation to be so closely related to banking are: (i) making or servicing loans; (ii) performing certain data processing services; (iii) providing discount brokerage services; (iv) acting as fiduciary, investment or financial advisor; (v) leasing personal or real property; (vi) making investments in corporations or projects designed primarily to promote community welfare; and (vii) acquiring a savings and loan association whose direct and indirect activities are limited to those permitted for bank holding companies.

The Gramm-Leach-Bliley Act of 1999 authorized a bank holding company that meets specified conditions, including being “well capitalized” and “well managed,” to opt to become a “financial holding company” and thereby engage in a broader array of financial activities than previously permitted. Such activities can include insurance underwriting and investment banking. Marathon Bancorp, Inc. and Marathon MHC did not elect “financial holding company” status.

***Capital.*** Consolidated regulatory capital requirements identical to those applicable to subsidiary banks generally apply to bank holding companies. However, the Federal Reserve Board has provided a “Small Bank Holding Company” exception to its consolidated capital requirements, and bank holding companies with less than $3.0 billion of consolidated assets are not subject to the consolidated holding company capital requirements unless otherwise directed by the Federal Reserve Board. As a result, the Federal Reserve Board’s consolidated holding company regulatory capital requirements do not presently apply to Marathon Bancorp, Inc. or Marathon MHC.

***Source of Strength.*** The Federal Reserve Board has issued regulations requiring that all bank holding companies serve as a source of strength to their subsidiary depository institutions by providing financial, managerial and other support in times of an institution’s distress.

***Dividends and Stock Repurchases.*** The Federal Reserve Board has issued a policy statement regarding the payment of dividends by holding companies. In general, the policy provides that dividends should be paid only out of current earnings and only if the prospective rate of earnings retention by the holding company appears consistent with the organization’s capital needs, asset quality and overall supervisory financial condition. Separate regulatory guidance provides for prior consultation with Federal Reserve Bank staff concerning dividends in certain circumstances such as when the company’s net income for the past four quarters, net of dividends previously paid over that period, is insufficient to fully fund the dividend, the proposed dividend is not covered by earnings for the period for which it is being paid or the company’s overall rate or earnings retention is inconsistent with the company’s capital needs and overall financial condition. The ability of a bank holding company to pay dividends may be restricted if a subsidiary savings bank becomes undercapitalized.

The Federal Reserve Board regulatory guidance also states that a bank holding company should consult with Federal Reserve Bank supervisory staff prior to redeeming or repurchasing common stock or perpetual preferred stock if the bank holding company is experiencing financial weaknesses or the repurchase or redemption would result in a net reduction, at the end of a quarter, in the amount of such equity instruments outstanding compared with the beginning of the quarter in which the redemption or repurchase occurred.

There is a separate requirement that a bank holding company give the Federal Reserve Board prior written notice of any purchase or redemption of then outstanding equity securities if the gross consideration for the purchase or redemption, when combined with the net consideration paid for all such purchases or redemptions during the preceding 12 months, is equal to 10% or more of the company’s consolidated net worth. The Federal Reserve Board may disapprove such a purchase or redemption if it determines that the proposal would constitute an unsafe and unsound practice, or would violate any law, regulation, Federal Reserve Board order or directive, or any condition imposed by, or written agreement with, the Federal Reserve Board. There is an exception to this approval requirement for well-capitalized bank holding companies that meet certain other conditions.

These regulatory policies may affect the ability of Marathon Bancorp, Inc. to pay dividends, repurchase shares of common stock or otherwise engage in capital distributions.

***Waivers of Dividends by Marathon MHC***. Marathon Bancorp, Inc. may pay dividends on its common stock to public stockholders. If it does, it is also required to pay the same dividends per share to Marathon MHC, unless Marathon MHC elects to waive the receipt of dividends. Marathon MHC must receive the prior approval of the Federal Reserve Board and WDFI before it may waive the receipt of any dividends from Marathon Bancorp, Inc. However, current Federal Reserve Board policy prohibits a mutual holding company that is regulated as a bank holding company, such as Marathon MHC, from waiving the receipt of dividends paid by its subsidiary holding company.

Therefore, unless Federal Reserve Board policy changes by allowing Marathon MHC to waive the receipt of dividends declared by Marathon Bancorp, Inc. without diluting minority stockholders, it is unlikely that Marathon Bancorp, Inc. will pay any dividends.

***Possible Conversion of Marathon MHC to Stock Form.*** In the future, Marathon MHC may convert from the mutual to capital stock form of ownership, in a transaction commonly referred to as a “second-step conversion.” Any second-step conversion of Marathon MHC would require the approval of the WDFI and the Federal Reserve Board.

### Acquisition of Bank Holding Company

Under the Change in Bank Control Act, no person (including a company), or group of persons acting in concert, may acquire control of a bank holding company unless the Federal Reserve Board has been given 60 days’ prior written notice and not disapproved the proposed acquisition. The Federal Reserve Board considers several factors in evaluating a notice, including the financial and managerial resources of the acquirer and competitive effects. Control, as defined under the Change in Bank Control Act and applicable regulations, means the power, directly or indirectly, to direct the management or policies of the company or to vote 25% or more of any class of voting securities of the company. Acquisition of more than 10% of any class of a bank holding company’s voting securities constitutes a rebuttable presumption of control under certain circumstances, including where, as is the case with Marathon Bancorp, Inc., the issuer has registered securities under Section 12 of the Securities Exchange Act of 1934.

In addition, federal regulations separately provide that no company may acquire control (as defined in the Bank Holding Company Act) of a bank holding company without the prior approval of the Federal Reserve Board. Control, as defined under the Bank Holding Company Act and Federal Reserve Board regulations, means ownership, control or power to vote 25% or more of any class of voting stock, control in any manner over the election of a majority of the company’s directors, or a determination by the regulator that the acquiror has the power to exercise, directly or indirectly, a controlling influence over the management or policies of the company. Any company that acquires such control becomes a “bank holding company” subject to registration, examination and regulation by the Federal Reserve Board. In March 2020, the Federal Reserve Board adopted a final rule, effective September 30, 2020, that revises its framework for determining whether a company has a “controlling influence” over a bank holding company for that purpose.

### Federal Securities Laws

Marathon Bancorp, Inc.’s common stock is registered with the Securities and Exchange Commission under the Securities Exchange Act of 1934. Marathon Bancorp, Inc. is subject to the information, proxy solicitation, insider trading restrictions and other requirements under the Securities Exchange Act of 1934.

### Emerging Growth Company Status

The JOBS Act, which was enacted in 2012, has made numerous changes to the federal securities laws to facilitate access to capital markets. Under the JOBS Act, a company with total annual gross revenues of less than $1.07 billion during its most recently completed fiscal year qualifies as an “emerging growth company.” Marathon Bancorp, Inc. qualifies as an emerging growth company under the JOBS Act.

An “emerging growth company” may choose not to hold stockholder votes to approve annual executive compensation (more frequently referred to as “say-on-pay” votes) or executive compensation payable in connection with a merger (more frequently referred to as “say-on-golden parachute” votes). An emerging growth company also is not subject to the requirement that its auditors attest to the effectiveness of the company’s internal control over financial reporting, and can provide scaled disclosure regarding executive compensation; however, Marathon Bancorp, Inc. will also not be subject to the auditor attestation requirement or additional executive compensation disclosure so long as it remains a “non-accelerated filer” and a “smaller reporting company,” respectively, under Securities and Exchange Commission regulations (generally less than $75 million and $250 million, respectively, of voting and non-voting equity held by non-affiliates or less than $100 million in annual revenue and less than $700 million in public float). Finally, an emerging growth company may elect to comply with new or amended accounting pronouncements in the same manner as a private company, but must make such election when the company is first required to file a registration statement. Marathon Bancorp, Inc. has elected to comply with new or amended accounting pronouncements in the same manner as a private company.

A company loses emerging growth company status on the earlier of: (i) the last day of the fiscal year of the company during which it had total annual gross revenues of $1.07 billion or more; (ii) the last day of the fiscal year of the issuer following the fifth anniversary of the date of the first sale of common equity securities of the company pursuant to an effective registration statement under the Securities Act of 1933; (iii) the date on which such company has, during the previous three-year period, issued more than $1.0 billion in non-convertible debt; or (iv) the date on which such company is deemed to be a “large accelerated filer” under Securities and Exchange Commission regulations (generally, at least $700 million of voting and non-voting equity held by non-affiliates).

## Properties

As filed, 1,025 characters.

As of June 30, 2022, the net book value of our office properties was $1.7 million. The following table sets forth information regarding our offices.

*(In thousands)*

| ​ ​ Location ​ Main Office: ​ | ​ ​ ​ ​ ​ | ​ Leased or Owned ​ ​ ​ | ​ ​ ​ ​ ​ | ​ Year Acquired or Leased ​ ​ ​ | ​ ​ ​ ​ ​ | ​ ​ Net Book Value of Real Property ​ ​ ​ ​ |
| --- | --- | --- | --- | --- | --- | --- |
| 500 Scott Street, Wausau, WI 54403 | ​ | Owned | ​ | 1963 | ​ | $1,305 |
| **​** | ​ | ​ | ​ | ​ | ​ | ​ ​ |
| ​ | ​ | ​ | ​ | ​ | ​ | ​ ​ |
| **Other Properties:** | ​ | ​ | ​ | ​ | ​ | ​ ​ |
| ​ | ​ | ​ | ​ | ​ | ​ | ​ ​ |
| 1133 E Grand Avenue, Rothschild, WI | ​ | Leased | ​ | 2009 | ​ | ​ 50 |
| ​ | ​ | ​ | ​ | ​ | ​ | ​ ​ |
| 307 Third Street, Mosinee, WI | ​ | Owned | ​ | 1974 | ​ | ​ 60 |
| ​ | ​ | ​ | ​ | ​ | ​ | ​ ​ |
| 11315 N. Cedurburg Rd, Mequon, WI | ​ | Leased | ​ | 2018 | ​ | ​ 261 |

We believe that current facilities are adequate to meet our present and foreseeable needs, subject to possible future expansion.

## Legal proceedings

As filed, 306 characters.

We are not involved in any pending legal proceedings as a defendant other than routine legal proceedings occurring in the ordinary course of business. At June 30, 2022, we were not involved in any legal proceedings the outcome of which would be material to our financial condition or results of operations.

## Management's discussion and analysis

As filed, 54,791 characters.

This discussion and analysis reflects our audited consolidated financial statements and other relevant statistical data, and is intended to enhance your understanding of our financial condition and results of operations. The information in this section has been derived from the audited consolidated financial statements, which appear beginning on page 51 of this Form 10-K.

### Overview

***Net Interest Income.*** Our primary source of income is net interest income. Net interest income is the difference between interest income, which is the income we earn on our loans and investments, and interest expense, which is the interest we pay on our deposits and borrowings.

***Provision for Loan Losses.*** The allowance for loan losses is a valuation allowance for probable incurred credit losses. The allowance for loan losses is increased through charges to the provision for loan losses. Loans are charged against the allowance when management believes that the collectability of the principal loan amount is not probable. Recoveries on loans previously charged-off, if any, are credited to the allowance for loan losses when realized.

***Non-interest Income.*** Our primary sources of non-interest income are mortgage banking income, service charges on deposit accounts and net gains in the cash surrender value of bank owned life insurance. Other sources of non-interest income include net gain on securities transactions, net gain or loss on disposal of foreclosed assets and other income.

***Non-Interest Expenses.*** Our non-interest expenses consist of salaries and employee benefits, net occupancy and equipment, data processing and office, professional fees, marketing expenses and other general and administrative expenses, including premium payments we make to the FDIC for insurance of our deposits.

***Income Tax Expense.*** Our income tax expense is the total of the current year income tax due or refundable and the change in deferred tax assets and liabilities. Deferred tax assets and liabilities are the expected future tax amounts for the temporary differences between the carrying amounts and the tax basis of assets and liabilities, computed using enacted tax rates. A valuation allowance, if needed, reduces deferred tax assets to the amounts expected to be realized.

### Impact of COVID-19 Outbreak

The Coronavirus Aid, Relief, and Economic Security Act, or CARES Act, was signed into law on March 27, 2020 and provided over $2.0 trillion in emergency economic relief to individuals and businesses impacted by the COVID-19 pandemic. The CARES Act authorized the Small Business Administration (“SBA”) to temporarily guarantee loans under a new 7(a) loan program called the Paycheck Protection Program (“PPP”). This was considered Round 1 of the PPP. Although we were not already a qualified SBA lender, we enrolled in the PPP by completing the required documentation. We subsequently obtained approval as a qualified SBA lender. On December 27, 2020, the Consolidated Appropriations Act, 2021 was signed into law and included new funding for the PPP (Round 2). The PPP program ended in May 2021.

Commercial and industrial loans include loans originated under the PPP, a specialized low-interest (1%) forgivable loan program funded by the U.S. Treasury Department and administered by the SBA. The SBA guarantees 100% of the PPP loans made to eligible borrowers. The entire principal amount of the borrower’s PPP loan, including any accrued interest, is eligible to be reduced by the loan forgiveness amount under the PPP so long as employee and compensation levels of the business are maintained and the loan proceeds are used for other qualifying expenses. As of June 30, 2022, we had originated 109 PPP loans totaling $10.4 million. As of June 30, 2022, all of these PPP loans have been forgiven. As of June 30, 2022, we had no PPP loans outstanding.

We have implemented various consumer and commercial loan modification programs to provide our borrowers relief from the economic impacts of COVID-19. Based on guidance in the CARES Act and COVID-19 related legislation, COVID-19 related modifications to loans that were current as of December 31, 2019 are exempt from TDR classification under U.S. GAAP through January 1, 2022. In addition, the bank regulatory agencies issued interagency guidance stating that COVID-19 related short-term modifications (i.e., six months or less) granted to loans that were current as of the loan modification program implementation date are not TDRs. As of June 30, 2022, we had granted short-term payment deferrals on 56 loans, totaling approximately $20.0 million in aggregate principal amount. As of June 30, 2022, all of these loans have returned to normal payment status.

### Business Strategy

Our business strategy is to operate as a well-capitalized and profitable community bank dedicated to providing personal service to our individual and business customers. We believe that we have a competitive advantage in the markets we serve because of our 119-year history in the community, our knowledge of the local marketplace and our long-standing reputation for providing superior, relationship-based customer service. The following are the key elements of our business strategy:

***Increase our commercial real estate lending into the higher growth Southeastern Wisconsin market.*** As a result of our recent efforts to better balance the overall loan portfolio between commercial and non-commercial lending and expansion into the Southeastern Wisconsin market, including the Milwaukee metropolitan area, our commercial real estate loans, including multifamily loans, increased to $114.5 million, or 61.0% of our loan portfolio, at June 30, 2022, compared to $69.4 million, or 47.3% of our loan portfolio, at June 30, 2021. We intend to retain our presence as a commercial real estate lender (which includes multifamily loans) in our market area and seek to expand our market share in existing and other growth markets in Southeastern Wisconsin, including Milwaukee. We intend to continue to build relationships with small and medium-sized businesses and high net worth individuals in these market areas focusing on lending to manufacturing, wholesale distribution and professional service businesses. We also intend to increase our Southeastern Wisconsin presence by using the capital raised in our stock offering to hire experienced local commercial real estate lenders with credit skills that fit well with our focus on asset quality, as well as possibly expand our branch network, either through acquisitions or organically, in Southeastern Wisconsin. We believe the additional capital raised in the offering will enable us to increase our originations of commercial real estate loans and related lending limits, which will enable us to originate larger loans to new and existing customers. Given their larger balances and the complexity of the underlying collateral, commercial real estate and multifamily real estate loans generally have more risk than the owner-occupied one- to four-family residential real estate loans we originate. Because the repayment of commercial real estate and multifamily real estate loans depends on the successful management and operation of the borrower’s properties or related businesses, repayment of such loans can be affected by adverse conditions in the local real estate market or economy. Furthermore, the significant loan growth may require an increase in our provision for loan losses as the portfolio growth continues to outpace the growth in our allowance for loan losses.

***Continue to originate and sell certain residential real estate loans.*** Residential mortgage lending has historically been a significant part of our business, and we recognize that originating one- to four-family residential real estate loans is essential to our status as a community-oriented bank. During the year ended June 30, 2022, we originated and sold $16.8 million of one- to four-family residential real estate loans held for sale for gains on sale of loans of $308,000. These amounts are significantly below 2021’s activity due to the increase in market interest rates over the past year. We intend to continue to sell in the secondary market most of the long-term conforming fixed-rate one- to four-family residential real estate loans that we originate for fee income that enhances our non-interest income and mitigates the risks associated with changes in market interest rates that may adversely impact our interest income.

***Increase our share of lower-cost core deposit growth.*** We have made a concerted effort to reduce our reliance on higher cost certificates of deposit in favor of obtaining lower cost retail and commercial deposit accounts. We have also made significant investments in our technology-based products. For example, we have enhanced our suite of deposit products, including remote deposit capture, commercial cash management and mobile deposits in order to accommodate business customers. This has had the dual effect of reducing our concentration of certificates of deposit to approximately 31.9% at June 30, 2022 from 35.4% of total deposits at June 30, 2021, while growing our core deposits to $128.1 million at June 30, 2022 from $112.7 million at June 30, 2021. We intend to continue our focus on core deposit growth by offering our retail and commercial customers a full selection of deposit-related services, and making further investments in technology so that we can deliver high-quality, innovative products and services to our customers.

***Manage credit risk to maintain a low level of non-performing assets.*** We believe that credit risk management is paramount to our long-term success. Over the past several years, we have invested significantly in both personnel and software to effectively manage our portfolio, and we have considerably enhanced our controls. We have established an experienced commercial credit team and we have implemented well-defined policies, a thorough and efficient loan underwriting process, and active credit monitoring. As a result of our continued focus on credit risk management, our non-performing loans to total loans was 0.06% and 0.12% as of June 30, 2022 and June 30, 2021, respectively. We intend to continue to support our investment in our commercial credit department as we grow our loan portfolio in the future.

***Grow organically and through opportunistic bank or branch acquisitions or de novo branching.*** In addition to organic growth, we will also consider acquisition opportunities that we believe would enhance the value of our franchise and yield potential financial benefits for our stockholders. Although we believe opportunities exist to increase our market share in our historical markets, we expect to continue to expand into Southeastern Wisconsin. We will consider expanding our branch network through acquisitions and/or through establishing de novo branches, although we have no current acquisitions or new branches planned. The recent capital we raised provides us the opportunity to make acquisitions of other financial institutions or branches thereof, and will also help fund improvements in our operating facilities, credit reporting and customer delivery services in order to enhance our competitiveness.

***Remain a community-oriented institution and relying on high quality service to maintain and build a loyal local customer base.*** We were established in 1902 and have been operating continuously since that time in our local community. Through the goodwill we have developed over the years of providing timely, efficient banking services, we believe that we have been able to attract a solid base of local retail customers on which we hope to continue to build our banking business.

### Anticipated Increase in Non-interest Expense

Our non-interest expense is expected to increase because of the increased costs associated with operating as a public company, and the increased compensation expenses associated with the implementation of the Company’s 2022 Equity Incentive Plan.

### Summary of Significant Accounting Estimates

The discussion and analysis of the financial condition and results of operations are based on our audited consolidated financial statements, which are prepared in conformity with U.S. GAAP. The preparation of these audited consolidated 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 significant accounting policies and estimates. 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.

In 2012, the JOBS Act was signed into law. 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.

The following represent our significant accounting estimates:

***Allowance for Loan Losses***. The allowance for loan losses established as losses is estimated to have occurred through a provision for loan losses charged to earnings. Loan losses are charged against the allowance when management believes the uncollectability of a loan balance is confirmed. Subsequent recoveries, if any, are credited to the allowance.

The allowance for loan losses is evaluated on a regular basis by management and is based upon management’s periodic review of the collectability of the loans in light of historical experience, the nature and volume of the loan portfolio, adverse situations that may affect the borrower’s ability to repay, estimated value of any underlying collateral, and prevailing economic conditions. This evaluation is inherently subjective as it requires estimates that are susceptible to significant revision as more information becomes available.

The allowance consists of allocated and general components. The allocated component relates to loans that are classified as impaired. For those loans that are classified as impaired, an allowance is established when the discounted cash flows (or collateral value or observable market price) of the impaired loan is lower than the carrying value of that loan. General components cover non-impaired loans and are based on historical loss rates for each portfolio segment, adjusted for the effects of qualitative or environmental factors that are likely to cause estimated credit losses as of the evaluation date to differ from the portfolio segment’s historical loss experience. Qualitative factors include consideration of the following: changes in lending policies and procedures; changes in economic conditions, changes in the nature and volume of the portfolio; changes in the experience, ability, and depth of lending management and other relevant staff; changes in the volume and severity of past due, nonaccrual and other adversely graded loans; changes in the loan review system; changes in the value of the underlying collateral for collateral-dependent loans; concentrations of credit; and the effect of other external factors such as competition and legal and regulatory requirements. At June 30, 2022 and 2021, the qualitative loan portfolio risk factors were slightly reduced in all loan categories except commercial real estate which we believe exhibits the most credit risk related to local and national economic conditions as well as industry conditions and concentrations.

A loan is considered impaired when, based on current information and events, it is probable that we will be unable to collect the scheduled payments of principal and interest when due according to the contractual terms of the loan agreement. Factors considered by management in determining impairment include payment status, collateral value, and the probability of collecting scheduled principal and interest payments when due. Loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired. Management determines the significance of payment delays and payment shortfalls on a case-by-case basis, taking into consideration all of the circumstances surrounding the loan and the borrower, including the length of the delay, the reason for the delay, the borrower’s prior payment record, and the amount of the shortfall in relation to the principal and interest owed. Impairment is measured on a loan-by-loan basis for commercial and commercial real estate loans by either the present value of expected future cash flows discounted at the loan’s effective interest rate, the loan’s observable market price, or the fair value of the collateral if the loan is collateral dependent.

As an integral part of their examination process, various regulatory agencies review the allowance for loan losses as well. Such agencies may require that changes in the allowance for loan losses be recognized when such regulatory credit evaluations differ from those of management based on information available to the regulators at the time of their examinations.

***Income Taxes***. Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis. Deferred tax assets and liabilities are measured using enacted tax rates in effect for the year in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized.

We recognize the tax effects from an uncertain tax position in the consolidated financial statements only if the position is more likely than not to be sustained on audit, based on the technical merits of the position. We recognize the financial statement benefit of a tax position only after determining that the relevant tax authority would more likely than not sustain the position following an audit. For tax positions meeting the more-likely-than-not threshold, the amount recognized in the consolidated financial statements is the largest benefit that has a greater than 50% likelihood of being realized, upon ultimate settlement with the relevant tax authority. We recognize interest and penalties accrued or released related to uncertain tax positions in current income tax expense or benefit.

***Debt Securities.*** Available-for-sale and held-to-maturity debt securities are reviewed by management on a quarterly basis, and more frequently when economic or market conditions warrant, for possible other-than-temporary impairment. In determining other-than-temporary impairment, management considers many factors, including the length of time and the extent to which the fair value has been less than cost, the financial condition and near-term prospects of the issuer, whether the market decline was affected by macroeconomic conditions and whether the Company has the intent to sell the debt security or more likely than not will be required to sell the debt security before its anticipated recovery. A decline in value that is considered to be other-than-temporary is recorded as a loss within non-interest income in the statement of income. The assessment of whether other-than-temporary impairment exists involves a high degree of subjectivity and judgment and is based on the information available to management at a point in time. In order to determine other-than-temporary impairment for mortgage-backed securities, asset-backed securities and collateralized mortgage obligations, we compare the present value of the remaining cash flows as estimated at the preceding evaluation date to the current expected remaining cash flows. Other-than-temporary impairment is deemed to have occurred if there has been an adverse change in the remaining expected future cash flows.

***Fair Value Measurements***. The Company determines the fair value of certain assets in accordance with the provisions of FASB Accounting Standards Codification Topic Accounting Standards Codification 820, *Fair Value Measurements*, which provides a framework for measuring fair value under generally accepted accounting principles.

Fair value is defined as the exchange price that would be received for an asset in the principal or most advantageous market for the asset in an orderly transaction between market participants on the measurement date. It is required that valuation techniques maximize the use of observable inputs and minimize the use of unobservable inputs. The Standard also establishes a fair value hierarchy, which prioritizes the valuation inputs into three broad levels:

- Level 1 inputs consist of quoted prices in active markets for identical assets that the reporting entity has the ability to access at the measurement date.
- Level 2 inputs are inputs other than quoted prices included within Level 1 that are observable for the related asset.
- Level 3 inputs are unobservable inputs related to the asset.

### Selected Financial Data

The following selected consolidated financial data sets forth certain financial highlights of the Company and should be read in conjunction with the audited consolidated financial statements and related notes included elsewhere in this Annual Report on Form 10-K for 2022.

*(In thousands)*

| ​ ​ ​ ​ Selected Financial Condition Data: | ​ ​ ​ | ​ ​ At June 30, 2022 ​ ​ | ​ ​ | ​ ​ 2021 ​ ​ |
| --- | --- | --- | --- | --- |
| Total assets | **​** | $220,019 | ​ | $213,627 |
| Cash, cash equivalents and interest-bearing deposits in other financial institutions | **​** | ​ 10,373 | ​ | ​ 48,111 |
| Debt securities available for sale | **​** | ​ 10,617 | ​ | ​ 10,910 |
| Debt securities held to maturity | **​** | ​ 532 | ​ | ​ 709 |
| Loans receivable, net | **​** | ​ 185,630 | ​ | ​ 144,169 |
| Federal Home Loan Bank stock, at cost | **​** | ​ 323 | ​ | ​ 262 |
| Bank owned life insurance | **​** | ​ 9,193 | ​ | ​ 5,969 |
| Premises and equipment, net | **​** | ​ 1,676 | ​ | ​ 1,850 |
| Deferred tax asset | **​** | ​ 97 | ​ | ​ 270 |
| Deposits | **​** | ​ 188,100 | ​ | ​ 171,956 |
| PPPLF Funding | **​** | ​ — | ​ | ​ 10,372 |
| Stockholders' Equity | **​** | ​ 30,743 | ​ | ​ 29,849 |

*(In thousands)*

| ​ ​ ​ ​ ​ Selected Operating Data: | ​ ​ ​ ​ ​ | ​ ​ For the Years Ended June 30, 2022 ​ ​ ​ | ​ ​ | ​ ​ 2021 ​ ​ |
| --- | --- | --- | --- | --- |
| Interest income | **​** | $7,157 | ​ | $6,484 |
| Interest expense | **​** | ​ 948 | ​ | ​ 1,091 |
| Net interest income | **​** | ​ 6,209 | ​ | ​ 5,393 |
| Provision for loan losses | **​** | ​ — | ​ | ​ — |
| Net interest income after provision for loan losses | **​** | ​ 6,209 | ​ | ​ 5,393 |
| Non-interest income | **​** | ​ 1,118 | ​ | ​ 1,896 |
| Non-interest expense | **​** | ​ 5,555 | ​ | ​ 5,438 |
| Income before income taxes | **​** | ​ 1,772 | ​ | ​ 1,851 |
| Income tax expense | **​** | ​ 437 | ​ | ​ 478 |
| Net income | **​** | $1,335 | ​ | $1,373 |

| ​ ​ ​ ​ Performance Ratios: | ​ ​ ​ ​ | ​ ​ At or For the Years Ended June 30, 2022 ​ ​ | ​ ​ ​ ​ 2021 ​ ​ ​ |
| --- | --- | ---: | ---: |
| Return on average assets | ​ | 0.62% | 0.73% |
| Return on average equity | ​ | 4.90% | 6.14% |
| Interest rate spread (1) | ​ | 2.99% | 2.99% |
| Net interest margin (2) | ​ | 3.09% | 3.10% |
| Non-interest expenses to average assets | ​ | 2.59% | 2.90% |
| Efficiency ratio (3) | ​ | 75.82% | 74.61% |
| Average interest-earning assets to average interest-bearing liabilities | ​ | 123.40% | 117.93% |
| ​ | ​ | ​ ​ | ​ ​ |
| ​ | ​ | ​ ​ | ​ ​ |
| **Capital Ratios (4):** | ​ | ​ ​ | ​ ​ |
| Average equity to average assets | ​ | 12.69% | 11.88% |
| Tier 1 capital to average assets | ​ | 12.17% | 12.47% |
| ​ | ​ | ​ ​ | ​ ​ |
| **Asset Quality Ratios:** | ​ | ​ ​ | ​ ​ |
| Allowance for loan losses as a percentage of total loans | ​ | 1.17% | 1.49% |
| Allowance for loan losses as a percentage of non-performing loans | ​ | 1,908.70% | 1,228.09% |
| Net recoveries to average outstanding loans during the year | ​ | 0.01% | 0.38% |
| Non-performing loans as a percentage of total loans | ​ | 0.06% | 0.12% |
| Non-performing loans as a percentage of total assets | ​ | 0.05% | 0.08% |
| Total non-performing assets as a percentage of total assets | ​ | 0.05% | 0.08% |
| ​ | ​ | ​ ​ | ​ ​ |
| **Other:** | ​ | ​ ​ | ​ ​ |
| Number of offices | ​ | 4 ​ | 4 ​ |
| Number of full-time equivalent employees | ​ | 35 ​ | 36 ​ |

(1) Represents the difference between the weighted average yield on average interest-earning assets and the weighted average cost of interest-bearing liabilities.

(2) Represents net interest income as a percentage of average interest-earning assets.

(3) Represents non-interest expenses divided by the sum of net interest income and non-interest income.

(4) Capital ratios are for the Bank only. As of June 30, 2022 and 2021, the Bank elected to adopt the Community Bank Leverage Ratio Framework.

### Comparison of Financial Condition at June 30, 2022 and June 30, 2021

***Total Assets.*** Total assets increased $6.4 million, or 3.0%, to $220.0 million at June 30, 2022 from $213.6 million at June 30, 2021. The increase was primarily due to an increase of $41.4 million, or 28.8%, in net loans and an increase in the cash surrender value of life insurance of $3.2 million or 54.0% which was offset by a decrease in cash and cash equivalents of $37.6 million or 81.7%.

***Cash and Cash Equivalents.*** Total cash and cash equivalents decreased $37.6 million, or 81.7%, to $8.4 million at June 30, 2022 from $46.0 million at June 30, 2021 due to the use of cash to fund loan originations, the purchase of $3.5 million of corporate bonds in our debt securities available for sale portfolio and the purchase of an additional $3.0 million of bank owned life insurance.

***Debt Securities Available for Sale.*** Total debt securities available for sale decreased $293,000, or 2.7%, to $10.6 million at June 30, 2022 from $10.9 million at June 30, 2021. The decrease was primarily due to a decrease of $2.0 million in mortgage-backed securities and $819,000 in state and municipal obligations as a result of paydowns and maturities, offset by the purchase of $3.5 million in corporate bonds.

***Debt Securities Held to Maturity.*** Total debt securities held to maturity decreased $177,000, or 24.9%, to $532,000 at June 30, 2022 from $709,000 at June 30, 2021. The decrease was primarily due to a decrease in mortgage-backed securities as a result of paydowns and maturities.

***Net Loans.*** Net loans increased $41.4 million, or 28.8%, to $185.6 million at June 30, 2022 from $144.2 million at June 30, 2021. The increase was due to a $28.5 million, or 54.6%, increase in commercial real estate loans to $80.6 million at June 30, 2022 from $52.1 million at June 30, 2021 and an increase in multifamily loans of $16.6 million, or 96.6%, to $33.9 million at June 30, 2022 from $17.3 million at June 30, 2021. One-to four-family residential mortgage loans also increased by $3.5 million, or 7.2%, to $51.9 million at June 30, 2022 from $48.4 million at June 30, 2021. Construction loans also increased by $2.6 million, or 32.5%, to $10.6 million at June 30, 2022 from $8.0 million at June 30, 2021. Commercial and industrial loans (including Paycheck Protection Program Loans) decreased by $10.5 million, or 54.5%, to $8.8 million at June 30, 2022 from $19.3 million at June 30, 2021 due to the repayment by the SBA of forgiven PPP loans. The increase in commercial and multifamily real estate loans was primarily due to our strategy to enhance our commercial lending in Southeastern Wisconsin. The increase in one- to four-family residential mortgage loans was due to additional growth with respect to adjustable-rate one-to four-family residential loans. Construction loans increased due to an increase in our construction loan participations.

***Deposits.*** Total deposits increased $16.1 million, or 9.4%, to $188.1 million at June 30, 2022 from $172.0 million at June 30, 2021. The increase in deposits reflected an increase in demand, NOW and money market accounts of $13.4 million, or 30.2%, to $57.8 million at June 30, 2022 from $44.4 million at June 30, 2021 and an increase in savings accounts of $1.9 million, or 4.3%, to $46.6 million at June 30, 2022 from $44.7 million at June 30, 2021. Certificates of deposit also increased by $769,000, or 1.3%, to $60.0 million at June 30, 2022 from $59.2 million at June 30, 2021. The increase in all deposit accounts was related to new customers.

***Borrowings.*** Our borrowings from the Federal Reserve PPP Liquidity Facility to fund our PPP loans decreased by $10.4 million, or 100%, to $0 at June 30, 2022 from $10.4 million at June 30, 2021 due to the repayment by the SBA of forgiven PPP loans and subsequent paydown of the related borrowings.

***Stockholders’ Equity.*** Total stockholders’ equity increased by $893,000, or 3.0%, to $30.7 million at June 30, 2022 from $29.8 million at June 30, 2021. The increase was primarily due to net income of $1.3 million offset by an increase in accumulated other comprehensive loss of $490,000 during the year ended June 30, 2022 as a result of an increase in market interest rates.

### Average Balance Sheets

The following table sets forth average balances, average yields and costs, and certain other information for the years indicated. No tax-equivalent yield adjustments have been made, as the effects would be immaterial. All average balances are daily average balances. Non-accrual loans were included in the computation of average balances. The yields set forth below include the effect of deferred fees, discounts, and premiums that are amortized or accreted to interest income or interest expense, as applicable. Loan balances include loans held for sale. Deferred loan fees accreted to interest income totaled $536,000 and $429,000 for the years ended June 30, 2022 and 2021, respectively.

*(Dollars in thousands)*

| ​ ​ ​ ​ ​ ​ ​ Interest-earning assets: | ​ ​ ​ ​ ​ ​ | ​ ​ ​ For the Year Ended June 30, 2022 Average ​ Outstanding ​ Balance ​ ​ | ​ ​ ​ ​ ​ ​ Interest ​ ​ | ​ ​ ​ | ​ ​ ​ Average ​ Yield/Rate ​ ​ ​ | ​ ​ ​ 2021 Average ​ Outstanding ​ Balance ​ ​ | ​ ​ ​ ​ ​ ​ Interest ​ ​ | ​ ​ ​ ​ Average ​ Yield/Rate ​ ​ ​ ​ |
| --- | --- | ---: | ---: | --- | ---: | ---: | ---: | ---: |
| Loans (excluding PPP loans) | ​ | $154,982 ​ | $6,266 |  | 4.04% | $119,103 ​ | $5,700 | 4.79% |
| PPP loans | ​ | 958 ​ | 493 |  | 51.57% | 7,964 ​ | 390 | 4.90% |
| Debt securities | ​ | 12,355 ​ | 331 |  | 2.68% | 14,122 ​ | 362 | 2.56% |
| Cash and cash equivalents | ​ | 32,201 ​ | 61 |  | 0.19% | 32,394 ​ | 20 | 0.06% |
| Other | ​ | 277 ​ | 6 |  | 2.17% | 262 ​ | 12 | 4.58% |
| Total interest-earning assets | ​ | 200,773 ​ | 7,157 |  | 3.57% | 173,845 ​ | 6,484 | 3.73% |
| Noninterest-earning assets | ​ | 13,993 ​ | ​ |  | ​ | 13,534 ​ |  | ​ |
| Total assets | ​ | $214,766 ​ | ​ ​ |  | ​ | $187,379 ​ |  | ​ |
| **Interest-bearing liabilities:** | ​ | ​ |  |  | ​ | ​ |  | ​ |
| Demand, NOW and money market deposits | ​ | $55,676 ​ | 213 |  | 0.38% | $41,737 ​ | 146 | 0.35% |
| Savings deposits | ​ | 46,069 ​ | 67 |  | 0.15% | 41,824 ​ | 60 | 0.14% |
| Certificates of deposit | ​ | 59,689 ​ | 661 |  | 1.11% | 50,233 ​ | 843 | 1.68% |
| Total interest-bearing deposits | ​ | 161,434 ​ | 941 |  | 0.58% | 133,794 ​ | 1,049 | 0.78% |
| FHLB advances and other borrowings | ​ | — ​ | — |  | —% | 6,441 ​ | 19 | 0.29% |
| PPP Liquidity Facility borrowings | ​ | 1,272 ​ | 7 |  | 0.55% | 7,181 ​ | 23 | 0.32% |
| Total interest-bearing liabilities | ​ | 162,706 ​ | 948 |  | 0.58% | 147,416 ​ | 1,091 | 0.74% |
| Non-interest-bearing demand deposits | ​ | 23,684 ​ | ​ |  | ​ | 16,482 ​ |  | ​ |
| Other non-interest-bearing liabilities | ​ | 1,130 ​ | ​ |  | ​ | 1,216 ​ |  | ​ |
| Total liabilities | ​ | 187,520 ​ | ​ |  | ​ | 165,114 ​ |  | ​ |
| Total stockholders' equity | ​ | 27,246 ​ | ​ |  | ​ | 22,265 ​ |  | ​ |
| Total liabilities and stockholders' equity | ​ | $214,766 ​ | ​ ​ |  | ​ | $187,379 ​ |  | ​ |
| Net interest income | ​ | ​ ​ ​ | $6,209 |  | ​ | ​ ​ | $5,393 | ​ |
| Net interest rate spread (1) | ​ | ​ ​ | ​ | ​ | 2.99% | ​ ​ |  | 2.99% |
| Net interest-earning assets (2) | ​ | $38,067 ​ | ​ ​ | ​ | ​ | $26,429 |  | ​ |
| Net interest margin (3) | ​ | ​ ​ | ​ | ​ | 3.09% | ​ ​ |  | 3.10% |
| Average interest-earning assets to interest-bearing liabilities | ​ | 123.40% | ​ | ​ | ​ | 117.93% |  | ​ |

(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.

### Rate/Volume Analysis

The following table presents the effects of changing rates and volumes on our net interest income for the years 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. For purposes of this table, 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.

*(In thousands)*

| ​ ​ ​ ​ ​ ​ ​ Interest-earning assets: | ​ ​ ​ ​ ​ ​ | ​ ​ Year Ended June 30, 2022 vs. 2021 Increase (Decrease) Due to ​ ​ Volume ​ ​ | ​ ​ ​ | ​ ​ ​ ​ Rate ​ ​ | ​ ​ ​ ​ | ​ ​ Total Increase (Decrease) ​ ​ |
| --- | --- | ---: | --- | ---: | --- | --- |
| Loans (excluding PPP loans) |  | $1,717 |  | $(1,151) |  | $566 |
| PPP loans | ​ | ​ (343) | ​ | 446 |  | ​ 103 |
| Debt securities | ​ | (45) | ​ | 14 |  | ​ (31) |
| Cash and cash equivalents | ​ | — | ​ | 41 |  | ​ 41 |
| Other | ​ | 1 | ​ | (7) |  | ​ (6) |
| Total interest-earning assets | ​ | 1,330 | ​ | (657) |  | ​ 673 |
| **Interest-bearing liabilities:** | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ |
| Demand, NOW and money market deposits | ​ | 49 | ​ | 18 |  | ​ 67 |
| Savings deposits | ​ | 6 | ​ | 1 |  | ​ 7 |
| Certificates of deposit | ​ | 159 | ​ | (341) |  | ​ (182) |
| Total interest-bearing deposits | ​ | 214 | ​ | (322) |  | ​ (108) |
| FHLB advances and other borrowings | ​ | (19) | ​ | — |  | ​ (19) |
| PPP Liquidity Facility borrowings | ​ | (19) | ​ | 3 |  | ​ (16) |
| Total interest-bearing liabilities | ​ | 176 | ​ | (319) |  | ​ (143) |
| Change in net interest income | ​ | $1,154 | ​ | $(338) | ​ | $816 |

### Comparison of Operating Results for the Years Ended June 30, 2022 and 2021

***General.*** Net income was $1.3 million for the year ended June 30, 2022, a decrease of $38,000, or 2.8%, from net income of $1.4 million for the year ended June 30, 2021. The decrease in net income for the year ended June 30, 2022 was primarily attributed to a decrease in non-interest income of $777,000 and an increase in non-interest expenses of $118,000, offset by an increase in net interest income of $816,000. The provision for income taxes decreased $40,000.

***Interest Income.*** Interest income increased by $673,000, or 10.4%, to $7.2 million for the year ended June 30, 2022 from $6.5 million for the year ended June 30, 2021, primarily due to increases in loan interest income and cash and cash equivalents interest income which was offset by a decrease in debt securities interest income.

Loan interest income increased by $669,000, or 11.0%, to $6.8 million for the year ended June 30, 2022 from $6.1 million for the year ended June 30, 2021, due to an increase in the average balance of the loan portfolio, offset by a decrease in the average yield on loans (excluding PPP loans). The average balance of the loan portfolio (excluding PPP loans) increased by $35.9 million, or 30.1%, from $119.1 million for the year ended June 30, 2021 to $155.0 million for the year ended June 30, 2022. The increase in the average balance of loans was due to our continued efforts to increase commercial and multifamily real estate loans in Southeastern Wisconsin. The average balance of PPP loans decreased due to the repayment by the SBA of forgiven PPP loans. There were no outstanding PPP loans as of June 30, 2022. The average yield on the loan portfolio (excluding PPP loans) decreased 75 basis points from 4.79% for the year ended June 30, 2021 to 4.04% for the year ended June 30, 2022. The decrease in the average yield on loans (excluding PPP loans) was primarily due to new loans being booked at low market interest rates prior to the recent increases in market interest rates approved by the Federal Reserve. In addition, loan interest income was positively impacted by the recognition of deferred fee income of $483,000 during the year ended June 30, 2022 on the forgiven PPP loans repaid by the SBA compared to $404,000 for the year ended June 30, 2021.

Debt securities interest income decreased $31,000, or 8.6%, to $331,000 for the year ended June 30, 2022 from $362,000 for the year ended June 30, 2021 due to a decrease of $1.8 million in the average balance of the debt securities portfolio which was offset by a 12 basis points increase in the average yield on the debt securities portfolio to 2.68% for the year ended June 30, 2022 from 2.56% for the year ended June 30, 2021. The decrease in the average balance of the debt securities portfolio was primarily due to securities paydowns which was offset by the purchase of $3.5 million in corporate bonds during the year ended June 30, 2022. The increase in the average yield on the debt securities portfolio was due to higher interest rates on the $3.5 million in corporate bonds purchased partially offset by the decrease in average yield of our collateralized mortgage obligations with inverse floating rates.

Cash and cash equivalent interest income increased by $41,000, or 205.0%, to $61,000 for the year ended June 30, 2022 as compared to $20,000 for the year ended June 30, 2021. The average yield increased to 0.19% for the year ended June 30, 2022 from 0.06% for the year ended June 30, 2021, while the average balance of cash and cash equivalents decreased slightly from $32.4 million for the year ended June 30, 2021 to $32.2 million for the year ended June 30, 2022. The increase in the average yield on cash and cash equivalents was primarily due to higher average rates earned on federal funds sold, as a result of the increase in market interest rates since June 30, 2021.

***Interest Expense.*** Interest expense decreased $143,000, or 13.2%, to $948,000 for the year ended June 30, 2022 from $1.1 million for the year ended June 30, 2021, due to a decrease of $108,000 in interest paid on deposits and a decrease of $35,000 in interest paid on borrowings.

Interest expense on deposits decreased $108,000, or 12.8%, to $941,000 for the year ended June 30, 2022 from $1.0 million for the year ended June 30, 2021 due to a decrease in interest expense on certificates of deposit which was offset by an increase in interest expense on interest-bearing core deposits (consisting of demand, NOW, money market and savings accounts). Interest expense on certificates of deposit decreased $182,000, or 21.6%, to $661,000 for the year ended June 30, 2022 from $843,000 for the year ended June 30, 2021 due to a decrease in the average rate paid on certificates of deposit which was offset by an increase in the average balance of certificates of deposit. The average rate paid on certificates of deposit decreased 57 basis points to 1.11% for the year ended June 30, 2022 from 1.68% for the year ended June 30, 2021 primarily due to higher rate certificates of deposit becoming due and reinvested at lower rates and the purchase of lower rate brokered certificates of deposit. The average balance of certificates of deposit increased by $9.5 million to $59.7 million, for the year ended June 30, 2022 compared to the year ended June 30, 2021 due to the purchase of $15.1 million in brokered certificates of deposit in March 2021 and an increase in new customers added by the Bank. Interest expense on interest-bearing core deposits increased by $74,000, or 35.9%, to $280,000 for the year ended June 30, 2022 from $206,000 for the year ended June 30, 2021. The average rate paid on our interest-bearing core deposits was 0.28% for the year ended June 30, 2022 compared to 0.25% for the year ended June 30, 2021. The average balance of our interest-bearing core deposits increased by $18.2 million during the year ended June 30, 2022 compared to the year ended June 30, 2021 and was related to new customers.

***Net Interest Income.*** Net interest income increased $816,000, or 15.1%, to $6.2 million for the year ended June 30, 2022 from $5.4 million for the year ended June 30, 2021 due to an increase in net interest-earning assets. The net interest rate spread remained the same at 2.99% for the years ended June 30, 2022 and 2021. Also included in net interest income for the year ended June 30, 2022 was the recognition of deferred fee income of $483,000 on the forgiven PPP loans repaid by the SBA compared to $404,000 for the year ended June 30, 2021. Net interest-earning assets increased by $11.7 million, or 44.0%, to $38.1 million for the year ended June 30, 2022 from $26.4 million for the year ended June 30, 2021. The net interest margin decreased one basis point to 3.09% for the year ended June 30, 2022 from 3.10% for the year ended June 30, 2021. Even though the net interest rate spread and net interest margin remained relatively unchanged when comparing the years ended June 30, 2022 with 2021, there were several components within the calculation that changed. The average yield on interest-earning assets decreased by 16 basis points while the average rate on interest-bearing liabilities decreased by 16 basis points. The decrease in the average yield on interest earning assets was primarily due to a decrease in the average yield on the loan portfolio (excluding PPP loans) of 75 basis points. The decrease in the average rate paid on interest-bearing liabilities is primarily due to higher rate certificates of deposit becoming due and reinvested at lower rates and the purchase of lower rate brokered certificates of deposit.

***Provision for Loan Losses.*** Provisions for loan losses are charged to operations to establish an allowance for loan losses at a level necessary to absorb known and inherent losses in our loan portfolio that are both probable and reasonably estimable at the date of the financial statements. In evaluating the level of the allowance for loan losses, management analyzes several qualitative loan portfolio risk factors including, but not limited to, management’s ongoing review and grading of loans, facts and issues related to specific loans, historical loan loss and delinquency experience, trends in past due and non-accrual loans, existing risk characteristics of specific loans or loan pools, changes in the nature, volume and terms of loans, the fair value of underlying collateral, changes in lending personnel, current economic conditions and other qualitative and quantitative factors which could affect potential credit losses. At June 30, 2022 and June 30, 2021, the qualitative loan portfolio risk factors were slightly reduced in all loan categories except commercial and multi-family real estate which we believe exhibits the most credit risk related to local and national economic conditions as well as industry conditions and concentrations.

After an evaluation of these factors, we recorded no provision for loan losses for the years ended June 30, 2022 or 2021. Our allowance for loan losses was $2.2 million at June 30, 2022 and 2021, respectively. The allowance for loan losses to total loans was 1.17% at June 30, 2022 and 1.49% at June 30, 2021. We recorded net recoveries of $9,000 for the year ended June 30, 2022 and net recoveries of $486,000 for the year ended June 30, 2021. Non-performing assets decreased to $115,000, or 0.05% of total assets, at June 30, 2022, compared to $178,000, or 0.08% of total assets, at June 30, 2021.

To the best of our knowledge, we have recorded all loan losses that are both probable and reasonable to estimate at June 30, 2022. However, future changes in the factors described herein, including, but not limited to, actual loss experience with respect to our loan portfolio, could result in material increases in our provision for loan losses. In addition, the WDFI and the FDIC, as an integral part of their examination process, will periodically review our allowance for loan losses, and as a result of such reviews, we may have to adjust our allowance for loan losses.

***Non-Interest Income.*** Non-interest income information is as follows.

*(Dollars in thousands)*

| ​ ​ ​ ​ ​ | ​ ​ | ​ ​ Year Ended June 30, 2022 | ​ | ​ ​ 2021 | ​ ​ | ​ ​ ​ Change Amount | ​ | ​ ​ Percent ​ |
| --- | --- | ---: | --- | ---: | --- | ---: | --- | ---: |
| Service charges on deposit accounts | ​ | $165 | ​ | $168 | ​ | $(3) |  | (1.8)% |
| Mortgage banking | ​ | 689 | ​ | 1,527 | ​ | (838) |  | (54.9)% |
| Increase in cash surrender value of BOLI | ​ | 225 | ​ | 165 | ​ | 60 |  | 36.4% |
| Gain on sale of foreclosed real estate | ​ | — | ​ | 11 | ​ | (11) |  | 100.0% |
| Net gain on securities transactions | ​ | ​ 14 | ​ | ​ — | ​ | ​ 14 | ​ | 100.0% |
| Other | ​ | 25 | ​ | 25 | ​ | — |  | —% |
| Total non-interest income | ​ | $1,118 | ​ | $1,896 | ​ | $(778) |  | (41.0)% |

Non-interest income decreased by $778,000 to $1.1 million for the year ended June 30, 2022 from $1.9 million for the year ended June 30, 2021 due primarily to a decrease in mortgage banking income. Mortgage banking income (consisting primarily of sales of fixed-rate one- to four-family residential real estate loans) decreased by $838,000 as we sold $16.8 million of mortgage loans into the secondary market during the year ended June 30, 2022 compared to $50.6 million of such sales during the year ended June 30, 2021 due to an increase in market rates, which resulted in decreased demand for mortgage loan refinancing.

***Non-Interest Expenses.*** Non-interest expenses information is as follows.

*(Dollars in thousands)*

| ​ ​ ​ ​ ​ | ​ ​ | ​ ​ Year Ended June 30, 2022 | ​ | ​ ​ 2021 | ​ ​ | ​ ​ ​ Change Amount | ​ | ​ ​ Percent ​ |
| --- | --- | ---: | --- | ---: | --- | ---: | --- | ---: |
| Salaries and employee benefits | ​ | $3,135 | ​ | $3,345 | ​ | $(210) |  | 8.7% |
| Occupancy and equipment | ​ | 711 | ​ | 671 | ​ | 40 |  | 6.0% |
| Data processing and office | ​ | 394 | ​ | 463 | ​ | (69) |  | (14.9)% |
| Professional fees | ​ | 657 | ​ | 367 | ​ | 290 |  | 79.0% |
| Marketing expenses | ​ | 78 | ​ | 63 | ​ | 15 |  | 23.8% |
| Debit card expenses | ​ | ​ 78 | ​ | ​ 89 | ​ | ​ (11) | ​ | (12.4) ​ |
| Directors fees | ​ | ​ 68 | ​ | ​ 78 | ​ | ​ (10) | ​ | (12.8) ​ |
| Other | ​ | 435 | ​ | 362 | ​ | 73 |  | 20.2% |
| Total non-interest expenses | ​ | $5,556 | ​ | $5,438 | ​ | $118 |  | 2.2% |

47

Non-interest expenses were $5.6 million for the year ended June 30, 2022 as compared to $5.4 million for the year ended June 30, 2021. Professional fees increased $290,000 primarily due to costs associated with being a public company including but not limited to preparing and filing the required periodic reports with the Securities and Exchange Commission. Salaries and employee benefits decreased $210,000 due primarily to a reduction in health insurance expense.

***Income Tax Expense.*** Income tax expense was $437,000 for the year ended June 30, 2022 as compared to $478,000 for the year ended June 30, 2021. The effective tax rate was 24.7% for the year ended June 30, 2022 as compared to 25.8% for the year ended June 30, 2021. The decrease in the effective tax rate was a result of an increase in earnings on bank owned life insurance.

### 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, proceeds from the sale of loans, and proceeds from maturities of securities. We also have the ability to borrow from the Federal Home Loan Bank of Chicago. At June 30, 2022, we had a $77.4 million line of credit (subject to providing additional collateral) with the Federal Home Loan Bank of Chicago, and had no borrowings outstanding as of that date. Under the Federal Reserve PPP Liquidity Facility program, we had no borrowings to fund PPP loans as of June 30, 2022 compared to borrowings of $10.4 million to fund PPP loans as of June 30, 2021, which were secured by an equal amount of PPP loans.

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 including interest-bearing demand deposits. The levels of these assets are dependent 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, investing activities, and financing activities. Net cash provided by operating activities was $826,000 and $1.0 million for the years ended June 30, 2022 and 2021, respectively. Net cash used in investing activities, which consists primarily of disbursements for loan originations, the purchase of securities and the purchase of bank owned life insurance, offset by principal collections on loans, proceeds from the sale of securities and proceeds from maturing securities and pay downs on securities, was $44.2 million for the year ended June 30, 2022 compared to $20.8 million for the year ended June 30, 2021. Net cash provided by financing activities, consisting of activity in deposit accounts and borrowings and net proceeds from our common stock offering, was $5.8 million and $41.6 million for the years ended June 30, 2022 and 2021, respectively.

We are committed to maintaining a strong liquidity position. 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, current pricing strategy and regulatory restrictions, we anticipate that a substantial portion of maturing time deposits will be retained, and that we can supplement our funding with borrowings in the event that we allow these deposits to run off at maturity.

At June 30, 2022, Marathon Bank was classified as “well capitalized” for regulatory capital purposes. See Note 15 in the Notes to the Audited Consolidated Financial Statements.

### Off-Balance Sheet Arrangements and Aggregate Contractual Obligations

***Commitments.*** As a financial services provider, we routinely are a party to various financial instruments with off-balance-sheet risks, such as commitments to extend credit and unused lines of credit. While these contractual obligations represent our future cash requirements, a significant portion of commitments to extend credit may expire without being drawn upon. Such commitments are subject to the same credit policies and approval process accorded to loans we make. At June 30, 2022, we had outstanding commitments to originate loans of $10.7 million, and outstanding commitments to sell loans of $696,000. We anticipate that we will have sufficient funds available to meet our current lending commitments. Time deposits that are scheduled to mature in one year or less from June 30, 2022 totaled $25.9 million. Management expects that a substantial portion of the maturing time deposits will be renewed. However, if a substantial portion of these deposits is not retained, we may utilize Federal Home Loan Bank advances or other borrowings, which may result in higher levels of interest expense.

***Contractual Obligations.*** In the ordinary course of our operations, we enter into certain contractual obligations. Such obligations include data processing services, operating leases for premises and equipment, agreements with respect to borrowed funds and deposit liabilities.

### Recent Accounting Pronouncements

Please refer to Note 1 to the financial statements beginning on page 50 for a description of recent accounting pronouncements that may affect our financial condition and results of operations.

### Impact of Inflation and Changing Price

The financial statements and related data presented herein have been prepared in accordance with U.S. GAAP, which requires the measurement of financial position and operating results in terms of historical dollars without considering changes in the relative purchasing power of money over time due to inflation. The primary impact of inflation on our operations is reflected in increased operating costs. Unlike most industrial companies, virtually all of the assets and liabilities of a financial institution are monetary in nature. As a result, interest rates, generally, have a more significant impact on a financial institution’s performance than does inflation. Interest rates do not necessarily move in the same direction or to the same extent as the prices of goods and services.

## Controls and procedures

As filed, 5,073 characters.

Disclosure controls and procedures are the controls and other procedures that are designed to ensure that information required to be disclosed in the reports that the Company files or submits under the Securities and Exchange Act of 1934, as amended (the “Exchange Act”) is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in the reports that the Company files or submits under the Exchange Act is accumulated and communicated to management, including the Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must necessarily reflect the fact that there are resource constraints and that management is required to apply its judgement in evaluating the benefits of possible controls and procedures relative to their costs.

Under the supervision and with the participation of the Company’s management, including our Chief Executive Officer and Chief Financial Officer, the Company has evaluated the effectiveness of the design and operation of its disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) under the Exchange Act) as of June 30, 2022. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that, as of June 30, 2022, the Company’s disclosure controls and procedures are effective to ensure that information required to be disclosed in the reports that the Company files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission’s rules and forms.

### Management’s Report on Internal Control over Financial Reporting

Management of Marathon Bancorp, Inc. is responsible for establishing and maintaining effective internal control over financial reporting.

Management evaluates the effectiveness of internal control over financial reporting and tests for reliability of recorded financial information through a program of ongoing internal audits. Any system of internal control, no matter how well designed, has inherent limitations, including the possibility that a control can be circumvented or overridden and misstatements due to error or fraud may occur and not be detected. Also, because of changes in conditions, internal control effectiveness may vary over time. Accordingly, even an effective system of internal control will provide only reasonable assurance with respect to financial statement preparation.

The Company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America. The Company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with accounting principles generally accepted in the United States of America, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Company’s assets that could have a material effect on the financial statements.

Management assessed the Company’s internal control over financial reporting as of June 30, 2022, as required by Section 404 of the Sarbanes-Oxley Act of 2002, based on the criteria for effective internal control over financial reporting described in the “2013 Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.” Based on this assessment, management concludes that, as of June 30, 2022, the Company’s internal control over financial reporting is effective.

There were no changes made in our internal controls during the quarter ended June 30, 2022 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

This Annual Report does not include an attestation report of the independent registered public accounting firm because Marathon Bancorp, Inc. is an emerging growth company.

Filed Sep 28, 2022.
Source: SEC EDGAR, the filing index for accession 0001558370-22-014665. Last ingested by Listed: Oct 24, 2026, 15:15 ET. No prices; not investment advice.