VWF Bancorp 10Q 2025 Q1 Quarterly report

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

☒	Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended September 30, 2024

☐	Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from to

Commission File No. 000-56459

VWF Bancorp, Inc.

(Exact Name of Registrant as Specified in Its Charter)


Maryland	88-1256373
(State or Other Jurisdiction of Incorporation or Organization)	(I.R.S. Employer Identification Number)

976 South Shannon Street, Van Wert, Ohio	45891
(Address of Principal Executive Offices)	(Zip Code)

Registrant’s telephone number, including area code: (419) 238-9662

Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report: N/A

Securities registered pursuant to Section 12(b) of the Act: None


Title of each class	Trading symbol(s)	Name of each exchange on which registered

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such requirements for the past 90 days.

YES ☒ NO ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the Registrant was required to submit such files). YES ☒NO ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act:


Large accelerated filer ☐	Accelerated filer ☐
Non-accelerated filer ☒	Smaller reporting company ☒
	Emerging growth company ☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). YES ☐ NO ☒

As of November 15, 2024, the Registrant had 1,951,765 shares of common stock issued, of which 1,914,965 are outstanding.

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VWF Bancorp, Inc.

Form 10-Q

Index


		Page
Part I. – Financial Information

Item 1.	Financial Statements

	Condensed Consolidated Balance Sheets as of September 30, 2024 (unaudited) and June 30, 2024	3

	Condensed Consolidated Statements of Operations for the Three Months Ended September 30, 2024 and 2023 (unaudited)	4

	Condensed Consolidated Statements of Comprehensive Income (Loss) for the Three Months Ended September 30, 2024 and 2023 (unaudited)	5

	Condensed Consolidated Statements of Changes in Shareholders’ Equity for the Three Months Ended September 30, 2024 and 2023 (unaudited)	6

	Condensed Consolidated Statements of Cash Flows for the Three Months Ended September 30, 2024 and 2023 (unaudited)	7

	Notes to Condensed Consolidated Financial Statements (unaudited)	8

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	25

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	31

Item 4.	Controls and Procedures	31

Part II. – Other Information

Item 1.	Legal Proceedings	32

Item 1A.	Risk Factors	32

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	32

Item 3.	Defaults upon Senior Securities	32

Item 4.	Mine Safety Disclosures	32

Item 5.	Other Information	32

Item 6.	Exhibits	33

	Signature Page	34

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Part I. – Financial Information

Item 1.Financial Statements

VWF Bancorp, Inc.

Condensed Consolidated Balance Sheets

September 30, 2024 and June 30, 2024


	September 30,		June 30,
	2024		2024
	(Unaudited)
Assets
Cash and due from banks	$	4,071,788	$	31,630,525
Available-for-sale debt securities		167,236,770		139,344,952
Loans, net of allowance for credit losses of $838,561 at September 30, 2024 and $772,969 June 30, 2024, respectively		134,053,134		126,391,092
Premises and equipment		2,909,658		2,261,260
Stock in correspondent banks		1,057,600		2,195,900
Bank owned life insurance		5,385,674		5,351,048
Accrued interest receivable		1,025,188		961,856
Right-of-use asset - operating lease		1,378,255		1,406,905
Other assets		1,551,357		1,710,583
Total assets	$	318,669,424	$	311,254,121

Liabilities and Shareholders' Equity

Liabilities
Deposits
Demand	$	40,421,421	$	26,493,048
Savings and money market		49,324,068		47,466,674
Time		155,391,757		135,350,608
Total deposits		245,137,246		209,310,330

Borrowings		32,700,000		62,000,000
Advances from borrowers		450,011		137,722
Operating lease liability		1,432,078		1,442,620
Accrued interest payable and other liabilities		2,191,330		1,815,617
Total liabilities		281,910,665		274,706,289

Commitments and Contingencies

Shareholders' Equity
Preferred stock, $0.01 par value, 1,000,000 shares authorized, none issued		—		—
Common stock, $0.01 par value, 14,000,000 shares authorized, 1,914,965 outstanding at September 30, 2024 and June 30, 2024, respectively		19,229		19,229
Additional paid-in capital		18,059,154		18,006,472
Treasury stock, 36,800 shares at September 30, 2024 and June 30, 2024, respectively		(598,000)		(598,000)
Unearned ESOP		(1,326,817)		(1,346,047)
Retained earnings		22,211,064		22,843,782
Accumulated other comprehensive loss		(1,605,871)		(2,377,604)
Total shareholders' equity		36,758,759		36,547,832
Total liabilities and shareholders' equity	$	318,669,424	$	311,254,121

See Notes to Condensed Consolidated Financial Statements

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VWF Bancorp, Inc.

Condensed Consolidated Statements of Operations

For the Three Months Ended September 30, 2024 and 2023


	Three Months Ended
	September 30,
	2024		2023

	(Unaudited)
Interest Income
Loans	$	1,749,804	$	889,674
Investment securities		2,269,969		1,045,771
Interest-bearing deposits and other		122,529		145,300
Total interest income		4,142,302		2,080,745
Interest Expense
Deposits		2,123,013		703,333
Borrowings		395,832		292,981
Total interest expense		2,518,845		996,314
Net Interest Income		1,623,457		1,084,431

Provision for Credit Losses - Loans		65,592		129,022
Provision for Credit Losses - Off Balance Sheet Credit Exposure		23,053		(357)
Credit Loss Expense		88,645		128,665

Net Interest Income After Provision for Credit Losses		1,534,812		955,766
Noninterest Income
Bank owned life insurance		34,626		30,029
Other income		24,439		11,437
Total noninterest income		59,065		41,466
Noninterest Expense
Salaries and employee benefits		1,112,363		714,781
Directors fees		88,047		45,700
Occupancy and equipment		191,058		136,410
Data processing fees		199,401		84,269
Franchise taxes		68,382		41,195
FDIC insurance premiums		78,290		19,038
Professional services		245,673		195,946
Advertising and marketing		78,695		66,418
Loss on sale of investment securities		—		1,951
Foreclosed assets, net		—		2,436
Loss (Gain) on disposal of assets		9,215		(2,866)
Other		330,708		254,499
Total noninterest expense		2,401,832		1,559,777
Loss before income taxes		(807,955)		(562,545)
Provision for income taxes (benefits)		(175,237)		(123,686)
Net Loss	$	(632,718)	$	(438,859)

Basic Loss Per Share	$	(0.36)	$	(0.25)
Diluted Loss Per Share	$	(0.36)	$	(0.25)

See Notes to Condensed Consolidated Financial Statements

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VWF Bancorp, Inc.

Condensed Consolidated Statements of Comprehensive Income (Loss)

For the Three Months Ended September 30, 2024 and 2023


	Three Months Ended
	September 30,
	2024		2023

	(Unaudited)
Net loss	$	(632,718)	$	(438,859)
Other comprehensive income (loss):
Net unrealized gains (losses) on available-for-sale securities		976,877		(610,158)
Tax (expense) benefit		(205,144)		128,134
Other comprehensive income (loss)		771,733		(482,024)
Comprehensive income (loss)	$	139,015	$	(920,883)

See Notes to Condensed Consolidated Financial Statements

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VWF Bancorp, Inc.

Condensed Consolidated Statements of Changes in Shareholders’ Equity

For the Three Months Ended September 30, 2024 and 2023


											Accumulated
					Unearned						Other
	Common		Additional		ESOP		Retained		Treasury		Comprehensive		Shareholders'
	Stock		Paid-in Capital		Shares		Earnings		Stock, at Cost		Loss		Equity

		(Unaudited)
Balance at July 1, 2023	$	19,229	$	17,875,071	$	(1,461,422)	$	24,916,481	$	—	$	(2,851,359)	$	38,498,000
Cumulative-effect adjustment for adoption of ASU 2016-13		—		—		—		(53,166)		—		—		(53,166)
Balance at July 1, 2023, as adjusted for change in accounting principle	$	19,229	$	17,875,071	$	(1,461,422)	$	24,863,315	$	—	$	(2,851,359)	$	38,444,834
ESOP shares committed to be released		—		—		—		—		—		—		—
Net loss		—		—		—		(438,859)		—		—		(438,859)
Other comprehensive loss		—		—		—		—		—		(482,024)		(482,024)
Balance at September 30, 2023	$	19,229	$	17,875,071	$	(1,461,422)	$	24,424,456	$	—	$	(3,333,383)	$	37,523,951

Balance at July 1, 2024	$	19,229	$	18,006,472	$	(1,346,047)	$	22,843,782	$	(598,000)	$	(2,377,604)	$	36,547,832
ESOP shares committed to be released		—		9,893		19,230		—		—		—		29,123
Net loss		—		—		—		(632,718)		—		—		(632,718)
Other comprehensive income		—		—		—		—		—		771,733		771,733
Stock compensation expense		—		42,789		—		—		—		—		42,789
Balance at September 30, 2024	$	19,229	$	18,059,154	$	(1,326,817)	$	22,211,064	$	(598,000)	$	(1,605,871)	$	36,758,759

See Notes to Condensed Consolidated Financial Statements

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VWF Bancorp, Inc.

Condensed Consolidated Statements of Cash Flows

For the Three Months Ended September 30, 2024 and 2023


	Three Months Ended
	September 30,
	2024		2023

	(Unaudited)
Operating Activities
Net loss	$	(632,718)	$	(438,859)
Items not requiring (providing) cash:
Depreciation and amortization		81,573		19,708
Amortization (accretion) of premiums and discounts, net		(67,332)		(78,192)
Deferred income taxes		(175,237)		123,066
Provision for credit losses		88,645		128,665
Loss on sale of investment securities		—		1,951
Net losses on sale of foreclosed assets		—		2,436
Interest capitalization on available-for-sale securities		(173,405)		—
Loss (Gain) on disposal of assets		9,215		(2,866)
Increase in cash surrender value of bank-owned life insurance		(34,626)		(30,029)
Stock and ESOP compensation expense		71,912		28,844
Changes in:
Accrued interest receivable		(63,332)		(105,227)
Operating lease liability		(10,542)		—
Other assets and liabilities		481,979		107,489
Net cash used in operating activities		(423,868)		(243,014)
Investing Activities
Purchases of available-for-sale securities		(34,882,537)		(36,971,788)
Proceeds from sales of available-for-sale securities		—		2,989,042
Proceeds from calls, maturities and paydowns of available-for-sale securities		8,208,333		2,506,545
Proceeds from sales of foreclosed assets		—		27,303
Net change in loans		(7,727,634)		(11,268,000)
Purchase of premises and equipment		(710,536)		(116,685)
Purchase of correspondent bank stock		(30,000)		(773,900)
Proceeds from redemption of correspondent bank stock		1,168,300		199,900
Net cash used in investing activities		(33,974,074)		(43,407,583)
Financing Activities
Net increase in deposit accounts		35,826,916		19,518,796
Proceeds from borrowings		21,000,000		36,000,000
Repayment of borrowings		(50,300,000)		(6,200,000)
Net change in advances by borrowers		312,289		(157,059)
Net cash provided by financing activities		6,839,205		49,161,737

(Decrease) Increase in Cash and Cash Equivalents		(27,558,737)		5,511,140
Cash and Cash Equivalents, Beginning of Period		31,630,525		5,515,728
Cash and Cash Equivalents, End of Period	$	4,071,788	$	11,026,868

Supplemental Disclosure of Cash Flow Information
Cash paid during the period for:
Interest on deposits and borrowings	$	2,376,257	$	715,278

Supplemental Disclosure of Noncash Financing Activities
Loans transferred to OREO	$	—	$	29,739

See Notes to Condensed Consolidated Financial Statements

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Note 1:Nature of Operations and Summary of Significant Accounting Policies

Principles of Consolidation

The consolidated financial statements include the accounts of VWF Bancorp, Inc. (“VWF Bancorp” or the “Company”) and its wholly owned subsidiary, GreenWay Bank (“Greenway” or the “Bank”), formerly known as Van Wert Federal Savings Bank. All intercompany transactions and balances have been eliminated in consolidation.

Nature of Operations

The Company, a Maryland corporation and registered savings and loan holding company, was incorporated by the Bank in February 2022, as part of the conversion of the Bank from the mutual to stock form of organization (the “Conversion”). The Conversion was completed on July 13, 2022. The Company’s shares trade on OTCQX under the symbol “VWFB”. In connection with the Conversion, the Company acquired 100% ownership of the Bank and the Company offered and sold shares of its common stock to certain depositors of the Bank, and others, including the Bank’s Employee Stock Ownership Plan.

Following the Conversion, voting rights in the Company are held and exercised exclusively by the shareholders of the Company. Deposit account holders continue to be insured by the FDIC. The Bank may not pay a dividend on its capital stock if the effect thereof would cause retained earnings to be reduced below regulatory capital requirements. In addition, the Company is subject to certain regulations related to the payment of dividends and the repurchase of its capital stock. The Conversion was accounted for as a change in corporate form with the historic basis of the Bank’s assets, liabilities and equity unchanged as a result.

The Bank, which is the sole subsidiary of the Company, is a federally chartered mutual thrift engaged primarily in the business of making residential mortgage loans, commercial loans and accepting deposits. Its operations are conducted through its offices located in Van Wert, Ohio and Fort Wayne, Indiana. The Bank faces competition from other financial institutions and is subject to the regulation of certain federal and state agencies and undergoes periodic examinations by those regulatory authorities. The Bank has elected to operate as a “covered savings association” (“CSA”). A CSA has the same rights and privileges as a national bank that has its main office situated in the same location as the home office of the CSA and is subject to the same duties, restrictions, penalties, liabilities, conditions, and limitations that would apply to such a national bank.

Basis of Presentation

The interim unaudited consolidated financial statements as of September 30, 2024, and for the three months ended September 30, 2024 and 2023, are unaudited and reflect all normal recurring adjustments that are, in the opinion of management, necessary for a fair presentation of the results for the interim periods presented. Such adjustments are the only adjustments contained in these unaudited consolidated financial statements. These unaudited consolidated financial statements have been prepared according to the rules and regulations of the Securities and Exchange Commission and, therefore, certain information and footnote disclosures normally included in the consolidated financial statements prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”) have been omitted. The results of operations for the three months ended September 30, 2024, are not necessarily indicative of the results to be achieved for the remainder of the year ending June 30, 2025, or any other period.

The accompanying consolidated financial statements have been derived from and should be read in conjunction with the audited financial statements as of and for the years ended June 30, 2024 and 2023 contained in the Company’s Form 10-K for the fiscal year ended June 30, 2024, filed with the Securities and Exchange Commission on September 27, 2024.

Significant Accounting Policies and Use of Estimates

Significant accounting policies are defined as those that are reflective of significant judgments and uncertainties and could reflect materially different results under different assumptions and conditions. Methodologies the Company uses when applying critical accounting policies and developing critical estimates are included in its Annual Report on Form 10-K for the year ended June 30, 2024. Our accounting policies for credit losses, investment securities, and income taxes comprise those that management believes involve the most critical estimates and aid in fully understanding and evaluating our reported financial results. There were no material changes from the significant accounting policies or critical accounting estimates previously disclosed in the Company’s Annual Report on Form 10-K for the year ended June 30, 2024.

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The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Material estimates that are particularly susceptible to significant change relate to the determination of the allowance for credit losses, valuation of real estate acquired in connection with foreclosures or in satisfaction of loans, valuation of deferred tax assets and fair values of financial instruments.

Debt Securities

Debt securities held by the Bank generally are classified and recorded in the consolidated financial statements as follows:

Classified as	Description	Recorded at
Held to maturity (HTM)	Certain debt securities that management has the positive intent and ability to hold to maturity	Amortized cost

Trading	Securities that are bought and held principally for the purpose of selling in the near term and, therefore, held for only a short period of time	Fair value, with changes in fair value included in earnings

Available for sale (AFS)	Securities not classified as HTM or trading	Fair value, with unrealized gains and losses excluded from earnings and reported in other comprehensive income

Purchase premiums and discounts are recognized in interest income using the interest method over the terms of the securities, identified as the call date as to premiums and maturity date as to discounts. Gains and losses on the sale of securities are recorded on the trade date and are determined using the specific identification method.

The Company uses a current expected credit loss ("CECL") model to estimate the allowance for credit losses on debt securities. For available-for-sale debt securities in an unrealized loss position, management first assesses whether it intends to sell, or it is more likely than not that it will be required to sell, the security before recovery of its amortized cost basis. If either of the criteria regarding intent or requirement to sell is met, the security's amortized cost basis is written down to fair value through income. For available-for-sale debt securities that do not meet the aforementioned criteria, the Company evaluates whether the decline in fair value has resulted from credit losses or other factors. In making this assessment, management considers the extent to which fair value is less than amortized cost, any changes to the rating of the security by a rating agency, and adverse conditions specifically related to the security, among other factors.

If this assessment indicates that a credit loss exists, the present value of cash flows expected to be collected from the security are compared to the amortized cost basis of the security. If the present value of cash flows expected to be collected is less than the amortized cost basis, a credit loss exists and an allowance for credit losses is recorded for the credit loss, limited by the amount that the fair value is less than the amortized cost basis. Any decline in fair value that has not been recorded through an allowance for credit losses is recognized in other comprehensive income, net of applicable taxes.

Amortized cost excludes accrued interest receivable, which is included in Accrued Interest Receivable on the consolidated balance sheets. At September 30, 2024 and June 30, 2024, accrued interest receivable on available for sale securities was $547,000 and $467,000, respectively, and is excluded from the estimate of credit losses.

Loans

Loans that management has the intent and ability to hold for the foreseeable future or until maturity or payoff are reported at their outstanding principal balances adjusted for unearned income, charge-offs, the allowance for credit losses and any unamortized deferred fees or costs on originated loans and unamortized premiums or discounts on purchased loans. For loans amortized at cost, interest income is accrued based on the unpaid principal balance. Loan origination fees, net of certain direct origination

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costs, as well as premiums and discounts, are deferred and amortized as a level yield adjustment over the respective term of the loan.

Accrued interest receivable on the Company’s loans, which is included in Accrued Interest Receivable on the consolidated balance sheets at September 30, 2024 and June 30, 2024 was $443,000 and $457,000, respectively, and is excluded from the estimate of credit losses.

The past due status of a loan is based on the contractual terms in the loan agreement. The accrual of interest on a loan is discontinued when the loan becomes 90 days delinquent or whenever management believes the borrower will be unable to make payments as they become due. When loans are placed on nonaccrual status or charged off, all unpaid accrued interest is reversed against interest income. The interest on these loans is subsequently accounted for on the cash basis if collection of the remaining recorded investment in the loan is still expected or using the cost-recovery method when collection of the remaining recorded investment is in doubt. Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured.

For loans amortized at cost, interest income is accrued based on the unpaid principal balance. Loan origination fees, net of certain direct origination costs, as well as premiums and discounts, are deferred and amortized as a level yield adjustment over the respective term of the loan.

For all loan portfolio segments except residential and consumer loans, the Bank promptly charges-off loans, or portions thereof, when available information confirms that specific loans are uncollectible based on information that includes, but is not limited to, (1) the deteriorating financial condition of the borrower, (2) declining collateral values, and/or (3) legal action, including bankruptcy, that impairs the borrower’s ability to adequately meet its obligations. For impaired loans that are considered to be solely collateral dependent, a partial charge-off is recorded when a loss has been confirmed by an updated appraisal or other appropriate valuation of the collateral.

The Bank charges-off residential and consumer loans, or portions thereof, when the Bank reasonably determines the amount of the loss. The Bank adheres to delinquency thresholds established by applicable regulatory guidance to determine the charge-off timeframe for these loans. Loans at these delinquency thresholds for which the Bank can clearly document that the loan is both well-secured and in the process of collection, such that collection will occur regardless of delinquency status, need not be charged off.

For all classes, all interest accrued but not collected for loans that are placed on nonaccrual or charged off is reversed against interest income. The interest on these loans is accounted for on the cash basis or cost recovery method, until qualifying for return to accrual. Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured. Nonaccrual loans are returned to accrual status when, in the opinion of management, the financial position of the borrower indicates there is no longer any reasonable doubt as to the timely collection of interest or principal. The Bank requires a period of satisfactory performance of not less than six months before returning a nonaccrual loan to accrual status.

When cash payments are received on impaired loans in each loan class, the Bank records the payment as interest income unless collection of the remaining recorded principal amount is doubtful, at which time payments are used to reduce the principal balance of the loan.

Allowance for Credit Losses

The allowance for credit losses on loans is a valuation allowance that is deducted from the loans' amortized cost basis to present the net amount expected to be collected on the Company's loan portfolio. The allowance for credit losses on loans is established through provisions for credit losses charged against earnings. When available information confirms that specific loans, or portions thereof, are uncollectible, these amounts are charged against the allowance for credit losses on loans, and subsequent recoveries, if any, are credited to the allowance for credit losses on loans.

The Company uses a current expected credit loss ("CECL") model to estimate the allowance for credit losses on loans. The CECL model considers historical loss rates and other qualitative adjustments, as well as a new forward-looking component that considers reasonable and supportable forecasts over the expected life of each loan. To develop the allowance for credit losses on

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loans estimate under the CECL model, the Company segments the loan portfolio into loan pools based on loan type and similar credit risk elements; performs an individual evaluation of certain collateral dependent and other credit-deteriorated loans; calculates the historical loss rates for the segmented loan pools; applies the loss rates over the calculated life of the collectively evaluated loan pools; adjusts for forecasted macro-level economic conditions and other anticipated changes in credit quality; and determines qualitative adjustments based on factors and conditions unique to the Company's loan portfolio.

Under the CECL model, loans that do not share similar risk characteristics with loans in their respective pools are individually evaluated for expected credit losses and are excluded from the collectively evaluated loan credit loss estimates. Management individually evaluates nonaccrual loans and other loans with evidence of credit deterioration. For loans individually evaluated, a specific reserve is estimated based on either the fair value of collateral or the discounted value of expected future cash flows.

A loan is considered to be collateral dependent when, based upon management's assessment, the borrower is experiencing financial difficulty and repayment is expected to be provided substantially through the operation or sale of the collateral. For collateral dependent loans, expected credit losses are based on the fair value of the collateral as of the date of the consolidated balance sheet, with consideration for estimated selling costs if satisfaction of the loan depends on the sale of the collateral.

Management evaluates all collectively evaluated loan pools using the weighted average remaining life ("WARM") methodology. The WARM methodology applies calculated quarterly net loss rates to collectively evaluated loan pools on a periodic basis based on the estimated remaining life of each pool. The estimated losses under the remaining life methodology are then adjusted for qualitative factors deemed appropriate by management.

The estimated remaining life of each pool is determined using annual, pool-based attrition measurements using the Company's loan-level historical data. The Company's historical call report data is utilized for historical loss rate calculations, and the lookback period for each collectively evaluated loan pool is determined by management based upon management’s evaluation of what historical data is most reflective indicator of expected losses. Forecasted historical loss rates are calculated using the Company's historical data based on the lookback, forecast, and reversion period inputs by management. Management elected to utilize an 8-quarter forecast period, with immediate reversion to historical losses after the forecast period.

The quantitative analysis described above is supplemented with other qualitative factors based on the risks present for each collectively evaluated loan pool. These qualitative factors include: changes in lending policies and practices; changes in international, national, regional, and local business conditions; changes in the nature and volume of the portfolio and in terms of loans; changes in lending staff; changes in the volume and severity of past due loans; changes in the quality of the Company’s loan review system; changes in the value of underlying collateral; existence and effect of any concentrations of credit risk and changes in the levels of concentrations; and the effect of other external factors such as competition.

In addition to the allowance for credit losses on loans, the Company maintains a reserve for unfunded loan commitments at a level that management believes is adequate to absorb estimated probable credit losses over the contractual terms of the Company's noncancellable loan commitments. The reserve for unfunded commitments, which is included in Accrued interest payable and other liabilities on the accompanying consolidated balance, is established through provisions for credit losses charged against earnings.

Unfunded loan commitments are segmented into the same pools used for estimating the allowance for credit losses on loans. Estimated credit losses on unfunded loan commitments are based on the same methodology, inputs, and assumptions used to estimate credit losses on collectively evaluated loans, adjusted for estimated funding probabilities. The estimated funding probabilities represent management's estimate of the amount of the current unfunded loan commitment that will be funded over the remaining contractual life of the commitment and is based on historical data, when available, or as determined by management when historical data is not available.

The Company may modify loans to borrowers experiencing financial difficulty and grant certain concessions that include principal forgiveness, a term extension, an other-than-insignificant payment delay, an interest rate reduction, or a combination of these concessions. An assessment of whether the borrower is experiencing financial difficulty is made at the time of the loan modification. Upon the Company's determination that a modified loan (or portion of a loan) has subsequently been deemed uncollectible, the loan (or portion of the loan) is written off. Therefore, the amortized cost basis of the loan is reduced by the uncollectible amount and the allowance for credit losses is adjusted by the same amount.

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Note 2:Recent Accounting Pronouncements

Accounting Standards Updates Issued, but Not Adopted

Income Taxes: In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. The amendments in this ASU add specific requirements for income tax disclosures to improve transparency and decision usefulness. The guidance in ASU 2023-09 requires that public business entities disclose specific categories in the income tax rate reconciliation and provide additional qualitative information for reconciling items that meet a quantitative threshold. In addition, the amendments in ASU 2023-09 require that all entities disclose the amount of income taxes paid disaggregated by federal, state, and foreign taxes and disaggregated by individual jurisdictions. The ASU also includes other disclosure amendments related to the disaggregation of income tax expense between federal, state and foreign taxes. For public business entities, the amendments in this update are effective for annual periods beginning after December 15, 2024. Early adoption is permitted for annual financial statements that have not yet been issued or made available for issuance. The amendments in this update should be applied on a prospective basis and retrospective application is permitted.

Segment Reporting: In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. These amendments require, among other things, that a public entity that has a single reportable segment provide all the disclosures required by the amendments in this ASU and all existing segment disclosures in Topic 208. This ASU is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted. A public entity should apply the amendments retrospectively to all periods presented in the financial statements.

Note 3:Debt Securities

Debt securities held by the Company generally are classified and recorded in the financial statements as available for sale, with unrealized gains and losses excluded from earnings and reported in other comprehensive income (loss).

The amortized cost and fair values, together with gross unrealized gains and losses of securities, are as follows:


			Gross		Gross
	Amortized		Unrealized		Unrealized		Approximate
	Cost		Gains		Losses		Fair Value

	(Unaudited)
Available-for-sale Securities:
September 30, 2024
U.S. Government agencies	$	5,000,000	$	—	$	155,410	$	4,844,590
Mortgage-backed Government
Sponsored Enterprises (GSEs)		28,324,751		58,379		1,303,536		27,079,594
Collateralized mortgage obligations (CMOs)		128,649,489		587,641		465,397		128,771,733
Subordinated debt		2,750,000		—		181,870		2,568,130
State and political subdivisions		4,545,278		8,522		581,077		3,972,723
	$	169,269,518	$	654,542	$	2,687,290	$	167,236,770

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			Gross		Gross
	Amortized		Unrealized		Unrealized		Approximate
	Cost		Gains		Losses		Fair Value
Available-for-sale Securities:
June 30, 2024
U.S. Government agencies	$	6,000,000	$	—	$	285,910	$	5,714,090
Mortgage-backed Government
Sponsored Enterprises (GSEs)		29,387,507		49,792		1,676,887		27,760,412
Collateralized mortgage obligations (CMOs)		99,668,482		293,565		459,194		99,502,853
Subordinated debt		2,750,000		—		212,045		2,537,955
State and political subdivisions		4,548,588		—		718,946		3,829,642
	$	142,354,577	$	343,357	$	3,352,982	$	139,344,952

The amortized cost and fair value of available-for-sale securities at September 30, 2024, by contractual maturity, are shown below. Expected maturities will differ from contractual maturities because issuers may have the right to call or prepay obligations with or without call or prepayment penalties:


	September 30, 2024
	Available-for-sale
	Amortized		Fair
	Cost		Value
Within one year	$	—	$	—
One to five years		6,401,551		6,187,632
Five to ten years		4,822,519		4,312,111
After ten years		1,071,208		885,700
		12,295,278		11,385,443
Mortgage-backed GSE's and CMO's		156,974,240		155,851,327
Totals	$	169,269,518	$	167,236,770

The carrying value of securities pledged as collateral, to secure public deposits and for other purposes, was $115,552,000 and $54,822,000 at September 30, 2024 and June 30, 2024, respectively.

During the three months ended September 30, 2024, the Company had no sales of available for sale securities. Proceeds from sales of securities totaled $2,989,000 during the three months ended September 30, 2023. Such sales resulted in realized losses of $2,000.

Certain investments in debt securities are reported in the financial statements at an amount less than their historical cost. Total fair value of these investments at September 30, 2024 and June 30, 2024 was $87,405,000 and $85,595,000, respectively, which is approximately 52 percent and 61 percent, respectively, of the fair value of the Company’s total investment portfolio. Management believes that all unrealized losses at September 30, 2024 and June 30, 2024 resulted from temporary changes in interest rates and current market conditions and not a result of credit deterioration.

Information related to unrealized losses in the investment portfolio as of September 30, 2024 and June 30, 2024 is summarized as follows:


	September 30, 2024
	Less than 12 Months				12 Months or More				Total
	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
Description of Securities	Value		Losses		Value		Losses		Value		Losses
U.S. Government agencies	$	—	$	—	$	4,844,590	$	155,410	$	4,844,590	$	155,410
Mortgage-backed Government
Sponsored Enterprises (GSEs)		1,095,060		515		12,277,640		1,303,021		13,372,700		1,303,536
Collateralized mortgage obligations		58,582,412		405,497		4,537,772		59,900		63,120,184		465,397
Subordinated debt		1,688,750		61,250		879,380		120,620		2,568,130		181,870
State and political subdivisions		—		—		3,499,077		581,077		3,499,077		581,077
Total available-for-sale securities	$	61,366,222	$	467,262	$	26,038,459	$	2,220,028	$	87,404,681	$	2,687,290

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	June 30, 2024
	Less than 12 Months				12 Months or More				Total
	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
Description of Securities	Value		Losses		Value		Losses		Value		Losses
U.S. Government agencies	$	—	$	—	$	5,714,090	$	285,910	$	5,714,090	$	285,910
Mortgage-backed Government
Sponsored Enterprises (GSEs)		2,910,227		3,516		13,077,539		1,673,371		15,987,766		1,676,887
Collateralized mortgage obligations		55,863,004		418,582		1,662,871		40,612		57,525,875		459,194
Subordinated debt		1,688,750		61,250		849,205		150,795		2,537,955		212,045
State and political subdivisions		—		—		3,829,642		718,946		3,829,642		718,946
Total available-for-sale securities	$	60,461,981	$	483,348	$	25,133,347	$	2,869,634	$	85,595,328	$	3,352,982

U.S. Government Agencies and State and Political Subdivisions and Subordinated Debt

Unrealized losses on these securities have not been recognized into income because the issuers’ bonds are of high credit quality, values have only been impacted by changes in interest rates since the securities were purchased, and the Company has the intent and ability to hold the securities for the foreseeable future. The fair value is expected to recover as the bonds approach the maturity date.

Mortgage-backed GSE’s, Collateralized Mortgage Obligations

Unrealized losses on these securities have not been recognized into income because the unrealized losses were caused by changes in interest rates and illiquidity, and not credit quality. The Company has the intent and ability to hold the securities for the foreseeable future. The fair value is expected to recover as the bonds approach the maturity date and the Company expects to recover the amortized cost basis over the term of the securities.

Note 4:Loans and Allowance for Credit Losses

Categories of loans at September 30, 2024 and June 30, 2024 include:


	September 30,		June 30,
	2024		2024
		(Unaudited)
Real estate loans:
Commercial	$	20,100,372	$	19,724,941
Residential		72,230,262		69,826,726
Multifamily		648,379		659,257
Agricultural		4,205,003		4,213,660
Construction and land		22,483,544		17,644,710
Home equity line of credit (HELOC)		1,838,190		1,622,877
Commercial and industrial		13,927,934		14,879,004
Consumer		1,022,243		955,415
Total loans		136,455,927		129,526,590
Less:
Undisbursed loans in process		1,457,103		2,222,582
Net deferred loan fees		107,129		139,947
Allowance for credit losses		838,561		772,969
Net loans	$	134,053,134	$	126,391,092

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The following tables present the activity in the allowance for credit losses based on portfolio segment for the three months ended September 30, 2024 and 2023.


	Balance		Provision (credit)						Balance
	June 30, 2024		for loan losses		Charge-offs		Recoveries		September 30, 2024

	(Unaudited)
Real estate loans:
Commercial	$	206,959	$	5,518	$	—	$	—	$	212,477
Residential		174,613		6,680		—		—		181,293
Multifamily		1,275		(21)		—		—		1,254
Agricultural		12,161		(25)		—		—		12,136
Construction and land		190,594		63,300		—		—		253,894
HELOC		3,051		405		—		—		3,456
Commercial and industrial		183,011		(11,208)		—		—		171,803
Consumer		1,305		943		—		—		2,248
Total	$	772,969	$	65,592	$	—	$	—	$	838,561

Unfunded loan commitments and letters of credit	$	176,353	$	23,053	$	—	$	—	$	199,406


	Balance		Adoption of		Provision (credit)						Balance
	June 30, 2023		ASC 326		for loan losses		Charge-offs		Recoveries		September 30, 2023

	(Unaudited)
Real estate loans:
Commercial	$	27,379	$	(2,203)	$	15,316	$	—	$	—	$	40,492
Residential		167,714		41,930		4,930		—		—		214,574
Multifamily		1,786		(9)		(20)		—		—		1,757
Agricultural		17,091		(1,196)		(104)		—		—		15,791
Construction and land		12,491		10,144		50,369		—		—		73,004
HELOC		34,779		(33,888)		362		—		—		1,253
Commercial and industrial		882		31,562		58,004		—		—		90,448
Consumer		1,300		455		165		—		—		1,920
Total	$	263,422	$	46,795	$	129,022	$	—	$	—	$	439,239

Unfunded loan commitments and letters of credit	$	—	$	20,503	$	(357)	$	—	$	—	$	20,146

The reserve for unfunded loan commitments is included in accrued interest payable and other liabilities on the accompanying consolidated balance sheets.

The Company has adopted a standard loan grading system for all non-residential real estate loans loans. Loan grades are numbered 1 through 8. Grades 1 through 3 are considered satisfactory grades. The grade of 4, Monitor, represents loans requiring more than normal attention. The grade of 5, Special Mention, represents loans of lower quality and is considered criticized. The grades of 6, or Substandard, and 7, Doubtful, refer to loans that are classified.

Pass (1-3) Loans of reasonable credit strength and repayment ability providing a satisfactory credit risk.

Monitor (4)

Loans requiring more than normal attention resulting from underwriting weaknesses as to repayment terms, loan structure, financial and/or documentation exceptions.

Special Mention (5)

Loans which may include the characteristics of the Monitor classification, problems that need to be addressed by both the lender and the borrower.

Substandard (6)

Loans which may include the characteristics of the Special Mention classification, but also reflects financial and other problems that might result in some loss at a future date and/or reliance upon collateral for ultimate collection.

Doubtful (7) Loans for which some loss is anticipated, but the timing and amount of the loss is not definite.

Loss (8) Loans considered non-bankable assets which may or may not have some salvage value.

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Internally prepared loan gradings for commercial loans are updated at least annually. Residential real estate and hom equity lines of credit are generally evaluated based on whether or not the loan is performing according to the contractual terms of the loans as of the consolidated balance sheet date.

Risk characteristics of each loan portfolio segment are described as follows:

Commercial Real Estate

These loans include commercial real estate and residential real estate secured by property with five or more units. The main risks are changes in the value of the collateral, ability of borrowers to collect rents, vacancy and changes in the tenants’ employment status. Management specifically considers unemployment and changes in real estate values in the Company’s market area.

Residential Real Estate

These loans include first liens and junior liens on 1-4 family residential real estate (both owner and non-owner occupied). The main risks for these loans are changes in the value of the collateral and stability of the local economic environment and its impact on the borrowers’ employment. Management specifically considers unemployment and changes in real estate values in the Company’s market area.

Multifamily

These loans include loans on residential real estate secured by property with five or more units. The main risks are changes in the value of collateral, ability of borrowers to collect rents, vacancy and changes in the tenants’ employment status. Management specifically considers unemployment and changes in real estate values in the Company’s market area.

Agriculture Real Estate

These loans include loans on farm ground, vacant land for development and loans on commercial real estate. The main risks are changes in the value of the collateral and changes in the economy or borrowers’ business operations. Management specifically considers unemployment and changes in real estate values in the Company’s market area.

Construction and Land Real Estate

These loans include construction loans for 1-4 family residential and commercial properties (both owner and non-owner occupied) and first liens on land. The main risks for construction loans include uncertainties in estimating costs of construction and in estimating the market value of the completed project. The main risks for land loans are changes in the value of the collateral and stability of the local economic environment. Management specifically considers unemployment and changes in real estate values in the Company's market area.

HELOC

These loans are generally secured by owner-occupied 1-4 family residences. The main risks for these loans are changes in the value of the collateral and stability of the local economic environment and its impact on the borrowers’ employment. Management specifically considers unemployment and changes in real estate values in the Company’s market area.

Commercial and Industrial

The commercial and industrial portfolio includes loans to commercial customers for use in financing working capital needs, equipment purchases and expansions. The loans in this category are repaid primarily from the cash flow of a borrower’s principal business operation. Credit risk in these loans is driven by creditworthiness of the borrower and the economic conditions that impact the cash flow stability from business operations. Commercial and industrial loans considered collateral dependent are primarily secured by accounts receivable, inventory, equipment and real estate.

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Consumer Loans

These loans include vehicle loans, share loans and unsecured loans. The main risks for these loans are the depreciation of the collateral values (vehicles) and the financial condition of the borrowers. Major employment changes are specifically considered by management. Some consumer loans are unsecured and have no underlying collateral.

The following shows the amortized cost of loans, segregated by portfolio segment, credit quality rating and year of origination as of September 30, 2024, and gross charge-offs for the three months ended September 30, 2024:


													Revolving Loans
													Amortized
	2025		2024		2023		2022		2021		Prior		Cost Basis		Total
September 30, 2024
Commercial
Pass (1-3)	$	398,443	$	13,925,856	$	1,096,295	$	1,436,646	$	323,425	$	2,202,697	$	717,010	$	20,100,372
Monitor (4)		—		—		—		—		—		—		—		—
Special Mention (5)		—		—		—		—		—		—		—		—
Substandard (6)		—		—		—		—		—		—		—		—
Doubtful (7)		—		—		—		—		—		—		—		—
Total commercial	$	398,443	$	13,925,856	$	1,096,295	$	1,436,646	$	323,425	$	2,202,697	$	717,010	$	20,100,372
Gross charge-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Multifamily
Pass (1-3)	$	—	$	—	$	—	$	648,379	$	—	$	—	$	—	$	648,379
Monitor (4)		—		—		—		—		—		—		—		—
Special Mention (5)		—		—		—		—		—		—		—		—
Substandard (6)		—		—		—		—		—		—		—		—
Doubtful (7)		—		—		—		—		—		—		—		—
Total multifamily	$	—	$	—	$	—	$	648,379	$	—	$	—	$	—	$	648,379
Gross charge-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Agricultural
Pass (1-3)	$	—	$	626,675	$	1,073,425	$	826,554	$	620,280	$	842,848	$	—	$	3,989,782
Monitor (4)		—		—		—		—		—		215,221		—		215,221
Special Mention (5)		—		—		—		—		—		—		—		—
Substandard (6)		—		—		—		—		—		—		—		—
Doubtful (7)		—		—		—		—		—		—		—		—
Total agricultural	$	—	$	626,675	$	1,073,425	$	826,554	$	620,280	$	1,058,069	$	—	$	4,205,003
Gross charge-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Construction and land
Pass (1-3)	$	—	$	17,441,698	$	4,988,188	$	18,130	$	—	$	—	$	—	$	22,448,016
Monitor (4)		—		—		—		—		—		—		—		—
Special Mention (5)		—		—		—		—		—		—		—		—
Substandard (6)		—		—		—		—		—		35,528		—		35,528
Doubtful (7)		—		—		—		—		—		—		—		—
Total construction and land	$	—	$	17,441,698	$	4,988,188	$	18,130	$	—	$	35,528	$	—	$	22,483,544
Gross charge-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Commercial and industrial
Pass (1-3)	$	858,960	$	12,442,462	$	142,896	$	—	$	—	$	—	$	—	$	13,444,318
Monitor (4)		483,616		—		—		—		—		—		—		483,616
Special Mention (5)		—		—		—		—		—		—		—		—
Substandard (6)		—		—		—		—		—		—		—		—
Doubtful (7)		—		—		—		—		—		—		—		—
Total commercial and industrial	$	1,342,576	$	12,442,462	$	142,896	$	—	$	—	$	—	$	—	$	13,927,934
Gross charge-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Consumer
Pass (1-3)	$	158,168	$	466,926	$	250,739	$	119,420	$	15,386	$	11,604	$	—	$	1,022,243
Monitor (4)		—		—		—		—		—		—		—		—
Special Mention (5)		—		—		—		—		—		—		—		—
Substandard (6)		—		—		—		—		—		—		—		—
Doubtful (7)		—		—		—		—		—		—		—		—
Total consumer	$	158,168	$	466,926	$	250,739	$	119,420	$	15,386	$	11,604	$	—	$	1,022,243
Gross charge-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Residential
Performing	$	3,898,446	$	9,731,379	$	5,654,749	$	14,599,595	$	16,233,444	$	21,432,421	$	153,922	$	71,703,956
Nonperforming		—		—		144,512		46,158		112,189		223,447		—		526,306
Total residential	$	3,898,446	$	9,731,379	$	5,799,261	$	14,645,753	$	16,345,633	$	21,655,868	$	153,922	$	72,230,262

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Gross charge-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
HELOC
Performing	$	302,040	$	1,111,043	$	49,834	$	188,967	$	43,177	$	143,129	$	—	$	1,838,190
Nonperforming		—		—		—		—		—		—		—		—
Total HELOC	$	302,040	$	1,111,043	$	49,834	$	188,967	$	43,177	$	143,129	$	—	$	1,838,190
Gross charge-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—

The following shows the amortized cost of loans, segregated by portfolio segment, credit quality rating and year of origination as of June 30, 2024, and gross charge-offs for the year ended June 30, 2024:


													Revolving Loans
													Amortized
	2024		2023		2022		2021		2020		Prior		Cost Basis		Total
June 30, 2024
Commercial
Pass (1-3)	$	14,580,611	$	1,093,719	$	1,456,599	$	336,694	$	295,178	$	1,962,140	$	—	$	19,724,941
Monitor (4)		—		—		—		—		—		—		—		—
Special Mention (5)		—		—		—		—		—		—		—		—
Substandard (6)		—		—		—		—		—		—		—		—
Doubtful (7)		—		—		—		—		—		—		—		—
Total commercial	$	14,580,611	$	1,093,719	$	1,456,599	$	336,694	$	295,178	$	1,962,140	$	—	$	19,724,941
Gross charge-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Multifamily
Pass (1-3)	$	—	$	—	$	659,257	$	—	$	—	$	—	$	—	$	659,257
Monitor (4)		—		—		—		—		—		—		—		—
Special Mention (5)		—		—		—		—		—		—		—		—
Substandard (6)		—		—		—		—		—		—		—		—
Doubtful (7)		—		—		—		—		—		—		—		—
Total multifamily	$	—	$	—	$	659,257	$	—	$	—	$	—	$	—	$	659,257
Gross charge-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Agricultural
Pass (1-3)	$	627,343	$	1,087,542	$	827,774	$	615,048	$	278,000	$	566,671	$	—	$	4,002,378
Monitor (4)		—		—		—		—		—		211,282		—		211,282
Special Mention (5)		—		—		—		—		—		—		—		—
Substandard (6)		—		—		—		—		—		—		—		—
Doubtful (7)		—		—		—		—		—		—		—		—
Total agricultural	$	627,343	$	1,087,542	$	827,774	$	615,048	$	278,000	$	777,953	$	—	$	4,213,660
Gross charge-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Construction and land
Pass (1-3)	$	12,732,392	$	4,855,874	$	20,212	$	—	$	—	$	—	$	—	$	17,608,478
Monitor (4)		—		—		—		—		—		—		—		—
Special Mention (5)		—		—		—		—		—		—		—		—
Substandard (6)		—		—		—		—		—		36,232		—		36,232
Doubtful (7)		—		—		—		—		—		—		—		—
Total construction and land	$	12,732,392	$	4,855,874	$	20,212	$	—	$	—	$	36,232	$	—	$	17,644,710
Gross charge-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Commercial and industrial
Pass (1-3)	$	14,429,210	$	161,367	$	—	$	288,427	$	—	$	—	$	—	$	14,879,004
Monitor (4)		—		—		—		—		—		—		—		—
Special Mention (5)		—		—		—		—		—		—		—		—
Substandard (6)		—		—		—		—		—		—		—		—
Doubtful (7)		—		—		—		—		—		—		—		—
Total commercial and industrial	$	14,429,210	$	161,367	$	—	$	288,427	$	—	$	—	$	—	$	14,879,004
Gross charge-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Consumer
Pass (1-3)	$	493,671	$	287,793	$	132,845	$	17,597	$	11,714	$	11,795	$	—	$	955,415
Monitor (4)		—		—		—		—		—		—		—		—
Special Mention (5)		—		—		—		—		—		—		—		—
Substandard (6)		—		—		—		—		—		—		—		—
Doubtful (7)		—		—		—		—		—		—		—		—
Total consumer	$	493,671	$	287,793	$	132,845	$	17,597	$	11,714	$	11,795	$	—	$	955,415
Gross charge-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Residential
Performing	$	9,835,966	$	5,704,514	$	14,362,807	$	16,673,325	$	7,723,487	$	14,614,432	$	410,032	$	69,324,563
Nonperforming		—		145,011		46,674		—		—		310,478		—		502,163
Total residential	$	9,835,966	$	5,849,525	$	14,409,481	$	16,673,325	$	7,723,487	$	14,924,910	$	410,032	$	69,826,726

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Gross charge-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
HELOC
Performing	$	1,231,286	$	34,140	$	145,393	$	39,737	$	51,479	$	120,842	$	—	$	1,622,877
Nonperforming		—		—		—		—		—		—		—		—
Total HELOC	$	1,231,286	$	34,140	$	145,393	$	39,737	$	51,479	$	120,842	$	—	$	1,622,877
Gross charge-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—

The following tables present the Company’s loan portfolio aging analysis of the recorded investment in loans as of September 30, 2024 and June 30, 2024:


	September 30, 2024
					Greater Than								Total Loans >
	30-59 Days		60-89 Days		90 Days		Total				Total Loans		90 Days &
	Past Due		Past Due		Past Due		Past Due		Current		Receivable		Accruing

	(Unaudited)
Real estate loans:
Commercial	$	220,830	$	—	$	—	$	220,830	$	19,879,542	$	20,100,372	$	—
Residential		2,016,868		376,770		239,925		2,633,563		69,596,699		72,230,262		—
Multifamily		—		—		—		—		648,379		648,379		—
Agricultural		—		—		—		—		4,205,003		4,205,003		—
Construction and land		—		—		—		—		22,483,544		22,483,544		—
HELOC		11,821		—		—		11,821		1,826,369		1,838,190		—
Commercial and industrial		—		—		—		—		13,927,934		13,927,934		—
Consumer		40,919		—		41,716		82,635		939,608		1,022,243		—
Total	$	2,290,438	$	376,770	$	281,641	$	2,948,849	$	133,507,078	$	136,455,927	$	—


	June 30, 2024
					Greater Than								Total Loans >
	30-59 Days		60-89 Days		90 Days		Total				Total Loans		90 Days &
	Past Due		Past Due		Past Due		Past Due		Current		Receivable		Accruing
Real estate loans:
Commercial	$	—	$	—	$	—	$	—	$	19,724,941	$	19,724,941	$	—
Residential		559,332		87,754		71,729		718,815		69,107,911		69,826,726		—
Multifamily		—		—		—		—		659,257		659,257		—
Agricultural		—		—		—		—		4,213,660		4,213,660		—
Construction and land		36,232		—		—		36,232		17,608,478		17,644,710		—
HELOC		—		—		—		—		1,622,877		1,622,877		—
Commercial and industrial		—		—		—		—		14,879,004		14,879,004		—
Consumer		1,528		3,522		—		5,050		950,365		955,415		—
Total	$	597,092	$	91,276	$	71,729	$	760,097	$	128,766,493	$	129,526,590	$	—

Information regarding collateral dependent loans as of September 30, 2024 and June 30, 2024 is as follows:


	As of September 30, 2024
							Related
	Real Estate		Other		Total		Allowance

	(Unaudited)
Real estate
Commercial	$	—	$	—	$	—	$	—
Residential		526,305		—		526,305		689
Multifamily		—		—		—		—
Agricultural		—		—		—		—
Construction and land		35,528		—		35,528		—
Home equity line of credit (HELOC)		—		—		—		—
Commercial and industrial		—		—		—		—
Consumer		—		41,716		41,716		887
Totals	$	561,833	$	41,716	$	603,549	$	1,576

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	As of June 30, 2024
							Related
	Real Estate		Other		Total		Allowance
Real estate
Commercial	$	—	$	—	$	—	$	—
Residential		502,163		—		502,163		—
Multifamily		—		—		—		—
Agricultural		—		—		—		—
Construction and land		36,232		—		36,232		—
Home equity line of credit (HELOC)		—		—		—		—
Commercial and industrial		—		—		—		—
Consumer		—		15,672		15,672		—
Totals	$	538,395	$	15,672	$	554,067	$	—

Information regarding nonaccrual loans as of September, 2024 and June 30, 2024 is as follows:


	As of September 30, 2024
											Amortized Cost
	Nonaccrual Loans		Nonaccrual Loans				Total Nonaccrual		Interest Income		Basis of Loans 90+
	With No Allowance		With an Allowance		Total Nonaccrual		Loans at Beginning		Recognized on		Days Past Due
	for Credit Losses		for Credit Losses		Loans		of Year		Nonaccrual Loans		Not on Nonaccrual
Real estate loans:
Commercial	$	—	$	—	$	—	$	—	$	—	$	—
Residential		414,116		112,189		526,305		502,163		—		—
Multifamily		—		—		—		—		—		—
Agricultural		—		—		—		—		—		—
Construction and land		35,528		—		35,528		36,232		—		—
Home equity line of credit (HELOC)		—		—		—		—		—		—
Commercial and industrial		—		—		—		—		—		—
Consumer		18,417		23,299		41,716		15,672		—		—
Total	$	468,061	$	135,488	$	603,549	$	554,067	$	—	$	—


	As of June 30, 2024
											Amortized Cost
	Nonaccrual Loans		Nonaccrual Loans				Total Nonaccrual		Interest Income		Basis of Loans 90+
	With No Allowance		With an Allowance		Total Nonaccrual		Loans at Beginning		Recognized on		Days Past Due
	for Credit Losses		for Credit Losses		Loans		of Year		Nonaccrual Loans		Not on Nonaccrual
Real estate loans:
Commercial	$	—	$	—	$	—	$	—	$	—	$	—
Residential		502,163		—		502,163		304,096		—		—
Multifamily		—		—		—		—		—		—
Agricultural		—		—		—		—		—		—
Construction and land		36,232		—		36,232		—		—		—
Home equity line of credit (HELOC)		—		—		—		—		—		—
Commercial and industrial		—		—		—		—		—		—
Consumer		15,672		—		15,672		—		—		—
Total	$	554,067	$	—	$	554,067	$	304,096	$	—	$	—

During the three months ended September 30, 2024 and 2023, respectively, there were no significant modifications of loans to borrowers who were experiencing financial difficulty. The Company did not provide any modifications under these circumstances to borrowers.

Note 5:Capital and Regulatory Matters

Prior to September 30, 2024, the Bank had a community bank leverage ratio (CBLR) framework election in effect. Effective for the quarter ended September 30, 2024, the Bank opted out of that election.

The Bank is subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the financial statements of the Company and the Bank. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Company must meet specific capital guidelines that involve quantitative measures of the Company’s assets, liabilities and certain off-balance-sheet items as calculated under U.S.

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GAAP reporting requirements and regulatory capital standards. The Bank’s capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings and other factors. Furthermore, the Bank’s regulators could require adjustments to regulatory capital not reflected in these financial statements.

Quantitative measures established by regulatory reporting standards to ensure capital adequacy require the Bank to maintain minimum amounts and ratios (set forth in the table below) of total and Tier 1 capital to risk-weighted assets, common equity Tier 1 capital to total risk-weighted assets and of Tier 1 capital to average assets. Management believes, as of September 30, 2024, that the Bank meets all capital adequacy requirements to which it is subject.

At September 30, 2024, the Bank was categorized as well capitalized under the regulatory framework for prompt corrective action. There are no conditions or events since the most recent notification that management believes have changed the Bank’s prompt corrective action category. The following table presents actual and required capital ratios for the Bank.


						To be Well Capitalized Under
	Actual					the Prompt Corrective Action Provision
(Dollars in thousands)	Amount		Ratio			Amount		Ratio
As of September 30, 2024
Common Equity Tier 1 Capital	$	32,446		18.59	%	$	11,346		>6.5	%
Tier 1 Risk-Based Capital		32,446		18.59			13,965		>8.0
Total Risk-Based Capital		33,484		19.18			17,456		>10.0
Tier 1 Leverage Capital		32,446		10.80			15,017		>5.0

On November 13, 2019, the federal regulators finalized and adopted a regulatory capital rule establishing a new community bank leverage ratio (CBLR), which became effective on January 1, 2020. The intent of the CBLR is to provide a simple alternative measure of capital adequacy for electing qualifying depository institutions and depository institution holding companies, as directed under the Economic Growth, Regulatory Relief, and Consumer Protection Act. If a qualifying depository institution, or depository institution holding company, elects to use such measure, such institution or holding company will be considered well capitalized if its ratio of Tier 1 capital to average total consolidated assets (i.e., leverage ratio) exceeds 9 percent, subject to a limited two quarter grace period, during which the leverage ratio cannot go 100 basis points below the then applicable threshold, and will not be required to calculate and report risk-based capital ratios. The Bank’s CBLR was 12.11 percent as of June 30, 2024. Management believes, as of June 30, 2024, that the Company met all capital adequacy requirements to which it is subject.

Note 6:

Disclosures about Fair Value of Assets and Liabilities

Fair value is the exchange price that would be received to sell an asset or paid to transfer a liability (exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants at the measurement date. Fair value measurements must maximize the use of observable inputs and minimize the use of unobservable inputs. There is a hierarchy of three levels of inputs that may be used to measure fair value:

Level 1

Quoted prices (unadjusted) for identical assets or liabilities in active markets that the entity has the ability to access as of the measurement date.

Level 2

Significant other observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.

Level 3

Significant unobservable inputs that reflect an entity’s own assumptions about the assumptions that market participants would use in pricing an asset or liability.

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Recurring Measurements

The following table presents the fair value measurements of assets recognized in the accompanying balance sheets measured at fair value on a recurring basis and the level within the fair value hierarchy in which the fair value measurements fall at September 30, 2024 and June 30, 2024:


			Fair Value Measurements Using
			Quoted Prices in				Significant
			Active Markets for		Significant Other		Unobservable
	Fair		Identical Assets		Observable Inputs		Inputs
	Value		(Level 1)		(Level 2)		(Level 3)
September 30, 2024
U.S. Government agencies	$	4,844,590	$	—	$	4,844,590	$	—
Mortgage-backed GSEs		27,079,594		—		27,079,594		—
Collateralized mortgage obligations		128,771,733		—		128,771,733		—
Subordinated debt		2,568,130		—		2,568,130		—
State and political subdivisions		3,972,723		—		3,972,723		—

June 30, 2024
U.S. Government agencies	$	5,714,090	$	—	$	5,714,090	$	—
Mortgage-backed GSEs		27,760,412		—		27,760,412		—
Collateralized mortgage obligations		99,502,853		—		99,502,853		—
Subordinated debt		2,537,955		—		2,537,955		—
State and political subdivisions		3,829,642		—		3,829,642		—

Following is a description of the valuation methodologies used for assets measured at fair value on a recurring basis and recognized in the accompanying balance sheets, as well as the general classification of such assets pursuant to the valuation hierarchy. There are no liabilities measured at fair value on a recurring basis. There have been no significant changes in the valuation techniques during the three months ended September 30, 2024 and for the year ended June 30, 2024.

Available-for-sale Securities

Where quoted market prices are available in an active market, securities are classified within Level 1 of the valuation hierarchy. If quoted market prices are not available, then fair values are estimated by using quoted prices of securities with similar characteristics or independent asset pricing services and pricing models, the inputs of which are market-based or independently sourced market parameters, including, but not limited to, yield curves, interest rates, volatilities, prepayments, defaults, cumulative loss projections and cash flows. Such securities are classified in Level 2 of the valuation hierarchy. In certain cases where Level 1 or Level 2 are not available, securities are classified within Level 3 of the hierarchy. The Company had no Level 3 securities.

Nonrecurring Measurements

At September 30, 2024, the Company had two loans measured at fair value with a carrying value of $134,000, which are classified within Level 3 of the fair value hierarchy. The fair values of the loans are estimated using third-party appraisals of the collateral, less estimated costs to sell. The Company had no assets or liabilities measured at fair value on a nonrecurring basis at June 30, 2024.

The estimated fair values of the Company’s financial instruments not carried at fair value on the consolidated balance sheets at September 30, 2024 and June 30, 2024 are as follows:

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	Carrying		Fair		Fair Value Measurements Using
	Value		Value		(Level 1)		(Level 2)		(Level 3)
September 30, 2024 (Unaudited)
Financial assets:
Cash and due from banks	$	4,071,788	$	4,071,788	$	4,071,788	$	—	$	—
Loans, net		134,053,134		126,686,134		—		—		126,686,134
Stock in correspondent banks		1,057,600		1,057,600		—		1,057,600		—
Accrued interest receivable		1,025,188		1,025,188		1,025,188		—		—

Financial liabilities:
Deposits		245,137,246		246,484,489		89,745,489		—		156,739,000
Borrowings		32,700,000		32,634,000		—		—		32,634,000
Accrued interest payable		921,419		921,419		921,419		—		—

June 30, 2024
Financial assets:
Cash and due from banks	$	31,630,525	$	31,630,525	$	31,630,525	$	—	$	—
Loans, net		126,391,092		115,890,092		—		—		115,890,092
Stock in correspondent banks		2,195,900		2,195,900		—		2,195,900		—
Accrued interest receivable		961,856		961,856		961,856		—		—

Financial liabilities:
Deposits		209,310,330		209,243,722		73,959,722		—		135,284,000
Borrowings		62,000,000		61,812,000		—		—		61,812,000
Accrued interest payable		778,831		778,831		778,831		—		—

Limitations: Fair value estimates are made at a specific point in time, based on relevant market information and information about the financial instrument. These estimates do not reflect any premium or discount that could result from offering for sale at one time the Company’s entire holdings of a particular financial instrument. Fair value estimates may not be realizable in an immediate settlement of the instrument. In some instances, there are no quoted market prices for the Company’s various financial instruments, in which case fair values may be based on estimates using present value or other valuation techniques, or based on judgments regarding future expected loss experience, current economic conditions, risk characteristic of the financial instruments, or other factors. Those techniques are significantly affected by the assumptions used, including the discount rate and estimate of future cash flows. Subsequent changes in assumptions could significantly affect the estimates.

Note 7:Commitments

Commitments to originate loans are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since a portion of the commitments may expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. Each customer’s creditworthiness is evaluated on a case-by-case basis. The amount of collateral obtained, if deemed necessary, is based on management’s credit evaluation of the counterparty. Collateral held varies, but may include accounts receivable, inventory, property, plant and equipment, commercial real estate and residential real estate.

Lines of credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Lines of credit generally have fixed expiration dates. Since a portion of the line may expire without being drawn upon, the total unused lines do not necessarily represent future cash requirements. Each customer’s creditworthiness is evaluated on a case-by-case basis. The amount of collateral obtained, if deemed necessary, is based on management’s credit evaluation of the counterparty. Collateral held varies but may include accounts receivable, inventory, property, plant and equipment, commercial real estate and residential real estate.

Management uses the same credit policies in granting lines of credit as it does for on-balance-sheet instruments.

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Commitments outstanding at September 30, 2024 and June 30, 2024 were as follows:


	September 30,		June 30,
	2024		2024
Commitments to originate loans	$	3,090,078	$	2,766,266
Undisbursed balance of loans closed		31,843,488		30,314,342
Total	$	34,933,566	$	33,080,608

Note 8:Loss Per Share

Loss per common share for the three months ended September 30, 2024 and 2023 is as follows:


	Three Months Ended
	September 30,
	2024		2023
Basic
Net loss	$	(632,718)	$	(438,859)

Shares outstanding for basic (loss) earnings per share:
Weighted-average common shares outstanding		1,886,124		1,922,924
Less average unearned ESOP shares		(133,330)		(146,142)
Weighted-average shares - basic		1,752,794		1,776,782

Basic loss per share	$	(0.36)	$	(0.25)

Diluted
Effect of dilutive stock-based awards
Weighted-average shares outstanding - basic		1,752,794		1,776,782
Stock options		—		—
Restricted stock		3,430		—
Weighted average shares - assuming dilution		1,756,224		1,776,782

Diluted loss per share	$	(0.36)	$	(0.25)

Stock options for 10,000 shares of common stock, were not considered in computing diluted earnings per common share for the three months ended September 30, 2024, because they were antidilutive. There were no stock options or restricted stock awards outstanding as of September 30, 2023.

Note 9:Borrowings

Borrowed funds at September 30, 2024 and June 30, 2024, are summarized as follows:


	September 30,			June 30,
	2024			2024
	Rate	Amount		Rate	Amount
Advances from Federal Home Loan Bank of Cincinnati	5.46%	$	11,000,000	5.46%	$	38,500,000
Advances from Federal Reserve Bank of Cleveland	4.76%		21,700,000	4.76%		23,500,000
Total borrowings		$	32,700,000		$	62,000,000

All borrowings from the Federal Reserve Bank (“FRB”) of Cleveland under the Bank Term Funding Program (“BTFP”) and Federal Home Loan Bank (“FHLB”) of Cincinnati mature in fiscal year 2025. Interest payments are due at maturity for the advances from the FRB and are due monthly for FHLB advances.

Based on collateral pledged, consisting of all shares of FHLB stock owned and a blanket pledge of approximately $68,664,000 and $65,848,000 of its qualifying mortgage loans as of September 30, 2024 and June 30, 2024, respectively, the Company had $33,934,000 and $3,945,000 in available borrowing capacity with the FHLB as of September 30, 2024 and June 30, 2024, respectively.

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Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

General

Management’s discussion and analysis of financial condition and results of operations is intended to assist in understanding the Company’s consolidated financial condition at September 30, 2024 and consolidated results of operations for the three months ended September 30, 2024 and 2023. It should be read in conjunction with the unaudited consolidated financial statements and the related notes appearing in Part I, Item 1, of this Quarterly Report on Form 10-Q.

Cautionary Note Regarding Forward-Looking Statements

This quarterly report contains forward-looking statements, which can be identified by the use of words such as “estimate,” “project,” “believe,” “intend,” “anticipate,” “assume,” “plan,” “seek,” “expect,” “will,” “may,” “should,” “indicate,” “would,” “believe,” “contemplate,” “continue,” “target” and words of similar meaning. These forward-looking statements include, but are not limited to:

●

statements of our goals, intentions and expectations;

●

statements regarding our business plans, prospects, growth and operating strategies;

●

statements regarding the asset quality of our loan and investment portfolios; and

●

estimates of our risks and future costs and benefits.

These forward-looking statements are based on our current beliefs and expectations and are inherently subject to significant business, economic and competitive uncertainties and contingencies, many of which are beyond our control. In addition, these forward-looking statements are subject to assumptions with respect to future business strategies and decisions that are subject to change.

The following factors, among others, could cause actual results to differ materially from the anticipated results or other expectations expressed in the forward-looking statements:

●

general economic conditions, either nationally or in our market area, which are worse than expected;

●

inflation and changes in the interest rate environment that reduce our margins and yields, the fair value of our financial instruments, or our level of loan originations, or increase the level of defaults, losses and prepayments within our loan portfolio;

●

changes in the level and direction of loan delinquencies and write-offs and changes in estimates of the adequacy of the allowance for credit losses;

●

our ability to access cost-effective funding;

●

fluctuations in real estate values and in the conditions of the residential real estate, commercial real estate, and agricultural real estate markets;

●

our ability to control cost and expenses, particularly those associated with operating a publicly traded company;

●

demand for loans and deposits in our market area;

●

our ability to implement and change our business strategies;

●

competition among depository and other financial institutions;

●

adverse changes in the securities markets;

●

changes in laws or government regulations or policies affecting financial institutions, including changes in regulatory fees, capital requirements and insurance premiums;

●

changes in the quality or composition of our loan or investment portfolios;

●

technological changes that may be more difficult or expensive than expected;

●

the inability of third-party providers to perform as expected;

●

a failure or breach of our operational or information security systems or infrastructure, including cyberattacks;

●

our ability to manage market risk, credit risk and operational risk;

●

our ability to enter new markets successfully and capitalize on growth opportunities;

●

changes in consumer spending, borrowing and savings habits;

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●

changes in accounting policies and practices, as may be adopted by the bank regulatory agencies, the Financial Accounting Standards Board, the Securities and Exchange Commission or the Public Company Accounting Oversight Board;

●

our ability to retain key employees;

●

material weakness or significant deficiency in our internal controls over financial reporting;

●

our ability to control costs when hiring employees in a highly competitive environment; and

●

changes in the financial condition, results of operations or future prospects of issuers of securities that we own.

Because of these and a wide variety of other uncertainties, our actual future results may be materially different from the results indicated by these forward-looking statements.

Critical Accounting Policies and Use of Critical Accounting Estimates

Fair Value Measurements. The fair value of a financial instrument is defined as the amount at which the instrument could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale. Van Wert Federal estimates the fair value of a financial instrument and any related asset impairment using a variety of valuation methods. Where financial instruments are actively traded and have quoted market prices, quoted market prices are used for fair value. When the financial instruments are not actively traded, other observable market inputs, such as quoted prices of securities with similar characteristics, may be used, if available, to determine fair value. When observable market prices do not exist, we estimate fair value. These estimates are subjective in nature and imprecision in estimating these factors can impact the amount of gain or loss recorded.

Comparison of Financial Condition at September 30, 2024 and June 30, 2024

Total Assets. Total assets were $318.7 million at September 30, 2024, an increase of $7.4 million, or 2.4%, from June 30, 2024. The increase is part of the continued execution of the strategic plan by management to add higher yielding variable rate interest earning assets using fixed rate funding to offset the liability sensitive nature of the balance sheet. The increase was comprised mainly of $27.9 million in securities, $7.7 million in loans, offset by a decrease of $27.6 million in cash.

Cash and Due from Banks. Cash and due from banks decrease by $27.6 million, or -87.1%, to $4.1 million at September 30, 2024 from $31.6 million at June 30, 2024. The decrease was due primarily to the payoff of the overnight Cash Management Advance (“CMA”) line with FHLB at June 30, 2024.

Investment Securities. Investment securities increased $27.9 million, or 20.0%, to $167.2 million at September 30, 2024, from $139.3 million at June 30, 2024. Aggregate securities purchases of $34.9 million during the three months ended September 30, 2024, were partially offset by $8.2 million of calls, maturities and repayments, as well as a $977,000 increase in fair value of the securities over the period. The yield on investment securities was 5.9% for the three months ended September 30, 2024, compared to 4.9% for the three months ended September 30, 2023, reflecting the increase in market interest rates during the period, as well as the addition of higher yielding securities. The increase in investment securities is part of a forward-looking investment strategy to increase the number of variable rate investments financed by fixed rate deposit instruments, such as brokered certificates of deposits noted in the deposit section below, which will ultimately provide a more balanced interest rate risk profile. The increase is also part of an effort to more appropriately leverage the Company’s capital.

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The $977,000 increase in the fair value of the investment securities was primarily attributable to the variability in market interest rates. As market interest rates decrease, the fair value of the securities increases. The unrealized losses are recorded to shareholders’ equity, net of tax, as management has determined that there are no credit quality concerns with the issuers of the securities and there is no intent to sell the securities and, as a result, the fair value is expected to recover as the securities approach their maturity dates.

Net Loans. Net loans increased by $7.7 million, or 6.1%, to $134.1 million at September 30, 2024, from $126.4 million at June 30, 2024. During the three months ended September 30, 2024, loan originations totaled $6.1 million, comprised of $3.9 million of loans secured by one-to-four family residential real estate, $302,000 of HELOCs, $158,000 of consumer loans, $1.3 million of commercial and industrial loans, and $398,000 in commercial. Increases in loan balances reflect our strategy to grow our loan portfolio, continuing to focus on owner-occupied one-to-four family residential real estate loans, while increasing our emphasis on commercial real estate loans and commercial and industrial loans. Management intends to continue to pursue growth in these loan segments in future periods.

Deposits. Deposits increased by $35.8 million, or 17.1%, to $245.1 million at September 30, 2024 from $209.3 million at June 30, 2024. Core deposits (defined as all deposits other than brokered deposits) increased $18.9 million, or 15.1%, to $144.1 million at September 30, 2024 from $125.2 million at June 30, 2024. Brokered Certificates of deposit increased $22.3 million, or 26.5%, to $106.4 million at September 30, 2024 from $84.1 million at June 30, 2024.

Shareholders’ Equity. Shareholders’ equity increased $211,000, or 0.6%, to $36.8 million at September 30, 2024 from $36.5 million at June 30, 2024. Primarily a result of a net tax effect on unrealized gains on securities of $772,000, offset in part by a net loss of $633,000 for the three months ended September 30, 2024, which includes certain one-time expenses noted in the noninterest expense section below, and partially offset by ESOP shares committed to be released.

Average Balances and Yields. The following table sets forth average balance sheets, average yields and costs, and certain other information for the periods indicated. No tax-equivalent yield adjustments have been made, as the effects are immaterial. Average balances are calculated using month-end average balances, rather than daily average balances. We believe the use of month-end average balances is representative of our operations. Non-accrual loans are included in average balances only. Average yields include the effect of deferred fees, discounts, and premiums that are amortized or accreted to interest income or interest expense. Deferred loan fees are immaterial.

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	For the Three Months Ended September 30,
	2024							2023
	Average							Average
	Outstanding					Yield/		Outstanding					Yield/
	Balance			Interest		Rate		Balance			Interest		Rate

Interest-earning assets:
Loans	$	132,700		$	1,750	5.28	%	$	86,737		$	890	4.10	%
Investment securities		148,687			2,270	6.11			86,056			1,046	4.86
Interest-bearing deposits and other		9,467			123	5.20			14,328			145	4.05
Total interest-earning assets		290,854			4,143	5.70			187,121			2,081	4.45
Non-interest-earning assets		11,291							3,625
Allowance for loan losses		(806)							(351)
Total assets	$	301,339						$	190,395

Interest-bearing liabilities:
Interest-bearing demand	$	34,717		$	99	1.14	%	$	26,526		$	70	1.06	%
Savings and money market		48,800			286	2.34			40,072			77	0.77
Certificates of deposit		144,892			1,738	4.80			63,153			556	3.52
Total deposits		228,409			2,123	3.72			129,751			703	2.17
Borrowings		31,171			396	5.08			21,100			293	5.55
Total interest-bearing liabilities		259,580			2,519	3.88			150,851			996	2.64
Non-interest-bearing liabilities		4,313							1,532
Total liabilities		263,893							152,383
Equity		37,446							38,011
Total liabilities and equity	$	301,339						$	190,394

Net interest income				$	1,624						$	1,085
Net interest rate spread (1)						1.82	%						1.81	%
Net interest-earning assets (2)	$	31,274						$	36,270
Net interest margin (3)						2.23	%						2.32	%
Average interest-earning assets to interest-bearing liabilities		112.05	%						124.04	%

(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.

Comparison of Operating Results for the Three Months Ended September 30, 2024 and 2023

General. Net loss for the three months ended September 30, 2024 was $633,000, an increase of $194,000, or 44.2%, compared to net loss of $439,000 for the three months ended September 30, 2023. The increase in net loss was primarily due to a $842,000 increase in noninterest expense, which included certain one-time expenses as noted in the noninterest expense section below, that was partially offset by an increase in pre-provision net interest income of $539,000 as we continue to see incremental increases as a result of the addition of higher yielding investment securities and commercial loans. We continue to execute the strategic process of building out the balance sheet and adding organic interest earning assets funded with organic deposits.

Interest Income. Interest income increased $2.0 million, or 99.1%, to $4.1 million for the three months ended September 30, 2024, compared to $2.1 million for the three months ended September, 30, 2023. This increase was attributable to a $1.2 million, or 117.1%, increase in interest on investment securities and a $860,000, or 96.7%, increase in interest on loans, and is reflective of management’s strategy to continue to add higher yielding interest earnings assets to the balance sheet.

The average balance of loans during the three months ended September 30, 2024, increased by $46.0 million, or 53.0%, from the average balance for the three months ended September 30, 2023, while the average yield on loans increased by 117 basis points to 5.27% for the three months ended September 30, 2024, from 4.10% for the three months ended September 30, 2023. The increase in average yield reflects the increases in market interest rates impacting the loan portfolio, as well as the addition of several higher yielding loans as the Company continues to add commercial loans to the portfolio.

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The average balance of investment securities increased $62.6 million, or 72.8%, to $148.7 million for the three months ended September 30, 2024, from $86.1 million for the three months ended September 30, 2023, while the average yield on investment securities increased by 125 basis points to 6.11% for the three months ended September 30, 2024, from 4.86% for the three months ended September 30, 2023. This increase in yields resulted from the effects of management’s purchasing of higher yielding securities beginning in March 2023.

The average balance of interest-bearing deposits and other, comprised of overnight deposits and stock in the Federal Home Loan Bank and Federal Reserve Bank, decreased $4.9 million, or -33.9%, for the three months ended September 30, 2024, and the average yield increased 113 basis points to 5.18% for the three months ended September 30, 2024, from 4.05% for the three months ended September 30, 2023.

Interest Expense. Total interest expense increased $1.5 million, or 152.8%, to $2.5 million for the three months ended September 30, 2024, from $996,000 for the three months ended September 30, 2023. The increase was due to an increase of 155 basis points in the average cost of deposits to 3.72% for the three months ended September 30, 2024, from 2.17% for the three months ended September 30, 2023, reflecting how management has had to increase the offered rates to be competitive in efforts to maintain and grow deposits. The increase in interest expense also includes a $103,000 increase to $396,000 for the three months ended September 30, 2024, compared to expense of $293,000 for the three months ended September 30, 2023, related to advances from the Federal Home Loan Bank and the Federal Reserve Bank under the Bank Term Funding Program. The advances have been part of a strategic initiative to fund higher yielding assets to help offset net interest margin compression experienced throughout the industry as a result of higher interest rates

Net Interest Income. Net interest income increased $539,000, or 49.7%, to $1.6 million for the three months ended September 30, 2024, compared to $1.1 million for the three months ended September 30, 2023, while net interest margin decreased 9 basis points to 2.23% for the three months ended September 30, 2024, from 2.32% for the three months ended September 30, 2023.

Provision for Credit Losses. The total provision for credit losses on loans and unfunded commitments was $89,000 for the three months ended September 30, 2024, compared to $129,000 for the three months ended September 30, 2023. In both periods, the provision for credit losses was largely attributable to commercial loan growth.

Total nonperforming and substandard loans were $604,000 at September 30, 2024, compared to $414,000 at September 30, 2023. Total loans past due greater than 30 days were $2.9 million and $760,000 at those respective dates. As a percentage of nonperforming and substandard loans, the allowance for credit losses was 138.9% at September 30, 2024, compared to 160.0% at September 30, 2023.

The allowance for credit losses reflects the estimate management believes to be appropriate to cover lifetime probable losses which were inherent in the loan portfolio at September 30, 2024 and 2023. While management believes the estimates and assumptions used in the determination of the adequacy of the allowance are reasonable, such estimates and assumptions could be proven incorrect in the future, and the actual amount of future provisions may exceed the amount of past provisions. Furthermore, as an integral part of its examination process, the OCC will periodically review our allowance for credit losses. The OCC may have judgments different than those of management, and we may determine to increase our allowance as a result of these regulatory reviews. Any material increase in the allowance for credit losses may adversely affect our financial condition and results of operations.

Non-Interest Income. Non-interest income remained flat for the three months ended September 30, 2024, at $50,000, compared to $45,000 for the three months ended September 30, 2023.

Non-Interest Expense. Non-interest expense increased $842,000, or 54.0%, to $2.4 million for the three months ended September 30, 2024, compared to $1.6 million for the three months ended September 30, 2023. This was primarily due to the increase in salaries and wages of $398,000, representative of our investing in staff as we continue to add key positions vital to the expansion and growth of the Company. Additionally, occupancy expenses have increased as a result of our Fort Wayne location which was not in place in September 2023. Other increases are seen in data processing fees as we continue to build out our suite of products with each product adding to ongoing recurring monthly expenses and increases of $59,000 in FDIC insurance premiums associated with our deposit growth. There were also $249,000 of one-time expenses incurred during the three months ended September 30, 2024. See additional discussion of one-time expenses further below.

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One-time Expenses Related to Conversion

At the time of the conversion on July 13, 2022, the Bank estimated that it would incur a one-time expense in the third quarter 2022 related to the termination of the defined benefit plan of approximately $3.1 million. Given the increase in interest rates since the time of the initial estimation, the actual cost of termination of the defined benefit plan is expected to be approximately $1.35 million, with over $1 million of those expenses occurring in fiscal year 2023

In January 2023, the board of directors agreed to take the necessary steps to become a regional commercial bank, ultimately electing to become a Covered Savings Association (CSA) instead of remaining as a Qualified Thrift Lender (QTL). The board of directors, in conjunction with the decreased one-time expenses related to the termination of the defined benefit plan, approved $1.85 million of one-time expenses for, among other things, investments in products, services, software, operating system modules, branding, personnel, consulting fees and training related to obtaining the capabilities required of a regional commercial bank.

The following is management’s classification of these expenses for fiscal year 2023, 2024, and year to date fiscal year 2025:


	Year Ended June 30,				Quarter Ended		Total since
	2023		2024		September 30, 2024		Conversion
Category
Termination of defined benefit plan	$	1,052,000	$	261,000	$	—	$	1,313,000
Contract termination and related personnel costs		256,000		206,000		2,000		464,000
IT and software maintenance and related consulting fees		102,000		154,000		8,000		264,000
Branding related costs		5,000		385,000		129,000		519,000
Other costs		—		105,000		110,000		215,000
Total one-time expenses	$	1,415,000	$	1,111,000	$	249,000	$	2,775,000

Federal Income Taxes. Provision for federal income taxes benefit increased $52,000, or 41.7%, to a $175,000 benefit provision for the three months ended September 30, 2024, compared to a $124,000 benefit provision for the three months ended September 30, 2023. The increase in the federal income tax benefit provision was due primarily to a $245,000, or 43.6%, increase in pretax net loss.

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, and proceeds from maturities of securities. We also have the ability to borrow from the Federal Home Loan Bank of Cincinnati and the Federal Reserve Bank of Cleveland under the Bank Term Funding Program. At September 30, 2024, we had outstanding borrowings of $21.7 million from the Federal Reserve Bank of Cleveland and $11.0 million from the Federal Home Loan Bank of Cincinnati. At September 30, 2024, we had the capacity to borrow $33.9 million from the Federal Home Loan Bank of Cincinnati.

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. 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, cash flows from investing activities, and cash flows from financing activities. For further information, see the statements of cash flows contained in the financial statements appearing elsewhere in this Form 10-Q.

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 and current pricing strategy, we anticipate that a significant portion of maturing time deposits will be retained.

Prior to September 30, 2024, the Bank had a community bank leverage ratio (CBLR) framework election in effect. Effective for the quarter ended September 30, 2024, the Bank opted out of that election.

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						To be Well Capitalized Under
	Actual					the Prompt Corrective Action Provision
(Dollars in thousands)	Amount		Ratio			Amount		Ratio
As of September 30, 2024
Common Equity Tier 1 Capital	$	32,446		18.59	%	$	11,346		>6.5	%
Tier 1 Risk-Based Capital		32,446		18.59			13,965		>8.0
Total Risk-Based Capital		33,484		19.18			17,456		>10.0
Tier 1 Leverage Capital		32,446		10.80			15,017		>5.0

Off-Balance Sheet Arrangements. At September 30, 2024, we had $34.9 million of outstanding commitments to originate loans. Certificates of deposit that are scheduled to mature in less than one year from September 30, 2024 totaled $44.5 million. Management expects that a substantial portion of the maturing certificates of deposit will be renewed. However, if a substantial portion of these deposits is not retained, we may utilize Federal Home Loan Bank of Cincinnati advances or raise interest rates on deposits to attract new accounts, which may result in higher levels of interest expense.

Item 3.Quantitative and Qualitative Disclosures About Market Risk

Not applicable, as the Company is a smaller reporting company.

Item 4.Controls and Procedures

Disclosure Controls and Procedures

An evaluation was performed under the supervision and with the participation of the Company’s management, including the President and Chief Executive Officer and the Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) promulgated under the Securities and Exchange Act of 1934, as amended) as of September 30, 2024. These disclosure controls and procedures are designed with the objective of ensuring that information required to be disclosed in our reports filed under the Securities and Exchange Act of 1934, as amended, such as this report, is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures are also designed with the objective of ensuring that such information is accumulated and communicated to the Company’s management, including the President and Chief Executive Officer and the Chief Financial Officer, as appropriate, to allow timely decisions regarding the required disclosure. Based on that evaluation, the Company’s management, including the President and Chief Executive Officer and the Chief Financial Officer, concluded that the Company’s disclosure controls and procedures were ineffective as of September 30, 2024.

Internal Controls Over Financial Reporting

The Company’s management, including the President and Chief Executive Officer and the Chief Financial Officer, is responsible for establishing and maintaining adequate internal control over the Company’s financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Securities and Exchange Act of 1934, as amended). Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of the Company’s financial reporting and the preparation of financial statements for external purposes in accordance with GAAP. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

As of September 30, 2024, the Company’s management, including the Company’s principal executive officer and principal financial officer, has assessed the effectiveness of its internal control over financial reporting using the criteria set forth in the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control—Integrated Framework (2013). Based on the assessment using those criteria, management identified material weaknesses related to the Company’s internal control over financial reporting and, as such, concluded that the Company’s internal control over financial reporting was ineffective as of September 30, 2024. A

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material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the annual or interim financial statements would not be prevented or detected on a timely basis. The following material weaknesses were identified in the Company’s internal control over financial reporting:

●

The Company has not identified, designed and maintained all applicable internal controls which has led to a level of precision on account reconciliations and review of financial statements that is less than what is required of an SEC filer. The material weakness did not result in a material misstatement.

The Company has concluded that the existence of these material weaknesses did not result in a material misstatement of the Company’s financial statements included in its Annual Report on Form 10-K for the year ended June 30, 2024, or in its Quarterly Report on Form 10-Q for the quarter ended September 30, 2024.

Changes in Internal Control Over Financial Reporting

During the quarter ended September 30, 2024 and year ended June 30, 2024, the Company made notable improvements in its internal controls over financial reporting. In addition to adding a new Chief Financial Officer and Corporate Controller in calendar year 2023, the Company also added two additional accounting staff early in calendar 2024, allowing for additional segregation of duties and more levels of review. Management has also engaged, and is currently working with a third party on a SOX gap analysis, internal control risk assessment, and regularly occurring internal audits. This work began in September 2024 and is ongoing. The Company expects this work to allow the Company to develop and implement enhanced internal controls over financial reporting.

Part II – Other Information

Item 1.Legal Proceedings

The Company is subject to various legal actions arising in the normal course of business. In the opinion of management, the resolution of these legal actions is not expected to have a material adverse effect on the Company’s consolidated financial condition or results of operations.

Item 1A. Risk Factors

Not applicable, as the Company is a smaller reporting company.

Item 2.Unregistered Sales of Equity Securities and Use of Proceeds

Not applicable.

Item 3.Defaults Upon Senior Securities

Not applicable.

Item 4.Mine Safety Disclosures

Not applicable.

Item 5.Other Information

During the three month period ending September 30, 2024, none of the Company’s directors or executive officers adopted, modified or terminated a “Rule 10b5-1 trading arrangement” or a “non-Rule 10b5-1 trading arrangement” as such terms are defined under Item 408 of Regulation S-K.

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Item 6.Exhibits


3.1	Articles of Incorporation of VWF Bancorp, Inc. (incorporated by reference to Exhibit 3.1 of the Company’s Registration Statement on Form S-1 filed March 11, 2022)
3.2	Bylaws of VWF Bancorp, Inc. (incorporated by reference to Exhibit 3.2 of the Company’s Registration Statement on Form S-1 filed March 11, 2022)
31.1*	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2*	Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32*	Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101	The following materials for the quarter ended September 30, 2024, formatted in Inline XBRL (Extensible Business Reporting Language): (i) Condensed Consolidated Balance Sheets, (ii) Condensed Consolidated Statements of Operations, (iii) Condensed Consolidated Statements of Comprehensive Income (Loss), (iv) Condensed Consolidated Statements of Changes in Shareholders’ Equity, (v) Condensed Consolidated Statements of Cash Flows, and (vi) Notes to Condensed Consolidated Financial Statements
104	Cover Page Interactive Data File (embedded within the Inline XBRL document and included in Exhibit 101)

* Filed concurrently herewith

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	VWF BANCORP, INC.

Date: November 15, 2024	/s/ Michael D. Cahill
	Michael D. Cahill
	President and Chief Executive Officer
	(Principal Executive Officer)

Date: November 15, 2024	/s/ Richard W. Brackin
	Richard W. Brackin
	EVP, Chief Financial Officer
	(Principal Financial and Accounting Officer)

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VWF Bancorp (VWFB) 10-Q2025 Q1 Quarterly report

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