Mercer Bancorp (MSBB) 10-Q 2025 Q1 Quarterly report

UNITED STATES

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 December 31, 2024

OR

☐ 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. 000-56575

Mercer Bancorp, Inc.

(Exact Name of Registrant as Specified in Its Charter)

Maryland	92-3452469
(State or Other Jurisdiction of Incorporation or Organization)	(I.R.S. Employer Identification Number)
1100 Irmscher Blvd, Celina, Ohio	45822
(Address of Principal Executive Offices)	(Zip Code)

(419) 586-5158

(Registrant’s Telephone Number, Including Area Code)

N/A

(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)

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

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 February 13, 2025. 1,022,970 shares of the registrant’s common stock, par value $0.01 per share, were issued and outstanding.

Mercer Bancorp, Inc.

Form 10-Q

Index

		Page
Part I. – Financial Information
Item 1.	Consolidated Financial Statements	1
	Balance Sheets as of December 31, 2024 (unaudited) and September 30, 2024	1
	Statements of Income for the Three Months Ended December 31, 2024 and 2023 (unaudited)	2
	Statements of Comprehensive Income for the Three Months Ended December 31, 2024 and 2023 (unaudited)	3
	Statements of Changes in Shareholders’ Equity for the Three Months Ended December 31, 2024 and 2023 (unaudited)	4
	Statements of Cash Flows for the Three Months Ended December 31, 2024 and 2023 (unaudited)	5
	Notes to Financial Statements (unaudited)	6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	28
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	35
Item 4.	Controls and Procedures	35
Part II. – Other Information
Item 1.	Legal Proceedings	36
Item 1A.	Risk Factors	36
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	36
Item 3.	Defaults Upon Senior Securities	36
Item 4.	Mine Safety Disclosures	36
Item 5.	Other Information	36
Item 6.	Exhibits	37
	Signature Page	38

Part I. – Financial Information

Item 1.Financial Statements

Mercer Bancorp, Inc.

Consolidated Balance Sheets

December 31, 2024 (Unaudited) and September 30, 2024

	December 31,		September 30,
	2024		2024
Assets
Cash and due from banks	$	2,502,933	$	2,303,569
Interest-bearing deposits in other financial institutions		1,328,971		2,435,027
Federal funds sold		1,051,000		1,159,000
Cash and cash equivalents		4,882,904		5,897,596
Interest-bearing time deposits		100,000		100,000
Available-for-sale securities		10,986,956		11,121,278
Held-to-maturity securities, net of allowance for credit losses of $0		85,458		92,840
Loans held for sale		10,101,613		10,538,902
Loans receivable		146,770,173		146,041,635
Allowance for credit losses		(959,771)		(963,268)
Net loans		145,810,402		145,078,367
Premises and equipment		2,750,114		2,731,333
Federal Home Loan Bank stock		1,952,600		1,872,500
Bank owned life insurance		1,841,002		1,829,180
Accrued interest receivable		630,189		685,515
Federal Home Loan Bank lender risk account		458,116		463,873
Deferred federal income taxes		318,053		283,564
Other assets		932,745		1,053,268
Total assets	$	180,850,152	$	181,748,216
Liabilities and Shareholders' Equity
Liabilities
Deposits
Demand	$	57,478,067	$	55,139,738
Savings and money market		36,681,781		36,559,264
Time		39,519,309		42,857,955
Total deposits		133,679,157		134,556,957
Advances from the Federal Home Loan Bank		22,000,000		22,000,000
Directors plan liability		399,456		409,033
Accrued interest payable and other liabilities		677,128		829,193
Total liabilities		156,755,741		157,795,183
Commitments and Contingencies
Shareholders' Equity
Preferred stock - authorized 1,000,000 shares of $0.01 par value, none issued		—		—
Common stock - authorized 9,000,000 shares of $0.01 par value, issued and outstanding 1,022,970 shares		10,229		10,229
Additional paid-in capital		8,672,640		8,658,653
Shares acquired by ESOP		(709,268)		(763,820)
Shares issued to irrevocable trust		96,360		96,360
Shares held in irrevocable trust		(96,360)		(96,360)
Retained earnings		16,647,621		16,371,313
Accumulated other comprehensive loss		(526,811)		(323,342)
Total shareholders' equity		24,094,411		23,953,033
Total liabilities and shareholders' equity	$	180,850,152	$	181,748,216

See Notes to Consolidated Financial Statements

1

Mercer Bancorp, Inc.

Consolidated Statements of Income

For the Three Months Ended December 31, 2024 and 2023

	Three Months Ended
	December 31,
	2024			2023
Interest Income
Loans	$	2,170,292	$	1,716,117
Investment securities		85,967		66,668
Interest-bearing deposits and other		77,398		94,720
Total interest income		2,333,657		1,877,505
Interest Expense
Deposits		463,186		329,666
Federal Home Loan Bank advances		277,186		166,288
Total interest expense		740,372		495,954
Net Interest Income		1,593,285		1,381,551
Provision for Credit Losses		—		—
Net Interest Income After Provision for Credit Losses		1,593,285		1,381,551
Noninterest Income
Service fees on deposits		79,354		83,252
Late charges and fees on loans		35,653		46,855
Gain on sale of loans		5,168		—
Loan servicing fees		9,599		11,986
Bank owned life insurance		16,570		15,555
Other income		5,364		3,954
Total noninterest income		151,708		161,602
Noninterest Expense
Salaries and employee benefits		627,528		615,555
Directors fees		19,200		22,425
Occupancy and equipment		122,441		123,975
Data processing fees		179,578		128,270
Franchise taxes		31,777		19,276
FDIC insurance premiums		21,024		17,059
Professional services		104,570		110,250
Deposit account services expense		73,773		73,514
Advertising		23,995		23,104
Loan expenses		81,544		69,183
Other		114,135		123,001
Total noninterest expense		1,399,565		1,325,612
Income before income taxes		345,428		217,541
Provision for income taxes		69,120		44,007
Net Income	$	276,308	$	173,534
Earnings per share - basic and diluted	$	0.29	$	0.18

See Notes to Consolidated Financial Statements

2

Mercer Bancorp, Inc.

Consolidated Statements of Comprehensive Income

For the Three Months Ended December 31, 2024 and 2023

	Three Months Ended
	December 31,
	2024		2023
Net income	$	276,308	$	173,534
Other comprehensive (loss) income:
Net unrealized (losses) gains on available-for-sale securities		(257,556)		435,576
Tax benefit (expense)		54,087		(91,471)
Other comprehensive (loss) income		(203,469)		344,105
Comprehensive income	$	72,839	$	517,639

See Notes to Consolidated Financial Statements

3

Mercer Bancorp, Inc.

Consolidated Statements of Changes in Shareholders’ Equity

For the Three Months Ended December 31, 2024 and 2023

													Accumulated
			Additional		Shares		Shares Issued		Shares Held				Other
	Common		Paid-in		Acquired by		to Irrevocable		to Irrevocable		Retained		Comprehensive
	Stock		Capital		ESOP		Trust		Trust		Earnings		Loss		Total
Balance at October 1, 2024	$	10,229	$	8,658,653	$	(763,820)	$	96,360	$	(96,360)	$	16,371,313	$	(323,342)	$	23,953,033
Net income		—		—		—		—		—		276,308		—		276,308
ESOP shares allocated to participants		—		13,987		54,552		—		—		—		—		68,539
Other comprehensive loss		—		—		—		—		—		—		(203,469)		(203,469)
Balance at December 31, 2024	$	10,229	$	8,672,640	$	(709,268)	$	96,360	$	(96,360)	$	16,647,621	$	(526,811)	$	24,094,411
Balance at October 1, 2023	$	10,229	$	8,642,312	$	(818,380)	$	96,360	$	(96,360)	$	15,703,856	$	(860,326)	$	22,677,691
Effect of adoption of ASU 2016-13		—		—		—		—		—		(25,280)		—		(25,280)
Net income as originally reported		—		—		—		—		—		189,855		—		189,855
Effect of restatement		—		—		—		—		—		(16,321)		—		(16,321)
Net income as restated		—		—		—		—		—		173,534		—		173,534
ESOP shares allocated to participants		—		16,341		64,051		—		—		—		—		80,392
Other comprehensive income		—		—		—		—		—		—		344,105		344,105
Balance at December 31, 2023	$	10,229	$	8,658,653	$	(754,329)	$	96,360	$	(96,360)	$	15,852,110	$	(516,221)	$	23,250,442

See Notes to Consolidated Financial Statements

4

Mercer Bancorp, Inc.

Consolidated Statements of Cash Flows

For the Three Months Ended December 31, 2024 and 2023

	Three Months Ended
	December 31,
	2024		2023
Operating Activities
Net income	$	276,308	$	173,534
Items not requiring (providing) cash:
Depreciation and amortization		87,653		92,109
Amortization of premiums and discounts		3,311		7,731
Amortization of deferred loan fees		(19,041)		(15,836)
Deferred income taxes		19,598		18,863
Provision for credit losses		—		—
ESOP compensation expense		68,539		80,392
Gain on sale of loans		(5,168)		—
Proceeds from sales of loans		256,094		—
Loans originated for sale		(706,559)		(2,142,238)
Increase in cash surrender value of bank-owned life insurance		(11,822)		(11,009)
Changes in:
Accrued interest receivable		55,326		(71,612)
Other assets		123,509		(38,717)
Other liabilities		(161,643)		(210,002)
Net cash used in operating activities		(13,895)		(2,116,785)
Investing Activities
Purchases of available-for-sale securities		(277,432)		(890,248)
Proceeds from calls, maturities and paydowns of available-for-sale securities		151,197		1,119,365
Principal repayments on securities held-to-maturity		7,072		13,365
Net change in loans		179,929		(3,595,497)
Purchase of premises and equipment		(103,663)		(40,683)
Proceeds from redemption of FHLB stock		(80,100)		(105,800)
Net cash used in investing activities		(122,997)		(3,499,498)
Financing Activities
Net (decrease) increase in deposits		(877,800)		7,960,164
Proceeds from FHLB advances - short term		21,000,000		15,000,000
Repayment of FHLB advances - short term		(21,000,000)		(16,000,000)
Net cash (used in) provided by financing activities		(877,800)		6,960,164
(Decrease) Increase in Cash and Cash Equivalents		(1,014,692)		1,343,881
Cash and Cash Equivalents, Beginning of Period		5,897,596		6,291,336
Cash and Cash Equivalents, End of Period	$	4,882,904	$	7,635,217
Supplemental Disclosure of Cash Flow Information
Cash paid during the period for:
Interest on deposits and borrowings	$	653,889	$	435,208
Income taxes		—		—
Supplemental Disclosure of Noncash Investing Activities
Effect of adoption of ASC 326	$	—	$	32,000

See Notes to Consolidated Financial Statements

5

Mercer Bancorp, Inc.

Notes to Consolidated Financial Statements

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

Inclusion of Unaudited Information

The financial information included herein as of December 31, 2024, and for the interim three month periods ended December 31, 2024 and 2023 is unaudited. However, in management’s opinion, the information reflects all normal, recurring adjustments that are necessary for a fair presentation. The results shown for the three months ended December 31, 2024, are not necessarily indicative of the results to be obtained for the fiscal year ending September 30, 2025.

Nature of Operations

Mercer Bancorp, Inc. (“Mercer Bancorp” or the “Company”) is a Maryland corporation incorporated on March 7, 2023, to serve as the bank holding company for Mercer Savings Bank (“Mercer Savings” or the “Bank”) in connection with the Bank’s conversion from the mutual form of organization to the stock form of organization (the “Conversion”). The Conversion was completed on July 26, 2023. In connection with the Conversion, Mercer Bancorp acquired 100% ownership of Mercer Savings and the Company offered and sold 972,970 shares of its common stock at $10.00 per share, for gross offering proceeds of $9,729,700. The Company also contributed 50,000 shares of common stock and $100,000 in cash to Mercer Savings Charitable Foundation, Inc.

Mercer Savings is an Ohio chartered stock bank engaged primarily in the business of providing a variety of deposit and lending services to individual customers in western Ohio. Its primary deposit products are checking, savings, and term certificate accounts, and its primary lending products are residential and commercial mortgage, agricultural, commercial, home equity lines of credit and installment loans, and indirect automobile loans. Its operations are conducted through its four office locations in Celina, Ft. Recovery and Greenville, Ohio. The Bank faces competition from other financial institutions and is subject to the regulation of certain federal and state banking agencies and undergoes periodic examinations by those regulatory authorities.

Principles of Consolidation

The consolidated financial statements as of and for the three months ended December 31, 2024, include the accounts of the Company and the Bank, its wholly-owned subsidiary. All intercompany transactions and balances have been eliminated in consolidation.

Revision of Prior Period Financial Statements.

The Company has revised the consolidated financial statements as of and for the year ended September 30, 2023. The revisions were considered necessary for two primary reasons, as follows:

(1) as a result of the recent discovery of unpaid and unaccrued invoices, for legal services provided during the year ended September 30, 2023. The invoices represented services performed in connection with the Company’s initial public offering completed effective July 27, 2023, as well as for services performed subsequent to completion of the stock offering.

(2) the Company has revised the consolidated financial statements to record the effects of irrevocable (Rabbi) trusts that have been established for the benefit of two members of the board of directors.

The effect of the revisions to the September 30, 2023 consolidated financial statements related to the legal invoices were as follows: (a) a reduction to additional paid-in capital totaling $81,340, (b) an increase in legal expense of $32,398, (c) a decrease in income tax expense of $6,804, (d) an increase in accrued liabilities of $106,934 and (d) a decrease in retained earnings of $25,594.

The effect of the revisions to the September 30, 2023 consolidated financial statements related to the Rabbi trusts included the addition of two offsetting $96,360 line items within the statement of stockholders’ equity, which had

6

Mercer Bancorp, Inc.

Notes to Consolidated Financial Statements

no net effect on the total stockholder’s equity as previously reported. There were no changes to the reported assets, liabilities, income or expense and no effect on net income for this revision.

The Company has concluded that the effect of the revisions to the consolidated financial statements as of and for the year ended September 30, 2023 were not material.

Use of Estimates

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 mortgage servicing rights and deferred tax assets and fair values of financial instruments.

Loans Held for Sale

Mortgage and indirect auto loans originated and intended for sale in the secondary market are carried at the lower of cost or fair value in the aggregate. Net unrealized losses, if any, are recognized through a valuation allowance by charges to noninterest income. Gains and losses on loan sales are recorded in noninterest income, and direct loan origination costs and fees are deferred at origination of the loan and are recognized in noninterest income upon sale of the loan.

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 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 Company 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 Company charges-off loans, or portions thereof, when the Company 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 Company 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

7

Mercer Bancorp, Inc.

Notes to Consolidated Financial Statements

reasonable doubt as to the timely collection of interest or principal. The Company requires a period of satisfactory performance of not less than nine months before returning a nonaccrual loan to accrual status.

When cash payments are received on individually evaluated loans, the Company 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. Loans to borrowers experiencing financial difficulties that have been modified recognize interest income on an accrual basis at the renegotiated rate if the loan is in compliance with the modified terms, no principal reduction has been granted and the loan has demonstrated the ability to perform in accordance with the renegotiated terms for a period of at least nine months.

Allowance for Credit Losses

The Company adopted ASU No. 2016-13 Financial Instruments – Credit Losses (Topic 326) using the modified retrospective method for financial assets measured at amortized cost and off-balance-sheet credit exposures effective October 1, 2023

Available-for-sale securities

For available for sale securities in an unrealized loss position, the Company 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 securities available-for-sale that do not meet the above criteria, the Company evaluates whether the decline in fair value has resulted from credit losses or other factors. In making this assessment, the Company considers the extent to which fair value is less than amortized cost and adverse conditions 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 the 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. Any impairment that has not been recorded through an allowance for credit losses is recognized in other comprehensive income, net of tax. The Company elected the practical expedient of zero loss estimates for securities issued by U.S. government entities and agencies. These securities are either explicitly or implicitly guaranteed by the U.S. government, are highly rated by major agencies and have a long history of no credit losses. Management concluded that no allowance for credit losses was required on available-for-sale securities at December 31, 2024.

Accrued interest receivable on available-for-sale debt securities totaled $53,900 and $151,047 at December 31, 2024 and September 30, 2024, respectively, and is included within accrued interest receivable on the balance sheet. This amount is excluded from the estimate of expected credit losses. Held-to-maturity debt securities are typically classified as nonaccrual when the contractual payment of principal or interest has become 90 days past due or management has serious doubts about the further collectability of principal or interest. When held-to-maturity debt securities are placed on nonaccrual status, unpaid interest credited to income is reversed.

Held-to-Maturity Securities

The Company measures expected credit losses on held-to-maturity debt securities, which are comprised of U.S. government sponsored enterprise mortgage-back securities and residential mortgage-backed securities. The Company’s residential mortgage-backed security holdings are issued by U.S. government entities and agencies and are either explicitly or implicitly guaranteed by the U.S. government, are highly rated by major rating agencies and have a long history of no credit losses. Management concluded that no allowance for credit losses was required on held-to-maturity securities at October 1, 2024 and December 31, 2024.

Accrued interest receivable on held-to-maturity debt securities totaled $431 and $464 at December 31, 2024 and September 30, 2024, respectively, and is included within accrued interest receivable on the balance sheet. This amount is

8

Mercer Bancorp, Inc.

Notes to Consolidated Financial Statements

excluded from the estimate of expected credit losses. Held-to-maturity debt securities are typically classified as nonaccrual when the contractual payment of principal or interest has become 90 days past due or management has serious doubts about the further collectability of principal or interest. When held-to-maturity debt securities are placed on nonaccrual status, unpaid interest credited to income is reversed.

Loans

The allowance for credit losses (ACL) is a valuation allowance that is deducted from the loans’ amortized cost basis to present the net amount expected to be collected on the loans. Loan losses are charged against the allowance when management believes the collectibility of a loan balance is doubtful. Subsequent recoveries, if any, are credited to the allowance. Management’s determination of the adequacy of the ACL is based on the assessment of the expected credit losses on loans over the expected life of the loan. The ACL is increased by provision expense and decreased by charge-offs, net of recoveries of amounts previously charged off and expected to be charged off. The Company made the policy election to exclude accrued interest receivable on loans from the estimate of credit losses.

Management estimates the ACL balance using relevant available information from both internal and external sources, relating to past events, current conditions and reasonable and supportable forecasts. Historical credit loss experience of a defined peer group, by affiliate, paired with economic forecasts provide the basis for the quantitatively modeled estimates of expected credit losses. The Company adjusts its quantitative model, as necessary, to reflect conditions not already considered by the quantitative model. These adjustments are commonly known as the qualitative factors.

The ACL is measured on a collective (pool) basis when similar risk characteristics exist. The Company uses the average historical loss method to measure the quantitative portion of the ACL over the forecast and reversion periods.

Loans that do not share risk characteristics are evaluated on an individual basis. Loans evaluated individually are not also included in the collective evaluation. When management determines that foreclosure is probable, expected credit losses are based on the fair value of the collateral at the reporting date, adjusted for selling costs as appropriate. The company made the policy election to exclude accrued interest receivable on loans from the estimate of credit losses.

Expected credit losses are estimated over the contractual term of the loans, adjusted for expected prepayments when appropriate. The contractual term excludes expected extensions, renewals and modifications unless either of the following applies: management has a reasonable expectation at the reporting date that a troubled debt restructuring will be executed with an individual borrower or the extension or renewal options are included in the original or modified contract at the reporting date and are not unconditionally cancellable by the Company.

Accrued interest receivable on loans totaled $548,490 and $489,780 at December 31, 2024 and September 30, 2024, respectively, and is included within accrued interest receivable on the balance sheet. This amount is excluded from the estimate of expected credit losses.

Unfunded Commitments

The Company estimates expected credit losses over the contractual period in which the Company is exposed to credit risk via a contractual obligation to extend credit, unless that obligation is unconditionally cancellable by the Company. The ACL on unfunded commitments is adjusted through the provision for credit loss expense. The estimate includes consideration of the likelihood that funding will occur and an estimate of expected credit losses on commitments expected to be funded over its estimated life consistent with the related ACL methodology.

In the course of working with borrowers, the Bank may choose to restructure the contractual terms of certain loans. Terms may be modified to fit the ability of the borrower to repay in line with the borrower’s current financial status, and the modification of the loan may include the transfer of assets from the borrower to satisfy the debt, a modification of loan terms or a combination of the two. If such efforts by the Bank do not result in a satisfactory

9

Mercer Bancorp, Inc.

Notes to Consolidated Financial Statements

arrangement, the loan is referred to legal counsel, at which time foreclosure proceedings are initiated. At any time prior to a sale of the property at foreclosure, the Bank may terminate foreclosure proceedings if the borrower is able to work out a satisfactory payment plan.

It is the Bank’s policy that any loans modified for borrowers experiencing financial difficulty on nonaccrual status prior to being modified remain on nonaccrual status until nine months of satisfactory borrower performance, at which time management would consider its return to accrual status. If a loan was accruing at the time of restructuring, the Bank reviews the loan to determine if it is appropriate to continue the accrual of interest on the restructured loan.

Employee Stock Ownership Plan (ESOP)

The cost of shares issued to the Employee Stock Ownership Plan (“ESOP”), but not yet allocated to participants, is shown as a reduction of shareholders’ equity. Compensation expense is based on the average fair value of shares as they are committed to be released to participant accounts.

Earnings Per Share

Basic earnings per share is calculated by dividing net income by the weighted-average number of common shares outstanding during the period. Unallocated common shares held by the ESOP are shown as a reduction in shareholders’ equity and are excluded from weighted-average common shares outstanding for both basic and diluted earnings per share calculations until they are committed to be released.

The Company had no dilutive or potentially dilutive securities during the three months ended December 31, 2024 and 2023.

Revenue Recognition

The Company accounts for certain revenues in accordance with Accounting Standards Update (“ASU”) 2014-09 Revenue from Contracts with Customers (ASC 606) and all subsequent ASUs that modified ASC 606. ASC 606 provides that an entity should recognize revenue to depict the transfer of promised goods and services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The majority of the Company’s revenue, including net interest income, fees related to loans and loan commitments, net securities gains (losses), gain on sale of loans and income from bank-owned life insurance are not included within the scope of ASC 606. For the revenue streams in the scope of ASC 606, service charges on deposits and electronic banking fees, there are no significant judgments related to the amount and timing of revenue recognition. All of the Company’s in scope revenue from contracts with customers is recognized within other noninterest income.

Deposit Services. The Bank generates revenues through fees charged to depositors related to deposit account maintenance fees, overdrafts, ATM fees, wire transfers and additional miscellaneous services provided at the request of the depositor.

For deposit-related services, revenue is recognized when performance obligations are satisfied, which is, generally, at a point in time.

Note 2:    Change in Accounting Principle

The Company adopted ASC 326 effective October 1, 2023, which introduced a new credit loss model, the current expected credit loss model (“CECL”).

10

Mercer Bancorp, Inc.

Notes to Consolidated Financial Statements

The CECL model utilizes a lifetime “expected credit loss” measurement objective for the recognition of credit losses for loans, held-to-maturity securities and other receivables at the time the financial asset is originated or acquired. The expected credit losses are adjusted each period for changes in expected lifetime credit losses. For available-for-sale securities where fair value is less than cost, credit-related impairment, if any, will be recognized in an allowance for credit losses and adjusted each period for changes in expected credit risk. This model replaces the existing impairment models, which generally require that a loss be incurred before it is recognized. The CECL model represents a significant change from existing practice and may result in material changes to the Company’s accounting for financial instruments.

The Company adopted the new standard effective October 1, 2023, which resulted in a $32,000 increase to the allowance for credit losses and a charge, net of tax, of $25,280 to retained earnings.

Note 3:    Debt Securities

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
Available-for-sale Securities:
December 31, 2024
U.S. Government agencies	$	3,473,934	$	5,710	$	(32,719)	$	3,446,925
Mortgage-backed Government Sponsored Enterprises (GSEs)		4,483,624		6,775		(337,420)		4,152,979
State and political subdivisions		3,696,248		547		(309,743)		3,387,052
	$	11,653,806	$	13,032	$	(679,882)	$	10,986,956

			Gross		Gross
	Amortized		Unrealized		Unrealized		Approximate
	Cost		Gains		Losses		Fair Value
Available-for-sale Securities:
September 30, 2024
U.S. Government agencies		3,473,459		20,089		(36,168)		3,457,380
Mortgage-backed Government Sponsored Enterprises (GSEs)		4,635,875		49,422		(211,027)		4,474,270
State and political subdivisions		3,421,238		20,904		(252,514)		3,189,628
	$	11,530,572	$	90,415	$	(499,709)	$	11,121,278

			Gross		Gross
	Amortized		Unrealized		Unrealized		Approximate
	Cost		Gains		Losses		Fair Value
Held-to-maturity Securities:
December 31, 2024
Mortgage-backed Government Sponsored Enterprises (GSEs)	$	85,458	$	—	$	(1,824)	$	83,634
September 30, 2024
Mortgage-backed Government Sponsored Enterprises (GSEs)	$	92,840	$	—	$	(1,439)	$	91,401

11

Mercer Bancorp, Inc.

Notes to Consolidated Financial Statements

The Company had no allowance for credit losses on available-for-sale and held-to maturity securities at December 31, 2024 and September 30, 2024.

The amortized cost and fair value of available-for-sale securities at December 31, 2024 by contractual maturity, are shown below. Expected maturities may differ from contractual maturities because issuers may have the right to call or prepay obligations with or without call or prepayment penalties:

	Amortized		Fair
	Cost		Value
December 31, 2024
Within one year	$	1,000,039	$	997,030
One to five years		2,000,000		1,970,290
Five to ten years		1,337,125		1,283,425
After ten years		2,833,018		2,583,232
		7,170,182		6,833,977
Mortgage-backed GSEs		4,483,624		4,152,979
Totals	$	11,653,806	$	10,986,956

Maturity information for held-to-maturity securities is not presented since expected maturities may differ from contractual maturities because issuers may have the right to call or prepay obligations with or without call or prepayment penalties.

The carrying value of securities pledged as collateral, to secure public deposits and for other purposes, was approximately $897,000 and $493,000 at December 31, 2024 and September 30, 2024, respectively.

There were no sales of securities during the three-month periods ended December 31, 2024 and 2023.

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, comprised of 22 securities at December 31, 2024 and 21 securities at September 30, 2024, was approximately $9,671,092 and $7,826,000 or 88% and 70%, respectively, of the fair value of the Company’s total investment portfolio. These declines primarily resulted from changes in market interest rates.

Based on evaluation of available evidence, including recent changes in market interest rates and information obtained from regulatory filings, management believes the declines in fair value for these securities are not credit-related.

The following tables show the Company’s investments’ gross unrealized losses and fair value of the Company’s investments with unrealized losses, for which an allowance for credit loss has not been recorded, aggregated by investment class and length of time that individual securities have been in a continuous unrealized loss position at December 31, 2024 and September 30, 2024:

	December 31, 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
Available for sale
U.S. Government agencies	$	—	$	—	$	2,967,320	$	(32,719)	$	2,967,320	$	(32,719)
Mortgage-backed Government Sponsored Enterprises (GSEs)		1,008,528		(41,934)		2,693,500		(295,486)		3,702,028		(337,420)
State and political subdivisions		1,413,544		(30,820)		1,588,200		(278,923)		3,001,744		(309,743)
	$	2,422,072	$	(72,754)	$	7,249,020	$	(607,128)	$	9,671,092	$	(679,882)

12

Mercer Bancorp, Inc.

Notes to Consolidated Financial Statements

	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
Available for sale
U.S. Government agencies		—		—		2,964,120		(36,168)		2,964,120		(36,168)
Mortgage-backed Government Sponsored Enterprises (GSEs)		—		—		2,898,583		(211,027)		2,898,583		(211,027)
State and political subdivisions		341,947		(4,544)		1,621,380		(247,970)		1,963,327		(252,514)
		341,947		(4,544)		7,484,083		(495,165)		7,826,030		(499,709)

U.S. Government Treasuries and Agencies and State and Political Subdivisions

Unrealized losses on these securities have not been recognized 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. Because the decline in market value was attributable to changes in interest rates, and not credit quality, and because the Company typically does not intend to sell the investments and it is not more likely than not the Company will be required to sell the investments before recovery of their amortized cost basis, which may be maturity, the Company has not established an allowance for credit losses for these securities at December 31, 2024 and September 30, 2024.

Mortgage-backed GSEs

The unrealized losses on the Company’s investment in residential mortgage-backed government sponsored enterprises were caused primarily by changes in interest rates. The Company expects to recover the amortized cost basis over the term of the securities. Because the decline in market value is attributable to changes in interest rates, and not credit quality, and because the Company typically does not intend to sell the investments and it is not more likely than not the Company will be required to sell the investments before recovery of their amortized cost basis, which may be maturity, the Company has not established an allowance for credit losses for these securities at December 31, 2024 and September 30, 2024.

13

Mercer Bancorp, Inc.

Notes to Consolidated Financial Statements

Note 4:    Loans and Allowance for Credit Losses

Categories of loans were as follows:

	December 31,		September 30,
	2024		2024
Real estate loans:
Residential	$	72,553,283	$	73,285,469
Multi-family		1,246,262		1,259,640
Agricultural		55,925,869		53,523,748
Commercial		2,291,425		2,453,082
Construction and land		5,169,111		6,024,429
Home equity line of credit (HELOC)		4,881,435		4,959,058
Commercial and industrial		1,681,711		1,666,188
Consumer		4,963,914		5,518,844
Total loans		148,713,010		148,690,458
Less:
Undisbursed loans in process		1,606,879		2,309,368
Net deferred loan fees		335,958		339,455
Allowance for credit losses		959,771		963,268
Net loans	$	145,810,402	$	145,078,367

Mortgage loans serviced for others are not included in the accompanying balance sheets. The unpaid principal balances of these loans at December 31, 2024 and September 30, 2024, were approximately $17,639,000 and $18,048,000 respectively.

14

Mercer Bancorp, Inc.

Notes to Consolidated Financial Statements

The Company adopted ASU 2016-13 effective October 1, 2023, which required implementation of the current expected credit loss (CECL) model in estimating the allowance for credit losses (ACL) valuation account. The implementation of the new standard resulted in a $32,000 increase to the overall balance of the Company’s allowance for credit losses (ACL). The following tables present the activity in the allowance for credit losses based on portfolio segment for the three months ended December 31, 2024 and 2023.

	Three Months Ended December 31, 2024
			Provision
	Balance		(credit)						Balance
	October 1, 2024		for credit losses		Charge-offs		Recoveries		December 31, 2024
Real estate loans:
Residential	$	691,852	$	(27,799)	$	—	$	—	$	664,053
Multi-family		2,525		(24)		—		—		2,501
Agricultural		107,284		4,964		—		—		112,248
Commercial		4,917		(319)		—		—		4,598
Construction and land		92,660		(10,875)		—		—		81,785
Home equity line of credit (HELOC)		14,910		(215)		—		—		14,695
Commercial and industrial		3,314		44		—		—		3,358
Consumer		45,806		35,139		(4,412)		—		76,533
Allowance for credit losses on loans	$	963,268	$	915	$	(4,412)	$	—	$	959,771

	Three Months Ended December 31, 2023
			Effect of		Provision
	Balance		adoption of		(credit)						Balance
	October 1, 2023		ASC 326		for credit losses		Charge-offs		Recoveries		December 31, 2023
Real estate loans:
Residential	$	738,230	$	32,000	$	7,412	$	—	$	—	$	777,642
Multi-family		12,840		—		(10,198)		—		—		2,642
Agricultural		73,608		—		9,801		—		—		83,409
Commercial		4,678		—		(153)		—		—		4,525
Construction and land		49,835		—		(9,550)		—		—		40,285
Home equity line of credit (HELOC)		14,289		—		595		—		—		14,884
Commercial and industrial		3,645		—		3		—		—		3,648
Consumer		37,206		—		2,090		—		262		39,558
Total loans	$	934,331	$	32,000	$	—	$	—	$	262	$	966,593

15

Mercer Bancorp, Inc.

Notes to Consolidated Financial Statements

The Company has adopted a standard loan grading system for all loans, as follows:

Pass. Loans of sufficient quality, which generally are protected by the current net worth and paying capacity of the obligor or by the value of the asset or underlying collateral.

Special Mention. Loans have potential weaknesses that deserve management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the asset or in the Bank’s credit position at some future date.

Substandard. Loans which are inadequately protected by the current sound worth and paying capacity of the obligor or of the collateral pledged, if any. Loans so classified must have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the Company will sustain some loss if the deficiencies are not corrected. Usually, this classification includes all 90 days or more, non-accrual, and past due loans.

Doubtful. Loans which have all the weaknesses inherent in those classified substandard with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable.

Loss. Loans considered uncollectible and of such little value that continuance as an asset without the establishment of a specific reserve is not warranted.

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

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 Bank’s market area.

Multi-family Real Estate

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 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 Bank’s market area.

Agriculture Real Estate

These loans are primarily loans on farm ground and include loans secured by residential properties located on farm ground, but agricultural activities may not be the primary occupation of the borrowers. 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 Bank’s market area.

Commercial Real Estate

These loans are generally secured by owner-occupied commercial real estate including warehouses and offices. The main risks are changes in the value of the collateral and ability of borrowers to successfully conduct their business operations. Management specifically considers unemployment and changes in real estate values in the Bank’s market area.

16

Mercer Bancorp, Inc.

Notes to Consolidated Financial Statements

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 Bank’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 Bank’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.

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.

Information regarding the credit quality indicators most closely monitored for other than residential real estate loans by class as of December 31, 2024 and September 30, 2024, follows:

	Term Loans Amortized Cost Basis by Origination Year													Revolving Loans		Revolving Loans
	For The Years Ending September 30,													Amortized		Converted
	2025		2024		2023		2022		2021		Prior			Cost Basis		to Term	Total
December 31, 2024
Commercial real estate
Risk Rating
Pass	$	-	$	371,910	$	-	$	745,183	$	1,000,333	$	173,999	$	-	$	-	$	2,291,425
Special Mention		-		-		-		-		-		-		-		-		-
Substandard		-		-		-		-		-		-		-		-		-
Doubtful		-		-		-		-		-		-		-		-		-
Total	$	-	$	371,910	$	-	$	745,183	$	1,000,333	$	173,999	$	-	$	-	$	2,291,425
Commercial real estate
Current period gross charge-offs	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-
Construction
Risk Rating
Pass	$	757,130	$	4,144,877	$	54,685	$	67,020	$	65,300	$	29,318	$	-	$	-	$	5,118,330
Special Mention		-		-		-		-		-		-		-		-		-
Substandard		-		-		-		-		-		50,781		-		-		50,781
Doubtful		-		-		-		-		-		-		-		-		-
Total	$	757,130	$	4,144,877	$	54,685	$	67,020	$	65,300	$	80,099	$	-	$	-	$	5,169,111
Construction
Current period gross charge-offs	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-
Commercial and industrial
Risk Rating
Pass	$	-	$	-	$	-	$	-	$	160,334	$	341,684	$	1,179,693	$	-	$	1,681,711
Special Mention		-		-		-		-		-		-		-		-		-
Substandard		-		-		-		-		-		-		-		-		-
Doubtful		-		-		-		-		-		-		-		-		-
Total	$	-	$	-	$	-	$	-	$	160,334	$	341,684	$	1,179,693	$	-	$	1,681,711
Commercial and industrial
Current period gross charge-offs	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-

17

Mercer Bancorp, Inc.

Notes to Consolidated Financial Statements

Multi Family
Risk Rating
Pass	$	-	$	-	$	-	$	949,175	$	-	$	297,087	$	-	$	-	$	1,246,262
Special Mention		-		-		-		-		-		-		-		-		-
Substandard		-		-		-		-		-		-		-		-		-
Doubtful		-		-		-		-		-		-		-		-		-
Total	$	-	$	-	$	-	$	949,175	$	-	$	297,087	$	-	$	-	$	1,246,262
Multi Family
Current period gross charge-offs	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-
Agricultural
Risk Rating
Pass	$	4,054,157	$	20,077,421	$	11,763,510	$	8,740,976	$	5,156,366	$	6,133,439	$	-	$	-	$	55,925,869
Special Mention		-		-		-		-		-		-		-		-		-
Substandard		-		-		-		-		-		-		-		-		-
Doubtful		-		-		-		-		-		-		-		-		-
Total	$	4,054,157	$	20,077,421	$	11,763,510	$	8,740,976	$	5,156,366	$	6,133,439	$	-	$	-	$	55,925,869
Agricultural
Current period gross charge-offs	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-
Total
Risk Rating
Pass	$	4,811,287	$	24,594,208	$	11,818,195	$	10,502,354	$	6,382,333	$	6,975,527	$	1,179,693	$	-	$	66,263,597
Special Mention		-		-		-		-		-		-		-		-		-
Substandard		-		-		-		-		-		50,781		-		-		50,781
Doubtful		-		-		-		-		-		-		-		-		-
Total	$	4,811,287	$	24,594,208	$	11,818,195	$	10,502,354	$	6,382,333	$	7,026,308	$	1,179,693	$	-	$	66,314,378
	Term Loans Amortized Cost Basis by Origination Year													Revolving Loans		Revolving Loans
	For The Years Ending September 30,													Amortized		Converted
	2024		2023		2022		2021		2020		Prior			Cost Basis		to Term	Total
September 30, 2024
Commercial real estate
Risk Rating
Pass	$	372,730	$	-	$	750,005	$	1,148,912	$	-	$	181,435	$	-	$	-	$	2,453,082
Special Mention		-		-		-		-		-		-		-		-		-
Substandard		-		-		-		-		-		-		-		-		-
Doubtful		-		-		-		-		-		-		-		-		-
Total	$	372,730	$	-	$	750,005	$	1,148,912	$	-	$	181,435	$	-	$	-	$	2,453,082
Commercial real estate
Current period gross charge-offs	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-
Construction
Risk Rating
Pass	$	4,897,328	$	909,827	$	68,054	$	66,740	$	-	$	31,698	$	-	$	-	$	5,973,647
Special Mention		-		-		-		-		-		-		-		-		-
Substandard		-		-		-		-		50,782		-		-		-		50,782
Doubtful		-		-		-		-		-		-		-		-		-
Total	$	4,897,328	$	909,827	$	68,054	$	66,740	$	50,782	$	31,698	$	-	$	-	$	6,024,429
Construction
Current period gross charge-offs	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-
Commercial and industrial
Risk Rating
Pass	$	-	$	-	$	-	$	175,600	$	379,296	$	-	$	1,093,861	$	-	$	1,648,757
Special Mention		-		-		-		-		-		-		-		-		-
Substandard		-		-		-		-		-		-		17,431		-		17,431
Doubtful		-		-		-		-		-		-		-		-		-
Total	$	-	$	-	$	-	$	175,600	$	379,296	$	-	$	1,111,292	$	-	$	1,666,188
Commercial and industrial
Current period gross charge-offs	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-
Multi Family
Risk Rating
Pass	$	-	$	-	$	955,479	$	-	$	-	$	304,161	$	-	$	-	$	1,259,640
Special Mention		-		-		-		-		-		-		-		-		-
Substandard		-		-		-		-		-		-		-		-		-
Doubtful		-		-		-		-		-		-		-		-		-
Total	$	-	$	-	$	955,479	$	-	$	-	$	304,161	$	-	$	-	$	1,259,640
Multi Family
Current period gross charge-offs	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-
Agricultural
Risk Rating
Pass	$	20,834,246	$	11,441,930	$	9,074,011	$	5,754,530	$	3,451,803	$	2,967,228	$	-	$	-	$	53,523,748
Special Mention		-		-		-		-		-		-		-		-		-
Substandard		-		-		-		-		-		-		-		-		-
Doubtful		-		-		-		-		-		-		-		-		-
Total	$	20,834,246	$	11,441,930	$	9,074,011	$	5,754,530	$	3,451,803	$	2,967,228	$	-	$	-	$	53,523,748
Agricultural

18

Mercer Bancorp, Inc.

Notes to Consolidated Financial Statements

Current period gross charge-offs	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-
Total
Risk Rating
Pass	$	26,104,304	$	12,351,757	$	10,847,549	$	7,145,782	$	3,831,099	$	3,484,522	$	1,093,861	$	-	$	64,858,874
Special Mention		-		-		-		-		-		-		-		-		-
Substandard		-		-		-		-		50,782		-		17,431		-		68,213
Doubtful		-		-		-		-		-		-		-		-		-
Total	$	26,104,304	$	12,351,757	$	10,847,549	$	7,145,782	$	3,881,881	$	3,484,522	$	1,111,292	$	-	$	64,927,087

The Company monitors the credit risk profile by payment activity for residential and consumer loan classes.  Loans past due 90 days or more and loans on nonaccrual status are considered nonperforming. Nonperforming loans are reviewed monthly. The following table presents the amortized cost in residential and consumer loans based on payment activity:

19

Mercer Bancorp, Inc.

Notes to Consolidated Financial Statements

	Term Loans Amortized Cost Basis by Origination Year												Revolving Loans		Revolving Loans
	For The Years Ending September 30,												Amortized		Amortized
	2025		2024		2023		2022		2021		Prior		Cost Basis		Cost Basis		Total
December 31, 2024
Residential real estate
Payment Performance
Performing	$	1,831,821	$	8,436,839	$	4,642,954	$	14,165,945	$	18,402,987	$	24,524,694	$	4,806,466	$	-	$	76,811,706
Nonperforming		-		-		-		-		256,748		291,295		74,969		-		623,012
Total	$	1,831,821	$	8,436,839	$	4,642,954	$	14,165,945	$	18,659,735	$	24,815,989	$	4,881,435	$	-	$	77,434,718
Residential real estate
Current period gross charge-offs	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-
Consumer
Payment Performance
Performing	$	36,679	$	331,267	$	4,379,498	$	130,177	$	48,784	$	14,773	$	-	$	-	$	4,941,178
Nonperforming		-		-		-		2,327		-		20,409		-		-		22,736
Total	$	36,679	$	331,267	$	4,379,498	$	132,504	$	48,784	$	35,182	$	-	$	-	$	4,963,914
Consumer
Current period gross charge-offs	$	66	$	4,346	$	-	$	-	$	-	$	-	$	-	$	-	$	4,412
Total
Payment Performance
Performing	$	1,868,500	$	8,768,106	$	9,022,452	$	14,296,122	$	18,451,771	$	24,539,467	$	4,806,466	$	-	$	81,752,884
Nonperforming		-		-	-	-	-	2,327	-	256,748	-	311,704	-	74,969	-	-		645,748
Total	$	1,868,500	$	8,768,106	$	9,022,452	$	14,298,449	$	18,708,519	$	24,851,171	$	4,881,435	$	-	$	82,398,632
	Term Loans Amortized Cost Basis by Origination Year												Revolving Loans		Revolving Loans
	For The Years Ending September 30,												Amortized		Amortized
	2024		2023		2022		2021		2020		Prior		Cost Basis		Cost Basis		Total
September 30, 2024
Residential real estate
Payment Performance
Performing	$	8,532,004	$	4,752,191	$	14,591,072	$	18,882,083	$	6,603,015	$	19,655,898	$	4,959,058	$	-	$	77,975,321
Nonperforming		-		-		-		135,161		-		134,045		-		-		269,206
Total	$	8,532,004	$	4,752,191	$	14,591,072	$	19,017,244	$	6,603,015	$	19,789,943	$	4,959,058	$	-	$	78,244,527
Residential real estate
Current period gross charge-offs	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-
Consumer
Payment Performance
Performing	$	348,272	$	4,892,481	$	147,659	$	38,002	$	30,725	$	13,348	$	-	$	-	$	5,470,487
Nonperforming		-		21,841		2,327		-		3,780		20,409		-		-		48,357
Total	$	348,272	$	4,914,322	$	149,986	$	38,002	$	34,505	$	33,757	$	-	$	-	$	5,518,844
Consumer
Current period gross charge-offs	$	-	$	66,864	$	-	$	-	$	-	$	-	$	-	$	-	$	66,864
Total
Payment Performance
Performing	$	8,880,276	$	9,644,672	$	14,738,731	$	18,920,085	$	6,633,740	$	19,669,246	$	4,959,058	$	-	$	83,445,808
Nonperforming		-		21,841	-	2,327	-	135,161	-	3,780	-	154,454	-	-	-	-		317,563
Total	$	8,880,276	$	9,666,513	$	14,741,058	$	19,055,246	$	6,637,520	$	19,823,700	$	4,959,058	$	-	$	83,763,371

20

Mercer Bancorp, Inc.

Notes to Consolidated Financial Statements

The Company evaluates the loan risk grading system definitions on an ongoing basis. No significant changes were made during the three months ended December 31, 2024 or the year ended September 30, 2024.

The following tables present the Bank’s loan portfolio aging analysis of the recorded investment in loans as of December 31, 2024 and September 30, 2024:

	December 31, 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:
Residential	$	519,379	$	130,361	$	548,043	$	1,197,783	$	71,355,500	$	72,553,283	$	—
Multi-family		—		—		—		—		1,246,262		1,246,262		—
Agricultural		—		253,238		—		253,238		55,672,631		55,925,869		—
Commercial		—		—		—		—		2,291,425		2,291,425		—
Construction and land		—		—		50,781		50,781		5,118,330		5,169,111		—
Home equity line of credit (HELOC)		—		8,691		74,969		83,660		4,797,775		4,881,435		—
Commercial and industrial		29,926		—		—		29,926		1,651,785		1,681,711		—
Consumer		—		24,371		22,736		47,107		4,916,807		4,963,914		22,736
Total	$	549,305	$	416,661	$	696,529	$	1,662,495	$	147,050,515	$	148,713,010	$	22,736

	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
Real estate loans:
Residential	$	498,008	$	184,393	$	269,206	$	951,607	$	72,333,862	$	73,285,469	$	—
Multi-family		—		—		—		—		1,259,640		1,259,640		—
Agricultural		—		—		—		—		53,523,748		53,523,748		—
Commercial		—		—		—		—		2,453,082		2,453,082		—
Construction and land		—		—		50,782		50,782		5,973,647		6,024,429		—
Home equity line of credit (HELOC)		74,969		—		—		74,969		4,884,089		4,959,058		—
Commercial and industrial		3,516		—		17,431		20,947		1,645,241		1,666,188		—
Consumer		113,123		—		48,357		161,480		5,357,364		5,518,844		26,516
Total	$	689,616	$	184,393	$	385,776	$	1,259,785	$	147,430,673	$	148,690,458	$	26,516

The Company had no loans identified as collateral dependent as of December 31, 2024 and September 30, 2024.

21

Mercer Bancorp, Inc.

Notes to Consolidated Financial Statements

The Company had three loans secured by deposits totaling $23,000, greater than 90 days past due and accruing at December 31, 2024 and September 30, 2024. The Company’s total nonaccrual loans, none of which had an allowance for credit losses at December 31, 2024 and September 30, 2024, were as follows:

	Nonaccrual Loans						Loans Past Due
	With No Allowance		With Allowance				Over 90 Days		Total
	for Credit Loss		for Credit Loss		Total		and Still Accruing		Nonperforming
December 31, 2024
Residential real estate loans	$	548,043	$	—	$	548,043	$	—	$	548,043
Construction and land		50,781		—		50,781		—		50,781
Home equity line of credit		74,969		—		74,969		—		74,969
Consumer		—		—		—		22,736		22,736
	$	673,793	$	—	$	673,793	$	22,736	$	696,529
	Nonaccrual Loans						Loans Past Due
	With No Allowance		With Allowance				Over 90 Days		Total
	for Credit Loss		for Credit Loss		Total		and Still Accruing		Nonperforming
September 30, 2024
Residential real estate loans	$	269,206	$	—	$	269,206	$	—	$	269,206
Construction and land		50,782		—		50,782		—		50,782
Commercial and industrial		17,431		—		17,431		—		17,431
Consumer		21,841		—		21,841		26,516		48,357
	$	359,260	$	—	$	359,260	$	26,516	$	385,776

There were no loans modified for borrowers experiencing financial difficulty during the three months ended December 31, 2024 and 2023 and during the year ended September 30, 2024. There were no loans modified for borrowers experiencing financial difficulty in the past 12 months that subsequently defaulted during the three months ended December 31, 2024 and 2023 and during the year ended September 30, 2024.

Note 5:    Regulatory Matters

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 Bank’s financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Bank must meet specific capital guidelines that involve quantitative measures of the Bank’s assets, liabilities and certain off-balance-sheet items as calculated under U.S. 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.

22

Mercer Bancorp, Inc.

Notes to Consolidated 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 I capital (as defined) to risk-weighted assets (as defined), common equity Tier I capital (as defined) to total risk-weighted assets (as defined) and of Tier I capital (as defined) to average assets (as defined). Management believes, as of December 31, 2024, that the Bank met all capital adequacy requirements to which it is subject.

As of December 31, 2024 the most recent notification from the regulators categorized the Bank as well capitalized under the regulatory framework for prompt corrective action. To be categorized as well capitalized, the Bank must maintain minimum total risk-based capital, Tier I risk-based capital, common equity Tier I risk-based capital and Tier I leverage ratios as set forth in the table.

There are no conditions or events since that notification that management believes have changed the Bank’s category.

The Bank’s actual and required capital amounts and ratios are as follows (table amounts in thousands):

							To Be Well Capitalized
							Under
							Prompt Corrective
				For Capital Adequacy			Action
	Actual			Purposes			Provisions
	Amount		Ratio	Amount		Ratio	Amount		Ratio
	(Dollars in thousands)
As of December 31, 2024
Total Capital
(to Risk-Weighted Assets)	$	22,129	16.6%	$	10,699	8.0%	$	13,374	10.0%
Tier 1 Capital
(to Risk-Weighted Assets)	$	21,165	15.9%	$	8,024	6.0%	$	10,699	8.0%
Common Equity Tier I Capital
(to Risk-Weighted Assets)	$	21,165	15.9%	$	6,018	4.5%	$	8,693	6.5%
Tier I Capital
(to Average Total Assets)	$	21,165	11.7%	$	7,183	4.0%	$	8,978	5.0%
As of September 30, 2024
Total Capital
(to Risk-Weighted Assets)	$	21,797	16.3%	$	10,699	8.0%	$	13,374	10.0%
Tier 1 Capital
(to Risk-Weighted Assets)	$	20,829	15.6%	$	8,024	6.0%	$	10,699	8.0%
Common Equity Tier I Capital
(to Risk-Weighted Assets)	$	20,829	15.6%	$	6,018	4.5%	$	8,693	6.5%
Tier I Capital
(to Average Total Assets)	$	20,829	11.6%	$	7,183	4.0%	$	8,978	5.0%

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 1Quoted prices (unadjusted) for identical assets or liabilities in active markets that the entity has the ability to access as of the measurement date.

23

Mercer Bancorp, Inc.

Notes to Consolidated Financial Statements

Level 2Significant 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 3Significant unobservable inputs that reflect an entity’s own assumptions about the assumptions that market participants would use in pricing an asset or liability.

Recurring Measurements

The following table presents the fair value measurements of assets recognized in the accompanying consolidated 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 December 31, 2024 and September 30, 2024:

			Fair Value Measurements Using
			Quoted Prices in		Significant
			Active Markets		Other		Significant
			for		Observable		Unobservable
	Fair		Identical Assets		Inputs		Inputs
	Value		(Level 1)		(Level 2)		(Level 3)
December 31, 2024
U.S. Government agencies	$	3,446,925	$	—	$	3,446,925	$	—
Mortgage-backed Government Sponsored Enterprises (GSEs)		4,152,979		—		4,152,979		—
State and political subdivisions		3,387,052		—		3,387,052		—
September 30, 2024
U.S. Government agencies	$	3,457,380	$	—	$	3,457,380	$	—
Mortgage-backed Government Sponsored Enterprises (GSEs)		4,474,270		—		4,474,270		—
State and political subdivisions		3,189,628		—		3,189,628		—

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 December 31, 2024 and the year ended September 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 Bank had no Level 3 securities.

Nonrecurring Measurements

The Company had no assets or liabilities measured at fair value on a nonrecurring basis at December 31, 2024 and September 30, 2024.

24

Mercer Bancorp, Inc.

Notes to Consolidated Financial Statements

The estimated fair values of the Company’s financial instruments not carried at fair value on the balance sheets are as follows:

	Carrying		Fair		Fair Value Measurements Using
	Value		Value		Level 1		Level 2		Level 3
December 31, 2024
Financial assets:
Cash and cash equivalents	$	4,882,904	$	4,882,904	$	4,882,904	$	—	$	—
Interest-bearing time deposits		100,000		100,000		100,000		—		—
Held-to-maturity securities		85,458		83,634		—		83,634		—
Loans held for sale		10,101,613		10,257,000		—		—		10,257,000
Loans, net		145,810,402		130,538,000		—		—		130,538,000
FHLB Stock		1,952,600		1,952,600		—		1,952,600		—
Bank owned life insurance		1,841,002		1,841,002		1,841,002		—		—
Accrued interest receivable		630,189		930,189		930,189		—		—
Financial liabilities:
Deposits		133,679,157		135,978,848		94,159,848		—		41,819,000
FHLB advances		22,000,000		21,982,000		—		21,982,000		—
Accrued interest payable		243,488		243,488		243,488		—		—
September 30, 2024
Financial assets:
Cash and cash equivalents	$	5,897,596	$	5,897,596	$	5,897,596	$	—	$	—
Interest-bearing time deposits		100,000		100,000		100,000		—		—
Held-to-maturity securities		92,840		91,402		—		91,402		—
Loans held for sale		10,538,902		10,679,333		—		—		10,679,333
Loans, net		145,078,367		135,120,682		—		—		135,120,682
FHLB Stock		1,872,500		1,872,500		—		1,872,500		—
Bank owned life insurance		1,829,180		1,829,180		1,829,180		—		—
Accrued interest receivable		685,515		685,515		685,515		—		—
Financial liabilities:
Deposits		134,556,957		137,200,002		91,699,002		—		45,501,000
FHLB advances		22,000,000		21,993,000		—		21,993,000		—
Accrued interest payable		157,006		157,006		157,006		—		—

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 and Credit Risks

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

25

Mercer Bancorp, Inc.

Notes to Consolidated Financial Statements

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.

Commitments outstanding were as follows:

	December 31,		September 30,
	2024		2024
Commitments to originate loans	$	1,530,979	$	2,516,011
Undisbursed balance of loans closed		6,981,576		7,495,563
Total	$	8,512,555	$	10,011,574

Note 8:   Earnings Per Share

Basic earnings per share is calculated by dividing net income by the weighted-average number of common shares outstanding during the period. Unallocated common shares held by the Employee Stock Ownership Plan (“ESOP”) are not included in the weighted-average number of common shares outstanding for purposes of calculating basic earnings per common share until they are committed to be released.

The following table sets forth the computation of basic and diluted earnings per share:

	Three Months Ended		Three Months Ended
	December 31,		December 31,
	2024		2023
Net income	$	276,308	$	173,534
Weighted-average shares issued		1,022,970		1,022,970
Less weighted-average unearned ESOP shares		(70,926)		(81,779)
Weighted-average shares outstanding		952,044		941,191
Earnings per share - basic and diluted	$	0.29	$	0.18

Note 9: Employee Stock Ownership Plan (ESOP)

In connection with the Conversion in July 2023, the Company established a leveraged ESOP for eligible employees of the Bank. The ESOP trust purchased 81,838 shares of Company common stock at the initial public offering price of $10.00 per share financed by the 15-year term loan with the Company. The interest rate of the loan is 8.50% and the maturity date is December 31, 2037. The loan is secured by shares purchased with the loan proceeds and will be repaid by the ESOP with funds from the Bank’s discretionary contributions to the ESOP. When the loan payments are made, ESOP shares are allocated to the participants based on relative compensation. The Bank recognizes expense based on the average fair value of the shares to be allocated to the ESOP participants.

26

Mercer Bancorp, Inc.

Notes to Consolidated Financial Statements

Activity in the ESOP for the three months ended December 31, 2024 and 2023 is as follows:

	For the Three Months Ended
	December 31,
	2024	2023
Shares committed to be released to participants	—	—
Shares allocated to participants	10,912	5,456
Unreleased shares	70,926	76,382
ESOP shares at end of plan year	81,838	81,838
Fair value of unreleased shares	$ 992,964	$ 1,031,157

Note 10:    Conversion to Stock Form

On March 3, 2023, the Board of Directors of the Bank adopted a plan of conversion (Plan). The Plan was subject to the approval of the Federal Deposit Insurance Corporation and the State of Ohio Division of Financial Institutions and was approved by the affirmative vote of a majority of the total votes eligible to be cast by the voting members of the Bank at a special meeting. The Plan set forth that the Bank proposed to convert into a stock bank structure with the establishment of a stock holding company (Mercer Bancorp, Inc.), as parent of the Bank. The Bank converted to the stock form of ownership, followed by the issuance of all of the Bank’s outstanding stock to Mercer Bancorp, Inc. Pursuant to the Plan, the Bank determined the total offering value and number of shares of common stock based upon an independent appraiser’s valuation. The stock was priced at $10.00 per share. In addition, the Bank’s Board of Directors adopted an employee stock ownership plan (ESOP) which subscribed for 8% of the common stock sold in the offering.

Mercer Bancorp is organized as a corporation under the laws of the State of Maryland and owns all of the outstanding common stock of the Bank upon completion of the conversion.

The costs of issuing the common stock was deducted from the sales proceeds of the offering.

At the completion of the conversion to stock form, the Bank established a liquidation account in the amount of retained earnings contained in the final prospectus. The liquidation account will be maintained for the benefit of eligible savings account holders who maintain deposit accounts in the Bank after conversion.

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. Mercer Bancorp, Inc. is an emerging growth company, and, for as long as it continues to be an emerging growth company, it may choose to take advantage of exemptions from various reporting requirements applicable to other public companies but not to “emerging growth companies.” Mercer Bancorp intends to use the extended transition period to delay adoption of new or revised accounting pronouncements applicable to public companies until such pronouncements are made applicable to private companies. Accordingly, its financial statements may not be comparable to the financial statements of public companies that comply with such new or revised accounting standards.

27

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

General

Management’s discussion and analysis is intended to enhance your understanding of our financial condition and results of operations. The financial information in this section is derived from the accompanying financial statements. You should read the financial information in this section in conjunction with the business and financial information contained in this Quarterly Report on Form 10-Q and in the Company’s Annual Report on Form 10-K for the Fiscal Year Ended September 30, 2024 as filed with the SEC on January 14, 2025.

Cautionary Note Regarding Forward-Looking Statements

This Quarterly Report on Form 10-Q 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. We are under no duty to and do not take any obligation to update any forward-looking statements after the date of this prospectus.

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, including the effects of inflation and monetary and fiscal policy;

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

● adverse changes in the securities markets;

● 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 manage market risk, credit risk and operational risk;

● our ability to access cost-effective funding;

● changes in liquidity, including the amount and composition of our deposits, including the percentage of uninsured deposits in our portfolio;

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

● 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;

● 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 enter new markets successfully and capitalize on growth opportunities;

● changes in consumer spending, borrowing and savings habits;

● 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; and

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

Accordingly, you should not place undue reliance on forward-looking statements.

Critical Accounting Policies

The discussion and analysis of the financial condition and results of operations are based on our consolidated financial statements, which are prepared in conformity with generally accepted accounting principles used in the United States of America. The preparation of these financial statements requires management to make estimates and assumptions affecting the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities, and the reported amounts of income and expenses. We consider the accounting policies discussed below to be critical accounting policies. The estimates and assumptions that we use are based on historical experience and various other factors and are believed to be reasonable under the circumstances. Actual results may differ from these estimates under different assumptions or conditions, resulting in a change that could have a material impact on the carrying value of our assets and liabilities and our results of operations.

The Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”) contains provisions that, among other things, reduce certain reporting requirements for qualifying public companies. As an “emerging growth company” we may delay adoption of new or revised accounting pronouncements applicable to public companies until such pronouncements are made applicable to private companies. We intend to take advantage of the benefits of this extended

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transition period. Accordingly, our financial statements may not be comparable to companies that comply with such new or revised accounting standards.

The following represent our critical accounting policies:

Allowance for Credit Losses. The allowance for credit losses is the estimated amount considered necessary to cover inherent, but unconfirmed, credit losses in the loan portfolio at the balance sheet date. The allowance is established through the provision for credit losses which is charged against income. In determining the allowance for credit losses, management makes significant estimates and has identified this policy as one of our most critical accounting policies.

Management performs a quarterly evaluation of the allowance for credit losses on loans and unfunded commitments. Consideration is given to a variety of factors in establishing this estimate including, but not limited to, current economic conditions, delinquency statistics, geographic and industry concentrations, the adequacy of the underlying collateral, the financial strength of the borrower, results of internal loan reviews and other relevant factors. This evaluation is inherently subjective as it requires material estimates that may be susceptible to significant change.

The allowance for credit losses is evaluated following the accounting guidance in Accounting Standards Update (ASU) No. 2016-13 Financial Instruments – Credit Losses (Topic 326). ASC 326 sets forth the current expected credit loss (CECL) methodology that reflects expected credit losses over the lives of the credit instruments and requires consideration of a broader range of information to estimate credit losses. ASC 326 requires an estimate of all expected credit losses for loans based on historical experience, current conditions, and reasonable and supportable forecasts.

Actual loan losses may be significantly more than the allowances we have established which could result in a material negative effect on our financial results.

Comparison of Financial Condition at December 31, 2024 and September 30, 2024

Total Assets. Total assets were $180.9 million at December 31, 2024, a decrease of $898,000, or 0.5%, from September 30, 2024. The decrease was due primarily to a decrease in cash and cash equivalents of $1.0 million and a decrease in loans held for sale of $437,000, which were partially offset by an increase in loans of $732,000.

Cash and Cash Equivalents. Cash and cash equivalents decreased by $1.0 million, or 17.2%, to $4.9 million at December 31, 2024 from $5.9 million at September 30, 2024. The decrease was due primarily to a decrease in deposits during the three months ended December 31, 2024.

Investment Securities. Investment securities available for sale and held to maturity decreased $142,000 to $11.1 million at December 31, 2024 compared to September 30, 2024. During the three months ended December 31, 2024, securities purchases of $277,000 were partially offset by calls, maturities and repayments of $158,000, while the fair value of available for sale securities decreased by $134,000.

The yield on investment securities was 2.93% for the three months ended December 31, 2024, compared to 2.13% for the three months ended December 31, 2023, reflecting the increases in the overall interest rate environment.

Loans Held for Sale. Loans held for sale decreased by $437,000, or 4.1% to $10.1 million at December 31, 2024 compared to $10.5 million at September 30, 2024. During fiscal 2023, management established an indirect automobile lending program and began to originate auto loans both for sale and for investment. During the three months ended December 31, 2024, auto loans originated for sale totaled $456,000, which were offset by principal repayments in the loans held for sale portfolio of $893,000. No sales of auto loans occurred during the three months ended December 31, 2024. Mortgage loans originated for sale totaling $251,000 were sold during the quarter, resulting in gains on sale of $5,000.

Net Loans. Net loans increased by $732,000, or 0.5%, to $145.8 million at December 31, 2024 from $145.1 million at September 30, 2024. During the three months ended December 31, 2024, agricultural real estate loans increased $2.4 million, or 4.5%, to a total of $55.9 million at December 31, 2024, while residential real estate loans

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decreased $732,000, or 1.0%, to $72.6 million at December 31, 2024, from $73.3 million at September 30, 2024 and consumer loans decreased $555,000, or 10.1%, to $5.0 million at December 31, 2024 compared to September 30, 2024.

The Bank’s loan growth has been achieved amid strong competition for one- to four-family residential mortgage loans and agricultural mortgage loans in our market area.

The Bank’s strategy includes growing the loan portfolio, continuing to focus primarily on owner-occupied one-to-four family residential real estate loans, agricultural real estate loans and automobile loans.

Deposits. Deposits decreased by $878,000, or 0.7%, to $133.7 million at December 31, 2024 from $134.6 million at September 30, 2024. Core deposits (which consists of savings accounts, money market accounts, other savings deposits and checking accounts) increased $2.5 million, or 2.7%, to $94.2 million at December 31, 2024 from $91.7 million at September 30, 2024. Certificates of deposit decreased $3.3 million, or 7.8%, to $39.5 million at December 31, 2024 from $42.8 million at September 30, 2024.

During the three months ended December 31, 2024, management continued its strategy of pursuing growth in demand accounts and other lower cost core deposits, in part by enhancing products and services offered and increased marketing. Management intends to continue its efforts to increase core deposits, with an emphasis on growth in consumer and business demand deposits.

Advances from the Federal Home Loan Bank. Advances from the Federal Home Loan Bank totaled $22.0 million at both December 31, 2024, and September 30, 2024. Advances totaling $21.0 million are scheduled to mature within one year from December 31, 2024 and the remaining $1.0 million is scheduled to mature within two years from December 31, 2024.

Shareholders’ Equity. Shareholders’ equity increased $149,000, or 0.6%, to $24.1 million at December 31, 2024, from $24.0 million at September 30, 2024. The increase resulted primarily from net income of $276,000 for the three months ended December 31, 2024, partially offset by a $203,000 decrease to equity through the accumulated other comprehensive loss.

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Average Balance Sheets

The following tables set forth average balance sheets, average yields and costs, and certain other information at the dates and for the periods indicated. No tax-equivalent yield adjustments have been made, as the effects would be immaterial. Average yields include the effect of net deferred fee income, discounts and premiums that are amortized or accreted to interest income or interest expense. Average balances are calculated using monthly average balances. Non-accrual loans are included in the computation of average balances only. Average loan balances include loans held for sale.

	For the Three Months Ended December 31,
	2024							2023
	Average							Average
	Outstanding					Average		Outstanding					Average
	Balance			Interest		Yield/Rate		Balance			Interest		Yield/Rate
	(dollars in thousands)
Interest-earning assets:
Loans (1)	$	142,068		$	2,170	6.11	%	$	127,025		$	1,716	5.40	%
Taxable securities		8,123			58	2.86			8,705			37	1.70
Tax-exempt securities		3,628			28	3.09			3,883			30	3.09
Interest-earning deposits and other		5,265			77	5.85			8,106			95	4.69
Total interest-earning assets		159,084			2,333	5.87			147,719			1,878	5.09
Noninterest-earning assets		22,947							19,141
Allowance for credit losses		(967)							(958)
Total assets	$	181,064						$	165,902
Interest-bearing liabilities:
Interest-bearing demand deposits	$	40,985			3	0.03	%	$	34,164			6	0.07	%
Savings deposits		36,760			73	0.79			39,401			5	0.05
Certificates of deposit		40,633			387	3.81			37,912			319	3.37
Total interest-bearing deposits		118,378			463	1.56			111,477			330	1.18
Federal Home Loan Bank advances		22,500			277	4.92			13,000			166	5.11
Total interest-bearing liabilities		140,878			740	2.10			124,477			496	1.59
Noninterest-bearing demand deposits		15,123							16,142
Other noninterest-bearing liabilities		1,089							3,212
Total liabilities		157,090							143,831
Equity		23,974							22,071
Total liabilities and equity	$	181,064						$	165,902
Net interest income				$	1,593						$	1,382
Net interest rate spread (2)						3.77	%						3.50	%
Net interest-earning assets (3)	$	18,206						$	23,242
Net interest margin (4)						4.01	%						3.74	%
Average interest-earning assets to interest-bearing liabilities		112.92	%						118.67	%

(1) Net deferred fee income included in interest earned on loans totaled $19,000 and $16,000 for the three months ended December 31, 2024 and 2023.

(2) 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.

(3) Net interest-earning assets represent total interest-earning assets less total interest-bearing liabilities.

(4) Net interest margin represents net interest income divided by average total interest-earning assets.

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Rate/Volume Analysis

The following table presents the effects of changing rates and volumes on our net interest income for the periods indicated. The rate column shows the effects attributable to changes in rate (changes in rate multiplied by prior volume). The volume column shows the effects attributable to changes in volume (changes in volume multiplied by prior rate). The total column represents the sum of the prior columns. For purposes of this table, changes attributable to both rate and volume, which cannot be segregated, have been allocated proportionately based on the changes due to rate and the changes due to volume. There were no out-of-period items or adjustments required to be excluded from the table below.

	Three Months Ended
	December 31, 2024 vs. 2023
	Increase (Decrease)				Total
	Due to				Increase
	Volume		Rate		(Decrease)
	(In thousands)
Interest-earning assets:
Loans	$	216	$	238	$	454
Taxable securities		(2)		23		21
Tax exempt-securities		(2)		—		(2)
Interest-earning deposits and other		(38)		20		(18)
Total interest-earning assets		174		281		455
Interest-bearing liabilities:
Interest-bearing demand deposits		1		(4)		(3)
Savings deposits		-		68		68
Certificates of deposit		24		44		68
Total interest-bearing deposits		25		108		133
Federal Home Loan Bank Advances		117		(6)		111
Total interest-bearing liabilities		142		102		244
Change in net interest income	$	32	$	179	$	211

Comparison of Operating Results for the Three Months Ended December 31, 2024 and 2023

General. Net income for the three months ended December 31, 2024, was $276,000, an increase of $103,000, or 59.2%, compared to $173,000 for the three months ended December 31, 2023. The increase in net income was primarily due to a $211,000 increase in net interest income which was partially offset by a $10,000 decrease in noninterest income, a $74,000 increase in noninterest expenses and a $25,000 increase in income taxes.

Interest Income. Interest income increased $455,000, or 24.3%, to $2.3 million for the three months ended December 31, 2024 from $1.9 million for the three months ended December 31, 2023. This increase was attributable to a $454,000, or 26.5%, increase in interest on loans receivable, a $19,000, or 28.9%, increase in interest on investment securities, which were partially offset by a $18,000, or 18.3%, decrease in interest on interest-bearing deposits and other assets.

The average balance of loans during the three months ended December 31, 2024 increased by $15.0 million, or 11.8%, from the balance for the three months ended December 31, 2023, while the average yield on loans increased by 71 basis points to 6.11% for the three months ended December 31, 2024 from 5.40% for the three months ended December 31, 2023. The increase in average yield on loans reflects the increase in the overall interest rate environment year to year. Increases in interest rates in the economy during the past several years have caused interest rates on the Bank’s adjustable-rate loans to adjust upward. Management expects the average interest rate on loans in the portfolio to continue to rise during 2025, compared to the average rates of the prior year, despite the recent decreases in rates in September, November and December 2024.

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The average balance of investment securities decreased $837,000 to $11.8 million for the three months ended December 31, 2024, from $12.6 million for the three months ended December 31, 2023, while the average yield on investment securities increased by 80 basis points to 2.93% for the three months ended December 31, 2024, from 2.13% for the three months ended December 31, 2023.

Interest income on other interest-bearing deposits, comprised primarily of certificates of deposit in other financial institutions, overnight deposits and stock in the Federal Home Loan Bank, decreased $18,000, or 18.3%, for the three months ended December 31, 2024, due primarily to a decrease in the average balance of $2.8 million, while the average yield increased by 116 basis points to 5.85% for the three months ended December 31, 2024, from 4.69% for the three months ended December 31, 2023.

Interest Expense. Total interest expense increased $244,000, or 49.3%, to $740,000 for the three months ended December 31, 2024, from $496,000 for the three months ended December 31, 2023. Interest expense on deposits increased $133,000, or 40.5%, due primarily to an increase of 38 basis points in the average cost of deposits to 1.56% for the three months ended December 31, 2024, from 1.18% for the three months ended December 31, 2023, and an increase of $6.9 million, or 6.2%, in the average balance of interest-bearing deposits to $118.4 million for the three months ended December 31, 2024, from $111.5 million for the three months ended December 31, 2023.

Interest expense on borrowings increased $111,000, or 66.9%, for the three months ended December 31, 2024, compared to the three months ended December 31, 2023. The increase was due to a $9.5 million increase in the average balance outstanding, to $22.5 million for the three months ended December 31, 2024, from $13.0 million for the three months ended December 31, 2023, partially offset by a 19 basis point decrease in the weighted-average rate, to 4.92% for the three months ended December 31, 2024, from 5.11% for the three months ended December 31, 2023.

Net Interest Income. Net interest income increased $212,000, or 15.3%, to $1.6 million for the three months ended December 31, 2024, compared to $1.4 million for the three months ended December 31, 2023. The increase reflected an increase in the net interest margin to 4.01% for the three months ended December 31, 2024, from 3.74% for the three months ended December 31, 2023. The net interest margin was impacted by a series of interest rate increases in the economy in the past several years, although recently there have been three decreases in rates, totaling 100 basis points, by the Federal Reserve Board.

Provision for Credit Losses. Based on an analysis of the loan portfolio and asset quality, management determined that no provision for credit losses was required for the three-month period ended December 31, 2024. The Company adopted the new standard effective October 1, 2023, which resulted in a $32,000 increase to the allowance for credit losses and a charge, net of tax, of $25,280 to retained earnings for the three months ending December 31, 2023. The allowance for credit losses was $960,000 at December 31, 2024 and $963,000 at September 30, 2024 and represented 0.64% and 0.65% of total loans at December 31, 2024 and September 30, 2024, respectively. The determination over the adequacy of the allowance for credit losses included consideration of the low balances of nonperforming loans and delinquent loans in both periods.

Total nonperforming loans were $697,000 at December 31, 2024, compared to $386,000 at September 30, 2024. Classified loans totaled $674,000 at December 31, 2024, compared to $482,000 at September 30, 2024, and total loans past due greater than 30 days were $1.7 million and $1.3 million at those respective dates. As a percentage of nonperforming loans, the allowance for credit losses was 137.8% at December 31, 2024 compared to 249.6% at September 30, 2024.

The allowance for credit losses reflects the estimate management believes to be appropriate to cover incurred probable losses which were inherent in the loan portfolio at December 31, 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, and the increase in future provisions that may be required may adversely impact the Bank’s financial condition and results of operations. In addition, bank regulatory agencies periodically review the allowance for

34

credit losses and may require an increase in the provision for credit losses or the recognition of loan charge-offs, based on judgments different than those of management.

Noninterest Income. Non-interest income totaled $152,000 for the three months ended December 31, 2024, a decrease of $10,000, or 6.1%, from $162,000 for the three months ended December 31, 2023. During the three months ended December 31, 2024, a decrease of $11,000, or 23.9%, in late charges and fees on loans and a $4,000, or 4.7%, decrease in service fees on deposits were partially offset by a $5,000 gain on sale of loans.

Noninterest Expense. Noninterest expense increased $74,000, or 5.6%, to $1.4 million for the three months ended December 31, 2024, compared to $1.3 million for the three months ended December 31, 2023. The increase was due primarily to a $12,000, or 1.9%, increase in salaries and employee benefits, a $51,000, or 40.0%, increase in data processing, and a $12,000, or 17.9%, increase in loan expenses.

The increase in salaries and employee benefits was due primarily to normal merit increases year-to-year. The increase in data processing was due primarily to managements’ decision to change it’s core processing servicer. The increase in loan expenses was due primarily to the indirect auto loan program and the increase in lending volume during the period.

Noninterest expense can be expected to increase because of compensation costs related to possible implementation of one or more stock-based benefit plans, if approved by our stockholders.

Income Taxes. Income taxes increased by $25,000, or 57.1%, to $69,000 for the three months ended December 31, 2024, compared to $44,000 for the three months ended December 31, 2023. The increase in the income tax provision was due primarily to a $128,000, or 58.8% increase in pretax income. The effective tax rates were 20.0% and 20.2% for the three months ended December 31, 2024 and 2023, respectively.

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

Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) under the Exchange Act) as of December 31, 2024. The term “disclosure controls and procedures,” under the Exchange Act, means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to our management, including its principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.

Based upon that evaluation, the principal executive officer and principal financial officer concluded that, as of December 31, 2024, due to the material weaknesses in the Company’s internal control over financial reporting described below, our disclosure controls and procedures were not effective. However, notwithstanding the material weaknesses, management believes, based on its procedures in preparing this report, that the financial statements included in this report fairly present, in all material respects, the Company’s financial position, results of operations and cash flows as of and for the periods presented in conformity with accounting principles generally accepted in the United States of America (“GAAP”).

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We identified the following material weaknesses in our internal control over financial reporting as of December 31, 2024:

● Allowance for credit losses on loans: We did not design and implement controls over the preparation and review of the allowance for credit losses, including the completeness and accuracy of qualitative factors. Notwithstanding the foregoing, our identification and review of this material weakness ultimately did not lead to any needed changes in the amount of our allowance for credit losses on loans.

● Accrued expenses review: We did not design and implement effective controls over the preparation and review of the accrued expenses. This resulted in improper recognition of accruals and inaccurate accrual balances, which were remediated upon identification as part of the preparation of our audited financial statements. Management is in the process of implementing an improved preparation and review process over accruals as well as a tracking mechanism to ensure all accruals are properly recorded and adjusted for payments made.

We have begun remediation of these material weaknesses. Management is committed to continuous improvement of the Company’s internal financial control processes and procedures, and will continue to diligently review and revise the Company’s processes and procedures to ensure they operate at an acceptable level of assurance. To this end, as previously announced, the company hired a new controller in the fourth quarter of 2024.

Changes in Internal Controls Over Financial Reporting

As described above, management is assessing and revising the Company’s internal financial control processes and procedures to ensure that the material weaknesses described above are remediated.

Part II – Other Information

Item 1.Legal Proceedings

The Company is periodically involved in legal proceedings arising in the ordinary course of business. In the opinion of management, the resolution of these legal proceedings is not expected to have a material effect on the Bank’s or the Company’s 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

None.

Item 3.Defaults Upon Senior Securities

None.

Item 4.Mine Safety Disclosures

Not applicable.

Item 5.Other Information

During the three months ended December 31, 2024 none of the Company’s directors or executive officers adopted or terminated any contract, instruction or written plan for the purchase or sale of the Company’s securities that was intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) or any “non-Rule 10b5-1 trading arrangement,” as that term is used in SEC regulations.

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Item 6.Exhibits

3.1	Articles of Incorporation of Mercer Bancorp, Inc. (incorporated by reference to Exhibit 3.1 to the Registration Statement on Form S-1 (file no. 333-270445), originally filed with the Securities and Exchange Commission on March 10, 2023)
3.2	Amended and Restated Bylaws of Mercer Bancorp, Inc. (incorporated by reference to Exhibit 3.2 to the Current Report on Form 8-K filed with the Securities and Exchange Commission on January 17, 2024)
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 June 30, 2024, formatted in Inline XBRL (Extensible Business Reporting Language): (i) Balance Sheets, (ii) Statements of Income, (iii) Statements of Comprehensive Income (Loss), (iv) Statements of Changes in Equity, (v) Statements of Cash Flows, and (vi) Notes to Financial Statements
104	Cover Page Interactive Data File (embedded within the Inline XBRL document and included in Exhibit 101)

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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.

	MERCER BANCORP, INC.
Date: February 14, 2025	/s/Alvin B. Parmiter
	Alvin B. Parmiter
	President and Chief Executive Officer
Date: February 14, 2025	/s/Sherman E. Crum
	Sherman E. Crum
	Principal Financial Officer

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