MFBI 10-K & 10-Q changes, risk factors and insider trading

Not applicable, as Monroe Federal Bancorp is a “smaller reporting company.company”.

We invest in bank owned life insurance to provide us with a funding source to offset some costs of our benefit plan obligations. Bank owned life insurance provides us with non-interest income that is nontaxable. Federal regulations generally limit our investment in bank owned life insurance to 25% of our Tier 1 capital plus our allowance for credit losses. At March 31, 2025,2026, our investment in bank owned life insurance was $3.6$3.7 million, which was withininside this investment limit.

Fair Value Measurements. The fair value of a financial instrument is defined as the amount at which the instrument could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale. We estimate the fair value of a financial instrument and any related asset impairment using a variety of valuation methods. Where financial instruments are actively traded and have quoted market prices, quoted market prices are used for fair value. When the financial instruments are not actively traded, other observable market inputs, such as quoted prices of securities with similar characteristics, may be used, if available, to determine fair value. When observable market prices do not exist, we estimate fair value. These estimates are subjective in nature and imprecision in estimating these factors can impact the amount of gain or loss recorded. For further informationinformation, see note 13 to the notes to financial statements.

Total Assets. Total assets were $144.3$142.4 million at March 31, 2025,2026, a decrease of $11.0$1.9 million, or 7.1%,1.3%, from $155.3$144.3 at March 31, 2024.2025. The decrease was primarily comprised of a decrease in cash and cash equivalents of $8.5 million and a decrease in available for sale investment securities of $2.0$4.7 million and a decrease in cash and cash equivalents of $623,000, which was partially offset by an increase in net loans of $3.5 million.

Cash and Cash Equivalents. Cash and cash equivalents decreased $8.5 million,$623,000, or 80.4%,30.0%, to $1.5 million at March 31, 2026 from $2.1 million at March 31, 2025 from $10.6 million at March 31, 2024.2025. The decrease was due primarily to a decrease in cash and due from banks of $357,000, or 21.4%, from $1.7 million at March 31, 2025 to $1.3 million at March 31, 2026 and a decrease in interest-bearing deposits held in other financial institutions of $7.1 million,$307,000, or 94.6%,75.6%, from $7.5 million at March 31, 2024 to $406,000 at March 31, 2025 to $99,000 at March 31, 2026. This was partially offset by an increase in federal funds sold to $41,000 at March 31, 2026 from no federal funds sold at March 31, 2025.

Investment Securities. Investment securities available for sale decreased $2.1$4.7 million, or 8.1%,20.3%, to $18.4 million at March 31, 2026, from $23.1 million at March 31, 2025, from $25.2 million at March 31, 2024.2025. The decrease was primarily attributable to calls,the maturitiessale andof repayments$4.2 million of securities totaling $2.3 million during the fiscal year ended March 31, 2025.2026. The Company sold the securities to fund 1-4 family residential, commercial residential and commercial and industrial loan demand. The loss recognized on the sale of the loans was $261,000. The unrealized loss on securities decreasedtotaled $393,000, or 7.1%, to $5.1$4.1 million at March 31, 2025 from $5.5 million at March 31, 2024.2026.

Net Loans. Net loans decreasedincreased $873,000$3.5 million, or 0.8%,3.3%, to $110.5 million at March 31, 2026 from $107.0 million at March 31, 2025 from $107.9 million at March 31, 2024.2025. During the fiscal year ended March 31, 2025,2026, loan originations totaled $18.6$24.8 million, comprised primarily of $7.6$7.3 million of loans secured by one- to four-family residential real estate, $4.3$5.9 million of commercial real estate loans, $4.2 million of construction and land loans, $3.4$4.1 million of home equity loans, $1.9$2.2 of commercial real estate loans, $500,000 of multi-family loans, and $560,000million of commercial and industrial loans, $600,000 of multi-family loans and $400,000 of consumer loans. Consumer loan originations totaled $331,000, theThe majority of whichthe consumer loans originated were auto loans.

During the fiscal year ended March 31, 2025,2026, residentialcommercial real estate loans increased $742,000,$3.1 million, or 1.1%,12.8%, to $69.9$27.3 million at March 31, 20252026, commercial and industrial loans increased $2.0 million, or 46.5%, to $6.3 million at March 31, 2026, home equity lines of credit increased $214,000,$500,000, or 5.1%,11.4%, to $4.4$4.9 million at March 31, 2025.2026 and multifamily loans increased $200,000, or 12.5%, to $1.8 million at March 31, 2026. These increases were partially offset by a decrease in constructionone-to-four andfamily landresidential loans of $578,000,$1.9 million, or 18.7%,2.7%, to $2.5$68.0 million at March 31, 2025,2026, a decrease in commercialconstruction and industrialland development loans of $634,000,$400,000, or 13.0%,16.0%, to $4.3$2.1 million at March 31, 20252026, and a decrease in consumer loans of $503,000,$200,000, or 28.1%,15.4%, to $1.3$1.1 million at March 31, 2025.2026.

The decreaseincrease in the Company’s loan portfolio has been due to anincreased intentionalloan slowdowndemand, ofprimarily marketingin efforts for new loans and strong competition for one- to four-family residentialcommercial mortgage loans and commercial and industrial loans. The Company also increased its participation loans inpurchased ourduring marketthe area.year ended March 31, 2026.

The Company’s strategy includes growing the loan portfolio, focusing on commercial real estate loans and home equity lines andof credit and commercial real estate loans.credit.

Deposits. Deposits decreasedincreased by $21.4$3.8 million, or 15.1%,3.1%, to $124.5 million at March 31, 2026 from $120.7 million at March 31, 20252025. fromCore $142.1deposits decreased $3.7 million, or 4.3%, to $83.2 million at March 31, 2024.2026 Core deposits decreased $12.8 million, or 12.8%, tofrom $86.9 million at March 31, 20252025. fromCertificates $99.7of deposit increased $7.5 million, or 22.2%, to $41.3 million at March 31, 2024.2026 Certificates of deposit decreased $8.6 million, or 20.4%, tofrom $33.8 million at March 31, 2025 from $42.4 million at March 31, 2024.2025. The decrease in core deposits was due primarily to a $10.0$5.5 million decrease in the account held by a significant commercial customer whose account balance fluctuates routinely in the normal course of its business.business, which was partially offset by an increase in savings and money market accounts of $2.7 million. The decreaseincrease in certificates of deposit was due primarily to outflowscertificate of higherdeposit ratespecials accounts as management elected notoffered to competeoffset onthe interestdecrease ratesin core deposits and to fund increased loan demand during the period.year-ended March 31, 2026.

Advances from the Federal Home Loan Bank. Advances from the Federal Home Loan Bank totaled $10.0$3.8 million at March 31, 2025,2026, ana increasedecrease of $7.0$6.2 million, or 232.4%,62.0%, from the $3.0$10.0 million balance at March 31, 2024.2025. The increasedecrease in advances was usedprimarily due to offset the decreaseincrease in deposits duringand the year.use of investment sale proceeds to pay down outstanding advances.

General. Net loss for the fiscal year ended March 31, 2025,2026, was $327,000,$515,000, a decrease in earnings of $386,000$188,000 or 646.5%,57.5%, compared to a net incomeloss of $60,000$327,000 for the fiscal year ended March 31, 2024.2025. The decrease in net incomeearnings was primarily due to a $277,000, or 6.6%,an increase in noninterest expensesexpense andof $467,000, or 10.4%, which was partially offset by an increase in noninterest income of $63,000, or 16.8%, a $159,000, or 110.7% increasedecrease in the provision for credit losses,losses whichof were partially offset by a $84,000,$72,000, or 172.5%,372.5%, an increase in net interest income of $93,000, or 2.5%, and an increase in the benefit for income taxtaxes benefitof provision.$51,000, or 38.3%.

Interest IncomeIncome. Interest income increased $209,000,$307,000, or 3.7%,5.2%, to $6.2 million for the fiscal year ended March 31, 2026, compared to $5.9 million for the fiscal year ended March 31, 2025 compared to $5.7 million for the fiscal year ended March 31, 2024.2025. This increase was attributable to a $246,000,$402,000, or 4.9%,7.7%, increase in interest on loans receivable, which was partially offset by a $41,000,$73,000, or 7.7%,42.9%, decrease in interest-bearing deposits and other and a $22,000, or 4.5%, decrease in interest on investment securities.

The average yield on loans increased by 32 basis points to 4.81%5.11% for the fiscal year ended March 31, 20252026 from 4.49%4.79% for the fiscal year ended March 31, 2024,2025, while the average balance of loans decreasedincreased by $2.3$1.1 million, or 2.0%,1.1%, during the fiscal year ended March 31, 20252026 compared to the average balance for the fiscal year ended March 31, 2024.2025. The increase in average yield on loans reflects the increase in the overallCompany’s commercial real estate and commercial and industrial loan portfolios. These loans typically have a higher interest rate environmentthan period-to-period.1-4 Thefamily increasesresidential inloans. interestTo ratesa havelesser provided higher yields on newly originated loans, as well asdegree, the Company’s adjustable-rate loans,loans whichthat have the five-year treasury as the index, adjusted upward and should continue to rise providedduring the higher interest rate environment persists.year.

The average balance of investment securities decreased $2.8$2.0 million, or 8.7%,6.8%, to $27.5 million for the fiscal year ended March 31, 2026 from $29.5 million for the fiscal year ended March 31, 2025 from $32.3 million for the fiscal year ended March 31, 2024,2025, while the average yield on investment securities increased by twofour basis points to 1.71% for the fiscal year ended March 31, 2026 from 1.67% for the fiscal year ended March 31, 20252025. fromThe 1.65%increase forin the average yield on investment securities was primarily due to the sale of $4.2 million of lower-yielding securities during the fiscal year ended March 31, 2024.2026.

Interest income on other interest-bearing deposits, comprised primarily of overnight deposits and stock in the Federal Home Loan Bank, increaseddecreased $4,000$73,000, or 2.4%,42.7%, for the fiscal year ended March 31, 2025,2026, due to ana increasedecrease in the average balance of $1.1 million, or 37.9%, to $1.8 million for the fiscal year ended March 31, 2026 from $2.9 million for the fiscal year ended March 31, 2025 and a decrease in the yield of 4651 basis points, to 5.47% for the fiscal year ended March 31, 2026 from 5.98% for the fiscal year ended March 31, 2025 from 5.52% for the fiscal year ended March 31, 2024.2025. The increasedecrease in the average yield was due to the increasedecrease in market interest rates in the overall economy period-to-period.

Interest ExpenseExpense. Total interest expense increased $254,000,$214,000, or 12.7%,9.6%, to $2.4 million for the fiscal year ended March 31, 2026 from $2.2 million for the fiscal year ended March 31, 2025 from $2.0 million for the fiscal year ended March 31, 2024.2025. Interest expense on deposits increased $274,000,$214,000, or 17.3%,11.5%, due primarily to an increase of 2823 basis points in the average cost of deposits to 1.79% for the fiscal year ended March 31, 2026 from 1.56% for the fiscal year ended March 31, 2025 from 1.28% for the fiscal year ended March 31, 2024,2025, which was partially offset by a decrease of $4.7$3.4 million, or 3.8%,2.9%, in the average balance of interest-bearing deposits to $119.3$115.8 million for the fiscal year ended March 31, 20252026 from $124.0$119.2 million for the fiscal year ended March 31, 2024.2025.

Net Interest Income. Net interest income decreasedincreased $45,000,$93,000, or 1.2%,2.5%, toand was $3.7 million for both fiscal years ended March 31, 2026 and 2025. The increase in net interest income was from an increase in the interest rate spread to 2.48% for the fiscal year ended March 31, 20252026 comparedfrom to the fiscal year ended March 31, 2024. An increase in the interest rate spread to 2.42%2.41% for the fiscal year ended March 31, 20252025, fromas 2.39%well as an increase in the average net interest earning assets of $534,000 period-to-period. The net interest margin increased to 2.69% for the fiscal year ended March 31, 2024,2026 wasfrom partially offset by the average net interest earning assets decrease of $236,000 period-to-period. The net interest margin increased to 2.62%2.59% for the fiscal year ended March 31, 2025 from 2.54% for the fiscal year ended March 31, 2024. The interest rate spread and net interest margin were impacted by a series of market interest rate increases during 2024, and to a lesser extent, a recent 100 basis point reduction in the federal funds rate by the Federal Reserve Board.2025.

Provision for Credit Losses. The Company recorded ana increasedecrease in the provision for credit losses of $159,000,$72,000, or 110.7%,480.0%, for the fiscal year ended March 31, 20252026 to a recovery for credit losses of $57,000 compared to a provision for credit losses of $15,000 compared to a recovery for credit losses of $144,000 recorded for the fiscal year ended March 31, 2024.2025. The allowance for credit losses on loans was $799,000 at March 31, 2026, a decrease of $54,000, or 6.3%, compared to $853,000 at March 31, 2025, a decrease of $3,000, or 0.4%, compared to $856,000 at March 31, 2024.2025. The allowance for credit losses on off-balance sheet commitments was $76,000$72,000 at March 31, 2025,2026, ana increasedecrease of $20,000,$4,000, or 35.7%,5.3%, over the $56,000$76,000 total at March 31, 2024.2025. The allowance for credit losses on loans represented 0.72% of total loans at March 31, 2026, and 0.79% of total loans at March 31, 2025, and 0.79% at March 31, 2024.2025.

The determination of the adequacy of the allowance for credit losses included consideration of the balances of nonperforming loans, delinquent loans and net charge-offs in both periods. The Company had nononperforming loans of $250,000 at March 31, 2026 compared to nonperforming loans of $629,000 at both March 31, 2025 and March 31, 2024.2025. Classified loans totaled $1.6 million at March 31, 2026, compared to $128,000 at March 31, 2025,2025. comparedThe increase in classified loans was primarily due to $67,000the addition of a $1.4 million commercial residential loan to substandard assets. At March 31, 2026, the loan was performing. Total loans past due greater than 30 days totaled $601,000 at March 31, 2024.2026 Therecompared wereto no total loans past due greater than 30 days at March 31, 2025, compared to $231,000 past due greater than 30 days at March 31, 2024.2025.

Non-Interest Income. Noninterest income increased $10,000$63,000, or 2.8%,16.8%, to $354,000$439,000 for the fiscal year ended March 31, 20252026 from $344,000$376,000 for the fiscal year ended March 31, 2024.2025. AThe $13,000,other income increase of $56,000, or 12.9%,150.4%, increase inand the cash surrender value of bank-ownedbank lifeowned live insurance (BOLI) wasincrease of $14,000, or 12.3%, were partially offset by a $4,000, or 10.7%,22.2%, decrease in otherloan income.servicing fees and a $4,000, or 2.0%, decrease in service fees on deposits. The annualized net yield on BOLI was 3.55% as of 3/31/26, compared to 3.45% as of 3/31/25, compared to 3.24% as of 3/31/24.25.

Noninterest Expense. Noninterest expense increased $277,000,$467,000, or 6.6%,10.4%, to $4.9 million for the fiscal year ended March 31, 2026, compared to $4.5 million for the fiscal year ended March 31, 2025, compared to $4.2 million for the fiscal year ended March 31, 2024.2025. The increase was due primarily to a $210,000$261,000 loss on the sale of investment securities, a $45,000 or 114.0%, increase in professional services, and a $58,000, or 2.8%,2.0%, increase in salaries and employee benefits.benefits, a $68,000, or 12.5%, increase in data processing fees, a $69,000, or 15.6%, increase in other noninterest expenses, and a $31,000, or 7.9%, increase in professional services. This was partially offset by aan $10,000$11,000 or 2.3%,12.5%, decrease in otherFDIC expenses,insurance premiums, a $7,000, or 5.7%, decrease in directors’ fees, and a $9,000,$7,000, or 9.8%,8.4%, decrease in advertising.

Provision (Benefit) for Income Taxes. The Company’s income tax benefit provision increased by $84,000,$51,000, or 172.5%,38.3%, to a total of $133,000$184,000 for the fiscal year ended March 31, 2025,2026, compared to a benefit provision of $49,000$133,000 during the fiscal year ended March 31, 2024.2025. The increase in the income tax benefit provision was due primarily to a $471,000$188,000 increase in pretax loss. The tax benefit provision and effective tax rates reflect the Company’s nontaxable interest income in each period.

We maintain a significant deposit account with a commercial customer. The asset/liability management committee monitors the status of the account at its monthly meeting and the account is segregated as a separate line item on the deposit reports reviewed by the committee. Furthermore, there is regular verbal communication between senior management and the depositor regarding any expected changes in the depositor’s business that could result in material inflows and outflowoutflows from the account in the short-term so that we may proactively manage any risks due to expected fluctuations in the account balance.

We maintain uninsured deposits that exceed the Federal Deposit Insurance Corporation insurance limit. Senior management reviews uninsured deposit balances monthly to manage any risks due to fluctuations in the balances of uninsured deposits. We do not maintain any internal policy limits on concentrations in uninsured deposits in total or by type of depositor. We may accept brokered deposits up to an internal policy limit of 00%less than 15.0% of total assets from brokers approved by the board of directors. Before a broker is approved by the board of directors, we conduct financial analysis and due diligence on the broker. We had no brokered deposits of $3.1 million at March 31, 2025.2026.

Historically, we have not sold loans we have originated. We planrecently to developdeveloped the infrastructure necessary to sell one- to four-family residential mortgage loans, particularly longer term one- to four-family residential mortgage loans, to the secondary market to further help mitigate our interest rate risk exposure.

The following table sets forth, as of March 31,31 2025,2026, the calculation of the estimated changes in our EVE that would result from the designated immediate changes in the United States Treasury yield curve. The estimated changes presented in the table exceeded the policy limits established by our board of directors.directors in an increased rate scenario of 200 and 300 basis points.

The table above indicates that as of March 31, 2025,2026, we would have experienced a 0.55%0.63% decrease in net interest income in the event of an instantaneous parallel 100 basis point increase in market interest rates and a 0.96%1.64% increasedecrease in net interest income in the event of an instantaneous 100 basis point decrease in market interest rate.

Our primary sources of funds are deposits, principal and interest payments on loans and securities, and proceeds from maturities of securities. We also have the ability to borrow from the Federal Home Loan Bank of Cincinnati, the Federal Reserve Bank of Cleveland and a correspondent bank. At March 31, 2025,2026, we had the ability to borrow up to $45.4$47.4 million from the Federal Home Loan Bank of Cincinnati under a collateral pledge facility. At March 31, 2025,2026, we had $10.0$3.1 million of outstanding advances under this facility. At March 31, 2025,2026, we had no outstanding borrowings from the Federal Reserve Bank of ClevelandCleveland, but had the capacity to borrow up to $6.7$5.7 million. At March 31, 2025,2026, we had no outstanding borrowings from the correspondent bankbank, but had the capacity to borrow up to $5.0 million.

Our cash flows are comprised of three primary classifications: cash flows from operating activities, cash flows from investing activities, and cash flows from financing activities. For the fiscal year ended March 31, 2025,2026, cash flows from operating, investing, and financing activities resulted in a net decrease in cash and cash equivalents of $8.5 million.$622,000. Net cash provided by investing activities amounted to $2.8$1.9 million, net cash used in financing activities amounted to $11.2$2.2 million, and net cash providedused byin operating activities amounted to $204,000.$318,000.

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 benefits that are subject to change.

Because of these and a wide variety of other uncertainties, our actual future results may be materially different from the results indicated by these forward-looking statements. Except as required by applicable law or regulation, we assume no obligation and disclaimsdisclaim any obligation to update any forward-looking statements.

Allowance for Credit Losses. The allowance for credit losses is the estimated amount considered necessary to cover inherent, but unconfirmed,estimated credit losses over the life of the loans. Management performs a quarterly evaluation of the allowance for credit losses on loans and unfunded commitments. The allowance for credit losses is based upon management’s evaluation of the collectibility of the loans in light of historical experience, the nature and volume of the loan portfolioportfolio, atadverse situations that may affect the balanceborrower’s sheetability date.to repay, estimated value of any underlying collateral and prevailing economic conditions. The allowance is established through the provision for credit losses which is charged against income. InThis determiningevaluation theis allowanceinherently forsubjective creditas losses,it managementrequires makesmaterial estimates that may be susceptible to significant estimateschange. andThis policy has been identified this policy as one of our most critical accounting policies.

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) for the fiscal year ended March 31, 2025.. ASC 326 requires an estimate of all expected credit losses for loans based on historical experience, current conditions, and reasonable and supportable forecasts.

Comparison of Financial Condition at DecemberJune 31,30, 20252026 and March 31, 20252026

Total Assets. Total assets were $147.9$144.1 million at DecemberJune 31,30, 2025,2026, an increase of $3.6$1.7 million, or 2.5%,1.2%, from $144.3$142.4 million at March 31, 2025.2026. The increase was due primarily to an increaseincreases in net loans of $4.4$1.5 million during the nine month period ended December 31, 2025, which was partially offset by a decrease inand cash and cash equivalents of $516,000.$510,000 during the three month period ended June 30, 2026.

Cash and Cash Equivalents. Cash and cash equivalents decreasedincreased $516,000,$510,000, or 24.6%,35.0%, to $1.6$2.0 million at DecemberJune 31,30, 20252026 from $2.1$1.5 million at March 31, 2025.2026. The decreaseincrease in cash and cash equivalents came primarily from FHLB advance funding. The FHLB advance funding was due primarily to the use of cashused to fund loan growth and paywill downcontinue FHLBto advancebe borrowingsused to fund loan growth over the ninenext month period ended December 31, 2025.quarter.

Investment Securities. Investment securities available for sale decreased $140,000,$67,000, or 0.6%,0.4%, toand $23.0were $18.4 million at Decemberboth 31,June 2025,30, from2026 $23.1 million atand March 31, 2025.2026. The decrease was primarily attributable to repayments of securities totaling $1.0 million$213,000 during the ninethree months ended DecemberJune 31,30, 2025,2026, which was offset by a decrease of $982,000,$165,000, or 19.2%,4.0%, in the unrealized loss on available for sale securities during the ninethree months ended DecemberJune 31,30, 2025.2026.

Net Loans. Net loans increased $4.4$1.5 million, or 4.1%,1.4%, to $111.4$112.0 million at DecemberJune 31,30, 20252026 from $107.0$110.5 million at March 31, 2025.2026. During the ninethree months ended DecemberJune 31,30, 2025,2026, loan originations totaled $16.5$8.1 million, comprised primarily of $6.1$2.4 million of loans secured by one- to four-family residential real estate, $3.2 million of commercial real estate loans, $1.8 million of commercialmulti-family loans, $1.5 million of construction and industrialloan loans, $2.4 million$880,000 in home equity lines of credit, $1.9 million$846,000 of constructioncommercial and loanindustrial loans and $600,000$580,000 inof multifamilycommercial real estate loans. Consumer loan originations totaled $338,000,$76,000, of which $203,000$48,000 were auto loans.

During the ninethree months ended DecemberJune 31,30, 2025,2026, multi-family loans increased $1.4 million, or 78.7%, to a total of $3.3 million at June 30, 2026, commercial real estate loans increased $2.4 million,$751,000, or 9.9%,2.7%, to a total of $26.6$28.1 million at DecemberJune 31,30, 2025,2026, commercial and industrialconsumer loans increased $2.1 million,$206,000, or 48.8%,18.6%, to a$1.3 totalmillion ofat $6.3June million,30, 2026 and home equity lines of credit increased $707,000,$201,000, or 16.1%,4.1%, to $5.1 million at DecemberJune 31,30, 2025 and multi-family loans increased $333,000, or 20.8%, to $1.9 million.2026. These increases were partially offset by a decrease in residential real estate loans of $722,000, or 1.1%, to $67.3 million at June 30, 2026, a decrease in construction and land loans of $885,000,$240,000, or 35.4%,11.4%, to $1.6$1.9 million at DecemberJune 31,30, 2025, a decrease in residential mortgage loans of $190,000, or 0.3%, to $69.7 million,2026 and a decrease in consumercommercial and industrial loans of $92,000,$117,000, or 7.1%,1.9%, to $1.2$6.2 million at DecemberJune 31,30, 2025.2026.

The increase in the Company’s loan portfolio has been due to increased demand for commercial real estate and commercial and industrial loanslending in our market area, as well as increased marketing efforts towards home equity lines of credit. The Company’s strategy includes continuing to grow the loan portfolio, focusing on home equity lines of credit and commercial real estate loans.

Deposits. Deposits increaseddecreased by $8.0$2.2 million, or 6.6%,1.8%, to $128.7$122.3 million at DecemberJune 31,30, 20252026 from $120.7$124.5 million at March 31, 2025.2026. Core deposits (defined as all deposits other than certificates of deposit) increaseddecreased $1.1$1.9 million, or 1.3%,2.3%, to $88.0$81.3 million at DecemberJune 31,30, 20252026 from $86.9$83.2 million at March 31, 2025.2026. Certificates of deposit increaseddecreased $6.9 million,$315,000, or 20.4%,0.8%, to $40.7$41.0 million at DecemberJune 31,30, 20252026 from $33.8$41.3 million at March 31, 2025.2026. The increasedecrease in core deposits was due primarily to a $3.3$2.1 million increasedecrease in money market deposit accounts. The decrease in money market deposit accounts and savings accounts. This increase was mostly offset by a $2.2 million decrease in demand accounts. The increase in certificates of deposit wasprimarily due primarily to ourlarge offeringwithdrawals offrom CDtwo specialscustomer’s to maintain our current deposit base and attract new deposits.accounts.

During the ninethree months ended DecemberJune 31,30, 2025,2026, 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 $4.7$7.4 million at DecemberJune 31,30, 2025,2026, aan decreaseincrease of $5.3$3.6 million, or 53.0%,93.9%, from the $10.0$3.8 million balance at March 31, 2025.2026. The decreaseincrease in advances was aused resultto offund paydownsloan usinggrowth given the cash received from the increasedecrease in deposits during the ninethree months endingended DecemberJune 31,30, 2025.2026.

Stockholders’ Equity. Stockholders’ equity increased $585,000$154,000 or 4.8%,1.2%, to $12.7$12.6 million at DecemberJune 31,30, 2025,2026, from $12.1$12.4 million at March 31, 2025.2026. The increase was due primarily to a decrease of $776,000$130,000 in the tax-effected unrealized loss on available for sale securities at DecemberJune 31,30, 2025,2026 which was partially offset byand a net$20,000 lossincrease ofin $211,000additional duringpaid-in the nine month period ending December 31, 2025.capital.

Comparison of Operating Results for the Three Months Ended DecemberJune 31,30, 20252026 and 20242025

General. The Company reported a net loss of $211,000$1,500 for the ninethree months ended DecemberJune 31,30, 2025,2026, a $111,000, or 34.5%,$134,000 decrease from the net loss of $322,000$135,000 for the ninethree months ended DecemberJune 31,30, 2024.2025. The decrease in the net loss was primarily due to a $79,000,$76,000, or 30.0%, increase in noninterest income, a $37,000, or 1.3%,8.4%, increase in net interest income, and a $17,000,decrease of $60,000, or 20.5%, increase75.0%, in the benefitprovision for federalcredit incomelosses taxes,and whicha wasdecrease partiallyof offset by an $89,000,$32,000, or 2.7%, increase2.9%, in noninterest expense.expenses.

Interest Income. Interest income increased $202,000,$76,000, or 4.6%,5.1%, for the ninethree months ended DecemberJune 31,30, 20252026 and totaled $4.6$1.6 million for the ninethree month period ended DecemberJune 31,30, 2025,2026, compared to $4.4$1.5 million for the ninethree month period ended DecemberJune 31,30, 2024.2025. This increase was primarily attributable to a $285,000,$103,000, or 7.3%,7.6%, increase in loan interest income.income, Thiswhich was partially offset by a $67,000,$22,000, or 47.5%,18.5%, decrease in interest on investment securities and a $5,000, or 20.0%, decrease in interest on interest-bearing deposits and other assets and a $16,000, or 4.3%, decrease in interest on investment securities.deposits.

The average yield on loans increased by 3221 basis points to 5.10%5.23% for the ninethree months ended DecemberJune 31,30, 20252026 from 4.78%5.02% for the ninethree months ended DecemberJune 31,30, 2024,2025, while the average balance of loans increased by $500,000,$3.6 million, or 0.5%,3.3%, during the ninethree months ended DecemberJune 31,30, 20252026 compared to the average balance for the ninethree months ended DecemberJune 31,30, 2024.2025. The increase in the average yield on loans reflects the increase in commercial real estate loans and commercial and industrialmulti-family loans and the decrease in 1-4 residential loans for the nine-monththree-month period ended DecemberJune 31,30, 20252026 compared to the nine-monththree-month period ended DecemberJune 31,30, 2024,2025, as commercial loans typically carry a higher interest rate than 1-4 residential loans. The Company also has several adjustable-rate commercial adjustable-ratereal estate loans which have adjusted upward following a five-year fixed interest rate period.

The average balance of investment securities decreased $2.1$5.6 million, or 7.0%,20.1%, to $27.7$22.4 million for the ninethree months ended DecemberJune 31,30, 20252026 from $29.8$28.1 million for the ninethree months ended DecemberJune 31,30, 2024,2025, while the average yield on investment securities increased by 5four basis points to 1.75% for the three months ended June 30, 2026 from 1.71% for the ninethree months ended DecemberJune 31,30, 2025 from 1.66% for the nine months ended December 31, 2024.2025.

Interest income on other interest-bearing deposits,deposits and other, comprised primarily of overnight deposits and stock in the Federal Home Loan Bank, decreased $67,000,$5,000, or 47.5%,20.0%, for the ninethree months ended DecemberJune 31,30, 20252026 due to a decrease in the average yieldbalance of 29$232,000, basisor points, to 5.59%13.9%, for the ninethree month ended December 31, 2025 from 5.88% for the nine monthsperiod ended DecemberJune 31,30, 2024,2026 and a decrease in the average balanceyield of $1.443 million,basis or 43.8%,points, to $1.8 million5.56%, for the ninethree month period ended June 30, 2026 from 5.99% for the three months ended DecemberJune 31,30, 2025 from $3.2 million for the nine months ended December 31, 2024.2025.

Interest Expense. Total interest expense increased $165,000, or 9.7%,amounted to $1.8 million$594,000 for theboth ninethree monthsmonth periods ended DecemberJune 31,30, 20252026 fromand $1.7 million for the nine months ended December 31, 2024.2025. Interest expense on deposits increased $120,000,$61,000, or 8.6%,12.8%, due primarily to an increase of 2218 basis points in the average cost of deposits to 1.76%1.87% for the ninethree months ended DecemberJune 31,30, 20252026 from 1.54%1.69% for the ninethree months ended DecemberJune 31,30, 2024,2025 whichand wasan offset by a decreaseincrease of $6.4$2.2 million, or 5.3%,2.0%, in the average balance of interest-bearing deposits to $114.8$114.4 million for the ninethree months ended DecemberJune 31,30, 20252026 from $121.2$112.2 million for the ninethree months ended DecemberJune 31,30, 2024.2025.

Interest expense on borrowings increaseddecreased $45,000,$61,000, or 16.9%,51.3%, to $312,000$58,000 for the ninethree monthsmonth period ended DecemberJune 31,30, 20252026 compared to $267,000$119,000 for the ninethree monthsmonth period ended DecemberJune 31,30, 2024.2025. The increasedecrease was primarily due to a $2.3decrease of $4.3 million, or 33.3%, increase41.5%, in the average balance outstanding,outstanding for the three month period ended June 30, 2026, to $9.2$6.0 million from $10.3 million for the ninethree months ended DecemberJune 31,30, 2025 from $6.9 million for the nine months ended December 31, 2024, which was offset byand a 6377 basis point decrease in the weighted-average rate, to 4.52%3.87%, for the ninethree months ended DecemberJune 31,30, 20252026 compared to 5.15%4.63% for the ninethree months ended DecemberJune 31,30, 2024.2025.

Net Interest Income. Net interest income increased $37,000,$76,000 or 1.3%,8.4%, andto was $2.8 million$983,000 for boththe ninethree month periodsmonths ended DecemberJune 31,30, 20252026 andcompared 2024.to $907,000 for the three months ended June 30, 2025. The increase reflected an increase in the net interest margin to 2.90% for the three months ended June 30, 2026 from 2.63% for the three months ended June 30, 2025. There was an increase in the interest rate spread to 2.46%2.68% for the ninethree months ended DecemberJune 31,30, 20252026 from 2.42% for the ninethree months ended DecemberJune 31,30, 2024,2025, while the average net interest earninginterest-earning assets increased $1.0 million period-to-period. The net interest margin increased to 2.68%interest-bearing liabilities was the same for theboth ninethree monthsmonth periods ended DecemberJune 31,30, 2026 and 2025 fromat 2.59% for the nine months ended December 31, 2024.112.5%.

Provision for (Recovery of) Credit Losses. The Company recorded a decrease in the provision for credit losses of $67,000, or 85.9%,$21,000, for the ninethree months ended DecemberJune 31,30, 2025, to a provision for credit losses of $11,0002026, compared to a provision for credit losses of $78,000 recorded$80,000 for the ninethree months ended DecemberJune 31,30, 2024.2025. The allowance for credit losses on loans was $890,000$806,000 at DecemberJune 31,30, 2025,2026, an increase of $37,000,$7,000, or 4.3%,0.9%, overcompared theto $853,000 total$799,000 at March 31, 2025.2026. The allowance for credit losses on off-balance sheet commitments was $50,000$86,000 at DecemberJune 31,30, 2025,2026, aan decreaseincrease of $26,000,$14,000, or 34.2%,19.4%, overcompared theto $76,000 total$72,000 at March 31, 2025.2026. The allowance for credit losses on loans represented 0.79%0.71% of total loans at bothJune December30, 31,2026 2025compared andto 0.72% of total loans at March 31, 2025.2026.

The determination of the adequacy of the allowance for credit losses included consideration of the balances of nonperforming loans, delinquent loans and net charge-offs in both periods. The Company’s nonaccrualNonaccrual loans totaled $539,000$248,000 at DecemberJune 31,30, 2025,2026, compared to $629,000$250,000 in nonaccrual loans at March 31, 2025.2026. Classified loans totaled $2.1$2.0 million at DecemberJune 31,30, 2025,2026, compared to $128,000$1.6 million at March 31, 2025.2026. Total loans past due greater than 30 days weretotaled $249,000$428,000 at DecemberJune 31,30, 20252026, compared to no loans past due greater than 30 days$601,000 at March 31, 2025.2026.

The allowance for credit losses reflects the estimate management believes to be adequate to cover incurred probableestimated losses whichbased wereupon inherentmanagement’s inevaluation of the collectability of its loan portfolio. In determining this estimate, consideration is given to historical experience, the nature and volume of the loan portfolioportfolio, atadverse Decembersituations 31,that 2025may affect the borrower’s ability to repay, the estimated value of any underlying collateral and Marchprevailing 31,economic 2025.conditions. 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 Company’s financial condition and results of operations. In addition, bank regulatory agencies periodically review the allowance for 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. Noninterest income totaled $342,000$96,000 for the ninethree months ended DecemberJune 31,30, 2025,2026, an increase of $79,000,$6,000, or 30.0%,6.7%, from $263,000$90,000 for the ninethree months ended DecemberJune 31,30, 2024.2025. The increase was attributable primarily to a $53,000,$4,000, or 203.8%, increase in other income, primarily from the recoupment of legal fees and fees received from the borrower of a previously charged-off loan, an increase of $21,000, or 300.0%, in late charges and fees on loans and an $11,000, or 13.1%,12.9%, increase in the cash surrender value of life insurance, a $3,000, or 60.0%, increase in income from late charges and fees on loans and a $2,000, or 25.0%, increase in other income, which was partially offset by a $3,000,$2,000, or 25.0%, decrease in loan servicing fees and a $3,000, or 2.3%,4.4%, decrease in service fees on deposits.

Noninterest Expense. Noninterest expense increaseddecreased $89,000, or 2.7%,$32,000 and wastotaled $3.4$1.1 million for theboth ninethree month periodperiods ended DecemberJune 31,30, 20252026 comparedand to $3.3 million for the nine month period ended December 31, 2024.2025. The increasedecrease was due primarily to a $65,000,$39,000, or 19.0%,47.0%, increasedecrease in otherprofessional expenses,services and a $53,000,$5,000, or 13.3%, increase in data processing fees and an $18,000, or 34.6%, increase in franchise taxes. This was partially offset by a $21,000, or 1.3%,0.9%, decrease in salaries and employee benefitsbenefits. expense,The decrease was partially offset by an increase in other expenses of $15,000, or 12.9% and a $14,000,$3,000, or 20.0%,16.7%, decreaseincrease in FDIC insurance premiums and a $13,000, or 4.5%, decrease in professional services.premiums.

Income Taxes. The Company’s income tax benefit increaseddecreased by $17,000,$39,000, or 20.5%,77.8%, with a benefit provision of $100,000$11,000 for the ninethree months ended DecemberJune 31,30, 2025,2026, compared to a benefit provision of $83,000,$51,000 for the ninethree months ended DecemberJune 31,30, 2024.2025. The tax benefit provision and effective tax rates reflect the Company’s nontaxable interest income in each period. The effective tax rate was -88.2% and -27.2% for the three months ended June 30, 2026 and 2025, respectively.

We maintain uninsured deposits that exceed the Federal Deposit Insurance Corporation insurance limit. Senior management reviews uninsured deposit balances monthly to manage any risks due to fluctuations in the balances of uninsured deposits. We do not maintain any internal policy limits on concentrations in uninsured deposits in total or by type of depositor. We may accept brokered deposits up to an internal policy limit of 15% of total assets from brokers approved by the board of directors. Before a broker is approved by the board of directors, we conduct financial analysis and due diligence on the broker. We had brokered deposits of $3.1 million at DecemberJune 31,30, 2025.2026.

Historically, we have not sold loans we have originated. We planrecently to developdeveloped the infrastructure necessary to sell one-one-to-four to four-familyfamily residential mortgage loans, particularly longer term one- to four-familyone-to-four-family residential mortgage loans, to further help mitigate our interest rate risk exposure.

The following table sets forth, as of DecemberJune 31,30, 2025,2026, the calculation of the estimated changes in our EVE that would result from the designated immediate changes in the United States Treasury yield curve. The estimated changes presented in the table are within the policy limits established by our board of directors except that the decrease in EVE at the positive 200 and 300 basis point levels exceeded policy limits of 15% and 25%, respectively.

The table above indicates that at DecemberJune 31,30, 2025,2026, we would have experienced a 21.76%18.35% decrease in EVE in the event of an instantaneous parallel 200 basis point increase in market interest rates and a 6.83%4.45% increase in EVE in the event of an instantaneous 200 basis point decrease in market interest rates.

Change in Net Interest Income. The table sets forth, as of DecemberJune 31,30, 2025,2026, the calculation of the estimated changes in our net interest income that would result from the designated immediate changes in the United States Treasury yield curve. All estimated changes presented in the table are within the policy limits established by the Company’s board of directors.

The table above indicates that as of DecemberJune 31,30, 2025,2026, we would have experienced a 2.95%6.46% decrease in net interest income in the event of an instantaneous parallel 200 basis point increase in market interest rates and a 3.25%4.87% decrease in net interest income in the event of an instantaneous 200 basis point decrease in market interest rate.

Our primary sources of funds are deposits, principal and interest payments on loans and securities, and proceeds from maturities of securities. We also have the ability to borrow from the Federal Home Loan Bank of Cincinnati, the Federal Reserve Bank of Cleveland and a correspondent bank. At DecemberJune 31,30, 2025,2026, we had the ability to borrow up to $49.0$46.3 million from the Federal Home Loan Bank of Cincinnati under a collateral pledge facility. At DecemberJune 31,30, 2025,2026, we had $4.7$7.4 million of outstanding advances and a $4.5 million standby letter of credit under this facility. At DecemberJune 31,30, 2025,2026, we had no outstanding borrowings from the Federal Reserve Bank of Cleveland, but had the capacity to borrow up to $5.8$5.3 million. At DecemberJune 31,30, 2025,2026, we had no outstanding borrowings from the correspondent bank, but had the capacity to borrow up to $5.0 million.

Our cash flows are comprised of three primary classifications: cash flows from operating activities, cash flows from investing activities, and cash flows from financing activities. For the ninethree month period ended DecemberJune 31,30, 2025,2026, cash flows from operating, investing, and financing activities resulted in a net decreaseincrease in cash and cash equivalents of approximately $500,000.$510,000. Net cash usedprovided inby operating activities amounted to $100,000,$127,000, net cash used in investing activities amounted to $3.5$1.2 million, and net cash provided by financing activities amounted to $3.1$1.6 million.

Monroe Federal Bancorp is a separate legal entity from Monroe Federal Savings and Loan Association Bank and must provide for its own liquidity to fund its operating expenses and other financial obligations. Its primary source of income is dividends received from the Bank. The amount of dividends that the Bank may declare and pay to Monroe Federal Bancorp is governed by applicable regulations. At DecemberJune 31,30, 2025,2026, Monroe Federal Bancorp (on an unconsolidated basis) had liquid assets of $1.5 million.