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

Total Assets. Total assets were $181.7$176.2 million at September 30, 2024,2025, ana increasedecrease of $22.7$5.6 million, or 14.3%,3.1%, from September 30, 2023.2024. The increasedecrease was primarily comprised of ana increasedecrease in loans and loans held for sale of $22.6$5.3 million, whicha wasdecrease partiallyin offsetinvestment bysecurities of $1.5 million, a decrease in FHLB stock of $664,000, and a decrease in cash and cash equivalents of $394,000$534,000, which were partially offset by an increase in premises and a decrease in investment securitiesequipment of $383,000.$2.4 million.

Loans Held for Sale. Loans held for sale increaseddecreased to $8.1 million at September 30, 2025 compared to $10.5 million at September 30, 20242024. comparedThe decrease was due primarily to $3.1 million at September 30, 2023.paydowns. During fiscal 2023, management established an indirect automobile lending program and began to originate auto loans both for sale and for investment. Loans held for sale consisted solely of automobile loans at September 30, 2024.2025. No sales of auto loans occurred during the year ended September 30, 20242025 or 2023.2024. Efforts to market indirect auto loan pools to investor banks are currently anticipated to begin in the second calendar quarter of 2026.

Net Loans. Net loans increaseddecreased by $15.1$2.8 million, or 11.6%,1.9%, to $142.3 million at September 30, 2025 from $145.1 million at September 30, 2024 from $130.0 million at September 30, 2023.2024. During the year ended September 30, 2024,2025, loan originations totaled $47.4$27.5 million, comprised primarily of $26.8$4.9 million secured by agricultural real estate, $9.5$17.0 million of loans secured by one- to four-family residential real estate and $483,000$2.8 million of construction loans. The growth in agricultural real estate was in the normal course of business. Consumer loans originated totaled $10.0$2.5 million, the majority of which were automobile loans. Management designated $8.4 million$609,000 of these auto loans originated during the year ended September 30, 20242025 as held for sale and $4.7$1.6 million were held in the portfolio.

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 indirect automobile loans.

Deposits. Deposits increased by $11.7$9.4 million, or 9.6%,7.0%, to $144.0 million at September 30, 2025 from $134.6 million at September 30, 20242024. fromCore $122.8deposits increased $2.0 million, or 2.2%, to $93.7 million at September 30, 2023.2025 Core deposits increased $1.2 million, or 1.3%, tofrom $91.7 million at September 30, 20242024. fromCertificates $90.5of deposit increased $7.4 million, or 17.3%, to $50.3 million at September 30, 2023.2025 Certificates of deposit increased $10.5 million, or 32.6%, tofrom $42.9 million at September 30, 2024 from $32.3 million at September 30, 2023.2024. The increase in certificates of deposit was primarily a result of a $13.0$9.7 million increase in brokered deposits year-to-year.

Advances from the Federal Home Loan Bank. Advances from the Federal Home Loan Bank totaled $22.0$6.0 million at September 30, 2024,2025, ana increasedecrease of $10.0$16.0 million, or 83.3%,72.7%, overfrom the $12.0$22.0 million balance at September 30, 2023.2024. ProceedsMaturing advances were repaid primarily from proceeds from the advancesgrowth werein useddeposits, primarilyas towell fundas the maturities of investment securities and repayments on loans. Advances totaling $19.0$6.0 million are scheduled to mature within one year from September 30, 2024.2025.

Shareholders’ Equity. Shareholders’ equity increased $1.3 million,$659,000, or 5.6%,2.8%, to $24.6 million at September 30, 2025, from $24.0 million at September 30, 2024, from $22.7 million at September 30, 2023.2024. The increase resulted primarily from net income of $693,000$972,000 which was partly offset by a $386,000 repurchase of common stock, and aan $537,000additional decrease$67,000 inof accumulated other comprehensive loss.

General. Net income for the year ended September 30, 20242025 was $693,000,$972,000, aan decreaseincrease of $51,000,$280,000, or 6.9%,40.4%, compared to $744,000$693,000 for the year ended September 30, 2023.2024. The decreaseincrease in net income was primarily due to a $502,000$1.1 million increase in net interest income, partially offset by a $341,000 decrease in noninterest income, a $376,000 increase in noninterest expenses, and a $68,000$90,000 increase in the provision for credit losses, which were partially offset by a $311,000 increase in net interest income and a $201,000 increase in noninterest income.taxes.

The average balance of investment securities decreased $1.5 million, or 10.6%,11.8%, to $12.3$10.9 million for the year ended September 30, 20242025 fromcompared $13.8 million forto the year ended September 30, 2023,2024, while the average yield on investment securities increased by 6455 basis points to 3.10% for the year ended September 30, 2025 from 2.55% for the year ended September 30, 2024 from 1.91% for the year ended September 30, 2023.2024.

Interest Expense. Total interest expense increased $1.9 million,$103,000, or 322.4%,4.1%, to $2.6 million for the year ended September 30, 2025 from $2.5 million for the year ended September 30, 2024 from $600,000 for the year ended September 30, 2023.2024. Interest expense on deposits increased $1.2 million,$112,000, or 257.2%,6.5%, due primarily to an increase of 106one basis pointspoint in the average cost of deposits to 1.50% for the year ended September 30, 2025 from 1.49% for the year ended September 30, 2024 from 0.43% for the year ended September 30, 2023,2024, and an increase of $3.7$7.0 million, or 3.3%,6.0%, in the average balance of interest-bearing deposits to $123.2 million for the year ended September 30, 2025 from $116.2 million for the year ended September 30, 2024 from $112.5 million for the year ended September 30, 2023.2024.

Interest expense on borrowings increaseddecreased $686,000,$9,000, or 598.8%,1.1%, for the year ended September 30, 2024,2025, compared to the year ended September 30, 2023.2024. The increasedecrease was due to a 25332 basis point increasedecrease in the weighted-average rate, to 5.11%4.79% for the year ended September 30, 20242025, andpartially offset by an $11.2 million$866,000 increase in the average balance outstanding, to $16.5 million for the year ended September 30, 2025 from $15.7 million for the year ended September 30, 2024 from $4.5 million for the year ended September 30, 2023.2024.

Net Interest Income. Net interest income increased $311,000,$1.1 million, or 5.8%,19.0%, to $6.8 million for the year ended September 30, 2025 compared to $5.7 million for the year ended September 30, 20242024. comparedThe interest rate spread increased to $5.4 million3.67% for the year ended September 30, 2023.2025 The increase reflected an increase of $6.5 million in the average net interest earning assets, which was partially offset by a decrease in the interest rate spread tofrom 3.12% for the year ended September 30, 20242024. fromOur 3.71%net interest margin increased to 4.01% for the year ended September 30, 2023.2025 Our net interest margin decreased tofrom 3.49% for the year ended September 30, 2024 from 3.80% for the year ended September 30, 2023.2024. The interest rate spread and net interest margin were impacted by a series of interest rate increasesdecreases in the economy during 20242025 and 2023.2024.

Provision for Credit Losses. Based on an analysis of the factors described in “Critical Accounting Policies—Allowance for Credit Losses,” management determined that a $68,000$66,000 provision for credit losses was required for the year ended September 30, 2024,2025, resultinga in an increasedecrease of $68,000$2,000 as no provision was recorded forfrom the year ended September 30, 2023.2024. The allowance for credit losses on loans was $960,000 at September 30, 2025 and $963,000 at September 30, 2024 and $934,000represented 0.67% of total loans at September 30, 20232025, and represented 0.65% of total loans at September 30, 2024, and 0.70% of total loans at September 30, 2023. The increase in provision for credit losses was due primarily to the growth in the loan portfolio during the year.2024.

Total nonperforming loans were $1.3 million at September 30, 2025, compared to $386,000 at September 30, 2024,2024. comparedClassified toloans $477,000totaled $737,000 at September 30, 2023.2025, Classifiedcompared loans totaledto $482,000 at September 30, 2024, compared to $477,000 at September 30, 2023, and total loans past due greater than 30 days were $2.3 million at September 30, 2025 and $1.3 million at September 30, 2024. each of those respective dates. As a percentage of nonperforming loans, the allowance for credit losses was 134.2% at September 30, 2025 compared to 249.6% at September 30, 2024 compared to 195.7% at September 30, 2023.2024.

Non-Interest Income. Non-interest income totaled $505,000 for the year ended September 30, 2025, a decrease of $341,000, or 40.3%, from $846,000 for the year ended September 30, 2024, an increase of $201,000, or 31.1%, from $645,000 for the year ended September 30, 2023.2024. The increasedecrease was due primarily to a non-recurring $160,000 incentive which had been received for switching to Mastercard as the Bank’s credit and debit card provider during fiscal 2024, a $26,000$97,000 gaindecrease in service fees on thedeposits, saleand a decrease of foreclosed real estate, and an $11,000 increase$85,000 in gainlate fees on the sale of investment securities.loans.

Noninterest Expense. Noninterest expense increased $502,000,$376,000, or 9.8%,6.7%, to $6.0 million for the year ended September 30, 2025, compared to $5.6 million for the year ended September 30, 2024, compared to $5.1 million for the year ended September 30, 2023.2024. The increase was due primarily to a $317,000,$210,000, or 14.5%,32.6%, increase in data processing fees, a $189,000, or 7.5%, increase in salaries and employee benefits, a $187,000, or 183.9%, increase in loan expense, a $226,000, or 80.3%, increase in professional services, a $118,000, or 22.3%, increase in data processing fees, a $106,000, or 29.3%, increase in other expense, and a $53,000,$50,000, or 11.8%,9.9%, increase in occupancy and equipment, partially offset by aan $607,000$88,000, or 31.6%, decrease in charitabledeposit contributions.account services expense.

The increase in salaries and employee benefits was due primarily to ESOPexpense compensationrelated expense,to stock awards and options, normal merit increases and ana 8%9% increase in health insurance cost year-to-year. The increase in loan expenses was due primarily to the increase in loan origination volume. The increase in occupancy and equipment expense was due primarily to depreciation associated with new data processing hardware and software and a new phone system. The increase in data processing was due primarily to anexpense increaserelated in fees followingto the Aprilconversion 2024to expirationa ofnew our contract with thecore data processing provider.service Wewhich havetook signed a contract with a new provider that is expected to beginplace in February 2025, that provides for lower fees more in line with the recently expired contract.2025. The new service is expected to provideprovides better customer facing enhancements and internal capabilities. The increase in professionaloccupancy servicesand equipment was due primarily to additional audit and related expenses required in connection with the reporting requirements of a public stock company. The increase in otherdepreciation expense was due primarily to anequipment increaseupgrades and the opening of the new branch office in computerBerne, suppliesIndiana. andThe decrease in account services expense andis ana increaseresult inof realour estateconversion ownedto expense.our new core processor.

Income Taxes. Income taxes decreasedincreased by $8,000,$90,000, or 4.5%,54.1%, to $255,000 for the year ended September 30, 2025, compared to $166,000 for the year ended September 30, 2024, compared to $173,000 for the year ended September 30, 2023.2024. The effective tax rates were 19.3%20.8% and 19.0%19.3% for the years ended September 30, 20242025 and 2023,2024, respectively.

Liquidity describes our ability to meet the financial obligations that arise in the ordinary course of business. Liquidity is primarily needed to meet the borrowing and deposit withdrawal requirements of our customers and to fund current and planned expenditures. Our primary sources of funds are deposits, principal and interest payments on loans and securities, and proceeds from maturities of securities. We also have the ability to borrow from the Federal Home Loan Bank of Cincinnati. At September 30, 2024,2025, we had $22.0$6.0 million of outstanding borrowings from the Federal Home Loan Bank of Cincinnati. At September 30, 2024,2025, we had the capacity to borrow $23.2$41.3 million from the Federal Home Loan Bank of Cincinnati. At September 30, 20242025 and 2023,2024, the Bank had a cash management line of credit agreement with the Federal Home Loan Bank providing for additional borrowing capacity of $11.0 and $10.0 million, respectively.million. The Bank had $2.0 million drawn on this line at September 30, 2025 and $7.0 million drawn on this line at September 30, 2024 and no borrowings drawn on this line at September 30, 2023.2024.

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 consolidated balance sheetsheets 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.

Comparison of Financial Condition at DecemberMarch 31, 20252026 and September 30, 2025

Total Assets. Total assets were $174.2$173.9 million at DecemberMarch 31, 2025,2026, a decrease of $2.0$2.2 million, or 1.1%,1.3%, from September 30, 2025. The decrease was due primarily to decreases in loans held for sale of $957,000,$1.9 cashmillion, and cash equivelantsloans of $628,000,$452,000, Federal Home Loan Bank stock of $161,000,$287,000, and loansother assets of $150,000,$110,000, which were partially offset by increases in securitiescash availableand forcash saleequivalents of $167,000.$588,000.

Cash and Cash Equivalents. Cash and cash equivalents decreasedincreased by $628,000,$588,000, or 11.7%,11.0%, to $4.7$6.0 million at DecemberMarch 31, 20252026 from $5.4 million at September 30, 2025. The decreaseincrease was due primarily to the decrease in loans, and an increase in deposits, partially offset by the paying down of $5.0 million in Federal Home Loan Bank advances, partially offset by funds received from the increase in deposits and decreases in loans during the three months ended DecemberMarch 31, 2025.2026.

InvestmentDebt Securities. InvestmentDebt securities available for sale and held to maturity increased $167,000$62,000 to $9.8 million at DecemberMarch 31, 20252026 compared to September 30, 2025. During the threesix months ended DecemberMarch 31, 2025,2026, securitiesthere purchases ofwere $2.3 million werein partiallysecurities offsetpurchases, byand $2.1 million in sales, maturitieswhich andresulted in a $12,088 loss. There were repayments or maturities of $2.1 million,$302,000, while the fair value of available for sale securities increased by $116,000.$142,000 during the six months ended March 31, 2026.

The yield on investmentdebt securities was 3.21%3.37% for the threesix months ended DecemberMarch 31, 2025,2026, compared to 2.93%3.03% for the threesix months ended DecemberMarch 31, 2024,2025, reflecting the increases in the overall interest rate environment.

Loans Held for Sale. Loans held for sale decreased by $957,000,$1.9 million, or 11.9%23.7%, to $7.1$6.1 million at DecemberMarch 31, 20252026 compared to September 30, 2025. The decrease in loans held for sale was primarily due to paydowns of those loans. During the threesix months ended DecemberMarch 31, 2025,2026, no new auto loans were originated for sale and there were no$175,000 in mortgage loans originated for sale. No sales of auto loans occurred during the threesix months ended DecemberMarch 31, 2025,2026, and no$175,000 in sales of mortgage loans occurred during the threesix months ended DecemberMarch 31, 2025.2026.

Net Loans. Net loans decreased by $150,000,$452,000, or 0.1%,0.3%, to $142.1$141.8 million at DecemberMarch 31, 20252026 from $142.3 million at September 30, 2025. During the threesix months ended DecemberMarch 31, 2025,2026, residential real estate loans increased $4.2$9.1 million, or 5.3%,11.5%, to $83.0$87.9 million at DecemberMarch 31, 2025,2026, from $78.8 million at September 30, 2025, construction and land loans increased $187,000,$749,000, or 4.4%,17.6%, to $4.5$5.0 million at DecemberMarch 31, 2025,2026, from $4.3 million at September 30, 2025, consumer loans decreased $254,000,$692,000, or 5.0%,13.6%, to $4.8$4.4 million at DecemberMarch 31, 20252026 compared to September 30, 2025, and agricultural real estate loans decreased $4.1$8.8 million, or 8.9%,19.1%, to a total of $42.2$37.4 million at DecemberMarch 31, 2025.2026.

Premises and Equipment. Premises and equipment decreased $15,000,$74,000, or 0.3%,1.4%, to $5.1 million during the three months ended DecemberMarch 31, 2025,2026, compared to $5.2 million at September 30, 2025. The decrease was due primarily to depreciation expense of $112,000,$226,000, partially offset by $99,000$152,000 in equipment purchases. The new equipment purchases were primarily related to computer networking, the new mobile branch and the core conversion.

Deposits. Deposits increased by $2.9$2.6 million, or 2.0%,1.8%, to $146.9$146.6 million at DecemberMarch 31, 20252026 from $144.0 million at September 30, 2025. Core deposits (which we define as savings accounts, money markets, other savings deposits and checking accounts) increased $1.4$4.8 million, or 1.5%,5.2%, to $95.1$98.5 million at DecemberMarch 31, 20252026 from $93.7 million at September 30, 2025. Certificates of deposit increaseddecreased $1.5$2.3 million, or 3.0%,4.5%, to $51.8$48.0 million at DecemberMarch 31, 20252026 from September 30, 2025. The increasedecrease in certificates of deposit was due primarily to ana increasedecrease in brokered deposits of $2.0$2.5 million, partially offset by a $361,000$225,000 decreaseincrease in customer certificates of deposit.

During the threesix months ended DecemberMarch 31, 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 $1.0 million at DecemberMarch 31, 2025,2026, a decrease of $5.0 million, or 83.3%, from September 30, 2025. Advances were repaid primarily from proceeds from deposit growth and repayments on loans held for sale, as well as cash and cash equivalents.sale. Advances totaling $1.0 million are scheduled to mature within one year from DecemberMarch 31, 2025.2026.

Shareholders’ Equity. Shareholders’ equity increased $370,000,$477,000, or 1.5%,1.9%, to $25.0$25.1 million at DecemberMarch 31, 2025,2026, compared to September 30, 2025. The increase resulted primarily from net income of $171,000$443,000 for the threesix months ended DecemberMarch 31, 2025,2026, a $91,000$122,000 increase to equity through a reduction in accumulated other comprehensive loss, and a decrease of $55,000 in shares acquired by ESOP, andpartially anoffset increaseby a decrease in additional paid in capital of $52,000.$143,000.

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

General. Net income for the three months ended DecemberMarch 31, 2025,2026, was $171,000,$272,000, aan decreaseincrease of $105,000,$237,000, or 38.0%,669.5%, compared to $276,000$35,000 for the three months ended DecemberMarch 31, 2024.2025. The decreaseincrease in net income was primarily due to a $259,000$170,000 increase in net interest income, a $118,000 decrease in noninterest expense, and a $32,000$13,000 decrease in provision for credit losses, partially offset by a $9,000 decease in noninterest income, which were partially offset by a $154,000 increase in net interest income, and a $32,000$55,000 decreaseincrease in income taxes.

Interest Income. Interest income increased $6,000,$64,000, or 0.3%,2.8%, to $2.3$2.4 million for the three months ended DecemberMarch 31, 20252026 from the three months ended DecemberMarch 31, 2024.2025. This increase was attributable to a $22,000,$79,000, or 3.7%, increase in interest on loans receivable, and a $1,000, or 1.0%, increase in interest on loansdebt receivable,securities, partially offset by a $2,000,$16,000, or 2.8%, decrease in interest on investment securities and a $13,000, or 17.4%,22.0%, decrease in interest on interest-bearing deposits and other assets.

The average balance of loans during the three months ended DecemberMarch 31, 20252026 increaseddecreased by $12.4$6.5 million, or 8.7%,4.2%, from the balance for the three months ended DecemberMarch 31, 2024,2025, while the average yield on loans decreasedincreased by 4345 basis points to 5.68%5.98% for the three months ended DecemberMarch 31, 20252026 from 6.11%5.53% for the three months ended DecemberMarch 31, 2024.2025. The decreaseincrease in the average yield on loans reflects the recent decreasesincreases in the overall interest rate environment, as the Federal Reserve Board acted to decrease the federal funds rate three times, a total of 75 basis points, in 2025.environment. These decreasesincreases in market interest rates have caused interest rates on the Bank’s adjustable-rate loans to adjust downward.upward.

The average yield on investmentdebt securities increased by 2825 basis points to 3.21%3.37% for the three months ended DecemberMarch 31, 2025,2026, from 2.93%3.12% for the three months ended DecemberMarch 31, 2024,2025, while the average balance of investmentdebt securities decreased $1.3 million$699,000 to $10.5$10.2 million for the three months ended DecemberMarch 31, 2025,2026, from $11.8$10.9 million for the three months ended DecemberMarch 31, 2024.2025.

Interest income on other interest-earning deposits, comprised primarily of certificates of deposit in other financial institutions, overnight deposits and stock in the Federal Home Loan Bank, decreased $13,000,$16,000, or 16.9%,22.0%, for the three months ended DecemberMarch 31, 2025,2026, due primarily to a decrease in the average balance of $510,000,$1.3 million, or 9.7%,21.7%, and a decrease in the average yield of 47five basis points to 5.38%4.75% for the three months ended DecemberMarch 31, 2025,2026, from 5.85%4.80% for the three months ended DecemberMarch 31, 2024.2025.

Interest Expense. Total interest expense decreased $148,000,$106,000, or 20.0%,16.1%, to $593,000$552,000 for the three months ended DecemberMarch 31, 2025,2026, from $740,000$658,000 for the three months ended DecemberMarch 31, 2024.2025. Interest expense on deposits increased $87,000,$130,000, or 18.8%,31.6%, due primarily to an increase of 1024 basis points in the average cost of deposits to 1.66%1.62% for the three months ended DecemberMarch 31, 2025,2026, from 1.56%1.38% for the three months ended DecemberMarch 31, 2024,2025, and an increase of $14.4$14.8 million, or 12.2%,12.4%, in the average balance of interest-bearing deposits to $132.8$134.0 million for the three months ended DecemberMarch 31, 2025,2026, from $118.4$119.2 million for the three months ended DecemberMarch 31, 2024.2025.

Interest expense on borrowings decreased $235,000,$237,000, or 84.8%,96.0%, for the three months ended DecemberMarch 31, 2025,2026, compared to the three months ended DecemberMarch 31, 2024.2025. The decrease was due to a $19.0$19.8 million decrease in the average balance outstanding, to $3.5$1.0 million for the three months ended DecemberMarch 31, 2025,2026, from $22.5$20.8 million for the three months ended DecemberMarch 31, 2024,2025, and a seven76 basis point decrease in the weighted-average rate, to 4.85%4.00% for the three months ended DecemberMarch 31, 2025,2026, from 4.92%4.76% for the three months ended DecemberMarch 31, 2024.2025.

Net Interest Income. Net interest income increased $154,000,$170,000, or 9.7%,10.3%, to $1.8 million for the three months ended March 31, 2026, compared to $1.7 million for the three months ended DecemberMarch 31, 2025, compared to $1.6 million for the three months ended December 31, 2024.2025. The increase reflected an increase in the net interest margin to 4.12%4.44% for the three months ended DecemberMarch 31, 2025,2026, from 4.01%3.82% for the three months ended DecemberMarch 31, 2024.2025. The net interest margin was impacted by a series of market interest rate increasesdecreases in the past several years,years. although inIn 2025 there were three decreases in the federal funds rate, totaling 75 basis points, by the Federal Reserve Board.

Provision for Credit Losses. Based on an analysis of the loan portfolio and asset quality, management recorded no$15,000 in provision for credit losses for the three-month periodsperiod ended DecemberMarch 31, 20252026 and 2024.$28,000 in provision for credit losses for the three month period ended March 31, 2025. The allowance for credit losses was $913,000$866,000 at DecemberMarch 31, 20252026 and $960,000 at September 30, 2025 and represented 0.64%0.60% and 0.67% of total loans at DecemberMarch 31, 20252026 and September 30, 2025, respectively. The determination of the adequacy of the allowance for credit losses included consideration of the levels of nonperforming loans, delinquent loans and net charge-offs of loans in both periods.

Total nonperforming loans were $660,000$234,000 at DecemberMarch 31, 2025,2026, compared to $1.3 million at September 30, 2025. Classified loans totaled $615,000$189,000 at DecemberMarch 31, 2025,2026, compared to $716,000 at September 30, 2025, and total loans past due 30 days and greater were $2.8 million$920,000 and $2.3 million at those respective dates. During the core processor conversion in 2025, some customers were not receiving their statements in a timely manner, which contributed to elevated delinquencies in 2025. As of September 30, 2025, $2.3 million of loans past due greater than 30 days were at 31 days. The send dates for the statements have been adjusted and delinquencies have declined. As a percentage of nonperforming loans, the allowance for credit losses was 370.4% at March 31, 2026 compared to 71.2% at September 30, 2025. Changes in residential real estate loans and agricultural loans were responsible for the increasedecrease in non-performing, classified, and past due loans. As a percentage of nonperforming loans, the allowance for credit losses was 138.3%370.4% at DecemberMarch 31, 20252026 compared to 71.2% at September 30, 2025.

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 DecemberMarch 31, 20252026 and 2024.2025. 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 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 $120,000$133,000 for the three months ended DecemberMarch 31, 2025,2026, a decrease of $32,000,$9,000, or 21.0%,6.30%, from $152,000$142,000 for the three months ended DecemberMarch 31, 2024.2025. During the three months ended DecemberMarch 31, 2025,2026, aan $16,000,$8,000, or 20.7%,11.5%, decrease in service fees on deposits, a $5,000$4,000 decrease in gain on sale of loans, a $4,000 decrease in loan servicing fees, and a $12,000$4,000 increasedecrease in lossbank onowned salelife of investments,insurance, were partially offset by an increase of $4,000,$12,000, or 12.2%,44.7%, in late charges and fees on loans. The increase in loss on sale of investments was the result of a strategic decision to increase the yield in our investment portfolio. The decrease in deposit service fee income was a result of reduced income from debit card processing as a result of our conversion to a new core processor. Loan origination fees were up $6,000 and late fees on loans were up $6,000.

Income Taxes. Income taxes decreasedincreased by $32,000,$55,000, or 45.7%,701.4%, to $38,000$63,000 for the three months ended DecemberMarch 31, 2025,2026, compared to $69,000$8,000 for the three months ended DecemberMarch 31, 2024.2025. The decreaseincrease in the income tax provision was due primarily to a $137,000,$292,000, or 39.6%675.3%, decreaseincrease in pretax income. The effective tax rates were 18.0%18.9% and 20.8%17.3% for the three months ended DecemberMarch 31, 20252026 and 2024,2025, respectively.

Liquidity describes our ability to meet the financial obligations that arise in the ordinary course of business. Liquidity is primarily needed to meet the borrowing and deposit withdrawal requirements of our customers and to fund current and planned expenditures. Our primary sources of funds are deposits, principal and interest payments on loans and securities, and proceeds from maturities of securities. We also have the ability to borrow from the Federal Home Loan Bank of Cincinnati. At DecemberMarch 31, 2025,2026, we had $1.0 million of outstanding borrowings from the Federal Home Loan Bank of Cincinnati. At DecemberMarch 31, 2025,2026, we had the capacity to borrow an additional $49.4$52.4 million from the Federal Home Loan Bank of Cincinnati. At DecemberMarch 31, 20252026 and 2024,2025, the Bank had a cash management line of credit agreement with the Federal Home Loan Bank providing for additional borrowing capacity of $11.0 million. The Bank had no borrowings drawn on this line at DecemberMarch 31, 2025,2026, and had $1.0 million drawn on this line at DecemberMarch 31, 2024.2025.

At DecemberMarch 31, 2025,2026, Mercer Savings Bank exceeded all regulatory capital levels required to be considered “well capitalized.” For further information, see Note 4 of the notes to the financial statements included as Part I, item 1 of this Quarterly Report on Form 10-Q.