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

Our business consists primarily of taking deposits from the general public and investing those deposits, together with funds generated from operations, in residential real estate loans and, to a lesser extent,loans, commercial real estate loans, agricultural mortgage loans, construction loans, commercial and industrial loans, home equity lines of credit, and consumer loans. We also invest in securities, which have historically consisted primarily of mortgage-backed securities and obligations issued by U.S. government sponsored enterprises, state and municipal securities. We offer a variety of deposit accounts including checking accounts, savings accountsaccounts, money market and certificate of deposit accounts. VanThe Wert FederalBank is subject to comprehensive regulation and examination by the OCC.

Our principalbusiness objectivestrategy is focused on embracing a relationship-oriented community bank model targeting small to buildmid-sized long-termbusinesses valueand forprofessionals in our stockholdersmarket byareas operatingwhile a profitable community-oriented financial institution dedicatedcontinuing to meeting the banking needs ofserve our customers by emphasizing personalized and efficienttraditional customer service.base. Highlights of our current business strategy include:

AllowanceThe allowance for Loancredit Losses.losses included the allowance for credit losses on loans, and the allowance for credit losses for unfunded lending commitments, which is recorded in other liabilities on the consolidated balance sheet. The allowance for loan 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 on loans which is charged against income. In determining the allowance for loancredit losses, management makes significant estimates and has identified this policy as one of our most critical accounting policies.

Total Assets. Total assets wereincreased $145.3 million, or 87.6%, to $311.3 million at June 30, 2024 from $166.0 million at June 30, 2023, an increase of $16.4 million, or 11.0%, over the $149.6 million at June 30, 2022.2023. The increase is part of the Company’s growth plans to more appropriately leverage capital and was largely concentrated to growth in available-for-sale debt securities,securities aand yearcommercial overloans, year increase of $46.0 million, thatwhich were funded primarily with cashborrowings onand hand,brokered a year over year decrease of $31.1 million. The source of the cash was the public offering during the mutual conversion that closed on July 13, 2022.deposits.

Cash and Due from Banks. Cash and due from banks decreasedincreased by $31.1$26.1 million, or -85.0%,473.5%, to $31.6 million at June 30, 2024 from $5.5 million at June 30, 2023 from $36.7 million at June 30, 2022.2023. The decreaseincrease was duea primarily to funding purchasesresult of available-for-salethe debtBank securitiestesting andits loanovernight growth.Cash Management Advance (“CMA”) line with FHLB. This resulted in a corresponding increase in borrowings as noted below.

Investment Securities. Investment securities increased $46.0$68.8 million, or 188.2%,97.4%, to $139.3 million at June 30, 2024 from $70.6 million at June 30, 2023 from $24.5 million at June 30, 2022.2023. Aggregate securities purchases of $51.7$114.8 million during the year ended June 30, 2023,2024, were funded through cash on hand, sales, calls, maturities and repayments of $4.6 million, FHLB borrowings of $6.2$44.3 million, and brokered deposits ofand $10.1wholesale million.funding from FHLB and FRB under the BTFP The increase in investment securities is part of a forward-looking investment strategy to increase the number of variable rate investments financed by fixed rate deposit instruments, which will ultimately provide a more balanced interest rate risk profile. The increase is also part of an effort to more appropriately leverage the Company’s capital.

The $1.0$682,000 million declineincrease in the fair value of the investment securities was primarily attributable to the increasesdeclines in interest rates in the economy.intermediate Asand thelong interest rates increased, the fair valueend of the securitiesyield declined.curve. The unrealized lossesgains are recorded to equity, net of tax, as management has determined that there are no credit quality concerns with the issuers of the securities and there is no intent to sell the securities and, as a result, the fair value is expected to recover as the securities approach their maturity dates.

Net Loans. Net loans increased by $3.5$45.2 million, or 4.5%,55.6%, to $126.4 million at June 30, 2024 from $81.2 million at June 30, 2023 from $77.7 million at June 30, 2022.2023. During the year ended June 30, 2023,2024, loan originations totaled $21.6$53.9 million, comprised of $6.7$9.8 million of loans secured by one- to four-family residential real estate, $2.3 million secured by commercial real estate, $3.4$1.2 million of commercialHELOCs, and$494,000 industrialof consumer loans, $7.5$628,000 of agricultural, $12.7 million of construction and land loans, $1.2and secured$29.0 bymillion agriculturalof commercial real estate and $444,000commercial ofand consumerindustrial loans.

During the year ended June 30, 2023,2024, residential real estate loans increased $219,000,$4.0 million, or 0.3%,6.0%, to $65.9$69.8 million at June 30, 2023,2024, construction and land loans increased $2.6$9.1 million, or 42.6%,106.0%, to $8.6$17.6 million at June 30, 2023,2024, commercial and industrial loans increased $3.0$11.5 million, or 902.5%,337.7%, to $3.3$14.9 million at June 30, 2023,2024, agricultural real estate loans increased $594,000,$169,000, or 17.2%,4.2%, to a total of $4.0$4.2 million at June 30, 2023,2024, and commercial real estate loans increased $874,000,$13.7 million, or 17.0%228.2% to $6.0$19.7 million at June 30, 2023.2024. Increases in loan balances reflect our strategy to grow our loan portfolio, continuing to focus on owner-occupied one-to-four family residential real estate loans, while increasing our emphasis on commercial real estate loans and commercial and industrial loans. Management intends to continue to pursue growth in these loan segments in future periods.

Deposits. Deposits increased by $10.0$89.3 million, or 9.1%,74.4%, to $209.3 million at June 30, 2024 from $120.0 million at June 30, 20232023. fromCore $110.0deposits increased $15.3 million, or 13.8%, to $125.2 million at June 30, 2022.2024. CoreBrokered deposits (definedincreased as all deposits other than certificates of deposit) decreased $6.2$74.1 million, or 8.3%, to $68.6 million735.0% at June 30, 20232024. fromThe $74.8 million at June 30, 2022. This is not unexpectedincrease in athe rates up environment as historically, corebrokered deposits shiftwere used to time deposits in an effort to lock infund higher ratesearning forassets aand fixedincrease periodnet ofinterest time. Certificates of deposit increased $16.2 million, or 46.0%, to $51.4 million at June 30, 2023 from $35.2 million at June 30, 2022. Of the $16.2 million increase, $10.1 million was from the addition of contractual intermediate callable deposits (‘brokered deposits’). These deposits have a time period of 5 years with a callable feature after 6 months.income. The addition of these deposits was part of management’s strategy to fund variable rate investments with fixed rate funding. TheA portion of the brokered deposits have a callable feature that allows for interest rate risk protection in rates down environment.

FHLB Borrowings. FHLB borrowingsBorrowings increased $6.2$55.8 million, or 100%,900%, to $6.2$62 million at June 30, 2023.2024. ThereThe borrowings consisted of advances from FHLB and from the FRB under the Bank Term Funding Program. $24 million of the FHLB advances were norepaid borrowingson atJuly June1, 30, 2022.2024. These borrowings were short-term in nature (less than one year maturity) and are being used as part of management’s overall growth strategy. See note 7 within Item 8 for further discussion of borrowings.

Total Equity. Total equity increaseddecreased $15.1$2.0 million, or 64.8%,5.1%, to $36.5 million at June 30, 2024 from $38.5 million at June 30, 2023 from $23.4 million at June 30, 2022.2023. The increasedecrease resulted from $16.3 million net proceedsloss during the fiscal year, purchase of thetreasury capitalstock, raised through the conversion, whichand was partially offset by a net loss of $545,000, and a $757,000 decrease in accumulated other comprehensive incomeloss comprisedresulted offrom unrealized gains on our investment portfolio during the unrealized losses, net of tax, on the investment securities portfolio and the valuation gain on the defined benefit plan, net of tax.year.

General. Net loss for the year ended June 30, 2023,2024, was $545,000,$2.0 amillion, decreasean increase of $536,000,$1.5 million, compared to net loss of $9,000$545,000 for the year ended June 30, 2022.2023. The increase in net loss was primarily due to a $2.0$2.3 million increase in noninterest expenses, which included certain one-time expenses as noted in the noninterest expense section below, andas waswell partially offset byas a $1.4 million increase in net interest income. In the original prospectus related to the conversionsalaries and publicemployee offering, the Company estimated it would incur $3.1 million in expenses related to the termination of its defined benefit plan. These expenses were expected to be incurred in the 3rd calendar quarter of 2022. Due to the timing involved in the termination of this plan, these expenses related to this termination have totaled $1.1 million this fiscal year. The final expenses will not be known until the expected final termination late in calendar year 2023.benefits.

Interest Income. Interest income increased $1.9$7.0 million, or 58.0%,137.9%, to $5.1$12.0 million for the year ended June 30, 2023,2024, from $3.2$5.0 million for the year ended June 30, 2022.2023. This increase was primarily attributable to a $1.1$5.1 million, or 328.5%,345.7%, increase in interest on investment securities, a $577,000,$2.0 million, or 478.0%,68.7%, increase in interest on interest-bearing deposits and other, and a $139,000, or 5.1%, increase in interest on loans..loans.

The average balance of loans during the year ended June 30, 2023,2024, decreasedincreased by $1.4$20.9 million, or 1.7%,26.3%, from the balance for the year ended June 30, 2022,2023, whileand the average yield on loans increased by 24 basis points1.21% to 3.83% for the year ended June 30, 2024 from 3.62% for the year ended June 30, 2023 from 3.38% for the year ended June 30, 2022.2023.

The average balance of investment securities increased $19.4$67.7 million, or 72.5%,146.9%, to $113.8 million for the year ended June 30, 2024 from $46.1 million for the year ended June 30, 2023 from $26.7 million for the year ended June 30, 2022,2023, while the average yield on investment securities increased by 193 basis points2.59% to 5.81% for the year ended June 30, 2024 from 3.22% for the year ended June 30, 2023 from 1.29% for the year ended June 30, 2022.2023. The increase in average yield on securities resulted from the effects of management’s purchasing of higher yielding variable rate securities during the fourth quarter of the fiscal year.securities.

The average balance of other interest-bearing deposits, comprised primarily of certificates of deposit in other financial institutions, overnight deposits and stock in the Federal Home Loan Bank and Federal Reserve Bank, decreased $3.0$4.1 million, or -12.9%,-26.9%, for the year ended June 30, 2024, while the average yield increased 49 basis points, to 5.04% for the year ended June 30, 2024 from 4.55% for the year ended June 30, 2023, while the average yield increased 289 basis points, to 3.40% for the year ended June 30, 2023 from 0.51% for the year ended June 30, 2022, reflecting the rise in theelevated interest rate environment.

Interest Expense. Total interest expense increased $456,000,$5.9 million, or 140.4%,762.6%, to $6.7 million for the year ended June 30, 2024 from $780,000 for the year ended June 30, 2023 from $325,000 for the year ended June 30, 2022.2023. The increase was primarily due to an increase of 41 basis points2.40% in the average cost of deposits to 0.72%3.10% for the year ended June 30, 2024, from 0.70% for the year ended June 30, 2023, from 0.31% for the year ended June 30, 2022, reflecting how management has had to increase the offered rates to be competitive in the current rising interest rate environment.environment, as well as management’s strategic decision to leverage wholesale funding and brokered deposits.

Provision for LoanCredit Losses. Based on an analysis of the factors described in “Critical Accounting Policies—Allowance for LoanCredit Losses,” management concluded that a provision for loancredit losses of $40,000$578,000 was required for the year ended June 30, 2023.2024, Nowhich included a provision wasof required$463,000 for theloan yearand endeda Juneprovision 30,of 2022.$156,000 for unfunded loan commitments. The allowance for loancredit losses was $263,000$773,000 and $223,000$263,000 at June 30, 20232024 and 2022,2023, respectively, and represented 0.60% of total loans at June 30, 2024, and 0.29% of total loans at June 30, 2023,2023. See Notes 1 and 0.27%2 within Item 8 for further discussion on the adoption of totalof loansASC at326 June 30, 2022. The determination overduring the adequacy of the allowance for loan losses was due primarily to the low balances of nonperforming loans, delinquent loans and no net charge-offs in both periods.year.

The allowance for loancredit losses reflects the estimate management believes to be appropriate to cover incurredcurrent probableexpected credit losses which were inherent in the loan portfolio at June 30, 2023 and 2022.portfolio. 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 loan losses and may require an increase in the provision for possible loan losses or the recognition of loan charge-offs, based on judgments different than those of management.

Non-Interest Income. Non-interest income totaled $230,000 for the year ended June 30, 2024, an increase of $22,000, or 10.6%, from $208,000 for the year ended June 30, 2023, a decrease of $9,000, or -3.8%, from $217,000 for the year ended June 30, 2022.2023. The decreaseincrease was primarily due to normal fluctuations in the volume of fees on loans and deposits.

Federal Income Taxes. Federal income taxes decreasedbenefit increased by $152,000,$367,000, or 483.2%,201.0%, to a $183,000$550,000 benefit for the year ended June 30, 2023,2024, compared to tax benefit of $31,000$183,000 for the year ended June 30, 2022.2023, The decrease in the federal income tax provisionwhich was duedriven primarilyby to a $688,000, or 1699.0%the increase in pretax loss.net loss of $1.8 million, or 252.9%

We have not engaged in hedging activities, such as engaging in futures or options.options Webut doare notevaluating anticipatethe enteringuse intoof similarthese transactionsproducts in the future.

Economic Value of Equity. We also compute amounts by which the net present value of our assets and liabilities (economic value of equity or “EVE”) would change in the event of a range of assumed changes in market interest rates. This model uses a discounted cash flow analysis and an option-based pricing approach to measure the interest rate sensitivity of net portfolio value. The model estimates the economic value of each type of asset, liability and off-balance sheet contract under the assumptions that the United States Treasury yield curve increases instantaneously by 100, 200, 300 and 400 basis point increments or decreases instantaneously by 100100, or200, 200300 basisand 400basis point increments, with changes in interest rates representing immediate and permanent, parallel shifts in the yield curve.

The table above indicates that at June 30, 2023,2024, we would have experienced an 1.4%1.12% increase in NII in the event of an instantaneous parallel 200 basis point increase in market interest rates and a 10.3%0.85% decreaseincrease in NII in the event of an instantaneous 200 basis point decrease in market interest rates.

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.Cincinnati and Federal Reserve Bank of Cleveland under the Bank Term Funding Program. At June 30, 2023,2024, we had outstanding borrowings of $6.2$38.5 million from the Federal Home Loan Bank of Cincinnati and $23.5 million from the Federal Reserve Bank of Cleveland. At June 30, 2024, we had the capacity to borrow an additional $3.9 million from the Federal Home Loan Bank of Cincinnati. AtOn JuneJuly 30,1, 2023,2024, we had the capacity to borrow an additional $38.8$24.0 million of borrowings from theFHLB Federalwere Home Loan Bank of Cincinnati.repaid.

At June 30, 2023,2024, Vanthe Wert Federal’sBank’s Tier 1 leverage capital was $41.3$32.9 million, or 24.9%12.1% of adjusted assets. Accordingly, it was categorized as well-capitalized at June 30, 20232024 under the “community bank leverage ratio” framework. Management is not aware of any conditions or events since the most recent notification that would change our category. For further information, see note 9 to the notes to financial statements.

Off-Balance Sheet Arrangements. At June 30, 2023,2024, we had $11.0$33.1 million of outstanding commitments to originate loans. Certificates of deposit that are scheduled to mature in less than one year from June 30, 20232024 totaled $24.8$46.1 million at June 30, 2023.2024. Management expects that a substantial portion of the maturing certificates of deposit will be renewed. However, if a substantial portion of these deposits is not retained, we may utilize Federal Home Loan Bank of Cincinnati advancesadvances, pledge eligible securities to the FRB under the discount window, or raise interest rates on deposits to attract new accounts, which may result in higher levels of interest expense.

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

Management’s discussion and analysis of financial condition and results of operations is intended to assist in understanding the Company’s consolidated financial condition at DecemberMarch 31, 20242025 and consolidated results of operations for the three and sixnine months ended DecemberMarch 31, 20242025 and 2023.2024. It should be read in conjunction with the unaudited consolidated financial statements and the related notes appearing in Part I, Item 1, of this Quarterly Report on Form 10-Q.

Comparison of Financial Condition at DecemberMarch 31, 20242025 and June 30, 2024

Total Assets. Total assets were $329.2$372.4 million at DecemberMarch 31, 2024,2025, an increase of $17.9$61.2 million, or 5.8%,19.7%, from June 30, 2024. The increase is part of the continued execution of the strategic plan by management to more appropriately leverage capital by adding higher yielding variable rate interest earning assets using fixed rate funding to offset the liability sensitive nature of the balance sheet. The increase was comprised primarily of $12.0$44.4 million in securities, $22.1$40.1 million in loans, and offset by a decrease of $16.0$24.8 million in cash.

Cash and Due from Banks. Cash and due from banks decreased by $16.0$24.8 million, or -50.4%,-78.2%, to $15.7$6.9 million at DecemberMarch 31, 20242025 from $31.6 million at June 30, 2024. The decrease was due primarily to thefunding payoffpurchases of the overnight Cash Management Advance (“CMA”) line with FHLB at June 30, 2024, which was partially offset by $17.2 million in cash proceeds from the sale ofinvestment securities inand Decemberloan 2024.growth.

Investment Securities. Investment securities increased $12.0 million, or 8.6%, to $151.3 million at December 31, 2024, from $139.3 million at June 30, 2024. Aggregate securities purchases of $48.8 million during the six months ended December 31, 2024, were partially offset by $20.2 million of calls, maturities and repayments and $17.2 million in proceeds from the sale of securities. Management identified $19.6 million of fixed rate securities as sale candidates with a weighted average book yield of 1.68% and a weighted average maturity of 8.6 years. After performing an earn back analysis, management identified that at a modest reinvestment rate of 6%, reinvesting the cash proceeds from the sale would result in approximately $700,000 of additional interest income annually and the earn back period on the loss would be 2.6 years. The yield on investment securities was 5.9% for the sixnine months ended DecemberMarch 31, 2024,2025, compared to 5.48%5.5% for the sixnine months ended DecemberMarch 31, 2023,2024, reflecting the increase in market interest rates during the period, as well as the addition of higher yielding securities. The increase in investment securities is part of a forward-looking investment strategy to increase the number of variable rate investments financed by fixed rate deposit instruments, such as brokered certificates of deposits noted in the deposit section below, which will ultimately provide a more balanced interest rate risk profile. The increase is also part of an effort to more appropriately leverage the Company’s capital.

The $166,000$148,000 increasedecrease in the fair value of the investment securities was primarily attributable to the variability in market interest rates. As market interest rates decrease,increase, the fair value of the securities increases.decreases. The unrealized gains and losses are recorded to shareholders’ equity, net of tax, as management has determined that there are no credit quality concerns with the issuers of the securities and there is no current intent to sell additional securities and, as a result, the fair value is expected to recover as the securities approach their maturity dates.

Net Loans. Net loans increased by $22.1$40.1 million, or 17.5%,31.8%, to $148.5$166.5 million at DecemberMarch 31, 2024,2025, from $126.4 million at June 30, 2024. During the sixnine months ended DecemberMarch 31, 2024,2025, loan originations totaled $21.0$41.1 million, comprised of $7.5$10.9 million of loans secured by one-to-four family residential real estate, $715,000$727,000 of HELOCs, $197,000$423,000 of consumer loans, $3.9$11.7 million of commercial and industrial loans, $5.5$9.8 million in commercial and $3.1$7.6 million in construction loans. Increases in loan balances reflect our strategy to grow our loan portfolio, continuing to focus on owner-occupied one-to-four family residential real estate loans, while increasing our emphasis on commercial real estate loans and commercial and industrial loans. Management intends to continue to pursue growth in these loan segments in future periods.

Deposits. Deposits increased by $80.4$93.9 million, or 38.4%,44.9%, to $289.7$303.2 million at DecemberMarch 31, 20242025 from $209.3 million at June 30, 2024. Core deposits (defined as all deposits other than brokered deposits and listing service certificates of deposit) increased $20.9$40.1 million, or 16.7%,32.1%, to $146.1$165.3 million at DecemberMarch 31, 20242025 from $125.2 million at June 30, 2024. Brokered Certificatescertificates of deposit and listing service certificates of deposit increased $59.4$53.7 million, or 70.6%,63.9%, to $143.5$137.8 million at DecemberMarch 31, 20242025 from $84.1 million at June 30, 2024.

Shareholders’ Equity. Shareholders’ equity decreased $813,000,$1.3 million, or 2.2%,3.7%, to $35.7$35.2 million at DecemberMarch 31, 20242025 from $36.5 million at June 30, 2024. Primarily a result of a net tax effect on unrealized gains on securities of $2.0$1.8 million, offset by a net loss of $3.0$3.3 million for the sixnine months ended DecemberMarch 31, 2024,2025, which includes certain one-time expenses noted in the noninterest expense section below and a $2.4 million loss on the sale of $19.6 of securities, and partially offset by ESOP shares committed to be released.

Comparison of Operating Results for the Three Months Ended DecemberMarch 31, 20242025 and 20232024

General. Net loss for the three months ended DecemberMarch 31, 20242025 was $2.3$386,000, million,a an increasedecrease of $2.0 million,$233,000, or 679.0%,-37.6%, compared to net loss of $299,000$619,000 for the three months ended DecemberMarch 31, 2023.2024. The increasedecrease in net loss was primarily due to the afterincrease taxin lossnet oninterest saleincome of securities$605,000 as we continue to see incremental increases as a $1.9result million.of the addition of higher yielding investment securities and commercial loans. We continue to execute the strategic process of building out and repositioning the balance sheet and adding organic interest earning assets funded with organic deposits.

Interest Income. Interest income increased $1.8$1.5 million, or 62.5%,46.3%, to $4.6$4.8 million for the three months ended DecemberMarch 31, 2024,2025, compared to $2.8$3.3 million for the three months ended DecemberMarch 31, 2023.2024. This increase was attributable to a $882,000 million,$557,000, or 76.9%,28.8%, increase in interest on investment securities and a $852,000,$993,000, or 54.6%,79.9%, increase in interest on loans, and is reflective of management’s strategy to continue to add higher yielding interest earnings assets to the balance sheet.

The average balance of loans during the three months ended DecemberMarch 31, 2024,2025, increased by $46.0$55.9 million, or 47.8%,54.5%, from the average balance for the three months ended DecemberMarch 31, 2023,2024, while the average yield on loans increased by 9480 basis points to 5.71%5.65% for the three months ended DecemberMarch 31, 2024,2025, from 4.77%4.85% for the three months ended DecemberMarch 31, 2023.2024. The increase in average yield reflects the increases in market interest rates impacting the loan portfolio, as well as the addition of several higher yielding loans as the Company continues to add commercial loans to the portfolio.

The average balance of investment securities during the three months ended March 31, 2025, increased $54.8by $34.1 million, or 49.6%,26.4%, tofrom $165.5the millionaverage balance for the three months ended DecemberMarch 31, 2024, from $110.6 million for the three months ended December 31, 2023,2024 while the average yield on investment securities increased by 1911 basis points to 5.83%6.07% for the three months ended DecemberMarch 31, 2024,2025, from 5.64%5.96% for the three months ended DecemberMarch 31, 2023.2024.

The average balance of interest-bearing deposits and other, comprised of overnight deposits and stock in the Federal Home Loan Bank and Federal Reserve Bank, increaseddecrease $762,000,$5.8 million, or -5.1%,-31.9%, for the three months ended DecemberMarch 31, 2024,2025, and the average yield increased 89104 basis points to 4.44%4.19% for the three months ended DecemberMarch 31, 2024,2025, from 3.55%3.15% for the three months ended DecemberMarch 31, 2023.2024.

Interest Expense. Total interest expense increased $1.2 million,$931,000, or 77.2%,48.2%, to $2.8 million for the three months ended DecemberMarch 31, 2024,2025, from $1.55$1.9 million for the three months ended DecemberMarch 31, 2023.2024. The increase was due to an increase of 10050 basis points in the average cost of deposits to 3.78%3.72% for the three months ended DecemberMarch 31, 2024,2025, from 2.78%3.22% for the three months ended DecemberMarch 31, 2023,2024, reflecting how management has had to increase the offered rates to be competitive in efforts to maintain and grow deposits. This is also reflective of management’s levering strategy by which short term wholesale funding sources are used to add short term floating rate assets while the organic side of the balance sheet continues to be built out.

Net Interest Income. Net interest income increased $575,000,$605,000, or 44.8%,43.7%, to $1.9$2.0 million for the three months ended DecemberMarch 31, 2024,2025, compared to $1.3$1.4 million for the three months ended DecemberMarch 31, 2023,2024, while net interest margin decreasedincreased 217 basis points to 2.30%2.38% for the three months ended DecemberMarch 31, 2024,2025, from 2.32%2.21% for the three months ended DecemberMarch 31, 2023.2024.

Provision for Credit Losses. The total provision for credit losses on loans and unfunded commitments was $248,000$205,000 for the three months ended DecemberMarch 31, 2024,2025, compared to $94,000$84,000 for the three months ended DecemberMarch 31, 2023.2024. In both periods, the provision for credit losses was largely attributable to commercial loan growth.

Total nonperforming and substandard loans were $573,000$773,000 at DecemberMarch 31, 2024,2025, compared to $529,000$588,000 at DecemberMarch 31, 2023.2024. Total loans past due greater than 30 days were $1.5$1.6 million and $747,000$1.8 million at those respective dates. As a percentage of nonperforming and substandard loans, the allowance for credit losses was 173.1%155.2% at DecemberMarch 31, 2024,2025, compared to 100.0%102.2% at DecemberMarch 31, 2023.2024.

The allowance for credit losses reflects the estimate management believes to be appropriate to cover lifetime probable losses which were inherent in the loan portfolio at DecemberMarch 31, 20242025 and 2023.2024. While management believes the estimates and assumptions used in the determination of the adequacy of the allowance are reasonable, such estimates and assumptions could be proven incorrect in the future, and the actual amount of future provisions may exceed the amount of past provisions. Furthermore, as an integral part of its examination process, the OCC will periodically review our allowance for credit losses. The OCC may have judgments different than those of management, and we may determine to increase our allowance as a result of these regulatory reviews. Any material increase in the allowance for credit losses may adversely affect our financial condition and results of operations.

Non-Interest Income. Non-interest income increaseddecreased $71,400,$18,000, or 131.4%,-37.5%, to $126,000$31,000 for the three months ended DecemberMarch 31, 2024,2025, compared to $54,000$49,000 for the three months ended DecemberMarch 31, 20232024 and is the result of a prior period adjustment decreasing income $58,000 offset by additional loan and deposit fee income from increased volume.

Non-Interest Expense. Non-interest expense increased $3.1 million$145,000 or 187.3%,6.8%, to $4.7$2.3 million for the three months ended DecemberMarch 31, 2024,2025, compared to $1.6$2.1 million for the three months ended DecemberMarch 31, 2023.2024. The largest contributor to the increase in non-interest expense is the $2.4 million loss on the sale of low yielding fixed rate securities as noted above in the investment securities paragraph of the Comparison of Financial Condition section. Additional notableNotable increases were salaries and employee benefits of $350,000,$218,000, representative of our investing in staff as we continue to add key positions vital to the expansion and growth of the Company as well as increases in occupancy expenses as a result of additional space in our Fort Wayne location which was not in place in December 2023 and FDIC insurance. ThereThese increases were alsooffset $160,000in part by the absence of one-timecosts expensesrelated incurred duringto the three months ended December 31, 2024. See additional discussionwithdrawal of one-timethe expensespension further below.plan.

Federal and Indiana Income Taxes. Provision for federal and Indiana income taxes benefit increased $651,000,$563,000, or 308.3%,146.9%, to a $862,000$946,000 benefit provision for the sixnine months ended DecemberMarch 31, 2024,2025, compared to a $211,000$383,000 benefit provision for the sixnine months ended DecemberMarch 31, 2023.2024. The increase in the federal and Indiana income tax benefit provision was due primarily to the loss on sale of securities during the quarter and the other noted increases in non-interest expenses above.

Liquidity describes our ability to meet the financial obligations that arise in the ordinary course of business. Liquidity is primarily needed to meet the borrowing and deposit withdrawal requirements of our customers and to fund current and planned expenditures. Our primary sources of funds are deposits, principal and interest payments on loans and securities, and proceeds from maturities of securities. We also have the ability to borrow from the Federal Home Loan Bank of Cincinnati and the Federal Reserve Bank of Cleveland Discount Window. At DecemberMarch 31, 2024,2025, we had no$30.5 million in outstanding borrowings from either the FHLB orand no outstanding borrowing from FRB. At DecemberMarch 31, 2024,2025, we had the capacity to borrow $45.3$17.5 million from the Federal Home Loan Bank of Cincinnati and $41.1$35.8 million from the Federal Reserve Bank of Cleveland.

At DecemberMarch 31, 2024,2025, the Bank was categorized as well capitalized under the regulatory framework for prompt corrective action. There are no conditions or events since the most recent notification that management believes have changed the Bank’s prompt corrective action category. The following table presents actual and required capital ratios for the Bank.

Off-Balance Sheet Arrangements. At DecemberMarch 31, 2024,2025, we had $38.9$38.4 million of outstanding commitments to originate loans. Certificates of deposit that are scheduled to mature in less than one year from DecemberMarch 31, 20242025 totaled $65.2$131.3 million. Management expects that a substantial portion of the maturing certificates of deposit will be renewed. However, if a substantial portion of these deposits is not retained, we may utilize Federal Home Loan Bank of Cincinnati or Federal Reserve Bank of Cleveland advances or raise interest rates on deposits to attract new accounts, which may result in higher levels of interest expense.