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Item 7. Management’s Discussion and Analysis

2026-03-25 compared with 2025-03-24 · 119 added, 54 removed, 204 unchanged (46% of the section changed)

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Critical Accounting Policies and Use of Critical Accounting Estimates

Our accounting policies are integral to understanding the results reported.

We consider accounting policies that require management to exercise significant judgment or discretion or to make significant assumptions that have, or could have, a material impact on the carrying value of certain assets or on income to be critical accounting policies.

As of December 31, 2024, there have been no material changes to our critical accounting policies as compared to the critical accounting policies disclosed under “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Prospectus.

The discussion and analysis of the financial condition and results of operations are based on our consolidated financial statements, which are prepared in conformity with U.S.

The preparation of these consolidated financial statements requires management to make estimates and assumptions affecting the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities, and the reported amounts of income and expenses.

We consider the accounting policies discussed below to be critical accounting policies.

The estimates and assumptions that we use are based on historical experience and various other factors and are believed to be reasonable under the circumstances.

Actual results may differ from these estimates under different assumptions or conditions, resulting in a change that could have a material impact on the carrying value of our assets and liabilities and our results of operations.

The JOBS Act contains provisions that, among other things, reduce certain reporting requirements for qualifying public companies.

As an “emerging growth company,” we have elected to use the extended transition period to delay adoption of new or revised accounting pronouncements applicable to public companies until such pronouncements are made applicable to private companies.

Accordingly, our consolidated financial statements may not be comparable to the financial statements of public companies that comply with such new or revised accounting standards.

The following represent our critical accounting policies:

Allowance for Credit Losses on Loans.

The allowance for credit losses (“ACL”) is an estimate of expected credit losses on the loans held for investment, and unfunded loan commitments.

The ACL is calculated according to GAAP standards and is maintained by management at a level believed adequate to absorb estimated credit losses that are expected to occur within the existing loan portfolio through their contractual terms.

The ACL is a valuation account that is deducted from the loans’ amortized cost basis to present the net amount expected to be collected on loans.

The determination of our allowance for credit losses is considered a critical accounting estimate by management because of the high degree of judgment involved in determining qualitative loss factors, the subjectivity of the assumptions used, and the potential for changes in the forecasted economic environment that could result in changes to the amount of the recorded allowance for credit losses.

While management utilizes its best judgment and information available, the ultimate adequacy of the ACL is dependent upon a variety of factors beyond the Company’s direct control, including, but not limited to, the performance of the loan portfolio, consideration of current economic trends, changes in interest rates and property values, estimated losses on pools of homogeneous loans based on an analysis that uses historical loss experience for prior periods that are determined to have like characteristics with the current period such as pre-recessionary, recessionary, or recovery periods, portfolio growth and concentration risk, management and staffing changes, the interpretation of loan risk classifications by regulatory authorities and other credit market factors.

While each component of the ACL is determined separately, the entire balance is available for the entire loan portfolio.

The ACL methodology consists of measuring loans on a collective (pool) basis when similar risk characteristics exist.

The Company has identified three loan portfolios and measures the ACL using the Scaled CECL Allowance for Losses Estimator (“SCALE”) method.

The loan portfolios are real estate;

commercial installment;

and consumer.

The SCALE method uses publicly available data from call reports to derive the initial proxy expected lifetime loss rates.

This proxy expected lifetime loss rates are then adjusted for bank-specific facts and circumstances to arrive at the final ACL estimate that adequately reflects the Company’s loss history and credit risk within our portfolio.

The qualitative factors considered for each loan portfolio consist of the impact of other internal and external qualitative and credit market factors as assessed by management through a detailed loan review, ACL analysis and credit discussions.

These internal and external qualitative and credit market factors include:

• changes in lending policies and procedures, including changes in underwriting standards and collections, charge-offs and recovery practices;

• changes in international, national, regionally and local conditions (specific factors which impact portfolios or discrepancies with national economic factors which are utilized within the economic forecast);

• changes in the experience, depth and ability of lending management;

• changes in the volume and severity of past due loans and other similar loan conditions;

• changes in the nature and volume of the loan portfolio and terms of loans;

• the existence and effect of any concentrations of credit and changes in the levels of such concentrations;

• effects of other external factors, such as competition, legal or regulatory factors, on the level of estimated credit losses;

• changes in the quality of our loan review functions;

• changes in the value of underlying collateral for collateral dependent loans.

The impact of the above-listed internal and external qualitative and credit market risk factors is assessed within predetermined ranges to adjust the ACL totals calculated.

In addition to the pooled analysis performed for the majority of our loan and commitment balances, we also review those loans that have collateral dependency or nonperforming status which requires a specific review of that loan, per our individually analyzed CECL calculations.

Loans are charged off against the ACL when management believes the uncollectibility of a loan balance is confirmed, while recoveries of amounts previously charged-off are credited to the ACL.

Approved releases from previously established ACL reserves authorized under our ACL methodology also reduce the ACL.

Additions to the ACL are established through the provision for credit losses on loans, which is charged to expense.

Our ACL methodology is intended to reflect all loan portfolio risk, but management recognizes the inability to accurately depict all future credit losses in a current ACL estimate, as the impact of various factors cannot be fully known.

Accrued interest receivable on loans is excluded from the amortized cost basis of financing receivables for the purpose of determining the allowance for credit losses.

Income Taxes.

Deferred tax assets and liabilities have been determined using the liability method.

Deferred tax assets and liabilities are determined based on the difference between the financial statement and tax bases of assets and liabilities as measured by the current enacted tax rates, which will be in effect when these differences are expected to reverse.

Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized.

Provision (benefit) for deferred taxes is the result of changes in the deferred tax assets and liabilities.

The Company may also recognize a liability for unrecognized tax benefits from uncertain tax positions.

Unrecognized tax benefits represent the differences between a tax position taken or expected to be taken in a tax return and the benefit recognized and measured in the financial statements.

Interest and penalties related to unrecognized tax benefits are classified as income taxes.

Debt Securities.

Debt securities are classified as held-to-maturity and carried at amortized cost when management has the positive intent and ability to hold them to maturity.

Debt securities are classified as available-for-sale when they might be sold before maturity.

Securities available-for-sale are carried at fair value, with unrealized holding gains and losses reported in other comprehensive income or loss, net of tax.

Amortization of premiums and accretion of discounts are recognized in interest income using the interest method over the estimated lives or earliest call date of the debt securities, as applicable.

Gains and losses on the sales of debt securities are recorded on the trade date and determined using the specific-identification method.

For held-to-maturity debt securities in an unrealized loss position, the Company evaluates the securities individually to determine whether the decline in fair value below amortized cost basis (impairment) is due to credit-related factors or noncredit-related factors, such as market interest rate fluctuations.

In evaluating securities held-to-maturity for potential impairment, the Company considers many factors, including the financial condition and near-term prospects of the issuer, which for debt securities considers external credit ratings and recent downgrades;

and its ability and intent to hold the security for a period of time sufficient for a recovery in value.

The Company also considers the extent to which the securities are issued by the federal government or its agencies, and any guarantee of issued amounts by those agencies.

Accrued interest receivable on securities held-to-maturity is excluded from the amortized cost basis of those securities for the purpose of determining the allowance for credit losses.

For available-for-sale debt securities in an unrealized loss position, the Company first assesses whether it intends to sell, or it is more likely than not that it will sell, the security before recovery of its amortized cost basis.

If either of the aforementioned criteria exists, the Company will record an ACL related to securities available-for-sale with an offsetting entry to the provision for credit losses on securities on the statements of income.

If neither of these criteria exists, the Company will evaluate the securities individually to determine whether the decline in the fair value below the amortized cost basis (impairment) is due to credit-related factors or noncredit-related factors, such as market interest rate fluctuations.

In evaluating securities available-for sale for potential impairment, the Company considers many factors, including the financial condition and near-term prospects of the issuer, which for debt securities considers external credit ratings and recent downgrades;

and its ability and intent to hold the security for a period of time sufficient for a recovery in value.

The Company also considers the extent to which the securities are issued by the federal government or its agencies, and any guarantee of issued amounts by those agencies.

The amount of the impairment related to other factors is recognized in other comprehensive income (loss).

Accrued interest receivable on securities available-for-sale is excluded from the amortized cost basis of those securities for the purpose of determining the allowance for credit losses.

Through December 31, 2025, declines in fair value of debt securities that are deemed to be other than temporary, if applicable, are reflected in earnings as realized losses.

In estimating other-than-temporary impairment losses, management considers the length of time and the extent to which fair value has been less than cost, the financial condition and near-term prospects of the issuer, and the intent and ability of the Company to retain its investment in the issuer for a period of time sufficient to allow for any anticipated recovery in fair value.

Our accounting and financial reporting policies conform to accounting principles generally accepted in the United States of America and to general practices within the banking industry.

Accordingly, the financial statements require certain estimates, judgments, and assumptions, which are believed to be reasonable based upon the information available.

These estimates and assumption affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of income and expenses during the periods presented.

Comparison of Financial Condition at December 31, 2025 and December 31, 2024

Total Assets.

Total assets increased $10.7 million, or 4.0%, to $273.3 million at December 31, 2024 from $262.6 million at December 31, 2023.

The change was primarily the result of a $12.0 million increase in portfolio loans offset by a $2.2 million decrease in total investment securities.

Total assets decreased $2.3 million, or 0.9%, to $271.0 million at December 31, 2025 from $273.3 million at December 31, 2024.

The change was primarily the result of a $3.6 million decrease in our net deferred tax asset and $3.1 million decrease in total investment securities, offset by a $3.1 million increase in portfolio loans and a $879,000 increase in Federal Home Loan Bank stock.

Cash and Cash Equivalents and Time Deposits with Other Financial Institutions.

Total cash and due from banks and time deposits with other financial institutions decreased $419,000, or 6.9% to $5.7 million at December 31, 2024 from $6.1 million at December 31, 2023.

The change was related to general business activity.

Total cash and due from banks and time deposits with other financial institutions increased $85,000, or 1.5% to $5.8 million at December 31, 2025 from $5.7 million at December 31, 2024.

Positive cash flow from investing activities was $1.9 million was which

was offset by a $1.7 million decrease in cash flow from operating activities and a $105,000 decrease in cash flow from financing activities.

Securities Available-for-Sale.

Securities available-for-sale decreased $1.1 million or 4.8%, to $22.8 million at December 31, 2024 from $23.9 million at December 31, 2023.

The decrease was primarily due to principal paydowns of $1.1 million on mortgage-backed securities.

The unrealized loss of the portfolio on December 31, 2024 and December 31, 2023 was consistent at $3.9 million.

The proceeds from principal paydowns are utilized to manage liquidity and support loan growth.

Securities available-for-sale decreased $517,000 or 2.3%, to $22.3 million at December 31, 2025 from $22.8 million at December 31, 2024.

The decrease was primarily due to principal paydowns of $1.9 million on mortgage-backed securities and other security maturities.

The unrealized loss of the portfolio declined $1.3 million to $2.6 million on December 31, 2025 compared to $3.9 million on December 31, 2024 due to a decline in interest rates.

The proceeds from principal paydowns and security maturities are utilized to manage liquidity and support loan growth.

Securities Held-to-Maturity.

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Loans, net increased $3.1 million, or 1.6%, to $189.4 million at December 31, 2025 from $186.3 million at December 31, 2024.

One- to four-family, home equity loans and lines of credit, construction, and marine and recreational vehicles, and other consumer loans increased $7.8 million, $1.9 million, $2.8 million, $350,000, and

$174,000, respectively, to $130.1 million, $8.1 million, $6.8 million, $31.2 million, and $4.2 million at December 31, 2024, respectively, as a result of loan production exceeding payoffs and amortization.

These increases were partially offset by decreases to commercial and multifamily of $40,000 and $860,000 respectively, to $3.9 million and $3.5 million at December 31, 2024, respectively.

Total deposits increased $1.1 million or 0.5% to $231.5 million at December 31, 2024 from $230.5 million at December 31, 2023.

Non-interest bearing deposits decreased $789,000, or 7.7%, to $9.5 million at December 31, 2024 from $10.3 million at December 31, 2023.

Home equity loans and lines of credit and construction loans increased $840,000 and $5.4 million, respectively, to $8.9 million and $12.2 million at December 31, 2025, respectively, as a result of loan production exceeding payoffs and amortization.

These increases were partially offset by decreases in one-to-four family, multi-family and commercial real estate, marine and recreational, and other consumer loans of $405,000, $854,000, $907,000 and $1.0 million respectively, to $129.7 million, $3.0 million, $30.2 million and $3.2 million at December 31, 2025, respectively.

Total deposits decreased $14.3 million or 6.2% to $217.3 million at December 31, 2025 from $231.5 million at December 31, 2024.

Non-interest bearing deposits decreased $1.8 million, or 18.7%, to $7.7 million at December 31, 2025 from $9.5 million at December 31, 2024.

Total interest-bearing deposits, other than time deposits, decreased approximately $14.3 million, or 12.8%, to $97.4 million at December 31, 2025, from $111.7 million at December 31, 2024.

We acquired $9.4 million in interest-bearing brokered demand deposits in 2024 which partially offset the decline in savings and money market account balances experienced during the year.

The decline is related to a $9.4 million reduction in interest-bearing brokered demand deposits and an overall decline in savings and money market account balances experienced during the year.

Certificates of deposits increased $1.8 million, or 1.7%, to $112.1 million at December 31, 2025, from $110.3 million at December 31, 2024.

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Total borrowings increased $14.2 million or 58.5% to $38.4 million at December 31, 2025 from $24.2 million at December 31, 2024.

The increase in borrowings were utilized to fund loan growth.

The increase in borrowings were utilized to offset deposit declines and to fund loan growth.

Stockholders’ Equity.

Total stockholders’ equity increased $4.1 million, or 35.5%, to $15.6 million at December 31, 2024 from $11.5 million at December 31, 2023, due to net proceeds of $5.5 million from the stock offering and other comprehensive income of $810,000.

These increases were partially offset by a decrease in retained earnings of $1.7 million, which resulted from the net loss incurred for the year ended December 31, 2024 and the $500,000 value of the unallocated common shares held by the ESOP.

Total stockholders’ equity decreased $2.4 million, or 15.4%, to $13.2 million at December 31, 2025 from $15.6 million at December 31, 2024, due to a $4.1 million decrease in retained earnings resulting from the net loss incurred for the year ended December 31, 2025.

The decrease was partially offset by $1.7 million in other comprehensive income for the year ended December 31, 2025

Comparison of Operating Results for the year Ended December 31, 2025 and 2024

Net Income/(Loss).

We recorded a net loss of $1.7 million for the year ended December 31, 2024, compared to a net loss of $935,000 for the year ended December 31, 2023, which is an increase of $755,000, or 80.7%.

The increase in our net loss year-over-year resulted primarily from a decrease in net interest income and increase in noninterest expense, partially offset by an increase in our noninterest income.

We recorded a net loss of $4.1 million for the year ended December 31, 2025, compared to a net loss of $1.7 million for the year ended December 31, 2024, which is an increase of $2.4 million, or 140.9%.

The increase in our net loss year-over-year resulted primarily from a $3.5 million increase in the provision for income taxes and $224,000 increase in noninterest expense, partially offset by a $1.3 million increase in net interest income and a $60,000 increase in our noninterest income.

Interest Income.

Interest income increased $806,000, or 9.0%, to $9.7 million for the year ended December 31, 2024 from $8.9 million for the year ended December 31, 2023, primarily due to a $913,000 increase in interest and fees on loans.

The increase in interest and fees on loans was primarily due to an increase of 45 basis points in the weighted average yield on the loan portfolio to 4.71% for 2024 from 4.26% for 2023 and an increase of $2.2 million in the average balance of the loan portfolio to $180.1 million for the year ended December 31, 2024 from $177.9 million for the year ended December 31, 2023, reflecting the increased rates on originations and adjustable rate loans as the growth in the one- to four-family, home equity loans and lines of credit, construction, and marine and recreational vehicles, and other consumer portfolios.

Interest income increased $1.4 million, or 14.2%, to $11.1 million for the year ended December 31, 2025 from $9.7 million for the year ended December 31, 2024, primarily due to a $1.3 million increase in interest and fees on loans.

The increase in interest and fees on loans was primarily due to an increase of 34 basis points in the weighted average yield on the loan portfolio to 5.05% for the year ended December 31, 2025 from 4.71% for the year ended December 31, 2024 and an increase of $14.4 million in the average balance of the loan portfolio to $194.5

million for the year ended December 31, 2025 from $180.1 million for the year ended December 31, 2024, reflecting the increased rates on originations and adjustable rate loans as well as the growth in the home equity loans and lines of credit and construction loans portfolios.

Interest Expense.

Total interest expense increased $2.0 million, or 46.3%, to $6.4 million for the year ended December 31, 2024 from $4.4 million for the year ended December 31, 2023.

Interest expense on deposits increased $1.6 million, or 43.9%, to $5.2 million for the year ended December 31, 2024 from $3.6 million for the year ended December 31, 2023, due primarily to an increase in the weighted average rate paid on certificates of deposit of 129 basis points to 4.37% for the year ended December 31, 2024 from 3.08% for the year ended December 31, 2023 combined with an increase in the average balance of such deposits of $7.3 million during 2024.

Interest expense on borrowed funds increased $429,000 or 58.2%, to $1.2 million for the year ended December 31, 2024 from $737,000 for the year ended December 31, 2023.

The rate paid on borrowed funds increased 87 basis points to 4.47% for the year ended December 31, 2024 from 3.60% for the year ended December 31, 2023 while the average balance of borrowed funds increased $5.5 million, or 26.9%, to $26.0 million for the year ended December 31, 2024 from $20.5 million for the year ended December 31, 2023.

Total interest expense increased $137,000, or 2.2%, to $6.5 million for the year ended December 31, 2025 from $6.4 million for the year ended December 31, 2024.

Interest expense on deposits decreased $225,000, or 4.3%, to $5.0 million for the year ended December 31, 2025 from $5.2 million for the year ended December 31, 2024, due primarily to a decrease in the weighted average rate paid on certificates of deposit of 34 basis points to 4.03% for the year ended December 31, 2025 from 4.37% for the year ended December 31, 2024 combined with a $4.2 million decline in the average balance of non-maturity interest-bearing deposits during 2025.

Interest expense on borrowed funds increased $353,000 or 31.1%, to $1.5 million for the year ended December 31, 2025 from $1.1 million for the year ended December 31, 2024.

The rate paid on borrowed funds decreased 56 basis points to 3.92% for the year ended December 31, 2025 from 4.48% for the year ended December 31, 2024 while the average balance of borrowed funds increased $13.0 million, or 50.4%, to $39.0 million for the year ended December 31, 2025 from $26.0 million for the year ended December 31, 2024.

The increase in the average balance was generally related to the measured use of borrowings to offset deposit outflows and to support the increase in the loan portfolio.

Net Interest Income.

Net interest income decreased $1.2 million, or 26.4%, to $3.4 million for the year ended December 31, 2024 from $4.5 million for the year ended December 31, 2023, primarily due to a decrease in the interest rate spread to 1.29% for the year ended December 31, 2024 from 1.79% for the year ended December 31, 2023 and a decrease in the net interest margin to 1.35% for the year ended December 31, 2024, from 1.82% for the year ended December 31, 2023.

The decreases in the interest rate spread and the net interest margin were primarily due to an increase in the rates paid on interest-bearing liabilities in conjunction with an increase in other borrowings, partially offset by a 34 basis point increase in the weighted average yield on our interest earning assets.

Net interest income increased $1.2 million, or 36.8%, to $4.6 million for the year ended December 31, 2025 from $3.4 million for the year ended December 31, 2024, primarily due to an increase in the interest rate spread to 1.65% for the year ended December 31, 2025 from 1.29% for the year ended December 31, 2024 and an increase in the net interest margin to 1.74% for the year ended December 31, 2025, from 1.35% for the year ended December 31, 2024.

The increases in the interest rate spread and the net interest margin were primarily due to an increase of 31 basis points in the weighted average yield on our interest earning assets and decrease of 5 basis points on our weighted average cost of interest-bearing liabilities, partially offset by an increase of $11.0 million in average interest-bearing liabilities.

Provision for Credit Losses.

Based on management’s analysis of the adequacy of the ACL and unfunded loan commitments, a net provision of $167,000 comprising of a provision of $85,000 to the ACL for loans and a provision of $82,000 for unfunded loan commitments was recorded for the year ended December 31, 2024, compared to a provision of $145,000 to the ACL for the same period in 2023.

The $22,000 increase in provision expense is primarily due to the increase in outstanding loan balances along with an analysis of current credit characteristics in conjunction with loss history of the loan portfolio and peer group loss data.

Based on management’s analysis of the adequacy of the ACL and unfunded loan commitments, a net provision of $131,000 comprising of a provision of $82,000 to the ACL for loans and a provision of $49,000 for unfunded loan commitments was recorded for the year ended December 31, 2025, compared to provisions of $85,000 to the ACL and $82,000 unfunded loan commitments for the same period in 2024.

The $36,000 decrease in provision expense is primarily due to a mix change in our loan portfolio and an analysis of current credit characteristics in conjunction with loss history of the loan portfolio and peer group loss data.

Noninterest Income.

Noninterest income increased $60,000 or 3.5%, to $1.8 million for the year ended December 31, 2025 from $1.7 million for the year ended December 31, 2024.

The increase resulted primarily from a $271,000 gain on an interest rate swap in place during 2024, an increase of $41,000 to $395,000 in total mortgage banking income, and an increase of $178,000 to $480,000 in other income driven primarily by an increase of $131,000 in investment and insurance income.

These increases were offset by nonrecurring gains of $208,000 on the sale of office properties and equipment resulting from the sale of one of our branch offices and a $71,000 gain on sale of land for sale occurring in the year ended December 31, 2023.

The increase resulted primarily from an increase of $210,000 to $605,000 in total mortgage banking income, and an increase of $32,000 to $512,000 in other income.

The increase in other income was driven primarily by an increase of $49,000 reciprocal deposit fee income and $13,000 in insurance agency income offset by a $26,000 decrease in consumer loan related application, late, and gap insurance fees.

These increases to noninterest income were offset by a $187,000 decrease in the gain on interest rate swap and $16,000 decline in deposit account service charges and interchange income.

The table below sets forth our noninterest income for the years ended December 31, 2025 and 2024:

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Increase in cash value of life insurance

Gain (loss) on sale and disposal of fixed assets

Gain on sale of land held for sale

Gain on interest rate swap

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Salaries and related benefits increased $88,000, or 2.1%, to $4.3 million at December 31, 2025 primarily due to higher employee salary expense and related benefits due to market factors.

Data processing expense increased $136,000 to $1.1 million at December 31, 2024 primarily due to implementation of additional network management services and general activity increases.

Partially offsetting these increases was a decrease of $262,000 in other noninterest expense to $900,000 at December 31, 2024.

The decrease in other noninterest expense was due in large part to a total of $241,000 expensed in 2023 related to the proposed acquisition of another mutual institution that was later terminated.

Data processing expense increased $34,000, or 3.1% totaling $1.1 million at December 31, 2025 primarily due to general activity increases.

Other expense increased $193,000, or 21.4% primarily due to a $173,000 increase in accounting, legal and shareholder services professional fees.

Partially offsetting these increases was a decrease of $43,000 in net occupancy expense due to closing of two branch locations, $34,000 decrease in loss on sale and disposal of fixed assets related to a 2024 branch closing, and a $38,000 decrease in advertising expense due to reduced activity.

The table below sets forth our noninterest expense for the year ended December 31, 2025 and 2024:

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Data processing

Loss on sale and disposal of fixed assets

Loss on sale of other real estate owned

FDIC insurance premiums

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Income Tax Expense.

Our benefit for income taxes increased $339,000 to a benefit of $736,000 for the year ended December 31, 2024, from a benefit of $398,000 for the year ended December 31, 2023 due to an increase in loss before income taxes.

Our provision for income taxes increased $3.6 million to $2.9 million for the year ended December 31, 2025, from a benefit of $736,000 for the year ended December 31, 2024 due to the recording of a $3.3 million valuation against our deferred tax asset and a $306,000 decrease in the income tax benefit related to a reduction in the loss before provision for (benefit from) income taxes.

Average Balances and Yields .

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Our Asset Liability Committee is responsible for evaluating the interest rate risk inherent in our assets and liabilities, for determining the level of risk that is appropriate, given our business strategy, operating environment, capital, liquidity and performance objectives, and for managing this risk consistent with the policy and guidelines approved by our board of directors.

The Asset Liability Committee, which is a management-level committee, meets quarterly, or more frequently when necessary, is comprised of our President/Chief Executive Officer, Senior Vice President of Finance, Vice President of Lending and Vice President of Member Relations, and reports to the full board of directors on at least a annual basis .

The Asset Liability Committee is responsible for recommending to the board of directors policies and procedures regarding asset/liability management, while it is the responsibility of the board of directors to determine whether to adopt such policies and procedures.

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(1) Assumes an immediate uniform change in interest rates at all maturities.

The table above indicates that at December 31, 2024, we would have experienced a 1.31% decrease in net interest income in the event of an instantaneous parallel 200 basis point increase in market interest rates and a 8.77% increase in net interest income in the event of an instantaneous parallel 200 basis point decrease in market interest rates.

The table above indicates that at December 31, 2025, we would have experienced a 3.02% increase in net interest income in the event of an instantaneous parallel 200 basis point increase in market interest rates and a 0.82% decrease in net interest income in the event of an instantaneous parallel 200 basis point decrease in market interest rates.

Economic Value of Equity .

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At December 31, 2025, we also had a $25.0 million available line of credit with the Discount Window at the Federal Reserve Bank of Chicago.

In addition, at December 31, 2024 we had a $6.0 million line of credit with a correspondent bank.

We have not drawn against the Discount Window or the line of credit.

In addition, at December 31, 2025 we had an unsecured $6.0 million federal funds line of credit with a correspondent bank.

We have not drawn against the Discount Window or the federal funds line of credit.

While maturities and scheduled amortization of loans and securities are predictable sources of funds, deposit flows and loan prepayments are greatly influenced by general interest rates, economic conditions, and competition.

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At December 31, 2025 and December 31, 2024, our capital levels at the Bank level exceeded the levels required to be technically considered “well capitalized” under federal regulatory capital regulations.

However, we operate under an MOU with the Department and the FDIC pursuant to which, among other things, we have agreed to achieve and

maintain Tier 1 capital and total risk-based capital ratio levels above that which are required under federal regulatory capital regulations and a net worth ratio (as defined under Wisconsin law) of 6.0%.

However, we operate under

an MOU with the Department and the FDIC pursuant to which, among other things, we have agreed to achieve and maintain Tier 1 capital and total risk-based capital ratio levels above that which are required under federal regulatory capital regulations and a net worth ratio (as defined under Wisconsin law) of 6.0%.

At December 31, 2025, we had Tier 1 capital equal to 6.1% of total average assets, total risk-based capital equal to 11.6% of risk-weighted assets and a net worth ratio of 4.89%.

At December 31, 2024, we had Tier 1 capital equal to 6.9% of total average assets, total risk-based capital equal to 12.5% of risk-weighted assets and a net worth ratio of 5.67%.

Our net worth ratio for purposes of compliance with Wisconsin law is calculated differently from the federal regulatory capital regulations in that it reflects the impact of the Bank’s unallocated general loan loss reserves.

The Bank’s unallocated general loan loss reserves do not impact the calculation of the federal regulatory capital ratios.

The net proceeds contributed to the Bank from the stock offering completed on September 20, 2024, have significantly increased our liquidity and capital resources.

Over time, the initial level of liquidity will be reduced as net proceeds from the stock offering are used for general corporate purposes, including funding loans.

Our financial condition and results of operations will be enhanced by the net proceeds from the offering, which will increase our net interest-earning assets and net interest income.

However, due to the increase in equity resulting from the net proceeds raised in the offering, as well as other factors associated with the offering, our return on equity may be adversely affected for a period of time following the offering.

This could negatively affect the trading price of our shares of common stock.

Off-Balance Sheet Arrangements and Aggregate Contractual Obligations

9 unchanged sentences

The unfunded commitments are evaluated on an annual basis.

Our expected losses related to the unfunded commitments as of December 31, 2024 were estimated to be $82,000 and have provisioned for this exposure and recorded a reserve of $82,000 as of December 31, 2024.

Our expected losses related to the unfunded commitments as of December 31, 2025 were estimated to be $131,000 and recorded a reserve of $131,000 as of December 31, 2025.

Contractual Obligations.

4 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis