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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended
September 30,
2025
OR
☐
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to __________
Commission File Number:
001-42627
WINCHESTER BANCORP, INC.
(Exact Name of Registrant as Specified in its Charter)
Maryland
33-3361275
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)
661 Main Street
Winchester
,
Massachusetts
01890
(Address of principal executive offices)
(Zip Code)
Registrant’s telephone number, including area code: (
781
)
729-2130
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading
Symbol(s)
Name of each exchange on which registered
Common Stock, par value $0.01 per share
WSBK
The
NASDAQ
Stock Market LLC
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes
☒
No
☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Yes
☒
No
☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
☐
Accelerated filer
☐
Non-accelerated filer
☒
Smaller reporting company
☒
Emerging growth company
☒
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No
☒
As of November 12, 2025
, the registrant had
9,295,376
shares of common stock outstanding.
Common stock, $
.01
par value,
20,000,000
shares authorized,
9,295,376
issued and outstanding as of September 30, 2025 and June 30, 2025
93
93
Additional paid-in capital
39,567
39,571
Unearned compensation (ESOP)
(
3,278
)
(
3,346
)
Retained earnings
81,682
80,720
Accumulated other comprehensive loss
(
1,072
)
(
1,686
)
Total stockholders' equity
116,992
115,352
Total liabilities and stockholders' equity
$
1,005,212
$
949,378
The accompanying notes are an integral part of these condensed consolidated financial statements.
2
Winchester Bancorp, Inc. and Subsidiaries
Consolidat
ed Statements of Operations (unaudited)
Three months ended
September 30,
2025
2024
(In thousands, except share data)
Interest and dividend income:
Interest and fees on loans
$
10,402
$
9,015
Interest and dividends on securities
1,113
898
Interest on federal funds sold and other interest-bearing deposits
422
318
Total interest and dividend income
11,937
10,231
Interest expense:
Interest on deposits
4,670
5,009
Interest on Federal Home Loan Bank advances
1,526
1,454
Total interest expense
6,196
6,463
Net interest income
5,741
3,768
Provision (benefit) for credit losses
(
320
)
1,162
Net interest income, after provision (benefit) for credit losses
6,061
2,606
Non-interest income:
Customer service fees
191
188
Income on bank owned life insurance
119
117
Gain on marketable equity securities, net
—
171
Loss on sale of securities available for sale
(
317
)
—
Miscellaneous
59
25
Total non-interest income
52
501
Non-interest expense:
Salaries and employee benefits
2,697
2,263
Occupancy and equipment, net
396
377
Data processing
408
347
Deposit insurance
210
221
Marketing and advertising
184
96
Other general and administrative
900
633
Total non-interest expense
4,795
3,937
Income (loss) before income taxes
1,318
(
830
)
Provision (benefit) for income taxes
356
(
198
)
Net income (loss)
$
962
$
(
632
)
Share Data:
Average common shares outstanding, basic and diluted
8,964,893
n/a
Basic and diluted net income per share
$
0.11
n/a
The accompanying notes are an integral part of these condensed consolidated financial statements.
3
Winchester Bancorp, Inc. and Subsidiaries
Consolidated Sta
tements of Comprehensive Income (Loss) (unaudited)
Three months ended
September 30,
2025
2024
(In thousands)
Net income (loss)
$
962
$
(
632
)
Other comprehensive income:
Securities available for sale:
Unrealized holding gains
480
744
Reclassification adjustment for losses realized in income
317
—
Net unrealized gains
797
744
Tax effect
(
183
)
(
167
)
Net-of-tax amount
614
577
Comprehensive income (loss)
$
1,576
$
(
55
)
The accompanying notes are an integral part of these consolidated financial statements.
4
Winchester Bancorp, Inc. and Subsidiaries
Consolidated
Stat
ements of Changes in Stockholders’ Equity (unaudited)
Three Months Ended September 30, 2025 and 2024
Shares of Common Stock
Common Stock
Additional Paid in Capital
Retained Earnings
Accumulated
Other
Comprehensive
Income (Loss)
Unearned Compensation ESOP
Total
Stockholders' Equity
(In thousands, except share data)
Balance at June 30, 2025
9,295,376
$
93
$
39,571
$
80,720
$
(
1,686
)
$
(
3,346
)
$
115,352
Comprehensive income
—
—
—
962
614
—
1,576
ESOP shares released and committed to be released
—
—
(
4
)
—
—
68
64
Balance at September 30, 2025
9,295,376
$
93
$
39,567
$
81,682
$
(
1,072
)
$
(
3,278
)
$
116,992
Surplus
Accumulated
Other
Comprehensive
Income (Loss)
Total
Surplus
(In thousands)
Balance at June 30, 2024
$
82,094
$
(
1,806
)
$
80,288
Comprehensive income (loss)
(
632
)
577
(
55
)
Balance at September 30, 2024
$
81,462
$
(
1,229
)
$
80,233
The accompanying notes are an integral part of these consolidated financial statements.
5
Winchester Bancorp, Inc. and Subsidiaries
Consolid
ated Statements of Cash Flows (unaudited)
For the Three Months Ended September 30, 2025 and 2024
Three months ended
September 30,
2025
2024
(In thousands)
Cash flows from operating activities:
Net income (loss)
$
962
$
(
632
)
Adjustments to reconcile net income (loss) to net cash provided (used) by operating activities:
Provision (benefit) for credit losses
(
320
)
1,162
Net amortization of securities
21
94
Depreciation and amortization
223
209
Increase in cash surrender value of bank owned life insurance
(
119
)
(
117
)
Accretion of net deferred loan origination fees
(
17
)
(
41
)
Losses on sale of securities available for sale, net
317
—
Gain on marketable equity securities, net
—
(
171
)
Deferred tax provision
64
—
Net change in:
Accrued interest receivable
(
131
)
94
Other assets
735
(
209
)
Accrued expenses and other liabilities
(
378
)
(
723
)
Net cash provided (used) by operating activities
1,357
(
334
)
Cash flows from investing activities:
Activity in securities available for sale:
Maturities, calls and prepayments
1,784
9,714
Sales
7,195
—
Purchases
(
15,789
)
(
6,500
)
Activity in securities held to maturity:
Maturities, calls and prepayments
1,516
2,442
Purchases
(
4,954
)
(
5,000
)
Purchase of Federal Home Loan Bank stock
(
650
)
(
160
)
Loan originations, net of principal payments
(
42,422
)
(
27,501
)
(Purchase) disposal of premises and equipment, net
8
(
60
)
Net cash used by investing activities
(
53,312
)
(
27,065
)
Cash flows from financing activities:
Net increase in deposits
37,239
6,886
Net change in short-term Federal Home Loan Bank advances
33,000
3,457
Proceeds from long-term Federal Home Loan Bank advances
—
15,000
Repayment of long-term Federal Home Loan Bank advances
(
16,000
)
(
5,000
)
Net increase in mortgagors’ escrow accounts
189
157
Net cash provided by financing activities
54,428
20,500
Net change in cash and cash equivalents
2,473
(
6,899
)
Cash and cash equivalents at beginning of year
55,244
44,114
Cash and cash equivalents at end of year
$
57,717
$
37,215
Supplemental cash flow information:
Interest paid on deposits
$
4,656
$
5,112
Interest paid on Federal Home Loan Bank advances
1,539
1,812
Income taxes paid, net of (refunds)
641
15
The accompanying notes are an integral part of these condensed consolidated financial statements.
6
Winchester Bancorp, Inc. and Subsidiaries
Notes to Unaudited Cons
olidated Financial Statements
1.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accompanying audited consolidated financial statements of Winchester Bancorp, Inc. (the “Company”), have been prepared in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP) for interim information. Accordingly, they do not include all the information and footnote disclosures required by GAAP for complete financial statements. In the opinion of management, all normal recurring adjustments necessary for a fair presentation of the financial condition and result of operations for the periods have been included.
For additional information and disclosures required under U.S. GAAP, refer to the Company's Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the year ended June 30, 2025.
Certain previously reported amounts have been reclassified to conform with current period's presentation.
Basis of consolidation and presentation
The consolidated financial statements include the accounts of the Company, its wholly owned subsidiary Winchester Savings Bank (the “Bank”) and the Bank's wholly owned subsidiaries, Sachem Holdings, Inc., Aberjona Holdings, Inc., 1871 Company, LLC, and Wedgemere Holdings, LLC. Sachem Holdings, Inc. and Aberjona Holdings, Inc. function as Massachusetts security corporations that buy, sell and hold securities. 1871 Company, LLC's principal activity is holding of bank premises.
Wedgemere Holdings, LLC's principal activity is the holding of properties acquired in settlement of loans.
All significant intercompany balances and transactions have been eliminated in consolidation.
Business
The Company is a Maryland corporation whose primarily purpose is to act as the holding company for the Bank. The Bank provides a variety of financial services to individuals and small businesses through its offices in Winchester, Woburn, Danvers and Arlington, Massachusetts. Its primary deposit products are checking, savings and term certificate accounts and its primary lending products are residential, commercial and multi-family real estate and construction loans.
Reorganization
On December 4, 2024, the Board of Trustees of the Bank adopted a plan of reorganization from a Mutual Savings Bank to a Mutual Holding Company and Plan of Stock Issuance (the "Plan"). The Plan received the required approvals of various regulatory agencies. The Bank’s reorganization and the related stock offering of the Company were consummated on April 30, 2025. The Company sold
3,997,012
shares of common stock at $
10.00
per share for gross proceeds of $
39,970,000
. In connection with the reorganization, the Company also issued
5,112,457
shares of common stock to Winchester Bancorp, MHC, the Company’s mutual holding company parent, and issued
185,907
shares of common stock to the Winchester Savings Bank Charitable Foundation, Inc.
A liquidation account was established by Winchester Bancorp, Inc. for the benefit of eligible account holders equal to the percentage of the shares of common stock issued in the offering to persons other than Winchester Bancorp, MHC multiplied by the net worth of Winchester Savings Bank as of September 30, 2024. In the unlikely event of a complete liquidation of (i) the Bank or (ii) the Bank and the Company, all claims of creditors, including those of depositors, will be paid first. However, except with respect to the liquidation account to be established, a depositor’s claim would be solely for the principal amount of his or her deposit accounts plus accrued interest. Depositors generally would not have an interest in the value of the assets of Winchester Savings Bank or Winchester Bancorp, Inc. above that amount. On any June 30 annual closing date, if the amount in any applicable deposit account is less than the amount in the deposit account as of the close of business on November 30, 2023, or any other annual closing date, then the liquidation account as well as the interest in the liquidation account relating to such deposit account would be reduced from time to time by the proportion of any such reduction, and such interest will cease to exist if such deposit account is closed. In addition, no interest in the liquidation account would ever be increased despite any subsequent increase in the related deposit account.
7
Use of estimates
In preparing consolidated financial statements in conformity with accounting principles generally accepted in the United States of America, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the consolidated balance sheet and reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. The allowance for credit losses is a material estimate that is particularly susceptible to significant change in the near term.
Fair value hierarchy
The Company groups its assets and liabilities measured at fair value in three levels, based on the markets in which the assets are traded and the reliability of the assumptions used to determine fair value.
Level 1 – Valuation is based on quoted prices in active markets for identical assets. Valuations are obtained from readily available pricing sources for market transactions involving identical assets.
Level 2 – Valuation is based on observable inputs other than Level 1 prices, such as quoted prices for similar assets; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets.
Level 3 – Valuation is based on unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets. Level 3 assets include financial instruments whose value is determined using unobservable inputs to pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires significant management judgment or estimation.
Defined benefit pension plan investments in hedge funds are measured using the net asset value per share (or its equivalent) as a practical expedient and have not been classified in the fair value hierarchy.
Accrued Interest Receivable
The Company elected not to measure an allowance for credit losses for accrued interest receivable and instead elected to reverse interest income on loans or securities that are placed on nonaccrual status, which is generally when the instrument is 90 days past due, or earlier if the Company believes the collection of interest is doubtful. The Company has concluded that this policy results in the timely reversal of uncollectible interest.
Allowance for Credit Losses-Loans
The allowance for credit losses is evaluated on a regular basis by management. This evaluation is inherently subjective as it requires estimates that are susceptible to significant revision as more information becomes available.
For the year ended June 30, 2025, the Company measured the allowance for credit losses using the Scaled CECL Allowance for Losses Estimator (“SCALE”) which has asset size limitations for institutions to use the methodology. Effective July 1, 2025 the Company could not longer use SCALE and changed its Allowance for Credit Loss methodology to use a quantitative Discounted Cash Flow (“DCF”) model combined with the assessment of certain qualitative factors.
Collectively evaluated loans
The allowance for credit losses is established based upon the Company's current estimate of expected lifetime credit losses on loans measured at amortized cost. Credit losses are charged against the allowance when management's assessments confirm that the Company will not collect the full amortized cost basis of a loan. Subsequent recoveries, if any, are credited to the allowance. The Company estimates credit losses for financial assets on a collective basis for loans sharing similar risk characteristics. The Company segments financial assets with similar risk characteristics and has elected to segment its loans based on Federal Call codes used for reporting loans to the Federal Deposit Insurance Corporation as part of the Call Report process. These segments are collectively evaluated for expected credit losses using a quantitative DCF model combined with an assessment of certain qualitative factors designed to address forecast risk and model risk inherent in the quantitative model output. The Company has elected to use this approach because DCF models allow for effective incorporation of a reasonable and supportable forecast in a directionally consistent and objective manner and peer data is available for certain inputs such as the probability of default and the loss given default. The quantitative model utilizes a loss factor based approach to
8
estimate expected credit losses, which are derived from industry peer loss experience. The model estimates expected credit losses using loan level data over the estimated life of the exposure, considering the effect of prepayments. Economic forecasts are incorporated into the estimate over a reasonable and supportable forecast period, beyond which is a reversion to the historical long-run average using the straight-line reversion method. Management periodically evaluates a reasonable and supportable forecast period and a reversion period to be appropriate for purposes of estimating expected credit losses. The qualitative risk factors impacting the expected risk of loss within the portfolio include the following:
•
changes in the Company’s loan policies, procedures and strategies;
•
changes in international, national, regional, and local economic and business conditions;
•
changes in the nature and volume of the portfolio and terms of loans;
•
changes in experience, depth, and ability of lending management;
•
changes in the volume, trend, and severity of past due financial assets;
•
changes in the quality of the organization’s loan review system;
•
changes in the value of underlying collateral for collateral-dependent loans;
•
the existence and effect of any concentrations of credit, and changes in the level of such concentrations; and
•
the effect of competition and legal/regulatory requirements on the portfolio.
Individually Evaluated Loans
Loans that do not share similar risk characteristics with any pools of assets are subject to individual evaluation and are removed from the collectively assessed pools to avoid double counting. This includes loans on non-accrual and loans that are 90 days or greater past due. For the loans that will be individually evaluated, the Company will use either a discounted cash flow ("DCF") approach or a fair value of collateral approach. The latter approach will be used for loans that are collateral dependent, that is, when the borrower is experiencing financial difficulty and repayment is expected to be provided substantially through the operation or sale of the collateral, expected credit losses are based on fair value of the collateral at the reporting date, adjusted for selling costs as appropriate.
Unallocated component
An unallocated component may be maintained to cover uncertainties that could affect management’s estimate of probable losses. The unallocated portion of the allowance reflects the margin of imprecision inherent in the underlying assumptions used in the methodologies for estimating collectively and individually evaluated loans in the portfolio.
Allowance for Credit Losses- Off-Balance Sheet Credit Exposures
The Company has off-balance sheet financial instruments, which include commitments to extend credit, standby letters of credit and commercial letters of credit. The Company estimates expected credit losses over the contractual period in which the Company is exposed to risk via a contractual obligation to extend credit, unless that obligation is unconditionally cancellable by the Company.
The Company’s allowance for credit losses on off-balance sheet credit exposures is recognized as a liability in accrued expenses and other liabilities on the consolidated balance sheets, with adjustments to the reserve recognized in the provision for credit losses in the consolidated statements of operations. The credit risk associated with these commitments is evaluated in a manner similar to the allowance for credit losses on loans with an additional assumption of probability of funding.
Derivatives and Hedging
The Company follows Accounting Standards Codification (“ASC”) Topic 815, Derivatives and Hedging, with regard to disclosure requirements for derivatives and hedging activities, with the intent to provide users of financial statements with an enhanced understanding of: (a) how and why an entity uses derivative instruments, (b) how the entity accounts for derivative instruments and related hedged items, and (c) how derivative instruments and related hedged items affect an entity’s financial position and performance. Qualitative disclosures explain the Company’s objectives and strategies for using derivatives, and quantitative disclosures are made regarding the fair value of, and gains and losses on, derivative instruments, and about credit-risk-related contingent features in derivative instruments.
9
As required by ASC 815, the Company reports all derivatives on its balance sheet at fair value. The accounting for changes in the fair value of derivatives depends on the intended use of the derivative, whether the Company has elected to designate a derivative in a hedging relationship and apply hedge accounting, and whether the hedging relationship has satisfied the criteria necessary to apply hedge accounting.
Derivatives designated and qualifying as a hedge of the exposure to changes in the fair value of an asset, liability, or firm commitment attributable to a particular risk, such as interest rate risk, are considered fair value hedges. Derivatives designated and qualifying as a hedge of the exposure to variability in expected future cash flows, or other types of forecasted transactions, are considered cash flow hedges.
In a fair value hedge, hedge accounting generally provides for the matching of the timing of gain or loss recognition on the hedging instrument with the recognition of the changes in the fair value of the hedged asset or liability that are attributable to the hedged risk.
Recent accounting pronouncements
Management has not identified any Accounting Standards Updates that have been issued but are not yet effective and could have a significant impact on the Company’s financial reporting or disclosure requirements.
2.
SECURITIES
The amortized cost and fair value of available for sale and held to maturity securities, at
September 30, 2025 and June 30, 2025, with gross unrealized gains and losses, follows:
September 30, 2025
Amortized
Cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Fair
Value
(In thousands)
Securities Available for Sale
U.S. Government agency and U.S. Government-
sponsored enterprise obligations
$
13,282
$
10
$
(
30
)
$
13,262
U.S. Government agency and U.S. Government-
sponsored enterprise residential mortgage-
backed securities
31,386
470
(
2
)
31,854
Corporate bonds and obligations
10,441
—
(
825
)
9,616
Total securities available for sale
$
55,109
$
480
$
(
857
)
$
54,732
Securities Held to Maturity
U.S. Government and U.S. Government-sponsored
enterprise obligations
$
30,720
$
10
$
(
850
)
$
29,880
U.S. Government agency and U.S. Government-
sponsored enterprise residential mortgage-
backed securities
18,682
154
(
187
)
18,649
Corporate bonds and obligations
9,288
—
(
834
)
8,454
Municipal bonds
1,933
290
(
79
)
2,144
Total securities held to maturity
$
60,623
$
454
$
(
1,950
)
$
59,127
10
June 30, 2025
Amortized
Cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Fair
Value
(In thousands)
Securities Available for Sale
U.S. Government agency and U.S. Government-
sponsored enterprise obligations
$
8,000
$
1
$
(
39
)
$
7,962
U.S. Government agency and U.S. Government-
sponsored enterprise residential mortgage-
backed securities
22,485
119
(
37
)
22,567
Corporate bonds and obligations
17,988
—
(
1,218
)
16,770
Total securities available for sale
$
48,473
$
120
$
(
1,294
)
$
47,299
Securities Held to Maturity
U.S. Government and U.S. Government-sponsored
enterprise obligations
$
28,721
$
2
$
(
1,034
)
$
27,689
U.S. Government agency and U.S. Government-
sponsored enterprise residential mortgage-
backed securities
17,233
82
(
244
)
17,071
Corporate bonds and obligations
9,312
—
(
885
)
8,427
Municipal bonds
1,945
282
(
91
)
2,136
Total securities held to maturity
$
57,211
$
366
$
(
2,254
)
$
55,323
The amortized cost and fair value of debt securities by contractual maturity at
September 30, 2025
are shown as follows.
Expected maturities may differ from contractual maturities because the issuers, in certain instances, have the right to call or prepay obligations with or without call or prepayment penalties.
Available for Sale
Held to Maturity
Amortized
Cost
Fair
Value
Amortized
Cost
Fair
Value
(In thousands)
Within 1 year
$
—
$
—
$
2,456
$
2,439
Over 1 year through 5 years
9,421
8,686
27,931
26,693
Over 5 years through 10 years
14,302
14,192
1,559
1,385
Over 10 years
—
—
9,995
9,961
23,723
22,878
41,941
40,478
U.S. Government agency and U.S. Government-
sponsored enterprise residential mortgage-
backed securities
31,386
31,854
18,682
18,649
Total securities
$
55,109
$
54,732
$
60,623
$
59,127
During the three months ended September 30, 2025, the Company sold $
7,195,000
of available for sale securities resulting in gross realized losses of $
317,000
. There were
no
realized losses on securities for the three months ended September 30, 2024.
Allowance for Credit Losses-Securities
Available
for sale (AFS) and held to maturity (HTM) securities, which are issued by the U. S. Treasury or are guaranteed by government agencies do not currently have an allowance for credit loss as the Company determined these securities are either backed by the full faith and credit of the U.S. government and/or there is an unconditional commitment to make interest payments and to return the principal investment in full to investors when a debt security reaches maturity. In assessing the Company’s investments in government-sponsored and U.S. government guaranteed mortgage-backed securities and government-sponsored enterprise obligations, the contractual cash flows of these investments are guaranteed by the respective government-sponsored enterprise. Accordingly, it is expected that the securities would not be settled at a price less than the par value of the Company’s investments. The Company will evaluate this position no less than annually, however, certain items which may cause the Company to change this methodology include legislative changes that reduce or eliminate the U.S. government’s implicit guarantee on such securities. Any expected credit losses would be presented as an allowance
11
for
credit loss. For corporate and municipal bonds, whether they are AFS or HTM, a probability of default and a loss given default analysis is performed to determine whether an allowance for credit losses is needed. There was
no
allowance for credit losses established on AFS or HTM securities during the
three months ended September 30, 2025.
Information pertaining to securities with gross unrealized losses at
September 30, 2025 and June 30, 2025, aggregated by investment category and length of time that individual securities have been in a continuous loss position, follows:
Less Than Twelve Months
Twelve Months or Over
Gross
Unrealized
Losses
Fair
Value
Gross
Unrealized
Losses
Fair
Value
(In thousands)
September 30, 2025
Securities Available for Sale
U.S. Government and U.S. Government-
sponsored enterprise obligations
$
30
$
7,255
$
—
$
—
U.S. Government agency and U.S. Government-
sponsored enterprise residential mortgage-
backed securities
—
—
2
93
Corporate bonds and obligations
—
—
825
9,616
Total securities available for sale
$
30
$
7,255
$
827
$
9,709
Securities Held to Maturity
U.S. Government and U.S. Government-sponsored
enterprise obligations
$
12
$
5,485
$
838
$
22,386
U.S. Government agency and U.S. Government-
sponsored enterprise residential mortgage-
backed securities
3
2,504
184
2,819
Corporate bonds and obligations
—
—
834
8,455
Municipal bonds
—
—
79
1,144
Total securities held to maturity
$
15
$
7,989
$
1,935
$
34,804
Less Than Twelve Months
Twelve Months or Over
Gross
Unrealized
Losses
Fair
Value
Gross
Unrealized
Losses
Fair
Value
(In thousands)
June 30, 2025
Securities Available for Sale
U.S. Government and U.S. Government-
sponsored enterprise obligations
$
39
$
6,961
$
—
$
—
U.S. Government agency and U.S. Government-
sponsored enterprise residential mortgage-
backed securities
29
6,697
8
2,438
Corporate bonds and obligations
—
—
1,218
16,770
Total securities available for sale
$
68
$
13,658
$
1,226
$
19,208
Securities Held to Maturity
U.S. Government and U.S. Government-sponsored
enterprise obligations
$
19
$
2,981
$
1,015
$
22,209
U.S. Government agency and U.S. Government-
sponsored enterprise residential mortgage-
backed securities
20
6,297
224
3,177
Corporate bonds and obligations
—
—
885
8,427
Municipal bonds
—
—
91
1,136
Total securities held to maturity
$
39
$
9,278
$
2,215
$
34,949
The Company monitors the credit quality of securities through the use of credit ratings. Management evaluates debt securities for impairment at least quarterly, and more frequently when economic or market concerns warrant such evaluation.
12
At September 30, 2025
,
103
debt securities have unrealized losses with aggregate depreciation of
4.48
% of the Company’s amortized cost basis. The decline in market value is attributable to changes in interest rates and not to credit quality, and the Company currently does not believe it is probable that it will be unable to collect all amounts due according to the contractual terms of the investments. Therefore, it is expected that the securities would not be settled at a price less than the par value of the investment. Because the Company does not intend to sell the securities and it is not “more likely than not” that the Company will be required to sell the securities before recovery of their amortized cost bases, which may be maturity, the Company does not consider these securities to be impaired at
September 30, 2025.
Accrued Interest Receivable
There were
no
write offs during the
three months ended September 30, 2025 and the year ended June 30, 2025
. The balance of accrued interest receivable on investments was $
819,000
and
$
857,000
at September 30, 2025 and June 30, 2025
, respectively.
3.
LOANS
A summary of the balances of loans follows:
September 30,
June 30,
2025
2025
(In thousands)
Mortgage loans:
Residential real estate
$
363,496
$
357,748
Commercial real estate
115,633
102,270
Multi-family
173,809
166,691
Construction
111,430
95,941
Home equity loans and lines-of-credit
27,126
26,786
Total mortgage loans
791,494
749,436
Commercial loans
4,135
4,335
Consumer loans
530
339
Total loans
796,159
754,110
Allowance for credit losses
(
4,356
)
(
4,151
)
Net deferred loan origination costs
1,381
1,261
Loans, net
$
793,184
$
751,220
The Company has sold mortgage loans in the secondary mortgage market and has retained the servicing responsibility and receives fees for the services provided. Total loans serviced for others at September 30, 2025 and June 30, 2025
amounted to $
22.1
million and $
22.4
million, respectively, and are not included on the accompanying consolidated balance sheets.
13
Activity in the allowance for credit losses, by segment, for the
three months ended September 30, 2025 follows:
Residential
Real Estate
Commercial
Real Estate
Multi-family
Construction
Home Equity
Commercial
Consumer
Unallocated
Total
(In thousands)
Allowance for credit losses-loans
Balance at June 30, 2025
$
1,510
$
579
$
944
$
705
$
113
$
298
$
2
$
—
$
4,151
Provision (benefit) for credit
losses
48
203
165
62
(
11
)
9
(
1
)
—
475
Loans charged-off
—
—
—
—
—
(
270
)
—
—
(
270
)
Recoveries
—
—
—
—
—
—
—
—
—
Balance at September 30, 2025
$
1,558
$
782
$
1,109
$
767
$
102
$
37
$
1
$
—
$
4,356
Residential
Real Estate
Commercial
Real Estate
Multi-family
Construction
Home Equity
Commercial
Consumer
Unallocated
Total
(In thousands)
Allowance for off balance sheet
credit exposures
Balance at June 30, 2025
$
60
$
16
$
25
$
1,067
$
4
$
14
$
—
$
—
$
1,186
Provision (benefit) for credit
losses
(
58
)
(
11
)
(
24
)
(
752
)
59
(
9
)
—
—
(
795
)
Balance at September 30, 2025
$
2
$
5
$
1
$
315
$
63
$
5
$
—
$
—
$
391
The increase in the allowance for credit losses on loans during the three months ended September 30, 2025 was due to the change in methodology and overall growth in the loan portfolio. The decrease in the allowance for credit losses for the off balance sheet credit exposures was due to the change in methodology and a decrease in unadvanced credit lines.
The allowance for credit losses, by loan segment, at September 30, 2025 and June 30, 2025 follows:
Residential
Real Estate
Commercial
Real Estate
Multi-family
Construction
Home Equity
Commercial
Consumer
Unallocated
Total
(In thousands)
September 30, 2025
Allowance for individually
evaluated loans
$
—
$
—
$
—
$
—
$
—
$
—
$
—
$
—
$
—
Allowance for collectively
evaluated loans
1,558
782
1,109
767
102
37
1
—
4,356
Total allowance for credit losses
$
1,558
$
782
$
1,109
$
767
$
102
$
37
$
1
$
—
$
4,356
Individually evaluated loans
$
773
$
1,166
$
—
$
—
$
—
$
—
$
—
$
1,939
Collectively evaluated loans
362,723
114,467
173,809
111,430
27,126
4,135
530
794,220
Total loans
$
363,496
$
115,633
$
173,809
$
111,430
$
27,126
$
4,135
$
530
$
796,159
Residential
Real Estate
Commercial
Real Estate
Multi-family
Construction
Home Equity
Commercial
Consumer
Unallocated
Total
(In thousands)
June 30, 2025
Allowance for individually
evaluated loans
$
—
$
—
$
—
$
—
$
—
$
270
$
—
$
—
$
270
Allowance for collectively
evaluated loans
1,510
579
944
705
113
28
2
—
3,881
Total allowance for credit losses
$
1,510
$
579
$
944
$
705
$
113
$
298
$
2
$
—
$
4,151
Individually evaluated loans
$
741
$
1,166
$
—
$
—
$
—
$
270
$
—
$
2,177
Collectively evaluated loans
357,007
101,104
166,691
95,941
26,786
4,065
339
751,933
Total loans
$
357,748
$
102,270
$
166,691
$
95,941
$
26,786
$
4,335
$
339
$
754,110
14
Activity in the allowance for credit losses, by segment, for the three months ended September 30, 2024 follows:
Residential
Real Estate
Commercial
Real Estate
Multi-family
Construction
Home Equity
Commercial
Consumer
Unallocated
Total
(In thousands)
Allowance for credit losses-loans
Balance at June 30, 2024
$
1,292
$
485
$
710
$
778
$
102
$
39
$
9
$
36
$
3,451
Provision (benefit) for credit
losses
57
44
(
30
)
(
58
)
(
1
)
1,271
(
4
)
(
6
)
1,273
Loans charged-off
—
(
85
)
—
—
—
(
1,280
)
—
—
(
1,365
)
Recoveries
—
—
—
—
—
—
—
—
—
Balance at September 30, 2024
$
1,349
$
444
$
680
$
720
$
101
$
30
$
5
$
30
$
3,359
$
—
Residential
Real Estate
Commercial
Real Estate
Multi-family
Construction
Home Equity
Commercial
Consumer
Unallocated
Total
(In thousands)
Allowance for off balance sheet
credit exposures
Balance at June 30, 2024
$
47
$
9
$
14
$
937
$
4
$
16
$
—
$
161
$
1,188
Provision for credit
losses
(
9
)
(
3
)
(
4
)
68
(
1
)
(
1
)
—
(
161
)
(
111
)
Balance at September 30, 2024
$
38
$
6
$
10
$
1,005
$
3
$
15
$
—
$
—
$
1,077
The following is a summary of past due and non-accrual loans at
September 30, 2025 and June 30, 2025:
30-59 Days
Past Due
60-89 Days
Past Due
90 Days
or Greater
Past Due
Total
Past Due
Loans on
Non-accrual
(In thousands)
September 30, 2025
Residential real estate
$
—
$
267
$
340
$
607
$
773
Commercial real estate
—
—
1,166
1,166
1,166
Total
$
—
$
267
$
1,506
$
1,773
$
1,939
30-59 Days
Past Due
60-89 Days
Past Due
90 Days
or Greater
Past Due
Total
Past Due
Loans on
Non-accrual
(In thousands)
June 30, 2025
Residential real estate
$
—
$
—
$
340
$
340
$
777
Commercial real estate
—
—
1,166
1,166
1,166
Commercial
—
—
270
270
270
Total
$
—
$
—
$
1,776
$
1,776
$
2,213
There are
no
loans 90 days or greater past due and still accruing at
September 30, 2025 and June 30, 2025
. The balance of accrued interest receivable on loans was $
2.4
million at each of
September 30, 2025 and June 30, 2025
. There was $
30,000
of accrued interest reversed on non-accrual loans during the three months ended September 30, 2024. There was
no
accrued interest reversed during the three months ended September 30, 2025.
No additional funds are committed to be advanced in connection with the individually evaluated loans. There were no loan modifications to borrowers experiencing financial difficulty during the three months ended September 30, 2025 and the year ended June 30, 2025.
Credit quality information
The Company has a ten-grade internal loan rating system for commercial real estate, multi-family, commercial, and construction loans as follows:
•
Loans rated in the first six grades 1-6 are considered “pass” rated loans with low to average risk.
15
•
Loans rated 7 are considered “watch.” These loans are starting to show signs of potential weakness and are being closely monitored by management.
•
Loans rated 8 are considered “substandard.” Generally, a loan is considered substandard if it is inadequately protected by the current net worth and paying capacity of the obligors and/or the collateral pledged. There is a distinct possibility that the Company will sustain some loss if the weakness is not corrected.
•
Loans rated 9 are considered “doubtful.” Loans classified as doubtful have all the weaknesses inherent in those classified substandard with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of existing facts, conditions and values, highly questionable and improbable.
•
Loans rated 10 are considered uncollectible (“loss”) and of such little value that their continuance as loans is not warranted.
On a periodic basis, management formally reviews the ratings on all commercial real estate, multi-family, commercial, and construction loans. Annually, the Company engages an independent third party to review a significant portion of the loans within these segments. Management uses the results of these reviews as part of its internal review process.
Credit quality for residential real estate, home equity loans and lines-of-credit, and consumer loans is determined by monitoring delinquency reports and loan payment history, and through on-going communication with customers.
16
The following table presents the Company’s risk rated loans by year of origination and gross write-offs at and for the
three months ended September 30, 2025:
As of September 30, 2025
Loans amortized cost basis by origination year
Rating:
2025
2024
2023
2022
2021
Prior
Total
(In thousands)
Residential Real Estate:
1-6 (Pass)
$
50,112
$
37,376
$
40,801
$
50,493
$
74,980
$
108,829
$
362,591
7 (Watch)
—
—
—
—
—
565
565
8 (Substandard)
—
—
—
—
—
340
340
9 (Doubtful)
—
—
—
—
—
—
—
10 (Loss)
—
—
—
—
—
—
—
Total
$
50,112
$
37,376
$
40,801
$
50,493
$
74,980
$
109,734
$
363,496
Current-period gross write-offs
$
—
$
—
$
—
$
—
$
—
$
—
$
—
Commercial Real Estate:
1-6 (Pass)
$
61,157
$
—
$
—
$
16,735
$
—
$
35,901
$
113,793
7 (Watch)
—
—
—
—
—
599
599
8 (Substandard)
—
—
—
—
—
75
75
9 (Doubtful)
—
—
—
—
—
1,166
1,166
10 (Loss)
—
—
—
—
—
—
—
Total
$
61,157
$
—
$
—
$
16,735
$
—
$
37,741
$
115,633
Current-period gross write-offs
$
—
$
—
$
—
$
—
$
—
$
—
$
—
Multi-family:
1-6 (Pass)
$
32,578
$
6,971
$
61,301
$
30,576
$
17,916
$
24,467
$
173,809
7 (Watch)
—
—
—
—
—
—
—
8 (Substandard)
—
—
—
—
—
—
—
9 (Doubtful)
—
—
—
—
—
—
—
10 (Loss)
—
—
—
—
—
—
—
Total
$
32,578
$
6,971
$
61,301
$
30,576
$
17,916
$
24,467
$
173,809
Current-period gross write-offs
$
—
$
—
$
—
$
—
$
—
$
—
$
—
Construction:
1-6 (Pass)
$
27,370
$
41,812
$
42,125
$
—
$
—
$
123
$
111,430
7 (Watch)
—
—
—
—
—
—
—
8 (Substandard)
—
—
—
—
—
—
—
9 (Doubtful)
—
—
—
—
—
—
—
10 (Loss)
—
—
—
—
—
—
—
Total
$
27,370
$
41,812
$
42,125
$
—
$
—
$
123
$
111,430
Current-period gross write-offs
$
—
$
—
$
—
$
—
$
—
$
—
$
—
Home equity loans and lines-of-credit:
1-6 (Pass)
$
3,239
$
2,767
$
3,490
$
4,913
$
3,534
$
9,183
$
27,126
7 (Watch)
—
—
—
—
—
—
—
8 (Substandard)
—
—
—
—
—
—
—
9 (Doubtful)
—
—
—
—
—
—
—
10 (Loss)
—
—
—
—
—
—
—
Total
$
3,239
$
2,767
$
3,490
$
4,913
$
3,534
$
9,183
$
27,126
Current-period gross write-offs
$
—
$
—
$
—
$
—
$
—
$
—
$
—
Commercial:
1-6 (Pass)
$
9
$
—
$
484
$
2,113
$
98
$
1,431
$
4,135
7 (Watch)
—
—
—
—
—
—
—
8 (Substandard)
—
—
—
—
—
—
—
9 (Doubtful)
—
—
—
—
—
—
—
10 (Loss)
—
—
—
—
—
—
—
Total
$
9
$
—
$
484
$
2,113
$
98
$
1,431
$
4,135
Current-period gross write-offs
$
—
$
270
$
—
$
—
$
—
$
—
$
270
Consumer:
1-6 (Pass)
$
311
$
13
$
—
$
72
$
28
$
106
$
530
7 (Watch)
—
—
—
—
—
—
—
8 (Substandard)
—
—
—
—
—
—
—
9 (Doubtful)
—
—
—
—
—
—
—
10 (Loss)
—
—
—
—
—
—
—
Total
$
311
$
13
$
—
$
72
$
28
$
106
$
530
Current-period gross write-offs
$
—
$
—
$
—
$
—
$
—
$
—
$
—
17
The following table presents the Bank’s risk rated loans by year of origination and gross write-offs at and for the year ended June 30, 2025:
As of June 30, 2025
Loans amortized cost basis by origination year
Rating:
2025
2024
2023
2022
2021
Prior
Total
(In thousands)
Residential Real Estate:
1-6 (Pass)
$
42,577
$
40,068
$
45,204
$
50,964
$
80,363
$
97,661
$
356,837
7 (Watch)
—
—
—
—
—
571
571
8 (Substandard)
—
—
—
—
—
340
340
9 (Doubtful)
—
—
—
—
—
—
—
10 (Loss)
—
—
—
—
—
—
—
Total
$
42,577
$
40,068
$
45,204
$
50,964
$
80,363
$
98,572
$
357,748
Current-period gross write-offs
$
—
$
—
$
—
$
—
$
—
$
—
$
—
Commercial Real Estate:
1-6 (Pass)
$
16,761
$
7,748
$
26,080
$
16,091
$
696
$
33,046
$
100,422
7 (Watch)
—
—
—
—
—
606
606
8 (Substandard)
—
—
—
—
—
76
76
9 (Doubtful)
—
—
—
—
—
1,166
1,166
10 (Loss)
—
—
—
—
—
—
—
Total
$
16,761
$
7,748
$
26,080
$
16,091
$
696
$
34,894
$
102,270
Current-period gross write-offs
$
—
$
—
$
—
$
—
$
—
$
85
$
85
Multi-family:
1-6 (Pass)
$
31,823
$
6,960
$
59,122
$
29,416
$
21,366
$
18,004
$
166,691
7 (Watch)
—
—
—
—
—
—
—
8 (Substandard)
—
—
—
—
—
—
—
9 (Doubtful)
—
—
—
—
—
—
—
10 (Loss)
—
—
—
—
—
—
—
Total
$
31,823
$
6,960
$
59,122
$
29,416
$
21,366
$
18,004
$
166,691
Current-period gross write-offs
$
—
$
—
$
—
$
—
$
—
$
—
$
—
Construction:
1-6 (Pass)
$
23,129
$
34,068
$
35,878
$
—
$
—
$
147
$
93,222
7 (Watch)
—
—
2,719
—
—
—
2,719
8 (Substandard)
—
—
—
—
—
—
—
9 (Doubtful)
—
—
—
—
—
—
—
10 (Loss)
—
—
—
—
—
—
—
Total
$
23,129
$
34,068
$
38,597
$
—
$
—
$
147
$
95,941
Current-period gross write-offs
$
—
$
—
$
—
$
—
$
—
$
—
$
—
Home equity loans and lines-of-credit:
1-6 (Pass)
$
3,554
$
2,975
$
4,325
$
4,147
$
3,307
$
8,478
$
26,786
7 (Watch)
—
—
—
—
—
—
—
8 (Substandard)
—
—
—
—
—
—
—
9 (Doubtful)
—
—
—
—
—
—
—
10 (Loss)
—
—
—
—
—
—
—
Total
$
3,554
$
2,975
$
4,325
$
4,147
$
3,307
$
8,478
$
26,786
Current-period gross write-offs
$
—
$
—
$
—
$
—
$
—
$
—
$
—
Commercial:
1-6 (Pass)
$
—
$
—
$
1,551
$
986
$
—
$
1,528
$
4,065
7 (Watch)
—
—
—
—
—
—
—
8 (Substandard)
—
—
—
—
—
—
—
9 (Doubtful)
—
270
—
—
—
—
270
10 (Loss)
—
—
—
—
—
—
—
Total
$
—
$
270
$
1,551
$
986
$
—
$
1,528
$
4,335
Current-period gross write-offs
$
—
$
1,330
$
—
$
—
$
—
$
—
$
1,330
Consumer:
1-6 (Pass)
$
21
$
11
$
81
$
51
$
44
$
131
$
339
7 (Watch)
—
—
—
—
—
—
—
8 (Substandard)
—
—
—
—
—
—
—
9 (Doubtful)
—
—
—
—
—
—
—
10 (Loss)
—
—
—
—
—
—
—
Total
$
21
$
11
$
81
$
51
$
44
$
131
$
339
Current-period gross write-offs
$
—
$
—
$
—
$
—
$
—
$
—
$
—
18
4. MINIMUM REGULATORY CAPITAL REQUIREMENT
S
Effective January 1, 2020, the Bank elected to comply with the community bank leverage ratio framework issued by the federal banking agencies. The framework provides for a simple measure of capital adequacy, calculated as Tier 1 capital divided by average total consolidated assets, which is consistent with how the Bank currently calculates its leverage ratio. Under this framework, a bank that maintains a community bank leverage ratio of greater than
9
% is considered to have satisfied the risk-based and leverage capital ratios. As of
September 30, 2025 and June 30, 2025
, the Bank met the minimum requirement with a community bank leverage ratio of
10.52
% and
10.48
%, respectively
.
As a small bank holding company, the Company is exempt from required minimum regulatory capital requirements.
5. FAIR VALUES OF ASSETS AND LIABILITIES
Determination of fair value
The Company uses fair value measurements to record fair value adjustments to certain assets. Fair value is the price that would be received to sell an asset in an orderly transaction between market participants at the measurement date. Fair value is best determined based upon quoted market prices. However, in some instances, quoted market prices may not be available. In cases where quoted market prices are not available, fair values are based on estimates using present value or other valuation techniques, including collateral value. Those techniques are significantly affected by the assumptions used, including the discount rate and estimates of future cash flows. Accordingly, the fair value estimates may not be realized in an immediate settlement of the assets.
Financial instruments measured at fair value on a recurring basis
Financial instruments measured at fair value on a recurring basis are summarized below. There are
no
liabilities measured at fair value on recurring basis at
June 30, 2025.
September 30, 2025
Total
Level 1
Level 2
Level 3
Fair Value
(In thousands)
Assets
Debt securities available for sale
$
—
$
54,732
$
—
$
54,732
Derivative assets
—
132
—
132
Total
$
—
$
54,864
$
—
$
54,864
Liabilities
Derivative liabilities
$
—
$
137
$
—
$
137
June 30, 2025
Total
Level 1
Level 2
Level 3
Fair Value
Assets
(In thousands)
Debt securities available for sale
$
—
$
47,299
$
—
$
47,299
Total
$
—
$
47,299
$
—
$
47,299
The following methods and assumptions were used by the Company in estimating fair value:
Cash and Cash Equivalent
s – For these financial instruments, which have original maturities of 90 days or less, their carrying amounts reported in the Consolidated Balance Sheets approximate fair value.
Available for sale and held to maturity securities
– The Company’s investment in debt securities is generally classified within Level 2 of the fair value hierarchy. For those securities, the Company obtains fair value measurements from independent pricing services which are not adjusted by management. The fair value measurements consider observable data that considers standard input factors such as observable market data, benchmark yields, interest rate volatilities, broker/dealer quotes, credit spreads and new issue data.
19
FHLB Stock
– The fair value of FHLB stock approximates the carrying amount based on the redemption provisions of the FHLB. These assets were classified as Level 2.
Loans
–The fair value of loans is measured on an exit price basis incorporating discounts for credit, liquidity and marketability factors. Loans were classified as Level 3 since the valuation methodology utilizes significant unobservable inputs.
Accrued Interest Receivable
– For these financial instruments, which have original maturities of 90 days or less, their carrying amounts reported in the Consolidated Balance Sheets approximate fair value. These assets were classified as Level 2.
Deposits
– The fair value of deposits is valued using a replacement cost of funds approach and discounted to the market rates and based on weighted remaining maturity for maturing deposits. Deposits were classified as Level 3 since the valuation methodology utilizes significant unobservable inputs.
FHLB Advances
– The fair value of the FHLB Advances approximates carrying amount of these liabilities were classified as Level 2.
Accrued Interest Payable and Mortgagor's escrow accounts
– For these financial instruments, which have original maturities of 90 days or less, their carrying amounts reported in the Consolidated Balance Sheets approximate fair value. These liabilities were classified as Level 2.
Derivative Instruments
–
The fair value of derivative instruments are estimated using a third-party derivative valuation expert who relies on Level 2 inputs, mainly interest cash flow models to determine value by calculation a settlement termination value with the counterparty.
Assets measured at fair value on a non-recurring basis
The Company may also be required, from time to time, to measure certain other assets and liabilities at fair value on a non-recurring basis in accordance with generally accepted accounting principles.
These adjustments to fair value usually result from application o
f lower-of-cost-or-market accounting or write-downs of individual assets. There were
no
assets or liabilities measured at fair value on a non-recurring basis at September 30, 2025 or June 30, 2025.
20
Summary of Fair Values of Financial Instruments
The estimated fair values, and related carrying amounts, of the Bank’s financial instruments are as follows. Certain financial instruments and all non-financial instruments are exempt from disclosure requirements. Accordingly, the aggregate fair value amounts presented herein do not represent the underlying fair value of the Company.
Carrying
Fair Value
Amount
Level 1
Level 2
Level 3
(In Thousands)
September 30, 2025
Financial assets:
Cash and cash equivalents
$
57,717
$
57,717
$
—
$
—
Securities available for sale
54,732
—
54,732
—
Securities held to maturity
60,623
—
59,127
—
Federal Home Loan Bank stock
6,928
—
6,928
—
Derivative assets
132
132
Loans, net
793,184
—
—
766,548
Accrued interest receivable
3,458
—
3,458
—
Financial liabilities:
Deposits
716,423
—
—
684,300
Federal Home Loan Bank advances
164,000
—
164,339
—
Mortgagors’ escrow accounts
1,946
—
1,946
—
Accrued interest payable
539
—
539
—
Derivative liabilities
137
—
137
—
June 30, 2025
Financial assets:
Cash and cash equivalents
$
55,244
$
55,244
$
—
$
—
Securities available for sale
47,299
—
47,299
—
Securities held to maturity
57,211
—
55,323
—
Federal Home Loan Bank stock
6,278
—
6,278
—
Loans, net
751,220
—
—
719,669
Accrued interest receivable
3,327
—
3,327
—
Financial liabilities:
Deposits
679,182
—
—
644,452
Federal Home Loan Bank advances
147,000
—
147,082
—
Mortgagors’ escrow accounts
1,756
—
1,756
—
Accrued interest payable
538
—
538
—
6. DERIVATIVES AND HEDGING ACTIVITIES
The Company is exposed to changes in the fair value of certain of its pools of fixed-rate assets due to changes in benchmark interest rates. In the current quarter, the Company entered into an interest rate swap agreement to manage its exposure to changes in the fair value of these instruments attributable to changes in the designated benchmark interest rate. The interest rate swap agreement is designated as a fair value hedge and involves the payment of fixed-rate amounts to a counterparty in exchange for the Company receiving variable-rate payments over the life of the agreement without the exchange of the underlying notional amount. For derivatives designated and that qualify as fair value hedges, the gain or loss on the derivative as well as the offsetting loss or gain on the hedged item attributable to the hedged risk are recognized in interest income.
Interest Rate Swaps
An
interest rate swap is an agreement whereby one party agrees to pay a floating rate of interest on a notional principal amount in exchange for receiving a fixed rate of interest on the same notional amount, for a predetermined period of time, from a second party. The amounts relating to the notional principal amount are not actually exchanged. The Company has entered into an interest rate swap in which it pays fixed and receives floating rate interest in order to manage its interest rate risk exposure to the changes in fair value on certain fixed-rate investments. For interest rate swaps that are accounted for as
21
fair
value hedges, changes in fair value are included in net income.
The following table reflects the Company’s derivative position for an interest rate swap which qualifies as fair value hedges for accounting purposes as of September 30, 2025:
Weighted Average Rate
Notional Amount
Weighted Average Maturity
Fixed Rate Paid
Current SOFR Rate Received
Fair Value
(in thousands)
(in years)
(in thousands)
Interest rate swap on investments
9,833
7.9
yrs
3.74
%
4.31
%
$
132
The table below presents the fair value of the Company’s derivative financial instrument, as well as the classification on the Consolidated Balance Sheet as of September 30, 2025:
Asset Derivatives
Liability Derivatives
Balance Sheet
Fair Value at
Balance Sheet
Fair Value at
Location
September 30, 2025
Location
September 30, 2025
(in thousands)
Interest rate swap on investments
Securities
$
132
Other Liabilities
$
137
The Company has an agreement with its derivative counterparty that contains a provision where if the Company defaults (or is capable of being declared in default) on any of its indebtedness, then the Company could also be declared in default on its derivative obligations, and it could be required to terminate its derivative positions with the counterparty. In order to mitigate counterparty default risk in conjunction with its derivative contract, the Company was required to maintain $
200,000
of collateral in a deposit account with the counterparty as of September 30, 2025.
Should a counterparty fail to perform under the terms of a derivative contract, the Company’s credit exposure on interest rate swaps is limited to the net positive fair value and accrued interest of the swap plus any initial margin collateral posted. The Company seeks to minimize counterparty credit risk through credit approvals, limits, monitoring procedures, and obtaining collateral, where appropriate. As such, management believes the risk of incurring credit losses on the derivative contract with the counterparty is remote.
7
. EARNINGS PER SHARE (EPS)
Basic EPS represents net income available to common stockholders divided by the weighted-average number of common shares outstanding during the year.
Diluted EPS reflects the potential dilution that could occur if securities or other contracts to issue common shares (such as stock options) were exercised or converted into additional common shares that would then share in the earnings of the Company. Diluted EPS is computed by dividing net income attributable to common stockholders by the weighted-average number of common shares outstanding for the year, plus the effect of potential dilutive common share equivalents computed using the treasury stock method.
22
There were
no
securities that had a dilutive effect during the three months ended September 30, 2025, and therefore the weighted-average common shares outstanding used to calculate both basic and diluted EPS are the same. Unallocated ESOP shares are not deemed outstanding for earnings per share calculations. For the three months ended September 30, 2025, there were
no
anti-dilutive shares. Earnings per share data is not applicable for the three months ended September 30, 2024 as the Company had
no
shares outstanding.
For the Three Months Ended
September 30,
2025
(Dollars in thousands)
Net income applicable to common shares
$
962
Average number of common shares outstanding
9,295,376
Less: average unallocated ESOP shares
330,483
Average number of common shares outstanding used to calculate basic and diluted EPS
8,964,893
Net income per common share:
Basic and diluted
$
0.11
Item 2. Management’s Discussion and Analysis of Finan
cial Condition and Results of Operations.
General
Management’s discussion and analysis of financial condition and results of operations at September 30, 2025 and June 30, 2025 and for the three months ended September 30, 2025 and 2024 is intended to assist in understanding the financial condition and results of operations of the Company. The information contained in this section should be read in conjunction with the unaudited financial statements and the notes thereto appearing in Part I, Item 1, of this Quarterly Report on Form 10-Q.
This report contains forward-looking statements, which can be identified by the use of words such as “anticipate,” “assume,” “believe,” “contemplate,” “continue,” “estimate,” “expect,” “indicate,” “intend,” “may,” “plan,” “project,” “seek,” “should,” “target,” “will,” “would,” and words of similar meaning. These forward-looking statements include, but are not limited to:
•
statements of our goals, intentions and expectations;
•
statements regarding our business plans, prospects, growth and operating strategies;
•
statements regarding the quality of our loan and investment portfolios; and
•
estimates of our risks and future costs and benefits.
These forward-looking statements are based on current beliefs and expectations of our management and are inherently subject to significant business, economic and competitive uncertainties and contingencies, many of which are beyond our control. In addition, these forward-looking statements are subject to assumptions with respect to future business strategies and decisions that are subject to change.
The following factors, among others, could cause actual results to differ materially from the anticipated results or other expectations expressed in the forward-looking statements:
•
general economic conditions, including any recessionary conditions and/or increases in unemployment, either nationally or in our market areas, that are worse than expected;
•
changes in the level and direction of loan delinquencies and write-offs and changes in estimates of the adequacy of the allowance for loan losses;
•
our ability to access cost-effective funding;
•
fluctuations in real estate values and in the conditions;
23
•
demand for loans, deposits and non-banking services in our market area;
•
our ability to implement and change our business strategies;
•
competition among depository and other financial institutions, including with respect to ability to charge overdraft fees;
•
inflation and changes in the interest rate environment that reduce our margins and yields, the fair value of financial instruments or our level of loan originations, or increase the level of defaults, losses and prepayments on loans we have made and will make;
•
adverse changes in the securities or secondary mortgage markets;
•
changes in laws or government regulations or policies affecting financial institutions and/or their holding companies, including changes in regulatory fees, capital requirements and insurance premiums;
•
monetary and fiscal policies of the U.S. Government, including policies of the U.S. Treasury and the Federal Reserve Board;
•
changes in the quality or composition of our loan or investment portfolios;
•
technological changes that may be more difficult or expensive than expected;
•
the inability of third-party providers to perform as expected;
•
a failure or breach of our operational or information security systems or infrastructure, including cyberattacks;
•
our ability to manage market risk, credit risk and operational risk;
•
our ability to enter new markets successfully and capitalize on growth opportunities;
•
our ability to successfully integrate into our operations any assets, liabilities, customers, systems and management personnel we may acquire and our ability to realize related revenue synergies and cost savings within expected time frames, and any goodwill charges related thereto;
•
changes in consumer spending, borrowing and savings habits;
•
changes in accounting policies and practices, as may be adopted by the bank regulatory agencies, the Financial Accounting Standards Board, the Securities and Exchange Commission or the Public Company Accounting Oversight Board;
•
changes in accounting and/or tax estimates;
•
our ability to retain key employees;
•
the effects of any national or global conflict, war or act of terrorism;
•
the ability of the U.S. Government to remain open, function properly and manage federal debt limits;
•
the potential effects of tariffs;
•
the impact of a pandemic on our operations and financial results and those of our customers;
•
our compensation expense associated with equity allocated or awarded to our employees; and
•
changes in the financial condition, results of operations or future prospects of issuers of securities that we own.
Critical Accounting Policies
The discussion and analysis of the financial condition and results of operations are based on our financial statements, which are prepared in conformity with GAAP. The preparation of these financial statements requires management to make estimates and assumptions affecting the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities, and the reported amounts of income and expenses. We consider the accounting policies discussed below to be critical accounting policies. The estimates and assumptions that we use are based on historical experience and various other factors and are believed to be reasonable under the circumstances. Actual results may differ from these estimates under
24
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 may delay adoption of new or revised accounting pronouncements applicable to public companies until such pronouncements are made applicable to private companies. We intend to take advantage of the benefits of this extended transition period. Accordingly, our financial statements may not be comparable to companies that comply with such new or revised accounting standards.
The following represents our critical accounting policy.
Allowance for Credit Losses on Loans.
The allowance for credit losses is established based upon the Company's current estimate of expected lifetime credit losses on loans measured at amortized cost. Credit losses are charged against the allowance when management's assessments confirm that the Company will not collect the full amortized cost basis of a loan. Subsequent recoveries, if any, are credited to the allowance. The Company estimates credit losses for financial assets on a collective basis for loans sharing similar risk characteristics. The Company segments financial assets with similar risk characteristics and has elected to segment its loans based on Federal Call codes used for reporting loans to the Federal Deposit Insurance Corporation as part of the Call Report process. These segments are collectively evaluated for expected credit losses using a quantitative Discounted Cash Flow ("DCF") model combined with an assessment of certain qualitative factors designed to address forecast risk and model risk inherent in the quantitative model output. The Company has elected to use this approach because DCF models allow for effective incorporation of a reasonable and supportable forecast in a directionally consistent and objective manner and peer data is available for certain inputs such as the probability of default and the loss given default. The quantitative model utilizes a loss factor based approach to estimate expected credit losses, which are derived from industry peer loss experience. The model estimates expected credit losses using loan level data over the estimated life of the exposure, considering the effect of prepayments. Economic forecasts are incorporated into the estimate over a reasonable and supportable forecast period, beyond which is a reversion to the historical long-run average using the straight-line reversion method. Management periodically evaluates a reasonable and supportable forecast period and a reversion period to be appropriate for purposes of estimating expected credit losses. The qualitative risk factors impacting the expected risk of loss within the portfolio include the following:
•
changes in the Company’s loan policies, procedures and strategies;
•
changes in international, national, regional, and local economic and business conditions;
•
changes in the nature and volume of the portfolio and terms of loans;
•
changes in experience, depth, and ability of lending management;
•
changes in the volume, trend, and severity of past due financial assets;
•
changes in the quality of the organization’s loan review system;
•
changes in the value of underlying collateral for collateral-dependent loans;
•
the existence and effect of any concentrations of credit, and changes in the level of such concentration; and
•
the effect of competition and legal/regulatory requirements on the portfolio.
The allowance for credit losses on loans is evaluated on a regular basis by management. This evaluation is inherently subjective as it requires estimates that are susceptible to significant revision as more information becomes available. For example, an increase of 25 basis points as to our lifetime loss rate for qualitative factors for all loan categories at September 30, 2025 would have increased our allowance for credit losses on loans at that date to $6.3 million from $4.4 million.
Loans that do not share similar risk characteristics with any pools of assets are subject to individual evaluation and are removed from the collectively assessed pools to avoid double counting. This includes loans on non-accrual and loans that are 90 days or greater past due. For the loans that will be individually evaluated, the Company will use either a DCF approach or a fair value of collateral approach. The latter approach will be used for loans that are collateral dependent, that is, when the borrower is experiencing financial difficulty and repayment is expected to be provided substantially through the operation or sale of the collateral, expected credit losses are based on fair value of the collateral at the reporting date, adjusted for selling costs as appropriate.
25
An unallocated component may be maintained to cover uncertainties that could affect management’s estimate of probable losses. The unallocated portion of the allowance reflects the margin of imprecision inherent in the underlying assumptions used in the methodologies for estimating collectively and individually evaluated loans in the portfolio.
Although we believe that we use the best information available to establish the allowance for credit losses on loans, future adjustments to the allowance may be necessary if economic conditions differ substantially from the assumptions used in making the evaluation. In addition, the Massachusetts Commissioner of Banks and the FDIC, as an integral part of their examination process, periodically review our allowance for credit losses on loans, and as a result of such reviews, we may have to adjust our allowance for credit losses on loans. A large loss could deplete the allowance and require increased provisions to replenish the allowance, which would adversely affect earnings.
For more information on our critical accounting policies, see Note 1 of the notes to our consolidated financial statements.
Comparison of Financial Condition at September 30, 2025 and June 30, 2025
Total Assets
. Total assets increased $55.8 million, or 5.9%, to $1.0 billion at September 30, 2025, from $949.4 million at June 30, 2025. The increase was primarily due to increases in loans, investment securities, and cash and cash equivalents.
Cash and Cash Equivalents
. Cash and cash equivalents increased $2.5 million, or 4.5%, to $57.7 million at September 30, 2025 from $55.2 million at June 30, 2025.
Investment Securities
. Investment securities, comprised of both available for sale and held to maturity securities, aggregated $115.4 million at September 30, 2025 compared to $104.5 million at June 30, 2025, as we continued to invest stock offering proceeds into government agency and mortgage backed securities.
Gross Loans
. Loans increased $42.0 million, or 5.6%, to $796.2 million at September 30, 2025 compared to $754.1 million at June 30, 2025. The main driver of the new growth was in construction and commercial real estate loans, which increased $15.5 million and $13.4 million, respectively. The multi-family and residential real estate portfolios also increased $7.1 million and $5.7 million, respectively. We remained focused on originating construction, commercial real estate, and multi-family real estate loans as the primary drivers of loan portfolio growth.
Deposits
. Deposits increased $37.2 million, or 5.5%, to $716.4 million at September 30, 2025 from $679.2 million at June 30, 2025. The increase was due primarily to an increase in money market accounts, which increased $49.3 million, or 40.4%, to $169.4 million at September 30, 2025 from $120.1 million at June 30, 2025; this was due to the growth in our municipal customer deposits. The offset was due to the certificates of deposit decrease of $8.5 million, or 3.0%, to $274.7 million at September 30, 2025 from $283.2 million at June 30, 2025. All of our deposits are fully insured by the FDIC or the Massachusetts Depositors Insurance Fund.
Borrowings
. Borrowings, which consisted solely of Federal Home Loan Bank of Boston advances, increased $17.0 million, or 11.6%, to $164.0 million at September 30, 2025, compared to $147.0 million at June 30, 2025; the increase was used to fund asset growth.
Total Stockholders’ Equity
. Total stockholders’ equity increased $1.6 million, and was $117.0 million at September 30, 2025 and $115.4 million at June 30, 2025. Total stockholders’ equity increased due to a $614,000 decrease in accumulated other comprehensive loss to $1.1 million at September 30, 2025, and by net income of $962,000 for the three months ended September 30, 2025.
Comparison of Operating Results for the Three Months Ended September 30, 2025 and 2024
General
.
We recorded net income of $962,000 and net loss of $632,000 for the three months ended September 30, 2025 and 2024, respectively. The increase in net income was due to an increase in interest and dividend income and a decrease in provision for credit loss expense, partially offset by an increase in operating expense, and a decrease in other income.
Interest and Dividend Income
.
Interest and dividend income increased $1.7 million, or 16.7%, to $11.9 million for the three months ended September 30, 2025, from $10.2 million for the three months ended September 30, 2024. Interest and
26
fees on loans, which is our primary source of interest income, increased $1.4 million, or 15.4%, to $10.4 million for the three months ended September 30, 2025.
The average balance of loans increased by $74.3 million, or 10.6%, to $775.0 million for the three months ended September 30, 2025, over the average balance for the three months ended September 30, 2024, while the average yield on loans increased by 22 basis points to 5.37% for the three months ended September 30, 2025, from 5.15% for the three months ended September 30, 2024. The increase in the average yield was due to increases in market interest rates as well as a change in the composition of our loan portfolio to include a higher percentage of higher yielding construction and commercial real estate loans, as well as multi-family residential real estate loans. The increase in average balance was due to our continuing to pursue new commercial relationships.
Interest Expense
.
Total interest expense decreased $267,000, or 4.1%, to $6.2 million for the three months ended September 30, 2025, compared to $6.5 million for the three months ended September 30, 2024. Interest expense on deposits decreased $339,000, or 6.8%, to $4.7 million for the three months ended September 30, 2025, from $5.0 million for the three months ended September 30, 2024. Our average balance of interest-bearing deposits increased $41.4 million, or 7.0%, to $629.5 million, while our average cost of deposits decreased 44 basis points to 2.97% for the three months ended September 30, 2025, from 3.41% for the three months ended September 30, 2024.
Interest expense on Federal Home Loan Bank advances increased $72,000, or 4.9%, to $1.5 million for the three months ended September 30, 2025, from $1.5 million for the three months ended September 30, 2024. Our average balance of Federal Home Loan Bank advances increased $13.3 million, while our average cost of borrowings decreased 22 basis points to 4.32% for the three months ended September 30, 2025, from 4.54% for the three months ended September 30, 2024. The decrease in the Federal Home Loan Bank cost of funds is due to the decrease in advance rates.
Net Interest Income
. Net interest income was $5.7 million for the three months ended September 30, 2025, compared to $3.8 million for the three months ended September 30, 2024, as our interest income increased faster than our interest expense. Our interest rate spread increased to 1.96% for the three months ended September 30, 2025 from 1.38% for the three months ended September 30, 2024. Our net interest margin increased to 2.49% for the three months ended September 30, 2025 from 1.84% for the three months ended September 30, 2024
Provision for Credit Losses
.
Based on an analysis of the factors described in “Critical Accounting Policies—Allowance for Credit Losses,” we recorded a benefit for credit losses of $320,000 for the three months ended September 30, 2025, compared to a provision of $1.2 million for the three months ended September 30, 2024. The provision for credit losses on loans for the three months ended September 30, 2025 was due to an increase in loan balances and the change in ACL methodology, while there was a benefit for credit losses on off balance sheet commitments of $795,000 for the same period, due to the change in ACL methodology and lower off balance sheet commitments.
The allowance for credit losses on loans was $4.4 million at September 30, 2025 and $4.2 million at June 30, 2025, and represented 0.55% of total loans at both September 30, 2025 and June 30, 2025 . The allowance for credit losses for off balance sheet commitments was $391,000 at September 30, 2025 and $1.1 million at June 30, 2025. The benefit for off balance sheet commitments related to the change in ACL methodology and lower balances of loan commitments as the commitments were converted to loans.
Total nonaccrual loans were $1.9 million at September 30, 2025, compared to $2.2 million at June 30, 2025. Total loans past due 30 days or greater were $1.8 million at both September 30, 2025 and June 30, 2025. As a percentage of nonperforming loans, the allowance for credit losses on loans was 224.67% at September 30, 2025 compared to 187.57% at June 30, 2025.
Our estimates and assumptions used in the determination of the adequacy of the allowance could be proven incorrect in the future, and the actual amount of future provisions may exceed the amount of past provisions. Any such increase in future provisions that may be required may adversely impact our financial condition and results of operations.
27
Non-interest income
.
Non-interest income information is as follows.
Three Months Ended
September 30,
Change
2025
2024
Amount
Percent
(Dollars in thousands)
Customer service fees
$
191
$
188
$
3
1.7
%
Bank owned life insurance
119
117
2
1.4
%
Gain on marketable equity securities, net
—
171
(171
)
(100.0
)%
Loss on the sale of securities available for sale
(317
)
—
(317
)
—
Miscellaneous
59
25
34
135.1
%
Total non-interest income
$
52
$
501
$
(449
)
(89.6
)%
The decrease in gain on marketable equity securities, net, was due to the liquidation of the equities portfolio in June 2025. In addition, in the current quarter the Company recognized $317,000 loss in sale of securities available for sale, which were replaced with higher yielding investment securities as part of the Company’s investment portfolio restructuring.
Non-interest Expense.
Non-interest expense information is as follows.
Three Months Ended
September 30,
Change
2025
2024
Amount
Percent
(Dollars in thousands)
Salaries and employee benefits
$
2,697
$
2,263
$
434
19.2
%
Occupancy and equipment, net
396
377
19
5.1
%
Data processing
408
347
61
17.6
%
Deposit insurance
210
221
(11
)
(5.0
)%
Marketing and advertising
184
96
88
91.7
%
Other
900
633
267
42.1
%
Total non-interest expense
$
4,795
$
3,937
$
858
21.8
%
The increase in salaries and employee benefits was due to the addition of key finance staff, and higher expenses related to our health plan, while the increase in deposit insurance expense was due to an increase in FDIC insurance rates and our higher deposit levels. Increases in marketing expense were due to the launch of a new website as well as a new investor relations site.
Income Taxes.
Income tax expense increased to $356,000 for the three months ended September 30, 2025, compared to a benefit of $198,000 for the three months ended September 30, 2024. The effective tax rates were 27.0% and (23.9%) for the three months ended September 30, 2025 and 2024, respectively, as we had lower levels of taxable income during the 2024 period.
28
Average Balances and Yields
The following tables set forth average balance sheets, average yields and costs, and certain other information for the periods indicated. No tax-equivalent yield adjustments have been made, as the effects would be immaterial. All average balances are daily average balances, and the average balance of loans includes non-accrual loans. The yields set forth below include the effect of deferred fees/costs, discounts, and premiums that are amortized or accreted to interest income. Deferred loan fees for the three months ended September 30, 2025 and 2024 were not material.
For the Three Months Ended September 30,
2025
2024
Average
Outstanding
Balance
Interest
Average
Yield/Rate (1)
Average
Outstanding
Balance
Interest
Average
Yield/Rate (1)
(Dollars in thousands)
Interest-earning assets:
Loans
$
775,015
$
10,402
5.37
%
$
700,691
$
9,015
5.15
%
Securities
109,870
1,113
4.05
%
85,575
898
4.20
%
Interest-bearing deposits
36,551
422
4.62
%
33,057
318
3.85
%
Total interest-earning assets
921,436
11,937
5.18
%
819,323
10,231
4.99
%
Non-interest-earning assets
43,149
27,443
Allowance for credit losses on loans
(4,180
)
(3,430
)
Total assets
$
960,405
$
843,336
Interest-bearing liabilities:
NOW and demand deposits
$
55,599
4
0.03
%
$
60,827
123
0.81
%
Savings accounts
159,587
916
2.30
%
167,105
1,071
2.56
%
Money market accounts
133,819
1,102
3.29
%
89,889
818
3.64
%
Certificates of deposit
280,536
2,648
3.77
%
270,327
2,997
4.44
%
Total interest-bearing deposits
629,541
4,670
2.97
%
588,148
5,009
3.41
%
Borrowings
141,294
1,526
4.32
%
128,009
1,454
4.54
%
Total interest-bearing liabilities
770,835
6,196
3.22
%
716,157
6,463
3.61
%
Other non-interest-bearing liabilities
73,546
47,410
Total liabilities
844,381
763,567
Stockholders' equity
116,024
79,769
Total liabilities and stockholders' equity
$
960,405
$
843,336
Net interest income
$
5,741
$
3,768
Net interest rate spread (2)
1.96
%
1.38
%
Net interest-earning assets (3)
$
150,601
$
103,166
Net interest margin (4)
2.49
%
1.84
%
Average interest-earning assets to
average interest-bearing liabilities
119.54
%
114.41
%
(1) Annualized.
(2) Net interest rate spread represents the difference between the weighted average yield on interest-earning assets and the weighted average rate of interest-bearing liabilities.
(3) Net interest-earning assets represent total interest-earning assets less total interest-bearing liabilities.
(4) Net interest margin represents net interest income divided by average total interest-earning assets.
29
Rate/Volume Analysis
The following table presents the effects of changing rates and volumes on our net interest income for the periods indicated. The rate column shows the effects attributable to changes in rate (changes in rate multiplied by prior volume). The volume column shows the effects attributable to changes in volume (changes in volume multiplied by prior rate). The total column represents the sum of the prior columns. For purposes of this table, changes attributable to both rate and volume, which cannot be segregated, have been allocated proportionately based on the changes due to rate and the changes due to volume. There were no out-of-period items or adjustments required to be excluded from the table below.
Three Months Ended
September 30, 2025 vs. 2024
Increase (Decrease) Due to
Total
Increase
Volume
Rate
(Decrease)
(In thousands)
Interest-earning assets:
Loans
$
998
$
389
$
1,387
Securities
255
(40
)
215
Interest-bearing deposits and other
33
71
104
Total interest-earning assets
1,286
420
1,706
Interest-bearing liabilities:
NOW and demand deposits
(41
)
(77
)
(118
)
Savings accounts
(47
)
(107
)
(154
)
Money market accounts
362
(78
)
284
Certificates of deposit
113
(463
)
(350
)
Borrowings
143
(72
)
71
Total interest-bearing liabilities
530
(797
)
(267
)
Change in net interest income
$
756
$
1,217
$
1,973
Management of Market Risk
General
. The majority of our assets and liabilities are monetary in nature. Consequently, our most significant form of market risk is interest rate risk. Our assets, consisting primarily of mortgage loans, have longer maturities than our liabilities, consisting primarily of deposits. As a result, a principal part of our business strategy is to manage the impact of changes in market interest rates on net interest income and capital. We have an Asset/Liability Committee that 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 guidelines approved by the board of trustees. The Committee establishes and monitors the volume, maturities, pricing and mix of assets and funding sources with the objective of managing assets and funding sources to provide results that are consistent with liquidity, growth, risk limits and profitability goals.
As part of our ongoing asset-liability management, we use the following strategies to manage our interest rate risk:
•
emphasizing the marketing of our non-interest-bearing demand, money market, savings and demand accounts;
•
investing in short- to medium-term repricing and/or maturing investment securities whenever the market allows;
•
maintaining capital levels that exceed those required for well-capitalized status under federal banking regulations;
•
maintaining prudent levels of liquidity;
•
managing our utilization of wholesale funding with borrowings and brokered deposits; and
•
continuing to diversify our loan portfolio by adding more commercial-related loans and consumer loans, which typically have shorter maturities.
30
We do not engage in hedging activities, such as engaging in futures, options or interest rate swap transactions, nor invest in high-risk mortgage derivatives, such as collateralized mortgage obligation residual interests, real estate mortgage investment conduit residual interests or stripped mortgage-backed securities.
Net Interest Income.
We analyze our sensitivity to changes in interest rates through a net interest income model. Net interest income is the difference between the interest income we earn on our interest-earning assets, such as loans and securities, and the interest we pay on our interest-bearing liabilities, such as deposits and borrowings. We estimate what our net interest income would be for a 12-month period. We then calculate what the net interest income would be for the same period under the assumptions that the United States Treasury yield curve increases or decreases instantaneously by up to 300 basis points, with changes in interest rates representing immediate and permanent, parallel shifts in the yield curve. A basis point equals one-hundredth of one percent, and 100 basis points equals one percent. An increase in interest rates from 2% to 3% would mean, for example, a 100 basis point increase in the “Change in Interest Rates” column below.
The tables below sets forth, as of September 30, 2025 and June 30, 2025, the calculation of the estimated changes in our net interest income that would result from the designated instantaneous changes in the United States Treasury yield curve.
At September 30, 2025
Change in Interest Rates
(Basis Points) (1)
Net Interest Income
Year 1 Forecast
Year 1 Change
From Level
(Dollars in thousands)
+300
$
18,522
(26.5
)%
+200
20,923
(16.9
)%
+100
23,224
(7.8
)%
Level
25,193
—
-100
26,207
4.0
%
-200
26,823
6.5
%
-300
27,269
8.2
%
(1)
Assumes an instantaneous uniform change in interest rates at all maturities.
At June 30, 2025
Change in Interest Rates
(Basis Points) (1)
Net Interest Income
Year 1 Forecast
Year 1 Change
From Level
(Dollars in thousands)
+300
$
17,784
(22.6
)%
+200
19,687
(14.3
)%
+100
21,522
(6.3
)%
Level
22,972
—
-100
23,403
1.9
%
-200
23,363
1.7
%
-300
23,098
0.6
%
(1)
Assumes an instantaneous uniform change in interest rates at all maturities.
The tables above indicate that at September 30, 2025, in the event of an instantaneous parallel 200 basis point increase in interest rates, we would have experienced a 16.9% decrease in net interest income, and in the event of an instantaneous parallel 200 basis point decrease in interest rates, we would have experienced a 6.5% increase in net interest income and at June 30, 2025, in the event of an instantaneous parallel 200 basis point increase in interest rates, we would have experienced a 14.3% decrease in net interest income, and in the event of an instantaneous parallel 200 basis point decrease in interest rates, we would have experienced a 1.7% increase in net interest income.
31
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 or decreases instantaneously by up to 300 basis points, with changes in interest rates representing immediate and permanent, parallel shifts in the yield curve.
The tables below sets forth, as of September 30, 2025 and June 30, 2025, the calculation of the estimated changes in our EVE that would result from the designated immediate changes in the United States Treasury yield curve.
At September 30, 2025
Estimated Increase (Decrease) in
EVE
EVE as a Percentage of Present
Value of Assets (3)
Change in Interest
Rates (Basis Points)(1)
Estimated
EVE (2)
Amount
Percent
EVE
Ratio (4)
Increase
(Decrease)
(Percent)
(Dollars in thousands)
+300
$
77,240
$
(43,991
)
(36.3
)%
8.6
%
(30.7
)%
+200
93,671
(27,560
)
(22.7
)%
10.1
%
(18.3
)%
+100
108,995
(12,236
)
(10.1
)%
11.5
%
(7.6
)%
—
121,231
—
—
12.4
%
—
-100
131,117
9,887
8.2
%
13.0
%
5.0
%
-200
132,147
10,917
9.0
%
12.8
%
3.5
%
-300
132,564
11,333
9.3
%
12.6
%
1.8
%
(1)
Assumes an immediate uniform change in interest rates at all maturities.
(2)
EVE is the discounted present value of expected cash flows from assets, liabilities and off-balance sheet contracts.
(3)
Present value of assets represents the discounted present value of incoming cash flows on interest-earning assets.
(4)
EVE Ratio represents EVE divided by the present value of assets.
At June 30, 2025
Estimated Increase (Decrease) in
EVE
EVE as a Percentage of Present
Value of Assets (3)
Change in Interest
Rates (Basis Points)
(1)
Estimated.
EVE (2)
Amount
Percent
EVE
Ratio (4)
Increase
(Decrease)
(Percent)
(Dollars in thousands)
+300
$
74,858
$
(41,822
)
(35.8
)%
8.9
%
(30.1
)%
+200
91,058
(25,622
)
(22.0
)%
10.5
%
(17.4
)%
+100
105,459
(11,221
)
(9.6
)%
11.8
%
(7.1
)%
—
116,680
—
—
12.7
%
—
-100
125,288
8,608
7.4
%
13.3
%
4.2
%
-200
124,997
8,317
7.1
%
13.0
%
1.7
%
-300
123,747
7,067
6.1
%
12.6
%
(1.3
)%
(1)
Assumes an immediate uniform change in interest rates at all maturities.
(2)
EVE is the discounted present value of expected cash flows from assets, liabilities and off-balance sheet contracts.
(3)
Present value of assets represents the discounted present value of incoming cash flows on interest-earning assets.
(4)
EVE Ratio represents EVE divided by the present value of assets.
The tables above indicate that at September 30, 2025, in the event of an instantaneous parallel 200 basis point increase in interest rates, we would have experienced a 22.7% decrease in EVE, and in the event of an instantaneous parallel 200 basis point decrease in interest rates, we would have experienced a 9.0% increase in EVE, and at June 30, 2025, in the event of an instantaneous parallel 200 basis point increase in interest rates, we would have experienced a 22.0% decrease in EVE, and in
32
the event of an instantaneous parallel 200 basis point decrease in interest rates, we would have experienced a 7.1% increase in EVE.
At September 30, 2025, all estimated changes described above with respect to net interest income and EVE with respect to potential increases in market interest rates were not in compliance with the current policy limits established by the board of trustees. We have determined that selling assets to comply with our internal policies would result in a significant loss that would deplete capital and, as a result, restrict future growth, while providing limited benefit during a period of declining market interest rates, as has begun in the latter half of 2024.
Certain shortcomings are inherent in the methodologies used in the above interest rate risk measurements. Modeling changes require making certain assumptions that may or may not reflect the manner in which actual yields and costs respond to changes in market interest rates. In this regard, the changes in net interest income and net economic value tables presented assume that the composition of our interest-sensitive assets and liabilities existing at the beginning of a period remains constant over the period being measured and assumes that a particular change in interest rates is reflected uniformly across the yield curve regardless of the duration or repricing of specific assets and liabilities. Accordingly, although the tables provide an indication of our interest rate risk exposure at a particular point in time, such measurements are not intended to and do not provide a precise forecast of the effect of changes in market interest rates, and actual results may differ. Furthermore, although certain assets and liabilities may have similar maturities or periods to repricing, they may react in different degrees to changes in market interest rates. Additionally, certain assets, such as adjustable-rate loans, have features that restrict changes in interest rates both on a short-term basis and over the life of the asset. In the event of changes in interest rates, prepayment and early withdrawal levels would likely deviate significantly from those assumed in calculating the tables.
Interest rate risk calculations also may not reflect the fair values of financial instruments. For example, decreases in market interest rates can increase the fair values of our loans, deposits and borrowings.
Liquidity and Capital Resources
Liquidity is our ability to meet current and future 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 and calls of securities. We also have the ability to borrow from the Federal Home Loan Bank of Boston. At September 30, 2025, we had $164.0 million outstanding in advances from the Federal Home Loan Bank of Boston. At September 30, 2025, we had the ability to borrow $147.3 million in additional Federal Home Loan Bank of Boston advances. At September 30, 2025, we had a $5.3 million line of credit with the Federal Home Loan Bank of Boston, which was not drawn at September 30, 2025. Additionally, at September 30, 2025, we had a $66.7 million secured line of credit through the Federal Reserve Borrower in Custody program. At that date, there were no amounts outstanding.
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. Our most liquid assets are cash and cash equivalents. The levels of these assets depend on our operating, financing, lending, and investing activities during any given period.
We test the level of our liquidity monthly and quarterly. Our monthly liquidity test is the ratio of basic surplus (deficit) divided by total assets, with basic surplus/deficit consisting of liquid assets (cash and due from banks, federal funds sold, securities available for sale, loans held for sale, total equities and securities maturities and payment) divided by investment commitments (loan commitments, 10% of certificates of deposit maturing within 30 days and 5% of non-maturing deposits). Our key quarterly test is the Primary Liquidity ratio, which we calculate as total liquid assets (cash and due from banks, federal funds sold and all securities that are not pledged to secure borrowing) as a percentage of total assets.
We seek to maintain a minimum monthly liquidity ratio of 4% to 6% of assets, and a minimum quarterly Primary Liquidity ratio of 10%. At September 30, 2025 and June 30, 2025, we were in compliance with both of these guidelines.
Our cash flows are comprised of three primary classifications: cash flows from operating activities, investing activities, and financing activities. Net cash provided by (used in) operating activities was $1.4 million and ($334,000) for the three months ended September 30, 2025 and 2024, respectively. Net cash used by investing activities, which consists primarily of disbursements for loan originations and the purchase of investment securities, offset by principal collections on loans and proceeds from maturing securities and pay downs on securities, was $53.3 million and $27.1 million for the three months
33
ended September 30, 2025 and 2024, respectively. Net cash provided by financing activities was $54.4 million and $20.5 million for the three months ended September 30, 2025 and 2024, respectively.
We are committed to maintaining a strong liquidity position. We monitor our liquidity position on a daily basis. We anticipate that we will have sufficient funds to meet our current funding commitments based on our current strategy to increase loans with an increase in core deposits and the continued use of Federal Home Loan Bank of Boston advances, as needed.
At September 30, 2025, Winchester Savings Bank exceeded its applicable regulatory capital requirement, and was considered “well capitalized” under regulatory guidelines.
The net proceeds from the offering significantly increased our liquidity and capital resources. Over time, the initial level of liquidity will be reduced as net offering proceeds 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, as well as other factors associated with the offering, our return on equity may remain lower in the immediate future.
Recent Accounting Pronouncements
There are no recent accounting pronouncements issued, but not yet adopted, that are expected to have a significant impact on our financial statements. As an emerging growth company, we have elected to use the extended transition period to delay the adoption of new or re-issued accounting pronouncements applicable to public companies until such pronouncements are applicable to private companies.
Impact of Inflation and Changing Prices
The financial statements and related data presented herein have been prepared in accordance with GAAP, which requires 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.
Item 3. Quantitative and
Qualitative Disclosures About Market Risk.
See Item 2, above.
Item 4. Controls an
d Procedures.
Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we have evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by the quarterly report. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that, as of the end of the period covered by this report, our disclosure controls and procedures are effective to ensure that information required to be disclosed in the reports that we file or submit under the Securities and Exchange Act of 1934 is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission’s rules and forms.
There has been no change in our internal control over financial reporting during the most recent fiscal quarter that has materially affected or is reasonably likely to materially affect our internal control over financial reporting.
34
PART II—OTHE
R INFORMATION
Item 1. Legal Pro
ceedings.
We are not involved in any pending legal proceedings as a plaintiff or defendant other than routine legal proceedings occurring in the ordinary course of business, and at September 30, 2025, we were not involved in any legal proceedings, the outcome of which would be material to our financial condition or results of operations.
Item 1A.
Risk Factors.
Not applicable, as the Registrant is a smaller reporting company.
Item 2. Unregistered Sales o
f Equity Securities and Use of Proceeds.
a)
There were no sales of unregistered securities during the period covered by this Report.
b)
Not applicable.
c)
There were no issuer repurchases of securities during the period covered by this Report.
Item 3. Defaults Upon
Senior Securities.
Not applicable.
Item 4. Min
e Safety Disclosures.
Not applicable.
Item 5. Ot
her Information.
None.
35
Ite
m 6. Exhibits.
Furnish the exhibits required by Item 601 of Regulation S-K (§ 229.601 of this chapter).
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* Filed herewith.
36
SIG
NATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
Winchester Bancorp, Inc.
Date: November 12, 2025
By:
/s/ John A. Carroll
John A. Carroll
President and Chief Executive Officer
Date: November 12, 2025
By:
/s/ Elda Heller
Elda Heller
Executive Vice President Chief Financial Officer and Treasurer
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