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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

☒Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended September 30, 2024

☐Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from to

Commission File No. 000-56702

Monroe Federal Bancorp, Inc.

(Exact Name of Registrant as Specified in Its Charter)


Maryland	99-3587922
(State or Other Jurisdiction of Incorporation or Organization)	(I.R.S. Employer Identification Number)

24 East Main Street, Tipp City, Ohio	45371
(Address of Principal Executive Offices)	(Zip Code)

(937) 667-8461

(Registrant’s Telephone Number, Including Area Code)

N/A

(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading symbol(s)	Name of Each Exchange on Which Registered

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 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 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 Act). YES ☐ NO ☒

526,438 shares of the registrant’s common stock, par value $0.01 per share, were issued and outstanding as of November 13, 2024.

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Monroe Federal Bancorp, Inc.

Form 10-Q

Index


		Page

Part I. – Financial Information		4

Item 1.	Financial Statements	4

	Balance Sheets as of September 30, 2024 (unaudited) and March 31, 2024	4

	Statements of Operations for the Three and Six Months Ended September 30, 2024 and 2023 (unaudited)	5

	Statements of Comprehensive Income (Loss) for the Three and Six Months Ended September 30, 2024 and 2023 (unaudited)	6

	Statements of Changes in Equity for the Three and Six Months Ended September 30, 2024 and 2023 (unaudited)	7

	Statements of Cash Flows for the Six Months Ended September 30, 2024 and 2023 (unaudited)	8

	Notes to Financial Statements (unaudited)	9

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	35

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	49

Item 4.	Controls and Procedures	49

Part II. – Other Information		50

Item 1.	Legal Proceedings	50

Item 1A.	Risk Factors	50

Item 2.	Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities	50

Item 3.	Defaults Upon Senior Securities	50

Item 4.	Mine Safety Disclosures	50

Item 5.	Other Information	50

Item 6.	Exhibits	50

	Signature Page	52

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EXPLANATORY NOTE

Monroe Federal Bancorp, Inc. (the “Company,” “we” or “us”) was incorporated on May 21, 2024, to serve as the savings and loan holding company for Monroe Federal Savings and Loan Association (“Monroe Federal” or the “Association”) upon the consummation of the Association’s conversion from the mutual form of organization to the stock form of organization. As of September 30, 2024, the conversion had not yet been consummated, and the Company had no assets or liabilities and had not conducted any business activities other than organizational activities. Accordingly, the financial statements and related notes and the other financial information contained in this report relate primarily to the Association. The conversion was consummated effective October 23, 2024.

The unaudited financial statements and other financial information contained in this report should be read in conjunction with the Association’s audited financial statements and related notes as of and for each of the years ended March 31, 2024 and 2023, contained in the Company’s definitive prospectus dated August 9, 2024, filed with the Securities and Exchange Commission.

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Part I — Financial Information

Item 1. Financial Statements

MONROE FEDERAL SAVINGS & LOAN ASSOCIATION

Balance Sheets


	September 30,		March 31,
		2024		2024
		(Unaudited)
Assets
Cash and due from banks	$	1,808,600	$	2,981,089
Interest-bearing deposits in other financial institutions		236,195		7,529,609
Federal funds sold		—		107,000
Cash and cash equivalents		2,044,795		10,617,698

Available-for-sale securities		24,706,332		25,181,361
Loans receivable		109,453,872		108,724,627
Allowance for credit losses		(875,318)		(855,455)
Net loans		108,578,554		107,869,172

Premises and equipment		5,236,245		5,339,998
Restricted stock		901,700		515,000
Bank owned life insurance		3,546,281		3,491,015
Accrued interest receivable		492,335		483,027
Net deferred federal income taxes		1,109,042		1,328,523
Other assets		1,293,781		511,468
Total assets	$	147,909,065	$	155,337,262

Liabilities and Equity
Liabilities
Deposits
Demand	$	40,054,572	$	48,459,382
Savings and money market		49,935,024		51,227,399
Time		34,367,392		42,405,531
Total deposits		124,356,988		142,092,312
Advances from the Federal Home Loan Bank		9,925,000		3,000,000
Stock subscription proceeds in escrow		3,099,058		—
Advances by borrowers for taxes and insurance		295,000		329,730
Directors plan liability		581,721		762,416
Accrued interest payable and other liabilities		567,155		588,099
Total liabilities		138,824,922		146,772,557

Equity
Retained earnings		12,715,954		12,917,702
Accumulated other comprehensive loss		(3,631,811)		(4,352,997)
Total equity		9,084,143		8,564,705
Total liabilities and equity	$	147,909,065	$	155,337,262

The accompanying notes are an integral part of these financial statements.

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MONROE FEDERAL SAVINGS & LOAN ASSOCIATION

Statements of Operations

(Unaudited)


	Three Months Ended				Six Months Ended
	September 30,				September 30,
	2024		2023		2024		2023
Interest income
Loans	$	1,314,949	$	1,252,620	$	2,590,593	$	2,468,247
Investment securities		125,394		134,540		250,268		271,399
Interest-bearing deposits and other		23,786		40,762		112,192		86,302

Total interest income		1,464,129		1,427,922		2,953,053		2,825,948

Interest expense
Deposits		468,255		380,584		934,367		702,309
Borrowings		151,930		127,259		192,831		236,670

Total interest expense		620,185		507,843		1,127,198		938,979

Net interest income		843,944		920,079		1,825,855		1,886,969

Provision for (recovery of) credit losses		(14,724)		(6,768)		17,225		(6,768)

Net interest income after provision for (recovery of) credit losses		858,668		926,847		1,808,630		1,893,737

Noninterest income
Service fees on deposits		42,017		44,275		88,526		88,477
Late charges and fees on loans		3,181		2,137		4,863		4,739
Loan servicing fees		4,081		3,590		8,140		7,110
Increase in cash surrender value of bank owned life insurance		28,064		25,132		55,266		49,340
Other income		7,595		11,550		16,289		23,755

Total noninterest income		84,938		86,684		173,084		173,421

Noninterest expense
Salaries and employee benefits		552,845		485,798		1,104,586		1,010,928
Directors fees		30,500		30,197		61,000		59,897
Occupancy and equipment		134,250		132,850		276,639		265,315
Data processing fees		136,688		131,324		261,335		260,611
Franchise taxes		18,000		15,876		34,916		40,626
FDIC insurance premiums		19,494		21,301		45,136		38,602
Professional services		40,767		38,590		213,876		80,949
Advertising		17,093		22,279		42,983		50,195
Other		113,753		113,558		219,667		229,961

Total noninterest expense		1,063,390		991,773		2,260,138		2,037,084

(Loss) Income before income taxes		(119,784)		21,758		(278,424)		30,074

Provision (benefit) for income taxes		(33,866)		(8,644)		(76,676)		(20,013)

Net (loss) income	$	(85,918)	$	30,402	$	(201,748)	$	50,087

The accompanying notes are an integral part of these financial statements.

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MONROE FEDERAL SAVINGS LOAN ASSOCIATION

Statements of Comprehensive Income (Loss)

(Unaudited)


	Three Months Ended				Six Months Ended
	September 30,				September 30,
	2024		2023		2024		2023
Net (loss) income	$	(85,918)	$	30,402	$	(201,748)	$	50,087

Other comprehensive income (loss):
Net unrealized gains (losses) on available-for-sale securities		1,051,592		(1,241,363)		912,894		(1,712,076)

Tax (expense) benefit		(220,834)		260,687		(191,708)		359,536

Other comprehensive income (loss)		830,758		(980,676)		721,186		(1,352,540)

Comprehensive income (loss)	$	744,840	$	(950,274)	$	519,438	$	(1,302,453)

The accompanying notes are an integral part of these financial statements.

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MONROE FEDERAL SAVINGS & LOAN ASSOCIATION

Statements of Changes in Equity

(Unaudited)


			Accumulated
			Other
	Retained		Comprehensive
For the three months ended September 30, 2023 and September 30, 2024	Earnings		Income (Loss)		Total
Balance at June 30, 2023	$	12,877,618	$	(4,729,530)	$	8,148,088

Net income		30,402		—		30,402

Other comprehensive loss		—		(980,676)		(980,676)

Balance at September 30, 2023	$	12,908,020	$	(5,710,206)	$	7,197,814

Balance at June 30, 2024	$	12,801,872	$	(4,462,569)	$	8,339,303

Net loss		(85,918)		—		(85,918)

Other comprehensive income		—		830,758		830,758

Balance at September 30, 2024	$	12,715,954	$	(3,631,811)	$	9,084,143

For the six months ended September 30, 2023 and September 30, 2024
Balance at April 1, 2023	$	13,143,241	$	(4,357,666)	$	8,785,575

Effect of change in accounting principle - ASC 326		(285,308)				(285,308)

Net income		50,087		—		50,087

Other comprehensive loss		—		(1,352,540)		(1,352,540)

Balance at September 30, 2023	$	12,908,020	$	(5,710,206)	$	7,197,814

Balance at April 1, 2024	$	12,917,702	$	(4,352,997)	$	8,564,705

Net loss		(201,748)		—		(201,748)

Other comprehensive income		—		721,186		721,186

Balance at September 30, 2024	$	12,715,954	$	(3,631,811)	$	9,084,143

The accompanying notes are an integral part of these financial statements.

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MONROE FEDERAL SAVINGS & LOAN ASSOCIATION

Statements of Cash Flows

(Unaudited)


	Six Months Ended
	September 30,
	2024		2023
Operating Activities
Net (loss) income	$	(201,748)	$	50,087
Items not requiring (providing) cash:
Depreciation and amortization		128,803		125,923
Amortization of premiums and discounts		79,595		90,356
Amortization of deferred loan fees		(15,243)		(47,601)
Provision (Benefit) for deferred income taxes		27,773		(21,537)
Provision for (recovery of) credit losses		17,225		(6,768)
Increase in cash surrender value of bank owned life insurance		(55,266)		(49,340)
Changes in:
Accrued interest receivable		(9,308)		(29,405)
Other assets		(782,313)		18,516
Accrued interest payable and other liabilities		(201,345)		(562,029)

Net cash used in operating activities		(1,011,827)		(431,798)

Investing Activities
Proceeds from calls, maturities and paydowns of available-for-sale securities		1,308,328		1,205,124
Net change in loans		(711,658)		(1,872,788)
Purchase of premises and equipment		(25,050)		(93,936)
Purchase of restricted stock		(386,700)		(186,000)
Proceeds from redemption of restricted stock		—		194,400

Net cash provided by (used in) investing activities		184,920		(753,200)

Financing Activities
Net (decrease) increase in deposit accounts		(17,735,324)		3,812,602
Net decrease in federal funds purchased		—		(739,000)
Proceeds from Federal Home Loan Bank advances		27,349,000		13,775,000
Repayment of Federal Home Loan Bank advances		(20,424,000)		(14,750,000)
Proceeds from stock subscriptions in escrow		3,099,058		—
Increase in advances from borrowers for taxes and insurance		(34,730)		(8,632)

Net cash (used in) provided by financing activities		(7,745,996)		2,089,970

(Decrease) Increase in Cash and Cash Equivalents		(8,572,903)		904,972

Cash and Cash Equivalents, Beginning of Period		10,617,698		2,927,788

Cash and Cash Equivalents, End of Period	$	2,044,795	$	3,832,760

Supplemental Disclosure of Cash Flow Information
Cash paid during the period for:
Interest on deposits and borrowings	$	591,598	$	498,699
Income taxes paid		—		45,000

Supplemental Disclosure of Noncash Investing Activities
Transfers from loans to assets acquired through foreclosure	$	—	$	12,481

The accompanying notes are an integral part of these financial statements.

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Monroe Federal Savings and Loan Association

Notes to Financial Statements

September 30, 2024 and 2023

Note 1:Nature of Operations and Summary of Significant Accounting Policies

Nature of Operations and Basis of Presentation

Monroe Federal Savings and Loan Association (the “Company”) is a federally chartered mutual thrift engaged primarily in the business of providing a variety of deposit and lending services to individual customers in western Ohio. Its primary deposit products are checking, savings, and term certificate accounts, and its primary lending products are residential and commercial mortgages, commercial, home equity lines of credit and installment loans. Its operations are conducted through its four office locations in Tipp City, Vandalia and Dayton, Ohio. The Company faces competition from other financial institutions and is subject to the regulation of certain federal agencies and undergoes periodic examinations by those regulatory authorities.

The financial statements included herein as of September 30, 2024, and for the interim three- and six-month periods ended September 30, 2024 and 2023 are unaudited. The unaudited interim financial statements and the notes thereto have been prepared in accordance with generally accepted accounting principles in the United States (“GAAP”) and in the opinion of management, contains all normal recurring adjustments necessary to present fairly the financial position, results of operations, changes in equity and cash flows as of and for the periods presented. Such adjustments are the only adjustments contained in the financial statements The results of operations for the three- and six – months ended September 30, 2024 are not necessarily indicative of the results of operations for the full fiscal year.

The accompanying unaudited financial statements and related notes should be read in conjunction with the audited annual financial statements and the notes thereto included in the prospectus dated August 9, 2024, as filed by Monroe Federal Bancorp, Inc. with the Securities and Exchange Commission on August 19, 2024.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Material estimates that are particularly susceptible to significant change relate to the determination of the allowance for credit losses, valuation of real estate acquired in connection with foreclosures or in satisfaction of loans, valuation of deferred tax assets and fair values of financial instruments.

Allowance for Credit Losses

The allowance for credit losses (ACL) is a valuation allowance for expected credit losses. The allowance for credit losses is established through a provision for credit losses charged to income. Loan losses are charged against the allowance when management believes the uncollectibility of a loan balance is confirmed. Subsequent recoveries, if any, are credited to the allowance.

The Company adopted Accounting Standards Update (ASU) No. 2016-13 Financial Instruments—Credit Losses (Topic 326) using the modified retrospective method for financial assets measured at amortized cost and off-balance-sheet credit exposures. ASC 326 replaced the incurred loss impairment methodology with a new “current expected credit loss” (CECL) methodology that reflects expected credit losses over the lives of the credit instruments and requires consideration of a broader range of information to estimate credit losses. ASC 326 requires an estimate of all expected credit losses for financial assets measured at amortized cost, including loans and held-to-maturity debt securities, based on historical experience, current conditions, and reasonable and supportable forecasts.

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Monroe Federal Savings and Loan Association

Notes to Financial Statements

September 30, 2024 and 2023

Available-for-sale securities

ASC 326 also made changes to the accounting for credit losses on available-for-sale debt securities. For available for sale securities in an unrealized loss position, the Company first assesses whether it intends to sell, or it is more likely than not that it will be required to sell the security before recovery of its amortized cost basis. If either of the criteria regarding intent or requirement to sell is met, the security’s amortized cost basis is written down to fair value through income.

For securities available for sale that do not meet the above criteria, the Company evaluates whether the decline in fair value has resulted from credit losses or other factors. In making this assessment, the Company considers the extent to which fair value is less than amortized cost and adverse conditions related to the security, among other factors. If this assessment indicates that a credit loss exists, the present value of cash flows expected to be collected from the security are compared to the amortized cost basis of the security.

If the present value of the cash flows expected to be collected is less than the amortized cost basis, a credit loss exists and an allowance for credit losses is recorded for the credit loss, limited by the amount that the fair value is less than the amortized cost. Any impairment that has not been recorded through an allowance for credit losses is recognized in other comprehensive income, net of tax. The Company elected to use zero loss estimates for securities issued by U.S. government entities and agencies. These securities are either explicitly or implicitly guaranteed by the U.S. government, are highly rated by major agencies and have a long history of no credit losses.

Loans

The ACL is a valuation allowance that is deducted from the loans’ amortized cost basis to present the net amount expected to be collected on the loans. Management’s determination of the adequacy of the ACL is based on the assessment of the expected credit losses on loans over the expected life of the loan. The ACL is increased by provision expense and decreased by charge-offs, net of recoveries of amounts previously charged off and expected to be charged off. Accrued interest receivable on loans totaled $360,114 and $348,007 at September 30, 2024 and March 31, 2024, respectively. The Company made the policy election to exclude accrued interest receivable on loans from the estimate of credit losses.

Management estimates the ACL balance using relevant available information from both internal and external sources, relating to past events, current conditions and reasonable and supportable forecasts. Historical credit loss experience of the Company is paired with economic forecasts to provide the basis for the quantitatively modeled estimates of expected credit losses. The Company adjusts its quantitative model, as necessary, to reflect conditions not already considered by the quantitative model. These adjustments are commonly known as the qualitative factors.

The ACL is measured on a collective (pool) basis when similar risk characteristics exist. The Company uses publicly available data, based on regulatory filings of larger banks, to derive initial proxy expected lifetime loss rates. Reasonable and supportable forecasts are incorporated into the development of these proxy loss rates, which generally revert back to historical and qualitative loss considerations after 12-24 months. The loss rates are adjusted, if necessary, based on management’s assessment of certain criteria, including economic and business conditions, that may affect the Company’s loan portfolio, to arrive at factors that best represent the estimated credit risk in the loan portfolio.

Loans that do not share risk characteristics are evaluated on an individual basis. Loans evaluated individually are not also included in the collective evaluation. When management determines that foreclosure is probable, expected credit losses are based on the fair value of the collateral at the reporting date, adjusted for selling costs as appropriate.

Expected credit losses are estimated over the contractual term of the loans, adjusted for expected prepayments when appropriate. The contractual term excludes expected extensions, renewals and modifications unless either of the following applies: management has a reasonable expectation at the reporting date that a loan modification will be

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Monroe Federal Savings and Loan Association

Notes to Financial Statements

September 30, 2024 and 2023

executed with an individual borrower or the extension or renewal options are included in the original or modified contract at the reporting date and are not unconditionally cancellable by the Company.

A loan for which the terms have been modified, resulting in a concession and for which the borrower is experiencing financial difficulties, is considered within the determination of the ACL using the same method as all other loans held for investment, except when the value of a concession cannot be measured using a method other than the discounted cash flow method. When the value of a concession is measured using the discounted cash flow method, the ACL is determined by discounting the expected future cash flows at the original interest rate of the loan.

Unfunded Commitments

The Company estimates expected credit losses over the contractual period in which the Company is exposed to credit risk via a contractual obligation to extend credit, unless that obligation is unconditionally cancellable by the Company. The ACL on unfunded commitments is adjusted through the provision for credit loss expense. The estimate includes consideration of the likelihood that funding will occur and an estimate of expected credit losses on commitments expected to be funded over its estimated life consistent with the related ACL methodology. The ACL on unfunded commitments totaled $55,797 and $56,091 at September 30, 2024 and March 31, 2024 , respectively, and is included in other liabilities on the balance sheet.

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Monroe Federal Savings and Loan Association

Notes to Financial Statements

September 30, 2024 and 2023

The following table illustrates the impact of adopting ASC 326:


	April 1, 2023
			Adoption
	Pre-Adoption		Impact		As Reported
Assets
Real estate loans:
Residential	$	360,908	$	11,949	$	372,857
Multi-family		13,350		(13,350)		—
Commercial		166,345		137,324		303,669
Construction and land		43,631		94,031		137,662
Home equity line of credit (HELOC)		16,034		(16,034)		—
Commercial and industrial		34,110		23,741		57,851
Consumer		7,958		24,833		32,791
Total ACL on loans		642,336		262,494		904,830
Liabilities
ACL for off-balance sheet exposure		—		98,654		98,654
	$	642,336	$	361,148	$	1,003,484

The Company has evaluated multi-family real estate loans and home equity line of credit loans within, and under similar risk characteristics as, the residential loan category, upon adoption of the CECL methodology.

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Monroe Federal Savings and Loan Association

Notes to Financial Statements

September 30, 2024 and 2023

Note 2:Investment Securities

The amortized cost and fair values, together with gross unrealized gains and losses on securities are as follows:


			Gross		Gross
	Amortized		Unrealized		Unrealized		Fair
	Cost		Gains		Losses		Value
Available-for-sale Securities:
September 30, 2024
U.S. Government agencies	$	3,250,868	$	—	$	(467,549)	$	2,783,319
Mortgage-backed Government Sponsored Enterprises (GSEs)		12,121,645		3		(1,835,083)		10,286,565
State and political subdivisions		13,184,185		—		(2,227,067)		10,957,118
Time deposits		746,864		—		(67,534)		679,330
	$	29,303,562	$	3	$	(4,597,233)	$	24,706,332


			Gross		Gross
	Amortized		Unrealized		Unrealized		Fair
	Cost		Gains		Losses		Value
Available-for-sale Securities:
March 31, 2024
U.S. Government agencies	$	3,250,909	$	—	$	(590,612)	$	2,660,297
Mortgage-backed Government Sponsored Enterprises (GSEs)		12,949,053		—		(2,231,211)		10,717,842
State and political subdivisions		13,244,761		—		(2,587,679)		10,657,082
Time deposits		1,246,762		—		(100,622)		1,146,140

	$	30,691,485	$	—	$	(5,510,124)	$	25,181,361

The amortized cost and fair value of available-for-sale securities at September 30, 2024, by contractual maturity, are shown below. Expected maturities may differ from contractual maturities because issuers may have the right to call or prepay obligations with or without call or prepayment penalties:


	Amortized		Fair
	Cost		Value
September 30, 2024
Within one year	$	—	$	—
One to five years		1,047,852		954,879
Five to ten years		5,099,520		4,461,825
After ten years		11,034,545		9,003,063
		17,181,917		14,419,767
Mortgage-backed GSEs		12,121,645		10,286,565

Totals	$	29,303,562	$	24,706,332

The carrying value of securities pledged as collateral, to secure public deposits and for other purposes, was approximately $6,799,000 and $1,051,000 at September 30, 2024 and March 31, 2024, respectively.

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Monroe Federal Savings and Loan Association

Notes to Financial Statements

September 30, 2024 and 2023

Certain investments in debt securities are reported in the financial statements at an amount less than their historical cost. Based on evaluation of available evidence, including recent changes in market interest rates and information obtained from regulatory filings, management believes the declines in fair value for these securities are not credit related.

Should the fair value decline of any of these securities be attributed to credit-related reasons, the cost basis of the investment will be reduced and the resulting loss recognized in net income in the period identified.

The following table shows the number of securities and aggregate fair value depreciation at September 30, 2024 and March 31, 2024.


	September 30, 2024			March 31, 2024
	Number of	Aggregate		Number of	Aggregate
Description of Securities	securities	Depreciation		securities	Depreciation
Available for sale
U.S. Government agencies	9	(14.4)	%	9	(18.2)	%
Mortgage-backed Government Sponsored Enterprises (GSEs)	41	(15.1)	%	42	(17.2)	%
State and political subdivisions	35	(16.9)	%	35	(19.5)	%
Time deposits	3	(9.0)	%	5	(8.1)	%

Total	88	(15.7)	%	91	(18.0)	%

The following tables show the Company’s investments’ gross unrealized losses and fair value of the Company’s investments with unrealized losses, aggregated by investment class and length of time that individual securities have been in a continuous unrealized loss position at September 30, 2024 and March 31, 2024.


	September 30, 2024
	Less than 12 Months				12 Months or More				Total
	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
Description of Securities	Value		Losses		Value		Losses		Value		Losses
Available for sale
U.S. Government agencies	$	—	$	—	$	2,783,319	$	(467,549)	$	2,783,319	$	(467,549)
Mortgage-backed Government Sponsored Enterprises (GSEs)		—		—		10,284,569		(1,835,083)		10,284,569		(1,835,083)
State and political subdivisions		—		—		10,957,118		(2,227,067)		10,957,118		(2,227,067)
Time deposits		—		—		679,330		(67,534)		679,330		(67,534)

Total portfolio	$	—	$	—	$	24,704,336	$	(4,597,233)	$	24,704,336	$	(4,597,233)


	March 31, 2024
	Less than 12 Months				12 Months or More				Total
	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
Description of Securities	Value		Losses		Value		Losses		Value		Losses
Available for sale
U.S. Government agencies	$	—	$	—	$	2,660,297	$	(590,612)	$	2,660,297	$	(590,612)
Mortgage-backed Government Sponsored Enterprises (GSEs)		—		—		10,717,842		(2,231,211)		10,717,842		(2,231,211)
State and political subdivisions		—		—		10,657,082		(2,587,679)		10,657,082		(2,587,679)
Time deposits		—		—		1,146,140		(100,622)		1,146,140		(100,622)

Total portfolio	$	—	$	—	$	25,181,361	$	(5,510,124)	$	25,181,361	$	(5,510,124)

Table of Contents

Monroe Federal Savings and Loan Association

Notes to Financial Statements

September 30, 2024 and 2023

U.S. Government Agencies and State and Political Subdivisions

Unrealized losses on these securities have not been recognized because the issuers’ bonds are of high credit quality, values have only been impacted by changes in interest rates since the securities were purchased, and the Company has the intent and ability to hold the securities for the foreseeable future. The fair value is expected to recover as the bonds approach the maturity date. Because the decline in market value was attributable to changes in interest rates, and not credit quality, and because the Company typically does not intend to sell the investments and it is not more likely than not the Company will be required to sell the investments before recovery of their amortized cost basis, which may be maturity, the Company determined that no credit loss provisions were required.

Mortgage-backed GSEs

The unrealized losses on the Company’s investment in residential mortgage-backed government sponsored enterprises were caused primarily by changes in interest rates. The Company expects to recover the amortized cost basis over the term of the securities. Because the decline in market value is attributable to changes in interest rates, and not credit quality, and because the Company typically does not intend to sell the investments and it is not more likely than not the Company will be required to sell the investments before recovery of their amortized cost basis, which may be maturity, the Company determined that no credit loss provisions were required.

Time Deposits

The unrealized losses on the Company’s investment in time deposits were caused primarily by changes in interest rates. The Company expects to recover the amortized cost basis over the term of the deposits. Because the decline in market value is attributable to changes in interest rates, and not credit quality, and because the Company typically does not intend to sell the deposits and it is not more likely than not the Company will be required to sell the deposits before recovery of their amortized cost basis, which may be maturity, the Company determined that no credit loss provisions were required.

Table of Contents

Monroe Federal Savings and Loan Association

Notes to Financial Statements

September 30, 2024 and 2023

Note 3:Loans and Allowance for Credit Losses

Categories of loans were as follows:


	September 30,		March 31,
	2024		2024
Real estate loans:
Residential	$	70,415,955	$	69,160,096
Multi-family		1,515,361		1,909,791
Commercial		23,662,445		24,001,533
Construction and land		3,986,985		3,087,855
Home equity line of credit (HELOC)		4,140,359		4,191,076
Commercial and industrial		4,429,054		4,889,602
Consumer		1,611,224		1,792,888

Total loans		109,761,383		109,032,841

Less:
Net deferred loan fees		307,511		308,214
Allowance for credit losses		875,318		855,455

Net loans	$	108,578,554	$	107,869,172

Loan participations where the Company serves as lead lender and services the participation interests for other participating lenders are not included in the accompanying balance sheets. The unpaid principal balances of these loans were approximately $6,633,000 and $6,506,000 at September 30, 2024 and March 31, 2024, respectively.

Risk characteristics of each loan portfolio segment are described as follows:

Residential Real Estate

These loans include first liens and junior liens on 1-4 family residential real estate and are generally owner-owner occupied. The Company generally establishes a maximum loan-to-value and requires private mortgage insurance if that ratio is exceeded. The main risks for these loans are changes in the value of the collateral and stability of the local economic environment and its impact on the borrowers’ employment. Management specifically considers unemployment and changes in real estate values in the Company’s market area.

Multi-family Real Estate

These loans include loans on residential real estate secured by property with five or more units. The main risks are changes in the value of the collateral, ability of borrowers to collect rents, vacancy and changes in the tenants’ employment status. Management specifically considers unemployment and changes in real estate values in the Company’s market area.

Table of Contents

Monroe Federal Savings and Loan Association

Notes to Financial Statements

September 30, 2024 and 2023

Commercial Real Estate

These loans are secured by both owner-occupied and non-owner-occupied commercial real estate with diverse characteristics and geographic location almost entirely in the Company’s market area. The main risks are changes in the value of the collateral and ability of borrowers to successfully conduct their business operations. Management generally avoids financing single purpose projects unless other underwriting factors are present to mitigate risks. Management specifically considers unemployment and changes in real estate values in the Company’s market area.

Construction and Land Real Estate

These loans include construction loans for 1-4 family residential and commercial properties (both owner and non-owner occupied) and first liens on land. The main risks for construction loans include uncertainties in estimating costs of construction and in estimating the market value of the completed project. The main risks for land loans are changes in the value of the collateral and stability of the local economic environment. Management specifically considers unemployment and changes in real estate values in the Company’s market area.

HELOC

These loans are generally secured by subordinate interests in owner-occupied 1-4 family residences. The main risks for these loans are changes in the value of the collateral and stability of the local economic environment and its impact on the borrowers’ employment. Management specifically considers unemployment and changes in real estate values in the Company’s market area.

Commercial and Industrial

The commercial and industrial portfolio includes loans to commercial customers for use in financing working capital needs, equipment purchases and expansions. The loans in this category are repaid primarily from the cash flow of a borrower’s principal business operation. Credit risk in these loans is driven by creditworthiness of the borrower and the economic conditions that impact the cash flow stability from business operations.

Consumer Loans

These loans include vehicle loans, share loans and unsecured loans. The main risks for these loans are the depreciation of the collateral values (vehicles) and the financial condition of the borrowers. Major employment changes are specifically considered by management.

Table of Contents

Monroe Federal Savings and Loan Association

Notes to Financial Statements

September 30, 2024 and 2023

The following tables present the activity in the allowance for credit losses based on portfolio segment for the three months and six months ended September 30, 2024 and September 30, 2023:


	Three Months Ended September 30, 2024
			Provision
			for
	Balance		(recovery of)						Balance
	June 30, 2024		credit losses		Charge-offs		Recoveries		September 30, 2024
Loans:
Real estate loans:
Residential	$	375,091	$	523	$	—	$	—	$	375,614
Multi-family		8,013		(940)		—		—		7,073
Commercial		337,171		(6,373)		—		—		330,798
Construction and land		49,630		11,511		—		—		61,141
Home equity line of credit (HELOC)		22,451		(3,126)		—		—		19,325
Commercial and industrial		40,625		5,641		—		721		46,987
Consumer		37,837		(3,757)		—		300		34,380

Total loans		870,818		3,479		—		1,021		875,318

Off-balance sheet commitments		74,000		(18,203)		—		—		55,797

Total allowance for credit losses	$	944,818	$	(14,724)	$	—	$	1,021	$	931,115


	Three Months Ended September 30, 2023
			Provision
			for
			(recovery
	Balance		of)						Balance
	June 30, 2023		credit losses		Charge-offs		Recoveries		September 30, 2023
Real estate loans:
Residential	$	386,880	$	15,990	$	—	$	—	$	402,870
Multi-family		—		—		—		—		—
Commercial		308,664		25,575		—		4,735		338,974
Construction and land		122,304		(34,485)		—		—		87,819
Home equity line of credit (HELOC)		—		—		—		—		—
Commercial and industrial		50,843		(5,932)		—		960		45,871
Consumer		38,050		5,840		500		380		43,770

Total loans	$	906,741	$	6,988	$	500	$	6,075	$	919,305

Off-balance sheet commitments		98,654		(13,756)		—		—		84,898

Total allowance for credit losses	$	1,005,395	$	(6,768)	$	500	$	6,075	$	1,004,203

Table of Contents

Monroe Federal Savings and Loan Association

Notes to Financial Statements

September 30, 2024 and 2023


	Six Months Ended September 30, 2024
			Provision
			for
	Balance		(recovery of)						Balance
	March 31, 2024		credit losses		Charge-offs		Recoveries		September 30, 2024
Loans:
Real estate loans:
Residential	$	394,445	$	(18,831)	$	—	$	—	$	375,614
Multi-family		—		7,073		—		—		7,073
Commercial		333,596		(2,798)		—		—		330,798
Construction and land		46,672		14,469		—		—		61,141
Home equity line of credit (HELOC)		—		19,325		—		—		19,325
Commercial and industrial		41,764		3,579		—		1,644		46,987
Consumer		38,978		(5,298)		—		700		34,380

Total loans		855,455		17,519		—		2,344		875,318

Off-balance sheet commitments		56,091		(294)		—		—		55,797

Total allowance for credit losses	$	911,546	$	17,225	$	—	$	2,344	$	931,115


	Six Months Ended September 30, 2023
					Provision
					for
			Effect of		(recovery
	Balance		adoption of		of)						Balance
	March 31, 2023		ASC 326		credit losses		Charge-offs		Recoveries		September 30, 2023
Real estate loans:
Residential	$	360,908	$	11,949	$	30,013	$	—	$	—	$	402,870
Multi-family		13,350		(13,350)		—		—		—		—
Commercial		166,345		137,324		24,570		—		10,735		338,974
Construction and land		43,631		94,031		(49,843)		—		—		87,819
Home equity line of credit (HELOC)		16,034		(16,034)		—		—		—		—
Commercial and industrial		34,110		23,741		(13,901)		—		1,921		45,871
Consumer		7,958		24,833		16,149		5,551		382		43,771

Total loans		642,336		262,494		6,988		5,551		13,038		919,305

Off-balance sheet commitments		—		98,654		(13,756)		—		—		84,898

Total allowance for credit losses	$	642,336	$	361,148	$	(6,768)	$	5,551	$	13,038	$	1,004,203

Table of Contents

Monroe Federal Savings and Loan Association

Notes to Financial Statements

September 30, 2024 and 2023

The following tables present a breakdown of the allowance for credit losses and the recorded investment in loans by segment, disaggregated based on the evaluation method as of September 30, 2024 and March 31, 2024.


	Allowance for credit losses				Loans
	Ending balance, evaluated for credit losses				Ending balance, evaluated for credit losses
	Individually		Collectively		Individually		Collectively
September 30, 2024
Real estate loans:
Residential	$	48,167	$	327,447	$	410,450	$	70,005,505
Multi-family		936		6,137		52,732		1,462,629
Commercial		3,581		327,217		538,983		23,123,462
Construction and land		—		61,141		—		3,986,985
Home equity line of credit (HELOC)		—		19,325		—		4,140,359
Commercial and industrial		8,067		38,920		416,019		4,013,035
Consumer		—		34,380		—		1,611,224

Total loans	$	60,751	$	814,567	$	1,418,184	$	108,343,199


	Allowance for credit losses				Loans
	Ending balance, evaluated for credit losses				Ending balance, evaluated for credit losses
	Individually		Collectively		Individually		Collectively
March 31, 2024
Real estate loans:
Residential	$	37,008	$	357,437	$	561,319	$	68,598,777
Multi-family		—		—		—		1,909,791
Commercial		10,198		323,398		587,295		23,414,238
Construction and land		—		46,672		—		3,087,855
Home equity line of credit (HELOC)		—		—		—		4,191,076
Commercial and industrial		—		41,764		449,386		4,440,216
Consumer		—		38,978		—		1,792,888

Total loans	$	47,206	$	808,249	$	1,598,000	$	107,434,841

The Company has adopted a standard loan grading system for all loans, as follows:

Pass. Loans of sufficient quality, which generally are protected by the current net worth and paying capacity of the obligor or by the value of the asset or underlying collateral.

Special Mention. Loans have potential weaknesses that deserve management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the asset or in the Company’s credit position at some future date.

Substandard. Loans which are inadequately protected by the current sound worth and paying capacity of the obligor or of the collateral pledged, if any. Loans so classified must have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the Company will sustain some loss if the deficiencies are not corrected. Usually, this classification includes all 90 days or more, non-accrual, and past due loans.

Doubtful. Loans which 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 currently existing facts, conditions, and values, highly questionable and improbable.

Table of Contents

Monroe Federal Savings and Loan Association

Notes to Financial Statements

September 30, 2024 and 2023

Loss Loans considered uncollectible and of such little value that continuance as an asset without the establishment of a specific reserve is not warranted.

Information regarding the credit quality indicators most closely monitored for other than residential real estate loans and consumer loans, by class as of September 30, 2024 and March 31, 2024, follows:


	Term Loans Amortized Cost Basis by Origination Year
	For the Six Months Ended September 30, 2024
		2025		2024		2023		2022		2021		Prior		Total
Multi-family
Risk rating:
Pass	$	—	$	—	$	—	$	221,732	$	254,708	$	1,038,921	$	1,515,361
Special Mention		—		—		—		—		—		—		—
Substandard		—		—		—		—		—		—		—
Doubtful		—		—		—		—		—		—		—
Total	$	—	$	—	$	—	$	221,732	$	254,708	$	1,038,921	$	1,515,361

Current period gross charge-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—

Commercial real estate
Risk rating:
Pass	$	331,738	$	2,647,316

Monroe Federal Bancorp, Inc. 10-Q