ROC

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 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 December 31, 2023

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: 001-41844

Central Plains Bancshares, Inc.

(Exact Name of Registrant as Specified in its Charter)

Maryland	93-2239246
( State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
221 South Locust Street Grand Island, NE	68801
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code: (308) 382-4000

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	CPBI	NASDAQ Capital Market

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 February 13, 2024, the registrant had 4,130,815 shares of common stock, $0.01 par value per share, outstanding.

Table of Contents

		Page
PART I.	FINANCIAL INFORMATION	1
Item 1.	Financial Statements (Unaudited)	1
	Condensed Consolidated Balance Sheets	1
	Condensed Consolidated Statements of Operations	2
	Condensed Consolidated Statements of Comprehensive Income (Loss)	3
	Condensed Consolidated Statements of Changes in Equity	3
	Condensed Consolidated Statements of Cash Flows	5
	Notes to Unaudited Condensed Consolidated Financial Statements	6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	28
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	38
Item 4.	Controls and Procedures	39
PART II.	OTHER INFORMATION	40
Item 1.	Legal Proceedings	40
Item 1A.	Risk Factors	40
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	40
Item 3.	Defaults Upon Senior Securities	40
Item 4.	Mine Safety Disclosures	40
Item 5.	Other Information	40
Item 6.	Exhibits	41
Signatures		42

i

Explanatory Note

Central Plains Bancshares, Inc. (the “Company”) was formed to serve as the holding company for Home Federal Savings and Loan Association of Grand Island (the “Association”), upon conversion into the stock form of organization, which was completed on October 19, 2023. Accordingly, the unaudited financial statements, as well as other financial information at or prior to October 19, 2023, contained in this Quarterly Report on Form 10-Q relate solely to the consolidated financial results of Home Federal Savings and Loan Association of Grand Island and Subsidiary.

The unaudited financial statements should be read in conjunction with the audited financial statements, and related notes, of Home Federal Savings and Loan Association of Grand Island and Subsidiary at and for the year ended March 31, 2023 contained in the Company's prospectus dated August 14, 2023 (the "Prospectus"), as filed with the Securities and Exchange Commission pursuant to Securities Act Rule 424(b)(3) on August 24, 2023.

ii

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

CENTRAL PLAINS BANCHSARES, INC.

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

(dollars in thousands)

	As of December 31, 2023			As of March 31, 2023
Assets:	(unaudited)
Cash and due from banks	$	7,190		$	7,915
Interest-bearing deposits in other banks		4,501			8,648
Total cash and cash equivalents		11,691			16,563
Investment securities - available for sale		57,316			57,842
Investment securities - held to maturity		327			422
Loans - net of allowance of $5,867 and $5,412, respectively		370,205			348,337
Accrued interest receivable		2,135			1,727
Federal Home Loan Bank (FHLB) stock - at cost		584			563
Premises and equipment, net		4,260			4,104
Deferred income taxes		3,269			3,292
Mortgage servicing rights		424			434
Other assets		4,097			4,508
Total assets	$	454,308		$	437,792
Liabilities:
Noninterest bearing deposits	$	82,376		$	73,248
Interest bearing deposits		285,068			317,704
Total deposits		367,444			390,952
Pension liability		2,193			2,310
Advances from borrowers for taxes and insurance		1,483			1,719
Accrued interest payable		1,541			668
Accounts payable, accrued expenses and other liabilities		3,853			3,477
Total liabilities		376,514			399,126
Stockholders' equity:
Common Stock ($0.01 par value, 10,000,000 shares authorized, 4,130,815 shares issued and outstanding)		41			—
Additional paid-in capital		39,317			—
Retained earnings		46,227			43,773
Unallocated common shares held by Employee Stock Ownership Plan (ESOP)		(3,173	)		—
Accumulated other comprehensive loss		(4,618	)		(5,107	)
Total stockholders' equity		77,794			38,666
Total liabilities and stockholders' equity	$	454,308		$	437,792

See accompanying notes to unaudited consolidated financial statements.

1

CENTRAL PLAINS BANCHSARES, INC.

CONSOLIDATED STATEMENTS OF INCOME

(dollars in thousands)

(unaudited)

	For the Three Months Ended December 31,					For the Nine Months Ended December 31,
	2023		2022			2023		2022
Interest and dividend income:
Loans—including fees	$	4,892	$	3,876		$	13,801	$	10,698
Investment securities		442		342			1,229		1,058
FHLB stock		7		13			21		25
Federal funds sold		101		6			190		71
Total interest and dividend income		5,442		4,237			15,241		11,852
Interest expense:
Deposits		1,692		709			4,572		1,400
Borrowings under Federal Home Loan Bank (FHLB) advances		2		152			104		269
Total interest expense		1,694		861			4,676		1,669
Net interest income before provision for credit losses		3,748		3,376			10,565		10,183
Provision for credit losses		191		2,522			99		2,842
Net interest income after provision for credit losses		3,557		854			10,466		7,341
Noninterest income:
Servicing fees on loans		66		55			228		198
Service charges on deposit accounts		194		164			579		490
Interchange income		286		279			885		837
Gain on sale of loans		60		9			173		90
Gain from real estate owned and other repossessed assets, net		—		—			4		—
Other		284		57			349		224
Total noninterest income		890		564			2,218		1,839
Noninterest expense:
Salaries and employee benefits		1,903		1,381			5,091		4,478
Occupancy and equipment		251		276			752		772
Data processing		459		451			1,366		1,313
Federal deposit insurance premiums		63		43			211		119
Debit card processing		66		57			190		168
Advertising		80		96			238		262
Other general and administrative expenses		470		430			1,271		1,240
Total noninterest expense		3,292		2,734			9,119		8,352
Income (loss) before income tax expense		1,155		(1,316	)		3,565		828
Income tax expense (benefit)		218		(260	)		709		137
Net income (loss)	$	937	$	(1,056	)	$	2,856	$	691
Basic and diluted earnings per share	$	0.31	n/a			n/a		n/a
Weighted average shares outstanding		3,057,992	n/a			n/a		n/a

See accompanying notes to unaudited consolidated financial statements.

2

CENTRAL PLAINS BANCHSARES, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(dollars in thousands)

(unaudited)

	For the Three Months Ended December 31,
	2023			2022
Net income (loss)	$	937		$	(1,056	)
Other comprehensive income (loss):
Unrealized holding gains arising during the period on available-for-sale securities		2,772			251
Minimum pension liability adjustment		—			19
Other comprehensive income, before tax		2,772			270
Income tax expense for other comprehensive income		(582	)		(58	)
Total other comprehensive income, net of tax		2,190			212
Comprehensive income (loss)	$	3,127		$	(844	)
	For the Nine Months Ended December 31,
	2023			2022
Net income	$	2,856		$	691
Other comprehensive income (loss):
Unrealized holding gains (losses) arising during the period on available-for-sale securities		617			(3,800	)
Minimum pension liability adjustment		—			59
Other comprehensive income (loss), before tax		617			(3,741	)
Income tax (expense) benefit for other comprehensive income (loss)		(128	)		786
Total other comprehensive income (loss) - net of tax		489			(2,955	)
Comprehensive income (loss)	$	3,345		$	(2,264	)

See accompanying notes to unaudited consolidated financial statements.

CENTRAL PLAINS BANCHSARES, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

(dollars in thousands)

(unaudited)

	Common Shares		Common Stock		Additional Paid-In Capital			Retained Earnings			Accumulated Other Comprehensive  Loss			Unallocated Common Shares Held by ESOP			Total Equity
	For the three months ended December 31, 2022
Balance—September 30, 2022		—	$	—	$	—		$	43,874		$	(6,892	)	$	—		$	36,982
Net loss		—		—		—			(1,056	)		—			—			(1,056	)
Other comprehensive income - net of tax		—		—		—			—			212			—			212
Balance—December 31, 2022		—	$	—	$	—		$	42,818		$	(6,680	)	$	—		$	36,138
	For the three months ended December 31, 2023
Balance—September 30, 2023		—	$	—	$	—		$	45,290		$	(6,808	)	$	—		$	38,482
Net income		—		—		—			937			—			—			937
Proceeds of stock offering and issuance of common shares (net of issuance costs of $1.9 million)		4,130,815		41		39,323			—			—			—			39,364
Purchase of common shares by the ESOP (330,465 shares)		—		—		—			—			—			(3,305	)		(3,305	)
ESOP shares committed to be released		—		—		(6	)		—			—			132			126
Other comprehensive income - net of tax		—		—		—			—			2,190			—			2,190
Balance—December 31, 2023		4,130,815	$	41	$	39,317		$	46,227		$	(4,618	)	$	(3,173	)	$	77,794

See accompanying notes to unaudited consolidated financial statements.

3

	Common Shares		Common Stock		Additional Paid-In Capital			Retained Earnings			Accumulated Other Comprehensive Loss			Unallocated Common Shares Held by ESOP			Total Equity
	For the nine months ended December 31, 2022
Balance—March 31, 2022		—	$	—	$	—		$	42,127		$	(3,725	)	$	—		$	38,402
Net income		—		—		—			691			—			—			691
Other comprehensive loss - net of tax		—		—		—			—			(2,955	)		—			(2,955	)
Balance—December 31, 2022		—	$	—	$	—		$	42,818		$	(6,680	)	$	—		$	36,138
	For the nine months ended December 31, 2023
Balance—March 31, 2023		—	$	—	$	—		$	43,773		$	(5,107	)	$	—		$	38,666
Net income		—		—		—			2,856			—			—			2,856
Adoption of ASU 326 credit losses		—		—		—			(402	)		—			—			(402	)
Proceeds of stock offering and issuance of common shares (net of issuance costs of $1.9 million)		4,130,815		41		39,323			—			—			—			39,364
Purchase of common shares by the ESOP (330,465 shares)		—		—		—			—			—			(3,305	)		(3,305	)
ESOP shares committed to be released		—		—		(6	)		—			—			132			126
Other comprehensive income - net of tax		—		—		—			—			489			—			489
Balance—December 31, 2023		4,130,815	$	41	$	39,317		$	46,227		$	(4,618	)	$	(3,173	)	$	77,794

See accompanying notes to unaudited consolidated financial statements.

4

CENTRAL PLAINS BANCHSARES, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(dollars in thousands)

(unaudited)

	Nine Months Ended December 31,
	2023			2022
Cash flows from operating activities
Net income	$	2,856		$	691
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation		377			352
Gain on sale of loans		(173	)		(90	)
Amortization of premium and accretion of discount on securities		131			245
Deferred income tax benefit		(106	)		(785	)
Provision for credit losses		99			2,842
Origination of loans held for sale		(10,584	)		(4,975	)
Proceeds from sales of loans held for sale		10,757			5,065
Contributions to pension plan		450			450
Change in assets and liabilities:
Accrued interest receivable		(408	)		(319	)
ESOP expense		126			—
Mortgage servicing rights		10			105
Other assets		411			291
Accrued interest payable		873			152
Accounts payable, accrued expenses and other liabilities		(593	)		(696	)
Net cash provided by operating activities		4,226			3,328
Cash flows from investing activities
Net change in loans		(21,967	)		(40,055	)
Purchase of investment securities available for sale		(6,030	)		—
Principal paydowns from investment securities available for sale		7,043			9,730
Principal paydowns from investment securities held to maturity		95			93
Purchase of FHLB stock		(21	)		(394	)
Purchase of premises and equipment		(533	)		(185	)
Net cash used in investing activities		(21,413	)		(30,811	)
Cash flows from financing activities
Net change in deposits		(23,508	)		1,837
Net change in advances from borrowers for taxes and insurance		(236	)		(247	)
Proceeds from short-term FHLB advances		—			14,508
Proceeds from issuance of common stock, net of costs		39,364			—
Loan to ESOP		(3,305	)		—
Net cash provided by financing activities		12,315			16,098
Net decrease in cash and cash equivalents		(4,872	)		(11,385	)
Cash and cash equivalents—beginning of period		16,563			18,979
Cash and cash equivalents—end of period	$	11,691		$	7,594
Supplemental disclosures of cash flow information:
Cash paid for taxes	$	500		$	225
Cash paid for interest	$	3,803		$	1,517

See accompanying notes to unaudited consolidated financial statements.

5

CENTRAL PLAINS BANCHSARES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(dollars in thousands, except per share data)

(unaudited)

Note 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Nature of Operations—Central Plains Bancshares, Inc. (the “Company”) was formed to serve as the holding company for Home Federal Savings and Loan Association of Grand Island (the “Association”), upon conversion into the stock form of organization, which was completed on October 19, 2023. Accordingly, the unaudited financial statements, as well as other financial information at or prior to October 19, 2023, contained in this Quarterly Report on Form 10-Q relate solely to the consolidated financial results of Home Federal Savings and Loan Association of Grand Island and Subsidiary.

The Company completed its stock offering on October 19, 2023. The Company sold 4,130,815 shares of common stock at $10.00 per share in its subscription offering for gross proceeds of approximately $41.3 million. Shares of the Company's common stock began trading on October 20, 2023 on the Nasdaq Capital Market under the trading symbol "CPBI."

The consolidated financial statements include the accounts of the Company and the Association, a wholly owned subsidiary. All intercompany balances and transactions have been eliminated in consolidation. The consolidated financial statements are presented in accordance with accounting principles generally accepted in the United States of America (GAAP) as codified in the Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC).

The Association is a federally chartered stock savings and loan association whose primary business is providing mortgage, consumer, commercial real estate, and commercial loans in the Grand Island, Nebraska area, with additional lending opportunities through the Association’s participation network of banks in Nebraska and other states, and acquiring consumer and commercial deposits to fund these investments.

All significant intercompany balances and transactions have been eliminated in consolidation.

Use of Estimates—In preparing the 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 balance sheet and reported amounts of revenues and expenses during the reporting period. Significant estimates that are particularly susceptible to change in the near term relate to the determination of the allowance for loan losses, the determination of the pension liability, as well as the fair value measurements of investment securities. As with any estimate, actual results could differ from those estimates.

Employee Stock Ownership Plan—The ESOP shares pledged as collateral are reported as unearned ESOP shares in the Consolidated Statements of Financial Condition. As shares are committed to be released from collateral, the Association reports compensation expense equal to the average market price of the shares during the year, and the shares become outstanding for basic net income per common share computations. Dividends on allocated ESOP shares reduce retained earnings; dividends on unearned ESOP shares reduce the ESOP's debt and accrued interest.

Earnings per Share—Basic earnings per share represents income available to common stockholders divided by the weighted-average number of common shares outstanding during the period. Unallocated ESOP shares are not deemed outstanding for earnings per share calculations. ESOP shares committed to be released are considered to be outstanding for purposes of the earnings per share computation. ESOP shares that have not been legally released, but that relate to employee services rendered during an accounting period (interim or annual) ending before the related debt service payment is made, are considered committed to be released. Diluted earnings per share reflects additional common shares that would have been outstanding if dilutive potential common shares had been issued, as well as any adjustments to income that would result from the assumed issuance.

Accounting Developments—In June 2016, the FASB issued Accounting Standards Update (ASU) No. 2016-13, “Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments,” also known as Current Expected Credit Losses, or CECL. ASU 2016-13 was issued to provide financial statement users with more useful information about the expected credit losses on financial instruments and other commitments to extend credit held by a reporting entity at each reporting date to enhance the decision making process. The CECL model utilizes a lifetime “expected credit loss” measurement objective for the recognition of credit losses for loans, held-to-maturity securities, and other receivables at the time the financial asset is originated or acquired. The expected credit losses are adjusted each period for changes in expected lifetime credit losses. For available for-sale securities where fair value is less than cost, credit-related impairment, if any, will be recognized in an allowance for credit losses and adjusted each period for changes in expected credit risk. This model replaced the previous existing impairment models, which generally required that a loss be incurred before it is recognized.

6

The Company adopted ASC 326 and all related subsequent amendments thereto effective on April 1, 2023 using the modified retrospective approach for all financial assets measured at amortized cost and off-balance sheet credit exposures. The transition adjustment for the adoption of CECL resulted in an increase in the allowance for credit losses on loans of $299, which is presented as a reduction to net loans outstanding, and the establishment of an allowance for credit losses on unfunded loan commitments of $210, which is recorded within accounts payable, accrued expenses and other liabilities on the consolidated statement of financial condition. The Company recorded a net decrease to retained earnings of $402, as of April 1, 2023, for the cumulative effect of adopting CECL, which reflects the transition adjustments noted above, net of the applicable deferred tax assets recorded. Results for reporting periods beginning after April 1, 2023 are presented under CECL while prior period amounts continue to be reported in accordance with previously applicable accounting standards (“Incurred Loss”).

In March 2022, the FASB issued ASU 2022-02, Financial Instruments-Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures. The amendments in this update eliminate the accounting guidance and related disclosures for troubled debt restructurings (TDRs) by creditors in Subtopic 310-40, Receivables—Troubled Debt Restructurings by Creditors, while enhancing disclosure requirements for certain loan refinancings and restructurings by creditors when a borrower is experiencing financial difficulty and requiring an entity to disclose current-period gross write-offs by year of origination for financing receivables and net investments in leases within the scope of Subtopic 326-20, Financial Instruments—Credit Losses—Measured at Amortized Cost. The Company adopted the amendments in this update on April 1, 2023, and is applying the amendments prospectively with the exception of the recognition and measurement of existing TDRs for which the entity has elected to apply a modified retrospective transition method.

Allowance for Credit Losses

The allowance for credit losses (“ACL”) is an estimate of the expected credit losses on the loans held for investment, unfunded loan commitments, held to maturity securities, and available-for-sale debt securities portfolios.

Allowance for Credit Losses on Loans—The ACL is maintained by management at a level believed adequate to absorb estimated credit losses that are expected to occur within the existing loan portfolio through their contractual terms adjusted for expected prepayments. The ACL is a valuation account that is deducted from the loans’ amortized cost basis to present the net amount expected to be collected on loans. Determination of the ACL is inherently subjective in nature since it requires significant estimates and management judgment, and includes a level of imprecision given the difficulty of identifying and assessing the factors impacting loan repayment and estimating the timing and amount of losses. While management utilizes its best judgment and information available, the ultimate adequacy of the ACL is dependent upon a variety of factors beyond the Company's direct control, including, but not limited to, the performance of the loan portfolio, consideration of current economic trends, changes in interest rates and property values, estimated losses on pools of homogeneous loans based on an analysis that uses historical loss experience for prior periods that are determined to have like characteristics with the current period such as pre-recessionary, recessionary, or recovery periods, portfolio growth and concentration risk, management and staffing changes, the interpretation of loan risk classifications by regulatory authorities and other credit market factors.

The ACL methodology consists of measuring loans on a collective (pool) basis when similar risk characteristics exist. The Company has identified seven portfolio segments and measures the ACL using the Scaled CECL Allowance for Losses Estimator (“SCALE”) method. The loan portfolios are real estate – construction, real estate – commercial, real estate – residential, commercial, agriculture, other consumer and land development/sanitary improvement districts (SIDS). The SCALE method uses publicly available data from Schedule RI-C of the Call Report to derive the initial proxy expected lifetime loss rates. These proxy expected lifetime loss rates are then adjusted for Company-specific facts and circumstances to arrive at the final ACL estimate that adequately reflects the Company's loss history and credit risk within our portfolio.

The qualitative factors applied to each loan portfolio consist of the impact of other internal and external qualitative and credit market factors as assessed by management through a detailed loan review, ACL analysis and credit discussions. These internal and external qualitative and credit market factors used include the following:

•The nature and volume of the Company’s financial assets;

•The existence, growth, and effect of any concentration of credit;

•The volume and severity of past due financial assets, the volume of nonaccrual assets, and the volume and severity of adversely classified or graded assets;

•The value of the underlying collateral for loans that are non-collateral-dependent;

•The Company’s lending policies and procedures, including changes in underwriting standards and practices for collections, write-offs, and recoveries;

7

•The quality of the Company’s credit review function;

•The experience, ability, and depth of the Company’s lending, investment, collection, and other relevant management and staff;

•The effect of other external factors such as the regulatory, legal and technological environments; competition; and events such as natural disasters; and

•Actual and expected changes in international, national, regional, and local economic and business conditions and developments in which the Company operates that affect the collectability of financial assets.

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

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

Loans are charged off against the ACL when management believes the uncollectability of a loan balance is confirmed, while recoveries of amounts previously charged-off are credited to the ACL. Approved releases from previously established ACL reserves authorized under our ACL methodology also reduce the ACL. Additions to the ACL are established through the provision for credit losses on loans, which is charged to expense.

The Company’s ACL methodology is intended to reflect all loan portfolio risk, but management recognizes the inability to accurately depict all future credit losses in a current ACL estimate, as the impact of various factors cannot be fully known. Accrued interest receivable on loans is excluded from the amortized cost basis of financing receivables for the purpose of determining the allowance for credit losses.

Allowance for Credit Losses on Unfunded Loan Commitments—The Company estimates expected credit losses over the contractual period in which the Company is exposed to credit risk by a contractual obligation to extend credit, unless that obligation is unconditionally cancelable by the Company. The ACL related to off-balance sheet credit exposures, which is recorded within accounts payable, accrued expenses and other liabilities on the consolidated statement of financial condition, is estimated at each balance sheet date under the CECL model, and is adjusted as determined necessary through the provision for credit losses on the consolidated statement of income. The estimate for ACL on unfunded loan commitments 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.

Allowance for Credit Losses on Securities Available-for-Sale—For available-for-sale debt securities in an unrealized loss position, the Company first assesses whether it intends to sell, or it is more likely than not that it will sell, the security before recovery of its amortized cost basis. If either of the aforementioned criteria exists, the Company will record an ACL related to securities available-for-sale with an offsetting entry to the provision for credit losses on securities on the income statement. If either of these criteria does not exist, the Company will evaluate the securities individually to determine whether the decline in the fair value below the amortized cost basis (impairment) is due to credit-related factors or noncredit-related factors, such as market interest rate fluctuations.

In evaluating securities available-for sale for potential impairment, the Company considers many factors, including the financial condition and near-term prospects of the issuer, which for debt securities considers external credit ratings and recent downgrades; and its ability and intent to hold the security for a period of time sufficient for a recovery in value. The Company also considers the extent to which the securities are issued by the federal government or its agencies, and any guarantee of issued amounts by those agencies. The amount of the impairment related to other factors is recognized in other comprehensive income (loss).

Allowance for Credit Losses on Held-to Maturity Securities—The allowance for credit losses on held-to-maturity debt securities is estimated using the CECL methodology. Any expected credit loss is provided through the ACL on held-to-maturity securities and is deducted from the amortized cost basis of the security so that the balance sheet reflects the net amount the Company expects to collect. Nearly all the Company's held-to-maturity debt securities are 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 rating agencies, and have a long history of no credit losses. Accordingly, there is a zero-credit loss expectation on these securities.

Allowance for Loan Losses (Prior to April 1, 2023)—The allowance for loan losses represents management’s estimate of probable losses inherent in the loan portfolio. Additions to the allowance are recorded in the provision for loan losses charged to expense. Charge-offs, net of recoveries, are deducted from the allowance. The allowance estimate is based on prior experience, the nature and volume of the loan portfolio, review of specific problem loans, and an evaluation of the overall portfolio quality under current economic

8

conditions. Specific reserves for impaired loans are measured and recognized to the extent that the recorded investment of an impaired loan exceeds its value based on either the fair value of the loan’s underlying collateral less estimated costs to sell, the calculated present value of projected cash flows discounted at the contractual interest rate, or the loan’s observable fair value.

The Association’s allowance for loan losses consists of various methodologies to determine impairment: (a) loans individually evaluated for impairment are evaluated based upon a specific identified probable loss, and (b) loans collectively evaluated for impairment are evaluated based on historical loan loss experience for similar loans with similar characteristics, adjusted to reflect the impact of current conditions. Factors considered in determining the adjustment for current conditions include the following: (a) changes in asset quality, (b) composition and concentrations of credit risk, and (c) the impact of economic risks on the portfolio.

In determining the allowance for loan losses, management considers factors such as economic and business conditions affecting key lending areas, credit concentrations and credit quality trends. Since the evaluation of the inherent loss with respect to these factors is subject to a higher degree of uncertainty, the measurement of the overall allowance is subject to estimation risk and the amount of actual losses can vary significantly from the estimated amounts. The Association’s measurement methods incorporate comparisons between recent experience and historical rates.

Loans are generally secured by underlying real estate, business assets, personal property and personal guarantees. The amount of collateral obtained is based upon management’s evaluation of the borrower.

The Association periodically may agree to modify the contractual terms of loans. When a loan is modified and a concession is made to a borrower experiencing financial difficulty, the modification is considered a TDR.

A loan is considered impaired when it is probable that all principal and interest amounts due will not be collected in accordance with the loan’s contractual terms. Except for TDRs, consumer loans within any class are generally not individually evaluated on a regular basis for impairment. All TDRs, regardless of the outstanding balance amount, are considered to be impaired.

The allowance established for probable losses on specific loans is based on a periodic analysis and evaluation of classified loans. Specific reserves for impaired loans are measured and recognized to the extent that the recorded investment of an impaired loan exceeds its value based on either the fair value of the loan’s underlying collateral less costs to sell, the calculated present value of projected cash flows discounted at the contractual effective interest rate or the loan’s observable fair value.

Cash and Cash Equivalents—Cash and cash equivalents include cash on hand, federal funds sold, demand deposits at other financial institutions, and short-term investments with maturities of three months or less when purchased.

Investment Securities—Debt securities that management has the positive intent and ability to hold to maturity are classified as held to maturity and recorded at amortized cost. Securities not classified as held to maturity are classified as available for sale and recorded at fair value, with unrealized gains and losses on a net-of-tax basis excluded from earnings and reported in other comprehensive income. The fair value of a security is determined based on quoted market prices. If quoted market prices are not available, fair value is determined based on quoted market prices of similar instruments or discounted cash flow models that incorporate market inputs and assumptions including discount rates, prepayment speeds, and loss rates. The Association did not have any securities classified as trading at December 31, 2023 or March 31, 2023.

Purchased premiums and discounts are amortized and accreted to the earlier of call or maturity of the related security using the effective interest method. Realized gains and losses on the sale of securities are recognized on the specific identification method in the statements of income.

For periods prior to April 1, 2023, management monitored securities for other-than-temporary-impairment (OTTI). If the Association intends to sell the security or will more likely than not be required to sell the security before recovery of the entire amortized cost basis, then an OTTI has occurred. However, even if the Association does not intend to sell the security and will not likely be required to sell the security before recovery of its entire amortized cost basis, the Association must evaluate expected cash flows to be received to determine if a credit loss has occurred. In the event of a credit loss, the credit component of the impairment is recorded as a loss in the statement of income and the non-credit component is recognized through other comprehensive income (loss).

Federal Home Loan Bank Stock—As a member of the Federal Home Loan Bank of Topeka (FHLB), the Association is required to maintain an investment in the capital stock of the FHLB. For financial reporting purposes, such stock is carried at cost, which approximates fair value, based on the redemption provisions.

Loans Held for Sale—Mortgage loans originated and intended for sale in the secondary market are carried at the lower of aggregate cost or fair value, as determined by outstanding commitments from investors. Net unrealized losses, if any, are recorded as a valuation allowance and charged to earnings. Mortgage loans held for sale are generally sold with servicing rights retained. Gains and losses on sales of mortgage loans are based on the difference between the selling price and the carrying value of the related mortgage

9

loan sold, which is reduced by the cost allocated to the servicing right. The Association generally locks in the sale price to the purchaser of the mortgage loan at the same time an interest rate commitment is made to the borrower.

Loans—Loans that management has the intent and ability to hold for the foreseeable future are stated at the amount of unpaid principal less an allowance for loan losses and any deferred fees or costs on originated loans. Interest on loans is calculated by using the simple interest method on daily balances of the principal amount outstanding. The accrual of interest on loans is discontinued when management believes that the borrower may be unable to make payments as scheduled, generally when a loan becomes contractually delinquent for three months or more. When interest accrual is discontinued, all unpaid accrued interest is reversed. Interest income is subsequently recognized only to the extent that cash payments are received in excess of principal due. Loan origination fees and commitment fees offset by certain direct loan origination costs are deferred and recognized over the contractual life of the loan as a yield adjustment.

Mortgage Servicing Rights—Mortgage servicing rights are established based on the allocated fair value of servicing rights retained on loans originated by the Association and subsequently sold in the secondary market. Mortgage servicing rights are amortized into servicing fees on loans on the consolidated statements of income in proportion to, and over the period of, the estimated net servicing income and are evaluated for impairment based on their fair value. Each class of separately recognized servicing assets subsequently measured using the amortization method are evaluated and measured for impairment. Impairment is determined by stratifying rights into tranches based on predominant characteristics, such as interest rate, loan type and investor type. Impairment is recognized through a valuation allowance, to the extent that fair value is less than the carrying amount of the servicing assets for that tranche. The valuation allowance is adjusted to reflect changes in the measurement of impairment after the initial measurement of impairment. Fair value in excess of the carrying amount of servicing assets for that stratum is not recognized.

Mortgage servicing assets are recognized separately when rights are acquired through purchase or through sale of financial assets. Under the servicing assets and liabilities accounting guidance (ASC 860-50), servicing rights resulting from the sale or securitization of loans originated by the Association are initially measured at fair value at the date of transfer. The Association has elected to subsequently measure the mortgage servicing rights using the amortization method. Under the amortization method, servicing rights are amortized in proportion to and over the period of estimated net servicing income. The amortized assets are assessed for impairment or increased obligation based on fair value at each reporting date.

Each class of separately recognized servicing assets subsequently measured using the amortization method are evaluated and measured for impairment. Impairment is determined by stratifying rights into tranches based on predominant characteristics, such as interest rate, loan type and investor type. Impairment is recognized through a valuation allowance for an individual tranche, to the extent that fair value is less than the carrying amount of the servicing assets for that tranche. The valuation allowance is adjusted to reflect changes in the measurement of impairment after the initial measurement of impairment. Changes in valuation allowances are reported with other noninterest expense on the income statement.

Servicing fee income is recorded for fees earned for servicing loans. The fees are based on a contractual percentage of the outstanding principal or a fixed amount per loan and are recorded as income when earned. The amortization of mortgage servicing rights is netted against loan servicing fee income.

Premises and Equipment—Office properties and equipment are carried at cost less accumulated depreciation. Depreciation is computed based on the straight-line basis over the estimated useful lives of the assets, which range from 3 to 15 years. Leasehold improvements are amortized over the terms of the respective leases or the estimated useful lives of the improvements, whichever is shorter. Costs incurred for maintenance and repairs are expensed as incurred. Premises and equipment are evaluated for impairment whenever events or changes in circumstances indicate that the carrying amount of a particular asset may not be recoverable.

Leases—Lease expense for operating and short-term leases is recognized on a straight-line basis over the lease term. Right-of-use assets represent the Association’s right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. Right-of-use assets and lease liabilities are recognized at the lease commencement date based on the estimated present value of the lease payments over the lease term. When the rate implicit in the lease is unknown, the present value of the lease payments is determined using our incremental borrowing rate based on the FHLB amortizing advance rate, adjusted for the lease term and other factors.

Revenue Recognition—Most of the Association’s revenue is not subject to ASC 606, Revenue from Contracts with Customers, including net interest income, fees related to loans and loan commitments, gain on derivatives, and gain on sales of loans and securities.

Under ASC 606, the Association must identify the contract with a customer, identify the performance obligation(s) within the contract, determine the transaction price, allocate the transaction price to the performance obligation(s) within the contract, and recognize revenue when (or as) the performance obligation(s) are satisfied. The core principle under ASC 606 requires the Association to recognize revenue to depict the transfer of services or products to customers in an amount that reflects the consideration that it expects to be

10

entitled to receive in exchange for those services or products recognized as performance obligations are satisfied. The Association generally fully satisfies its performance obligations on its contracts with customers as services are rendered and the transaction prices are typically fixed; charged either on a periodic basis or based on activity. Since performance obligations are satisfied as services are rendered and the transaction prices are fixed, there is little judgment involved in applying Topic 606 that significantly affects the determination of the amount and timing of revenue from contracts with customers.

Transfer of Financial Assets—Transfers of financial assets are accounted for as sales when control over the assets has been relinquished. Control over transferred assets is deemed to be surrendered when the assets have been isolated from the Association, the transferee obtains the right (free of conditions that constrain it from taking advantage of that right) to pledge or exchange the transferred assets, and the Association does not maintain effective control over the transferred assets through an agreement to repurchase them before maturity.

Retirement Plans—Pension expense is the net of service and interest cost, return on plan assets, and amortization of gains and losses not immediately recognized. Deferred compensation and supplemental retirement plan expense allocates the benefits over years of service.

Interest Rate Risk—The Association is engaged principally in originating and investing in first mortgage loans, consumer loans to individuals, agricultural loans and commercial loans to businesses primarily in Grand Island, Nebraska. These loans are funded primarily with short-term liabilities that have interest rates that vary with market rates over time. The earnings of the Association are exposed to interest rate risk largely because of the mismatch between the repricing intervals of its assets and liabilities.

To reduce interest rate risk, the Association has employed the strategy of selling a majority of the single family fixed-rate home loans the Association originates into the secondary market. The Association holds any adjustable-rate single family home loans in their portfolio. In addition, the commercial loans the Association originates and maintains in its portfolio are either tied to some variant of Wall Street Journal Prime (WSJP) and adjust as WSJP adjusts or they contain shorter term call dates (typically three or five years) when amortized over longer periods of time. The consumer portfolio has three-to-five-year amortized terms which mitigate long term interest rate exposure in this portfolio.

Income Taxes—The Company and its subsidiary file consolidated income tax returns. Income taxes are accounted for using an asset and liability method. Deferred tax liabilities or assets are recognized for the estimated future tax effects attributable to operating loss and tax credit carryforwards and temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes using the currently enacted tax rates expected to apply in the year in which those temporary differences are expected to be recovered or settled. If needed, a valuation allowance is recorded to reduce deferred tax assets to the amount expected to be realized. The Company recognizes tax benefits only for tax positions that are more likely than not to be sustained upon examination by tax authorities. The amount recognized is measured as the largest amount of benefit that is greater than 50% likely to be realized upon settlement. A liability for unrecognized tax benefits is recorded for any tax benefits claimed in tax returns that do not meet these recognition and measurement standards. The Company recognizes both interest and penalties (if applicable) as a component of income tax expense.

Comprehensive Income—Accounting principles generally require that recognized revenue, expenses, gains and losses be included in net income. Certain changes in assets and liabilities, such as unrealized gains and losses on available for sale securities and minimum pension liability adjustments, are reported as a separate component of the equity section of the consolidated statements of financial condition; such items, along with net income, are components of comprehensive income, net of tax.

Financial Instruments and Loan Commitments—Financial instruments include off-balance-sheet credit instruments, such as commitments to make loans and commercial letters of credit, issued to meet customer financing needs. The face amount for these items represents the exposure to loss before considering customer collateral or ability to repay. Such financial instruments are recorded when they are funded. Instruments, such as standby letters of credit, that are considered financial guarantees are recorded at fair value.

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Note 2 - Investment SECURITIES

The following is a summary of investment securities at December 31, 2023 and March 31, 2023:

(dollars in thousands)	December 31, 2023
			Gross		Gross
	Amortized		Unrealized		Unrealized			Fair
Available-for-Sale	Cost		Gains		Losses			Value
FHLMC bonds	$	24,609	$	45	$	(1,976	)	$	22,678
GNMA bonds		3,595		1		(45	)		3,551
FNMA bonds		25,837		163		(2,205	)		23,795
Municipal bonds		8,630		—		(1,338	)		7,292
Total	$	62,671	$	209	$	(5,564	)	$	57,316
Held-to-Maturity
FHLMC bonds	$	89	$	—	$	(1	)	$	88
GNMA bonds		61		—		(1	)		60
FNMA bonds		177		—		(1	)		176
Total	$	327	$	—	$	(3	)	$	324

(dollars in thousands)	March 31, 2023
			Gross		Gross
	Amortized		Unrealized		Unrealized			Fair
Available-for-Sale	Cost		Gains		Losses			Value
FHLMC bonds	$	25,446	$	13	$	(2,203	)	$	23,256
GNMA bonds		2,648		—		(58	)		2,590
FNMA bonds		26,726		17		(2,453	)		24,290
Municipal bonds		8,994		1		(1,289	)		7,706
Total	$	63,814	$	31	$	(6,003	)	$	57,842
Held-to-Maturity
FHLMC bonds	$	116	$	—	$	(2	)	$	114
GNMA bonds		74		—		(1	)		73
FNMA bonds		232		1		(4	)		229
Total	$	422	$	1	$	(7	)	$	416

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The fair value and gross unrealized losses on the Association’s available-for-sale investment securities, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position, at December 31, 2023 and March 31, 2023, are as follows:

(dollars in thousands)	Less than 12 Months					12 Months or Greater					Total
	Fair		Unrealized			Fair		Unrealized			Fair		Unrealized
December 31, 2023	Value		Losses			Value		Losses			Value		Losses
Available-for-Sale
FHLMC bonds	$	2,263	$	(15	)	$	17,002	$	(1,961	)	$	19,265	$	(1,976	)
GNMA bonds		1,325		(20	)		1,977		(25	)		3,302		(45	)
FNMA bonds		200		(1	)		16,602		(2,204	)		16,802		(2,205	)
Municipal bonds		904		(90	)		5,662		(1,248	)		6,566		(1,338	)
Total	$	4,692	$	(126	)	$	41,243	$	(5,438	)	$	45,935	$	(5,564	)
	Less than 12 Months					12 Months or Greater					Total
	Fair		Unrealized			Fair		Unrealized			Fair		Unrealized
March 31, 2023	Value		Losses			Value		Losses			Value		Losses
Available-for-Sale
FHLMC bonds	$	4,714	$	(133	)	$	16,482	$	(2,070	)	$	21,196	$	(2,203	)
GNMA bonds		2,576		(57	)		14		(1	)		2,590		(58	)
FNMA bonds		4,315		(78	)		17,027		(2,375	)		21,342		(2,453	)
Municipal bonds		—		—			5,688		(1,289	)		5,688		(1,289	)
Total	$	11,605	$	(268	)	$	39,211	$	(5,735	)	$	50,816	$	(6,003	)

The unrealized losses at December 31, 2023 are related to mortgage-backed securities and municipal bonds. Government-sponsored enterprises, such as the Federal Home Loan Mortgage Corporation or the Federal National Mortgage Association, have an implied guarantee by the U.S. government. At December 31, 2023, all of the mortgage-backed securities held by the Association were issued by U.S. government-sponsored entities and agencies. The issuers continue to make timely principal and interest payments on the mortgage-backed securities.

Unrealized losses on municipal bonds have not been recognized into income because the issuers’ bonds are high credit quality, the Association does not intend to sell and it is likely that the Association will not be required to sell the securities prior to their anticipated recovery, and the decline in fair value is largely due to changes in interest rates and other market conditions. The issuers continue to make timely principal and interest payments on the bonds. The fair value is expected to recover as the bonds approach maturity.

At December 31, 2023 and March 31, 2023, investment securities with amortized cost of $42,089, and $34,149, respectively, and estimated fair value of $38,843 and $31,935, respectively, were pledged to secure public, consumer, and commercial deposits.

The amortized cost and fair values of available for sale investment securities as of December 31, 2023 by contractual maturity, are shown below:

(dollars in thousands)	Available for Sale
	Amortized Cost		Fair Value
Maturity
Due less than one year	$	—	$	—
Due after one year through five years		2,284		2,114
Due after five years through ten years		2,357		2,020
Due after ten years		3,989		3,158
Mortgage-backed securities and collateralized mortgage obligations		54,041		50,024
Total	$	62,671	$	57,316

The Association had no sales of available for sale investment securities for the nine months ended December 31, 2023 or 2022.

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Note 3 - LOANS AND ALLOWANCE FOR Credit LOSSES

Accounting Standards Adopted in 2023

In conjunction with the adoption of ASC 326, the Company made certain loan portfolio segment reclassifications to conform to the new allowance for credit losses methodology. Loans and these related reclassifications, are summarized as follows at December 31, 2023 and March 31, 2023:

(dollars in thousands)				Post Adoption			The Effect			Pre Adoption
	December 31, 2023			March 31, 2023			of Adoption			March 31, 2023
Real Estate - Construction	$	9,972		$	19,301		$	19,301		$	—
Non-1-4 Family Construction & Land Development		—			—			(23,644	)		23,644
Real Estate - Commercial		123,754			102,446			—			102,446
Real Estate - Residential		151,215			148,486			148,486			—
1-4 Family Residential		—			—			(119,610	)		119,610
Multi-Family Residential		—			—			(34,296	)		34,296
Commercial Non-Real Estate		34,068			30,101			—			30,101
Agriculture		18,353			18,166			18,166			—
Agriculture Real Estate		—			—			(9,245	)		9,245
Agriculture Non-Real Estate		—			—			(8,921	)		8,921
Other Consumer		22,508			19,956			19,956			—
Consumer Auto		—			—			(5,622	)		5,622
Consumer Other		—			—			(14,334	)		14,334
Land Development and SIDs*		16,178			15,231			15,231			—
Sanitary & Improvement Districts		—			—			(5,468	)		5,468
Total Loans		376,048			353,687			—			353,687
Allowance for credit losses		(5,867	)		(5,711	)		(299	)		(5,412	)
Net deferred origination costs & fees		24			62			—			62
Loans—net	$	370,205		$	348,038		$	(299	)	$	348,337
*SIDs = Sanitary & Improvement Districts

Related Party Loans: In the normal course of business, loans are made to directors and officers of the Association. Loans to Association directors and key officers outstanding as of December 31, 2023 and March 31, 2023 were $73 and $76, respectively. Additionally, the Association had loans totaling $618 and $679 as of December 31, 2023 and March 31, 2023 to related parties that were originated by the Association, sold to Federal Home Loan Mortgage Company and are serviced by the Association.

Changes in the allowance for the three and nine months ended December 31, 2023 and 2022 are as follows:

(dollars in thousands)	Three Months Ended December 31, 2023
	Beginning		Provision for							Ending
	Allowance		(Recovery of)			Loans				Allowance
	Balance		Credit Losses			Charged off		Recoveries		Balance
Real Estate - Construction	$	398	$	(201	)	$	—	$	—	$	197
Real Estate - Commercial		1,277		1,028			—		—		2,305
Real Estate - Residential		1,832		(13	)		—		—		1,819
Commercial Non-Real Estate		1,298		(558	)		—		19		759
Agricultural		240		(29	)		—		—		211
Other Consumer		334		26			—		—		360
Land Development and SIDs		278		(62	)		—		—		216
Total	$	5,657	$	191		$	—	$	19	$	5,867

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(dollars in thousands)	Three Months Ended December 31, 2022
	Beginning		Provision for								Ending
	Allowance		(Recovery of)			Loans					Allowance
	Balance		Loan Losses			Charged off			Recoveries		Balance
1-4 Family Residential	$	600	$	11		$	—		$	—	$	611
Multi Family Residential		620		50			—			—		670
Commercial Real Estate		1,962		85			—			—		2,047
Agricultural Real Estate		203		—			—			—		203
Commercial Non-Real Estate		965		2,426			(2,448	)		20		963
Agricultural Non-Real Estate		281		—			—			—		281
SIDS		50		—			—			—		50
Consumer Auto		44		—			—			—		44
Consumer Other		131		—			—			—		131
Non 1-4 Family Construction and Land Development		427		(50	)		—			—		377
Total	$	5,283	$	2,522		$	(2,448	)	$	20	$	5,377

(dollars in thousands)	Nine Months Ended December 31, 2023
	Beginning		Impact of			Provision for								Ending
	Allowance		ASC326			(Recovery of)			Loans					Allowance
	Balance		Adoption			Credit Losses			Charged off			Recoveries		Balance
Real Estate - Construction	$	334	$	28		$	(165	)	$	—		$	—	$	197
Real Estate - Commercial		2,048		(904	)		1,161			—			—		2,305
Real Estate - Residential		1,286		775			(242	)		—			—		1,819
Commercial Non-Real Estate		915		450			(661	)		—			55		759
Agricultural		484		(255	)		(18	)		—			—		211
Other Consumer		157		138			64			(1	)		2		360
Land Development and SIDs		188		67			(40	)		—			1		216
Total	$	5,412	$	299		$	99		$	(1	)	$	58	$	5,867

(dollars in thousands)	Nine Months Ended December 31, 2022
	Beginning		Provision for								Ending
	Allowance		(Recovery of)			Loans					Allowance
	Balance		Loan Losses			Charged off			Recoveries		Balance
1-4 Family Residential	$	636	$	(25	)	$	—		$	—	$	611
Multi Family Residential		481		189			—			—		670
Commercial Real Estate		1,845		202			—			—		2,047
Agricultural Real Estate		213		(10	)		—			—		203
Commercial Non-Real Estate		930		2,426			(2,448	)		55		963
Agricultural Non-Real Estate		281		—			—			—		281
SIDS		50		—			—			—		50
Consumer Auto		64		(20	)		—			—		44
Consumer Other		71		60			—			—		131
Non 1-4 Family Construction and Land Development		357		20			—			—		377
Total	$	4,928	$	2,842		$	(2,448	)	$	55	$	5,377

15

The following table presents the balance in the allowance for loan losses and the recorded investment in loans by portfolio segments and based on impairment method as of March 31, 2023.

(dollars in thousands)	Year Ended March 31, 2023
	Individually		Collectively		Ending
	Evaluated for		Evaluated For		Allowance
Ending allowance balance attributed to loans:	Impairment		Impairment		Balance
1-4 Family Residential	$	193	$	493	$	686
Multi Family Residential		—		670		670
Commercial Real Estate		—		2,048		2,048
Agricultural Real Estate		—		203		203
Commercial Non-Real Estate		28		887		915
Agricultural Non-Real Estate		—		281		281
SIDS		—		50		50
Consumer Auto		—		44		44
Consumer Other		—		113		113
Non 1-4 Family Construction and Land Development		—		402		402
Total	$	221	$	5,191	$	5,412

(dollars in thousands)	Year Ended March 31, 2023
	Individually		Collectively
	Evaluated for		Evaluated For		Total
Loans:	Impairment		Impairment		Loans
1-4 Family Residential	$	338	$	119,272	$	119,610
Multi Family Residential		—		34,296		34,296
Commercial Real Estate		483		101,963		102,446
Agricultural Real Estate		—		9,245		9,245
Commercial Non-Real Estate		29		30,072		30,101
Agricultural Non-Real Estate		—		8,921		8,921
SIDS		—		5,468		5,468
Consumer Auto		—		5,622		5,622
Consumer Other		—		14,334		14,334
Non 1-4 Family Construction and Land Development		—		23,644		23,644
Total	$	850	$	352,837	$	353,687

16

The Association’s impaired loans at March 31, 2023, were as follows:

(dollars in thousands)			Unpaid				Average
	Recorded		Principal		Specific		Investment in
	Balance		Balance		Allowance		Impaired Loans
With no related allowance recorded:
1–4 Family Residential	$	—	$	—	$	—	$	—
Multi-Family Residential		—		—		—		—
Commercial Real Estate		483		605		—		516
Agriculture Real Estate		—		—		—		—
Commercial Non-Real Estate		1		103		—		6
Agriculture Non-Real Estate		—		—		—		—
Sanitary & Improvement Districts		—		—		—		—
Consumer Auto		—		3		—		—
Consumer Other		—		—		—		—
Non 1–4 Family Construction and Land Development		—		—		—		—
With an allowance recorded:
1–4 Family Residential		338		366		193		303
Multi-family Residential		—		—		—		—
Commercial Real Estate		—		—		—		42
Agriculture Real Estate		—		—		—		—
Commercial Non-Real Estate		28		43		28		35
Agriculture Non-Real Estate		—		—		—		—
Consumer Auto		—		—		—		—
Consumer Other		—		—		—		2
Non 1–4 Family Construction and Land Development		—		—		—		—
Total impaired loans	$	850	$	1,120	$	221	$	904

Collateral dependent loans individually evaluated for purposes of the ACL by collateral type were as follows at December 31, 2023:

(dollars in thousands)	Real Estate		Other
Portfolio Segment
Real Estate - Construction	$	—	$	—
Real Estate - Commercial		431		—
Real Estate - Residential		101		—
Commercial Non-Real Estate		—		19
Agricultural		—		—
Other Consumer		—		6
Land Development and SIDs		—		—
Total	$	532	$	25

Credit Risk—The Association monitors the credit risk within the loan portfolio by assessing the strength of the borrower’s repayment capacity and the probability of default. The Association first assesses the paying capacity of the borrower; then, it analyzes the sound worth of any pledged collateral or guarantees. In estimating the allowance for loan losses management also uses a quarterly Loan Concentration Report to monitor any concentrations that may develop in any specific category of the loan portfolio. It identifies four varying degrees of credit worthiness:

•Pass Loans: Loans in the pass category are loans that do not raise Association concerns.

•Special Mention Loans: Loans in this category may have a potential for weakness which, if not corrected, could weaken the asset and increase the risk in the future. By classifying a loan as Special Mention the Association can give the loan the attention needed to remedy any credit deficiencies or potential weaknesses.

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•Substandard Loans: Loans identified as Substandard are assets that are inadequately protected by the current net worth and paying capacity of the obligor or the collateral pledged, if any. Loans in this classification category must have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the Association will sustain some loss if the deficiencies are not corrected. If a loan is classified as Substandard, a determination based upon objective evidence must be made as to any specific or general valuation allowance within the guidelines of generally accepted accounting principles.

•Doubtful Loans: Loans in this category have all the weaknesses inherent in Substandard loans 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. If a loan is classified as Doubtful, a determination based upon objective evidence must be made as to any specific or general valuation allowance within the guidelines of generally accepted accounting principles.

Based on the most recent analysis performed, the risk category of loans by class and year of origination is as follows:

(dollars in thousands)	Term Loans by Origination Year								Revolving
	2023		2022		2021		Prior		Loans		Total
At December 31, 2023
Real Estate - Construction
Pass	$	6,129	$	2,011	$	—	$	1,832	$	—	$	9,972
Special Mention		—		—		—		—		—		—
Substandard		—		—		—		—		—		—
Doubtful		—		—		—		—		—		—
Total Real Estate - Construction	$	6,129	$	2,011	$	—	$	1,832	$	—	$	9,972
Current year-to-date gross write-offs		—		—		—		—		—		—
Real Estate - Commercial
Pass		22,598		29,857		24,390		37,740		6,364	$	120,949
Special Mention		—		—		—		—		—		—
Substandard		—		—		—		2,805		—		2,805
Doubtful		—		—		—		—		—		—
Total Real Estate - Commercial	$	22,598	$	29,857	$	24,390	$	40,545	$	6,364	$	123,754
Current year-to-date gross write-offs		—		—		—		—		—		—
Real Estate - Residential
Pass		16,011		31,469		51,976		39,842		11,455	$	150,753
Special Mention		—		—		—		—		—		—
Substandard		—		—		—		378		—		378
Doubtful		84		—		—		—		—		84
Total Real Estate - Residential	$	16,095	$	31,469	$	51,976	$	40,220	$	11,455	$	151,215
Current year-to-date gross write-offs		—		—		—		—		—		—
Commercial - Non Real Estate
Pass		7,153		8,009		2,243		11,685		4,378	$	33,468
Special Mention		—		—		—		—		—		—
Substandard		—		136		—		445		—		581
Doubtful		—		—		—		19		—		19
Total Commercial - Non Real Estate	$	7,153	$	8,145	$	2,243	$	12,149	$	4,378	$	34,068
Current year-to-date gross write-offs		—		—		—		—		—		—
Agricultural
Pass		1,313		3,708		2,647		4,158		6,527	$	18,353
Special Mention		—		—		—		—		—		—
Substandard		—		—		—		—		—		—
Doubtful		—		—		—		—		—		—
Total - Agricultural	$	1,313	$	3,708	$	2,647	$	4,158	$	6,527	$	18,353
Current year-to-date gross write-offs		—		—		—		—		—		—
Other Consumer
Pass		13,462		5,436		940		2,617		—	$	22,455
Special Mention		—		—		—		—		—		—
Substandard		6		5		42		—		—		53
Doubtful		—		—		—		—		—		—
Total Other Consumer	$	13,468	$	5,441	$	982	$	2,617	$	—	$	22,508
Current year-to-date gross write-offs		—		1		—		—		—		1
Land Development and SIDs
Pass		854		7,448		6,209		1,467		200	$	16,178
Special Mention		—		—		—		—		—		—
Substandard		—		—		—		—		—		—
Doubtful		—		—		—		—		—		—
Total Land Development and SIDs	$	854	$	7,448	$	6,209	$	1,467	$	200	$	16,178
Current year-to-date gross write-offs		—		—		—		—		—		—
Total loans	$	67,610	$	88,079	$	88,447	$	102,988	$	28,924	$	376,048

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The Association’s loan classifications as of March 31, 2023, are as follows:

(dollars in thousands)			Special						Total
	Pass		Mention		Substandard		Doubtful		Loans
1–4 Family Residential	$	118,839	$	—	$	771	$	—	$	119,610
Multi-Family Residential		34,296		—		—		—		34,296
Commercial Real Estate		99,367		—		3,079		—		102,446
Agriculture Real Estate		9,245		—		—		—		9,245
Commercial Non-Real Estate		29,390		—		711		—		30,101
Agriculture Non-Real Estate		8,921		—		—		—		8,921
Sanitary & Improvement Districts		5,468		—		—		—		5,468
Consumer Auto		5,591		—		31		—		5,622
Consumer Other		14,334		—		—		—		14,334
Non 1–4 Family Construction & Land Development		23,644		—		—		—		23,644
Total	$	349,095	$	—	$	4,592	$	—	$	353,687

Nonperforming and Past-Due Loans—All loans in the Association’s portfolio are considered past due if the required principal and interest payments have not been received as of the date such payments were due.

The following table presents certain information with respect to loans on nonaccrual status as of and for the nine months ended December 31, 2023:

(dollars in thousands)	Nonaccrual				Nonaccrual with no		Nonaccrual with		Interest Income
	loans beginning		Nonaccrual loans		Allowance for Credit		Allowance for Credit		Recognized During
December 31, 2023	of period		end of period		Loss		Loss		the Period
Real Estate - Commercial	$	483	$	431	$	431	$	—	$	26
Real Estate- Residential		338		101		17		84		5
Commercial Non-Real Estate		29		19		—		19		6
Other Consumer		—		6		—		6		—
Total	$	850	$	557	$	448	$	109	$	37

The following table presents the recorded investment in nonaccrual and loans past due 90 days or more and still on accrual, by class as of March 31, 2023:

(dollars in thousands)			Loans Past
			Due 90 Days
			or More Still
March 31, 2023	Nonaccrual		Accruing
1-4 Family Residential	$	338	$	—
Commercial Real Estate		483		—
Commercial Non-Real Estate		29		—
Consumer Other		—		178
Total	$	850	$	178

The following is an aging analysis of the contractually past due loans as of December 31, 2023:

(dollars in thousands)													Loans Past
					Greater than								Due 90 Days
	30–59 Days		60–89 Days		89 Days		Total						or More Still
	Past Due		Past Due		Past Due		Past Due		Current		Total		Accruing
Real Estate - Construction	$	—	$	—	$	—	$	—	$	9,972	$	9,972	$	—
Real Estate - Commercial		—		—		—		—		123,754		123,754		—
Real Estate - Residential		238		30		—		268		150,947		151,215		—
Commercial Non-RE		—		—		—		—		34,068		34,068		—
Agricultural		—		—		—		—		18,353		18,353		—
Other Consumer		52		458		176		686		21,822		22,508		176
Land Development and SIDs		—		—		—		—		16,178		16,178		—
Total	$	290	$	488	$	176	$	954	$	375,094	$	376,048	$	176

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The following is an aging analysis of the contractually past due loans as of March 31, 2023:

(dollars in thousands)					Greater than
	30–59 Days		60–89 Days		89 Days		Total
	Past Due		Past Due		Past Due		Past Due		Current		Total
1-4 Family Residential	$	585	$	—	$	—	$	585	$	119,025	$	119,610
Multi Family Residential		—		—		—		—		34,296		34,296
Commercial Real Estate		—		—		—		—		102,446		102,446
Agricultural Real Estate		—		—		—		—		9,245		9,245
Commercial Non-Real Estate		—		—		28		28		30,073		30,101
Agricultural Non-Real Estate		—		—		—		—		8,921		8,921
SIDS		—		—		—		—		5,468		5,468
Consumer Auto		43		24		—		67		5,555		5,622
Consumer Other		344		—		178		522		13,812		14,334
Non 1-4 Family Construction and Land Development		—		—		—		—		23,644		23,644
Total	$	972	$	24	$	206	$	1,202	$	352,485	$	353,687

The Association may modify loans to borrowers experiencing financial difficulty by providing modifications to repayment terms; more specifically, modifications to loan interest rates. Management performs an analysis at the time of loan modification. Any reserve required is recorded through a provision to the allowance for credit losses on loans.

As of April 1, 2023, the Association adopted ASU 2022-02, Financial Instruments - Credit Losses (Topic 326): Troubled Debt Restructuring and Vintage Disclosures. There were no modifications on loans to borrowers experiencing financial difficulty during the nine months ended December 31, 2023. See Note 1. There were no new troubled debt restructurings during the nine months ended December 31, 2022.

Note 4 - PREMISES AND EQUIPMENT

Premises and equipment at December 31, 2023 and March 31, 2023, consist of the following:

(dollars in thousands)	December 31, 2023		March 31, 2023
Land	$	838	$	818
Buildings and leasehold improvements		9,294		8,855
Equipment		3,370		3,150
Automobiles		136		48
Computer software		1,036		1,031
Total cost		14,674		13,902
Less accumulated depreciation		10,414		9,798
Total premises and equipment	$	4,260	$	4,104

Depreciation expense included in occupancy and equipment on the consolidated statements of income totaled $129 and $125 for the three months ended December 31, 2023 and 2022, and $377 and $352 for the nine months ended December 31, 2023 and 2022, respectively.

Note 5 - DEPOSITS

A summary of certificates of deposit included in interest bearing deposits in the consolidated statements of financial condition by maturity at December 31, 2023, is as follows:

(dollars in thousands)
12 Months Ending December 31,	Amount
2024	$	98,285
2025		4,485
2026		2,270
2027		993
2028 or later		283
Total certificate accounts	$	106,316

The aggregate amount of jumbo certificates of deposit, each with a minimum denomination of $250, was $33,324 at December 31, 2023 and $31,376 at March 31, 2023, respectively. At March 31, 2023, the Company had $8,062 in brokered deposits. The Company had no brokered deposits at December 31, 2023.

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Note 6 - Borrowings

The Company had no outstanding borrowings as of December 31, 2023 and March 31, 2023.

The Company had remaining availability for FHLB borrowings of approximately $40,873 and $40,579 at December 31, 2023 and March 31, 2023, respectively. The FHLB has sole discretion to deny additional advances. $80 of investment securities and $50,000 of loans were pledged as collateral for FHLB advances at December 31, 2023.

Additionally, the Company had the capacity to borrow $5,000 from a private bankers’ bank at December 31, 2023 and March 31, 2023.

Note 7 - REGULATORY CAPITAL REQUIREMENTS

The Association is subject to various regulatory capital requirements administered by federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the Association’s financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Association must meet specific capital guidelines that involve quantitative measures of the Association’s assets, liabilities, and certain off-balance-sheet items as calculated under regulatory accounting practices. The Association’s capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors.

Quantitative measures established by regulation to ensure capital adequacy require the Association to maintain minimum amounts and ratios as set forth in the following tables of tangible, core, and total risk-based capital. To be considered well-capitalized under the regulatory framework for Prompt Corrective Action provisions, the Association must maintain minimum Tier I leverage, Tier I risk- based, common equity Tier 1, and total risk-based capital ratios (as defined) as set forth in the following tables.

As of December 31, 2023 and March 31, 2023, the Association was well-capitalized under the regulatory framework for prompt corrective action. To be categorized as well-capitalized, the Association must maintain minimum total risk-based, Tier I risk-based, and Tier I leverage ratios as set forth in the table. There are no conditions or events since December 31, 2023, that management believes have changed the Association’s category.

The Association’s actual capital amounts and ratios as of December 31, 2023 and March 31, 2023, are also presented in the table below:

(dollars in thousands)	Actual					Minimum Required for Capital Adequacy Purposes					Minimum Required To be Well-Capitalized Under Prompt Corrective Action Provisions
As of December 31, 2023	Amount		Ratio			Amount		Ratio			Amount		Ratio
Total Capital (to Risk- Weighted Assets)	$	66,949		17.98	%	$	29,782		8.00	%	$	37,228		10.00	%
Tier 1 Capital (to Risk- Weighted Assets)	$	62,278		16.73	%	$	22,337		6.00	%	$	29,782		8.00	%
Common Equity Tier 1 Capital to Risk-Weighted Assets	$	62,278		16.73	%	$	16,753		4.50	%	$	24,198		6.50	%
Tier 1 Capital (to Average Assets)	$	62,278		13.77	%	$	18,091		4.00	%	$	22,614		5.00	%
As of March 31, 2023	Amount		Ratio			Amount		Ratio			Amount		Ratio
Total Capital (to Risk- Weighted Assets)	$	47,809		13.45	%	$	28,432		8.00	%	$	35,540		10.00	%
Tier 1 Capital (to Risk- Weighted Assets)	$	43,355		12.20	%	$	21,324		6.00	%	$	28,432		8.00	%
Common Equity Tier 1 Capital to Risk-Weighted Assets	$	43,355		12.20	%	$	15,993		4.50	%	$	23,101		6.50	%
Tier 1 Capital (to Average Assets)	$	43,355		10.12	%	$	17,139		4.00	%	$	21,424		5.00	%

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Note 8 - MORTGAGE SERVICING

Activity for mortgage servicing rights ("MSRs") measured using the amortized cost method was as follows:

(dollars in thousands)	As of December 31, 2023			As of March 31, 2023
Mortgage servicing rights
Balance at beginning of year	$	434		$	563
Additions		103			33
Repayments and amortization		(113	)		(162	)
Balance at end of period	$	424		$	434

At December 31, 2023, no allowance for impairment on the Association’s MSRs was established.

At December 31, 2023 and March 31, 2023, the Association was servicing loans for others amounting to $152,759 and $149,521, respectively. These loans are not reflected in the Association’s financial statements. Servicing loans for others generally consists of collecting mortgage payments, maintaining escrow accounts, disbursing payments to investors, and foreclosure processing. Loan servicing income is recorded on the accrual basis and includes servicing fees from investors and certain charges collected from borrowers, such as late payment fees. In connection with these loans serviced for others, the Association held borrowers’ escrow balances of $2,570 and $3,211 at December 31, 2023 and March 31, 2023, respectively, which are included in interest bearing deposits.

Derivative instruments include interest rate locks on commitments to originate loans for the held for sale portfolio and forward commitments on contracts to deliver mortgage-backed securities. The Association has entered into forward commitments for the sale of mortgage loans principally to protect against the risk of adverse interest rate movements on net income. These derivatives are not designated in a hedging relationship. In addition, the Association has entered into commitments to originate loans, which when funded, are classified as held for sale. Such commitments meet the definition of a derivative and are not designated in a hedging relationship. The notional amount and estimated fair value of all such derivative instruments are immaterial.

Note 9 - COMMITMENTS AND CONTINGENCIES

The Association is a party to financial instruments with off-balance-sheet risk in the normal course of business to meet the financing needs of its customers including commitments to extend credit and lines or letters of credit and commitments to sell to investors loans held for sale. The Association uses the same credit policies in making commitments and conditional obligations as it does for on-balance-sheet instruments.

At December 31, 2023 and March 31, 2023, the Association had approved outstanding loan origination commitments of $183 and $4,681, respectively. Loan commitments, which are funded subject to certain limitations, extend over various periods of time and may expire without being drawn upon. Generally, unused commitments are canceled upon expiration of the commitment term as outlined in each individual contract. All outstanding loan origination commitments were subject to forward sales commitments to various entities. Also, at December 31, 2023 and March 31, 2023, the Association has committed unused lines of credit, equity lines, loans in process and letters of credit to consumers totaling $45,258 and $48,938, respectively. The Association evaluates each customer’s credit worthiness on a separate basis and requires collateral based on this evaluation. Collateral consists mainly of residential family units and personal property.

Various legal claims also arise from time to time in the normal course of business which, in the opinion of management, will have no material effect on the Association’s consolidated financial statements.

Note 10 - FAIR VALUE OF FINANCIAL INSTRUMENTS

The Association measures certain financial assets and liabilities at fair value in accordance with GAAP, which defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. GAAP also establishes a fair value hierarchy, which prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. The fair value hierarchy gives the highest priority to quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the instrument’s fair value measurement. The three levels within the fair value hierarchy are described as follows:

Level 1—Quoted prices (unadjusted) in active markets for identical assets or liabilities.

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Level 2—Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. Level 2 inputs include: quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; or other inputs that are observable or can be corroborated by observable market data of substantially the full term of the assets or liabilities.

Level 3—Unobservable inputs for the asset or liability for which there is little, if any, market activity at the measurement date. The inputs are developed based on the best information available in the circumstances, which might include the Association’s own financial data such as internally developed pricing models, discounted cash flow methodologies, as well as instruments for which the fair value determination requires significant management judgment.

Fair Value of Financial Instruments—Financial instruments are classified within the fair value hierarchy using the methodologies described above. The following disclosures include financial instruments that are not carried at fair value on the Statements of Financial Condition. The calculation of estimated fair values is based on market conditions at a specific point in time and may not reflect current or future fair values.

Certain financial instruments generally expose the Association to limited credit risk and have no stated maturities or have short-term maturities and carry interest rates that approximate market. The carrying value of these financial instruments assumes to approximate the fair value of these instruments. These instruments include cash and cash equivalents, non-interest-bearing deposit accounts, FHLB advances, FHLB stock, escrow deposits and accrued interest receivable and payable.

The carrying amounts and estimated fair values by fair value hierarchy of certain financial instruments are as follows:

(dollars in thousands)	Measurements at Reporting Date Using
	Carrying Amount		Level 1		Level 2		Level 3		Estimated Fair Value
December 31, 2023
Financial assets:
Loans, net	$	370,205	$	—	$	—	$	335,909	$	335,909
Financial liabilities:
Interest-bearing deposits	$	285,068	$	—	$	259,477	$	—	$	259,477
March 31, 2023
Financial assets:
Loans, net	$	348,337	$	—	$	—	$	316,169	$	316,169
Financial liabilities:
Interest-bearing deposits	$	317,704	$	—	$	272,270	$	—	$	272,270

Available-for-Sale Securities (Recurring)

Where quoted market prices are available in an active market, securities such as U.S. Treasuries, would be classified within Level 1 of the valuation hierarchy. If quoted market prices are not available, then fair values are estimated by using quoted prices of securities with similar characteristics or independent asset pricing services and pricing models, the inputs of which are market-based or independently sourced market parameters, including, but not limited to, yield curves, interest rates, volatilities, prepayments, defaults, cumulative loss projections and cash flows. Such securities are classified in Level 2 of the valuation hierarchy. In certain cases where Level 1 or Level 2 inputs are not available, securities would be classified within Level 3 of the hierarchy.

The Association’s financial assets measured at fair value on a recurring basis are available-for-sale securities. Available-for-sale securities are classified within Level 2 because they are valued based on market prices for similar assets. The fair value of the Association’s available-for-sale securities as of December 31, 2023 and March 31, 2023 was $57,316 and $57,842, respectively. The Association does not have any other assets or liabilities measured at fair value on a recurring basis as of December 31, 2023 or March 31, 2023.

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(dollars in thousands)	Fair Value Measurements at Reporting Date Using
	Estimated Fair Value		Level 1		Level 2		Level 3
December 31, 2023
Securities Available-for-sale
Mortgage Backed Securities	$	50,024	$	—	$	50,024	$	—
Municipal Bonds		7,292		—		7,292		—
Total	$	57,316	$	—	$	57,316	$	—
March 31, 2023
Securities Available-for-sale
Mortgage Backed Securities	$	50,136	$	—	$	50,136	$	—
Municipal Bonds		7,706		—		7,706		—
Total	$	57,842	$	—	$	57,842	$	—

There were no transfers of financial instruments between Levels 1, 2, and 3 during the nine months ended December 31, 2023. The Association does not have any financial instruments measured at fair value on a recurring basis classified as Level 3.

Nonrecurring Measurements

The following table presents the fair value measurement of assets and liabilities measured at fair value on a nonrecurring basis and the level within the fair value hierarchy in which the fair value measurements fall at December 31, 2023 and March 31, 2023:

(dollars in thousands)	Fair Value Measurements at Reporting Date Using
	Estimated Fair Value		Level 1		Level 2		Level 3
December 31, 2023
Financial Assets
Individually evaluated loans	$	448	$	—	$	—	$	448
Total	$	448	$	—	$	—	$	448
March 31, 2023
Financial Assets
Impaired loans	$	629	$	—	$	—	$	629
Total	$	629	$	—	$	—	$	629

Following is a description of the valuation methodologies and inputs used for assets measured at fair value on a nonrecurring basis and recognized in the accompanying balance sheet, as well as the general classification of such assets pursuant to the valuation hierarchy. For assets classified within Level 3 of the fair value hierarchy, the process used to develop the reported fair value is described below.

Impaired Loans (March 31, 2023) / Individually Evaluated Loans (December 31, 2023)

Impaired/Individually evaluated loans are recorded at fair value on a nonrecurring basis. The fair value of loans is generally based on recent real estate appraisals. These appraisals may utilize a single valuation approach or a combination of approaches including comparable sales and the income approach. Adjustments are routinely made in the appraisal process by the independent appraisers to adjust for differences between the comparable sales and income data available. Such adjustments are usually significant and typically result in a Level 3 classification of the inputs for determining fair value. Non-real estate collateral may be valued using an appraisal, net book value per the borrower’s financial statements, or aging reports, adjusted or discounted based on management’s historical knowledge, changes in market conditions from the time of the valuation and management’s expertise and knowledge of the client and client’s business, resulting in a Level 3 fair value classification. Impaired/Individually evaluated loans are evaluated on a monthly basis for additional impairment and adjusted accordingly.

The numerical range of unobservable inputs for these valuation assumptions is not meaningful to this presentation.

Note 11 -accumulated other comprehensive loss

The components of accumulated other comprehensive loss for the three and nine months ended December 31, 2023 and 2022 are as follows:

24

(dollars in thousands)	Unrealized Gains and Losses on Available-for- Sale Debt Securities			Defined Benefit Pension Plans			Total
Three Months Ended December 31, 2023
Balance at beginning of period	$	(6,419	)	$	(389	)	$	(6,808	)
Other comprehensive income		2,190			—			2,190
Balance at end of period	$	(4,229	)	$	(389	)	$	(4,618	)
Three Months Ended December 31, 2022
Balance at beginning of period	$	(5,236	)	$	(1,656	)	$	(6,892	)
Other comprehensive income		197			15			212
Balance at end of period	$	(5,039	)	$	(1,641	)	$	(6,680	)

(dollars in thousands)	Unrealized Gains and Losses on Available-for- Sale Debt Securities			Defined Benefit Pension Plans			Total
Nine Months Ended December 31, 2023
Balance at beginning of period	$	(4,718	)	$	(389	)	$	(5,107	)
Other comprehensive income		489			—			489
Balance at end of period	$	(4,229	)	$	(389	)	$	(4,618	)
Nine Months Ended December 31, 2022
Balance at beginning of period	$	(2,033	)	$	(1,692	)	$	(3,725	)
Other comprehensive (loss) income		(3,006	)		51			(2,955	)
Balance at end of period	$	(5,039	)	$	(1,641	)	$	(6,680	)

The following table summarizes the significant amounts reclassified out of each component of AOCI for three and nine months ended December 31, 2023 and 2022:

(dollars in thousands)	Three Months Ended December 31,
	2023			2022
	Amount Reclassified from AOCI
Details about AOCI Components
Unrealized gains and losses on available-for-sale securities	$	2,772		$	251		Debt Securities gains, net
		(582	)		(54	)	Income tax expense
	$	2,190		$	197		Net income
Amortization of defined benefit pension items
Actuarial gains (losses)	$	—		$	19		Salaries and employee benefits
		—			(4	)	Income tax expense
	$	—		$	15		Net income
Total reclassification for the period	$	2,190		$	212		Net income

25

(dollars in thousands)	Nine Months Ended December 31,
	2023			2022
	Amount Reclassified from AOCI
Details about AOCI Components
Unrealized gains and losses on available-for-sale securities	$	617		$	(3,800	)	Debt Securities gains (losses), net
		(128	)		794		Income tax (expense) benefit
	$	489		$	(3,006	)	Net income (loss)
Amortization of defined benefit pension items
Actuarial gains (losses)	$	—		$	59		Salaries and employee benefits
		—			(8	)	Income tax expense
	$	—		$	51		Net income
Total reclassification for the period	$	489		$	(2,955	)	Net income (loss)

Note 12 -LEASES

The Association leases office space under operating leases that expire at various dates through October 2030.

Rent expense, which is included in occupancy expenses on the consolidated statements of income, was $57 and $57 for the nine months ended December 31, 2023 and 2022, respectively.

The following table shows the future undiscounted lease payments required under the leases described above as of December 31, 2023:

12 Months Ending December 31,	Operating Leases
2024	$	71
2025		54
2026		46
2027		37
2028		37
Thereafter		103
Total undiscounted lease payments	$	348
Less: Imputed interest		(29	)
Net lease liability	$	319

Note 13 - EARNINGS PER SHARE

Basic EPS represents income available to common stockholders divided by weighted-average number of common shares outstanding during the period. 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 should then share in the earnings of the entity. Diluted EPS is computed by dividing net income attributed to common stockholders by the weighted-average number of common shares outstanding for the period, plus the effect of potential dilutive common share equivalents.

There were no securities or other contracts that had a dilutive effect during the three and nine months ended December 31, 2023, and therefore the weighted-average common shares outstanding used to calculate both basic and diluted EPS are the same. Shares held by the Employee Stock Ownership Plan ("ESOP") that have not been allocated to employees in accordance with the terms of the ESOP, referred to as "unallocated ESOP shares", are not deemed outstanding for EPS calculations. EPS data is not applicable for three and nine months ended December 31, 2022 as the Company had no shares outstanding.

(income in thousands)	Three Months Ended
	December 31, 2023
Net income applicable to common shares	$	937
Average number of common shares outstanding		3,322,612
Less: Average unallocated ESOP shares		264,620
Average number of common shares outstanding used to calculate basic earnings per common share		3,057,992
Earnings per common share basic and diluted	$	0.31

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All unallocated ESOP shares have been excluded from the calculation of basic and diluted EPS. The Company did not present earnings per share for the nine months ended December 31, 2023 because the year-to-date weighted average computation, as a result of the conversion during the period, would present a figure that would not aid investors in understanding the Company's financial results.

Note 14 - ESOP

Employees participate in an Employee Stock Ownership Plan ("ESOP"). The ESOP borrowed funds from the Company to purchase 330,465 shares of stock at $10 per share. The Association makes discretionary contributions to the ESOP and the ESOP uses funds it receives to repay the loan. When loan payments are made, ESOP shares are allocated to participants based on relative compensation. Participants receive the shares at the end of employment.

Each December, the Association makes discretionary contributions to the ESOP, which are equal to principal and interest payments required on the term loan. In December 2023, the Association made a discretionary contribution of $303,000 to the Company for payment on the loan. Expense recorded was $126,000 during the first nine months of 2023, and is recognized over the service period.

Shares held by the ESOP were as follows:

(dollars in thousands)	As of December 31,
	2023
Shares committed for allocation		13,218
Unallocated		317,247
Total ESOP shares		330,465
Less: Average unallocated ESOP shares
Fair value of unearned shares at December 31, 2023	$	3,236

Note 15 - SUBSEQUENT EVENTS

Management evaluated subsequent events through February 13, 2024, the date the unaudited consolidated financial statements were issued. Management does not believe there were any material subsequent events during this period that would have required further recognition or disclosure in the unaudited consolidated financial statements included in this report.

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

General

Management’s discussion and analysis of financial condition and results of operations at December 31, 2023 and March 31, 2023 and for the three and nine months ended December 31, 2023 and 2022 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.

Cautionary Note Regarding Forward-Looking Statements

This report contains forward-looking statements, which can be identified by the use of words such as “estimate,” “project,” “believe,” “intend,” “anticipate,” “plan,” “seek,” “expect” 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 and to maintain adequate liquidity, primarily through deposits;

•fluctuations in real estate values and in the conditions of the residential real estate, commercial real estate, and agricultural real estate markets;

•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 our 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 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;

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•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;

•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;

•our compensation expense associated with equity allocated or awarded to our directors and/or employees;

•the impact of the COVID-19 pandemic or any other pandemic on our operations and financial results and those of our customers;

•our ability to attract and retain key employees; and

•changes in the financial condition, results of operations or future prospects of issuers of securities that we own.

Critical Accounting Policies

Our most significant accounting policies are described in Note 1 to the consolidated financial statements. Certain of these accounting policies require management to use significant judgment and estimates, which can have a material impact on the carrying value of certain assets and liabilities. We consider these policies to be our critical accounting estimates.

The estimates and assumptions that we use are based on historical experience, future forecasts and various other factors and are believed to be reasonable under the circumstances. Actual results may differ from these estimates under different assumptions or conditions, resulting in a change that could have a material impact on the carrying value of our assets and liabilities and our results of operations.

Critical accounting estimates are necessary in the application of certain accounting policies and procedures and are particularly susceptible to significant change. Critical accounting policies are defined as those involving significant judgments and assumptions by management that could have a material impact on the carrying value of certain assets or on income under different assumptions or conditions. Actual results could differ from these judgments and estimates under different conditions, resulting in a change that could have a material impact on the carrying values of our assets and liabilities and our results of operations.

The Jumpstart Our Business Startups ("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.

See Note 1, "Basis of Presentation" for additional information on the adoption of ASC 326, which changes the methodology under which management calculates the reserve for loans and investment securities, now referred to as the allowance for credit losses. Management considers the measurement of the allowance for credit losses to be a critical accounting policy. Other than the adoption of ASC 326, there have been no significant changes to the Association's critical accounting policies since March 31, 2023.

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Comparison of Financial Condition at December 31, 2023 and March 31, 2023

Total Assets. Total assets increased $16.5 million, or 3.8%, to $454.3 million at December 31, 2023 from $437.8 million at March 31, 2023. The increase was primarily due to a $22.3 million, or 6.3%, increase in gross loans.

Cash and Cash Equivalents. Cash and cash equivalents decreased $4.9 million, or 29.4%, to $11.7 million at December 31, 2023 from $16.6 million at March 31, 2023. This decrease was primarily due to an increase in loan funding and a decrease in interest bearing deposits in other banks, partially offset by cash received in connection with the initial public offering of the Company's common stock. We regularly review our liquidity position based on alternative uses of available funds as well as market conditions.

Investment Securities Available for Sale. Securities available-for-sale decreased $526,000, or 0.9%, to $57.3 million at December 31, 2023 from $57.8 million at March 31, 2023. We purchased $6.0 million in securities, received principal payments of $7.0 million, had net premium amortization and discount accretion of $131,000 and had an increase in the unrealized gain on the securities portfolio of $617,000 during the nine-month period ended December 31, 2023.

Gross Loans. Gross loans held for investment increased $22.3 million, or 6.3%, to $376.1 million at December 31, 2023 from $353.7 million at March 31, 2023. We experienced increases in all loan categories except for construction real estate loans. The largest increase was in commercial real estate loans, which increased $21.4 million, or 20.8%, to $123.8 million from $102.4 at March 31, 2023.

Total Deposits. Total deposits decreased $23.6 million, or 6.0%, to $367.4 million at December 31, 2023 from $391.0 million at March 31, 2023. This decrease was the result of customers using cash to purchase shares in our conversion.

Noninterest-bearing deposits increased $9.1 million, or 12.5%, to $82.4 million at December 31, 2023 from $73.2 million at March 31, 2023. Time certificates of deposit increased $22.1 million, or 28.8%, to $107.7 million at December 31, 2023 from $85.6 million at March 31, 2023, as we believe that long-term customers have sought higher-yield deposits as a result of recent increases in market interest rates. We also had brokered deposits of $8.1 million at March 31, 2023 that are included in the $85.6 million total.

Borrowings. We had no borrowings at December 31, 2023 or March 31, 2023. We have had limited borrowings in recent periods, as we have generally been able to utilize cash provided by our increase in deposits to fund our operations, although we will utilize FHLB advances as needed to support increased loan funding.

Stockholders' Equity. Stockholders' equity increased $39.1 million, or 101.2% to $77.8 million at December 31, 2023 from $38.7 million at March 31, 2023. This increase is the result of the net proceeds of the stock offering, less unallocated shares of the ESOP. Net income of $2.9 million and other comprehensive income of $489,000 for the nine months ended December 31, 2023, was offset by a reduction in equity of $402,000 resulting from increasing our allowance for credit losses in connection with our adopting the CECL accounting methodology effective April 1, 2023.

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Average Balance Sheets and Related Yields and Rates

The following tables set forth average annualized 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. The yields set forth below include the effect of deferred fees, discounts, and premiums that are amortized or accreted to interest income or interest expense. Loan fees are included in interest income on loans and are not material.

	For the Three Months Ended December 31,
	2023								2022
	Average Outstanding Balance			Interest		Average Yield/Rate			Average Outstanding Balance			Interest		Average Yield/Rate
	(Dollars in thousands)
Interest-earning assets:
Loans	$	367,941		$	4,892		5.32	%	$	341,703		$	3,876		4.54	%
Mortgage-backed securities		48,970			397		3.24	%		53,075			297		2.24	%
Investment securities (1)		7,213			45		2.50	%		8,036			45		2.24	%
Interest-bearing deposits and other		7,409			108		5.83	%		1,068			19		7.12	%
Total interest-earning assets		431,533			5,442		5.04	%		403,882			4,237		4.20	%
Non-interest-earning assets		18,898								14,574
Total assets	$	450,431							$	418,456
Interest-bearing liabilities:
Savings accounts	$	42,485		$	53		0.50	%	$	51,132		$	17		0.13	%
Money market accounts		21,594			140		2.59	%		25,782			73		1.13	%
NOW accounts		134,427			401		1.19	%		158,411			281		0.71	%
Certificates of deposit		88,134			907		4.12	%		42,717			243		2.28	%
Individual retirement accounts		16,084			191		4.75	%		15,544			95		2.44	%
Total interest-bearing deposits		302,724			1,692		2.24	%		293,586			709		0.97	%
Borrowings		158			2		5.06	%		15,946			152		3.81	%
Total interest-bearing liabilities		302,882			1,694		2.24	%		309,532			861		1.11	%
Other non-interest-bearing liabilities		102,603								73,016
Total liabilities		405,485								382,548
Total equity		44,946								35,908
Total liabilities and total equity	$	450,431							$	418,456
Net interest income				$	3,748							$	3,376
Net interest rate spread (2)							2.81	%							3.08	%
Net interest-earning assets (3)	$	128,651							$	94,350
Net interest margin (4)							3.47	%							3.34	%
Average interest-earning assets to   interest-bearing liabilities		142.48	%							130.48	%

(1)Represents investments in municipal bonds.

(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.

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	Nine Months Ended December 31,
	2023								2022
	Average Outstanding Balance			Interest		Average Yield/Rate			Average Outstanding Balance			Interest		Average Yield/Rate
	(Dollars in thousands)
Interest-earning assets:
Loans	$	359,515		$	13,801		5.12	%	$	331,219		$	10,698		4.31	%
Mortgage-backed securities		49,958			1,091		2.91	%		58,311			923		2.11	%
Investment securities (1)		7,937			138		2.32	%		8,136			135		2.21	%
Interest-bearing deposits and other		5,137			211		5.48	%		5,009			96		2.55	%
Total interest-earning assets		422,547			15,241		4.81	%		402,675			11,852		3.92	%
Non-interest-earning assets		18,170								14,257
Total assets	$	440,717							$	416,932
Interest-bearing liabilities:
Savings accounts	$	45,040		$	107		0.32	%	$	53,106		$	35		0.09	%
Money market accounts		21,742			320		1.96	%		25,975			189		0.97	%
NOW accounts		125,685			1,461		1.55	%		164,572			547		0.44	%
Certificates of deposit		81,017			2,333		3.84	%		34,187			431		1.68	%
Individual retirement accounts		15,832			351		2.96	%		15,653			198		1.69	%
Total interest-bearing deposits		289,316			4,572		2.11	%		293,493			1,400		0.64	%
Borrowings		2,580			104		5.37	%		13,079			269		2.74	%
Total interest-bearing liabilities		291,896			4,676		2.14	%		306,572			1,669		0.73	%
Other non-interest-bearing liabilities		107,893								73,257
Total liabilities		399,789								379,829
Total equity		40,928								37,103
Total liabilities and total equity	$	440,717							$	416,932
Net interest income				$	10,565							$	10,183
Net interest rate spread (2)							2.67	%							3.20	%
Net interest-earning assets (3)	$	130,651							$	96,103
Net interest margin (4)							3.33	%							3.37	%
Average interest-earning assets to   interest-bearing liabilities		144.76	%							131.35	%

(1)Represents investments in municipal bonds.

(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.

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Comparison of Operating Results for the Three Months Ended December 31, 2023 and December 31, 2022

General. Net income increased $2.0 million, or 188.7%, to $937,000 for the three months ended December 31, 2023, compared to a net loss of $1.1 million for the three months ended December 31, 2022. This increase was due primarily to an increase of $2.3 million in provision for credit losses for the three months ended December 31, 2022. The Association recorded a significant provision for credit losses as we recognized a charge-off of $2.4 million on a commercial and industrial loan during 2022.

Interest and Dividend Income. Interest and dividend income increased $1.2 million, or 28.4%, to $5.4 million for the three months ended December 31, 2023 from $4.2 million for the three months ended December 31, 2022. The increase was due primarily to an increase in interest income on loans, which is our primary source of interest income, due to increases in market interest rates.

Interest income on loans increased $1.0 million, or 26.2%, to $4.9 million for the three months ended December 31, 2023 from $3.9 million for the three months ended December 31, 2022. The average balance of loans increased $26.2 million, or 7.7%, to $367.9 million for the three months ended December 31, 2023 from $341.7 million for the three months ended December 31, 2022. The increase was primarily due to our continued focus on growing our loan portfolio consistent with maintaining asset quality. Our yield on loans increased 78 basis points to 5.32% for the three months ended December 31, 2023 from 4.54% for the three months ended December 31, 2022. The increase in yield was due to increases in market interest rates.

Interest income on securities increased $100,000, or 29.2%, to $442,000 for the three months ended December 31, 2023 from $342,000 for the three months ended December 31, 2022, due to a 91 basis point increase in the average yield from 2.24% for the three months ended December 31, 2022 to 3.15% for the three months ended December 31, 2023. The increase was offset by a $4.9 million decrease in the average balance of securities to $56.2 million for the three months ended December 31, 2023 from $61.1 million for the three months ended December 31, 2022. This decrease in the average balance of securities is attributed to paydowns received over the period.

Interest Expense. Interest expense increased $833,000, or 96.7%, to $1.7 million for the three months ended December 31, 2023 compared to $861,000 for the three months ended December 31, 2022, due to increases in the average balance of and higher costs of interest-bearing liabilities.

Interest expense on deposits increased $983,000, or 138.6%, to $1.7 million for the three months ended December 31, 2023 compared to $709,000 for the three months ended December 31, 2022. The increase was due to a 127 basis point increase in the average cost of deposits to 2.24% for the three months ended December 31, 2023 from 0.97% for the three months ended December 31, 2022. The increase in the average cost of deposits was due to the higher interest rate environment and an increase in the average balances of certificates of deposit of $45.4 million to $88.1 million for the three months ended December 31, 2023 from $42.7 million for the three months ended December 31, 2022.

Interest expense on FHLB borrowings decreased $150,000, or 98.7%, to $2,000 for the three months ended December 31, 2023 compared to $152,000 for the three months ended December 31, 2022. The decrease was due to a decrease in the average balance of borrowings of $15.7 million, or 99.0%, to $158,000 for the three months ended December 31, 2023 compared to $15.9 million for the three months ended December 31, 2022, as we have generally been able to utilize cash provided by our increase in deposits to fund our operations.

Net Interest Income. Net interest income less provision for credit losses increased $2.7 million, or 316.5%, to $3.6 million for the three months ended December 31, 2023 compared to $854,000 for the three months ended December 31, 2022.

Our interest rate spread decreased 28 basis points to 2.81% for the three months ended December 31, 2023, compared to 3.08% for the three months ended December 31, 2022, and our net interest margin increased 13 basis points to 3.47% for the three months ended December 31, 2023 compared to 3.34% for the three months ended December 31, 2022.

Provision for Credit Losses. Effective April 1, 2023, we adopted the CECL accounting methodology. As a result, we now determine periodic estimates of lifetime expected credit losses on loans and unfunded commitments and recognize the expected credit losses as allowances for credit losses. Previously, provisions for loan losses were charged to operations to establish an allowance for loan losses at a level necessary to absorb known and inherent losses in our loan portfolio that were both probable and reasonably estimable at the date of the consolidated financial statements.

We recorded a provision for credit losses of $191,000 for the three months ended December 31, 2023 compared to a provision for loan losses of $2.5 million for the three months ended December 31, 2022. We had recoveries of $19,000 during the three months ended December 31, 2023, and recoveries of $20,000 during the three months ended December 31, 2022. We had no loans charged off during the three months ended December 31, 2023, and had loans charged off of $2.4 million during the three months ended December 31, 2022.

33

Non-Interest Income. Noninterest income increased $326,000, or 57.8%, to $890,000 for the three months ended December 31, 2023 from $564,000 for the three months ended December 31, 2022. Other income increased $227,000, or 398.2%, to $284,000 for the three months ended December 31, 2023 compared to $57,000 for the three months ended December 31, 2022, due to a recovery of a previously written off receivable. Service charges on deposit accounts increased $30,000, or 18.3%, to $194,000 for the three months ended December 31, 2023 compared to $164,000 for the three months ended December 31, 2023, primarily due to an increase in overdraft income and debit card usage.

Non-Interest Expense. Noninterest expense increased $558,000, or 20.4% to $3.3 million for the three months ended December 31, 2023 from $2.7 million for the three months ended December 31, 2022. Salaries and employee benefits expense increased $522,000, or 37.8%, to $1.9 million for the three months ended December 31, 2023 from $1.4 million for the three months ended December 31, 2022, due to the reversal of the executive bonus accrual in November 2022. Executive bonus accruals are calculated monthly based on a forecast of year-end earnings. However, due to a significant provision for credit losses the Association recognized during 2022, it was determined that no executive bonus payouts would be made for the year ended March 31, 2023. Additionally, the Association entered into an Employee Stock Ownership Plan at the closing of the conversion, which resulted in additional ESOP related expenses of $126,000 during the three months ended December 31, 2023.

Federal deposit insurance premiums increased $20,000, or 46.5%, to $63,000 for the three months ended December 31, 2023 from $43,000 for the three months ended December 31, 2022, due to a combination of an increase in deposits and an increase in federal deposit insurance premium rates.

Income Tax Expense. We recognized income tax expense of $218,000 for the three months ended December 31, 2023 and an income tax benefit of $260,000 for the three months ended December 31, 2022, respectively, resulting in effective rates of 18.9% for the three months ended December 31, 2023 and 19.9% for the three months ended December 31, 2022. The most significant difference between our effective tax rate and statutory rates results from investment partnership tax credits.

Comparison of Operating Results for the Nine Months Ended December 31, 2023 and December 31, 2022

General. Net income increased $2.2 million, or 313.3%, to $2.9 million for the nine months ended December 31, 2023, compared to $691,000 for the nine months ended December 31, 2022. This increase was due primarily to an increase of $2.7 million in provision for credit losses for the nine months ended December 31, 2022. The Association recorded a significant provision for credit losses as we recognized a charge-off of $2.4 million on a commercial and industrial loan during 2022.

Interest and Dividend Income. Interest and dividend income increased $3.3 million, or 28.6%, to $15.2 million for the nine months ended December 31, 2023 from $11.9 million for the nine months ended December 31, 2022. The increase was due primarily to an increase in interest income on loans, which is our primary source of interest income, due to increases in market interest rates.

Interest income on loans increased $3.1 million, or 29.0%, to $13.8 million for the nine months ended December 31, 2023 from $10.7 million for the nine months ended December 31, 2022. The average balance of loans increased $28.3 million, or 8.5%, to $359.5 million for the nine months ended December 31, 2023 from $331.2 million for the nine months ended December 31, 2022. The increase is due to our continued focus on growing our loan portfolio consistent with maintaining asset quality. Our yield on loans increased 81 basis points to 5.12% for the nine months ended December 31, 2023 from 4.31% for the nine months ended December 31, 2022. The increase in yield was due to increases in market interest rates.

Interest income on securities increased $171,000, or 16.2%, to $1.2 million for the nine months ended December 31, 2023 from $1.1 million for the nine months ended December 31, 2022, due to a 71 basis point increase in the average yield from 2.12% for the nine months ended December 31, 2022 to 2.83% for the nine months ended December 31, 2023. The increase was offset by a $8.5 million decrease in the average balance of securities to $57.9 million for the nine months ended December 31, 2023 from $66.4 million for the nine months ended December 31, 2022. This decrease in the average balance of securities is attributed to paydowns received over the period.

Interest Expense. Interest expense increased $3.0 million, or 180.2%, to $4.7 million for the nine months ended December 31, 2023 compared to $1.7 million for the nine months ended December 31, 2022, due to increases in the average balance of and higher costs of interest-bearing liabilities.

Interest expense on deposits increased $3.2 million, or 226.6%, to $4.6 million for the nine months ended December 31, 2023 compared to $1.4 million for the nine months ended December 31, 2022. The increase was due to a 147 basis point increase in the average cost of deposits to 2.11% for the nine months ended December 31, 2023 from 0.64% for the nine months ended December 31, 2022. The increase in the average cost of deposits was due to the higher interest rate environment and an increase in the average balances of certificates of deposit of $46.8 million to $81.0 million for the nine months ended December 31, 2023 from $34.2 million for the nine months ended December 31, 2022.

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Interest expense on FHLB borrowings decreased $165,000, or 61.3%, to $104,000 for the nine months ended December 31, 2023 compared to $269,000 for the nine months ended December 31, 2022. The decrease was due to a decrease in the average balance of borrowings of $10.5 million, or 80.3%, to $2.6 million for the nine months ended December 31, 2023 compared to $13.1 million for nine months ended December 31, 2022.

Net Interest Income. Net interest income less provision for credit losses increased $3.1 million, or 42.6%, to $10.5 million for the nine months ended December 31, 2023 compared to $7.3 million for the nine months ended December 31, 2022.

Our interest rate spread decreased 53 basis points to 2.67% for the nine months ended December 31, 2023, compared to 3.20% for the nine months ended December 31, 2022, and our net interest margin decreased four basis points to 3.33% for the nine months ended December 31, 2023 compared to 3.37% for the nine months ended December 31, 2022.

Provision for Credit Losses. Effective April 1, 2023, we adopted the CECL accounting methodology. As a result, we now determine periodic estimates of lifetime expected credit losses on loans and unfunded commitments and recognize the expected credit losses as allowances for credit losses. Previously, provisions for loan losses were charged to operations to establish an allowance for loan losses at a level necessary to absorb known and inherent losses in our loan portfolio that are both probable and reasonably estimable at the date of the consolidated financial statements.

We recorded a provision for loan losses of $99,000 for the nine months ended December 31, 2023 compared to a provision for loan losses of $2.8 million for the nine months ended December 31, 2022. In addition, we recognized a reduction in beginning retained earnings of $402,000 related to an increase in our allowance for credit losses in connection with our adoption of CECL. Our allowance for credit losses was $5.9 million at December 31, 2023 compared to an allowance for loan losses of $5.4 million at March 31, 2023 and $5.4 million at December 31, 2022. The ratio of our allowance for credit/loan losses to total loans was 1.56% at December 31, 2023 compared to 1.53% at March 31, 2023 and 1.54% at December 31, 2022.

We had charge-offs of less than $1,000 and recoveries of $58,000 during the nine months ended December 31, 2023, compared to charge-offs of $2.4 million and recoveries of $55,000 during the nine months ended December 31, 2022.

To the best of our knowledge, we have recorded all lifetime expected credit losses on loans and unfunded commitments at December 31, 2023. However, future changes could result in material increases in our provision for credit losses. In addition, the OCC, as an integral part of its examination process, will periodically review our allowance for credit losses, and as a result of such reviews, we may have to adjust our allowance for credit losses.

Non-Interest Income. Noninterest income increased $379,000, or 20.6%, to $2.2 million for the nine months ended December 31, 2023 compared to $1.8 million for the nine months ended December 31, 2022. Service charges on deposit accounts increased $89,000, or 18.2%, to $579,000 for the nine months ended December 31, 2023 compared to $490,000 for the nine months ended December 31, 2022, primarily due to increases in overdraft income and debit card usage. Other income increased $125,000, or 55.8%, to $349,000 for the nine months ended December 31, 2023 compared to $224,000 for the nine months ended December 31, 2022. Gain on sale of loans increased $83,000, or 92.2%, to $173,000 for the nine months ended December 31, 2023 from $90,000 for the nine months ended December 31, 2022.

Non-Interest Expense. Noninterest expense increased $767,000, or 9.2%, to $9.1 million for the nine months ended December 31, 2023 from $8.4 million for the nine months ended December 31, 2022. Salaries and employee benefits increased $613,000, or 13.7%, to $5.1 million for the nine months ended December 31, 2023 from $4.5 million for the nine months ended December 31, 2022, due to the reversal of the executive bonus accrual in November 2022. Executive bonus accruals are calculated monthly based on a forecast of year-end earnings. However, due to a significant provision for credit losses the Association recognized during 2022, it was determined that no executive bonus payouts would be made for the year ended March 31, 2023. Additionally, the Association entered into an Employee Stock Ownership Plan at the closing of the conversion, which resulted in additional ESOP related expenses of $126,000 during the nine months ended December 31, 2023.

Federal deposit insurance premiums increased $92,000, or 77.3%, to $211,000 for the nine months ended December 31, 2023 from $119,000 for the nine months ended December 31, 2022, due to a combination of an increase in deposits and an increase in federal deposit insurance premium rates.

Income Tax Expense. Income tax expense increased $572,000, or 417.5%, to $709,000 for the nine months ended December 31, 2023 from $137,000 for the nine months ended December 31, 2022. The effective tax rate for the nine months ended December 31, 2023 and 2022 were 19.9% and 16.6%, respectively. The most significant difference between our effective tax rate and statutory rates results from investment partnership tax credits.

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Management of Market Risk

General. Our most significant form of market risk is interest rate risk because, as a financial institution, the majority of our assets and liabilities are sensitive to changes in interest rates. Therefore, a principal part of our operations is to manage interest rate risk and limit the exposure of our financial condition and results of operations to changes in market interest rates. All directors participate in discussions during the regular board meetings evaluating the interest rate risk inherent in our assets and liabilities, and the level of risk that is appropriate. These discussions take into consideration our business strategy, operating environment, capital, liquidity and performance objectives consistent with the policy and guidelines approved by them.

Our asset/liability management strategy attempts to manage the impact of changes in interest rates on net interest income, our primary source of earnings. Among the techniques we are using to manage interest rate risk are:

•maintaining capital levels that exceed the thresholds for well-capitalized status under federal regulations;

•maintaining adequate levels of liquidity;

•selling longer-term, fixed-rate loans, subject to market conditions; and

•continuing to diversify our loan portfolio by adding more commercial-related loans, which typically have shorter maturities and/or adjustable rates.

By following these strategies, we believe that we are better positioned to react to increases and decreases in market interest rates.

We have not engaged in hedging activities, such as engaging in futures or options. We do not anticipate entering into similar transactions in the future.

Net Interest Income Analysis. We analyze our sensitivity to changes in interest rates through a third-party net interest income ("NII") model. NII 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 NII would be for a one-year period and then calculate what the NII would be for the same period under the assumptions that the United States Treasury yield curve increases or decreases gradually by up to 400 basis points. A basis point equals one-hundredth of one percent, and 100 basis points equals one percent. An increase in the interest rates from 3% to 4% would mean, for example, a 100 basis point increase in the "Change in Interest Rates" column below.

The following table sets forth, at December 31, 2023, the calculation of the estimated changes in our NII that would result from the designated changes in the United States Treasury yield curve over a one-year period.

Changes in Interest Rates (basis points)(1)	NII Year 1 Forecast (Dollars in thousands)		Change in Net Interest Income Year One (% change from year one base)
400	$	15,327		(2.71	)%
300		15,429		(2.06	)
200		15,536		(1.38	)
100		15,641		(0.72	)
Base		15,754		—
(100)		15,845		0.58
(200)		15,952		1.26
(300)		16,148		2.50
(400)		16,338		3.71

(1)Assumes a gradual change in interest rates at all maturities over a one-year period.

The table above indicates that at December 31, 2023, we would have experienced a 1.38% decrease in NII in the event of a gradual, one-year 200 basis point increase in market interest rates, and a 1.26% increase in NII in the event of a gradual, one-year 200 basis point decrease in market interest rates.

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Market Value of Equity

We also use a third-party model to compute amounts by which the net present value of our assets and liabilities (market value of equity or "MVE") 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 400 basis points.

The following table sets forth, at December 31, 2023, the calculation of the estimated changes in our MVE that would result from the designated immediate changes in the United States Treasury yield curve.

			Estimated Increase (Decrease) in MVE						MVE as a Percentage of Present Value of Assets(3)
	(Dollars in thousands)
Changes in Interest Rates (basis points)(1)	Estimated MVE(2)		Dollar Change			Percent Change			MVE Ratio(4)			Increase (Decrease) (basis points)
400	$	73,687	$	(7,377	)		(9.10	)%		20.40	%		78
300		76,285		(4,779	)		(5.90	)		20.45			83
200		77,823		(3,241	)		(4.00	)		20.19			57
100		78,062		(3,002	)		(3.70	)		19.60			(2	)
Base		81,064		—			—			19.62			—
(100)		75,095		(5,969	)		(7.36	)		17.54			(208	)
(200)		66,993		(14,071	)		(17.36	)		15.21			(441	)
(300)		56,621		(24,443	)		(30.15	)		12.48			(714	)
(400)		58,407		(22,657	)		(27.95	)		12.53			(709	)

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

(2)MVE 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)MVE Ratio represents MVE divided by the present value of assets.

The table above indicates that at December 31, 2023, we would have experienced a 4.00% decrease in MVE in the event of an instantaneous parallel 200 basis point increase in the market interest rates and a 17.36% decrease in MVE in the event of an instantaneous 200 basis point decrease in market interest rates.

Certain shortcomings are inherent in the methodologies used in the above interest rate risk measurement. Modeling changes in NII and MVE 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. For instance, the NII and MVE tables presented above 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. However, the shape of the yield curve changes constantly and the value and pricing of our assets and liabilities, including our deposits, may not closely correlate with changes in market interest rates. Accordingly, although the NII and MVE tables may provide an indication of our interest rate risk exposure at a particular point in time and in the context of a particular yield curve, such measurements are not intended to and do not provide a precise forecast of the effect of changes in market interest rates on NII and MVE and will differ from actual results.

NII and MVE 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. Liquidity describes our ability to meet financial obligations that arise in the ordinary course of business. Liquidity is primarily needed to meet the borrowing and deposit withdrawal requirements of our customers and to fund current and planned expenditures. Our primary sources of funds are deposits, principal and interest payments on loans and securities, and proceeds from maturities of securities. We also have the ability to borrow from the FHLB. The Association had remaining availability for FHLB borrowings of approximately $40.9 million at December 31, 2023. The FHLB has sole discretion to deny additional advances. Additionally, the Association had the capacity to borrow $5.0 from a private bankers’ bank at December 31, 2023. We could significantly increase our borrowing capacity from the FHLB Topeka if we pledged additional assets as security. We also have the ability to participate in the Federal Reserve Board's Bank Term Funding Program if needed.

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While maturities and scheduled amortization of loans and securities are predictable sources of funds, deposit flows and loan prepayments are greatly influenced by market interest rates, economic conditions, and competition. Our most liquid assets are cash and short-term investments. The levels of these assets are dependent on our operating, financing, lending and investing activities during any period.

Our cash flows are comprised of three primary classifications: cash flows from operating activities, cash flows from investing activities, and cash flows from financing activities.

For the nine months ended December 31, 2023, cash flows from operating, investing, and financing activities resulted in a net decrease in cash and cash equivalents of $4.9 million. Net cash provided by operating activities amounted to $4.2 million, primarily due to net income of $2.9 million. Net cash used in investing activities amounted to $21.4 million, primarily due to a net increase in loans of $22.0 million and the purchase of available-for-sale investment securities of $6.0 million, partially offset by proceeds from paydowns of available-for-sale investment securities of $7.0 million. Net cash provided by financing activities amounted to $12.3 million, primarily due to the proceeds from the issuance of common stock.

For the nine months ended December 31, 2022, cash flows from operating, investing, and financing activities resulted in a net decrease in cash and cash equivalents of $11.4 million. Net cash provided by operating activities amounted to $3.3 million. Net cash used in investing activities amount to $30.8 million, primarily due to a net increase in loans of $40.1 million, partially offset by proceeds from paydowns of available-for-sale investment securities of $9.7 million. Net cash provided by financing activities amounted to $16.1 million, primarily due to a net increase in proceeds from short-term FHLB advances of $14.5 million. For further information, see the statements of cash flows contained in the consolidated financial statements in Part 1, Item 1 of this Quarterly Report.

Impact of Inflation and Changing Prices

The consolidated financial statements and related data presented in this Quarterly Report have been prepared according to GAAP which require the measurement of financial position and operating results in terms of historical dollars without considering changes in the relative purchasing power of money over time due to inflation. The primary impact of inflation on our operations is reflected in increased operating costs. Unlike most industrial companies, virtually all 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.

Concentration - Commercial Real Estate

Our market areas have experienced strong population and job growth, contributing to favorable economic conditions for generating new commercial loans. We target new commercial real estate loan originations to experienced, growing small- and mid-size owners and investors in our market area. Our commercial real estate loans are secured by owner-occupied and non-owner-occupied properties, including medical practices, insurance offices, warehouses, single- and multi-tenant retail and hotels. Our commercial residential real estate loans are secured by properties located within our primary market area, or we generally participate with a Nebraska-based bank for loans outside of our primary market area. Generally, our commercial real estate loans have terms and amortization periods up to 20 years with options for balloon payments and interest rate adjustments to occur every five years. The interest rate is fixed for the initial term (five years or less) and then adjusts again at the end of the next period matching the initial term or as negotiated at the end of the first term. Commercial real estate loans generally have terms and amortization periods up to 20 years. We generally limit the loan-to-value ratios of our commercial real estate loans to 75% of the purchase price or appraised value, whichever is lower.

We consider a number of factors in originating commercial real estate loans. We evaluate the qualifications and financial condition of the borrower, including credit history, profitability and expertise, as well as the value and condition of the property securing the loan. When evaluating the qualifications of the borrower, we consider the financial resources of the borrower, the borrower’s experience in owning or managing similar property and the borrower’s payment history with us and other financial institutions. In evaluating the property securing the loan, the factors we consider include the net operating income of the mortgaged property before debt service and depreciation, the ratio of the loan amount to the appraised value of the mortgaged property, and the debt service coverage ratio (the ratio of net operating income to debt service). Generally, the debt service coverage ratio on these loans is at least 1.20x. The significant majority of our commercial real estate loans are appraised by outside independent appraisers approved by the board of directors. Personal guarantees are generally obtained from the principals of commercial real estate borrowers.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

Information with respect to qualitative disclosures about market risk can be found in Item 2, "Management's Discussion and Analysis of Financial Condition and Results of Operation - Management of Market Risk."

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Item 4. Controls and 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.

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PART II—OTHER INFORMATION

Item 1. Legal Proceedings.

At December 31, 2023, we were not involved in any pending legal proceedings other than routine legal proceedings occurring in the ordinary course of business, the outcome of which would not be material to our financial condition or results of operations.

Item 1A. Risk Factors.

Not required for smaller reporting companies.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

On October 19, 2023, the Company completed the sale of 4,130,815 shares of its common stock, par value $0.01 per share, in connection with the mutual-to-stock conversion of the Association. The effective date of the Company's registration statement (Commission File No. 333-272636) was August 14, 2023. The Company registered for offer and sale shares of common stock, par value $0.01, at a sales price of $10.00 per share.

The selling agent who assisted the Company in the sale of its common stock was Keefe, Bruyette & Woods, Inc. ("KBW") For their services, KBW received a fee of 1.0% of the aggregate purchase price of the shares of common stock sold in the subscription offering, and $30,000 for conversion agent and data processing records management agent, as well as reimbursements for out-of-pocket expenses and legal expenses related to its marketing agent services and its conversion agent and records manager services.

As of December 31, 2023, the Company incurred expenses in connection with the offer and sale of the common stock totaling $1.9 million, resulting in net proceeds of $39.4 million. The Company utilized $3.3 million to fund an ESOP loan and invested $19.7 million of the net proceeds it received from the sale into the Association's operations, and has retained the remaining amount for general corporate purposes.

Item 3. Defaults Upon Senior Securities.

None.

Item 4. Mine Safety Disclosures.

None.

Item 5. Other Information.

None.

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Item 6. Exhibits.

Furnish the exhibits required by Item 601 of Regulation S-K (§ 229.601 of this chapter).

Exhibit Number	Description
10.1	Employment Agreement with Steven D. Kunzman (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K of the Company (file no. 001-41844), filed with the SEC on October 26, 2023).
10.2	Change in Control Agreement with Lisa A. Harris (incorporated by reference to Exhibit 10.2 to the Current Report on Form 8-K of the Company (file no. 001-41844), filed with the SEC on October 26, 2023).
10.3	Change in Control Agreement with Kurt A. Haecker (incorporated by reference to Exhibit 10.3 to the Current Report on Form 8-K of the Company (file no. 001-41844), filed with the SEC on October 26, 2023).
31.1*	Certification of Principal Executive Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*	Certification of Principal Financial Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1*	Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2*	Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS	Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because XBRL tags are embedded within the Inline XBRL document.
101.SCH	Inline XBRL Taxonomy Extension Schema Document
101.CAL	Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF	Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB	Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE	Inline XBRL Taxonomy Extension Presentation Linkbase Document
104	Cover Page Interactive Data File (embedded within the Inline XBRL document)

* Filed herewith.

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SIGNATURES

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.

	Central Plains Bancshares, Inc.
Date: February 13, 2024	By:	/s/ Steven D. Kunzman
		Steven D. Kunzman
		Chairman of the Board, President and Chief Executive Officer
Date: February 13, 2024	By:	/s/ Bradley M. Kool
		Bradley M. Kool First Vice President and Chief Financial Officer

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