Marathon Bancorp swung from near-breakeven to $1.79M net income in the year ended June 30, 2026 as net interest margin widened 63bps to 3.59% — but a 4.59% return on equity shows the capital raised in its 2025 conversion is still only partly at work.
A margin recovery, not a growth story
Marathon Bancorp — the holding company for Marathon Bank, a five-branch Wisconsin savings bank headquartered in Wausau — earned $1.79 million in the fiscal year ended June 30, 2026, against $42,000 the year before. The 412% jump looks dramatic, but the prior year was close to breakeven, so the percentage says less than the drivers do. Almost all of the improvement came from one place: net interest income rose $2.16 million, or 35.8%, to $8.21 million.
Net interest income is what a bank earns on loans and securities minus what it pays on deposits and borrowings — for Marathon it is roughly 91% of total revenue, so it effectively is the income statement. The bank's net interest margin (NIM — net interest income as a percentage of the average assets that earn interest, the standard measure of how profitably a bank turns funding into lending) widened to 3.59% from 2.96%.
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Non-interest expense
$6.87M
$6.87M
−0.1%
Pre-tax income
$2.13M
$0.011M
+$2.12M
Net income
$1.79M
$0.042M
+412.0%
Diluted EPS
$0.66
$0.02
+$0.64
Net interest margin (NIM)
3.59%
2.96%
+63 bps
Interest rate spread
3.11%
2.56%
+55 bps
Efficiency ratio
76.01%
101.21%
−25.2 pts
Return on average assets
0.72%
0.02%
+70 bps
Return on average equity
4.59%
0.14%
+445 bps
Non-performing loans / total loans
0.03%
0.03%
unchanged
Non-performing assets / total assets
0.41%
0.45%
−4 bps
Book value per share
$16.32
$15.55
+5.0%
Note on the efficiency ratio: it is operating expenses divided by revenue, so lower is better. At 101.21% in FY2025 the bank was spending slightly more than it brought in; 76.01% means it now keeps about 24 cents of each revenue dollar before credit costs and tax. That is still high for a bank — the mid-50s to low-60s is typical for profitable community banks — and is the clearest evidence that this year's result is a recovery rather than a settled level of earnings.
Where the margin came from: asset repricing, not cheaper funding
The rate/volume table in the filing splits the $2.16 million increase in net interest income into $1.29 million from rate changes and $870,000 from higher balances. Rate did roughly 60% of the work.
That split matters because it is the opposite of what most US banks reported over the same period. With the federal funds rate falling, the usual FY2026 story is funding costs dropping faster than asset yields. Marathon's cost of interest-bearing liabilities fell just one basis point, to 2.10% from 2.11%, while the yield on interest-earning assets rose 54 basis points, to 5.21% from 4.67%. Two things held funding costs up:
The loan portfolio was funded partly with borrowings, not deposits. Federal Home Loan Bank advances averaged $19.2 million, up $7.0 million from $12.1 million, and interest paid on them rose $242,000 to $711,000. At an average 3.71%, those advances cost nearly double the 1.90% average rate on deposits — so even though the rate on the advances themselves fell (from 3.86%), using more of them pushed blended funding costs up.
Certificates of deposit were priced to win balances. CD balances rose $7.8 million, or 11.7%, on what the filing describes as "offering higher rates on specific terms (specials) to attract new customers and meet internal lending demand."
On the asset side the gain is a mix effect plus new-origination pricing. The average yield on loans rose 60 basis points to 5.33%, which management attributes to higher rates on new originations, a growing share of commercial and multi-family real estate loans (which carry higher rates than the rest of the book), and a decision to hold higher-rate one-to-four-family mortgages on balance sheet rather than sell them. One quirk flatters the securities yield: a floating-rate corporate bond bought in 2021 was paying 10.17% in its final three months before being called in October 2025, lifting the debt-securities yield 51 basis points on a portfolio that is now only $3.9 million — too small to matter to the consolidated result.
Cash was the one drag: the yield on cash and equivalents fell 76 basis points as the federal funds rate declined, costing $110,000 of interest income.
The expense line is flat, but the composition changed completely
Non-interest expense was $6.87 million in both years — a $8,000 decrease. That flatness hides a substantial swap:
Expense line
FY2026
FY2025
Change
Salaries and employee benefits
$3,886K
$3,646K
+$240K
Professional fees
$856K
$701K
+$155K
Occupancy and equipment
$891K
$915K
−$24K
Data processing and office
$315K
$450K
−$135K
Foreclosed assets, net
$56K
$429K
−$373K
Other
$578K
$487K
+$91K
Total
$6,866K
$6,874K
−$8K
The $373,000 decline in foreclosed-asset expense is a non-recurring item that deserves weight, because it is roughly 18% of the $2.12 million pre-tax swing. It traces to a single property: a construction loan the bank foreclosed on in fiscal 2023, taken onto the books at $2.3 million, written down to $1.4 million in fiscal 2024 (a $937,100 valuation allowance), then written down a further $378,767 in fiscal 2025 after the bank accepted a $1.1 million offer. That sale contract was terminated in the quarter ended December 31, 2025, and the property has been relisted at $1.5 million against a carrying value of $996,000. So the write-downs stopped, but the asset did not actually leave — it is still the bulk of the bank's non-performing assets, and a buyer at the new ask has yet to appear.
Putting the pieces together, the pre-tax bridge from $11,000 to $2.13 million is: net interest income +$2,162K, fee income +$79K, foreclosed-asset costs +$373K, offset by other operating expenses −$365K and the credit provision −$129K.
Two smaller items worth flagging. First, salaries rose 6.6% while full-time equivalent headcount fell from 35 to 31; the filing attributes the increase to expansion of the employee stock ownership plan and new hires, and ESOP compensation expense alone rose to $141,752 from $61,667 as the post-conversion share block began releasing to participants. Second, data processing fell 30% on a new core-software contract that began in September 2025, which management expects to save about $185,000 a year — a real, identified, recurring saving rather than a timing swing, and one that had only ten months of effect in FY2026.
The capital question sitting underneath the numbers
Marathon completed its second-step conversion on April 21, 2025 — ten weeks before FY2025 ended — selling 1,693,411 shares at $10.00 and listing on Nasdaq. (A second-step conversion is when a mutual holding company, in this case one owned by depositors, dissolves and sells its remaining ownership to public shareholders; it raises permanent capital in one shot.) FY2026 is therefore the first full year the bank operated with that money.
The deployment is visible: net interest-earning assets — the excess of earning assets over interest-bearing funding, essentially the portion of the book funded by free capital — rose $14.0 million, or 36.8%, to $51.9 million. Gross loans grew $16.7 million, or 8.3%, to $219.3 million, led by one-to-four-family residential (+$7.2 million, +12.8%), multi-family (+$6.1 million, +12.8%) and commercial real estate (+$4.0 million, +4.4%). Total assets reached $261.0 million, up 9.3%.
But the return on that capital is where the analysis has to land. Average equity was 15.78% of average assets, up from 13.87%. Return on equity of 4.59% is low — a bank earning 0.72% on assets while carrying that much capital cannot generate a competitive return for shareholders until either earnings rise materially or the capital base comes down. Management has started on the second path: a repurchase program for up to 146,931 shares (about 5% of shares outstanding) was adopted April 24, 2026, but only 4,264 shares had been bought back under it through June 30, at an average of $15.23 — leaving 142,667 authorized. No dividend is paid, and the company states it does not currently intend to start one. Book value is $16.32 per share.
Takeaway: The earnings turnaround is genuine and rate-driven — 63 basis points of margin expansion on a portfolio shifting toward commercial and multi-family lending — but at a 4.59% return on equity, Marathon is still earning a sub-market return on capital it raised in April 2025 and has only partly put to work. The decisive question for FY2027 is not whether the margin holds; it is whether loan growth, the identified $185,000 core-processing saving and the barely-started buyback can together move ROE toward a level that justifies the equity base.
Credit quality: clean book, one stubborn property
Asset quality is genuinely strong and essentially unchanged. Non-performing loans (loans generally more than 90 days past due or on non-accrual) were $66,000, or 0.03% of loans — the same ratio as last year — and the bank recorded no meaningful net charge-offs in either year. The allowance for credit losses stands at $1.75 million, or 0.80% of loans, down from 0.84% as the loan book grew faster than the reserve. The provision swung to a $35,000 charge from a $94,000 recovery, which the filing attributes to portfolio growth rather than deterioration.
Total non-performing assets of $1.06 million, or 0.41% of assets, are almost entirely the $996,000 foreclosed property discussed above — a problem asset from three years ago, already written down twice, rather than evidence of anything happening in the current book.
The concentration is the thing to watch instead. Commercial real estate ($95.9 million, 43.7% of loans, of which $85.2 million is non-owner-occupied) plus multi-family ($53.9 million, 24.6%) make up 68.3% of the loan portfolio, against Tier 1 capital that is 15.34% of average assets. For a bank with 31 employees, that is a meaningful bet on Southeastern Wisconsin commercial property, concentrated in office, industrial, warehouse and small retail. The average multi-family loan is $1.1 million and the largest is $4.5 million, so single-name risk is contained — but the portfolio's performance will move with one regional property market.
Funding: growing, but leaning on rate-sensitive money
Deposits rose $14.5 million, or 8.3%, to $189.8 million. The mix is the concern rather than the total:
Deposit category
6/30/2026
% of total
6/30/2025
% of total
Non-interest-bearing demand
$22.2M
11.68%
$22.5M
12.82%
Demand, NOW and money market
$55.3M
29.12%
$48.1M
27.45%
Savings
$37.5M
19.75%
$37.6M
21.48%
Certificates of deposit
$74.9M
39.45%
$67.0M
38.25%
Free deposits — the non-interest-bearing accounts that cost nothing — shrank in dollars and fell more than a percentage point as a share of funding. Meanwhile CDs, the most price-sensitive category, grew to 39.45% of deposits and include $13.8 million of brokered money. Uninsured deposits (balances above the $250,000 FDIC limit) rose to $77.3 million from $64.9 million, or from 37% to 41% of total deposits. None of this is alarming at current levels, and management notes the growth in commercial demand balances comes from requiring deposit relationships when granting new loans — a sound practice. But $63.7 million of time deposits mature within twelve months, and retaining them at current rates is a live assumption rather than a given.
Liquidity itself is comfortable: cash rose 44.7% to $20.8 million, and the bank has an $87.0 million Federal Home Loan Bank line with $20.0 million drawn, $19.6 million available from the Federal Reserve, and a $5.0 million correspondent fed funds line undrawn. The Bank is classified as "well capitalized."
Outlook
Management gives no formal earnings guidance — typical for a bank this size — so the forward read has to be built from what the filing commits to:
A sixth branch in New Holstein, Wisconsin, is planned for the fourth quarter of calendar 2026. New branches cost money before they gather deposits, so expect occupancy and salary expense to rise in FY2027 ahead of any funding benefit.
The core-processing contract saves about $185,000 annually and will have a full twelve months of effect in FY2027 versus roughly ten in FY2026.
142,667 shares remain authorized for repurchase. With the stock trading below book value (the April–June repurchases averaged $15.23 against $16.32 book), buybacks add to book value per share — an unusually cheap way to lift returns while earnings build.
Our read on trajectory: the margin gain should largely stick, because it came from loans repricing upward and from a deliberate shift into higher-yielding commercial and multi-family credit, not from a one-time event. The harder part is that further margin expansion will be slower — the asset yield has already caught up, and funding costs are being held up by CD specials and FHLB advances rather than falling with the federal funds rate. From here the earnings lever is operating leverage: revenue of roughly $9.0 million against $6.9 million of costs leaves little room, so growing the balance sheet without growing expenses proportionally is what moves ROE. Two specific things to watch in FY2027 are whether the foreclosed property finally sells (a sale near the $1.5 million ask would produce a gain against the $996,000 carrying value; another failed listing would suggest the current mark is still optimistic) and whether the buyback accelerates beyond the token pace of its first two months.
One structural caveat for anyone reading this as an investment case: the public float is very small — the aggregate market value of shares held by non-affiliates was $6.9 million at December 31, 2025, against 3,009,903 shares outstanding — so the shares trade thinly and price moves may not track the fundamentals closely in either direction.
Source: Marathon Bancorp, Inc. Form 10-K for the fiscal year ended June 30, 2026, filed with the SEC on September 16, 2026 (CIK 0001835385).