Note 2 - Investment SECURITIES

The unrealized losses at September 30, 2026 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 September 30, 2026, all 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. The fair value is expected to recover as the bonds approach maturity.

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 more likely than not, 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.

No allowance for credit losses was required to be recorded as of September 30, 2026, as there was no credit quality deterioration noted. Therefore, no provision for credit losses on securities was recognized for the six months ended September 30, 2026.

During the quarter ended September 30, 2026, the Company purchased a $3.0 million bank subordinated debt security that was classified as held-to-maturity. The Company evaluates its held-to-maturity securities portfolio for expected credit losses in accordance with ASC 326. Management monitors the credit quality of held-to-maturity securities based on the nature of the security and relevant credit-risk factors, which may include external credit ratings, payment performance, the financial condition of the issuer or guarantor, and other available information regarding the issuer’s ability to meet its contractual obligations.

For the Company’s held-to-maturity securities, management evaluated expected credit losses based on the credit characteristics of the securities and relevant current conditions. Management identified no deterioration in credit quality or other conditions indicating that contractual principal and interest payments were not expected to be received.

With respect to the $3.0 million bank subordinated debt security, the Company monitors the issuer’s financial condition, including regulatory capital, asset quality, earnings, liquidity and other relevant credit-risk indicators. At September 30, 2026, the subordinated debt was rated BBB (low) by Morningstar DBRS, which is considered investment grade. Based on management’s evaluation of the held-to-maturity securities portfolio, including the subordinated debt security, no allowance for credit losses was required on the Company’s held-to-maturity securities at September 30, 2026.

At September 30, 2026 and March 31, 2026, investment securities with amortized cost of $26.0 million, and $22.5 million, respectively, and estimated fair value of $23.6 million and $21.2 million, respectively, were pledged to secure public, consumer, and commercial deposits.

During the six months ended September 30, 2026, an available-for-sale investment security was redeemed following a tender pursuant to an offer by the issuer. The Association received proceeds of $1.1 million and recognized a loss of $226,000 upon redemption. The proceeds were subsequently reinvested in higher-yielding available-for-sale mortgage-backed securities. The Association had no sales of available-for-sale securities during the six months ended September 30, 2026 or 2025.

Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

There were no sales of securities held to maturity during the six months ended September 30, 2026 and 2025.