Monroe Federal Bancorp, Inc. (MFBI)
Monroe Federal Bancorp, formed in 2024, is the holding company for Monroe Federal Savings & Loan Association, a century-old community thrift in the Dayton, OH area. It operates four branches and specializes in 1–4 family residential mortgages, but also offers commercial real estate, home equity, ...
Monroe Federal Bancorp, Inc.
10-K Review for Fiscal Year Ended March 31, 2025
Table of Contents
Warren.AI 💰 4.2 / 10
- Executive Summary
- Company Overview
- Market and Competition
- Lending & Asset Quality
- Investment Portfolio
- Funding, Liquidity & Capital
- Financial Performance
- Risk Factors
- Regulatory Environment
- Corporate Governance & Management
- Outlook & Investment Thesis
Executive Summary
Monroe Federal Bancorp, Inc.
- Incorporated: May 21, 2024 (Conversion completed October 23, 2024)
- Headquarters: Tipp City, Ohio
- Operations: Four offices in Tipp City, Dayton, and Vandalia, Ohio
- Fiscal Year 2025 Highlights:
- Total assets: $144.3 million (–7.1% YoY)
- Net loans (ex-ACL): $107.0 million (–0.8% YoY)
- Deposits: $120.7 million (–15.1% YoY)
- Stockholders’ equity: $12.1 million (+40.9%)
- Net loss: –$0.33 million (vs. +$0.06 million prior year)
- Net interest margin: 2.60% (vs. 2.54% prior year)
- Nonperforming assets: $0.63 million (0.44% of assets)
Investment Score: 4.2 / 10
Small community lender with conservative underwriting and improving capital but a modest FY25 loss, limited scale, and concentrated market risk.
Company Overview
Monroe Federal Bancorp is the newly formed holding company for Monroe Federal Savings & Loan Association, a mutual-to-stock conversion completed in October 2024. The Bank traces its roots to an 1875 charter, focusing on classic thrift activities:
- Core Business: Accept retail deposits; originate 1–4 family residential mortgages.
- Loan Mix: 64.6% 1–4 family residential, 22.4% commercial real estate, 4.1% home equity, 3.9% commercial & industrial, 2.3% construction & land, 1.2% consumer.
- Investment Portfolio: U.S. agency, GSE mortgage-backed, state & muni debt; total $23.1 million.
- Employees & Branches: 27 employees; four offices serving OhioDayton region.
Key Strengths
- One of the few locally owned thrifts in Tipp City–Dayton area
- Conservative underwriting and historically low loan losses
- Strong community ties; majority of loans and deposits in primary market area
Operational Strategy
- Continue to emphasize 1–4 family mortgage originations
- Prudently grow commercial real estate & C&I lending
- Develop infrastructure to sell secondary market mortgages
- Grow low-cost core deposits and manage interest rate risk
Market and Competition
Primary Market Area: Miami & Montgomery Counties, Ohio
- Population ~650k; Wright-Patterson AFB is a major employer
- Diverse economy: healthcare, manufacturing, government, professional services
Competition: Money-center/regional banks, community banks, credit unions, fintech
- Market share at June 30, 2024: 2.8% (Miami) and 0.68% (Montgomery)
- High competition for deposits and mortgages
Lending & Asset Quality
Loan Portfolio ($108.2 million)
| Category | $ Millions | % of Total |
|---|---|---|
| One–Four Family Residential | 69.9 | 64.6% |
| Commercial Real Estate | 24.2 | 22.4% |
| Home Equity | 4.4 | 4.1% |
| C&I | 4.3 | 3.9% |
| Construction & Land | 2.5 | 2.3% |
| Consumer | 1.3 | 1.2% |
Highlights
- 100% held–to–own; no loan sales
- 1% subprime 1–4 family exposure (credit scores <620)
- One–Four family LTV generally ≤ 90%; up to 95% with PMI
- CRE LTV ≤ 75%; 5-year rate caps, 20-year amortization
Asset Quality
- Nonperforming assets: $628k (0.58% of loans, 0.44% of assets)
- 90+ days past due: $628k (all on nonaccrual)
- Criticized & classified: $128k substandard; $0 doubtful; $0 loss
- Allowance for credit losses: $853k (0.79% of loans)
- FY25 CECL Adoption Impact: +$361k to ACL, +56% vs. prior methodology
Credit Metrics
| Metric | FY25 | FY24 |
|---|---|---|
| ACL / Loans | 0.79% | 0.79% |
| ACL / Nonperforming Loans | 135% | N/A |
| Nonperforming Loans / Total Loans | 0.58% | 0% |
| Net Charge-offs / Avg Loans | 0% | 0.05% |
Investment Portfolio
Available-for-sale securities: $23.1 million
- Agency debt, GSE mortgage-backed & state/muni securities
- Avg. yield 1.67% on $29.5 million (FY25) vs. 1.65% (FY24)
- Net unrealized loss (FV < Amortized cost): $5.1 million
Risk Management
- 70%–80% in floating-rate or shorter-duration securities
- Actively manage calls, maturities, prepayments to fund loans, liquidity
- No material OTTI recognized; declines reflect rate shifts, not credit
Funding, Liquidity & Capital
Deposits: $120.7 million (–15.1% YoY)
- Core deposits $86.9 million; certificates $33.8 million
- Avg. cost 1.56% (FY25) vs. 1.28% (FY24)
- $6.7 million uninsured CDs (5.6% of total deposits)
Borrowings: $10 million FHLB advances (avg. rate ~4.97%)
- $35.4 million borrowing capacity; collateralized by 1–4 family loans
- No Fed discount window usage
Liquidity: 2% of assets in cash & equivalents; $3 million Fed funds facility
Capital:
- CET1: 14.2% / Tier1: 14.2% / Total Capital: 15.0% of RWA at FY24
- Well capitalized under PCA guidelines; 10.0% community bank leverage ratio at FY25
Financial Performance
Interest Income: +3.7% to $5.90 million
- Loans: +4.8% avg yield at 4.81%; portfolios repricing in rising rate cycle
- Securities & deposits: marginal mix shifts and rate changes
Interest Expense: +12.7% to $2.23 million
- Deposit funding costs up 28 bp to 1.56%; time deposits repriced in FY25
- FHLB funding steady at ~5.0%
Net Interest Income (NII): $3.67 million vs. $3.72 million
- Net interest spread 2.42% vs. 2.39%; NIM 2.60% vs. 2.54%
Provision for Credit Losses: $15 k vs. (–$143 k)
- CECL adoption accounted for +$361 k; FY25 modest incremental provision
Noninterest Income: $354 k vs. $344 k
- BOLI earnings +12.9%; ancillary fees stable
Noninterest Expense: $4.47 million vs. $4.19 million
- Audit & professional fees +114%; stock‐conversion costs
- Staffing & compensation +3%; FDIC premiums –23%
Net (Loss) Income: –$0.33 million vs. +$0.06 million
| Ratio / Metric | FY25 | FY24 |
|---|---|---|
| Return on Avg Assets | –0.22% | 0.04% |
| Return on Avg Equity | –3.33% | 0.73% |
| Efficiency (Noninterest/Revenue) | 111% | 103% |
| Provision / NII | 0.4% | –3.9% |
| Loan / Deposit Ratio | 88.6% | 76.0% |
Risk Factors (Item 1A Highlights)
- Economic & Rate Risk: Local economy or rapid rate shifts could erode margins, credit quality or deposit gathering
- Credit Losses / ACL: CECL adds ACL volatility; true credit losses may exceed current reserves
- Deposit Competition: High rate environment intensifies funding costs, deposit flight risk
- Concentration: ~65% of loans in 1–4 family residential mortgage; ~47% of deposits uninsured in high-wealth accounts
- Operational / Cybersecurity: IT failures or breaches could disrupt operations, increase expenses
- Conversion & Scale: Costs of public‐company reporting; limited scale vs. larger banks
Regulatory Environment
- Regulated by OCC (thrift), FDIC (insurance) & FRB (holding co.)
- Well-capitalized under Prompt Corrective Action; 10% CBLR
- Remains subject to Community Reinvestment, BSA/AML, and consumer laws
- Conversion costs to maintain public co. compliance (SOX, 10-K, 10-Q)
Corporate Governance & Management
- Board of Directors: Seven members, all but CEO are independent
- Committee Structure: Audit, Compensation, Nominating/Governance
- Key Executives:
- CEO: Lewis Renollet (39 yrs banking, President since 2014)
- CFO: Lisa Bird (Monroe employee since 1987)
- Commercial Lending: Doug Thompson (C&I background, 2019)
- Retail Banking: Jim Conley (PNC veteran, 2018)
- Business Development: Christina Hassink (2012)
Outlook & Investment Thesis
Strengths
- Deep community roots and established local franchise
- Conservative underwriting, low credit losses, sound underwriting policies
- Well above required regulatory capital
Challenges
- FY25 loss and rising noninterest expense post-conversion
- Shallow regional scale vs. larger competitors
- Concentrated loan portfolio in a single metro region
Opportunities
- Broaden product mix: >22% CRE, rising C&I and HELOC originations
- Leverage secondary market for 1–4 family mortgages to hedge rates
- Potential expansion via de novo branches or M&A in niche markets
Investment Risks
- Continued net losses or thin profitability in sustained high rate / economic stress
- Deposit attrition in a rate-sensitive environment
- Technology & cybersecurity expense creep
Conclusion: Monroe Federal offers a classic community bank franchise with solid underwriting, strong capital and a clear post-conversion road map. However, FY25 net loss, high noninterest expenses and limited scale restrain near-term earnings potential. The low-teens NIM and modest loan-to-deposit ratio provide room to rebuild profitability—but only if local market conditions remain stable and management executes new loan sales and deposit-growth strategies. This leads to an Investment Score of 4.2/10, reflecting a cautious stance: viable franchise but requiring successful execution to justify a higher score.