Winchester Bancorp, Inc.WSBK決算レポート

Item 6. [Reserved] 42 It em 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations. This discussion and analysis reflects our consolidated financial statements and other relevant statistical data, and is intended to enhance your understanding of our financial condition and results of operations.

The information in this section has been derived from the consolidated financial statements, which appear elsewhere in this Annual Report. Overview Total assets increased $96.4 million, or 11.3%, to $949.4 million at June 30, 2025, from $853.0 million at June 30, 2024. The increase was primarily due to increases in loans, investments and cash and cash equivalents.

Net loss for the year ended June 30, 2025 was $874,000, a decrease of $1.7 million, compared to net income of $786,000 for the year ended June 30, 2024.

The decrease was due to a one-time donation of $400,000 in cash and 185,907 shares of common stock to the Winchester Savings Bank Charitable Foundation at a total market value of $2.3 million, resulting in an after-tax charge of $1.6 million in connection with the reorganization and stock offering.

Selected Financial Data (dollars in thousands except per share data) For the Years Ended June 30, 2025 2024 Earnings Data Net interest income $ 17,522 $ 14,374 Non-interest income 1,792 1,779 Total net interest income and non-interest income 19,314 16,153 Provision for credit losses 2,066 514 Non-interest expense 18,778 14,885 Pre-tax income (loss) (1,530 ) 754 Net income (loss) (874 ) 786 Per share Data Basic and diluted loss per share $ (0.10 ) N/A Book value per share $ 12.41 N/A Earnings Return on average assets (0.10 )% 0.10 % Return on average stockholders' equity (1.08 )% 1.01 % Net interest margin 2.05 % 1.90 % Cost of deposits 3.17 % 2.92 % Efficiency ratio 97.22 % 92.15 % Balance Sheet Total assets $ 949,378 $ 852,968 Loans, net $ 751,220 $ 681,951 Total stockholders' equity $ 115,352 $ 80,288 Asset quality Allowance for credit losses (ACL) $ 4,151 $ 3,451 ACL/Total loans 0.55 % 0.50 % ACL/Total nonperforming loans (NPLs) 187.57 % 245.45 % Net charge-offs/average total loans (0.20 )% — Capital Ratios Stockholders' equity/total assets 12.15 % 9.41 % 43 Critical Accounting Policies The discussion and analysis of the financial condition and results of operations are based on our financial statements, which are prepared in conformity with GAAP.

The preparation of these financial statements requires management to make estimates and assumptions affecting the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities, and the reported amounts of income and expenses. We consider the accounting policy discussed below to be a critical accounting policy.

The estimates and assumptions that we use are based on historical experience 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. The 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.

The following represents our critical accounting policy. Allowance for Credit Losses on Loans. The allowance for credit losses on loans is a valuation account that is deducted from the loans’ amortized cost basis to present the net amount expected to be collected on the loans.

Such allowance is based on losses expected to arise over the life of the asset (contractual term). The allowance for credit losses on loans is established through a provision for credit losses charged to earnings. Loan losses are charged against the allowance when management believes the uncollectibility of a loan balance is confirmed.

Subsequent recoveries, if any, are credited to the allowance. We measure the allowance for credit losses on loans using the SCALE method, which is a simple, spreadsheet-based method developed by the Federal Reserve Board to assist community banks in calculating a CECL compliant allowance for credit losses using proxy expected lifetime loss rates.

The SCALE tool is a template designed for smaller community banks with total assets of less than $1 billion. It uses publicly available data to derive the initial proxy lifetime loss rates.

Management uses judgment to further adjust the proxy expected lifetime loss rates with qualitative factors to reflect the facts and circumstances of our internal loss history and credit risk factors for each loan segment. The allowance for credit losses on loans is measured on a collective (pool) basis when similar characteristics exist.

We segment our loan portfolio to correspond to call report classification to make peer data more useful. The allowance for credit losses on loans is evaluated on a regular basis by management. This evaluation is inherently subjective as it requires estimates that are susceptible to significant revision as more information becomes available.

For example, an increase of 25 basis points as to our lifetime loss rate for qualitative factors for all loan categories at June 30, 2025 would have increased our allowance for credit losses on collectively evaluated loans at that date to $5.4 million from $3.9 million. Loans that do not share risk characteristics are evaluated on an individual loan basis.

Loans evaluated individually are not also included in the collective evaluation.

For loans that are collateral dependent, that is, when the borrower is experiencing financial difficulty and repayment is expected to be provided substantially through the operation or sale of the collateral, expected credit losses are based on fair value of the collateral at the reporting date, adjusted for selling costs as appropriate.

An unallocated component may be maintained to cover uncertainties that could affect management’s estimate of probable losses. The unallocated portion of the allowance reflects the margin of imprecision inherent in the underlying assumptions used in the methodologies for estimating collectively and individually evaluated loans in the portfolio.

Although we believe that we use the best information available to establish the allowance for credit losses on loans, future adjustments to the allowance may be necessary if economic conditions differ substantially from the assumptions used in making the evaluation.

In addition, the Massachusetts Commissioner of Banks and the FDIC, as an integral part of their examination process, periodically review our allowance for credit losses on loans, and as a result of such reviews, we may have to adjust our allowance for credit losses on loans.

A large loss could deplete the allowance and require increased provisions to replenish the allowance, which would adversely affect earnings.

Effective on July 1, 2025, the Company has changed the methodology to calculate the allowance for credit losses on loans and off-balance sheet credit exposures to a discounted cash flow method from the SCALE method as the SCALE method is not applicable for institutions with assets greater than $1 billion.

The Company does not expect the resulting 44 methodology change to have a significant impact on the total allowance for credit losses as a result of this methodology change. For more information on our critical accounting policies, see Note 2 of the notes to our consolidated financial statements.

Comparison of Financial Condition at June 30, 2025 and June 30, 2024 Total Assets . Total assets increased $96.4 million, or 11.3%, to $949.4 million at June 30, 2025, from $853.0 million at June 30, 2024. The increase was primarily due to increases in loans, securities and cash and cash equivalents. Cash and Cash Equivalents .

Cash and cash equivalents increased $11.1 million, or 25.2%, to $55.2 million at June 30, 2025 from $44.1 million at June 30, 2024. The increase represents cash proceeds from our initial public offering. Investment Securities .

Investment securities, comprised of both available for sale and held to maturity securities, aggregated $104.5 million at June 30, 2025 compared to $86.6 million at June 30, 2024, as excess cash from the stock offering was invested in securities. Gross Loans .

Loans increased $69.7 million, or 10.2%, to $754.1 million at June 30, 2025 compared to $684.4 million at June 30, 2024.

The primary increases were in multi-family real estate loans, which increased by $41.8 million, or 33.5%, one- to four-family residential real estate loans which increased by $18.8 million, or 5.6% and commercial real estate loans which increased by $16.9 million, or 19.8%. Partially offsetting those increases was a decrease of $5.5 million or 5.4% in the construction loan portfolio.

The aforementioned increase in the loan portfolios reflects our strategy to continue to diversify into higher yielding multi-family and commercial real estate loans to improve portfolio yields and manage interest rate risk. In addition, we will continue to originate single-family residential real estate loans to support local homebuyers.

The recent increase in one- to four-family residential real estate loans was mostly due to our establishing new broker relationships. The allowance for credit losses on loans was $4.2 million at June 30, 2025 and $3.5 million at June 30, 2024, which represented 0.55% and 0.50% of total loans at June 30, 2025 and June 30, 2024, respectively.

The allowance for credit losses for off balance sheet commitments was $1.2 million at June 30, 2025 and June 30, 2024. Total nonaccrual loans were $2.2 million at June 30, 2025, compared to $1.4 million at June 30, 2024. The increase was primarily due to a $622,000 increase in residential real estate loans and a $270,000 increase in commercial loans.

Total loans past due 30 days or greater were $1.8 million at June 30, 2025 compared to $1.3 million at June 30, 2024. The increase was primarily due to a $340,00 increase in residential real estate loans and a $270,000 increase in commercial loans.

The allowance for credit losses on loans to nonaccrual loans was 187.6% at June 30, 2025 compared to 245.5% at June 30, 2024. Deposits . Deposits increased $43.8 million, or 6.9%, to $679.2 million at June 30, 2025 from $635.4 million at June 30, 2024.

The increase was due primarily to an increase in money market accounts, which increased $34.0 million, or 39.3%, to $120.6 million at June 30, 2025 from $86.6 million at June 30, 2024, as customers continued to hold deposit products with higher interest rates.

The increase in deposits was also due to a $21.0 million or 8.0% increase in certificates of deposits to $283.2 million at June 30, 2025 from $262.2 million at June 30, 2024, which was primarily due to a $13.1 million increase in brokered deposits.

This increase consisted of an increase of $23.7 million, or 14.7%, in certificates of deposit in amounts of less than $250,000, and a decrease of $2.7 million, or 2.7%, in certificates of deposit in amounts of $250,000 or greater (the limit for federal deposit insurance). Offsetting the increases is an $7.1 million or 4.2% decrease in savings accounts.

All of our deposits are fully insured under the DIF. Borrowings . Borrowings, which consisted solely of Federal Home Loan Bank of Boston advances, increased $17.5 million, or 13.5%, to $147.0 million at June 30, 2025, compared to $129.5 million from June 30, 2024, as funds were used to supplement loan growth. Total stockholders' equity .

Total stockholders' equity increased $35.1 million, and was $115.4 million at June 30, 2025 and $80.3 million at June 30, 2024. The increase in total stockholders' equity was mostly due to the stock offering proceeds of $37.8 million, partially offset by a decreased of $1.4 million in retained earnings for the year ended June 30, 2025.

Comparison of Operating Results for the years ended June 30, 2025 and 2024 General . We recorded net loss of $874,000 and net income of $786,000 for the years ended June 30, 2025 and 2024.

The decrease in net income was due primarily to increases in non-interest expense due to a one-time contribution of $2.3 45 million to the Winchester Savings Bank Charitable foundation and an increase of $1.6 million in the provision for credit losses, partially offset by a $3.1 million increase in net interest income and an increase in the income tax benefit.

Interest and Dividend Income . Interest and dividend income increased $7.9 million, or 22.5%, to $42.7 million for the year ended June 30, 2025, from $34.9 million for the year ended June 30, 2024.

Interest and fees on loans, which is our primary source of interest income, increased $6.9 million, or 22.5%, to $37.5 million for the year ended June 30, 2025, from $30.6 million for the year ended June 30, 2024.

The average balance of loans increased by $80.9 million, or 12.6%, to $725.6 million for the year ended June 30, 2025, over the average balance for the year ended June 30, 2024, while the average yield on loans increased by 42 basis points to 5.17% for the year ended June 30, 2025, from 4.75% for the year ended June 30, 2024.

The increase in the average yield was due to increases in market interest rates as well as changes in the composition of our loan portfolio to include a higher percentage of higher-yielding construction and commercial real estate loans, and multi-family residential real estate loans. The increase in average balance was due to our continuing to pursue new commercial relationships.

Interest Expense . Total interest expense increased $4.7 million, or 23.0%, to $25.2 million for the year ended June 30, 2025, compared to $20.5 million for the year ended June 30, 2024.

Interest expense on deposits increased $3.2 million, or 19.9%, to $19.1 million for the year ended June 30, 2025, from $15.9 million for the year ended June 30, 2024.

Our average balance of interest-bearing deposits increased $58.1 million, or 10.7%, to $603.4 million, while our average cost of deposits increased 25 basis points to 3.17% for the year ended June 30, 2025, from 2.92% for the year ended June 30, 2024.

The increase in the average cost of deposits was due to increases in market interest rates as well as a higher percentage of our deposits consisting of certificates of deposit, and money market accounts, which bear higher rates than other deposit categories.

Interest expense on Federal Home Loan Bank advances increased $1.5 million, or 33.7%, to $6.1 million for the year ended June 30, 2025, from $4.5 million for the year ended June 30, 2024.

The increase was due to increases in our average balance of Federal Home Loan Bank advances ($35.9 million, or 34.8%), offset by a decrease in the average cost of borrowings (four basis points to 4.36% for the year ended June 30, 2025, from 4.40% for the year ended June 30, 2024).

We increased Federal Home Loan Bank borrowings in recent periods primarily to fund loan growth. Net Interest Income . Net interest income was $17.5 million for the year ended June 30, 2025, compared to $14.4 million for the year ended June 30, 2024, as our interest income increased faster than our interest expense.

Our interest rate spread increased to 1.60% for the year ended June 30, 2025 from 1.45% for the year ended June 30, 2024, as well as our net interest margin to 2.05% for the year ended June 30, 2025 from 1.90% for the year ended June 30, 2024.

The interest rate spread and net interest margin were both positively impacted by the addition of new higher yielding loans and investments. Provision for Credit Losses .

Based on an analysis of the factors described in “Critical Accounting Policies—Allowance for Credit Losses,” we recorded a provision for credit losses of $2.1 million for the year ended June 30, 2025, compared to a provision of $514,000 for the year ended June 30, 2024.

The provision for credit losses on loans was $2.1 million while a benefit of $2,000 was recorded for off balance sheet commitments.

The increase in the provision for credit losses on loans for the year ended June 30, 2025 was primarily due to our charging off and fully reserving on a $1.6 million commercial loan due to the borrower’s filing for bankruptcy protection and terminating operations of the underlying business.

Our estimates and assumptions used in the determination of the adequacy of the allowance could be proven incorrect in the future, and the actual amount of future provisions may exceed the amount of past provisions. Any such increase in future provisions that may be required may adversely impact our financial condition and results of operations. 46 Other Income .

Year Ended June 30, Change 2025 2024 Amount Percent (Dollars in thousands) Customer service fees $ 728 $ 683 $ 45 6.6 % Bank owned life insurance 466 315 151 47.9 % Gain on marketable equity securities, net 374 378 (4 ) (1.1 )% Loss on investment securities — (33 ) 33 (100.0 )% Gain on sale of fixed assets — 314 (314 ) (100.0 )% Miscellaneous 224 122 102 83.6 % Total other income $ 1,792 $ 1,779 $ 13 0.7 % The increase in income on bank owned life insurance was due to the purchase of $4.0 million of additional policies during the 2024 fiscal year.

Gain on sale of fixed assets during the 2024 period was related to the sale of a bank branch. Operating Expense. Operating expense information is as follows.

Year Ended June 30, Change 2025 2024 Amount Percent (Dollars in thousands) Salaries and employee benefits $ 9,688 $ 9,554 $ 134 1.4 % Occupancy and equipment, net 1,579 1,513 66 4.4 % Data processing 1,368 1,131 237 21.0 % Deposit insurance 848 472 376 79.7 % Marketing and advertising 462 376 86 22.9 % Net periodic pension and post-retirement cost (benefit), less service costs (73 ) (723 ) 650 (89.9 )% Other 4,906 2,562 2,344 91.5 % Total operating expense $ 18,778 $ 14,885 $ 3,893 26.2 % The increase in other expense was due to a one-time contribution of $2.3 million to the Winchester Savings Bank Charitable Foundation.

Additional increases include higher deposit insurance expense which was due to an increase in FDIC insurance rates and our higher deposit levels.

The increase in salaries and employee benefits was due to the addition of key staff in finance and other areas, while the increase in data processing expense was due to our implementing a new program for electronic communications and online account opening. Income Taxes.

Income taxes decreased by $624,000 to a benefit of $656,000 for the year ended June 30, 2025, compared to a benefit of $32,000 for the year ended June 30, 2024.

The decrease in the income tax provision was due primarily to a net loss for the 2025 period. 47 Average Balances and Yields The following tables set forth average 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, and the average balance of loans includes non-accrual loans. The yields set forth below include the effect of deferred fees/costs, discounts, and premiums that are amortized or accreted to interest income. Deferred loan fees for the years ended June 30, 2025 and 2024 were not material.

For the Years Ended June 30, 2025 2024 Average Outstanding Balance Interest Average Yield/Rate Average Outstanding Balance Interest Average Yield/Rate (Dollars in thousands) Interest-earning assets: Loans $ 725,618 $ 37,528 5.17 % $ 644,711 $ 30,643 4.75 % Securities 87,850 3,128 3.56 % 76,982 2,352 3.05 % Interest-bearing deposits 42,473 2,057 4.84 % 34,240 1,868 5.46 % Total interest-earning assets 855,941 42,713 4.99 % 755,933 34,863 4.61 % Non-interest-earning assets 39,045 24,194 Allowance for credit losses on loans (3,575 ) (3,691 ) Total assets $ 891,411 $ 776,436 Interest-bearing liabilities: NOW and demand deposits $ 55,520 137 0.25 % $ 71,008 578 0.81 % Savings accounts 163,597 3,871 2.37 % 168,498 3,947 2.34 % Money market accounts 104,832 3,460 3.30 % 64,689 1,782 2.75 % Certificates of deposit 279,500 11,647 4.17 % 241,168 9,637 4.00 % Total interest-bearing deposits 603,449 19,115 3.17 % 545,363 15,944 2.92 % Borrowings 139,207 6,076 4.36 % 103,309 4,545 4.40 % Total interest-bearing liabilities 742,656 25,191 3.39 % 648,672 20,489 3.16 % Other non-interest-bearing liabilities 67,710 50,073 Total liabilities 810,366 698,745 Stockholders' equity 81,045 77,691 Total liabilities and stockholders' equity $ 891,411 $ 776,436 Net interest income $ 17,522 $ 14,374 Net interest rate spread (1) 1.60 % 1.45 % Net interest-earning assets (2) $ 113,285 $ 107,261 Net interest margin (3) 2.05 % 1.90 % Average interest-earning assets to average interest-bearing liabilities 115.25 % 116.54 % (1) 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.

(2) Net interest-earning assets represent total interest-earning assets less total interest-bearing liabilities. (3) Net interest margin represents net interest income divided by average total interest-earning assets. 48 Rate/Volume Analysis The following table presents the effects of changing rates and volumes on our net interest income for the periods indicated.

The rate column shows the effects attributable to changes in rate (changes in rate multiplied by prior volume). The volume column shows the effects attributable to changes in volume (changes in volume multiplied by prior rate). The total column represents the sum of the prior columns.

For purposes of this table, changes attributable to both rate and volume, which cannot be segregated, have been allocated proportionately based on the changes due to rate and the changes due to volume. There were no out-of-period items or adjustments required to be excluded from the table below.

Year Ended June 30, 2025 vs. 2024 Increase (Decrease) Due to Total Increase Volume Rate (Decrease) (In thousands) Interest-earning assets: Loans $ 4,044 $ 2,841 $ 6,885 Securities 365 411 776 Interest-bearing deposits 399 (209 ) 190 Total interest-earning assets 4,808 3,043 7,851 Interest-bearing liabilities: NOW and demand deposits (105 ) (336 ) (441 ) Savings accounts (116 ) 40 (76 ) Money market accounts 1,272 406 1,678 Certificates of deposit 1,532 479 2,011 Borrowings 1,579 (48 ) 1,531 Total interest-bearing liabilities 4,162 541 4,703 Change in net interest income $ 646 $ 2,502 $ 3,148 Management of Market Risk General .

The majority of our assets and liabilities are monetary in nature. Consequently, our most significant form of market risk is interest rate risk. Our assets, consisting primarily of mortgage loans, have longer maturities than our liabilities, consisting primarily of deposits.

As a result, a principal part of our business strategy is to manage the impact of changes in market interest rates on net interest income and capital.

We have an Asset/Liability Committee that is responsible for evaluating the interest rate risk in our assets and liabilities, for determining the level of risk that is appropriate, given our business strategy, operating environment, capital, liquidity and performance objectives, and for managing this risk consistent with the guidelines approved by the board of directors.

The committee establishes and monitors the amount, maturities, pricing and mix of assets and funding sources with the objective of managing assets and funding sources to provide results that are consistent with liquidity, growth, risk limits and profitability goals.

As part of our ongoing asset-liability management, we use the following strategies to manage our interest rate risk: • marketing our non-interest-bearing demand, money market, savings and demand accounts; • investing in short- to medium-term investment securities whenever the market allows; • maintaining capital levels that exceed those required for well-capitalized status under federal banking regulations; • maintaining prudent levels of liquidity; • managing our utilization of wholesale funding with borrowings and brokered deposits; and • continuing to diversify our loan portfolio by adding more commercial-related loans and consumer loans, which typically have shorter maturities.

We do not engage in hedging activities, such as engaging in futures, options or interest rate swap transactions, nor invest in high-risk mortgage derivatives, such as collateralized mortgage obligation residual interests, real estate mortgage investment conduit residual interests or stripped mortgage-backed securities. 49 Net Interest Income.

We analyze our sensitivity to changes in interest rates through a net interest income model. Net interest income 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.