Marathon Bancorp, Inc. /MD/ (MBBC) stock intrinsic value fair value estimate & owner earnings analysis

Marathon Bancorp is the holding company for Marathon Bank, a Wisconsin-chartered savings bank founded in 1902 and headquartered in Wausau. It operates a main office and four branches in Marathon, Ozaukee and Waukesha Counties, and expects to open a branch in New Holstein, Wisconsin in the fourth quarter of 2026. Once a traditional home-mortgage thrift, since 2014 the bank has built a commercial real estate lending business aimed at Southeastern Wisconsin, including the Milwaukee area, opening branches in Mequon (2018) and Brookfield (January 2024). At June 30, 2026 it had $261.0 million of assets, $189.8 million of deposits, $20.0 million of Federal Home Loan Bank advances and $48.0 million of shareholders' equity. Loans of about $219 million were 43.7% commercial real estate ($95.9 million, of which $85.2 million non-owner-occupied), 24.6% multifamily ($53.9 million, including $6.0 million of purchased participations) and 29.0% one-to-four-family mortgages. In April 2025 the company completed its conversion from mutual holding company form, selling 1,693,411 shares at $10.00 (gross proceeds $16.9 million, $1.7 million of expenses) and listing on the Nasdaq Capital Market; each old public share became 1.3728 new shares, and all per-share figures here are on the new share basis. How we measure earnings. We measure the cash the business produces for its owners: operating cash flow, stripped of short-term timing swings in receivables and other assets and liabilities, less stock and ESOP compensation (treated as real pay) and less the capital spending needed to keep the branches running. On that basis owner earnings per share were $0.53 in fiscal 2021 (years end June 30), $0.41 in 2022, $0.48 in 2023, -$0.65 in 2024, $0.06 in 2025 and $0.49 in 2026. Fiscal 2024 is distorted by $2.26 million of capital spending, mostly for the new Brookfield branch, which our method charges entirely against that one year, so we exclude it. Fiscal 2025 was a genuine squeeze on lending margins: the net interest margin was just 2.96% and the spread 2.56%. The median of the remaining years, which cover both the low-rate period and that squeeze, is $0.48 per share, and the one full year since the conversion ($0.49) sits right on it. Two accounting choices matter: the roughly $284,000 a year of non-cash growth in the bank's life-insurance policies is not counted as earnings, and write-downs of a foreclosed construction property were non-cash and so are not in these figures; we charge for credit losses separately below. Why no growth is credited. Net loans grew from $144 million at June 30, 2021 to about $219 million in 2026, yet owner earnings per share did not rise ($0.53 then, $0.49 now). Balance-sheet growth has not translated into higher per-share earnings, so we credit none. The New Holstein branch brings certain costs and unproven revenue. Base case ($6.69 per share). We start from $0.48 and deduct $0.06 a year for credit losses at the bank's own recent record: collateral from a construction loan foreclosed in fiscal 2023 was written down by $937,100 in fiscal 2024 and $378,767 in fiscal 2025, about $1.3 million over six years. That gives a normal level of $0.42. For fiscal 2027 through 2030 we deduct a further $0.09 a year for the new 2026 Equity Incentive Plan: at June 30, 2026 there was $883,497 of unrecognized option expense (to be recognized over 4.0 years) and $877,776 of restricted-stock expense (over 3.5 years), roughly triple the $161,000 of stock compensation recorded in fiscal 2026. After that, earnings stay at $0.42 indefinitely, supported by a deposit franchise that has operated since 1902. Discounted at 6%, that is worth $6.69 per share. Bear case ($4.97). The fiscal 2024-2025 margin squeeze returns for three years. The bank's commercial real estate loans are generally fixed-rate with five-year terms and balloon payments, and in fiscal 2025 its spread was only 2.56%. Even with the conversion capital replacing borrowings that cost 3.71% in fiscal 2026, a repeat of that record plus the higher equity-plan expense and the cost of the new branch leaves roughly nothing for owners for three years. Afterward, credit losses run at twice the recent rate, a fair stress for a book in which commercial real estate and multifamily loans ($149.8 million) are about three times equity, leaving a permanent level of $0.36 per share. Bull case ($8.85). The margin improvement already under way holds: the average loan yield rose from 4.73% to 5.33% in fiscal 2026 as new loans were made at higher rates, the net interest margin reached 3.59%, and fourth-quarter net interest income of $2.14 million ran about $0.34 million a year above the full-year average, worth about $0.10 per share after tax. Credit losses run at half the recent rate. That gives a level of $0.55 per share ($0.46 while equity-plan expense is elevated through 2030). Debt. For a bank, deposits and Federal Home Loan Bank borrowings are the raw material of the business, and the interest on them is already deducted in the earnings above, so nothing further is subtracted; the balance sheet shows no borrowings other than the $20.0 million of Federal Home Loan Bank advances. In each case the business value and the share value are the same: bear $4.97, base $6.69, bull $8.85 per share, with no debt ranking ahead of shareholders beyond the bank's ordinary funding. What could make this wrong. The bank is heavily capitalized, with equity at 18.4% of assets and book value of about $15.91 per share, but its owner earnings are only about 3% of that equity, so our earnings-based values sit well below book. If management returned much of the surplus capital or sold the bank, shareholders could realize far more than the earnings alone justify. The only evidence of capital return so far is a repurchase program adopted April 24, 2026 for up to 146,931 shares (about 5%), and the company says it does not currently intend to pay cash dividends, so we credit neither. On credit, nonperforming loans at June 30, 2026 were a single fully secured home loan, and the foreclosed property is carried at $996,000 after a sale contract fell through; it has been relisted at $1.5 million. The margin-of-safety price is $4.35: a wide margin under the base case because the bank is very small and its earnings have swung sharply with interest rates.