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Item 1. |
Financial Statements |
September 30, 2024 |
June 30, 2024 |
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(Unaudited) |
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Assets |
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Cash and due from banks |
$ | $ | |||||||||
Interest-bearing demand deposits |
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Cash and cash equivalents |
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Interest-bearing time deposits in banks |
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Available-for-sale |
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Loans, net of allowance for credit losses of $ and $ at September 30, 2024 and June 30, 2024, respectively |
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Premises and equipment, net of accumulated depreciation of $ and $ at September 30, 2024 and June 30, 2024, respectively |
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Federal Home Loan Bank stock, at cost |
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Accrued interest receivable |
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Bank-owned life insurance |
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Mortgage servicing rights |
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Deferred income taxes |
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Other |
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Total assets |
$ | $ | |||||||||
Liabilities and Stockholders’ Equity |
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Liabilities |
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Deposits |
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Demand |
$ | $ | |||||||||
Savings, NOW and money market |
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Certificates of deposit |
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Brokered certificates of deposit |
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Total deposits |
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Repurchase agreements |
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Federal Home Loan Bank advances |
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Other borrowings |
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Advances from borrowers for taxes and insurance |
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Accrued post-retirement benefit obligation |
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Accrued interest payable |
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Allowance for credit losses on off-balance sheet credit exposures |
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Other |
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Total liabilities |
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Commitments and Contingencies |
par value per share, shares authorized, shares issued and outstanding at both September 30, 2024 and June 30, 2024 | ||||||||||
Additional paid-in capital |
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Unearned ESOP shares, at cost, and shares at September 30, 2024 and June 30, 2024, respectively |
( | ) | ( | ) | |||||||
Retained earnings |
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Accumulated other comprehensive loss, net of tax |
( | ) | ( | ) | |||||||
Total stockholders’ equity |
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Total liabilities and stockholders’ equity |
$ | $ | |||||||||
Three Months Ended September 30, |
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2024 |
2023 |
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Interest and Dividend Income |
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Interest and fees on loans |
$ | $ | ||||||
Securities: |
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Taxable |
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Tax-exempt |
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Federal Home Loan Bank dividends |
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Deposits with other financial institutions |
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Total interest and dividend income |
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Interest Expense |
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Deposits |
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Federal Home Loan Bank advances and repurchase agreements |
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Line of credit and other borrowings |
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Total interest expense |
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Net Interest Income |
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Provision for Credit Losses |
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Net Interest Income After Provision for Credit Losses |
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Noninterest Income |
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Customer service fees |
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Other service charges and fees |
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Insurance commissions |
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Brokerage commissions |
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Net realized losses on sale of available-for-sale |
( | ) | ||||||
Mortgage banking income (loss), net |
( | ) | ||||||
Gain on sale of loans |
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Bank-owned life insurance income, net |
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Other |
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Total noninterest income |
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Noninterest Expense |
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Compensation and benefits |
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Office occupancy |
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Equipment |
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Federal deposit insurance |
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Stationary, printing and office |
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Advertising |
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Professional services |
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Supervisory examinations |
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Audit and accounting services |
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Organizational dues and subscriptions |
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Insurance bond premiums |
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Telephone and postage |
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Other |
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Total noninterest expense |
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Income Before Income Tax |
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Provision for Income Tax |
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Net Income |
$ | $ | ||||||
Earnings Per Share: |
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Basic |
$ | $ | ||||||
Diluted |
$ | $ | ||||||
Dividends declared per common share |
$ | $ | ||||||
Three Months Ended September 30, |
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2024 |
2023 |
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Net Income |
$ | $ | ||||||
Other Comprehensive Income (Loss) |
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Unrealized appreciation (depreciation) on available-for-sale |
( | ) | ||||||
Less: reclassification adjustment for realized gains (losses) included in net income, net of taxes of $() and $, for 2024 and 2023, respectively |
( | ) | ||||||
| ( | ) | |||||||
Change in postretirement health plan gains and losses, net of taxes of $ and $ for 2024 and 2023, respectively |
( | ) | ||||||
Other comprehensive income (loss), net of tax |
( | ) | ||||||
Comprehensive Income (Loss) |
$ | $ | ( | ) | ||||
Common Stock |
Additional Paid-In Capital |
Unearned ESOP Shares |
Retained Earnings |
Accumulated Other Comprehensive Loss |
Total |
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For the three months ended September 30, 2024 |
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Balance, June 30, 2024 |
$ | $ | $ | ( | ) | $ | $ | ( | ) | $ | ||||||||||||||
Net income |
— | — | — | — | ||||||||||||||||||||
Other comprehensive income |
— | — | — | — | ||||||||||||||||||||
Dividends on common stock, $ per share |
— | — | — | ( | ) | — | ( | ) | ||||||||||||||||
Stock equity plan |
— | — | — | — | ||||||||||||||||||||
ESOP shares earned, shares |
— | — | — | |||||||||||||||||||||
Balance, September 30, 2024 |
$ | $ | $ | ( | ) | $ | $ | ( | ) | $ | ||||||||||||||
For the three months ended September 30, 2023 |
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Balance, June 30, 2023 |
$ | $ | $ | ( | ) | $ | $ | ( | ) | $ | ||||||||||||||
Net income |
— | — | — | — | ||||||||||||||||||||
Other comprehensive loss |
— | — | — | — | ( | ) | ( | ) | ||||||||||||||||
Dividends on common stock, $ per share |
— | — | — | ( | ) | — | ( | ) | ||||||||||||||||
Stock equity plan |
— | — | — | — | ||||||||||||||||||||
ESOP shares earned, shares |
— | — | — | |||||||||||||||||||||
Balance, September 30, 2023 |
$ | $ | $ | ( | ) | $ | $ | ( | ) | $ | ||||||||||||||
Three Months Ended September 30, |
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2024 |
2023 |
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Operating Activities |
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Net income |
$ | $ | ||||||
Items not requiring (providing) cash |
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Depreciation |
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Provision for credit losses on loans |
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Accretion of premiums and discounts on securities |
( | ) | ( | ) | ||||
Deferred income taxes |
( | ) | ||||||
Net realized gains on loan sales |
( | ) | ( | ) | ||||
Net realized losses on sales of available-for-sale |
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| Nontaxable bank-owned life insurance income, net |
( | ) | ( | ) | ||||
Originations of loans held for sale |
( | ) | ( | ) | ||||
Proceeds from sales of loans held for sale |
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ESOP compensation expense |
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Stock equity plan expense |
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Changes in |
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Accrued interest receivable |
( | ) | ( | ) | ||||
Other assets |
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Accrued interest payable |
( | ) | ||||||
Post-retirement benefit obligation |
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Other liabilities |
( | ) | ||||||
Net cash provided by operating activities |
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Investing Activities |
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Purchases of available-for-sale |
( | ) | ||||||
Proceeds from the sales of available-for-sale |
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Proceeds from maturities and pay downs of available-for-sale |
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Net change in loans |
( | ) | ( | ) | ||||
Purchase of premises and equipment |
( | ) | ( | ) | ||||
Proceeds from the sale of foreclosed assets |
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Purchase of Federal Home Loan Bank stock |
( | ) | ( | ) | ||||
Redemption of Federal Home Loan Bank stock |
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Net cash used in investing activities |
( | ) | ( | ) | ||||
Financing Activities |
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Net decrease in demand deposits, money market, NOW and savings accounts |
( | ) | ( | ) | ||||
Net increase (decrease) in certificates of deposit, including brokered certificates |
( | ) | ||||||
Net decrease in advances from borrowers for taxes and insurance |
( | ) | ( | ) | ||||
Proceeds from Federal Home Loan Bank advances |
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Repayments of Federal Home Loan Bank advances |
( | ) | ( | ) | ||||
Proceeds from other borrowings |
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Repayments of other borrowings |
( | ) | ||||||
Net increase in repurchase agreements |
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Net cash provided by financing activities |
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Net Increase (Decrease) in Cash and Cash Equivalents |
( | ) | ||||||
Cash and Cash Equivalents, Beginning of Period |
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Cash and Cash Equivalents, End of Period |
$ | $ | ||||||
Supplemental Cash Flows Information |
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Interest paid |
$ | $ | ||||||
Income taxes paid (net of refunds) |
$ | $ | ||||||
Dividends payable |
$ | $ | ||||||
| (1) | Based on closing price of $ and $ per share on September 30, 2024, and June 30, 2024, respectively. |
June 30, 2024 |
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Risk Rating |
2024 |
2023 |
2022 |
2021 |
2020 |
Prior Years |
Total |
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| One- to Four-Family |
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| Pass |
$ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||
| Watch |
— | — | — | — | — | |||||||||||||||||||||||
| Substandard |
— | — | ||||||||||||||||||||||||||
| |
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| Total |
$ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||
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| Current period recoveries |
$ | — | $ | — | $ | — | $ | — | $ | — | $ | $ | ||||||||||||||||
| Multi-Family |
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| Pass |
$ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||
| Watch |
— | — | — | — | — | — | — | |||||||||||||||||||||
| Substandard |
— | — | — | — | — | |||||||||||||||||||||||
| |
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| Total |
$ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||
| |
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| Commercial Real Estate |
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| Pass |
$ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||
| Watch |
— | — | — | — | — | — | — | |||||||||||||||||||||
| Substandard |
— | — | — | |||||||||||||||||||||||||
| |
|
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|
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| Total |
$ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||
| |
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| Home Equity Line of Credit |
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| Pass |
$ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||
| Watch |
— | — | — | — | — | — | — | |||||||||||||||||||||
| Substandard |
— | — | — | — | — | — | — | |||||||||||||||||||||
| |
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| Total |
$ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||
| |
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|
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| Construction |
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| Pass |
$ | $ | $ | $ | — | $ | — | $ | $ | |||||||||||||||||||
| Watch |
— | — | — | — | — | — | — | |||||||||||||||||||||
| Substandard |
— | — | — | — | — | — | — | |||||||||||||||||||||
| |
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| Total |
$ | $ | $ | $ | — | $ | — | $ | $ | |||||||||||||||||||
| |
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|
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| Commercial Business |
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| Pass |
$ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||
| Watch |
— | — | — | — | — | — | — | |||||||||||||||||||||
| Substandard |
— | |||||||||||||||||||||||||||
| |
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| Total |
$ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||
| |
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30-59 Days Past Due |
60-89 Days Past Due |
Greater Than 90 Days |
Total Past Due |
Current |
Total Loans Receivable |
Total Loans > 90 Days & Accruing |
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June 30, 2024: |
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Real estate loans: |
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One- to four-family |
$ |
$ |
$ |
— |
$ |
$ |
$ |
$ |
— |
|||||||||||||||||||
Multi-family |
— |
— |
— |
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Commercial |
— |
— |
— |
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Home equity lines of credit |
— |
— |
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Construction |
— |
— |
— |
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Commercial |
— |
— |
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Consumer |
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Total |
$ |
$ |
$ |
$ |
$ |
$ |
$ |
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| Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations |
Cautionary Note Regarding Forward-Looking Statements
This Quarterly Report on Form 10-Q may contain forward-looking statements within the meaning of the federal securities laws. These statements are not historical facts, but rather are statements based on management’s current expectations regarding its business strategies and their intended results and IF Bancorp, Inc.’s (“the Company”) future performance. Forward-looking statements are preceded by terms such as “expects,” “believes,” “anticipates,” “intends” and similar expressions.
Management’s ability to predict results or the effect of future plans or strategies is inherently uncertain. Factors that could have a material adverse effect on our actual results include, but are not limited to, general economic conditions, changes in the interest rate environment, legislative or regulatory changes that may adversely affect our business, changes in accounting policies and practices, changes in competition and demand for financial services, adverse changes in the securities markets and changes in the quality or composition of the Association’s loan or investment portfolios.
Additional factors that may affect our results are discussed under “Item 1A.—Risk Factors”, in the Company’s Annual Report on Form 10-K for the year ended June 30, 2024, and the Company’s other filings with the SEC. These factors should be considered in evaluating the forward-looking statements and undue reliance should not be placed on such statements. IF Bancorp, Inc. assumes no obligation to update any forward-looking statement, except as may be required by law.
Overview
On July 7, 2011, we completed our initial public offering of common stock in connection with the Association’s mutual-to-stock conversion, selling 4,496,500 shares of common stock at $10.00 per share, including 384,900 shares sold to the Association’s employee stock ownership plan, and raising approximately $45.0 million of gross proceeds. We also established a charitable foundation, Iroquois Federal Foundation, to which we contributed 314,755 shares of our common stock. As of September 30, 2024, the Company had repurchased 1,674,479 shares of common stock under stock repurchase plans.
The Company is a savings and loan holding company and is subject to regulation by the Board of Governors of the Federal Reserve System. The Company’s business activities are limited to oversight of its investment in the Association.
The Association is primarily engaged in providing a full range of banking and mortgage services to individual and corporate customers within a 100-mile radius of its locations in Watseka, Danville, Clifton, Hoopeston, Savoy, Champaign, and Bourbonnais, Illinois and Osage Beach, Missouri. The principal activity of the Association’s wholly-owned subsidiary, L.C.I. Service Corporation (“L.C.I.”), is the sale of property and casualty insurance. The Association is subject to regulation by the Office of the Controller of the Currency and the Federal Deposit Insurance Corporation.
Our results of operations depend primarily on our net interest income. Net interest income is the difference between the interest income we earn on our interest-earning assets, consisting primarily of loans, investment securities and other interest-earning assets, and the interest paid on our interest-bearing liabilities, consisting primarily of savings and transaction accounts, certificates of deposit, and Federal Home Loan Bank of Chicago advances. Our results of operations also are affected by our provision for credit losses, noninterest income and noninterest expense. Noninterest income consists primarily of customer service fees, brokerage commission income, insurance commission income, net realized gains on loan sales, mortgage banking income, and income on bank-owned life insurance. Noninterest expense consists primarily of compensation and benefits, occupancy and equipment, data processing, professional fees, marketing, office supplies, federal deposit insurance premiums, and foreclosed assets. Our results of operations also may be affected significantly by general and local economic and competitive conditions, changes in market interest rates, governmental policies and actions of regulatory authorities.
34
Our net interest rate spread (the difference between the yield on average interest-earning assets and the cost of average interest-bearing liabilities) was 1.93% and 1.98% for the three months ended September 30, 2024 and 2023, respectively. Net interest income increased to $4.8 million for the three months ended September 30, 2024 from $4.6 million for the three months ended September 30, 2023.
Our emphasis on conservative loan underwriting has historically resulted in relatively low levels of non-performing assets. Our non-performing assets (consisting exclusively of non-performing loans) totaled $201,000 or 0.1% of total loans at September 30, 2024, and $173,000, or 0.1% of total loans at June 30, 2024.
At September 30, 2024, the Association was categorized as “well capitalized” under federal regulations.
Our net income for the three months ended September 30, 2024 was $633,000, compared to a net income of $466,000 for the three months ended September 30, 2023. The increase in net income was due to an increase in net interest income and an increase in noninterest income, partially offset by an increase in noninterest expense and an increase in provision for credit losses.
Management’s discussion and analysis of the financial condition and results of operations at and for three months ended September 30, 2024 and 2023 is intended to assist in understanding the financial condition and results of operations of the Association. The information contained in this section should be read in conjunction with the unaudited financial statements and the notes thereto, appearing in Part I, Item 1 of this Quarterly Report on Form 10-Q.
Critical Accounting Policies
We define critical accounting policies as those policies that require management to exercise significant judgment or discretion or make significant assumptions that have, or could have, a material impact on the carrying value of certain assets or on income. We consider the following to be our critical accounting policies.
Allowance for Credit Losses. The Company believes the allowance for credit losses for loans is the critical accounting policy that requires the most significant judgments and assumptions used in the preparation of the consolidated financial statements. The allowance for credit losses for loans represents the best estimate of losses inherent in the existing loan portfolio. An estimate of potential losses inherent in the loan portfolio are determined and an allowance for those losses is established by factors considered by the Company during the evaluation of the overall adequacy of the allowance which include historical net loan losses, the level and composition of nonaccrual, past due and loan modifications with borrowers experiencing financial difficulty, trends in volumes and terms of loans, effects of changes in risk selection and underwriting standards or lending practices, lending staff changes, concentrations of credit, industry conditions and the current economic conditions in the region where the Company operates. In addition, a forecast, using reasonable and supportable future conditions, is prepared that is used to estimate expected changes to existing and historical conditions in the current period.
The Company utilizes a current expected credit loss (“CECL”) methodology which relies on segmenting the loan portfolio into pools with similar risks, tracking the performance of the pools over time, and using the data to determine pool loss experience. Based on our estimate of the level of allowance for credit losses required, we record a provision for credit losses as a charge to earnings to maintain the allowance for credit losses at an appropriate level. The allowance for credit losses on most loans is measured on a collective (pool) basis for loans with similar risk characteristics. The Company estimates the appropriate level of allowance for credit losses for certain collateral-dependent loans by evaluating them individually. The Company also uses the CECL model to calculate the allowance for credit losses on off-balance sheet credit exposures, such as undrawn amounts on lines of credit. While the allowance for credit losses on loans is reported as a contra-asset asset for loans, the allowance for credit losses on off-balance sheet credit exposures is reported as a liability.
The allowance for credit losses is evaluated on a regular basis by management and reflects consideration of all significant factors that affect the collectability of the loan portfolio. This evaluation is inherently subjective as it requires estimates that are subject to significant revision as more information becomes available. Actual loan losses may be significantly more than the allowance for credit losses we have established which could have a material negative effect on our financial results.
35
Income Tax Accounting. The provision for income taxes is based upon income in our condensed consolidated financial statements, rather than amounts reported on our income tax return. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect of a change in tax rates on our deferred tax assets and liabilities is recognized as income or expense in the period that includes the enactment date. Under U.S. GAAP, a valuation allowance is required to be recognized if it is more likely than not that a deferred tax asset will not be realized. The determination as to whether we will be able to realize the deferred tax assets is highly subjective and dependent upon judgment concerning our evaluation of both positive and negative evidence, our forecasts of future income, applicable tax planning strategies, and assessments of current and future economic and business conditions. Positive evidence includes the existence of taxes paid in available carryback years as well as the probability that taxable income will be generated in future periods, while negative evidence includes any cumulative losses in the current year and prior two years and general business and economic trends. Any reduction in estimated future taxable income may require us to record a valuation allowance against our deferred tax assets. Any required valuation allowance would result in additional income tax expense in the period and could have a significant impact on our future earnings. Positions taken in our tax returns may be subject to challenge by the taxing authorities upon examination. The benefit of an uncertain tax position is initially recognized in the financial statements only when it is more likely than not the position will be sustained upon examination by the tax authorities. Such tax positions are both initially and subsequently measured as the largest amount of tax benefit that is greater than 50% likely of being realized upon settlement with the tax authority, assuming full knowledge of the position and all relevant facts. Differences between our position and the position of tax authorities could result in a reduction of a tax benefit or an increase to a tax liability, which could adversely affect our future income tax expense.
There were no material changes to the critical accounting policies disclosed in the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2024.
Comparison of Financial Condition at September 30 and June 30, 2024
Total assets increased $5.7 million, or 0.6%, to $893.4 million at September 30, 2024 from $887.7 million at June 30, 2024. The increase was primarily due to an $7.8 million increase in net loans and a $2.2 million increase in investment securities, partially offset by a $1.8 million decrease in cash and cash equivalents.
Net loans receivable increased by $7.8 million, or 1.2%, to $647.1 million at September 30, 2024, from $639.3 million at June 30, 2024. The increase in net loans receivable during this period was due primarily to a $5.1 million, or 2.5%, increase in commercial real estate loans, a $7.1 million, or 7.7%, increase in commercial business loans, and a $68,000, or 0.7%, increase in home equity lines of credit, partially offset by a $2.9 million, or 8.5%, decrease in construction loans, a $929,000, or 0.5%, decrease in one- to four-family mortgage loans, a $125,000, or 0.1% decrease in multi-family loans, and a $541,000, or 7.0%, decrease in consumer loans.
Investment securities, consisting entirely of available-for-sale securities, increased $2.2 million, or 1.1%, to $192.7 million at September 30, 2024 from $190.5 million at June 30, 2024. We had no securities held to maturity at September 30, 2024 or June 30, 2024.
Between June 30, 2024, and September 30, 2024, accrued interest receivable increased $366,000 to $3.8 million, and Federal Home Loan Bank (FHLB) stock increased $259,000 to $4.8 million, while deferred income taxes decreased $1.9 million to $8.6 million, other assets decreased $1.1 million to $1.6 million and premises and equipment decreased $82,000 to $10.5 million. The increase in accrued interest receivable was the result of increases in both the average balances of loans and the average yields of loans, and the increase in FHLB stock was due to an increased stock ownership requirement due to an increase in FHLB advances. The decrease in deferred income taxes was mostly due to a decrease in unrealized losses on available-for-sale securities. The decrease in other assets was mostly due to receipt of previously outstanding receivables, and the decrease in premises and equipment was the result of ordinary depreciation.
36
At September 30, 2024, our investment in bank-owned life insurance was $15.0 million, an increase of $113,000 from $14.9 million at June 30, 2024. We invest in bank-owned life insurance to provide us with a funding source for our benefit plan obligations. Bank-owned life insurance also generally provides us noninterest income that is non-taxable. Federal regulations generally limit our investment in bank-owned life insurance to 25% of our Tier 1 capital plus our allowance for credit losses, which totaled $23.7 million at September 30, 2024.
Deposits decreased $50.0 million, or 6.9%, to $677.2 million at September 30, 2024 from $727.2 million at June 30, 2024. Noninterest bearing demand accounts decreased $66.5 million, or 64.3%, to $36.9 million, while certificates of deposit, excluding brokered certificates of deposit, decreased $130,000, or 0.1%, to $290.5 million, savings, NOW, and money market accounts combined increased $22.1 million, or 7.3%, to $326.3 million, and brokered certificates of deposit decreased $5.5 million, or 19.0%, to $23.5 million. The large decrease in noninterest bearing demand accounts was due to approximately $62.7 million in deposits from a public entity that collects real estate taxes that were withdrawn during the three months ended September 30, 2024, when tax monies were distributed. Repurchase agreements increased $141,000, or 0.8%, to $17.9 million at September 30, 2024 from $17.8 million at June 30, 2024. Borrowings consisted of advances from the Federal Home Loan Bank of Chicago, which increased $50.5 million to $83.5 million at September 30, 2024 from $33.0 million at June 30, 2024, and borrowing from the Federal Reserve Bank Term Funding Program (BTFP), which decreased $75,000 to $25.2 million at September 30, 2024 from $25.3 million at June 30, 2024.
Accrued interest payable decreased $253,000, or 8.4%, to $2.8 million at September 30, 2024 from $3.0 million at June 30, 2024, while advances from borrowers for taxes and insurance decreased $458,000, or 47.3%, to $510,000 at September 30, 2024 from $968,000 at June 30, 2024, allowance for credit losses on off-balance sheet credit exposures increased $5,000 to $103,000 at September 30, 2024 from $98,000 at June 30, 2024, and other liabilities increased $1.1 million, or 26.1%, to $5.4 million at September 30, 2024 from $4.3 million at June 30, 2024. The decrease in accrued interest payable was mostly due to a discontinued CD special with a 7-month term and accrued interest payable of $678,000 at June 30, 2024, which matured in the three months ended September 30, 2024. The decrease in advances from borrowers for taxes and insurance was attributable to the timing of the payment of real estate taxes and insurance, the increase in the allowance for credit losses on off-balance sheet credit exposures was due to increases in loans with unfunded balances without the Bank’s ability to cancel on demand, and the increase in other liabilities was mostly due to a fluctuation in items in process.
Total equity increased $4.8 million, or 6.6%, to $78.8 million at September 30, 2024 from $73.9 million at June 30, 2024. Equity increased primarily due to an increase of $4.8 million in accumulated other comprehensive income (loss), net of tax, net income of $633,000 and ESOP and stock equity plan activity of $134,000, partially offset by the accrual of approximately $670,000 in dividends to our stockholders. The increase in accumulated other comprehensive income (loss) was primarily due to decrease in unrealized depreciation on available-for-sale securities, net of tax.
Comparison of Operating Results for the Three Months Ended September 30, 2024 and 2023
General. Net income increased $167,000 to $633,000 for the three months ended September 30, 2024 from $466,000 for the three months ended September 30, 2023. The increase was primarily due to an increase in net interest income and an increase in noninterest income, partially offset by an increase in noninterest expenses and an increase in provision for credit losses.
Net Interest Income. Net interest income increased by $238,000, or 5.2%, to $4.8 million for the three months ended September 30, 2024 from $4.6 million for the three months ended September 30, 2023. The increase was due to an increase of $1.6 million in interest income, partially offset by an increase of $1.4 million in interest expense. Our net interest margin increased by one basis point to 2.27% for the three months ended September 30, 2024 compared to 2.26% for the three months ended September 30, 2023, while our interest rate spread decreased by five basis points to 1.93% for the three months ended September 30, 2024 compared to 1.98% for the three months ended September 30, 2023. A $38.1 million, or 4.7%, increase in the average balance of interest-earning assets was partially offset by a $33.25 million, or 4.6%, increase in the average balance of interest-bearing liabilities.
37
Interest and Dividend Income. Interest income increased by $1.6 million, or 17.5%, to $10.9 million for the three months ended September 30, 2024, from $9.3 million for the three months ended September 30, 2023. The increase in interest income was primarily due to a $1.7 million increase in interest income on loans, and a $25,000 increase in other interest income, partially offset by a $145,000 decrease in interest income on securities. The increase in interest income on loans resulted from a 72 basis point, or 14.2%, increase in the average yield on loans to 5.83% for the three months ended September 30, 2024, from 5.11% for the three months ended September 30, 2023, and a $44.4 million, or 7.3%, increase in the average balance of loans to $649.8 million for the three months ended September 30, 2024, from $605.4 million for the three months ended September 30, 2023. Interest on securities decreased $145,000, or 10.2%, as a result of a 22 basis point, or 7.5%, decrease in the average yield on securities to 2.69% for the three months ended September 30, 2024 from 2.91% for the three months ended September 30, 2023, and a $5.7 million, or 2.9%, decrease in the average balance of securities, to $189.8 million for the three months ended September 30, 2024, from $195.6 million for the three months ended September 30, 2023.
Interest Expense. Interest expense increased $1.4 million, or 29.4%, to $6.1 million for the three months ended September 30, 2024, from $4.7 million for the three months ended September 30, 2023. The increase was due to both increases in the average cost of interest-bearing liabilities and by increases in the average balance of interest-bearing liabilities.
Interest expense on interest-bearing deposits increased by $918,000, or 23.9%, to $4.8 million for the three months ended September 30, 2024 from $3.8 million for the three months ended September 30, 2023. This increase was due to a 58 basis point, or 24.1%, increase in the average cost of interest bearing deposits to 2.98% for the three months ended September 2024, from 2.40% for the three months ended September 30, 2023, and a $554,000, or 0.1% increase in the average balance of interest-bearing deposits to $639.0 million for the three months ended September 30, 2024 from $638.5 million for the three months ended September 30, 2023.
Interest expense on borrowings, including FHLB advances, repurchase agreements and other borrowings, increased $466,000, or 53.4%, to $1.3 million for the three months ended September 30, 2024, from $873,000 for the three months ended September 30, 2023. This increase was due to an increase in the average balance of borrowings to $119.7 million for the three months ended September 30, 2024 from $87.1 million for the three months ended September 30, 2023, and a 46 basis point increase in the average cost of such borrowings to 4.47% for the three months ended September 30, 2024 from 4.01% for the three months ended September 30, 2023.
Provision (Credit) for Credit Losses. We establish provisions for credit losses, which are charged to operations in order to maintain the allowance for credit losses at a level we consider necessary to absorb potential credit losses inherent in our loan portfolio. We recorded a provision for credit losses of $382,000 for the three months ended September 30, 2024, which includes a provision for credit losses on loans of $377,000 and a provision for credit losses on off-balance sheet credit exposures of $5,000, compared to a provision for credit losses of $222,000 for the three months ended September 30, 2023, which includes a provision for credit losses on loans of $310,000 and a credit for credit losses on off-balance sheet credit exposures of $88,000. The allowance for credit losses on loans was $7.5 million, or 1.14% of total loans, at September 30, 2024, compared to $7.4 million, or 1.20% of total loans at September 30, 2023, and $7.5 million, or 1.16% of total loans, at June 30, 2024. During the three months ended September 30, 2024, a net loss of $404,000 was recorded, while during the three months ended September 30, 2023, a net recovery of $1,000 was recorded.
38
The following table sets forth information regarding the allowance for credit losses and nonperforming assets at the dates indicated:
| Three Months Ended September 30, 2024 |
Year Ended June 30, 2024 |
|||||||
| Allowance to non-performing loans |
3717.41 | % | 4329.57 | % | ||||
| Allowance to total loans outstanding at the end of the period |
1.14 | % | 1.16 | % | ||||
| Net charge-offs (recoveries) to average total loans outstanding during the period, annualized |
0.25 | % | (0.03 | )% | ||||
| Total non-performing loans to total loans |
0.03 | % | 0.03 | % | ||||
| Total non-performing assets to total assets |
0.02 | % | 0.02 | % | ||||
Noninterest Income. Noninterest income increased $280,000, or 24.8%, to $1.4 million for the three months ended September 30, 2024 from $1.1 million for the three months ended September 30, 2023. The increase was primarily due to an increase in customer service fees and other income, partially offset by a decrease in mortgage banking income (loss), net, and net realized loss on sale of available-for-sale securities. For the three months ended September 30, 2024, customer service fees increased $24,000 to $125,000, other income increased $450,000 to $761,000, while mortgage banking income (loss), net, decreased $182,000 to a loss of $42,000 and net realized gains (losses) on sale of available-for-sale securities decreased by $71,000 to a loss of $71,000, from the three months ended September 30, 2023. The increase in customer service fees was due to more customer services performed in the three months ended September 30, 2024, and the increase in other income was due to the receipt of an insurance settlement filed as a result of HELOC check fraud. The decrease in mortgage banking income (loss), net was a result of a decrease in the valuation of mortgage servicing rights and a decrease in loan servicing fees in the three months ended September 30, 2024. The decrease in net realized gain (loss) on sale of available-for-sale securities was due to a few securities sold at a net loss in the three months ended September 30, 2024.
Noninterest Expense. Noninterest expense increased $148,000, or 3.1%, to $5.0 million for three months ended September 30, 2024 from $4.8 million for the three months ended September 30, 2023. Compensation and benefits increased $52,000, or 1.7%, advertising increased $24,000, or 31.2%, professional services increased $44,000, or 47.8%, and equipment expense increased $33,000, or 6.0%. These increases were partially offset by a $10,000, or 3.5%, decrease in office occupancy, and a $17,000, or 3.8%, decrease in other operating expense. Compensation and benefits increased due to normal salary increases, annual incentive plan increases and increased medical costs, advertising increased primarily due to increased television advertising and community sponsorship in the three months ended September 30, 2024, professional services increased due to additional services received during the three months ended September 30, 2024, and equipment expense increased due to an increase in the cost of core processing. Office occupancy expense decreased due to slight decreases in office building repairs and real estate taxes, and other operating expenses decreased due to a decrease in loan-related expenses.
Income Tax Expense. We recorded a provision for income tax of $218,000 for the three months ended September 30, 2024, compared to a provision for income tax of $175,000 for the three months ended September 30, 2023, reflecting effective tax rates of 25.6% and 27.3%, respectively.
Asset Quality
At September 30, 2024, our non-accrual loans totaled $163,000, which consisted of one commercial real estate loan in the amount of $142,000 and one consumer loan for $21,000.
At September 30, 2024 we had one loan in the amount of $38,000 that was delinquent 90 days or greater and still accruing interest.
39
At September 30, 2024, loans classified as substandard equaled $3.1 million. Loans classified as substandard consisted of $216,000 in one- to four-family loans, $231,000 in multi-family loans, $1.2 million in commercial real estate loans, $1.5 million in commercial business loans and $22,000 in consumer loans. No loans were classified as doubtful or loss at September 30, 2024.
At September 30, 2024, watch assets consisted of $66,000 in one- to four-family loans.
Loan Modifications with Borrowers Experiencing Financial Difficulty. The Company made no loan modifications for borrowers with financial difficulties in the three months ended September 30, 2024 and two such modifications in the year ended June 30, 2024. One of these modifications was a $252,000 commercial real estate loan, the other was a $133,000 commercial business loan, and both were modified to allow for a payment delay.
Foreclosed Assets. At September 30 2024 and June 30, 2024, we had no foreclosed assets.
Allowance for Credit Loss Activity
The Company regularly reviews its allowance for credit losses and adjusts its balance based on management’s analysis of the loan portfolio, the amount of non-performing and classified loans, as well as general economic conditions. Although the Company maintains its allowance for credit losses at a level that it considers sufficient to provide for losses, there can be no assurance that future losses will not exceed internal estimates. In addition, the amount of the allowance for credit losses is subject to review by regulatory agencies, which can order the establishment of additional loss provisions. The following table summarizes changes in the allowance for credit losses over the three-month periods ended September 30, 2024 and 2023:
| Three months ended September 30, |
||||||||
| 2024 | 2023 | |||||||
| Balance, beginning of period |
$ | 7,499 | $ | 7,139 | ||||
| Loans charged off: |
||||||||
| Real estate loans: |
||||||||
| One- to four-family |
— | — | ||||||
| Multi-family |
(350 | ) | — | |||||
| Commercial |
— | — | ||||||
| HELOC |
— | — | ||||||
| Construction |
— | — | ||||||
| Commercial business |
(50 | ) | — | |||||
| Consumer |
(9 | ) | (7 | ) | ||||
|
|
|
|
|
|||||
| Gross charged off loans |
(409 | ) | (7 | ) | ||||
|
|
|
|
|
|||||
| Recoveries of loans previously charged off: |
||||||||
| Real estate loans: |
||||||||
| One- to four-family |
1 | — | ||||||
| Multi-family |
— | — | ||||||
| Commercial |
— | — | ||||||
| HELOC |
— | — | ||||||
| Construction |
— | — | ||||||
| Commercial business |
2 | 6 | ||||||
| Consumer |
2 | 2 | ||||||
|
|
|
|
|
|||||
| Gross recoveries of charged off loans |
5 | 8 | ||||||
|
|
|
|
|
|||||
| Net (charge-offs) recoveries |
(404 | ) | 1 | |||||
|
|
|
|
|
|||||
| Provision (credit) charged to expense |
377 | 310 | ||||||
|
|
|
|
|
|||||
| Balance, end of period |
$ | 7,472 | $ | 7,450 | ||||
|
|
|
|
|
|||||
The allowance for credit losses has been calculated based upon an evaluation of pertinent factors underlying the various types and quality of the Company’s loans. Management considers such factors as the repayment status of a loan, the estimated net fair value of the underlying collateral, the borrower’s intent and ability to repay the loan, local economic conditions, and the Company’s historical loss ratios. We maintain the allowance for credit losses through the provisions
40
for credit losses that we charge to income. We charge losses on loans against the allowance for credit losses when we believe the collection of loan principal is unlikely. The allowance for credit losses decreased $27,000 and was $7.5 million at both September 30, 2024, and at June 30, 2024. This slight decrease in the allowance for credit losses on loans was made to bring the allowance for credit losses on loans to a level that represents the Company’s best estimate of the reserve necessary to adequately account for probable losses expected over the remaining contractual life of the loans.
Within each pool, risk elements are evaluated that have specific impacts to the borrowers within the pool. These, along with the general risks and events, and the specific lending policies and procedures by loan type, are analyzed to estimate the qualitative factors used to adjust the historical loss rates. Factors considered by the Company during the evaluation of the overall adequacy of the allowance include historical net loan losses, the level and composition of nonaccrual, past due and troubled debt restructurings, trends in volumes and terms of loans, effects of changes in risk selection and underwriting standards or lending practices, lending staff changes, concentrations of credit, industry conditions and the current economic conditions in the region where the Company operates. Management reviews economic factors including the potential for reduced cash flow for commercial operating loans from reduction in sales or increased operating costs, decreased occupancy rates for commercial buildings, reduced levels of home sales for commercial land developments, increased operating costs for businesses, and increased levels of unemployment and bankruptcy impacting consumer’s ability to pay. Each of these economic uncertainties was taken into consideration in developing the level of the reserve, and management has included a qualitative factor within the ACL. In addition, a forecast, using reasonable and supportable future conditions, is prepared that is used to estimate expected changes to existing and historical conditions in the current period.
While management believes that our asset quality remains strong, it recognizes that, due to the continued growth in the loan portfolio and the potential changes in market conditions, our level of nonperforming assets and resulting charge-offs may fluctuate. Higher levels of net charge-offs requiring additional provisions for credit losses could result. Although management uses the best information available, the level of the allowance for credit losses remains an estimate that is subject to significant judgment and short-term change.
Liquidity and Capital Resources
Liquidity is the ability to meet current and future financial obligations of a short-term nature. Our primary sources of funds consist of deposit inflows, loan sales and repayments, advances from the Federal Home Loan Bank of Chicago, and maturities of securities. While maturities and scheduled amortization of loans and securities are predictable sources of funds, deposit flows and mortgage prepayments are greatly influenced by general interest rates, economic conditions and competition. Our Asset/Liability Management Committee is responsible for establishing and monitoring our liquidity targets and strategies in order to ensure that sufficient liquidity exists for meeting the borrowing needs and deposit withdrawals of our customers as well as unanticipated contingencies. For the three months ended September 30, 2024 and the year ended June 30, 2024, our liquidity ratio averaged 24.3% and 25.9% of our total assets, respectively. We believe that we had enough sources of liquidity to satisfy our short- and long-term liquidity needs as of September 30, 2024.
We regularly monitor and adjust our investments in liquid assets based upon our assessment of: (i) expected loan demand; (ii) expected deposit flows; (iii) yields available on interest-earning deposits and securities; and (iv) the objectives of our asset/liability management program. Excess liquid assets are invested generally in interest-earning deposits and short- and medium-term securities.
Our most liquid assets are cash and cash equivalents. The levels of these assets are affected by our operating, financing, lending and investing activities during any given period. At September 30, 2024, cash and cash equivalents totaled $7.8 million. Interest-earning time deposits which can offer additional sources of liquidity, totaled $250,000 at September 30, 2024.
Our cash flows are derived from operating activities, investing activities and financing activities as reported in our Condensed Consolidated Statement of Cash Flows included in our financial statements. Net cash provided by operating activities was $2.2 million and $1.0 million for the three months ended September 30, 2024 and 2023, respectively. Net cash used in investing activities consisted primarily of proceeds from the sales, maturities, pay downs of available-for-sale
41
securities, partially offset by disbursements for loan originations and the purchase of securities. Net cash used in investing activities was $(4.0) million and $(26.0) million for the three months ended September 30, 2024 and 2023, respectively. Net cash provided by financing activities consisted primarily of the activity in deposit accounts, FHLB advances and other borrowings. The net cash provided by financing activities was $90,000 and $27.6 million for the three months ended September 30, 2024 and 2023, respectively.
The Company must also maintain adequate levels of liquidity to ensure the availability of funds to satisfy loan commitments. The Company anticipates that it will have sufficient funds available to meet its current commitments principally through the use of current liquid assets and through its borrowing capacity discussed above. The following table summarizes these commitments at September 30, 2024 and June 30, 2024.
| September 30, 2024 | June 30, 2024 | |||||||
| (Dollars in thousands) | ||||||||
| Commitments to fund loans |
$ | 1,458 | $ | 8,317 | ||||
| Lines of credit |
71,272 | 71,240 | ||||||
At September 30, 2024, certificates of deposit due within one year of September 30, 2024 totaled $260.4 million, or 38.5% of total deposits. Depending on market conditions, we may be required to pay higher rates on such deposits or other borrowings than we currently pay on the certificates of deposit due on or before September 30, 2025. It is our intention as we continue to grow our commercial real estate portfolio, to emphasize lower cost deposit relationships with these commercial loan customers and thereby replace the higher cost certificates with lower cost deposits. We have the ability to attract and retain deposits by adjusting the interest rates offered.
Liquidity management is both a daily and long-term function of business management. If we require funds beyond our ability to generate them internally, borrowing agreements, which provide an additional source of funds, exist with the Federal Home Loan Bank of Chicago, Federal Reserve Discount Window, Federal Reserve BTFP, and CIBC Bank USA. At September 30, 2024, our borrowings consisted of $83.5 million in Federal Home Loan Bank advances and $25.2 million from the Federal Reserve BTFP. At September 30, 2024, we had the ability to borrow up to an additional $45.6 million from the Federal Home Loan Bank of Chicago, we had $14.0 million available from CIBC Bank, and also had the ability to borrow $35.3 million from the Federal Reserve based on current collateral pledged.
The Association is subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory and discretionary actions by regulators that if undertaken, could have a direct material effect on the Association’s financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Association must meet specific capital guidelines involving quantitative measures of the Association’s assets, liabilities, and certain off-balance-sheet items as calculated under regulatory accounting practices. The Association’s capital amounts, and classification are also subject to qualitative judgments by the regulators about components, risk-weightings and other factors.
The Basel III regulatory capital framework (the “Basel III Capital Rules”) adopted by U.S. federal regulatory authorities, among other things, (i) establish the capital measure called “Common Equity Tier 1” (“CET1”), (ii) specify that Tier 1 capital consist of CET1 and “Additional Tier 1 Capital” instruments meeting stated requirements, (iii) define CET1 narrowly by requiring that most deductions/adjustments to regulatory capital measures be made to CET1 and not to the other components of capital and (iv) set forth the acceptable scope of deductions/adjustments to the specified capital measures.
In addition, to avoid restrictions on capital distributions, including dividend payments and stock repurchases, or discretionary bonus payments to executives, a covered banking organization must maintain a “capital conservation buffer” of 2.5% on top of its minimum risk-based capital requirements. This buffer must consist solely of Tier 1 Common Equity and the buffer applies to all three measurements: Common Equity Tier 1, Tier 1 capital and total capital.
42
As a result of the Economic Growth, Regulatory Relief, and Consumer Protection Act, the federal banking agencies were required to develop a “Community Bank Leverage Ratio” (the ratio of a bank’s tangible equity capital to average total consolidated assets) for financial institutions with assets of less than $10 billion. A “qualifying community bank” that exceeds this ratio will be deemed to be in compliance with all other capital and leverage requirements, including the capital requirements to be considered “well capitalized” under Prompt Corrective Action statutes. The Community Bank Leverage Ratio is currently set at 9%. The Association opted into the Community Bank Leverage Ratio in 2020.
As of September 30, 2024, the Association met all capital adequacy requirements to which it is subject and was categorized as well capitalized under the regulatory framework for prompt corrective action. There are no conditions or events that management believes have changed the Association’s prompt corrective action category. The Association’s Community Bank Leverage Ratio is presented in the table below.
| September 30, 2024 Actual |
June 30, 2024 Actual |
Minimum to Be Well Capitalized |
||||||||||
| Community Bank Leverage Ratio |
9.5 | % | 9.2 | % | 9.0 | % | ||||||
Average Balances and Yields
The following tables set forth average balance sheets, average yields and costs, and certain other information at and for the periods indicated. Yields and costs are annualized. Tax-equivalent yield adjustments have not been made for tax-exempt securities. All average balances are based on month-end balances, which management deems to be representative of the operations of the Company. Non-accrual loans were included in the computation of average balances but have been reflected in the table as loans carrying a zero yield. The yields set forth below include the effect of deferred fees, discounts and premiums that are amortized or accreted to interest income or expense.
| For the Three Months Ended September 30, | ||||||||||||||||||||||||
| 2024 | 2023 | |||||||||||||||||||||||
| Average Balance |
Interest Income/ Expense |
Yield/Cost | Average Balance |
Interest Income/ Expense |
Yield/Cost | |||||||||||||||||||
| (Dollars in thousands) | ||||||||||||||||||||||||
| Assets |
||||||||||||||||||||||||
| Loans |
$ | 649,753 | 9,475 | 5.83 | % | $ | 605,378 | 7,733 | 5.11 | % | ||||||||||||||
| Securities: |
||||||||||||||||||||||||
| U.S. Treasury |
— | — | — | 434 | 2 | 1.84 | % | |||||||||||||||||
| U.S. Government and federal agency |
5,732 | 35 | 2.44 | % | 6,441 | 40 | 2.48 | % | ||||||||||||||||
| Mortgage-backed: |
||||||||||||||||||||||||
| GSE residential |
166,750 | 1,122 | 2.69 | % | 170,555 | 1,241 | 2.91 | % | ||||||||||||||||
| Small Business Administration |
14,267 | 96 | 2.69 | % | 14,739 | 112 | 3.04 | % | ||||||||||||||||
| State and political subdivisions |
3,099 | 23 | 2.97 | % | 3,417 | 26 | 3.04 | % | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Total securities |
189,848 | 1,276 | 2.69 | % | 195,586 | 1,421 | 2.91 | % | ||||||||||||||||
| Other |
10,074 | 162 | 6.43 | % | 10,644 | 137 | 5.15 | % | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Total interest-earning assets |
849,675 | 10,913 | 5.14 | % | 811,608 | 9,291 | 4.58 | % | ||||||||||||||||
| Non-interest earning assets |
38,980 | 40,981 | ||||||||||||||||||||||
|
|
|
|
|
|||||||||||||||||||||
| Total assets |
$ | 888,655 | $ | 852,589 | ||||||||||||||||||||
43
| For the Three Months Ended September 30, | ||||||||||||||||||||||||
| 2024 | 2023 | |||||||||||||||||||||||
| Average Balance |
Interest Income/ Expense |
Yield/Cost | Average Balance |
Interest Income/ Expense |
Yield/Cost | |||||||||||||||||||
| (Dollars in thousands) | ||||||||||||||||||||||||
| Liabilities and Stockholders’ Equity |
||||||||||||||||||||||||
| Interest-bearing liabilities: |
||||||||||||||||||||||||
| Interest-bearing checking or NOW |
$ | 100,193 | 40 | 0.16 | % | $ | 103,876 | 45 | 0.17 | % | ||||||||||||||
| Savings accounts |
54,365 | 42 | 0.31 | % | 62,993 | 105 | 0.67 | % | ||||||||||||||||
| Money market accounts |
167,690 | 1,208 | 2.88 | % | 183,201 | 1,265 | 2.76 | % | ||||||||||||||||
| Certificates of deposit |
316,769 | 3,463 | 4.37 | % | 288,393 | 2,420 | 3.36 | % | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Total interest-bearing deposits |
639,017 | 4,753 | 2.98 | % | 638,463 | 3,835 | 2.40 | % | ||||||||||||||||
| Borrowings and repurchase agreements |
119,711 | 1,339 | 4.47 | % | 87,065 | 873 | 4.01 | % | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Total interest-bearing liabilities |
758,728 | 6,092 | 3.21 | % | 725,528 | 4,708 | 2.60 | % | ||||||||||||||||
| Noninterest-bearing liabilities |
46,165 | 51,786 | ||||||||||||||||||||||
| Other Noninterest-bearing liabilities |
6,602 | 5,950 | ||||||||||||||||||||||
|
|
|
|
|
|||||||||||||||||||||
| Total liabilities |
811,495 | 783,264 | ||||||||||||||||||||||
| Stockholders’ equity |
77,160 | 69,325 | ||||||||||||||||||||||
|
|
|
|
|
|||||||||||||||||||||
| Total liabilities and stockholders’ equity |
$ | 888,655 | $ | 852,589 | ||||||||||||||||||||
|
|
|
|
|
|||||||||||||||||||||
| Net interest income |
$ | 4,821 | $ | 4,583 | ||||||||||||||||||||
|
|
|
|
|
|||||||||||||||||||||
| Interest rate spread (1) |
1.93 | % | 1.98 | % | ||||||||||||||||||||
| Net interest margin (2) |
2.27 | % | 2.26 | % | ||||||||||||||||||||
| Net interest-earning assets (3) |
$ | 90,947 | $ | 86,080 | ||||||||||||||||||||
|
|
|
|
|
|||||||||||||||||||||
| Average interest-earning assets to interest-bearing liabilities |
1.12 | % | 1.12 | % | ||||||||||||||||||||
| (1) | Net interest rate spread represents the difference between the yield on average interest-earning assets and the cost of average interest-bearing liabilities. |
| (2) | Net interest margin represents net interest income divided by average total interest-earning assets. |
| (3) | Net interest-earning assets represents total interest-earning assets less total interest-bearing liabilities. |
44
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 net 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 to the changes due to rate and the changes due to volume in proportion to the relationship of the absolute dollar amounts of change in each.
| Three Months Ended September 30, 2024 vs. 2023 |
||||||||||||
| Increase (Decrease) Due to |
Total Increase (Decrease) |
|||||||||||
| Volume | Rate | |||||||||||
| Interest-earning assets: |
||||||||||||
| Loans |
$ | 596 | $ | 1,146 | $ | 1,742 | ||||||
| Securities |
(41 | ) | (104 | ) | (145 | ) | ||||||
| Other |
(43 | ) | 68 | 25 | ||||||||
|
|
|
|
|
|
|
|||||||
| Total interest-earning assets |
$ | 512 | $ | 1,110 | $ | 1,622 | ||||||
|
|
|
|
|
|
|
|||||||
| Interest-bearing liabilities: |
||||||||||||
| Interest-bearing checking or NOW |
$ | (2 | ) | $ | (3 | ) | $ | (5 | ) | |||
| Savings accounts |
(13 | ) | (50 | ) | (63 | ) | ||||||
| Certificates of deposit |
257 | 786 | 1,043 | |||||||||
| Money market accounts |
(328 | ) | 271 | (57 | ) | |||||||
|
|
|
|
|
|
|
|||||||
| Total interest-bearing deposits |
(86 | ) | 1,004 | 918 | ||||||||
| Federal Home Loan Bank advances, other borrowings and repurchase agreements |
357 | 109 | 466 | |||||||||
|
|
|
|
|
|
|
|||||||
| Total interest-bearing liabilities |
$ | 271 | $ | 1,113 | $ | 1,384 | ||||||
|
|
|
|
|
|
|
|||||||
| Change in net interest income |
$ | 241 | $ | (3 | ) | $ | 238 | |||||
|
|
|
|
|
|
|
|||||||
| Item 3. | Quantitative and Qualitative Disclosures about Market Risk |
An internal interest rate risk analysis is performed at least quarterly to assess the Company’s Earnings at Risk and Value at Risk. As of September 30, 2024, there were no material changes in interest rate risk from the analysis disclosed in the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2024, as filed with the Securities and Exchange Commission.
| Item 4. | Controls and Procedures |
An evaluation was performed under the supervision and with the participation of the Company’s management, including the Company’s principal executive officer and principal financial officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) promulgated under the Securities and Exchange Act of 1934, as amended) as of September 30, 2024. Based upon such evaluation, the principal executive officer and principal financial officer concluded that, as of the end of the period covered by this report, the Company’s disclosure controls and procedures were effective for the purpose of ensuring that the information required to be disclosed in the reports that the Company files or submits under the Exchange Act with the Securities and Exchange Commission (the “SEC”) (1) is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and (2) is accumulated and communicated to the Company’s management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure.
During the quarter ended September 30, 2024, there have been no changes in the Company’s internal controls over financial reporting that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
45
Item 1. |
Legal Proceedings |
Item 1A. |
Risk Factors |
Item 2. |
Unregistered Sales of Equity Securities and Use of Proceeds |
Item 3. |
Defaults Upon Senior Securities |
Item 4. |
Mine Safety Disclosures |
Item 5. |
Other Information |
| Item 6. | Exhibits |
| 31.1 | Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
| 31.2 | Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
| 32 |
| 101 | Interactive data files pursuant to Rule 405 of Regulation S-T: (i) the Condensed Consolidated Balance Sheets as of September 30 and June 30, 2024, (ii) the Condensed Consolidated Statements of Income for the three months ended September 30, 2024 and 2023, (iii) the Condensed Consolidated Statements of Comprehensive Income for the three months ended September 30, 2024and 2023, (iv) the Condensed Consolidated Statements of Stockholders’ Equity for the three months ended September 30, 2024 and 2023, (v) the Condensed Consolidated Statements of Cash Flows for the three months ended September 30, 2024 and 2023, and (vi) the notes to the Condensed Consolidated Financial Statements. |
| * | This information is furnished and not filed for purposes of Section 11 and 12 of the Securities Act of 1933 and Section 18 of the Securities Exchange Act of 1934. |
47
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| IF BANCORP, INC. | ||||||
| Date: November 12, 2024 | /s/ Walter H. Hasselbring III | |||||
| Walter H. Hasselbring III | ||||||
| President and Chief Executive Officer | ||||||
| Date: November 12, 2024 | /s/ Pamela J. Verkler | |||||
| Pamela J. Verkler | ||||||
| Senior Executive Vice President and Chief Financial Officer (Principal Financial Officer) | ||||||
48