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What changed in IF Bancorp, Inc.'s 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of IF Bancorp, Inc.'s 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+285 added−315 removedSource: 10-K (2024-09-11) vs 10-K (2023-09-13)

Top changes in IF Bancorp, Inc.'s 2024 10-K

285 paragraphs added · 315 removed · 250 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

141 edited+23 added−31 removed172 unchanged
Biggest changeFor this purpose, a savings bank is placed in one of the five categories based on the institution’s capital: • Well Capitalized —a total risk-based capital ratio of 10.0% or greater, a Tier 1 risk-based capital ratio of 8.0% or greater, a leverage ratio of 5.0% or greater and a common equity Tier 1 ratio of 6.5% or greater; or if applicable, a community bank leverage ratio of 8.5% for 2021 or 9% beginning January 1, 2021 • Adequately Capitalized – a total risk-based capital ratio of 8.0% or greater, a Tier 1 risk-based capital ratio of 6.0% or greater, a leverage ratio of 4.0% or greater and a common equity Tier 1 ratio of 4.5% or greater. • Undercapitalized —a total risk-based capital ratio of less than 8.0%, a Tier 1 risk-based capital ratio of less than 6.0%, a leverage ratio of less than 4.0% or a common equity Tier 1 ratio of less than 4.5%. • Significantly Undercapitalized —a total risk-based capital ratio of less than 6.0%, a Tier 1 risk-based capital ratio of less than 4.0%, a leverage ratio of less than 3.0% or a common equity Tier 1 ratio of less than 3.0%. • Critically Undercapitalized —a ratio of tangible equity (as defined in the regulations) to total assets that is equal to or less than 2.0%.
Biggest changeFor this purpose, a savings bank is placed in one of the five categories based on the institution’s capital: • Well Capitalized – a total risk-based capital ratio of 10.0% or greater, a Tier 1 risk-based capital ratio of 8.0% or greater, a leverage ratio of 5.0% or greater and a common equity Tier 1 ratio of 6.5% or greater.
We face the risk that the collateral will be insufficient to compensate us for loan losses and costs of foreclosure. When customers default on their loans, we attempt to foreclose on the property and resell the property as soon as possible to minimize foreclosure and carrying costs.
We face the risk that the collateral will be insufficient to compensate us for loan losses and costs of foreclosure. When customers default on their loans, we attempt to foreclose on the property and resell the property as soon as possible to minimize foreclosure and carrying costs.
Any change in applicable laws or regulations, whether by the OCC, the FDIC, the Federal Reserve Board or Congress, could have a material adverse impact on the operations and financial performance of IF Bancorp and Iroquois. Set forth below is a brief description of material regulatory requirements that are applicable to Iroquois Federal and IF Bancorp.
Any change in applicable laws or regulations, whether by the OCC, the FDIC, the Federal Reserve Board or Congress, could have a material adverse impact on the operations and financial performance of IF Bancorp and Iroquois Federal. Set forth below is a brief description of material regulatory requirements that are applicable to Iroquois Federal and IF Bancorp.
In evaluating applications by holding companies to acquire savings institutions, the Federal Reserve Board must consider the financial and managerial resources, future prospects of the company and institution involved, the effect of the acquisition on the risk to the federal deposit insurance fund, the convenience and needs of the community and competitive factors.
In evaluating applications by holding companies to acquire savings institutions, the Federal Reserve Board must consider the financial and managerial resources, and future prospects of the company and institution involved, the effect of the acquisition on the risk to the federal deposit insurance fund, the convenience and needs of the community, and competitive factors.
The operations of Iroquois Federal also are subject to the: • Right to Financial Privacy Act, which imposes a duty to maintain confidentiality of consumer financial records and prescribes procedures for complying with administrative subpoenas of financial records; • Electronic Funds Transfer Act and Regulation E promulgated thereunder, which govern automatic deposits to and withdrawals from deposit accounts and customers’ rights and liabilities arising from the use of automated teller machines and other electronic banking services; • Check Clearing for the 21 st Century Act (also known as “Check 21”), which gives “substitute checks,” such as digital check images and copies made from that image, the same legal standing as the original paper check; • The USA PATRIOT Act, which requires savings banks to, among other things, establish broadened anti-money laundering compliance programs, and due diligence policies and controls to ensure the detection and reporting of money laundering.
The operations of Iroquois Federal also are subject to the: • Right to Financial Privacy Act, which imposes a duty to maintain confidentiality of consumer financial records and prescribes procedures for complying with administrative subpoenas of financial records; • Electronic Funds Transfer Act and Regulation E promulgated thereunder, which govern automatic deposits to and withdrawals from deposit accounts and customers’ rights and liabilities arising from the use of automated teller machines and other electronic banking services; 28 Table of Contents • Check Clearing for the 21 st Century Act (also known as “Check 21”), which gives “substitute checks,” such as digital check images and copies made from that image, the same legal standing as the original paper check; • The USA PATRIOT Act, which requires savings banks to, among other things, establish broadened anti-money laundering compliance programs, and due diligence policies and controls to ensure the detection and reporting of money laundering.
As a savings and loan holding company, IF Bancorp is required to comply with the rules and regulations of the Federal Reserve Board and to file certain reports with and is subject to examination by the Federal Reserve Board. IF Bancorp is also subject to the rules and regulations of the Securities and Exchange Commission under the federal securities laws.
As a savings and loan holding company, IF Bancorp is required to comply with the rules and regulations of, must file certain reports with, and is subject to examination by the Federal Reserve Board. IF Bancorp is also subject to the rules and regulations of the Securities and Exchange Commission under the federal securities laws.
This program allows eligible savings associations to make additional residential real estate loans or extensions of credit to one borrower, small business loans or extensions of credit to one borrower, or small farm loans or extensions of credit to one borrower, in the lesser of the following two amounts: (1) 10% of its capital and surplus; or (2) the percentage of capital and surplus, in excess of 15%, that a state bank is permitted to lend under the state lending limit that is available for loans secured by one- to four-family residential real estate, small business loans, small farm loans or unsecured loans in the state where the main office of the savings association is located.
This program allows an eligible savings association to make additional residential real estate loans or extensions of credit to one borrower, small business loans or extensions of credit to one borrower, or small farm loans or extensions of credit to one borrower, in the lesser of the following two amounts: (1) 10% of its capital and surplus; or (2) the percentage of capital and surplus, in excess of 15%, that a state bank is permitted to lend under the state lending limit that is available for loans secured by one-to four-family residential real estate, small business loans, small farm loans or unsecured loans in the state where the main office of the savings association is located.
A less than satisfactory rating may also prevent a financial institution, such as Iroquois Federal or its holding company, from obtaining necessary regulatory approvals to access the capital markets, pay dividends, acquire other financial institutions or establish new branches. 21 Table of Contents In addition, we must comply with significant anti-money laundering and anti-terrorism laws and regulations, Community Reinvestment Act laws and regulations, and fair lending laws and regulations.
A less than satisfactory rating may also prevent a financial institution, such as Iroquois Federal or its holding company, from obtaining necessary regulatory approvals to access the capital markets, pay dividends, acquire other financial institutions or establish new branches. 22 Table of Contents In addition, we must comply with significant anti-money laundering and anti-terrorism laws and regulations, Community Reinvestment Act laws and regulations, and fair lending laws and regulations.
Iroquois Federal’s operations are also subject to federal laws applicable to credit transactions, such as the: • Truth-In-Lending Act, governing disclosures of credit terms to consumer borrowers; 27 Table of Contents • Real Estate Settlement Procedures Act, requiring that borrowers for mortgage loans for one- to four-family residential real estate receive various disclosures, including good faith estimates of settlement costs, lender servicing and escrow account practices, and prohibiting certain practices that increase the cost of settlement services; • Equal Credit Opportunity Act, prohibiting discrimination on the basis of race, creed or other prohibited factors in extending credit; • Fair Credit Reporting Act of 1978, governing the use and provision of information to credit reporting agencies; • Fair Debt Collection Act, governing the manner in which consumer debts may be collected by collection agencies; and • Truth in Savings Act.
Iroquois Federal’s operations are also subject to federal laws applicable to credit transactions, such as the: • Truth-In-Lending Act, governing disclosures of credit terms to consumer borrowers; • Real Estate Settlement Procedures Act, requiring that borrowers for mortgage loans for one- to four-family residential real estate receive various disclosures, including good faith estimates of settlement costs, lender servicing and escrow account practices, and prohibiting certain practices that increase the cost of settlement services; • Equal Credit Opportunity Act, prohibiting discrimination on the basis of race, creed or other prohibited factors in extending credit; • Fair Credit Reporting Act of 1978, governing the use and provision of information to credit reporting agencies; • Fair Debt Collection Act, governing the manner in which consumer debts may be collected by collection agencies; and • Truth in Savings Act.
Also included in Tier 2 capital is the 22 Table of Contents allowance for loan and lease losses limited to a maximum of 1.25% of risk-weighted assets and, for institutions that have exercised an opt-out election regarding the treatment of Accumulated other comprehensive income, up to 45% of net unrealized gains on available-for-sale equity securities with readily determinable fair market values.
Also included in Tier 2 capital is the allowance for loan and lease losses limited to a maximum of 1.25% of risk-weighted assets and, for institutions that have exercised an opt-out election regarding the treatment of Accumulated other comprehensive income, up to 45% of net unrealized gains 23 Table of Contents on available-for-sale equity securities with readily determinable fair market values.
At June 30, 2023, there were no other loans or other assets that are not disclosed in the text or tables above where known information about the possible credit problems of borrowers caused us to have serious doubts as to the ability of the borrowers to comply with present loan repayment terms and which may result in disclosure of such loans in the future.
At June 30, 2024, there were no other loans or other assets that are not disclosed in the text or tables above where known information about the possible credit problems of borrowers caused us to have serious doubts as to the ability of the borrowers to comply with present loan repayment terms and which may result in disclosure of such loans in the future.
Under the Change in Bank Control Act, no person may acquire control of a savings and loan holding company, such as IF Bancorp, unless the FRB has been given 60 days prior written notice and has not issued a notice disapproving the proposed acquisition, taking into consideration certain factors, including the financial and managerial resources of the acquirer and the competitive effects of the acquisition.
Under the Change in Bank Control Act, no person may acquire control of a savings and loan holding company, such as IF Bancorp, unless the FRB has been given 60 days’ prior written notice and has not issued a notice disapproving the proposed acquisition, taking into consideration certain factors, including the financial and managerial resources of the acquirer and the competitive effects of the acquisition.
Raymond James Financial Services, Inc. serves as the broker-dealer for Iroquois Financial. 1 Table of Contents Available Information IF Bancorp’s executive offices are located at 201 East Cherry Street, Watseka, Illinois 60970. Our telephone number at this address is (815) 432-2476, and our website address is www.iroquoisfed.com .
Raymond James Financial Services, Inc. serves as the broker-dealer for Iroquois Financial. 2 Table of Contents Available Information IF Bancorp’s executive offices are located at 201 East Cherry Street, Watseka, Illinois 60970. Our telephone number at this address is (815) 432-2476, and our website address is www.iroquoisfed.com .
If the estimate of construction cost is inaccurate, we may be required to advance additional funds beyond the amount originally committed in order to protect the value of the property. 8 Table of Contents Moreover, if the estimated value of the completed project is inaccurate, the borrower may hold a property with a value that is insufficient to assure full repayment of the construction loan upon the sale of the property.
If the estimate of construction cost is inaccurate, we may be required to advance additional funds beyond the amount originally committed in order to protect the value of the property. 9 Table of Contents Moreover, if the estimated value of the completed project is inaccurate, the borrower may hold a property with a value that is insufficient to assure full repayment of the construction loan upon the sale of the property.
Government agency securities, securities issued or guaranteed by Fannie Mae, Freddie Mac and Ginnie Mae, bank-qualified municipal securities, bank-qualified money market instruments, and bank-qualified corporate bonds. We do not engage in speculative trading. As of June 30, 2023, we held no asset-backed securities other than mortgage- backed securities.
Government agency securities, securities issued or guaranteed by Fannie Mae, Freddie Mac and Ginnie Mae, bank-qualified municipal securities, bank-qualified money market instruments, and bank-qualified corporate bonds. We do not engage in speculative trading. As of June 30, 2024, we held no asset-backed securities other than mortgage-backed securities.
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. 15 Table of Contents The following table sets forth activity in our allowance for credit losses at and for the periods indicated.
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. 16 Table of Contents The following table sets forth activity in our allowance for credit losses at and for the periods indicated.
Once known primarily as a resort area, this market is becoming an area of permanent residences and a growing retirement community, providing an excellent market for mortgage loans. 2 Table of Contents Competition We face intense competition in our market area both in making loans and attracting deposits.
Once known primarily as a resort area, this market is becoming an area of permanent residences and a growing retirement community, providing an excellent market for mortgage loans. 3 Table of Contents Competition We face intense competition in our market area both in making loans and attracting deposits.
We also invest in securities, which historically have consisted primarily of securities issued by the U.S. government, U.S. government agencies and U.S. government-sponsored enterprises, as well as mortgage-backed securities issued or guaranteed by U.S. government-sponsored enterprises. To a lesser extent, we also invest in municipal obligations.
We also invest in securities, which historically have consisted primarily of securities issued by the U.S. government, U.S. government agencies and U.S. government-sponsored enterprises, as well as mortgage-backed securities issued or guaranteed by U.S. government-sponsored enterprises. To a lesser extent, we also invest in municipal obligationsns.
In recent years, Iroquois and Vermilion Counties, our traditional primary market areas, have experienced negative growth, reflecting in part, the economic downturn. However, Champaign County, where our Savoy and Champaign branches are located, has experienced population growth. Future business and growth opportunities will be influenced by economic and demographic characteristics of our primary market area and of east central Illinois.
In recent years, Iroquois, Vermilion and Kankakee Counties have experienced negative growth, reflecting in part, the economic downturn. However, Champaign County, where our Savoy and Champaign branches are located, has experienced population growth. Future business and growth opportunities will be influenced by economic and demographic characteristics of our primary market area and of east central Illinois.
This regulation and supervision establishes a comprehensive framework of activities in which an institution may engage and is intended primarily for the protection of the FDIC’s deposit insurance fund and depositors, and not for the protection of stockholders.
This regulation and supervision establish a comprehensive framework of activities in which an institution may engage and is intended primarily for the protection of the FDIC’s deposit insurance fund and depositors, and not for the protection of stockholders.
If an institution fails to meet these standards, the appropriate federal banking agency may require the institution to implement an acceptable compliance plan. Failure to implement such a plan can result in further enforcement action, including the issuance of a cease and desist order or the imposition of civil money penalties. 25 Table of Contents Interstate Banking and Branching.
If an institution fails to meet these standards, the appropriate federal banking agency may require the institution to implement an acceptable compliance plan. Failure to implement such a plan can result in further enforcement action, including the issuance of a cease and desist order or the imposition of civil money penalties. Interstate Banking and Branching.
As a member of the Federal Home Loan Bank of Chicago, Iroquois Federal is required to acquire and hold shares of capital stock in the Federal Home Loan Bank. As of June 30, 2023, Iroquois Federal was in compliance with this requirement.
As a member of the Federal Home Loan Bank of Chicago, Iroquois Federal is required to acquire and hold shares of capital stock in the Federal Home Loan Bank. As of June 30, 2024, Iroquois Federal was in compliance with this requirement.
Loan Portfolio Maturities and Yields. The following table summarizes the scheduled repayments of our loan portfolio at June 30, 2023. We had no demand loans or loans having no stated repayment schedule or maturity at June 30, 2023.
Loan Portfolio Maturities and Yields. The following table summarizes the scheduled repayments of our loan portfolio at June 30, 2024. We had no demand loans or loans having no stated repayment schedule or maturity at June 30, 2024.
IF Bancorp is an affiliate of Iroquois Federal because of its control of Iroquois Federal. In general, transactions between an insured depository institution and its affiliate are subject to certain quantitative limits and collateral requirements.
IF Bancorp is an affiliate of Iroquois Federal because of its control of Iroquois Federal. In general, covered transactions between an insured depository institution and its affiliates are subject to certain quantitative limits and collateral requirements.
The economy in our primary market is fairly diversified, with employment in services, wholesale/retail trade, and government serving as the basis of the Iroquois County, Vermilion County, Champaign County and Kankakee economies.
The economy in our primary markets is fairly diversified, with employment in services, wholesale/retail trade, and government serving as the basis of the Iroquois County, Vermilion County, Champaign County and Kankakee County economies.
Iroquois Federal’s investment policy allows it to purchase municipal securities of credit-worthy issuers, and does not permit it to invest more than 10% of Iroquois Federal’s capital in the bonds of any single issuer. At June 30, 2023, we held $3.4 million of municipal securities, all of which were issued by local governments and school districts within our market area.
Iroquois Federal’s investment policy allows it to purchase municipal securities of credit-worthy issuers, and does not permit it to invest more than 10% of Iroquois Federal’s capital in the bonds of any single issuer. At June 30, 2024, we held $3.1 million of municipal securities, all of which were issued by local governments and school districts within our market area.
For additional information regarding retained risk associated with these loans, see “Allowance for Credit Losses—Other Credit Risk.” Loan Approval Procedures and Authority. Our lending activities follow written, non-discriminatory underwriting standards and loan origination procedures established by our Board of Directors.
For additional information regarding retained risk associated with these loans, see “Allowance for Credit Losses—Other Credit Risk.” 10 Table of Contents Loan Approval Procedures and Authority. Our lending activities follow written, non-discriminatory underwriting standards and loan origination procedures established by our Board of Directors.
As a federal savings bank that has not exercised the covered savings association election, Iroquois Federal must either qualify as a “domestic building and loan association” within the meaning of the Internal Revenue Code or satisfy the qualified thrift lender, or “QTL,” test.
As a federal savings bank that has not exercised the covered savings association election, Iroquois Federal must either qualify as a “domestic building and loan association” within the meaning of the Internal Revenue Code or satisfy the Home Owners’ Loan Act qualified thrift lender, or “QTL,” test.
Real Estate Owned and Foreclosed Assets. Real estate acquired by us as a result of foreclosure or by deed in lieu of foreclosure is classified as real estate owned. When property is acquired it is recorded at fair value less cost to sell at the date of foreclosure, establishing a new cost basis.
Real estate acquired by us as a result of foreclosure or by deed in lieu of foreclosure is classified as real estate owned. When property is acquired it is recorded at fair value less cost to sell at the date of foreclosure, establishing a new cost basis.
A savings bank that fails the qualified thrift lender test must operate under specified restrictions specified in the Home Owners’ Loan Act. The Dodd-Frank Act made noncompliance with the QTL Test potentially subject to agency enforcement action for a violation of law.
A savings bank that fails the QTL test must operate under specified restrictions specified in the Home Owners’ Loan Act. The Dodd-Frank Act made noncompliance with the QTL Test potentially subject to agency enforcement action for a violation of law.
We generally originate both fixed- and adjustable-rate mortgage loans in amounts up to the maximum conforming loan limits as established by the Federal Housing Finance Agency for Fannie Mae and Freddie Mac, which for our primary market area is currently $726,200 for single-family homes.
We generally originate both fixed- and adjustable-rate mortgage loans in amounts up to the maximum conforming loan limits as established by the Federal Housing Finance Agency for Fannie Mae and Freddie Mac, which for our primary market area is currently $766,550 for single-family homes.
At June 30, 2023, substantially all of our commercial real estate and multi-family real estate loans were secured by properties located in Illinois, Indiana and Missouri. 6 Table of Contents Our commercial real estate mortgage loans are primarily secured by owner-occupied businesses, retail rentals, churches, student housing, office buildings, and farm loans secured by real estate.
At June 30, 2024, substantially all of our commercial real estate and multi-family real estate loans were secured by properties located in Illinois, Indiana and Missouri. 7 Table of Contents Our commercial real estate mortgage loans are primarily secured by owner-occupied businesses, student housing, retail rentals, churches, office buildings, and farm loans secured by real estate.
The Company establishes a general allowance for loans that are not individually evaluated to recognize the inherent losses associated with lending activities, but which, unlike specific allowances, has not been allocated to particular problem assets. The general valuation allowance is determined by segmenting the loan portfolio into pools with similar risks and collecting data to determine pool loss experience.
The Company establishes a general allowance for loans that are not deemed collateral-dependent to recognize the inherent losses associated with lending activities, but which, unlike specific allowances, has not been allocated to particular problem assets. The general valuation allowance is determined by segmenting the loan portfolio into pools with similar risks and collecting data to determine pool loss experience.
See “—Loan Originations, Purchases, Sales, Participations and Servicing.” Our loan portfolio also includes commercial loan participations which are secured by both real estate and other business assets, primarily within 100 miles of our primary lending market. As of June 30, 2023 and 2022, the amount of such loans equaled $46.1 million and $30.0 million, respectively.
See “—Loan Originations, Purchases, Sales, Participations and Servicing.” Our loan portfolio also includes commercial loan participations which are secured by both real estate and other business assets, primarily within 100 miles of our primary lending market. As of June 30, 2024 and 2023, the amount of such loans equaled $51.8 million and $46.1 million, respectively.
Managing Officers (those with designated loan approval authority) generally have authority to approve one- to four-family residential mortgage loans and other 9 Table of Contents secured loans up to $375,000, and unsecured loans up to $100,000. In addition, any two individual officers may combine their loan authority limits to approve a loan.
Managing Officers (those with designated loan approval authority) generally have authority to approve one- to four-family residential mortgage loans and other secured loans up to $375,000, and unsecured loans up to $100,000. In addition, any two individual officers may combine their loan authority limits to approve a loan.
When loans are placed on non-accrual status, unpaid accrued interest is fully reversed, and further income is recognized only to the extent received and only after the loan is returned to accrual status. The loans are typically returned to accrual status if unpaid principal and interest are repaid so that the loan is current. 10 Table of Contents Non-Performing Assets.
When loans are placed on non-accrual status, unpaid accrued interest is fully reversed, and further income is recognized only to the extent received and only after the loan is returned to accrual status. The loans are typically returned to accrual status if unpaid principal and interest are repaid so that the loan is current. Non-Performing Assets.
At that date we had $11.3 million of undisbursed funds related to home equity lines of credit. 7 Table of Contents Home equity lines of credit secured by second mortgages have greater risk than one- to four-family residential mortgage loans secured by first mortgages.
At that date we had $11.0 million of undisbursed funds related to home equity lines of credit. 8 Table of Contents Home equity lines of credit secured by second mortgages have greater risk than one- to four-family residential mortgage loans secured by first mortgages.
Iroquois Federal uses the supplemental limit for its loans to one borrower infrequently, and all such credit facilities must receive prior approval by the Board of Directors. As of June 30, 2023, Iroquois Federal was in compliance with its loans-to-one borrower limitations. 23 Table of Contents Qualified Thrift Lender Test.
Iroquois Federal uses the supplemental limit for its loans to one borrower infrequently, and all such credit facilities must receive prior approval by the Board of Directors. As of June 30, 2024, Iroquois Federal was in compliance with its loans-to-one borrower limitations. Qualified Thrift Lender Test.
Unemployment rates in our primary market have increased slightly over the last year. According to the Illinois Department of Employment Security, unemployment, on a non-seasonally adjusted basis, increased from 4.0% to 4.5% in Iroquois County, from 4.9% to 5.9% in Vermilion County, from 4.1% to 4.7% in Champaign County, and from 4.8% to 5.7% in Kankakee County .
Unemployment rates in our primary market have increased slightly over the last year. According to the Illinois Department of Employment Security, unemployment, on a non-seasonally adjusted basis, increased from 4.5% to 5.2% in Iroquois County, from 5.9% to 7.5% in Vermilion County, from 4.7% to 5.4% in Champaign County, and from 5.7% to 6.5% in Kankakee County.
Personnel At June 30, 2023, the Association had 104 full-time employees and 6 part-time employees, none of whom is represented by a collective bargaining unit. Iroquois Federal believes that its relationship with its employees is good. Subsidiaries IF Bancorp conducts its principal business activities through its wholly-owned subsidiary, Iroquois Federal Savings and Loan Association.
Personnel At June 30, 2024, the Association had 109 full-time employees and 7 part-time employees, none of whom is represented by a collective bargaining unit. Iroquois Federal believes that its relationship with its employees is good. Subsidiaries IF Bancorp conducts its principal business activities through its wholly-owned subsidiary, Iroquois Federal Savings and Loan Association.
Our deposit sources are primarily concentrated in the communities surrounding our banking offices located in Iroquois and Vermilion Counties, Illinois. As of June 30, 2022, the latest date for which FDIC data is available, we ranked second of 12 bank and thrift institutions with offices in Iroquois County with a 19.95% deposit market share.
Our deposit sources are primarily concentrated in the communities surrounding our banking offices located in Iroquois and Vermilion Counties, Illinois. As of June 30, 2023, the latest date for which FDIC data is available, we ranked second of 12 bank and thrift institutions with offices in Iroquois County with a 20.55% deposit market share.
At June 30, 2023, our largest commercial real estate loan had an outstanding balance of $9.8 million, was secured by an industrial warehouse, and was performing in accordance with its terms.
At June 30, 2024, our largest commercial real estate loan had an outstanding balance of $9.5 million, was secured by an industrial warehouse, and was performing in accordance with its terms.
In addition, we could repossess certain collateral, including automobiles and other titled vehicles, called other repossessed assets. At June 30, 2023, we had $31,000 in foreclosed assets compared to $120,000 as of June 30, 2022.
In addition, we could repossess certain collateral, including automobiles and other titled vehicles, called other repossessed assets. At June 30, 2024, we had no foreclosed assets compared to $31,000 as of June 30, 2023.
However, while we retain the servicing of these 13 Table of Contents loans and receive both service fees and credit enhancement fees, they are not our assets.
However, while we retain the servicing of these loans and receive both service fees and credit enhancement fees, they are not our assets.
For these purposes, the law establishes five capital categories: well capitalized, adequately capitalized, undercapitalized, significantly undercapitalized and critically undercapitalized. The OCC has adopted regulations to implement the prompt corrective action legislation.
For these purposes, the law establishes five capital categories: well capitalized, adequately capitalized, undercapitalized, significantly undercapitalized and critically undercapitalized. 26 Table of Contents The OCC has adopted regulations to implement the prompt corrective action legislation.
The related specific valuation allowance in the allowance for loan losses for such nonperforming loans was $0 at both June 30, 2023 and 2022. Substandard assets shown include foreclosed assets.
The related specific valuation allowance in the allowance for credit losses for such nonperforming loans was $0 at both June 30, 2024 and 2023. Substandard assets shown include foreclosed assets.
In addition to loans originated by Iroquois Federal, our loan portfolio includes loan purchases which are secured by single family homes located primarily in the Midwest. As of June 30, 2023 and 2022, the amount of such loans equaled $652,000 and $1.6 million, respectively.
In addition to loans originated by Iroquois Federal, our loan portfolio includes loan purchases which are secured by single family homes located primarily in the Midwest. As of June 30, 2024 and 2023, the amount of such loans equaled $253,000 and $652,000, respectively.
The Iroquois Federal Savings and Loan Association has one wholly-owned subsidiary, L.C.I. Service Corporation, an insurance agency with offices in Watseka and Danville, Illinois. REGULATION AND SUPERVISION General Iroquois Federal is subject to regulation, examination and supervision by the OCC.
Iroquois Federal Savings and Loan Association has one wholly-owned subsidiary, L.C.I. Service Corporation, an insurance agency with offices in Watseka and Danville, Illinois. REGULATION AND SUPERVISION General Iroquois Federal is subject to regulation, examination and supervision by the Office of the Comptroller of the Currency (“OCC”).
Total loans sold under this program equaled approximately $133.2 million and $141.2 million as of June 30, 2023 and 2022, respectively. See “—One- to Four-Family Residential Real Estate Lending” below for more information regarding the origination of loans for sale to the Federal Home Loan Bank of Chicago. 3 Table of Contents Loan Portfolio Composition.
The balance of loans sold under this program equaled approximately $133.8 million and $133.2 million as of June 30, 2024 and 2023, respectively. See “—One- to Four-Family Residential Real Estate Lending” below for more information regarding the origination of loans for sale to the Federal Home Loan Bank of Chicago. 4 Table of Contents Loan Portfolio Composition.
During the years ended June 30, 2023 and 2022, we sold $7.9 million and $28.0 million of loans to the Federal Home Loan Bank of Chicago under the program. Prior to December 2008, we also retained some credit risk associated with loans sold to the Federal Home Loan Bank of Chicago.
During the years ended June 30, 2024 and 2023, we sold $13.5 million and $7.9 million of loans to the Federal Home Loan Bank of Chicago under the program. Prior to December 2008, we also retained some credit risk associated with loans sold to the Federal Home Loan Bank of Chicago.
Our Loan Committee may approve one- to four-family residential mortgage loans, commercial real estate loans, multi-family real estate loans and land loans up to $2,000,000 and unsecured loans up to $500,000. All loans above these limits must be approved by the Operating Committee, consisting of the Chairman, and including, but not limited to, four board members.
Our Loan Committee may approve one- to four-family residential mortgage loans, commercial real estate loans, multi-family real estate loans and land loans up to $2,000,000 and unsecured loans up to $500,000. All loans above these limits must be approved by the Operating Committee, consisting of the Chairman, and at least four other Board members.
Interest rate changes are further limited by floors. After the initial fixed period, the interest rate will generally have a floor that is equal to the initial rate, but no less than 4.0% on our five and seven year adjustable-rate mortgage loans.
After the initial fixed period, the interest rate will generally have a floor that is equal to the initial rate, but no less than 4.0% on our five and seven year adjustable-rate mortgage loans.
At June 30, 2023, approximately $2.4 million, or 1.5% of our one- to four-family mortgage loans were home equity loans secured by a second mortgage. Home equity loans secured by second mortgages have greater risk than one- to four-family residential mortgage loans or home equity loans secured by first mortgages.
At June 30, 2024, approximately $3.4 million, or 1.9% of our one- to four-family mortgage loans were home equity loans secured by a second mortgage. Home equity loans secured by second mortgages have greater risk than one- to four-family residential mortgage loans or home equity loans secured by first mortgages.
The following table sets forth our amounts of classified assets, assets designated as watch and total criticized assets (classified assets and loans designated as watch) as of the date indicated. Amounts shown at June 30, 2023 and 2022, include approximately $117,000 and $1.2 million of nonperforming loans, respectfully.
The following table sets forth our amounts of classified assets, assets designated as watch and total criticized assets (classified assets and loans designated as watch) as of the date indicated. Amounts shown at June 30, 2024 and 2023, include approximately $173,000 and $117,000 of nonperforming loans, respectfully.
At June 30, 2023, we had $14.8 million invested in bank-owned life insurance, which was 16.2% of our Tier 1 capital plus our allowance for credit losses. 18 Table of Contents Portfolio Maturities and Yields. The composition and maturities of the investment securities portfolio at June 30, 2023 are summarized in the following table.
At June 30, 2024, we had $14.9 million invested in bank-owned life insurance, which was 15.8% of our Tier 1 capital plus our allowance for credit losses. 19 Table of Contents Portfolio Maturities and Yields. The composition and maturities of the investment securities portfolio at June 30, 2024 are summarized in the following table.
At June 30, 2023, loans secured by commercial real estate had an average loan balance of $621,000. We originate commercial real estate loans with balloon and adjustable rates of up to seven years with amortization up to 25 years. At June 30, 2023, $27.9 million or 14.4% of our commercial real estate loans had adjustable rates.
At June 30, 2024, loans secured by commercial real estate had an average loan balance of $633,000. We originate commercial real estate loans with balloon and adjustable rates of up to seven years with amortization up to 25 years. At June 30, 2024, $29.9 million or 14.9% of our commercial real estate loans had adjustable rates.
We seek to minimize these risks through our underwriting standards. At June 30, 2023, our largest commercial business loan outstanding was for $3.4 million and was a commercial line of credit secured by an industrial warehouse. At June 30, 2023, this loan was performing in accordance with its terms. Construction Loans.
We seek to minimize these risks through our underwriting standards. At June 30, 2024, our largest commercial business loan outstanding was for $4.5 million and was a commercial line of credit secured by business assets. At June 30, 2024, this loan was performing in accordance with its terms. Construction Loans.
At June 30, 2023, $8.7 million or 9.7% of our multi-family loans had adjustable rates. The rates on our adjustable-rate multi-family loans are generally tied to the prime rate of interest plus or minus an applicable margin and generally have a specified floor.
At June 30, 2024, $26.9 million or 21.4% of our multi-family loans had adjustable rates. The rates on our adjustable-rate multi-family loans are generally tied to the prime rate of interest plus or minus an applicable margin and generally have a specified floor.
Both fixed and adjustable rate home equity lines of credit have balloon terms of five years. At June 30, 2023, we had $8.1 million, or 1.4% of our total loan portfolio in home equity lines of credit.
Both fixed and adjustable rate home equity lines of credit have balloon terms of five years. At June 30, 2024, we had $9.9 million, or 1.5% of our total loan portfolio in home equity lines of credit.
Acquisition of more than 10% of any class of a savings and loan holding company’s voting stock constitutes a rebuttable determination of control under the regulations under certain circumstances including where, as is the case with IF Bancorp, the issuer has registered securities under Section 12 of the Securities Exchange Act of 1934. 29 Table of Contents Federal Securities Laws IF Bancorp common stock is registered with the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended.
Acquisition of more than 10% of any class of a savings and loan holding company’s voting stock constitutes a rebuttable determination of control under the regulations under certain circumstances including where, as is the case with IF Bancorp, the issuer has registered securities under Section 12 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”).
The following table sets forth the composition of our loan portfolio, including loans held for sale, by type of loan at the dates indicated. Amounts shown for one- to four-family loans include loans held for sale of approximately $0 and $227,000 at June 30, 2023 and 2022, respectively.
The following table sets forth the composition of our loan portfolio, including loans held for sale, by type of loan at the dates indicated. Amounts shown for one- to four-family loans include no loans held for sale at June 30, 2024 and 2023, respectively.
Federal Home Loan Bank Stock. At June 30, 2023, we held $3.1 million of Federal Home Loan Bank of Chicago common stock in connection with our borrowing activities totaling $19.5 million. The common stock of the Federal Home Loan Bank is carried at cost and classified as a restricted equity security. Bank-Owned Life Insurance.
Federal Home Loan Bank Stock. At June 30, 2024, we held $4.5 million of Federal Home Loan Bank of Chicago common stock in connection with our borrowing activities totaling $33.0 million. The common stock of the Federal Home Loan Bank is carried at cost and classified as a restricted equity security. Bank-Owned Life Insurance.
The specific allowance for non-performing loans that are individually evaluated is measured by determining the fair value of the collateral adjusted for market conditions and selling expense.
The specific allowance for collateral-dependent loans that are evaluated separately is measured by determining the fair value of the collateral adjusted for market conditions and selling expense.
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 non-performing loans by evaluating them separately.
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 collateral-dependent loans by evaluating them individually.
At June 30, 2023, Iroquois Federal held 69.0% of its “portfolio assets” in “qualified thrift investments,” and satisfied the QTL Test. Capital Distributions. Federal regulations govern capital distributions by a federal savings bank, which include cash dividends, stock repurchases and other transactions charged to the capital account.
At June 30, 2024, Iroquois Federal held 70.35% of its “portfolio assets” in “qualified thrift investments,” and satisfied the QTL Test. 24 Table of Contents Capital Distributions. Federal regulations govern capital distributions by a federal savings bank, which include cash dividends, stock repurchases, and other transactions charged to the capital account.
Factors considered by the Company in 14 Table of Contents evaluating 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.
Factors considered by the Company in evaluating the overall adequacy of the allowance include historical net loan losses, the level and 15 Table of Contents composition of nonaccrual, past due and loan modifications to borrowers experiencing financial difficulties, 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.
One- to Four-Family Residential Mortgage Loans . At June 30, 2023, $163.9 million, or 27.6% of our total loan portfolio, consisted of one- to four-family residential mortgage loans. We offer residential mortgage loans that conform to Fannie Mae and Freddie Mac underwriting standards (conforming loans) as well as non-conforming loans.
One- to Four-Family Residential Mortgage Loans . At June 30, 2024, $177.3 million, or 27.4% of our total loan portfolio, consisted of one- to four-family residential mortgage loans. We offer residential mortgage loans that conform to Fannie Mae and Freddie Mac underwriting standards (conforming loans) as well as non-conforming loans.
In all instances, loans are placed on non-accrual or are charged-off at an earlier date if collection of principal and interest is considered doubtful. All interest accrued but not collected for loans that are placed on non-accrual or charged-off are reversed against interest income.
Past due status is based on contractual terms of the loan. In all instances, loans are placed on non-accrual or are charged-off at an earlier date if collection of principal and interest is considered doubtful. All interest accrued but not collected for loans that are placed on non-accrual or charged-off are reversed against interest income.
The Company’s most significant asset is its investment in Iroquois Federal. At June 30, 2023 and 2022, we had consolidated assets of $849.0 million and $857.6 million, consolidated deposits of $735.3 million and $752.0 million and consolidated equity of $71.8 million and $71.7 million, respectively. Iroquois Federal is a federally chartered savings association headquartered in Watseka, Illinois.
The Company’s most significant asset is its investment in Iroquois Federal. At June 30, 2024 and 2023, we had consolidated assets of $887.7 million and $849.0 million, consolidated deposits of $727.2 million and $735.3 million and consolidated equity of $73.9 million and $71.8 million, respectively. Iroquois Federal is a federally chartered savings association headquartered in Watseka, Illinois.
Total mortgages sold under this program were approximately 5 Table of Contents $542,000 and $5.7 million for the years ended June 30, 2023 and 2022, respectively. In October 2015, we began to also sell loans to FHLBC under its Mortgage Partnership Finance Original Program.
In October 2015, we began to also sell loans to FHLBC under its Mortgage Partnership 6 Table of Contents Finance Original Program. Total loans sold under this program were approximately $12.7 million and $7.4 million for the years ended June 30, 2024 and 2023, respectively.
The Company adopted ASU 2016-13, effective July 1, 2022, and utilizes the CECL cohort methodology analysis 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.
The Company utilizes the CECL cohort methodology analysis 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.
The adjustable rate mortgage loans we are currently offering have a 2% maximum annual rate change up or down, and a 6% lifetime cap. In our portfolio are also adjustable rate mortgage loans with a 1% maximum annual rate change up or down, and a 5% lifetime cap up from the initial rate.
The adjustable rate mortgage loans we are currently offering have a 2% maximum annual rate change up or down, and a 6% lifetime cap. Our portfolio also has adjustable rate mortgage loans with a 1% maximum annual rate change up or down, and a 5% lifetime cap up from the initial rate. Interest rate changes are further limited by floors.
At June 30, 2023, we had $19.5 million in brokered certificates of deposit and $2.9 million in non-brokered certificates of deposit obtained through an internet listing service. Interest rates, maturity terms, service fees and withdrawal penalties are established on a periodic basis.
At June 30, 2024, we had $29.0 million in brokered certificates of deposit and no non-brokered certificates of deposit obtained through an internet listing service. Interest rates, maturity terms, service fees and withdrawal penalties are established on a periodic basis.
The FDIC charges insured depository institutions premiums to maintain the Deposit Insurance Fund. 26 Table of Contents Assessments for institutions with less than $10 billion of assets, such as Iroquois Federal, are based on financial measures and supervisory ratings derived from statistical modeling estimating the probability of an institution’s failure within three years (along with certain specified adjustments), with institutions deemed less risky paying lower assessments.
Assessments for institutions with less than $10 billion of assets, such as Iroquois Federal, are based on financial measures and supervisory ratings derived from statistical modeling estimating the probability of an institution’s failure within three years (along with certain specified adjustments), with institutions deemed less risky paying lower assessments.
We also originate construction loans for one- to four-family residential properties and commercial real estate properties, including multi-family properties. At June 30, 2023, $51.0 million, or 8.6%, of our total loan portfolio, consisted of construction loans, which were secured by one- to four-family residential real estate, multi-family real estate properties and commercial real estate properties.
We also originate construction loans for one- to four-family residential properties and commercial real estate properties, including multi-family properties. At June 30, 2024, $33.7 million, or 5.2%, of our total loan portfolio, consisted of construction loans, which were secured by one- to four-family residential real estate, multi-family real estate properties and commercial real estate properties.
At or For the Fiscal Years Ended June 30, 2023 2022 (Dollars in thousands) Balance at beginning of period $ 7,052 $ 6,599 Impact of adopting ASU 2016-13 47 — Charge-offs: Real estate loans: One- to four-family (1) — (40 ) Multi-family — — Commercial — — Home equity lines of credit — — Construction — — Commercial (14 ) — Consumer (37 ) (27 ) Total charge-offs (51 ) (67 ) Recoveries: Real estate loans: One- to four-family (1) 1 1 Multi-family — — Commercial — — Home equity lines of credit — — Construction — — Commercial 23 20 Consumer 15 7 Total recoveries 39 28 Net charge-offs (12 ) (39 ) Provision for credit losses 52 492 Balance at end of period $ 7,139 $ 7,052 Ratios: Net charge-offs to average loans outstanding 0.01 % 0.01 % Allowance for credit losses to non-performing loans at end of period 6101.71 % 600.68 % Allowance for credit losses to total loans at end of period 1.20 % 1.34 % (1) Includes home equity loans. 16 Table of Contents Allocation of Allowance for Credit Losses.
At or For the Fiscal Years Ended June 30, 2024 2023 (Dollars in thousands) Balance at beginning of period $ 7,139 $ 7,052 Impact of adopting ASU 2016-13 — 47 Charge-offs: Real estate loans: One- to four-family (1) — — Multi-family — — Commercial — — Home equity lines of credit — — Construction — — Commercial — (14 ) Consumer (49 ) (37 ) Total charge-offs (49 ) (51 ) Recoveries: Real estate loans: One- to four-family (1) 3 1 Multi-family — — Commercial — — Home equity lines of credit — — Construction — — Commercial 242 23 Consumer 14 15 Total recoveries 259 39 Net recoveries (charge-offs) 210 (12 ) Provision for credit losses 150 52 Balance at end of period $ 7,499 $ 7,139 Ratios: Net charge-offs (recoveries)to average loans outstanding (0.03 )% 0.01 % Allowance for credit losses to non-performing loans at end of period 4329.57 % 6101.71 % Allowance for credit losses to total loans at end of period 1.16 % 1.20 % (1) Includes home equity loans. 17 Table of Contents Allocation of Allowance for Credit Losses.
Mortgage-backed securities are created by pooling mortgages and issuing a security with an interest rate that is less than the interest rate on the underlying mortgages. Some securities pools are guaranteed as to payment of principal and interest to investors.
We invest in mortgage-backed securities insured or guaranteed by the U.S. Government or government sponsored enterprises. Mortgage-backed securities are created by pooling mortgages and issuing a security with an interest rate that is less than the interest rate on the underlying mortgages. Some securities pools are guaranteed as to payment of principal and interest to investors.
Insurance of deposits may be terminated by the FDIC upon a finding that an institution has engaged in unsafe or unsound practices, is in an unsafe or unsound condition to continue operations or has violated any applicable law, regulation, rule, order or condition imposed by the FDIC.
Management cannot predict what assessment rates will be in the future. 27 Table of Contents Insurance of deposits may be terminated by the FDIC upon a finding that an institution has engaged in unsafe or unsound practices, is in an unsafe or unsound condition to continue operations or has violated any applicable law, regulation, rule, order or condition imposed by the FDIC.
At June 30, 2023 and 2022, the amount of commercial loan participations totaled $46.1 million and $30.0 million, respectively, of which $29.0 million and $13.2 million, at June 30, 2023 and 2022 were outside our primary market area.
At June 30, 2024 and 2023, the amount of commercial loan participations totaled $51.8 million and $46.1 million, respectively, of which $34.9 million and $29.0 million, at June 30, 2024 and 2023 were outside our primary market area.
Loans Delinquent For 60 to 89 Days 90 Days or Greater Total Number Amount Number Amount Number Amount (Dollars in thousands) At June 30, 2023 Real estate loans: One- to four-family (1) 5 116 — — 5 116 Multi-family — — — — — — Commercial — — — — — — Home equity lines of credit 1 20 — — 1 20 Construction — — — — — — Commercial — — 2 58 2 58 Consumer 2 6 1 2 3 8 Total loans 8 $ 142 3 $ 60 11 $ 202 At June 30, 2022 Real estate loans: One- to four-family (1) 4 144 3 1,174 7 1,318 Multi-family — — — — — — Commercial — — — — — — Home equity lines of credit — — — — — — Construction — — — — — — Commercial — — — — — — Consumer 2 21 — — 2 21 Total loans 6 $ 165 3 $ 1,174 9 $ 1,339 (1) Includes home equity loans.
Loans Delinquent For 60 to 89 Days 90 Days or Greater Total Number Amount Number Amount Number Amount (Dollars in thousands) At June 30, 2024 Real estate loans: One- to four-family (1) 4 $ 192 — — 4 192 Multi-family — — — — — — Commercial — — 1 150 1 150 Home equity lines of credit 1 25 — — 1 25 Construction — — — — — — Commercial 1 20 — — 1 20 Consumer 1 1 1 23 2 24 Total loans 7 $ 238 2 $ 173 9 $ 411 At June 30, 2023 Real estate loans: One- to four-family (1) 5 116 — — 5 116 Multi-family — — — — — — Commercial — — — — — — Home equity lines of credit 1 20 — — 1 20 Construction — — — — — — Commercial — — 2 58 2 58 Consumer 2 6 1 2 3 8 Total loans 8 $ 142 3 $ 60 11 $ 202 (1) Includes home equity loans.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

25 edited+5 added−14 removed76 unchanged
Biggest changeNet interest income is the difference between: • the interest income we earn on our interest-earning assets, such as loans and securities; and • the interest expense we incur on our interest-bearing liabilities, such as deposits and borrowings. The interest rates on our loans are generally fixed for a longer period of time than the interest rates on our deposits.
Biggest changeOur profitability largely depends on our net interest income, which can be negatively affected by changes in interest rates. 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 expense we incur on our interest-bearing liabilities, such as deposits and borrowings.
These changes can be hard to predict and can materially impact how we record and report our financial condition and results of operations. In some cases, we could be required to apply new or revised guidance retroactively. 32 Table of Contents We face significant operational risks because the financial services business involves a high volume of transactions.
These changes can be hard to predict and can materially impact how we record and report our financial condition and results of operations. In some cases, we could be required to apply new or revised guidance retroactively. We face significant operational risks because the financial services business involves a high volume of transactions.
Moreover, a significant decline in general economic conditions caused by inflation, recession, acts of terrorism, an outbreak of hostilities or other international or domestic calamities, an epidemic or pandemic, unemployment or other factors beyond our control could further impact these local economic conditions and could further negatively affect the financial results of our banking operations.
Moreover, a significant decline in general economic conditions caused by inflation, recession, acts of terrorism, an outbreak of hostilities or other international or domestic calamities, an epidemic or pandemic, unemployment or other factors beyond our control could further impact these local economic conditions and could 35 Table of Contents further negatively affect the financial results of our banking operations.
In addition, deflationary pressures, while possibly lowering our operating costs, could have a significant negative effect on our borrowers, especially our business borrowers, and the values of underlying collateral securing loans, which could negatively affect our financial performance. 35 Table of Contents Monetary policies and regulations of the Federal Reserve Board could adversely affect our business, financial condition and results of operations.
In addition, deflationary pressures, while possibly lowering our operating costs, could have a significant negative effect on our borrowers, especially our business borrowers, and the values of underlying collateral securing loans, which could negatively affect our financial performance. Monetary policies and regulations of the Federal Reserve Board could adversely affect our business, financial condition and results of operations.
Moreover, our decision regarding the classification of a loan 30 Table of Contents participation and credit loss provisions associated with a loan participation is made in part based upon information provided by the lead lender. A lead lender also may not monitor a participation loan in the same manner as we would for loans that we originate.
Moreover, our decision regarding the classification of a loan participation and credit loss provisions associated with a loan participation is made in part based upon information provided by the lead lender. A lead lender also may not monitor a participation loan in the same manner as we would for loans that we originate.
Any change in such regulation and oversight, whether in the form of regulatory policy, regulations or legislation, could have a material impact on 36 Table of Contents our results of operations. Because our business is highly regulated, the laws, rules and applicable regulations are subject to regular modification and change.
Any change in such regulation and oversight, whether in the form of regulatory policy, regulations or legislation, could have a material impact on our results of operations. Because our business is highly regulated, the laws, rules and applicable regulations are subject to regular modification and change.
In the event of a breakdown in our internal control systems, improper operation of systems or improper employee actions, we could suffer financial loss, face regulatory action, and/or suffer damage to our reputation. Cyber-attacks or other security breaches could adversely affect our operations, net income or reputation.
In the event of a breakdown in our internal control systems, improper operation of systems or improper employee actions, we could suffer financial loss, face regulatory action, and/or suffer damage to our reputation. 32 Table of Contents Cyber-attacks or other security breaches could adversely affect our operations, net income or reputation.
A deterioration in economic conditions, especially local conditions, as a result of COVID-19 or otherwise, could have the following consequences, any of which could have a material adverse effect on our business, financial condition, liquidity and results of operations, and could more negatively affect us compare to a financial institution that operates with more geographic diversity: • demand for our products and services may decline; • loan delinquencies, problem assets and foreclosures may increase; • collateral for loans, especially real estate, may decline in value, thereby reducing customers’ future borrowing power, and reducing the value of assets and collateral associated with existing loans; and • the net worth and liquidity of loan guarantors may decline, impairing their ability to honor commitments to us.
A deterioration in economic conditions, especially local conditions, could have the following consequences, any of which could have a material adverse effect on our business, financial condition, liquidity and results of operations, and could more negatively affect us compare to a financial institution that operates with more geographic diversity: • demand for our products and services may decline; • loan delinquencies, problem assets and foreclosures may increase; • collateral for loans, especially real estate, may decline in value, thereby reducing customers’ future borrowing power, and reducing the value of assets and collateral associated with existing loans; and • the net worth and liquidity of loan guarantors may decline, impairing their ability to honor commitments to us.
These regulatory authorities have extensive discretion in connection with their supervisory and enforcement activities, including the imposition of restrictions on the operations of a savings association, the classification of assets by a savings association, and the adequacy of a savings association’s allowance for loan losses.
These regulatory authorities have extensive discretion in connection with their supervisory and enforcement activities, including the imposition of restrictions on the operations of a savings association, the classification of assets by a savings 36 Table of Contents association, and the adequacy of a savings association’s allowance for loan losses.
Because the repayment of commercial real estate, multi-family and commercial business loans depends on the successful management and operation of the borrower’s properties or businesses, repayment of such loans can be affected by adverse conditions in the local real estate market or economy.
Because the repayment of commercial real estate, multi-family and commercial business 30 Table of Contents loans depends on the successful management and operation of the borrower’s properties or businesses, repayment of such loans can be affected by adverse conditions in the local real estate market or economy.
See “Regulation and Supervision—Federal Banking Regulation—Capital Requirements.” Changes in accounting standards could affect reported earnings. The bodies responsible for establishing accounting standards, including the Financial Accounting Standards Board, the Securities and Exchange Commission and other regulatory bodies, periodically change the financial accounting and reporting guidance that governs the preparation of our financial statements.
See “Regulation and Supervision—Federal Banking Regulation—Capital Requirements.” Changes in accounting standards could affect reported earnings. The bodies responsible for establishing accounting standards, including the Financial Accounting Standards Board, the SEC and other regulatory bodies, periodically change the financial accounting and reporting guidance that governs the preparation of our financial statements.
At June 30, 2023, our non-performing assets (which consist of non-accrual loans, loans 90 days or more delinquent and still accruing, and real estate owned) totaled $148,000. Our non-performing assets adversely affect our net income in various ways.
At June 30, 2024, our non-performing assets (which consist of non-accrual loans, loans 90 days or more delinquent and still accruing, and real estate owned) totaled $173,000. Our non-performing assets adversely affect our net income in various ways.
Our efforts to take these risks into account in making lending and other decisions, including by increasing our business with climate-friendly companies, may not be effective in protecting us from the negative impact of new laws and regulations or changes in consumer or business behavior.
Our efforts to take these risks into account in making lending and other decisions, including by increasing our business with climate-friendly companies, may not be effective in protecting us from the negative impact of new laws and regulations or changes in consumer or business behavior. ITEM 1B. UNRESOLVED STAFF COMMENTS None.
At June 30, 2023, our loan participations totaled $46.1 million, or 7.8% of our gross loans, most of which are within 100 miles of our primary lending market and consist primarily of multi-family, commercial real estate and commercial loans. Additionally, we expect to continue to use loan participations as a way to effectively deploy our capital.
At June 30, 2024, our loan participations totaled $51.8 million, or 8.0% of our gross loans, most of which are within 100 miles of our primary lending market and consist primarily of multi-family, commercial real estate and commercial loans. Additionally, we expect to continue to use loan participations as a way to effectively deploy our capital.
Our allowance for credit losses was 1.20% of total loans at June 30, 2023. Additions to our allowance could materially decrease our net income.
Our allowance for credit losses was 1.16% of total loans at June 30, 2024. Additions to our allowance could materially decrease our net income.
For example, as of June 30, 2023, 5.1% of our loans had remaining maturities of, or reprice after, 5 years or longer, while 85.6% of our certificates of deposit had remaining maturities of, or reprice in, one year or less. This imbalance can create significant earnings volatility because market interest rates change over time.
For example, as of June 30, 2024, 2.4% of our loans had remaining maturities of, or reprice after, 5 years or longer, while 90.4% of our certificates of deposit had remaining maturities of, or reprice in, one year or less. This imbalance can create significant earnings volatility because market interest rates change over time.
Like many savings institutions, our focus on deposits as a source of funds, which either have no stated maturity or shorter contractual maturities than mortgage loans, results in our liabilities having a shorter average duration than our assets.
The interest rates on our loans are generally fixed for a longer period of time than the interest rates on our deposits. Like many savings institutions, our focus on deposits as a source of funds, which either have no stated maturity or shorter contractual maturities than mortgage loans, results in our liabilities having a shorter average duration than our assets.
The occurrence of any systems failures, interruptions, or breach of security could damage our reputation and result in a loss of customers and business thereby subjecting us to additional regulatory scrutiny, or could expose us to litigation and possible financial liability.
Threats to information security also exist in the processing of customer information through various other vendors and their personnel. The occurrence of any systems failures, interruptions, or breach of security could damage our reputation and result in a loss of customers and business thereby subjecting us to additional regulatory scrutiny, or could expose us to litigation and possible financial liability.
We may experience significant loan losses, which may have a material adverse effect on our operating results. We make various assumptions and judgments about the collectability of our loan portfolio, including the creditworthiness of our borrowers and the value of the real estate and other assets serving as collateral for the repayment of many of our loans.
We make various assumptions and judgments about the collectability of our loan portfolio, including the creditworthiness of our borrowers and the value of the real estate and other assets serving as collateral for the repayment of many of our loans.
If these third-party providers encounter difficulties, or if we have difficulty communicating with them, our ability to adequately process and account for transactions could be affected, and our business operations could be adversely affected. Threats to information security also exist in the processing of customer information through various other vendors and their personnel.
In addition, we outsource some of our data processing to certain third-party providers. If these third-party providers encounter difficulties, or if we have difficulty communicating with them, our ability to adequately process and account for transactions could be affected, and our business operations could be adversely affected.
Any increase in our allowance for credit losses or loan charge-offs as required by these regulatory authorities may have a material adverse effect on our financial condition and results of operations 31 Table of Contents The Company’s results of operations and financial condition may be adversely affected by epidemics and pandemics, such as the COVID-19 outbreak, or other infectious disease outbreaks.
Any increase in our allowance for credit losses or loan charge-offs as required by these regulatory authorities may have a material adverse effect on our financial condition and results of operations.
Although we rely on security systems to provide security and authentication necessary to effect the secure transmission of data, these precautions may not protect our systems from compromises or breaches of security. 33 Table of Contents In addition, we outsource some of our data processing to certain third-party providers.
In addition, any compromise of our systems could deter customers from using our products and services. Although we rely on security systems to provide security and authentication necessary to effect the secure transmission of data, these precautions may not protect our systems from compromises or breaches of security.
Further, the resolution of non-performing assets requires the active involvement of management, which can distract us from the overall supervision of operations and other income-producing activities of Iroquois Federal. Finally, if our estimate of the allowance for credit losses is inadequate, we will have to increase the allowance accordingly by recording a provision for credit losses.
Further, the resolution of non-performing assets requires the active involvement of management, which can distract us from the overall supervision of operations and other income-producing activities of Iroquois Federal.
If our allowance for credit losses is not sufficient to cover actual loan losses, our earnings will decrease. Our customers may not repay their loans according to the original terms, and the collateral, if any, securing the payment of these loans may be insufficient to pay any remaining loan balance.
Our customers may not repay their loans according to the original terms, and the collateral, if any, securing the payment of these loans may be insufficient to pay any remaining loan balance. We may experience significant loan losses, which may have a material adverse effect on our operating results.
At June 30, 2023, $193.7 million, or 32.6%, of our total loan portfolio consisted of commercial real estate loans, $89.6 million, or 15.1%, of our total loan portfolio consisted of multi-family loans, and $79.7 million, or 13.4%, of our total loan portfolio consisted of commercial business loans.
At June 30, 2024, $200.0 million, or 30.9%, of our total loan portfolio consisted of commercial real estate loans, $126.0 million, or 19.5%, of our total loan portfolio consisted of multi-family loans, and $91.8 million, or 14.2%, of our total loan portfolio consisted of commercial business loans.
Removed
The Company may face risks related to epidemics, pandemics or other infectious disease outbreaks, which could result in a widespread health crisis that could adversely affect general commercial activity, the global economy (including the states and local economies in which we operate) and financial markets.
Added
Finally, if our estimate of the allowance for credit losses is inadequate, we will have to increase the allowance accordingly by recording a provision for credit losses. 31 Table of Contents If our allowance for credit losses is not sufficient to cover actual loan losses, our earnings will decrease.
Removed
For example, the spread of COVID-19, which was identified as a pandemic by the World Health Organization and declared a national emergency in the United States, created a global public-health crisis that resulted in significant economic uncertainty, and has impacted household, business, economic, and market conditions, including in the states and local economies in which we conduct nearly all of our business.
Added
Any of these events could have a material adverse effect on our financial condition and results of operations. 33 Table of Contents While our Board of Directors takes an active role in cybersecurity risk tolerance, we rely to a large degree on management and outside consultants in overseeing cybersecurity risk management.
Removed
The continuation of the COVID-19 pandemic, or a new epidemic, pandemic or infectious disease outbreak, may result in the Company closing certain offices and may require us to limit how customers conduct business through our branch network.
Added
Our Board of Directors takes an active role in the cybersecurity risk tolerance of the Company and all members receive cybersecurity training annually. The Board reviews the annual risk assessments and approves information technology policies, which include cybersecurity.
Removed
If our employees continue or are required to work remotely, the Company will be exposed to increased cybersecurity risks such as phishing, malware, and other cybersecurity attacks, all of which could expose us to liability and could seriously disrupt our business operations.
Added
Furthermore, our Audit Committee is responsible for reviewing all audit findings related to information technology general controls, internal and external vulnerability, and penetration testing. The Board receives an annual information security report from our Information Security Officer as it relates to cybersecurity and related issues. We also engage outside consultants to support our cybersecurity efforts.
Removed
Furthermore, the Company’s business operations may be disrupted due to vendors and third-party service providers being unable to work or provide services effectively during such a health crisis, including because of illness, quarantines or other government actions.
Added
However, our directors do not have significant experience in cybersecurity risk management outside of the Company and therefore, its ability to fulfill its oversight function remains dependent on the input it receives from management and outside consultants. Market and Industry Risks Future changes in interest rates could reduce our profits.
Removed
In addition, an epidemic, a pandemic or another infectious disease outbreak, or the continuation of the COVID-19 pandemic, could again significantly impact households and businesses, or cause limitations on commercial activity, increased unemployment and general economic and financial instability.
Removed
An economic slow-down in, or a reversal in the economic recovery of, the regions in which we conduct our business could result in declines in loan demand and collateral values.
Removed
Furthermore, negative impacts on our customers caused by such a health crisis, including the continuation of COVID-19, could result in increased risk of delinquencies, defaults, foreclosures and losses on our loans.
Removed
Moreover, governmental and regulatory actions taken in response to an epidemic, a pandemic or another infectious disease outbreak may include decreased interest rates, which could adversely impact the Company’s interest margins and may lead to decreases in the Company’s net interest income.
Removed
The extent to which a widespread health crisis, including the continuation of COVID-19, may impact the Company’s business, results of operations and financial condition, as well as its regulatory capital and liquidity ratios, will depend on future developments, which are highly uncertain and are difficult to predict, including, but not limited to, the duration and severity of the crisis, the potential for seasonal or other resurgences, actions taken by governmental authorities and other third parties to contain and treat an epidemic, a pandemic or another infectious disease outbreak, and how quickly and to what extent normal economic and operating conditions can resume.
Removed
Moreover, the effects of a widespread health crisis, including the continuation of the COVID-19 pandemic, may heighten many of the other risks described in this “Risk Factors” section.
Removed
As a result, the negative effects on the Company’s business, results of operations and financial condition from an epidemic, a pandemic or another infectious disease outbreak, including the continuation or resurgence of the COVID-19 pandemic, could be material.
Removed
In addition, any compromise of our systems could deter customers from using our products and services.
Removed
Any of these events could have a material adverse effect on our financial condition and results of operations Market and Industry Risks Future changes in interest rates could reduce our profits. Our profitability largely depends on our net interest income, which can be negatively affected by changes in interest rates.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeITEM 2. PROPERTIES We operate from our main office, six branch offices, an administrative office, and a data center located in Iroquois, Vermilion, Champaign and Kankakee Counties, Illinois, and a loan production office in Osage Beach, Missouri.
Biggest changeITEM 2. PROPERTIES We operate from our main office, six branch offices, an administrative office, and a data center located in Iroquois, Vermilion, Champaign and Kankakee Counties, Illinois, and a loan production office in Osage Beach, Missouri. The net book value of our premises, land and equipment was $10.6 million at June 30, 2024.
The net book value of our premises, land and equipment was $11.1 million at June 30, 2023 The following tables set forth information with respect to our banking offices, including the expiration date of leases with respect to leased facilities.
The following tables set forth information with respect to our banking offices, including the expiration date of leases with respect to leased facilities.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeWe are not a party to any pending legal proceedings that we believe would have a material adverse effect on our financial condition, results of operations or cash flows. 38 Table of Contents ITEM 4. MINE SAFETY DISCLOSURES Not applicable. PART II
Biggest changeWe are not a party to any pending legal proceedings that we believe would have a material adverse effect on our financial condition, results of operations or cash flows. 39 Table of Contents ITEM 4. MINE SAFETY DISCLOSURES Not applicable. PART II

Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

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Biggest changeITEM 4. MINE SAFETY DISCLOSURES 39 PART II 39 ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES 39 ITEM 6. [RESERVED] 39 ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION 40 ITEM7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 54 ITEM 8.
Biggest changeITEM 4. MINE SAFETY DISCLOSURES 40 PART II 40 ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES 40 ITEM 6. [RESERVED] 40 ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION 41 ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 52 ITEM 8.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeThe Company paid dividends of $0.175 per share in in October 2021 and April 2022 and $0.20 per share in October 2022 and April 2023. The payment of dividends in the future will depend upon a number of factors, including capital requirements, the Company’s financial condition and results of operations, tax considerations, statutory and regulatory limitations and general economic conditions.
Biggest changeThe Company paid dividends of $0.20 per share in October 2022 and April 2023 and $0.20 per share in October 2023 and April 2024. The payment of dividends in the future will depend upon a number of factors, including capital requirements, the Company’s financial condition and results of operations, tax considerations, statutory and regulatory limitations and general economic conditions.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Market and Dividend Information. The Company’s common stock is listed on the Nasdaq Capital Market (“NASDAQ”) under the trading symbol “IROQ.” Holders. As of September 1, 2023, there were 326 holders of record of the Company’s common stock. Dividends.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Market and Dividend Information. The Company’s common stock is listed on the Nasdaq Capital Market (“NASDAQ”) under the trading symbol “IROQ.” Holders. As of September 1, 2024, there were 322 holders of record of the Company’s common stock. Dividends.
There were no share repurchases during the quarter ended June 30, 2023. The Company does not have an active stock repurchase plan in place.
There were no share repurchases during the year ended June 30, 2024. The Company does not have an active stock repurchase plan in place.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeThe yields set forth below include the effect of deferred fees, discounts and premiums that are amortized or accreted to interest income or expense. 48 Table of Contents For The Twelve Months Ended June 30, 2023 2022 Difference Average Outstanding Balance Interest Yield/ Rate Average Outstanding Balance Interest Yield/ Rate Average Outstanding Balance Interest Yield/ Rate (Dollars in thousands) Interest-earning assets: Loans: Real estate loans: One- to four-family (1) $ 150,343 $ 6,675 4.44 % $ 122,652 $ 5,052 4.12 % $ 27,691 $ 1,623 0.32 % Multi-family 95,481 3,990 4.18 92,372 3,721 4.03 3,109 269 0.15 Commercial 187,519 8,213 4.38 162,236 6,419 3.96 25,283 1,794 0.42 Home equity lines of credit 7,192 414 5.76 6,496 286 4.40 696 128 1.36 Construction loans 41,267 2,045 4.96 30,856 1,178 3.82 10,411 867 1.14 Commercial business loans 76,538 4,380 5.72 86,223 3,221 3.74 (9,685 ) 1,159 1.98 Consumer loans 9,021 389 4.31 8,048 318 3.95 973 71 0.36 Total loans 567,361 26,106 4.60 508,883 20,195 3.97 58,478 5,911 0.63 Securities: U.S. government, federal agency and government-sponsored enterprises 25,069 593 2.37 25,234 466 1.85 (165 ) 127 0.52 U.S. government sponsored mortgage-backed securities 179,326 4,766 2.66 186,837 3,830 2.05 (7,511 ) 936 0.61 State and political subdivisions 3,550 106 2.99 1,739 51 2.93 1,811 55 0.06 Total securities 207,945 5,465 2.63 213,810 4,347 2.03 (5,865 ) 1,118 0.60 Other 10,788 501 4.64 36,341 250 0.69 (25,553 ) 251 3.95 Total interest-earning assets 786,094 32,072 4.08 759,034 24,792 3.27 27,060 7,280 0.81 Noninterest-earning assets 41,149 23,342 17,807 Total assets $ 827,243 $ 782,376 $ 44,867 Interest-bearing liabilities: Interest-bearing checking or NOW $ 117,672 191 0.16 $ 109,929 134 0.12 $ 7,743 57 0.04 Savings accounts 70,129 275 0.39 70,111 105 0.15 18 170 0.24 Money market accounts 171,990 2,476 1.44 166,787 549 0.33 5,203 1,927 1.11 Certificates of deposit 266,418 5,055 1.90 258,199 1,280 0.50 8,219 3,775 1.40 Total interest-bearing deposits 626,209 7,997 1.28 605,026 2,068 0.34 21,183 5,929 0.94 Borrowings and repurchase agreements 63,224 2,078 3.29 32,110 461 1.44 31,114 1,617 1.85 Total interest-bearing liabilities 689,433 10,075 1.46 637,136 2,529 0.40 52,297 7,546 1.06 Noninterest-bearing deposits 57,445 55,722 1,723 Noninterest-bearing liabilities 9,284 7,674 1,610 Total liabilities 756,162 700,532 55,630 Equity 71,081 81,844 (10,763 ) Total liabilities and equity 827,243 782,376 44,867 Net interest income $ 21,997 $ 22,263 $ (266 ) Net interest rate spread (2) 2.62 % 2.87 % -0.25 % Net interest-earning assets (3) $ 96,661 $ 121,898 $ (25,537 ) Net interest margin (4) 2.80 % 2.93 % -0.13 % Average interest-earning assets to interest-bearing liabilities 1.14 % 1.19 % -0.05 % (1) Includes home equity loans.
Biggest changeFor The Twelve Months Ended June 30, 2024 2023 Difference Average Outstanding Balance Interest Yield/ Rate Average Outstanding Balance Interest Yield/ Rate Average Outstanding Balance Interest Yield/ Rate (Dollars in thousands) Interest-earning assets: Loans: Real estate loans: One- to four-family (1) $ 173,701 $ 9,045 5.21 % $ 150,343 $ 6,675 4.44 % $ 23,358 $ 2,370 0.77 % Multi-family 113,146 5,216 4.61 95,481 3,990 4.18 17,665 1,226 0.43 Commercial 201,306 9,902 4.92 187,519 8,213 4.38 13,787 1,689 0.54 Home equity lines of credit 9,152 633 6.92 7,192 414 5.76 1,960 219 1.16 Construction loans 47,955 3,411 7.11 41,267 2,045 4.96 6,688 1,366 2.15 Commercial business loans 85,424 6,171 7.22 76,538 4,380 5.72 8,886 1,791 1.50 Consumer loans 8,070 448 5.55 9,021 389 4.31 (951 ) 59 1.24 Total loans 638,754 34,826 5.45 567,361 26,106 4.60 71,393 8,720 0.85 Securities: U.S. government, federal agency and government-sponsored enterprises 21,299 558 2.62 25,069 593 2.37 (3,770 ) (35 ) 0.25 U.S. government sponsored mortgage-backed securities 169,375 4,887 2.89 179,326 4,766 2.66 (9,951 ) 121 0.23 State and political subdivisions 3,222 97 3.01 3,550 106 2.99 (328 ) (9 ) 0.02 Total securities 193,896 5,542 2.86 207,945 5,465 2.63 (14,049 ) 77 0.23 Other 11,052 616 5.57 10,788 501 4.64 264 115 0.93 Total interest-earning assets 843,702 40,984 4.86 786,094 32,072 4.08 57,608 8,912 0.78 Noninterest-earning assets 39,711 41,149 (1,438 ) Total assets $ 883,413 $ 827,243 $ 56,170 Interest-bearing liabilities: Interest-bearing checking or NOW $ 102,926 153 0.15 $ 117,672 191 0.16 $ (14,746 ) (38 ) (0.01 ) Savings accounts 60,550 371 0.61 70,129 275 0.39 (9,579 ) 96 0.22 Money market accounts 161,591 4,827 2.99 171,990 2,476 1.44 (10,399 ) 2,351 1.55 Certificates of deposit 310,866 12,302 3.96 266,418 5,055 1.90 44,448 7,247 2.06 Total interest-bearing deposits 635,933 17,653 2.78 626,209 7,997 1.28 9,724 9,656 1.50 Borrowings and repurchase agreements 119,099 5,602 4.70 63,224 2,078 3.29 55,875 3,524 1.41 Total interest-bearing liabilities 755,032 23,255 3.08 689,433 10,075 1.46 65,599 13,180 1.62 Noninterest-bearing deposits 51,894 57,445 (5,551 ) Noninterest-bearing liabilities 5,898 9,284 (3,386 ) Total liabilities 812,824 756,162 56,662 Equity 70,589 71,081 (492 ) Total liabilities and equity 883,413 827,243 56,170 Net interest income $ 17,729 $ 21,997 $ (4,268 ) Net interest rate spread (2) 1.78 % 2.62 % (0.84 )% Net interest-earning assets (3) $ 88,670 $ 96,661 $ (7,991 ) Net interest margin (4) 2.10 % 2.80 % (0.70 )% Average interest-earning assets to interest-bearing liabilities 1.12 % 1.14 % (0.02 )% (1) Includes home equity loans.
The decrease was due to a decrease in net interest income, a decrease in noninterest income, and an increase in noninterest expense, partially offset by a decrease in provisions for credit losses. Net Interest Income.
The decrease was due to a decrease in net interest income and an increase in provisions for credit losses, partially offset by an increase in noninterest income, and a decrease in noninterest expense. Net Interest Income.
As part of our ongoing asset-liability management, we currently use the following strategies to manage our interest rate risk: (i) sell the majority of our long-term, fixed-rate one- to four-family residential mortgage loans that we originate; (ii) lengthen the weighted average maturity of our liabilities through retail deposit pricing strategies and through longer-term wholesale funding sources such as brokered certificates of deposit and fixed-rate advances from the Federal Home Loan Bank of Chicago; (iii) invest in shorter- to medium-term investment securities and interest-earning time deposits; 50 Table of Contents (iv) originate commercial mortgage loans, including multi-family loans and land loans, commercial loans and consumer loans, which tend to have shorter terms and higher interest rates than one- to four-family residential mortgage loans, and which generate customer relationships that can result in larger noninterest-bearing demand deposit accounts; and (v) maintain adequate levels of capital.
As part of our ongoing asset-liability management, we currently use the following strategies to manage our interest rate risk: (i) sell the majority of our long-term, fixed-rate one- to four-family residential mortgage loans that we originate; (ii) lengthen the weighted average maturity of our liabilities through retail deposit pricing strategies and through longer-term wholesale funding sources such as brokered certificates of deposit and fixed-rate advances from the Federal Home Loan Bank of Chicago; (iii) invest in shorter- to medium-term investment securities and interest-earning time deposits; 49 Table of Contents (iv) originate commercial mortgage loans, including multi-family loans and land loans, commercial loans and consumer loans, which tend to have shorter terms and higher interest rates than one- to four-family residential mortgage loans, and which generate customer relationships that can result in larger noninterest-bearing demand deposit accounts; and (v) maintain adequate levels of capital.
Such commitments are subject to the same credit policies and approval process accorded to loans we make. For additional information, see Note 20 Commitments and Credit Risk of the notes to the financial statements included in this Annual Report on Form 10-K. Contractual Obligations. In the ordinary course of our operations, we enter into certain contractual obligations.
Such commitments are subject to the same credit policies and approval process accorded to loans we make. For additional information, see Note 18 Commitments and Credit Risk of the notes to the financial statements included in this Annual Report on Form 10-K. Contractual Obligations. In the ordinary course of our operations, we enter into certain contractual obligations.
(4) Net interest margin represents net interest income divided by average total interest-earning assets. 49 Table of Contents 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).
(4) Net interest margin represents net interest income divided by average total interest-earning assets. 48 Table of Contents 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).
For additional information regarding the fair values of our assets and liabilities, see Note 18 to the Notes to our Consolidated Financial Statements. Interest Rate Risk Analysis We also perform an interest rate risk analysis that assesses our earnings at risk and our value at risk (or net economic value of equity at risk).
For additional information regarding the fair values of our assets and liabilities, see Note 16 to the Notes to our Consolidated Financial Statements. Interest Rate Risk Analysis We also perform an interest rate risk analysis that assesses our earnings at risk and our value at risk (or net economic value of equity at risk).
The table below illustrates the simulated impact of immediate rate shocks, ranging from -400 basis points to +400 basis points on our earnings at risk for net interest income at June 30, 2023 over one-year and two-year periods.
The table below illustrates the simulated impact of immediate rate shocks, ranging from -400 basis points to +400 basis points on our earnings at risk for net interest income at June 30, 2024 over one-year and two-year periods.
The net economic value of equity at risk table below sets forth our calculation of the estimated changes in our net economic value of equity at June 30, 2023 resulting from immediate rate shocks ranging from -400 basis points to +400 basis points.
The net economic value of equity at risk table below sets forth our calculation of the estimated changes in our net economic value of equity at June 30, 2024 resulting from immediate rate shocks ranging from -400 basis points to +400 basis points.
We also do not own any private label mortgage-backed securities that are collateralized by Alt-A, low or no documentation or subprime mortgage loans. 40 Table of Contents The Association’s legal lending limit to any one borrower is 15% of unimpaired capital and surplus.
We also do not own any private label mortgage-backed securities that are collateralized by Alt-A, low or no documentation or subprime mortgage loans. The Association’s legal lending limit to any one borrower is 15% of unimpaired capital and surplus.
The Association “opted in” to elect the Community Bank Leverage Ratio, effective with the quarter ended March 31, 2020. At June 30, 2023, Iroquois Federal exceeded all regulatory capital requirements. Iroquois Federal is considered “well capitalized” under regulatory guidelines. See Note 13 Regulatory Matters of the notes to the financial statements included in this Annual Report on Form 10-K .
The Association “opted in” to elect the Community Bank Leverage Ratio, effective with the quarter ended March 31, 2020. At June 30, 2024, Iroquois Federal exceeded all regulatory capital requirements. Iroquois Federal is considered “well capitalized” under regulatory guidelines. See Note 11 Regulatory Matters of the notes to the financial statements included in this Annual Report on Form 10-K .
We believe our tax liabilities and assets are properly recorded in the consolidated financial statements at June 30, 2023 and no valuation allowance was necessary.
We believe our tax liabilities and assets are properly recorded in the consolidated financial statements at June 30, 2024 and no valuation allowance was necessary.
Such tax positions are both initially and 42 Table of Contents 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.
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.
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. We also utilize brokered certificates of deposit, internet funding, borrowings from the Federal Reserve, and sales of securities, when appropriate.
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. We also utilize brokered certificates of deposit, internet funding, borrowings from the Federal Reserve Discount Window and BTFP, and sales of securities, when appropriate.
We believe that we have enough sources of liquidity to satisfy our short- and long-term liquidity needs as of June 30, 2023.
We believe that we have enough sources of liquidity to satisfy our short- and long-term liquidity needs as of June 30, 2024.
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION Overview We have grown our organization to $849.0 million in assets at June 30, 2023 from $377.2 million in assets at June 30, 2009. We have increased our assets primarily through increased investment securities and loan growth. Historically, we have operated as a traditional thrift institution.
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION Overview We have grown our organization to $887.7 million in assets at June 30, 2024 from $377.2 million in assets at June 30, 2009. We have increased our assets primarily through increased investment securities and loan growth. Historically, we have operated as a traditional thrift institution.
Our net income for the year ended June 30, 2023 was $4.7 million, compared to a net income of $5.8 million for the year ended June 30, 2022. Our emphasis on conservative loan underwriting has resulted in relatively low levels of non-performing assets.
Our net income for the year ended June 30, 2024 was $1.8 million, compared to a net income of $4.7 million for the year ended June 30, 2023. Our emphasis on conservative loan underwriting has resulted in relatively low levels of non-performing assets.
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 years ended June 30, 2023 and 2022, our liquidity ratio averaged 29.3% and 31.2% of our total assets, respectively.
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 years ended June 30, 2024 and 2023, our liquidity ratio averaged 25.9% and 29.3% of our total assets, respectively.
This program allows eligible savings associations to make additional residential real estate loans or extensions of credit to one borrower, small business loans or extensions of credit to one borrower, or small farm loans or extensions of credit to one borrower.
This program allows eligible savings associations to make additional residential real estate loans or extensions of credit to one borrower, small business loans or extensions of 41 Table of Contents credit to one borrower, or small farm loans or extensions of credit to one borrower.
At June 30, 2023, our investment in bank-owned life insurance was $14.8 million, an increase of $388,000 from $14.4 million at June 30, 2022. 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.
At June 30, 2024, our investment in bank-owned life insurance was $14.9 million, an increase of $131,000 from $14.8 million at June 30, 2023. 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.
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.
Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary 42 Table of Contents differences are expected to be recovered or settled.
Deposit flows are affected by the overall level of interest rates, the interest rates and products offered by us, our local competitors, national deposit brokers and by other factors. Liquidity management is both a daily and long-term function of business management.
Deposit flows are affected by the overall level of interest rates, the interest rates and products offered by us and our local competitors, and by other factors. 51 Table of Contents Liquidity management is both a daily and long-term function of business management.
Federal regulations generally limit our investment in bank-owned life insurance to 25% of the Association’s Tier 1 capital plus our allowance for credit losses. At June 30, 2023, our investment of $14.8 million in bank-owned life insurance was 16.2% of our Tier 1 capital plus our allowance for credit losses.
Federal regulations generally limit our investment in bank-owned life insurance to 25% of the Association’s Tier 1 capital plus our allowance for credit losses. At June 30, 2024, our investment of $14.9 million in bank-owned life insurance was 15.8% of our Tier 1 capital plus our allowance for credit losses.
During the years ended June 30, 2023 and 2022, we originated $202.2 million and $296.2 million of loans, respectively. Financing activities consist primarily of activity in deposit accounts and Federal Home Loan Bank advances.
During the years ended June 30, 2024 and 2023, we originated $215.2 million and $202.2 million of loans, respectively. Financing activities consist primarily of activity in deposit accounts and Federal Home Loan Bank advances and other borrowings.
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 June 30, 2023, cash and cash equivalents totaled $10.7 million.
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 June 30, 2024, cash and cash equivalents totaled $9.6 million.
The decrease in accumulated other comprehensive income (loss) was primarily due to unrealized depreciation on available-for-sale securities, net of tax. Comparison of Operating Results for the Years Ended June 30, 2023 and 2022 General.
The increase in accumulated other comprehensive income (loss) was primarily due to a decrease in unrealized depreciation on available-for-sale securities, net of tax. 45 Table of Contents Comparison of Operating Results for the Years Ended June 30, 2024 and 2023 General.
All average balances are based on month-end balances, which management deems to be representative of the operations of Iroquois Federal. Non-accrual loans were included in the computation of average balances, but have been reflected in the table as loans carrying a zero yield.
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 Iroquois Federal. 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 Company adopted ASU 2016-13, effective July 1, 2022, and 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.
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.
Our net interest rate spread (the difference between the yield on average interest-earning assets and the cost of average interest-bearing liabilities) was 2.62% and 2.87% for the year ended June 30, 2023 and 2022, respectively. Net interest income decreased to $22.0 million for the year ended June 30, 2023, from $22.3 million for the year ended June 30, 2022.
Our net interest rate spread (the difference between the yield on average interest-earning assets and the cost of average interest-bearing liabilities) was 1.78% and 2.62% for the years ended June 30, 2024 and 2023, respectively. Net interest income decreased to $17.7 million for the year ended June 30, 2024, from $22.0 million for the year ended June 30, 2023.
Our cash flows are derived from operating activities, investing activities and financing activities as reported in our Statements of Cash Flows included in our consolidated financial statements. At June 30, 2023, we had $5.1 million in loan commitments outstanding, and $94.2 million in unused lines of credit to borrowers.
Our cash flows are derived from operating activities, investing activities and financing activities as reported in our Statements of Cash Flows included in our financial statements. At June 30, 2024, we had $8.3 million in loan commitments outstanding, and $71.2 million in unused lines of credit to borrowers.
This increase was due to an increase in the average balance of borrowings to $63.2 million for the year ended June 30, 2023 from $32.1 million for the year ended June 30, 2022, and by a 185 basis point increase in the average cost of such borrowings to 3.29% for the year ended June 30, 2023 from 1.44% for the year ended June 30, 2022.
This increase was due to an increase in the average balance of borrowings to $119.1 million for the year ended June 30, 2024 from $63.2 million for the year ended June 30, 2023, and by a 141 basis point increase in the average cost of such borrowings to 4.70% for the year ended June 30, 2024 from 3.29% for the year ended June 30, 2023.
The CBLR is the ratio of Tier 1 capital to average assets. 44 Table of Contents Comparison of Financial Condition at June 30, 2023 and June 30, 2022 Total assets decreased $8.6 million, or 1.0%, to $849.0 million at June 30, 2023 from $857.6 million at June 30, 2022.
The CBLR is the ratio of Tier 1 capital to average assets. 44 Table of Contents Comparison of Financial Condition at June 30, 2024 and June 30, 2023 Total assets increased $38.8 million, or 4.6%, to $887.7 million at June 30, 2024 from $849.0 million at June 30, 2023.
The decrease was primarily due to a decrease in mortgage banking income, net, a decrease in gain on sale of loans, a decrease in brokerage commissions, a decrease in bank-owned life insurance and a decrease in other service charges and fees, partially offset by an increase in net realized gain on sale of available-for-sale securities and an increase in customer service fees.
The increase was primarily due to an increase in gain on sale of loans, an increase in net realized gain (loss) on sale of available-for-sale securities, an increase in insurance commissions, and an increase in bank-owned life insurance, partially offset by a decrease in brokerage commissions.
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, and CIBC Bank USA. Federal Home Loan Bank advances were $19.5 million at June 30, 2023.
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.
Certificates of deposit due within one year of June 30, 2023 totaled $243.7 million, or 33.1% of total deposits. Depending on market conditions, we may be required to pay higher rates on such deposits or other 52 Table of Contents borrowings than we currently pay on the certificates of deposit due on or before June 30, 2024.
Certificates of deposit due within one year of June 30, 2024 totaled $289.1 million, or 39.8% 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 June 30, 2025.
The allowance for credit losses was $7.1 million, or 1.20% of total loans, at June 30, 2023, compared to $7.1 million, or 1.34% of total loans, at June 30, 2022. Non-performing loans decreased during the year ended June 30, 2023, to $117,000, from $1.2 million at June 30, 2022.
The allowance for credit losses was $7.5 million, or 1.16% of total loans, at June 30, 2024, compared to $7.1 million, or 1.20% of total loans, at June 30, 2023. Non-performing loans increased during the year ended June 30, 2024, to $173,000, from $117,000 at June 30, 2023.
At June 30, 2023 2022 2021 (In thousands) Selected Financial Condition Data: Total assets $ 848,976 $ 857,558 $ 797,341 Cash and cash equivalents 10,988 75,811 62,735 Investment securities available for sale 201,299 220,906 189,891 Federal Home Loan Bank of Chicago stock 3,127 3,142 4,198 Loans held for sale — 227 632 Loans receivable, net 587,457 518,704 512,739 Foreclosed assets held for sale 31 120 259 Bank-owned life insurance 14,761 14,373 9,339 Deposits 735,314 752,020 667,632 Federal Home Loan Bank of Chicago advances 19,500 15,000 25,000 Total equity 71,753 71,658 85,304 For the Fiscal Year Ended June 30, 2023 2022 2021 (In thousands) Selected Operating Data: Interest income $ 32,072 $ 24,792 $ 24,357 Interest expense 10,075 2,529 4,178 Net interest income 21,997 22,263 20,179 Provision (credit) for credit losses (228 ) 492 844 Net interest income after provision (credit) for credit losses 22,225 21,771 19,335 Noninterest income 4,069 5,504 6,258 Noninterest expense 20,034 19,448 18,212 Income before income tax expense 6,260 7,827 7,381 Income tax expense 1,600 2,043 2,034 Net income $ 4,660 $ 5,784 $ 5,347 43 Table of Contents At or For the Fiscal Years Ended June 30, 2023 2022 2021 Selected Financial Ratios and Other Data: Performance Ratios: Return on average assets (net income as a percentage of average total assets) 0.56 % 0.74 % 0.72 % Return on average equity (net income as a percentage of average equity) 6.56 % 7.07 % 6.34 % Interest rate spread (1) 2.62 % 2.87 % 2.75 % Net interest margin (2) 2.80 % 2.93 % 2.86 % Efficiency ratio (3) 76.86 % 70.04 % 68.89 % Dividend payout ratio 26.67 % 18.62 % 17.05 % Noninterest expense to average total assets 2.42 % 2.49 % 2.46 % Average interest-earning assets to average interest-bearing liabilities 114.02 % 119.13 % 118.77 % Average equity to average total assets 8.59 % 10.46 % 11.40 % Asset Quality Ratios: Non-performing assets to total assets 0.02 % 0.15 % 0.05 % Non-performing loans to total loans 0.02 % 0.22 % 0.03 % Allowance for credit losses to non-performing loans 6101.71 % 600.68 % 4341.45 % Allowance for credit losses to total loans 1.20 % 1.34 % 1.27 % Allowance for credit losses to total loans excluding PPP loans 1.20 % 1.34 % 1.32 % Net charge-offs (recoveries) to average loans 0.01 % 0.01 % 0.09 % Capital Ratios: Community Bank Leverage Ratio: Company (4) 10.5 % 10.7 % 11.1 % Association (4) 9.5 % 9.8 % 10.5 % Tier 1 capital (to adjusted total assets): Company 10.5 % 10.7 % 11.1 % Association 9.5 % 9.8 % 10.5 % Tangible capital (to adjusted total assets): Company 10.5 % 10.7 % 11.1 % Association 9.5 % 9.8 % 10.5 % Other Data: Number of full-service offices 7 7 7 Full time equivalent employees 107 112 111 (1) The interest rate spread represents the difference between the weighted-average yield on interest-earning assets and the weighted-average cost of interest-bearing liabilities for the period.
At June 30, 2024 2023 2022 (In thousands) Selected Financial Condition Data: Total assets $ 887,745 $ 848,976 $ 857,558 Cash and cash equivalents 9,571 10,988 75,811 Investment securities available for sale 190,475 201,299 220,906 Federal Home Loan Bank of Chicago stock 4,499 3,127 3,142 Loans held for sale — — 227 Loans receivable, net 639,297 587,457 518,704 Foreclosed assets held for sale — 31 120 Bank-owned life insurance 14,892 14,761 14,373 Deposits 727,177 735,314 752,020 Federal Home Loan Bank of Chicago advances 32,999 19,500 15,000 Federal Reserve Bank Term Funding Program (BTFP) 25,250 — — Total equity 73,916 71,753 71,658 43 Table of Contents For the Fiscal Year Ended June 30, 2024 2023 2022 (In thousands) Selected Operating Data: Interest income $ 40,984 $ 32,072 $ 24,792 Interest expense 23,255 10,075 2,529 Net interest income 17,729 21,997 22,263 Provision for credit losses 32 (228 ) 492 Net interest income after provision (credit) for credit losses 17,697 22,225 21,771 Noninterest income 4,386 4,069 5,504 Noninterest expense 19,728 20,034 19,448 Income before income tax expense 2,355 6,260 7,827 Income tax expense 565 1,600 2,043 Net income $ 1,790 $ 4,660 $ 5,784 At or For the Fiscal Years Ended June 30, 2024 2023 2022 Selected Financial Ratios and Other Data: Performance Ratios: Return on average assets (net income as a percentage of average total assets) 0.20 % 0.56 % 0.74 % Return on average equity (net income as a percentage of average equity) 2.54 % 6.56 % 7.07 % Interest rate spread (1) 1.78 % 2.62 % 2.87 % Net interest margin (2) 2.10 % 2.80 % 2.93 % Efficiency ratio (3) 89.21 % 76.86 % 70.04 % Dividend payout ratio 70.18 % 26.67 % 18.62 % Noninterest expense to average total assets 2.23 % 2.42 % 2.49 % Average interest-earning assets to average interest-bearing liabilities 111.74 % 114.02 % 119.13 % Average equity to average total assets 7.99 % 8.59 % 10.46 % Asset Quality Ratios: Non-performing assets to total assets 0.02 % 0.02 % 0.15 % Non-performing loans to total loans 0.03 % 0.02 % 0.22 % Allowance for credit losses to non-performing loans 4329.57 % 6101.71 % 600.68 % Allowance for credit losses to total loans 1.16 % 1.20 % 1.34 % Net charge-offs (recoveries) to average loans (0.03 )% 0.01 % 0.01 % Capital Ratios: Community Bank Leverage Ratio: Company (4) 10.1 % 10.5 % 10.7 % Association (4) 9.2 % 9.5 % 9.8 % Tier 1 capital (to adjusted total assets): Company 10.1 % 10.5 % 10.7 % Association 9.2 % 9.5 % 9.8 % Tangible capital (to adjusted total assets): Company 10.1 % 10.5 % 10.7 % Association 9.2 % 9.5 % 9.8 % Other Data: Number of full-service offices 7 7 7 Full time equivalent employees 113 107 112 (1) The interest rate spread represents the difference between the weighted-average yield on interest-earning assets and the weighted-average cost of interest-bearing liabilities for the period.
We had a net decrease in total deposits of $16.7 million for the year ended June 30, 2023, and a net increase in total deposits of $84.4 million for the year ended June 30, 2022.
We had a net decrease in total deposits of $8.1 million for the year ended June 30, 2024, and a net decrease in total deposits of $16.7 million for the year ended June 30, 2023.
Our non-performing assets totaled $148,000, or 0.1% of total assets at June 30, 2023, and $1.3 million, or 0.2% of assets at June 30, 2022.
Our non-performing assets totaled $173,000, or 0.1% of total assets at June 30, 2024, and $148,000, or 0.1% of assets at June 30, 2023.
The increase was due to a 106 basis point increase in the cost of interest-bearing liabilities to 1.46% for the year ended June 30, 2023 from 0.40% for the year ended June 30, 2022, and a $52.3 million increase in the average balance of interest-bearing liabilities to $689.4 million for the year ended June 30, 2023 from $637.1 million for the year ended June 30, 2022.
The increase was due to a 162 basis point increase in the cost of interest-bearing liabilities to 3.08% for the year ended June 30, 2024 from 1.46% for the year ended June 30, 2023, and a $65.6 million increase in the average balance of interest-bearing liabilities to $755.0 million for the year ended June 30, 2024 from $689.4 million for the year ended June 30, 2023.
The increase in net loans receivable during this period was due primarily to a $26.3 million, or 15.7%, increase in commercial real estate loans, a $31.4 million, or 23.7%, increase in one- to four-family loans, a $9.7 million, or 23.6%, increase in construction loans, a $1.4 million, or 1.6%, increase in multi-family loans, and a $1.1 million, or 15.4%, increase in home equity lines of credit, partially offset by a $725,000, or 0.9%, decrease in commercial business loans, and a $599,000, or 6.7%, decrease in consumer loans.
The increase in net loans receivable during this period was due primarily to a $36.4 million, or 40.6%, increase in multi-family loans, a $13.4 million, or 8.2%, increase in one- to four-family loans, a $12.1 million, or 15.2%, increase in commercial business loans, a $6.3 million, or 3.3%, increase in commercial real estate loans, and a $1.8 million, or 22.2%, increase in home equity lines of credit, partially offset by a $17.3 million, or 33.9%, decrease in construction loans, and a $655,000, or 7.8%, decrease in consumer loans.
Net interest income decreased by $266,000, or 1.2%, to $22.0 million for the year ended June 30, 2023 from $22.3 million for the year ended June 30, 2022. The decrease was due to an increase of $7.5 million in interest expense, partially offset by an increase of $7.3 million in interest and dividend income.
Net interest income decreased by $4.3 million, or 19.4%, to $17.7 million for the year ended June 30, 2024 from $22.0 million for the year ended June 30, 2023. The decrease was due to an increase of $13.2 million in interest expense, partially offset by an increase of $8.9 million in interest and dividend income.
Equity increased primarily due to net income of $4.7 million, and ESOP and stock equity plan activity of $1.4 million, mostly offset by a decrease of $4.3 million in accumulated other comprehensive income (loss), net of tax, and the accrual of approximately $1.3 million in dividends to our shareholders.
Equity increased primarily due to net income of $1.8 million, an increase of $1.1 million in accumulated other comprehensive income (loss), net of tax, and ESOP and stock equity plan activity of $563,000, partially offset by the accrual of approximately $1.3 million in dividends to our shareholders.
Interest expense on interest-bearing deposits increased $5.9 million, or 286.7%, to $8.0 million for the year ended June 30, 2023, from $2.1 million for the year ended June 30, 2022.
Interest expense on interest-bearing deposits increased $9.7 million, or 120.7%, to $17.7 million for the year ended June 30, 2024, from $8.0 million for the year ended June 30, 2023.
The decrease was primarily due to a $64.8 million decrease in cash and cash equivalents, and a $19.6 million decrease in investments, partially offset by a $68.5 million increase in net loans. Cash and cash equivalents decreased by $64.8 million to $11.0 million at June 30, 2023, from $75.8 million at June 30, 2022.
The increase was primarily due to a $51.8 million increase in net loans, partially offset by a $10.8 million decrease in investments, and a $1.4 million decrease in cash and cash equivalents. Cash and cash equivalents decreased by $1.4 million to $9.6 million at June 30, 2024, from $11.0 million at June 30, 2023.
At June 30, 2023, we had the ability to borrow up to an additional $94.8 million from the Federal Home Loan Bank of Chicago based on our collateral, had $5.0 million available on our CIBC Bank line of credit, and had the ability to borrow an additional $55.9 million from the Federal Reserve based upon current collateral pledged.
At June 30, 2024, we had the ability to borrow up to an additional $73.2 million from the Federal Home Loan Bank of Chicago based on our collateral, we had $14.0 million available from CIBC Bank, and had the ability to borrow an additional $35.1 million from the Federal Reserve based upon current collateral pledged.
Our interest rate spread decreased 25 basis points to 2.62% for the year ended June 30, 2023 from 2.87% for the year ended June 30, 2022, and our net interest margin decreased by 13 basis points to 2.80% for the year ended June 30, 2023 from 2.93% for the year ended June 30, 2022. Interest and Dividend Income.
Our interest rate spread decreased 84 basis points to 1.78% for the year ended June 30, 2024 from 2.62% for the year ended June 30, 2023, and our net interest margin decreased by 70 basis points to 2.10% for the year ended June 30, 2024 from 2.80% for the year ended June 30, 2023. Interest and Dividend Income.
Net income decreased $1.1 million, or 19.4%, to $4.7 million net income for the year ended June 30, 2023 from $5.8 million net income for the year ended June 30, 2022.
Net income decreased $2.9 million, or 61.6%, to $1.8 million net income for the year ended June 30, 2024 from $4.7 million net income for the year ended June 30, 2023.
We recorded a provision (credit) for credit losses of $(228,000) for the year ended June 30, 2023, which includes a provision for credit losses on loans of $52,000 and a credit for credit losses on off- 46 Table of Contents balance sheet credit exposures of $(280,000), compared to a provision for loan losses of $492,000 for the year ended June 30, 2022.
We recorded a provision for credit losses of $32,000 for the year ended June 30, 2024, which includes a provision for credit losses on loans of $150,000 and a credit for credit losses on off-balance sheet credit exposures of $(118,000), compared to a provision (credit) for credit losses of $(228,000) for the year ended June 30, 2023.
The decrease in mortgage banking income, net, and the decrease in gain on sale of loans were a result of a decrease in loans originated and sold through the FHLBC Mortgage Partnership Finance program in the year ended June 30, 2023.
The increase in gain on sale of loans was a result of an increase in loans originated and sold through the FHLBC Mortgage Partnership Finance program in the year ended June 30, 2024.
The following table sets forth information regarding the allowance for credit losses and nonperforming assets at the dates indicated: Year Ended June 30, 2023 Year Ended June 30, 2022 Allowance to non-performing loans 6101.71 % 600.68 % Allowance to total loans outstanding at the end of the period 1.20 % 1.34 % Net charge-offs to average total loans outstanding during the period, annualized 0.01 % 0.01 % Total non-performing loans to total loans 0.02 % 0.22 % Total non-performing assets to total assets 0.02 % 0.15 % Noninterest Income.
During the year ended June 30, 2024, net recoveries of $210,000 were recognized, while during the year ended June 30, 2023, $12,000 in net charge-offs were recognized. 46 Table of Contents The following table sets forth information regarding the allowance for credit losses and nonperforming assets at the dates indicated: Year Ended June 30, 2024 Year Ended June 30, 2023 Allowance to non-performing loans 4329.57 % 6101.71 % Allowance to total loans outstanding at the end of the period 1.16 % 1.20 % Net charge-offs (recoveries) to average total loans outstanding during the period, annualized (0.03 )% 0.01 % Total non-performing loans to total loans 0.03 % 0.02 % Total non-performing assets to total assets 0.02 % 0.02 % Noninterest Income.
Interest on securities increased $1.1 million, or 25.7%, due to a 60 basis point, or 29.5%, increase in the average yield on securities to 2.63% for the year ended June 30, 2023 from 2.03% for the year ended June 30, 2022, partially offset by a $5.9 million decrease in the average balance of securities to $207.9 million at June 30, 2023 from $213.8 million at June 30, 2022.
Interest on securities increased $77,000, or 1.4%, due to a 23 basis point, or 8.8%, increase in the average yield on securities to 2.86% for the year ended June 30, 2024 from 2.63% for the year ended June 30, 2023, partially offset by a $14.0 million decrease in the average balance of securities to $193.9 million at June 30, 2024 from $207.9 million at June 30, 2023.
A $52.3 million, or 8.2%, increase in the average balance of interest-bearing liabilities was partially offset by a $27.1 million, or 3.6%, increase in the average balance of interest earning assets.
A $65.6 million, or 9.5%, increase in the average balance of interest-bearing liabilities was partially offset by a $57.6 million, or 7.3%, increase in the average balance of interest earning assets.
This increase was due to a 94 basis point, or 273.6% increase in the average cost of interest-bearing deposits to 1.28% from 0.34%, and a $21.2 million increase in the average balance of interest-bearing deposits to $626.2 million for the year ended June 30, 2023, from $605.0 million for the year ended June 30, 2022.
This increase was due to a 150 basis point, or 117.4% increase in the average cost of interest-bearing deposits to 2.78% from 1.28%, and a $9.7 million increase in the average balance of interest-bearing deposits to $635.9 million for the year ended June 30, 2024, from $626.2 million for the year ended June 30, 2023.
Interest expense on borrowings, including FHLB advances, our line of credit at CIBC Bank USA, the discount window at the Federal Reserve Bank, and repurchase agreements, increased $1.6 million, or 350.8%, to $2.1 million for the year ended June 30, 2023 from $461,000 for the year ended June 30, 2022.
Interest expense on borrowings, including FHLB advances, the discount window and the BTFP at the Federal Reserve Bank, and repurchase agreements, increased $3.5 million, or 169.6%, to $5.6 million for the year ended June 30, 2024 from $2.1 million for the year ended June 30, 2023.
Net loans receivable, including loans held for sale, increased by $68.5 million, or 13.2%, to $587.5 million at June 30, 2023 from $518.9 million at June 30, 2022.
Net loans receivable, including loans held for sale, increased by $51.8 million, or 8.8%, to $639.3 million at June 30, 2024 from $587.5 million at June 30, 2023.
(2) The net interest margin represents net interest income as a percent of average interest-earning assets for the period. (3) The efficiency ratio represents noninterest expense as a percentage of the sum of net interest income and noninterest income.
(2) The net interest margin represents net interest income as a percent of average interest-earning assets for the period. (3) The efficiency ratio represents noninterest expense as a percentage of the sum of net interest income and noninterest income. (4) Leverage Ratio (CBLR) is a capital requirement which became effective for the Association for the quarter ended March 31, 2020.
Interest Expense. Interest expense increased $7.5 million, or 298.4%, to $10.1 million for the year ended June 30, 2023 from $2.5 million for the year ended June 30, 2022.
Interest Expense. Interest expense increased $13.2 million, or 130.8%, to $23.3 million for the year ended June 30, 2024 from $10.1 million for the year ended June 30, 2023.
Noninterest income decreased $1.4 million, or 26.1%, to $4.1 million for the year ended June 30, 2023 from $5.5 million for the year ended June 30, 2022.
Noninterest income increased $317,000, or 7.8%, to $4.4 million for the year ended June 30, 2024 from $4.1 million for the year ended June 30, 2023.
Business—Non-performing and Problem Assets” and “Item 1. Business—Allowance for Credit Losses.” Average Balances and Yields The following tables set forth average balance sheets, average yields and costs, and certain other information for the periods indicated. Tax-equivalent yield adjustments have not been made for tax-exempt securities.
Asset Quality and Allowance for Credit Losses For information regarding asset quality and allowance for credit loss activity, see “Item 1. Business—Non-performing and Problem Assets” and “Item 1. Business—Allowance for Credit Losses.” 47 Table of Contents Average Balances and Yields The following tables set forth average balance sheets, average yields and costs, and certain other information for the periods indicated.
Deposits decreased $16.7 million, or 2.2%, to $735.3 million at June 30, 2023 from $752.0 million at June 30, 2022.
Deposits decreased $8.1 million, or 1.1%, to $727.2 million at June 30, 2024 from $735.3 million at June 30, 2023.
An increase of $5.9 million, or 29.3%, in interest on loans resulted from a 63 basis point, or 16.0%, increase in the average yield on loans to 4.60% from 3.97%, and a $58.5 million, or 11.5%, increase in the average balance of loans to $567.4 million for the year ended June 30, 2023 from $508.9 million for the year ended June 30, 2022.
An increase of $8.7 million, or 33.4%, in interest on loans resulted from an 85 basis point, or 18.5%, increase in the average yield on loans to 5.45% from 4.60%, and a $71.4 million, or 12.6%, increase in the average balance of loans to $638.8 million for the year ended June 30, 2024 from $567.4 million for the year ended June 30, 2023.
This decrease was primarily due to the funding of more loans at June 30, 2023. Investment securities, consisting entirely of securities available for sale, decreased $19.6 million, or 8.9%, to $201.3 million at June 30, 2023 from $220.9 million at June 30, 2022. We had no held-to-maturity securities at June 30, 2023 or June 30, 2022.
Investment securities, consisting entirely of securities available for sale, decreased $10.8 million, or 5.4%, to $190.5 million at June 30, 2024 from $201.3 million at June 30, 2023. We had no held-to-maturity securities at June 30, 2024 or June 30, 2023.
Savings, NOW, and money market accounts decreased $52.4 million, or 13.2%, to $344.2 million, noninterest bearing demand accounts increased $2.6 million, or 2.5%, to $107.6 million, certificates of deposit, excluding brokered certificates of deposit, increased $17.1 million, or 6.9%, to $264.1 million, and brokered certificates of deposit increased $16.0 million, or 447.7%, to $19.5 million.
Savings, NOW, and money market accounts decreased $39.9 million, or 11.6%, to $304.2 million, noninterest bearing demand accounts decreased $4.3 million, or 4.0%, to $103.3 million, certificates of deposit, excluding brokered certificates of deposit, increased $26.6 million, or 10.1%, to $290.6 million, and brokered certificates of deposit increased $9.5 million, or 48.4%, to $29.0 million.
As a result, changes in market interest rates have a greater impact on our performance than the effects of inflation.
The impact of inflation is reflected in the increased cost of our operations. Unlike industrial companies, our assets and liabilities are primarily monetary in nature. As a result, changes in market interest rates have a greater impact on our performance than the effects of inflation.
GAAP. U.S. GAAP generally requires the measurement of financial position and operating results in terms of historical dollars without consideration of changes in the relative purchasing power of money over time due to inflation. The impact of inflation is reflected in the increased cost of our operations. Unlike industrial companies, our assets and liabilities are primarily monetary in nature.
Impact of Inflation and Changing Prices Our consolidated financial statements and related notes have been prepared in accordance with U.S. GAAP. U.S. GAAP generally requires the measurement of financial position and operating results in terms of historical dollars without consideration of changes in the relative purchasing power of money over time due to inflation.
We recorded a provision for income tax of $1.6 million for the year ended June 30, 2023, compared to a provision for income tax of $2.0 million for the year ended June 30, 2022, reflecting effective tax rates of 25.6% and 26.1%, respectively. 47 Table of Contents Asset Quality and Allowance for Credit Losses For information regarding asset quality and allowance for credit loss activity, see “Item 1.
We recorded a provision for income tax of $565,000 for the year ended June 30, 2024, compared to a provision for income tax of $1.6 million for the year ended June 30, 2023, reflecting effective tax rates of 24.0% and 25.6%, respectively.
Recent Accounting Pronouncements For a discussion of the impact of recent and future accounting pronouncements, see Note 1 of the notes to our consolidated financial statements beginning on page F-1 of this Annual Report on Form 10-K. 53 Table of Contents Impact of Inflation and Changing Prices Our consolidated financial statements and related notes have been prepared in accordance with U.S.
Such obligations include data processing services, operating leases for premises and equipment, agreements with respect to borrowed funds and deposit liabilities. Recent Accounting Pronouncements For a discussion of the impact of recent and future accounting pronouncements, see Note 1 of the notes to our consolidated financial statements beginning on page F-1 of this Annual Report on Form 10-K.
Between June 30, 2022 and June 30, 2023, accrued interest receivable increased $758,000 to $2.8 million, deferred income taxes increased $1.9 million to $11.0 million, premises and equipment increased $1.6 million, and other assets increased $3.1 million to $3.7 million, while foreclosed assets held for sale decreased $89,000 to $31,000.
Between June 30, 2023 and June 30, 2024, accrued interest receivable increased $676,000 to $3.5 million, and Federal Home Loan Bank (FHLB) stock increased $1.4 million to $4.5 million, while premises and equipment decreased $512,000 to $10.6 million, deferred income taxes decreased $554,000 to $10.5 million, and other assets decreased $921,000 to $2.8 million.
The decrease in brokerage commissions was the result of a decrease in the amount of renewal commissions and management fees, and the decrease in bank-owned life insurance income was due to the receipt of death benefit proceeds in the year ended June 30, 2022.
The increase in gain (loss) on sale of available-for-sale securities was the result of securities sold at a larger loss in the year ended June 30, 2023, while the increase in insurance commissions was due to an increase in personal lines commissions, and the increase in bank-owned life insurance income was due to the receipt of death benefit proceeds in the year ended June 30, 2024.
Interest and dividend income increased $7.3 million, or 29.4%, to $32.1 million for the year ended June 30, 2023 from $24.8 million for the year ended June 30, 2022.
Interest and dividend income increased $8.9 million, or 27.8%, to $41.0 million for the year ended June 30, 2024 from $32.1 million for the year ended June 30, 2023. The increase in interest income was due to a $8.7 million increase in interest on loans, $77,000 increase in interest income on securities, and a $115,000 increase in other interest income.
For the year ended June 30, 2023, mortgage banking income, net, decreased $437,000 to $360,000, gains on the sale of loans decreased $343,000 to $172,000, brokerage commissions decreased $358,000 to $773,000, bank-owned life insurance decreased $100,000 to $388,000, and other service charges and fees decreased $66,000 to $248,000, while net realized gain on sale of available-for-sale securities increased $104,000 to $(171,000), and customer service fees increased $33,000 to $380,000.
For the year ended June 30, 2024, gains on the sale of loans increased $94,000 to $266,000, net realized gain (loss) on sale of available-for-sale securities increased $171,000 to $0, insurance commissions increased $94,000 to $745,000, and bank-owned life insurance increased $118,000 to $506,000, while brokerage commissions decreased $123,000 to $650,000.
The increase in accrued interest receivable was primarily the result of an increase in the average balance and the average yield of interest-earning assets, the increase in deferred income taxes was mostly due to an increase in unrealized losses on available-for-sale securities, and the increase in premises and equipment was due to acquiring a new building for our Hoopeston banking facility.
The decrease in premises and equipment was the result of ordinary depreciation, the decrease in deferred income taxes was mostly due to a decrease in unrealized losses on available-for-sale securities, and the decrease in other assets was primarily due to the receipt of a large accounts receivable item in the year ended June 30, 2024.
While the Company does not currently anticipate any material changes or deficiencies to its capital or liquidity sources, uncertainties about duration and overall effects on the economy could result in more adverse effects than expected. 41 Table of Contents Critical Accounting Policies We consider accounting 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, to be critical accounting policies.
In addition, we issued 314,755 shares of our common stock to the Iroquois Federal Foundation. Critical Accounting Policies We consider accounting 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, to be critical accounting policies.
Fiscal Years Ended June 30, 2023 vs. 2022 Increase (Decrease) Due to Total Increase (Decrease) Volume Rate (In thousands) Interest-earning assets: Loans $ 2,483 $ 3,428 $ 5,911 Securities (123 ) 1,241 1,118 Other (286 ) 537 251 Total interest-earning assets $ 2,074 $ 5,206 $ 7,280 Interest-bearing liabilities: Interest-bearing checking or NOW $ 10 $ 47 $ 57 Savings accounts — 170 170 Certificates of deposit 42 3,733 3,775 Money market accounts 18 1,909 1,927 Total interest-bearing deposits 70 5,859 5,929 Federal Home Loan Bank advances 695 922 1,617 Total interest-bearing liabilities $ 765 $ 6,781 $ 7,546 Change in net interest income $ 1,309 $ (1,575 ) $ (266 ) Management of Market Risk General .
Fiscal Years Ended June 30, 2024 vs. 2023 Increase (Decrease) Due to Total Increase (Decrease) Volume Rate (In thousands) Interest-earning assets: Loans $ 3,532 $ 5,188 $ 8,720 Securities (383 ) 460 77 Other 12 103 115 Total interest-earning assets $ 3,161 $ 5,751 $ 8,912 Interest-bearing liabilities: Interest-bearing checking or NOW $ (25 ) $ (13 ) $ (38 ) Savings accounts (41 ) 137 96 Certificates of deposit 967 6,280 7,247 Money market accounts (159 ) 2,510 2,351 Total interest-bearing deposits 742 8,914 9,656 Federal Home Loan Bank advances 2,373 1,151 3,524 Total interest-bearing liabilities $ 3,115 $ 10,065 $ 13,180 Change in net interest income $ 46 $ (4,314 ) $ (4,268 ) Management of Market Risk General .
Noninterest Expense. Noninterest expense increased $586,000, or 3.0%, to $20.0 million for the year ended June 30, 2023 from $19.4 million for the year ended June 30, 2022.
The decrease in brokerage commissions was the result of a decrease in the amount of renewal commissions and management fees. Noninterest Expense. Noninterest expense decreased $306,000, or 1.5%, to $19.7 million for the year ended June 30, 2024 from $20.0 million for the year ended June 30, 2023.
Repurchase agreements increased $1.5 million, or 16.7%, to $10.8 million. FHLB advances increased $4.5 million, or 30.0%, to $19.5 million at June 30, 2023 from $15.0 million at June 30, 2022. 45 Table of Contents Total equity increased $95,000, or 0.1%, to $71.8 million at June 30, 2023 from $71.7 million at June 30, 2022.
Repurchase agreements increased $7.0 million, or 64.8%, to $17.8 million. FHLB advances increased $13.5 million, or 69.2%, to $33.0 million at June 30, 2024 from $19.5 million at June 30, 2023. Borrowings from Federal Reserve BTFP increased $25.3 million to $25.3 million at June 30, 2024 from $0 at June 30, 2023.
The largest components of this increase were equipment expense, which increased $505,000, or 25.3%, office occupancy expense, which increased $55,000, or 5.8%, federal deposit insurance premium, which increased $136,000, or 69.0%, advertising, which increased $134,000, or 33.2%, and professional services, which increased $61,000, or 15.3%.
The largest components of this decrease were compensation and benefits, which decreased $700,000, or 5.5%, equipment expense, which decreased $314,000, or 12.6%, advertising, which decreased $129,000, or 24.0%, and supervisory examinations, which decreased $72,000, or 41.6%, and were partially offset by federal deposit insurance premium, which increased $241,000, or 72.4%, and other expense, which increased $668,000, or 40.8%.
Removed
In addition, we issued 314,755 shares of our common stock to the Iroquois Federal Foundation. COVID-19 When it began in 2020, the COVID-19 pandemic caused economic and social disruption on an unprecedented scale. Congress, the President, and the Federal Reserve took several actions designed to cushion the economic fallout.
Added
The increase in accrued interest receivable was primarily the result of an increase in the average balance and the average yield of interest-earning assets, and the increase in FHLB stock was the result of an increased stock requirement due to an increase in FHLB advances.
Removed
The Company implemented our Business Continuity and Pandemic Response Plan to keep our staff and customers safe, while continuing to provide customer service. Recently, the President announced that COVID-19 will no longer be a public health emergency, effective May 11, 2023. Lending operations and accommodations to borrowers We have worked directly with customers affected by the COVID-19 pandemic.

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Other IROQ 10-K year-over-year comparisons