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What changed in IF Bancorp, Inc.'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of IF Bancorp, Inc.'s 2022 and 2023 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 2023 report.

+312 added−330 removedSource: 10-K (2023-09-13) vs 10-K (2022-09-15)

Top changes in IF Bancorp, Inc.'s 2023 10-K

312 paragraphs added · 330 removed · 242 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

123 edited+30 added−27 removed191 unchanged
Biggest changeIroquois 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; 29 Table of Contents • 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; • Truth in Savings Act; and 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.
Biggest changeThe 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.
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.
For additional information regarding retained risk associated with these loans, see “Allowance for Loan 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.” Loan Approval Procedures and Authority. Our lending activities follow written, non-discriminatory underwriting standards and loan origination procedures established by our Board of Directors.
The allowance for loan losses is the amount estimated by management as necessary to absorb credit losses incurred in the loan portfolio that are both probable and reasonably estimable at the balance sheet date. When we classify a problem asset as loss, we charge off the asset.
The allowance for credit losses is the amount estimated by management as necessary to absorb credit losses incurred in the loan portfolio that are both probable and reasonably estimable at the balance sheet date. When we classify a problem asset as loss, we charge off the asset.
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 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.
Such required compliance programs are intended to supplement existing compliance requirements that also apply to financial institutions under the Bank Secrecy Act and the Office of Foreign Assets Control regulations; and Holding Company Regulation General . IF Bancorp is a unitary savings and loan holding company within the meaning of Home Owners’ Loan Act.
Such required compliance programs are intended to supplement existing compliance requirements that also apply to financial institutions under the Bank Secrecy Act and the Office of Foreign Assets Control regulations. Holding Company Regulation General . IF Bancorp is a unitary savings and loan holding company within the meaning of Home Owners’ Loan Act.
Factors used in identifying a specific problem loan include: (1) the strength of the customer’s personal or business cash flows; (2) the availability of other sources of repayment; (3) the amount due or past due; (4) the type and value of collateral; (5) the strength of our collateral position; (6) the estimated cost to sell the collateral; and (7) the borrower’s effort to cure the delinquency.
Factors used in identifying a specific problem loan include: (1) the strength of the customer’s personal or business cash flows; (2) the availability of other sources of repayment; (3) the amount due or past due; (4) the type and value of collateral; (5) the strength of the collateral position; (6) the estimated cost to sell the collateral; and (7) the borrower’s effort to cure the delinquency.
We also have some credit risk associated with fixed-rate residential loans that we sold to the Federal Home Loan Bank of Chicago between 2000 and December 2008, and again starting in October 2015, under its Mortgage Partnership Finance (MPF) Original Program.
Other Credit Risk. We also have some credit risk associated with fixed-rate residential loans that we sold to the Federal Home Loan Bank of Chicago between 2000 and December 2008, and again starting in October 2015, under its Mortgage Partnership Finance (MPF) Original Program.
As a federal savings and loan association, Iroquois Federal is generally not permitted to invest in equity securities, although this general restriction will not apply to IF Bancorp, which may acquire up to 5% of voting securities of any company without regulatory approval. 19 Table of Contents ASC 320-10, “Investment – Debt and Equity Securities” requires that, at the time of purchase, we designate a security as held to maturity, available-for-sale, or trading, depending on our ability and intent.
As a federal savings and loan association, Iroquois Federal is generally not permitted to invest in equity securities, although this general restriction will not apply to IF Bancorp, which may acquire up to 5% of voting securities of any company without regulatory approval. 17 Table of Contents ASC 320-10, “Investment – Debt and Equity Securities” requires that, at the time of purchase, we designate a security as held-to-maturity, available-for-sale, or trading, depending on our ability and intent.
Securities available for sale are reported at fair value, while securities held to maturity are reported at amortized cost. All of our securities are available for sale. We do not maintain a trading portfolio. U.S. Treasury, U.S. Government and Agency Debt Securities. While U.S. Treasury, U.S.
Securities available for sale are reported at fair value, while securities held to maturity are reported at amortized cost. All of our securities are available for sale. We do not maintain a trading portfolio. U.S. Government and Agency Debt Securities. While U.S.
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. 23 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. 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.
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 24 Table of Contents 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 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.
The FDIC charges insured depository institutions premiums to maintain the Deposit Insurance Fund. 28 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.
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.
At June 30, 2022, Iroquois Federal met the criteria for being considered “well-capitalized.” The previously referenced 2018 legislation provides that qualifying institutions that elect and comply with the alternative community bank ratio framework will be considered to be “well-capitalized.” “Undercapitalized” institution’s must adhere to growth, capital distribution (including dividend) and other limitations and are required to submit a capital restoration plan.
At June 30, 2023, Iroquois Federal met the criteria for being considered “well-capitalized.” The previously referenced 2018 legislation provides that qualifying institutions that elect and comply with the alternative community bank ratio framework will be considered to be “well-capitalized.” “Undercapitalized” institution’s must adhere to growth, capital distribution (including dividend) and other limitations and are required to submit a capital restoration plan.
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. 31 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. 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.
The following table sets forth the allowance for loan losses allocated by loan category and the percent of loans in each category to total loans at the dates indicated.
The following table sets forth the allowance for credit losses allocated by loan category and the percent of loans in each category to total loans at the dates indicated.
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. 27 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. 25 Table of Contents Interstate Banking and Branching.
Iroquois Federal received a “satisfactory” Community Reinvestment Act rating in its most recent federal examination. 26 Table of Contents On May 5, 2022, the Office of the Comptroller of the Currency released a notice of proposed rulemaking with other bank regulatory agencies to “strengthen and modernize” Community Reinvestment Act regulations and the related regulatory framework. Transactions with Related Parties.
Iroquois Federal received a “satisfactory” Community Reinvestment Act rating in its most recent federal examination. 24 Table of Contents On May 5, 2022, the Office of the Comptroller of the Currency released a notice of proposed rulemaking with other bank regulatory agencies to “strengthen and modernize” Community Reinvestment Act regulations and the related regulatory framework. Transactions with Related Parties.
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 $647,200 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 $726,200 for single-family homes.
We invest in bank-owned life insurance to provide us with a funding source for our benefit plan obligations. Bank-owned life insurance also generally provides us noninterest income that is non-taxable. Federal regulations generally limit our investment in bank-owned life insurance to 25% of our Tier 1 capital plus our allowance for loan losses.
We invest in bank-owned life insurance to provide us with a funding source for our benefit plan obligations. Bank-owned life insurance also generally provides us noninterest income that is non-taxable. Federal regulations generally limit our investment in bank-owned life insurance to 25% of our Tier 1 capital plus our allowance for credit losses.
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, 2022, 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, 2023, we held no asset-backed securities other than mortgage- backed securities.
In addition, as an integral part of their examination process, the Office of the Comptroller of the Currency will periodically review our allowance for loan losses. Such agency may require that we recognize additions to the allowance based on their judgments of information available to them at the time of their examination.
In addition, as an integral part of their examination process, the Office of the Comptroller of the Currency will periodically review our allowance for credit losses. Such agency may require that we recognize additions to the allowance based on their judgments of information available to them at the time of their examination.
All investments are reported to the Board of Directors for ratification at the next regular Board meeting. Our current investment policy permits us to invest only in investment quality securities permitted by Office of the Comptroller of the Currency regulations, including U.S. Treasury or Government guaranteed securities, U.S.
All investments are reported to the Board of Directors at the next regular Board meeting. Our current investment policy permits us to invest only in investment quality securities permitted by Office of the Comptroller of the Currency regulations, including U.S. Treasury or Government guaranteed securities, U.S.
That system, effective July 1, 2016, replaced a previous system under which institutions were placed into risk categories. Currently, the assessment range (inclusive of possible adjustments) for insured institutions of less than $10 billion of total assets is 1.5 basis points.
That system, effective July 1, 2016, replaced a previous system under which institutions were placed into risk categories. Currently, the assessment range (inclusive of possible adjustments) for insured institutions of less than $10 billion of total assets is 1.5 basis points to 30 basis points.
Federal Reserve System Federal Reserve Board regulations historically required savings banks to maintain noninterest-earning reserves against their transaction accounts, such as negotiable order of withdrawal and regular checking accounts. At June 30, 2022, Iroquois Federal was in compliance with these reserve requirements.
Federal Reserve System Federal Reserve Board regulations historically required savings banks to maintain noninterest-earning reserves against their transaction accounts, such as negotiable order of withdrawal and regular checking accounts. At June 30, 2023, Iroquois Federal was in compliance with these reserve requirements.
An institution that temporarily ceases to meet any qualifying criteria is provided with a two quarter grace period to again achieve compliance. Failure to meet the qualifying criteria within the grace period or maintain a leverage ratio of 8% or greater requires the institution to comply with the generally applicable capital requirements.
An institution that temporarily ceases to meet any qualifying criteria is provided with a two quarter grace period to again achieve compliance. Failure to meet the qualifying criteria within the grace period or maintain a leverage ratio of 9% or greater requires the institution to comply with the generally applicable capital requirements.
Our primary lending market includes the Illinois counties of Vermilion, Iroquois, Champaign and Kankakee, as well as the adjacent counties in Illinois and Indiana within 30 miles of a branch or loan production office. Our loan production and wealth management office in Osage Beach, Missouri, serves the Missouri counties of Camden, Miller and Morgan.
Our primary lending market includes the Illinois counties of Vermilion, Iroquois, Champaign and Kankakee, as well as the adjacent counties in Illinois and Indiana within 30 miles of a branch or loan production office. Our loan production office in Osage Beach, Missouri, serves the Missouri counties of Camden, Miller and Morgan.
Iroquois Federal opted into the community bank leverage ratio framework effective with the quarter ended March 31, 2020. At June 30, 2022, Iroquois Federal’s capital exceeded all applicable requirements. Loans to One Borrower.
Iroquois Federal opted into the community bank leverage ratio framework effective with the quarter ended March 31, 2020. At June 30, 2023, Iroquois Federal’s capital exceeded all applicable requirements. Loans to One Borrower.
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, 2022, 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, 2023, Iroquois Federal was in compliance with this requirement.
As of June 30, 2021, IF Bancorp, Inc. has not elected financial holding company status. 30 Table of Contents Federal law prohibits a savings and loan holding company, including IF Bancorp, directly or indirectly, or through one or more subsidiaries, from acquiring more than 5% of another savings institution or holding company thereof, without prior regulatory approval.
As of June 30, 2023, IF Bancorp, Inc. has not elected financial holding company status. 28 Table of Contents Federal law prohibits a savings and loan holding company, including IF Bancorp, directly or indirectly, or through one or more subsidiaries, from acquiring more than 5% of another savings institution or holding company thereof, without prior regulatory approval.
The related specific valuation allowance in the allowance for loan losses for such nonperforming loans was $0 at both June 30, 2022 and 2021. Substandard assets shown include foreclosed assets.
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.
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, 2022, we held $3.8 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, 2023, we held $3.4 million of municipal securities, all of which were issued by local governments and school districts within our market area.
The allowance for loan losses allocated to each category is not necessarily indicative of future losses in any particular category and does not restrict the use of the allowance to absorb losses in other categories.
The allowance for credit losses allocated to each category is not necessarily indicative of future losses in any particular category and does not restrict the use of the allowance to absorb losses in other categories.
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 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.
At that date, our largest multi-family real estate loan had a balance of $8.8 million, was secured by a multi-unit apartment building, and was performing in accordance with its terms. Home Equity Lines of Credit.
At that date, our largest multi-family real estate loan had a balance of $7.1 million, was secured by a multi-unit apartment building, and was performing in accordance with its terms. Home Equity Lines of Credit.
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.
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.
Although management uses the best information available, the level of the allowance for loan losses remains an estimate that is subject to significant judgment and short-term change. 17 Table of Contents The following table sets forth activity in our allowance for loan 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. 15 Table of Contents The following table sets forth activity in our allowance for credit losses at and for the periods indicated.
While management believes that our asset quality remains strong, it recognizes that, due to the continued growth in the loan portfolio, the increase in troubled debt restructurings and the potential changes in market conditions, our level of nonperforming assets and resulting charges-offs may fluctuate. Higher levels of net charge-offs requiring additional provisions for loan losses could result.
While management believes that our asset quality remains strong, it recognizes that, due to the continued growth in the loan portfolio and the potential changes in market conditions, our level of nonperforming assets and resulting charges-offs may fluctuate. Higher levels of net charge-offs requiring additional provisions for credit losses could result.
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 $227,000 and $632,000 at June 30, 2022 and 2021, 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 loans held for sale of approximately $0 and $227,000 at June 30, 2023 and 2022, respectively.
At that date we had $11.5 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.
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 June 30, 2022, 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. 14 Table of Contents Other Credit Risk.
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.
For the years ended June 30, 2022 and 2021, gross interest income that would have been recorded had our troubled debt restructurings been performing in accordance with their original terms was $65,000 and $74,000, respectively. We recognized interest income of $19,000 and $67,000 on such modified loans for the years ended June 30, 2022 and 2021, respectively.
For the years ended June 30, 2023 and 2022, gross interest income that would have been recorded had our troubled debt restructurings been performing in accordance with their original terms was $19,000 and $65,000, respectively. We recognized interest income of $19,000 and $19,000 on such modified loans for the years ended June 30, 2023 and 2022, respectively. Delinquent Loans.
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, 2022 and 2021, include approximately $1.2 million and $152,000 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, 2023 and 2022, include approximately $117,000 and $1.2 million of nonperforming loans, respectfully.
Under the QTL test, 25 Table of Contents Iroquois Federal must maintain at least 65% of its “portfolio assets” in “qualified thrift investments” in at least nine months of the most recent 12 months.
Under the QTL test, Iroquois Federal must maintain at least 65% of its “portfolio assets” in “qualified thrift investments” in at least nine months of the most recent 12 months.
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, 2022, Iroquois Federal was in compliance with its loans-to-one borrower limitations. 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, 2023, Iroquois Federal was in compliance with its loans-to-one borrower limitations. 23 Table of Contents Qualified Thrift Lender Test.
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, 2022 and 2021, the amount of such loans equaled $30.0 million and $26.9 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, 2023 and 2022, the amount of such loans equaled $46.1 million and $30.0 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, 2022 and 2021, the amount of such loans equaled $1.6 million and $3.6 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, 2023 and 2022, the amount of such loans equaled $652,000 and $1.6 million, respectively.
Personnel At June 30, 2022, the Association had 109 full-time employees and 5 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, 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.
Our deposit sources are primarily concentrated in the communities surrounding our banking offices located in Iroquois and Vermilion Counties, Illinois. As of June 30, 2021, 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 20.96% 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, 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.
At June 30, 2022, our largest commercial real estate loan had an outstanding balance of $6.8 million, was secured by an industrial warehouse, and was performing in accordance with its terms.
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.
In addition, we could repossess certain collateral, including automobiles and other titled vehicles, called other repossessed assets. At June 30, 2022, we had $120,000 in foreclosed assets compared to $259,000 as of June 30, 2021.
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.
However, while we retain the servicing of these loans and receive both service fees and credit enhancement fees, they are not our assets.
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.
At June 30, 2022, Iroquois Federal held 71.03% 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, 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.
Total loans sold under this program equaled approximately $141.2 million and $138.1 million as of June 30, 2022 and 2021, 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.
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.
Loan Portfolio Maturities. The following table summarizes the scheduled repayments of our loan portfolio at June 30, 2022. We had no demand loans or loans having no stated repayment schedule or maturity at June 30, 2022.
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.
At June 30, 2022, 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 office buildings, owner-occupied businesses, retail rentals, churches, and farm loans secured by real estate.
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.
Federal Home Loan Bank Stock. At June 30, 2022, we held $3.1 million of Federal Home Loan Bank of Chicago common stock in connection with our borrowing activities totaling $15.0 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.
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.
At June 30, 2022, approximately $2.2 million, or 1.7% 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, 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.
We sold $22.3 million in loans under this program in the year ended June 30, 2022, and we continue to service approximately $90.3 million of these loans, for which our maximum potential credit risk is approximately $3.7 million. From June 2000 to June 30, 2022, we experienced only $176,000 in actual losses under the MPF Original Program.
We sold $ 7.4 million in loans under this program in the year ended June 30, 2023, and we continue to service approximately $88.3 million of these loans, for which our maximum potential credit risk is approximately $1.7 million. From June 2000 to June 30, 2023, we experienced only $176,000 in actual losses under the MPF Original Program.
We periodically modify loans to extend the term or make other concessions to help borrowers stay current on their loans and to avoid foreclosure. At June 30, 2022 and 2021, we had troubled debt restructurings of approximately $998,000 and $1.3 million, respectively.
We periodically modify loans to extend the term or make other concessions to help borrowers stay current on their loans and to avoid foreclosure. At June 30, 2023 and 2022, we had troubled debt restructurings of approximately $215,000 and $998,000, respectively.
At June 30, 2022, $4.3 million or 4.8% 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, 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.
During the years ended June 30, 2022 and 2021, we sold $28.0 million and $58.6 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, 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.
Total mortgages sold under this program were approximately $5.7 6 Table of Contents million and $19.4 million for the years ended June 30, 2022 and 2021, respectively. In October 2015, we began to also sell loans to FHLBC under its Mortgage Partnership Finance Original Program.
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.
The Company’s most significant asset is its investment in Iroquois Federal. At June 30, 2022 and 2021, we had consolidated assets of $857.6 million and $797.3 million, consolidated deposits of $752.0 million and $667.6 million and consolidated equity of $71.7 million and $85.3 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, 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.
At June 30, 2022, we had the ability to borrow up to an additional $109.9 million from the Federal Home Loan Bank of Chicago, we had $7.5 million available on our line of credit from CIBC BANK USA, and we also had the ability to borrow up to $41.0 million from the Federal Reserve Discount Window based on our current collateral pledged.
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, we had $5.0 million available on our line of credit from CIBC BANK USA, and we also had the ability to borrow up to $55.9 million from the Federal Reserve Discount Window based on our current collateral pledged.
Unemployment rates in our primary market have decreased over the last year. According to the Illinois Department of Employment Security, unemployment, on a non-seasonally adjusted basis, decreased from 4.7% to 3.9% in Iroquois County, from 7.2% to 5.5% in Vermilion County, from 5.8% to 4.3% in Champaign County, and from 6.9% to 5.3% 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 4.0% 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 .
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 and our wealth management and financial services business. 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. 2 Table of Contents Competition We face intense competition in our market area both in making loans and attracting deposits.
All loans that we originate are underwritten pursuant to our standard policies and procedures. In addition, our one- to four-family residential mortgage loans generally incorporate Fannie Mae, Freddie Mac or Federal Home Loan Bank of Chicago underwriting guidelines, as applicable. We originate both adjustable-rate and fixed-rate loans.
In addition, our one- to four-family residential mortgage loans generally incorporate Fannie Mae, Freddie Mac or Federal Home Loan Bank of Chicago underwriting guidelines, as applicable. We originate both adjustable-rate and fixed-rate loans.
Both fixed and adjustable rate home equity lines of credit have balloon terms of five years. At June 30, 2022, we had $7.0 million, or 1.3% 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, 2023, we had $8.1 million, or 1.4% of our total loan portfolio in home equity lines of credit.
At June 30, 2022 our troubled debt restructurings consisted of $962,000 of residential one- to four-family mortgage loans and $36,000 of commercial business loans, all of which were impaired.
At June 30, 2023 our troubled debt restructurings consisted of $189,000 of residential one- to four-family mortgage loans and $26,000 of commercial business loans, all of which were impaired.
At June 30, 2022, we had $14.4 million invested in bank-owned life insurance, which was 16.3% of our Tier 1 capital plus our allowance for loan losses. 20 Table of Contents Portfolio Maturities and Yields. The composition and maturities of the investment securities portfolio at June 30, 2022 are summarized in the following table.
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.
Loans Delinquent For Total 60 to 89 Days 90 Days or Greater Number Amount Number Amount Number Amount (Dollars in thousands) 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 At June 30, 2021 Real estate loans: One- to four-family (1) 1 52 2 152 3 204 Multi-family — — — — — — Commercial — — — — — — Home equity lines of credit — — — — — — Construction — — — — — — Commercial — — — — — — Consumer — — — — — — Total loans 1 $ 52 2 $ 152 3 $ 204 (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, 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.
We also offer annuities, mutual funds, individual and group retirement plans, life, disability and health insurance, individual securities, managed accounts and other financial services at all of our locations through Iroquois Financial, a division of Iroquois Federal. Raymond James Financial Services, Inc. serves as the broker-dealer for Iroquois Financial.
We also offer annuities, mutual funds, individual and group retirement plans, life, disability and health insurance, individual securities, managed accounts and other financial services at all of our locations through Iroquois Financial, a division of Iroquois Federal.
Total loans sold under this program were approximately $22.3 million and $39.2 million for the years ended June 30, 2022 and 2021, respectively.
Total loans sold under this program were approximately $7.4 million and $22.3 million for the years ended June 30, 2023 and 2022, respectively.
One- to Four-Family Residential Mortgage Loans . At June 30, 2022, $132.5 million, or 25.2% 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, 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.
At June 30, 2022, loans secured by commercial real estate had an average loan balance of $593,000. 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, 2022, $4.1 million or 2.5% of our commercial real estate loans had adjustable rates.
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.
We also originate construction loans for one- to four-family residential properties and commercial real estate properties, including multi-family properties. At June 30, 2022, $41.3 million, or 7.9%, 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, 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.
At June 30, 2022, we had $3.6 million in brokered certificates of deposit and $249,000 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, 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.
We had one loan for $47,000 that was delinquent 90 days or greater and still accruing interest at June 30, 2022, and we had one loan for $118,000 that was delinquent 120 days or greater and that was still accruing interest at June 30, 2021.
We had no loans that were delinquent 90 days or greater and still accruing interest at June 30, 2023, and we had one loan for $47,000 that was delinquent 90 days or greater and that was still accruing interest at June 30, 2022. .
In addition, for loans secured by real estate, the Company also considers the extent of any past due and unpaid property taxes applicable to the property serving as collateral on the mortgage. 15 Table of Contents Determination of General Allowance for Remainder of the Loan Portfolio.
In addition, for loans secured by real estate, the Company also considers the extent of any past due and unpaid property taxes applicable to the property serving as collateral on the mortgage.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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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.
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.
If our allowance for loan 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.
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.
In addition, bank regulators periodically review our allowance for loan losses and, as a result of such reviews, we may be required to increase our allowance for loan losses or recognize further loan charge-offs.
In addition, bank regulators periodically review our allowance for credit losses and, as a result of such reviews, we may be required to increase our allowance for credit losses or recognize further loan charge-offs.
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 loan losses is inadequate, we will have to increase the allowance accordingly by recording a provision for loan 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. 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.
We do not record interest income on non-accrual loans, and we must establish reserves or take charge-offs for probable losses on non-performing loans. Reserves are established through a current period charge to income in the provision for loan losses. There are also legal fees associated with the resolution of problem assets.
We do not record interest income on non-accrual loans, and we must establish reserves or take charge-offs for probable losses on non-performing loans. Reserves are established through a current period charge to income in the provision for credit losses. There are also legal fees associated with the resolution of problem assets.
In determining the amount of the allowance for loan losses, we review our loans and our loss and delinquency experience, and we evaluate economic conditions. If our assumptions are incorrect, our allowance for loan losses may not be sufficient to cover probable losses in our loan portfolio, requiring us to make additions to our allowance for loan losses.
In determining the amount of the allowance for credit losses on loans, we review our loans and our loss and delinquency experience, and we evaluate economic conditions. If our assumptions are incorrect, our allowance for credit losses may not be sufficient to cover probable losses in our loan portfolio, requiring us to make additions to our allowance for credit losses.
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.
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.
As our commercial real estate, multi-family and commercial business loan portfolios increase, the corresponding risks and potential for losses from these loans may also increase. 33 Table of Contents Our funding sources may prove insufficient to replace deposits and support our future growth. We must maintain sufficient funds to respond to the needs of depositors and borrowers.
As our commercial real estate, multi-family and commercial business loan portfolios increase, the corresponding risks and potential for losses from these loans may also increase. Our funding sources may prove insufficient to replace deposits and support our future growth. We must maintain sufficient funds to respond to the needs of depositors and borrowers.
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.
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.
Furthermore, these rules and regulations continue to evolve and expand. We have not been subject to fines or other penalties, or have suffered business or reputational harm, as a result of money laundering activities in the past. 39 Table of Contents Legal and regulatory proceedings and related matters could adversely affect us.
Furthermore, these rules and regulations continue to evolve and expand. We have not been subject to fines or other penalties, or have suffered business or reputational harm, as a result of money laundering activities in the past. Legal and regulatory proceedings and related matters could adversely affect us.
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.
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.
The effects of such policies upon our business, financial condition and results of operations cannot be predicted. 38 Table of Contents Strong traditional and non-traditional competition within our market areas may limit our growth and profitability. We face intense competition in making loans and attracting deposits.
The effects of such policies upon our business, financial condition and results of operations cannot be predicted. Strong traditional and non-traditional competition within our market areas may limit our growth and profitability. We face intense competition in making loans and attracting deposits.
In addition, population outflow from the State of Illinois could affect our ability to attract and retain customers. 37 Table of Contents Some of the markets we are in include significant university and healthcare presence, which rely heavily on state funding and contracts.
In addition, population outflow from the State of Illinois could affect our ability to attract and retain customers. Some of the markets we are in include significant university and healthcare presence, which rely heavily on state funding and contracts.
Moreover, our decision regarding the classification of a loan participation and loan 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 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.
At June 30, 2022, our loan participations totaled $30.0 million, or 5.7% 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, 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, 2022, our non-performing assets (which consist of non-accrual loans, loans 90 days or more delinquent and still accruing, and real estate owned) totaled $1.3 million. Our non-performing assets adversely affect our net income in various ways.
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.
For example, as of June 30, 2022, 9.2% of our loans had remaining maturities of, or reprice after, 5 years or longer, while 87.3% 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, 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.
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.
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.
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.
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.
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.
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, 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.
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.
As a result, a prolonged period of secondary market illiquidity may reduce our loan mortgage production volume and could have a material adverse effect on our financial condition and results of operations.
As a result, a prolonged period of secondary market illiquidity may reduce our loan mortgage production volume and could have a material adverse effect on our financial condition and results of operations. 34 Table of Contents Declines in the value of securities held in the investment portfolio may negatively affect the Company’s earnings, capital and liquidity.
Any increase in our allowance for loan 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.
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.
In some cases, this confidential or proprietary information is collected, compiled, processed, transmitted or stored by third parties on our behalf. 35 Table of Contents Information security risks have generally increased in recent years because of the proliferation of new technologies, the use of the Internet and telecommunications technologies to conduct financial and other transactions and the increased sophistication and activities of perpetrators of cyber-attacks and mobile phishing.
Information security risks have generally increased in recent years because of the proliferation of new technologies, the use of the Internet and telecommunications technologies to conduct financial and other transactions and the increased sophistication and activities of perpetrators of cyber-attacks and mobile phishing.
We regularly collect, process, transmit and store significant amounts of confidential information regarding our customers, employees and others and concerning our own business, operations, plans and strategies.
We regularly collect, process, transmit and store significant amounts of confidential information regarding our customers, employees and others and concerning our own business, operations, plans and strategies. In some cases, this confidential or proprietary information is collected, compiled, processed, transmitted or stored by third parties on our behalf.
Any one or a combination of the factors identified above could negatively impact our business, financial condition and results of operations and prospects. We intend to continue to grow our commercial real estate, multi-family and commercial business loans and increase these loans as a percentage of our total loan portfolio.
ITEM 1A. RISK FACTORS Operational Risks We intend to continue to grow our commercial real estate, multi-family and commercial business loans and increase these loans as a percentage of our total loan portfolio.
At June 30, 2022, $167.4 million, or 31.8%, of our total loan portfolio consisted of commercial real estate loans, $88.2 million, or 16.8%, of our total loan portfolio consisted of multi-family loans, and $80.4 million, or 15.3%, of our total loan portfolio consisted of commercial business loans.
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.
Our allowance for loan losses was 1.34% of total loans at June 30, 2022. Additions to our allowance could materially decrease our net income. 34 Table of Contents The Financial Accounting Standards Board has delayed the effective date of the Current Expected Credit Loss, or CECL, standard.
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.
Any of these events could have a material adverse effect on our financial condition and results of operations. Market and Industry Risks A continuation of the historically low interest rate environment and the possibility that we may access higher-cost funds to support our loan growth and operations may adversely affect our net interest income and profitability.
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.
Removed
ITEM 1A. RISK FACTORS Operational Risks The economic impact of the COVID-19 outbreak could adversely affect our financial condition and results of operations. The COVID-19 coronavirus pandemic has caused economic and social disruption on an unprecedented scale. While some industries have been impacted more severely than others, all businesses have been impacted to some degree.
Added
The Company adopted ASU 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments , effective July 1, 2023, which replaced the previous “incurred loss” model for measuring credit losses with an “expected life of loan loss” model referred to as the CECL model.
Removed
Industries that have been particularly hard-hit include the travel and hospitality industry, the restaurant industry and the retail industry. This disruption has resulted in the shuttering of businesses and schools across the country, significant job loss, restrictions on travel and social distancing protocols, highly volatile financial markets and aggressive measures by the federal government.
Added
Adoption of the CECL methodology has substantially changed how the Company calculates its allowance for credit losses, and the ongoing impact of the adoption is dependent on various factors, including credit quality, macroeconomic forecasts and conditions, composition of our loans and securities porfolios, and other management judgements.
Removed
The spread of the coronavirus has also caused us to modify our business practices, including employee travel, employee work locations, and cancellation of physical participation in meetings, events and conferences.
Added
There can be no assurance that the Company’s monitoring procedures and policies will reduce certain lending risks or that the Company’s allowance for credit losses will be adequate to cover actual losses.
Removed
While almost all our employees are currently working onsite, we have many employees prepared to work remotely if required as per action by government authorities or if we determine that it is in the best interests of our employees, customers and business partners.
Added
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.
Removed
Significant progress has been made to combat the outbreak of COVID-19; however, the global pandemic has adversely impacted a broad range of industries in which the Company’s customers operate and could still impair their ability to fulfill their financial obligations to the Company.
Added
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.
Removed
Given the ongoing and dynamic nature of the circumstances, it is difficult to predict the full impact of the COVID-19 outbreak on our business. The extent of such impact will depend on future developments, which are highly uncertain, including when the coronavirus can be controlled and abated and when and how the economy may be reopened.
Added
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.
Removed
As the result of the COVID-19 pandemic and the related adverse local and national economic consequences, we could be subject to any of the following risks, any of which could have a material, adverse effect on our business, financial condition, liquidity, and results of operations: • demand for our products and services may decline, making it difficult to grow assets and income; • if the economy is unable to substantially reopen, and high levels of unemployment continue for an extended period of time, loan delinquencies, problem assets, and foreclosures may increase, resulting in increased charges and reduced income; • collateral for loans, especially real estate, may decline in value, which could cause loan losses to increase; • limitations may be placed on our ability to foreclose on properties during the pandemic; • our allowance for loan losses may have to be increased if borrowers experience financial difficulties beyond forbearance periods, which will adversely affect our net income; • the net worth and liquidity of loan guarantors may decline, impairing their ability to honor commitments to us; 32 Table of Contents • as the result of the Federal Reserve Board’s target federal funds rate of 1.50% to 1.75% at June 30, 2022, the yield on our assets may decline to a greater extent than the decline in our cost of interest-bearing liabilities, reducing our net interest margin and spread and reducing net income; • our cyber security risks are increased as the result of an increase in the number of employees working remotely; • a worsening of business and economic conditions or in the financial markets could result in an impairment of certain intangible assets, such as goodwill; • litigation, regulatory enforcement risk and reputation risk regarding our participation in the PPP and the risk that the SBA may not fund some or all PPP loan guaranties; • the unanticipated loss or unavailability of key employees due to the outbreak, which could harm our ability to operate our business or execute our business strategy, especially as we may not be successful in finding and integrating suitable successors; • we rely on third party vendors for certain services and the unavailability of a critical service due to the COVID-19 outbreak could have an adverse effect on us; and • Federal Deposit Insurance Corporation premiums may increase if the agency experience additional resolution costs; Moreover, our future success and profitability substantially depends on the management skills of our executive officers and directors, many of whom have held officer and director positions with us for many years.
Added
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.
Removed
The unanticipated loss or unavailability of key employees due to the outbreak could harm our ability to operate our business or execute our business strategy. We may not be successful in finding and integrating suitable successors in the event of key employee loss or unavailability.
Added
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.
Removed
After transition modeling for a couple years and validating our CECL model, we adopted CECL effective July 1, 2022. CECL will require financial institutions to determine periodic estimates of lifetime expected credit losses on loans, and recognize the expected credit losses as allowances for credit losses.
Added
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
This will change the current method of providing allowances for loan losses that are incurred or probable, which would likely require us to increase our allowance for credit losses, and to greatly increase the types of data we would need to collect and review to determine the appropriate level of the allowance for credit losses.
Added
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
In recent years the Federal Reserve Board’s policy has been to maintain interest rates at historically low levels through its targeted federal funds rate and the purchase of mortgage-backed securities.
Added
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
Our ability to reduce our interest expense may be limited at current interest rate levels while the average yield on our interest-earning assets may continue to decrease, and our interest expense may increase as we access non-core funding sources or increase deposit rates to fund our operations.
Added
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
A continuation of a low interest rate environment or an increase in our cost of funds may adversely affect our net interest income, which would have an adverse effect on our profitability. 36 Table of Contents Future changes in interest rates could reduce our profits.
Added
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.
Added
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.
Added
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.
Added
In addition, any compromise of our systems could deter customers from using our products and services.
Added
The value of an investment in the portfolio could decrease due to changes in market factors. The market value of certain investment securities is volatile and future increases in unrealized losses on available-for-sale securities could materially adversely affect the Company’s future earnings, capital and liquidity.
Added
Continued volatility in the market value of certain of the investment securities, whether caused by changes in market perceptions of credit risk, as reflected in the expected market yield of the security, or actual defaults in the portfolio could result in significant fluctuations in the value of the securities.
Added
This could have a material adverse impact on the Company’s accumulated other comprehensive loss and shareholders’ equity depending upon the direction of the fluctuations. It could also negatively impact our ability to sell securities for liquidity needs without taking a loss. For further discussion of the Company’s investments, see Note 2 – “Securities”.

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 our loan production and wealth management office in Osage Beach, Missouri. The net book value of our premises, land and equipment was $9.5 million at June 30, 2022.
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.
Location Year Opened Owned/ Leased Main Office: 201 East Cherry Street Watseka, Illinois 60970 1964 Owned Branches: 619 North Gilbert Street Danville, Illinois 61832 1973 Owned 175 East Fourth Avenue Clifton, Illinois 60927 1977 Owned 511 South Chicago Road Hoopeston, Illinois 60942 1979 Owned 108 Arbours Drive Savoy, Illinois 61874 2014 Owned 421 Brown Boulevard Bourbonnais, Illinois 60914 2017 Owned 2411 Village Green Place Champaign, Illinois 61822 2018 Owned Loan Production Office: 3535 Highway 54 Osage Beach, Missouri 65065 2006 Owned Administrative Office: 204 East Cherry Street Watseka, Illinois 60970 2001 Owned Data Center: 183 Bethel Drive Bourbonnais, Illinois 60914 2019 Leased (expires March 31, 2025)
Location Year Opened Owned/ Leased Main Office: 201 East Cherry Street Watseka, Illinois 60970 1964 Owned Branches: 619 North Gilbert Street Danville, Illinois 61832 1973 Owned 175 East Fourth Avenue Clifton, Illinois 60927 1977 Owned 655 South Dixie Highway Hoopeston, Illinois 60942 2023 Owned 108 Arbours Drive Savoy, Illinois 61874 2014 Owned 421 Brown Boulevard Bourbonnais, Illinois 60914 2017 Owned 2411 Village Green Place Champaign, Illinois 61822 2018 Owned Loan Production Office: 3535 Highway 54 Osage Beach, Missouri 65065 2006 Owned Administrative Office: 204 East Cherry Street Watseka, Illinois 60970 2001 Owned Data Center: 183 Bethel Drive Bourbonnais, Illinois 60914 2019 Leased (expires March 31, 2025)
The following tables set forth information with respect to our banking offices, including the expiration date of leases with respect to leased facilities.
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.

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. 41 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. 38 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 42 PART II 42 ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES 42 ITEM 6. [RESERVED] 42 ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION 43 ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 58 ITEM 8.
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.

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 $0.15 per share in October 2020 and April 2021 and $0.175 per share in October 2021 and April 2022. 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 $0.175 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.
There were no share repurchases during the quarter ended June 30, 2022. The Company does not have an active stock repurchase plan in place.
There were no share repurchases during the quarter ended June 30, 2023. The Company does not have an active stock repurchase plan in place.
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, 2022, there were 334 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, 2023, there were 326 holders of record of the Company’s common stock. Dividends.

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. 53 Table of Contents For the Fiscal Years Ended June 30, 2022 2021 2020 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) $ 122,652 $ 5,052 4.12 % $ 122,179 $ 5,391 4.41 % $ 128,915 $ 5,950 4.62 % Multi-family 92,372 3,721 4.03 103,612 4,305 4.15 103,710 4,414 4.26 Commercial 162,236 6,419 3.96 151,690 6,346 4.18 145,978 6,544 4.48 Home equity lines of credit 6,496 286 4.40 7,794 349 4.48 8,916 420 4.71 Construction loans 30,856 1,178 3.82 18,376 678 3.69 19,098 946 4.95 Commercial business loans 86,223 3,221 3.74 104,702 3,573 3.41 89,023 4,254 4.78 Consumer loans 8,048 318 3.95 7,791 357 4.58 7,410 389 5.25 Total loans 508,883 20,195 3.97 516,144 20,999 4.07 503,050 22,917 4.56 Securities: U.S. government, federal agency and government-sponsored enterprises 25,234 466 1.85 13,379 292 2.18 13,636 354 2.60 U.S. government sponsored mortgage-backed securities 186,837 3,830 2.05 149,052 2,809 1.88 131,059 3,327 2.54 State and political subdivisions 1,739 51 2.93 1,334 39 2.92 1,981 46 2.32 Total securities 213,810 4,347 2.03 163,765 3,140 1.92 146,676 3,727 2.54 Other 36,341 250 0.69 26,853 218 0.81 15,586 338 2.17 Total interest-earning assets 759,034 24,792 3.27 706,762 24,357 3.45 665,312 26,982 4.06 Noninterest-earning assets 23,342 33,033 28,160 Total assets $ 782,376 $ 739,795 $ 693,472 Interest-bearing liabilities: Interest-bearing checking or NOW $ 109,929 134 0.12 $ 90,459 137 0.15 $ 63,964 188 0.29 Savings accounts 70,111 105 0.15 57,900 114 0.20 46,552 164 0.35 Money market accounts 166,787 549 0.33 132,860 492 0.37 103,150 1,053 1.02 Certificates of deposit 258,199 1,280 0.50 277,752 2,950 1.06 308,089 6,505 2.11 Total interest-bearing deposits 605,026 2,068 0.34 558,971 3,693 0.66 521,755 7,910 1.52 Borrowings and repurchase agreements 32,110 461 1.44 36,088 485 1.34 43,023 784 1.82 Total interest-bearing liabilities 637,136 2,529 0.40 595,059 4,178 0.70 564,778 8,694 1.54 Noninterest-bearing deposits 55,722 49,297 39,515 Noninterest-bearing liabilities 7,674 11,115 9,062 Total liabilities 700,532 655,471 613,355 Equity 81,844 84,324 80,117 Total liabilities and equity 782,376 739,795 693,472 Net interest income $ 22,263 $ 20,179 $ 18,288 Net interest rate spread (2) 2.87 % 2.75 % 2.52 % Net interest-earning assets (3) $ 121,898 $ 111,703 $ 100,534 Net interest margin (4) 2.93 % 2.86 % 2.75 % Average interest-earning assets to interest-bearing liabilities 119 % 119 % 118 % (1) Includes home equity loans.
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.
The decrease was primarily due to a decrease in the gain on the sale of loans, a decrease in the net realized gain on sale of available-for-sale securities, and a decrease in other service charges and fees, partially offset by an increase in other income, an increase in bank-owned life insurance income, an increase in mortgage banking income, net, an increase in brokerage commissions and an increase in customer service fees.
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.
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; 55 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; 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.
Our results of operations also are affected by our provision for loan losses, noninterest income and noninterest expense. Noninterest income consists primarily of customer service fees, brokerage commission income, insurance commission income, net realized gains on loan sales, mortgage banking income, and income on bank-owned life insurance.
Our results of operations also are affected by our provision for credit losses, noninterest income and noninterest expense. Noninterest income consists primarily of customer service fees, brokerage commission income, insurance commission income, net realized gains on loan sales, mortgage banking income, and income on bank-owned life insurance.
We establish provisions for loan losses, which are charged to operations in order to maintain the allowance for loan losses at a level we consider necessary to absorb potential credit losses inherent in our loan portfolio.
Provision for Credit Losses. We establish provisions for credit losses, which are charged to operations in order to maintain the allowance for credit losses at a level we consider necessary to absorb potential credit losses inherent in our loan portfolio.
The Association “opted in” to elect the Community Bank Leverage Ratio, effective with the quarter ended March 31, 2020. At June 30, 2022, 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, 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 .
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. 43 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. 40 Table of Contents The Association’s legal lending limit to any one borrower is 15% of unimpaired capital and surplus.
(4) Net interest margin represents net interest income divided by average total interest-earning assets. 54 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. 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).
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.
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.
The increase was due to an increase in net interest income and a decrease in provisions for loan losses, partially offset by a decrease in noninterest income and an increase in noninterest expense. Net Interest Income.
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.
We believe that we have enough sources of liquidity to satisfy our short- and long-term liquidity needs as of June 30, 2022.
We believe that we have enough sources of liquidity to satisfy our short- and long-term liquidity needs as of June 30, 2023.
This evaluation is inherently subjective as it requires estimates that are subject to significant revision as more information becomes available. Actual loan losses may be significantly more than the allowance for loan losses we have established which could have a material negative effect on our financial results. See also “Business — Allowance for Loan Losses.” Income Tax Accounting.
This evaluation is inherently subjective as it requires estimates that are subject to significant revision as more information becomes available. Actual loan losses may be significantly more than the allowance for credit losses we have established, which could have a material negative effect on our financial results. Income Tax Accounting.
Details of our general ledger along with key data from each deposit, loan, investment, and borrowing are downloaded into our forecasting model, which takes into account both market and internal trends. Historical testing is done internally on a regular basis to confirm the validity of the model, while third-party testing is done periodically.
Details of our general ledger along with key data from each deposit, loan, investment, and borrowing are downloaded into our forecasting model, which takes into account both market and internal trends. We perform historical backtesting on a regular basis to confirm the validity of the model and assumptions, while third-party testing is done periodically.
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, 2022 and 2021, our liquidity ratio averaged 31.2% and 25.0% 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, 2023 and 2022, our liquidity ratio averaged 29.3% and 31.2% of our total assets, respectively.
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION Overview We have grown our organization to $857.6 million in assets at June 30, 2022 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 $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.
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 $15.0 million at June 30, 2022.
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.
Our net income for the year ended June 30, 2022 was $5.8 million, compared to a net income of $5.3 million for the year ended June 30, 2021. 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, 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.
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. 57 Table of Contents 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, our local competitors, national deposit brokers and by other factors. Liquidity management is both a daily and long-term function of business management.
With the passage of the Paycheck Protection Program (“PPP”), administered by the SBA, the Company actively participated in assisting our customers with applications for resources through the program. Most PPP loans had a five-year term and earned interest at 1%.
With the passage of the Paycheck Protection Program (“PPP”), administered by the SBA, the Company actively participated in assisting our customers with applications for resources through the program. Most PPP loans had a five-year term, earned interest at 1%, and were fully guaranteed by the U.S. government.
During the years ended June 30, 2022 and 2021, we originated $296.2 million and $261.3 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, 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.
Our non-performing assets totaled $1.3 million, or 0.2% of total assets at June 30, 2022, and $411,000, or 0.1% of assets at June 30, 2021.
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 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, 2022, cash and cash equivalents totaled $75.8 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, 2023, cash and cash equivalents totaled $10.7 million.
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.
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.
At June 30, 2022, we had the ability to borrow up to an additional $109.9 million from the Federal Home Loan Bank of Chicago based on our collateral, had $7.5 million available on our CIBC Bank line of credit, and had the ability to borrow an additional $41.0 million from the Federal Reserve based upon current collateral pledged.
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.
Our net interest rate spread (the difference between the yield on average interest-earning assets and the cost of average interest-bearing liabilities) was 2.87% and 2.75% for the year ended June 30, 2022 and 2021, respectively. Net interest income increased to $22.3 million for the year ended June 30, 2021, from $20.2 million for the year ended June 30, 2021.
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.
Certificates of deposit due within one year of June 30, 2022 totaled $218.7 million, or 29.1% 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, 2023.
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.
At June 30, 2022 2021 2020 (In thousands) Selected Financial Condition Data: Total assets $ 857,558 $ 797,341 $ 735,517 Cash and cash equivalents 75,811 62,735 33,467 Investment securities available for sale 220,906 189,891 162,394 Federal Home Loan Bank of Chicago stock 3,142 4,198 3,028 Loans held for sale 227 632 552 Loans receivable, net 518,704 512,739 509,265 Foreclosed assets held for sale 120 259 386 Bank-owned life insurance 14,373 9,339 9,345 Deposits 752,020 667,632 601,700 Federal Home Loan Bank of Chicago advances 15,000 25,000 34,500 Total equity 71,658 85,304 82,564 For the Fiscal Year Ended June 30, 2022 2021 2020 (In thousands) Selected Operating Data: Interest income $ 24,792 $ 24,357 $ 26,982 Interest expense 2,529 4,178 8,694 Net interest income 22,263 20,179 18,288 Provision for loan losses 492 844 128 Net interest income after provision for loan losses 21,771 19,335 18,160 Noninterest income 5,504 6,258 4,810 Noninterest expense 19,448 18,212 17,086 Income before income tax expense 7,827 7,381 5,884 Income tax expense 2,043 2,034 1,639 Net income $ 5,784 $ 5,347 $ 4,245 48 Table of Contents At or For the Fiscal Years Ended June 30, 2022 2021 2020 Selected Financial Ratios and Other Data: Performance Ratios: Return on average assets (net income as a percentage of average total assets) 0.74 % 0.72 % 0.61 % Return on average equity (net income as a percentage of average equity) 7.07 % 6.34 % 5.30 % Interest rate spread (1) 2.87 % 2.75 % 2.52 % Net interest margin (2) 2.93 % 2.86 % 2.75 % Efficiency ratio (3) 70.04 % 68.89 % 73.97 % Dividend payout ratio 18.62 % 17.05 % 21.90 % Noninterest expense to average total assets 2.49 % 2.46 % 2.46 % Average interest-earning assets to average interest-bearing liabilities 119.13 % 118.77 % 117.80 % Average equity to average total assets 10.46 % 11.40 % 11.55 % Asset Quality Ratios: Non-performing assets to total assets 0.15 % 0.05 % 0.15 % Non-performing loans to total loans 0.22 % 0.03 % 0.14 % Allowance for loan losses to non-performing loans 600.68 % 4341.45 % 879.27 % Allowance for loan losses to total loans 1.34 % 1.27 % 1.21 % Allowance for loan losses to total loans excluding PPP loans 1.34 % 1.32 % 1.27 % Net charge-offs (recoveries) to average loans 0.01 % 0.09 % 0.04 % Capital Ratios: Community Bank Leverage Ratio: Company (4) 10.7 % 11.1 % 11.0 % Association (4) 9.8 % 10.5 % 10.7 % Tier 1 capital (to adjusted total assets): Company 10.7 % 11.1 % 11.0 % Association 9.8 % 10.5 % 10.7 % Tangible capital (to adjusted total assets): Company 10.7 % 11.1 % 11.0 % Association 9.8 % 10.5 % 10.7 % Other Data: Number of full service offices 7 7 7 Full time equivalent employees 112 111 107 (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, 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.
A $52.3 million, or 7.4%, increase in the average balance of interest earning assets was partially offset by a $42.1 million, or 7.1%, increase in the average balance of interest bearing liabilities.
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.
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, 2022, we had $28.0 million in loan commitments outstanding, and $116.3 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 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.
We had a net increase in total deposits of $84.4 million for the year ended June 30, 2022, and a net increase in total deposits of $65.9 million for the year ended June 30, 2021.
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.
The following table sets forth information regarding the allowance for loan losses and nonperforming assets at the dates indicated: Year Ended June 30, 2022 Year Ended June 30, 2021 Allowance to non-performing loans 600.68 % 4341.45 % Allowance to total loans outstanding at the end of the period 1.34 % 1.27 % Allowance to total loans outstanding, excluding PPP loans, at end of the period 1.34 % 1.32 % Net charge-offs to average total loans outstanding during the period, annualized 0.01 % 0.09 % Total non-performing loans to total loans 0.22 % 0.03 % Total non-performing assets to total assets 0.15 % 0.05 % Noninterest Income.
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.
The earnings at risk tables show net interest income decreasing in a rising rate environment. 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, 2022 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, 2023 resulting from immediate rate shocks ranging from -400 basis points to +400 basis points.
The increase in net loans receivable during this period was due primarily to a $15.9 million, or 62.8%, increase in construction loans, a $15.0 million, or 12.8%, increase in one- to four-family loans, an $11.5 million, or 7.4%, increase in commercial real estate loans, a $1.3 million, or 17.4%, increase in consumer loans, and a $299,000, or 4.5%, increase in home equity lines of credit, partially offset by a $16.2 million, or 15.5%, decrease in multi-family loans, and a $22.7 million, or 22.0%, decrease in commercial business loans.
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.
Interest and dividend income increased $435,000, or 1.8%, to $24.8 million for the year ended June 30, 2022 from $24.4 million for the year ended June 30, 2021.
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.
Net loans receivable, including loans held for sale, increased by $5.6 million, or 1.1%, to $518.9 million at June 30, 2022 from $513.4 million at June 30, 2021.
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 interest income increased by $2.1 million, or 10.3%, to $22.3 million for the year ended June 30, 2022 from $20.2 million for the year ended June 30, 2021. The increase was due to a decrease of $1.6 million in interest expense and an increase of $435,000 in interest and dividend income.
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.
Our interest rate spread increased 12 basis points to 2.87% for the year ended June 30, 2022 from 2.75% for the year ended June 30, 2021, and our net interest margin increased by 7 basis points to 2.93% for the year ended June 30, 2022 from 2.86% for the year ended June 30, 2021. Interest and Dividend Income.
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.
The CBLR is the ratio of Tier 1 capital to average assets. 49 Table of Contents Comparison of Financial Condition at June 30, 2022 and June 30, 2021 Total assets increased $60.2 million, or 7.6%, to $857.6 million at June 30, 2022 from $797.3 million at June 30, 2021.
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.
Interest expense on interest-bearing deposits decreased $1.6 million, or 44.0%, to $2.1 million for the year ended June 30, 2022, from $3.7 million for the year ended June 30, 2021.
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.
Based on our estimate of the level of allowance for loan losses required, we record a provision for loan losses as a charge to earnings to maintain the allowance for loan losses at an appropriate level.
Based on our estimate of the level of allowance for credit losses required, we record a provision for credit losses as a charge to earnings to maintain the allowance for credit losses at an appropriate level. The allowance for credit losses on most loans is measured on a collective (pool) basis for loans with similar risk characteristics.
The increase in bank-owned life insurance income was due to the receipt of death benefit proceeds and the purchase of additional bank-owned life insurance in 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, 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 decrease in the gain on the sale of loans was a result of a decrease in loans originated and sold through the FHLBC Mortgage Partnership Finance program in the year ended June 30, 2022, and decrease in net realized gain on sale of available-for-sale securities was due to more securities sold for a gain in the year ended June 30, 2021.
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.
Interest expense on borrowings, including FHLB advances, our line of credit at CIBC Bank USA, and repurchase agreements, decreased $24,000, or 5.0%, to $461,000 for the year ended June 30, 2022 from $485,000 for the year ended June 30, 2021.
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.
The increase was primarily due to a $13.1 million increase in cash and cash equivalents, a $31.0 million increase in investments and a $5.6 million increase in net loans. Cash and cash equivalents increased by $13.1 million to $75.8 million at June 30, 2022, from $62.7 million at June 30, 2021.
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.
Savings, NOW, and money market accounts increased $87.9 million, or 28.5%, to $396.6 million, noninterest bearing demand accounts increased $8.0 million, or 8.3%, to $104.9 million, certificates of deposit, excluding brokered certificates of deposit, decreased $4.3 million, or 1.7%, to $246.9 million, and brokered certificates of deposit decreased $7.2 million, or 66.9%, to $3.6 million.
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.
Interest on securities increased $1.2 million, or 38.4%, due to an 11 basis point, or 5.7%, increase in the average yield on securities to 2.03% for the year ended June 30, 2022 from 1.92% for the year ended June 30, 2021, and a $50.0 million increase in the average balance of securities to $213.8 million at June 30, 2022 from $163.8 million at June 30, 2021.
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.
Asset Quality and Allowance for Loan Losses For information regarding asset quality and allowance for loan loss activity, see “Item 1. Business—Non-performing and Problem Assets” and “Item 1. Business—Allowance for Loan 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.
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.
We believe our tax liabilities and assets are properly recorded in the consolidated financial statements at June 30, 2022 and no valuation allowance was necessary. 47 Table of Contents Selected Financial Data The following selected consolidated financial data sets forth certain financial highlights of the Company and should be read in conjunction with the audited consolidated financial statements and related notes included elsewhere in this Annual Report on Form 10-K.
Selected Financial Data The following selected consolidated financial data sets forth certain financial highlights of the Company and should be read in conjunction with the audited consolidated financial statements and related notes included elsewhere in this Annual Report on Form 10-K.
The increase in accrued interest receivable was primarily the result of an increase in the average balance of securities, the increase in deferred income taxes was mostly due to an increase in unrealized losses on available-for-sale securities, and the increase in mortgage servicing rights was due to an increase in the valuation of the asset.
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.
A decrease of $804,000, or 3.8%, in interest on loans resulted from a 10 basis point, or 2.5%, decrease in the average yield on loans to 3.97% from 4.07%, and a $7.3 million, or 1.4%, decrease in the average balance of loans to $508.9 million for the year ended June 30, 2022.
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.
We recorded a provision for income tax of $2.0 million for the year ended June 30, 2022, compared to a provision for income tax of $2.0 million for the year ended June 30, 2021, reflecting effective tax rates of 26.1% and 27.6%, respectively.
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.
Noninterest income decreased $754,000, or 12.0%, to $5.5 million for the year ended June 30, 2022 from $6.3 million for the year ended June 30, 2021.
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.
This decrease was due to a decrease in the average balance of borrowings to $32.1 million for the year ended June 30, 2022 from $36.1 million for the year ended June 30, 2021, partially offset by a 10 basis point increase in the average cost of such borrowings to 1.44% for the year ended June 30, 2022 from 1.34% for the year ended June 30, 2021 51 Table of Contents Provision for Loan Losses.
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 decrease was primarily due to a 32 basis point, or 48.3% decrease in the average cost of interest-bearing deposits to 0.34% from 0.66%, partially offset by an increase in the average balance of interest-bearing deposits to $605.0 million for the year ended June 30, 2022, from $559.0 million for the year ended June 30, 2021.
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.
Impact of Inflation and Changing Prices Our 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.
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.
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.
As a result, changes in market interest rates have a greater impact on our performance than the effects of inflation.
Between June 30, 2021 and June 30, 2022, accrued interest receivable increased $126,000 to $2.0 million, deferred income taxes increased $7.5 million to $9.2 million, and mortgage servicing rights increased $450,000 to $1.5 million, while premises and equipment decreased $288,000 to $9.5 million, foreclosed assets held for sale decreased $139,000 to $120,000, and Federal Home Loan Bank (FHLB) stock decreased $1.1 million to $3.1 million.
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.
Equity decreased primarily due to a decrease of $19.3 million in accumulated other comprehensive income (loss), net of tax, and the accrual of approximately $1.1 million in dividends to our shareholders. The decrease in accumulated other comprehensive income (loss) was primarily due to unrealized depreciation on available-for-sale securities, net of tax.
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.
Net income increased $437,000, or 8.2%, to $5.8 million net income for the year ended June 30, 2022 from $5.3 million net income for the year ended June 30, 2021.
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.
This increase was primarily due to an increase in deposits from public entities. Investment securities, consisting entirely of securities available for sale, increased $31.0 million, or 16.3%, to $220.9 million at June 30, 2022 from $189.9 million at June 30, 2021. We had no held-to-maturity securities at June 30, 2022 or June 30, 2021.
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.
Details of our interest rate risk analysis are reviewed by the Asset/Liability Management Committee and presented to the Board on a quarterly basis. The tables below illustrate the simulated impact of rate shock scenarios up to 400 basis points over a two-year period on our earnings at risk for net interest income.
Details of our interest rate risk analysis are reviewed by the Asset/Liability Management Committee and presented to the Board on a quarterly basis.
Non-performing loans increased during the year ended June 30, 2022, to $1.2 million, from $152,000 at June 30, 2021. During the year ended June 30, 2022, net charge-offs of $39,000 were recorded, while during the year ended June 30, 2021, $479,000 in net charge-offs were recorded.
During the year ended June 30, 2023, net charge-offs of $12,000 were recorded, while during the year ended June 30, 2022, $39,000 in net charge-offs were recorded.
For the year ended June 30, 2022, gains on the sale of loans decreased $1.1 million to $515,000, net realized gain on sale of available-for-sale securities decreased $595,000 to $(275,000), and other service charges and fees decreased $105,000 to $314,000, while other income increased $460,000 to $1.5 million, bank-owned life insurance income increased $77,000 to $488,000, mortgage banking income, net, increased $184,000 to $797,000, brokerage commissions increased $164,000 to $1.1 million, and customer service fees increased $72,000 to $347,000.
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.
We invest in bank-owned life insurance to provide us with a funding source for our benefit plan obligations. Bank-owned life insurance also generally provides us noninterest income that is non-taxable. Federal regulations generally limit our investment in bank-owned life insurance to 25% of the Association’s Tier 1 capital plus our allowance for loan losses.
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.
In addition, we issued 314,755 shares of our common stock to the Iroquois Federal Foundation. COVID-19 and the CARES Act The COVID-19 pandemic caused economic and social disruption on an unprecedented scale. While some industries were impacted more severely than others, all businesses were impacted to some degree.
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.
While the general element of our allowance for loan losses increased early in the pandemic due to COVID-related changes in the economic forecast, our allowance for loan losses at June 30, 2022, is only minimally impacted by additional reserves for loans that remain under temporary COVID-19 modifications.
While the general element of our allowance for credit losses increased early in the pandemic due to COVID-related changes in the economic forecast, our allowance for credit losses as of June 30, 2023, is only minimally impacted by COVID-19. The Company’s current financial position and the fundamental earning capabilities of its existing operations are strong.
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.
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.
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.
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.
The allowance for loan losses was $7.1 million, or 1.34% of total loans, or 1.34% of total loans excluding PPP loans, at June 30, 2022, compared to $6.6 million, or 1.27% of total loans, or 1.32% of total loans excluding PPP loans, at June 30, 2021.
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.
We recorded a provision for loan losses of $492,000 for the year ended June 30, 2022, compared to a provision for loan losses of $844,000 for the year ended June 30, 2021.
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.
At June 30, 2022, our investment of $14.4 million in bank-owned life insurance was 16.3% of our Tier 1 capital plus our allowance for loan losses. Deposits increased $84.4 million, or 12.6%, to $752.0 million at June 30, 2022 from $667.6 million at June 30, 2021.
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.
The decrease in other service charges and fees was due to a decrease in the number of fees charged in the year ended June 30, 2022. The increase in other income was mostly due to an increase in debit card and ATM income.
The decrease in other service charges and fees was due to a decrease in the number of fees charged in the year ended June 30, 2023, while the increase in gain on sale of available-for-sale securities was the result of securities sold at a larger loss in the year ended June 30, 2022, and the increase in customer service fees was primarily due to a higher number of nonsufficient funds and overdraft fees in the year ended June 30, 2023.
Compensation and benefits increased due to normal salary increases, annual incentive plan increases, and increased medical costs, while equipment expense increased as a result of an increase in the cost of core processing.
These increases were partially offset by a decrease in compensation and benefits, which decreased $339,000, or 2.6%. Equipment expense increased as a result of an increase in the cost of core processing, while office occupancy expense increased due to the addition of a new banking facility in Hoopeston.
The FHLB advances decreased $10.0 million, or 40.0%, to $15.0 million at June 30, 2022 from $25.0 million at June 30, 2021, while the line of credit balance decreased $3.0 million to a zero balance at June 30, 2022 from $3.0 million at June 30, 2021. 50 Table of Contents Total equity decreased $13.6 million, or 16.0%, to $71.7 million at June 30, 2022 from $85.3 million at June 30, 2021.
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.
Fiscal Years Ended June 30, 2022 vs. 2021 Increase (Decrease) Due to Total Increase (Decrease) Volume Rate (In thousands) Interest-earning assets: Loans $ (293) $ (511) $ (804) Securities 1,017 190 1,207 Other 68 (36 ) 32 Total interest-earning assets $ 792 $ (357 ) $ 435 Interest-bearing liabilities: Interest-bearing checking or NOW $ 26 $ (29) $ (3) Savings accounts 22 (31 ) (9 ) Certificates of deposit (196 ) (1,474 ) (1,670 ) Money market accounts 115 (58 ) 57 Total interest-bearing deposits (33 ) (1,592 ) (1.625 ) Federal Home Loan Bank advances (57 ) 33 (24 ) Total interest-bearing liabilities $ (90) $ (1,559) $ (1,649) Change in net interest income $ 882 $ 1,202 $ 2,084 Management of Market Risk General .
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 .
The estimate of our credit losses is applied to two general categories of loans: • loans that we evaluate individually for impairment under ASC 310-10, “Receivables;” and • groups of loans with similar risk characteristics that we evaluate collectively for impairment under ASC 450-20, “Loss Contingencies.” The allowance for loan losses is evaluated on a regular basis by management and reflects consideration of all significant factors that affect the collectability of the loan portfolio.
While the allowance for credit losses on loans is reported as a contra-asset asset for loans, the allowance for credit losses on off-balance sheet credit exposures is reported as a liability. The allowance for credit losses is evaluated on a regular basis by management and reflects consideration of all significant factors that affect the collectability of the loan portfolio.
Interest Expense. Interest expense decreased $1.6 million, or 39.5%, to $2.5 million for the year ended June 30, 2022 from $4.2 million for the year ended June 30, 2021. The decrease was primarily due to lower market rates of interest during the period ended June 30, 2022, partially offset by an increased average balance of interest-bearing liabilities.
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.
The increase in interest income was due to a $1.2 million increase in interest income on securities, and a $32,000 increase in other interest income, partially offset by an $804,000 decrease in interest income on loans. Interest income on loans included about $729,000 and $702,000, in deferred PPP fees in years ended June 30, 2022 and 2021, respectively.
The increase in interest income was due to a $5.9 million increase in interest on loans, $1.1 million increase in interest income on securities, and a $251,000 increase in other interest income.
Professional services decreased as a result of additional services received during the year ended June 30, 2021, while, advertising expenses decreased due to additional digital advertising in the year ended June 30, 2021. 52 Table of Contents Income Tax Expense .
Federal deposit insurance premium increased as a result of the FDIC increasing the initial base deposit insurance assessment rate. Advertising increased due to a new ad campaign in the year ended June 30, 2023, and professional services increased as a result of additional services received during the year ended June 30, 2023.
We consider the following to be our critical accounting policies. 46 Table of Contents Allowance for Loan Losses.
We consider the following to be our critical accounting policies. Allowance for Credit Losses. The Company believes the allowance for credit losses for loans is the critical accounting policy that requires the most significant judgments and assumptions used in the preparation of the consolidated financial statements.

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