10-Q

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM

10-Q

☒	Quarterly Report Pursuant To Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended September 30, 2024

☐	Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from ___________ to ___________

Commission File

No. 001-35226

IF Bancorp, Inc.

(Exact name of registrant as specified in its charter)


Maryland		45-1834449
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification Number)

201 East Cherry Street, Watseka, Illinois		60970
(Address of Principal Executive Offices)		Zip Code

(815)

432-2476

(Registrant’s telephone number)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.01 par value	IROQ	The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such requirements for the past 90 days.

YES

☒ NO ☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation

S-T

during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

YES

☒ NO ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a

non-accelerated

filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule

12b-2

of the Exchange Act. (Check one)


Large accelerated filer	☐	Accelerated filer	☐

Non-accelerated filer	☒	Smaller reporting company	☒

Emerging growth company	☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule

12b-2

of the Exchange Act). YES ☐ NO ☒

The Registrant had 3,353,026 shares of common stock, par value $0.01 per share, issued and outstanding as of November 5, 2024.

Part I. – Financial Information

Item 1.

Financial Statements

IF Bancorp, Inc.

Condensed Consolidated Balance Sheets

(Dollars in thousands, except per share amount)


	September 30, 2024			June 30, 2024
	(Unaudited)
Assets
Cash and due from banks	$	7,214		$	9,276
Interest-bearing demand deposits		570			295

Cash and cash equivalents		7,784			9,571

Interest-bearing time deposits in banks		250			250
Available-for-sale securities		192,651			190,475
Loans, net of allowance for credit losses of $7,472 and $7,499 at September 30, 2024 and June 30, 2024, respectively		647,064			639,297
Premises and equipment, net of accumulated depreciation of $9,350 and $9,196 at September 30, 2024 and June 30, 2024, respectively		10,498			10,580
Federal Home Loan Bank stock, at cost		4,758			4,499
Accrued interest receivable		3,823			3,457
Bank-owned life insurance		15,005			14,892
Mortgage servicing rights		1,366			1,491
Deferred income taxes		8,625			10,483
Other		1,601			2,750

Total assets	$	893,425		$	887,745

Liabilities and Stockholders’ Equity
Liabilities
Deposits
Demand	$	36,851		$	103,314
Savings, NOW and money market		326,305			304,230
Certificates of deposit		290,503			290,633
Brokered certificates of deposit		23,500			29,000

Total deposits		677,159			727,177

Repurchase agreements		17,913			17,772
Federal Home Loan Bank advances		83,499			32,999
Other borrowings		25,175			25,250
Advances from borrowers for taxes and insurance		510			968
Accrued post-retirement benefit obligation		2,258			2,256
Accrued interest payable		2,756			3,009
Allowance for credit losses on off-balance sheet credit exposures		103			98
Other		5,287			4,300

Total liabilities		814,660			813,829

Commitments and Contingencies
Stockholders’ Equity
Common stock, $.01 par value per share, 100,000,000 shares authorized, 3,353,026 shares issued and outstanding at both September 30, 2024 and June 30, 2024		33			33
Additional paid-in capital		51,999			51,913
Unearned ESOP shares, at cost, 129,904 and 134,715 shares at September 30, 2024 and June 30, 2024, respectively		(1,299	)		(1,347	)
Retained earnings		43,839			43,876
Accumulated other comprehensive loss, net of tax		(15,807	)		(20,559	)

Total stockholders’ equity		78,765			73,916

Total liabilities and stockholders’ equity	$	893,425		$	887,745

See accompanying notes to the unaudited condensed consolidated financial statements.

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IF Bancorp, Inc.

Condensed Consolidated Statements of Income (Unaudited)

(Dollars in thousands except per share amounts)


	Three Months Ended September 30,
	2024			2023
Interest and Dividend Income
Interest and fees on loans	$	9,475		$	7,733
Securities:
Taxable		1,253			1,395
Tax-exempt		23			26
Federal Home Loan Bank dividends		113			68
Deposits with other financial institutions		49			69

Total interest and dividend income		10,913			9,291

Interest Expense
Deposits		4,753			3,835
Federal Home Loan Bank advances and repurchase agreements		1,033			873
Line of credit and other borrowings		306			—

Total interest expense		6,092			4,708

Net Interest Income		4,821			4,583
Provision for Credit Losses		382			222

Net Interest Income After Provision for Credit Losses		4,439			4,361

Noninterest Income
Customer service fees		125			101
Other service charges and fees		61			70
Insurance commissions		184			171
Brokerage commissions		178			162
Net realized losses on sale of available-for-sale securities		(71	)		—
Mortgage banking income (loss), net		(42	)		140
Gain on sale of loans		97			72
Bank-owned life insurance income, net		115			101
Other		761			311

Total noninterest income		1,408			1,128

Noninterest Expense
Compensation and benefits		3,068			3,016
Office occupancy		279			289
Equipment		579			546
Federal deposit insurance		132			138
Stationary, printing and office		22			10
Advertising		101			77
Professional services		136			92
Supervisory examinations		25			27
Audit and accounting services		92			83
Organizational dues and subscriptions		22			23
Insurance bond premiums		64			59
Telephone and postage		46			41
Other		430			447

Total noninterest expense		4,996			4,848

Income Before Income Tax		851			641
Provision for Income Tax		218			175

Net Income	$	633		$	466

Earnings Per Share:
Basic	$	0.20		$	0.15
Diluted	$	0.20		$	0.14
Dividends declared per common share	$	0.20		$	0.20

See accompanying notes to the unaudited condensed consolidated financial statements.

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IF Bancorp, Inc.

Condensed Consolidated Statements of Cash Flows (Unaudited)

(Dollars in thousands)


	Three Months Ended September 30,
	2024			2023
Operating Activities
Net income	$	633		$	466
Items not requiring (providing) cash
Depreciation		154			177
Provision for credit losses on loans		377			222
Accretion of premiums and discounts on securities		(30	)		(66	)
Deferred income taxes		(37	)		116
Net realized gains on loan sales		(97	)		(72	)
Net realized losses on sales of available-for-sale securities		71			—
Nontaxable bank-owned life insurance income, net		(113	)		(101	)
Originations of loans held for sale		(4,629	)		(3,539	)
Proceeds from sales of loans held for sale		4,851			3,502
ESOP compensation expense		85			73
Stock equity plan expense		49			90
Changes in
Accrued interest receivable		(366	)		(442	)
Other assets		1,149			1,908
Accrued interest payable		(253	)		1,071
Post-retirement benefit obligation		—			8
Other liabilities		322			(2,412	)

Net cash provided by operating activities		2,166			1,001

Investing Activities
Purchases of available-for-sale securities		(4,353	)		—
Proceeds from the sales of available-for-sale securities		4,665			—
Proceeds from maturities and pay downs of available-for-sale securities		4,120			3,091
Net change in loans		(8,144	)		(27,402	)
Purchase of premises and equipment		(72	)		(93	)
Proceeds from the sale of foreclosed assets		—			3
Purchase of Federal Home Loan Bank stock		(427	)		(1,637	)
Redemption of Federal Home Loan Bank stock		168			—

Net cash used in investing activities		(4,043	)		(26,038	)

Financing Activities
Net decrease in demand deposits, money market, NOW and savings accounts		(44,388	)		(61,444	)
Net increase (decrease) in certificates of deposit, including brokered certificates		(5,630	)		13,278
Net decrease in advances from borrowers for taxes and insurance		(458	)		(454	)
Proceeds from Federal Home Loan Bank advances		216,000			203,500
Repayments of Federal Home Loan Bank advances		(165,500	)		(132,500	)
Proceeds from other borrowings		23,100			—
Repayments of other borrowings		(23,175	)		—
Net increase in repurchase agreements		141			5,251

Net cash provided by financing activities		90			27,631

Net Increase (Decrease) in Cash and Cash Equivalents		(1,787	)		2,594
Cash and Cash Equivalents, Beginning of Period		9,571			10,988

Cash and Cash Equivalents, End of Period	$	7,784		$	13,582

Supplemental Cash Flows Information
Interest paid	$	6,345		$	3,637
Income taxes paid (net of refunds)	$	—		$	45
Dividends payable	$	670		$	672

See accompanying notes to the unaudited condensed consolidated financial statements.

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IF Bancorp, Inc.

Form

10-Q

(Unaudited)

(Table dollar amounts in thousands)

Notes to Condensed Consolidated Financial Statements

Note 1: Basis of Financial Statement Presentation

IF Bancorp, Inc., (“IF Bancorp” or the “Company”) is a Maryland corporation whose principal activity is the ownership and management of its
wholly-owned subsidiary, Iroquois Federal Savings and Loan Association (“Iroquois Federal” or the “Association”). The unaudited condensed consolidated financial statements include the accounts of the Company, the Association, and the Association’s wholly owned subsidiary, L.C.I. Service Corporation. All significant intercompany accounts and transactions have been eliminated in consolidation.

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (GAAP) for interim financial reporting and with instructions for Form

10-Q

and Regulation

S-X.

Accordingly, certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. The preparation of consolidated financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the balance sheet date and revenues and expenses for the period. Actual results could differ from these estimates. In the opinion of management, the preceding unaudited condensed consolidated financial statements contain all adjustments (consisting only of normal recurring accruals) necessary for a fair presentation of the financial condition of the Company as of September 30, 2024 and June 30, 2024, and the results of its operations for the three month periods ended September 30, 2024 and 2023. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form

10-K

for the year ended June 30, 2024. The results of operations for the three-month period ended September 30, 2024 are not necessarily indicative of the results that may be expected for the entire year.

Revenue Recognition

Accounting Standards Codification (“ASC”) 606,

Revenue from Contracts with Customers

(“ASC 606”), establishes principles for reporting information about the nature, amount, timing and uncertainty of revenue and cash flows arising from the entity’s contracts to provide goods or services to customers. The core principle requires an entity to recognize revenue to depict the transfer of goods or services to customers in an amount that reflects the consideration that it expects to be entitled to receive in exchange for those goods or services recognized as performance obligations are satisfied.

The majority of our revenue-generating transactions are not subject to ASC 606, including revenue generated from financial instruments, such as our loans, letters of credit and investments securities, as well as revenue related to our mortgage servicing activities and bank owned life insurance, as these activities are subject to other GAAP discussed elsewhere within our disclosures. Descriptions of our revenue-generating activities that are within the scope of ASC 606, and which are presented in our income statements as components of noninterest income are as follows:

•

Customer Service Fees - The Company generates revenue from fees charged for deposit account maintenance, overdrafts, wire transfers, and check fees. The revenue related to deposit fees is recognized at the time the performance obligation is satisfied.

•

Insurance Commissions - The Company’s insurance agency, IF Insurance Agency, receives commissions on premiums of new and renewed business policies. IF Insurance Agency records commission revenue on direct bill policies as the cash is received. For agency bill policies, IF Insurance Agency retains its commission portion of the customer premium payment and remits the balance to the carrier. In both cases, the carrier holds the performance obligation.

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•

Brokerage Commissions - The primary brokerage revenue is recorded at the beginning of each quarter through billing to customers based on the account asset size on the last day of the previous quarter. If a withdrawal of funds takes place, a prorated refund may occur; this is reflected within the same quarter as the original billing occurred. All performance obligations are met within the same quarter that the revenue is recorded.

•

Other - The Company generates revenue through service charges from the use of its ATM machines and interchange income from the use of Company issued credit and debit cards. The revenue is recognized at the time the service is used, and the performance obligation is satisfied.

Note 2: New Accounting Pronouncements

In March 2022, FASB issued ASU

2022-02,

Financial Instruments-Credit Losses (Topic 326): Troubled Debt Restructurings and

Vintage Disclosures

The amendments in this update eliminate the accounting guidance and related disclosures for TDRs by creditors in Subtopic

310-40,

Receivables—Troubled Debt Restructurings by Creditors

, while enhancing disclosure requirements for certain loan refinancings and restructurings by creditors when a borrower is experiencing financial difficulty and requiring an entity to disclose current-period gross write-offs by year of origination for financing receivables and net investments in leases within the scope of Subtopic

326-20,

Financial Instruments—Credit Losses—Measured at Amortized Cost

. The amendments in this update were effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years and are applied prospectively, except with respect to the recognition and measurement of TDRs, where an entity has the option to apply a modified retrospective transition method. The Company adopted ASU

2022-02,

effective July 1, 2023, with changes applied prospectively, except with respect to the recognition and measurement of TDRs where a modified retrospective transition method was applied. The adoption of this accounting guidance did not have a material impact on the Company’s consolidated financial statements.

In December 2023, the FASB issued ASU

2023-09,

Income Tax (Topic 740):

Improvements to Income Tax Disclosures.

The amendments expand the disclosure requirements of income taxes, primarily related to the income tax rate reconciliation and income taxes paid. The guidance also eliminates certain existing disclosure requirements related to uncertain tax positions and unrecognized deferred income tax liabilities. The amendments are effective for fiscal years beginning after December 15, 2024, and interim periods within fiscal years beginning after December 15, 2025. Earlier adoption is permitted. The adoption of the guidance is not expected to have a material impact on the Company’s consolidated financial statements.

Note 3: Stock-based Compensation

In connection with the conversion to stock form, the Association established an ESOP for the exclusive benefit of eligible employees (all salaried employees who have completed at least

1,000

hours of service in a twelve-month period and have attained the age of 21). The ESOP borrowed funds from the Company in an amount sufficient to purchase 384,900 shares (approximately 8% of the common stock issued in the stock offering). The loan is secured by the shares purchased and will be repaid by the ESOP with funds from contributions made by the Association and dividends received by the ESOP. Contributions will be applied to repay interest on the loan first, and then the remainder will be applied to principal. The loan is expected to be repaid over a period of up to 20 years. Shares purchased with the loan proceeds are held in a suspense account for allocation among participants as the loan is repaid. Contributions to the ESOP and shares released from the suspense account are allocated among participants in proportion to their compensation, relative to total compensation of all active participants. Participants will vest 100% in their accrued benefits under the employee stock ownership plan after

six

vesting years, with prorated vesting in years

two

through

five

. Vesting is accelerated upon retirement, death or disability of the participant or a change in control of the Association. Forfeitures will be reallocated to remaining plan participants. Benefits may be payable upon retirement, death, disability, separation from service, or termination of the ESOP. Since the Association’s annual contributions are discretionary, benefits payable under the ESOP cannot be estimated. Participants receive the shares at the end of employment.

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The Company is accounting for its ESOP in accordance with ASC Topic 718,

Employers Accounting for Employee Stock Ownership Plans

. Accordingly, the debt of the ESOP is eliminated in consolidation and the shares pledged as collateral are reported as unearned ESOP shares in the consolidated balance sheets. Contributions to the ESOP shall be sufficient to pay principal and interest currently due under the loan agreement. As shares are committed to be released from collateral, the Company reports compensation expense equal to the average market price of the shares for the respective period, and the shares become outstanding for earnings per share computations. Dividends, if any, on unallocated ESOP shares are recorded as a reduction of debt and accrued interest.

A summary of ESOP shares at September 30, 2024 and June 30, 2024 are as follows (dollars in thousands):


	September 30, 2024		June 30, 2024
Allocated shares		189,941		170,696
Shares committed for release		4,811		19,245
Unearned shares		129,904		134,715

Total ESOP shares		324,656		324,656

Fair value of unearned ESOP shares (1)	$	2,620	$	2,180

(1)	Based on closing price of $20.17 and $16.18 per share on September 30, 2024, and June 30, 2024, respectively.

During the three months ended September 30, 2024 and 2023, no ESOP shares were paid to ESOP participants due to separation from service.

The IF Bancorp, Inc. 2012 Equity Incentive Plan (the “Equity Incentive Plan”) was approved by stockholders in 2012 for a

ten-year

period which ended in November 2022. The purpose of the Equity Incentive Plan was to promote the long-term financial success of the Company and its Subsidiaries by providing a means to attract, retain and reward individuals who contribute to such success and to further align their interests with those of the Company’s stockholders. The Equity Incentive Plan authorized the issuance or delivery to participants of up to 673,575 shares of the Company common stock pursuant to grants of incentive and

non-qualified

stock options, restricted stock awards and restricted stock unit awards, provided that the maximum number of shares of Company common stock that may be delivered pursuant to the exercise of stock options (all of which may be granted as incentive stock options) was 481,125 and the maximum number of shares of Company stock that may be issued as restricted stock awards or restricted stock units was 192,450. This plan was replaced by the 2022 Equity Incentive Plan when the stockholders approved the new plan on November 21, 2022. The new plan authorizes the issuance or delivery to participants of up to 264,850 shares of the Company common stock pursuant to grants of incentive and

non-qualified

On December 10, 2013, 85,500 shares of restricted stock and 167,000 in stock options were awarded to senior officers and directors of the Association. These shares of restricted stock vested in equal installments over 10 years and the stock options vested in equal installments over 7 years. Vesting of both the restricted stock and options started in December 2014, and were fully vested in December 2023. On December 10, 2015, 16,900 shares of restricted stock were awarded to senior officers and directors of the Association. These shares of restricted stock vest in equal installments over 8 years, starting in December 2016, and were fully vested in December 2023. On September 9, 2022, 53,000 shares of restricted stock were awarded to senior officers and directors of the Association. These shares of restricted stock will vest in equal installments over 5 years, starting in September 2023. No shares have been granted from the 2022 Equity Incentive Plan as of September 30, 2024, so there are 211,880 shares of restricted stock and 52,970 stock option shares available for future grants under this plan.

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No stock options were outstanding at September 30, 2024 and June 30, 2024, while 90,143 stock options were outstanding and exercisable at September 30, 2023. No stock options were granted or vested during the three months ended September 30, 2024 and 2023.

The following table summarizes

non-vested

restricted stock activity for the three months ended September 30, 2024:


	Shares		Weighted-Average Grant- Date Fair Value
Balance, June 30, 2024		40,800	$	19.10
Granted		—		—
Forfeited		—		—
Earned and issued		10,200		19.10

Balance, September 30, 2024		30,600	$	19.10

The fair value of the restricted stock awards is amortized to compensation expense over the vesting period and is based on the market price of the Company’s common stock at the date of grant multiplied by the number of shares granted that are expected to vest. At the date of grant the par value of the shares granted was recorded in equity as a credit to common stock and a debit to

paid-in

capital. Stock-based compensation expense and related tax benefit for restricted stock, which was recognized in

non-interest

expense, was $49,000 and $14,000, respectively, for the three months ended September 30, 2024, and was $90,000 and $26,000, respectively, for the three months ended September 30, 2023. Unrecognized compensation expense for

non-vested

restricted stock awards was $568,000 and is expected to be recognized over 2.9 years with a corresponding credit to

paid-in

capital.

Note 4: Earnings Per Common Share (“EPS”)

Basic and diluted earnings per common share are presented for the three-month periods ended September 30, 2024 and 2023. The factors used in the earnings per common share computation are as follows:


	Three Months Ended September 30, 2024			Three Months Ended September 30, 2023
Net income	$	633		$	466

Basic weighted average shares outstanding		3,353,026			3,354,626
Less: Average unallocated ESOP shares		(132,309	)		(151,554	)

Basic average shares outstanding		3,220,717			3,203,072

Diluted effect of restricted stock awards and stock options		—			63,681

Diluted average shares outstanding		3,220,717			3,266,753

Basic earnings per common share	$	0.20		$	0.15

Diluted earnings per common share	$	0.20		$	0.14

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Note 5: Securities

The amortized cost and approximate fair value of securities, together with gross unrealized gains and losses, on securities are as follows:


	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
Available-for-sale securities:
September 30, 2024:
U.S. Government and federal agency	$	5,983	$	—	$	(220	)	$	5,763
Mortgage-backed:
GSE residential		190,071		62		(20,495	)		169,638
Small Business Administration		15,898		3		(1,749	)		14,152
State and political subdivisions		3,098		—		—			3,098

	$	215,050	$	65	$	(22,464	)	$	192,651

June 30, 2024:
U.S. Treasury	$	497	$	—	$	(53	)	$	444
U.S. Government and federal agency		6,979		—		(370	)		6,609
Mortgage-backed:
GSE residential		192,556		41		(26,361	)		166,236
Small Business Administration		16,387		—		(2,301	)		14,086
State and political subdivisions		3,104		—		(4	)		3,100

	$	219,523	$	41	$	(29,089	)	$	190,475

Available for sale securities (“AFS”), which include any security for which the Company has no immediate plan to sell but which may be sold in the future, are carried at fair value. Unrealized gains and losses, net of tax, are reported in accumulated other comprehensive loss, a component of stockholders’ equity. All securities have been classified as available for sale.

Premiums and discounts on debt securities are amortized or accreted as adjustments to income over the estimated life of the security using the level yield method or to the earlier of call or maturity date. Realized gains or losses on the sale of securities is based on the specific identification method. The fair value of securities is based on quoted market prices or dealer quotes. If a quoted market price is not available, fair value is estimated using quoted market prices for similar securities.

For AFS securities with fair value less than amortized cost that management has no intent to sell and believes that it more likely than not will not be required to sell prior to recovery, only the credit loss component of the impairment is recognized in earnings, while the noncredit loss is recognized in accumulated other comprehensive income (loss). The credit loss component recognized in earnings is identified as the amount of principal cash flows not expected to be received over the remaining term of the security as projected based on cash flow projections, and is recorded to the allowance for credit losses (ACL) on investments, by a charge to provision for credit losses.

Accrued interest receivable

, or $510,000, is excluded from the estimate of credit losses. Both the ACL and the adjustment to net income may be reversed if conditions change. However, if the Company intends to sell an impaired AFS security, or, if it is more likely than not the Company will be required to sell such a security before recovering its amortized cost basis, the entire impairment amount would be recognized in earnings with a corresponding adjustment to the security’s amortized cost basis. Because the security’s amortized cost basis is adjusted to fair value, there would be no ACL in this situation.

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At adoption of ASU

2016-13,

no impairment on AFS securities was attributable to credit. The Company will evaluate impaired AFS securities at the individual level on a quarterly basis, and will consider such factors including, but not limited to: the extent to which the fair value of the security is less than the amortized cost basis; adverse conditions specifically related to the security, an industry, or geographic area; the payment structure of the security and likelihood of the issuer to be able to make payments that may increase in the future; failure of the issuer to make scheduled interest or principal payments; any changes to the rating of the security by a rating agency; and the ability and intent to hold the security until maturity. A qualitative determination as to whether any portion of the impairment is attributable to credit risk is acceptable. There were no credit related factors underlying unrealized losses on AFS securities at September 30, 2024, and June 30, 2024.

Changes in the ACL are recorded as expense. Losses are charged against the ACL when management believes the uncollectability of an AFS debt security is confirmed or when either of the criteria regarding intent or requirement to sell is met.

The Company did not hold securities of any one issuer at September 30, 2024 with a book value that exceeded 10% of the Company’s total equity except for Mortgage-backed GSE residential securities and Small Business Administration securities with an amortized cost of approximately $190,071,000 and $15,898,000, respectively, and a market value of approximately $169,638,000 and $14,152,000, respectively, at September 30, 2024.

All mortgage-backed securities at September 30, 2024, and June 30, 2024 were issued by GSEs.

The amortized cost and fair value of

available-for-sale

securities at September 30, 2024, by contractual maturity, are shown below. Expected maturities will differ from contractual maturities because issuers may have the right to call or prepay obligations with or without call or prepayment penalties.


	Available-for-sale Securities
	Amortized Cost		Fair Value
Within one year	$	5,040	$	5,015
One to five years		4,062		3,818
Five to ten years		6,409		6,053
After ten years		9,468		8,127

		24,979		23,013
Mortgage-backed securities		190,071		169,638

Totals	$	215,050	$	192,651

The carrying value of securities pledged as collateral to secure public deposits and for other purposes was $87,969,000 and $118,577,000 as of September 30, 2024 and June 30, 2024, respectively.

The carrying value of securities sold under agreement to repurchase amounted to $17.9 million at September 30, 2024 and $17.8 million at June 30, 2024. At September 30, 2024, all $17.9 million of our repurchase agreements had an overnight maturity, and all were secured by U.S. Government, federal agency and GSE securities. The right of offset for a repurchase agreement resembles a secured borrowing, whereby the collateral pledged by the Company would be used to settle the fair value of the repurchase agreement should the Company be in default. The collateral is held by the Company in a segregated custodial account. In the event the collateral fair value falls below stipulated levels, the Company will pledge additional securities. The Company closely monitors collateral levels to ensure adequate levels are maintained.

Gross gains of $30,000 and $0 and gross losses of $101,000 and $0 resulting from sales of

available-for-sale

securities were realized for the three months ended September 30, 2024, and 2023, respectively. The tax credit applicable to these net realized losses amounted to approximately $20,000 and $0 for the three months ended September 30, 2024, and 2023, respectively.

Certain investments in debt securities are reported in the condensed consolidated financial statements at an amount less than their historical cost. Total fair value of these investments at September 30, 2024 and June 30, 2024, was $181,210,000 and $185,652,000, respectively, which is approximately 94% and 97% of the Company’s

available-for-sale

investment portfolio.

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The following table shows the Company’s gross unrealized investment losses and the fair value of the Company’s investments, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position at September 30, 2024 and June 30, 2024:


	Less Than 12 Months					12 Months or More					Total
Description of Securities	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
September 30, 2024:
U.S. Government and federal agency	$	—	$	—		$	5,763	$	(220)		$	5,763	$	(220	)
Mortgage-backed:
GSE residential		—		—			162,563		(20,495	)		162,563		(20,495	)
Small Business Administration		—		—			12,884		(1,749	)		12,884		(1,749	)

Total	$	—	$	—		$	181,210	$	(22,464	)	$	181,210	$	(22,464	)

June 30, 2024:
U.S. Treasury	$	—	$	—		$	444	$	(53	)	$	444	$	(53	)
U.S. Government and federal agency		—		—			6,609		(370	)		6,609		(370	)
Mortgage-backed:
GSE residential		945		(1	)		162,525		(26,360	)		163,470		(26,361	)
Small Business Administration		—		—			14,086		(2,301	)		14,086		(2,301	)
State and political subdivisions		1,043		(4	)		—		—			1,043		(4	)

Total	$	1,988	$	(5	)	$	183,664	$	(29,084	)	$	185,652	$	(29,089	)

As of September 30, 2024, the company’s

available-for-sale

securities portfolio consisted of 174 securities, of which 164 were in an unrealized loss position.

The unrealized losses on the Company’s investment in U.S. Treasury, U.S. Government and federal agency, Mortgage-backed Government sponsored enterprises, Small Business Administration and state and political subdivision securities at September 30, 2024 and June 30, 2024, were mostly the result of a decline in market value that was attributable to changes in interest rates and not credit quality, and the Company does not consider those investments to need an allowance for credit losses at September 30, 2024 and June 30, 2024.

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Note 6: Loans and Allowance for Credit Losses


Segments of loans include:	September 30, 2024			June 30, 2024
Real estate loans:
One- to four-family	$	176,334		$	177,263
Multi-family		125,906			126,031
Commercial		205,103			200,017
Home equity lines of credit		9,927			9,859
Construction		30,839			33,708
Commercial		98,894			91,784
Consumer		7,186			7,727

Total loans		654,189			646,389
Less:
Unearned fees and discounts, net		(347	)		(407	)
Allowance for credit losses		7,472			7,499

Loans, net	$	647,064		$	639,297

The Company had no loans held for sale included in

one-

to four-family real estate loans as of September 30, 2024 and June 30, 2024.

The Company believes that sound loans are a necessary and desirable means of employing funds available for investment. Recognizing the Company’s obligations to its depositors and to the communities it serves, authorized personnel are expected to seek to develop and make sound, profitable loans that resources permit and that opportunity affords. The Company maintains lending policies and procedures in place designed to focus our lending efforts on the types, locations, and duration of loans most appropriate for our business model and markets. The Company’s principal lending activity is the origination of

one-

to four-family residential mortgage loans but also includes multi-family loans, commercial real estate loans, home equity lines of credits, commercial business loans, consumer (consisting primarily of automobile loans), and, to a much lesser extent, construction loans and land loans. The primary lending market includes the Illinois counties of Vermilion, Iroquois, Champaign and Kankakee, as well as the adjacent counties in Illinois and Indiana. The Company also has a loan production office in Osage Beach, Missouri, which serves the Missouri counties of Camden, Miller, and Morgan. Generally, loans are collateralized by assets, primarily real estate, of the borrowers and guaranteed by individuals. The loans are expected to be repaid from cash flows of the borrowers or from proceeds from the sale of selected assets of the borrowers.

Management reviews and approves the Company’s lending policies and procedures on a routine basis. Management routinely (at least quarterly) reviews our allowance for credit losses and reports related to loan production, loan quality, concentrations of credit, loan delinquencies and

non-performing

and potential problem loans. Our underwriting standards are designed to encourage relationship banking rather than transactional banking. Relationship banking implies a primary banking relationship with the borrower that includes, at a minimum, an active deposit banking relationship in addition to the lending relationship. The integrity and character of the borrower are significant factors in our loan underwriting. As a part of underwriting, tangible positive or negative evidence of the borrower’s integrity and character are sought out. Additional significant underwriting factors beyond location, duration, the sound and profitable cash flow basis underlying the loan and the borrower’s character are the quality of the borrower’s financial history, the liquidity of the underlying collateral and the reliability of the valuation of the underlying collateral.

The Company’s policies and loan approval limits are established by the Board of Directors. The structure of the Company’s loan approval process is based on progressively larger lending authorities granted to loan officers, loan committees, and ultimately the Board of Directors through its Operating Committee, consisting of the Chairman and up to four other Board members. At no time is a borrower’s total borrowing relationship to exceed our regulatory lending limit. Loans to related parties, including executive officers and the Company’s directors, are reviewed for compliance with regulatory guidelines and the Board of Directors at least annually.

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The Company conducts internal loan reviews that validate the loans against the Company’s loan policy quarterly for mortgage, consumer, and small commercial loans on a sample basis, and all larger commercial loans on an annual basis. The Company also receives independent loan reviews performed by a third party on larger commercial loans to be performed semi-annually. In addition to compliance with our policy, the third-party loan review process reviews the risk assessments made by our credit department, lenders and loan committees. Results of these reviews are presented to management and the Board of Directors.

The Company’s lending can be summarized into six primary areas:

one-

to four-family residential mortgage loans, commercial real estate and multi-family real estate loans, home equity lines of credit, real estate construction, commercial business loans, and consumer loans.

One-

to four-family Residential Mortgage Loans

The Company offers

one-

to four-family residential mortgage loans that conform to Fannie Mae and Freddie Mac underwriting standards (conforming loans) as well as

non-conforming

loans. The Company has sold a substantial portion of the fixed-rate

one-

to four-family residential mortgage loans with terms of 15 years or greater. Generally, the Company retains fixed-rate

one-

to four-family residential mortgage loans with terms of less than 15 years, although this has represented a small percentage of the fixed-rate loans originated in recent years due to the favorable long-term rates for borrowers.

The Company offers USDA (USDA Rural Development), FHA and VA loans that are originated through a nationwide wholesale lender.

In addition, the Company also offers home equity loans that are secured by a second mortgage on the borrower’s primary or secondary residence. Home equity loans are generally underwritten using the same criteria used to underwrite

one-

to four-family residential mortgage loans.

one-

to four-family residential mortgage and home equity loan underwriting are subject to specific regulations, the Company typically underwrites its

one-

to four-family residential mortgage and home equity loans to conform to widely accepted standards. Several factors are considered in underwriting including the value of the underlying real estate and the

debt-to-income

ratio and credit history of the borrower.

Commercial Real Estate and Multi-Family Real Estate Loans

Commercial real estate mortgage loans are primarily secured by owner-occupied businesses, retail rentals, churches, office buildings, and farm loans secured by real estate. In underwriting commercial real estate and multi-family real estate loans, the Company considers a number of factors, which include the projected net cash flow to the loan’s debt service requirement, the age and condition of the collateral, the financial resources and income level of the borrower and the borrower’s experience in owning or managing similar properties. Personal guarantees are typically obtained from commercial real estate and multi-family real estate borrowers. In addition, the borrower’s financial information on such loans is monitored on an ongoing basis by requiring periodic financial statement updates. The repayment of these loans is primarily dependent on the cash flows of the underlying property. However, the commercial real estate loan generally must be supported by an adequate underlying collateral value. The performance and the value of the underlying property may be adversely affected by economic factors or geographical and/or industry specific factors. These loans are subject to other industry guidelines that are closely monitored by the Company.

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Home Equity Lines of Credit

In addition to traditional

one-

to four-family residential mortgage loans and home equity loans, the Company offers home equity lines of credit that are secured by the borrower’s primary or secondary residence. Home equity lines of credit are generally underwritten using the same criteria used to underwrite

one-

to four-family residential mortgage loans. As home equity lines of credit underwriting is subject to specific regulations, the Company typically underwrites its home equity lines of credit to conform to widely accepted standards. Several factors are considered in underwriting including the value of the underlying real estate and the

debt-to-income

ratio and credit history of the borrower.

Commercial Business Loans

The Company originates commercial

non-mortgage

business (term) loans and adjustable lines of credit. These loans are generally originated to

small-and

medium-sized

companies in the Company’s primary market area. Commercial business loans are generally used for working capital purposes or for acquiring equipment, inventory, or furniture, and are primarily secured by business assets other than real estate, such as business equipment and inventory, accounts receivable or stock. The Company also offers agriculture loans that are not secured by real estate.

The commercial business loan portfolio consists primarily of secured loans. When making commercial business loans, the Company considers the financial statements, lending history and debt service capabilities of the borrower, the projected cash flows of the business and the value of any collateral. The cash flows of the underlying borrower, however, may not perform consistently with historical or projected information. Further, the collateral securing loans may fluctuate in value due to individual economic or other factors. Loans are typically guaranteed by the principals of the borrower. The Company has established minimum standards and underwriting guidelines for all commercial loan types.

Real Estate Construction Loans

The Company originates construction loans for

one-

to four-family residential properties and commercial real estate properties, including multi-family properties. The Company generally requires that a commitment for permanent financing be in place prior to closing the construction loan. The repayment of these loans is typically through permanent financing following completion of the construction. Real estate construction loans are inherently riskier than loans on completed properties as the unimproved nature and the financial risks of construction significantly enhance the risks of commercial real estate loans. These loans are closely monitored and subject to other industry guidelines.

Consumer Loans

Consumer loans consist of installment loans to individuals, primarily automotive loans. These loans are underwritten utilizing the borrower’s financial history, including the Fair Isaac Corporation (“FICO”)

credit scoring and information as to the underlying collateral. Repayment is expected from the cash flow of the borrower. Consumer loans may be underwritten with terms up to seven years, fully amortized. Unsecured loans are limited to twelve months.

Loan-to-value

ratios vary based on the type of collateral. The Company has established minimum standards and underwriting guidelines for all consumer loan collateral types.

Loan Concentrations

The loan portfolio includes a concentration of loans secured by commercial real estate properties, including real estate construction loans, amounting to $349,133,000 and $346,499,000 as of September 30, 2024 and June 30, 2024, respectively. Generally, these loans are collateralized by multi-family and nonresidential properties. The loans are expected to be repaid from cash flows or from proceeds from the sale of the properties of the borrower.

Purchased Loans and Loan Participations

The Company’s loans receivable included purchased loans of $237,000 and $253,000 at September 30, 2024 and June 30, 2024, respectively. All these purchased loans are secured by single family homes located out of our primary market area, primarily in the Midwest. The Company’s loans receivable also included commercial loan participations of $54,082,000 and $51,798,000 at September 30, 2024 and June 30, 2024, respectively, of which $37,297,000 and $34,929,000, at September 30, 2024 and June 30, 2024 were outside our primary market area. These participation loans are secured by real estate and other business assets.

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Allowance for Credit Losses

The following tables present the activity in the allowance for credit losses for the three-month periods ended September 30, 2024 and 2023 and the year ended June 30, 2024:


	Three Months Ended September 30, 2024 Real Estate Loans
	One- to Four-Family			Multi-Family			Commercial			Home Equity Lines of Credit
Allowance for credit losses:
Balance, beginning of period	$	1,774		$	1,764		$	2,358		$	148
Provision (credit) charged to expense		(147	)		348			4			(1	)
Losses charged off		—			(350	)		—			—
Recoveries		1			—			—			—

Balance, end of period	$	1,628		$	1,762		$	2,362		$	147

Loans:
Ending balance	$	176,334		$	125,906		$	205,103		$	9,927


	Three Months Ended September 30, 2024 (Continued)
	Construction			Commercial			Consumer			Total
Allowance for credit losses:
Balance, beginning of period	$	337		$	1,053		$	65		$	7,499
Provision (credit) charged to expense		(59	)		231			1			377
Losses charged off		—			(50	)		(9	)		(409	)
Recoveries		—			2			2			5

Balance, end of period	$	278		$	1,236		$	59		$	7,472

Loans:
Ending balance	$	30,839		$	98,894		$	7,186		$	654,189


	Year Ended June 30, 2024
	Real Estate Loans
	One- to Four-Family			Multi-Family			Commercial			Home Equity Lines of Credit
Allowance for credit losses:
Balance, beginning of period	$	1,898		$	1,121		$	2,369		$	121
Provision (credit) charged to expense		(127	)		643			(11	)		27
Losses charged off		—			—			—			—
Recoveries		3			—			—			—

Balance, end of period	$	1,774		$	1,764		$	2,358		$	148

Loans:
Ending balance	$	177,263		$	126,031		$	200,017		$	9,859

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	Year Ended June 30, 2024 (Continued)
	Construction			Commercial			Consumer			Total
Allowance for credit losses:
Balance, beginning of period	$	765		$	794		$	71		$	7,139
Provision (credit) charged to expense		(428	)		17			29			150
Losses charged off		—			—			(49	)		(49	)
Recoveries		—			242			14			259

Balance, end of period	$	337		$	1,053		$	65		$	7,499

Loans:
Ending balance	$	33,708		$	91,784		$	7,727		$	646,389


	Three Months Ended September 30, 2023
	Real Estate Loans
	One- to Four-Family			Multi-Family			Commercial			Home Equity Lines of Credit
Allowance for credit losses:
Balance, beginning of period	$	1,898		$	1,121		$	2,369		$	121
Provision (credit) charged to expense		8			(6	)		(104	)		13
Losses charged off		—			—			—			—
Recoveries		—			—			—			—

Balance, end of period	$	1,906		$	1,115		$	2,265		$	134

Loans:
Ending balance	$	170,154		$	89,177		$	193,582		$	8,511


	Three Months Ended September 30, 2023 (Continued)
	Construction			Commercial			Consumer			Total
Allowance for credit losses:
Balance, beginning of period	$	765		$	794		$	71		$	7,139
Provision (credit) charged to expense		400			(12	)		11			310
Losses charged off		—			—			(7	)		(7	)
Recoveries		—			6			2			8

Balance, end of period	$	1,165		$	788		$	77		$	7,450

Loans:
Ending balance	$	72,810		$	79,194		$	8,343		$	621,771

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Management’s opinion as to the ultimate collectability of loans is subject to estimates regarding future cash flows from operations and the value of property, real and personal, pledged as collateral. These estimates are affected by changing economic conditions and the economic prospects of borrowers.

The allowance for credit losses represents the Company’s best estimate of the reserve necessary to adequately account for probable losses expected over the remaining contractual life of the assets. The provision for credit losses is the charge against current earnings that is determined by the Company as the amount needed to maintain an adequate allowance for credit losses. In determining the adequacy of the allowance for credit losses, and therefore the provision to be charged to current earnings, the Company relies on a sound credit review and approval process. The review process is directed by the overall lending policy and is intended to identify, at the earliest possible stage, borrowers who might be facing financial difficulty.

The Company utilizes the CECL cohort methodology analysis which relies on segmenting the loan portfolio into pools with similar risks, tracking the performance of the pools over time, and using the data to determine pool loss experience.

The ACL is a valuation account that is deducted from the loans’ amortized cost basis to present the net amount expected to be collected on the loans and is established through provision for credit losses charged to current earnings. The ACL is increased by the provision for losses on loans charged to expense and reduced by loans charged off, net of recoveries. Loans are charged off in the period deemed uncollectible, based on management’s analysis of expected cash flows (for

non-collateral

dependent loans) or collateral value (for collateral-dependent loans). Subsequent recoveries of loans previously charged off, if any, are credited to the allowance when received.

Management estimates the ACL balance using relevant available information, from internal and external sources, relating to past events, current conditions, and reasonable and supportable forecasts. Adjustments may be made to historical loss information for differences identified in current loan-specific risk characteristics, such as differences in underwriting standards or terms; lending review systems; experience, ability, or depth of lending management and staff; portfolio growth and mix; delinquency levels and trends; as well as for changes in environmental conditions, such as changes in economic activity or employment, industry economic conditions, property values, or other relevant factors.

The allowance for credit losses on most loans is measured on a collective (pool) basis for loans with similar risk characteristics. The Company estimates the appropriate level of allowance for credit losses for specifically identified loans by evaluating them individually.

The specific allowance for collateral-dependent loans that are evaluated separately is measured by determining the fair value of the collateral adjusted for market conditions and selling expense. 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. 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.

The Company establishes a general allowance for loans that are not individually evaluated to recognize the inherent losses associated with lending activities, but which, unlike specific allowances, has not been allocated to particular problem assets. The general valuation allowance is determined by segmenting the loan portfolio into pools with similar risks and collecting data to determine pool loss experience. Factors considered by the Company in evaluating the overall adequacy of the allowance include historical net loan losses, the level and composition of nonaccrual, past due and loan modifications for borrowers with financial difficulties, trends in volumes and terms of loans, effects of changes in risk selection and underwriting standards or lending practices, lending staff changes, concentrations of credit, industry conditions and the current economic conditions in the region where the Company operates. In addition, a forecast, using reasonable and supportable future conditions, is prepared that is used to estimate expected changes to existing and historical conditions in the current period.

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The Company categorizes loans into risk categories based on relevant information about the ability of borrowers to service their debt such as current financial information, historical payment experience, credit documentation, public information and current economic trends, among other factors. All loans are graded at inception of the loan. Subsequently, analyses are performed on an annual basis and grade changes are made as necessary. Interim grade reviews may take place if the circumstances of the borrower warrant a timelier review. The Company utilizes an internal asset classification system as a means of reporting problem and potential problem loans. Under the Company’s risk rating system, the Company classifies problem and potential problem loans as “Watch,” “Substandard,” “Doubtful,” and “Loss.” The Company uses the following definitions for risk ratings:

Pass –

Loans classified as pass are well protected by the ability of the borrower to pay or by the value of the asset or underlying collateral.

Watch –

Loans classified as watch have a potential weakness that deserves management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or of the Company’s credit position at some future date.

Substandard –

Loans classified as substandard are inadequately protected by the current net worth and paying capacity of the obligor or of any pledged collateral. Loans so classified have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the institution will sustain some loss if the deficiencies are not corrected.

Doubtful –

Loans classified as doubtful have all the weaknesses inherent in those classified as substandard, with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions and values, highly questionable and improbable.

Loss –

Loans classified as loss are the portion of the loan that is considered uncollectible so that its continuance as an asset is not warranted. The amount of the loss determined will be charged off.

Risk characteristics applicable to each segment of the loan portfolio are described as follows.

Residential

One-

to Four-Family and Equity Lines of Credit Real Estate:

The residential

one-

to four-family real estate loans are generally secured by owner-occupied

one-

to four-family residences. Repayment of these loans is primarily dependent on the personal income and credit rating of the borrowers. Credit risk in these loans can be impacted by economic conditions within the Company’s market areas that might impact either property values or a borrower’s personal income. Risk is mitigated by the fact that the loans are of smaller individual amounts and spread over a large number of borrowers.

Commercial and Multi-family Real Estate:

Commercial and multi-family real estate loans typically involve larger principal amounts, and repayment of these loans is generally dependent on the successful operations of the property securing the loan or the business conducted on the property securing the loan. These loans are viewed primarily as cash flow loans and secondarily as loans secured by real estate. Credit risk in these loans may be impacted by the creditworthiness of a borrower, property values and the local economies in the Company’s market areas.

Construction Real Estate:

Construction real estate loans are usually based upon estimates of costs and estimated value of the completed project and include independent appraisal reviews and a financial analysis of the developers and property owners. Sources of repayment of these loans may include permanent loans, sales of developed property, or an interim loan commitment from the Company until permanent financing is obtained. These loans are considered to be higher risk than other real estate loans due to their ultimate repayment being sensitive to interest rate changes, general economic conditions and the availability of long-term financing. Credit risk in these loans may be impacted by the creditworthiness of a borrower, property values and the local economies in the Company’s market areas.

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Commercial Business:

The commercial portfolio includes loans to commercial customers for use in financing working capital needs, equipment purchases and expansions. The loans in this category are repaid primarily from the cash flow of a borrower’s principal business operation. Credit risk in these loans is driven by creditworthiness of a borrower and the economic conditions that impact the cash flow stability from business operations.

Consumer:

The consumer loan portfolio consists of various term loans such as automobile loans and loans for other personal purposes. Repayment for these types of loans will come from a borrower’s income sources that are typically independent of the loan purpose. Credit risk is driven by consumer economic factors (such as unemployment and general economic conditions in the Company’s market area) and the creditworthiness of a borrower.

The following tables present the credit risk profile of the Company’s loan portfolio based on risk rating category and calendar year of origination as of both September 30, 2024 and June 30, 2024 (in thousands):


September 30, 2024
Risk Rating	2024		2023			2022		2021		2020		Prior Years		Total
One- to Four-Family
Pass	$	17,952	$	38,730		$	49,615	$	23,713	$	15,223	$	30,819	$	176,052
Watch		—		—			—		66		—		—		66
Substandard		—		—			4		5		—		207		216

Total	$	17,952	$	38,730		$	49,619	$	23,784	$	15,223	$	31,026	$	176,334

Current period recoveries	$	—	$	—		$	—	$	—	$	—	$	1	$	1
Multi-Family
Pass	$	1,634	$	8,623		$	51,025	$	20,238	$	22,583	$	21,572	$	125,675
Watch		—		—			—		—		—		—		—
Substandard		—		—			—		—		—		231		231

Total	$	1,634	$	8,623		$	51,025	$	20,238	$	22,583	$	21,803	$	125,906

Current period charge-offs	$	—	$	(350	)	$	—	$	—	$	—	$	—	$	(350	)
Commercial Real Estate
Pass	$	13,090	$	32,704		$	53,483	$	27,342	$	29,944	$	47,334	$	203,897
Watch		—		—			—		—		—		—		—
Substandard		—		—			—		142		812		252		1,206

Total	$	13,090	$	32,704		$	53,483	$	27,484	$	30,756	$	47,586	$	205,103

Home Equity Line of Credit
Pass	$	2,575	$	2,263		$	1,497	$	1,531	$	717	$	1,344	$	9,927
Watch		—		—			—		—		—		—		—
Substandard		—		—			—		—		—		—		—

Total	$	2,575	$	2,263		$	1,497	$	1,531	$	717	$	1,344	$	9,927

Construction
Pass	$	8,993	$	18,377		$	3,250	$	—	$	—	$	219	$	30,839
Watch		—		—			—		—		—		—		—
Substandard		—		—			—		—		—		—		—

Total	$	8,993	$	18,377		$	3,250	$	—	$	—	$	219	$	30,839

Commercial Business
Pass	$	18,935	$	42,386		$	9,605	$	9,586	$	7,055	$	9,873	$	97,440
Watch		—		—			—		—		—		—		—
Substandard		—		133			41		190		1,034		56		1,454

Total	$	18,935	$	42,519		$	9,646	$	9,776	$	8,089	$	9,929	$	98,894

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Current period charge-offs	$	—		$	(50	)	$	—		$	—	$	—	$	—	$	(50	)
Current period recoveries	$	—		$	—		$	—		$	—	$	2	$	—	$	2
Consumer
Pass	$	2,287		$	2,291		$	1,569		$	662	$	301	$	54	$	7,164
Watch		—			—			—			—		—		—		—
Substandard		—			22			—			—		—		—		22

Total	$	2,287		$	2,313		$	1,569		$	662	$	301	$	54	$	7,186

Current period charge-offs	$	(8	)	$	—		$		(1)	$	—	$	—	$	—	$	(9	)
Current period recoveries	$	2		$	—		$	—		$	—	$	—	$	—	$	2
Total Loans
Pass	$	65,466		$	145,374		$	170,044		$	83,072	$	75,823	$	111,215	$	650,994
Watch		—			—			—			66		—		—		66
Substandard		—			155			45			337		1,846		746		3,129

Total	$	65,466		$	145,529		$	170,089		$	83,475	$	77,669	$	111,961	$	654,189


June 30, 2024
Risk Rating	2024		2023		2022		2021		2020		Prior Years		Total
One- to Four-Family
Pass	$	14,790	$	39,202	$	51,262	$	24,362	$	15,455	$	31,926	$	176,997
Watch		—		—		—		72		—		—		72
Substandard		—		14		5		5		—		170		194

Total	$	14,790	$	39,216	$	51,267	$	24,439	$	15,455	$	32,096	$	177,263

Current period recoveries	$	—	$	—	$	—	$	—	$	—	$	3	$	3
Multi-Family
Pass	$	573	$	9,004	$	51,279	$	20,346	$	22,728	$	21,867	$	125,797
Watch		—		—		—		—		—		—		—
Substandard		—		—		—		—		—		234		234

Total	$	573	$	9,004	$	51,279	$	20,346	$	22,728	$	22,101	$	126,031

Commercial Real Estate
Pass	$	4,602	$	29,665	$	57,530	$	27,622	$	30,489	$	48,886	$	198,794
Watch		—		—		—		—		—		—		—
Substandard		—		—		—		150		821		252		1,223

Total	$	4,602	$	29,665	$	57,530	$	27,772	$	31,310	$	49,138	$	200,017

Home Equity Line of Credit
Pass	$	1,629	$	2,361	$	1,874	$	1,806	$	795	$	1,394	$	9,859
Watch		—		—		—		—		—		—		—
Substandard		—		—		—		—		—		—		—

Total	$	1,629	$	2,361	$	1,874	$	1,806	$	795	$	1,394	$	9,859

Construction
Pass	$	9,123	$	21,043	$	3,250	$	—	$	—	$	292	$	33,708
Watch		—		—		—		—		—		—		—
Substandard		—		—		—		—		—		—		—

Total	$	9,123	$	21,043	$	3,250	$	—	$	—	$	292	$	33,708

Commercial Business
Pass	$	10,357	$	38,853	$	10,158	$	9,898	$	8,201	$	12,803	$	90,270
Watch		—		—		—		—		—		—		—
Substandard		—		133		47		190		1,088		56		1,514

Total	$	10,357	$	38,986	$	10,205	$	10,088	$	9,289	$	12,859	$	91,784

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Current period recoveries	$	—		$	—	$	—	$	—		$	242	$	—	$	242
Consumer
Pass	$	1,956		$	2,635	$	1,830	$	843		$	394	$	69	$	7,727
Watch		—			—		—		—			—		—		—
Substandard		—			—		—		—			—		—		—

Total	$	1,956		$	2,635	$	1,830	$	843		$	394	$	69	$	7,727

Current period charge-offs	$	(48	)	$	—	$	—	$	(1	)	$	—	$	—	$	(49	)
Current period recoveries	$	14		$	—	$	—	$	—		$	—	$	—	$	14
Total Loans
Pass	$	43,030		$	142,763	$	177,183	$	84,877		$	78,062	$	117,237	$	643,152
Watch		—			—		—		72			—		—		72
Substandard		—			147		52		345			1,909		712		3,165

Total	$	43,030		$	142,910	$	177,235	$	85,294		$	79,971	$	117,949	$	646,389

The following tables present the Company’s loan portfolio aging analysis:


	30-59 Days Past Due		60-89 Days Past Due		Greater Than 90 Days		Total Past Due		Current		Total Loans Receivable		Total Loans > 90 Days & Accruing
September 30, 2024:
Real estate loans:
One- to four-family	$	440	$	609	$	38	$	1,087	$	175,247	$	176,334	$	38
Multi-family		—		144		—		144		125,762		125,906		—
Commercial		—		—		—		—		205,103		205,103		—
Home equity lines of credit		4		—		—		4		9,923		9,927		—
Construction		—		—		—		—		30,839		30,839		—
Commercial		—		21		—		21		98,873		98,894		—
Consumer		105		1		21		127		7,059		7,186		—

Total	$	549	$	775	$	59	$	1,383	$	652,806	$	654,189	$	38


	30-59 Days Past Due		60-89 Days Past Due		Greater Than 90 Days		Total Past Due		Current		Total Loans Receivable		Total Loans > 90 Days & Accruing
June 30, 2024:
Real estate loans:
One- to four-family	$	1,009	$	192	$	—	$	1,201	$	176,062	$	177,263	$	—
Multi-family		141		—		—		141		125,890		126,031		—
Commercial		—		—		150		150		199,867		200,017		—
Home equity lines of credit		17		25		—		42		9,817		9,859		—
Construction		237		—		—		237		33,471		33,708		—
Commercial		21		20		—		41		91,743		91,784		—
Consumer		27		1		23		51		7,676		7,727		23

Total	$	1,452	$	238	$	173	$	1,863	$	644,526	$	646,389	$	23

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The allowance for credit losses on most loans is measured on a collective (pool) basis for loans with similar risk characteristics, while some loans are selected to be evaluated individually. At September 30, 2024 and at June 30, 2024, no

non-performing

loans were individually evaluated and no specific reserve was established.

The following table presents the amortized cost basis of loans on nonaccrual status and of nonaccrual loans individually evaluated for which no allowance was recorded at September 30, 2024 and June 30, 2024:


	September 30, 2024				June 30, 2024
	Nonaccrual with no Allowance for Credit Losses		Nonaccrual		Nonaccrual with no Allowance for Credit Losses		Nonaccrual
Mortgages on real estate:
One- to four-family	$	—	$	—	$	—	$	—
Multi-family		—		—		—		—
Commercial		—		142		—		150
Home equity lines of credit		—		—		—		—
Construction loans		—		—		—		—
Commercial business loans		—		—		—		—
Consumer loans		—		21		—		—

Total	$	—	$	163	$	—	$	150

Loan Modifications with Borrowers Experiencing Financial Difficulty

The Company modified no loans for borrowers with financial difficulty in the three months ended September 30, 2024 and two in the year ended June 30, 2024.

The following table shows the amortized cost of loans at September 30, 2024 and at June 30, 2024 that were modified and experiencing financial difficulty, segregated by portfolio segment and type of modification. The percentage of the amortized cost of loans that were modified to borrowers in financial distress as compared to outstanding loans is also presented below.


September 30, 2024	Payment Delay		Total Class of Financing Receivable
Real estate loans
One- to four-family	$	—		—
Multi-family		—		—
Commercial		252		0.12	%
Home equity lines of credit		—		—
Construction		—		—
Commercial business		133		0.13	%
Consumer		—		—

Total	$	385		0.06	%

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June 30, 2024	Payment Delay		Total Class of Financing Receivable
Real estate loans
One- to four-family	$	—		—
Multi-family		—		—
Commercial		252		0.13	%
Home equity lines of credit		—		—
Construction		—		—
Commercial business		133		0.15	%
Consumer		—		—

Total	$	385		0.06	%

Loan Modifications with Defaults

The Company had no loan modifications for borrowers experiencing financial difficulty in default or in foreclosure as of September 30, 2024 or as of June 30, 2024. The Company defines a default as any loan that becomes 90 days or more past due.

Management considers the level of defaults within the various portfolios, as well as the current adverse economic environment and negative outlook in the real estate and collateral markets when evaluating qualitative adjustments used to determine the adequacy of the allowance for credit losses. The Company believes the qualitative adjustments more accurately reflect collateral values considering the sales and economic conditions that the Company has recently observed.

The Company may obtain physical possession of real estate collateralizing a residential mortgage loan or home equity loan via foreclosure or

in-substance

repossession. As of September 30, 2024 and June 30, 2024, the Company had no foreclosed residential real estate properties as a result of obtaining physical possession. As of September 30, 2024 and June 30, 2024, the Company had no residential mortgage loans or home equity loans collateralized by residential real estate property for which formal foreclosure proceedings were in process.

Note 7: Federal Home Loan Bank Stock

Federal Home Loan Bank stock is a required investment for institutions that are members of the Federal Home Loan Bank system. The required investment in the common stock is based on a predetermined formula. The Company owned approximately $4,758,000 and $4,499,000 of Federal Home Loan Bank stock as of September 30, 2024 and June 30, 2024, respectively. The FHLB provides liquidity and funding through advances.

Note 8: Federal Home Loan Bank Advances and Other Borrowings

The Federal Home Loan Bank advances totaled $83,499,000 and $32,999,000 as of September 30, 2024 and June 30, 2024, respectively. The Federal Home Loan Bank advances are secured by mortgage, multi-family, commercial real estate and HELOC loans totaling $414,249,000 at September 30, 2024 and $408,196,000 at June 30, 2024, and are subject to restrictions or penalties in the event of prepayment. Interest rates on advances were from 0 to 5.29 percent with maturities from 2024 to 2030 at September 30, 2024, while interest rates on advances were from 0.00 to 5.29 percent with maturities from 2024 to 2030 at June 30, 2024. At September 30, 2024, the Company’s advances included 7 advances at a rate of 0% totaling $1,499,000 as part of the Federal Home Loan Bank Community Small Business Advance program.

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Other borrowings include borrowings from the Federal Reserve Bank Term Funding Program (BTFP). The Federal Reserve created the BTFP in March 2023 to offer loans of up to one year in length to qualifying financial institutions which pledge collateral, such as U.S. Treasuries, U.S. agency securities, and U.S. agency mortgage-backed securities. The collateral is valued at par and advances under this program do not include any fees or prepayment penalties. At September 30, 2024 and June 30, 2024, the Company had total borrowings from the Federal Reserve BTFP of $25,175,000 and $25,250,000, respectively, at a rate of 4.76% with a maturity of January 16, 2025. The collateral par value of securities pledged to the Federal Reserve BTFP was $25,178,000 and $25,272,000 as of September 30, 2024 and June 30, 2024, respectively.

Note 9: Accumulated Other

Comprehensive

Income (Loss)

The following tables present changes in accumulated other comprehensive income (loss), by component, net of tax, for the three months ended September 30, 2024 and 2023:


	Unrealized Gains and Losses on Available-for- Sale Securities			Defined Benefit Pension Items			Total
September 30, 2024:
Beginning balance	$	(20,768	)	$	209		$	(20,559	)
Other comprehensive income before reclassification		4,703			—			4,703
Amounts reclassified from accumulated other comprehensive loss		51			—			51
Net current period other comprehensive loss		—			(2	)		(2	)

Ending balance	$	(16,014	)	$	207		$	(15,807	)

September 30, 2023:
Beginning balance	$	(21,715	)	$	67		$	(21,648	)
Other comprehensive loss before reclassification		(5,121	)		—			(5,121	)
Net current period other comprehensive loss		—			2			2

Ending balance	$	(26,836	)	$	69		$	(26,767	)

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Note 10: Changes in Accumulated Other Comprehensive Income (Loss) (AOCI) by Component

Amounts reclassified from AOCI and the affected line items in the statements of income during the quarters ended September 30, 2024 and 2023, were as follows:


	Amounts Reclassified from AOCI
	2024			2023		Affected Line Item in the Condensed Consolidated Statements of Income
Realized gains (losses) on available-for-sale securities	$	(71	)	$	—	Net realized gains (losses) on sale of available-for-sale securities
Amortization of defined benefit pension items:
Actuarial losses	$	(2	)	$	2	Components are included in computation of net periodic pension cost

Total reclassified amount before tax	$	(73	)	$	2
Tax expense (credit)	$	(20	)	$	—	Provision (credit) for Income Tax

Total reclassification out of AOCI	$	(53	)	$	2	Net Income

Note 11: Income Taxes

A reconciliation of income tax expense at the statutory rate to the Company’s actual income tax expense is shown below:


	Three Months Ended September 30,
	2024			2023
Computed at the statutory rate	$	179		$	135
Increase resulting from
Tax exempt interest		(8	)		(8	)
Cash surrender value of life insurance		(24	)		(21	)
State income taxes		58			46
Other		13			23

Actual expense	$	218		$	175

Note 12: Regulatory Capital

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guidelines and the regulatory framework for prompt corrective action, the Association must meet specific capital guidelines involving quantitative measures of the Association’s assets, liabilities and certain

off-balance-sheet

items as calculated under regulatory accounting practices. The Association’s capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk-weightings and other factors.

The Basel III regulatory capital framework (the “Basel III Capital Rules”) adopted by U.S. federal regulatory authorities, among other things, (i) establish the capital measure called “Common Equity Tier 1” (“CET1”), (ii) specify that Tier 1 capital consist of CET1 and “Additional Tier 1 Capital” instruments meeting stated requirements, (iii) define CET1 narrowly by requiring that most deductions/adjustments to regulatory capital measures be made to CET1 and not to the other components of capital and (iv) set forth the acceptable scope of deductions/adjustments to the specified capital measures.

In addition, to avoid restrictions on capital distributions, including dividend payments and stock repurchases, or discretionary bonus payments to executives, a covered banking organization must maintain a “capital conservation buffer” of 2.5 percent on top of its minimum risk-based capital requirements. This buffer must consist solely of Tier 1 Common Equity and the buffer applies to all three measurements: Common Equity Tier 1, Tier 1 capital and total capital.

As a result of the Economic Growth, Regulatory Relief, and Consumer Protection Act, the federal banking agencies were required to develop a “Community Bank Leverage Ratio” (the ratio of a bank’s tangible equity capital to average total consolidated assets) for financial institutions with assets of less than $10 billion. A “qualifying community bank” that exceeds this ratio will be deemed to be in compliance with all other capital and leverage requirements, including the capital requirements to be considered “well capitalized” under Prompt Corrective Action statutes. The Community Bank Leverage Ratio is currently set at 9%. The Association opted into the Community Bank Leverage Ratio in 2020.

As of September 30, 2024, the Association met all capital adequacy requirements to which it is subject and was categorized as well capitalized under the regulatory framework for prompt corrective action. There are no conditions or events that management believes have changed the Association’s prompt corrective action category.

Note 13: Disclosures About Fair Value of Assets

Fair value is the price that would be received to sell an asset in an orderly transaction between market participants at the measurement date. Fair value measurements must maximize the use of observable inputs and minimize the use of unobservable inputs. There is a hierarchy of three levels of inputs that may be used to measure fair value:

Level 1

Quoted prices in active markets for identical assets

Level 2

Observable inputs other than Level 1 prices, such as quoted prices for similar assets; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets

Level 3

Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets

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Recurring Measurements

The following table presents the fair value measurements of assets recognized in the accompanying condensed consolidated balance sheets measured at fair value on a recurring basis and the level within the fair value hierarchy in which the fair value measurements fall at September 30, 2024 and June 30, 2024:


			Fair Value Measurements Using
	Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
September 30, 2024:
Available-for-sale securities:
U.S. Government and federal agency and Government sponsored enterprises (GSE’s)	$	5,763	$	—	$	5,763	$	—
Mortgage-backed: GSE residential		169,638		—		169,638		—
Small Business Administration		14,152		—		14,152		—
State and political subdivisions		3,098		—		1,041		2,057
Mortgage servicing rights		1,366		—		—		1,366

			Fair Value Measurements Using
	Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
June 30, 2024:
Available-for-sale securities:
U.S. Treasury	$	444	$	444	$	—	$	—
U.S. Government and federal agency and Government sponsored enterprises (GSE’s)		6,609		—		6,609		—
Mortgage-backed: GSE residential		166,236		—		166,236		—
Small Business Administration		14,086		—		14,086		—
State and political subdivisions		3,100		—		1,043		2,057
Mortgage servicing rights		1,491		—		—		1,491

Following is a description of the valuation methodologies and inputs used for assets measured at fair value on a recurring basis and recognized in the accompanying condensed consolidated balance sheets, as well as the general classification of such assets pursuant to the valuation hierarchy. There have been no significant changes in the valuation techniques during the period ended September 30, 2024. For assets classified within Level 3 of the fair value hierarchy, the process used to develop the reported fair value is described below.

Available-for-sale

Securities

Where quoted market prices are available in an active market, securities are classified within Level 1 of the valuation hierarchy. If quoted market prices are not available, then fair values are estimated by using pricing models, quoted prices of securities with similar characteristics or discounted cash flows. For these investments, the inputs used by the pricing

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service to determine fair value may include one, or a combination of, observable inputs such as benchmark yields, reported trades, broker/dealer quotes, issuer spreads,

two-sided

markets, benchmark securities, bid, offers and reference data market research publications and are classified within Level 2 of the valuation hierarchy. Level 2 securities include U.S. Treasury, U.S. Government and federal agency, mortgage-backed securities (GSE—residential), Small Business Administration and state and political subdivisions. In certain cases where Level 1 or Level 2 inputs are not available, securities are classified within Level 3 of the hierarchy.

Mortgage Servicing Rights

Mortgage servicing rights do not trade in an active, open market with readily observable prices. Accordingly, fair value is estimated using discounted cash flow models. Due to the nature of the valuation inputs, mortgage servicing rights are classified within Level 3 of the hierarchy.

Level 3 Reconciliation

The following is a reconciliation of the beginning and ending balances of recurring fair value measurements recognized in the accompanying balance sheet using significant unobservable (Level 3) inputs:


	Three months ended September 30, 2024
	Obligations of State and Political Subdivisions		Mortgage Servicing Rights			Total
Beginning balance	$	2,057	$	1,491		$	3,548
Transfers into Level 3		—		47			47
Transfers out of Level 3		—		(34	)		(34	)
Total realized and unrealized gains and losses included in net income		—		(138	)		(138	)
Purchases		—		—			—
Sales		—		—			—
Settlements		—		—			—

Ending balance	$	2,057	$	1,366		$	3,423

Total gains or losses for the period included in net income attributable to the change in unrealized gains or losses related to assets and liabilities still held at the reporting date	$	—	$	(138	)	$	(138	)

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	Year ended June 30, 2024
	Obligations of State and Political Subdivisions			Mortgage Servicing Rights			Total
Beginning balance	$	2,361		$	1,482		$	3,843
Transfers into Level 3		—			151			151
Transfers out of Level 3		—			(143	)		(143	)
Total realized and unrealized gains and losses included in net income		—			1			1
Purchases		—			—			—
Sales		—			—			—
Settlements		(304	)		—			(304	)

Ending balance	$	2,057		$	1,491		$	3,548

Total gains or losses for the period included in net income attributable to the change in unrealized gains or losses related to assets and liabilities still held at the reporting date	$	—		$	1		$	1

Realized and unrealized gains and losses for items reflected in the table above are included in net income in the condensed consolidated statements of income as noninterest income.

Unobservable (Level 3) Inputs

The following tables present quantitative information about unobservable inputs used in recurring and nonrecurring Level 3 fair value measurements at September 30, 2024 and June 30, 2024.


	Fair Value at September 30, 2024		Valuation Technique	Unobservable Inputs	Range (Weighted Average)
Mortgage servicing rights	$	1,366	Discounted cash flow	Discount rate Constant prepayment rate Probability of default	10.0% (10.0%) 7.2% - 10.0% (7.7%) 0.08% - 0.12% (0.11%)
State and political subdivision	$	2,057	Discounted cash flow	Maturity/Call Date Weighted average coupon Marketability yield adjustment	1 month – 7 years 2.97% - 3.08% (3.04%) 1.0% - 2.0% (1.6%)

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	Fair Value at June 30, 2024		Valuation Technique	Unobservable Inputs	Range (Weighted Average)
Mortgage servicing rights	$	1,491	Discounted cash flow	Discount rate Constant prepayment rate Probability of default	10.0% ( 10.0%) 6.2% - 8.0% (7.7%) 0.08% - 0.12% (0.11%)
State and political subdivision		2,057	Discounted cash flow	Maturity/Call Date Weighted average coupon Marketability yield adjustment	1 month – 7 years 2.97% - 3.08% (3.04%) 1.0% - 2.0% (1.6%)

Fair Value of Financial Instruments

The following tables present estimated fair values of the Company’s financial instruments and the level within the fair value hierarchy in which the fair value measurements fall at September 30, 2024 and June 30, 2024.


	Carrying Amount		Fair Value Measurements Using Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
September 30, 2024:
Financial assets
Cash and cash equivalents	$	7,784	$	7,784	$	—	$	—
Interest-bearing time deposits in banks		250		250		—		—
Loans, net of allowance for credit losses		647,064		—		—		619,357
Federal Home Loan Bank stock		4,758		—		4,758		—
Accrued interest receivable		3,823		—		3,823		—
Financial liabilities
Deposits		677,159		—		363,156		314,167
Repurchase agreements		17,913		—		17,913		—
Federal Home Loan Bank advances		83,499		—		83,119		—
Other borrowings		25,175				25,183
Advances from borrowers for taxes and insurance		510		—		510		—
Accrued interest payable		2,756		—		2,756		—
Unrecognized financial instruments (net of contract amount)		—		—		—		—
Commitments to originate loans		—		—		—		—

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	Carrying Amount		Fair Value Measurements Using Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
June 30, 2024:
Financial assets
Cash and cash equivalents	$	9,571	$	9,571	$	—	$	—
Interest-bearing time deposits in banks		250		250		—		—
Loans, net of allowance for credit losses		639,297		—		—		607,076
Federal Home Loan Bank stock		4,499		—		4,499		—
Accrued interest receivable		3,457		—		3,457		—
Financial liabilities
Deposits		727,177		—		407,544		318,612
Repurchase agreements		17,772		—		17,772		—
Federal Home Loan Bank advances		32,999		—		32,560		—
Other Borrowings		25,250		—		25,199		—
Advances from borrowers for taxes and insurance		968		—		968		—
Accrued interest payable		3,009		—		3,009		—
Unrecognized financial instruments (net of contract amount)
Commitments to originate loans		—		—		—		—

The methods utilized to measure the fair value of financial instruments at September 30, 2024,

represent

an approximation of exit price; however, an actual exit price may differ.

Note 14: Commitments

Commitments to Originate Loans

Commitments to extend credit are agreements to lend to a customer if there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since a portion of the commitments may expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. Each customer’s creditworthiness is evaluated on a

case-by-case

basis. The amount of collateral obtained, if deemed necessary, is based on management’s credit evaluation of the counterparty. Collateral held varies, but may include accounts receivable, inventory, property, plant and equipment, commercial real estate and residential real estate.

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Lines of Credit

Lines of credit are agreements to lend to a customer if there is no violation of any condition established in the contract. Lines of credit generally have fixed expiration dates. Since a portion of the line may expire without being drawn upon, the total unused lines do not necessarily represent future cash requirements. Each customer’s creditworthiness is evaluated on a

case-by-case

basis. The amount of collateral obtained, if deemed necessary, is based on management’s credit evaluation of the counterparty. Collateral held varies but may include accounts receivable, inventory, property, plant and equipment, commercial real estate and residential real estate. Management uses the same credit policies in granting lines of credit as it does for

on-balance-sheet

instruments.

Off-Balance

Sheet Credit Exposures

Off-balance

sheet credit instruments include commitments to make loans, and commercial letters of credit, issued to meet customer financing needs. The Company’s exposure to credit loss in the event of

non-performance

by the other party to the financial instrument for

off-balance

sheet loan commitments is represented by the contractual amount of those instruments. Such financial instruments are recorded when they are funded. The ACL on

off-balance

sheet credit exposures is estimated by loan pool on a quarterly basis under the current CECL model using the same methodologies as portfolio loans, taking into consideration the likelihood that funding will occur and is included in other liabilities on the Company’s consolidated balance sheets. The Company records an ACL on

off-balance

sheet credit exposures, unless the commitments to extend credit are unconditionally cancelable. During the three months ended September 30, 2024, the Company recorded a provision for credit losses on

off-balance

sheet credit exposures of $5,000 compared to a credit for credit losses of $(88,000) for the three months ended September 30, 2023. Our allowance for credit losses (ACL) on

off-balance

sheet credit exposures was $103,000 and $98,000 at September 30, 2024 and June 30, 2024, respectively. This increase was primarily due to an increase in loans with unfunded balances without the Company’s ability to cancel on demand.

Table of Contents

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

Cautionary Note Regarding Forward-Looking Statements

This Quarterly Report on Form 10-Q may contain forward-looking statements within the meaning of the federal securities laws. These statements are not historical facts, but rather are statements based on management’s current expectations regarding its business strategies and their intended results and IF Bancorp, Inc.’s (“the Company”) future performance. Forward-looking statements are preceded by terms such as “expects,” “believes,” “anticipates,” “intends” and similar expressions.

Management’s ability to predict results or the effect of future plans or strategies is inherently uncertain. Factors that could have a material adverse effect on our actual results include, but are not limited to, general economic conditions, changes in the interest rate environment, legislative or regulatory changes that may adversely affect our business, changes in accounting policies and practices, changes in competition and demand for financial services, adverse changes in the securities markets and changes in the quality or composition of the Association’s loan or investment portfolios.

Additional factors that may affect our results are discussed under “Item 1A.—Risk Factors”, in the Company’s Annual Report on Form 10-K for the year ended June 30, 2024, and the Company’s other filings with the SEC. These factors should be considered in evaluating the forward-looking statements and undue reliance should not be placed on such statements. IF Bancorp, Inc. assumes no obligation to update any forward-looking statement, except as may be required by law.

Overview

On July 7, 2011, we completed our initial public offering of common stock in connection with the Association’s mutual-to-stock conversion, selling 4,496,500 shares of common stock at $10.00 per share, including 384,900 shares sold to the Association’s employee stock ownership plan, and raising approximately $45.0 million of gross proceeds. We also established a charitable foundation, Iroquois Federal Foundation, to which we contributed 314,755 shares of our common stock. As of September 30, 2024, the Company had repurchased 1,674,479 shares of common stock under stock repurchase plans.

The Company is a savings and loan holding company and is subject to regulation by the Board of Governors of the Federal Reserve System. The Company’s business activities are limited to oversight of its investment in the Association.

The Association is primarily engaged in providing a full range of banking and mortgage services to individual and corporate customers within a 100-mile radius of its locations in Watseka, Danville, Clifton, Hoopeston, Savoy, Champaign, and Bourbonnais, Illinois and Osage Beach, Missouri. The principal activity of the Association’s wholly-owned subsidiary, L.C.I. Service Corporation (“L.C.I.”), is the sale of property and casualty insurance. The Association is subject to regulation by the Office of the Controller of the Currency and the Federal Deposit Insurance Corporation.

Our results of operations depend primarily on our net interest income. Net interest income is the difference between the interest income we earn on our interest-earning assets, consisting primarily of loans, investment securities and other interest-earning assets, and the interest paid on our interest-bearing liabilities, consisting primarily of savings and transaction accounts, certificates of deposit, and Federal Home Loan Bank of Chicago advances. Our results of operations also are affected by our provision for credit losses, noninterest income and noninterest expense. Noninterest income consists primarily of customer service fees, brokerage commission income, insurance commission income, net realized gains on loan sales, mortgage banking income, and income on bank-owned life insurance. Noninterest expense consists primarily of compensation and benefits, occupancy and equipment, data processing, professional fees, marketing, office supplies, federal deposit insurance premiums, and foreclosed assets. Our results of operations also may be affected significantly by general and local economic and competitive conditions, changes in market interest rates, governmental policies and actions of regulatory authorities.

Our net interest rate spread (the difference between the yield on average interest-earning assets and the cost of average interest-bearing liabilities) was 1.93% and 1.98% for the three months ended September 30, 2024 and 2023, respectively. Net interest income increased to $4.8 million for the three months ended September 30, 2024 from $4.6 million for the three months ended September 30, 2023.

Our emphasis on conservative loan underwriting has historically resulted in relatively low levels of non-performing assets. Our non-performing assets (consisting exclusively of non-performing loans) totaled $201,000 or 0.1% of total loans at September 30, 2024, and $173,000, or 0.1% of total loans at June 30, 2024.

At September 30, 2024, the Association was categorized as “well capitalized” under federal regulations.

Our net income for the three months ended September 30, 2024 was $633,000, compared to a net income of $466,000 for the three months ended September 30, 2023. The increase in net income was due to an increase in net interest income and an increase in noninterest income, partially offset by an increase in noninterest expense and an increase in provision for credit losses.

Management’s discussion and analysis of the financial condition and results of operations at and for three months ended September 30, 2024 and 2023 is intended to assist in understanding the financial condition and results of operations of the Association. The information contained in this section should be read in conjunction with the unaudited financial statements and the notes thereto, appearing in Part I, Item 1 of this Quarterly Report on Form 10-Q.

Critical Accounting Policies

We define critical accounting policies as those policies that require management to exercise significant judgment or discretion or make significant assumptions that have, or could have, a material impact on the carrying value of certain assets or on income. We consider the following to be our critical accounting policies.

Allowance for Credit Losses. The Company believes the allowance for credit losses for loans is the critical accounting policy that requires the most significant judgments and assumptions used in the preparation of the consolidated financial statements. The allowance for credit losses for loans represents the best estimate of losses inherent in the existing loan portfolio. An estimate of potential losses inherent in the loan portfolio are determined and an allowance for those losses is established by factors considered by the Company during the evaluation of the overall adequacy of the allowance which include historical net loan losses, the level and composition of nonaccrual, past due and loan modifications with borrowers experiencing financial difficulty, trends in volumes and terms of loans, effects of changes in risk selection and underwriting standards or lending practices, lending staff changes, concentrations of credit, industry conditions and the current economic conditions in the region where the Company operates. In addition, a forecast, using reasonable and supportable future conditions, is prepared that is used to estimate expected changes to existing and historical conditions in the current period.

The Company utilizes a current expected credit loss (“CECL”) methodology which relies on segmenting the loan portfolio into pools with similar risks, tracking the performance of the pools over time, and using the data to determine pool loss experience. Based on our estimate of the level of allowance for credit losses required, we record a provision for credit losses as a charge to earnings to maintain the allowance for credit losses at an appropriate level. The allowance for credit losses on most loans is measured on a collective (pool) basis for loans with similar risk characteristics. The Company estimates the appropriate level of allowance for credit losses for certain collateral-dependent loans by evaluating them individually. The Company also uses the CECL model to calculate the allowance for credit losses on off-balance sheet credit exposures, such as undrawn amounts on lines of credit. While the allowance for credit losses on loans is reported as a contra-asset asset for loans, the allowance for credit losses on off-balance sheet credit exposures is reported as a liability.

The allowance for credit losses is evaluated on a regular basis by management and reflects consideration of all significant factors that affect the collectability of the loan portfolio. This evaluation is inherently subjective as it requires estimates that are subject to significant revision as more information becomes available. Actual loan losses may be significantly more than the allowance for credit losses we have established which could have a material negative effect on our financial results.

Income Tax Accounting. The provision for income taxes is based upon income in our condensed consolidated financial statements, rather than amounts reported on our income tax return. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect of a change in tax rates on our deferred tax assets and liabilities is recognized as income or expense in the period that includes the enactment date. Under U.S. GAAP, a valuation allowance is required to be recognized if it is more likely than not that a deferred tax asset will not be realized. The determination as to whether we will be able to realize the deferred tax assets is highly subjective and dependent upon judgment concerning our evaluation of both positive and negative evidence, our forecasts of future income, applicable tax planning strategies, and assessments of current and future economic and business conditions. Positive evidence includes the existence of taxes paid in available carryback years as well as the probability that taxable income will be generated in future periods, while negative evidence includes any cumulative losses in the current year and prior two years and general business and economic trends. Any reduction in estimated future taxable income may require us to record a valuation allowance against our deferred tax assets. Any required valuation allowance would result in additional income tax expense in the period and could have a significant impact on our future earnings. Positions taken in our tax returns may be subject to challenge by the taxing authorities upon examination. The benefit of an uncertain tax position is initially recognized in the financial statements only when it is more likely than not the position will be sustained upon examination by the tax authorities. Such tax positions are both initially and subsequently measured as the largest amount of tax benefit that is greater than 50% likely of being realized upon settlement with the tax authority, assuming full knowledge of the position and all relevant facts. Differences between our position and the position of tax authorities could result in a reduction of a tax benefit or an increase to a tax liability, which could adversely affect our future income tax expense.

There were no material changes to the critical accounting policies disclosed in the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2024.

Comparison of Financial Condition at September 30 and June 30, 2024

Total assets increased $5.7 million, or 0.6%, to $893.4 million at September 30, 2024 from $887.7 million at June 30, 2024. The increase was primarily due to an $7.8 million increase in net loans and a $2.2 million increase in investment securities, partially offset by a $1.8 million decrease in cash and cash equivalents.

Net loans receivable increased by $7.8 million, or 1.2%, to $647.1 million at September 30, 2024, from $639.3 million at June 30, 2024. The increase in net loans receivable during this period was due primarily to a $5.1 million, or 2.5%, increase in commercial real estate loans, a $7.1 million, or 7.7%, increase in commercial business loans, and a $68,000, or 0.7%, increase in home equity lines of credit, partially offset by a $2.9 million, or 8.5%, decrease in construction loans, a $929,000, or 0.5%, decrease in one- to four-family mortgage loans, a $125,000, or 0.1% decrease in multi-family loans, and a $541,000, or 7.0%, decrease in consumer loans.

Investment securities, consisting entirely of available-for-sale securities, increased $2.2 million, or 1.1%, to $192.7 million at September 30, 2024 from $190.5 million at June 30, 2024. We had no securities held to maturity at September 30, 2024 or June 30, 2024.

Between June 30, 2024, and September 30, 2024, accrued interest receivable increased $366,000 to $3.8 million, and Federal Home Loan Bank (FHLB) stock increased $259,000 to $4.8 million, while deferred income taxes decreased $1.9 million to $8.6 million, other assets decreased $1.1 million to $1.6 million and premises and equipment decreased $82,000 to $10.5 million. The increase in accrued interest receivable was the result of increases in both the average balances of loans and the average yields of loans, and the increase in FHLB stock was due to an increased stock ownership requirement due to an increase in FHLB advances. The decrease in deferred income taxes was mostly due to a decrease in unrealized losses on available-for-sale securities. The decrease in other assets was mostly due to receipt of previously outstanding receivables, and the decrease in premises and equipment was the result of ordinary depreciation.

At September 30, 2024, our investment in bank-owned life insurance was $15.0 million, an increase of $113,000 from $14.9 million at June 30, 2024. We invest in bank-owned life insurance to provide us with a funding source for our benefit plan obligations. Bank-owned life insurance also generally provides us noninterest income that is non-taxable. Federal regulations generally limit our investment in bank-owned life insurance to 25% of our Tier 1 capital plus our allowance for credit losses, which totaled $23.7 million at September 30, 2024.

Deposits decreased $50.0 million, or 6.9%, to $677.2 million at September 30, 2024 from $727.2 million at June 30, 2024. Noninterest bearing demand accounts decreased $66.5 million, or 64.3%, to $36.9 million, while certificates of deposit, excluding brokered certificates of deposit, decreased $130,000, or 0.1%, to $290.5 million, savings, NOW, and money market accounts combined increased $22.1 million, or 7.3%, to $326.3 million, and brokered certificates of deposit decreased $5.5 million, or 19.0%, to $23.5 million. The large decrease in noninterest bearing demand accounts was due to approximately $62.7 million in deposits from a public entity that collects real estate taxes that were withdrawn during the three months ended September 30, 2024, when tax monies were distributed. Repurchase agreements increased $141,000, or 0.8%, to $17.9 million at September 30, 2024 from $17.8 million at June 30, 2024. Borrowings consisted of advances from the Federal Home Loan Bank of Chicago, which increased $50.5 million to $83.5 million at September 30, 2024 from $33.0 million at June 30, 2024, and borrowing from the Federal Reserve Bank Term Funding Program (BTFP), which decreased $75,000 to $25.2 million at September 30, 2024 from $25.3 million at June 30, 2024.

Accrued interest payable decreased $253,000, or 8.4%, to $2.8 million at September 30, 2024 from $3.0 million at June 30, 2024, while advances from borrowers for taxes and insurance decreased $458,000, or 47.3%, to $510,000 at September 30, 2024 from $968,000 at June 30, 2024, allowance for credit losses on off-balance sheet credit exposures increased $5,000 to $103,000 at September 30, 2024 from $98,000 at June 30, 2024, and other liabilities increased $1.1 million, or 26.1%, to $5.4 million at September 30, 2024 from $4.3 million at June 30, 2024. The decrease in accrued interest payable was mostly due to a discontinued CD special with a 7-month term and accrued interest payable of $678,000 at June 30, 2024, which matured in the three months ended September 30, 2024. The decrease in advances from borrowers for taxes and insurance was attributable to the timing of the payment of real estate taxes and insurance, the increase in the allowance for credit losses on off-balance sheet credit exposures was due to increases in loans with unfunded balances without the Bank’s ability to cancel on demand, and the increase in other liabilities was mostly due to a fluctuation in items in process.

Total equity increased $4.8 million, or 6.6%, to $78.8 million at September 30, 2024 from $73.9 million at June 30, 2024. Equity increased primarily due to an increase of $4.8 million in accumulated other comprehensive income (loss), net of tax, net income of $633,000 and ESOP and stock equity plan activity of $134,000, partially offset by the accrual of approximately $670,000 in dividends to our stockholders. The increase in accumulated other comprehensive income (loss) was primarily due to decrease in unrealized depreciation on available-for-sale securities, net of tax.

Comparison of Operating Results for the Three Months Ended September 30, 2024 and 2023

General. Net income increased $167,000 to $633,000 for the three months ended September 30, 2024 from $466,000 for the three months ended September 30, 2023. The increase was primarily due to an increase in net interest income and an increase in noninterest income, partially offset by an increase in noninterest expenses and an increase in provision for credit losses.

Net Interest Income. Net interest income increased by $238,000, or 5.2%, to $4.8 million for the three months ended September 30, 2024 from $4.6 million for the three months ended September 30, 2023. The increase was due to an increase of $1.6 million in interest income, partially offset by an increase of $1.4 million in interest expense. Our net interest margin increased by one basis point to 2.27% for the three months ended September 30, 2024 compared to 2.26% for the three months ended September 30, 2023, while our interest rate spread decreased by five basis points to 1.93% for the three months ended September 30, 2024 compared to 1.98% for the three months ended September 30, 2023. A $38.1 million, or 4.7%, increase in the average balance of interest-earning assets was partially offset by a $33.25 million, or 4.6%, increase in the average balance of interest-bearing liabilities.

Interest and Dividend Income. Interest income increased by $1.6 million, or 17.5%, to $10.9 million for the three months ended September 30, 2024, from $9.3 million for the three months ended September 30, 2023. The increase in interest income was primarily due to a $1.7 million increase in interest income on loans, and a $25,000 increase in other interest income, partially offset by a $145,000 decrease in interest income on securities. The increase in interest income on loans resulted from a 72 basis point, or 14.2%, increase in the average yield on loans to 5.83% for the three months ended September 30, 2024, from 5.11% for the three months ended September 30, 2023, and a $44.4 million, or 7.3%, increase in the average balance of loans to $649.8 million for the three months ended September 30, 2024, from $605.4 million for the three months ended September 30, 2023. Interest on securities decreased $145,000, or 10.2%, as a result of a 22 basis point, or 7.5%, decrease in the average yield on securities to 2.69% for the three months ended September 30, 2024 from 2.91% for the three months ended September 30, 2023, and a $5.7 million, or 2.9%, decrease in the average balance of securities, to $189.8 million for the three months ended September 30, 2024, from $195.6 million for the three months ended September 30, 2023.

Interest Expense. Interest expense increased $1.4 million, or 29.4%, to $6.1 million for the three months ended September 30, 2024, from $4.7 million for the three months ended September 30, 2023. The increase was due to both increases in the average cost of interest-bearing liabilities and by increases in the average balance of interest-bearing liabilities.

Interest expense on interest-bearing deposits increased by $918,000, or 23.9%, to $4.8 million for the three months ended September 30, 2024 from $3.8 million for the three months ended September 30, 2023. This increase was due to a 58 basis point, or 24.1%, increase in the average cost of interest bearing deposits to 2.98% for the three months ended September 2024, from 2.40% for the three months ended September 30, 2023, and a $554,000, or 0.1% increase in the average balance of interest-bearing deposits to $639.0 million for the three months ended September 30, 2024 from $638.5 million for the three months ended September 30, 2023.

Interest expense on borrowings, including FHLB advances, repurchase agreements and other borrowings, increased $466,000, or 53.4%, to $1.3 million for the three months ended September 30, 2024, from $873,000 for the three months ended September 30, 2023. This increase was due to an increase in the average balance of borrowings to $119.7 million for the three months ended September 30, 2024 from $87.1 million for the three months ended September 30, 2023, and a 46 basis point increase in the average cost of such borrowings to 4.47% for the three months ended September 30, 2024 from 4.01% for the three months ended September 30, 2023.

Provision (Credit) for Credit Losses. We establish provisions for credit losses, which are charged to operations in order to maintain the allowance for credit losses at a level we consider necessary to absorb potential credit losses inherent in our loan portfolio. We recorded a provision for credit losses of $382,000 for the three months ended September 30, 2024, which includes a provision for credit losses on loans of $377,000 and a provision for credit losses on off-balance sheet credit exposures of $5,000, compared to a provision for credit losses of $222,000 for the three months ended September 30, 2023, which includes a provision for credit losses on loans of $310,000 and a credit for credit losses on off-balance sheet credit exposures of $88,000. The allowance for credit losses on loans was $7.5 million, or 1.14% of total loans, at September 30, 2024, compared to $7.4 million, or 1.20% of total loans at September 30, 2023, and $7.5 million, or 1.16% of total loans, at June 30, 2024. During the three months ended September 30, 2024, a net loss of $404,000 was recorded, while during the three months ended September 30, 2023, a net recovery of $1,000 was recorded.

The following table sets forth information regarding the allowance for credit losses and nonperforming assets at the dates indicated:


	Three Months Ended September 30, 2024			Year Ended June 30, 2024
Allowance to non-performing loans		3717.41	%		4329.57	%
Allowance to total loans outstanding at the end of the period		1.14	%		1.16	%
Net charge-offs (recoveries) to average total loans outstanding during the period, annualized		0.25	%		(0.03	)%
Total non-performing loans to total loans		0.03	%		0.03	%
Total non-performing assets to total assets		0.02	%		0.02	%

Noninterest Income. Noninterest income increased $280,000, or 24.8%, to $1.4 million for the three months ended September 30, 2024 from $1.1 million for the three months ended September 30, 2023. The increase was primarily due to an increase in customer service fees and other income, partially offset by a decrease in mortgage banking income (loss), net, and net realized loss on sale of available-for-sale securities. For the three months ended September 30, 2024, customer service fees increased $24,000 to $125,000, other income increased $450,000 to $761,000, while mortgage banking income (loss), net, decreased $182,000 to a loss of $42,000 and net realized gains (losses) on sale of available-for-sale securities decreased by $71,000 to a loss of $71,000, from the three months ended September 30, 2023. The increase in customer service fees was due to more customer services performed in the three months ended September 30, 2024, and the increase in other income was due to the receipt of an insurance settlement filed as a result of HELOC check fraud. The decrease in mortgage banking income (loss), net was a result of a decrease in the valuation of mortgage servicing rights and a decrease in loan servicing fees in the three months ended September 30, 2024. The decrease in net realized gain (loss) on sale of available-for-sale securities was due to a few securities sold at a net loss in the three months ended September 30, 2024.

Noninterest Expense. Noninterest expense increased $148,000, or 3.1%, to $5.0 million for three months ended September 30, 2024 from $4.8 million for the three months ended September 30, 2023. Compensation and benefits increased $52,000, or 1.7%, advertising increased $24,000, or 31.2%, professional services increased $44,000, or 47.8%, and equipment expense increased $33,000, or 6.0%. These increases were partially offset by a $10,000, or 3.5%, decrease in office occupancy, and a $17,000, or 3.8%, decrease in other operating expense. Compensation and benefits increased due to normal salary increases, annual incentive plan increases and increased medical costs, advertising increased primarily due to increased television advertising and community sponsorship in the three months ended September 30, 2024, professional services increased due to additional services received during the three months ended September 30, 2024, and equipment expense increased due to an increase in the cost of core processing. Office occupancy expense decreased due to slight decreases in office building repairs and real estate taxes, and other operating expenses decreased due to a decrease in loan-related expenses.

Income Tax Expense. We recorded a provision for income tax of $218,000 for the three months ended September 30, 2024, compared to a provision for income tax of $175,000 for the three months ended September 30, 2023, reflecting effective tax rates of 25.6% and 27.3%, respectively.

Asset Quality

At September 30, 2024, our non-accrual loans totaled $163,000, which consisted of one commercial real estate loan in the amount of $142,000 and one consumer loan for $21,000.

At September 30, 2024 we had one loan in the amount of $38,000 that was delinquent 90 days or greater and still accruing interest.

At September 30, 2024, loans classified as substandard equaled $3.1 million. Loans classified as substandard consisted of $216,000 in one- to four-family loans, $231,000 in multi-family loans, $1.2 million in commercial real estate loans, $1.5 million in commercial business loans and $22,000 in consumer loans. No loans were classified as doubtful or loss at September 30, 2024.

At September 30, 2024, watch assets consisted of $66,000 in one- to four-family loans.

Loan Modifications with Borrowers Experiencing Financial Difficulty. The Company made no loan modifications for borrowers with financial difficulties in the three months ended September 30, 2024 and two such modifications in the year ended June 30, 2024. One of these modifications was a $252,000 commercial real estate loan, the other was a $133,000 commercial business loan, and both were modified to allow for a payment delay.

Foreclosed Assets. At September 30 2024 and June 30, 2024, we had no foreclosed assets.

Allowance for Credit Loss Activity

The Company regularly reviews its allowance for credit losses and adjusts its balance based on management’s analysis of the loan portfolio, the amount of non-performing and classified loans, as well as general economic conditions. Although the Company maintains its allowance for credit losses at a level that it considers sufficient to provide for losses, there can be no assurance that future losses will not exceed internal estimates. In addition, the amount of the allowance for credit losses is subject to review by regulatory agencies, which can order the establishment of additional loss provisions. The following table summarizes changes in the allowance for credit losses over the three-month periods ended September 30, 2024 and 2023:


	Three months ended September 30,
	2024			2023
Balance, beginning of period	$	7,499		$	7,139
Loans charged off:
Real estate loans:
One- to four-family		—			—
Multi-family		(350	)		—
Commercial		—			—
HELOC		—			—
Construction		—			—
Commercial business		(50	)		—
Consumer		(9	)		(7	)

Gross charged off loans		(409	)		(7	)

Recoveries of loans previously charged off:
Real estate loans:
One- to four-family		1			—
Multi-family		—			—
Commercial		—			—
HELOC		—			—
Construction		—			—
Commercial business		2			6
Consumer		2			2

Gross recoveries of charged off loans		5			8

Net (charge-offs) recoveries		(404	)		1

Provision (credit) charged to expense		377			310

Balance, end of period	$	7,472		$	7,450

The allowance for credit losses has been calculated based upon an evaluation of pertinent factors underlying the various types and quality of the Company’s loans. Management considers such factors as the repayment status of a loan, the estimated net fair value of the underlying collateral, the borrower’s intent and ability to repay the loan, local economic conditions, and the Company’s historical loss ratios. We maintain the allowance for credit losses through the provisions

for credit losses that we charge to income. We charge losses on loans against the allowance for credit losses when we believe the collection of loan principal is unlikely. The allowance for credit losses decreased $27,000 and was $7.5 million at both September 30, 2024, and at June 30, 2024. This slight decrease in the allowance for credit losses on loans was made to bring the allowance for credit losses on loans to a level that represents the Company’s best estimate of the reserve necessary to adequately account for probable losses expected over the remaining contractual life of the loans.

Within each pool, risk elements are evaluated that have specific impacts to the borrowers within the pool. These, along with the general risks and events, and the specific lending policies and procedures by loan type, are analyzed to estimate the qualitative factors used to adjust the historical loss rates. Factors considered by the Company during the evaluation of the overall adequacy of the allowance include historical net loan losses, the level and composition of nonaccrual, past due and troubled debt restructurings, trends in volumes and terms of loans, effects of changes in risk selection and underwriting standards or lending practices, lending staff changes, concentrations of credit, industry conditions and the current economic conditions in the region where the Company operates. Management reviews economic factors including the potential for reduced cash flow for commercial operating loans from reduction in sales or increased operating costs, decreased occupancy rates for commercial buildings, reduced levels of home sales for commercial land developments, increased operating costs for businesses, and increased levels of unemployment and bankruptcy impacting consumer’s ability to pay. Each of these economic uncertainties was taken into consideration in developing the level of the reserve, and management has included a qualitative factor within the ACL. In addition, a forecast, using reasonable and supportable future conditions, is prepared that is used to estimate expected changes to existing and historical conditions in the current period.

While management believes that our asset quality remains strong, it recognizes that, due to the continued growth in the loan portfolio and the potential changes in market conditions, our level of nonperforming assets and resulting charge-offs may fluctuate. Higher levels of net charge-offs requiring additional provisions for credit losses could result. Although management uses the best information available, the level of the allowance for credit losses remains an estimate that is subject to significant judgment and short-term change.

Liquidity and Capital Resources

Liquidity is the ability to meet current and future financial obligations of a short-term nature. Our primary sources of funds consist of deposit inflows, loan sales and repayments, advances from the Federal Home Loan Bank of Chicago, and maturities of securities. While maturities and scheduled amortization of loans and securities are predictable sources of funds, deposit flows and mortgage prepayments are greatly influenced by general interest rates, economic conditions and competition. Our Asset/Liability Management Committee is responsible for establishing and monitoring our liquidity targets and strategies in order to ensure that sufficient liquidity exists for meeting the borrowing needs and deposit withdrawals of our customers as well as unanticipated contingencies. For the three months ended September 30, 2024 and the year ended June 30, 2024, our liquidity ratio averaged 24.3% and 25.9% of our total assets, respectively. We believe that we had enough sources of liquidity to satisfy our short- and long-term liquidity needs as of September 30, 2024.

We regularly monitor and adjust our investments in liquid assets based upon our assessment of: (i) expected loan demand; (ii) expected deposit flows; (iii) yields available on interest-earning deposits and securities; and (iv) the objectives of our asset/liability management program. Excess liquid assets are invested generally in interest-earning deposits and short- and medium-term securities.

Our most liquid assets are cash and cash equivalents. The levels of these assets are affected by our operating, financing, lending and investing activities during any given period. At September 30, 2024, cash and cash equivalents totaled $7.8 million. Interest-earning time deposits which can offer additional sources of liquidity, totaled $250,000 at September 30, 2024.

Our cash flows are derived from operating activities, investing activities and financing activities as reported in our Condensed Consolidated Statement of Cash Flows included in our financial statements. Net cash provided by operating activities was $2.2 million and $1.0 million for the three months ended September 30, 2024 and 2023, respectively. Net cash used in investing activities consisted primarily of proceeds from the sales, maturities, pay downs of available-for-sale

securities, partially offset by disbursements for loan originations and the purchase of securities. Net cash used in investing activities was $(4.0) million and $(26.0) million for the three months ended September 30, 2024 and 2023, respectively. Net cash provided by financing activities consisted primarily of the activity in deposit accounts, FHLB advances and other borrowings. The net cash provided by financing activities was $90,000 and $27.6 million for the three months ended September 30, 2024 and 2023, respectively.

The Company must also maintain adequate levels of liquidity to ensure the availability of funds to satisfy loan commitments. The Company anticipates that it will have sufficient funds available to meet its current commitments principally through the use of current liquid assets and through its borrowing capacity discussed above. The following table summarizes these commitments at September 30, 2024 and June 30, 2024.


	September 30, 2024		June 30, 2024
	(Dollars in thousands)
Commitments to fund loans	$	1,458	$	8,317
Lines of credit		71,272		71,240

At September 30, 2024, certificates of deposit due within one year of September 30, 2024 totaled $260.4 million, or 38.5% of total deposits. Depending on market conditions, we may be required to pay higher rates on such deposits or other borrowings than we currently pay on the certificates of deposit due on or before September 30, 2025. It is our intention as we continue to grow our commercial real estate portfolio, to emphasize lower cost deposit relationships with these commercial loan customers and thereby replace the higher cost certificates with lower cost deposits. We have the ability to attract and retain deposits by adjusting the interest rates offered.

Liquidity management is both a daily and long-term function of business management. If we require funds beyond our ability to generate them internally, borrowing agreements, which provide an additional source of funds, exist with the Federal Home Loan Bank of Chicago, Federal Reserve Discount Window, Federal Reserve BTFP, and CIBC Bank USA. At September 30, 2024, our borrowings consisted of $83.5 million in Federal Home Loan Bank advances and $25.2 million from the Federal Reserve BTFP. At September 30, 2024, we had the ability to borrow up to an additional $45.6 million from the Federal Home Loan Bank of Chicago, we had $14.0 million available from CIBC Bank, and also had the ability to borrow $35.3 million from the Federal Reserve based on current collateral pledged.

The Association is subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory and discretionary actions by regulators that if undertaken, could have a direct material effect on the Association’s financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Association must meet specific capital guidelines involving quantitative measures of the Association’s assets, liabilities, and certain off-balance-sheet items as calculated under regulatory accounting practices. The Association’s capital amounts, and classification are also subject to qualitative judgments by the regulators about components, risk-weightings and other factors.

In addition, to avoid restrictions on capital distributions, including dividend payments and stock repurchases, or discretionary bonus payments to executives, a covered banking organization must maintain a “capital conservation buffer” of 2.5% on top of its minimum risk-based capital requirements. This buffer must consist solely of Tier 1 Common Equity and the buffer applies to all three measurements: Common Equity Tier 1, Tier 1 capital and total capital.


	September 30, 2024 Actual			June 30, 2024 Actual			Minimum to Be Well Capitalized
Community Bank Leverage Ratio		9.5	%		9.2	%		9.0	%

Average Balances and Yields

The following tables set forth average balance sheets, average yields and costs, and certain other information at and for the periods indicated. Yields and costs are annualized. Tax-equivalent yield adjustments have not been made for tax-exempt securities. All average balances are based on month-end balances, which management deems to be representative of the operations of the Company. Non-accrual loans were included in the computation of average balances but have been reflected in the table as loans carrying a zero yield. The yields set forth below include the effect of deferred fees, discounts and premiums that are amortized or accreted to interest income or expense.


	For the Three Months Ended September 30,
	2024							2023
	Average Balance		Interest Income/ Expense		Yield/Cost			Average Balance		Interest Income/ Expense		Yield/Cost
	(Dollars in thousands)
Assets
Loans	$	649,753		9,475		5.83	%	$	605,378		7,733		5.11	%
Securities:
U.S. Treasury		—		—		—			434		2		1.84	%
U.S. Government and federal agency		5,732		35		2.44	%		6,441		40		2.48	%
Mortgage-backed:
GSE residential		166,750		1,122		2.69	%		170,555		1,241		2.91	%
Small Business Administration		14,267		96		2.69	%		14,739		112		3.04	%
State and political subdivisions		3,099		23		2.97	%		3,417		26		3.04	%

Total securities		189,848		1,276		2.69	%		195,586		1,421		2.91	%
Other		10,074		162		6.43	%		10,644		137		5.15	%

Total interest-earning assets		849,675		10,913		5.14	%		811,608		9,291		4.58	%
Non-interest earning assets		38,980							40,981

Total assets	$	888,655						$	852,589


	For the Three Months Ended September 30,
	2024								2023
	Average Balance			Interest Income/ Expense		Yield/Cost			Average Balance			Interest Income/ Expense		Yield/Cost
	(Dollars in thousands)
Liabilities and Stockholders’ Equity
Interest-bearing liabilities:
Interest-bearing checking or NOW	$	100,193			40		0.16	%	$	103,876			45		0.17	%
Savings accounts		54,365			42		0.31	%		62,993			105		0.67	%
Money market accounts		167,690			1,208		2.88	%		183,201			1,265		2.76	%
Certificates of deposit		316,769			3,463		4.37	%		288,393			2,420		3.36	%

Total interest-bearing deposits		639,017			4,753		2.98	%		638,463			3,835		2.40	%
Borrowings and repurchase agreements		119,711			1,339		4.47	%		87,065			873		4.01	%

Total interest-bearing liabilities		758,728			6,092		3.21	%		725,528			4,708		2.60	%
Noninterest-bearing liabilities		46,165								51,786
Other Noninterest-bearing liabilities		6,602								5,950

Total liabilities		811,495								783,264
Stockholders’ equity		77,160								69,325

Total liabilities and stockholders’ equity	$	888,655							$	852,589

Net interest income				$	4,821							$	4,583

Interest rate spread (1)							1.93	%							1.98	%
Net interest margin (2)							2.27	%							2.26	%
Net interest-earning assets (3)	$	90,947							$	86,080

Average interest-earning assets to interest-bearing liabilities		1.12	%							1.12	%

(1)	Net interest rate spread represents the difference between the yield on average interest-earning assets and the cost of average interest-bearing liabilities.

(2)	Net interest margin represents net interest income divided by average total interest-earning assets.

(3)	Net interest-earning assets represents total interest-earning assets less total interest-bearing liabilities.

Rate/Volume Analysis

The following table presents the effects of changing rates and volumes on our net interest income for the periods indicated. The rate column shows the effects attributable to changes in rate (changes in rate multiplied by prior volume). The volume column shows the effects attributable to changes in volume (changes in volume multiplied by prior rate). The net column represents the sum of the prior columns. For purposes of this table, changes attributable to both rate and volume, which cannot be segregated, have been allocated to the changes due to rate and the changes due to volume in proportion to the relationship of the absolute dollar amounts of change in each.


	Three Months Ended September 30, 2024 vs. 2023
	Increase (Decrease) Due to						Total Increase (Decrease)
	Volume			Rate			Total Increase (Decrease)
Interest-earning assets:
Loans	$	596		$	1,146		$	1,742
Securities		(41	)		(104	)		(145	)
Other		(43	)		68			25

Total interest-earning assets	$	512		$	1,110		$	1,622

Interest-bearing liabilities:
Interest-bearing checking or NOW	$	(2	)	$	(3	)	$	(5	)
Savings accounts		(13	)		(50	)		(63	)
Certificates of deposit		257			786			1,043
Money market accounts		(328	)		271			(57	)

Total interest-bearing deposits		(86	)		1,004			918
Federal Home Loan Bank advances, other borrowings and repurchase agreements		357			109			466

Total interest-bearing liabilities	$	271		$	1,113		$	1,384

Change in net interest income	$	241		$	(3	)	$	238

Item 3.

Quantitative and Qualitative Disclosures about Market Risk

An internal interest rate risk analysis is performed at least quarterly to assess the Company’s Earnings at Risk and Value at Risk. As of September 30, 2024, there were no material changes in interest rate risk from the analysis disclosed in the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2024, as filed with the Securities and Exchange Commission.

Item 4.

Controls and Procedures

An evaluation was performed under the supervision and with the participation of the Company’s management, including the Company’s principal executive officer and principal financial officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) promulgated under the Securities and Exchange Act of 1934, as amended) as of September 30, 2024. Based upon such evaluation, the principal executive officer and principal financial officer concluded that, as of the end of the period covered by this report, the Company’s disclosure controls and procedures were effective for the purpose of ensuring that the information required to be disclosed in the reports that the Company files or submits under the Exchange Act with the Securities and Exchange Commission (the “SEC”) (1) is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and (2) is accumulated and communicated to the Company’s management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure.

During the quarter ended September 30, 2024, there have been no changes in the Company’s internal controls over financial reporting that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

Item 6.

Exhibits

31.1

Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2

Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.*

101

Interactive data files pursuant to Rule 405 of Regulation S-T: (i) the Condensed Consolidated Balance Sheets as of September 30 and June 30, 2024, (ii) the Condensed Consolidated Statements of Income for the three months ended September 30, 2024 and 2023, (iii) the Condensed Consolidated Statements of Comprehensive Income for the three months ended September 30, 2024and 2023, (iv) the Condensed Consolidated Statements of Stockholders’ Equity for the three months ended September 30, 2024 and 2023, (v) the Condensed Consolidated Statements of Cash Flows for the three months ended September 30, 2024 and 2023, and (vi) the notes to the Condensed Consolidated Financial Statements.

*	This information is furnished and not filed for purposes of Section 11 and 12 of the Securities Act of 1933 and Section 18 of the Securities Exchange Act of 1934.


				IF BANCORP, INC.

Date: November 12, 2024				/s/ Walter H. Hasselbring III
				Walter H. Hasselbring III
				President and Chief Executive Officer

Date: November 12, 2024				/s/ Pamela J. Verkler
				Pamela J. Verkler
				Senior Executive Vice President and Chief Financial Officer (Principal Financial Officer)


		Page
	Part I. Financial Information

Item 1.	Condensed Consolidated Financial Statements		1

	Condensed Consolidated Balance Sheets as of September 30, 2024 (unaudited) and June 30, 2024		1

	Condensed Consolidated Statements of Income for the Three Months Ended September 30, 2024 and 2023 (unaudited)		2

	Condensed Consolidated Statements of Comprehensive Income (Loss) for the Three Months Ended September 30, 2024 and 2023 (unaudited)		3

	Condensed Consolidated Statements of Stockholders’ Equity for the Three Months Ended September 30, 2024 and 2023 (unaudited)		4

	Condensed Consolidated Statements of Cash Flows for the Three Months Ended September 30, 2024 and 2023 (unaudited)		5

	Notes to Condensed Consolidated Financial Statements (unaudited)		6

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		34

Item 3.	Quantitative and Qualitative Disclosures about Market Risk		45

Item 4.	Controls and Procedures		45

Part II. Other Information

Item 1.	Legal Proceedings		46

Item 1A.	Risk Factors		46

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		46

Item 3.	Defaults upon Senior Securities		46

Item 4.	Mine Safety Disclosures		46

Item 5.	Other Information		46

Item 6.	Exhibits		47

	Signature Page		48


	Common Stock		Additional Paid-In Capital		Unearned ESOP Shares			Retained Earnings			Accumulated Other Comprehensive Loss			Total
For the three months ended September 30, 2024
Balance, June 30, 2024	$	33	$	51,913	$	(1,347	)	$	43,876		$	(20,559	)	$	73,916
Net income		—		—		—			633			—			633
Other comprehensive income		—		—		—			—			4,752			4,752
Dividends on common stock, $0.20 per share		—		—		—			(670	)		—			(670	)
Stock equity plan		—		49		—			—			—			49
ESOP shares earned, 4,811 shares		—		37		48			—			—			85

Balance, September 30, 2024	$	33	$	51,999	$	(1,299	)	$	43,839		$	(15,807	)	$	78,765

For the three months ended September 30, 2023
Balance, June 30, 2023	$	33	$	51,543	$	(1,540	)	$	43,365		$	(21,648	)	$	71,753
Net income		—		—		—			466			—			466
Other comprehensive loss		—		—		—			—			(5,119	)		(5,119	)
Dividends on common stock, $0.20 per share		—		—		—			(672	)		—			(672	)
Stock equity plan		—		90		—			—			—			90
ESOP shares earned, 4,811 shares		—		24		49			—			—			73

Balance, September 30, 2023	$	33	$	51,657	$	(1,491	)	$	43,159		$	(26,767	)	$	66,591