10-Q 1 d835753d10q.htm 10-Q 10-Q
Table of Contents
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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 March 31, 2024
OR
 
☐
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 May 6, 2024.
 
 
 

Table of Contents

IF Bancorp, Inc.

Form 10-Q

Index

 

         Page  
Part I. Financial Information

 

Item 1.

   Condensed Consolidated Financial Statements      1  
  Condensed Consolidated Balance Sheets as of March 31, 2024 (unaudited) and June 30, 2023      1  
  Condensed Consolidated Statements of Income for the Three Months and Nine Months Ended March 31, 2024 and 2023 (unaudited)      2  
  Condensed Consolidated Statements of Comprehensive Income (Loss) for the Three Months and Nine Months Ended March 31, 2024 and 2023 (unaudited)      3  
  Condensed Consolidated Statements of Stockholders’ Equity for the Three and Nine Months Ended March 31, 2024 and 2023 (unaudited)      4  
  Condensed Consolidated Statements of Cash Flows for the Nine Months Ended March 31, 2024 and 2023 (unaudited)      6  
  Notes to Condensed Consolidated Financial Statements (unaudited)      7  

Item 2.

   Management’s Discussion and Analysis of Financial Condition and Results of Operations      38  

Item 3.

   Quantitative and Qualitative Disclosures about Market Risk      53  

Item 4.

   Controls and Procedures      53  
Part II. Other Information

 

Item 1.

   Legal Proceedings      54  

Item 1A.

   Risk Factors      54  

Item 2.

   Unregistered Sales of Equity Securities and Use of Proceeds      54  

Item 3.

   Defaults upon Senior Securities      54  

Item 4.

   Mine Safety Disclosures      54  

Item 5.

   Other Information      54  

Item 6.

   Exhibits      55  
  Signature Page      56  

Table of Contents
PT1000HP6YP2YP5Y
 
Part I. – Financial Information
 
Item 1.
Condensed Consolidated Financial Statements
IF Bancorp, Inc.
Condensed Consolidated Balance Sheets
(Dollars in thousands, except per share amount)
 
    
March 31,
2024
    
June 30,
2023
  
    
(Unaudited)
        
Assets
     
Cash and due from banks
    $ 15,885     $ 10,717  
Interest-bearing demand deposits
      175       271  
  
 
 
    
 
 
  
Cash and cash equivalents
      16,060       10,988  
  
 
 
    
 
 
  
Interest-bearing time deposits in banks
      750       1,250  
Available-for-sale
securities
      195,257       201,299  
Loans, net of allowance for credit losses of $7,725 and $7,139 at March 31, 2024 and June 30, 2023, respectively
      643,326       587,457  
Premises and equipment, net of accumulated depreciation of $9,105 and $9,212 at March 31, 2024 and June 30, 2023, respectively
      10,683       11,092  
Federal Home Loan Bank stock, at cost
      5,419       3,127  
Foreclosed assets held for sale
      7       31  
Accrued interest receivable
      3,749       2,781  
Bank-owned life insurance
      15,079       14,761  
Mortgage servicing rights
      1,454       1,482  
Deferred income taxes
      10,846       11,037  
Other
      2,359       3,671  
  
 
 
    
 
 
  
Total assets
    $ 904,989     $ 848,976  
  
 
 
    
 
 
  
Liabilities and Equity
     
Liabilities
     
Deposits
     
Demand
    $ 43,205     $ 107,567  
Savings, NOW and money market
      315,980       344,151  
Certificates of deposit
      293,603       264,058  
Brokered certificates of deposit
      29,000       19,538  
  
 
 
    
 
 
  
Total deposits
      681,788       735,314  
  
 
 
    
 
 
  
Repurchase agreements
      18,182       10,787  
Federal Home Loan Bank advances
      95,999       19,500  
Other borrowings
      25,300       —   
Advances from borrowers for taxes and insurance
      1,331       1,233  
Accrued post-retirement benefit obligation
      2,448       2,431  
Accrued interest payable
      2,762       1,666  
Allowance for credit losses on
off-balance
sheet credit exposures
      44       216  
Other
      4,751       6,076  
  
 
 
    
 
 
  
Total liabilities
      832,605       777,223  
  
 
 
    
 
 
  
Commitments and Contingencies
     
Stockholders’ Equity
     
Common stock, $.01 par value per share, 100,000,000 shares authorized, 3,353,026 and 3,354,626 shares issued and outstanding at March 31, 2024 and June 30, 2023, respectively
      33       33  
Additional
paid-in
capital
      51,833       51,543  
Unearned ESOP shares, at cost, 139,527 and 153,960 shares at March 31, 2024 and June 30, 2023, respectively
      (1,395 )      (1,540 ) 
Retained earnings
      43,414       43,365  
Accumulated other comprehensive loss, net of tax
      (21,501 )      (21,648 ) 
  
 
 
    
 
 
  
Total stockholders’ equity
      72,384       71,753  
  
 
 
    
 
 
  
Total liabilities and stockholders’ equity
    $ 904,989     $ 848,976  
  
 
 
    
 
 
  
See accompanying notes to the unaudited condensed consolidated financial statements.
 
1
IF Bancorp, Inc.
Condensed Consolidated Statements of Income (Unaudited)
(Dollars in thousands except per share amounts)
 
    
Three Months Ended March 31,
     
Nine Months Ended March 31,
  
    
2024
    
2023
     
2024
     
2023
  
Interest and Dividend Income
           
Interest and fees on loans
    $ 9,273     $ 6,690      $ 25,708      $ 18,889  
Securities:
           
Taxable
      1,364       1,345        4,124        4,048  
Tax-exempt
      23       26        74        80  
Federal Home Loan Bank dividends
      112       64        258        134  
Deposits with other financial institutions
      31       73        159        231  
  
 
 
    
 
 
     
 
 
     
 
 
  
Total interest and dividend income
      10,803       8,198        30,323        23,382  
  
 
 
    
 
 
     
 
 
     
 
 
  
Interest Expense
           
Deposits
      4,756       2,501        12,927        4,560  
Federal Home Loan Bank advances and repurchase agreements
      1,392       661        3,620        1,491  
Line of credit and other borrowings
      396       —         546        —   
  
 
 
    
 
 
     
 
 
     
 
 
  
Total interest expense
      6,544       3,162        17,093        6,051  
  
 
 
    
 
 
     
 
 
     
 
 
  
Net Interest Income
      4,259       5,036        13,230        17,331  
Provision (Credit) for Credit Losses
      (390 )      240        196        253  
  
 
 
    
 
 
     
 
 
     
 
 
  
Net Interest Income After Provision (Credit) for Credit Losses
      4,649       4,796        13,034        17,078  
  
 
 
    
 
 
     
 
 
     
 
 
  
Noninterest Income
           
Customer service fees
      100       91        309        294  
Other service charges and fees
      62       58        195        173  
Insurance commissions
      182       130        556        506  
Brokerage commissions
      166       168        485        607  
Net realized gains (losses) on sales of
available-for-sale
securities
      —        12        —         (171 ) 
Mortgage banking income, net
      126       43        218        267  
Gain on sale of loans
      76       48        186        124  
Bank-owned life insurance income, net
      112       96        318        290  
Other
      316       296        916        938  
  
 
 
    
 
 
     
 
 
     
 
 
  
Total noninterest income
      1,140       942        3,183        3,028  
  
 
 
    
 
 
     
 
 
     
 
 
  
Noninterest Expense
           
Compensation and benefits
      3,081       3,203        8,929        9,414  
Office occupancy
      277       248        854        728  
Equipment
      549       563        1,688        1,725  
Federal deposit insurance
      135       57        435        169  
Stationary, printing and office
      18       23        48        78  
Advertising
      104       109        286        379  
Professional services
      75       78        304        368  
Supervisory examinations
      19       43        73        132  
Audit and accounting services
      21       43        127        137  
Organizational dues and subscriptions
      22       8        51        51  
Insurance bond premiums
      64       50        177        151  
Telephone and postage
      49       44        122        124  
Loss (gain) on foreclosed assets, net
      —        —         2        (28 ) 
Other
      424       377        1,297        1,187  
  
 
 
    
 
 
     
 
 
     
 
 
  
Total noninterest expense
      4,838       4,846        14,393        14,615  
  
 
 
    
 
 
     
 
 
     
 
 
  
Income Before Income Tax
      951       892        1,824        5,491  
Provision for Income Tax
      243       202        465        1,428  
  
 
 
    
 
 
     
 
 
     
 
 
  
Net Income
    $ 708     $ 690      $ 1,359      $ 4,063  
  
 
 
    
 
 
     
 
 
     
 
 
  
Earnings Per Share:
           
Basic
    $ 0.22     $ 0.22      $ 0.42      $ 1.29  
Diluted
    $ 0.22     $ 0.21      $ 0.42      $ 1.25  
Dividends declared per common share
    $ 0.20     $ 0.20      $ 0.40      $ 0.40  
See accompanying notes to the unaudited condensed consolidated financial statements.
 
2
IF Bancorp, Inc.
Condensed Consolidated Statements of Comprehensive Income (Loss) (Unaudited)
(Dollars in thousands)
 
    
Three Months Ended March 31,
  
    
   2024   
    
   2023   
  
Net Income
    $ 708     $ 690  
Other Comprehensive Income (Loss)
     
Unrealized appreciation (depreciation) on
available-for-sale
securities, net of taxes of
$(
606
) and $874, for 2024 and 2023, respectively
      (1,521 )      2,195  
Less: reclassification adjustment for realized gains included in net income, net of taxes of $0 and $4, for 2024 and 2023, respectively
      —        8  
  
 
 
    
 
 
  
     (1,521 )      2,187  
Postretirement health plan amortization of transition obligation and prior service cost and change in net loss, net of taxes of $0 and $0 for 2024 and 2023, respectively
      (1 )      (2 ) 
  
 
 
    
 
 
  
Other comprehensive income (loss), net of tax
      (1,522 )      2,185  
  
 
 
    
 
 
  
Comprehensive Income (Loss)
    $ (814 )    $ 2,875  
  
 
 
    
 
 
  
 
    
Nine Months Ended March 31,
  
    
    2024    
     
   2023   
  
Net Income
    $ 1,359      $ 4,063  
Other Comprehensive Income (Loss)
      
Unrealized appreciation (depreciation) on
available-for-sale
securities, net of taxes of
$58 and $(
649
), for 2024 and 2023, respectively
      146        (1,630 ) 
Less: reclassification adjustment for realized gains (losses) included in net income, net of taxes of $
0
and $(
48
), for 2024 and 2023, respectively
      —         (123 ) 
  
 
 
     
 
 
  
     146        (1,507 ) 
Postretirement health plan amortization of transition obligation and prior service cost and change in net loss, net of taxes of $1 and $(1) for 2024 and 2023, respectively
      1        (4 ) 
  
 
 
     
 
 
  
Other comprehensive income (loss), net of tax
      147        (1,511 ) 
  
 
 
     
 
 
  
Comprehensive Income
    $ 1,506      $ 2,552  
  
 
 
     
 
 
  
See accompanying notes to the unaudited condensed consolidated financial statements.
 
3
IF Bancorp, Inc.
Condensed Consolidated Statements of Stockholders’ Equity (Unaudited)
(Dollars in thousands, except per share amounts)
 
    
Common

Stock
     
Additional

Paid-In

Capital
     
Unearned

ESOP
Shares
    
Retained

Earnings
    
Accumulated

Other

Comprehensive

Income (Loss)
    
Total
  
For the three months ended March 31, 2024
               
Balance, January 1, 2024
    $ 33      $ 51,753      $ (1,443 )    $ 43,377     $ (19,979 )    $ 73,741  
Net income
      —         —         —        708       —        708  
Other comprehensive loss
      —         —         —        —        (1,522 )      (1,522 ) 
Dividends on common stock, $0.20 per share
      —         —         —        (671 )      —        (671 ) 
Stock equity plan
      —         49        —        —        —        49  
ESOP shares earned, 4,811 shares
      —         31        48       —        —        79  
  
 
 
     
 
 
     
 
 
    
 
 
    
 
 
    
 
 
  
Balance, March 31, 2024
    $ 33      $ 51,833      $ (1,395 )    $ 43,414     $ (21,501 )    $ 72,384  
  
 
 
     
 
 
     
 
 
    
 
 
    
 
 
    
 
 
  
For the three months ended March 31, 2023
               
Balance, January 1, 2023
    $ 33      $ 51,021      $ (1,636 )    $ 42,714     $ (21,042 )    $ 71,090  
Net income
      —         —         —        690       —        690  
Other comprehensive income
      —         —         —        —        2,185       2,185  
Dividends on common stock, $0.20 per share
      —         —         —        (672 )      —        (672 ) 
Stock options exercised
      —         283        —        —        —        283  
Stock equity plan
      —         90        —        —        —        90  
ESOP shares earned, 4,811 shares
      —         35        48       —        —        83  
  
 
 
     
 
 
     
 
 
    
 
 
    
 
 
    
 
 
  
Balance, March 31, 2023
    $ 33      $ 51,429      $ (1,588 )    $ 42,732     $ (18,857 )    $ 73,749  
  
 
 
     
 
 
     
 
 
    
 
 
    
 
 
    
 
 
  
See accompanying notes to the unaudited condensed consolidated financial statements.
 
4
    
Common

Stock
     
Additional

Paid-In

Capital
     
Unearned

ESOP
Shares
    
Retained

Earnings
    
Accumulated

Other

Comprehensive

Income (Loss)
    
Total
  
For the nine months ended March 31, 2024
               
Balance, July 1, 2023
    $ 33      $ 51,543      $ (1,540 )    $ 43,365     $ (21,648 )    $ 71,753  
Net income
      —         —         —        1,359       —        1,359  
Other comprehensive income
      —         —         —        —        147       147  
Dividends on common stock, $0.40 per share
      —         —         —        (1,310 )      —        (1,310 ) 
Stock equity plan
      —         212        —        —        —        212  
ESOP shares earned, 14,433 shares
      —         78        145       —        —        223  
  
 
 
     
 
 
     
 
 
    
 
 
    
 
 
    
 
 
  
Balance, March 31, 2024
    $ 33      $ 51,833      $ (1,395 )    $ 43,414     $ (21,501 )    $ 72,384  
  
 
 
     
 
 
     
 
 
    
 
 
    
 
 
    
 
 
  
For the nine months ended March 31, 2023
               
Balance, June 30, 2022
    $ 32      $ 50,342      $ (1,732 )    $ 40,362     $ (17,346 )    $ 71,658  
Cumulative impact of ASU
2016-13
      —         —         —        (388 )      —        (388 ) 
  
 
 
     
 
 
     
 
 
    
 
 
    
 
 
    
 
 
  
Balance, July 1, 2022
    $ 32      $ 50,342      $ (1,732 )    $ 39,974     $ (17,346 )    $ 71,270  
Net income
      —         —         —        4,063       —        4,063  
Other comprehensive loss
      —         —         —        —        (1,511 )      (1,511 ) 
Dividends on common stock, $0.40 per share
      —         —         —        (1,305 )      —        (1,305 ) 
Stock options exercised
      1        731        —        —        —        732  
Stock equity plan
      —         237        —        —        —        237  
ESOP shares earned, 14,434 shares
      —         119        144       —        —        263  
  
 
 
     
 
 
     
 
 
    
 
 
    
 
 
    
 
 
  
Balance, March 31, 2023
    $ 33      $ 51,429      $ (1,588 )    $ 42,732     $ (18,857 )    $ 73,749  
  
 
 
     
 
 
     
 
 
    
 
 
    
 
 
    
 
 
  
See accompanying notes to the unaudited condensed consolidated financial statements.
 
5
IF Bancorp, Inc.
Condensed Consolidated Statements of Cash Flows (Unaudited)
(Dollars in thousands)
 
    
Nine Months Ended March 31,
  
    
2024
    
2023
  
Operating Activities
     
Net income
    $ 1,359     $ 4,063  
Items not requiring (providing) cash
     
Depreciation
      514       487  
Provision for credit losses
      196       253  
Amortization (accretion) of premiums and discounts on securities
      (172 )      217  
Deferred income taxes
      132       (236 ) 
Net realized gains on loan sales
      (186 )      (124 ) 
Net realized losses on sales of
available-for-sale
securities
      —        171  
Loss (gain) on foreclosed assets held for sale
      2       (28 ) 
Bank-owned life insurance income, net
      (318 )      (290 ) 
ESOP compensation expense
      223       263  
Stock equity plan expense
      212       237  
Originations of loans held for sale
      (9,225 )      (5,116 ) 
Proceeds from sales of loans held for sale
      8,938       5,458  
Changes in
     
Accrued interest receivable
      (968 )      (618 ) 
Other assets
      1,312       (1,648 ) 
Accrued interest payable
      1,096       785  
Post-retirement benefit obligation
      19       17  
Other liabilities
      (1,996 )      (2,239 ) 
  
 
 
    
 
 
  
Net cash provided by operating activities
      1,138       1,652  
  
 
 
    
 
 
  
Investing Activities
     
Net change in interest bearing time deposits
      500       250  
Purchases of
available-for-sale
securities
      (1,977 )      (16,810 ) 
Proceeds from the sales of
available-for-sale
securities
      —        7,695  
Proceeds from maturities and
pay-downs
of
available-for-sale
securities
      8,395       19,832  
Net change in loans
      (55,739 )      (59,786 ) 
Purchase of premises and equipment
      (193 )      (2,142 ) 
Proceeds from sale of premises and equipment
      88       —   
Proceeds from sale of foreclosed assets
      25       148  
Purchase of Federal Home Loan Bank stock
      (2,292 )      (1,050 ) 
Redemption of Federal Home Loan Bank Stock
      —        349  
  
 
 
    
 
 
  
Net cash used in investing activities
      (51,193 )      (51,514 ) 
  
 
 
    
 
 
  
Financing Activities
     
Net decrease in demand deposits, money market, NOW and savings accounts
      (92,533 )      (96,884 ) 
Net increase in certificates of deposit, including brokered certificates
      39,007       36,432  
Net increase in advances from borrowers for taxes and insurance
      98       849  
Proceeds from other borrowings
      497,875       —   
Repayments of other borrowings
      (472,575 )      —   
Proceeds from Federal Home Loan Bank advances
      561,999       263,600  
Repayments of Federal Home Loan Bank advances
      (485,500 )      (222,100 ) 
Net increase in repurchase agreements
      7,395       1,520  
Dividends paid
      (639 )      (633 ) 
Proceeds from exercise of stock options
      —        732  
  
 
 
    
 
 
  
Net cash provided by (used in) financing activities
      55,127       (16,484 ) 
  
 
 
    
 
 
  
Net Increase (Decrease) in Cash and Cash Equivalents
      5,072       (66,346 ) 
Cash and Cash Equivalents, Beginning of Period
      10,988       75,811  
  
 
 
    
 
 
  
Cash and Cash Equivalents, End of Period
    $ 16,060     $ 9,465  
  
 
 
    
 
 
  
Supplemental Cash Flows Information
     
Interest paid
    $ 15,997     $ 5,266  
Income taxes paid, net of refunds
    $ 221     $ 1,780  
Foreclosed assets acquired in settlement of loans
    $ 3     $ —   
Dividends payable
    $ 671     $ 672  
See accompanying notes to the unaudited condensed consolidated financial statements.
 
6
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 March 31, 2024 and June 30, 2023, and the results of its operations for the three month and nine month periods ended March 31, 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, 2023. The results of operations for the three-month and nine-month periods ended March 31, 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.
 
7
  •  
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 June 2016, the FASB issued ASU
2016-13,
Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments
. The ASU requires an organization to measure all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. Financial institutions and other organizations will now use forward-looking information to better inform their credit loss estimates. Many of the loss estimation techniques applied today will still be permitted, although the inputs to those techniques will change to reflect the full amount of expected credit losses. Organizations will continue to use judgment to determine which loss estimation method is appropriate for their circumstances. Additionally, the ASU amends the accounting for credit losses on
available-for-sale
debt securities and purchased financial assets with credit deterioration. For public companies eligible to be smaller reporting companies (SRC), this update was effective for interim and annual periods beginning after December 15, 2022. In preparation for the adoption of ASU
2016-13,
we engaged a firm specializing in ALLL modeling and utilized transition modeling for the two years prior to implementation. We also had our CECL model validated by an independent firm.
The Company early adopted ASU
2016-13
using the current expected credit loss (“CECL”) methodology for financial assets measured at amortized cost, effective July 1, 2022. Results for the periods beginning after July 1, 2022, are presented under ASU
2016-13,
while prior period amounts were reported in accordance with the previously applicable accounting standards. The Company recorded a reduction to retained earnings of approximately $388,000 upon adoption of ASU
2016-13.
The transition adjustment included an increase to the allowance for credit losses on loans of $47,000 and an increase to the allowance to credit losses on
off-balance
sheet credit exposure of $496,000. The transition adjustment included a corresponding increase in deferred tax assets.
 
8
The following table illustrates the impact of ASU
2016-13
adoption (in thousands):
 
    
July 1, 2022
  
    
Allowance for credit
losses as reported under

ASU
2016-13
     
Allowance pre-ASU 2016-

13 Adoption
     
Impact on Allowance
of ASU
2016-13

Adoption
  
Assets:
         
Real Estate Loans
         
One-
to four-family
    $ 1,410      $ 1,028      $ 382  
Multi-Family
      1,235        1,375        (140 ) 
Commercial
      2,370        1,985        385  
HELOC
      103        70        33  
Construction
      681        489        192  
Commercial Business
      1,207        2,025        (818 ) 
Consumer
      93        80        13  
  
 
 
     
 
 
     
 
 
  
Allowance for credit losses for all loans
    $ 7,099      $ 7,052      $ 47  
  
 
 
     
 
 
     
 
 
  
Liabilities:
         
Allowance for credit losses on
off-balance
sheet exposures
    $ 496      $ —       $ 496  
  
 
 
     
 
 
     
 
 
  
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.
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
 
9
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.
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 March 31, 2024 and June 30, 2023 are as follows (dollars in thousands):
 
     March 31, 2024      June 30, 2023  
Allocated shares
      170,696        162,986  
Shares committed for release
      14,433        19,245  
Unearned shares
      139,527        153,960  
  
 
 
     
 
 
  
Total ESOP shares
      324,656        336,191  
  
 
 
     
 
 
  
Fair value of unearned ESOP shares (1)
    $ 2,320      $ 2,223  
  
 
 
     
 
 
  
 
(1)
Based on closing price of $16.63 and $14.44 per share on March 31, 2024, and June 30, 2023, respectively.
During the nine months ended March 31, 2024, 9,130 ESOP shares were paid to ESOP participants due to separation from service and 2,405 shares were transferred out as a result of participant diversification. During the nine months ended March 31, 2023, 9,348 ESOP shares were paid to ESOP participants due to separation from service and 7,683 shares were transferred out as a result of participant diversification.
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
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 52,970 and the maximum number of shares of Company stock that may be issued as restricted stock awards or restricted stock units was 211,880.
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,
 
10
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 March 31, 2024, so there are 211,880 shares of restricted stock and 52,970 stock option shares available for future grants under this plan.
The following table summarizes stock option activity for the nine months ended March 31, 2024 (dollars in thousands):
 
    
Options
     
Weighted-Average

Exercise Price/Share
     
Weighted-Average

Remaining Contractual
Life (in years)
     
Aggregate Intrinsic
Value
  
Outstanding, June 30, 2023
      90,143      $ 16.63        
Granted
      —         —         
Exercised
      —         —         
Forfeited
      90,143        16.63        
  
 
 
     
 
 
        
Outstanding, March 31, 2024
      —       $ —         0.0      $ 0  
  
 
 
     
 
 
     
 
 
     
 
 
  
Exercisable, March 31, 2024
      —       $ —         0.0      $ 0  
  
 
 
     
 
 
     
 
 
     
 
 
  
Intrinsic value for stock options is defined as the difference between the current market value and the exercise price. There were no stock options granted during the nine months ended March 31, 2024, and no stock options outstanding as of March 31, 2024.
No stock options vested during the nine months ended March 31, 2024 and 2023. Stock-based compensation expense and related tax benefit were zero for stock options for the nine months ended March 31, 2024 and 2023. Compensation cost related to
non-vested
stock options was recognized over the seven-year vesting period ending in December, 2020, leaving no unrecognized compensation cost at March 31, 2024.
The following table summarizes
non-vested
restricted stock activity for the nine months ended March 31, 2024:
 
    
Shares
     
Weighted-Average

Grant-Date Fair Value
  
Balance, June 30, 2023
      62,314      $ 18.76  
Granted
      —         —   
Forfeited
      1,600        19.10  
Earned and issued
      19,914        18.76  
  
 
 
     
 
 
  
Balance, March 31, 2024
      40,800      $ 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 $212,000 and $61,000, respectively, for the nine months ended March 31, 2024, and was $234,000 and $67,000, respectively, for the nine months ended March 31, 2023. Unrecognized compensation expense for
non-vested
restricted stock awards was $666,000 at March 31, 2024, and is expected to be recognized over 3.4 years with a corresponding credit to
paid-in
capital.
 
11
Note 4: Earnings Per Common Share (“EPS”)
Basic and diluted earnings per common share are presented for the three month and nine-month periods ended March 31, 2024 and 2023. The factors used in the earnings per common share computation are as follows:
 
    
Three Months Ended
March 31, 2024
    
Three Months Ended
March 31, 2023
    
Nine Months Ended
March 31, 2024
    
Nine Months Ended
March 31, 2023
  
Net income
    $ 708     $ 690     $ 1,359     $ 4,063  
  
 
 
    
 
 
    
 
 
    
 
 
  
Basic weighted average shares outstanding
      3,353,026       3,343,670       3,354,097       3,318,809  
Less: Average unallocated ESOP shares
      (141,932 )      (161,177 )      (146,743 )      (165,988 ) 
  
 
 
    
 
 
    
 
 
    
 
 
  
Basic average shares outstanding
      3,211,094       3,182,493       3,207,354       3,152,821  
  
 
 
    
 
 
    
 
 
    
 
 
  
Diluted effect of restricted stock awards and stock options
      —        82,103       —        86,964  
  
 
 
    
 
 
    
 
 
    
 
 
  
Diluted average shares outstanding
      3,211,094       3,264,596       3,207,354       3,239,785  
  
 
 
    
 
 
    
 
 
    
 
 
  
Basic earnings per common share
    $ 0.22     $ 0.22     $ 0.42     $ 1.29  
  
 
 
    
 
 
    
 
 
    
 
 
  
Diluted earnings per common share
    $ 0.22     $ 0.21     $ 0.42     $ 1.25  
  
 
 
    
 
 
    
 
 
    
 
 
  
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:
           
March 31, 2024:
           
U.S. Treasury
    $ 497      $ —       $ (54 )    $ 443  
U.S. Government and federal agency
      6,979        —         (412 )      6,567  
Mortgage-backed:
           
GSE residential
      198,279        41        (27,382 )      170,938  
Small Business Administration
      16,560        —         (2,359 )      14,201  
State and political subdivisions
      3,110        —         (2 )      3,108  
  
 
 
     
 
 
     
 
 
    
 
 
  
   $ 225,425      $ 41      $ (30,209 )    $ 195,257  
  
 
 
     
 
 
     
 
 
    
 
 
  
June 30, 2023:
           
U.S. Treasury
    $ 497      $ —       $ (59 )    $ 438  
U.S. Government and federal agency
      6,976        —         (499 )      6,477  
Mortgage-backed:
           
GSE residential
      203,139        21        (27,434 )      175,726  
Small Business Administration
      17,629        1        (2,397 )      15,233  
State and political subdivisions
      3,431        —         (6 )      3,425  
  
 
 
     
 
 
     
 
 
    
 
 
  
   $ 231,672      $ 22      $ (30,395 )    $ 201,299  
  
 
 
     
 
 
     
 
 
    
 
 
  
 
12
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 income (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 $531,000, 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.
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 March 31, 2024, and June 30, 2023.
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 March 31, 2024 with a book value that exceeded 10% of the Company’s total equity except for: Mortgage-backed Government Sponsored Entity (GSE) residential securities and Small Business Administration securities with a book value of approximately $198,279,000 and $16,560,000, respectively, and a market value of approximately $170,938,000 and $14,201,000, respectively, at March 31, 2024.
All mortgage-backed securities at March 31, 2024 and June 30, 2023 were issued by GSEs.
The amortized cost and fair value of
available-for-sale
securities at March 31, 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.
 
13
    
Available-for-sale Securities
  
    
Amortized
Cost
     
Fair
Value
  
Within one year
    $ 4,001      $ 3,921  
One to five years
      3,691        3,558  
Five to ten years
      9,633        8,713  
After ten years
      9,821        8,127  
  
 
 
     
 
 
  
     27,146        24,319  
Mortgage-backed securities
      198,279        170,938  
  
 
 
     
 
 
  
Totals
    $ 225,425      $ 195,257  
  
 
 
     
 
 
  
The carrying value of securities pledged as collateral to secure public deposits and for other purposes was $83,514,000 and $138,022,000 as of March 31, 2024 and June 30, 2023, respectively.
The carrying value of securities sold under agreement to repurchase amounted to $18.2 million at March 31, 2024 and $10.8 million at June 30, 2023. At March 31, 2024, all $18.2 million of our repurchase agreements had an overnight maturity and all of our repurchase agreements 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 $0 and $12,000 and gross losses of $0 and $183,000, resulting from sales of
available-for-sale
securities were realized for the nine-month period ended March 31, 2024, and 2023, respectively. The tax credit applicable to these net realized losses amounted to approximately $0 and $48,000 respectively. Gross gains of $0 and $12,000 and gross losses of $0 and $0, resulting from sales of
available-for-sale
securities were realized for the three-month period ended March 31, 2024 and 2023, respectively. The tax provision applicable to these net realized gains amounted to approximately $0 and $4,000, respectively.
Certain investments in debt securities are reported in the consolidated financial statements at an amount less than their historical cost. Total fair value of these investments at March 31, 2024 and June 30, 2023 was $190,402,000 and $194,818,000, respectively, which is approximately 98% and 97% of the Company’s
available-for-sale
investment portfolio. These declines in fair value at March 31, 2024 and June 30, 2023, resulted from increases in market interest rates and are considered temporary.
 
14
The following tables show the gross unrealized investment losses and the fair value of the Company’s investments for which an allowance for credit losses has not been recorded, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position at March 31, 2024 and June 30, 2023:
 
    
Less Than 12 Months
    
12 Months or More
    
Total
  
Description of
Securities
   
Fair Value
     
Unrealized
Losses
    
Fair Value
     
Unrealized
Losses
    
Fair Value
     
Unrealized
Losses
  
March 31, 2024:
                
U.S. Treasury
    $ —       $ —      $ 443      $ (54 )    $ 443      $ (54 ) 
U.S. Government and federal agency
      —         —        6,567        (412 )      6,567        (412 ) 
Mortgage-backed:
                
GSE residential
      3,227        (79 )      164,914        (27,303 )      168,141        (27,382 ) 
Small Business Administration
      —         —        14,201        (2,359 )      14,201        (2,359 ) 
State and political subdivisions
      1,050        (2 )      —         —        1,050        (2 ) 
  
 
 
     
 
 
    
 
 
     
 
 
    
 
 
     
 
 
  
Total
    $ 4,277      $ (81 )    $ 186,125      $ (30,128 )    $ 190,402      $ (30,209 ) 
  
 
 
     
 
 
    
 
 
     
 
 
    
 
 
     
 
 
  
June 30, 2023:
                
U.S. Treasury
    $ —       $ —      $ 438      $ (59 )    $ 438      $ (59 ) 
U.S. Government and federal agency
      —         —        6,477        (499 )      6,477        (499 ) 
Mortgage-backed:
                
GSE residential
      14,517        (440 )      158,413        (26,994 )      172,930        (27,434 ) 
Small Business Administration
      1,148        (60 )      12,762        (2,337 )      13,910        (2,397 ) 
State and political subdivisions
      1,063        (6 )      —         —        1,063        (6 ) 
  
 
 
     
 
 
    
 
 
     
 
 
    
 
 
     
 
 
  
Total
    $ 16,728      $ (506 )    $ 178,090      $ (29,889 )    $ 194,818      $ (30,395 ) 
  
 
 
     
 
 
    
 
 
     
 
 
    
 
 
     
 
 
  
As of March 31, 2024, the company’s
available-for-sale
securities portfolio consisted of 178 securities, of which 174 were in an unrealized loss position. The unrealized losses relate to all categories of securities.
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 March 31, 2024 and June 30, 2023, 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 March 31, 2024 and June 30, 2023.
 
15
Note 6: Loans and Allowance for Credit Losses
Classes of loans include:
 
    
March 31, 2024
    
June 30, 2023
  
Real estate loans:
     
One-
to four-family
    $ 176,117     $ 163,854  
Multi-family
      127,757       89,649  
Commercial
      198,823       193,707  
Home equity lines of credit
      9,602       8,066  
Construction
      41,342       50,973  
Commercial
      89,383       79,693  
Consumer
      7,657       8,382