UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 10-K

 

 

 

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended June 30, 2020

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 Number: 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 No.)
201 East Cherry Street, Watseka, Illinois   60970
(Address of principal executive offices)   (Zip Code)

(815) 432-2476

(Registrant’s telephone number, including area code)

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, par value $0.01 per share   IROQ   The NASDAQ Stock Market, LLC

Securities registered pursuant to Section 12(g) of the Act: None

 

 

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    Yes  ☐    No  ☒

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.    Yes  ☐    No  ☒

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 filing requirements for the past 90 days.    Yes  ☒    No  ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit 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,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer         ☐   Accelerated filer ☐   Smaller reporting company         ☒
Non-accelerated filer           ☒   Emerging growth company ☐  

If an emerging growth company, indicate by check mark if the Registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Act).    YES  ☐    NO  ☒

The aggregate market value of the voting and non-voting common equity held by nonaffiliates as of December 31, 2019 was $53,640,260.

The number of shares outstanding of the registrant’s common stock as of September 4, 2020 was 3,240,376.

DOCUMENTS INCORPORATED BY REFERENCE:

Portions of the Proxy Statement for the Registrant’s Annual Meeting of Stockholders to be held on November 23, 2020 are incorporated by reference in Part III of this Form 10-K.

 

 

 


INDEX

 

     Page  

PART I

     3  

ITEM 1.

  

BUSINESS

     3  

ITEM 1A.

  

RISK FACTORS

     40  

ITEM 1B.

  

UNRESOLVED STAFF COMMENTS

     48  

ITEM 2.

  

PROPERTIES

     49  

ITEM 3.

  

LEGAL PROCEEDINGS

     49  

ITEM 4.

  

MINE SAFETY DISCLOSURES

     50  

PART II

     50  

ITEM 5.

  

MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

     50  

ITEM 6.

  

SELECTED FINANCIAL DATA

     51  

ITEM 7.

  

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION

     53  

ITEM 7A.

  

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     67  

ITEM 8.

  

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

     67  

ITEM 9.

  

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

     67  

ITEM 9A.

  

CONTROLS AND PROCEDURES

     67  

ITEM 9B.

  

OTHER INFORMATION

     68  

PART III

     69  

ITEM 10.

  

DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

     69  

ITEM 11.

  

EXECUTIVE COMPENSATION

     69  

ITEM 12.

  

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDERS MATTERS

     69  

ITEM 13.

  

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

     70  

ITEM 14.

  

PRINCIPAL ACCOUNTING FEES AND SERVICES

     70  

PART IV

        71  

ITEM 15.

  

EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

     71  

ITEM 16.

  

FORM 10-K SUMMARY

     72  

SIGNATURES

     73  


Cautionary Note Regarding Forward-Looking Statements

This report contains certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements can be identified by the use of words such as “estimate,” “project,” “believe,” “intend,” “anticipate,” “assume,” “plan,” “seek,” “expect,” “will,” “may,” “should,” “indicate,” “would,” “contemplate,” “continue,” “target” and words of similar meaning. These forward-looking statements include, but are not limited to:

 

   

statements of our goals, intentions and expectations;

 

   

statements regarding our business plans, prospects, growth and operating strategies;

 

   

statements regarding the asset quality of our loan and investment portfolios; and

 

   

estimates of our risks and future costs and benefits.

These forward-looking statements are based on our current beliefs and expectations and are inherently subject to significant business, economic and competitive uncertainties and contingencies, many of which are beyond our control. In addition, these forward-looking statements are subject to assumptions with respect to future business strategies and decisions that are subject to change. We are under no duty to and do not take any obligation to update any forward-looking statements after the date of this report. For a discussion of factors that may affect our results of operations and financial condition, and the accuracy of our forward-looking statements, see “Item 1A. Risk Factors” in this Annual Report on Form 10-K. These factors should be considered in evaluating the forward-looking statements and undue reliance should not be placed on such statements.

Given its ongoing and dynamic nature, it is difficult to predict the full impact of the COVID-19 outbreak on our business. The extent of such impact will depend on future developments, which are highly uncertain, including when the coronavirus that has caused the COVID-19 pandemic can be controlled and abated and when and how the economy may be reopened. As the result of the COVID-19 pandemic and the related adverse local and national economic consequences, our forward-looking statements are subject to the following additional risks, uncertainties and assumptions:

 

   

demand for our products and services may decline as a result of the COVID-19 pandemic making it difficult to grow assets and income;

 

   

the COVID-19 pandemic may continue to have a negative impact on the economy and overall financial stability of us, the communities where we have our branches, the state of Illinois and the United States, and may also exacerbate the effects of the other factors listed herein under “Item 1A. Risk Factors”;

 

   

if the economy is unable to substantially reopen, and high levels of unemployment continue for an extended period of time, loan delinquencies, problem assets, and foreclosures may increase, resulting in increased charges and reduced income;

 

   

collateral for loans, especially real estate, may decline in value, which could cause loan losses to increase;

 

   

limitations may be placed on our ability to foreclose on properties during the pandemic;

 

   

our allowance for loan losses may have to be increased if borrowers experience financial difficulties beyond forbearance periods which will adversely affect our net income, including possibly through the reversal of interest income and fees that we are accruing under COVID-19 related exceptions to normal GAAP accounting;

 

   

the net worth and liquidity of loan guarantors may decline, impairing their ability to honor commitments to us;

 

   

as the result of the decline in the Federal Reserve Board’s target federal funds rate to near 0%, the yield on our assets may decline to a greater extent than the decline in our cost of interest-bearing liabilities, reducing our net interest margin and spread and reducing net income;

 

   

a material decrease in net income or a net loss over several quarters could result in a decrease in the rate of our semi-annual cash dividend;

 

   

actions taken by the federal, state or local governments to cushion the impact of COVID-19 on consumers and businesses may have a negative impact on us and our business;

 

2


   

changes in accounting policies and practices, as may be adopted by the bank regulatory agencies, the Financial Accounting Standards Board, the Securities and Exchange Commission and the Public Company Accounting Oversight Board;

 

   

our wealth management revenues may decline with continuing market turmoil;

 

   

our cyber security risks are increased by the COVID-19 pandemic as the result of an increase in the number of employees working remotely;

 

   

litigation, regulatory enforcement risk and reputation risk regarding our participation in the PPP and the risk that the SBA may not fund some or all PPP loan guaranties;

 

   

the unanticipated loss or unavailability of key employees due to the outbreak, which could harm our ability to operate our business or execute our business strategy, especially as we may not be successful in finding and integrating suitable successors;

 

   

we rely on third party vendors for certain services and the unavailability of a critical service due to the COVID-19 outbreak could have an adverse effect on us; and

 

   

Federal Deposit Insurance Corporation premiums may increase if the agency experience additional resolution costs.

PART I

 

ITEM 1.

BUSINESS

General

IF Bancorp, Inc. (“IF Bancorp” or the “Company”) is a Maryland corporation formed in March 2011 to become the holding company for Iroquois Federal Savings and Loan Association (“Iroquois Federal” or the “Association”).

The Company is primarily engaged in the business of directing, planning, and coordinating the business activities of Iroquois Federal. The Company’s most significant asset is its investment in Iroquois Federal. At June 30, 2020 and 2019, we had consolidated assets of $735.5 million and $723.9 million, consolidated deposits of $601.7 million and $607.0 million and consolidated equity of $82.6 million and $82.5 million, respectively.

Iroquois Federal is a federally chartered savings association headquartered in Watseka, Illinois. The Association’s business consists primarily of taking deposits from the general public and investing those deposits, together with funds generated from operations and borrowings, in one- to four-family residential mortgage loans, multi-family mortgage loans, commercial real estate loans (including farm loans), home equity lines of credit, commercial business loans, consumer loans (consisting primarily of automobile loans), and, to a much lesser extent, construction loans and land development loans. We also invest in securities, which historically have consisted primarily of securities issued by the U.S. government, U.S. government agencies and U.S. government-sponsored enterprises, as well as mortgage-backed securities issued or guaranteed by U.S. government-sponsored enterprises. To a lesser extent, we also invest in municipal obligations.

We offer a variety of deposit accounts, including savings accounts, certificates of deposit, money market accounts, commercial and personal checking accounts, individual retirement accounts and health savings accounts. We also offer alternative delivery channels, including ATMs, online banking and bill pay, mobile banking with mobile deposit and bill pay, ACH origination, remote deposit capture and telephone banking.

In addition to our traditional banking products and services, we offer a full line of property and casualty insurance products through Iroquois Federal’s wholly-owned subsidiary, L.C.I. Service Corporation, an insurance agency with offices in Watseka and Danville, Illinois. We also offer annuities, mutual funds, individual and group retirement plans, life, disability and health insurance, individual securities, managed accounts and other financial services at all of our locations through Iroquois Financial, a division of Iroquois Federal. Raymond James Financial Services, Inc. serves as the broker-dealer for Iroquois Financial.

 

3


Available Information

IF Bancorp’s executive offices are located at 201 East Cherry Street, Watseka, Illinois 60970. Our telephone number at this address is (815) 432-2476, and our website address is www.iroquoisfed.com. Information on our website should not be considered a part of this annual report.

IF Bancorp, Inc. is a public company, and files interim, quarterly and annual reports with the Securities and Exchange Commission (“SEC”). The SEC maintains an Internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC (http://www.sec.gov).

We make available free of charge through the investor relations section of our website, annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the U.S. Securities Exchange Act of 1934, as well as proxy statements, as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC.

Market Area

We conduct our operations from our seven full-service banking offices located in the municipalities of Watseka, Danville, Clifton, Hoopeston, Savoy, Bourbonnais and Champaign, Illinois and our loan production and wealth management office in Osage Beach, Missouri. Our primary lending market includes the Illinois counties of Vermilion, Iroquois, Champaign and Kankakee, as well as the adjacent counties in Illinois and Indiana within 30 miles of a branch or loan production office. Our loan production and wealth management office in Osage Beach, Missouri, serves the Missouri counties of Camden, Miller and Morgan.

In recent years, Iroquois and Vermilion Counties, our traditional primary market areas, have experienced negative growth, reflecting in part, the economic downturn. However, Champaign County, where our Savoy and Champaign branches are located, has experienced population growth. Future business and growth opportunities will be influenced by economic and demographic characteristics of our primary market area and of east central Illinois. According to data from the U.S. Census Bureau, Iroquois County had an estimated population of 27,000 in July 2019, a decrease of 8.8% since April 2010, Vermilion County had an estimated population of 76,000 in July 2019, a decrease of 7.2% since April 2010, and Kankakee County had an estimated population of 110,000 in July 2019, a decrease of 3.2% since April 2010, while Champaign County had an estimated population of 210,000 in July 2019, an increase of 4.3% since April 2010. Unemployment rates in our primary market have increased over the last year. According to the Illinois Department of Employment Security, unemployment, on a non-seasonally adjusted basis, increased from 3.3% to 8.5% in Iroquois County, from 4.2% to 14.8% in Vermilion County, from 3.2% to 10.1% in Champaign County, and from 4.0% to 13.3% in Kankakee County.

The economy in our primary market is fairly diversified, with employment in services, wholesale/retail trade, and government serving as the basis of the Iroquois County, Vermilion County, Champaign County and Kankakee economies. Manufacturing jobs, which tend to be higher paying jobs, are also a large source of employment in Vermilion, Champaign and Kankakee Counties, while Iroquois County is heavily influenced by agriculture and agriculture related businesses. Hospitals and other health care providers, local schools and trucking/distribution businesses also serve as major sources of employment.

Our Osage Beach, Missouri loan production and wealth management office is located in the Lake of the Ozarks region and serves the Missouri counties of Camden, Miller and Morgan. Once known primarily as a resort area, this market is becoming an area of permanent residences and a growing retirement community, providing an excellent market for mortgage loans and our wealth management and financial services business.

Competition

We face intense competition in our market area both in making loans and attracting deposits. We also compete with commercial banks, credit unions, savings institutions, mortgage brokerage firms, finance companies, mutual funds, insurance companies and investment banking firms. Some competitors in our newer markets have the natural advantage of greater name recognition and market presence, while we work to increase our market share in those markets.

 

4


Our deposit sources are primarily concentrated in the communities surrounding our banking offices located in Iroquois and Vermilion Counties, Illinois. As of June 30, 2019, the latest date for which FDIC data is available, we ranked first of 12 bank and thrift institutions with offices in Iroquois County with a 26.68% deposit market share. As of the same date, we ranked first of 16 bank and thrift institutions with offices in Vermilion County with a 23.24% deposit market share, we ranked 17th of 29 bank and thrift institutions with offices in Champaign County, with a 0.98% deposit market share and we ranked 12th of 16 bank and thrift institutions with offices in Kankakee County, with a 1.87% deposit market share.

Lending Activities

Our principal lending activity is the origination of one- to four-family residential mortgage loans, multi-family loans, commercial real estate loans (including farm loans), home equity loans and lines of credit, commercial business loans, consumer loans (consisting primarily of automobile loans), and, to a much lesser extent, construction loans and land development loans.

In addition to loans originated by Iroquois Federal, our loan portfolio includes loan purchases which are secured by single family homes located primarily in the Midwest. As of June 30, 2020 and 2019, the amount of such loans equaled $4.2 million and $4.8 million, respectively. See “—Loan Originations, Purchases, Sales, Participations and Servicing.”    

Our loan portfolio also includes commercial loan participations which are secured by both real estate and other business assets, primarily within 100 miles of our primary lending market. As of June 30, 2020 and 2019, the amount of such loans equaled $24.0 million and $29.5 million, respectively. See “—Loan Originations, Purchases, Sales, Participations and Servicing.”    

The Association’s legal lending limit to any one borrower is 15% of unimpaired capital and surplus. On July 30, 2012 our bank received approval from the Comptroller of the Currency to participate in the Supplemental Lending Limits Program (SLLP). This program allows eligible savings associations to make additional residential real estate loans or extensions of credit to one borrower, small business loans or extensions of credit to one borrower, or small farm loans or extensions of credit to one borrower, in the lesser of the following two amounts: (1) 10% of its capital and surplus; or (2) the percentage of capital and surplus, in excess of 15%, that a state bank is permitted to lend under the state lending limit that is available for loans secured by one- to four-family residential real estate, small business loans, small farm loans or unsecured loans in the state where the main office of the savings association is located. For our association this additional limit (or “supplemental limit(s)”) for one- to four-family residential real estate, small business, or small farm loans is 10% of our Association’s capital and surplus. In addition, the total outstanding amount of the Association’s loans or extensions of credit or parts of loans and extensions of credit made to all of its borrowers under the SLLP may not exceed 100% of the Association’s capital and surplus. By Association policy, participation of any credit facilities in the SLLP is to be infrequent and all credit facilities are to be with prior Board approval. Total loans in the SLLP equaled $6.1 million, or 7.1%, of capital and surplus as of June 30, 2020, and $12.2 million, or 15.1%, as of June 30, 2019.

We originate a substantial portion of our fixed-rate one- to four-family residential mortgage loans for sale to the Federal Home Loan Bank of Chicago with servicing retained. Total loans sold under this program equaled approximately $116.7 million and $99.0 million as of June 30, 2020 and 2019, respectively. See “—One- to Four-Family Residential Real Estate Lending” below for more information regarding the origination of loans for sale to the Federal Home Loan Bank of Chicago.

 

5


Loan Portfolio Composition. The following table sets forth the composition of our loan portfolio, including loans held for sale, by type of loan at the dates indicated. Amounts shown for one- to four-family loans include loans held for sale of approximately $552,000, $316,000, $206,000, $186,000 and $0 at June 30, 2020, 2019, 2018, 2017 and 2016, respectively.

 

     At June 30,  
     2020     2019     2018     2017     2016  
     Amount     Percent     Amount     Percent     Amount     Percent     Amount     Percent     Amount      Percent  
     (Dollars in thousands)  

Real estate loans:

          

One- to four-family (1)

   $  128,876       24.98   $  129,290       26.19   $  134,977       27.99   $  140,647       31.47   $  149,538        33.29

Multi-family

     96,195       18.65       104,663       21.20       107,436       22.28       87,228       19.52       84,200        18.15  

Commercial

     145,113       28.13       143,367       29.04       140,944       29.22       133,841       29.94       119,643        26.64  

Home equity lines of credit

     8,551       1.66       8,938       1.81       9,058       1.88       7,520       1.68       8,138        1.81  

Construction

     22,042       4.27       16,113       3.26       13,763       2.85       7,421       1.66       19,698        4.39  

Commercial

     107,581       20.85       84,246       17.06       68,720       14.25       62,392       13.96       57,826        12.87  

Consumer

     7,529       1.46       7,136       1.44       7,366       1.53       7,905       1.77       10,086        2.25  
  

 

 

     

 

 

     

 

 

   

 

 

   

 

 

   

 

 

   

 

 

    

 

 

 

Total loans

     515,887       100.00     493,753       100.00     482,264       100.00     446,954       100.00     449,129        100.00
    

 

 

     

 

 

     

 

 

     

 

 

      

 

 

 

Less:

                     

Unearned fees and discounts, net

     (164       (349       (161       (203       30     

Allowance for loan losses

     6,234         6,328         5,945         6,835         5,351     
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

    

Total loans, net

   $  509,817       $  487,774       $  476,480       $  440,322       $  443,748     
  

 

 

     

 

 

     

 

 

     

 

 

     

 

 

    

 

(1)

Includes home equity loans.

 

6


Loan Portfolio Maturities and Yields. The following table summarizes the scheduled repayments of our loan portfolio at June 30, 2020. We had no demand loans or loans having no stated repayment schedule or maturity at June 30, 2020.

 

     One- to four-family
residential real estate (1)
    Multi-family
real estate
    Commercial
real estate
    Home equity lines of
credit
 
   Amount      Weighted
Average
Rate
    Amount      Weighted
Average
Rate
    Amount      Weighted
Average
Rate
    Amount      Weighted
Average
Rate
 
   (Dollars in thousands)  

Due During the Years Ending June 30,

                    

2021

   $ 11,167        4.32   $  10,974        4.13   $ 37,323        3.81   $ 910        4.37

2022

     4,922        4.62       16,260        4.19       13,353        4.10       727        4.29  

2023 to 2024

     21,339        5.17       26,330        4.26       46,598        4.88       1,628        5.50  

2025 to 2029

     23,962        4.58       42,291        4.15       42,200        3.89       789        5.20  

2030 to 2034

     9,411        4.57       —          —         1,991        4.24       3,638        4.00  

2035 and beyond

     58,075        4.18       340        6.33       3,648        5.08       859        3.59  
  

 

 

      

 

 

      

 

 

      

 

 

    

Total

   $  128,876        4.48   $ 96,195        4.19   $ 145,113        4.24   $  8,551        4.42
  

 

 

      

 

 

      

 

 

      

 

 

    

 

     Construction     Commercial     Consumer     Total  
     Amount      Weighted
Average
Rate
    Amount      Weighted
Average
Rate
    Amount      Weighted
Average
Rate
    Amount      Weighted
Average
Rate
 
     (Dollars in thousands)  

Due During the Years Ending June 30,

                    

2021

   $  12,159        3.67   $ 57,257        3.84   $  1,214        4.06   $  131,004        3.89

2022

     504        3.50       29,341        1.41       886        8.45       65,993        3.02  

2023 to 2024

     5,104        3.25       6,659        5.56       2,900        5.13       110,558        4.77  

2025 to 2029

     3,538        4.37       13,742        4.53       2,529        3.98       129,051        4.20  

2030 to 2034

     —          —         546        3.75       —          —         15,586        4.36  

2035 and beyond

     737        4.91       36        5.50       —          —         63,695        4.25  
  

 

 

      

 

 

      

 

 

      

 

 

    

Total

   $  22,042        3.72   $ 107,581        3.37   $  7,529        4.96   $  515,887        4.10
  

 

 

      

 

 

      

 

 

      

 

 

    

 

(1)

Includes home equity loans.

The following table sets forth the scheduled repayments of fixed- and adjustable-rate loans at June 30, 2020 that are contractually due after June 30, 2021.

 

     Due After June 30, 2021  
     Fixed      Adjustable      Total  
     (In thousands)  

Real estate loans:

        

One- to four-family (1)

   $ 53,383      $  64,326      $  117,709  

Multi-family

     75,693        9,528        85,221  

Commercial

     94,004        13,786        107,790  

Home equity lines of credit

     2,711        4,930        7,641  

Construction

     9,146        737        9,883  

Commercial

     46,914        3,410        50,324  

Consumer

     6,315        —          6,315  
  

 

 

    

 

 

    

 

 

 

Total loans

   $ 288,166      $  96,717      $  384,883  
  

 

 

    

 

 

    

 

 

 

 

(1)

Includes home equity loans.

 

7


One- to Four-Family Residential Mortgage Loans. At June 30, 2020, $128.9 million, or 25.0% of our total loan portfolio, consisted of one- to four-family residential mortgage loans. We offer residential mortgage loans that conform to Fannie Mae and Freddie Mac underwriting standards (conforming loans) as well as non-conforming loans. We generally underwrite our one- to four-family residential mortgage loans based on the applicant’s employment and credit history and the appraised value of the subject property. We also offer loans through various agency programs, such as the Mortgage Partnership Finance Program of the Federal Home Loan Bank of Chicago, which are originated for sale.

We currently offer fixed-rate conventional mortgage loans with terms of up to 30 years that are fully amortizing with monthly loan payments. We also offer adjustable-rate mortgage loans that generally provide an initial fixed interest rate of five to seven years and annual interest rate adjustments thereafter. Our adjustable rate mortgage loans amortize over a period of up to 30 years. We offer one- to four-family residential mortgage loans with loan-to-value ratios up to 102%. Private mortgage insurance or participation in a government sponsored program is required for all one- to four-family residential mortgage loans with loan-to-value ratios exceeding 90%. One- to four-family residential mortgage loans with loan-to-value ratios above 80%, but below 90%, require private mortgage insurance unless waived by management. At June 30, 2020, fixed-rate one- to four-family residential mortgage loans totaled $62.9 million, or 48.8% of our one- to four-family residential mortgage loans, and adjustable-rate one- to four-family residential mortgage loans totaled $66.0 million, or 51.2% of our one- to four-family residential mortgage loans.

Our one- to four-family residential mortgage loans are generally conforming loans. We generally originate both fixed- and adjustable-rate mortgage loans in amounts up to the maximum conforming loan limits as established by the Federal Housing Finance Agency for Fannie Mae and Freddie Mac, which for our primary market area is currently $510,400 for single-family homes. At June 30, 2020, our average one- to four-family residential mortgage loan had a principal balance of $47,000. We also originate loans above the lending limit for conforming loans, which we refer to as “jumbo loans.” At June 30, 2020, $24.6 million, or 19.1%, of our total one- to four-family residential loans had principal balances in excess of $510,400. Most of our jumbo loans are originated with a seven-year fixed-rate term and an annual adjustable rate thereafter, with up to a 30 year amortization schedule. Occasionally we will originate fixed-rate jumbo loans with terms of up to 15 years.

We actively monitor our interest rate risk position to determine the desirable level of investment in fixed-rate mortgage loans. In recent years there has been increased demand for long-term fixed-rate loans, as market rates have dropped and remained near historic lows. As a result, we have sold a substantial majority of our fixed-rate one- to four-family residential mortgage loans with terms of 15 years or greater. We sell fixed-rate residential mortgages to the Federal Home Loan Bank of Chicago, with servicing retained, under its Mortgage Partnership Finance Program. Since December 2008, we have sold loans to the Federal Home Loan Bank of Chicago under its Mortgage Partnership Finance Xtra Program. Total mortgages sold under this program were approximately $8.0 million and $3.4 million for the years ended June 30, 2020 and 2019, respectively. In October 2015, we began to also sell loans to FHLBC under its Mortgage Partnership Finance Original Program. Total loans sold under this program were approximately $33.3 million and $13.7 million for the years ended June 30, 2020 and 2019, respectively. Generally, however, we retain in our portfolio 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 that we have originated in recent years due to the favorable long-term rates for borrowers.

We currently offer several types of adjustable-rate mortgage loans secured by residential properties with interest rates that are fixed for an initial period of five to seven years. We offer adjustable-rate mortgage loans that are fully amortizing. After the initial fixed period, the interest rate on adjustable-rate mortgage loans generally resets every year based upon the weekly average of a one-year U.S. Treasury Securities rate plus an applicable margin, subject to periodic and lifetime limitations on interest rate changes. The adjustable rate mortgage loans we are currently offering have a 2% maximum annual rate change up or down, and a 6% lifetime cap. In our portfolio are also adjustable rate mortgage loans with a 1% maximum annual rate change up or down, and a 5% lifetime cap up from the initial rate. Interest rate changes are further limited by floors. After the initial fixed period, the interest rate will generally have a floor that is equal to the initial rate, but no less than 3.0% on our five and seven year adjustable-rate mortgage loans.

 

8


Adjustable-rate mortgage loans generally present different credit risks than fixed-rate mortgage loans, This is primarily because the underlying debt service payments of the borrowers increase as interest rates increase, thereby increasing the potential for default and higher rates of delinquency in a rising interest rate environment. At the same time, the marketability of the underlying collateral may be adversely affected by higher interest rates. Since changes in the interest rates on adjustable-rate mortgages may be limited by an initial fixed-rate period or by the contractual limits on periodic interest rate adjustments, adjustable-rate loans may not adjust as quickly to increases in interest rates as our interest-bearing liabilities.

In addition to traditional one- to four-family residential mortgage loans, we offer 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 that we use to underwrite one- to four-family residential mortgage loans. Home equity loans may be underwritten with a loan-to-value ratio of up to 90% when combined with the principal balance of the existing first mortgage loan. Our home equity loans are primarily originated with fixed rates of interest with terms of up to 10 years, fully amortized. At June 30, 2020, approximately $2.0 million, or 1.6% of our one- to four-family mortgage loans were home equity loans secured by a second mortgage.

Home equity loans secured by second mortgages have greater risk than one- to four-family residential mortgage loans or home equity loans secured by first mortgages. We face the risk that the collateral will be insufficient to compensate us for loan losses and costs of foreclosure. When customers default on their loans, we attempt to foreclose on the property and resell the property as soon as possible to minimize foreclosure and carrying costs. However, the value of the collateral may not be sufficient to compensate us for the amount of the unpaid loan and we may be unsuccessful in recovering the remaining balance from those customers. Particularly with respect to our home equity loans, decreases in real estate values could adversely affect the value of property used as collateral for our loans.

We do not offer or purchase loans that provide for negative amortization of principal, such as “Option ARM” loans, where the borrower can pay less than the interest owed on the loan, resulting in an increased principal balance during the life of the loan.

We require title insurance on all of our one- to four-family residential mortgage loans, and we also require that borrowers maintain fire and extended coverage casualty insurance in an amount at least equal to the lesser of the loan balance or the replacement cost of the improvements. We also require flood insurance, as applicable. We do not conduct environmental testing on residential mortgage loans unless specific concerns for hazards are identified by the appraiser used in connection with the origination of the loan.

Commercial Real Estate and Multi-family Real Estate Loans. At June 30, 2020, $145.1 million, or 28.1% of our loan portfolio consisted of commercial real estate loans, and $96.2 million, or 18.7% of our loan portfolio consisted of multi-family (which we consider to be five or more units) residential real estate loans. At June 30, 2020, substantially all of our commercial real estate and multi-family real estate loans were secured by properties located in Illinois, Indiana and Missouri.

Our commercial real estate mortgage loans are primarily secured by office buildings, owner-occupied businesses, retail rentals, churches, and farm loans secured by real estate. At June 30, 2020, loans secured by commercial real estate had an average loan balance of $556,000. We originate commercial real estate loans with balloon and adjustable rates of up to seven years with amortization up to 25 years. At June 30, 2020, $15.4 million or 10.6% of our commercial real estate loans had adjustable rates. The rates on our adjustable-rate commercial real estate loans are generally based on the prime rate of interest plus an applicable margin, and generally have a specified floor.

We originate multi-family loans with balloon and adjustable rates for terms of up to seven years with amortization up to 25 years. At June 30, 2020, $9.8 million or 10.2% of our multi-family loans had adjustable rates. The rates on our adjustable-rate multi-family loans are generally tied to the prime rate of interest plus or minus an applicable margin and generally have a specified floor.

In underwriting commercial real estate and multi-family real estate loans, we consider a number of factors, which include the projected net cash flow to the loan’s debt service requirement (generally requiring a minimum

 

9


ratio of 120%), 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. Commercial real estate and multi-family real estate loans are originated in amounts up to 80% of the appraised value or the purchase price of the property securing the loan, whichever is lower. 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.

Commercial real estate and multi-family real estate loans generally carry higher interest rates and have shorter terms than one- to four-family residential mortgage loans. Commercial real estate and multi-family real estate loans, however, entail greater credit risks compared to the one- to four-family residential mortgage loans we originate, as they typically involve larger loan balances concentrated with single borrowers or groups of related borrowers. In addition, the payment of loans secured by income-producing properties typically depends on the successful operation of the property, as repayment of the loan generally is dependent, in large part, on sufficient income from the property to cover operating expenses and debt service. Changes in economic conditions that are not in the control of the borrower or lender could affect the value of the collateral for the loan or the future cash flow of the property. Additionally, any decline in real estate values may be more pronounced for commercial real estate and multi-family real estate than for one- to four-family residential properties.

At June 30, 2020, our largest commercial real estate loan had an outstanding balance of $6.4 million, was secured by a commercial building, and was performing in accordance with its terms. At that date, our largest multi-family real estate loan had a balance of $10.9 million, was secured by multiple apartment buildings with a total of 353 units, and was performing in accordance with its terms.

Home Equity Lines of Credit. In addition to traditional one- to four-family residential mortgage loans and home equity loans, we offer 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 that we use to underwrite one- to four-family residential mortgage loans. Our home equity lines of credit are originated with either fixed or adjustable rates and may be underwritten with a loan-to-value ratio of up to 90% when combined with the principal balance of an existing first mortgage loan. Fixed-rate lines of credit are generally based on the prime rate of interest plus an applicable margin and have monthly payments of 1.5% of the outstanding balance. Adjustable-rate home equity lines of credit are based on the prime rate of interest plus or minus an applicable margin and require interest paid monthly. Both fixed and adjustable rate home equity lines of credit have balloon terms of five years. At June 30, 2020, we had $8.6 million, or 1.7% of our total loan portfolio in home equity lines of credit. At that date we had $7.6 million of undisbursed funds related to home equity lines of credit.

Home equity lines of credit secured by second mortgages have greater risk than one- to four-family residential mortgage loans secured by first mortgages. We face the risk that the collateral will be insufficient to compensate us for loan losses and costs of foreclosure. When customers default on their loans, we attempt to foreclose on the property and resell the property as soon as possible to minimize foreclosure and carrying costs. However, the value of the collateral may not be sufficient to compensate us for the amount of the unpaid loan and we may be unsuccessful in recovering the remaining balance from those customers. Particularly with respect to our home equity lines of credit, decreases in real estate values could adversely affect the value of property securing the loan.

Commercial Business Loans. We also originate commercial non-mortgage business (term) loans and adjustable lines of credit. At June 30, 2020, we had $107.6 million of commercial business loans outstanding, representing 20.9% of our total loan portfolio. At that date, we also had $44.6 million of unfunded commitments on such loans. These loans are generally originated to small- and medium-sized companies in our primary market area. Our 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. We also offer agriculture loans that are not secured by real estate.

In underwriting commercial business loans, we generally lend up to 80% of the appraised value or purchase price of the collateral securing the loan, whichever is lower. The commercial business loans that we offer have fixed interest rates or adjustable rates indexed to the prime rate of interest plus an applicable margin, and with terms

 

10


ranging from one to seven years. Our commercial business loan portfolio consists primarily of secured loans. When making commercial business loans, we consider the financial statements, lending history and debt service capabilities of the borrower (generally requiring a minimum ratio of 120%), the projected cash flows of the business and the value of the collateral, if any. Virtually all of our loans are guaranteed by the principals of the borrower.

Commercial business loans generally have a greater credit risk than one- to four-family residential mortgage loans. Unlike residential mortgage loans, which generally are made on the basis of the borrower’s ability to make repayment from his or her employment and other income, and which are secured by real property whose value tends to be more easily ascertainable, commercial business loans are of higher risk and typically are made on the basis of the borrower’s ability to make repayment from the cash flow of the borrower’s business. As a result, the availability of funds for the repayment of commercial business loans may be substantially dependent on the success of the business itself. Further, the collateral securing the loans may depreciate over time, may be difficult to appraise and may fluctuate in value based on the success of the business. We seek to minimize these risks through our underwriting standards.

Commercial business loans also include Small Business Administration (SBA) Paycheck Protection Program (PPP) loans which are covered by a 100% government guaranty. As of June 30, 2020, the Company had 295 PPP loans totaling $26.2 million.

At June 30, 2020, our largest commercial business loan outstanding was for $4.9 million and was secured by commercial business assets. At June 30, 2020, this loan was performing in accordance with its terms.

Construction Loans. We also originate construction loans for one- to four-family residential properties and commercial real estate properties, including multi-family properties. At June 30, 2020, $22.0 million, or 4.3%, of our total loan portfolio, consisted of construction loans, which were secured by one- to four-family residential real estate, multi-family real estate properties and commercial real estate properties.

Construction loans for one- to four-family residential properties are originated with a maximum loan to value ratio of 85% and are generally “interest-only” loans during the construction period which typically does not exceed 12 months. After this time period, the loan converts to permanent, amortizing financing following the completion of construction. Construction loans for commercial real estate are made in accordance with a schedule reflecting the cost of construction, and are generally limited to an 80% loan-to-completed appraised value ratio. We generally require that a commitment for permanent financing be in place prior to closing the construction loan.

Construction financing generally involves greater credit risk than long-term financing on improved, owner-occupied real estate. Risk of loss on a construction loan depends largely upon the accuracy of the initial estimate of the value of the property at completion of construction compared to the estimated cost (including interest) of construction and other assumptions. If the estimate of construction cost is inaccurate, we may be required to advance additional funds beyond the amount originally committed in order to protect the value of the property.

Moreover, if the estimated value of the completed project is inaccurate, the borrower may hold a property with a value that is insufficient to assure full repayment of the construction loan upon the sale of the property. Construction loans also expose us to the risk that improvements will not be completed on time in accordance with specifications and projected costs. In addition, the ultimate sale or rental of the property may not occur as anticipated.

At June 30, 2020, all of the construction loans that we originated were for one- to four-family residential properties, multi-family real estate properties and commercial real estate properties. The largest of such construction loans at June 30, 2020 was for a 93 unit apartment building and had a principal balance of $7.1 million. This loan was performing in accordance with its terms at June 30, 2020.

Loan Originations, Purchases, Participations, Sales and Servicing. Lending activities are conducted primarily by our loan personnel operating in each office. All loans that we originate are underwritten pursuant to our standard policies and procedures. In addition, our one- to four-family residential mortgage loans generally incorporate Fannie Mae, Freddie Mac or Federal Home Loan Bank of Chicago underwriting guidelines, as

 

11


applicable. We originate both adjustable-rate and fixed-rate loans. Our ability to originate fixed- or adjustable-rate loans is dependent upon the relative customer demand for such loans, which is affected by current market interest rates as well as anticipated future market interest rates. Our loan origination and sales activity may be adversely affected by a rising interest rate environment which typically results in decreased loan demand. Most of our commercial real estate and commercial business loans are generated by our internal business development efforts and referrals from professional contacts. Most of our originations of one- to four-family residential mortgage loans, consumer loans and home equity loans and lines of credit are generated by existing customers, referrals from realtors, residential home builders, walk-in business and from our website.

Consistent with our interest rate risk strategy, in the low interest rate environment that has existed in recent years, we have sold on a servicing-released basis a substantial majority of the conforming, fixed-rate one- to four-family residential mortgage loans with maturities of 15 years or greater that we have originated.

From time to time, we purchase loan participations in commercial loans in which we are not the lead lender secured by real estate and other business assets, primarily within 100 miles of our primary lending area. In these circumstances, we follow our customary loan underwriting and approval policies. We have sufficient capital to take advantage of these opportunities to purchase loan participations, as well as strong relationships with other community banks in our primary market area and throughout Illinois that may desire to sell participations, and we may increase our purchases of participations in the future as a growth strategy. At June 30, 2020 and 2019, the amount of commercial loan participations totaled $24.0 million and $29.5 million, respectively, of which $8.1 million and $12.0 million, at June 30, 2020 and 2019 were outside our primary market area.

We sell a portion of our fixed-rate residential mortgage loans to the Federal Home Loan Bank of Chicago under its Mortgage Partnership Finance Xtra Program and its Mortgage Partnership Finance Original Program. We retain servicing on all loans sold under these programs. During the years ended June 30, 2020 and 2019, we sold $41.3 million and $17.1 million of loans to the Federal Home Loan Bank of Chicago under the program. Prior to December 2008, we also retained some credit risk associated with loans sold to the Federal Home Loan Bank of Chicago. For additional information regarding retained risk associated with these loans, see “Non-performing and Problem Assets—Other Credit Risk.”

Loan Approval Procedures and Authority. Our lending activities follow written, non-discriminatory underwriting standards and loan origination procedures established by our Board of Directors. The loan approval process is intended to assess the borrower’s ability to repay the loan and the value of the collateral that will secure the loan. To assess the borrower’s ability to repay, we review the borrower’s employment and credit history and information on the historical and projected income and expenses of the borrower. We will also evaluate a guarantor when a guarantee is provided as part of the loan.

Iroquois Federal’s policies and loan approval limits are established by our Board of Directors. Our loan officers generally have authority to approve one- to four-family residential mortgage loans up to $100,000, other secured loans up to $50,000, and unsecured loans up to $10,000. Managing Officers (those with designated loan approval authority) generally have authority to approve one- to four-family residential mortgage loans and other secured loans up to $375,000, and unsecured loans up to $100,000. In addition, any two individual officers may combine their loan authority limits to approve a loan. Our Loan Committee may approve one- to four-family residential mortgage loans, commercial real estate loans, multi-family real estate loans and land loans up to $2,000,000 and unsecured loans up to $500,000. All loans above these limits must be approved by the Operating Committee, consisting of the Chairman, and up to four other Board members.

We generally require appraisals from certified or licensed third party appraisers of all real property securing loans. When appraisals are ordered, they are done so through an agency independent of the Association or by staff independent of the loan approval process, in order to maintain a process free of any influence or pressure from any party that has an interest in the transaction.

Non-performing and Problem Assets

For all of our loans, once a loan is 15 days delinquent, a past due notice is mailed. Past due notices continue to be mailed monthly in the event the account is not brought current. Prior to the time a loan is 30 days past

 

12


due, we attempt to contact the borrower by telephone. Thereafter we continue with follow-up calls. Generally, once a loan becomes 90-120 days delinquent, if no work-out efforts have been pursued, we commence the foreclosure or repossession process. A summary report of all loans 90 days or more past due and all criticized and classified loans is provided monthly to our Board of Directors.

Loans are evaluated for non-accrual status when payment of principal and/or interest is 90 days or more past due. Loans are also placed on non-accrual status when it is determined collection of principal or interest is in doubt or if the collateral is in jeopardy. When loans are placed on non-accrual status, unpaid accrued interest is fully reversed, and further income is recognized only to the extent received and only after the loan is returned to accrual status. The loans are typically returned to accrual status if unpaid principal and interest are repaid so that the loan is current.

Non-Performing Assets. The table below sets forth the amounts and categories of our non-performing assets at the dates indicated. At June 30, 2020, 2019, 2018, 2017 and 2016, we had troubled debt restructurings of approximately $1.3 million, $1.5 million, $2.9 million, $3.1 million and $2.3 million, respectively. At the dates presented, we had one loan that was delinquent 120 days or greater and that were still accruing interest. This loan is a performing TDR with more than 2 years of payments as agreed, but it is still listed as delinquent more than 120 days.

 

13


     At June 30,  
     2020     2019     2018     2017     2016  
     (Dollars in thousands)  

Non-accrual loans:

          

Real estate loans:

          

One- to four-family (1)

   $ 81     $ 414     $  6,339     $ 9,105     $  1,604  

Multi-family

     —         —         116       146       185  

Commercial

     —         18       50       25       63  

Home equity lines of credit

     15       20       —         24       316  

Construction

     —         —         —         —         —    

Commercial

     304       60       30       84       9  

Consumer

     5       29       —         —         —    
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total non-accrual loans

     405       541       6,535       9,384       2,177  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Loans delinquent 90 days or greater and still accruing:

          

Real estate loans:

          

One- to four-family (1)

     304       226       293       155       4  

Multi-family

     —         —         —         —         —    

Commercial

     —         —         —         —         —    

Home equity line of credit

     —         —         —         —         —    

Construction

     —         —         —         —         —    

Commercial

     —         —         —         —         —    

Consumer

     —         —         1       —         8  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total loans delinquent 90 days or greater and still accruing

     304       226       294       155       12  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total non-performing loans

     709       767       6,829       9,539       2,189  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Performing troubled debt restructurings

     1,255       1,310       2,675       2,211       2,084  

Total non-performing loans and performing troubled debt restructurings

   $  1,964     $  2,264     $ 9,504     $  11,750     $ 4,273  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Other real estate owned and foreclosed assets:

          

Real estate loans:

          

One- to four-family (1)

     186       539       —         210       338  

Multi-family

     —         —         —         —         —    

Commercial

     200       219       —         —         —    

Home equity lines of credit

     —         —         —         —         —    

Construction

     —         —         —         —         —    

Commercial

     —         20       219       219       —    

Consumer

     —         —         —         —         —    
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total other real estate owned and foreclosed assets

     386       778       219       429       338  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total non-performing assets

   $ 1,095     $ 1,545     $ 7,048     $ 9,968     $ 2,527  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Ratios:

          

Non-performing loans to total loans

     0.14     0.16     1.42     2.13     0.49

Non-performing assets to total assets

     0.15     0.21     1.10     1.70     0.42

 

(1)

Includes home equity loans.

For the years ended June 30, 2020 and 2019, gross interest income that would have been recorded had our non-accruing loans been current in accordance with their original terms was $29,000 and $25,000, respectively. We recognized no interest income on such loans for the years ended June 30, 2020 and 2019.

At June 30, 2020, our non-accrual loans totaled $405,000. These non-accrual loans consisted primarily of three one- to four-family residential loans with aggregate principal balances totaling $81,000 and no specific allowances, one home equity line of credit with a principal balance of $15,000 and no specific allowance, nine commercial business loans with aggregate principal balances totaling $304,000 with no specific allowances, and one consumer loan with a principal balance of $5,000 and no specific allowance.

 

14


Troubled Debt Restructurings. Troubled debt restructurings are defined under ASC 310-40 to include loans for which either a portion of interest or principal has been forgiven, or for loans modified at interest rates or on terms materially less favorable than current market rates. We periodically modify loans to extend the term or make other concessions to help borrowers stay current on their loans and to avoid foreclosure. At June 30, 2020 and 2019, we had $1.3 million and $1.5 million, respectively, of troubled debt restructurings. At June 30, 2020 our troubled debt restructurings consisted of $1.3 million of residential one- to four-family mortgage loans, $15,000 of home equity lines of credit loans, and $59,000 of commercial business loans, all of which were impaired.

For the years ended June 30, 2020 and 2019, gross interest income that would have been recorded had our troubled debt restructurings been performing in accordance with their original terms was $69,000 and $84,000, respectively. We recognized interest income of $60,000 and $56,000 on such modified loans for the years ended June 30, 2020 and 2019, respectively.

Under the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) that was signed into law on March 27, 2020, certain COVID-19 loan modifications are not designated as TDRs. The CARES Act allows the Company to presume a loan modification is not a TDR if it is (1) related to COVID-19; (2) executed on a loan that was not more than 30 days past due as of December 31, 2019; and (3) executed between March 1, 2020, and the earlier of (a) 60 days after the date of termination of the National Emergency or (b) December 31, 2020. During the year ended June 30, 2020, the Company had 176 COVID-19 loan modifications for a total of $85.6 million. These modifications allowed borrowers to defer the principal component of loan payments for up to six months.

 

15


Delinquent Loans. The following table sets forth certain information with respect to our loan portfolio delinquencies at the dates indicated.

 

     Loans Delinquent For                
     60 to 89 Days      90 Days or Greater      Total  
     Number      Amount      Number      Amount      Number      Amount  
     (Dollars in thousands)  

At June 30, 2020

                                         

Real estate loans:

                 

One- to four-family (1)

     5        225        6        385        11        610  

Multi-family

     —          —          —          —          —          —    

Commercial

     2        95        —          —          2        95  

Home equity lines of credit

     —          —          —          —          —          —    

Construction

     —          —          —          —          —          —    

Commercial

     1        4        8        244        9        248  

Consumer

     2        43        —          —          2        43  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total loans

     10      $  367        14      $ 629        24      $ 996  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

At June 30, 2019

                                         

Real estate loans:

                 

One- to four-family (1)

     5        255        10        481        15        736  

Multi-family

     —          —          —          —          —          —    

Commercial

     1        6        2        12        3        18  

Home equity lines of credit

     1        26        1        20        2        46  

Construction

     —          —          —          —          —          —    

Commercial

     —          —          2        60        2        60  

Consumer

     —          —          5        29        5        29  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total loans

     7      $ 287        20      $ 602        27      $ 889  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

At June 30, 2018

                                         

Real estate loans:

                 

One- to four-family (1)

     4        207        10        6,633        14        6,840  

Multi-family

     —          —          1        2        1        2  

Commercial

     1        13        2        37        3        50  

Home equity lines of credit

     1        23        —          —          1        23  

Construction

     —          —          —          —          —          —    

Commercial

     —          —          1        30        1        30  

Consumer

     2        29        1        1        3        30  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total loans

     8      $ 272        15      $  6,703        23      $  6,975  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

At June 30, 2017

                                         

Real estate loans:

                 

One- to four-family (1)

     4        158        5        540        9        698  

Multi-family

     —          —          —          —          —          —    

Commercial

     1        84        —          —          1        84  

Home equity lines of credit

     —          —          1        24        1        24  

Construction

     —          —          —          —          —          —    

Commercial

     —          —          —          —          —          —    

Consumer

     3        6        —          —          3        6  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total loans

     8      $ 248        6      $ 564        14      $ 812  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

At June 30, 2016

                                         

Real estate loans:

                 

One- to four-family (1)

     6        148        9        1,489        15        1,637  

Multi-family

     —          —          —          —          —          —    

Commercial

     2        97        1        27        3        124  

Home equity lines of credit

     —          —          1        316        1        316  

Construction

     —          —          —          —          —          —    

Commercial

     1        100        —          —          1        100  

Consumer

     1        5        1        8        2        13  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total loans

     10      $ 350        12      $ 1,840        22      $ 2,190  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

(1)

Includes home equity loans.

 

16


Total delinquent loans increased by $107,000 to $996,000 at June 30, 2020 from $889,000 at June 30, 2019. The increase in delinquent loans was due primarily to an increase of $188,000 in commercial business loans, an increase of $77,000 in commercial real estate loans, and an increase of $14,000 in consumer loans, partially offset by a decrease of $126,000 in one- to four-family loans and a decrease of $46,000 in home equity lines of credit.

During the year ended June 30, 2020, the Company had 176 COVID-19 loan modifications for a total of $85.6 million that allowed borrowers to defer the principal component of loan payments for up to six months. These modifications included 63 one- to four-family loans for $7.7 million, 25 multi-family loans for $37.0 million, 44 commercial real estate loans for $23.6 million, 2 home equity lines of credit for $114,000, 2 construction loans for $7.5 million, 38 commercial business loans for $9.7 million and 2 consumer loans for $27,000.

Real Estate Owned and Foreclosed Assets. Real estate acquired by us as a result of foreclosure or by deed in lieu of foreclosure is classified as real estate owned. When property is acquired it is recorded at fair value less cost to sell at the date of foreclosure, establishing a new cost basis. Estimated fair value generally represents the sale price a buyer would be willing to pay on the basis of current market conditions, including normal terms from other financial institutions, less the estimated costs to sell the property. Holding costs and declines in fair value result in charges to expense after acquisition. In addition, we could repossess certain collateral, including automobiles and other titled vehicles, called other repossessed assets. At June 30, 2020, we had $386,000 in foreclosed assets compared to $778,000 as of June 30, 2019. Foreclosed assets at June 30, 2020, consisted of $186,000 in residential real estate, and $200,000 in commercial non-occupied property, while foreclosed assets at June 30, 2019, consisted of of $539,000 in residential real estate properties, $219,000 in commercial non-occupied property, and $20,000 in business assets.

Classification of Assets. Our policies, consistent with regulatory guidelines, provide for the classification of loans and other assets that are considered to be of lesser quality as substandard, doubtful, or loss assets. An asset is considered substandard if it is inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. Substandard assets include those assets characterized by the distinct possibility that we will sustain some loss if the deficiencies are not corrected. Assets classified as doubtful have all of the weaknesses inherent in those classified substandard with the added characteristic that the weaknesses present make collection or liquidation in full, on the basis of currently existing facts, conditions and values, highly questionable and improbable. Assets (or portions of assets) classified as loss are those considered uncollectible and of such little value that their continuance as assets is not warranted. Assets that do not expose us to risk sufficient to warrant classification in one of the aforementioned categories, but which possess potential weaknesses that deserve our close attention, are required to be designated as watch.

When we classify assets as either substandard or doubtful, we undertake an impairment analysis which may result in allocating a portion of our general loss allowances to a specific allowance for such assets as we deem prudent. The allowance for loan losses is the amount estimated by management as necessary to absorb credit losses incurred in the loan portfolio that are both probable and reasonably estimable at the balance sheet date. When we classify a problem asset as loss, we charge off the asset. For other classified assets, we provide a specific allowance for that portion of the asset that is considered uncollectible. Our determination as to the classification of our assets and the amount of our loss allowances are subject to review by our principal federal regulator, the Office of the Comptroller of the Currency, which can require that we establish additional loss allowances. We regularly review our asset portfolio to determine whether any assets require classification in accordance with applicable regulations.

The following table sets forth our amounts of classified assets, assets designated as watch and total criticized assets (classified assets and loans designated as watch) as of the date indicated. Amounts shown at June 30, 2020 and 2019, include approximately $709,000 and $767,000 of nonperforming loans, respectfully. The related specific valuation allowance in the allowance for loan losses for such nonperforming loans was $0 and $23,000 at June 30, 2020 and 2019, respectively. Substandard assets shown include foreclosed assets.

 

17


     At June 30,  
     2020      2019  
     (In thousands)  

Classified assets:

     

Substandard

   $  1,892      $  4,096  

Doubtful

     244        10  

Loss

     —          —    
  

 

 

    

 

 

 

Total classified assets

     2,136        4,106  

Watch

     3,633        2,415  
  

 

 

    

 

 

 

Total criticized assets

   $ 5,769      $ 6,521  
  

 

 

    

 

 

 

At June 30, 2020, substandard assets consisted of $822,000 of one- to four-family residential mortgage loans, $270,000 in multi-family loans, $313,000 of commercial real estate loans, $15,000 in home equity lines of credit, $81,000 of commercial business loans, $5,000 of consumer loans, and $386,000 of foreclosed assets held for sale. At June 30, 2020, watch assets consisted of $775,000 of one- to four-family loans, $1.1 million of commercial real estate loans, $134,000 of home equity lines of credit, and $1.7 million of commercial business loans, while doubtful assets consisted of $244,000 in commercial business loans. At June 30, 2020, no assets were classified as loss.

Other Loans of Concern. At June 30, 2020, there were no other loans or other assets that are not disclosed in the text or tables above where known information about the possible credit problems of borrowers caused us to have serious doubts as to the ability of the borrowers to comply with present loan repayment terms and which may result in disclosure of such loans in the future.

Other Credit Risk. We also have some credit risk associated with fixed-rate residential loans that we sold to the Federal Home Loan Bank of Chicago. Between 2000 and 2004, we sold loans under its Mortgage Partnership Finance (MPF) 100 Program. Then from 2004 to December 2008, and again starting in October 2015, loans were sold under its Mortgage Partnership Finance (MPF) Original Program. However, while we retain the servicing of these loans and receive both servicing fees and credit enhancement fees, they are not our assets. We sold $33.3 million in loans under the MPF Original program in the year ended June 30, 2020, and we continue to service approximately $64.5 million of loans in the MPF 100 and MPF Original programs combined, for which our maximum potential credit risk is approximately $2.6 million. We established an FHLB Recourse Liability reserve of $320,000 against this $2.6 million in potential credit risk, and we have received $447,000 in credit enhancement income on these loans since 2004. From June 2000 to June 30, 2020, we experienced only $134,000 in actual losses under the MPF 100 and MPF Original Programs combined. We have also sold loans to the Federal Home Loan Bank of Chicago since December 2008 under its MPF Xtra Program. Unlike loans sold under the MPF 100 and MPF Original Programs, we do not retain any credit risk with respect to loans sold under the MPF Xtra Program.

Allowance for Loan Losses

The allowance for loan losses represents one of the most significant estimates within our financial statements and regulatory reporting. Because of this, we have developed, maintained, and documented a comprehensive, systematic, and consistently applied process for determining the allowance for loan losses, in accordance with GAAP, our stated policies and procedures, management’s best judgment and relevant supervisory guidance.

Our allowance for loan losses is the amount considered necessary to reflect probable incurred losses in our loan portfolio. We evaluate the need to establish allowances against losses on loans on a quarterly basis, and more frequently if warranted. We analyze the collectability of loans held for investment and maintain an allowance that is appropriate and determined in accordance with GAAP. When additional allowances are necessary, a provision for loan losses is charged to earnings.

Our methodology for assessing the appropriateness of the allowance for loan losses consists of two key elements: (1) specific allowances for estimated credit losses on individual loans that are determined to be impaired through our review for identified problem loans; and (2) a general allowance based on estimated credit losses inherent in the remainder of the loan portfolio.

 

18


In performing the allowance for loan loss review, we have divided our credit portfolio into several separate homogeneous and non-homogeneous categories within the following groups:

 

   

Mortgage Loans: one- to four-family residential first lien loans originated by Iroquois Federal; one- to four-family residential first lien loans purchased from a separate origination company; one- to four-family residential junior lien loans; home equity lines of credit; multi-family residential loans on properties with five or more units; non-residential real estate loans; and loans on land under current development or for future development.

 

   

Consumer Loans (unsecured or secured by other than real estate): loans secured by deposit accounts; loans for home improvement; educational loans; automobile loans; mobile home loans; loans on other security; and unsecured loans.

 

   

Commercial Loans (unsecured or secured by other than real estate): secured loans and unsecured loans.

Determination of Specific Allowances for Identified Problem Loans. The Company establishes a specific allowance when loans are determined to be impaired. Loss is measured by determining the present value of expected future cash flows, the loan’s observable market value, or, for collateral-dependant loans, the fair value of the collateral adjusted for market conditions and selling expenses. Factors used in identifying a specific problem loan include: (1) the strength of the customer’s personal or business cash flows; (2) the availability of other sources of repayment; (3) the amount due or past due; (4) the type and value of collateral; (5) the strength of our collateral position; (6) the estimated cost to sell the collateral; and (7) the borrower’s effort to cure the delinquency. 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.

Determination of General Allowance for Remainder of the Loan Portfolio. The Company establishes a general allowance for loans that are not deemed impaired 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 segregating the loans by loan category and assigning allowance percentages based on our historical loss experience, delinquency trends and management’s evaluation of the collectability of the loan portfolio. In certain instances, the historical loss experience could be adjusted if similar risks are not inherent in the remaining portfolio. The allowance is then adjusted for significant factors that, in management’s judgment, affect the collectability of the portfolio as of the evaluation date. These qualitative factors may include: (1) Management’s assumptions regarding the minimal level of risk for a given loan category and includes amounts for anticipated losses which may not be reflected in our current loss history experience; (2) changes in lending policies and procedures, including changes in underwriting standards, and charge-off and recovery practices not considered elsewhere in estimating credit losses; (3) changes in international, national, regional and local economics and business conditions and developments that affect the collectability of the portfolio, including the conditions of various market segments; (4) changes in the nature and volume of the portfolio and in the terms of loans; (5) changes in the experience, ability, and depth of the lending officers and other relevant staff; (6) changes in the volume and severity of past due loans, the volume of non-accrual loans, the volume of troubled debt restructured (“TDR”) and other loan modifications, and the volume and severity of adversely classified loans; (7) changes in the quality of the loan review system; (8) changes in the value of the underlying collateral for collateral-dependant loans; (9) the existence and effect of any concentrations of credit, and changes in the level of such concentrations; and (10) the effect of other external factors such as competition and legal and regulatory requirements on the level of estimated credit losses in the existing portfolio. The applied loss factors are re-evaluated quarterly to ensure their relevance in the current environment.

Although our policy allows for a general valuation allowance on certain smaller-balance, homogenous pools of loans classified as substandard, we have historically evaluated every loan classified as substandard, regardless of size, for impairment as part of our review for establishing specific allowances. Our policy also allows for a general valuation allowance on certain smaller-balance, homogenous pools of loans which are loans criticized as special mention or watch. A separate general allowance calculation is made on these loans based on historical measured weakness, and which is no less than twice the amount of general allowances calculated on our non-classified loans.

 

19


In addition, as an integral part of their examination process, the Office of the Comptroller of the Currency will periodically review our allowance for loan losses. Such agency may require that we recognize additions to the allowance based on their judgments of information available to them at the time of their examination.

We periodically evaluate the carrying value of loans and the allowance is adjusted accordingly. While we use the best information available to make evaluations, future adjustments to the allowance may be necessary if conditions differ substantially from the information used in making the evaluations.

The accrual of interest on loans is discontinued at the time the loan is 90 days delinquent unless the credit is well secured and in the process of collection. Loans are placed on nonaccrual status or charged off at an earlier date if collection of principal or interest is considered doubtful.

All interest accrued but not collected for loans, including troubled debt restructurings, that are placed on nonaccrual status or charged off is reversed against interest income. The interest on these loans is accounted for on the cash-basis or cost-recovery method, until qualifying for return to accrual. Generally, loans are returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured.

The allowance for loan losses decreased $94,000 to $6.2 million at June 30, 2020, from $6.3 million at June 30, 2019. The decrease was a result of a decrease in the multi-family loan portfolio and the addition of SBA PPP loans that do not require a reserve since they are 100% guaranteed by the Small Business Administration (“SBA”), partially offset by an adjustment for COVID-19 concerns.

As noted above, in its quarterly evaluation of the adequacy of its allowance for loan losses, the Company employs historical data including past due percentages, charge-offs, and recoveries. The Company’s allowance methodology weights the most recent twelve-quarter period’s net charge-offs and uses this information as one of the primary factors for evaluation of allowance adequacy. The most recent four-quarter net charge-offs are given a higher weight of 50%, while quarters 5-8 are given a 30% weight and quarters 9-12 are given only a 20% weight. The average net charge-offs in each period are calculated as net charge-offs by portfolio type for the period as a percentage of the quarter end balance of respective portfolio type over the same period. The Company believes that it is prudent to emphasize more recent historical factors in the allowance evaluation.

The following table sets forth the Company’s weighted average historical net charge-offs as of June 30, 2020 and June 30, 2019:

 

Portfolio segment

  June 30, 2020
Net charge-offs –
12 quarter weighted historical
    June 30, 2019
Net charge-offs –
12 quarter weighted historical
 

Real Estate:

   

One- to four-family

    0.25%       0.38%  

Multi-family

    0.00%       0.00%  

Commercial

    0.00%       0.00%  

HELOC

    0.11%       0.17%  

Construction

    0.00%       0.00%  

Commercial business

    0.08%       0.01%  

Consumer

    0.06%       0.02%  

Entire portfolio total

    0.09%       0.12%  

Additionally, in its quarterly evaluation of the adequacy of the allowance for loan losses, the Company evaluates changes in financial conditions of individual borrowers; changes in local, regional, and national economic conditions; the Company’s historical loss experience; and changes in market conditions for property pledged to the Company as collateral. As noted above, the Company has identified specific qualitative factors that address these issues and assigns a percentage to each factor based on management’s judgement. The qualitative factors are applied to the allowance for loan losses based upon the following percentages by loan type:

 

20


Portfolio segment

   Qualitative factor applied at
June 30, 2020
    Qualitative factor applied at
June 30, 2019
 

Real Estate:

    

One- to four-family

     0.57%       0.42%  

Multi-family

     1.57%       1.57%  

Commercial

     1.20%       1.18%  

HELOC

     0.90%       0.83%  

Construction

     1.09%       1.32%  

Commercial business

     1.85%(1)       1.96%  

Consumer

     0.70%       0.75%  

Entire portfolio total

     1.18%(1)       1.16%  

 

(1)

At June 30, 2020, $26.2 million in PPP loans with no associated allowance, were excluded from the calculation of qualitative factors since they are guaranteed by the SBA.

At June 30, 2020, the amount of our allowance for loan losses attributable to these qualitative factors was approximately $5.8 million, as compared to $5.7 million at June 30, 2019. The general increase in qualitative factors was attributable primarily to an adjustment for COVID-19 concerns, partially offset by a change in loan portfolio mix.

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

The following table sets forth activity in our allowance for loan losses at and for the periods indicated.

 

21


     At or For the Fiscal Years Ended June 30,  
     2020     2019     2018     2017     2016  
     (Dollars in thousands)  

Balance at beginning of period

   $ 6,328     $ 5,945     $ 6,835     $  5,351     $ 4,211  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Charge-offs:

          

Real estate loans:

          

One- to four-family (1)

     (40     (17     (1,608     (232     (188

Multi-family

     —         —         —         —         —    

Commercial

     —         —         —         (8     (3

Home equity lines of credit

     —         (15     (24     —         (32

Construction

     —         —         —         —         —    

Commercial

     (191     —         (30     —         —    

Consumer

     (37     (18     (14     (35     (10
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total charge-offs

     (268     (50     (1,676     (275     (233

Recoveries:

          

Real estate loans:

          

One- to four-family (1)

     3       22       1       32       5  

Multi-family

     —         —         —         —         —    

Commercial

     —         —         —         —         —    

Home equity lines of credit

     —         —         —         —         —    

Construction

     —         —         —         —         —    

Commercial

     31       —         —         —         —    

Consumer

     12       4       8       6       2  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total recoveries

     46       26       9       38       7  

Net charge-offs

     (222     (24     (1,667     (237     (226
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Provision for loan losses

     128       407       777       1,721       1,366  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance at end of period

   $ 6,234     $ 6,328     $ 5,945     $ 6,835     $ 5,351  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Ratios:

          

Net charge-offs to average loans outstanding

     0.04     0.01     0.35     0.05     0.05

Allowance for loan losses to non-performing loans at end of period

     879.27     825.03     87.06     71.66     244.39

Allowance for loan losses to total loans at end of period

     1.21     1.28     1.23     1.53     1.19

Allowance for loan losses to total loans excluding PPP loans at end of period

     1.27     1.28     1.23     1.53     1.19

 

(1)

Includes home equity loans.

 

22


Allocation of Allowance for Loan Losses. The following table sets forth the allowance for loan losses allocated by loan category and the percent of loans in each category to total loans at the dates indicated. The allowance for loan losses allocated to each category is not necessarily indicative of future losses in any particular category and does not restrict the use of the allowance to absorb losses in other categories.

 

     At June 30,  
     2020     2019     2018  
     Allowance for
Loan Losses
     Percent of
Loans in Each
Category to
Total Loans
    Allowance for
Loan Losses
     Percent of
Loans in Each
Category to
Total Loans
    Allowance for
Loan Losses
     Percent of
Loans in Each
Category to
Total Loans
 
     (Dollars in thousands)  

Real estate loans:

               

One- to four-family (1)

   $  1,044        25.0   $  1,031        26.2   $ 997        28.0

Multi-family

     1,514        18.6       1,642        21.2       1,650        22.3  

Commercial

     1,706        28.1       1,623        29.0       1,604        29.2  

Home equity lines of credit

     87        1.7       89        1.8       91        1.9  

Construction

     240        4.3       213        3.3       168        2.9  

Commercial

     1,583        20.8       1,659        17.1       1,373        14.2  

Consumer

     60        1.5       71        1.4       62        1.5  
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 

Total allocated allowance

     6,234          6,328          5,945     

Unallocated

     —            —            —       
  

 

 

      

 

 

      

 

 

    

Total

   $ 6,234        100.0   $ 6,328        100.0   $  5,945        100.0
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 

 

(1)

Includes home equity loans.

 

     At June 30,  
     2017     2016  
     Allowance for
Loan Losses
     Percent of
Loans in Each
Category to
Total Loans
    Allowance for
Loan Losses
     Percent of
Loans in Each
Category to
Total Loans
 
     (Dollars in thousands)  

Real estate loans:

          

One- to four-family (1)

   $  2,519        31.5   $  1,198        33.3

Multi-family

     1,336        19.5       1,202        18.8  

Commercial

     1,520        29.9       1,399        26.6  

Home equity lines of credit

     76        1.7       94        1.8  

Construction

     75        1.6       227        4.4  

Commercial

     1,242        14.0       1,140        12.9  

Consumer

     67        1.8       91        2.2  
  

 

 

    

 

 

   

 

 

    

 

 

 

Total allocated allowance

     6,835          5,351     

Unallocated

     —            —       
  

 

 

      

 

 

    

Total

   $ 6,835        100.0   $ 5,351        100.0
  

 

 

    

 

 

   

 

 

    

 

 

 

 

(1)

Includes home equity loans.

Net charge-offs increased to $222,000 for the year ended June 30, 2020, from $24,000 for the year ended June 30, 2019. Charge-offs for the year ended June 30, 2020 involved one- to four-family residential real estate loans, commercial business loans, and consumer loans, while most of the charge-offs during the year ended June 30, 2019, involved one- to four-family residential real estate loans, home equity lines of credit and consumer loans. In addition, non-performing loans decreased by $58,000 during the year ended June 30, 2020.

The allowance for loan losses decreased $94,000, or 1.5%, to $6.2 million at June 30, 2020 from $6.3 million at June 30, 2019. The decrease was due to a decrease in the multi-family loan portfolio and the addition of SBA PPP loans that do not require a reserve since they are 100% guaranteed by the SBA. At June 30, 2020, the allowance for loan losses represented 1.21% of total loans compared to 1.28% of total loans at June 30, 2019. At June 30, 2020, the allowance for loan losses, excluding PPP loans of $26.2 million, represented 1.27% of total loans.

Investments

We conduct investment transactions in accordance with our Board-approved investment policy. The investment policy is reviewed at least annually by the Budget and Investment Committee of the Board, and any

 

23


changes to the policy are subject to ratification by the full Board of Directors. This policy dictates that investment decisions give consideration to the safety of the investment, liquidity requirements, potential returns, the ability to provide collateral for pledging requirements, minimizing exposure to credit risk, potential returns and consistency with our interest rate risk management strategy. Authority to make investments under approved guidelines is delegated to our Investment Committee, comprised of our President and Chief Executive Officer, our Senior Executive Vice President and Chief Financial Officer, our Executive Vice President and Community President, and our Senior Vice President and Controller. All investments are reported to the Board of Directors for ratification at the next regular Board meeting.

Our current investment policy permits us to invest only in investment quality securities permitted by Office of the Comptroller of the Currency regulations, including U.S. Treasury or Government guaranteed securities, U.S. Government agency securities, securities issued or guaranteed by Fannie Mae, Freddie Mac and Ginnie Mae, bank-qualified municipal securities, bank-qualified money market instruments, and bank-qualified corporate bonds. We do not engage in speculative trading. As of June 30, 2020, we held no asset-backed securities other than mortgage-backed securities. As a federal savings and loan association, Iroquois Federal is generally not permitted to invest in equity securities, although this general restriction will not apply to IF Bancorp, which may acquire up to 5% of voting securities of any company without regulatory approval.

ASC 320-10, “Investment – Debt and Equity Securities” requires that, at the time of purchase, we designate a security as held to maturity, available-for-sale, or trading, depending on our ability and intent. Securities available for sale are reported at fair value, while securities held to maturity are reported at amortized cost. All of our securities are available for sale. We do not maintain a trading portfolio.

U.S. Government and Agency Debt Securities. While U.S. Government and federal agency securities generally provide lower yields than other investments, including mortgage-backed securities and interest-earning certificates of deposit, we maintain these investments, to the extent appropriate, for liquidity purposes and as collateral for borrowings.

Mortgage-Backed Securities. We invest in mortgage-backed securities insured or guaranteed by the U.S. Government or government sponsored enterprises. Mortgage-backed securities are created by pooling mortgages and issuing a security with an interest rate that is less than the interest rate on the underlying mortgages. Some securities pools are guaranteed as to payment of principal and interest to investors. Mortgage-backed securities generally yield less than the loans that underlie such securities because of the cost of payment guarantees and credit enhancements. However, mortgage-backed securities are more liquid than individual mortgage loans since there is an active trading market for such securities. In addition, mortgage-backed securities may be used to collateralize our specific liabilities and obligations. Finally, mortgage-backed securities are assigned lower risk weightings for purposes of calculating our risk-based capital level. Investments in mortgage-backed securities involve a risk that actual payments will be greater or less than the prepayment rate estimated at the time of purchase, which may require adjustments to the amortization of any premium or acceleration of any discount relating to such interests, thereby affecting the net yield on our securities. We periodically review current prepayment speeds to determine whether prepayment estimates require modification that could cause amortization or accretion adjustments. Also classified as agency mortgage-backed securities, are securities backed by debentures/loans for working capital to small businesses with limited or no access to private venture capital, and regulated by the Small Business Administration (SBA). Like other agency mortgage-backed securities, they are backed by the full faith and credit of the United States Government. They have zero risk weighting for purposes of calculating our risk-based capital level. With ten year maturities, these fixed rate bullet debentures pay interest semi-annually and principal at maturity. Prepayments are required to be in whole on any semi-annual payment date, and there are no prepayments penalties for deals issued since 2007. Therefore, the two sources of prepayment risk are voluntary prepays and defaults. In the event of default, the SBA may accelerate the payment equal to 100% of the outstanding principal balance, or the SBA will make the principal and interest payments.

Municipal Obligations. Iroquois Federal’s investment policy allows it to purchase municipal securities of credit-worthy issuers, and does not permit it to invest more than 10% of Iroquois Federal’s capital in the bonds of any single issuer. At June 30, 2020, we held $1.7 million of municipal securities, all of which were issued by local governments and school districts within our market area.

 

24


Federal Home Loan Bank Stock. At June 30, 2020, we held $3.0 million of Federal Home Loan Bank of Chicago common stock in connection with our borrowing activities totaling $34.5 million. The common stock of the Federal Home Loan Bank is carried at cost and classified as a restricted equity security.

Bank-Owned Life Insurance. We invest in bank-owned life insurance to provide us with a funding source for our benefit plan obligations. Bank-owned life insurance also generally provides us noninterest income that is non-taxable. Federal regulations generally limit our investment in bank-owned life insurance to 25% of our Tier 1 capital plus our allowance for loan losses. At June 30, 2020, we had $9.3 million invested in bank-owned life insurance, which was 11.3% of our Tier 1 capital plus our allowance for loan losses.

Investment Securities Portfolio. The following table sets forth the composition of our investment securities portfolio at the dates indicated, excluding Federal Home Loan Bank of Chicago stock, federally insured interest-earning time deposits and bank-owned life insurance. As of June 30, 2020, 2019 and 2018 all of such securities were classified as available for sale.

 

     At June 30,  
     2020      2019      2018  
     Amortized
Cost
     Fair Value      Amortized
Cost
     Fair Value      Amortized
Cost
     Fair Value  
     (In thousands)  

Securities available for sale:

                 

U.S. government, federal agency and government-sponsored enterprises

   $ 7,528      $ 8,236      $ 12,654      $ 12,950      $ 24,757      $ 23,922  

U.S. government sponsored mortgage-backed securities

     143,033        148,855        124,615        125,510        100,534        97,059  

Small Business Administration

     3,578        3,640        4,911        4,935        1,965        1,891  

State and political subdivisions

     1,449        1,663        2,725        2,896        2,980        3,124  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $  155,588      $  162,394      $  144,905      $  146,291      $  130,236      $  125,996  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

25


Portfolio Maturities and Yields. The composition and maturities of the investment securities portfolio at June 30, 2020 are summarized in the following table. At such date, all of our securities were available for sale. Maturities are based on the final contractual payment dates, and do not reflect the impact of prepayments or early redemptions that may occur. The yields on municipal securities have not been adjusted to a tax-equivalent basis.

 

    One Year or Less     More than One Year
through Five Years
    More than Five
Years through Ten
Years
    More than Ten
Years
    Total Securities  
    Amortized
Cost
    Weighted
Average
Yield
    Amortized
Cost
    Weighted
Average
Yield
    Amortized
Cost
    Weighted
Average
Yield
    Amortized
Cost
    Weighted
Average
Yield
    Amortized
Cost
    Fair Value     Weighted
Average
Yield
 
    (Dollars in thousands)  

U.S. government, federal agency and government-sponsored enterprises

  $ —         —     $ 6,038       2.56   $ 1,490       2.24   $ —         —     $ 7,528     $ 8,236       2.49

U.S. government sponsored mortgage-backed securities

    —         —         8,263       2.46       45,148       2.56       89,622       2.11       143,033       148,855       2.27  

Small Business Administration

    —         —         —         —         1,581       2.61       1,997       2.40       3,578       3,640       2.49  

State and political subdivisions

    —         —         62       4.83       1,387       2.97       —         —         1,449       1,663       3.05  
 

 

 

     

 

 

     

 

 

     

 

 

     

 

 

   

 

 

   

Total

  $ —         —     $  14,363       2.51   $  49,606       2.56   $  91,619       2.12   $  155,588     $  162,394       2.29
 

 

 

     

 

 

     

 

 

     

 

 

     

 

 

   

 

 

   

 

26


Sources of Funds

General. Deposits traditionally have been our primary source of funds for our lending and investment activities. We also borrow from the Federal Home Loan Bank of Chicago, to supplement cash flow needs, to lengthen the maturities of liabilities for interest rate risk management purposes and to manage our cost of funds. Our additional sources of funds are the proceeds from the sale of loans originated for sale, scheduled loan payments, maturing investments, loan prepayments, retained earnings and income on other earning assets.

Deposits. We generate deposits primarily from the areas in which our branch offices are located. We rely on our competitive pricing, convenient locations and customer service to attract and retain both retail and commercial deposits.

We offer a variety of deposit accounts with a range of interest rates and terms. Our deposit accounts consist of statement savings accounts, certificates of deposit, money market accounts, commercial and regular checking accounts, individual retirement accounts and health savings accounts. From time to time we utilize brokered certificates of deposit or or non-brokered certificates of deposit obtained through an internet listing service. At June 30, 2020, we had $12.4 million in brokered certificates of deposit and $5.7 million in non-brokered certificates of deposit obtained through an internet listing service.

Interest rates, maturity terms, service fees and withdrawal penalties are established on a periodic basis. Deposit rates and terms are based primarily on current operating strategies, including the cost of alternate sources of funds, and market interest rates, liquidity requirements, interest rates paid by competitors and our deposit growth goals.

The following tables set forth the distribution of our average total deposit accounts, by account type, for the periods indicated.

 

     For the Fiscal Year Ended
June 30, 2020
    For the Fiscal Year Ended
June 30, 2019
 
     Average
Balance
     Percent     Weighted
Average Rate
    Average
Balance
     Percent     Weighted
Average Rate
 
     (Dollars in thousands)  

Deposit type:

              

Noninterest bearing demand

   $ 37,874        6.77     0.00   $ 28,429        5.50     0.00

Interest-bearing checking or NOW

     63,964        11.43       0.29       50,668        9.81       0.28  

Savings accounts

     46,552        8.32       0.35       43,183        8.36       0.41  

Money market accounts

     103,150        18.43       1.02       97,555        18.89       1.29  

Certificates of deposit

     308,089        55.05       2.11       296,692        57.44       1.94  
  

 

 

    

 

 

     

 

 

    

 

 

   

Total deposits

   $  559,629        100.00     1.41   $  516,527        100.00     1.42
  

 

 

    

 

 

     

 

 

    

 

 

   

 

     For the Fiscal Year Ended
June 30, 2018
 
     Average
Balance
     Percent     Weighted
Average Rate
 
     (Dollars in thousands)  

Deposit type:

       

Noninterest bearing demand

   $ 21,029        4.53     0.00

Interest-bearing checking or NOW

     46,299        9.98       0.14  

Savings accounts

     43,159        9.31       0.24  

Money market accounts

     96,984        20.92       0.88  

Certificates of deposit

     256,250        55.26       1.34  
  

 

 

    

 

 

   

Total deposits

   $  453,721        100.00     0.96
  

 

 

    

 

 

   

 

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As of June 30, 2020, the aggregate amount of outstanding certificates of deposit in amounts greater than or equal to $100,000 was approximately $151.5 million. The following table sets forth the maturity of those certificates as of June 30, 2020.

 

     At
June 30, 2020
 
     (In thousands)  

Three months or less

   $ 40,287  

Over three months through six months

     28,413  

Over six months through one year

     67,135  

Over one year to three years

     15,113  

Over three years

     508  
  

 

 

 

Total

   $  151,456  
  

 

 

 

The following table sets forth the amount of our certificates of deposit classified by interest rate as of the dates indicated.

 

     At June 30,  
     2020      2019      2018  
     (In thousands)  

Interest Rate:

        

Less than 2.00%

   $  205,757      $  125,493      $  216,275  

2.00% to 2.99%

     73,725        199,791        45,565  

3.00% to 3.99%

     2,009        5,001        1,740  

4.00% to 4.99%

     —          —          —    

5.00% to 5.99%

     —          —          —    
  

 

 

    

 

 

    

 

 

 

Total

   $ 281,491      $ 330,285      $ 263,580  
  

 

 

    

 

 

    

 

 

 

Borrowings. Our borrowings consist of advances from the Federal Home Loan Bank of Chicago, a line of credit from CIBC Bank USA, and repurchase agreements. At June 30, 2020, we had access to additional Federal Home Loan Bank of Chicago advances of up to $126.8 million based on our collateral and an additional $4.5 million on the line of credit from CIBC Bank USA. The following table sets forth information concerning balances and interest rates on our borrowings and repurchase agreements at the dates and for the periods indicated.

 

28


     At or For the Fiscal Years Ended
June 30,
 
     2020     2019     2018  
     (Dollars in thousands)  

Federal Home Loan Bank of Chicago

      

Balance at end of period

   $  34,500     $  24,000     $  67,500  

Average balance during period

     35,625       61,017       61,374  

Maximum outstanding at any month end

     65,500       81,500       67,500  

Weighted average interest rate at end of period

     1.44     2.11     1.88

Average interest rate during period

     1.74     2.48     1.34

CIBC Bank USA

      

Balance at end of period

   $ 3,000       N/A       N/A  

Average balance during period

     4,000       N/A       N/A  

Maximum outstanding at any month end

     5,000       N/A       N/A  

Weighted average interest rate at end of period

     2.50     N/A       N/A  

Average interest rate during period

     3.34     N/A       N/A  

Repurchase Agreements

      

Balance at end of period

   $ 3,738     $ 2,015     $ 2,281  

Average balance during period

     3,398       2,400       2,623  

Maximum outstanding at any month end

     3,939       2,840       2,980  

Weighted average interest rate at end of period

     0.58     1.12     0.94

Average interest rate during period

     0.87     0.84     0.63

Personnel

At June 30, 2020, the Association had 104 full-time employees and 6 part-time employees, none of whom is represented by a collective bargaining unit. Iroquois Federal believes that its relationship with its employees is good.

Subsidiaries

IF Bancorp conducts its principal business activities through its wholly-owned subsidiary, Iroquois Federal Savings and Loan Association. Iroquois Federal Savings and Loan Association has one wholly-owned subsidiary, L.C.I. Service Corporation, an insurance agency with offices in Watseka and Danville, Illinois.

REGULATION AND SUPERVISION

General

Iroquois Federal is subject to examination and regulation by the OCC, and is also subject to examination by the FDIC. This regulation and supervision establishes a comprehensive framework of activities in which an institution may engage and is intended primarily for the protection of the FDIC’s deposit insurance fund and depositors, and not for the protection of stockholders. Iroquois Federal also is a member of and owns stock in the FHLB-Chicago, which is one of the 11 regional banks in the Federal Home Loan Bank System.

Under this system of regulation, the regulatory authorities have extensive discretion in connection with their supervisory, enforcement, rulemaking and examination activities and policies, including rules or policies that: establish minimum capital levels; restrict the timing and amount of dividend payments; govern the classification of assets; determine the adequacy of loan loss reserves for regulatory purposes; and establish the timing and amounts of assessments and fees. Moreover, as part of their examination authority, the banking regulators assign numerical ratings to banks and savings institutions relating to capital, asset quality, management, liquidity, earnings and other factors. The receipt of a less than satisfactory rating in one or more categories may result in enforcement action by the banking regulators against a financial institution. A less than satisfactory rating may also prevent a financial institution, such as Iroquois Federal or its holding company, from obtaining necessary regulatory approvals to access the capital markets, pay dividends, acquire other financial institutions or establish new branches.

 

29


In addition, we must comply with significant anti-money laundering and anti-terrorism laws and regulations, Community Reinvestment Act laws and regulations, and fair lending laws and regulations. Government agencies have the authority to impose monetary penalties and other sanctions on institutions that fail to comply with these laws and regulations, which could significantly affect our business activities, including our ability to acquire other financial institutions or expand our branch network.

As a savings and loan holding company, IF Bancorp is required to comply with the rules and regulations of the Federal Reserve Board and to file certain reports with and is subject to examination by the Federal Reserve Board. IF Bancorp is also subject to the rules and regulations of the Securities and Exchange Commission under the federal securities laws.

Any change in applicable laws or regulations, whether by the OCC, the FDIC, the Federal Reserve Board or Congress, could have a material adverse impact on the operations and financial performance of IF Bancorp and Iroquois.

Set forth below is a brief description of material regulatory requirements that are applicable to Iroquois Federal and IF Bancorp. The description is limited to certain material aspects of the statutes and regulations addressed, and is not intended to be a complete description of such statutes and regulations and their effects on Iroquois Federal and IF Bancorp.

Federal Banking Regulation

Business Activities. A federal savings bank derives its lending and investment powers from the Home Owners’ Loan Act, as amended, and applicable federal regulations. Under these laws and regulations, Iroquois Federal may invest in mortgage loans secured by residential and commercial real estate, commercial business and consumer loans, certain types of debt securities and certain other assets, subject to applicable limits. Iroquois Federal may also establish subsidiaries that may engage in certain activities not otherwise permissible for Iroquois Federal, including real estate investment and securities and insurance brokerage.

Effective July 1, 2019, the OCC issued a final rule, pursuant to federal legislation, that permits a federal savings association to elect to exercise national bank powers without converting to a national bank charter. The election is available to any federal savings association that had total consolidated assets of $20 billion or less as of December 31, 2017. The effect of the so-called “covered savings association” election is that a federal savings association generally has the same rights and privileges, including broad commercial lending authority as a national bank, that has its main office in the same location as the home office of the covered savings association. The covered savings association is also subject to the same duties, restrictions, liabilities and limitations applicable to a national bank.    A covered savings association retains its federal savings association charter and continues to be subject to the corporate governance laws and regulations applicable to such associations, including as to its bylaws, board of directors and shareholders, capital distributions and mergers. Iroquois Federal has not made such an election.

Capital Requirements. Federal regulations require federally insured depository institutions to meet several minimum capital standards: a common equity Tier 1 capital to risk-based assets ratio of 4.5%, a Tier 1 capital to risk-based assets ratio of 6.0%, a total capital to risk-based assets of 8%, and a 4% Tier 1 capital to total assets leverage ratio. The existing capital requirements were effective January 1, 2015 and are the result of regulations implementing recommendations of the Basel Committee on Banking Supervision and certain requirements of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the “Dodd-Frank Act”).

As noted, the risk-based capital standards for savings associations require the maintenance of common equity Tier 1 capital, Tier 1 capital and total capital to risk-weighted assets of at least 4.5%, 6% and 8%, respectively. In determining the amount of risk-weighted assets, all assets, including certain off-balance sheet assets, are multiplied by a risk-weight factor assigned by the regulations based on the risks believed inherent in the type of asset. Common equity Tier 1 capital is generally defined as common stockholders’ equity and retained

 

30


earnings. Tier 1 capital is generally defined as common equity Tier 1 and additional Tier 1 capital. Additional Tier 1 capital includes certain noncumulative perpetual preferred stock and related surplus and minority interests in equity accounts of consolidated subsidiaries. Total capital includes Tier 1 capital (common equity Tier 1 capital plus additional Tier 1 capital) and Tier 2 capital. Tier 2 capital is comprised of capital instruments and related surplus, meeting specified requirements, and may include cumulative preferred stock and long-term perpetual preferred stock, mandatory convertible securities, intermediate preferred stock and subordinated debt. Also included in Tier 2 capital is the allowance for loan and lease losses limited to a maximum of 1.25% of risk-weighted assets and, for institutions that have exercised an opt-out election regarding the treatment of Accumulated other comprehensive income, up to 45% of net unrealized gains on available-for-sale equity securities with readily determinable fair market values. Calculation of all types of regulatory capital is subject to deductions and adjustments specified in the regulations. In assessing an institution’s capital adequacy, the OCC takes into consideration, not only these numeric factors, but qualitative factors as well, and has the authority to establish higher capital requirements for individual associations where necessary.

In addition to establishing the minimum regulatory capital requirements, the regulations limit capital distributions and certain discretionary bonus payments to management if the institution does not hold a “capital conservation buffer” consisting of 2.5% of common equity Tier 1 capital to risk-weighted asset above the amount necessary to meet its minimum risk-based capital requirements. The capital conservation buffer requirement was phased in beginning January 1, 2016 at 0.625% of risk-weighted assets and increasing each year until fully implemented at 2.5% on January 1, 2019.

Legislation enacted in May 2018, required the federal banking agencies, including the OCC, to establish for institutions with assets of less than $10 billion a “community bank leverage ratio” of between 8 to 10%. Institutions with capital equaling or exceeding the ratio and otherwise meeting the specified requirements (including off-balance sheet exposures of 25% or less of total assets and trading assets and liabilities of 5% or less of total assets) and electing the alternative framework are considered to comply with the applicable regulatory capital requirements, including the risk-based requirements.

The community bank leverage ratio was established at 9% Tier 1 capital to total average assets, effective January 1, 2020. A qualifying institution may opt in and out of the community bank leverage ratio framework on its quarterly call report. An institution that temporarily ceases to meet any qualifying criteria is provided with a two quarter grace period to again achieve compliance. Failure to meet the qualifying criteria within the grace period or maintain a leverage ratio of 8% or greater requires the institution to comply with the generally applicable capital requirements.

Section 4012 of the Coronavirus Aid, Relief and Economic Security Act of 2020 required that the community bank leverage ratio be temporarily lowered to 8%. The federal regulators issued a rule making the reduced ratio effective April 23, 2020. The rules also established a two quarter grace period for a qualifying community bank whose leverage ratio falls below the 8% community bank leverage ratio requirement, or fails to meet other qualifying criteria, so long as the bank maintains a leverage ratio of 7% or greater. Another rule was issued to transition back to the 9% community bank leverage ratio by increasing the ratio to 8.5% for calendar year 2021 and to 9% thereafter.

At June 30, 2020, Iroquois Federal’s capital exceeded all applicable requirements.

Loans to One Borrower. Generally, a federal savings bank may not make a loan or extend credit to a single or related group of borrowers in excess of 15% of unimpaired capital and surplus. An additional amount may be loaned, equal to 10% of unimpaired capital and surplus, if the loan is secured by readily marketable collateral, which generally does not include real estate.

On July 30, 2012 Iroquois Federal received approval from the OCC to participate in the Supplemental Lending Limits Program (SLLP). This program allows eligible savings associations to make additional residential real estate loans or extensions of credit to one borrower, small business loans or extensions of credit to one borrower, or small farm loans or extensions of credit to one borrower, in the lesser of the following two amounts: (1) 10% of its capital and surplus; or (2) the percentage of capital and surplus, in excess of 15%, that a state bank is permitted to lend under the state lending limit that is available for loans secured by one- to four-family residential real estate, small business loans, small farm loans or unsecured loans in the state where the main office of the

 

31


savings association is located. For Iroquois Federal, this additional limit (or “supplemental limit”) for one- to four-family residential real estate, small business, or small farm loans is 10% of its capital and surplus. In addition, the total outstanding amount of Iroquois Federal’s loans or extensions of credit or parts of loans and extensions of credit made to all of Iroquois Federal’s borrowers under the SLLP may not exceed 100% of Iroquois Federal’s capital and surplus. Iroquois Federal uses the supplemental limit for its loans to one borrower infrequently, and all such credit facilities must receive prior approval by the Board of Directors.

As of June 30, 2020, Iroquois Federal was in compliance with its loans-to-one borrower limitations.

Qualified Thrift Lender Test. As a federal savings bank that has not exercised the covered savings association election, Iroquois Federal must either qualify as a “domestic building and loan association” within the meaning of the Internal Revenue Code or satisfy the qualified thrift lender, or “QTL,” test. Under the QTL test, Iroquois Federal must maintain at least 65% of its “portfolio assets” in “qualified thrift investments” in at least nine months of the most recent 12 months. “Portfolio assets” generally means total assets of a savings institution, less the sum of specified liquid assets up to 20% of total assets, goodwill and other intangible assets, and the value of property used in the conduct of the savings institution’s business. A savings bank that fails the qualified thrift lender test must operate under specified restrictions specified in the Home Owners’ Loan Act. The Dodd-Frank Act made noncompliance with the QTL Test potentially subject to agency enforcement action for a violation of law. At June 30, 2020, Iroquois Federal held 71.9% of its “portfolio assets” in “qualified thrift investments,” and satisfied the QTL Test.

Capital Distributions. Federal regulations govern capital distributions by a federal savings bank, which include cash dividends, stock repurchases and other transactions charged to the capital account. A savings bank must file an application for approval of a capital distribution if:

 

   

the total capital distributions for the applicable calendar year exceed the sum of the savings bank’s net income for that year to date plus the savings bank’s retained net income for the preceding two years;

 

   

the savings bank would not be at least adequately capitalized (as defined in the prompt corrective action regulations discussed below) following the distribution;

 

   

the distribution would violate any applicable statute, regulation, agreement or regulatory condition; or

 

   

the savings bank is not eligible for expedited treatment of its filings.

Even if an application is not otherwise required, every federal savings bank that is a subsidiary of a holding company, such as Iroquois Federal, must still file a notice with the Federal Reserve Board (with a copy to the OCC) at least 30 days before the Board of Directors declares a dividend or approves a capital distribution.

The Federal Reserve Board, upon consultation with OCC, may disapprove a notice or application if:

 

   

the savings bank would be undercapitalized following the distribution;

 

   

the proposed capital distribution raises safety and soundness concerns; or

 

   

the capital distribution would violate a prohibition contained in any statute, regulation, agreement with a federal banking regulatory agency or condition imposed in connection with an application or notice.

In addition, the Federal Deposit Insurance Act provides that an insured depository institution may not make any capital distribution if, after making such distribution, the institution would fail to satisfy any applicable regulatory capital requirement. A federal savings bank also may not make a capital distribution that would reduce its regulatory capital below the amount required for the liquidation account established in connection with its conversion to stock form. In addition, Iroquois Federal’s ability to pay dividends is now limited if Iroquois Federal does not have the capital conservation buffer required by the new capital rules, which may limit the ability of IF Bancorp to pay dividends to its stockholders. See “— Capital Requirements.”

Community Reinvestment Act and Fair Lending Laws. All federal savings banks have a responsibility under the Community Reinvestment Act and related regulations to help meet the credit needs of their communities, including low- and moderate-income borrowers. In connection with its examination of a federal savings bank, the

 

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OCC is required to assess the association’s record of compliance with the Community Reinvestment Act. In addition, the Equal Credit Opportunity Act and the Fair Housing Act prohibit lenders from discriminating in their lending practices on the basis of characteristics specified in those statutes. A savings bank’s failure to comply with the provisions of the Community Reinvestment Act could, at a minimum, result in denial of certain corporate applications such as branches or mergers, or in restrictions on its activities. The failure to comply with the Equal Credit Opportunity Act and the Fair Housing Act could result in enforcement actions by the OCC, as well as other federal regulatory agencies and the Department of Justice. Iroquois Federal received a “satisfactory” Community Reinvestment Act rating in its most recent federal examination.

In June 2020, the OCC published amendments to its Community Reinvestment Act regulations. The final rule clarifies and expands the activities that qualify for Community Reinvestment Act credit, updates where activities count for such credit and, according to the agency, seeks to create a more consistent and objective method for evaluating Community Reinvestment Act performance. The final rule is effective October 1, 2020 but compliance with the revised requirements is not mandatory until January 1, 2024 for institutions of Iroquois Federal Bank’s size.

Transactions with Related Parties. A federal savings bank’s authority to engage in transactions with its affiliates is limited by Sections 23A and 23B of the Federal Reserve Act and its implementing Regulation W. An affiliate is a company that controls, is controlled by, or is under common control with an insured depository institution such as Iroquois Federal. IF Bancorp is an affiliate of Iroquois Federal because of its control of Iroquois Federal. In general, transactions between an insured depository institution and its affiliate are subject to certain quantitative limits and collateral requirements. In addition, federal regulations prohibit a federal savings bank from lending to any of its affiliates that are engaged in activities that are not permissible for bank holding companies and from purchasing the securities of any affiliate, other than a subsidiary. Finally, transactions with affiliates must be consistent with safe and sound banking practices, not involve the purchase of low-quality assets and be on terms that are as favorable to the institution as comparable transactions with non-affiliates.

Iroquois Federal’s authority to extend credit to its directors, executive officers and 10% stockholders, as well as to entities controlled by such persons, is currently governed by the requirements of Sections 22(g) and 22(h) of the Federal Reserve Act and Regulation O of the Federal Reserve Board. Among other things, these provisions generally require that extensions of credit to insiders

 

   

be made on terms that are substantially the same as, and follow credit underwriting procedures that are not less stringent than, those prevailing for comparable transactions with unaffiliated persons and that do not involve more than the normal risk of repayment or present other unfavorable features (subject to an exception for bank-wide lending programs available to all employees); and

 

   

not exceed certain limitations on the amount of credit extended to such persons, individually and in the aggregate, which limits are based, in part, on the amount of Iroquois Federal’s capital.

In addition, extensions of credit in excess of certain limits must be approved by Iroquois Federal’s Board of Directors. Extensions of credit to executive officers are subject to additional restrictions, including limits on various types of loans.

Enforcement. The OCC has primary enforcement responsibility over federal savings institutions and has the authority to bring enforcement action against all “institution-affiliated parties,” including stockholders, and attorneys, appraisers and accountants who knowingly or recklessly participate in wrongful action likely to have an adverse effect on an insured institution. Formal enforcement action by the OCC may range from the issuance of a capital directive or cease and desist order, to removal of officers and/or directors of the institution and the appointment of a receiver or conservator. Civil penalties cover a wide range of violations and actions, and range up to $25,000 per day, unless a finding of reckless disregard is made, in which case penalties may be as high as $1 million per day. The FDIC also has the authority to terminate deposit insurance or to recommend to the OCC that enforcement action be taken with respect to a particular savings institution. If action is not taken by the OCC, the FDIC has authority to take action under specified circumstances.

 

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Standards for Safety and Soundness. Federal law requires each federal banking agency to prescribe certain standards for all insured depository institutions. These standards relate to, among other things, internal controls, information systems and audit systems, loan documentation, credit underwriting, interest rate risk exposure, asset growth, compensation, and other operational and managerial standards as the agency deems appropriate. Interagency guidelines set forth the safety and soundness standards that the federal banking agencies use to identify and address problems at insured depository institutions before capital becomes impaired. If the appropriate federal banking agency determines that an institution fails to meet any standard prescribed by the guidelines, the agency may require the institution to submit to the agency an acceptable plan to achieve compliance with the standard. If an institution fails to meet these standards, the appropriate federal banking agency may require the institution to implement an acceptable compliance plan. Failure to implement such a plan can result in further enforcement action, including the issuance of a cease and desist order or the imposition of civil money penalties.

Interstate Banking and Branching. Federal regulations permit federal savings banks to establish branches in any state subject to OCC approval and certain other requirements.

Prompt Corrective Action Regulations. Federal law requires, among other things, that federal bank regulatory authorities take “prompt corrective action” with respect to banks that do not meet minimum capital requirements. For these purposes, the law establishes five capital categories: well capitalized, adequately capitalized, undercapitalized, significantly undercapitalized and critically undercapitalized.

The OCC has adopted regulations to implement the prompt corrective action legislation. For this purpose, a savings bank is placed in one of the five categories based on the institution’s capital:

 

   

Well Capitalized – a total risk-based capital ratio of 10.0% or greater, a Tier 1 risk-based capital ratio of 8.0% or greater, a leverage ratio of 5.0% or greater and a common equity Tier 1 ratio of 6.5% or greater.

 

   

Adequately Capitalized – a total risk-based capital ratio of 8.0% or greater, a Tier 1 risk-based capital ratio of 6.0% or greater, a leverage ratio of 4.0% or greater and a common equity Tier 1 ratio of 4.5% or greater.

 

   

Undercapitalized – a total risk-based capital ratio of less than 8.0%, a Tier 1 risk-based capital ratio of less than 6.0%, a leverage ratio of less than 4.0% or a common equity Tier 1 ratio of less than 4.5%.

 

   

Significantly Undercapitalized – a total risk-based capital ratio of less than 6.0%, a Tier 1 risk-based capital ratio of less than 4.0%, a leverage ratio of less than 3.0% or a common equity Tier 1 ratio of less than 3.0%.

 

   

Critically Undercapitalized – a ratio of tangible equity (as defined in the regulations) to total assets that is equal to or less than 2.0%.

At June 30, 2020, Iroquois Federal met the criteria for being considered “well-capitalized.”

The previously referenced 2018 legislation provides that qualifying institutions that elect and comply with the alternative community bank ratio framework will be considered to be “well-capitalized.”

“Undercapitalized” institution’s must adhere to growth, capital distribution (including dividend) and other limitations and are required to submit a capital restoration plan. Compliance with such a plan must be guaranteed by any company that controls the undercapitalized institution in an amount equal to the lesser of 5% of the institution’s total assets when deemed undercapitalized or the amount necessary to achieve the status of adequately capitalized. If an “undercapitalized” institution fails to submit an acceptable plan, it is treated as if it is “significantly undercapitalized.” “Significantly undercapitalized” institutions must comply with one or more of a number of additional measures, including, but not limited to, a required sale of sufficient voting stock to become adequately

 

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capitalized, a requirement to reduce total assets, cessation of taking deposits from correspondent banks, the dismissal of directors or officers and restrictions on interest rates paid on deposits, compensation of executive officers and capital distributions by the parent holding company. “Critically undercapitalized” institutions are subject to additional measures including, subject to a narrow exception, the appointment of a receiver or conservator within 270 days after it obtains such status. These actions are in addition to other discretionary supervisory or enforcement actions that the OCC may take.

Insurance of Deposit Accounts. The Deposit Insurance Fund of the FDIC insures deposits at FDIC-insured financial institutions such as Iroquois Federal. Deposit accounts in Iroquois Federal are insured by the FDIC generally up to a maximum of $250,000 per separately insured depositor and up to a maximum of $250,000 for self-directed retirement accounts. The FDIC charges insured depository institutions premiums to maintain the Deposit Insurance Fund.

Assessments for institutions with less than $10 billion of assets, such as Iroquois Federal, are based on financial measures and supervisory ratings derived from statistical modeling estimating the probability of an institution’s failure within three years (along with certain specified adjustments), with institutions deemed less risky paying lower assessments. That system, effective July 1, 2016, replaced a previous system under which institutions were placed into risk categories.

Currently, the assessment range (inclusive of possible adjustments) for insured institutions of less than $10 billion of total assets is 1.5 basis points to 30 basis points. The FDIC may increase or decrease the scale uniformly, except that no adjustment can deviate more than two basis points from the base scale without notice and comment rulemaking.

The Dodd-Frank Act increased the minimum target Deposit Insurance Fund ratio from 1.15% of estimated insured deposits to 1.35% of estimated insured deposits. The FDIC announced that the 1.35% ratio was achieved in September 2018. The Dodd-Frank Act eliminated the 1.5% maximum fund ratio, instead leaving it to the discretion of the FDIC, which has exercised that discretion by establishing a long range fund ratio of 2%.

The FDIC has authority to increase insurance assessments. Any significant increases would have an adverse effect on the operating expenses and results of operations of Iroquois Federal. Management cannot predict what assessment rates will be in the future.

Insurance of deposits may be terminated by the FDIC upon a finding that an institution has engaged in unsafe or unsound practices, is in an unsafe or unsound condition to continue operations or has violated any applicable law, regulation, rule, order or condition imposed by the FDIC. We do not currently know of any practice, condition or violation that may lead to termination of our deposit insurance.

USA Patriot Act. Iroquois Federal is subject to the USA PATRIOT Act, which gives federal agencies additional powers to address terrorist threats through enhanced domestic security measures, expanded surveillance powers, increased information sharing, and broadened anti-money laundering requirements. The USA PATRIOT Act contains provisions intended to encourage information sharing among bank regulatory agencies and law enforcement bodies and imposes affirmative obligations on financial institutions, such as enhanced recordkeeping and customer identification requirements.

Prohibitions Against Tying Arrangements. Federal savings banks are prohibited, subject to some exceptions, from extending credit to or offering any other service, or fixing or varying the consideration for such extension of credit or service, on the condition that the customer obtain some additional service from the institution or its affiliates or not obtain services of a competitor of the institution.

Federal Home Loan Bank System. Iroquois Federal is a member of the Federal Home Loan Bank System, which consists of 11 regional Federal Home Loan Banks. The Federal Home Loan Bank System provides a central credit facility primarily for member institutions as well as other entities involved in home mortgage lending. As a member of the Federal Home Loan Bank of Chicago, Iroquois Federal is required to acquire and hold shares of capital stock in the Federal Home Loan Bank. As of June 30, 2020, Iroquois Federal was in compliance with this requirement.

 

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Federal Reserve System

Federal Reserve Board regulations historically required savings banks to maintain noninterest-earning reserves against their transaction accounts, such as negotiable order of withdrawal and regular checking accounts. At June 30, 2020, Iroquois Federal was in compliance with these reserve requirements. Due to a change in its approach to monetary policy, the Federal Reserve Board reduced the reserve requirement to zero, effective March 26, 2020. The Federal Reserve Board has indicated that it has no plans to re-impose reserve requirements, but may do so in the future if conditions warrant.

Other Regulations

Interest and other charges collected or contracted for by Iroquois Federal are subject to state usury laws and federal laws concerning interest rates. Iroquois Federal’s operations are also subject to federal laws applicable to credit transactions, such as the:

 

   

Truth-In-Lending Act, governing disclosures of credit terms to consumer borrowers;

 

   

Real Estate Settlement Procedures Act, requiring that borrowers for mortgage loans for one- to four-family residential real estate receive various disclosures, including good faith estimates of settlement costs, lender servicing and escrow account practices, and prohibiting certain practices that increase the cost of settlement services;

 

   

Home Mortgage Disclosure Act of 1975, requiring financial institutions to provide information to enable the public and public officials to determine whether a financial institution is fulfilling its obligation to help meet the housing needs of the community it serves;

 

   

Equal Credit Opportunity Act, prohibiting discrimination on the basis of race, creed or other prohibited factors in extending credit;

 

   

Fair Credit Reporting Act of 1978, governing the use and provision of information to credit reporting agencies;

 

   

fair lending laws;

 

   

Unfair or Deceptive Acts or Practices laws and regulations;

 

   

Fair Debt Collection Act, governing the manner in which consumer debts may be collected by collection agencies;

 

   

Truth in Savings Act; and

 

   

Rules and regulations of the various federal agencies charged with the responsibility of implementing such federal laws.

In addition, the Consumer Financial Protection Bureau issues regulations and standards under these federal consumer protection laws that affect our consumer businesses. These include regulations setting “ability to repay” and “qualified mortgage” standards for residential mortgage loans and mortgage loan servicing and originator compensation standards. Iroquois Federal is evaluating recent regulations and proposals, and devotes significant compliance, legal and operational resources to compliance with consumer protection regulations and standards.

The operations of Iroquois Federal also are subject to the:

 

   

Right to Financial Privacy Act, which imposes a duty to maintain confidentiality of consumer financial records and prescribes procedures for complying with administrative subpoenas of financial records;

 

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Electronic Funds Transfer Act and Regulation E promulgated thereunder, which govern automatic deposits to and withdrawals from deposit accounts and customers’ rights and liabilities arising from the use of automated teller machines and other electronic banking services;

 

   

Check Clearing for the 21st Century Act (also known as “Check 21”), which gives “substitute checks,” such as digital check images and copies made from that image, the same legal standing as the original paper check;

 

   

The USA PATRIOT Act, which requires savings banks to, among other things, establish broadened anti-money laundering compliance programs, and due diligence policies and controls to ensure the detection and reporting of money laundering. Such required compliance programs are intended to supplement existing compliance requirements that also apply to financial institutions under the Bank Secrecy Act and the Office of Foreign Assets Control regulations; and

 

   

The Gramm-Leach-Bliley Act, which places limitations on the sharing of consumer financial information by financial institutions with unaffiliated third parties. Specifically, the Gramm-Leach-Bliley Act requires all financial institutions offering financial products or services to retail customers to provide such customers with the financial institution’s privacy policy and provide such customers the opportunity to “opt out” of the sharing of certain personal financial information with unaffiliated third parties.

Holding Company Regulation

General. IF Bancorp is a unitary savings and loan holding company within the meaning of Home Owners’ Loan Act. As such, IF Bancorp is registered with the Federal Reserve Board and is subject to regulations, examinations, supervision and reporting requirements applicable to savings and loan holding companies. In addition, the Federal Reserve Board has enforcement authority over IF Bancorp and any future non-savings institution subsidiaries. Among other things, this authority permits the Federal Reserve Board to restrict or prohibit activities that are determined to be a serious risk to the subsidiary savings institution.

Permissible Activities. Under present law, the business activities of IF Bancorp are generally limited to those activities permissible for financial holding companies under Section 4(k) of the Bank Holding Company Act of 1956, as amended, provided certain conditions are met (including electing such status), or for multiple savings and loan holding companies. A financial holding company may engage in activities that are financial in nature, including underwriting equity securities and insurance as well as activities that are incidental to financial activities or complementary to a financial activity. A multiple savings and loan holding company is generally limited to activities permissible for bank holding companies under Section 4(c)(8) of the Bank Holding Company Act, subject to regulatory approval, and certain additional activities authorized by federal regulations. As of June 30, 2020, IF Bancorp, Inc. has not elected financial holding company status.

Federal law prohibits a savings and loan holding company, including IF Bancorp, directly or indirectly, or through one or more subsidiaries, from acquiring more than 5% of another savings institution or holding company thereof, without prior regulatory approval. It also prohibits the acquisition or retention of, with certain exceptions, more than 5% of a non-subsidiary company engaged in activities that are not closely related to banking or financial in nature, or acquiring or retaining control of an institution that is not federally insured. In evaluating applications by holding companies to acquire savings institutions, the Federal Reserve Board must consider the financial and managerial resources, future prospects of the company and institution involved, the effect of the acquisition on the risk to the federal deposit insurance fund, the convenience and needs of the community and competitive factors.

 

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The Federal Reserve Board is prohibited from approving any acquisition that would result in a multiple savings and loan holding company controlling savings institutions in more than one state, subject to two exceptions:

 

   

the approval of interstate supervisory acquisitions by savings and loan holding companies; and

 

   

the acquisition of a savings institution in another state if the laws of the state of the target savings institution specifically permit such acquisition.

The states vary in the extent to which they permit interstate savings and loan holding company acquisitions.

Capital. Pursuant to federal legislation, the Federal Reserve Board has established for all depository institution holding companies minimum consolidated capital requirements that are as stringent as those required for the insured depository institution subsidiaries. However, subsequent legislation extended the applicability of the “Small Bank Holding Company” exception to the Federal Reserve Board’s consolidated capital requirements to bank and savings and loan holding companies with less than $3.0 billion in consolidated assets.. Consequently, holding companies with up to $3 billion of consolidated assets are generally not subject to the holding company capital requirements unless otherwise directed by the Federal Reserve Board.

Source of Strength. The Dodd-Frank Act extended the “source of strength” doctrine to savings and loan holding companies. The Federal Reserve Board has issued regulations requiring that all bank and savings and loan holding companies serve as a source of managerial and financial strength to their subsidiary savings and loan associations by providing capital, liquidity and other support in times of financial stress.

Dividends. The Federal Reserve Board has issued a policy statement regarding the payment of dividends and the repurchase of shares of common stock by bank holding companies and savings and loan holding companies. In general, the policy provides that dividends should be paid only out of current earnings and only if the prospective rate of earnings retention by the holding company appears consistent with the organization’s capital needs, asset quality and overall financial condition. Regulatory guidance provides for prior regulatory consultation with respect to capital distributions in certain circumstances such as where the company’s net income for the past four quarters, net of dividends previously paid over that period, is insufficient to fully fund the dividend or the company’s overall rate or earnings retention is inconsistent with the company’s capital needs and overall financial condition. The ability of a savings and loan holding company to pay dividends may be restricted if a subsidiary savings and loan association becomes undercapitalized. The regulatory guidance also states that a savings and loan holding company should inform the Federal Reserve Board supervisory staff prior to redeeming or repurchasing common stock or perpetual preferred stock if the savings and loan holding company is experiencing financial weaknesses or if the repurchase or redemption would result in a net reduction, as of the end of a quarter, in the amount of such equity instruments outstanding compared with the beginning of the quarter in which the redemption or repurchase occurred. These regulatory policies may affect the ability of IF Bancorp to pay dividends, repurchase shares of common stock or otherwise engage in capital distributions.

Acquisition. Under the federal Change in Bank Control Act, a notice must be submitted to the Federal Reserve Board if any person (including a company), or group acting in concert, seeks to acquire direct or indirect “control” of a savings and loan holding company. Under certain circumstances, a change of control may occur, and prior notice is required, upon the acquisition of 10% or more of the company’s outstanding voting stock, unless the Federal Reserve Board has found that the acquisition will not result in control of the company. A change in control definitively occurs upon the acquisition of 25% or more of the company’s outstanding voting stock. Under the Change in Bank Control Act, the Federal Reserve Board generally has 60 days from the filing of a complete notice to act, taking into consideration certain factors, including the financial and managerial resources of the acquirer and the competitive effects of the acquisition.

In addition, the federal Bank Holding Company Act provides that no “company” may acquire control of a savings and loan holding company without the prior approval of the Federal Reserve Board. Any company that acquires such “control,” as defined in the applicable regulations, becomes a “savings and loan holding company” subject to registration, examination and regulation by the Federal Reserve Board. In March 2020, the Federal Reserve Board adopted a final rule, effective September 30, 2020, that revises its framework for determining whether a company has a “controlling influence” over a bank or savings and loan holding company for that purpose.

 

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Federal Securities Laws

IF Bancorp common stock is registered with the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended. IF Bancorp is subject to the information, proxy solicitation, insider trading restrictions and other requirements under the Securities Exchange Act of 1934.

The registration under the Securities Act of 1933 of shares of common stock issued in the stock offering does not cover the resale of those shares. Shares of common stock purchased by persons who are not our affiliates may be resold without registration. Shares purchased by our affiliates are subject to the resale restrictions of Rule 144 under the Securities Act of 1933. If we meet the current public information requirements of Rule 144 under the Securities Act of 1933, each affiliate of ours that complies with the other conditions of Rule 144, including those that require the affiliate’s sale to be aggregated with those of other persons, would be able to sell in the public market, without registration, a number of shares not to exceed, in any three-month period, the greater of 1% of our outstanding shares, or the average weekly volume of trading in the shares during the preceding four calendar weeks. In the future, we may permit affiliates to have their shares registered for sale under the Securities Act of 1933.

Sarbanes-Oxley Act of 2002

The Sarbanes-Oxley Act addresses, among other issues, corporate governance, auditing and accounting, executive compensation, and enhanced and timely disclosure of corporate information. As directed by the Sarbanes-Oxley Act, our Chief Executive Officer and Chief Financial Officer are required to certify that our quarterly and annual reports do not contain any untrue statement of a material fact. The rules adopted by the Securities and Exchange Commission under the Sarbanes-Oxley Act have several requirements, including having these officers certify that: (i) they are responsible for establishing, maintaining and regularly evaluating the effectiveness of our internal control over financial reporting; (ii) they have made certain disclosures to our auditors and the audit committee of the board of directors about our internal control over financial reporting; and (iii) they have included information in our quarterly and annual reports about their evaluation and whether there have been changes in our internal control over financial reporting or in other factors that could materially affect internal control over financial reporting.

 

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ITEM 1A.

RISK FACTORS

The economic impact of the COVID-19 outbreak could adversely affect our financial condition and results of operations.

The coronavirus 2019 (COVID-19) pandemic has caused significant economic dislocation in the United States as many state and local governments have ordered non-essential businesses to close and residents to shelter in place at home. This has resulted in an unprecedented slow-down in economic activity and a related increase in unemployment. Since the COVID-19 outbreak, millions of individuals have filed claims for unemployment, and stock markets have declined in value and in particular bank stocks have significantly declined in value. In response to the COVID-19 outbreak, the Federal Reserve has reduced the benchmark fed funds rate to a target range of 0% to 0.25%, and the yields on 10 and 30-year treasury notes have declined to historic lows. Various state governments and federal agencies are requiring lenders to provide forbearance and other relief to borrowers (e.g., waiving late payment and other fees). The federal banking agencies have encouraged financial institutions to prudently work with affected borrowers and recently passed legislation has provided relief from reporting loan classifications due to modifications related to the COVID-19 outbreak. Certain industries have been particularly hard-hit, including the travel and hospitality industry, the restaurant industry and the retail industry. Finally, the spread of the coronavirus has caused us to modify our business practices, including employee travel, employee work locations, and cancellation of physical participation in meetings, events and conferences. We have many employees prepared to work remotely and we may take further actions as may be required by government authorities or that we determine are in the best interests of our employees, customers and business partners.

Given the ongoing and dynamic nature of the circumstances, it is difficult to predict the full impact of the COVID-19 outbreak on our business. The extent of such impact will depend on future developments, which are highly uncertain, including when the coronavirus can be controlled and abated and when and how the economy may be reopened. As the result of the COVID-19 pandemic and the related adverse local and national economic consequences, we could be subject to any of the following risks, any of which could have a material, adverse effect on our business, financial condition, liquidity, and results of operations and could exacerbate the effects of other risk factors disclosed herein:

 

   

demand for our products and services may decline, making it difficult to grow assets and income;

 

   

extended period of time, loan delinquencies, problem assets, and foreclosures may increase, resulting in increased charges and reduced income;

 

   

collateral for loans, especially real estate, may decline in value, which could cause loan losses to increase;

 

   

limitations may be placed on our ability to foreclose on properties during the pandemic;

 

   

our allowance for loan losses may have to be increased if borrowers experience financial difficulties beyond forbearance periods which will adversely affect our net income, including possibly through the reversal of interest income and fees that we are accruing under COVID-19 related exceptions to normal GAAP accounting;

 

   

the net worth and liquidity of loan guarantors may decline, impairing their ability to honor commitments to us;

 

   

as the result of the decline in the Federal Reserve Board’s target federal funds rate to near 0%, the yield on our assets may decline to a greater extent than the decline in our cost of interest-bearing liabilities, reducing our net interest margin and spread and reducing net income;

 

   

a material decrease in net income or a net loss over several quarters could result in a decrease in the rate of our semi-annual cash dividend;

 

   

actions taken by the federal, state or local governments to cushion the impact of COVID-19 on consumers and businesses may have a negative impact on us and our business;

 

   

changes in accounting policies and practices, as may be adopted by the bank regulatory agencies, the Financial Accounting Standards Board, the Securities and Exchange Commission and the Public Company Accounting Oversight Board;

 

   

our wealth management revenues may decline with continuing market turmoil;

 

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our cyber security risks are increased by the COVID-19 pandemic as the result of an increase in the number of employees working remotely;

 

   

litigation, regulatory enforcement risk and reputation risk regarding our participation in the PPP and the risk that the SBA may not fund some or all PPP loan guaranties;

 

   

the unanticipated loss or unavailability of key employees due to the outbreak, which could harm our ability to operate our business or execute our business strategy, especially as we may not be successful in finding and integrating suitable successors;

 

   

we rely on third party vendors for certain services and the unavailability of a critical service due to the COVID-19 outbreak could have an adverse effect on us; and

 

   

Federal Deposit Insurance Corporation premiums may increase if the agency experience additional resolution costs.

Moreover, our future success and profitability substantially depends on the management skills of our executive officers and directors, many of whom have held officer and director positions with us for many years. The unanticipated loss or unavailability of key employees due to the outbreak could harm our ability to operate our business or execute our business strategy. We may not be successful in finding and integrating suitable successors in the event of key employee loss or unavailability.

Any one or a combination of the factors identified above could negatively impact our business, financial condition and results of operations and prospects.

We intend to continue to grow our commercial real estate, multi-family and commercial business loans and increase these loans as a percentage of our total loan portfolio. As a result, our credit risk will continue to increase, and downturns in the local real estate market or economy could have a more severe adverse effect on our earnings.

We intend to continue growing our portfolio of commercial real estate, multi-family and commercial business loans. Since our mutual-to-stock conversion in 2011 we have emphasized the origination of our commercial loans. At June 30, 2020, $145.1 million, or 28.1%, of our total loan portfolio consisted of commercial real estate loans, $96.2 million, or 18.7%, of our total loan portfolio consisted of multi-family loans, and $107.6 million, or 20.9%, of our total loan portfolio consisted of commercial business loans. We expect each of these loan categories to continue to increase as a percentage of our total loan portfolio. Commercial real estate, multi-family and commercial business loans generally have more risk than the one- to four-family residential real estate loans that we originate. Because the repayment of commercial real estate, multi-family and commercial business loans depends on the successful management and operation of the borrower’s properties or businesses, repayment of such loans can be affected by adverse conditions in the local real estate market or economy. Commercial real estate, multi-family and commercial business loans may also involve relatively large loan balances to individual borrowers or groups of related borrowers. In addition, a downturn in the real estate market or the local economy could adversely affect the value of properties securing the loan or the revenues from the borrower’s business, thereby increasing the risk of nonperforming loans. As our commercial real estate, multi-family and commercial business loan portfolios increase, the corresponding risks and potential for losses from these loans may also increase.

A continuation of the historically low interest rate environment and the possibility that we may access higher-cost funds to support our loan growth and operations may adversely affect our net interest income and profitability.

In recent years the Federal Reserve Board’s policy has been to maintain interest rates at historically low levels through its targeted federal funds rate and the purchase of mortgage-backed securities. Our ability to reduce our interest expense may be limited at current interest rate levels while the average yield on our interest-earning assets may continue to decrease, and our interest expense may increase as we access non-core funding sources or increase deposit rates to fund our operations. A continuation of a low interest rate environment or an increase in our cost of funds may adversely affect our net interest income, which would have an adverse effect on our profitability.

 

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Future changes in interest rates could reduce our profits.

Our profitability largely depends on our net interest income, which can be negatively affected by changes in interest rates. Net interest income is the difference between:

 

   

the interest income we earn on our interest-earning assets, such as loans and securities; and

 

   

the interest expense we incur on our interest-bearing liabilities, such as deposits and borrowings.

The interest rates on our loans are generally fixed for a longer period of time than the interest rates on our deposits. Like many savings institutions, our focus on deposits as a source of funds, which either have no stated maturity or shorter contractual maturities than mortgage loans, results in our liabilities having a shorter average duration than our assets. For example, as of June 30, 2020, 7.6% of our loans had remaining maturities of, or reprice after, 5 years or longer, while 88.2% of our certificates of deposit had remaining maturities of, or reprice in, one year or less. This imbalance can create significant earnings volatility because market interest rates change over time. In a period of rising interest rates, the interest we earn on our assets, such as loans and investments, may not increase as rapidly as the interest we pay on our liabilities, such as deposits. In a period of declining market interest rates, the interest income we earn on our assets may decrease more rapidly than the interest expense we incur on our liabilities, as borrowers prepay mortgage loans and mortgage-backed securities and callable investment securities are called or prepaid, thereby requiring us to reinvest these cash flows at lower interest rates. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Management of Market Risk.”

Any substantial, unexpected, prolonged change in market interest rates could have a material adverse effect on our financial condition, liquidity and results of operations. Changes in the level of interest rates also may negatively affect the value of our assets and ultimately affect our earnings.

We evaluate interest rate sensitivity using a model that estimates the change in our net portfolio value over a range of interest rate scenarios, also known as a “rate shock” analysis. Net portfolio value is the discounted present value of expected cash flows from assets, liabilities and off-balance sheet contracts. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Management of Market Risk.”

Increased interest rates and changes in secondary mortgage market conditions could reduce our earnings from our mortgage banking operations.

Our mortgage banking income varies with movements in interest rates, and increases in interest rates could negatively affect our ability to originate loans in the same volume as we have in past years. In addition to being affected by interest rates, the secondary mortgage markets are also subject to investor demand for residential mortgage loans and increased investor yield requirements for these loans. These conditions may fluctuate or worsen in the future. In light of current conditions, there is greater risk in retaining mortgage loans pending their sale to investors. As a result, a prolonged period of secondary market illiquidity may reduce our loan mortgage production volume and could have a material adverse effect on our financial condition and results of operations.

The State of Illinois has significant financial difficulties, and this could adversely impact certain of our borrowers and the economic vitality of the state, which would have a negative impact on our business.

The State of Illinois has significant financial difficulties, including material pension funding shortfalls. The State of Illinois’ debt rating has been. These issues could impact the economic vitality of the state and the businesses operating there, encourage businesses to leave the State of Illinois, discourage new employers from starting or moving businesses to the state, and could result in an increase in the Illinois state income tax rate. In addition, population outflow from the State of Illinois could affect our ability to attract and retain customers.

Some of the markets we are in include significant university and healthcare presence, which rely heavily on state funding and contracts. Payment delays by the State of Illinois to its vendors and government sponsored entities may have significant, negative effects on our markets, which could in turn adversely affect our financial condition and results of operations. In addition, adverse changes in agribusiness and capital goods exports could materially adversely affect downstate Illinois markets, which are heavily reliant upon these industries. Delays in the payment of accounts receivable owed to borrowers that are employed by or who do business with these industries or the State of Illinois could impair their ability to repay their loans when due and negatively impact our business.

 

42


A worsening of economic conditions in our market area could reduce demand for our products and services and/or result in increases in our level of non-performing loans, which could adversely affect our operations, financial condition and earnings.

Local economic conditions have a significant impact on the ability of our borrowers to repay loans and the value of the collateral securing loans. A deterioration in economic conditions, especially local conditions, as a result of COVID-19 or otherwise, could have the following consequences, any of which could have a material adverse effect on our business, financial condition, liquidity and results of operations, and could more negatively affect us compare to a financial institution that operates with more geographic diversity:

 

   

demand for our products and services may decline;

 

   

loan delinquencies, problem assets and foreclosures may increase;

 

   

collateral for loans, especially real estate, may decline in value, thereby reducing customers’ future borrowing power, and reducing the value of assets and collateral associated with existing loans; and

 

   

the net worth and liquidity of loan guarantors may decline, impairing their ability to honor commitments to us.

Moreover, a significant decline in general economic conditions caused by inflation, recession, acts of terrorism, an outbreak of hostilities or other international or domestic calamities, an epidemic or pandemic, unemployment or other factors beyond our control could further impact these local economic conditions and could further negatively affect the financial results of our banking operations. In addition, deflationary pressures, while possibly lowering our operating costs, could have a significant negative effect on our borrowers, especially our business borrowers, and the values of underlying collateral securing loans, which could negatively affect our financial performance.

Monetary policies and regulations of the Federal Reserve Board could adversely affect our business, financial condition and results of operations.

In addition to being affected by general economic conditions, our earnings and growth are affected by the policies of the Federal Reserve Board. An important function of the Federal Reserve Board is to regulate the money supply and credit conditions. Among the instruments used by the Federal Reserve Board to implement these objectives are open market purchases and sales of U.S. government securities, adjustments of the discount rate and changes in banks’ reserve requirements against bank deposits. These instruments are used in varying combinations to influence overall economic growth and the distribution of credit, bank loans, investments and deposits. Their use also affects interest rates charged on loans or paid on deposits.

The monetary policies and regulations of the Federal Reserve Board have had a significant effect on the operating results of financial institutions in the past and are expected to continue to do so in the future. The effects of such policies upon our business, financial condition and results of operations cannot be predicted.

Strong traditional and non-traditional competition within our market areas may limit our growth and profitability.

We face intense competition in making loans and attracting deposits. Price competition from other financial institutions, credit unions, money market and mutual funds, insurance companies, and other non-traditional competitors such as financial technology companies for loans and deposits sometimes results in us charging lower interest rates on our loans and paying higher interest rates on our deposits and may reduce our net interest income. Competition also makes it more difficult and costly to attract and retain qualified employees. Many of the institutions with which we compete have substantially greater resources and lending limits than we have and may offer services that we do not provide. Our competitors also may price loan and deposit products aggressively when they enter into new lines of business or new market areas. We expect competition to increase in the future as a

 

43


result of legislative, regulatory, and technological changes and the continuing trend of consolidation in the financial services industry. If we are not able to compete effectively in our market area, our profitability may be negatively affected. The greater resources and broader offering of deposit and loan products of some of our competitors may also limit our ability to increase our interest-earning assets.

Our funding sources may prove insufficient to replace deposits and support our future growth.

We must maintain sufficient funds to respond to the needs of depositors and borrowers. As a part of our liquidity management, we use a number of funding sources in addition to core deposit growth and repayments and maturities of loans and investments. These additional sources consist primarily of FHLB advances, certificates of deposit and brokered certificates of deposit and, to a lesser extent, repurchase agreements. As we continue to grow, we are likely to become more dependent on these sources. Adverse operating results or changes in industry conditions could lead to difficulty or an inability to access these additional funding sources. Our financial flexibility will be severely constrained if we are unable to maintain our access to funding or if adequate financing is not available to accommodate future growth at acceptable interest rates. If we are required to rely more heavily on more expensive funding sources to support future growth, our revenues may not increase proportionately to cover our costs. In this case, our operating margins and profitability would be adversely affected.

A portion of our loan portfolio consists of loan participations secured by properties outside of our primary market area. Loan participations may have a higher risk of loss than loans we originate because we are not the lead lender and we have limited control over credit monitoring.

We occasionally purchase loan participations secured by properties outside of our primary market area in which we are not the lead lender. Although we underwrite these loan participations consistent with our general underwriting criteria, loan participations may have a higher risk of loss than loans we originate because we rely on the lead lender to monitor the performance of the loan. Moreover, our decision regarding the classification of a loan participation and loan loss provisions associated with a loan participation is made in part based upon information provided by the lead lender. A lead lender also may not monitor a participation loan in the same manner as we would for loans that we originate. At June 30, 2020, our loan participations totaled $24.0 million, or 4.6% of our gross loans, most of which are within 100 miles of our primary lending market and consist primarily of multi-family, commercial real estate and commercial loans.

Additionally, we expect to continue to use loan participations as a way to effectively deploy our capital. If our underwriting of these participation loans is not sufficient, our non-performing loans may increase and our earnings may decrease.

If our non-performing loans and other non-performing assets increase, or the value of our foreclosed assets decreases our earnings will decrease.

At June 30, 2020, our non-performing assets (which consist of non-accrual loans, loans 90 days or more delinquent and still accruing, and real estate owned) totaled $1.1 million. Our non-performing assets adversely affect our net income in various ways. We do not record interest income on non-accrual loans, and we must establish reserves or take charge-offs for probable losses on non-performing loans. Reserves are established through a current period charge to income in the provision for loan losses. There are also legal fees associated with the resolution of problem assets.

Further, the resolution of non-performing assets requires the active involvement of management, which can distract us from the overall supervision of operations and other income-producing activities of Iroquois Federal. Finally, if our estimate of the allowance for loan losses is inadequate, we will have to increase the allowance accordingly by recording a provision for loan losses.

If our allowance for loan losses is not sufficient to cover actual loan losses, our earnings will decrease.

Our customers may not repay their loans according to the original terms, and the collateral, if any, securing the payment of these loans may be insufficient to pay any remaining loan balance. We may experience significant loan losses, which may have a material adverse effect on our operating results. We make various assumptions and judgments about the collectability of our loan portfolio, including the creditworthiness of our borrowers and the value of the real estate and other assets serving as collateral for the repayment of many of our loans. In determining

 

44


the amount of the allowance for loan losses, we review our loans and our loss and delinquency experience, and we evaluate economic conditions. If our assumptions are incorrect, our allowance for loan losses may not be sufficient to cover probable losses in our loan portfolio, requiring us to make additions to our allowance for loan losses. Our allowance for loan losses was1.21% of total loans, and 1.27% of total loans excluding PPP loans, at June 30, 2020. Additions to our allowance could materially decrease our net income.

The Financial Accounting Standards Board has delayed the effective date of the Current Expected Credit Loss, or CECL, standard. CECL will be effective for us on July 1, 2023. CECL will require financial institutions to determine periodic estimates of lifetime expected credit losses on loans, and recognize the expected credit losses as allowances for credit losses. This will change the current method of providing allowances for loan losses that are incurred or probable, which may require us to increase our allowance for credit losses, and to greatly increase the types of data we would need to collect and review to determine the appropriate level of the allowance for credit losses.

In addition, bank regulators periodically review our allowance for loan losses and, as a result of such reviews, we may be required to increase our allowance for loan losses or recognize further loan charge-offs. Any increase in our allowance for loan losses or loan charge-offs as required by these regulatory authorities may have a material adverse effect on our financial condition and results of operations.

Government responses to economic conditions may adversely affect our operations, financial condition and earnings.

The Dodd-Frank Wall Street Reform and Consumer Protection Act has changed the bank regulatory framework, created an independent consumer protection bureau that has assumed the consumer protection responsibilities of the various federal banking agencies, and established more stringent capital standards for savings associations and savings and loan holding companies, subject to a transition period. Bank regulatory agencies also have been responding aggressively to concerns and adverse trends identified in examinations. Ongoing uncertainty and adverse developments in the financial services industry and the domestic and international credit markets, and the effect of the Dodd-Frank Act and regulatory actions, may adversely affect our operations by restricting our business activities, including our ability to originate or sell loans, modify loan terms, or foreclose on property securing loans. These risks could affect the performance and value of our loan and investment securities portfolios, which also would negatively affect our financial performance.

We operate in a highly regulated environment and may be adversely affected by changes in laws and regulations.

We are subject to extensive regulation, supervision, and examination by the Office of the Comptroller of the Currency and the Federal Deposit Insurance Corporation. Federal regulations govern the activities in which we may engage, and are primarily for the protection of depositors and the Deposit Insurance Fund. These regulatory authorities have extensive discretion in connection with their supervisory and enforcement activities, including the imposition of restrictions on the operations of a savings association, the classification of assets by a savings association, and the adequacy of a savings association’s allowance for loan losses. Any change in such regulation and oversight, whether in the form of regulatory policy, regulations or legislation, could have a material impact on our results of operations. Because our business is highly regulated, the laws, rules and applicable regulations are subject to regular modification and change. Any legislative, regulatory or policy changes adopted in the future could make compliance more difficult or expensive or otherwise adversely affect our business, financial condition or prospects. Further, we expect any such new laws, rules or regulations will add to our compliance costs and place additional demands on our management team.

Non-compliance with the USA PATRIOT Act, Bank Secrecy Act, or other laws and regulations could result in fines or sanctions.

The USA PATRIOT and Bank Secrecy Acts require financial institutions to develop programs to prevent financial institutions from being used for money laundering and terrorist activities. If such activities are suspected, financial institutions are obligated to file suspicious activity reports with the U.S. Treasury’s Office of Financial Crimes Enforcement Network. These rules require financial institutions to establish procedures for identifying and verifying the identity of customers seeking to open new financial accounts. Failure to comply with these regulations

 

45


could result in fines or sanctions, including restrictions on pursuing acquisitions or establishing new branches. The policies and procedures we have adopted that are designed to assist in compliance with these laws and regulations may not be effective in preventing violations of these laws and regulations. Furthermore, these rules and regulations continue to evolve and expand. We have not been subject to fines or other penalties, or have suffered business or reputational harm, as a result of money laundering activities in the past.

We are subject to stringent capital requirements, which may adversely impact our return on equity, require us to raise additional capital, or limit our ability to pay dividends or repurchase shares.

Federal regulations establish minimum capital requirements for insured depository institutions, including minimum risk-based capital and leverage ratios, and defines “capital” for calculating these ratios. The application of these capital requirements could, among other things, result in lower returns on equity, and result in regulatory actions if we are unable to comply with such requirements. In addition, our ability to pay dividends to could be limited if we do not meet a minimum capital conservation buffer required by the capital rules. See “Regulation and Supervision—Federal Banking Regulation—Capital Requirements.”

Changes in accounting standards could affect reported earnings.

The bodies responsible for establishing accounting standards, including the Financial Accounting Standards Board, the Securities and Exchange Commission and other regulatory bodies, periodically change the financial accounting and reporting guidance that governs the preparation of our financial statements. These changes can be hard to predict and can materially impact how we record and report our financial condition and results of operations. In some cases, we could be required to apply new or revised guidance retroactively.

Legal and regulatory proceedings and related matters could adversely affect us.

We have been and may in the future become involved in legal and regulatory proceedings. We consider most of the proceedings to be in the normal course of our business or typical for the industry; however, it is inherently difficult to assess the outcome of these matters, and we may not prevail in any proceedings or litigation. There could be substantial costs and management diversion in such litigation and proceedings, and any adverse determination could have a materially adverse effect on our business, brand or image, or our financial condition and results of our operations.

Societal responses to climate change could adversely affect our business and performance, including indirectly through impacts on our customers.

Concerns over the long-term impacts of climate change have led and will continue to lead to governmental efforts around the world to mitigate those impacts. Consumers and businesses also may change their behavior on their own as a result of these concerns. We and our customers will need to respond to new laws and regulations as well as consumer and business preferences resulting from climate change concerns. We and our customers may face cost increases, asset value reductions, operating process changes, and the like. The impact on our customers will likely vary depending on their specific attributes, including reliance on or role in carbon intensive activities. Among the impacts to us could be a drop in demand for our products and services, particularly in certain sectors. In addition, we could face reductions in creditworthiness on the part of some customers or in the value of assets securing loans. Our efforts to take these risks into account in making lending and other decisions, including by increasing our business with climate-friendly companies, may not be effective in protecting us from the negative impact of new laws and regulations or changes in consumer or business behavior.

We face significant operational risks because the financial services business involves a high volume of transactions.

We operate in diverse markets and rely on the ability of our employees and systems to process a high number of transactions. Operational risk is the risk of loss resulting from our operations, including but not limited to, the risk of fraud by employees or persons outside our company, the execution of unauthorized transactions by employees, errors relating to transaction processing and technology, breaches of our internal control systems and compliance requirements, and business continuation and disaster recovery. Insurance coverage may not be available

 

46


for such losses, or where available, such losses may exceed insurance limits. This risk of loss also includes the potential legal actions that could arise as a result of operational deficiencies or as a result of non-compliance with applicable regulatory standards or customer attrition due to potential negative publicity. In the event of a breakdown in our internal control systems, improper operation of systems or improper employee actions, we could suffer financial loss, face regulatory action, and/or suffer damage to our reputation.

Cyber-attacks or other security breaches could adversely affect our operations, net income or reputation.

We regularly collect, process, transmit and store significant amounts of confidential information regarding our customers, employees and others and concerning our own business, operations, plans and strategies. In some cases, this confidential or proprietary information is collected, compiled, processed, transmitted or stored by third parties on our behalf.

Information security risks have generally increased in recent years because of the proliferation of new technologies, the use of the Internet and telecommunications technologies to conduct financial and other transactions and the increased sophistication and activities of perpetrators of cyber-attacks and mobile phishing. Mobile phishing, a means for identity thieves to obtain sensitive personal information through fraudulent e-mail, text or voice mail, is an emerging threat targeting the customers of popular financial entities. As a result of the COVID-19 pandemic, our potential information security risks have amplified, as employees work remotely and customers have substantially increased their use of online and mobile banking. A failure in or breach of our operational or information security systems, or those of our third-party service providers, as a result of cyber-attacks or information security breaches or due to employee error, malfeasance or other disruptions could adversely affect our business, result in the disclosure or misuse of confidential or proprietary information, damage our reputation, increase our costs and/or cause losses.

If this confidential or proprietary information were to be mishandled, misused or lost, we could be exposed to significant regulatory consequences, reputational damage, civil litigation and financial loss.

Although we employ a variety of physical, procedural and technological safeguards to protect this confidential and proprietary information from mishandling, misuse or loss, these safeguards do not provide absolute assurance that mishandling, misuse or loss of the information will not occur, and that if mishandling, misuse or loss of information does occur, those events will be promptly detected and addressed. Similarly, when confidential or proprietary information is collected, compiled, processed, transmitted or stored by third parties on our behalf, our policies and procedures require that the third party agree to maintain the confidentiality of the information, establish and maintain policies and procedures designed to preserve the confidentiality of the information, and permit us to confirm the third party’s compliance with the terms of the agreement. As information security risks and cyber threats continue to evolve, we may be required to expend additional resources to continue to enhance our information security measures and/or to investigate and remediate any information security vulnerabilities.

Risks associated with system failures, interruptions, or breaches of security could negatively affect our earnings.

Information technology systems are critical to our business. We use various technology systems to manage our customer relationships, general ledger, securities, deposits, and loans. We have established policies and procedures to prevent or limit the impact of system failures, interruptions, and security breaches, but such events may still occur and may not be adequately addressed if they do occur. In addition, any compromise of our systems could deter customers from using our products and services. Although we rely on security systems to provide security and authentication necessary to effect the secure transmission of data, these precautions may not protect our systems from compromises or breaches of security.

In addition, we outsource some of our data processing to certain third-party providers. If these third-party providers encounter difficulties, or if we have difficulty communicating with them, our ability to adequately process and account for transactions could be affected, and our business operations could be adversely affected. Threats to information security also exist in the processing of customer information through various other vendors and their personnel.

 

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The occurrence of any systems failures, interruptions, or breach of security could damage our reputation and result in a loss of customers and business thereby subjecting us to additional regulatory scrutiny, or could expose us to litigation and possible financial liability. Any of these events could have a material adverse effect on our financial condition and results of operations.

 

ITEM 1B.

UNRESOLVED STAFF COMMENTS

None.

 

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ITEM 2.

PROPERTIES

We operate from our main office, six branch offices, an administrative office, and a data center located in Iroquois, Vermilion, Champaign and Kankakee Counties, Illinois, and our loan production and wealth management office in Osage Beach, Missouri. The net book value of our premises, land and equipment was $10.2 million at June 30, 2020. The following tables set forth information with respect to our banking offices, including the expiration date of leases with respect to leased facilities.

 

Location

   Year
Opened
     Owned/
Leased
 

Main Office:

     

201 East Cherry Street

Watseka, Illinois 60970

     1964        Owned  

Branches:

     

619 North Gilbert Street

Danville, Illinois 61832

     1973        Owned  

175 East Fourth Avenue

Clifton, Illinois 60927

     1977        Owned  

511 South Chicago Road

Hoopeston, Illinois 60942

     1979        Owned  

108 Arbours Drive

Savoy, Illinois 61874

     2014        Owned  

421 Brown Boulevard

Bourbonnais, Illinois 60914

     2017        Owned  

2411 Village Green Place

Champaign, Illinois 61822

     2018        Owned  

Loan Production Office:

     

3535 Highway 54

Osage Beach, Missouri 65065

     2006        Owned  

Administrative Office:

     

204 East Cherry Street

Watseka, Illinois 60970

     2001        Owned  

Data Center:

     

183 Bethel Drive

Bourbonnais, Illinois 60914

     2019       


Leased

(expires March 31,
2022)

 

 
 

 

ITEM 3.

LEGAL PROCEEDINGS

Periodically, there have been various claims and lawsuits against us, such as claims to enforce liens, condemnation proceedings on properties in which we hold security interests, claims involving the making and servicing of real property loans and other issues incident to our business. We are not a party to any pending legal proceedings that we believe would have a material adverse effect on our financial condition, results of operations or cash flows.

 

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ITEM 4.

MINE SAFETY DISCLOSURES

Not applicable.

PART II

 

ITEM 5.

MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Holders.

As of September 1, 2020, there were 361 holders of record of the Company’s common stock.

Dividends.

The Company paid dividends of $0.15 per share in October 2019 and April 2020, and $0.125 per share in October 2018 and April 2019. The payment of dividends in the future will depend upon a number of factors, including capital requirements, the Company’s financial condition and results of operations, tax considerations, statutory and regulatory limitations and general economic conditions. In addition, the Company’s ability to pay dividends is dependent on dividends received from Iroquois Federal. No assurances can be given that dividends will continue to be paid, or that, if paid, will not be reduced. For more information regarding restrictions on the payment of cash dividends by the Company and by Iroquois Federal, see “Business—Regulation and Supervision—Holding Company Regulation—Dividends” and “—Regulation and Supervision—Federal Savings Institution Regulation—Capital Distributions.”

Recent Sales of Unregistered Securities; Use of Proceeds from Registered Securities.

Not applicable.

 

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Purchases of Equity Securities by the Issuer and Affiliated Purchasers.

There were no share repurchases during the quarter ended June 30, 2020. The Company does not have an active stock repurchase plan in place.

 

ITEM 6.

SELECTED FINANCIAL DATA

 

     At June 30,  
     2020      2019      2018      2017      2016  
     (In thousands)  

Selected Financial Condition Data:

              

Total assets

   $  735,517      $  723,870      $  638,923      $  585,474      $  595,565  

Cash and cash equivalents

     33,467        59,600        4,754        7,766        6,449  

Investment securities available for sale

     162,394        146,291        125,996        111,611        121,328  

Federal Home Loan Bank of Chicago stock

     3,028        1,174        3,285        2,543        5,425  

Loans held for sale

     552        316        206        186        —    

Loans receivable, net

     509,265        487,458        476,274        440,136        443,748  

Foreclosed assets held for sale

     386        778        219        429        338  

Bank-owned life insurance

     9,345        9,072        8,803        8,823        8,555  

Deposits

     601,700        607,023        480,421        439,146        433,708  

Federal Home Loan Bank of Chicago advances

     34,500        24,000        67,500        53,500        67,000  

Total equity

     82,564        82,461        81,675        83,969        83,972  

 

     For the Fiscal Year Ended June 30,  
     2020      2019      2018      2017      2016  
     (In thousands)  

Selected Operating Data:

              

Interest income

   $  26,982      $  26,725      $  22,794      $  21,338      $  20,373  

Interest expense

     8,694        8,854        5,289        3,617        3,313  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Net interest income

     18,288        17,871        17,505        17,721        17,060  

Provision for loan losses

     128        407        777        1,721        1,366  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Net interest income after provision for loan losses

     18,160        17,464        16,728        16,000        15,694  

Noninterest income

     4,810        4,159        4,091        4,728        4,095  

Noninterest expense

     17,086        16,772        16,356        14,535        14,209  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Income before income tax expense

     5,884        4,851        4,463        6,193        5,580  

Income tax expense

     1,639        1,293        2,725        2,274        2,014  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Net income

   $ 4,245      $ 3,558      $ 1,738      $ 3,919      $ 3,566  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

51


     At or For the Fiscal Years Ended June 30,  
     2020     2019     2018     2017     2016  

Selected Financial Ratios and Other Data:

          

Performance Ratios:

          

Return on average assets (net income as a percentage of average total assets)

     0.61     0.53     0.28     0.67     0.62

Return on average equity (net income as a percentage of average equity)

     5.30     4.41     2.09     4.69     4.35

Interest rate spread (1)

     2.52     2.54     2.77     3.02     3.00

Net interest margin (2)

     2.75     2.78     2.93     3.14     3.11

Efficiency ratio (3)

     73.97     76.14     75.76     64.75     67.17

Dividend payout ratio

     21.90     24.51     42.55     15.09     13.54

Noninterest expense to average total assets

     2.46     2.52     2.66     2.48     2.49

Average interest-earning assets to average interest-bearing liabilities

     117.80     116.69     118.01     118.30     117.85

Average equity to average total assets

     11.55     12.10     13.48     14.27     14.33

Asset Quality Ratios:

          

Non-performing assets to total assets

     0.15     0.21     1.10     1.70     0.42

Non-performing loans to total loans

     0.14     0.16     1.42     2.13     0.49

Allowance for loan losses to non-performing loans

     879.27     825.03     87.06     71.66     244.39

Allowance for loan losses to total loans

     1.21     1.28     1.23     1.53     1.19

Allowance for loan losses to total loans excluding PPP loans

     1.27     1.28     1.23     1.53     1.19

Net charge-offs (recoveries) to average
loans

     0.04     0.01     0.35     0.05     0.05

Capital Ratios:

          

Community Bank Leverage Ratio:

          

Company (5)

     11.0     N/A       N/A       N/A       N/A  

Association (5)

     10.7     N/A       N/A       N/A       N/A  

Total capital (to risk-weighted assets):

          

Company (6)

     N/A       17.6     18.5     20.09     19.7

Association (6)

     N/A       16.3     16.1     16.9     16.1

Tier 1 capital (to risk-weighted assets):

          

Company (6)

     N/A       16.3     17.3     18.8     18.5

Association (6)

     N/A       15.0     14.9     15.7     14.9

Common Equity Tier 1 Capital (to risk-weighted assets):

          

Company (4)(6)

     N/A       16.3     17.3     18.8     18.5

Association (4)(6)

     N/A       15.0     14.9     15.7     14.9

Tier 1 capital (to adjusted total assets):

          

Company

     11.0     11.9     13.4     14.3     14.4

Association

     10.7     11.0     11.5     12.0     11.1

Tangible capital (to adjusted total assets):

          

Company

     11.0     11.9     13.4     14.3     14.4

Association

     10.7     11.0     11.5     12.0     11.1

Other Data:

          

Number of full service offices

     7       7       6       6       5  

Full time equivalent employees

     107       103       104       100       95  

 

(1)

The interest rate spread represents the difference between the weighted-average yield on interest-earning assets and the weighted-average cost of interest-bearing liabilities for the period.

(2)

The net interest margin represents net interest income as a percent of average interest-earning assets for the period.

(3)

The efficiency ratio represents noninterest expense as a percentage of the sum of net interest income and noninterest income.

(4)

The common equity Tier 1 (“CET1”) capital is a new capital requirement adopted by the OCC, which became effective for the Association in January, 2015.

(5)

The Community Bank Leverage Ratio (CBLR) is a new capital requirement which the Association chose to become effective for the Association for the quarter ended March 31, 2020.

(6)

Institutions that adopt and meet the capital requirements of the CBLR capital ratio are considered to comply with the applicable capital requirements, including the risk-based requirements. Since our CBLR exceeded the required minimum of 8% as of June 30, 2020, we were not required to calculate any risk-based capital ratios.

 

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ITEM 7.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION

Overview

Historically, we operated as a traditional thrift institution. As recently as June 30, 2009, approximately 72.4% of our loan portfolio, consisted of longer-term, one- to four-family residential real estate loans. However, in recent years, we have increased our focus on the origination of commercial real estate loans, multi-family real estate loans and commercial business loans, which generally provide higher returns than one- to four-family residential mortgage loans, have shorter durations and are often originated with adjustable rates of interest.

We have grown our organization to $735.5 million in assets at June 30, 2020 from $377.2 million in assets at June 30, 2009. We have increased our assets primarily through increased investment securities and loan growth.

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, repurchase agreements, and Federal Home Loan Bank of Chicago advances. Our results of operations also are affected by our provision for loan losses, noninterest income and noninterest expense. Noninterest income consists primarily of customer service fees, brokerage commission income, insurance commission income, net realized gains on loan sales, mortgage banking income, and income on bank-owned life insurance. 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 2.52% and 2.54% for the year ended June 30, 2020 and 2019, respectively. Net interest income increased to $18.3 million for the year ended June 30, 2020, from $17.9 million for the year ended June 30, 2019.

Our net income for the year ended June 30, 2020 was $4.2 million, compared to a net income of $3.6 million for the year ended June 30, 2019.

Our emphasis on conservative loan underwriting has resulted in relatively low levels of non-performing assets. Our non-performing assets totaled $1.1 million or 0.2% of total assets at June 30, 2020, and $1.5 million, or 0.2% of assets at June 30, 2019.

Other than our loans for the construction of one- to four-family residential properties and the draw portion of our home equity lines of credit, we do not offer “interest only” mortgage loans on one- to four-family residential properties (where the borrower pays interest but no principal for an initial period, after which the loan converts to a fully amortizing loan). We also do not offer loans that provide for negative amortization of principal, such as “Option ARM” loans, where the borrower can pay less than the interest owed on their loan, resulting in an increased principal balance during the life of the loan. We do not offer “subprime loans” (loans that generally target borrowers with weakened credit histories typically characterized by payment delinquencies, previous charge-offs, judgments, bankruptcies, or borrowers with questionable repayment capacity as evidenced by low credit scores or high debt-burden ratios) or Alt-A loans (traditionally defined as loans having less than full documentation). We also do not own any private label mortgage-backed securities that are collateralized by Alt-A, low or no documentation or subprime mortgage loans.

The Association’s legal lending limit to any one borrower is 15% of unimpaired capital and surplus. On July 30, 2012 the Association received approval from the Office of the Comptroller of the Currency to participate in the Supplemental Lending Limits Program (SLLP). This program allows eligible savings associations to make additional residential real estate loans or extensions of credit to one borrower, small business loans or extensions of

 

53


credit to one borrower, or small farm loans or extensions of credit to one borrower. For our association this additional limit (or “supplemental limit(s)”) for one- to four-family residential real estate, small business, or small farm loans is 10% of our Association’s capital and surplus. In addition, the total outstanding amount of the Association’s loans or extensions of credit or parts of loans and extensions of credit made to all of its borrowers under the SLLP may not exceed 100% of the Association’s capital and surplus. By Association policy, participation of any credit facilities in the SLLP is to be infrequent and all credit facilities are to be with prior Board approval.

All of our mortgage-backed securities have been issued by Freddie Mac, Fannie Mae or Ginnie Mae, U.S. government-sponsored enterprises. These entities guarantee the payment of principal and interest on our mortgage-backed securities.

On July 7, 2011, we completed our initial public offering of common stock in connection with Iroquois Federal’s mutual-to-stock conversion, selling 4,496,500 shares of common stock at $10.00 per share, including 384,900 shares sold to Iroquois Federal’s employee stock ownership plan, and raising approximately $45.0 million of gross proceeds. In addition, we issued 314,755 shares of our common stock to the Iroquois Federal Foundation.

Recent Developments: COVID-19 and the CARES Act

The COVID-19 pandemic has caused economic and social disruption on an unprecedented scale. While some industries have been impacted more severely than others, all businesses have been impacted to some degree. This disruption has resulted in the shuttering of businesses and schools across the country, significant job loss, restrictions on travel and social distancing protocols, highly volatile financial markets and aggressive measures by the federal government.

Congress, the President, and the Federal Reserve have taken several actions designed to cushion the economic fallout. Most notably, the Coronavirus Aid, Relief and Economic Security (“CARES”) Act was signed into law at the end of March 2020 as a $2 trillion legislative package. The goal of the CARES Act is to prevent a severe economic downturn through various measures, including direct financial aid to American families and economic stimulus to significantly impacted industry sectors. The package also includes extensive emergency funding for hospitals and healthcare providers. In addition to the general impact of COVID-19, certain provisions of the CARES Act as well as other recent legislative and regulatory relief efforts are expected to have a material impact on our operations.

Due to the uncertainty surrounding the emergence and future effects of the COVID-19 pandemic, it is not possible to determine the overall impact of the pandemic on the Company’s business. To the extent that customers are not able to fulfill their contractual obligations to the Company, the Company’s business operations, asset valuations, financial condition, cash flows and results of operations could be materially impacted. Material adverse impacts may include all or a combination of valuation impairments on our intangible assets, investments, loans, deferred tax assets, or other real estate owned.

The ultimate impact of the COVID-19 pandemic on the Company’s operations and financial performance will depend on future developments related to the duration, extent and severity of the pandemic and the length of time that mandated business and school and school closures, restrictions on travel and social distancing remain in place. The Company’s operations rely on third-party vendors to process, record and monitor transactions. If any of these vendors are unable to provide these services, our ability to serve customers could be disrupted. The pandemic could negatively impact customers’ ability to conduct banking and other financial transactions. The Company’s operations could be adversely impacted if key personnel or a significant number of employees were unable to work due to illness or restrictions.

Financial position and results of operations

Our June 30, 2020 financial condition and results of operations reflect a slightly negative impact on the general element of our allowance for loan losses as a result of COVID-19. While we have not yet experienced any charge-offs related to COVID-19, the general element of our allowance for loan losses calculation and resulting provision for credit losses were impacted by changes in forecasted economic conditions. Given that forecasted economic scenarios have darkened since the pandemic was declared in early March 2020, our need for additional

 

54


reserve for credit loss increased. Refer to our discussions in “Business-Allowance for Loan Losses-Determination of General Allowance for Remainder of the Loan Portfolio”, MD&A below and under Risk Factors. Should economic conditions worsen, we could experience further increases in our required allowance for loan losses and record additional credit loss expense. The execution of the payment deferrals discussed in the following commentary assisted our ratio of past due loans to total loans. It is possible that our asset quality measures could worsen at future measurement periods if the effects of COVID-19 are prolonged.

Our fee income could be reduced due to COVID-19. We are working with COVID-19 affected customers by temporarily waiving fees when appropriate including insufficient funds and overdraft fees, and ATM fees. At this time, we do not anticipate a material impact on our fee income.

Our interest income could be reduced due to COVID-19. In keeping with guidance from regulators, we are actively working with COVID-19 affected borrowers to defer their payments, interest, and fees. While interest and fees will still accrue to income, through normal GAAP accounting, should eventual credit losses on these deferred payments emerge, interest income and fees accrued would need to be reversed. In such a scenario, interest income in future periods could be negatively impacted. At this time, we are unable to project the materiality of such an impact, but recognize the breadth of the economic impact may affect our borrowers’ ability to repay in future periods.

Capital and liquidity

As of June 30, 2020, all of our capital ratios were in excess of all regulatory requirements. While we believe that we have sufficient capital to withstand an extended economic recession brought about by COVID-19, our reported and regulatory capital ratios could be adversely impacted by further credit losses.

We maintain access to multiple sources of liquidity. Wholesale funding markets have remained open to us and rates become more stable in the past couple months. If funding costs are elevated for an extended period of time, it could have an adverse effect on our net interest margin. If an extended recession caused large numbers of our deposit customers to withdraw their funds, we might become more reliant on volatile or more expensive sources of funding.

Asset valuation

Currently, we do not expect COVID-19 to affect our ability to account timely for the assets on our balance sheet; however, this could change in future periods. While certain valuation assumptions and judgments will change to account for pandemic-related circumstances such as widening credit spreads, we do not anticipate significant changes in methodology used to determine the fair value of assets measured in accordance with GAAP. As of June 30, 2020 we did not have any impairment with respect to our intangible assets, premises and equipment or other long-lived assets.

Our Business Continuity and Pandemic Response Plan

The Company maintains a Disaster Recovery/Business Continuity Plan to ensure the maintenance or recovery of operations, including services to customers, when confronted with adverse events such as natural disasters, technological failures, human error, cybercrime, terrorism or pandemic outbreak. When the COVID-19 pandemic declaration was announced, the Disaster Planning/Recovery team activated the Disaster Recovery Plan, including the Pandemic Response Plan, with a focus on maintaining virtually all customer services in the event of a total or partial closure of banking offices and/or staffing shortages. The team implemented protocols for employee safety, reviewed critical business processes, identified staff who could work remotely, and began mobilizing and preparing the equipment that would be required. An Employee Telecommuting Agreement was developed to establish controls and expectations for those working remotely, including adherence to security and privacy policies. Timely communication was provided to employees and customers. ATM and vault cash was increased at all locations in anticipation of greater demand. The Company’s quick and decisive plan implementation resulted in minimal impacts to operations as a result of the COVID-19 pandemic. Prior technology planning enabled the successful deployment of certain operations and other personnel to remote environments thereby reducing the number of employees working from physical banking offices. In addition, bank lobbies were closed and customer traffic limited to drive-up facilities. This reduced the number of employees required to be on-site at any given time and allowed teams to rotate in and out at periodic intervals, helping to facilitate the effective implementation of social distancing standards.

 

55


We do not anticipate any material cost related to the deployment of safety protocols, including PPE or the remote working strategy. No material operational or internal control challenges or risks have been identified to date. Our COVID-19 Response Team continues to anticipate and respond to COVID-19 developments. We don’t anticipate any significant challenges to our ability to maintain our systems and controls and we do not currently face any material resource constraint through the implementation of our business continuity plans.

Lending operations and accommodations to borrowers

We are working with customers directly affected by the COVID-19 pandemic. We are prepared to offer short-term assistance in accordance with regulator guidelines. As a result of the current economic environment caused by COVID-19, we are engaging in more frequent communication with borrowers to better understand their situation and the challenges faced, allowing us to respond proactively as needs and issues arise.

In keeping with regulatory guidance to work with borrowers during this unprecedented situation, the Company is executing payment deferrals for our lending clients that are adversely affected by the pandemic. Under the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) that was signed into law on March 27, 2020, certain COVID-19 loan modifications are not designated as TDRs. The CARES Act allows the Company to presume a loan modification is not a TDR if it is (1) related to COVID-19; (2) executed on a loan that was not more than 30 days past due as of December 31, 2019; and (3) executed between March 1, 2020, and the earlier of (a) 60 days after the date of termination of the National Emergency or (b) December 31, 2020. During the year ended June 30, 2020, the Company granted 176 COVID-19 loan modifications for a total of $85.6 million. These modifications allowed borrowers to defer the principal component of loan payments for up to six months.

With the passage of the Paycheck Protection Program (“PPP”), administered by the SBA, the Company is actively participating in assisting our customers with applications for resources through the program. PPP loans have a two-year term and earn interest at 1%. We believe that the majority of these loans will ultimately be forgiven by the SBA in accordance with the terms of the program. As of June 30, 2020, we closed 295 SBA PPP loans representing $26.2 million in funding. It is our understanding that loans funded through the PPP program are fully guaranteed by the U.S. government. Should those circumstances change, we could be required to establish additional allowance for credit loss through additional credit loss expense charged to earnings.

In response to the COVID-19 pandemic, Management identified food and accommodations as industries that were most likely to be adversely impacted in the near-term by economic disruption caused by the pandemic. As of June 30, 2020, our food and accommodation loans were $5.8 million, or 1.1% of total loans. These loans are mostly to restaurants and bars, and include $4.0 million in PPP loans and no COVID-19 modifications.

Retail operations

With the health and safety of our customers and staff in mind, the drive-up facilities of our Watseka and Danville offices are open, while lobby services are available by appointment only. The drive-up and lobby of the Hoopeston office remain open with protective screening. The Bourbonnais, Champaign, Clifton, and Savoy offices are operating as drive-up only facilities at this time. Most banking transactions continue through the drive-ups, including opening new deposit accounts. In addition, Online and Mobile Banking are available for customers to open an account, check their balance, transfer funds, and pay bills. Checks can be deposited using Mobile Banking. Our network of over 50,000 ATMs are available for cash withdrawals with no service charge. Although some of our lobbies remain closed, we continue to operate and serve our customers with uninterrupted access to their account information and the ability to complete banking transactions.

 

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Critical Accounting Policies

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

Allowance for Loan Losses. We believe that the allowance for loan losses and related provision for loan losses are particularly susceptible to change in the near term, due to changes in credit quality which are evidenced by trends in charge-offs and in the volume and severity of past due loans. In addition, our portfolio is comprised of a substantial amount of commercial real estate loans which generally have greater credit risk than one- to four-family residential mortgage and consumer loans because these loans generally have larger principal balances and are non-homogenous.

The allowance for loan losses is maintained at a level to cover probable credit losses inherent in the loan portfolio at the balance sheet date. Based on our estimate of the level of allowance for loan losses required, we record a provision for loan losses as a charge to earnings to maintain the allowance for loan losses at an appropriate level. The estimate of our credit losses is applied to two general categories of loans:

 

   

loans that we evaluate individually for impairment under ASC 310-10, “Receivables;” and

 

   

groups of loans with similar risk characteristics that we evaluate collectively for impairment under ASC 450-20, “Loss Contingencies.”

The allowance for loan losses is evaluated on a regular basis by management and reflects consideration of all significant factors that affect the collectability of the loan portfolio. The factors used to evaluate the collectability of the loan portfolio include, but are not limited to, current economic conditions, our historical loss experience, the nature and volume of the loan portfolio, the financial strength of the borrower, and estimated value of any underlying collateral. This evaluation is inherently subjective as it requires estimates that are subject to significant revision as more information becomes available. Actual loan losses may be significantly more than the allowance for loan losses we have established which could have a material negative effect on our financial results. See also “Business — Allowance for Loan Losses.”

Income Tax Accounting. The provision for income taxes is based upon income in our 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 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.

 

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We believe our tax policies and practices are critical accounting policies because the determination of our tax provision and current and deferred tax assets and liabilities have a material impact on our net income and the carrying value of our assets. We believe our tax liabilities and assets are properly recorded in the consolidated financial statements at June 30, 2020 and no valuation allowance was necessary.

Comparison of Financial Condition at June 30, 2020 and June 30, 2019

Total assets increased $11.6 million, or 1.6%, to $735.5 million at June 30, 2020 from $723.9 million at June 30, 2019. The increase was primarily due to a $22.0 million increase in net loans and a $16.1 million increase in investments, partially offset by a $26.1 million decrease in cash and cash equivalents.

Cash and cash equivalents decreased by $26.1 million to $33.5 million at June 30, 2020, from $59.6 million at June 30, 2019. This decrease was partially the result of a fluctuation in the balance of one large public entity deposit account and the purchase of investment securities. The public entity collects real estate taxes in two installments, due in June and September, and then makes distributions from the account in early July and September. Amounts received prior to June 30, and subsequently distributed the first week of July were $45.3 million and $55.3 million in 2020 and 2019, respectively.

Investment securities, consisting entirely of securities available for sale, increased $16.1 million, or 11.0%, to $162.4 million at June 30, 2020 from $146.3 million at June 30, 2019. We had no held-to-maturity securities at June 30, 2020 or June 30, 2019.

Net loans receivable, including loans held for sale, increased by $22.0 million, or 4.5%, to $509.8 million at June 30, 2020 from $487.8 million at June 30, 2019. The increase in net loans receivable during this period was due primarily to a $23.3 million, or 27.7%, increase in commercial business loans, a $5.9 million, or 36.8% increase in construction loans, a $1.7 million, or 1.2%, increase in commercial real estate loans, and a $393,000, or 5.5% increase in consumer loans, partially offset by a $8.5 million, or 8.1%, decrease in multi-family loans, a $414,000, or 0.3%, decrease in one- to four-family loans, and a $387,000, or 4.3%, decrease in home equity lines of credit.

Between June 30, 2019 and June 30, 2020, premises and equipment decreased $513,000 to $10.2 million, accrued interest receivable decreased $234,000 to $1.9 million, foreclosed assets held for sale decreased $392,000 to $386,000, deferred income taxes decreased $1.4 million, to $630,000, and mortgage servicing rights decreased $138,000 to $715,000, while Federal Home Loan Bank (FHLB) stock increased $1.9 million to $3.0 million, and other assets increased $220,000 to $634,000. The decrease in premises and equipment was the result of ordinary depreciation, and the decrease in accrued interest receivable was due to decreases in the average rates of both loans and securities. The decrease in foreclosed assets held for sale was due to the sale of property and the decrease in deferred income taxes was mostly due to an increase in unrealized gains on the sale of available-for sale securities. The decrease in mortgage servicing rights was the result of a decrease in valuation. The increase in FHLB stock was the result of a higher stock requirement due to an increased balance of FHLB advances, and the increase in other assets resulted from a year-over-year fluctuation in items in process.

At June 30, 2020, our investment in bank-owned life insurance was $9.3 million, an increase of $273,000 from $9.1 million at June 30, 2019. We invest in bank-owned life insurance to provide us with a funding source for our benefit plan obligations. Bank-owned life insurance also generally provides us noninterest income that is non-taxable. Federal regulations generally limit our investment in bank-owned life insurance to 25% of the Association’s Tier 1 capital plus our allowance for loan losses. At June 30, 2020, our investment of $9.3 million in bank-owned life insurance was 11.3% of our Tier 1 capital plus our allowance for loan losses.

Deposits decreased $5.3 million, or 0.9%, to $601.7 million at June 30, 2020 from $607.0 million at June 30, 2019. Savings, NOW, and money market accounts increased $36.4 million, or 18.6%, to $232.7 million, noninterest bearing demand accounts increased $7.0 million, or 8.8%, to $87.5 million, certificates of deposit, excluding brokered certificates of deposit, decreased $21.6 million, or 7.4%, to $269.2 million, and brokered certificates of deposit decreased $27.2 million, or 68.8%, to $12.3 million.

Repurchase agreements increased $1.7 million to $3.7 million, while advances from the Federal Home Loan Bank of Chicago increased $10.5 million, or 43.8%, to $34.5 million at June 30, 2020 from $24.0 million at June 30, 2019. During the year ended June 30, 2020, we established a line of credit at CIBC Bank USA, which had a balance of $3.0 million at June 30, 2020.

 

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Total equity increased $103,000, or 0.1%, to $82.6 million at June 30, 2020 from $82.5 million at June 30, 2019. Equity increased due to net income of $4.2 million, an increase of $3.7 million in accumulated other comprehensive income, net of tax, and ESOP and stock equity plan activity of $618,000, partially offset by the repurchase of 337,876 shares of common stock at an aggregate cost of approximately $7.5 million, and the payment of approximately $939,000 in dividends to our shareholders. The Company announced a stock repurchase plan on June 12, 2019, whereby the Company could repurchase up to 89,526 shares of its common stock, or approximately 2.5% of its then current outstanding shares. On September 13, 2019, after repurchasing 20,200 shares at an average price od $21.17 per share, the Company announced an increase in the number of shares that may be repurchased under the Company’s existing repurchase plan, whereby the Company could repurchase up to 320,476 shares, or approximately 9.0% of its then outstanding shares. As of June 30, 2020, the Company had repurchased all shares under this plan at an average price of $22.12 per share.

Comparison of Operating Results for the Years Ended June 30, 2020 and 2019

General. Net income increased $687,000, or 19.3%, to $4.2 million net income for the year ended June 30, 2020 from $3.6 million net income for the year ended June 30, 2019. The increase was due to an increase in net interest income, a decrease in provision for loan losses, and an increase in noninterest income, partially offset by an increase in noninterest expense.

Net Interest Income. Net interest income increased by $417,000, or 2.3%, to $18.3 million for the year ended June 30, 2020 from $17.9 million for the year ended June 30, 2019. The increase was due to an increase of $257,000 in interest and dividend income and a decrease of $160,000 in interest expense. A $21.7 million, or 3.4%, increase in the average balance of interest earning assets was partially offset by a $13.3 million, or 2.4%, increase in the average balance of interest bearing liabilities. Our interest rate spread decreased 2 basis points to 2.52% for the year ended June 30, 2020 from 2.54% for the year ended June 30, 2019, and our net interest margin decreased by 3 basis points to 2.75% for the year ended June 30, 2020 from 2.78% for the year ended June 30, 2019.

Interest and Dividend Income. Interest and dividend income increased $257,000, or 1.0%, to $27.0 million for the year ended June 30, 2020 from $26.7 million for the year ended June 30, 2019. The increase in interest income was due to a $84,000 increase in interest income on loans, and a $264,000 increase in interest income on securities, partially offset by a $91,000 decrease in other interest income. An increase of $84,000, or 0.4%, in interest on loans resulted from a $8.1 million, or 1.6%, increase in the average balance of loans to $503.1 million for the year ended June 30, 2020, partially offset by a 6 basis point, or 1.3%, decrease in the average yield on loans to 4.56% from 4.61%. Interest on securities increased $264,000, or 7.6%, due to a $14.5 million increase in the average balance of securities to $146.7 million at June 30, 2020 from $132.2 million at June 30, 2019, partially offset by a 8 basis point, or 3.0%, decrease in the average yield on securities to 2.54% for the year ended June 30, 2020 from 2.62% for the year ended June 30, 2019.

Interest Expense. Interest expense decreased $160,000, or 1.8%, to $8.7 million for the year ended June 30, 2020 from $8.9 million for the year ended June 30, 2019. The decrease was primarily due to lower market rates of interest on FHLB advances during the period, partially offset by increased average balance of interest-bearing liabilities.

Interest expense on interest-bearing deposits increased $593,000, or 8.1%, to $7.9 million for the year ended June 30, 2020, from $7.3 million for the year ended June 30, 2019. This increase was primarily due to an increase in the average balance of interest-bearing deposits to $521.8 million for the year ended June 30, 2020, from $488.1 million for the year ended June 30, 2019, and also a 2 basis point, or 1.1% increase in the average cost of interest-bearing deposits to 1.52% from 1.50%.    

Interest expense on borrowings, including FHLB advances, our line of credit at CIBC Bank USA, and repurchase agreements, decreased $753,000, or 49.0%, to $784,000 for the year ended June 30, 2020 from $1.5 million for the year ended June 30, 2019. This decrease was due to an 60 basis point decrease in the average cost of such borrowings to 1.82% for the year ended June 30, 2020 from 2.42% for the year ended June 30, 2019, and by a $20.4 million, or 32.2%, decrease in the average balance of borrowings to $43.0 million for the year ended June 30, 2020 from $63.4 million for the year ended June 30, 2019.

 

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Provision for Loan Losses. We establish provisions for loan losses, which are charged to operations in order to maintain the allowance for loan losses at a level we consider necessary to absorb potential credit losses inherent in our loan portfolio. We recorded a provision for loan losses of $128,000 for the year ended June 30, 2020, compared to a provision for loan losses of $407,000 for the year ended June 30, 2019. The allowance for loan losses was $6.2 million, or 1.21% of total loans, or 1.27% of total loans excluding PPP loans, at June 30, 2020, compared to $6.3 million, or 1.28% of total loans, at June 30, 2019. Non-performing loans decreased during the year ended June 30, 2020, to $709,000, from $767,000 at June 30, 2019. During the year ended June 30, 2020, net charge-offs of $222,000 were recorded, while during the year ended June 30, 2019, $24,000 in net charge-offs were recorded.

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

 

     Year Ended
June 30, 2020
    Year Ended
June 30, 2019
 

Allowance to non-performing loans

     879.27     825.03

Allowance to total loans outstanding at the end of the period

     1.21     1.28

Allowance to total loans outstanding, excluding PPP loans, at end of the period

     1.27     1.28

Net charge-offs to average total loans outstanding during the period, annualized

     0.04     0.00

Total non-performing loans to total loans

     0.14     0.16

Total non-performing assets to total assets

     0.15     0.21

Noninterest Income. Noninterest income increased $651,000, or 15.7%, to $4.8 million for the year ended June 30, 2020 from $4.2 million for the year ended June 30, 2019. The increase was primarily due to an increase in in the gain on the sale of loans, an increase in the net realized gain on sale of available-for-sale securities, and an increase in other service charges and fees, partially offset by a decrease in mortgage banking income, net, and a decrease in brokerage commissions. For the year ended June 30, 2020, gains on the sale of loans increased $458,000 to $801,000, the net realized gain on sale of available-for-sale securities increased $256,000 to $267,000, and other service charges and fees increased $88,000 to $367,000, while mortgage banking income, net decreased $117,000 to $119,000, and brokerage commissions decreased $70,000 to $911,000. The increase in the gain on the sale of loans was the result of an increase in loans sold, the increase in the gain on sale of available-for-sale securities was due to more securities sold for a gain in the year ended June 30, 2020, and the increase in other service charges and fees was due to more fees collected in the year ended June 30, 2020. The decrease in mortgage banking income, net was the result of a decrease in the valuation of mortgage servicing rights, and the decrease in brokerage commissions due to a decrease in commissions on annuities.

Noninterest Expense. Noninterest expense increased $314,000, or 1.9%, to $17.1 million for the year ended June 30, 2020 from $16.8 million for the year ended June 30, 2019. The largest components of this increase were compensation and benefits, which increased $426,000, or 4.0%, office occupancy, which increased $56,000, or 6.3%, equipment expense, which increased $187,000, or 13.6%, and professional services, which increased $87,000, or 24.5%. These increases were partially offset by decreases in federal deposit insurance fees, which decreased $148,000, or 87.6%, and other expenses, which decreased $336,000, or 16.7%. Compensation and benefits increased due to increased staffing changes, normal salary increases and increased medical costs. Office occupancy and equipment expense increased as a result of the addition of the Champaign office. The increase in professional services was due to additional legal services received in the year ended June 30, 2020, compared to the year ended June 30, 2019. The federal deposit insurance premium decreased as a result of receiving an FDIC small bank assessment credit in the year ended June 30, 2020. Other expenses decreased due to expenses related to foreclosed assets held for sale in the year ended June 30, 2019.

Income Tax Expense. We recorded a provision for income tax of $1.6 million for the year ended June 30, 2020, compared to a provision for income tax of $1.3 million for the year ended June 30, 2019, reflecting effective tax rates of 27.9% and 26.7%, respectively.

 

60


Asset Quality and Allowance for Loan Losses

For information regarding asset quality and allowance for loan loss activity, see “Item 1. Business—Non-performing and Problem Assets” and “Item 1. Business—Allowance for Loan Losses.”

Average Balances and Yields

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

 

61


     For the Fiscal Years Ended June 30,  
     2020     2019     2018  
     Average
Outstanding
Balance
    Interest      Yield/
Rate
    Average
Outstanding
Balance
    Interest      Yield/
Rate
    Average
Outstanding
Balance
    Interest      Yield/
Rate
 
     (Dollars in thousands)  

Interest-earning assets:

                     

Loans:

                     

Real estate loans:

                     

One- to four-family (1)

   $  128,915     $ 5,950        4.62   $  131,494     $ 5,909        4.49   $  139,529     $ 5,866        4.20

Multi-family

     103,710       4,414        4.26       107,282       4,543        4.23       97,767       3,857        3.95  

Commercial

     145,978       6,544        4.48       148,344       6,672        4.50       138,351       5,584        4.04  

Home equity lines of credit

     8,916       420        4.71       9,033       437        4.84       8,269       358        4.33  

Construction loans

     19,098       946        4.95       13,931       745        5.35       10,945       491        4.49  

Commercial business loans

     89,023       4,254        4.78       77,548       4,148        5.35       66,962       3,092        4.62  

Consumer loans

     7,410       389        5.25       7,288       379        5.20       7,923       368        4.64  
  

 

 

   

 

 

      

 

 

   

 

 

      

 

 

   

 

 

    

Total loans

     503,050       22,917        4.56       494,920       22,833        4.61       469,746       19,616        4.18  
  

 

 

   

 

 

      

 

 

   

 

 

      

 

 

   

 

 

    

Securities:

                     

U.S. government, federal agency and government-sponsored enterprises

     13,636       354        2.60       27,816       711        2.56       22,594       543        2.40  

U.S. government sponsored mortgage-backed securities

     131,059       3,327        2.54       101,530       2,700        2.66       93,247       2,345        2.51  

State and political subdivisions

     1,981       46        2.32       2,812       52        1.85       3,103       65        2.09  
  

 

 

   

 

 

      

 

 

   

 

 

      

 

 

   

 

 

    

Total securities

     146,676       3,727        2.54       132,158       3,463        2.62       118,944       2,953        2.48  

Other

     15,586       338        2.17       16,512       429        2.60       9,276       225        2.43  
  

 

 

   

 

 

      

 

 

   

 

 

      

 

 

   

 

 

    

Total interest-earning assets

     665,312       26,982        4.06       643,590       26,725        4.15       597,966       22,794        3.81  
    

 

 

        

 

 

        

 

 

    

Noninterest-earning assets

     28,160            23,054            17,948       
  

 

 

        

 

 

        

 

 

      

Total assets

   $ 693,472          $ 666,644          $ 615,914       
  

 

 

        

 

 

        

 

 

      

Interest-bearing liabilities:

                     

Interest-bearing checking or NOW

   $ 63,964       188        0.29     $ 50,668       141        0.28     $ 46,299       66        0.14  

Savings accounts

     46,552       164        0.35       43,183       178        0.41       43,159       102        0.24  

Money market accounts

     103,150       1,053        1.02       97,555       1,254        1.29       96,984       853        0.88  

Certificates of deposit

     308,089       6,505        2.11       296,692       5,744        1.94       256,250       3,429        1.34  
  

 

 

   

 

 

      

 

 

   

 

 

      

 

 

   

 

 

    

Total interest-bearing deposits

     521,755       7,910        1.52       488,098       7,317        1.50       442,692       4,450        1.01  

Borrowings and repurchase agreements

     43,023       784        1.82       63,417       1,537        2.42       63,997       839        1.31  
  

 

 

   

 

 

      

 

 

   

 

 

      

 

 

   

 

 

    

Total interest-bearing liabilities

     564,778       8,694        1.54       551,515       8,854        1.61       506,689       5,289        1.04  
    

 

 

        

 

 

        

 

 

    

Noninterest-bearing liabilities

     48,577            34,440            26,193       
  

 

 

        

 

 

        

 

 

      

Total liabilities

     613,355            585,955            532,882       

Equity

     80,117            80,689            83,032       
  

 

 

        

 

 

        

 

 

      

Total liabilities and equity

     693,472            666,644            615,914       
  

 

 

        

 

 

        

 

 

      

Net interest income

     $ 18,288          $ 17,871          $ 17,505     
    

 

 

        

 

 

        

 

 

    

Net interest rate spread (2)

          2.52          2.54          2.77

Net interest-earning assets (3)

   $ 100,534          $ 92,075          $ 91,277       
  

 

 

        

 

 

        

 

 

      

Net interest margin (4)

          2.75          2.78          2.93

Average interest-earning assets to interest-bearing liabilities

     118          117          118     

 

(1)

Includes home equity loans.

(2)

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

(3)

Net interest-earning assets represents total interest-earning assets less total interest-bearing liabilities.

(4)

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

 

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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.

 

     Fiscal Years Ended June 30,
2020 vs. 2019
     Fiscal Years Ended June 30,
2019 vs. 2018
 
     Increase (Decrease)
Due to
     Total
Increase
(Decrease)
     Increase (Decrease)
Due to
     Total
Increase
(Decrease)
 
     Volume      Rate      Volume      Rate  
     (In thousands)  

Interest-earning assets:

                 

Loans

   $ 348      $  (264)      $ 84      $  1,102      $  2,115      $  3,217  

Securities

     372        (108      264        338        172        510  

Other

     (23      (68      (91      187        17        204  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total interest-earning assets

   $ 697      $  (440)      $ 257      $ 1,627      $ 2,304      $ 3,931  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Interest-bearing liabilities:

                 

Interest-bearing checking or NOW

   $ 41      $ 6      $ 47      $ 6      $ 69      $ 75  

Savings accounts

     13        (27      (14      —          76        76  

Certificates of deposit

     232        529        761        603        1,712        2,315  

Money market accounts

     70        (271      (201      5        396        401  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total interest-bearing deposits

     356        237        593        614        2,253        2,867  

Federal Home Loan Bank advances

     (425      (328      (753      (8      706        698  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total interest-bearing liabilities

   $  (69)      $ (91)      $  (160)      $ 606      $ 2,959      $ 3,565  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Change in net interest income

   $ 766      $ (349)      $ 417      $ 1,021      $ (655)      $ 366  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

63


Management of Market Risk

General. Because the majority of our assets and liabilities are sensitive to changes in interest rates, our most significant form of market risk is interest rate risk. We are vulnerable to an increase in interest rates to the extent that our interest-bearing liabilities mature or reprice more quickly than our interest-earning assets. As a result, a principal part of our business strategy is to manage interest rate risk and limit the exposure of our net interest income to changes in market interest rates. Accordingly, our Board of Directors has established an Asset/Liability Management Committee pursuant to our Interest Rate Risk Management Policy that is responsible for evaluating the interest rate risk inherent in our assets and liabilities, for determining the level of risk that is appropriate, given our business strategy, operating environment, capital, liquidity and performance objectives, and for managing this risk consistent with the guidelines approved by the Board of Directors.

As part of our ongoing asset-liability management, we currently use the following strategies to manage our interest rate risk:

 

  (i)

sell the majority of our long-term, fixed-rate one- to four-family residential mortgage loans that we originate;

 

  (ii)

lengthen the weighted average maturity of our liabilities through retail deposit pricing strategies and through longer-term wholesale funding sources such as brokered certificates of deposit and fixed-rate advances from the Federal Home Loan Bank of Chicago;

 

  (iii)

invest in shorter- to medium-term investment securities and interest-earning time deposits;

 

  (iv)

originate commercial mortgage loans, including multi-family loans and land loans, commercial loans and consumer loans, which tend to have shorter terms and higher interest rates than one- to four-family residential mortgage loans, and which generate customer relationships that can result in larger noninterest-bearing demand deposit accounts; and

 

  (v)

maintain adequate levels of capital.

We currently do not engage in hedging activities, such as futures, options or swap transactions, or investing in high-risk mortgage derivatives, such as collateralized mortgage obligations, residual interests, real estate mortgage investment conduit residual interests or stripped mortgage backed securities.

In addition, changes in interest rates can affect the fair values of our financial instruments. For additional information regarding the fair values of our assets and liabilities, see Note 18 to the Notes to our Consolidated Financial Statements.

Interest Rate Risk Analysis

We also perform an interest rate risk analysis that assesses our earnings at risk and our value at risk (or net economic value of equity at risk). Earnings at risk represents the underlying threat to earnings associated with the continual repricing of a financial institution’s various assets and liabilities in differing amounts, at different times, at different interest rate levels, all within the context of a continually changing, global interest rate environment. Our analysis of our earnings at risk is completed monthly on our net interest income for periods extending twelve and twenty-four months forward. Simulations include a base line analysis with no change in the current interest rate environment and alternative interest rate possibilities including rising and falling interest rates of 100, 200, 300, and 400 basis points in interest rates under ramp, shock, static and dynamic rate environments to generate the estimated impact on net interest income. Value at risk represents the threat to the underlying value of a financial institution’s various assets and liabilities, and consequently its capital, given the potential for change in the interest rate structure in which these financial instruments might either reprice, or fail to reprice, in an environment of constantly changing interest rates. Our analysis of our value at risk is completed quarterly and the calculation measures the net effect on the market value of the bank’s equity position when quantifying the impact when interest rates rise and fall for the range of -400 basis points to +400 basis points. Details of our general ledger along with key data from each deposit, loan, investment, and borrowing are downloaded into our forecasting model, which takes into account both market

 

64


and internal trends. Historical testing is done internally on a regular basis to confirm the validity of the model, while third-party testing is done periodically. Details of our interest rate risk analysis are reviewed by the Asset/Liability Management Committee and presented to the Board on a quarterly basis.

The tables below illustrate the simulated impact of rate shock scenarios up to 400 basis points over a two-year period on our earnings at risk for net interest income. The earnings at risk tables show net interest income decreasing in a rising rate environment. The net economic value of equity at risk table below sets forth our calculation of the estimated changes in our net economic value of equity at June 30, 2020 resulting from immediate rate shocks ranging from -400 basis points to +400 basis points..

Earnings at Risk

 

Change in Interest

Rates (basis points)

   % Change in Net Interest Income  
   6/30/21      6/30/22  

+400

     (1.55      (1.32

+300

     (0.91      (0.43

+200

     (0.69      (0.18

+100

     (0.69      (0.48

0

     

-100

     (3.63      (4.50

-200

     (7.70      (8.77

-300

     (11.75      (13.03

-400

     (12.79      (14.14
Net Economic Value of Equity (NEVE) at Risk      

Change in Interest

Rates (basis points)

   Estimated NEVE      % Change NEVE  

+400

     75,872        (13.75

+300

     80,690        (8.27

+200

     85,784        (2.48

+100

     88,713        0.85  

0

     87,966     

-100

     90,789        3.21  

-200

     93,016        5.74  

-300

     95,404        8.46  

-400

     96,100        9.25  

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. We also utilize brokered certificates of deposit, internet funding, borrowings from the Federal Reserve, and sales of securities, when appropriate. 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 years ended June 30, 2020 and 2019, our liquidity ratio averaged 22.9% and 21.4% of our total assets, respectively. We believe that we have enough sources of liquidity to satisfy our short- and long-term liquidity needs as of June 30, 2020.

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 June 30, 2020, cash and cash equivalents totaled $33.5 million.

 

65


Our cash flows are derived from operating activities, investing activities and financing activities as reported in our Statements of Cash Flows included in our financial statements.

At June 30, 2020, we had $16.9 million in loan commitments outstanding, and $86.2 million in unused lines of credit to borrowers. Certificates of deposit due within one year of June 30, 2020 totaled $248.4 million, or 41.3% of total deposits. Depending on market conditions, we may be required to pay higher rates on such deposits or other borrowings than we currently pay on the certificates of deposit due on or before June 30, 2019. Additionally, 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.

Our primary investing activity is originating loans. During the years ended June 30, 2020 and 2019, we originated $283.1 million and $156.2 million of loans, respectively.

Financing activities consist primarily of activity in deposit accounts and Federal Home Loan Bank advances. We had a net decrease in total deposits of $5.3 million for the year ended June 30, 2020, and a net increase in total deposits of $126.6 million for the year ended June 30, 2019. Deposit flows are affected by the overall level of interest rates, the interest rates and products offered by us and our local competitors, and by other factors.

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 exist with the Federal Home Loan Bank of Chicago, which provides an additional source of funds. Federal Home Loan Bank advances were $34.5 million at June 30, 2020. At June 30, 2020, we had the ability to borrow up to an additional $126.8 million from the Federal Home Loan Bank of Chicago based on our collateral and had the ability to borrow an additional $26.7 million from the Federal Reserve based upon current collateral pledged.

Iroquois Federal is subject to various regulatory capital requirements, including a risk-based capital measure. The risk-based capital guidelines include both a definition of capital and a framework for calculating risk-weighted assets by assigning balance sheet assets and off-balance sheet items to broad risk categories. At June 30, 2020, Iroquois Federal exceeded all regulatory capital requirements. Iroquois Federal is considered “well capitalized” under regulatory guidelines. See Note 13 Regulatory Matters of the notes to the financial statements included in this Annual Report on Form 10-K.

Off-Balance Sheet Arrangements and Aggregate Contractual Obligations

Commitments. As a financial services provider, we routinely are a party to various financial instruments with off-balance-sheet risks, such as commitments to extend credit and unused lines of credit. While these contractual obligations represent our future cash requirements, a significant portion of commitments to extend credit may expire without being drawn upon. Such commitments are subject to the same credit policies and approval process accorded to loans we make. For additional information, see Note 20 Commitments and Credit Risk of the notes to the financial statements included in this Annual Report on Form 10-K.

Contractual Obligations. In the ordinary course of our operations, we enter into certain contractual obligations. Such obligations include data processing services, operating leases for premises and equipment, agreements with respect to borrowed funds and deposit liabilities.

Recent Accounting Pronouncements

For a discussion of the impact of recent and future accounting pronouncements, see Note 1 of the notes to our consolidated financial statements beginning on page F-1 of this Annual Report on Form 10-K.

Impact of Inflation and Changing Prices

Our financial statements and related notes have been prepared in accordance with U.S. GAAP. U.S. GAAP

 

66


generally requires the measurement of financial position and operating results in terms of historical dollars without consideration of changes in the relative purchasing power of money over time due to inflation. The impact of inflation is reflected in the increased cost of our operations. Unlike industrial companies, our assets and liabilities are primarily monetary in nature. As a result, changes in market interest rates have a greater impact on our performance than the effects of inflation.

 

ITEM 7A.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The information required by this item is incorporated herein by reference to Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operation.”

 

ITEM 8.

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The Consolidated Financial Statements, including supplemental data, of IF Bancorp begin on page F-1 of this Annual Report.

 

ITEM 9.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.

 

ITEM 9A.

CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures.

The Company’s President and Chief Executive Officer, its Chief Financial Officer, and other members of its senior management team have evaluated the effectiveness of the Company’s disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) or 15d-15(e)), as of June 30, 2020. Based on such evaluation, the President and Chief Executive Officer and Chief Financial Officer have concluded that the Company’s disclosure controls and procedures, as of the end of the period covered by this report, were adequate and effective to provide reasonable assurance that information required to be disclosed by the Company, including Iroquois Federal, in reports that are filed or submitted under the Exchange Act, is (1) recorded, processed, summarized and reported, within the time periods specified in the Commission’s rules and forms and (2) is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer as appropriate to allow timely discussions regarding required disclosures.

Changes in Internal Controls Over Financial Reporting.

There have been no changes in the Company’s internal control over financial reporting during the quarter ended June 30, 2020 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

Management’s Report on Internal Control Over Financial Reporting.

The management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting. The internal control process has been designed under our supervision to provide reasonable assurance regarding the reliability of financial reporting and the preparation of the Company’s financial statements for external reporting purposes in accordance with accounting principles generally accepted in the United States of America.

Management conducted an assessment of the effectiveness of the Company’s internal control over financial reporting as of June 30, 2020, utilizing the framework established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on this assessment, management has determined that the Company’s internal control over financial reporting as of June 30, 2020 is effective.

Our internal control over financial reporting includes policies and procedures that pertain to the

 

67


maintenance of records that accurately and fairly reflect, in reasonable detail, transactions and dispositions of assets; and provide reasonable assurances that: (1) transactions are recorded as necessary to permit preparation of financial statements in accordance with accounting principles generally accepted in the United States of America; (2) receipts and expenditures are being made only in accordance with authorizations of management and the directors of the Company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Company’s assets that could have a material effect on the Company’s financial statements.

All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

 

ITEM 9B.

OTHER INFORMATION

Not applicable.

 

68


PART III

 

ITEM 10.

DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

The information relating to the directors and officers of the Company, information regarding compliance with Section 16(a) of the Exchange Act and information regarding the audit committee and audit committee financial expert is incorporated herein by reference to the Company’s Proxy Statement for the Registrant’s Annual Meeting of Stockholders, to be held on November 23, 2020 (the “Proxy Statement”) under the captions “Proposal 1—Election of Directors,” “Executive Officers,” “Section 16(a) Beneficial Ownership Reporting Compliance,” “Nominating Committee Procedures—Procedures to be Followed by Stockholders,” “Corporate Governance—Committees of the Board of Directors” and “—Audit Committee” is incorporated herein by reference.

The Company has adopted a code of ethics that applies to its principal executive officer, the principal financial officer and principal accounting officer. The Code of Ethics is posted on the Company’s Internet Web site.

 

ITEM 11.

EXECUTIVE COMPENSATION

The information regarding executive compensation, compensation committee interlocks and insider participation is incorporated herein by reference to the Proxy Statement under the captions “Executive Officers—Executive Compensation” and “Director Compensation.”

 

ITEM 12.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDERS MATTERS

 

  (a)

Security Ownership of Certain Beneficial Owners

Information required by this item is incorporated herein by reference to the section captioned “Stock Ownership” in the Proxy Statement.

 

  (b)

Security Ownership of Management

Information required by this item is incorporated herein by reference to the section captioned “Stock Ownership” in the Proxy Statement.

 

  (c)

Changes in Control

Management of the Company knows of no arrangements, including any pledge by any person or securities of the Company, the operation of which may at a subsequent date result in a change in control of the registrant.

 

69


Equity Compensation Plan Information

The following table sets forth information as of June 30, 2020 about Company common stock that may be issued upon the exercise of options under the IF Bancorp, Inc. 2012 Equity Incentive Plan. The plan was approved by the Company’s stockholders.

 

Plan Category

   Number of securities to be
issued upon the exercise
of outstanding options,
warrants and rights
     Weighted-average
exercise price of
outstanding options,
warrants and rights
     Number of securities
remaining available for
future issuance under
equity compensation plans
(excluding securities
reflected in the first
column)
 

Equity compensation plans approved by security holders

     153,143      $ 16.63        314,125  

Equity compensation plans not approved by security holders

     N/A        N/A        N/A  
  

 

 

       

 

 

 

Total

     153,143      $ 16.63        314,125  
  

 

 

       

 

 

 

 

ITEM 13.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

The information relating to certain relationships and related transactions and director independence is incorporated herein by reference to the Proxy Statement under the captions “Transactions with Related Persons” and “Proposal 1 — Election of Directors.”

 

ITEM 14.

PRINCIPAL ACCOUNTING FEES AND SERVICES

The information relating to the principal accounting fees and expenses is incorporated herein by reference to the Proxy Statement under the captions “Proposal III—Ratification of Independent Registered Public Accounting Firm—Audit Fees” and “—Pre-Approval of Services by the Independent Registered Public Accounting Firm.”

 

70


PART IV

 

ITEM 15.

EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

 

  (1)

The financial statements required in response to this item are incorporated by reference from Item 8 of this report.

 

  (2)

All financial statement schedules are omitted because they are not required or applicable, or the required information is shown in the consolidated financial statements or the notes thereto.

 

  (3)

Exhibits

 

  3.1

Articles of Incorporation of IF Bancorp, Inc. (1)

  3.2

Amended and Restated Bylaws of IF Bancorp, Inc. (2)

  4.1

Specimen Stock Certificate of IF Bancorp, Inc. (1)

  4.6

Description of Registrant’s Securities (10)

  10.1

Employment Agreement between Iroquois Federal Savings and Loan Association and Walter H. Hasselbring, III (3)

  10.2

Employment Agreement between IF Bancorp, Inc. and Walter H. Hasselbring, III (3)

  10.3

Change in Control Agreement of Pamela J. Verkler (4)

  10.4

Change in Control Agreement of Thomas J. Chamberlain (9)

  10.5

Amendment One to Employment Agreement between Iroquois Federal Savings and Loan Association and Walter H. Hasselbring, III (5)

  10.6

Amendment One to Employment Agreement between IF Bancorp, Inc. and Walter H. Hasselbring, III (5)

  10.7

Amendment Two to Employment Agreement between Iroquois Federal Savings and Loan Association and Walter H. Hasselbring, III (6)

  10.8

Amendment Two to Employment Agreement between IF Bancorp, Inc. and Walter H. Hasselbring, III (6)

  10.9

Directors Non Qualified Retirement Plan (1)

  10.10

IF Bancorp, Inc. 2012 Equity Incentive Plan (7)

  21.0

List of Subsidiaries (1)

  23.0

Consent of BKD, LLP

  31.1

Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer

  31.2

Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer

  32.0

Section  1350 Certification of Chief Executive Officer and Chief Financial Officer (8)

  101

Interactive data files pursuant to Rule 405 of Regulation S-T: (i) the Consolidated Balance Sheets as of June 30, 2020 and 2019, (ii) the Consolidated Statements of Income for the years ended June 30, 2020 and 2019 (iii) the Consolidated Statements of Comprehensive Income (Loss) for the years ended June 30, 2020 and 2019, (iv) the Consolidated Statements of Stockholders’ Equity for the years ended June 30, 2020 and 2019, (v) the Consolidated Statements of Cash Flows for the years ended June 30, 2020 and 2019, and (vi) the notes to the Consolidated Financial Statements.

 

(1)

Incorporated by reference to the Company’s Registration Statement on Form S-1 (333-172842), as amended, initially filed with the SEC on March 16, 2011.

(2)

Incorporated by reference to the Company’s Current Report on Form 8-K filed with the SEC on March 8, 2018.

(3)

Incorporated by reference to the Company’s Current Report on Form 8-K filed with the SEC on December 1, 2015.

(4)

Incorporated by reference to the Company’s Current Report on Form 8-K filed with the SEC on July 14, 2011.

(5)

Incorporated by reference to the Company’s Current Report on Form 8-K filed with the SEC on May 31, 2016.

(6)

Incorporated by reference to the Company’s Current Report on Form 8-K filed with the SEC on June 15, 2017.

 

71


(7)

Incorporated by reference to Appendix A to the Company’s Definitive Proxy Statement filed with the SEC on October 12, 2012.

(8)

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

(9)

Incorporated by reference to the Company’s Form 10-K filed with the SEC on September 11, 2017.

(10)

Incorporated by reference to the Company’s Form 10-K filed with the SEC on September 12, 2019.

 

ITEM 16.

FORM 10-K SUMMARY

None.

 

72


SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

    IF BANCORP, INC.
Date: September 14, 2020   By:   /s/ Walter H. Hasselbring, III
        Walter H. Hasselbring, III
        President and Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.

 

Signatures    Title   Date

/s/ Walter H. Hasselbring, III

  

President, Chief Executive Officer and Director

(Principal Executive Officer)

  September 14, 2020

Walter H. Hasselbring, III

/s/ Pamela J. Verkler

   Senior Executive Vice President and Chief Financial Officer (Principal Financial and Accounting Officer)   September 14, 2020

Pamela J. Verkler

/s/ Gary Martin

   Chairman of the Board   September 14, 2020

Gary Martin

/s/ Alan D. Martin

   Director   September 14, 2020

Alan D. Martin

/s/ Joseph A. Cowan

   Director   September 14, 2020

Joseph A. Cowan

/s/ Wayne A. Lehmann

   Director   September 14, 2020

Wayne A. Lehmann

/s/ Dennis C. Wittenborn

   Director   September 14, 2020

Dennis C. Wittenborn

/s/ Rodney E. Yergler

   Director   September 14, 2020

Rodney E. Yergler

 


IF Bancorp, Inc.

Report of Independent Registered Public Accounting Firm and

Consolidated Financial Statements

June 30, 2020 and 2019


IF Bancorp, Inc.

June 30, 2020 and 2019

Contents

 

Report of Independent Registered Public Accounting Firm

     F-1  

Consolidated Financial Statements

  

Balance Sheets

     F-2  

Statements of Income

     F-3  

Statements of Comprehensive Income

     F-4  

Statements of Stockholders’ Equity

     F-5  

Statements of Cash Flows

     F-6  

Notes to Financial Statements

     F-7  


Report of Independent Registered Public Accounting Firm

To the Shareholders, Board of Directors and Audit Committee

IF Bancorp, Inc.

Watseka, Illinois

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of IF Bancorp, Inc. (Company) as of June 30, 2020 and 2019, the related consolidated statements of income, comprehensive income, stockholders’ equity and cash flows for the years then ended, and the related notes (collectively referred to as the “financial statements”). In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of June 30, 2020 and 2019, and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

We have served as the Company’s auditor since 2009.

 

/s/ BKD, LLP

Decatur, Illinois

September 14, 2020

 

F-1


IF Bancorp, Inc.

Consolidated Balance Sheets

June 30, 2020 and 2019

(in thousands)

 

Assets     
     2020     2019  

Cash and due from banks

   $ 31,529     $ 57,994  

Interest-bearing demand deposits

     1,938       1,606  
  

 

 

   

 

 

 

Cash and cash equivalents

     33,467       59,600  
  

 

 

   

 

 

 

Interest-bearing time deposits in banks

     3,000       3,000  

Available-for-sale securities

     162,394       146,291  

Loans, net of allowance for loan losses of $6,234 and $6,328 at June 30, 2020 and 2019, respectively

     509,817       487,774  

Premises and equipment, net of accumulated depreciation of $8,016 and $7,345 at June 30, 2020 and 2019, respectively

     10,193       10,706  

Federal Home Loan Bank stock, at cost

     3,028       1,174  

Foreclosed assets held for sale

     386       778  

Accrued interest receivable

     1,908       2,142  

Bank-owned life insurance

     9,345       9,072  

Mortgage servicing rights

     715       853  

Deferred income taxes

     630       2,066  

Other

     634       414  
  

 

 

   

 

 

 

Total assets

   $ 735,517     $ 723,870  
  

 

 

   

 

 

 
Liabilities and Stockholders’ Equity     

Liabilities

    

Deposits

    

Demand

   $ 87,486     $ 80,442  

Savings, NOW and money market

     232,723       196,296  

Certificates of deposit

     269,152       290,761  

Brokered certificates of deposit

     12,339       39,524  
  

 

 

   

 

 

 

Total deposits

     601,700       607,023  
  

 

 

   

 

 

 

Repurchase agreements

     3,738       2,015  

Federal Home Loan Bank advances

     34,500       24,000  

Line of credit and other borrowings

     3,000       —    

Advances from borrowers for taxes and insurance

     519       747  

Accrued post-retirement benefit obligation

     3,306       2,919  

Accrued interest payable

     537       801  

Other

     5,653       3,904  
  

 

 

   

 

 

 

Total liabilities

     652,953       641,409  
  

 

 

   

 

 

 

Commitments and Contingencies

    

Stockholders’ Equity

    

Common stock, $.01 par value, 100,000,000 shares authorized, 3,240,376 and 3,578,252 shares issued and outstanding at June 30, 2020 and 2019, respectively

     32       36  

Additional paid-in capital

     49,239       48,813  

Unearned ESOP shares, at cost, 211,695 and 230,940 shares at June 30, 2020 and 2019, respectively

     (2,117     (2,309

Retained earnings

     31,207       35,356  

Accumulated other comprehensive income, net of tax

     4,203       565  
  

 

 

   

 

 

 

Total stockholders’ equity

     82,564       82,461  
  

 

 

   

 

 

 

Total liabilities and stockholders’ equity

   $ 735,517     $ 723,870  
  

 

 

   

 

 

 

See Notes to Consolidated Financial Statements

 

F-2


IF Bancorp, Inc.

Consolidated Statements of Income

Years Ended June 30, 2020 and 2019

(in thousands)

 

     2020      2019  

Interest Income

     

Interest and fees on loans

   $ 22,917      $ 22,833  

Securities

     

Taxable

     3,652        3,341  

Tax-exempt

     75        122  

Federal Home Loan Bank dividends

     71        150  

Deposits with financial institutions

     267        279  
  

 

 

    

 

 

 

Total interest and dividend income

     26,982        26,725  
  

 

 

    

 

 

 

Interest Expense

     

Deposits

     7,910        7,317  

Federal Home Loan Bank advances and repurchase agreements

     651        1,537  

Line of credit and other borrowings

     133        —    
  

 

 

    

 

 

 

Total interest expense

     8,694        8,854  
  

 

 

    

 

 

 

Net Interest Income

     18,288        17,871  

Provision for Loan Losses

     128        407  
  

 

 

    

 

 

 

Net Interest Income After Provision for Loan Losses

     18,160        17,464  
  

 

 

    

 

 

 

Noninterest Income

     

Customer service fees

     340        367  

Other service charges and fees

     367        279  

Insurance commissions

     630        660  

Brokerage commissions

     911        981  

Net realized gains on sale of available-for-sale securities

     267        11  

Mortgage banking income, net

     119        236  

Gain on sale of loans

     801        343  

Bank-owned life insurance income, net

     273        269  

Other

     1,102        1,013  
  

 

 

    

 

 

 

Total noninterest income

     4,810        4,159  
  

 

 

    

 

 

 

Noninterest Expense

     

Compensation and benefits

   $ 11,070      $ 10,644  

Office occupancy

     943        887  

Equipment

     1,564        1,377  

Federal deposit insurance

     21        169  

Loss (gain) sale of foreclosed assets

     27        (3

Stationary, printing and office

     128        107  

Advertising

     499        503  

Professional services

     442        355  

Supervisory examination

     154        165  

Audit and accounting services

     136        138  

Organizational dues and subscriptions

     49        44  

Insurance bond premiums

     163        150  

Telephone and postage

     213        223  

Other

     1,677        2,013  
  

 

 

    

 

 

 

Total noninterest expense

     17,086        16,772  
  

 

 

    

 

 

 

Income Before Income Tax

     5,884        4,851  

Provision for Income Taxes

     1,639        1,293  
  

 

 

    

 

 

 

Net Income

   $ 4,245      $ 3,558  
  

 

 

    

 

 

 

Earnings Per Share:

     

Basic

   $ 1.37      $ 1.02  

Diluted

   $ 1.35      $ 1.01  

Dividends Paid Per Share

   $ 0.30      $ 0.25  

See Notes to Consolidated Financial Statements

 

F-3


IF Bancorp, Inc.

Consolidated Statements of Comprehensive Income

Years Ended June 30, 2020 and 2019

(in thousands)

 

     2020     2019  

Net Income

   $ 4,245     $ 3,558  

Other Comprehensive Income

    

Unrealized appreciation on available-for-sale securities, net of taxes of $1,621 and $1,860 for 2020 and 2019, respectively

     4,065       3,777  

Less: reclassification adjustment for realized gains included in net income, net of taxes of $76 and $3 for 2020 and 2019, respectively

     191       8  
  

 

 

   

 

 

 
     3,874       3,769  
  

 

 

   

 

 

 

Postretirement health plan amortization of transition obligation and prior service cost and change in net loss, net of taxes of $(123) and $(4) for 2020 and 2019, respectively

     (236     (96
  

 

 

   

 

 

 

Other comprehensive income, net of tax

     3,638       3,673  
  

 

 

   

 

 

 

Comprehensive Income

   $ 7,883     $ 7,231  
  

 

 

   

 

 

 

See Notes to Consolidated Financial Statements

 

F-4


IF Bancorp, Inc.

Consolidated Statements of Stockholders’ Equity

Years Ended June 30, 2020 and 2019

(in thousands)

 

                              Accumulated        
           Additional      Unearned           Other        
     Common     Paid-In      ESOP     Retained     Comprehensive        
     Stock     Capital      Shares     Earnings     Income (Loss)     Total  

Balance, July 1, 2018

   $ 39     $ 48,361      $ (2,502   $ 38,885     $ (3,108   $ 81,675  

Net income

     —         —          —         3,558       —         3,558  

Other comprehensive income

     —         —          —         —         3,673       3,673  

Dividends on common stock, $0.25 per share

     —         —          —         (868     —         (868

Stock equity plan

     —         225        —         —         —         225  

Stock repurchase, 293,156 shares, average price $21.22 each

     (3     —          —         (6,219     —         (6,222

ESOP shares earned, 19,245 shares

     —         227        193       —         —         420  
  

 

 

   

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

Balance, June 30, 2019

     36       48,813        (2,309     35,356       565       82,461  

Net income

     —         —          —         4,245       —         4,245  

Other comprehensive income

     —         —          —         —         3,638       3,638  

Dividends on common stock, $0.30 per share

     —         —          —         (939     —         (939

Stock equity plan

     —         223        —         —         —         223  

Stock repurchase, 337,876 shares, average price $22.08 each

     (4     —          —         (7,455     —         (7,459

ESOP shares earned, 19,245 shares

     —         203        192       —         —         395  
  

 

 

   

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

Balance, June 30, 2020

   $ 32     $ 49,239      $ (2,117   $ 31,207     $ 4,203     $ 82,564  
  

 

 

   

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

See Notes to Consolidated Financial Statements

 

F-5


IF Bancorp, Inc.

Consolidated Statements of Cash Flows

Years Ended June 30, 2020 and 2019

(in thousands)

 

     2020     2019  

Operating Activities

    

Net income

   $ 4,245     $ 3,558  

Items not requiring (providing) cash

    

Depreciation

     671       628  

Provision for loan losses

     128       407  

Amortization of premiums and discounts on securities

     304       83  

Deferred income taxes

     (15     76  

Net realized gains on loan sales

     (801     (343

Net realized gains on sales of available-for-sale securities

     (267     (11

(Gain) loss on foreclosed real estate held for sale

     27       (3

Bank-owned life insurance income, net

     (273     (269

Originations of loans held for sale

     (40,615     (16,836

Proceeds from sales of loans held for sale

     41,318       17,082  

ESOP compensation expense

     395       420  

Stock equity plan expense

     223       225  

Changes in

    

Accrued interest receivable

     234       (321

Other assets

     (219     306  

Accrued interest payable

     (264     613  

Post-retirement benefit obligation

     57       57  

Other liabilities

     1,748       125  
  

 

 

   

 

 

 

Net cash provided by operating activities

     6,896       5,797  
  

 

 

   

 

 

 

Investing Activities

    

Net change in interest bearing time deposits

     —         (1,250

Purchases of available-for-sale securities

     (52,052     (42,148

Proceeds from the sales of available-for-sale securities

     15,712       6,852  

Proceeds from maturities and pay-downs of available-for-sale securities

     25,619       20,555  

Net change in loans

     (22,165     (17,950

Purchase of premises and equipment

     (158     (1,108

Proceeds from the sale of foreclosed assets

     595       5,803  

Purchase of Federal Home Loan Bank stock

     (1,854     (1,440

Redemption of Federal Home Loan Bank stock

     —         3,551  
  

 

 

   

 

 

 

Net cash used in investing activities

     (34,303     (27,135
  

 

 

   

 

 

 

Financing Activities

    

Net increase in demand deposits, money market, NOW and savings accounts

   $ 43,471     $ 59,897  

Net increase (decrease) in certificates of deposit, including brokered certificates

     (48,794     66,705  

Net increase (decrease) in advances from borrowers for taxes and insurance

     (228     438  

Proceeds from Federal Home Loan Bank advances

     101,500       111,500  

Repayment of Federal Home Loan Bank advances

     (91,000     (155,000

Proceeds from other borrowings

     5,000       —    

Repayments of other borrowings

     (2,000     —    

Net increase (decrease) in repurchase agreements

     1,723       (266

Dividends paid

     (939     (868

Purchases of common stock

     (7,459     (6,222
  

 

 

   

 

 

 

Net cash provided by financing activities

     1,274       76,184  
  

 

 

   

 

 

 

Increase (Decrease) in Cash and Cash Equivalents

     (26,133     54,846  

Cash and Cash Equivalents, Beginning of Year

     59,600       4,754  
  

 

 

   

 

 

 

Cash and Cash Equivalents, End of Year

   $ 33,467     $ 59,600  
  

 

 

   

 

 

 

Supplemental Cash Flows Information

    

Interest paid

   $ 8,958     $ 8,241  

Income taxes paid (net of refunds)

   $ 1,145     $ 365  

Foreclosed assets acquired in settlement of loans

   $ 230     $ 6,359  

See Notes to Consolidated Financial Statements

 

F-6


IF Bancorp, Inc.

Notes to Consolidated Financial Statements

June 30, 2020 and 2019

(Table dollar amounts in thousands)

Note 1: Nature of Operations and Summary of Significant Accounting Policies

Nature of Operations

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 Association provides a full range of banking and financial services to individual and corporate customers from our seven full-service banking offices located in the municipalities of Watseka, Danville, Clifton, Hoopeston, Savoy, Bourbonnais, and Champaign, Illinois, and our loan production and wealth management office in Osage Beach, Missouri. Our primary lending market includes the Illinois counties of Vermilion, Iroquois, Champaign and Kankakee, as well as the adjacent counties in Illinois and Indiana. Our loan production and wealth management office in Osage Beach, Missouri, serves the Missouri counties of Camden, Miller and Morgan. 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 Company is primarily engaged in the business of directing, planning, and coordinating the business activities of the Association. The Company and Association are subject to competition from other financial institutions. The Company and Association are also subject to the regulation of certain federal and state agencies and undergo periodic examinations by those regulatory authorities.

Principles of Consolidation

The consolidated financial statements include the accounts of the Company, the Association and Association’s wholly owned subsidiary, L.C.I. All significant intercompany accounts and transactions have been eliminated in consolidation.

Operating Segment

The Company provides community banking services, including such products and services as loans, certificates of deposits, savings accounts, and mortgage originations. These activities are reported as a single operating segment.

The Company does not derive revenues from, or have assets located in, foreign countries, nor does it derive revenues from any single customer that represents 10% or more of the Company’s total revenues.

 

F-7


IF Bancorp, Inc.

Notes to Consolidated Financial Statements

June 30, 2020 and 2019

(Table dollar amounts in thousands)

 

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Material estimates that are particularly susceptible to significant change relate to the determination of the allowance for loan losses and the valuation of real estate acquired in connection with foreclosures or in satisfaction of loans, fair value measurements and classifications of investment securities, loan servicing rights and income taxes.

Interest-bearing Time Deposits in Banks

Interest-bearing time deposits in banks mature within five years and are carried at cost.

Cash Equivalents

The Company considers all liquid investments with original maturities of three months or less to be cash equivalents. At June 30, 2020 and 2019, cash equivalents consisted primarily of noninterest bearing deposits and interest bearing demand deposits.

Securities

Securities are classified as “available for sale” and recorded at fair value, with unrealized gains and losses excluded from earnings and reported in other comprehensive loss. Purchase premiums and discounts are recognized in interest income using the interest method over the terms of the securities. Gains and losses on the sale of securities are recorded on the trade date and are determined using the specific identification method.

Loans Held for Sale

Mortgage loans originated and intended for sale in the secondary market are carried at the lower of cost or fair value in the aggregate. Net unrealized losses, if any, are recognized through a valuation allowance by charges to noninterest income. Gains and losses on loan sales are recorded in noninterest income, and direct loan origination costs and fees are deferred at origination of the loan and are recognized in noninterest income upon sale of the loan.

 

F-8


IF Bancorp, Inc.

Notes to Consolidated Financial Statements

June 30, 2020 and 2019

(Table dollar amounts in thousands)

 

Loans

Loans that management has the intent and ability to hold for the foreseeable future or until maturity or payoffs are reported at their outstanding principal balances adjusted for unearned income, charge-offs, the allowance for loan losses, and any unamortized deferred fees or costs on originated loans.

For loans amortized at cost, interest income is accrued based on the unpaid principal balance. Loan origination fees, net of certain direct origination costs, are deferred and amortized as a level yield adjustment over the respective term of the loan.

The accrual of interest on loans is discontinued at the time the loan is 90 days past due unless the credit is well-secured and in process of collection. Past due status is based on contractual terms of the loan. In all cases, loans are placed on nonaccrual or charged off at an earlier date if collection of principal or interest is considered doubtful.

All interest accrued but not collected for loans that are placed on nonaccrual or charged off are reversed against interest income. The interest on these loans is accounted for on the cash-basis or cost-recovery method, until qualifying for return to accrual. Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured.

Allowance for Loan Losses

The allowance for loan losses is established as losses are estimated to have occurred through a provision for loan losses charged to income. Loan losses are charged against the allowance when management believes the uncollectibility of a loan balance is confirmed. Subsequent recoveries, if any, are credited to the allowance.

The allowance for loan losses is evaluated on a regular basis by management and is based upon management’s periodic review of the collectibility of the loans in light of historical experience, the nature and volume of the loan portfolio, adverse situations that may affect the borrower’s ability to repay, estimated value of any underlying collateral and prevailing economic conditions. This evaluation is inherently subjective as it requires estimates that are susceptible to significant revision as more information becomes available.

The allowance consists of allocated and general components. The allocated component relates to loans that are classified as impaired. For those loans that are classified as impaired, an allowance is established when the collateral value of the impaired loan is lower than the carrying value of that loan. The general component covers nonclassified loans and is based on historical charge-off experience and expected loss given default derived from the Company’s internal risk rating process. Other adjustments may be made to the allowance for pools of loans after an assessment of internal or external influences on credit quality that are not fully reflected in the historical loss or risk rating data.

 

F-9


IF Bancorp, Inc.

Notes to Consolidated Financial Statements

June 30, 2020 and 2019

(Table dollar amounts in thousands)

 

A loan is considered impaired when, based on current information and events, it is probable that the Company will be unable to collect the scheduled payments of principal or interest when due according to the contractual terms of the loan agreement. Factors considered by management in determining impairment include payment status, collateral value and the probability of collecting scheduled principal and interest payments when due. Loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired. Management determines the significance of payment delays and payment shortfalls on a case-by-case basis, taking into consideration all of the circumstances surrounding the loan and the borrower, including the length of the delay, the reasons for the delay, the borrower’s prior payment record and the amount of the shortfall in relation to the principal and interest owed. Impairment is measured on a loan-by-loan basis for commercial and construction loans by either the present value of expected future cash flows discounted at the loan’s effective interest rate, the loan’s obtainable market price or the fair value of the collateral if the loan is collateral dependent.

Groups of loans with similar characteristics, including individually evaluated loans not determined to be impaired, are collectively evaluated for impairment based on the group’s historical loss experience adjusted for changes in trends, conditions and other relevant factors that affect repayment of the loans.

Premises and Equipment

Depreciable assets are stated at cost less accumulated depreciation. Depreciation is charged to expense using the straight-line method over the estimated useful lives of the assets.

The estimated useful lives for each major depreciable classification of premises and equipment are as follows:

 

Buildings and improvements

    35-40 years  

Furniture and equipment

    3-5 years  

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, carried at cost and evaluated for impairment.

Foreclosed Assets Held for Sale

Assets acquired through, or in lieu of, loan foreclosure are held for sale and are initially recorded at fair value less cost to sell at the date of foreclosure, establishing a new cost basis. Subsequent to foreclosure, valuations are periodically performed by management and the assets are carried at the lower of carrying amount or fair value less cost to sell. Revenue and expenses from operations and changes in the valuation allowance are included in net income or expense from foreclosed assets.

 

F-10


IF Bancorp, Inc.

Notes to Consolidated Financial Statements

June 30, 2020 and 2019

(Table dollar amounts in thousands)

 

Bank-owned Life Insurance

Bank-owned life insurance policies are reflected on the consolidated balance sheets at the estimated cash surrender value. Changes in the cash surrender value are reflected in noninterest income in the consolidated statements of income.

Fee Income

Loan origination fees, net of direct origination costs, are recognized as income using the level-yield method over the contractual life of the loans.

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, Iroquois Insurance Agency, receives commissions on premiums of new and renewed business policies. Iroquois Insurance Agency records commission revenue on direct bill policies as the cash is received. For agency bill policies, Iroquois 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.

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.

 

F-11


IF Bancorp, Inc.

Notes to Consolidated Financial Statements

June 30, 2020 and 2019

(Table dollar amounts in thousands)

 

Mortgage Servicing Rights

Mortgage servicing assets are recognized separately when rights are acquired through purchase or through sale of financial assets. Under the servicing assets and liabilities accounting guidance (ASC 860-50), servicing rights resulting from the sale or securitization of loans originated by the Company are initially measured at fair value at the date of transfer. The Company has elected to initially and subsequently measure the mortgage servicing rights for consumer mortgage loans using the fair value method. Under the fair value method, the servicing rights are carried in the balance sheet at fair value and the changes in fair value are reported in earnings in the period in which the changes occur.

Fair value is based on market prices for comparable mortgage servicing contracts, when available, or alternatively, is based on a valuation model that calculates the present value of estimated future net servicing income. The valuation model incorporates assumptions that market participants would use in estimating future net servicing income, such as the cost to service, the discount rate, the custodial earnings rate, an inflation rate, ancillary income, prepayment speeds and default rates and losses. These variables change from quarter to quarter as market conditions and projected interest rates change, and may have an adverse impact on the value of the mortgage servicing right and may result in a reduction to noninterest income.

Servicing fee income is recorded for fees earned for servicing loans. The fees are based on a contractual percentage of the outstanding principal or a fixed amount per loan and are recorded as income when earned. The change in fair value of mortgage servicing rights is netted against loan servicing fee income.

Transfers of Financial Assets

Transfers of financial assets are accounted for as sales, when control over the assets has been surrendered. Control over transferred assets is deemed to be surrendered when (1) the assets have been isolated from the Company – put presumptively beyond the reach of the transferor and its creditors, even in bankruptcy or other receivership, (2) the transferee obtains the right (free of conditions that constrain it from taking advantage of that right) to pledge or exchange the transferred assets and (3) the Company does not maintain effective control over the transferred assets through an agreement to repurchase them before their maturity or the ability to unilaterally cause the holder to return specific assets.

Income Taxes

The Company accounts for income taxes in accordance with income tax accounting guidance (ASC 740, Income Taxes). The income tax accounting guidance results in two components of income tax expense: current and deferred. Current income tax expense reflects taxes to be paid or

 

F-12


IF Bancorp, Inc.

Notes to Consolidated Financial Statements

June 30, 2020 and 2019

(Table dollar amounts in thousands)

 

refunded for the current period by applying the provisions of the enacted tax law to the taxable income or excess of deductions over revenues. The Company determines deferred income taxes using the liability (or balance sheet) method. Under this method, the net deferred tax asset or liability is based on the tax effects of the differences between the book and tax bases of assets and liabilities, and enacted changes in tax rates and laws are recognized in the period in which they occur. Deferred income tax expense results from changes in deferred tax assets and liabilities between periods. Deferred tax assets are reduced by a valuation allowance if, based on the weight of evidence available, it is more likely than not that some portion or all of a deferred tax asset will not be realized.

Tax positions are recognized if it is more likely than not, based on the technical merits, that the tax position will be realized or sustained upon examination. The term more likely than not means a likelihood of more than 50 percent; the terms examined and upon examination also include resolution of the related appeals or litigation processes, if any. A tax position that meets the more-likely-than-not recognition threshold is initially and subsequently measured as the largest amount of tax benefit that has a greater than 50 percent likelihood of being realized upon settlement with a taxing authority that has full knowledge of all relevant information. The determination of whether or not a tax position has met the more-likely-than-not recognition threshold considers the facts, circumstances and information available at the reporting date and is subject to management’s judgment.

The Company recognizes interest and penalties on income taxes as a component of income tax expense.

The Company files consolidated income tax returns with its subsidiary.

Earnings Per Share

Basic earnings per share represents income available to common stockholders divided by the weighted-average number of common shares outstanding during each year. Diluted earnings per share reflects additional potential common shares that would have been outstanding if dilutive potential common shares had been issued, as well as any adjustment to income that would result from the assumed issuance. Potential common shares that may be issued by the Company relate solely to outstanding stock options and restricted stock awards and are determined using the treasury stock method.

Comprehensive Income

Comprehensive income consists of net income and other comprehensive income, net of applicable income taxes. Other comprehensive income includes unrealized appreciation on available-for-sale securities and changes in the funded status of the postretirement health benefit plan.

Stock-based Compensation Plans

At June 30, 2020 and 2019, the Company has stock-based compensation plans (stock options and restricted stock) which are described more fully in Note 16.

 

F-13


IF Bancorp, Inc.

Notes to Consolidated Financial Statements

June 30, 2020 and 2019

(Table dollar amounts in thousands)

 

COVID-19

We are subject to risks and uncertainties as a result of the COVID-19 pandemic. The extent of the impact of the COVID-19 pandemic on the Company’s business is highly uncertain and difficult to predict, as the response to the pandemic is in its early stages and information is rapidly evolving. Furthermore, capital markets and economies worldwide have also been negatively impacted by the COVID-19 pandemic.

The severity of the impact of the COVID-19 pandemic on the Company’s business will depend on a number of factors, including, but not limited to, the duration and severity of the pandemic and the extent and severity of the impact on the Company’s customers, all of which are uncertain and cannot be predicted. The Company’s future results of operations and liquidity could be adversely impacted. As of the date of issuance of these consolidated financial statements, the extent to which the COVID-19 pandemic may materially impact the Company’s financial condition, liquidity, or results of operations is uncertain.

Transfers between Fair Value Hierarchy Levels

Transfers in and out of Level 1 (quoted market prices), Level 2 (other significant observable inputs) and Level 3 (significant unobservable inputs) are recognized on the period ending date.

Reclassifications

Certain reclassifications have been made to the 2019 financial statements to conform to the 2020 financial statement presentation. These reclassifications had no effect on income.

Recent and Future Accounting Requirements

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), which amends the existing standards for lease accounting effectively bringing most leases onto the balance sheets of the related lessees by requiring them to recognize a right-of-use asset and a corresponding lease liability, while leaving lessor accounting largely unchanged with only targeted changes incorporated into the update. ASU 2016-02 became effective for the Company effective July 1, 2019. As permitted by the amendments, the Company has elected an accounting policy to not recognize lease assets and lease liabilities for leases with a term of twelve months or less. The impact does not have a material effect on the Company’s financial position or results of operations since the Company does not have a material amount of lease agreements.

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

 

F-14


IF Bancorp, Inc.

Notes to Consolidated Financial Statements

June 30, 2020 and 2019

(Table dollar amounts in thousands)

 

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 will be effective for interim and annual periods beginning after December 15, 2022. As we prepare for the adoption of ASU 2016-13, we have engaged a firm specializing in ALLL modeling and have begun transition modeling so we will be ready for the required adoption. As of June 30, 2020, model installation and testing continues and we are still evaluating the test runs for accuracy and directional consistency required to reach a reliable determination as to the final expected impact that the adoption of ASU 2016-13 will have on the consolidated financial statements.

Note 2: Securities

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

 

     Amortized
Cost
     Gross
Unrealized
Gains
     Gross
Unrealized
Losses
     Fair Value  

Available-for-sale Securities:

           

June 30, 2020:

           

U.S. Government and federal agency and Government sponsored enterprises (GSEs)

   $ 7,528      $ 708      $ —        $ 8,236  

Mortgage-backed:

           

GSE residential

     143,033        6,044        (222      148,855  

Small Business Administration

     3,578        62        —          3,640  

State and political subdivisions

     1,449        215        (1      1,663  
  

 

 

    

 

 

    

 

 

    

 

 

 
   $ 155,588      $ 7,029      $ (223    $ 162,394  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

F-15


IF Bancorp, Inc.

Notes to Consolidated Financial Statements

June 30, 2020 and 2019

(Table dollar amounts in thousands)

 

June 30, 2019:

           

U.S. Government and federal agency and Government sponsored enterprises (GSEs)

   $ 12,654      $ 296      $ —        $ 12,950  

Mortgage-backed:

           

GSE residential

     124,615        1,231        (336      125,510  

Small Business Administration

     4,911        25        (1      4,935  

State and political subdivisions S

     2,725        171        —          2,896  
  

 

 

    

 

 

    

 

 

    

 

 

 
   $ 144,905      $ 1,723      $ (337    $ 146,291  
  

 

 

    

 

 

    

 

 

    

 

 

 

With the exception of Mortgage-backed-GSE residential securities with a book value of $143,033,000 and a market value of $148,855,000 at June 30, 2020, the Company held no securities at June 30, 2020 with a book value that exceeded 10% of total equity.

All mortgage-backed securities at June 30, 2020 and 2019 were issued by government sponsored enterprises.

The amortized cost and fair value of available-for-sale securities at June 30, 2020, 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.

 

     Amortized
Cost
     Fair Value  

Within one year

   $ —        $ —    

One to five years

     6,100        6,658  

Five to ten years

     4,458        4,856  

After ten years

     1,997        2,025  
  

 

 

    

 

 

 
     12,555        13,539  

Mortgage-backed securities

     143,033        148,855  
  

 

 

    

 

 

 

Totals

   $ 155,588      $ 162,394  
  

 

 

    

 

 

 

The carrying value of securities pledged as collateral, to secure public deposits and for other purposes, was $66,186,000 at June 30, 2020 and $57,921,000 at June 30, 2019.

Gross gains of $295,000 and $96,000 and gross losses of $28,000 and $85,000 resulting from sales of available-for-sale securities were realized for 2020 and 2019, respectively. The tax provision applicable to these net realized gains amounted to approximately $76,000 and $3,000 for 2020 and 2019, 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 June 30, 2020 and 2019, was $24,574,000 and $47,146,000, respectively, which is approximately 16% and 32% of the Company’s available-for-sale investment portfolio. These declines in fair value at June 30, 2020 and 2019, resulted from changes in market interest rates and are considered temporary.

 

F-16


IF Bancorp, Inc.

Notes to Consolidated Financial Statements

June 30, 2020 and 2019

(Table dollar amounts in thousands)

 

The following table shows the Company’s gross unrealized investment losses and the fair value of the Company’s investments with unrealized losses that are not deemed to be other-than-temporarily impaired, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position at June 30, 2020 and 2019:

 

     Less Than 12 Months     12 Months or More     Total  

Description of
Securities

   Fair Value      Unrealized
Losses
    Fair Value      Unrealized
Losses
    Fair Value      Unrealized
Losses
 

June 30, 2020:

               

Mortgage-backed:

               

GSE residential

   $ 22,162      $ (116   $ 2,351      $ (106   $ 24,513      $ (222

State and political subdivisions

     61        (1     —          —         61        (1
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 

Total temporarily impaired securities

   $ 22,223      $ (117   $ 2,351      $ (106   $ 24,574      $ (223
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 

June 30, 2019:

               

Mortgage-backed:

               

GSE residential

   $ 15,167      $ (72   $ 31,049      $ (264   $ 46,216      $ (336

Small Business Administration

     930        (1     —          —         930        (1
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 

Total temporarily impaired securities

   $ 16,097      $ (73   $ 31,049      $ (264   $ 47,146      $ (337
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 

The unrealized losses on the Company’s investment in residential mortgage-backed securities and U.S. Government and federal agency and Government sponsored enterprises at June 30, 2020 and 2019, 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 be other-than-temporarily impaired at June 30, 2020 and 2019.

 

F-17


IF Bancorp, Inc.

Notes to Consolidated Financial Statements

June 30, 2020 and 2019

(Table dollar amounts in thousands)

 

Note 3: Loans and Allowance for Loan Losses

Classes of loans at June 30, include:

 

     2020      2019  

Real estate loans

     

One- to four-family, including home equity loans

   $ 128,876      $ 129,290  

Multi-family

     96,195        104,663  

Commercial

     145,113        143,367  

Home equity lines of credit

     8,551        8,938  

Construction

     22,042        16,113  

Commercial

     107,581        84,246  

Consumer

     7,529        7,136  
  

 

 

    

 

 

 
     515,887        493,753  

Less

     

Unearned fees and discounts, net

     (164      (349

Allowance for loan losses

     6,234        6,328  
  

 

 

    

 

 

 

Loans, net

   $ 509,817      $ 487,774  
  

 

 

    

 

 

 

The Company had loans held for sale included in one- to four-family real estate loans totaling $552,000 and $316,000 as of June 30, 2020 and 2019, respectively.

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 lending activity includes the origination of one- to four-family residential mortgage loans, multi-family loans, commercial real estate loans, home equity lines of credits, commercial business loans, consumer (consisting primarily of automobile loans), and construction 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 within 30 miles of a branch or loan production office. The Company also has a loan production and wealth management 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.

 

F-18


IF Bancorp, Inc.

Notes to Consolidated Financial Statements

June 30, 2020 and 2019

(Table dollar amounts in thousands)

 

Management reviews and approves the Company’s lending policies and procedures on a routine basis. Management routinely (at least quarterly) reviews our allowance for loan 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 loan officers generally have authority to approve one- to four-family residential mortgage loans up to $100,000, other secured loans up to $50,000, and unsecured loans up to $10,000. Managing Officers (those with designated loan approval authority), generally have authority to approve one- to four-family residential mortgage loans up to $375,000, other secured loans up to $375,000, and unsecured loans up to $100,000. In addition, any two individual officers may combine their loan authority limits to approve a loan. Our Loan Committee may approve one- to four-family residential mortgage loans, commercial real estate loans, multi-family real estate loans and land loans up to $2,000,000 and unsecured loans up to $500,000. All loans above these limits must be approved by the Operating Committee, consisting of the Chairman, and 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.

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 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, Audit Committee and the Board of Directors.

 

F-19


IF Bancorp, Inc.

Notes to Consolidated Financial Statements

June 30, 2020 and 2019

(Table dollar amounts in thousands)

 

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 credits, 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. In recent years there has been an increased demand for long-term fixed-rate loans, as market rates have dropped and remained near historic lows. As a result, 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 borrower.

The Company offers USDA Rural Development loans which are originated and sold servicing released. The Company also offers 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.

As 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 and credit history of the borrower.

Commercial Real Estate and Multi-Family Real Estate Loans

Commercial real estate mortgage loans are primarily secured by office buildings, owner-occupied businesses, strip mall centers, churches, 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.

 

F-20


IF Bancorp, Inc.

Notes to Consolidated Financial Statements

June 30, 2020 and 2019

(Table dollar amounts in thousands)

 

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 are 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 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 the collateral, if any. The cash flows of the underlying borrower, however, may not perform consistent 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.

Commercial business loans also include Small Business Administration (SBA) Paycheck Protection Program (PPP) loans which are covered by a 100% government guaranty. As of June 30, 2020, the Company had 295 loans totaling $26.2 million.

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 more risky 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.

 

F-21


IF Bancorp, Inc.

Notes to Consolidated Financial Statements

June 30, 2020 and 2019

(Table dollar amounts in thousands)

 

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 commercial real estate construction loans, amounting to $256,015,000 and $260,888,000 as of June 30, 2020 and 2019, 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 $4,181,000 and $4,844,000 at June 30, 2020 and 2019, respectively. All of 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 include commercial loan participations of $23,950,000 and $29,524,000 at June 30, 2020 and 2019, respectively, of which $8,126,000 and $12,025,000, at June 30, 2020 and 2019 were outside of our primary market area. These participation loans are secured by real estate and other business assets.

 

F-22


IF Bancorp, Inc.

Notes to Consolidated Financial Statements

June 30, 2020 and 2019

(Table dollar amounts in thousands)

 

The following tables present the balance in the allowance for loan losses and the recorded investment in loans based on portfolio segment and impairment method as of June 30, 2020 and 2019:

 

     2020  
     Real Estate Loans  
     One- to four-
family
    Multi-family     Commercial     Home Equity
Lines of Credit
 

Allowance for loan losses:

        

Balance, beginning of year

   $ 1,031     $ 1,642     $ 1,623     $ 89  

Provision charged to expense

     50       (128     83       (2

Losses charged off

     (40     —         —         —    

Recoveries

     3       —         —         —    
  

 

 

   

 

 

   

 

 

   

 

 

 

Balance, end of period

   $ 1,044     $ 1,514     $ 1,706     $ 87  
  

 

 

   

 

 

   

 

 

   

 

 

 

Ending balance: individually evaluated for impairment

   $ —       $ —       $ —       $ —    
  

 

 

   

 

 

   

 

 

   

 

 

 

Ending balance: collectively evaluated for impairment

   $ 1,044     $ 1,514     $ 1,706     $ 87  
  

 

 

   

 

 

   

 

 

   

 

 

 

Loans:

        

Ending balance

   $ 128,876     $ 96,195     $ 145,113     $ 8,551  
  

 

 

   

 

 

   

 

 

   

 

 

 

Ending balance: individually evaluated for impairment

   $ 1,336     $ —       $ —       $ 15  
  

 

 

   

 

 

   

 

 

   

 

 

 

Ending balance: collectively evaluated for impairment

   $ 127,540     $ 96,195     $ 145,113     $ 8,536  
  

 

 

   

 

 

   

 

 

   

 

 

 
     2020 (Continued)  
     Construction     Commercial     Consumer     Total  

Allowance for loan losses:

        

Balance, beginning of year

   $ 213     $ 1,659     $ 71     $ 6,328  

Provision charged to expense

     27       84       14       128  

Losses charged off

     —         (191     (37     (268

Recoveries

     —         31       12       46  
  

 

 

   

 

 

   

 

 

   

 

 

 

Balance, end of year

   $ 240     $ 1,583     $ 60     $ 6,234  
  

 

 

   

 

 

   

 

 

   

 

 

 

Ending balance: individually evaluated for impairment

   $ —       $ —       $ —       $ —    
  

 

 

   

 

 

   

 

 

   

 

 

 

Ending balance: collectively evaluated for impairment

   $ 240     $ 1,583     $ 60     $ 6,234  
  

 

 

   

 

 

   

 

 

   

 

 

 

Loans:

        

Ending balance

   $ 22,042     $ 107,581     $ 7,529     $ 515,887  
  

 

 

   

 

 

   

 

 

   

 

 

 

Ending balance: individually evaluated for impairment

   $ —       $ 304     $ 5     $ 1,660  
  

 

 

   

 

 

   

 

 

   

 

 

 

Ending balance: collectively evaluated for impairment

   $ 22,042     $ 107,277     $ 7,524     $ 514,227  
  

 

 

   

 

 

   

 

 

   

 

 

 

 

F-23


IF Bancorp, Inc.

Notes to Consolidated Financial Statements

June 30, 2020 and 2019

(Table dollar amounts in thousands)

 

     2019  
     Real Estate Loans  
     One- to four-
family
    Multi-family     Commercial     Home Equity
Lines of Credit
 

Allowance for loan losses:

        

Balance, beginning of year

   $ 997     $ 1,650     $ 1,604     $ 91  

Provision charged to expense

     29       (8     19       13  

Losses charged off

     (17     —         —         (15

Recoveries

     22       —         —         —    
  

 

 

   

 

 

   

 

 

   

 

 

 

Balance, end of period

   $ 1,031     $ 1,642     $ 1,623     $ 89  
  

 

 

   

 

 

   

 

 

   

 

 

 

Ending balance: individually evaluated for impairment

   $ 13     $ —       $ —       $ —    
  

 

 

   

 

 

   

 

 

   

 

 

 

Ending balance: collectively evaluated for impairment

   $ 1,018     $ 1,642     $ 1,623     $ 89  
  

 

 

   

 

 

   

 

 

   

 

 

 

Loans:

        

Ending balance

   $ 129,290     $ 104,663     $ 143,367     $ 8,938  
  

 

 

   

 

 

   

 

 

   

 

 

 

Ending balance: individually evaluated for impairment

   $ 1,722     $ —       $ 18     $ 22  
  

 

 

   

 

 

   

 

 

   

 

 

 

Ending balance: collectively evaluated for impairment

   $ 127,568     $ 104,663     $ 143,349     $ 8,916  
  

 

 

   

 

 

   

 

 

   

 

 

 
     2019 (Continued)  
     Construction     Commercial     Consumer     Total  

Allowance for loan losses:

        

Balance, beginning of year

   $ 168     $ 1,373     $ 62     $ 5,945  

Provision charged to expense

     45       286       23       407  

Losses charged off

     —         —         (18     (50

Recoveries

     —         —         4       26  
  

 

 

   

 

 

   

 

 

   

 

 

 

Balance, end of year

   $ 213     $ 1,659     $ 71     $ 6,328  
  

 

 

   

 

 

   

 

 

   

 

 

 

Ending balance: individually evaluated for impairment

   $ —       $ —       $ 10     $ 23  
  

 

 

   

 

 

   

 

 

   

 

 

 

Ending balance: collectively evaluated for impairment

   $ 213     $ 1,659     $ 61     $ 6,305  
  

 

 

   

 

 

   

 

 

   

 

 

 

Loans:

        

Ending balance

   $ 16,113     $ 84,246     $ 7,136     $ 493,753  
  

 

 

   

 

 

   

 

 

   

 

 

 

Ending balance: individually evaluated for impairment

   $ —       $ 60     $ 29     $ 1,851  
  

 

 

   

 

 

   

 

 

   

 

 

 

Ending balance: collectively evaluated for impairment

   $ 16,113     $ 84,186     $ 7,107     $ 491,902  
  

 

 

   

 

 

   

 

 

   

 

 

 

 

F-24


IF Bancorp, Inc.

Notes to Consolidated Financial Statements

June 30, 2020 and 2019

(Table dollar amounts in thousands)

 

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.

Allowance for Loan Losses

The allowance for loan losses represents an estimate of the amount of losses believed inherent in our loan portfolio at the balance sheet date. The allowance calculation involves a high degree of estimation that management attempts to mitigate through the use of objective historical data where available. Loan losses are charged against the allowance for loan losses when management believes that the loan balance is confirmed as uncollectible. Subsequent recoveries, if any, are credited to the allowance. Overall, we believe the reserve to be consistent with prior periods and adequate to cover the estimated losses in our loan portfolio.

The Company’s methodology for assessing the appropriateness of the allowance for loan losses consists of two key elements: (1) specific allowances for estimated credit losses on individual loans that are determined to be impaired through the Company’s review for identified problem loans; and (2) a general allowance based on estimated credit losses inherent in the remainder of the loan portfolio.

The specific allowance is measured by determining the present value of expected cash flows, the loan’s observable market value, or for collateral-dependent loans, 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 deemed impaired 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 segregating the loans by loan category and assigning allowance percentages based on the Company’s historical loss experience, delinquency trends, and management’s evaluation of the collectability of the loan portfolio. In certain instances, the historical loss experience could be adjusted if similar risks are not inherent in the remaining portfolio. The allowance is then adjusted for qualitative factors that, in management’s judgment, affect the collectability of the portfolio as of the evaluation date. These qualitative factors may include: (1) Management’s assumptions regarding the minimal level of risk for a given loan category; (2) changes in lending policies and procedures, including changes in underwriting standards, and charge-off and recovery practices not considered elsewhere in estimating credit losses; (3) changes in international, national, regional and local economics and business conditions and developments that affect the collectability of the portfolio, including the conditions of various market segments; (4) changes in the nature and

 

F-25


IF Bancorp, Inc.

Notes to Consolidated Financial Statements

June 30, 2020 and 2019

(Table dollar amounts in thousands)

 

volume of the portfolio and in the terms of loans; (5) changes in the experience, ability, and depth of the lending officers and other relevant staff; (6) changes in the volume and severity of past due loans, the volume of non-accrual loans, the volume of troubled debt restructured and other loan modifications, and the volume and severity of adversely classified loans; (7) changes in the quality of the loan review system; (8) changes in the value of the underlying collateral for collateral-dependent loans; (9) the existence and effect of any concentrations of credit, and changes in the level of such concentrations; and (10) the effect of other external factors such as competition and legal and regulatory requirements on the level of estimated credit losses in the existing portfolio. The applied loss factors are re-evaluated quarterly to ensure their relevance in the current environment.

Although the Company’s policy allows for a general valuation allowance on certain smaller-balance, homogenous pools of loans classified as substandard, the Company has historically evaluated every loan classified as substandard, regardless of size, for impairment as part of the review for establishing specific allowances. The Company’s policy also allows for general valuation allowance on certain smaller-balance, homogenous pools of loans which are loans criticized as special mention or watch. A separate general allowance calculation is made on these loans based on historical measured weakness, and which is no less than twice the amount of the general allowance calculated on the non-classified loans.

There have been no changes to the Company’s accounting policies or methodology from the prior periods.

Credit Quality Indicators

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 circumstances of the borrower warrant a more timely 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.

 

F-26


IF Bancorp, Inc.

Notes to Consolidated Financial Statements

June 30, 2020 and 2019

(Table dollar amounts in thousands)

 

Substandard – Loans classified as substandard are inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. 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.

 

F-27


IF Bancorp, Inc.

Notes to Consolidated Financial Statements

June 30, 2020 and 2019

(Table dollar amounts in thousands)

 

Commercial: 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, as of June 30, 2020 and 2019, based on rating category and payment activity:

 

     Real Estate Loans         

June 30, 2020

   One- to
four-family
     Multi-
family
     Commercial      Home Equity
Lines of Credit
     Construction  

Pass

   $ 127,279      $ 95,925      $ 143,727      $ 8,402      $ 22,042  

Watch

     775        —          1,073        134        —    

Substandard

     822        270        313        15        —    

Doubtful

     —          —          —          —          —    

Loss

     —          —          —          —          —    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 128,876      $ 96,195      $ 145,113      $ 8,551      $ 22,042  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

June 30, 2020, (Continued)

   Commercial      Consumer      Total  

Pass

   $ 105,605      $ 7,524      $ 510,504  

Watch

     1,651        —          3,633  

Substandard

     81        5        1,506  

Doubtful

     244        —          244  

Loss

     —          —          —    
  

 

 

    

 

 

    

 

 

 

Total

   $ 107,581      $ 7,529      $ 515,887  
  

 

 

    

 

 

    

 

 

 

 

F-28


IF Bancorp, Inc.

Notes to Consolidated Financial Statements

June 30, 2020 and 2019

(Table dollar amounts in thousands)

 

     Real Estate Loans         

June 30, 2019

   One- to
four-family
     Multi-
family
     Commercial      Home Equity
Lines of Credit
     Construction  

Pass

   $ 127,386      $ 104,504      $ 142,076      $ 8,918      $ 16,113  

Watch

     —          —          1,040        —          —    

Substandard

     1,904        159        251        20        —    

Doubtful

     —          —          —          —          —    

Loss

     —          —          —          —          —    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 129,290      $ 104,663      $ 143,367      $ 8,938      $ 16,113  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

June 30, 2019, (Continued)

   Commercial      Consumer      Total  

Pass

   $ 81,906      $ 7,107      $ 488,010  

Watch

     1,375        —          2,415  

Substandard

     965        19        3,318  

Doubtful

     —          10        10  

Loss

     —          —          —    
  

 

 

    

 

 

    

 

 

 

Total

   $ 84,246      $ 7,136      $ 493,753  
  

 

 

    

 

 

    

 

 

 

The following tables present the Company’s loan portfolio aging analysis as of June 30, 2020 and 2019:

 

     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, 2020

                    

Real estate loans:

                    

One- to four-family

   $ 1,034      $ 225      $ 385      $ 1,644      $ 127,232      $ 128,876      $ 304  

Multi-family

     —          —          —          —          96,195        96,195        —    

Commercial

     172        95        —          267        144,846        145,113        —    

Home equity lines of credit

     —          —          —          —          8,551        8,551        —    

Construction

     —          —          —          —          22,042        22,042        —    

Commercial

     —          4        244        248        107,333        107,581        —    

Consumer

     24        43        —          67        7,462        7,529        —    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 1,230      $ 367      $ 629      $ 2,226      $ 513,661      $ 515,887      $ 304  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

June 30, 2019

                    

Real estate loans:

                    

One- to four-family

   $ 1,515      $ 255      $ 481      $ 2,251      $ 127,039      $ 129,290      $ 226  

Multi-family

     422        —          —          422        104,241        104,663        —    

Commercial

     74        6        12        92        143,275        143,367        —    

Home equity lines of credit

     —          26        20        46        8,892        8,938        —    

Construction

     —          —          —          —          16,113        16,113        —    

Commercial

     291        —          60        351        83,895        84,246        —    

Consumer

     99        —          29        128        7,008        7,136        —    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 2,401      $ 287      $ 602      $ 3,290      $ 490,463      $ 493,753      $ 226  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

F-29


IF Bancorp, Inc.

Notes to Consolidated Financial Statements

June 30, 2020 and 2019

(Table dollar amounts in thousands)

 

A loan is considered impaired, in accordance with the impairment accounting guidance (ASC 310-10-35-16), when based on current information and events, it is probable the Company will be unable to collect all amounts due from the borrower in accordance with the contractual terms of the loan. Factors considered by management in determining impairment include payment status, collateral value, and the probability of collecting scheduled principal and interest payments when due. Loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired. Management determines the significance of payment delays and payment shortfalls on a case-by-case basis, taking into consideration all of the circumstances surrounding the loans and the borrower, including the length of the delay, the reasons for the delay, the borrower’s prior payment record, and the amount of the shortfall in relation to the principal and interest owed.

Impairment is measured on a loan-by-loan basis by either the present value of the expected future cash flows, the loan’s observable market value, or, for collateral-dependent loans, the fair value of the collateral adjusted for market conditions and selling expenses. Significant restructured loans are considered impaired in determining the adequacy of the allowance for loan losses.

The Company actively seeks to reduce its investment in impaired loans. The primary tools to work through impaired loans are settlement with the borrowers or guarantors, foreclosure of the underlying collateral, or restructuring. Included in certain loan categories in the impaired loans are $1.3 million in troubled debt restructurings that were classified as impaired.

 

F-30


IF Bancorp, Inc.

Notes to Consolidated Financial Statements

June 30, 2020 and 2019

(Table dollar amounts in thousands)

 

The following tables present impaired loans for year ended June 30, 2020 and 2019:

 

     June 30, 2020  
     Recorded
Balance
     Unpaid
Principal
Balance
     Specific
Allowance
     Average
Investment in
Impaired
Loans
     Interest
Income
Recognized
     Interest on
Cash Basis
 

Loans without a specific allowance:

                 

Real estate loans:

                 

One- to four-family

   $ 1,336      $ 1,336      $ —        $ 1,388      $ 61      $ 62  

Multi-family

     —          —          —          —          —          —    

Commercial

     —          —          —          3        —          —    

Home equity lines of credit

     15        15        —          18        —          —    

Construction

     —          —          —          —          —          —    

Commercial

     304        304        —          382        23        25  

Consumer

     5        5        —          9        —          —    

Loans with a specific allowance:

                 

Real estate loans:

                 

One- to four-family

   $ —        $ —        $ —        $ —        $ —        $ —    

Multi-family

     —          —          —          —          —          —    

Commercial

     —          —          —          —          —          —    

Home equity lines of credit

     —          —          —          —          —          —    

Construction

     —          —          —          —          —          —    

Commercial

     —          —          —          —          —          —    

Consumer

     —          —          —          —          —          —    

Total:

                 

Real estate loans:

                 

One- to four-family

   $ 1,336      $ 1,336      $ —        $ 1,388      $ 61      $ 62  

Multi-family

     —          —          —          —          —          —    

Commercial

     —          —          —          3        —          —    

Home equity lines of credit

     15        15        —          18        —          —    

Construction

     —          —          —          —          —          —    

Commercial

     304        304        —          382        23        25  

Consumer

     5        5        —          9        —          —    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 1,660      $ 1,660      $ —        $ 1,800      $ 84      $ 87  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

F-31


IF Bancorp, Inc.

Notes to Consolidated Financial Statements

June 30, 2020 and 2019

(Table dollar amounts in thousands)

 

     June 30, 2019  
     Recorded
Balance
     Unpaid
Principal
Balance
     Specific
Allowance
     Average
Investment in
Impaired
Loans
     Interest
Income
Recognized
     Interest on
Cash Basis
 

Loans without a specific allowance:

                 

Real estate loans:

                 

One- to four-family

   $ 1,676      $ 1,676      $ —        $ 1,718      $ 63      $ 71  

Multi-family

     —          —          —          1        —          —    

Commercial

     18        18        —          34        —          —    

Home equity lines of credit

     22        22        —          24        1        2  

Construction

     —          —          —          —          —          —    

Commercial

     60        60        —          63        6        6  

Consumer

     19        19        —          24        2        2  

Loans with a specific allowance:

                 

Real estate loans:

                 

One- to four-family

   $ 46      $ 46      $ 13      $ 47      $ 1      $ 1  

Multi-family

     —          —          —          —          —          —    

Commercial

     —          —          —          —          —          —    

Home equity lines of credit

     —          —          —          —          —          —    

Construction

     —          —          —          —          —          —    

Commercial

     —          —          —          —          —          —    

Consumer

     10        10        10        11        1        1  

Total:

                 

Real estate loans:

                 

One- to four-family

   $ 1,722      $ 1,722      $ 13      $ 1,765      $ 64      $ 72  

Multi-family

     —          —          —          1        —          —    

Commercial

     18        18        —          34        —          —    

Home equity lines of credit

     22        22        —          24        1        2  

Construction

     —          —          —          —          —          —    

Commercial

     60        60        —          63        6        6  

Consumer

     29        29        10        35        3        3  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 1,851      $ 1,851      $ 23      $ 1,922      $ 74      $ 83  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Interest income recognized on impaired loans includes interest accrued and collected on the outstanding balances of accruing impaired loans as well as interest cash collections on non-accruing impaired loans for which the ultimate collectability of principal is not uncertain.

 

F-32


IF Bancorp, Inc.

Notes to Consolidated Financial Statements

June 30, 2020 and 2019

(Table dollar amounts in thousands)

 

The following table presents the Company’s nonaccrual loans at June 30, 2020 and 2019:

 

     2020      2019  

Real estate loans

     

One- to four-family, including home equity loans

   $ 81      $ 414  

Multi-family

     —          —    

Commercial

     —          18  

Home equity lines of credit

     15        20  

Construction

     —          —    

Commercial

     304        60  

Consumer

     5        29  
  

 

 

    

 

 

 

Total

   $     405      $     541  
  

 

 

    

 

 

 

At June 30, 2020 and 2019, the Company had a number of loans that were modified in troubled debt restructurings (TDR’s) and impaired. The modification of terms of such loans included one or a combination of the following: an extension of maturity, a reduction of the stated interest rate or a permanent reduction of the recorded investment in the loan.

The following table presents the recorded balance, at original cost, of troubled debt restructurings, as of June 30, 2020 and 2019. With the exception of a single one- to four-family loan for $127,000, all were performing according to the terms of the restructuring as of June 30, 2020, and with the exception of three one- to four-family loans totaling $8,000, one home equity line of credit for $20,000, and one consumer loan for $2,000, all loans were performing according to the terms of restructuring as of June 30, 2019. As of June 30, 2020 all loans listed were on nonaccrual except for nine one- to four-family residential loans totaling $1.3 million. As of June 30, 2019 all loans listed were on nonaccrual except for ten one- to four-family residential loans totaling $1.3 million, one home equity line of credit for $1,000.    

 

     June 30,
2020
     June 30,
2019
 

Real estate loans

     

One- to four-family

   $ 1,256      $ 1,475  

Multi-family

     —          —    

Commercial

     —          6  

Home equity lines of credit

     15        22  
  

 

 

    

 

 

 

Total real estate loans

     1,271        1,503  
  

 

 

    

 

 

 

Construction

     —          —    

Commercial

     59        —    

Consumer

     —          2  
  

 

 

    

 

 

 

Total

   $ 1,330      $ 1,505  
  

 

 

    

 

 

 

 

F-33


IF Bancorp, Inc.

Notes to Consolidated Financial Statements

June 30, 2020 and 2019

(Table dollar amounts in thousands)

 

The following table represents loans modified as troubled debt restructurings during the years ending June 30, 2020 and 2019:

 

     Year Ended June 30, 2020      Year Ended June 30, 2019  
     Number of
Modifications
     Recorded
Investment
     Number of
Modifications
     Recorded
Investment
 

Real estate loans:

           

One- to four-family

     —        $ —          1      $ 159  

Home equity lines of credit

     —          —          —          —    

Multi-family

     —          —          —          —    

Commercial

     —          —          —          —    
  

 

 

    

 

 

    

 

 

    

 

 

 

Total real estate loans

     —          —          1        159  
  

 

 

    

 

 

    

 

 

    

 

 

 

Construction

     —          —          —          —    

Commercial

     1        61        —          —    

Consumer loans

     —          —          —          —    
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

     1      $ 61        1      $ 159  
  

 

 

    

 

 

    

 

 

    

 

 

 

2020 Modifications

During the year ended June 30, 2020, the Company modified one commercial business loan in the amount of $61,000. This modification included a decrease in interest rate and a maturity concession.

2019 Modifications

During the year ended June 30, 2019, the Company modified a single one- to four-family loan in the amount of $166,000. This modification did not include any concessions, but was considered a TDR since the customer was in bankruptcy.

COVID-19 Modifications

Under the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) that was signed into law on March 27, 2020, certain COVID-19 loan modifications are not designated as TDRs. The CARES Act allows the Company to presume a loan modification is not a TDR if it is (1) related to COVID-19; (2) executed on a loan that was not more than 30 days past due as of December 31, 2019; and (3) executed between March 1, 2020, and the earlier of (a) 60 days after the date of termination of the National Emergency or (b) December 31, 2020. During the year ended June 30, 2020, the Company had 176 COVID-19 loan modifications for a total of $85.6 million. These modifications allowed borrowers to pay interest only for up to six months.

 

F-34


IF Bancorp, Inc.

Notes to Consolidated Financial Statements

June 30, 2020 and 2019

(Table dollar amounts in thousands)

 

TDRs with Defaults

The Company had one TDR, a one- to four-family residential loans for $127,000 that was in default as of June 30, 2020, and was restructured in prior years. No restructured loans were in foreclosure at June 30, 2020. The Company had six TDRs, four one- to four-family residential loans for $144,000, one home equity line of credit for $20,000, and one consumer loan for $2,000 that were in default as of June 30, 2019, and was restructured in prior years. No restructured loans were in foreclosure at June 30, 2019. The Company defines a default as any loan that becomes 90 days or more past due.

Specific loss allowances are included in the calculation of estimated future loss ratios, which are applied to the various loan portfolios for purposes of estimating future losses.

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 loan losses. We believe the qualitative adjustments more accurately reflect collateral values in light of the sales and economic conditions that we have recently observed.

We may obtain physical possession of real estate collateralizing a residential mortgage loan or home equity loan via foreclosure or in-substance repossession. As of June 30, 2020 and 2019, the carrying value of foreclosed residential real estate properties as a result of obtaining physical possession was $186,000 and $539,000, respectively. In addition, as of June 30, 2020 and 2019, we had residential mortgage loans and home equity loans with a carrying value of $41,000 and $200,000, respectively, collateralized by residential real estate property for which formal foreclosure proceedings were in process.

Note 4: Premises and Equipment

Major classifications of premises and equipment, stated at cost, are as follows:

 

     2020      2019  

Land

   $ 1,976      $ 1,976  

Buildings and improvements

     11,338        11,319  

Furniture and equipment

     4,895        4,756  
  

 

 

    

 

 

 
     18,209        18,051  

Less accumulated depreciation

     8,016        7,345  
  

 

 

    

 

 

 

Net premises and equipment

   $ 10,193      $ 10,706  
  

 

 

    

 

 

 

 

F-35


IF Bancorp, Inc.

Notes to Consolidated Financial Statements

June 30, 2020 and 2019

(Table dollar amounts in thousands)

 

Note 5: Loan Servicing

Mortgage loans serviced for others are not included in the accompanying consolidated balance sheets. The unpaid principal balance of mortgage loans serviced for others was $116,696,000 and $99,021,000 at June 30, 2020 and 2019, respectively.

Custodial escrow balances in connection with the foregoing loan servicing were $672,000 and $652,000 at June 30, 2020 and 2019, respectively.

The aggregate fair value of capitalized mortgage servicing rights at June 30, 2020 and 2019 was $715,000 and $853,000, respectively. Comparable market values and a valuation model that calculates the present value of future cash flows were used to estimate fair value. The valuation model incorporates assumptions that market participants would use in estimating future net servicing income, such as costs to service, a discount rate, custodial earnings rate, default rates and losses and prepayment speeds.

The following summarizes the activity in mortgage servicing rights measured using the fair value method:

 

     2020      2019  

Fair value, beginning of period

   $ 853      $ 866  

Additions:

     

Servicing assets resulting from asset transfers

     255        144  

Subtractions:

     

Payments received and loans refinanced

     (99      (112

Changes in fair value, due to changes in valuation inputs or assumptions

     (294      (45
  

 

 

    

 

 

 

Fair value, end of period

   $ 715      $ 853  
  

 

 

    

 

 

 

For purposes of measuring impairment, risk characteristics including product type, investor type, and interest rates, were used to stratify the originated mortgage servicing rights.

Note 6: Interest-bearing Deposits

Interest-bearing deposits in denominations of $100,000 or more were $276,821,000 at June 30, 2020 and $260,311,000 at June 30, 2019.

 

F-36


IF Bancorp, Inc.

Notes to Consolidated Financial Statements

June 30, 2020 and 2019

(Table dollar amounts in thousands)

 

The following table represents interest expense by deposit type:

 

     2020      2019  

Savings, NOW, and Money Market

   $ 1,405      $ 1,574  

Certificates of deposit

     5,962        4,954  

Brokered certificates of deposit

     543        789  
  

 

 

    

 

 

 

Total deposit interest expense

   $ 7,910      $ 7,317  
  

 

 

    

 

 

 

At June 30, 2020, the scheduled maturities of time deposits; including brokered time deposits, are as follows:

 

2021

   $ 248,359  

2022

     23,848  

2023

     6,928  

2024

     1,490  

2025 and thereafter

     866  
  

 

 

 
   $ 281,491  
  

 

 

 

Note 7: Federal Home Loan Bank Advances

The Federal Home Loan Bank advances totaled $34,500,000 and $24,000,000 as of June 30, 2020 and 2019, respectively. The Federal Home Loan Bank advances are secured by mortgage, multi-family, commercial real estate, and HELOC loans totaling $315,819,000 at June 30, 2020. Advances at June 30, 2020, at interest rates from 0.00 to 2.89 percent are subject to restrictions or penalties in the event of prepayment.

Aggregate annual maturities of Federal Home Loan Bank advances at June 30, 2020, are:

 

2021

   $ 19,500  

2022

     —    

2023

     5,000  

2024

     10,000  

2025

     —    

Thereafter

     —    
  

 

 

 
   $ 34,500  
  

 

 

 

Note 8: Lines of Credit

In September of 2019, the Company secured a revolving line of credit up to $7.5 million from CIBC BANK USA for general corporate purposes. The Company has a current balance of $3.0 million at an interest rate of 2.50%. The current note matures in September, 2020.

 

F-37


IF Bancorp, Inc.

Notes to Consolidated Financial Statements

June 30, 2020 and 2019

(Table dollar amounts in thousands)

 

Note 9: Repurchase Agreements

Securities sold under agreements to repurchase consist of obligations of the Company to other parties. The carrying value of securities sold under agreement to repurchase amounted to $3.7 million at June 30, 2020 and $2.0 million at June 30, 2019. At June 30, 2020, approximately $2.0 million of our repurchase agreements had an overnight maturity, while the remaining $1.7 million in repurchase agreements had a term of 30 to 90 days. The maximum amount of outstanding agreements at any month-end during 2020 and 2019 totaled $3,939,000 and $2,840,000, respectively, and the monthly average of such agreements totaled $3,398,000 and $2,400,000 for 2020 and 2019, respectively. 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.

Note 10: Income Taxes

The Company and its subsidiary file income tax returns in the U.S. federal jurisdiction and the States of Illinois and Missouri. During the years ended June 30, 2020 and 2019, the Company did not recognize expense for interest or penalties.

The provision for income taxes includes these components:

 

     2020      2019  

Taxes currently payable

   $ 1,654      $ 1,217  

Deferred income taxes

     (15      76  
  

 

 

    

 

 

 

Income tax expense

   $ 1,639      $ 1,293  
  

 

 

    

 

 

 

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

 

     2020     2019  

Computed at the statutory rate of 21.0%

   $ 1,236     $ 1,019  

Increase (decrease) resulting from

    

Tax exempt interest

     (16     (26

Cash surrender value of life insurance

     (57     (56

State income taxes

     441       329  

Other

     35       27  
  

 

 

   

 

 

 

Actual tax expense

   $ 1,639     $ 1,293  
  

 

 

   

 

 

 

Tax rate as a percentage of pre-tax income

     27.9     26.7

 

F-38


IF Bancorp, Inc.

Notes to Consolidated Financial Statements

June 30, 2020 and 2019

(Table dollar amounts in thousands)

 

The tax effects of temporary differences related to deferred taxes shown on the consolidated balance sheets were:

 

     2020      2019  

Deferred tax assets

     

Allowance for loan losses

   $ 1,776      $ 1,802  

Accrued retirement liability

     677        651  

Deferred compensation

     468        422  

Deferred loan fees

     291        83  

Postretirement health plan

     264        170  

Accrued vacation

     66        46  

MPF recourse liability

     97        66  

Deferred revenue Mastercard

     23        27  

Stock options – Directors

     50        42  

Restricted stock

     11        (9

Accrued professional services

     18        —    

Other

     7        12  
  

 

 

    

 

 

 
     3,748        3,312  
  

 

 

    

 

 

 

Deferred tax liabilities

     

Depreciation

     (731      (426

Mortgage servicing rights

     (204      (243

Deferred loan expense

     (181      (182

Unrealized gains on available-for-sale securities

     (1,940      (395

Prepaid expenses

     (62      —    
  

 

 

    

 

 

 
     (3,118      (1,246
  

 

 

    

 

 

 

Net deferred tax asset

   $ 630      $ 2,066  
  

 

 

    

 

 

 

Retained earnings at both June 30, 2020 and 2019, include approximately $2,217,000, for which no deferred federal income tax liability has been recognized. These amounts represent an allocation of income to bad debt deductions for tax purposes only. Reduction of amounts so allocated for purposes other than tax bad debt losses or adjustments arising from carryback of net operating losses would create income for tax purposes only, which would be subject to the then-current corporate income tax rate. The deferred income tax liabilities on the preceding amounts that would have been recorded if they were expected to reverse into taxable income in the foreseeable future were approximately $466,000 at both June 30, 2020 and 2019.

 

F-39


IF Bancorp, Inc.

Notes to Consolidated Financial Statements

June 30, 2020 and 2019

(Table dollar amounts in thousands)

 

Note 11: Accumulated Other Comprehensive Income

The components of accumulated other comprehensive income, included in stockholders’ equity, are as follows:

 

     2020      2019  

Net unrealized gains on securities available for sale

   $ 6,805      $ 1,386  

Net unrealized postretirement health benefit plan obligations

     (926      (596
  

 

 

    

 

 

 
     5,879        790  

Tax effect

     (1,676      (225
  

 

 

    

 

 

 

Net-of-tax amount

   $ 4,203      $ 565  
  

 

 

    

 

 

 

 

F-40


IF Bancorp, Inc.

Notes to Consolidated Financial Statements

June 30, 2020 and 2019

(Table dollar amounts in thousands)

 

Note 12: Changes in Accumulated Other Comprehensive Income (AOCI) by Component

Amounts reclassified from AOCI and the affected line items in the statements of income during the years ended June 30, 2020 and 2019, were as follows:

 

     Amounts Reclassified       
     From AOCI       
            Affected Line Item in the
            Condensed Consolidated
     2020      2019     

Statements of Income

Realized gains on available-for-sale securities

   $ 267      $ 11      Net realized gains on sale of available-for-sale securities

Amortization of defined benefit pension items:

        

Actuarial losses

     359        104      Components are included in computation of net periodic pension cost
  

 

 

    

 

 

    

Total reclassified amount before tax

     626        115     

Tax expense

     199        11      Provision for Income Tax
  

 

 

    

 

 

    

Total reclassification out of AOCI

   $ 427      $ 104      Net Income
  

 

 

    

 

 

    

 

F-41


IF Bancorp, Inc.

Notes to Consolidated Financial Statements

June 30, 2020 and 2019

(Table dollar amounts in thousands)

 

Note 13: Regulatory Matters

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

The Basel III regulatory capital framework (the “Basel III Capital Rules”) adopted by U.S. federal regulatory authorities, among other things, (i) establish the capital measure called “Common Equity Tier 1” (“CET1”), (ii) specify that Tier 1 capital consist of CET1 and “Additional Tier 1 Capital” instruments meeting stated requirements, (iii) define CET1 narrowly by requiring that most deductions/adjustments to regulatory capital measures be made to CET1 and not to the other components of capital and (iv) set forth the acceptable scope of deductions/adjustments to the specified capital measures. The Basel III Capital Rules became effective for us on January 1, 2015 with certain transition provisions fully phased in on January 1, 2019.

Additionally, the Basel III Capital Rules require that we maintain a capital conservation buffer with respect to each of the CET1, Tier 1 and total capital to risk-weighted assets, which provides for capital levels that exceed the minimum risk-based capital adequacy requirements. The capital conservation buffer was phased in and became fully phased in on January 1, 2019 at 2.5%. A financial institution with a conservation buffer of less than the required amount is subject to limitations on capital distributions, including dividend payments and stock repurchases, and certain discretionary bonus payments to executive officers.

As a result of the recently enacted 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 federal banking agencies have issued a final rule setting the Community Bank Leverage Ratio at 9%, effective with the quarter ended March 31, 2020. On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) was enacted, which temporarily reduced the required Community Bank Leverage Ratio to 8% through the end of 2020, and to 8.5% throughout 2021, before returning to 9% in 2022. The Association “opted in” to elect the Community Bank Leverage Ratio, effective with the quarter ended March 31, 2020.

As of June 30, 2020 and 2019, the Association was categorized as well capitalized under the regulatory framework for prompt corrective action. To be categorized as well capitalized at June 30, 2020, the Association has to maintain a minimum Community Bank Leverage Ratio as disclosed in the table below. To be categorized as well capitalized at June 30, 2019, the

 

F-42


IF Bancorp, Inc.

Notes to Consolidated Financial Statements

June 30, 2020 and 2019

(Table dollar amounts in thousands)

 

Association had to maintain minimum total risk-based, Tier 1 risk-based, and Tier 1 leverage ratios as disclosed in the table below. There are no conditions or events that management believes have changed the Association’s prompt corrective action category. The Association’s actual capital amounts (in thousands) and ratios are also presented in the table.

 

     Actual     Minimum Capital
Requirement
    Minimum to Be
Well Capitalized
Under Prompt
Corrective Action
Provisions
 
     Amount      Ratio     Amount      Ratio     Amount      Ratio  

As of June 30, 2020

               

Community Bank Leverage Ratio

   $ 76,428        10.68   $ 57,238        8.00   $ 57,238        8.00

Total capital (to risk-weighted assets)

     N/A        N/A       N/A        N/A       N/A        N/A  

Tier 1 capital (to risk-weighted assets)

     N/A        N/A       N/A        N/A       N/A        N/A  

Common Equity Tier 1 capital (to risk-weighted assets)

     N/A        N/A       N/A        N/A       N/A        N/A  

Tier 1 capital (to adjusted total assets)

     76,428        10.68     28,619        4.00     35,774        5.00

Tangible capital (to adjusted tangible assets)

     76,428        10.68     10,732        1.50     N/A        N/A  

As of June 30, 2019

               

Community Bank Leverage Ratio

   $ N/A        N/A   $ N/A        N/A   $ N/A        N/A

Total capital (to risk-weighted assets)

     81,624        16.28     40,119        8.00     50,149        10.00

Tier 1 capital (to risk-weighted assets)

     75,355        15.03     30,090        6.00     40,119        8.00

Common Equity Tier 1 capital (to risk-weighted assets)

     75,355        15.03     22,567        4.50     32,597        6.50

Tier 1 capital (to adjusted total assets)

     75,355        10.96     27,513        4.00     34,392        5.00

Tangible capital (to adjusted tangible assets)

     75,355        10.96     10,317        1.50     N/A        N/A  

 

F-43


IF Bancorp, Inc.

Notes to Consolidated Financial Statements

June 30, 2020 and 2019

(Table dollar amounts in thousands)

 

The following is a reconciliation of the Association equity amounts included in the consolidated balance sheets to the amounts reflected for regulatory purposes:

 

     2020      2019  

Association equity

   $ 80,631      $ 75,920  

Less net unrealized gains

     4,865        991  

Less postretirement benefit plan

     (662      (426
  

 

 

    

 

 

 

Tier 1 capital

     76,428        75,355  

Plus allowance for loan losses subject to limit

     6,234        6,269  
  

 

 

    

 

 

 

Total risk-based capital

   $ 82,662      $ 81,624  
  

 

 

    

 

 

 

The Association’s ability to pay dividends on its common stock to the Company is restricted to maintain adequate capital as shown in the previous tables. Additionally, prior regulatory approval is required for the declaration of any dividends generally in excess of the sum of net income for the calendar year and retained net income for the preceding two calendar years.

Note 14: Related Party Transactions

At June 30, 2020 and 2019, the Company had loans outstanding to executive officers, directors, significant members and their affiliates (related parties). Changes in loans to executive officers and directors are summarized as follows:

 

     2020      2019  

Balance, beginning of year

   $ 3,033      $ 3,132  

New loans

     1,087        756  

Repayments

     (779      (855
  

 

 

    

 

 

 

Balance, end of year

   $ 3,341      $ 3,033  
  

 

 

    

 

 

 

Deposits from related parties held by the Company at June 30, 2020 and 2019 totaled $1,526,000 and $1,482,000, respectively.

In management’s opinion, such loans and other extensions of credit and deposits were made in the ordinary course of business and were made on substantially the same terms (including interest rates and collateral) as those prevailing at the time for comparable transactions with other persons. Further, in management’s opinion, these loans did not involve more than normal risk of collectability or present other unfavorable features.

 

F-44


IF Bancorp, Inc.

Notes to Consolidated Financial Statements

June 30, 2020 and 2019

(Table dollar amounts in thousands)

 

Note 15: Employee Benefits

The Company sponsors a noncontributory postretirement health benefit plan (postretirement plan). The postretirement plan provides medical coverage benefits for former employees and their spouses upon retirement. The postretirement plan has no assets to offset the future liabilities incurred under the postretirement plan. The Company’s funding policy is to make the minimum annual contribution that is required by applicable regulations, plus such amounts as the Company may determine to be appropriate from time to time. The Company expects to contribute $191,000 to the plan in fiscal year 2021.

The Company uses a June 30 measurement date for the plan. Information about the plan’s funded status and pension cost follows:

 

     2020      2019  

Change in benefit obligation

     

Beginning of year

   $ 2,919      $ 2,770  

Service cost

     53        50  

Interest cost

     93        107  

Actuarial gain

     355        106  

Benefits paid

     (114      (114
  

 

 

    

 

 

 

End of year

   $ 3,306      $ 2,919  
  

 

 

    

 

 

 

Significant balances, costs and assumptions are:

 

     Postretirement Plan  
     2020      2019  

Benefit obligation

   $ 3,306      $ 2,919  

Fair value of plan assets

     —          —    
  

 

 

    

 

 

 

Funded status

   $ (3,306    $ (2,919
  

 

 

    

 

 

 

Accumulated benefit obligation

   $ 3,306      $ 2,919  
  

 

 

    

 

 

 

Amounts recognized in the consolidated balance sheets:

     

Accrued benefit cost

   $ 3,306      $ 2,919  
  

 

 

    

 

 

 

 

F-45


IF Bancorp, Inc.

Notes to Consolidated Financial Statements

June 30, 2020 and 2019

(Table dollar amounts in thousands)

 

Components of net periodic benefit cost:

 

     2020      2019  

Service cost

   $ 53      $ 50  

Interest cost

     93        107  

Amortization of (Gain) or Loss

     25        16  
  

 

 

    

 

 

 
   $ 171      $ 173  
  

 

 

    

 

 

 

Amounts recognized in accumulated other comprehensive income not yet recognized as components of net periodic benefit cost consist of:

 

     2020      2019  

Net loss

   $ 860      $ 531  

Other significant balances and costs are:

 

     2020      2019  

Employer contribution

   $ 114      $ 114  

Benefits paid

     114        114  

Benefit costs

     171        173  

Other changes in plan assets and benefit obligations recognized in other comprehensive income are described in Note 12.

The estimated net loss, prior service cost and transition obligation for the postretirement plan that will be amortized from accumulated other comprehensive income into net periodic benefit cost of the next fiscal year are $59,000, $0, and $0, respectively.

A discount rate of 3.25% was used for both 2020 and 2019, to determine the benefit obligations and benefit costs.

Assumed health care cost trend rates have a significant effect on the amounts reported for health care plans. A one-percentage-point change in assumed health care cost trend rates would have the following effects:

 

     One-
Percentage-
Point

Increase
     One-
Percentage-
Point

Decrease
 

Effect on total of service and interest cost components

   $ 4      $ (4

Effect on postretirement benefit obligation

     36        (34

 

F-46


IF Bancorp, Inc.

Notes to Consolidated Financial Statements

June 30, 2020 and 2019

(Table dollar amounts in thousands)

 

For measurement purposes, a 9% annual rate of increase in the per capita cost of covered health care benefits was assumed for 2020, 2021 and 2022, respectively. The rate was assumed to decrease gradually to 5% by the year 2031 and remain at that level thereafter.

The following postretirement plan benefit payments, which reflect expected future service, as appropriate, are expected to be paid as of June 30, 2020:

 

2021

   $ 137  

2022

     168  

2023

     183  

2024

     199  

2025

     195  

2026-2030

     986  

The Company has a 401(k) plan covering substantially all employees. The Company matches 25% of the first 5% of compensation that a participant defers. Employer contributions charged to expense for 2020 and 2019 were $81,000 and $68,000, respectively. The plan also includes an Employer Profit Sharing contribution which allows all eligible participants to receive at least 5% of their Plan year salary. The Company’s contributions for the plan years ended June 30, 2020 and 2019 were $602,000 and $510,000, respectively.

The Company has deferred compensation agreements for directors, which provides benefits payable upon normal retirement age of 72. The present value of the estimated liability under the agreement is being accrued using a discount rate of 6 percent. The deferred compensation charged to expense totaled $249,000 and $220,000 for the years ended June 30, 2020 and 2019, respectively. The agreements’ accrued liability of $1.6 million and $1.5 million as of June 30, 2020 and 2019, respectively, is included in other liabilities in the consolidated balance sheets. The following benefit payments are expected to be paid for these agreements:

 

2021

   $ 121  

2022

     151  

2023

     133  

2024

     134  

2025

     134  

Thereafter

     3,928  
  

 

 

 
   $ 4,601  
  

 

 

 

 

F-47


IF Bancorp, Inc.

Notes to Consolidated Financial Statements

June 30, 2020 and 2019

(Table dollar amounts in thousands)

 

Note 16: 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, with funds from any contributions on ESOP assets. Contributions will be applied to repay interest on the loan first, and 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.

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.

 

F-48


IF Bancorp, Inc.

Notes to Consolidated Financial Statements

June 30, 2020 and 2019

(Table dollar amounts in thousands)

 

A summary of ESOP shares at June 30, 2020 and 2019 are as follows (dollars in thousands):

 

     2020      2019  

Allocated shares

     127,102        109,018  

Shares committed for release

     19,245        19,245  

Unearned shares

     211,695        230,940  
  

 

 

    

 

 

 

Total ESOP shares

     358,042        359,203  
  

 

 

    

 

 

 

Fair value of unearned ESOP shares (1)

   $ 3,652      $ 4,829  
  

 

 

    

 

 

 

 

  (1)

Based on closing price of $17.25 and $20.91 per share on June 30, 2020, and 2019, respectively.

During the year ended June 30, 2020 and 2019, 1,161 and 6,360 ESOP shares, respectively, 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. The purpose of the Equity Incentive Plan is 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 authorizes 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) is 481,125 and the maximum number of shares of Company stock that may be issued as restricted stock awards or restricted stock units is 192,450.

On December 10, 2013, the Board of Directors approved grants of 85,500 shares of restricted stock and 167,000 in stock options to be awarded to senior officers and directors of the Association. The restricted stock will vest in equal installments over 10 years and the stock options will vest in equal installments over 7 years, both starting in December 2014. On December 10, 2015, the Board of Directors approved grants of 16,900 shares of restricted stock to be awarded to senior officers and directors of the Association. The restricted stock will vest in equal installments over 8 years, starting in December 2016. As of June 30, 2020, there were 90,050 shares of restricted stock and 314,125 stock option shares available for future grants under this plan.

 

F-49


IF Bancorp, Inc.

Notes to Consolidated Financial Statements

June 30, 2020 and 2019

(Table dollar amounts in thousands)

 

The following table summarizes stock option activity for the year ended June 30, 2020 (dollars in thousands):

 

     Shares      Weighted-
Average
Exercise
Price/
Share
     Weighted-
Average
Remaining
Contractual
Term
     Aggregate
Intrinsic
Value
 

Outstanding, June 30, 2019

     153,143      $ 16.63        

Granted

     —          —          

Exercised

     —          —          

Forfeited

     —          —          
  

 

 

    

 

 

       

Outstanding, June 30, 2020

     153,143      $ 16.63        3.4      $ 95 (1) 
  

 

 

    

 

 

    

 

 

    

 

 

 

Exercisable, June 30, 2020

     130,857      $ 16.63        3.4      $ 81 (1) 
  

 

 

    

 

 

    

 

 

    

 

 

 

 

  (1)

Based on closing price of $17.25 per share on June 30, 2020.

Intrinsic value for stock options is defined as the difference between the current market value and the exercise price. There were no options granted during the year ended June 30, 2020.

There were 22,286 options that vested during the year ended June 30, 2020 compared to 22,286 stock options that vested during the year ended June 30, 2019. Stock-based compensation expense and related tax benefit was $57,000 and $16,000, respectively, for both the year ended June 30, 2020, and the year ended June 30, 2019, and was recognized in non-interest expense. Total unrecognized compensation cost related to non-vested stock options was $24,000 at June 30, 2020 and is expected to be recognized over a weighted-average period of 0.4 years.

 

F-50


IF Bancorp, Inc.

Notes to Consolidated Financial Statements

June 30, 2020 and 2019

(Table dollar amounts in thousands)

 

The following table summarizes non-vested restricted stock activity for the year ended June 30, 2020:

 

     Shares      Weighted-
Average
Grant-
Date
Fair Value
 

Balance, June 30, 2019

     50,313      $ 16.79  

Granted

     —          —    

Forfeited

     —          —    

Earned and issued

     10,063        16.79  
  

 

 

    

 

 

 

Balance, June 30, 2020

     40,250        16.79  
  

 

 

    

 

 

 

The fair value of the restricted stock awards is amortized to compensation expense over the vesting period (ten years) 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 was $169,000 and $48,000, respectively, for the year ended June 30, 2020, and was $169,000 and $48,000, respectively, for the year ended June 30, 2019, and was recognized in non-interest expense. Unrecognized compensation expense for non-vested restricted stock awards was $578,000 and is expected to be recognized over 3.4 years with a corresponding credit to paid-in capital.

Note 17: Earnings Per Share (“EPS”)

Basic and diluted earnings per common share are presented for the years ended June 30, 2020 and 2019. The factors used in the earnings per common share computation follow:

 

     Year Ended      Year Ended  
     June 30,
2020
     June 30,
2019
 

Net income

   $ 4,245      $ 3,558  
  

 

 

    

 

 

 

Basic weighted average shares outstanding

     3,324,657        3,716,924  

Less: Average unallocated ESOP shares

     (221,318      (240,563
  

 

 

    

 

 

 

Average shares outstanding

     3,103,339        3,476,361  
  

 

 

    

 

 

 

Diluted effect of restricted stock awards and stock options

     44,693        53,856  
  

 

 

    

 

 

 

Diluted average shares outstanding

     3,148,032        3,530,217  
  

 

 

    

 

 

 

Basic earnings per common share

   $ 1.37      $ 1.02  
  

 

 

    

 

 

 

Diluted earnings per common share

   $ 1.35      $ 1.01  
  

 

 

    

 

 

 

 

F-51


IF Bancorp, Inc.

Notes to Consolidated Financial Statements

June 30, 2020 and 2019

(Table dollar amounts in thousands)

 

The Company announced a stock repurchase plan on June 12, 2019, whereby the Company could repurchase up to 89,526 shares of its common stock, or approximately 2.5% of its then current outstanding shares. On September 13, 2019, after repurchasing 20,200 shares at an average price of $21.17 per share, the Company announced an increase in the number of shares that may be repurchased under the Company’s existing stock repurchase plan, whereby the Company could repurchase up to 320,476 shares, or approximately 9.0% of its then outstanding shares. As of June 30, 2020, the Company had repurchased all shares under this plan at an average price of $22.12 per share.

Note 18: 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

 

F-52


IF Bancorp, Inc.

Notes to Consolidated Financial Statements

June 30, 2020 and 2019

(Table dollar amounts in thousands)

 

Recurring Measurements

The following table presents the fair value measurements of assets recognized in the accompanying 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 June 30, 2020 and 2019:

 

            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, 2020:

           

Available-for-sale securities:

           

US Government and federal agency

   $ 8,236      $ —        $ 8,236      $ —    

Mortgage-backed securities – GSE residential

     148,855        —          148,855        —    

Small Business Administration

     3,640        —          3,640        —    

State and political subdivisions

     1,663        —          1,663        —    

Mortgage servicing rights

     715        —          —          715  

 

            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, 2019:

           

Available-for-sale securities:

           

US Government and federal agency

   $ 12,950      $ —        $ 12,950      $ —    

Mortgage-backed securities – GSE residential

     125,510        —          125,510        —    

Small Business Administration

     4,935        —          4,935        —    

State and political subdivisions

     2,896        —          2,896        —    

Mortgage servicing rights

     853        —          —          853  

 

F-53


IF Bancorp, Inc.

Notes to Consolidated Financial Statements

June 30, 2020 and 2019

(Table dollar amounts in thousands)

 

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 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 year ended June 30, 2020. 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. There were no Level 1 securities as of June 30, 2019 or 2018. 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 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. Government and federal agency, mortgage-backed securities (GSE—residential) 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. There were no Level 3 securities as of June 30, 2020 or 2019.

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.

Management measures mortgage servicing rights through the completion of a proprietary model. Inputs to the model are developed by the accounting staff and are reviewed by management. The model is tested annually using baseline data to check its accuracy.

 

F-54


IF Bancorp, Inc.

Notes to Consolidated Financial Statements

June 30, 2020 and 2019

(Table dollar amounts in thousands)

 

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:

 

     Mortgage
Servicing
Rights
 

Balance, July 1, 2018

   $ 866  

Total realized and unrealized gains and losses included in net income

     (45

Servicing rights that result from asset transfers

     144  

Payments received and loans refinanced

     (112
  

 

 

 

Balance, June 30, 2019

     853  
  

 

 

 

Total realized and unrealized gains and losses included in net income

     (294

Servicing rights that result from asset transfers

     255  

Payments received and loans refinanced

     (99
  

 

 

 

Balance, June 30, 2020

   $ 715  
  

 

 

 

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

   $ (294
  

 

 

 

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

Nonrecurring Measurements

The following table presents the fair value measurement of assets measured at fair value on a nonrecurring basis and the level within the fair value hierarchy in which the fair value measurements fall at June 30, 2020 and 2019:

 

            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, 2020:

           

Foreclosed assets

   $ 200      $ —        $ —        $ 200  

June 30, 2019:

           

Impaired loans (collateral dependent)

   $ 33      $ —        $ —        $ 33  

Foreclosed assets

     512        —          —          512  

 

F-55


IF Bancorp, Inc.

Notes to Consolidated Financial Statements

June 30, 2020 and 2019

(Table dollar amounts in thousands)

 

The following table presents (losses)/recoveries recognized on assets measured on a non-recurring basis for the years ended June 30, 2020 and 2019:

 

     2020      2019  

Impaired loans (collateral dependent)

   $ 13      $ (20

Foreclosed and repossessed assets held for sale

     (19      (196

Following is a description of the valuation methodologies used for assets measured at fair value on a nonrecurring basis and recognized in the accompanying balance sheets, as well as the general classification of such assets pursuant to the valuation hierarchy. For assets classified within Level 3 of the fair value hierarchy, the process used to develop the reported fair value is described below.

Collateral-dependent Impaired Loans, Net of the Allowance for Loan Losses

The estimated fair value of collateral-dependent impaired loans is based on the appraised fair value of the collateral, less estimated cost to sell. Collateral-dependent impaired loans are classified within Level 3 of the fair value hierarchy.

The Company considers the appraisal or evaluation as the starting point for determining fair value and then considers other factors and events in the environment that may affect the fair value. Appraisals of the collateral underlying collateral-dependent loans are obtained when the loan is determined to be collateral-dependent and subsequently as deemed necessary by the senior lending officer. Appraisals are reviewed for accuracy and consistency by the senior lending officer. Appraisers are selected from the list of approved appraisers maintained by management. The appraised values are reduced by discounts to consider lack of marketability and estimated cost to sell if repayment or satisfaction of the loan is dependent on the sale of the collateral. These discounts and estimates are developed by the senior lending officer by comparison to historical results.

 

F-56


IF Bancorp, Inc.

Notes to Consolidated Financial Statements

June 30, 2020 and 2019

(Table dollar amounts in thousands)

 

Unobservable (Level 3) Inputs

The following table presents quantitative information about unobservable inputs used in recurring and nonrecurring Level 3 fair value measurements.

 

     Fair Value at
June 30,
2020
    

Valuation Technique

  

Unobservable Inputs

  

Range (Weighted Average)

Mortgage servicing rights

   $ 715      Discounted cash flow   

Discount rate

  

9.5% – 11.5% (9.5%)

         Constant prepayment rate    13.5% – 17.7% (13.8%)
         Probability of default    0.04% – 0.12% (0.11%)

Foreclosed assets

     200      Market comparable properties    Comparability adjustments (%)    11.1% (11.1%)

 

     Fair Value at
June 30,
2019
    

Valuation Technique

  

Unobservable Inputs

  

Range (Weighted Average)

Mortgage servicing rights

   $ 853      Discounted cash flow   

Discount rate

  

9.5% – 11.5% (9.5%)

         Constant prepayment rate    8.3% – 11.0% (9.0%)
         Probability of default    0.05% – 0.12% (0.11%)

Impaired loans (collateral dependent)

     33      Market comparable properties    Marketability discount    11.1% (11.1%)

Foreclosed assets

     512      Market comparable properties    Comparability adjustments (%)    7.8% (7.8%)

 

F-57


IF Bancorp, Inc.

Notes to Consolidated Financial Statements

June 30, 2020 and 2019

(Table dollar amounts in thousands)

 

Fair Value of Financial Instruments

The following table presents 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 June 30, 2020 and 2019.

 

            Fair Value
Measurements
Using
               
     Carrying
Amount
     Quoted Prices
in Active
Markets for
Identical
Assets

(Level 1)
     Significant
Other
Observable
Inputs

(Level 2)
     Significant
Unobservable
Inputs

(Level 3)
 

June 30, 2020:

           

Financial assets

           

Cash and cash equivalents

   $ 33,467      $ 33,467      $ —        $ —    

Interest-bearing time deposits in banks

     3,000        3,000        —          —    

Loans, net of allowance for loan losses

     509,817        —          —          513,221  

Federal Home Loan Bank stock

     3,028        —          3,028        —    

Accrued interest receivable

     1,908        —          1,908        —    

Financial liabilities

           

Deposits

     601,700        —          320,209        283,304  

Repurchase agreements

     3,738        —          3,738        —    

Federal Home Loan Bank advances

     34,500        —          35,472        —    

Lines of credit

     3,000        —          3,000        —    

Advances from borrowers for taxes and insurance

     519        —          519        —    

Accrued interest payable

     537        —          537        —    

Unrecognized financial instruments (net of contract amount)

           

Commitments to originate loans

     —          —          —          —    

 

F-58


IF Bancorp, Inc.

Notes to Consolidated Financial Statements

June 30, 2020 and 2019

(Table dollar amounts in thousands)

 

            Fair Value
Measurements
Using
               
     Carrying
Amount
     Quoted Prices
in Active
Markets for
Identical
Assets

(Level 1)
     Significant
Other
Observable
Inputs

(Level 2)
     Significant
Unobservable
Inputs

(Level 3)
 

June 30, 2019:

           

Financial assets

           

Cash and cash equivalents

   $ 59,600      $ 59,600      $ —        $ —    

Interest-bearing time deposits in banks

     3,000        3,000        —          —    

Loans, net of allowance for loan losses

     487,774        —          —          480,479  

Federal Home Loan Bank stock

     1,174        —          1,174        —    

Accrued interest receivable

     2,142        —          2,142        —    

Financial liabilities

           

Deposits

     607,023        —          276,738        331,865  

Repurchase agreements

     2,015        —          2,015        —    

Federal Home Loan Bank advances

     24,000        —          24,419        —    

Advances from borrowers for taxes and insurance

     747        —          747        —    

Accrued interest payable

     801        —          801        —    

Unrecognized financial instruments (net of contract amount)

           

Commitments to originate loans

     —          —          —          —    

Lines of credit

     —          —          —          —    

In accordance with the Company’s adoption of ASU 2016-01 as of July 1, 2018, the methods utilized to measure the fair value of financial instruments at June 30, 2020 represent an approximation of exit price; however, an actual exit price may differ.

 

F-59


IF Bancorp, Inc.

Notes to Consolidated Financial Statements

June 30, 2020 and 2019

(Table dollar amounts in thousands)

 

Note 19: Significant Estimates and Concentrations

Accounting principles generally accepted in the United States of America require disclosure of certain significant estimates and current vulnerabilities due to certain concentrations. Estimates related to the allowance for loan losses are reflected in the footnote regarding loans. Current vulnerabilities due to certain concentrations of credit risk are discussed in the footnote on commitments and credit risk.

Note 20: Commitments and Credit Risk

The Company generates commercial, mortgage and consumer loans and receives deposits from customers located in the Illinois counties of Vermilion, Iroquois, Champaign, and Kankakee, as well as adjacent counties in Illinois and Indiana within 30 miles of a branch or loan production office. The Company generates commercial, mortgage and consumer loans from its location in Osage Beach, Missouri. The Company’s loans are generally secured by specific items of collateral including real property and consumer assets. Although the Company has a diversified loan portfolio, a substantial portion of its debtors’ ability to honor their contracts is dependent upon economic conditions in the Company’s various locations.

Commitments to Originate Loans

Commitments to originate loans are agreements to lend to a customer as long as 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.

At June 30, 2020 and 2019, the Company had outstanding commitments to originate loans aggregating approximately $16,873,000 and $5,430,000, respectively. The commitments extended over varying periods of time with the majority being disbursed within a one-year period. Loan commitments at fixed rates of interest amounted to $5,178,000 and $2,959,000 at June 30, 2020 and 2019, respectively, with the remainder subject to adjustable interest rates. The weighted average interest rates for fixed rate loan commitments were 3.49% and 5.03% as of June 30, 2020 and 2019, respectively.

 

F-60


IF Bancorp, Inc.

Notes to Consolidated Financial Statements

June 30, 2020 and 2019

(Table dollar amounts in thousands)

 

Lines of Credit

Lines of credit are agreements to lend to a customer as long as 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.

At June 30, 2020, the Company had granted unused lines of credit to borrowers aggregating approximately $78,600,000 and $7,582,000 for commercial lines and open-end consumer lines, respectively. At June 30, 2019, the Company had granted unused lines of credit to borrowers aggregating approximately $44,070,000 and $6,726,000 for commercial lines and open-end consumer lines, respectively.

Other Credit Risks

At June 30, 2020 and 2019, the interest-bearing demand deposits on the consolidated balance sheets represent amounts on deposit with one financial institution, the Federal Home Loan Bank of Chicago.

 

F-61


IF Bancorp, Inc.

Notes to Consolidated Financial Statements

June 30, 2020 and 2019

(Table dollar amounts in thousands)

 

Note 21: Condensed Financial Information (Parent Company Only)

Presented below is condensed financial information as to financial position, results of operations and cash flows of the Company as of and for the years ended June 30, 2020 and 2019:

Condensed Balance Sheet

 

     June 30,      June 30,  
     2020      2019  

Assets

     

Cash and due from banks

   $ 2,592      $ 4,058  

Investment in common stock of subsidiary

     80,631        75,920  

ESOP loan

     2,469        2,628  
  

 

 

    

 

 

 

Total assets

   $ 85,692      $ 82,606  
  

 

 

    

 

 

 

Liabilities

     

Line of credit

   $ 3,000      $ —    

Interest payable

     31        —    

Other liabilities

     97        145  
  

 

 

    

 

 

 

Total liabilities

     3,128        145  

Stockholders’ Equity

     82,564        82,461  
  

 

 

    

 

 

 

Total liabilities and stockholders’ equity

   $ 85,692      $ 82,606  
  

 

 

    

 

 

 

 

F-62


IF Bancorp, Inc.

Notes to Consolidated Financial Statements

June 30, 2020 and 2019

(Table dollar amounts in thousands)

 

Condensed Statement of Income and Comprehensive Income

 

     Year Ending
June 30,
    Year Ending
June 30,
 
     2020     2019  

Income

    

Interest on ESOP loan

   $ 141     $ 136  

Deposits with financial institutions

     —         —    
  

 

 

   

 

 

 

Total income

     141       136  

Expense

    

Interest on line of credit

     133       —    

Other expenses

     203       183  
  

 

 

   

 

 

 

Total expense

     336       183  

Loss Before Income Tax and Equity in Undistributed Income of Subsidiary

     (195     (47

Benefit for Income Taxes

     (54     (11
  

 

 

   

 

 

 

Loss Before Equity in Undistributed Loss of Subsidiary

     (141     (36

Equity in Undistributed Income of Subsidiary

     4,386       3,594  
  

 

 

   

 

 

 

Net Income

   $ 4,245     $ 3,558  
  

 

 

   

 

 

 

Comprehensive Income

   $ 7,883     $ 7,231  
  

 

 

   

 

 

 

 

F-63


IF Bancorp, Inc.

Notes to Consolidated Financial Statements

June 30, 2020 and 2019

(Table dollar amounts in thousands)

 

Condensed Statement of Cash Flows

 

     Year Ended
June 30,
    Year Ended
June 30,
 
     2020     2019  

Cash flows from operating activities

    

Net income

   $ 4,245     $ 3,558  
  

 

 

   

 

 

 

Items not requiring (providing) cash

    

Net change accrued interest payable

     30       —    

Net change in other liabilities

     (48     30  

Earnings from subsidiary

     (4,386     (3,594
  

 

 

   

 

 

 

Net cash provided by operating activities

     (159     (6
  

 

 

   

 

 

 

Cash flows from financing activities

    

Stock purchase per stock repurchase plan

     (7,459     (6,222

Dividends paid

     (1,008     (930

Dividends received

     4,000       2,000  

Loan for ESOP

     159       156  

Proceeds from CIBC line of credit

     5,000       —    

Repayment of CIBC line of credit

     (2,000     —    
  

 

 

   

 

 

 

Net cash used in financing activities

     (1,308     (4,996
  

 

 

   

 

 

 

Net Change in Cash and Cash Equivalents

     (1,467     (5,002

Cash and Cash Equivalents at Beginning of Year

     4,058       9,060  
  

 

 

   

 

 

 

Cash and Cash Equivalents at End of Year

   $ 2,591     $ 4,058  
  

 

 

   

 

 

 

 

F-64

EX-23.0

Exhibit 23.0

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We consent to the incorporation by reference in Registration Statements No. 333-176222 and No. 333-185075 on Form S-8 of our report dated September 14, 2020 relating to the consolidated financial statements of IF Bancorp, Inc. and subsidiary as of June 30, 2020 and 2019 and for the years then ended appearing in this Annual Report on Form 10-K.

 

/s/ BKD, LLP
Decatur, Illinois
September 14, 2020
EX-31.1

Exhibit 31.1

Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer

CERTIFICATION

I, Walter H. Hasselbring, III certify that:

1. I have reviewed this annual report on Form 10-K of IF Bancorp, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

Date: September 14, 2020

   /s/ Walter H. Hasselbring, III
  

Walter H. Hasselbring, III

  

President and Chief Executive Officer

  

(principal executive officer)

EX-31.2

Exhibit 31.2

Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer

CERTIFICATION

I, Pamela J. Verkler, certify that:

1.I have reviewed this annual report on Form 10-K of IF Bancorp, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f))for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

Date: September 14, 2020

   /s/ Pamela J. Verkler
  

Pamela J. Verkler

  

Senior Executive Vice President and Chief Financial Officer

  

(principal financial and accounting officer)

 

EX-32.0

Exhibit 32.0

Section 1350 Certification of Chief Executive Officer and Chief Financial Officer

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADDED BY

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report of IF Bancorp, Inc. (the “Company”) on Form 10-K for the period ended June 30, 2020 as filed with the Securities and Exchange Commission (the “Report”), the undersigned hereby certify, pursuant to 18 U.S.C. §1350, as added by § 906 of the Sarbanes-Oxley Act of 2002, that:

 

  (1)

The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

 

  (2)

The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of and for the period covered by the Report.

 

/s/ Walter H. Hasselbring, III
Walter H. Hasselbring, III
President and Chief Executive Officer
/s/ Pamela J. Verkler
Pamela J. Verkler
Senior Executive Vice President and
Chief Financial Officer

September 14, 2020

v3.20.2
Cover Page - USD ($)
12 Months Ended
Jun. 30, 2020
Sep. 04, 2020
Dec. 31, 2019
Cover [Abstract]      
Document Type 10-K    
Amendment Flag false    
Document Period End Date Jun. 30, 2020    
Document Fiscal Year Focus 2020    
Document Fiscal Period Focus FY    
Trading Symbol IROQ    
Entity Registrant Name IF Bancorp, Inc.    
Entity Central Index Key 0001514743    
Current Fiscal Year End Date --06-30    
Entity Well-known Seasoned Issuer No    
Entity Voluntary Filers No    
Entity Current Reporting Status Yes    
Entity Filer Category Non-accelerated Filer    
Entity Common Stock, Shares Outstanding   3,240,376  
Entity Public Float     $ 53,640,260
Entity Interactive Data Current Yes    
Entity Shell Company false    
Entity Small Business true    
Entity Emerging Growth Company false    
Title of 12(b) Security Common Stock    
Security Exchange Name NASDAQ    
Entity Address, State or Province IL    
v3.20.2
Consolidated Balance Sheets - USD ($)
$ in Thousands
Jun. 30, 2020
Jun. 30, 2019
Assets    
Cash and due from banks $ 31,529 $ 57,994
Interest-bearing demand deposits 1,938 1,606
Cash and cash equivalents 33,467 59,600
Interest-bearing time deposits in banks 3,000 3,000
Available-for-sale securities 162,394 146,291
Loans, net of allowance for loan losses of $6,234 and $6,328 at June 30, 2020 and 2019, respectively 509,817 487,774
Premises and equipment, net of accumulated depreciation of $8,016 and $7,345 at June 30, 2020 and 2019, respectively 10,193 10,706
Federal Home Loan Bank stock, at cost 3,028 1,174
Foreclosed assets held for sale 386 778
Accrued interest receivable 1,908 2,142
Bank-owned life insurance 9,345 9,072
Mortgage servicing rights 715 853
Deferred income taxes 630 2,066
Other 634 414
Total assets 735,517 723,870
Deposits    
Demand 87,486 80,442
Savings, NOW and money market 232,723 196,296
Certificates of deposit 269,152 290,761
Brokered certificates of deposit 12,339 39,524
Total deposits 601,700 607,023
Repurchase agreements 3,738 2,015
Federal Home Loan Bank advances 34,500 24,000
Line of credit and other borrowings 3,000  
Advances from borrowers for taxes and insurance 519 747
Accrued post-retirement benefit obligation 3,306 2,919
Accrued interest payable 537 801
Other 5,653 3,904
Total liabilities 652,953 641,409
Commitments and Contingencies
Stockholders' Equity    
Common stock, $.01 par value, 100,000,000 shares authorized, 3,240,376 and 3,578,252 shares issued and outstanding at June 30, 2020 and 2019, respectively 32 36
Additional paid-in capital 49,239 48,813
Unearned ESOP shares, at cost, 211,695 and 230,940 shares at June 30, 2020 and 2019, respectively (2,117) (2,309)
Retained earnings 31,207 35,356
Accumulated other comprehensive income, net of tax 4,203 565
Total stockholders' equity 82,564 82,461
Total liabilities and stockholders' equity $ 735,517 $ 723,870
v3.20.2
Consolidated Balance Sheets (Parenthetical) - USD ($)
$ in Thousands
Jun. 30, 2020
Jun. 30, 2019
Statement of Financial Position [Abstract]    
Allowance for loan losses $ 6,234 $ 6,328
Premises and equipment, accumulated depreciation $ 8,016 $ 7,345
Common stock, par value $ 0.01 $ 0.01
Common stock, shares authorized 100,000,000 100,000,000
Common stock, shares issued 3,240,376 3,578,252
Common stock, shares outstanding 3,240,376 3,578,252
Unearned ESOP shares 211,695 230,940
v3.20.2
Consolidated Statements of Income - USD ($)
$ in Thousands
12 Months Ended
Jun. 30, 2020
Jun. 30, 2019
Interest Income    
Interest and fees on loans $ 22,917 $ 22,833
Securities    
Taxable 3,652 3,341
Tax-exempt 75 122
Federal Home Loan Bank dividends 71 150
Deposits with financial institutions 267 279
Total interest and dividend income 26,982 26,725
Interest Expense    
Deposits 7,910 7,317
Federal Home Loan Bank advances and repurchase agreements 651 1,537
Line of credit and other borrowings 133  
Total interest expense 8,694 8,854
Net Interest Income 18,288 17,871
Provision for Loan Losses 128 407
Net Interest Income After Provision for Loan Losses 18,160 17,464
Noninterest Income    
Insurance commissions 630 660
Brokerage commissions 911 981
Net realized gains on sale of available-for-sale securities 267 11
Mortgage banking income, net 119 236
Gain on sale of loans 801 343
Bank-owned life insurance income, net 273 269
Other 1,102 1,013
Total noninterest income 4,810 4,159
Noninterest Expense    
Compensation and benefits 11,070 10,644
Office occupancy 943 887
Equipment 1,564 1,377
Federal deposit insurance 21 169
Loss (gain) sale of foreclosed assets 27 (3)
Stationary, printing and office 128 107
Advertising 499 503
Professional services 442 355
Supervisory examination 154 165
Audit and accounting services 136 138
Organizational dues and subscriptions 49 44
Insurance bond premiums 163 150
Telephone and postage 213 223
Other 1,677 2,013
Total noninterest expense 17,086 16,772
Income Before Income Tax 5,884 4,851
Provision for Income Taxes 1,639 1,293
Net Income $ 4,245 $ 3,558
Earnings Per Share:    
Basic $ 1.37 $ 1.02
Diluted 1.35 1.01
Dividends Paid Per Share $ 0.30 $ 0.25
Customer Service Fees [Member]    
Noninterest Income    
Noninterest income $ 340 $ 367
Other Service Charges and Fees [Member]    
Noninterest Income    
Noninterest income $ 367 $ 279
v3.20.2
Consolidated Statements of Comprehensive Income - USD ($)
$ in Thousands
12 Months Ended
Jun. 30, 2020
Jun. 30, 2019
Statement of Comprehensive Income [Abstract]    
Net Income $ 4,245 $ 3,558
Other Comprehensive Income    
Unrealized appreciation on available-for-sale securities, net of taxes of $1,621 and $1,860 for 2020 and 2019, respectively 4,065 3,777
Less: reclassification adjustment for realized gains included in net income, net of taxes of $76 and $3 for 2020 and 2019, respectively 191 8
Accumulated other comprehensive income (loss) before tax 3,874 3,769
Postretirement health plan amortization of transition obligation and prior service cost and change in net loss, net of taxes of $(123) and $(4) for 2020 and 2019, respectively (236) (96)
Other comprehensive income, net of tax 3,638 3,673
Comprehensive Income $ 7,883 $ 7,231
v3.20.2
Consolidated Statements of Comprehensive Income (Parenthetical) - USD ($)
$ in Thousands
12 Months Ended
Jun. 30, 2020
Jun. 30, 2019
Statement of Comprehensive Income [Abstract]    
Unrealized appreciation (depreciation) on available-for-sale securities, tax $ 1,621 $ 1,860
Reclassification adjustment for realized gains included in net income, Tax 76 3
Postretirement health plan amortization of transition obligation and prior service cost and change in net loss, tax $ (123) $ (4)
v3.20.2
Consolidated Statements of Stockholders' Equity - USD ($)
$ in Thousands
Total
Common Stock [Member]
Additional Paid-In Capital [Member]
Unearned Esop Shares [Member]
Retained Earnings [Member]
Accumulated Other Comprehensive Income (Loss) [Member]
Beginning Balance at Jun. 30, 2018 $ 81,675 $ 39 $ 48,361 $ (2,502) $ 38,885 $ (3,108)
Net income 3,558       3,558  
Other comprehensive income (loss) 3,673         3,673
Dividends on common stock (868)       (868)  
Stock equity plan 225   225      
Stock repurchase (6,222) (3)     (6,219)  
ESOP shares earned 420   227 193    
Ending Balance at Jun. 30, 2019 82,461 36 48,813 (2,309) 35,356 565
Net income 4,245       4,245  
Other comprehensive income (loss) 3,638         3,638
Dividends on common stock (939)       (939)  
Stock equity plan 223   223      
Stock repurchase (7,459) (4)     (7,455)  
ESOP shares earned 395   203 192    
Ending Balance at Jun. 30, 2020 $ 82,564 $ 32 $ 49,239 $ (2,117) $ 31,207 $ 4,203
v3.20.2
Consolidated Statements of Stockholders' Equity (Parenthetical) - $ / shares
12 Months Ended
Jun. 30, 2020
Jun. 30, 2019
Dividends declared per common share $ 0.30 $ 0.25
Repurchase of stock during the period, shares 337,876 293,156
Repurchase of stock, average price $ 22.08 $ 21.22
ESOP shares earned, shares 19,245 19,245
Retained Earnings [Member]    
Dividends declared per common share $ 0.30 $ 0.25
v3.20.2
Consolidated Statements of Cash Flows - USD ($)
$ in Thousands
12 Months Ended
Jun. 30, 2020
Jun. 30, 2019
Operating Activities    
Net income $ 4,245 $ 3,558
Items not requiring (providing) cash    
Depreciation 671 628
Provision for loan losses 128 407
Amortization of premiums and discounts on securities 304 83
Deferred income taxes (15) 76
Net realized gains on loan sales (801) (343)
Net realized gains on sales of available-for-sale securities (267) (11)
(Gain) loss on foreclosed real estate held for sale 27 (3)
Bank-owned life insurance income, net (273) (269)
Originations of loans held for sale (40,615) (16,836)
Proceeds from sales of loans held for sale 41,318 17,082
ESOP compensation expense 395 420
Stock equity plan expense 223 225
Changes in    
Accrued interest receivable 234 (321)
Other assets (219) 306
Accrued interest payable (264) 613
Post-retirement benefit obligation 57 57
Other liabilities 1,748 125
Net cash provided by operating activities 6,896 5,797
Investing Activities    
Net change in interest bearing time deposits   (1,250)
Purchases of available-for-sale securities (52,052) (42,148)
Proceeds from the sales of available-for-sale securities 15,712 6,852
Proceeds from maturities and pay-downs of available-for-sale securities 25,619 20,555
Net change in loans (22,165) (17,950)
Purchase of premises and equipment (158) (1,108)
Proceeds from the sale of foreclosed assets 595 5,803
Purchase of Federal Home Loan Bank stock (1,854) (1,440)
Redemption of Federal Home Loan Bank stock   3,551
Net cash used in investing activities (34,303) (27,135)
Financing Activities    
Net increase in demand deposits, money market, NOW and savings accounts 43,471 59,897
Net increase (decrease) in certificates of deposit, including brokered certificates (48,794) 66,705
Net increase (decrease) in advances from borrowers for taxes and insurance (228) 438
Proceeds from Federal Home Loan Bank advances 101,500 111,500
Repayment of Federal Home Loan Bank advances (91,000) (155,000)
Proceeds from other borrowings 5,000  
Repayments of other borrowings (2,000)  
Net increase (decrease) in repurchase agreements 1,723 (266)
Dividends paid (939) (868)
Purchases of common stock (7,459) (6,222)
Net cash provided by financing activities 1,274 76,184
Increase (Decrease) in Cash and Cash Equivalents (26,133) 54,846
Cash and Cash Equivalents, Beginning of Year 59,600 4,754
Cash and Cash Equivalents, End of Year 33,467 59,600
Supplemental Cash Flows Information    
Interest paid 8,958 8,241
Income taxes paid (net of refunds) 1,145 365
Foreclosed assets acquired in settlement of loans $ 230 $ 6,359
v3.20.2
Nature of Operations and Summary of Significant Accounting Policies
12 Months Ended
Jun. 30, 2020
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
Nature of Operations and Summary of Significant Accounting Policies
Note 1: Nature of Operations and Summary of Significant Accounting Policies
Nature of Operations
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 Association provides a full range of banking and financial services to individual and corporate customers from our seven full-service banking offices located in the municipalities of Watseka, Danville, Clifton, Hoopeston, Savoy, Bourbonnais, and Champaign, Illinois, and our loan production and wealth management office in Osage Beach, Missouri. Our primary lending market includes the Illinois counties of Vermilion, Iroquois, Champaign and Kankakee, as well as the adjacent counties in Illinois and Indiana. Our loan production and wealth management office in Osage Beach, Missouri, serves the Missouri counties of Camden, Miller and Morgan. 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 Company is primarily engaged in the business of directing, planning, and coordinating the business activities of the Association. The Company and Association are subject to competition from other financial institutions. The Company and Association are also subject to the regulation of certain federal and state agencies and undergo periodic examinations by those regulatory authorities.
Principles of Consolidation
The consolidated financial statements include the accounts of the Company, the Association and Association’s wholly owned subsidiary, L.C.I. All significant intercompany accounts and transactions have been eliminated in consolidation.
Operating Segment
The Company provides community banking services, including such products and services as loans, certificates of deposits, savings accounts, and mortgage originations. These activities are reported as a single operating segment.
The Company does not derive revenues from, or have assets located in, foreign countries, nor does it derive revenues from any single customer that represents 10% or more of the Company’s total revenues.
 
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Material estimates that are particularly susceptible to significant change relate to the determination of the allowance for loan losses and the valuation of real estate acquired in connection with foreclosures or in satisfaction of loans, fair value measurements and classifications of investment securities, loan servicing rights and income taxes.
Interest-bearing Time Deposits in Banks
Interest-bearing time deposits in banks mature within five years and are carried at cost.
Cash Equivalents
The Company considers all liquid investments with original maturities of three months or less to be cash equivalents. At June 30, 2020 and 2019, cash equivalents consisted primarily of noninterest bearing deposits and interest bearing demand deposits.
Securities
Securities are classified as “available for sale” and recorded at fair value, with unrealized gains and losses excluded from earnings and reported in other comprehensive loss. Purchase premiums and discounts are recognized in interest income using the interest method over the terms of the securities. Gains and losses on the sale of securities are recorded on the trade date and are determined using the specific identification method.
Loans Held for Sale
Mortgage loans originated and intended for sale in the secondary market are carried at the lower of cost or fair value in the aggregate. Net unrealized losses, if any, are recognized through a valuation allowance by charges to noninterest income. Gains and losses on loan sales are recorded in noninterest income, and direct loan origination costs and fees are deferred at origination of the loan and are recognized in noninterest income upon sale of the loan.
 
Loans
Loans that management has the intent and ability to hold for the foreseeable future or until maturity or payoffs are reported at their outstanding principal balances adjusted for unearned income, charge-offs, the allowance for loan losses, and any unamortized deferred fees or costs on originated loans.
For loans amortized at cost, interest income is accrued based on the unpaid principal balance. Loan origination fees, net of certain direct origination costs, are deferred and amortized as a level yield adjustment over the respective term of the loan.
The accrual of interest on loans is discontinued at the time the loan is 90 days past due unless the credit is well-secured and in process of collection. Past due status is based on contractual terms of the loan. In all cases, loans are placed on nonaccrual or charged off at an earlier date if collection of principal or interest is considered doubtful.
All interest accrued but not collected for loans that are placed on nonaccrual or charged off are reversed against interest income. The interest on these loans is accounted for on the cash-basis or cost-recovery method, until qualifying for return to accrual. Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured.
Allowance for Loan Losses
The allowance for loan losses is established as losses are estimated to have occurred through a provision for loan losses charged to income. Loan losses are charged against the allowance when management believes the uncollectibility of a loan balance is confirmed. Subsequent recoveries, if any, are credited to the allowance.
The allowance for loan losses is evaluated on a regular basis by management and is based upon management’s periodic review of the collectibility of the loans in light of historical experience, the nature and volume of the loan portfolio, adverse situations that may affect the borrower’s ability to repay, estimated value of any underlying collateral and prevailing economic conditions. This evaluation is inherently subjective as it requires estimates that are susceptible to significant revision as more information becomes available.
The allowance consists of allocated and general components. The allocated component relates to loans that are classified as impaired. For those loans that are classified as impaired, an allowance is established when the collateral value of the impaired loan is lower than the carrying value of that loan. The general component covers nonclassified loans and is based on historical
charge-off
experience and expected loss given default derived from the Company’s internal risk rating process. Other adjustments may be made to the allowance for pools of loans after an assessment of internal or external influences on credit quality that are not fully reflected in the historical loss or risk rating data.
 
A loan is considered impaired when, based on current information and events, it is probable that the Company will be unable to collect the scheduled payments of principal or interest when due according to the contractual terms of the loan agreement. Factors considered by management in determining impairment include payment status, collateral value and the probability of collecting scheduled principal and interest payments when due. Loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired. Management determines the significance of payment delays and payment shortfalls on a
case-by-case
basis, taking into consideration all of the circumstances surrounding the loan and the borrower, including the length of the delay, the reasons for the delay, the borrower’s prior payment record and the amount of the shortfall in relation to the principal and interest owed. Impairment is measured on a
loan-by-loan
basis for commercial and construction loans by either the present value of expected future cash flows discounted at the loan’s effective interest rate, the loan’s obtainable market price or the fair value of the collateral if the loan is collateral dependent.
Groups of loans with similar characteristics, including individually evaluated loans not determined to be impaired, are collectively evaluated for impairment based on the group’s historical loss experience adjusted for changes in trends, conditions and other relevant factors that affect repayment of the loans.
Premises and Equipment
Depreciable assets are stated at cost less accumulated depreciation. Depreciation is charged to expense using the straight-line method over the estimated useful lives of the assets.
The estimated useful lives for each major depreciable classification of premises and equipment are as follows:
 
Buildings and improvements
   
35-40 years
 
Furniture and equipment
   
3-5 years
 
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, carried at cost and evaluated for impairment.
Foreclosed Assets Held for Sale
Assets acquired through, or in lieu of, loan foreclosure are held for sale and are initially recorded at fair value less cost to sell at the date of foreclosure, establishing a new cost basis. Subsequent to foreclosure, valuations are periodically performed by management and the assets are carried at the lower of carrying amount or fair value less cost to sell. Revenue and expenses from operations and changes in the valuation allowance are included in net income or expense from foreclosed assets.
 
Bank-owned Life Insurance
Bank-owned life insurance policies are reflected on the consolidated balance sheets at the estimated cash surrender value. Changes in the cash surrender value are reflected in noninterest income in the consolidated statements of income.
Fee Income
Loan origination fees, net of direct origination costs, are recognized as income using the level-yield method over the contractual life of the loans.
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, Iroquois Insurance Agency, receives commissions on premiums of new and renewed business policies. Iroquois Insurance Agency records commission revenue on direct bill policies as the cash is received. For agency bill policies, Iroquois 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.
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.
Mortgage Servicing Rights
Mortgage servicing assets are recognized separately when rights are acquired through purchase or through sale of financial assets. Under the servicing assets and liabilities accounting guidance
(ASC 860-50),
servicing rights resulting from the sale or securitization of loans originated by the Company are initially measured at fair value at the date of transfer. The Company has elected to initially and subsequently measure the mortgage servicing rights for consumer mortgage loans using the fair value method. Under the fair value method, the servicing rights are carried in the balance sheet at fair value and the changes in fair value are reported in earnings in the period in which the changes occur.
Fair value is based on market prices for comparable mortgage servicing contracts, when available, or alternatively, is based on a valuation model that calculates the present value of estimated future net servicing income. The valuation model incorporates assumptions that market participants would use in estimating future net servicing income, such as the cost to service, the discount rate, the custodial earnings rate, an inflation rate, ancillary income, prepayment speeds and default rates and losses. These variables change from quarter to quarter as market conditions and projected interest rates change, and may have an adverse impact on the value of the mortgage servicing right and may result in a reduction to noninterest income.
Servicing fee income is recorded for fees earned for servicing loans. The fees are based on a contractual percentage of the outstanding principal or a fixed amount per loan and are recorded as income when earned. The change in fair value of mortgage servicing rights is netted against loan servicing fee income.
Transfers of Financial Assets
Transfers of financial assets are accounted for as sales, when control over the assets has been surrendered. Control over transferred assets is deemed to be surrendered when (1) the assets have been isolated from the Company – put presumptively beyond the reach of the transferor and its creditors, even in bankruptcy or other receivership, (2) the transferee obtains the right (free of conditions that constrain it from taking advantage of that right) to pledge or exchange the transferred assets and (3) the Company does not maintain effective control over the transferred assets through an agreement to repurchase them before their maturity or the ability to unilaterally cause the holder to return specific assets.
Income Taxes
The Company accounts for income taxes in accordance with income tax accounting guidance (ASC 740,
Income Taxes
). The income tax accounting guidance results in two components of income tax expense: current and deferred. Current income tax expense reflects taxes to be paid or refunded for the current period by applying the provisions of the enacted tax law to the taxable income or excess of deductions over revenues. The Company determines deferred income taxes using the liability (or balance sheet) method. Under this method, the net deferred tax asset or liability is based on the tax effects of the differences between the book and tax bases of assets and liabilities, and enacted changes in tax rates and laws are recognized in the period in which they occur. Deferred income tax expense results from changes in deferred tax assets and liabilities between periods. Deferred tax assets are reduced by a valuation allowance if, based on the weight of evidence available, it is more likely than not that some portion or all of a deferred tax asset will not be realized.
Tax positions are recognized if it is more likely than not, based on the technical merits, that the tax position will be realized or sustained upon examination. The term more likely than not means a likelihood of more than 50 percent; the terms examined and upon examination also include resolution of the related appeals or litigation processes, if any. A tax position that meets the
more-likely-than-not
recognition threshold is initially and subsequently measured as the largest amount of tax benefit that has a greater than 50 percent likelihood of being realized upon settlement with a taxing authority that has full knowledge of all relevant information. The determination of whether or not a tax position has met the
more-likely-than-not
recognition threshold considers the facts, circumstances and information available at the reporting date and is subject to management’s judgment.
The Company recognizes interest and penalties on income taxes as a component of income tax expense.
The Company files consolidated income tax returns with its subsidiary.
Earnings Per Share
Basic earnings per share represents income available to common stockholders divided by the weighted-average number of common shares outstanding during each year. Diluted earnings per share reflects additional potential common shares that would have been outstanding if dilutive potential common shares had been issued, as well as any adjustment to income that would result from the assumed issuance. Potential common shares that may be issued by the Company relate solely to outstanding stock options and restricted stock awards and are determined using the treasury stock method.
Comprehensive Income
Comprehensive income consists of net income and other comprehensive income, net of applicable income taxes. Other comprehensive income includes unrealized appreciation on
available-for-sale
securities and changes in the funded status of the postretirement health benefit plan.
Stock-based Compensation Plans
At June 30, 2020 and 2019, the Company has stock-based compensation plans (stock options and restricted stock) which are described more fully in Note 16.
COVID-19
We are subject to risks and uncertainties as a result of the
COVID-19
pandemic. The extent of the impact of the
COVID-19
pandemic on the Company’s business is highly uncertain and difficult to predict, as the response to the pandemic is in its early stages and information is rapidly evolving. Furthermore, capital markets and economies worldwide have also been negatively impacted by the
COVID-19
pandemic.
The severity of the impact of the
COVID-19
pandemic on the Company’s business will depend on a number of factors, including, but not limited to, the duration and severity of the pandemic and the extent and severity of the impact on the Company’s customers, all of which are uncertain and cannot be predicted. The Company’s future results of operations and liquidity could be adversely impacted. As of the date of issuance of these consolidated financial statements, the extent to which the
COVID-19
pandemic may materially impact the Company’s financial condition, liquidity, or results of operations is uncertain.
Transfers between Fair Value Hierarchy Levels
Transfers in and out of Level 1 (quoted market prices), Level 2 (other significant observable inputs) and Level 3 (significant unobservable inputs) are recognized on the period ending date.
Reclassifications
Certain reclassifications have been made to the 2019 financial statements to conform to the 2020 financial statement presentation. These reclassifications had no effect on income.
Recent and Future Accounting Requirements
In February 2016, the FASB issued ASU
2016-02,
Leases (Topic 842), which amends the existing standards for lease accounting effectively bringing most leases onto the balance sheets of the related lessees by requiring them to recognize a
right-of-use
asset and a corresponding lease liability, while leaving lessor accounting largely unchanged with only targeted changes incorporated into the update. ASU
2016-02
became effective for the Company effective July 1, 2019. As permitted by the amendments, the Company has elected an accounting policy to not recognize lease assets and lease liabilities for leases with a term of twelve months or less. The impact does not have a material effect on the Company’s financial position or results of operations since the Company does not have a material amount of lease agreements.
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 will be effective for interim and annual periods beginning after December 15, 2022. As we prepare for the adoption of ASU
2016-13,
we have engaged a firm specializing in ALLL modeling and have begun transition modeling so we will be ready for the required adoption. As of June 30, 2020, model installation and testing continues and we are still evaluating the test runs for accuracy and directional consistency required to reach a reliable determination as to the final expected impact that the adoption of ASU
2016-13
will have on the consolidated financial statements.
v3.20.2
Securities
12 Months Ended
Jun. 30, 2020
Investments, Debt and Equity Securities [Abstract]  
Securities
Note 2: Securities
The amortized cost and approximate fair values, together with gross unrealized gains and losses, of securities are as follows:
 
   
Amortized
Cost
   
Gross
Unrealized
Gains
   
Gross
Unrealized
Losses
   
Fair Value
 
Available-for-sale
Securities:
        
June 30, 2020:
        
U.S. Government and federal agency and Government
 
sponsored enterprises (GSEs)
  $7,528   $708   $—     $8,236 
Mortgage-backed:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
GSE residential
   143,033    6,044    (222   148,855 
Small Business Administration
   3,578    62    —      3,640 
State and political subdivisions
   1,449    215    (1   1,663 
  
 
 
   
 
 
   
 
 
   
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  $155,588   $7,029   $(223  $162,394 
  
 
 
   
 
 
   
 
 
   
 
 
 
June 30, 2019:
        
U.S. Government and federal agency and Government sponsored
 
enterprises (GSEs)
  $12,654   $296   $—     $12,950 
Mortgage-backed:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
GSE residential
   124,615    1,231    (336   125,510 
Small Business Administration
   4,911    25    (1   4,935 
State and political subdivisions S
   2,725    171    —      2,896 
  
 
 
   
 
 
   
 
 
   
 
 
 
  $144,905   $1,723   $(337  $146,291 
  
 
 
   
 
 
   
 
 
   
 
 
 
 
With the exception of
Mortgage-backed-GSE
residential securities with a book value of $143,033
,000
 
and a market value of $148,855
,000
 
at June 30, 2020, the Company held no securities at June 30, 2020 with a book value that exceeded 10% of total equity.
All mortgage-backed securities at June 30, 2020 and 2019 were issued by government sponsored enterprises.
The amortized cost and fair value of
available-for-sale
securities at June 30, 2020, 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.
 
   
Amortized
Cost
   
Fair Value
 
Within one year
  $—     $—   
One to five years
   6,100    6,658 
Five to ten years
   4,458    4,856 
After ten years
   1,997    2,025 
  
 
 
   
 
 
 
   12,555    13,539 
Mortgage-backed securities
   143,033    148,855 
  
 
 
   
 
 
 
Totals
  $155,588   $162,394 
  
 
 
   
 
 
 
The carrying value of securities pledged as collateral, to secure public deposits and for other purposes, was $66,186
,000
 
at June 30, 2020 and $57,921
,000
 
at June 30, 2019.
Gross gains of $295
,000
 
and $96
,000
 
and gross losses of $28
,000
 
and $85
,000
 
resulting from sales of
available-for-sale
securities were realized for 2020 and 2019, respectively. The tax provision applicable to these net realized gains amounted to approximately $76,000 and $3,000 for 2020 and 2019, 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 June 30, 2020 and 2019, was $24,574
,000
 
and $47,146
,000
,
respectively, which is approximately 16% and 32% of the Company’s
available-for-sale
investment portfolio. These declines in fair value at June 30, 2020 and 2019, resulted from changes in market interest rates and are considered temporary.
The following table shows the Company’s gross unrealized investment losses and the fair value of the Company’s investments with unrealized losses that are not deemed to be other-than-temporarily impaired, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position at June 30, 2020 and 2019:
 
   
Less Than 12 Months
  
12 Months or More
  
Total
 
Description of
Securities
  
Fair Value
 
  
Unrealized
Losses
 
 
Fair Value
 
  
Unrealized
Losses
 
 
Fair Value
 
  
Unrealized
Losses
 
June 30, 2020:
          
Mortgage-backed:
          
GSE residential
  $22,162   $(116 $2,351   $(106 $24,513   $(222
State and political subdivisions
   61    (1  —      —     61    (1
  
 
 
   
 
 
  
 
 
   
 
 
  
 
 
   
 
 
 
Total temporarily impaired securities
  $22,223   $(117 $2,351   $(106 $24,574   $(223
  
 
 
   
 
 
  
 
 
   
 
 
  
 
 
   
 
 
 
June 30, 2019:
          
Mortgage-backed:
          
GSE residential
  $15,167   $(72 $31,049   $(264 $46,216   $(336
Small Business Administration
   930    (1  —      —     930    (1
  
 
 
   
 
 
  
 
 
   
 
 
  
 
 
   
 
 
 
Total temporarily impaired securities
  $16,097   $(73 $31,049   $(264 $47,146   $(337
  
 
 
   
 
 
  
 
 
   
 
 
  
 
 
   
 
 
 
The unrealized losses on the Company’s investment in residential mortgage-backed securities and U.S. Government and federal agency and Government sponsored enterprises at June 30, 2020 and 2019, 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 be other-than-temporarily impaired at June 30, 2020 and 2019.
v3.20.2
Loans and Allowance for Loan Losses
12 Months Ended
Jun. 30, 2020
Receivables [Abstract]  
Loans and Allowance for Loan Losses
Note 3: Loans and Allowance for Loan Losses
Classes of loans at June 30, include:
 
   
2020
  
2019
 
Real estate loans
     
One-
to four-family, including home equity loans
  $128,876  $129,290 
Multi-family
   96,195   104,663 
Commercial
   145,113   143,367 
Home equity lines of credit
   8,551   8,938 
Construction
   22,042   16,113 
Commercial
   107,581   84,246 
Consumer
   7,529   7,136 
  
 
 
  
 
 
 
   515,887  493,753 
  
Less
     
Unearned fees and discounts, net
   (164  (349
Allowance for loan losses
   6,234   6,328 
  
 
 
  
 
 
 
Loans, net
  $509,817  $487,774 
  
 
 
  
 
 
 
The Company had loans held for sale included in
one-
to four-family real estate loans totaling $552,000 and $316,000 as of June 30, 2020 and 2019, respectively.
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 lending activity includes the origination of
one-
to four-family residential mortgage loans, multi-family loans, commercial real estate loans, home equity lines of credits, commercial business loans, consumer (consisting primarily of automobile loans), and construction 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 within 30 miles of a branch or loan production office. The Company also has a loan production and wealth management 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 loan 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 loan officers generally have authority to approve
one-
to four-family residential mortgage loans up to $100,000, other secured loans up to $50,000, and unsecured loans up to $10,000. Managing Officers (those with designated loan approval authority), generally have authority to approve
one-
to four-family residential mortgage loans up to $375,000, other secured loans up to $375,000, and unsecured loans up to $100,000. In addition, any two individual officers may combine their loan authority limits to approve a loan. Our Loan Committee may approve
one-
to four-family residential mortgage loans, commercial real estate loans, multi-family real estate loans and land loans up to $2,000,000 and unsecured loans up to $500,000. All loans above these limits must be approved by the Operating Committee, consisting of the Chairman, and 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.
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 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, Audit Committee 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 credits, 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. In recent years there has been an increased demand for long-term fixed-rate loans, as market rates have dropped and remained near historic lows. As a result, 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 borrower.
The Company offers USDA Rural Development loans which are originated and sold servicing released. The Company also offers 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.
As
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 and credit history of the borrower.
Commercial Real Estate and Multi-Family Real Estate Loans
Commercial real estate mortgage loans are primarily secured by office buildings, owner-occupied businesses, strip mall centers, churches, 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.
 
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 are 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 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 the collateral, if any. The cash flows of the underlying borrower, however, may not perform consistent 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.
Commercial business loans also include Small Business Administration (SBA) Paycheck Protection Program (PPP) loans which are covered by a 100% government guaranty. As of June 30, 2020, the Company had 295 loans totaling $26.2 million.
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 more risky 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 commercial real estate construction loans, amounting to $256,015,000 and $260,888,000 as of June 30, 2020 and 2019, 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 $4,181,000 and $4,844,000 at June 30, 2020 and 2019, respectively. All of 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 include commercial loan participations of $23,950,000 and $29,524,000 at June 30, 2020 and 2019, respectively, of which $8,126,000 and $12,025,000, at June 30, 2020 and 2019 were outside of our primary market area. These participation loans are secured by real estate and other business assets.
The following tables present the balance in the allowance for loan losses and the recorded investment in loans based on portfolio segment and impairment method as of June 30, 2020 and 2019:
 
   
2020
 
   
Real Estate Loans
 
   
One- to four-

family
   
Multi-family
   
Commercial
   
Home Equity
Lines of Credit
 
Allowance for loan losses:
        
Balance, beginning of year
  $1,031   $1,642   $1,623   $89 
Provision charged to expense
   50    (128   83    (2
Losses charged off
   (40   —      —      —   
Recoveries
   3    —      —      —   
  
 
 
   
 
 
   
 
 
   
 
 
 
Balance, end of period
  $1,044   $1,514   $1,706   $87 
  
 
 
   
 
 
   
 
 
   
 
 
 
Ending balance: individually evaluated for impairment
  $—     $—     $—     $—   
  
 
 
   
 
 
   
 
 
   
 
 
 
Ending balance: collectively evaluated for impairment
  $1,044   $1,514   $1,706   $87 
  
 
 
   
 
 
   
 
 
   
 
 
 
Loans:
        
Ending balance
  $128,876   $96,195   $145,113   $8,551 
  
 
 
   
 
 
   
 
 
   
 
 
 
Ending balance: individually evaluated for impairment
  $1,336   $—     $—     $15 
  
 
 
   
 
 
   
 
 
   
 
 
 
Ending balance: collectively evaluated for impairment
  $127,540   $96,195   $145,113   $8,536 
  
 
 
   
 
 
   
 
 
   
 
 
 
 
 
 
 
   
2020 (Continued)
 
   
Construction
   
Commercial
   
Consumer
   
Total
 
Allowance for loan losses:
        
Balance, beginning of year
  $213   $1,659   $71   $6,328 
Provision charged to expense
   27    84    14    128 
Losses charged off
   —      (191   (37   (268
Recoveries
   —      31    12    46 
  
 
 
   
 
 
   
 
 
   
 
 
 
Balance, end of year
  $240   $1,583   $60   $6,234 
  
 
 
   
 
 
   
 
 
   
 
 
 
Ending balance: individually evaluated for impairment
  $—     $—     $—     $—   
  
 
 
   
 
 
   
 
 
   
 
 
 
Ending balance: collectively evaluated for impairment
  $240   $1,583   $60   $6,234 
  
 
 
   
 
 
   
 
 
   
 
 
 
Loans:
        
Ending balance
  $22,042   $107,581   $7,529   $515,887 
  
 
 
   
 
 
   
 
 
   
 
 
 
Ending balance: individually evaluated for impairment
  $—     $304   $5   $1,660 
  
 
 
   
 
 
   
 
 
   
 
 
 
Ending balance: collectively evaluated for impairment
  $22,042   $107,277   $7,524   $514,227 
  
 
 
   
 
 
   
 
 
   
 
 
 
 
 
 
 
   
2019
 
   
Real Estate Loans
 
   
One- to four-

family
   
Multi-family
   
Commercial
   
Home Equity 
Lines
 
of Credit
 
Allowance for loan losses:
        
Balance, beginning of year
  $997   $1,650   $1,604   $91 
Provision charged to expense
   29    (8   19    13 
Losses charged off
   (17   —      —      (15
Recoveries
   22    —      —      —   
  
 
 
   
 
 
   
 
 
   
 
 
 
Balance, end of period
  $1,031   $1,642   $1,623   $89 
  
 
 
   
 
 
   
 
 
   
 
 
 
Ending balance: individually evaluated for impairment
  $13   $—     $—     $—   
  
 
 
   
 
 
   
 
 
   
 
 
 
Ending balance: collectively evaluated for impairment
  $1,018   $1,642   $1,623   $89 
  
 
 
   
 
 
   
 
 
   
 
 
 
Loans:
        
Ending balance
  $129,290   $104,663   $143,367   $8,938 
  
 
 
   
 
 
   
 
 
   
 
 
 
Ending balance: individually evaluated for impairment
  $1,722   $—     $18   $22 
  
 
 
   
 
 
   
 
 
   
 
 
 
Ending balance: collectively evaluated for impairment
  $127,568   $104,663   $143,349   $8,916 
  
 
 
   
 
 
   
 
 
   
 
 
 
 
 
 
 
   
2019 (Continued)
 
   
Construction
   
Commercial
   
Consumer
   
Total
 
Allowance for loan losses:
        
Balance, beginning of year
  $168   $1,373   $62   $5,945 
Provision charged to expense
   45    286    23    407 
Losses charged off
   —      —      (18   (50
Recoveries
   —      —      4    26 
  
 
 
   
 
 
   
 
 
   
 
 
 
Balance, end of year
  $213   $1,659   $71   $6,328 
  
 
 
   
 
 
   
 
 
   
 
 
 
Ending balance: individually evaluated for impairment
  $—     $—     $10   $23 
  
 
 
   
 
 
   
 
 
   
 
 
 
Ending balance: collectively evaluated for impairment
  $213   $1,659   $61   $6,305 
  
 
 
   
 
 
   
 
 
   
 
 
 
Loans:
        
Ending balance
  $16,113   $84,246   $7,136   $493,753 
  
 
 
   
 
 
   
 
 
   
 
 
 
Ending balance: individually evaluated for impairment
  $—     $60   $29   $1,851 
  
 
 
   
 
 
   
 
 
   
 
 
 
Ending balance: collectively evaluated for impairment
  $16,113   $84,186   $7,107   $491,902 
  
 
 
   
 
 
   
 
 
   
 
 
 
 
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.
Allowance for Loan Losses
The allowance for loan losses represents an estimate of the amount of losses believed inherent in our loan portfolio at the balance sheet date. The allowance calculation involves a high degree of estimation that management attempts to mitigate through the use of objective historical data where available. Loan losses are charged against the allowance for loan losses when management believes that the loan balance is confirmed as uncollectible. Subsequent recoveries, if any, are credited to the allowance. Overall, we believe the reserve to be consistent with prior periods and adequate to cover the estimated losses in our loan portfolio.
The Company’s methodology for assessing the appropriateness of the allowance for loan losses consists of two key elements: (1) specific allowances for estimated credit losses on individual loans that are determined to be impaired through the Company’s review for identified problem loans; and (2) a general allowance based on estimated credit losses inherent in the remainder of the loan portfolio.
The specific allowance is measured by determining the present value of expected cash flows, the loan’s observable market value, or for collateral-dependent loans, 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 deemed impaired 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 segregating the loans by loan category and assigning allowance percentages based on the Company’s historical loss experience, delinquency trends, and management’s evaluation of the collectability of the loan portfolio. In certain instances, the historical loss experience could be adjusted if similar risks are not inherent in the remaining portfolio. The allowance is then adjusted for qualitative factors that, in management’s judgment, affect the collectability of the portfolio as of the evaluation date. These qualitative factors may include: (1) Management’s assumptions regarding the minimal level of risk for a given loan category; (2) changes in lending policies and procedures, including changes in underwriting standards, and
charge-off
and recovery practices not considered elsewhere in estimating credit losses; (3) changes in international, national, regional and local economics and business conditions and developments that affect the collectability of the portfolio, including the conditions of various market segments; (4) changes in the nature and volume of the portfolio and in the terms of loans; (5) changes in the experience, ability, and depth of the lending officers and other relevant staff; (6) changes in the volume and severity of past due loans, the volume of
non-accrual
loans, the volume of troubled debt restructured and other loan modifications, and the volume and severity of adversely classified loans; (7) changes in the quality of the loan review system; (8) changes in the value of the underlying collateral for collateral-dependent loans; (9) the existence and effect of any concentrations of credit, and changes in the level of such concentrations; and (10) the effect of other external factors such as competition and legal and regulatory requirements on the level of estimated credit losses in the existing portfolio. The applied loss factors are
re-evaluated
quarterly to ensure their relevance in the current environment.
Although the Company’s policy allows for a general valuation allowance on certain smaller-balance, homogenous pools of loans classified as substandard, the Company has historically evaluated every loan classified as substandard, regardless of size, for impairment as part of the review for establishing specific allowances. The Company’s policy also allows for general valuation allowance on certain smaller-balance, homogenous pools of loans which are loans criticized as special mention or watch. A separate general allowance calculation is made on these loans based on historical measured weakness, and which is no less than twice the amount of the general allowance calculated on the
non-classified
loans.
There have been no changes to the Company’s accounting policies or methodology from the prior periods.
Credit Quality Indicators
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 circumstances of the borrower warrant a more timely 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 the collateral pledged, if any. 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.
 
Commercial:
 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, as of June 30, 2020 and 2019, based on rating category and payment activity:
 
 
  
Real Estate Loans
 
  
 
 
June 30
, 2020
  
One-
to
four-family
 
  
Multi-
family
 
  
Commercial
 
  
Home Equity
Lines of Credit
 
  
Construction
 
Pass
  $127,279   $95,925   $143,727   $8,402   $22,042 
Watch
   775    —      1,073    134    —   
Substandard
   822    270    313    15    —   
Doubtful
   —      —      —      —      —   
Loss
   —      —      —      —      —   
  
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Total
  $128,876   $96,195   $145,113   $8,551   $22,042 
  
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
June 30
, 2020
, (Continued)
  
Commercial
 
  
Consumer
 
  
Total
 
Pass
  $105,605   $7,524   $510,504 
Watch
   1,651    —      3,633 
Substandard
   81    5    1,506 
Doubtful
   244    —      244 
Loss
   —      —      —   
Total
  $107,581   $7,529   $515,887 
 
 
  
Real Estate Loans
 
  
 
 
June 30
, 2019
  
One-
to
four-family
 
  
Multi-
family
 
  
Commercial
 
  
Home Equity
Lines of Credit
 
  
Construction
 
Pass
  $127,386   $104,504   $142,076   $8,918   $16,113 
Watch
   —      —      1,040    —      —   
Substandard
   1,904    159    251    20    —   
Doubtful
   —      —      —      —      —   
Loss
   —      —      —      —      —   
  
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Total
  $129,290   $104,663   $143,367   $8,938   $16,113 
  
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
June 30
, 2019
, (Continued)
  
Commercial
 
  
Consumer
 
  
Total
 
Pass
  $81,906   $7,107   $488,010
Watch
   1,375    —      2,415
Substandard
   965    19    3,318
Doubtful
   —      10    10
Loss
   —      —      —  
Total
  $84,246   $7,136   $493,753
The following tables present the Company’s loan portfolio aging analysis as of June 30, 2020 and 2019:
 
   
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, 2020
              
Real estate loans:
              
One-
to four-family
  $1,034   $225   $385   $1,644   $127,232   $128,876   $304 
Multi-family
   —      —      —      —      96,195    96,195    —   
Commercial
   172    95    —      267    144,846    145,113    —   
Home equity lines of credit
   —      —      —      —      8,551    8,551    —   
Construction
   —      —      —      —      22,042    22,042    —   
Commercial
   —      4    244    248    107,333    107,581    —   
Consumer
   24    43    —      67    7,462    7,529    —   
  
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Total
  $1,230   $367   $629   $2,226   $513,661   $515,887   $304 
  
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
June 30, 2019
              
Real estate loans:
              
One-
to four-family
  $1,515   $255   $481   $2,251   $127,039   $129,290   $226 
Multi-family
   422    —      —      422    104,241    104,663    —   
Commercial
   74    6    12    92    143,275    143,367    —   
Home equity lines of credit
   —      26    20    46    8,892    8,938    —   
Construction
   —      —      —      —      16,113    16,113    —   
Commercial
   291    —      60    351    83,895    84,246    —   
Consumer
   99    —      29    128    7,008    7,136    —   
  
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Total
  $2,401   $287   $602   $3,290   $490,463   $493,753   $226 
  
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
 
A loan is considered impaired, in accordance with the impairment accounting guidance (ASC
310-10-35-16),
when based on current information and events, it is probable the Company will be unable to collect all amounts due from the borrower in accordance with the contractual terms of the loan. Factors considered by management in determining impairment include payment status, collateral value, and the probability of collecting scheduled principal and interest payments when due. Loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired. Management determines the significance of payment delays and payment shortfalls on a
case-by-case
basis, taking into consideration all of the circumstances surrounding the loans and the borrower, including the length of the delay, the reasons for the delay, the borrower’s prior payment record, and the amount of the shortfall in relation to the principal and interest owed.
Impairment is measured on a
loan-by-loan
basis by either the present value of the expected future cash flows, the loan’s observable market value, or, for collateral-dependent loans, the fair value of the collateral adjusted for market conditions and selling expenses. Significant restructured loans are considered impaired in determining the adequacy of the allowance for loan losses.
The Company actively seeks to reduce its investment in impaired loans. The primary tools to work through impaired loans are settlement with the borrowers or guarantors, foreclosure of the underlying collateral, or restructuring. Included in certain loan categories in the impaired loans are $1.3 million in troubled debt restructurings that were classified as impaired.
 
The following tables present impaired loans for year ended June 30, 2020 and 2019:
 
   
June 30, 2020
 
   
Recorded
Balance
   
Unpaid
Principal
Balance
   
Specific
Allowance
   
Average
Investment in
Impaired
Loans
   
Interest
Income
Recognized
   
Interest on
Cash Basis
 
Loans without a specific allowance:
            
Real estate loans:
            
One-
to four-family
  $1,336   $1,336   $—     $1,388   $61   $62 
Multi-family
   —      —      —      —      —      —   
Commercial
   —      —      —      3    —      —   
Home equity lines of credit
   15    15    —      18    —      —   
Construction
   —      —      —      —      —      —   
Commercial
   304    304    —      382    23    25 
Consumer
   5    5    —      9    —      —   
Loans with a specific allowance:
            
Real estate loans:
            
One-
to four-family
  $—     $—     $—     $—     $—     $—   
Multi-family
   —      —      —      —      —      —   
Commercial
   —      —      —      —      —      —   
Home equity lines of credit
   —      —      —      —      —      —   
Construction
   —      —      —      —      —      —   
Commercial
   —      —      —      —      —      —   
Consumer
   —      —      —      —      —      —   
Total:
            
Real estate loans:
            
One-
to four-family
  $1,336   $1,336   $—     $1,388   $61   $62 
Multi-family
   —      —      —      —      —      —   
Commercial
   —      —      —      3    —      —   
Home equity lines of credit
   15    15    —      18    —      —   
Construction
   —      —      —      —      —      —   
Commercial
   304    304    —      382    23    25 
Consumer
   5    5    —      9    —      —   
  
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Total
  $1,660   $1,660   $—     $1,800   $84   $87 
  
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
 
   
June 30, 2019
 
   
Recorded
Balance
   
Unpaid
Principal
Balance
   
Specific
Allowance
   
Average
Investment in
Impaired
Loans
   
Interest
Income
Recognized
   
Interest on
Cash Basis
 
Loans without a specific allowance:
            
Real estate loans:
            
One-
to four-family
  $1,676   $1,676   $—     $1,718   $63   $71 
Multi-family
   —      —      —      1    —      —   
Commercial
   18    18    —      34    —      —   
Home equity lines of credit
   22    22    —      24    1    2 
Construction
   —      —      —      —      —      —   
Commercial
   60    60    —      63    6    6 
Consumer
   19    19    —      24    2    2 
Loans with a specific allowance:
            
Real estate loans:
            
One-
to four-family
  $46   $46   $13   $47   $1   $1 
Multi-family
   —      —      —      —      —      —   
Commercial
   —      —      —      —      —      —   
Home equity lines of credit
   —      —      —      —      —      —   
Construction
   —      —      —      —      —      —   
Commercial
   —      —      —      —      —      —   
Consumer
   10    10    10    11    1    1 
Total:
            
Real estate loans:
            
One-
to four-family
  $1,722   $1,722   $13   $1,765   $64   $72 
Multi-family
   —      —      —      1    —      —   
Commercial
   18    18    —      34    —      —   
Home equity lines of credit
   22    22    —      24    1    2 
Construction
   —      —      —      —      —      —   
Commercial
   60    60    —      63    6    6 
Consumer
   29    29    10    35    3    3 
  
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Total
  $1,851   $1,851   $23   $1,922   $74   $83 
  
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Interest income recognized on impaired loans includes interest accrued and collected on the outstanding balances of accruing impaired loans as well as interest cash collections on
non-accruing
impaired loans for which the ultimate collectability of principal is not uncertain.
The following table presents the Company’s nonaccrual loans at June 30, 2020 and 2019:
 
   
2020
   
2019
 
Real estate loans
    
One-
to four-family, including home equity loans
  $81   $414 
Multi-family
   —      —   
Commercial
   —      18 
Home equity lines of credit
   15    20 
Construction
   —      —   
Commercial
   304    60 
Consumer
   5    29 
  
 
 
   
 
 
 
Total
  $405   $541 
  
 
 
   
 
 
 
At June 30, 2020 and 2019, the Company had a number of loans that were modified in troubled debt restructurings (TDR’s) and impaired. The modification of terms of such loans included one or a combination of the following: an extension of maturity, a reduction of the stated interest rate or a permanent reduction of the recorded investment in the loan.
The following table presents the recorded balance, at original cost, of troubled debt restructurings, as of June 30, 2020 and 2019. With the exception of
 
a single
one-
to four-family loan for $127,000, all were performing according to the terms of the restructuring as of June 30, 2020, and with the exception of three
one-
to four-family loans totaling $8,000, one home equity line of credit for $20,000, and one consumer loan for $2,000, all loans were performing according to the terms of restructuring as of June 30, 2019. As of June 30, 2020 all loans listed were on nonaccrual except for nine
one-
to four-family residential loans totaling $1.3 million. As of June 30, 2019 all loans listed were on nonaccrual except for ten
one-
to four-family residential loans totaling $1.3 million, one home equity line of credit for $1,000.    
 
   
June 30,
2020
   
June 30,
2019
 
Real estate loans
    
One-
to four-family
  $1,256   $1,475 
Multi-family
   —      —   
Commercial
   —      6 
Home equity lines of credit
   15    22 
  
 
 
   
 
 
 
Total real estate loans
   1,271    1,503 
  
 
 
   
 
 
 
Construction
   —      —   
Commercial
   59    —   
Consumer
   —      2 
  
 
 
   
 
 
 
Total
  $1,330   $1,505 
  
 
 
   
 
 
 
 
The following table represents loans modified as troubled debt restructurings during the years ending June 30, 2020 and 2019:
 
   
Year Ended June 30, 2020
   
Year Ended June 30, 2019
 
   
Number of
Modifications
   
Recorded
Investment
   
Number of
Modifications
   
Recorded
Investment
 
Real estate loans:
        
One-
to four-family
   —     $—      1   $159 
Home equity lines of credit
   —      —      —      —   
Multi-family
   —      —      —      —   
Commercial
   —      —      —      —   
  
 
 
   
 
 
   
 
 
   
 
 
 
Total real estate loans
   —      —      1    159 
  
 
 
   
 
 
   
 
 
   
 
 
 
Construction
   —      —      —      —   
Commercial
   1    61    —      —   
Consumer loans
   —      —      —      —   
  
 
 
   
 
 
   
 
 
   
 
 
 
Total
   1   $61    1   $159 
  
 
 
   
 
 
   
 
 
   
 
 
 
2020 Modifications
During the year ended June 30, 2020, the Company modified one commercial business loan in the amount of $61,000. This modification included a decrease in interest rate and a maturity concession.
2019 Modifications
During the year ended June 30, 2019, the Company modified
 
a
single
one-
to four-family loan in the amount of $166,000. This modification did not include any concessions, but was considered a TDR since the customer was in bankruptcy.
COVID-19
Modifications
Under the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) that was signed into law on March 27, 2020, certain
COVID-19
loan modifications are not designated as TDRs. The CARES Act allows the Company to presume a loan modification is not a TDR if it is (1) related to
COVID-19;
(2) executed on a loan that was not more than 30 days past due as of December 31, 2019; and (3) executed between March 1, 2020, and the earlier of (a) 60 days after the date of termination of the National Emergency or (b) December 31, 2020. During the year ended June 30, 2020, the Company had 176
COVID-19
loan modifications for a total of $85.6 million. These modifications allowed borrowers to pay interest only for up to six months.
 
TDRs with Defaults
The Company had one TDR, a
one-
to four-family residential loans for $127,000 that was in default as of June 30, 2020, and was restructured in prior years. No restructured loans were in foreclosure at June 30, 2020. The Company had six TDRs, four
one-
to four-family residential loans for $144,000, one home equity line of credit for $20,000, and one consumer loan for $2,000 that were in default as of June 30, 2019, and was restructured in prior years. No restructured loans were in foreclosure at June 30, 2019. The Company defines a default as any loan that becomes 90 days or more past due.
Specific loss allowances are included in the calculation of estimated future loss ratios, which are applied to the various loan portfolios for purposes of estimating future losses.
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 loan losses. We believe the qualitative adjustments more accurately reflect collateral values in light of the sales and economic conditions that we have recently observed.
We may obtain physical possession of real estate collateralizing a residential mortgage loan or home equity loan via foreclosure or
in-substance
repossession. As of June 30, 2020 and 2019, the carrying value of foreclosed residential real estate properties as a result of obtaining physical possession was $186,000 and $539,000, respectively. In addition, as of June 30, 2020 and 2019, we had residential mortgage loans and home equity loans with a carrying value of $41,000 and $200,000, respectively, collateralized by residential real estate property for which formal foreclosure proceedings were in process.
v3.20.2
Premises and Equipment
12 Months Ended
Jun. 30, 2020
Property, Plant and Equipment [Abstract]  
Premises and Equipment
Note 4: Premises and Equipment
Major classifications of premises and equipment, stated at cost, are as follows:
 
   
2020
   
2019
 
Land
  $1,976   $1,976 
Buildings and improvements
   11,338    11,319 
Furniture and equipment
   4,895    4,756 
  
 
 
   
 
 
 
   18,209    18,051 
Less accumulated depreciation
   8,016    7,345 
  
 
 
   
 
 
 
Net premises and equipment
  $10,193   $10,706 
  
 
 
   
 
 
 
v3.20.2
Loan Servicing
12 Months Ended
Jun. 30, 2020
Transfers and Servicing [Abstract]  
Loan Servicing
Note 5: Loan Servicing
Mortgage loans serviced for others are not included in the accompanying consolidated balance sheets. The unpaid principal balance of mortgage loans serviced for others was $116,696,000 and $99,021,000 at June 30, 2020 and 2019, respectively.
Custodial escrow balances in connection with the foregoing loan servicing were $672,000 and $652,000 at June 30, 2020 and 2019, respectively.
The aggregate fair value of capitalized mortgage servicing rights at June 30, 2020 and 2019 was $715,000 and $853,000, respectively. Comparable market values and a valuation model that calculates the present value of future cash flows were used to estimate fair value. The valuation model incorporates assumptions that market participants would use in estimating future net servicing income, such as costs to service, a discount rate, custodial earnings rate, default rates and losses and prepayment speeds.
The following summarizes the activity in mortgage servicing rights measured using the fair value method:
 
   
2020
   
2019
 
Fair value, beginning of period
  $853   $866 
Additions:
    
Servicing assets resulting from asset transfers
   255    144 
Subtractions:
    
Payments received and loans refinanced
   (99   (112
Changes in fair value, due to changes in valuation
 
inputs or assumptions
   (294   (45
  
 
 
   
 
 
 
Fair value, end of period
  $715   $853 
  
 
 
   
 
 
 
For purposes of measuring impairment, risk characteristics including product type, investor type, and interest rates, were used to stratify the originated mortgage servicing rights.
v3.20.2
Interest-Bearing Deposits
12 Months Ended
Jun. 30, 2020
Banking and Thrift [Abstract]  
Interest-Bearing Deposits
Note 6: Interest-bearing Deposits
Interest-bearing deposits in denominations of $100,000 or more were $276,821,000 at June 30, 2020 and $260,311,000 at June 30, 2019.
The following table represents interest expense by deposit type:
 
   
2020
   
2019
 
Savings, NOW, and Money Market
  $1,405   $1,574 
Certificates of deposit
   5,962    4,954 
Brokered certificates of deposit
   543    789 
  
 
 
   
 
 
 
Total deposit interest expense
  $7,910   $7,317 
  
 
 
   
 
 
 
 
At June 30, 2020, the scheduled maturities of time deposits; including brokered time deposits, are as follows:
 
2021
  $248,359 
2022
   23,848 
2023
   6,928 
2024
   1,490 
2025 and thereafter
   866 
  
 
 
 
  $281,491 
  
 
 
 
v3.20.2
Federal Home Loan Bank Advances
12 Months Ended
Jun. 30, 2020
Banking and Thrift [Abstract]  
Federal Home Loan Bank Advances
Note 7: Federal Home Loan Bank Advances
The Federal Home Loan Bank advances totaled $34,500
,000
 
and $24,000
,000
 
as of June 30, 2020 and 2019, respectively. The Federal Home Loan Bank advances are secured by mortgage, multi-family, commercial real estate, and HELOC loans totaling $315,819
,000
 
at June 30, 2020. Advances at June 30, 2020, at interest rates from 0.00 to 2.89 percent are subject to restrictions or penalties in the event of prepayment.
Aggregate annual maturities of Federal Home Loan Bank advances at June 30, 2020, are:
 
2021
  $19,500 
2022
   —   
2023
   5,000 
2024
   10,000 
2025
   —   
Thereafter
   —   
  
 
 
 
  $34,500 
  
 
 
 
v3.20.2
Lines of Credit
12 Months Ended
Jun. 30, 2020
Line of Credit Facility [Abstract]  
Lines of Credit
Note 8: Lines of Credit
In September of 2019, the Company secured a revolving line of credit up to $7.5 million from CIBC BANK USA for general corporate purposes. The Company has a current balance of $3.0 million at an interest rate of 2.50%. The current note matures in September, 2020.
 
v3.20.2
Repurchase Agreements
12 Months Ended
Jun. 30, 2020
Brokers and Dealers [Abstract]  
Repurchase Agreements
Note 9: Repurchase Agreements
Securities sold under agreements to repurchase consist of obligations of the Company to other parties. The carrying value of securities sold under agreement to repurchase amounted to $3.7 million at June 30, 2020 and $2.0 million at June 30, 2019. At June 30, 2020, approximately $2.0 million of our repurchase agreements had an overnight maturity, while the remaining $1.7 million in repurchase agreements had a term of 30 to 90 days. The maximum amount of outstanding agreements at any
month-end
during 2020 and 2019 totaled $3,939,000 and $2,840,000, respectively, and the monthly average of such agreements totaled $3,398,000 and $2,400,000 for 2020 and 2019, respectively. 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.
v3.20.2
Income Taxes
12 Months Ended
Jun. 30, 2020
Income Tax Disclosure [Abstract]  
Income Taxes
Note 10: Income Taxes
The Company and its subsidiary file income tax returns in the U.S. federal jurisdiction and the States of Illinois and Missouri. During the years ended June 30, 2020 and 2019, the Company did not recognize expense for interest or penalties.
The provision for income taxes includes these components:
 
   
2020
   
2019
 
Taxes currently payable
  $1,654   $1,217 
Deferred income taxes
   (15   76 
  
 
 
   
 
 
 
Income tax expense
  $1,639   $1,293 
  
 
 
   
 
 
 
A reconciliation of income tax expense at the statutory rate to the Company’s actual income tax expense is shown below:
 
   
2020
  
2019
 
Computed at the statutory rate of 21.0%
  $1,236  $1,019 
Increase (decrease) resulting from
   
Tax exempt interest
   (16  (26
Cash surrender value of life insurance
   (57  (56
State income taxes
   441   329 
Other
   35   27 
  
 
 
  
 
 
 
Actual tax expense
  $1,639  $1,293 
  
 
 
  
 
 
 
Tax rate as a percentage of
pre-tax
income
   27.9  26.7
 
The tax effects of temporary differences related to deferred taxes shown on the consolidated balance sheets were:
 
   
2020
   
2019
 
Deferred tax assets
    
Allowance for loan losses
  $1,776   $1,802 
Accrued retirement liability
   677    651 
Deferred compensation
   468    422 
Deferred loan fees
   291    83 
Postretirement health plan
   264    170 
Accrued vacation
   66    46 
MPF recourse liability
   97    66 
Deferred revenue Mastercard
   23    27 
Stock options – Directors
   50    42 
Restricted stock
   11    (9
Accrued professional services
   18    —   
Other
   7    12 
  
 
 
   
 
 
 
   3,748    3,312 
  
 
 
   
 
 
 
Deferred tax liabilities
    
Depreciation
   (731   (426
Mortgage servicing rights
   (204   (243
Deferred loan expense
   (181   (182
Unrealized gains on
available-for-sale
securities
   (1,940   (395
Prepaid expenses
   (62   —   
  
 
 
   
 
 
 
   (3,118   (1,246
  
 
 
   
 
 
 
Net deferred tax asset
  $630   $2,066 
  
 
 
   
 
 
 
Retained earnings at both June 30, 2020 and 2019, include approximately $2,217,000, for which no deferred federal income tax liability has been recognized. These amounts represent an allocation of income to bad debt deductions for tax purposes only. Reduction of amounts so allocated for purposes other than tax bad debt losses or adjustments arising from carryback of net operating losses would create income for tax purposes only, which would be subject to the then-current corporate income tax rate. The deferred income tax liabilities on the preceding amounts that would have been recorded if they were expected to reverse into taxable income in the foreseeable future were approximately $466,000 at both June 30, 2020 and 2019.
v3.20.2
Accumulated Other Comprehensive Income
12 Months Ended
Jun. 30, 2020
Equity [Abstract]  
Accumulated Other Comprehensive Income
Note 11: Accumulated Other Comprehensive Income
The components of accumulated other comprehensive income, included in stockholders’ equity, are as follows:
 
   
2020
   
2019
 
Net unrealized gains on securities available for sale
  $6,805   $1,386 
Net unrealized postretirement health benefit plan obligations
   (926   (596
  
 
 
   
 
 
 
   5,879    790 
Tax effect
   (1,676   (225
  
 
 
   
 
 
 
Net-of-tax
amount
  $4,203   $565 
  
 
 
   
 
 
 
v3.20.2
Changes in Accumulated Other Comprehensive Income (AOCI) by Component
12 Months Ended
Jun. 30, 2020
Text Block [Abstract]  
Changes in Accumulated Other Comprehensive Income (AOCI) by Component
Note 12: Changes in Accumulated Other Comprehensive Income (AOCI) by Component
Amounts reclassified from AOCI and the affected line items in the statements of income during the years ended June 30, 2020 and 2019, were as follows:
 
   
Amounts Reclassified
From AOCI
    
   
2020
   
2019
   
Affected Line Item in the
Condensed Consolidated
Statements of Income
Realized gains on
available-for-sale
securities
  $267   $11   Net realized gains on sale of
 
available-for-sale securities
Amortization of defined benefit pension items:
      
Actuarial losses
   359    104   Components are included in
 
computation of net periodic
 
pension cost
  
 
 
   
 
 
   
Total reclassified amount before tax
   626    115   
Tax expense
   199    11   Provision for Income Tax
  
 
 
   
 
 
   
Total reclassification out of AOCI
  $427   $104   Net Income
  
 
 
   
 
 
   
v3.20.2
Regulatory Matters
12 Months Ended
Jun. 30, 2020
Banking and Thrift [Abstract]  
Regulatory Matters
Note 13: Regulatory Matters
The Association is subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory and discretionary actions by regulators that if undertaken, could have a direct material effect on the Association’s financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Association must meet specific capital guidelines involving quantitative measures of the Association’s assets, liabilities and certain
off-balance-sheet
items as calculated under regulatory accounting practices. The Association’s capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk-weightings and other factors.
The Basel III regulatory capital framework (the “Basel III Capital Rules”) adopted by U.S. federal regulatory authorities, among other things, (i) establish the capital measure called “Common Equity Tier 1” (“CET1”), (ii) specify that Tier 1 capital consist of CET1 and “Additional Tier 1 Capital” instruments meeting stated requirements, (iii) define CET1 narrowly by requiring that most deductions/adjustments to regulatory capital measures be made to CET1 and not to the other components of capital and (iv) set forth the acceptable scope of deductions/adjustments to the specified capital measures. The Basel III Capital Rules became effective for us on January 1, 2015 with certain transition provisions fully phased in on January 1, 2019.
Additionally, the Basel III Capital Rules require that we maintain a capital conservation buffer with respect to each of the CET1, Tier 1 and total capital to risk-weighted assets, which provides for capital levels that exceed the minimum risk-based capital adequacy requirements. The capital conservation buffer was phased in and became fully phased in on January 1, 2019 at 2.5%. A financial institution with a conservation buffer of less than the required amount is subject to limitations on capital distributions, including dividend payments and stock repurchases, and certain discretionary bonus payments to executive officers.
As a result of the recently enacted 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 federal banking agencies have issued a final rule setting the Community Bank Leverage Ratio at 9%, effective with the quarter ended March 31, 2020. On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) was enacted, which temporarily reduced the required Community Bank Leverage Ratio to 8% through the end of 2020, and to 8.5% throughout 2021, before returning to 9% in 2022. The Association “opted in” to elect the Community Bank Leverage Ratio, effective with the quarter ended March 31, 2020.
As of June 30, 2020 and 2019, the Association was categorized as well capitalized under the regulatory framework for prompt corrective action. To be categorized as well capitalized at June 30, 2020, the Association has to maintain a minimum Community Bank Leverage Ratio as disclosed in the table below. To be categorized as well capitalized at June 30, 2019, the Association had to maintain minimum total risk-based, Tier 1 risk-based, and Tier 1 leverage ratios as disclosed in the table below. There are no conditions or events that management believes have changed the Association’s prompt corrective action category. The Association’s actual capital amounts (in thousands) and ratios are also presented in the table.
 
   
Actual
   
Minimum
Capital Requirement
   
Minimum to Be Well
Capitalized Under Prompt
Corrective Action
Provisions
 
   
Amount
   
Ratio
   
Amount
   
Ratio
   
Amount
   
Ratio
 
As of June 30, 2020
            
Community Bank Leverage Ratio
  $76,428    10.68  $57,238    8.00  $57,238    8.00
Total capital (to risk-weighted assets)
   N/A    N/A    N/A    N/A    N/A    N/A 
Tier 1 capital (to risk-weighted assets)
   N/A    N/A    N/A    N/A    N/A    N/A 
Common Equity Tier 1 capital (to risk-weighted assets)
   N/A    N/A    N/A    N/A    N/A    N/A 
Tier 1 capital (to adjusted total assets)
   76,428    10.68   28,619    4.00   35,774    5.00
Tangible capital (to adjusted tangible assets)
   76,428    10.68   10,732    1.50   N/A    N/A 
As of June 30, 2019
            
Community Bank Leverage Ratio
  $N/A    N/A  $N/A    N/A  $N/A    N/A
Total capital (to risk-weighted assets)
   81,624    16.28   40,119    8.00   50,149    10.00
Tier 1 capital (to risk-weighted assets)
   75,355    15.03   30,090    6.00   40,119    8.00
Common Equity Tier 1 capital (to risk-weighted assets)
   75,355    15.03   22,567    4.50   32,597    6.50
Tier 1 capital (to adjusted total assets)
   75,355    10.96   27,513    4.00   34,392    5.00
Tangible capital (to adjusted tangible assets)
   75,355    10.96   10,317    1.50   N/A    N/A 
 
The following is a reconciliation of the Association equity amounts included in the consolidated balance sheets to the amounts reflected for regulatory purposes:
 
   
2020
   
2019
 
Association equity
  $80,631   $75,920 
Less net unrealized gains
   4,865    991 
Less postretirement benefit plan
   (662   (426
  
 
 
   
 
 
 
Tier 1 capital
   76,428    75,355 
Plus allowance for loan losses subject to limit
   6,234    6,269 
  
 
 
   
 
 
 
Total risk-based capital
  $82,662   $81,624 
  
 
 
   
 
 
 
The Association’s ability to pay dividends on its common stock to the Company is restricted to maintain adequate capital as shown in the previous tables. Additionally, prior regulatory approval is required for the declaration of any dividends generally in excess of the sum of net income for the calendar year and retained net income for the preceding two calendar years.
v3.20.2
Related Party Transactions
12 Months Ended
Jun. 30, 2020
Related Party Transactions [Abstract]  
Related Party Transactions
Note 14: Related Party Transactions
At June 30, 2020 and 2019, the Company had loans outstanding to executive officers, directors, significant members and their affiliates (related parties). Changes in loans to executive officers and directors are summarized as follows:
 
   
2020
   
2019
 
Balance, beginning of year
  $3,033   $3,132 
New loans
   1,087    756 
Repayments
   (779   (855
  
 
 
   
 
 
 
Balance, end of year
  $3,341   $3,033 
  
 
 
   
 
 
 
Deposits from related parties held by the Company at June 30, 2020 and 2019 totaled $1,526,000 and $1,482,000, respectively.
In management’s opinion, such loans and other extensions of credit and deposits were made in the ordinary course of business and were made on substantially the same terms (including interest rates and collateral) as those prevailing at the time for comparable transactions with other persons. Further, in management’s opinion, these loans did not involve more than normal risk of collectability or present other unfavorable features.
v3.20.2
Employee Benefits
12 Months Ended
Jun. 30, 2020
Retirement Benefits [Abstract]  
Employee Benefits
Note 15: Employee Benefits
The Company sponsors a noncontributory postretirement health benefit plan (postretirement plan). The postretirement plan provides medical coverage benefits for former employees and their spouses upon retirement. The postretirement plan has no assets to offset the future liabilities incurred under the postretirement plan. The Company’s funding policy is to make the minimum annual contribution that is required by applicable regulations, plus such amounts as the Company may determine to be appropriate from time to time. The Company expects to contribute $191,000 to the plan in fiscal year 2021.
The Company uses a June 30 measurement date for the plan. Information about the plan’s funded status and pension cost follows:
 
   
2020
   
2019
 
Change in benefit obligation
    
Beginning of year
  $ 2,919   $ 2,770 
Service cost
   53    50 
Interest cost
   93    107 
Actuarial gain
   355    106 
Benefits paid
   (114   (114
  
 
 
   
 
 
 
End of year
  $3,306   $2,919 
  
 
 
   
 
 
 
Significant balances, costs and assumptions are:
 
   
Postretirement Plan
 
   
2020
   
2019
 
Benefit obligation
  $3,306   $2,919 
Fair value of plan assets
   —      —   
  
 
 
   
 
 
 
Funded status
  $(3,306  $(2,919
  
 
 
   
 
 
 
Accumulated benefit obligation
  $3,306   $2,919 
  
 
 
   
 
 
 
Amounts recognized in the consolidated balance sheets:
 
 
 
 
 
 
 
 
Accrued benefit cost
  $3,306   $2,919 
 
Components of net periodic benefit cost:
 
   
2020
   
2019
 
Service cost
  $53   $50 
Interest cost
   93    107 
Amortization of (Gain) or Loss
   25    16 
  
 
 
   
 
 
 
  $171   $173 
  
 
 
   
 
 
 
Amounts recognized in accumulated other comprehensive income not yet recognized as components of net periodic benefit cost consist of:
 
   
2020
   
2019
 
Net loss
  $860   $531 
Other significant balances and costs are:
 
   
2020
   
2019
 
Employer contribution
  $114   $114 
Benefits paid
   114    114 
Benefit costs
   171    173 
Other changes in plan assets and benefit obligations recognized in other comprehensive income are described in Note 12.
The estimated net loss, prior service cost and transition obligation for the postretirement plan that will be amortized from accumulated other comprehensive income into net periodic benefit cost of the next fiscal year are $59,000, $0, and $0, respectively.
A discount rate of 3.25% was used for both 2020 and 2019, to determine the benefit obligations and benefit costs.
 
Assumed health care cost trend rates have a significant effect on the amounts reported for health care plans. A
one-percentage-point
change in assumed health care cost trend rates would have the following effects:
 
   
One-

Percentage-Point

Increase
   
One-

Percentage-Point

Decrease
 
Effect on total of service and interest cost components
  $4   $(4
Effect on postretirement benefit obligation
   36    (34
For measurement purposes, a 9% annual rate of increase in the per capita cost of covered health care benefits was assumed for 2020, 2021 and 2022, respectively. The rate was assumed to decrease gradually to 5% by the year 2031 and remain at that level thereafter.
The following postretirement plan benefit payments, which reflect expected future service, as appropriate, are expected to be paid as of June 30, 2020:
 
2021  
$
137 
2022   168 
2023   183 
2024   199 
2025   195 
2026-2030   986 
The Company has a 401(k) plan covering substantially all employees. The Company matches 25% of the first 5% of compensation that a participant defers. Employer contributions charged to expense for 2020 and 2019 were $81,000 and $68,000, respectively. The plan also includes an Employer Profit Sharing contribution which allows all eligible participants to receive at least 5% of their Plan year salary. The Company’s contributions for the plan years ended June 30, 2020 and 2019 were $602,000 and $510,000, respectively.
The Company has deferred compensation agreements for directors, which provides benefits payable upon normal retirement age of 72. The present value of the estimated liability under the agreement is being accrued using a discount rate of 6 percent. The deferred compensation charged to expense totaled $249,000 and $220,000 for the years ended June 30, 2020 and 2019, respectively. The agreements’ accrued liability of $1.6 million and $1.5 million as of June 30, 2020 and 2019, respectively, is included in other liabilities in the consolidated balance sheets. The following benefit payments are expected to be paid for these agreements:
 
2021  
$
121 
2022   151 
2023   133 
2024   134 
2025   134 
Thereafter   3,928 
  
 
 
 
  
$
4,601 
  
 
 
 
v3.20.2
Stock-based Compensation
12 Months Ended
Jun. 30, 2020
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]  
Stock-based Compensation
Note 16: 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, with funds from any contributions on ESOP assets. Contributions will be applied to repay interest on the loan first, and 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.
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 June 30, 2020 and 2019 are as follows (dollars in thousands):
 
   
2020
   
2019
 
Allocated shares
   127,102    109,018 
Shares committed for release
   19,245    19,245 
Unearned shares
   211,695    230,940 
  
 
 
   
 
 
 
Total ESOP shares
   358,042    359,203 
  
 
 
   
 
 
 
Fair value of unearned ESOP shares
(1)
  $3,652   $4,829 
  
 
 
   
 
 
 
 
 
(1)
Based on closing price of $17.25
and $20.91
per share on June 30, 2020, and 2019, respectively.
During the year ended June 30, 2020 and 2019, 1,161 and 6,360 ESOP shares, respectively, 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. The purpose of the Equity Incentive Plan is 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 authorizes 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) is 481,125 and the maximum number of shares of Company stock that may be issued as restricted stock awards or restricted stock units is 192,450.
On December 10, 2013, the Board of Directors approved grants of 85,500 shares of restricted stock and 167,000 in stock options to be awarded to senior officers and directors of the Association. The restricted stock will vest in equal installments over 10 years and the stock options will vest in equal installments over 7 years, both starting in December 2014. On December 10, 2015, the Board of Directors approved grants of 16,900 shares of restricted stock to be awarded to senior officers and directors of the Association. The restricted stock will vest in equal installments over 8 years, starting in December 2016. As of June 30, 2020, there were 90,050 shares of restricted stock and 314,125 stock option shares available for future grants under this plan.
 
The following table summarizes stock option activity for the year ended June 30, 2020 (dollars in thousands):
 
   
Shares
   
Weighted-
Average
Exercise
Price/
Share
   
Weighted-
Average
Remaining
Contractual
Term
   
Aggregate
Intrinsic
Value
 
Outstanding, June 30, 2019
   153,143   $ 16.63     
Granted
   —      —       
Exercised
   —      —       
Forfeited
   —      —       
  
 
 
   
 
 
     
Outstanding, June 30, 2020
   153,143   $16.63    3.4   $95
(1)
 
  
 
 
   
 
 
   
 
 
   
 
 
 
Exercisable, June 30, 2020
   130,857   $16.63    3.4   $81
(1)
 
  
 
 
   
 
 
   
 
 
   
 
 
 
 
 
(1)
Based on closing price of $17.25
per share on June 30, 2020.
Intrinsic value for stock options is defined as the difference between the current market value and the exercise price. There were no options granted during the year ended June 30, 2020.
There were 22,286 options that vested during the year ended June 30, 2020 compared to 22,286 stock options that vested during the year ended June 30, 2019. Stock-based compensation expense and related tax benefit was $57,000 and $16,000, respectively, for both the year ended June 30, 2020, and the year ended June 30, 2019, and was recognized in
non-interest
expense. Total unrecognized compensation cost related to
non-vested
stock options was $24,000 at June 30, 2020 and is expected to be recognized over a weighted-average period of 0.4 years.
 
The following table summarizes
non-vested
restricted stock activity for the year ended June 30, 2020:
 
   
Shares
   
Weighted-
Average
Grant-
Date

Fair Value
 
Balance, June 30, 2019
   50,313   $16.79 
Granted
   —      —   
Forfeited
   —       
Earned and issued
   10,063    16.79 
  
 
 
   
 
 
 
Balance, June 30, 2020
   40,250    16.79 
  
 
 
   
 
 
 
The fair value of the restricted stock awards is amortized to compensation expense over the vesting period (ten years) 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 was $169,000 and $48,000, respectively, for the year ended June 30, 2020, and was $169,000 and $48,000, respectively, for the year ended June 30, 2019, and was recognized in
non-interest
expense. Unrecognized compensation expense for
non-vested
restricted stock awards was $578,000 and is expected to be recognized over 3.4 years with a corresponding credit to
paid-in
capital.
v3.20.2
Earnings Per Share ("EPS")
12 Months Ended
Jun. 30, 2020
Earnings Per Share [Abstract]  
Earnings Per Share ("EPS")
Note 17: Earnings Per Share (“EPS”)
Basic and diluted earnings per common share are presented for the years ended June 30, 2020 and 2019. The factors used in the earnings per common share computation follow:
 
   
Year Ended
   
Year Ended
 
   
June 30,
2020
   
June 30,
2019
 
Net income
  $4,245   $3,558 
  
 
 
   
 
 
 
Basic weighted average shares outstanding
   3,324,657    3,716,924 
Less: Average unallocated ESOP shares
   (221,318   (240,563
  
 
 
   
 
 
 
Average shares outstanding
   3,103,339    3,476,361 
  
 
 
   
 
 
 
Diluted effect of restricted stock awards and stock options
   44,693    53,856 
  
 
 
   
 
 
 
Diluted average shares outstanding
   3,148,032    3,530,217 
  
 
 
   
 
 
 
Basic earnings per common share
  $1.37   $1.02 
  
 
 
   
 
 
 
Diluted earnings per common share
  $1.35   $1.01 
  
 
 
   
 
 
 
 
The Company announced a stock repurchase plan on June 12, 2019, whereby the Company could repurchase up to 89,526 shares of its common stock, or approximately 2.5% of its then current outstanding shares. On September 13, 2019, after repurchasing 20,200 shares at an average price of $21.17 per share, the Company announced an increase in the number of shares that may be repurchased under the Company’s existing stock repurchase plan, whereby the Company could repurchase up to 320,476 shares, or approximately 9.0% of its then outstanding shares. As of June 30, 2020, the Company had repurchased all shares under this plan at an average price of $22.12 per share.
v3.20.2
Disclosures about Fair Value of Assets
12 Months Ended
Jun. 30, 2020
Fair Value Disclosures [Abstract]  
Disclosures about Fair Value of Assets
Note 18: 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
 
Recurring Measurements
The following table presents the fair value measurements of assets recognized in the accompanying 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 June 30, 2020 and 2019:
 
       
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, 2020:
        
Available-for-sale
securities:
        
US Government and federal agency
  $8,236   $—     $8,236   $—   
Mortgage-backed securities – GSE residential
   148,855    —      148,855    —   
Small Business Administration
   3,640    —      3,640    —   
State and political subdivisions
   1,663    —      1,663    —   
Mortgage servicing rights
   715    —      —      715 
 
       
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, 2019:
        
Available-for-sale
securities:
        
US Government and federal agency
  $12,950   $—     $12,950   $—   
Mortgage-backed securities – GSE residential
   125,510    —      125,510    —   
Small Business Administration
   4,935    —      4,935    —   
State and political subdivisions
   2,896    —      2,896    —   
Mortgage servicing rights
   853    —      —      853 
 
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 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 year ended June 30, 2020. 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. There were no Level 1 securities as of June 30, 2019 or 2018. 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 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. Government and federal agency, mortgage-backed securities (GSE—residential) 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. There were no Level 3 securities as of June 30, 2020 or 2019.
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.
Management measures mortgage servicing rights through the completion of a proprietary model. Inputs to the model are developed by the accounting staff and are reviewed by management. The model is tested annually using baseline data to check its accuracy.
 
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:
 
   
Mortgage
Servicing 
Rights
 
Balance, July 1, 2018
  $866 
Total realized and unrealized gains and losses included in net income
   (45
Servicing rights that result from asset transfers
   144 
Payments received and loans refinanced
   (112
  
 
 
 
Balance, June 30, 2019
   853 
  
 
 
 
Total realized and unrealized gains and losses included in net income
   (294
Servicing rights that result from asset transfers
   255 
Payments received and loans refinanced
   (99
  
 
 
 
Balance, June 30, 2020
  $715 
  
 
 
 
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
  $(294
  
 
 
 
 
Realized and unrealized gains and losses for items reflected in the table above are included in net income in the consolidated statements of income as noninterest income.
Nonrecurring Measurements
The following table presents the fair value measurement of assets measured at fair value on a nonrecurring basis and the level within the fair value hierarchy in which the fair value measurements fall at June 30, 2020 and 2019:
 
       
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, 2020:
        
Foreclosed assets
  $200   $—     $—     $200 
June 30, 2019:
        
Impaired loans (collateral dependent)
  $33   $—     $—     $33 
Foreclosed assets
   512    —      —      512 
 
The following table presents (losses)/recoveries recognized on assets measured on a
non-recurring
basis for the years ended June 30, 2020 and 2019:
 
   
2020
   
2019
 
Impaired loans (collateral dependent)
  $13   $(20
Foreclosed and repossessed assets held for sale
   (19   (196
Following is a description of the valuation methodologies used for assets measured at fair value on a nonrecurring basis and recognized in the accompanying balance sheets, as well as the general classification of such assets pursuant to the valuation hierarchy. For assets classified within Level 3 of the fair value hierarchy, the process used to develop the reported fair value is described below.
Collateral-dependent Impaired Loans, Net of the Allowance for Loan Losses
The estimated fair value of collateral-dependent impaired loans is based on the appraised fair value of the collateral, less estimated cost to sell. Collateral-dependent impaired loans are classified within Level 3 of the fair value hierarchy.
The Company considers the appraisal or evaluation as the starting point for determining fair value and then considers other factors and events in the environment that may affect the fair value. Appraisals of the collateral underlying collateral-dependent loans are obtained when the loan is determined to be collateral-dependent and subsequently as deemed necessary by the senior lending officer. Appraisals are reviewed for accuracy and consistency by the senior lending officer. Appraisers are selected from the list of approved appraisers maintained by management. The appraised values are reduced by discounts to consider lack of marketability and estimated cost to sell if repayment or satisfaction of the loan is dependent on the sale of the collateral. These discounts and estimates are developed by the senior lending officer by comparison to historical results.
Unobservable (Level 3) Inputs
The following table presents quantitative information about unobservable inputs used in recurring and nonrecurring Level 3 fair value measurements.
 
   
Fair Value at
June 30,
2020
   
Valuation Technique
  
Unobservable
 
Inputs
 
Range (Weighted Average)
Mortgage servicing rights
  $715   Discounted cash
 
flow
  Discount
 
rate
 
9.5% – 11.5% (9.5%)
      Constant
 
prepayment
 
rate
 
13.5% – 17.7% (13.8%)
      Probability of
 
default
 
0.04% – 0.12% (0.11%)
Foreclosed assets
   200   Market comparable
 
properties
  Comparability
 
adjustments (%)
 11.1% (11.1%)
   
Fair Value at
June 30,
2019
   
Valuation Technique
  
Unobservable
 
Inputs
 
Range (Weighted Average)
Mortgage servicing rights
  $853   Discounted cash
 
flow
  Discount
 
rate
 
9.5% – 11.5% (9.5%)
      Constant
 
prepayment
 
rate
 
8.3% – 11.0% (9.0%)
      Probability of
 
default
 
0.05% – 0.12% (0.11%)
Impaired loans (collateral dependent)
   33   Market comparable
 
properties
  Marketability
 
discount
 11.1% (11.1%)
Foreclosed assets
   512   Market comparable
 
properties
  Comparability
 
adjustments (%)
 7.8% (7.8%)
Fair Value of Financial Instruments
The following table presents 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 June 30, 2020 and 2019.
 
 
  
 
 
  
Fair Value
Measurements
Using
 
  
 
 
  
 
 
 
  
Carrying
Amount
 
  
Quoted Prices
in Active
Markets for
Identical
Assets

(Level 1)
 
  
Significant
Other
Observable
Inputs

(Level 2)
 
  
Significant
Unobservable
Inputs

(Level 3)
 
June 30, 2020:
        
Financial assets
        
Cash and cash equivalents
  $33,467   $33,467   $—     $—   
Interest-bearing time deposits in banks
   3,000    3,000    —      —   
Loans, net of allowance for loan losses
   509,817    —      —      513,221 
Federal Home Loan Bank stock
   3,028    —      3,028    —   
Accrued interest receivable
   1,908    —      1,908    —   
Financial liabilities
        
Deposits
   601,700    —      320,209    283,304 
Repurchase agreements
   3,738    —      3,738    —   
Federal Home Loan Bank advances
   34,500    —      35,472    —   
Line
s
 
of credit
 
 
 3,000
 
 
 
 
 
 
 3,000
 
 
 
 
Advances from borrowers for taxes and insurance
   519    —      519    —   
Accrued interest payable
   537    —      537    —   
Unrecognized financial instruments (net of contract amount)
        
Commitments to originate loans
   —      —      —      —   
 
 
  
 
 
  
Fair Value
Measurements
Using
 
  
 
 
  
 
 
 
  
Carrying
Amount
 
  
Quoted Prices
in Active
Markets for
Identical
Assets

(Level 1)
 
  
Significant
Other
Observable
Inputs

(Level 2)
 
  
Significant
Unobservable
Inputs

(Level 3)
 
June 30, 2019:
        
Financial assets
        
Cash and cash equivalents
  $59,600   $59,600   $—     $—   
Interest-bearing time deposits in banks
   3,000    3,000    —      —   
Loans, net of allowance for loan losses
   487,774    —      —      480,479 
Federal Home Loan Bank stock
   1,174    —      1,174    —   
Accrued interest receivable
   2,142    —      2,142    —   
Financial liabilities
        
Deposits
   607,023    —      276,738    331,865 
Repurchase agreements
   2,015    —      2,015    —   
Federal Home Loan Bank advances
   24,000    —      24,419    —   
Advances from borrowers for taxes and insurance
   747    —      747    —   
Accrued interest payable
   801    —      801    —   
Unrecognized financial instruments (net of contract amount)
        
Commitments to originate loans
   —      —      —      —   
Lines of credit
   —      —      —      —   
In accordance with the Company’s adoption of ASU
2016-01
as of July 1, 2018, the methods utilized to measure the fair value of financial instruments at June 30, 2020 represent an approximation of exit price; however, an actual exit price may differ.
v3.20.2
Significant Estimates and Concentrations
12 Months Ended
Jun. 30, 2020
Text Block [Abstract]  
Significant Estimates and Concentrations
Note 19: Significant Estimates and Concentrations
Accounting principles generally accepted in the United States of America require disclosure of certain significant estimates and current vulnerabilities due to certain concentrations. Estimates related to the allowance for loan losses are reflected in the footnote regarding loans. Current vulnerabilities due to certain concentrations of credit risk are discussed in the footnote on commitments and credit risk.
v3.20.2
Commitments and Credit Risk
12 Months Ended
Jun. 30, 2020
Commitments and Contingencies Disclosure [Abstract]  
Commitments and Credit Risk
Note 20: Commitments and Credit Risk
The Company generates commercial, mortgage and consumer loans and receives deposits from customers located in the Illinois counties of Vermilion, Iroquois, Champaign, and Kankakee, as well as adjacent counties in Illinois and Indiana within 30 miles of a branch or loan production office. The Company generates commercial, mortgage and consumer loans from its location in Osage Beach, Missouri. The Company’s loans are generally secured by specific items of collateral including real property and consumer assets. Although the Company has a diversified loan portfolio, a substantial portion of its debtors’ ability to honor their contracts is dependent upon economic conditions in the Company’s various locations.
Commitments to Originate Loans
Commitments to originate loans are agreements to lend to a customer as long as 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.
At June 30, 2020 and 2019, the Company had outstanding commitments to originate loans aggregating approximately $16,873,000 and $5,430,000, respectively. The commitments extended over varying periods of time with the majority being disbursed within a
one-year
period. Loan commitments at fixed rates of interest amounted to $5,178,000 and $2,959,000 at June 30, 2020 and 2019, respectively, with the remainder subject to adjustable interest rates. The weighted average interest rates for fixed rate loan commitments were 3.49% and 5.03% as of June 30, 2020 and 2019, respectively.
 
Lines of Credit
Lines of credit are agreements to lend to a customer as long as 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.
At June 30, 2020, the Company had granted unused lines of credit to borrowers aggregating approximately $78,600,000 and $7,582,000 for commercial lines and
open-end
consumer lines, respectively. At June 30, 2019, the Company had granted unused lines of credit to borrowers aggregating approximately $44,070,000 and $6,726,000 for commercial lines and
open-end
consumer lines, respectively.
Other Credit Risks
At June 30, 2020 and 2019, the interest-bearing demand deposits on the consolidated balance sheets represent amounts on deposit with one financial institution, the Federal Home Loan Bank of Chicago.
v3.20.2
Condensed Financial Information (Parent Company Only)
12 Months Ended
Jun. 30, 2020
Condensed Financial Information Disclosure [Abstract]  
Condensed Financial Information (Parent Company Only)
Note 21: Condensed Financial Information (Parent Company Only)
Presented below is condensed financial information as to financial position, results of operations and cash flows of the Company as of and for the years ended June 30, 2020 and 2019:
Condensed Balance Sheet
 
   
June 30,
   
June 30,
 
   
2020
   
2019
 
Assets
    
Cash and due from banks
  $2,592   $4,058 
Investment in common stock of subsidiary
   80,631    75,920 
ESOP loan
   2,469    2,628 
  
 
 
   
 
 
 
Total assets
  $85,692   $82,606 
  
 
 
   
 
 
 
Liabilities
    
Line of credit
  $3,000   $—   
Interest payable
   31    —   
Other liabilities
   97    145 
  
 
 
   
 
 
 
Total liabilities
   3,128    145 
Stockholders’ Equity
   82,564    82,461 
  
 
 
   
 
 
 
Total liabilities and stockholders’ equity
  $85,692   $82,606 
  
 
 
   
 
 
 
 
Condensed Statement of Income and Comprehensive Income
 
   
Year Ending
June 30,
2020
   
Year Ending
June 30, 
2019
 
Income
    
Interest on ESOP loan
  $141   $136 
Deposits with financial institutions
   —      —   
  
 
 
   
 
 
 
Total income
   141    136 
Expense
    
Interest on line of credit
   133    —   
Other expenses
   203    183 
  
 
 
   
 
 
 
Total expense
   336    183 
Loss Before Income Tax and Equity in Undistributed Income of Subsidiary
   (195   (47
Benefit for Income Taxes
   (54   (11
  
 
 
   
 
 
 
Loss Before Equity in Undistributed Loss of Subsidiary
   (141   (36
Equity in Undistributed Income of Subsidiary
   4,386    3,594 
  
 
 
   
 
 
 
Net Income
  $4,245   $3,558 
  
 
 
   
 
 
 
Comprehensive Income
  $7,883   $7,231 
  
 
 
   
 
 
 
 
Condensed Statement of Cash Flows
 
   
Year Ended
June 30,
2020
   
Year Ended
June 30,
2019
 
Cash flows from operating activities
    
Net income
  $4,245   $3,558 
  
 
 
   
 
 
 
Items not requiring (providing) cash
    
Net change accrued interest payable
   30    —   
Net change in other liabilities
   (48   30 
Earnings from subsidiary
   (4,386   (3,594
  
 
 
   
 
 
 
Net cash provided by operating activities
   (159   (6
  
 
 
   
 
 
 
Cash flows from financing activities
    
Stock purchase per stock repurchase plan
   (7,459   (6,222
Dividends paid
   (1,008   (930
Dividends received
   4,000    2,000 
Loan for ESOP
   159    156 
Proceeds from CIBC line of credit
   5,000    —   
Repayment of CIBC line of credit
   (2,000   —   
  
 
 
   
 
 
 
Net cash used in financing activities
   (1,308   (4,996
  
 
 
   
 
 
 
Net Change in Cash and Cash Equivalents
   (1,467   (5,002
Cash and Cash Equivalents at Beginning of Year
   4,058    9,060 
  
 
 
   
 
 
 
Cash and Cash Equivalents at End of Year
  $2,591   $4,058 
  
 
 
   
 
 
v3.20.2
Nature of Operations and Summary of Significant Accounting Policies (Policies)
12 Months Ended
Jun. 30, 2020
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
Nature of Operations
Nature of Operations
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 Association provides a full range of banking and financial services to individual and corporate customers from our seven full-service banking offices located in the municipalities of Watseka, Danville, Clifton, Hoopeston, Savoy, Bourbonnais, and Champaign, Illinois, and our loan production and wealth management office in Osage Beach, Missouri. Our primary lending market includes the Illinois counties of Vermilion, Iroquois, Champaign and Kankakee, as well as the adjacent counties in Illinois and Indiana. Our loan production and wealth management office in Osage Beach, Missouri, serves the Missouri counties of Camden, Miller and Morgan. 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 Company is primarily engaged in the business of directing, planning, and coordinating the business activities of the Association. The Company and Association are subject to competition from other financial institutions. The Company and Association are also subject to the regulation of certain federal and state agencies and undergo periodic examinations by those regulatory authorities.
Principles of Consolidation
Principles of Consolidation
The consolidated financial statements include the accounts of the Company, the Association and Association’s wholly owned subsidiary, L.C.I. All significant intercompany accounts and transactions have been eliminated in consolidation.
Operating Segment
Operating Segment
The Company provides community banking services, including such products and services as loans, certificates of deposits, savings accounts, and mortgage originations. These activities are reported as a single operating segment.
The Company does not derive revenues from, or have assets located in, foreign countries, nor does it derive revenues from any single customer that represents 10% or more of the Company’s total revenues.
Use of Estimates
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Material estimates that are particularly susceptible to significant change relate to the determination of the allowance for loan losses and the valuation of real estate acquired in connection with foreclosures or in satisfaction of loans, fair value measurements and classifications of investment securities, loan servicing rights and income taxes.
Interest-bearing Time Deposits in Banks
Interest-bearing Time Deposits in Banks
Interest-bearing time deposits in banks mature within five years and are carried at cost.
Cash Equivalents
Cash Equivalents
The Company considers all liquid investments with original maturities of three months or less to be cash equivalents. At June 30, 2020 and 2019, cash equivalents consisted primarily of noninterest bearing deposits and interest bearing demand deposits.
Securities
Securities
Securities are classified as “available for sale” and recorded at fair value, with unrealized gains and losses excluded from earnings and reported in other comprehensive loss. Purchase premiums and discounts are recognized in interest income using the interest method over the terms of the securities. Gains and losses on the sale of securities are recorded on the trade date and are determined using the specific identification method.
Loans Held for Sale
Loans Held for Sale
Mortgage loans originated and intended for sale in the secondary market are carried at the lower of cost or fair value in the aggregate. Net unrealized losses, if any, are recognized through a valuation allowance by charges to noninterest income. Gains and losses on loan sales are recorded in noninterest income, and direct loan origination costs and fees are deferred at origination of the loan and are recognized in noninterest income upon sale of the loan.
Loans
Loans
Loans that management has the intent and ability to hold for the foreseeable future or until maturity or payoffs are reported at their outstanding principal balances adjusted for unearned income, charge-offs, the allowance for loan losses, and any unamortized deferred fees or costs on originated loans.
For loans amortized at cost, interest income is accrued based on the unpaid principal balance. Loan origination fees, net of certain direct origination costs, are deferred and amortized as a level yield adjustment over the respective term of the loan.
The accrual of interest on loans is discontinued at the time the loan is 90 days past due unless the credit is well-secured and in process of collection. Past due status is based on contractual terms of the loan. In all cases, loans are placed on nonaccrual or charged off at an earlier date if collection of principal or interest is considered doubtful.
All interest accrued but not collected for loans that are placed on nonaccrual or charged off are reversed against interest income. The interest on these loans is accounted for on the cash-basis or cost-recovery method, until qualifying for return to accrual. Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured.
Allowance for Loan Losses
Allowance for Loan Losses
The allowance for loan losses is established as losses are estimated to have occurred through a provision for loan losses charged to income. Loan losses are charged against the allowance when management believes the uncollectibility of a loan balance is confirmed. Subsequent recoveries, if any, are credited to the allowance.
The allowance for loan losses is evaluated on a regular basis by management and is based upon management’s periodic review of the collectibility of the loans in light of historical experience, the nature and volume of the loan portfolio, adverse situations that may affect the borrower’s ability to repay, estimated value of any underlying collateral and prevailing economic conditions. This evaluation is inherently subjective as it requires estimates that are susceptible to significant revision as more information becomes available.
The allowance consists of allocated and general components. The allocated component relates to loans that are classified as impaired. For those loans that are classified as impaired, an allowance is established when the collateral value of the impaired loan is lower than the carrying value of that loan. The general component covers nonclassified loans and is based on historical
charge-off
experience and expected loss given default derived from the Company’s internal risk rating process. Other adjustments may be made to the allowance for pools of loans after an assessment of internal or external influences on credit quality that are not fully reflected in the historical loss or risk rating data.
 
A loan is considered impaired when, based on current information and events, it is probable that the Company will be unable to collect the scheduled payments of principal or interest when due according to the contractual terms of the loan agreement. Factors considered by management in determining impairment include payment status, collateral value and the probability of collecting scheduled principal and interest payments when due. Loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired. Management determines the significance of payment delays and payment shortfalls on a
case-by-case
basis, taking into consideration all of the circumstances surrounding the loan and the borrower, including the length of the delay, the reasons for the delay, the borrower’s prior payment record and the amount of the shortfall in relation to the principal and interest owed. Impairment is measured on a
loan-by-loan
basis for commercial and construction loans by either the present value of expected future cash flows discounted at the loan’s effective interest rate, the loan’s obtainable market price or the fair value of the collateral if the loan is collateral dependent.
Groups of loans with similar characteristics, including individually evaluated loans not determined to be impaired, are collectively evaluated for impairment based on the group’s historical loss experience adjusted for changes in trends, conditions and other relevant factors that affect repayment of the loans.
Premises and Equipment
Premises and Equipment
Depreciable assets are stated at cost less accumulated depreciation. Depreciation is charged to expense using the straight-line method over the estimated useful lives of the assets.
The estimated useful lives for each major depreciable classification of premises and equipment are as follows:
 
Buildings and improvements
   
35-40 years
 
Furniture and equipment
   
3-5 years
 
Federal Home Loan Bank Stock
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, carried at cost and evaluated for impairment.
Foreclosed Assets Held for Sale
Foreclosed Assets Held for Sale
Assets acquired through, or in lieu of, loan foreclosure are held for sale and are initially recorded at fair value less cost to sell at the date of foreclosure, establishing a new cost basis. Subsequent to foreclosure, valuations are periodically performed by management and the assets are carried at the lower of carrying amount or fair value less cost to sell. Revenue and expenses from operations and changes in the valuation allowance are included in net income or expense from foreclosed assets.
Bank-owned Life Insurance
Bank-owned Life Insurance
Bank-owned life insurance policies are reflected on the consolidated balance sheets at the estimated cash surrender value. Changes in the cash surrender value are reflected in noninterest income in the consolidated statements of income.
Fee Income
Fee Income
Loan origination fees, net of direct origination costs, are recognized as income using the level-yield method over the contractual life of the loans.
Revenue Recognition
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, Iroquois Insurance Agency, receives commissions on premiums of new and renewed business policies. Iroquois Insurance Agency records commission revenue on direct bill policies as the cash is received. For agency bill policies, Iroquois 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.
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.
Mortgage Servicing Rights
Mortgage Servicing Rights
Mortgage servicing assets are recognized separately when rights are acquired through purchase or through sale of financial assets. Under the servicing assets and liabilities accounting guidance
(ASC 860-50),
servicing rights resulting from the sale or securitization of loans originated by the Company are initially measured at fair value at the date of transfer. The Company has elected to initially and subsequently measure the mortgage servicing rights for consumer mortgage loans using the fair value method. Under the fair value method, the servicing rights are carried in the balance sheet at fair value and the changes in fair value are reported in earnings in the period in which the changes occur.
Fair value is based on market prices for comparable mortgage servicing contracts, when available, or alternatively, is based on a valuation model that calculates the present value of estimated future net servicing income. The valuation model incorporates assumptions that market participants would use in estimating future net servicing income, such as the cost to service, the discount rate, the custodial earnings rate, an inflation rate, ancillary income, prepayment speeds and default rates and losses. These variables change from quarter to quarter as market conditions and projected interest rates change, and may have an adverse impact on the value of the mortgage servicing right and may result in a reduction to noninterest income.
Servicing fee income is recorded for fees earned for servicing loans. The fees are based on a contractual percentage of the outstanding principal or a fixed amount per loan and are recorded as income when earned. The change in fair value of mortgage servicing rights is netted against loan servicing fee income.
Transfers of Financial Assets
Transfers of Financial Assets
Transfers of financial assets are accounted for as sales, when control over the assets has been surrendered. Control over transferred assets is deemed to be surrendered when (1) the assets have been isolated from the Company – put presumptively beyond the reach of the transferor and its creditors, even in bankruptcy or other receivership, (2) the transferee obtains the right (free of conditions that constrain it from taking advantage of that right) to pledge or exchange the transferred assets and (3) the Company does not maintain effective control over the transferred assets through an agreement to repurchase them before their maturity or the ability to unilaterally cause the holder to return specific assets.
Income Taxes
Income Taxes
The Company accounts for income taxes in accordance with income tax accounting guidance (ASC 740,
Income Taxes
). The income tax accounting guidance results in two components of income tax expense: current and deferred. Current income tax expense reflects taxes to be paid or refunded for the current period by applying the provisions of the enacted tax law to the taxable income or excess of deductions over revenues. The Company determines deferred income taxes using the liability (or balance sheet) method. Under this method, the net deferred tax asset or liability is based on the tax effects of the differences between the book and tax bases of assets and liabilities, and enacted changes in tax rates and laws are recognized in the period in which they occur. Deferred income tax expense results from changes in deferred tax assets and liabilities between periods. Deferred tax assets are reduced by a valuation allowance if, based on the weight of evidence available, it is more likely than not that some portion or all of a deferred tax asset will not be realized.
Tax positions are recognized if it is more likely than not, based on the technical merits, that the tax position will be realized or sustained upon examination. The term more likely than not means a likelihood of more than 50 percent; the terms examined and upon examination also include resolution of the related appeals or litigation processes, if any. A tax position that meets the
more-likely-than-not
recognition threshold is initially and subsequently measured as the largest amount of tax benefit that has a greater than 50 percent likelihood of being realized upon settlement with a taxing authority that has full knowledge of all relevant information. The determination of whether or not a tax position has met the
more-likely-than-not
recognition threshold considers the facts, circumstances and information available at the reporting date and is subject to management’s judgment.
The Company recognizes interest and penalties on income taxes as a component of income tax expense.
The Company files consolidated income tax returns with its subsidiary.
Earnings Per Share
Earnings Per Share
Basic earnings per share represents income available to common stockholders divided by the weighted-average number of common shares outstanding during each year. Diluted earnings per share reflects additional potential common shares that would have been outstanding if dilutive potential common shares had been issued, as well as any adjustment to income that would result from the assumed issuance. Potential common shares that may be issued by the Company relate solely to outstanding stock options and restricted stock awards and are determined using the treasury stock method.
Comprehensive Income
Comprehensive Income
Comprehensive income consists of net income and other comprehensive income, net of applicable income taxes. Other comprehensive income includes unrealized appreciation on
available-for-sale
securities and changes in the funded status of the postretirement health benefit plan.
Stock-based Compensation Plans
Stock-based Compensation Plans
At June 30, 2020 and 2019, the Company has stock-based compensation plans (stock options and restricted stock) which are described more fully in Note 16.
COVID-19
COVID-19
We are subject to risks and uncertainties as a result of the
COVID-19
pandemic. The extent of the impact of the
COVID-19
pandemic on the Company’s business is highly uncertain and difficult to predict, as the response to the pandemic is in its early stages and information is rapidly evolving. Furthermore, capital markets and economies worldwide have also been negatively impacted by the
COVID-19
pandemic.
The severity of the impact of the
COVID-19
pandemic on the Company’s business will depend on a number of factors, including, but not limited to, the duration and severity of the pandemic and the extent and severity of the impact on the Company’s customers, all of which are uncertain and cannot be predicted. The Company’s future results of operations and liquidity could be adversely impacted. As of the date of issuance of these consolidated financial statements, the extent to which the
COVID-19
pandemic may materially impact the Company’s financial condition, liquidity, or results of operations is uncertain.
Transfers between Fair Value Hierarchy Levels
Transfers between Fair Value Hierarchy Levels
Transfers in and out of Level 1 (quoted market prices), Level 2 (other significant observable inputs) and Level 3 (significant unobservable inputs) are recognized on the period ending date.
Reclassifications
Reclassifications
Certain reclassifications have been made to the 2019 financial statements to conform to the 2020 financial statement presentation. These reclassifications had no effect on income.
Liabilities
Recent and Future Accounting Requirements
In February 2016, the FASB issued ASU
2016-02,
Leases (Topic 842), which amends the existing standards for lease accounting effectively bringing most leases onto the balance sheets of the related lessees by requiring them to recognize a
right-of-use
asset and a corresponding lease liability, while leaving lessor accounting largely unchanged with only targeted changes incorporated into the update. ASU
2016-02
became effective for the Company effective July 1, 2019. As permitted by the amendments, the Company has elected an accounting policy to not recognize lease assets and lease liabilities for leases with a term of twelve months or less. The impact does not have a material effect on the Company’s financial position or results of operations since the Company does not have a material amount of lease agreements.
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 will be effective for interim and annual periods beginning after December 15, 2022. As we prepare for the adoption of ASU
2016-13,
we have engaged a firm specializing in ALLL modeling and have begun transition modeling so we will be ready for the required adoption. As of June 30, 2020, model installation and testing continues and we are still evaluating the test runs for accuracy and directional consistency required to reach a reliable determination as to the final expected impact that the adoption of ASU
2016-13
will have on the consolidated financial statements.
v3.20.2
Nature of Operations and Summary of Significant Accounting Policies (Tables)
12 Months Ended
Jun. 30, 2020
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
Estimated Useful Lives of Premises and Equipment
The estimated useful lives for each major depreciable classification of premises and equipment are as follows:
 
Buildings and improvements
   
35-40 years
 
Furniture and equipment
   
3-5 years
 
v3.20.2
Securities (Tables)
12 Months Ended
Jun. 30, 2020
Investments, Debt and Equity Securities [Abstract]  
Amortized Cost and Approximate Fair Value of Securities, Together with Gross Unrealized Gains and Losses of Securities
The amortized cost and approximate fair values, together with gross unrealized gains and losses, of securities are as follows:
 
   
Amortized
Cost
   
Gross
Unrealized
Gains
   
Gross
Unrealized
Losses
   
Fair Value
 
Available-for-sale
Securities:
        
June 30, 2020:
        
U.S. Government and federal agency and Government
 
sponsored enterprises (GSEs)
  $7,528   $708   $—     $8,236 
Mortgage-backed:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
GSE residential
   143,033    6,044    (222   148,855 
Small Business Administration
   3,578    62    —      3,640 
State and political subdivisions
   1,449    215    (1   1,663 
  
 
 
   
 
 
   
 
 
   
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  $155,588   $7,029   $(223  $162,394 
  
 
 
   
 
 
   
 
 
   
 
 
 
June 30, 2019:
        
U.S. Government and federal agency and Government sponsored
 
enterprises (GSEs)
  $12,654   $296   $—     $12,950 
Mortgage-backed:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
GSE residential
   124,615    1,231    (336   125,510 
Small Business Administration
   4,911    25    (1   4,935 
State and political subdivisions S
   2,725    171    —      2,896 
  
 
 
   
 
 
   
 
 
   
 
 
 
  $144,905   $1,723   $(337  $146,291 
  
 
 
   
 
 
   
 
 
   
 
 
 
 
Amortized Cost and Fair Value of Available for Sale Securities by Contractual Maturity
   
Amortized
Cost
   
Fair Value
 
Within one year
  $—     $—   
One to five years
   6,100    6,658 
Five to ten years
   4,458    4,856 
After ten years
   1,997    2,025 
  
 
 
   
 
 
 
   12,555    13,539 
Mortgage-backed securities
   143,033    148,855 
  
 
 
   
 
 
 
Totals
  $155,588   $162,394 
  
 
 
   
 
 
 
Association's Investments Gross Unrealized Investment Losses and Fair Value of Association's Investments with Unrealized Losses
The following table shows the Company’s gross unrealized investment losses and the fair value of the Company’s investments with unrealized losses that are not deemed to be other-than-temporarily impaired, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position at June 30, 2020 and 2019:
 
   
Less Than 12 Months
  
12 Months or More
  
Total
 
Description of
Securities
  
Fair Value
 
  
Unrealized
Losses
 
 
Fair Value
 
  
Unrealized
Losses
 
 
Fair Value
 
  
Unrealized
Losses
 
June 30, 2020:
          
Mortgage-backed:
          
GSE residential
  $22,162   $(116 $2,351   $(106 $24,513   $(222
State and political subdivisions
   61    (1  —      —     61    (1
  
 
 
   
 
 
  
 
 
   
 
 
  
 
 
   
 
 
 
Total temporarily impaired securities
  $22,223   $(117 $2,351   $(106 $24,574   $(223
  
 
 
   
 
 
  
 
 
   
 
 
  
 
 
   
 
 
 
June 30, 2019:
          
Mortgage-backed:
          
GSE residential
  $15,167   $(72 $31,049   $(264 $46,216   $(336
Small Business Administration
   930    (1  —      —     930    (1
  
 
 
   
 
 
  
 
 
   
 
 
  
 
 
   
 
 
 
Total temporarily impaired securities
  $16,097   $(73 $31,049   $(264 $47,146   $(337
  
 
 
   
 
 
  
 
 
   
 
 
  
 
 
   
 
 
 
v3.20.2
Loans and Allowance for Loan Losses (Tables)
12 Months Ended
Jun. 30, 2020
Categories of Loans
Classes of loans at June 30, include:
 
   
2020
  
2019
 
Real estate loans
     
One-
to four-family, including home equity loans
  $128,876  $129,290 
Multi-family
   96,195   104,663 
Commercial
   145,113   143,367 
Home equity lines of credit
   8,551   8,938 
Construction
   22,042   16,113 
Commercial
   107,581   84,246 
Consumer
   7,529   7,136 
  
 
 
  
 
 
 
   515,887  493,753 
  
Less
     
Unearned fees and discounts, net
   (164  (349
Allowance for loan losses
   6,234   6,328 
  
 
 
  
 
 
 
Loans, net
  $509,817  $487,774 
  
 
 
  
 
 
 
Allowance for Loan Losses and Recorded Investment in Loans Based on Portfolio Segment and Impairment Method
The following tables present the balance in the allowance for loan losses and the recorded investment in loans based on portfolio segment and impairment method as of June 30, 2020 and 2019:
 
   
2020
 
   
Real Estate Loans
 
   
One- to four-

family
   
Multi-family
   
Commercial
   
Home Equity
Lines of Credit
 
Allowance for loan losses:
        
Balance, beginning of year
  $1,031   $1,642   $1,623   $89 
Provision charged to expense
   50    (128   83    (2
Losses charged off
   (40   —      —      —   
Recoveries
   3    —      —      —   
  
 
 
   
 
 
   
 
 
   
 
 
 
Balance, end of period
  $1,044   $1,514   $1,706   $87 
  
 
 
   
 
 
   
 
 
   
 
 
 
Ending balance: individually evaluated for impairment
  $—     $—     $—     $—   
  
 
 
   
 
 
   
 
 
   
 
 
 
Ending balance: collectively evaluated for impairment
  $1,044   $1,514   $1,706   $87 
  
 
 
   
 
 
   
 
 
   
 
 
 
Loans:
        
Ending balance
  $128,876   $96,195   $145,113   $8,551 
  
 
 
   
 
 
   
 
 
   
 
 
 
Ending balance: individually evaluated for impairment
  $1,336   $—     $—     $15 
  
 
 
   
 
 
   
 
 
   
 
 
 
Ending balance: collectively evaluated for impairment
  $127,540   $96,195   $145,113   $8,536 
  
 
 
   
 
 
   
 
 
   
 
 
 
 
 
 
 
   
2020 (Continued)
 
   
Construction
   
Commercial
   
Consumer
   
Total
 
Allowance for loan losses:
        
Balance, beginning of year
  $213   $1,659   $71   $6,328 
Provision charged to expense
   27    84    14    128 
Losses charged off
   —      (191   (37   (268
Recoveries
   —      31    12    46 
  
 
 
   
 
 
   
 
 
   
 
 
 
Balance, end of year
  $240   $1,583   $60   $6,234 
  
 
 
   
 
 
   
 
 
   
 
 
 
Ending balance: individually evaluated for impairment
  $—     $—     $—     $—   
  
 
 
   
 
 
   
 
 
   
 
 
 
Ending balance: collectively evaluated for impairment
  $240   $1,583   $60   $6,234 
  
 
 
   
 
 
   
 
 
   
 
 
 
Loans:
        
Ending balance
  $22,042   $107,581   $7,529   $515,887 
  
 
 
   
 
 
   
 
 
   
 
 
 
Ending balance: individually evaluated for impairment
  $—     $304   $5   $1,660 
  
 
 
   
 
 
   
 
 
   
 
 
 
Ending balance: collectively evaluated for impairment
  $22,042   $107,277   $7,524   $514,227 
  
 
 
   
 
 
   
 
 
   
 
 
 
 
 
 
 
   
2019
 
   
Real Estate Loans
 
   
One- to four-

family
   
Multi-family
   
Commercial
   
Home Equity 
Lines
 
of Credit
 
Allowance for loan losses:
        
Balance, beginning of year
  $997   $1,650   $1,604   $91 
Provision charged to expense
   29    (8   19    13 
Losses charged off
   (17   —      —      (15
Recoveries
   22    —      —      —   
  
 
 
   
 
 
   
 
 
   
 
 
 
Balance, end of period
  $1,031   $1,642   $1,623   $89 
  
 
 
   
 
 
   
 
 
   
 
 
 
Ending balance: individually evaluated for impairment
  $13   $—     $—     $—   
  
 
 
   
 
 
   
 
 
   
 
 
 
Ending balance: collectively evaluated for impairment
  $1,018   $1,642   $1,623   $89 
  
 
 
   
 
 
   
 
 
   
 
 
 
Loans:
        
Ending balance
  $129,290   $104,663   $143,367   $8,938 
  
 
 
   
 
 
   
 
 
   
 
 
 
Ending balance: individually evaluated for impairment
  $1,722   $—     $18   $22 
  
 
 
   
 
 
   
 
 
   
 
 
 
Ending balance: collectively evaluated for impairment
  $127,568   $104,663   $143,349   $8,916 
  
 
 
   
 
 
   
 
 
   
 
 
 
 
 
 
 
   
2019 (Continued)
 
   
Construction
   
Commercial
   
Consumer
   
Total
 
Allowance for loan losses:
        
Balance, beginning of year
  $168   $1,373   $62   $5,945 
Provision charged to expense
   45    286    23    407 
Losses charged off
   —      —      (18   (50
Recoveries
   —      —      4    26 
  
 
 
   
 
 
   
 
 
   
 
 
 
Balance, end of year
  $213   $1,659   $71   $6,328 
  
 
 
   
 
 
   
 
 
   
 
 
 
Ending balance: individually evaluated for impairment
  $—     $—     $10   $23 
  
 
 
   
 
 
   
 
 
   
 
 
 
Ending balance: collectively evaluated for impairment
  $213   $1,659   $61   $6,305 
  
 
 
   
 
 
   
 
 
   
 
 
 
Loans:
        
Ending balance
  $16,113   $84,246   $7,136   $493,753 
  
 
 
   
 
 
   
 
 
   
 
 
 
Ending balance: individually evaluated for impairment
  $—     $60   $29   $1,851 
  
 
 
   
 
 
   
 
 
   
 
 
 
Ending balance: collectively evaluated for impairment
  $16,113   $84,186   $7,107   $491,902 
  
 
 
   
 
 
   
 
 
   
 
 
 
Credit Risk Profile of Association's Loan Portfolio Based on Rating Category and Payment Activity
The following tables present the credit risk profile of the Company’s loan portfolio, as of June 30, 2020 and 2019, based on rating category and payment activity:
 
 
  
Real Estate Loans
 
  
 
 
June 30
, 2020
  
One-
to
four-family
 
  
Multi-
family
 
  
Commercial
 
  
Home Equity
Lines of Credit
 
  
Construction
 
Pass
  $127,279   $95,925   $143,727   $8,402   $22,042 
Watch
   775    —      1,073    134    —   
Substandard
   822    270    313    15    —   
Doubtful
   —      —      —      —      —   
Loss
   —      —      —      —      —   
  
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Total
  $128,876   $96,195   $145,113   $8,551   $22,042 
  
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
June 30
, 2020
, (Continued)
  
Commercial
 
  
Consumer
 
  
Total
 
Pass
  $105,605   $7,524   $510,504 
Watch
   1,651    —      3,633 
Substandard
   81    5    1,506 
Doubtful
   244    —      244 
Loss
   —      —      —   
Total
  $107,581   $7,529   $515,887 
 
 
  
Real Estate Loans
 
  
 
 
June 30
, 2019
  
One-
to
four-family
 
  
Multi-
family
 
  
Commercial
 
  
Home Equity
Lines of Credit
 
  
Construction
 
Pass
  $127,386   $104,504   $142,076   $8,918   $16,113 
Watch
   —      —      1,040    —      —   
Substandard
   1,904    159    251    20    —   
Doubtful
   —      —      —      —      —   
Loss
   —      —      —      —      —   
  
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Total
  $129,290   $104,663   $143,367   $8,938   $16,113 
  
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
June 30
, 2019
, (Continued)
  
Commercial
 
  
Consumer
 
  
Total
 
Pass
  $81,906   $7,107   $488,010
Watch
   1,375    —      2,415
Substandard
   965    19    3,318
Doubtful
   —      10    10
Loss
   —      —      —  
Total
  $84,246   $7,136   $493,753
Association's Loan Portfolio Aging Analysis
The following tables present the Company’s loan portfolio aging analysis as of June 30, 2020 and 2019:
 
   
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, 2020
              
Real estate loans:
              
One-
to four-family
  $1,034   $225   $385   $1,644   $127,232   $128,876   $304 
Multi-family
   —      —      —      —      96,195    96,195    —   
Commercial
   172    95    —      267    144,846    145,113    —   
Home equity lines of credit
   —      —      —      —      8,551    8,551    —   
Construction
   —      —      —      —      22,042    22,042    —   
Commercial
   —      4    244    248    107,333    107,581    —   
Consumer
   24    43    —      67    7,462    7,529    —   
  
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Total
  $1,230   $367   $629   $2,226   $513,661   $515,887   $304 
  
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
June 30, 2019
              
Real estate loans:
              
One-
to four-family
  $1,515   $255   $481   $2,251   $127,039   $129,290   $226 
Multi-family
   422    —      —      422    104,241    104,663    —   
Commercial
   74    6    12    92    143,275    143,367    —   
Home equity lines of credit
   —      26    20    46    8,892    8,938    —   
Construction
   —      —      —      —      16,113    16,113    —   
Commercial
   291    —      60    351    83,895    84,246    —   
Consumer
   99    —      29    128    7,008    7,136    —   
  
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Total
  $2,401   $287   $602   $3,290   $490,463   $493,753   $226 
  
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Summary of Impaired Loans
The following tables present impaired loans for year ended June 30, 2020 and 2019:
 
   
June 30, 2020
 
   
Recorded
Balance
   
Unpaid
Principal
Balance
   
Specific
Allowance
   
Average
Investment in
Impaired
Loans
   
Interest
Income
Recognized
   
Interest on
Cash Basis
 
Loans without a specific allowance:
            
Real estate loans:
            
One-
to four-family
  $1,336   $1,336   $—     $1,388   $61   $62 
Multi-family
   —      —      —      —      —      —   
Commercial
   —      —      —      3    —      —   
Home equity lines of credit
   15    15    —      18    —      —   
Construction
   —      —      —      —      —      —   
Commercial
   304    304    —      382    23    25 
Consumer
   5    5    —      9    —      —   
Loans with a specific allowance:
            
Real estate loans:
            
One-
to four-family
  $—     $—     $—     $—     $—     $—   
Multi-family
   —      —      —      —      —      —   
Commercial
   —      —      —      —      —      —   
Home equity lines of credit
   —      —      —      —      —      —   
Construction
   —      —      —      —      —      —   
Commercial
   —      —      —      —      —      —   
Consumer
   —      —      —      —      —      —   
Total:
            
Real estate loans:
            
One-
to four-family
  $1,336   $1,336   $—     $1,388   $61   $62 
Multi-family
   —      —      —      —      —      —   
Commercial
   —      —      —      3    —      —   
Home equity lines of credit
   15    15    —      18    —      —   
Construction
   —      —      —      —      —      —   
Commercial
   304    304    —      382    23    25 
Consumer
   5    5    —      9    —      —   
  
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Total
  $1,660   $1,660   $—     $1,800   $84   $87 
  
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
 
   
June 30, 2019
 
   
Recorded
Balance
   
Unpaid
Principal
Balance
   
Specific
Allowance
   
Average
Investment in
Impaired
Loans
   
Interest
Income
Recognized
   
Interest on
Cash Basis
 
Loans without a specific allowance:
            
Real estate loans:
            
One-
to four-family
  $1,676   $1,676   $—     $1,718   $63   $71 
Multi-family
   —      —      —      1    —      —   
Commercial
   18    18    —      34    —      —   
Home equity lines of credit
   22    22    —      24    1    2 
Construction
   —      —      —      —      —      —   
Commercial
   60    60    —      63    6    6 
Consumer
   19    19    —      24    2    2 
Loans with a specific allowance:
            
Real estate loans:
            
One-
to four-family
  $46   $46   $13   $47   $1   $1 
Multi-family
   —      —      —      —      —      —   
Commercial
   —      —      —      —      —      —   
Home equity lines of credit
   —      —      —      —      —      —   
Construction
   —      —      —      —      —      —   
Commercial
   —      —      —      —      —      —   
Consumer
   10    10    10    11    1    1 
Total:
            
Real estate loans:
            
One-
to four-family
  $1,722   $1,722   $13   $1,765   $64   $72 
Multi-family
   —      —      —      1    —      —   
Commercial
   18    18    —      34    —      —   
Home equity lines of credit
   22    22    —      24    1    2 
Construction
   —      —      —      —      —      —   
Commercial
   60    60    —      63    6    6 
Consumer
   29    29    10    35    3    3 
  
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Total
  $1,851   $1,851   $23   $1,922   $74   $83 
  
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Loans Modified as Troubled Debt Restructurings
The following table represents loans modified as troubled debt restructurings during the years ending June 30, 2020 and 2019:
 
   
Year Ended June 30, 2020
   
Year Ended June 30, 2019
 
   
Number of
Modifications
   
Recorded
Investment
   
Number of
Modifications
   
Recorded
Investment
 
Real estate loans:
        
One-
to four-family
   —     $—      1   $159 
Home equity lines of credit
   —      —      —      —   
Multi-family
   —      —      —      —   
Commercial
   —      —      —      —   
  
 
 
   
 
 
   
 
 
   
 
 
 
Total real estate loans
   —      —      1    159 
  
 
 
   
 
 
   
 
 
   
 
 
 
Construction
   —      —      —      —   
Commercial
   1    61    —      —   
Consumer loans
   —      —      —      —   
  
 
 
   
 
 
   
 
 
   
 
 
 
Total
   1   $61    1   $159 
  
 
 
   
 
 
   
 
 
   
 
 
 
Nonaccrual 1 [Member]  
Nonaccrual Loans
The following table presents the Company’s nonaccrual loans at June 30, 2020 and 2019:
 
   
2020
   
2019
 
Real estate loans
    
One-
to four-family, including home equity loans
  $81   $414 
Multi-family
   —      —   
Commercial
   —      18 
Home equity lines of credit
   15    20 
Construction
   —      —   
Commercial
   304    60 
Consumer
   5    29 
  
 
 
   
 
 
 
Total
  $405   $541 
  
 
 
   
 
 
 
Nonaccrual 2 [Member]  
Nonaccrual Loans
The following table presents the recorded balance, at original cost, of troubled debt restructurings, as of June 30, 2020 and 2019. With the exception of one
one-
to four-family loan for $127,000, all were performing according to the terms of the restructuring as of June 30, 2020, and with the exception of three
one-
to four-family loans totaling $8,000, one home equity line of credit for $20,000, and one consumer loan for $2,000, all loans were performing according to the terms of restructuring as of June 30, 2019. As of June 30, 2020 all loans listed were on nonaccrual except for nine
one-
to four-family residential loans totaling $1.3 million. As of June 30, 2019 all loans listed were on nonaccrual except for ten
one-
to four-family residential loans totaling $1.3 million, one home equity line of credit for $1,000.    
 
   
June 30, 2020
   
June 30, 2019
 
Real estate loans
    
One-
to four-family
  $1,256   $1,475 
Multi-family
   —      —   
Commercial
   —      6 
Home equity lines of credit
   15    22 
  
 
 
   
 
 
 
Total real estate loans
   1,271    1,503 
  
 
 
   
 
 
 
Construction
   —      —   
Commercial
   59    —   
Consumer
   —      2 
  
 
 
   
 
 
 
Total
  $1,330   $1,505 
  
 
 
   
 
 
 
v3.20.2
Premises and Equipment (Tables)
12 Months Ended
Jun. 30, 2020
Property, Plant and Equipment [Abstract]  
Major Classifications of Premises and Equipment, Stated at Cost
Major classifications of premises and equipment, stated at cost, are as follows:
 
   
2020
   
2019
 
Land
  $1,976   $1,976 
Buildings and improvements
   11,338    11,319 
Furniture and equipment
   4,895    4,756 
  
 
 
   
 
 
 
   18,209    18,051 
Less accumulated depreciation
   8,016    7,345 
  
 
 
   
 
 
 
Net premises and equipment
  $10,193   $10,706 
  
 
 
   
 
 
 
v3.20.2
Loan Servicing (Tables)
12 Months Ended
Jun. 30, 2020
Transfers and Servicing [Abstract]  
Activity in Mortgage Servicing Rights Measured Using Fair Value Method
The following summarizes the activity in mortgage servicing rights measured using the fair value method:
 
   
2020
   
2019
 
Fair value, beginning of period
  $853   $866 
Additions:
    
Servicing assets resulting from asset transfers
   255    144 
Subtractions:
    
Payments received and loans refinanced
   (99   (112
Changes in fair value, due to changes in valuation
 
inputs or assumptions
   (294   (45
  
 
 
   
 
 
 
Fair value, end of period
  $715   $853 
  
 
 
   
 
 
 
v3.20.2
Interest-Bearing Deposits (Tables)
12 Months Ended
Jun. 30, 2020
Banking and Thrift [Abstract]  
Interest Expense by Deposit Type
The following table represents interest expense by deposit type:
 
   
2020
   
2019
 
Savings, NOW, and Money Market
  $1,405   $1,574 
Certificates of deposit
   5,962    4,954 
Brokered certificates of deposit
   543    789 
  
 
 
   
 
 
 
Total deposit interest expense
  $7,910   $7,317 
  
 
 
   
 
 
 
Scheduled Maturities of Time Deposits Including Brokered Time Deposits
At June 30, 2020, the scheduled maturities of time deposits; including brokered time deposits, are as follows:
 
2021
  $248,359 
2022
   23,848 
2023
   6,928 
2024
   1,490 
2025 and thereafter
   866 
  
 
 
 
  $281,491 
  
 
 
 
v3.20.2
Federal Home Loan Bank Advances (Tables)
12 Months Ended
Jun. 30, 2020
Banking and Thrift [Abstract]  
Aggregate Annual Maturities of Federal Home Loan Bank Advances
Aggregate annual maturities of Federal Home Loan Bank advances at June 30, 2020, are:
 
2021
  $19,500 
2022
   —   
2023
   5,000 
2024
   10,000 
2025
   —   
Thereafter
   —   
  
 
 
 
  $34,500 
  
 
 
 
v3.20.2
Income Taxes (Tables)
12 Months Ended
Jun. 30, 2020
Income Tax Disclosure [Abstract]  
Components of the Provision for Income Taxes
The provision for income taxes includes these components:
 
   
2020
   
2019
 
Taxes currently payable
  $1,654   $1,217 
Deferred income taxes
   (15   76 
  
 
 
   
 
 
 
Income tax expense
  $1,639   $1,293 
  
 
 
   
 
 
 
Reconciliation of Income Tax Expense at the Statutory Rate
A reconciliation of income tax expense at the statutory rate to the Company’s actual income tax expense is shown below:
 
   
2020
  
2019
 
Computed at the statutory rate of 21.0%
  $1,236  $1,019 
Increase (decrease) resulting from
   
Tax exempt interest
   (16  (26
Cash surrender value of life insurance
   (57  (56
State income taxes
   441   329 
Other
   35   27 
  
 
 
  
 
 
 
Actual tax expense
  $1,639  $1,293 
  
 
 
  
 
 
 
Tax rate as a percentage of
pre-tax
income
   27.9  26.7
Temporary Differences Related to Deferred Taxes
The tax effects of temporary differences related to deferred taxes shown on the consolidated balance sheets were:
 
   
2020
   
2019
 
Deferred tax assets
    
Allowance for loan losses
  $1,776   $1,802 
Accrued retirement liability
   677    651 
Deferred compensation
   468    422 
Deferred loan fees
   291    83 
Postretirement health plan
   264    170 
Accrued vacation
   66    46 
MPF recourse liability
   97    66 
Deferred revenue Mastercard
   23    27 
Stock options – Directors
   50    42 
Restricted stock
   11    (9
Accrued professional services
   18    —   
Other
   7    12 
  
 
 
   
 
 
 
   3,748    3,312 
  
 
 
   
 
 
 
Deferred tax liabilities
    
Depreciation
   (731   (426
Mortgage servicing rights
   (204   (243
Deferred loan expense
   (181   (182
Unrealized gains on
available-for-sale
securities
   (1,940   (395
Prepaid expenses
   (62   —   
  
 
 
   
 
 
 
   (3,118   (1,246
  
 
 
   
 
 
 
Net deferred tax asset
  $630   $2,066 
  
 
 
   
 
 
 
v3.20.2
Accumulated Other Comprehensive Income (Tables)
12 Months Ended
Jun. 30, 2020
Equity [Abstract]  
Components of Accumulated Other Comprehensive Income
The components of accumulated other comprehensive income, included in stockholders’ equity, are as follows:
 
   
2020
   
2019
 
Net unrealized gains on securities available for sale
  $6,805   $1,386 
Net unrealized postretirement health benefit plan obligations
   (926   (596
  
 
 
   
 
 
 
   5,879    790 
Tax effect
   (1,676   (225
  
 
 
   
 
 
 
Net-of-tax
amount
  $4,203   $565 
  
 
 
   
 
 
 
v3.20.2
Changes in Accumulated Other Comprehensive Income (AOCI) by Component (Tables)
12 Months Ended
Jun. 30, 2020
Text Block [Abstract]  
Amounts Reclassified from Accumulated Other Comprehensive Income
Amounts reclassified from AOCI and the affected line items in the statements of income during the years ended June 30, 2020 and 2019, were as follows:
 
   
Amounts Reclassified
From AOCI
    
   
2020
   
2019
   
Affected Line Item in the
Condensed Consolidated
Statements of Income
Realized gains on
available-for-sale
securities
  $267   $11   Net realized gains on sale of
 
available-for-sale securities
Amortization of defined benefit pension items:
      
Actuarial losses
   359    104   Components are included in
 
computation of net periodic
 
pension cost
  
 
 
   
 
 
   
Total reclassified amount before tax
   626    115   
Tax expense
   199    11   Provision for Income Tax
  
 
 
   
 
 
   
Total reclassification out of AOCI
  $427   $104   Net Income
  
 
 
   
 
 
   
v3.20.2
Regulatory Matters (Tables)
12 Months Ended
Jun. 30, 2020
Banking and Thrift [Abstract]  
Association's Actual Capital Amounts and Ratios
The Association’s actual capital amounts (in thousands) and ratios are also presented in the table.
   
Actual
   
Minimum
Capital Requirement
   
Minimum to Be Well
Capitalized Under Prompt
Corrective Action
Provisions
 
   
Amount
   
Ratio
   
Amount
   
Ratio
   
Amount
   
Ratio
 
As of June 30, 2020
            
Community Bank Leverage Ratio
  $76,428    10.68  $57,238    8.00  $57,238    8.00
Total capital (to risk-weighted assets)
   N/A    N/A    N/A    N/A    N/A    N/A 
Tier 1 capital (to risk-weighted assets)
   N/A    N/A    N/A    N/A    N/A    N/A 
Common Equity Tier 1 capital (to risk-weighted assets)
   N/A    N/A    N/A    N/A    N/A    N/A 
Tier 1 capital (to adjusted total assets)
   76,428    10.68   28,619    4.00   35,774    5.00
Tangible capital (to adjusted tangible assets)
   76,428    10.68   10,732    1.50   N/A    N/A 
As of June 30, 2019
            
Community Bank Leverage Ratio
  $N/A    N/A  $N/A    N/A  $N/A    N/A
Total capital (to risk-weighted assets)
   81,624    16.28   40,119    8.00   50,149    10.00
Tier 1 capital (to risk-weighted assets)
   75,355    15.03   30,090    6.00   40,119    8.00
Common Equity Tier 1 capital (to risk-weighted assets)
   75,355    15.03   22,567    4.50   32,597    6.50
Tier 1 capital (to adjusted total assets)
   75,355    10.96   27,513    4.00   34,392    5.00
Tangible capital (to adjusted tangible assets)
   75,355    10.96   10,317    1.50   N/A    N/A 
Reconciliation of Association Equity Amounts
The following is a reconciliation of the Association equity amounts included in the consolidated balance sheets to the amounts reflected for regulatory purposes:
 
   
2020
   
2019
 
Association equity
  $80,631   $75,920 
Less net unrealized gains
   4,865    991 
Less postretirement benefit plan
   (662   (426
  
 
 
   
 
 
 
Tier 1 capital
   76,428    75,355 
Plus allowance for loan losses subject to limit
   6,234    6,269 
  
 
 
   
 
 
 
Total risk-based capital
  $82,662   $81,624 
  
 
 
   
 
 
 
v3.20.2
Related Party Transactions (Tables)
12 Months Ended
Jun. 30, 2020
Related Party Transactions [Abstract]  
Changes in Loans Outstanding Changes in loans to executive officers and directors are summarized as follows:
 
   
2020
   
2019
 
Balance, beginning of year
  $3,033   $3,132 
New loans
   1,087    756 
Repayments
   (779   (855
  
 
 
   
 
 
 
Balance, end of year
  $3,341   $3,033 
  
 
 
   
 
 
 
v3.20.2
Employee Benefits (Tables)
12 Months Ended
Jun. 30, 2020
Retirement Benefits [Abstract]  
Plan's Funded Status and Pension Cost
The Company uses a June 30 measurement date for the plan. Information about the plan’s funded status and pension cost follows:
 
   
2020
   
2019
 
Change in benefit obligation
    
Beginning of year
  $ 2,919   $ 2,770 
Service cost
   53    50 
Interest cost
   93    107 
Actuarial gain
   355    106 
Benefits paid
   (114   (114
  
 
 
   
 
 
 
End of year
  $3,306   $2,919 
  
 
 
   
 
 
 
Significant Balances, Costs and Assumptions
Significant balances, costs and assumptions are:
 
   
Postretirement Plan
 
   
2020
   
2019
 
Benefit obligation
  $3,306   $2,919 
Fair value of plan assets
   —      —   
  
 
 
   
 
 
 
Funded status
  $(3,306  $(2,919
  
 
 
   
 
 
 
Accumulated benefit obligation
  $3,306   $2,919 
  
 
 
   
 
 
 
Amounts recognized in the consolidated balance sheets:
 
 
 
 
 
 
 
 
Accrued benefit cost
  $3,306   $2,919 
 
Net Periodic Benefit Cost
Components of net periodic benefit cost:
 
   
2020
   
2019
 
Service cost
  $53   $50 
Interest cost
   93    107 
Amortization of (Gain) or Loss
   25    16 
  
 
 
   
 
 
 
  $171   $173 
  
 
 
   
 
 
 
Accumulated Other Comprehensive Income Not Yet Recognized
Amounts recognized in accumulated other comprehensive income not yet recognized as components of net periodic benefit cost consist of:
 
   
2020
   
2019
 
Net loss
  $860   $531 
Other Significant Balances and Costs
Other significant balances and costs are:
 
   
2020
   
2019
 
Employer contribution
  $114   $114 
Benefits paid
   114    114 
Benefit costs
   171    173 
One-percentage-Point Change in Assumed Health Care Cost Trend Rates
   
One-

Percentage-Point

Increase
   
One-

Percentage-Point

Decrease
 
Effect on total of service and interest cost components
  $4   $(4
Effect on postretirement benefit obligation
   36    (34
Postretirement Plan Benefit Payments Expected Future Service
The following postretirement plan benefit payments, which reflect expected future service, as appropriate, are expected to be paid as of June 30, 2020:
 
2021  
$
137 
2022   168 
2023   183 
2024   199 
2025   195 
2026-2030   986 
Benefit Payments Expected to be Paid for Agreements The following benefit payments are expected to be paid for these agreements:
2021  
$
121 
2022   151 
2023   133 
2024   134 
2025   134 
Thereafter   3,928 
  
 
 
 
  
$
4,601 
  
 
 
 
v3.20.2
Stock-based Compensation (Tables)
12 Months Ended
Jun. 30, 2020
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]  
Summary of ESOP Shares
A summary of ESOP shares at June 30, 2020 and 2019 are as follows (dollars in thousands):
 
   
2020
   
2019
 
Allocated shares
   127,102    109,018 
Shares committed for release
   19,245    19,245 
Unearned shares
   211,695    230,940 
  
 
 
   
 
 
 
Total ESOP shares
   358,042    359,203 
  
 
 
   
 
 
 
Fair value of unearned ESOP shares
(1)
  $3,652   $4,829 
  
 
 
   
 
 
 
 
 (1)
Based on closing price of $17.25 and $20.91 per share on June 30, 2020, and 2019, respectively.
Summary of Stock Option Activity
The following table summarizes stock option activity for the year ended June 30, 2020 (dollars in thousands):
 
   
Shares
   
Weighted-
Average
Exercise
Price/
Share
   
Weighted-
Average
Remaining
Contractual
Term
   
Aggregate
Intrinsic
Value
 
Outstanding, June 30, 2019
   153,143   $ 16.63     
Granted
   —      —       
Exercised
   —      —       
Forfeited
   —      —       
  
 
 
   
 
 
     
Outstanding, June 30, 2020
   153,143   $16.63    3.4   $95
(1)
 
  
 
 
   
 
 
   
 
 
   
 
 
 
Exercisable, June 30, 2020
   130,857   $16.63    3.4   $81
(1)
 
  
 
 
   
 
 
   
 
 
   
 
 
 
 
 (1)
Based on closing price of $17.25 per share on June 30, 2020.
Summary of Non-vested Restricted Stock Activity
The following table summarizes
non-vested
restricted stock activity for the year ended June 30, 2020:
 
   
Shares
   
Weighted-
Average
Grant-Date

Fair Value
 
Balance, June 30, 2019
   50,313   $16.79 
Granted
   —      —   
Forfeited
   —       
Earned and issued
   10,063    16.79 
  
 
 
   
 
 
 
Balance, June 30, 2020
   40,250    16.79 
  
 
 
   
 
 
 
v3.20.2
Earnings Per Share ("EPS") (Tables)
12 Months Ended
Jun. 30, 2020
Earnings Per Share [Abstract]  
Factors Used in Earnings Per Common Share Computation
Basic and diluted earnings per common share are presented for the years ended June 30, 2020 and 2019. The factors used in the earnings per common share computation follow:
 
   
Year Ended
   
Year Ended
 
   
June 30, 2020
   
June 30, 2019
 
Net income
  $4,245   $3,558 
  
 
 
   
 
 
 
Basic weighted average shares outstanding
   3,324,657    3,716,924 
Less: Average unallocated ESOP shares
   (221,318   (240,563
  
 
 
   
 
 
 
Average shares outstanding
   3,103,339    3,476,361 
  
 
 
   
 
 
 
Diluted effect of restricted stock awards and stock options
   44,693    53,856 
  
 
 
   
 
 
 
Diluted average shares outstanding
   3,148,032    3,530,217 
  
 
 
   
 
 
 
Basic earnings per common share
  $1.37   $1.02 
  
 
 
   
 
 
 
Diluted earnings per common share
  $1.35   $1.01 
  
 
 
   
 
 
 
v3.20.2
Disclosures about Fair Value of Assets (Tables)
12 Months Ended
Jun. 30, 2020
Fair Value Disclosures [Abstract]  
Fair Value Measurements of Assets Recognized on Recurring Basis
The following table presents the fair value measurements of assets recognized in the accompanying 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 June 30, 2020 and 2019:
 
       
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, 2020:
        
Available-for-sale
securities:
        
US Government and federal agency
  $8,236   $—     $8,236   $—   
Mortgage-backed securities – GSE residential
   148,855    —      148,855    —   
Small Business Administration
   3,640    —      3,640    —   
State and political subdivisions
   1,663    —      1,663    —   
Mortgage servicing rights
   715    —      —      715 
 
       
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, 2019:
        
Available-for-sale
securities:
        
US Government and federal agency
  $12,950   $—     $12,950   $—   
Mortgage-backed securities – GSE residential
   125,510    —      125,510    —   
Small Business Administration
   4,935    —      4,935    —   
State and political subdivisions
   2,896    —      2,896    —   
Mortgage servicing rights
   853    —      —      853 
Reconciliation of Beginning and Ending Balances of Recurring Fair Value Measurements Recognized in Accompanying Balance Sheet
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:
 
   
Mortgage
Servicing 
Rights
 
Balance, July 1, 2018
  $866 
Total realized and unrealized gains and losses included in net income
   (45
Servicing rights that result from asset transfers
   144 
Payments received and loans refinanced
   (112
  
 
 
 
Balance, June 30, 2019
   853 
  
 
 
 
Total realized and unrealized gains and losses included in net income
   (294
Servicing rights that result from asset transfers
   255 
Payments received and loans refinanced
   (99
  
 
 
 
Balance, June 30, 2020
  $715 
  
 
 
 
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
  $(294
  
 
 
 
 
Fair Value Measurement of Assets Recognized on Nonrecurring Basis
The following table presents the fair value measurement of assets measured at fair value on a nonrecurring basis and the level within the fair value hierarchy in which the fair value measurements fall at June 30, 2020 and 2019:
 
       
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, 2020:
        
Foreclosed assets
  $200   $—     $—     $200 
June 30, 2019:
        
Impaired loans (collateral dependent)
  $33   $—     $—     $33 
Foreclosed assets
   512    —      —      512 
(Losses)/Recoveries Recognized on Assets Measured on Non-Recurring Basis
The following table presents (losses)/recoveries recognized on assets measured on a
non-recurring
basis for the years ended June 30, 2020 and 2019:
 
   
2020
   
2019
 
Impaired loans (collateral dependent)
  $13   $(20
Foreclosed and repossessed assets held for sale
   (19   (196
Quantitative Information about Unobservable Inputs Used in Recurring and Nonrecurring Level 3 Fair Value Measurements
The following table presents quantitative information about unobservable inputs used in recurring and nonrecurring Level 3 fair value measurements.
 
   
Fair Value at
June 30,
2020
   
Valuation Technique
  
Unobservable
 
Inputs
 
Range (Weighted Average)
Mortgage servicing rights
  $715   Discounted cash
 
flow
  Discount
 
rate
 
9.5% – 11.5% (9.5%)
      Constant
 
prepayment
 
rate
 
13.5% – 17.7% (13.8%)
      Probability of
 
default
 
0.04% – 0.12% (0.11%)
Foreclosed assets
   200   Market comparable
 
properties
  Comparability
 
adjustments (%)
 11.1% (11.1%)
   
Fair Value at
June 30,
2019
   
Valuation Technique
  
Unobservable
 
Inputs
 
Range (Weighted Average)
Mortgage servicing rights
  $853   Discounted cash
 
flow
  Discount
 
rate
 
9.5% – 11.5% (9.5%)
      Constant
 
prepayment
 
rate
 
8.3% – 11.0% (9.0%)
      Probability of
 
default
 
0.05% – 0.12% (0.11%)
Impaired loans (collateral dependent)
   33   Market comparable
 
properties
  Marketability
 
discount
 11.1% (11.1%)
Foreclosed assets
   512   Market comparable
 
properties
  Comparability
 
adjustments (%)
 7.8% (7.8%)
Estimated Fair Values of Financial Instruments and Level within Fair Value Hierarchy in which Fair Value Measurements Fall
The following table presents 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 June 30, 2020 and 2019.
 
 
  
 
 
  
Fair Value
Measurements
Using
 
  
 
 
  
 
 
 
  
Carrying
Amount
 
  
Quoted Prices
in Active
Markets for
Identical
Assets

(Level 1)
 
  
Significant
Other
Observable
Inputs

(Level 2)
 
  
Significant
Unobservable
Inputs

(Level 3)
 
June 30, 2020:
        
Financial assets
        
Cash and cash equivalents
  $33,467   $33,467   $—     $—   
Interest-bearing time deposits in banks
   3,000    3,000    —      —   
Loans, net of allowance for loan losses
   509,817    —      —      513,221 
Federal Home Loan Bank stock
   3,028    —      3,028    —   
Accrued interest receivable
   1,908    —      1,908    —   
Financial liabilities
        
Deposits
   601,700    —      320,209    283,304 
Repurchase agreements
   3,738    —      3,738    —   
Federal Home Loan Bank advances
   34,500    —      35,472    —   
Line
s
 
of credit
 
 
 3,000
 
 
 
 
 
 
 3,000
 
 
 
 
Advances from borrowers for taxes and insurance
   519    —      519    —   
Accrued interest payable
   537    —      537    —   
Unrecognized financial instruments (net of contract amount)
        
Commitments to originate loans
   —      —      —      —   
 
 
  
 
 
  
Fair Value
Measurements
Using
 
  
 
 
  
 
 
 
  
Carrying
Amount
 
  
Quoted Prices
in Active
Markets for
Identical
Assets

(Level 1)
 
  
Significant
Other
Observable
Inputs

(Level 2)
 
  
Significant
Unobservable
Inputs

(Level 3)
 
June 30, 2019:
        
Financial assets
        
Cash and cash equivalents
  $59,600   $59,600   $—     $—   
Interest-bearing time deposits in banks
   3,000    3,000    —      —   
Loans, net of allowance for loan losses
   487,774    —      —      480,479 
Federal Home Loan Bank stock
   1,174    —      1,174    —   
Accrued interest receivable
   2,142    —      2,142    —   
Financial liabilities
        
Deposits
   607,023    —      276,738    331,865 
Repurchase agreements
   2,015    —      2,015    —   
Federal Home Loan Bank advances
   24,000    —      24,419    —   
Advances from borrowers for taxes and insurance
   747    —      747    —   
Accrued interest payable
   801    —      801    —   
Unrecognized financial instruments (net of contract amount)
        
Commitments to originate loans
   —      —      —      —   
Lines of credit
   —      —      —      —   
v3.20.2
Condensed Financial Information (Parent Company Only) (Tables)
12 Months Ended
Jun. 30, 2020
Condensed Financial Information Disclosure [Abstract]  
Condensed Balance Sheet
Presented below is condensed financial information as to financial position, results of operations and cash flows of the Company as of and for the years ended June 30, 2020 and 2019:
Condensed Balance Sheet
 
   
June 30,
   
June 30,
 
   
2020
   
2019
 
Assets
    
Cash and due from banks
  $2,592   $4,058 
Investment in common stock of subsidiary
   80,631    75,920 
ESOP loan
   2,469    2,628 
  
 
 
   
 
 
 
Total assets
  $85,692   $82,606 
  
 
 
   
 
 
 
Liabilities
    
Line of credit
  $3,000   $—   
Interest payable
   31    —   
Other liabilities
   97    145 
  
 
 
   
 
 
 
Total liabilities
   3,128    145 
Stockholders’ Equity
   82,564    82,461 
  
 
 
   
 
 
 
Total liabilities and stockholders’ equity
  $85,692   $82,606 
  
 
 
   
 
 
 
Condensed Statement of Income and Comprehensive Income (Loss)
Condensed Statement of Income and Comprehensive Income
 
   
Year Ending
June 30,
2020
   
Year Ending
June 30, 
2019
 
Income
    
Interest on ESOP loan
  $141   $136 
Deposits with financial institutions
   —      —   
  
 
 
   
 
 
 
Total income
   141    136 
Expense
    
Interest on line of credit
   133    —   
Other expenses
   203    183 
  
 
 
   
 
 
 
Total expense
   336    183 
Loss Before Income Tax and Equity in Undistributed Income of Subsidiary
   (195   (47
Benefit for Income Taxes
   (54   (11
  
 
 
   
 
 
 
Loss Before Equity in Undistributed Loss of Subsidiary
   (141   (36
Equity in Undistributed Income of Subsidiary
   4,386    3,594 
  
 
 
   
 
 
 
Net Income
  $4,245   $3,558 
  
 
 
   
 
 
 
Comprehensive Income
  $7,883   $7,231 
  
 
 
   
 
 
 
Condensed Statement of Cash Flows
Condensed Statement of Cash Flows
 
   
Year Ended
June 30,
2020
   
Year Ended
June 30,
2019
 
Cash flows from operating activities
    
Net income
  $4,245   $3,558 
  
 
 
   
 
 
 
Items not requiring (providing) cash
    
Net change accrued interest payable
   30    —   
Net change in other liabilities
   (48   30 
Earnings from subsidiary
   (4,386   (3,594
  
 
 
   
 
 
 
Net cash provided by operating activities
   (159   (6
  
 
 
   
 
 
 
Cash flows from financing activities
    
Stock purchase per stock repurchase plan
   (7,459   (6,222
Dividends paid
   (1,008   (930
Dividends received
   4,000    2,000 
Loan for ESOP
   159    156 
Proceeds from CIBC line of credit
   5,000    —   
Repayment of CIBC line of credit
   (2,000   —   
  
 
 
   
 
 
 
Net cash used in financing activities
   (1,308   (4,996
  
 
 
   
 
 
 
Net Change in Cash and Cash Equivalents
   (1,467   (5,002
Cash and Cash Equivalents at Beginning of Year
   4,058    9,060 
  
 
 
   
 
 
 
Cash and Cash Equivalents at End of Year
  $2,591   $4,058 
  
 
 
   
 
 
v3.20.2
Nature of Operations and Summary of Significant Accounting Policies - Estimated Useful Lives of Premises and Equipment (Detail)
12 Months Ended
Jun. 30, 2020
Maximum [Member] | Buildings and Improvements [Member]  
Property, Plant and Equipment [Line Items]  
Estimated useful lives 40 years
Maximum [Member] | Furniture and Equipment [Member]  
Property, Plant and Equipment [Line Items]  
Estimated useful lives 5 years
Minimum [Member] | Buildings and Improvements [Member]  
Property, Plant and Equipment [Line Items]  
Estimated useful lives 35 years
Minimum [Member] | Furniture and Equipment [Member]  
Property, Plant and Equipment [Line Items]  
Estimated useful lives 3 years
v3.20.2
Nature of Operations and Summary of Significant Accounting Policies - Additional Information (Detail)
12 Months Ended
Jun. 30, 2020
Banking_Office
Federal Home Loan Bank, Advances, Branch of FHLB Bank [Line Items]  
Number Of Full Service Banking Offices 7
Interest-bearing deposits, maturity period (in months) 5 years
Liquid investments with original maturity period 3 months
Accrual of interest on loans due discontinued period, in days 90 days
Percentage of minimum likelihood of realized tax benefit upon settlement 50.00%
Sales [Member]  
Federal Home Loan Bank, Advances, Branch of FHLB Bank [Line Items]  
Percentage of major customer revenues 10.00%
v3.20.2
Securities - Amortized Cost and Approximate Fair Value of Securities, Together with Gross Unrealized Gains and Losses of Securities (Detail) - USD ($)
$ in Thousands
Jun. 30, 2020
Jun. 30, 2019
Debt Securities, Available-for-sale [Line Items]    
Amortized Cost $ 155,588 $ 144,905
Gross Unrealized Gains 7,029 1,723
Gross Unrealized Losses (223) (337)
Fair Value 162,394 146,291
U.S. Government and Federal Agency and Government Sponsored Enterprises (GSEs) [Member]    
Debt Securities, Available-for-sale [Line Items]    
Amortized Cost 7,528 12,654
Gross Unrealized Gains 708 296
Fair Value 8,236 12,950
Mortgage-backed Securities - GSE Residential [Member]    
Debt Securities, Available-for-sale [Line Items]    
Amortized Cost 143,033 124,615
Gross Unrealized Gains 6,044 1,231
Gross Unrealized Losses (222) (336)
Fair Value 148,855 125,510
Small Business Administration [Member]    
Debt Securities, Available-for-sale [Line Items]    
Amortized Cost 3,578 4,911
Gross Unrealized Gains 62 25
Gross Unrealized Losses   (1)
Fair Value 3,640 4,935
State and Political Subdivisions [Member]    
Debt Securities, Available-for-sale [Line Items]    
Amortized Cost 1,449 2,725
Gross Unrealized Gains 215 171
Gross Unrealized Losses (1)  
Fair Value $ 1,663 $ 2,896
v3.20.2
Securities - Additional Information (Detail) - USD ($)
$ in Thousands
12 Months Ended
Jun. 30, 2020
Jun. 30, 2019
Debt Securities, Available-for-sale [Line Items]    
Mortgage-backed securities with a book value $ 155,588 $ 144,905
Fair Value $ 162,394 146,291
Percentage of equity securities 10.00%  
Carrying value of securities pledged as collateral $ 66,186 57,921
Gross gains from sales of available for sale securities 295 96
Gross losses from sales of available for sale securities 28 85
Tax benefit to net realized gains (losses) 76 3
Investments in debt and marketable equity securities $ 24,574 $ 47,146
Temporarily impaired debt securities percentage of investment securities portfolio 16.00% 32.00%
Mortgage-backed Securities - GSE Residential [Member]    
Debt Securities, Available-for-sale [Line Items]    
Mortgage-backed securities with a book value $ 143,033 $ 124,615
Fair Value 148,855 125,510
Investments in debt and marketable equity securities 24,513 46,216
Debt Securities [Member]    
Debt Securities, Available-for-sale [Line Items]    
Investments in debt and marketable equity securities $ 24,574 $ 47,146
v3.20.2
Securities - Amortized Cost and Fair Value of Available-for-Sale Securities by Contractual Maturity (Detail) - USD ($)
$ in Thousands
Jun. 30, 2020
Jun. 30, 2019
Debt Securities, Available-for-sale [Line Items]    
Within one year, Amortized Cost  
One to five years, Amortized Cost 6,100  
Five to ten years, Amortized Cost 4,458  
After ten years, Amortized Cost 1,997  
Amortized Cost 12,555  
Amortized Cost 155,588 $ 144,905
Within one year, Fair Value  
One to five years, Fair Value 6,658  
Five to ten years, Fair Value 4,856  
After ten years, Fair Value 2,025  
Fair Value 13,539  
Fair Value 162,394 146,291
Mortgage-backed Securities - GSE Residential [Member]    
Debt Securities, Available-for-sale [Line Items]    
Amortized Cost 143,033 124,615
Fair Value $ 148,855 $ 125,510
v3.20.2
Securities - Association's Investments Gross Unrealized Investment Losses and Fair Value of Association's Investments with Unrealized Losses (Detail) - USD ($)
$ in Thousands
Jun. 30, 2020
Jun. 30, 2019
Less than 12 Months, Fair Value $ 22,223 $ 16,097
Less than 12 Months, Unrealized Losses (117) (73)
12 Months or More, Fair Value 2,351 31,049
12 Months or More, Unrealized Losses (106) (264)
Total Fair Value 24,574 47,146
Total, Unrealized Losses (223) (337)
Mortgage-backed Securities - GSE Residential [Member]    
Less than 12 Months, Fair Value 22,162 15,167
Less than 12 Months, Unrealized Losses (116) (72)
12 Months or More, Fair Value 2,351 31,049
12 Months or More, Unrealized Losses (106) (264)
Total Fair Value 24,513 46,216
Total, Unrealized Losses (222) (336)
Small Business Administration [Member]    
Less than 12 Months, Fair Value   930
Less than 12 Months, Unrealized Losses   (1)
Total Fair Value   930
Total, Unrealized Losses   $ (1)
State and Political Subdivisions [Member]    
Less than 12 Months, Fair Value 61  
Less than 12 Months, Unrealized Losses (1)  
Total Fair Value 61  
Total, Unrealized Losses $ (1)  
v3.20.2
Loans and Allowance for Loan Losses - Categories of Loans (Detail) - USD ($)
$ in Thousands
Jun. 30, 2020
Jun. 30, 2019
Jun. 30, 2018
Real estate loans      
Total loans $ 515,887 $ 493,753  
Unearned fees and discounts, net (164) (349)  
Allowance for loan losses 6,234 6,328 $ 5,945
Loans, net 509,817 487,774  
One- to four-family [Member]      
Real estate loans      
Total loans 128,876 129,290  
Allowance for loan losses 1,044 1,031 997
Multi-family [Member]      
Real estate loans      
Total loans 96,195 104,663  
Allowance for loan losses 1,514 1,642 1,650
Home equity lines of credit [Member]      
Real estate loans      
Total loans 8,551 8,938  
Allowance for loan losses 87 89 91
Construction [Member]      
Real estate loans      
Total loans 22,042 16,113  
Allowance for loan losses 240 213 168
Commercial [Member]      
Real estate loans      
Total loans 145,113 143,367  
Allowance for loan losses 1,706 1,623 1,604
Commercial [Member]      
Real estate loans      
Total loans 107,581 84,246  
Allowance for loan losses 1,583 1,659 1,373
Consumer [Member]      
Real estate loans      
Total loans 7,529 7,136  
Allowance for loan losses $ 60 $ 71 $ 62
v3.20.2
Loans and Allowance for Loan Losses - Additional Information (Detail)
6 Months Ended 12 Months Ended
Dec. 31, 2019
Jun. 30, 2020
USD ($)
SecurityLoan
Modification
Loans
Jun. 30, 2019
USD ($)
Jun. 30, 2019
USD ($)
SecurityLoan
Jun. 30, 2019
USD ($)
Modification
Jun. 30, 2019
SecurityLoan
Jun. 30, 2019
TDRs
Loans and Allowance for Credit Losses [Line Items]              
Maximum amount of one-to-four family residential mortgage loans can be approved by loan officer   $ 100,000          
Maximum amount of other secured loans real estate loans can be approved by loan officer   50,000          
Maximum amount of unsecured loans real estate loans can be approved by loan officer   10,000          
Maximum amount of one-to-four family residential mortgage loans can be approved by managing officer   375,000 $ 2,000,000 $ 2,000,000 $ 2,000,000    
Maximum amount other secured loans residential mortgage loans can be approved by managing officer   375,000 500,000 500,000 500,000    
Maximum amount of unsecured loans residential mortgage loans can be approved by managing officer   $ 100,000          
Maximum term of fixed-rate one- to four-family residential mortgage loans   15 years          
Troubled debt restructurings, Impaired loans   $ 1,330,000 1,505,000 $ 1,505,000 $ 1,505,000    
Investment recorded prior to modification   $ 61,000 159,000        
Number of Modifications   1   4 1    
Residential real estate properties foreclosure proceedings   $ 41,000 200,000 $ 200,000 $ 200,000    
Foreclosed residential real estate properties   386,000 778,000 778,000 778,000    
Loans and Leases Receivable, Gross   515,887,000 493,753,000 493,753,000 493,753,000    
Fair Value, Concentration of Risk, Collateral Policy [Member]              
Loans and Allowance for Credit Losses [Line Items]              
Commercial and multi-family real estate   256,015,000 260,888,000,000 260,888,000,000 260,888,000,000    
Troubled Debt Restructurings [Member]              
Loans and Allowance for Credit Losses [Line Items]              
Troubled debt restructurings, Impaired loans   $ 1,300,000          
Minimum period for default   90 days          
Residential Real Estate [Member]              
Loans and Allowance for Credit Losses [Line Items]              
Foreclosed residential real estate properties   $ 186,000 539,000 539,000 539,000    
Consumer [Member]              
Loans and Allowance for Credit Losses [Line Items]              
Amount of troubled debt restructurings in accrual status   1,000,000,000 2,000 2,000 2,000    
Loans and Leases Receivable, Gross   7,529,000 7,136,000 $ 7,136,000 7,136,000    
Consumer [Member] | Troubled Debt Restructurings [Member]              
Loans and Allowance for Credit Losses [Line Items]              
Number of Modifications | SecurityLoan       1      
Investment recorded post modification     2,000        
Commercial [Member]              
Loans and Allowance for Credit Losses [Line Items]              
Troubled debt restructurings, Impaired loans     6,000 $ 6,000 $ 6,000    
Investment recorded prior to modification   $ 61,000 166,000        
Number of Modifications | Modification   1     0    
Loans and Leases Receivable, Gross   $ 145,113,000 143,367,000 143,367,000 $ 143,367,000    
Commercial Business Loans [Member]              
Loans and Allowance for Credit Losses [Line Items]              
Troubled debt restructurings, Impaired loans   59,000          
Investment recorded prior to modification   $ 61,000          
Number of Modifications | Modification   1          
Loans and Leases Receivable, Gross   $ 107,581,000 84,246,000 84,246,000 84,246,000    
Commercial Business Loans [Member] | Small Business Administration Paycheck Protection Programme Loans [Member]              
Loans and Allowance for Credit Losses [Line Items]              
Percentage of government guarantee for loans as per scheme   100.00%          
Commercial Portfolio And Commercial Residential Portfolio [Member]              
Loans and Allowance for Credit Losses [Line Items]              
Number of loans as on closing date | Loans   295          
Loans and Leases Receivable, Gross   $ 26.2          
One- to four-family [Member]              
Loans and Allowance for Credit Losses [Line Items]              
Loans held for sale   $ 552,000 316,000 316,000 316,000    
Maximum term of fixed-rate one- to four-family residential mortgage loans   15 years          
Troubled debt restructurings, Impaired loans   $ 1,256,000 1,475,000 $ 1,475,000 1,475,000    
Number of default loans | SecurityLoan   1   3      
Number of troubled debt restructurings in accrual status | SecurityLoan   9       10  
Amount of troubled debt restructurings in accrual status   $ 1,300,000 1,300,000 $ 1,300,000 $ 1,300,000    
Investment recorded prior to modification   $ 0 159,000        
Number of Modifications | Modification   0     1    
Investment recorded post modification   $ 127,000 8,000        
Loans and Leases Receivable, Gross   $ 128,876,000 129,290,000 $ 129,290,000 $ 129,290,000    
One- to four-family [Member] | Troubled Debt Restructurings [Member]              
Loans and Allowance for Credit Losses [Line Items]              
Number of default loans | SecurityLoan   1   6      
Investment recorded post modification   $ 127,000 144,000        
Purchased Loans and Loan Participations [Member]              
Loans and Allowance for Credit Losses [Line Items]              
Approximate amount of purchase loans included in loans receivable   4,181,000 4,844,000 $ 4,844,000 4,844,000    
Approximate amount of loans included on out-of-area participation   23,950,000 29,524,000 29,524,000 29,524,000    
Amount within 100 miles of primary area   8,126,000 12,025,000 $ 12,025,000 12,025,000    
Troubled Debt Restructurings [Member] | Covid Nineteen [Member]              
Loans and Allowance for Credit Losses [Line Items]              
Investment recorded prior to modification   $ 85,600,000          
Number of Modifications | Modification   176          
Foreclosure [Member] | Troubled Debt Restructurings [Member]              
Loans and Allowance for Credit Losses [Line Items]              
Number of default loans | SecurityLoan   0   0      
Home equity lines of credit [Member]              
Loans and Allowance for Credit Losses [Line Items]              
Troubled debt restructurings, Impaired loans   $ 15,000 22,000 $ 22,000 22,000    
Number of troubled debt restructurings in accrual status           1 1
Amount of troubled debt restructurings in accrual status     20,000 20,000 20,000    
Loans and Leases Receivable, Gross   $ 8,551,000 8,938,000 $ 8,938,000 $ 8,938,000    
Home equity lines of credit [Member] | Troubled Debt Restructurings [Member]              
Loans and Allowance for Credit Losses [Line Items]              
Number of Modifications | SecurityLoan       1      
Investment recorded post modification     $ 20,000        
Non troubled debt restructuring [Member] | Covid Nineteen [Member] | Financing receivables, 30 to 59 days past due [Member]              
Loans and Allowance for Credit Losses [Line Items]              
Financing receivable number of days past due 30 days            
Period of loan excecution   60 days          
v3.20.2
Loans and Allowance for Loan Losses - Allowance for Loan Losses and Recorded Investment in Loans Based on Portfolio Segment and Impairment Method (Detail) - USD ($)
$ in Thousands
12 Months Ended
Jun. 30, 2020
Jun. 30, 2019
Allowance for loan losses:    
Balance, beginning of year $ 6,328 $ 5,945
Provision charged to expense 128 407
Losses charged off (268) (50)
Recoveries 46 26
Balance, end of period 6,234 6,328
Ending balance: individually evaluated for impairment 0 23
Ending balance: collectively evaluated for impairment 6,234 6,305
Loans:    
Ending balance 515,887 493,753
Ending balance: individually evaluated for impairment 1,660 1,851
Ending balance: collectively evaluated for impairment 514,227 491,902
One- to four-family [Member]    
Allowance for loan losses:    
Balance, beginning of year 1,031 997
Provision charged to expense 50 29
Losses charged off (40) (17)
Recoveries 3 22
Balance, end of period 1,044 1,031
Ending balance: individually evaluated for impairment 0 13
Ending balance: collectively evaluated for impairment 1,044 1,018
Loans:    
Ending balance 128,876 129,290
Ending balance: individually evaluated for impairment 1,336 1,722
Ending balance: collectively evaluated for impairment 127,540 127,568
Multi-family [Member]    
Allowance for loan losses:    
Balance, beginning of year 1,642 1,650
Provision charged to expense (128) (8)
Losses charged off 0 0
Recoveries 0 0
Balance, end of period 1,514 1,642
Ending balance: individually evaluated for impairment 0 0
Ending balance: collectively evaluated for impairment 1,514 1,642
Loans:    
Ending balance 96,195 104,663
Ending balance: individually evaluated for impairment 0 0
Ending balance: collectively evaluated for impairment 96,195 104,663
Home equity lines of credit [Member]    
Allowance for loan losses:    
Balance, beginning of year 89 91
Provision charged to expense (2) 13
Losses charged off 0 (15)
Recoveries 0 0
Balance, end of period 87 89
Ending balance: individually evaluated for impairment 0 0
Ending balance: collectively evaluated for impairment 87 89
Loans:    
Ending balance 8,551 8,938
Ending balance: individually evaluated for impairment 15 22
Ending balance: collectively evaluated for impairment 8,536 8,916
Construction [Member]    
Allowance for loan losses:    
Balance, beginning of year 213 168
Provision charged to expense 27 45
Losses charged off 0 0
Recoveries 0 0
Balance, end of period 240 213
Ending balance: individually evaluated for impairment 0 0
Ending balance: collectively evaluated for impairment 240 213
Loans:    
Ending balance 22,042 16,113
Ending balance: individually evaluated for impairment 0 0
Ending balance: collectively evaluated for impairment 22,042 16,113
Commercial [Member]    
Allowance for loan losses:    
Balance, beginning of year 1,623 1,604
Provision charged to expense 83 19
Losses charged off 0 0
Recoveries 0 0
Balance, end of period 1,706 1,623
Ending balance: individually evaluated for impairment 0 0
Ending balance: collectively evaluated for impairment 1,706 1,623
Loans:    
Ending balance 145,113 143,367
Ending balance: individually evaluated for impairment 0 18
Ending balance: collectively evaluated for impairment 145,113 143,349
Commercial [Member]    
Allowance for loan losses:    
Balance, beginning of year 1,659 1,373
Provision charged to expense 84 286
Losses charged off (191) 0
Recoveries 31 0
Balance, end of period 1,583 1,659
Ending balance: individually evaluated for impairment 0 0
Ending balance: collectively evaluated for impairment 1,583 1,659
Loans:    
Ending balance 107,581 84,246
Ending balance: individually evaluated for impairment 304 60
Ending balance: collectively evaluated for impairment 107,277 84,186
Consumer [Member]    
Allowance for loan losses:    
Balance, beginning of year 71 62
Provision charged to expense 14 23
Losses charged off (37) (18)
Recoveries 12 4
Balance, end of period 60 71
Ending balance: individually evaluated for impairment 0 10
Ending balance: collectively evaluated for impairment 60 61
Loans:    
Ending balance 7,529 7,136
Ending balance: individually evaluated for impairment 5 29
Ending balance: collectively evaluated for impairment $ 7,524 $ 7,107
v3.20.2
Loans and Allowance for Loan Losses - Credit Risk Profile of Association's Loan Portfolio Based on Rating Category and Payment Activity (Detail) - USD ($)
$ in Thousands
Jun. 30, 2020
Jun. 30, 2019
Financing Receivable, Recorded Investment [Line Items]    
Total loans $ 515,887 $ 493,753
Pass [Member]    
Financing Receivable, Recorded Investment [Line Items]    
Total loans 510,504 488,010
Watch [Member]    
Financing Receivable, Recorded Investment [Line Items]    
Total loans 3,633 2,415
Substandard [Member]    
Financing Receivable, Recorded Investment [Line Items]    
Total loans 1,506 3,318
Doubtful [Member]    
Financing Receivable, Recorded Investment [Line Items]    
Total loans 244 10
One- to four-family [Member]    
Financing Receivable, Recorded Investment [Line Items]    
Total loans 128,876 129,290
One- to four-family [Member] | Pass [Member]    
Financing Receivable, Recorded Investment [Line Items]    
Total loans 127,279 127,386
One- to four-family [Member] | Watch [Member]    
Financing Receivable, Recorded Investment [Line Items]    
Total loans 775  
One- to four-family [Member] | Substandard [Member]    
Financing Receivable, Recorded Investment [Line Items]    
Total loans 822 1,904
Multi-family [Member]    
Financing Receivable, Recorded Investment [Line Items]    
Total loans 96,195 104,663
Multi-family [Member] | Pass [Member]    
Financing Receivable, Recorded Investment [Line Items]    
Total loans 95,925 104,504
Multi-family [Member] | Substandard [Member]    
Financing Receivable, Recorded Investment [Line Items]    
Total loans 270 159
Home equity lines of credit [Member]    
Financing Receivable, Recorded Investment [Line Items]    
Total loans 8,551 8,938
Home equity lines of credit [Member] | Pass [Member]    
Financing Receivable, Recorded Investment [Line Items]    
Total loans 8,402 8,918
Home equity lines of credit [Member] | Watch [Member]    
Financing Receivable, Recorded Investment [Line Items]    
Total loans 134  
Home equity lines of credit [Member] | Substandard [Member]    
Financing Receivable, Recorded Investment [Line Items]    
Total loans 15 20
Construction [Member]    
Financing Receivable, Recorded Investment [Line Items]    
Total loans 22,042 16,113
Construction [Member] | Pass [Member]    
Financing Receivable, Recorded Investment [Line Items]    
Total loans 22,042 16,113
Commercial [Member]    
Financing Receivable, Recorded Investment [Line Items]    
Total loans 145,113 143,367
Commercial [Member] | Pass [Member]    
Financing Receivable, Recorded Investment [Line Items]    
Total loans 143,727 142,076
Commercial [Member] | Watch [Member]    
Financing Receivable, Recorded Investment [Line Items]    
Total loans 1,073 1,040
Commercial [Member] | Substandard [Member]    
Financing Receivable, Recorded Investment [Line Items]    
Total loans 313 251
Commercial [Member]    
Financing Receivable, Recorded Investment [Line Items]    
Total loans 107,581 84,246
Commercial [Member] | Pass [Member]    
Financing Receivable, Recorded Investment [Line Items]    
Total loans 105,605 81,906
Commercial [Member] | Watch [Member]    
Financing Receivable, Recorded Investment [Line Items]    
Total loans 1,651 1,375
Commercial [Member] | Substandard [Member]    
Financing Receivable, Recorded Investment [Line Items]    
Total loans 81 965
Commercial [Member] | Doubtful [Member]    
Financing Receivable, Recorded Investment [Line Items]    
Total loans 244  
Consumer [Member]    
Financing Receivable, Recorded Investment [Line Items]    
Total loans 7,529 7,136
Consumer [Member] | Pass [Member]    
Financing Receivable, Recorded Investment [Line Items]    
Total loans 7,524 7,107
Consumer [Member] | Substandard [Member]    
Financing Receivable, Recorded Investment [Line Items]    
Total loans $ 5 19
Consumer [Member] | Doubtful [Member]    
Financing Receivable, Recorded Investment [Line Items]    
Total loans   $ 10
v3.20.2
Loans and Allowance for Loan Losses - Association's Loan Portfolio Aging Analysis (Detail) - USD ($)
$ in Thousands
Jun. 30, 2020
Jun. 30, 2019
Financing Receivable, Allowance for Credit Losses [Line Items]    
Total Past Due $ 2,226 $ 3,290
Current 513,661 490,463
Total loans 515,887 493,753
Total Loans 90 Days Past Due & Accruing 304 226
Commercial [Member]    
Financing Receivable, Allowance for Credit Losses [Line Items]    
Total Past Due 267 92
Current 144,846 143,275
Total loans 145,113 143,367
Commercial [Member]    
Financing Receivable, Allowance for Credit Losses [Line Items]    
Total Past Due 248 351
Current 107,333 83,895
Total loans 107,581 84,246
Consumer [Member]    
Financing Receivable, Allowance for Credit Losses [Line Items]    
Total Past Due 67 128
Current 7,462 7,008
Total loans 7,529 7,136
Total Loans 90 Days Past Due & Accruing   0
One- to four-family [Member]    
Financing Receivable, Allowance for Credit Losses [Line Items]    
Total Past Due 1,644 2,251
Current 127,232 127,039
Total loans 128,876 129,290
Total Loans 90 Days Past Due & Accruing 304 226
Multi-family [Member]    
Financing Receivable, Allowance for Credit Losses [Line Items]    
Total Past Due   422
Current 96,195 104,241
Total loans 96,195 104,663
Home equity lines of credit [Member]    
Financing Receivable, Allowance for Credit Losses [Line Items]    
Total Past Due   46
Current 8,551 8,892
Total loans 8,551 8,938
Construction [Member]    
Financing Receivable, Allowance for Credit Losses [Line Items]    
Current 22,042 16,113
Total loans 22,042 16,113
Financing Receivables, 30 to 59 Days Past Due [Member]    
Financing Receivable, Allowance for Credit Losses [Line Items]    
Total Past Due 1,230 2,401
Financing Receivables, 30 to 59 Days Past Due [Member] | Commercial [Member]    
Financing Receivable, Allowance for Credit Losses [Line Items]    
Total Past Due 172 74
Financing Receivables, 30 to 59 Days Past Due [Member] | Commercial [Member]    
Financing Receivable, Allowance for Credit Losses [Line Items]    
Total Past Due   291
Financing Receivables, 30 to 59 Days Past Due [Member] | Consumer [Member]    
Financing Receivable, Allowance for Credit Losses [Line Items]    
Total Past Due 24 99
Financing Receivables, 30 to 59 Days Past Due [Member] | One- to four-family [Member]    
Financing Receivable, Allowance for Credit Losses [Line Items]    
Total Past Due 1,034 1,515
Financing Receivables, 30 to 59 Days Past Due [Member] | Multi-family [Member]    
Financing Receivable, Allowance for Credit Losses [Line Items]    
Total Past Due   422
Financing Receivables, 60 to 89 Days Past Due [Member]    
Financing Receivable, Allowance for Credit Losses [Line Items]    
Total Past Due 367 287
Financing Receivables, 60 to 89 Days Past Due [Member] | Commercial [Member]    
Financing Receivable, Allowance for Credit Losses [Line Items]    
Total Past Due 95 6
Financing Receivables, 60 to 89 Days Past Due [Member] | Commercial [Member]    
Financing Receivable, Allowance for Credit Losses [Line Items]    
Total Past Due 4  
Financing Receivables, 60 to 89 Days Past Due [Member] | Consumer [Member]    
Financing Receivable, Allowance for Credit Losses [Line Items]    
Total Past Due 43 0
Financing Receivables, 60 to 89 Days Past Due [Member] | One- to four-family [Member]    
Financing Receivable, Allowance for Credit Losses [Line Items]    
Total Past Due 225 255
Financing Receivables, 60 to 89 Days Past Due [Member] | Home equity lines of credit [Member]    
Financing Receivable, Allowance for Credit Losses [Line Items]    
Total Past Due   26
Financing Receivables, 90 Days or Greater [Member]    
Financing Receivable, Allowance for Credit Losses [Line Items]    
Total Past Due 629 602
Financing Receivables, 90 Days or Greater [Member] | Commercial [Member]    
Financing Receivable, Allowance for Credit Losses [Line Items]    
Total Past Due   12
Financing Receivables, 90 Days or Greater [Member] | Commercial [Member]    
Financing Receivable, Allowance for Credit Losses [Line Items]    
Total Past Due 244 60
Financing Receivables, 90 Days or Greater [Member] | Consumer [Member]    
Financing Receivable, Allowance for Credit Losses [Line Items]    
Total Past Due 0 29
Financing Receivables, 90 Days or Greater [Member] | One- to four-family [Member]    
Financing Receivable, Allowance for Credit Losses [Line Items]    
Total Past Due $ 385 481
Financing Receivables, 90 Days or Greater [Member] | Home equity lines of credit [Member]    
Financing Receivable, Allowance for Credit Losses [Line Items]    
Total Past Due   $ 20
v3.20.2
Loans and Allowance for Loan Losses - Summary of Impaired Loans (Detail) - USD ($)
$ in Thousands
12 Months Ended
Jun. 30, 2020
Jun. 30, 2019
Financing Receivable, Impaired [Line Items]    
Specific Allowance $ 0 $ 23
Recorded Balance 1,660 1,851
Unpaid Principal Balance 1,660 1,851
Specific Allowance 0 23
Average Investment in Impaired Loans 1,800 1,922
Interest Income Recognized 84 74
Interest on Cash Basis 87 83
Commercial [Member]    
Financing Receivable, Impaired [Line Items]    
Recorded Balance, Loans without a specific allowance   18
Unpaid Principal Balance, Loans without a specific allowance   18
Average Investment in Impaired Loans, Loans without a specific allowance 3 34
Specific Allowance   0
Recorded Balance   18
Unpaid Principal Balance   18
Specific Allowance   0
Average Investment in Impaired Loans 3 34
Interest Income Recognized   0
Interest on Cash Basis   0
Commercial [Member]    
Financing Receivable, Impaired [Line Items]    
Recorded Balance, Loans without a specific allowance 304 60
Unpaid Principal Balance, Loans without a specific allowance 304 60
Average Investment in Impaired Loans, Loans without a specific allowance 382 63
Interest Income Recognized, Loans without a specific allowance 23 6
Interest on Cash Basis, Loans without a specific allowance 25 6
Recorded Balance 304 60
Unpaid Principal Balance 304 60
Average Investment in Impaired Loans 382 63
Interest Income Recognized 23 6
Interest on Cash Basis 25 6
Consumer [Member]    
Financing Receivable, Impaired [Line Items]    
Recorded Balance, Loans without a specific allowance 5 19
Unpaid Principal Balance, Loans without a specific allowance 5 19
Average Investment in Impaired Loans, Loans without a specific allowance 9 24
Interest Income Recognized, Loans without a specific allowance 0 2
Interest on Cash Basis, Loans without a specific allowance 0 2
Recorded Balance, Loans with a specific allowance 0 10
Unpaid Principal Balance, Loans with a specific allowance 0 10
Specific Allowance 0 10
Average Investment in Impaired Loans, Loans with a specific allowance 0 11
Interest Income Recognized, Loans with a specific allowance 0 1
Interest on Cash Basis, Loans with a specific allowance 0 1
Recorded Balance 5 29
Unpaid Principal Balance 5 29
Specific Allowance 0 10
Average Investment in Impaired Loans 9 35
Interest Income Recognized   3
Interest on Cash Basis   3
One- to four-family [Member]    
Financing Receivable, Impaired [Line Items]    
Recorded Balance, Loans without a specific allowance 1,336 1,676
Unpaid Principal Balance, Loans without a specific allowance 1,336 1,676
Average Investment in Impaired Loans, Loans without a specific allowance 1,388 1,718
Interest Income Recognized, Loans without a specific allowance 61 63
Interest on Cash Basis, Loans without a specific allowance 62 71
Recorded Balance, Loans with a specific allowance 0 46
Unpaid Principal Balance, Loans with a specific allowance 0 46
Specific Allowance 0 13
Average Investment in Impaired Loans, Loans with a specific allowance 0 47
Interest Income Recognized, Loans with a specific allowance 0 1
Interest on Cash Basis, Loans with a specific allowance 0 1
Recorded Balance 1,336 1,722
Unpaid Principal Balance 1,336 1,722
Specific Allowance 0 13
Average Investment in Impaired Loans 1,388 1,765
Interest Income Recognized 61 64
Interest on Cash Basis 62 72
Multi-family [Member]    
Financing Receivable, Impaired [Line Items]    
Average Investment in Impaired Loans, Loans without a specific allowance   1
Recorded Balance   0
Unpaid Principal Balance   0
Average Investment in Impaired Loans   1
Interest Income Recognized   0
Interest on Cash Basis   0
Home equity lines of credit [Member]    
Financing Receivable, Impaired [Line Items]    
Recorded Balance, Loans without a specific allowance 15 22
Unpaid Principal Balance, Loans without a specific allowance 15 22
Average Investment in Impaired Loans, Loans without a specific allowance 18 24
Interest Income Recognized, Loans without a specific allowance   1
Interest on Cash Basis, Loans without a specific allowance   2
Recorded Balance 15 22
Unpaid Principal Balance 15 22
Average Investment in Impaired Loans $ 18 24
Interest Income Recognized   1
Interest on Cash Basis   $ 2
v3.20.2
Loans and Allowance for Loan Losses - Non Accruals (Detail) - USD ($)
$ in Thousands
Jun. 30, 2020
Jun. 30, 2019
Mortgages on real estate:    
Total $ 405 $ 541
One- to four-family [Member]    
Mortgages on real estate:    
Total 81 414
Real Estate Loans Home Equity Lines Of Credit [Member]    
Mortgages on real estate:    
Total 15 20
Consumer Loans [Member]    
Mortgages on real estate:    
Total 5 29
Commercial [Member]    
Mortgages on real estate:    
Total   18
Commercial Business Loans [Member]    
Mortgages on real estate:    
Total $ 304 $ 60
v3.20.2
Loans and Allowance for Loan Losses - Non Accruals 1 (Detail) - USD ($)
$ in Thousands
Jun. 30, 2020
Jun. 30, 2019
Real estate loans    
Total $ 1,330 $ 1,505
One- to four-family [Member]    
Real estate loans    
Total 1,256 1,475
Home equity lines of credit [Member]    
Real estate loans    
Total 15 22
Real Estate Loan [Member]    
Real estate loans    
Total 1,271 1,503
Commercial [Member]    
Real estate loans    
Total   6
Commercial [Member]    
Real estate loans    
Total $ 59  
Consumer Loans [Member]    
Real estate loans    
Total   $ 2
v3.20.2
Loans and Allowance for Loan Losses - Loans Modified as Troubled Debt Restructurings (Detail)
12 Months Ended
Jun. 30, 2020
USD ($)
Modification
Jun. 30, 2019
USD ($)
Jun. 30, 2019
SecurityLoan
Jun. 30, 2019
Modification
Financing Receivable, Modifications [Line Items]        
Number of Modifications 1   4 1
Recorded Investment $ 61,000 $ 159,000    
Commercial [Member]        
Financing Receivable, Modifications [Line Items]        
Number of Modifications | Modification 1     0
Recorded Investment $ 61,000 166,000    
Commercial [Member]        
Financing Receivable, Modifications [Line Items]        
Number of Modifications | Modification 1      
Recorded Investment $ 61,000      
One- to four-family [Member]        
Financing Receivable, Modifications [Line Items]        
Number of Modifications | Modification 0     1
Recorded Investment $ 0 159,000    
Real Estate Loan [Member]        
Financing Receivable, Modifications [Line Items]        
Number of Modifications | Modification 0     1
Recorded Investment $ 0 $ 159,000    
v3.20.2
Premises and Equipment - Major Classifications of Premises and Equipment, Stated at Cost (Detail) - USD ($)
$ in Thousands
Jun. 30, 2020
Jun. 30, 2019
Property Plant And Equipment Useful Life And Values [Abstract]    
Land $ 1,976 $ 1,976
Buildings and improvements 11,338 11,319
Furniture and equipment 4,895 4,756
Premises and equipment, gross 18,209 18,051
Less accumulated depreciation 8,016 7,345
Net premises and equipment $ 10,193 $ 10,706
v3.20.2
Loan Servicing - Activity in Mortgage Servicing Rights Measured Using the Fair Value Method (Detail) - USD ($)
$ in Thousands
12 Months Ended
Jun. 30, 2020
Jun. 30, 2019
Transfers and Servicing [Abstract]    
Fair value, beginning of period $ 853 $ 866
Servicing assets resulting from asset transfers 255 144
Payments received and loans refinanced (99) (112)
Changes in fair value, due to changes in valuation inputs or assumptions (294) (45)
Fair value, end of period $ 715 $ 853
v3.20.2
Loan Servicing - Additional Information (Detail) - USD ($)
12 Months Ended
Jun. 30, 2020
Jun. 30, 2019
Jun. 30, 2018
Transfers and Servicing [Abstract]      
Unpaid principal balances of mortgage loans serviced for others $ 116,696,000 $ 99,021,000  
Custodial escrow balances in connection with the foregoing loan servicing 672,000 652,000  
Mortgage servicing rights, Fair value $ 715,000 $ 853,000 $ 866,000
v3.20.2
Interest-Bearing Deposits - Interest Expense by Deposit Type (Detail) - USD ($)
$ in Thousands
12 Months Ended
Jun. 30, 2020
Jun. 30, 2019
Banking and Thrift [Abstract]    
Savings, NOW, and Money Market $ 1,405 $ 1,574
Certificates of deposit 5,962 4,954
Brokered certificates of deposit 543 789
Total deposit interest expense $ 7,910 $ 7,317
v3.20.2
Interest-Bearing Deposits - Scheduled Maturities of Time Deposits Including Brokered Time Deposits (Detail)
$ in Thousands
Jun. 30, 2020
USD ($)
Banking and Thrift [Abstract]  
2021 $ 248,359
2022 23,848
2023 6,928
2024 1,490
2025 and thereafter 866
Time Deposits $ 281,491
v3.20.2
Interest-Bearing Deposits - Additional Information (Detail) - USD ($)
Jun. 30, 2020
Jun. 30, 2019
Banking and Thrift [Abstract]    
Interest-bearing deposits in denominations of $100,000 or more $ 276,821,000 $ 260,311,000
v3.20.2
Federal Home Loan Bank Advances - Aggregate Annual Maturities of Federal Home Loan Bank Advances (Detail) - USD ($)
$ in Thousands
Jun. 30, 2020
Jun. 30, 2019
Banking and Thrift [Abstract]    
2021 $ 19,500  
2022  
2023 5,000  
2024 10,000  
2025  
Total federal home loan bank advances $ 34,500 $ 24,000
v3.20.2
Federal Home Loan Bank Advances - Additional Information (Detail) - USD ($)
$ in Thousands
Jun. 30, 2020
Jun. 30, 2019
Federal Home Loan Bank, Advances [Line Items]    
Federal Home Loan Bank advances $ 34,500 $ 24,000
Mortgage loans secured for Federal Home Loan Bank Advances $ 315,819  
Maximum [Member]    
Federal Home Loan Bank, Advances [Line Items]    
Federal Home Loan Bank advances interest rate range from 2.89%  
Minimum [Member]    
Federal Home Loan Bank, Advances [Line Items]    
Federal Home Loan Bank advances interest rate range from 0.00%  
v3.20.2
Lines of Credit - Additional information (Detail) - USD ($)
$ in Thousands
12 Months Ended
Jun. 30, 2020
Sep. 30, 2019
Line of Credit Facility [Line Items]    
Line of credit outstanding $ 3,000  
CIBC Bank USA [Member]    
Line of Credit Facility [Line Items]    
Line of credit maximum borrowing capacity   $ 7,500
Line of credit outstanding $ 3,000  
Debt instrument stated interest rate 2.50%  
Line of credit maturity Sep. 30, 2020  
v3.20.2
Repurchase Agreements - Additional Information (Detail) - USD ($)
12 Months Ended
Jun. 30, 2020
Jun. 30, 2019
Assets Sold under Agreements to Repurchase [Line Items]    
Maximum amount of outstanding agreements $ 3,939,000 $ 2,840,000
Repurchase agreement monthly average amount 3,398,000 2,400,000
Repurchase agreements 3,738,000 $ 2,015,000
Maturity Overnight [Member]    
Assets Sold under Agreements to Repurchase [Line Items]    
Repurchase agreements 2,000,000  
Maturity 30 to 90 Days [Member]    
Assets Sold under Agreements to Repurchase [Line Items]    
Repurchase agreements $ 1,700,000  
Maximum [Member]    
Assets Sold under Agreements to Repurchase [Line Items]    
Repurchase agreements term 90 days  
Minimum [Member]    
Assets Sold under Agreements to Repurchase [Line Items]    
Repurchase agreements term 30 days  
v3.20.2
Income Taxes - Components of the Provision for Income Taxes (Detail) - USD ($)
$ in Thousands
12 Months Ended
Jun. 30, 2020
Jun. 30, 2019
Income Tax Disclosure [Abstract]    
Taxes currently payable $ 1,654 $ 1,217
Deferred income taxes (15) 76
Income tax expense $ 1,639 $ 1,293
v3.20.2
Income Taxes - Reconciliation of Income Tax Expense at the Statutory Rate (Detail) - USD ($)
$ in Thousands
12 Months Ended
Jun. 30, 2020
Jun. 30, 2019
Income Taxes Paid, Net [Abstract]    
Computed at the statutory rate $ 1,236 $ 1,019
Increase (decrease) resulting from    
Tax exempt interest (16) (26)
Cash surrender value of life insurance (57) (56)
State income taxes 441 329
Other 35 27
Income tax expense $ 1,639 $ 1,293
Tax rate as a percentage of pre-tax income 27.90% 26.70%
v3.20.2
Income Taxes - Reconciliation of Income Tax Expense at the Statutory Rate (Parenthetical) (Detail)
12 Months Ended
Jun. 30, 2020
Jun. 30, 2019
Income Taxes Paid, Net [Abstract]    
Statutory tax rate 21.00% 21.00%
v3.20.2
Income Taxes - Temporary Differences Related to Deferred Taxes (Detail) - USD ($)
$ in Thousands
Jun. 30, 2020
Jun. 30, 2019
Deferred tax assets    
Allowance for loan losses $ 1,776 $ 1,802
Accrued retirement liability 677 651
Deferred compensation 468 422
Deferred loan fees 291 83
Postretirement health plan 264 170
Accrued vacation 66 46
MPF recourse liability 97 66
Deferred revenue Mastercard 23 27
Stock options – Directors 50 42
Restricted stock 11 (9)
Accrued professional services 18  
Other 7 12
Total deferred tax assets 3,748 3,312
Deferred tax liabilities    
Depreciation (731) (426)
Mortgage servicing rights (204) (243)
Deferred loan expense (181) (182)
Unrealized gains on available-for-sale securities (1,940) (395)
Prepaid expenses (62)  
Total deferred tax liabilities (3,118) (1,246)
Net deferred tax asset $ 630 $ 2,066
v3.20.2
Income Taxes - Additional Information (Detail) - USD ($)
Jun. 30, 2020
Jun. 30, 2019
Income Tax Disclosure [Abstract]    
Retained earnings excluding deferred federal income tax liability $ 2,217,000 $ 2,217,000
Amount deferred income tax liabilities expected to reverse into taxable income $ 466,000 $ 466,000
v3.20.2
Accumulated Other Comprehensive Income - Components of Accumulated Other Comprehensive Income (Detail) - USD ($)
$ in Thousands
Jun. 30, 2020
Jun. 30, 2019
Accumulated Other Comprehensive Income [Line Items]    
Before Tax $ 5,879 $ 790
Tax effect (1,676) (225)
Net-of-tax amount 4,203 565
Realized gains on available-for-sale securities [Member]    
Accumulated Other Comprehensive Income [Line Items]    
Before Tax 6,805 1,386
Amortization of Defined Benefit Pension Items [Member]    
Accumulated Other Comprehensive Income [Line Items]    
Before Tax $ (926) $ (596)
v3.20.2
Changes in Accumulated Other Comprehensive Income (AOCI) by Component - Amounts Reclassified from Accumulated Other Comprehensive Income (Detail) - USD ($)
$ in Thousands
12 Months Ended
Jun. 30, 2020
Jun. 30, 2019
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]    
Realized gains on available-for-sale securities $ 267 $ 11
Tax expense 1,639 1,293
Net Income 4,245 3,558
Amounts Reclassified from AOCI [Member]    
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]    
Total reclassified amount before tax 626 115
Tax expense 199 11
Net Income 427 104
Accumulated Net Realized Investment Gains (Losses) [Member] | Amounts Reclassified from AOCI [Member]    
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]    
Realized gains on available-for-sale securities 267 11
Amortization of Defined Benefit Pension Items [Member] | Amounts Reclassified from AOCI [Member]    
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]    
Actuarial losses $ 359 $ 104
v3.20.2
Regulatory Matters - Association's Actual Capital Amounts and Ratios (Detail) - Association [Member] - USD ($)
$ in Thousands
Jun. 30, 2020
Jun. 30, 2019
Compliance with Regulatory Capital Requirements under Banking Regulations [Line Items]    
Actual, Community Bank Leverage Ratio, Amount $ 76,428 $ 75,355
Actual, Total capital (to risk-weighted assets), Amount 82,662 81,624
Actual, Tier I capital (to risk-weighted assets), Amount   75,355
Actual, Common Equity Tier I capital (to risk-weighted assets), Amount   75,355
Actual, Tier I capital (to adjusted total assets), Amount 76,428 75,355
Actual, Tangible capital (to adjusted total assets), Amount $ 76,428 $ 75,355
Actual, Community Bank Leverage Ratio, Ratio 10.68%  
Actual, Total capital (to risk-weighted assets), Ratio   16.28%
Actual, Tier I capital (to risk-weighted assets), Ratio   15.03%
Actual, Common Equity Tier I capital (to risk-weighted assets), Ratio   15.03%
Actual, Tier I capital (to adjusted total assets), Ratio 10.68% 10.96%
Actual, Tangible capital (to adjusted total assets), Ratio 10.68% 10.96%
Minimum Capital Requirement, Community Bank Leverage Ratio, Amount $ 57,238  
Minimum Capital Requirement, Total capital (to risk-weighted assets), Amount   $ 40,119
Minimum Capital Requirement, Tier I capital (to risk-weighted assets), Amount   30,090
Minimum Capital Requirement, Common Equity Tier I capital (to risk-weighted assets), Amount   22,567
Minimum Capital Requirement, Tier I capital (to adjusted total assets), Amount 28,619 27,513
Minimum Capital Requirement, Tangible capital (to adjusted total assets), Amount $ 10,732 $ 10,317
Minimum Capital Requirement, Community Bank Leverage Ratio, Ratio 8.00%  
Minimum Capital Requirement, Total capital (to risk-weighted assets), Ratio   8.00%
Minimum Capital Requirement, Tier I capital (to risk-weighted assets), Ratio   6.00%
Minimum Capital Requirement, Common Equity Tier I capital (to risk-weighted assets), Ratio   4.50%
Minimum Capital Requirement, Tier I capital (to adjusted total assets), Ratio 4.00% 4.00%
Minimum Capital Requirement, Tangible capital (to adjusted total assets), Ratio 1.50% 1.50%
Minimum To Be Well Capitalised Under Prompt Corrective Action Provisions, Community Bank Leverage Ratio, Amount $ 57,238  
Minimum to Be Well Capitalized Under Prompt Corrective Action Provisions, Total Capital (to risk-weighted assets), Amount   $ 50,149
Minimum to Be Well Capitalized Under Prompt Corrective Action Provisions, Tier I capital (to risk-weighted assets), Amount   40,119
Minimum to Be Well Capitalized Under Prompt Corrective Action Provisions, Common Equity Tier I capital (to risk-weighted assets), Amount   32,597
Minimum to Be Well Capitalized Under Prompt Corrective Action Provisions, Tier I capital (to adjusted total assets), Amount $ 35,774 $ 34,392
Minimum To Be Well Capitalised Under Prompt Corrective Action Provisions, Community Bank Leverage Ratio, Ratio 8.00%  
Minimum to Be Well Capitalized Under Prompt Corrective Action Provisions, Total Capital (to risk-weighted assets), Ratio   10.00%
Minimum to Be Well Capitalized Under Prompt Corrective Action Provisions, Tier I capital (to risk-weighted assets), Ratio   8.00%
Minimum to Be Well Capitalized Under Prompt Corrective Action Provisions, Common Equity Tier I capital (to risk-weighted assets), Ratio   6.50%
Minimum to Be Well Capitalized Under Prompt Corrective Action Provisions, Tier I capital (to adjusted total assets), Ratio 5.00% 5.00%
v3.20.2
Regulatory Matters - Reconciliation of Association Equity Amounts (Detail) - USD ($)
$ in Thousands
12 Months Ended
Jun. 30, 2020
Jun. 30, 2019
Jun. 30, 2018
Compliance with Regulatory Capital Requirements under Banking Regulations [Line Items]      
Association equity $ 82,564 $ 82,461 $ 81,675
Association [Member]      
Compliance with Regulatory Capital Requirements under Banking Regulations [Line Items]      
Association equity 80,631 75,920  
Less net unrealized gains 4,865 991  
Less postretirement benefit plan (662) (426)  
Tier 1 capital 76,428 75,355  
Plus allowance for loan losses subject to limit 6,234 6,269  
Total risk-based capital $ 82,662 $ 81,624  
v3.20.2
Regulatory Matters - Additional Information (Detail) - USD ($)
$ in Billions
Jan. 01, 2019
Jun. 30, 2020
Mar. 31, 2020
Compliance with Regulatory Capital Requirements under Banking Regulations [Line Items]      
Maximum Asset Value Required To Be Maintained Leverage Ratio   $ 10  
Capital conservation buffer risk-weighted assets 2.50%    
Covid 19[Member] | Throughout Two Thousand And Twenty [Member]      
Compliance with Regulatory Capital Requirements under Banking Regulations [Line Items]      
Leverage ratio   8.00%  
Covid 19[Member] | Throughout Two Thousand And Twenty One [Member]      
Compliance with Regulatory Capital Requirements under Banking Regulations [Line Items]      
Leverage ratio   8.50%  
Covid 19[Member] | From Two Thousand And Twenty Two Onwards [Member]      
Compliance with Regulatory Capital Requirements under Banking Regulations [Line Items]      
Leverage ratio   9.00%  
Maximum [Member]      
Compliance with Regulatory Capital Requirements under Banking Regulations [Line Items]      
Leverage ratio     9.00%
v3.20.2
Related Party Transactions - Changes in Loans Outstanding (Detail) - Management [Member] - USD ($)
$ in Thousands
12 Months Ended
Jun. 30, 2020
Jun. 30, 2019
Related Party Transaction [Line Items]    
Balance, beginning of year $ 3,033 $ 3,132
New loans 1,087 756
Repayments (779) (855)
Balance, end of year $ 3,341 $ 3,033
v3.20.2
Related Party Transactions - Additional Information (Detail) - USD ($)
Jun. 30, 2020
Jun. 30, 2019
Management [Member]    
Related Party Transaction [Line Items]    
Deposits from related parties held by the Company $ 1,526,000 $ 1,482,000
v3.20.2
Employee Benefits - Plan's Funded Status and Pension Cost (Detail) - USD ($)
$ in Thousands
12 Months Ended
Jun. 30, 2020
Jun. 30, 2019
Change in benefit obligation    
Beginning of year $ 2,919 $ 2,770
Service cost 53 50
Interest cost 93 107
Actuarial gain 355 106
Benefits paid (114) (114)
End of year $ 3,306 $ 2,919
v3.20.2
Employee Benefits - Significant Balances, Costs and Assumptions (Detail) - USD ($)
$ in Thousands
Jun. 30, 2020
Jun. 30, 2019
Jun. 30, 2018
Retirement Benefits [Abstract]      
Benefit obligation $ 3,306 $ 2,919 $ 2,770
Fair value of plan assets  
Funded status (3,306) (2,919)  
Accumulated benefit obligation 3,306 2,919  
Amounts recognized in the consolidated balance sheets:      
Accrued benefit cost $ 3,306 $ 2,919  
v3.20.2
Employee Benefits - Net Periodic Benefit Cost (Detail) - USD ($)
$ in Thousands
12 Months Ended
Jun. 30, 2020
Jun. 30, 2019
Retirement Benefits [Abstract]    
Service cost $ 53 $ 50
Interest cost 93 107
Amortization of (Gain) or Loss 25 16
Net periodic benefit cost, Total $ 171 $ 173
v3.20.2
Employee Benefits - Accumulated Other Comprehensive Income Not Yet Recognized (Detail) - USD ($)
$ in Thousands
Jun. 30, 2020
Jun. 30, 2019
Retirement Benefits [Abstract]    
Net loss $ 860 $ 531
v3.20.2
Employee Benefits - Other Significant Balances and Costs (Detail) - USD ($)
$ in Thousands
12 Months Ended
Jun. 30, 2020
Jun. 30, 2019
Retirement Benefits [Abstract]    
Employer contribution $ 114 $ 114
Benefits paid 114 114
Benefit Costs $ 171 $ 173
v3.20.2
Employee Benefits - One-Percentage-Point Change in Assumed Health Care Cost Trend Rates (Detail)
$ in Thousands
12 Months Ended
Jun. 30, 2020
USD ($)
Retirement Benefits [Abstract]  
One-Percentage-Point Increase, Effect on total of service and interest cost components $ 4
One-Percentage-Point Increase, Effect on postretirement benefit obligation 36
One-Percentage-Point Decrease, Effect on total of service and interest cost components (4)
One-Percentage-Point Decrease, Effect on postretirement benefit obligation $ (34)
v3.20.2
Employee Benefits - Postretirement Plan Benefit Payments Expected Future Service (Detail)
$ in Thousands
Jun. 30, 2020
USD ($)
Retirement Benefits [Abstract]  
2021 $ 137
2022 168
2023 183
2024 199
2025 195
2026-2030 $ 986
v3.20.2
Employee Benefits - Benefit Payments Expected to be Paid for Agreements (Detail)
$ in Thousands
Jun. 30, 2020
USD ($)
Defined Benefit Plan Disclosure [Line Items]  
2021 $ 137
2022 168
2023 183
2024 199
2025 195
Thereafter 986
Deferred Compensation Agreements [Member]  
Defined Benefit Plan Disclosure [Line Items]  
2021 121
2022 151
2023 133
2024 134
2025 134
Thereafter 3,928
Total $ 4,601
v3.20.2
Employee Benefits - Additional Information (Detail) - USD ($)
12 Months Ended
Jun. 30, 2020
Jun. 30, 2019
Defined Benefit Plan Disclosure [Line Items]    
Expected contribution by the association in the year 2021 $ 191,000  
Estimated net loss (59,000)  
Prior service cost 0  
Transition obligation $ 0  
Discount rates 3.25% 3.25%
Annual rate of health care cost, increase 9.00%  
Matching contribution contributed by the association under the plan 25.00%  
Percentage of employee's compensation 5.00%  
Employer contributions $ 81,000 $ 68,000
Employer contributions $ 1,600,000 1,500,000
Normal retirement age of directors 72 years  
Deferred Profit Sharing [Member]    
Defined Benefit Plan Disclosure [Line Items]    
Employer contributions $ 602,000 510,000
Deferred Compensation Agreements [Member]    
Defined Benefit Plan Disclosure [Line Items]    
Expected annual rate of health care cost, decrease (5.00%)  
Benefit cost discount rate 6.00%  
Employer contributions $ 249,000 $ 220,000
Minimum [Member] | Deferred Profit Sharing [Member]    
Defined Benefit Plan Disclosure [Line Items]    
Employer Profit Sharing contribution under the Plan 5.00%  
v3.20.2
Stock-based Compensation - Summary of ESOP Shares (Detail) - USD ($)
$ in Thousands
Jun. 30, 2020
Jun. 30, 2019
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]    
Allocated shares 127,102 109,018
Shares committed for release 19,245 19,245
Unearned shares 211,695 230,940
Total ESOP shares 358,042 359,203
Fair value of unearned ESOP shares [1] $ 3,652 $ 4,829
[1] Based on closing price of $17.25 and $20.91 per share on June 30, 2020, and 2019, respectively.
v3.20.2
Stock-based Compensation - Summary of ESOP Shares (Parenthetical) (Detail) - $ / shares
Jun. 30, 2020
Jun. 30, 2019
Employee Stock Ownership Plan Esop [Member]    
Employee Stock Ownership Plan (ESOP) Disclosures [Line Items]    
ESOP, closing price per share $ 17.25 $ 20.91
v3.20.2
Stock-based Compensation - Summary of Stock Option Activity (Detail)
$ / shares in Units, $ in Thousands
12 Months Ended
Jun. 30, 2020
USD ($)
$ / shares
shares
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]  
Outstanding, June 30, 2019 | shares 153,143
Granted | shares
Exercised | shares
Forfeited | shares
Outstanding, June 30, 2020 | shares 153,143
Exercisable, June 30, 2020 | shares 130,857
Outstanding, June 30, 2019 | $ / shares $ 16.63
Granted | $ / shares
Exercised | $ / shares
Forfeited | $ / shares
Outstanding, June 30, 2020 | $ / shares 16.63
Exercisable, June 30, 2020 | $ / shares $ 16.63
Outstanding, June 30, 2020 3 years 4 months 24 days
Exercisable, June 30, 2020 3 years 4 months 24 days
Outstanding, June 30, 2020 | $ $ 95 [1]
Exercisable, June 30, 2020 | $ $ 81 [1]
[1] Based on closing price of $17.25 per share on June 30, 2020.
v3.20.2
Stock-based Compensation - Summary of Stock Option Activity (Parenthetical) (Detail)
Jun. 30, 2020
$ / shares
Employee Stock Option [Member]  
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]  
Closing price per share $ 17.25
v3.20.2
Stock-based Compensation - Summary of Non-vested Restricted Stock Activity (Detail) - Restricted Stock [Member]
12 Months Ended
Jun. 30, 2020
$ / shares
shares
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]  
Beginning balance, Shares | shares 50,313
Granted, Shares | shares
Forfeited, Shares | shares
Earned and issued, Shares | shares 10,063
Ending balance, Shares | shares 40,250
Beginning balance, Weighted-Average Grant-Date Fair Value | $ / shares $ 16.79
Granted, Weighted-Average Grant-Date Fair Value | $ / shares
Forfeited, Weighted-Average Grant-Date Fair Value | $ / shares
Earned and issued, Weighted-Average Grant-Date Fair Value | $ / shares 16.79
Ending balance, Weighted-Average Grant-Date Fair Value | $ / shares $ 16.79
v3.20.2
Stock-based Compensation - Additional Information (Detail) - USD ($)
6 Months Ended 12 Months Ended
Dec. 10, 2013
Dec. 31, 2016
Jun. 30, 2020
Jun. 30, 2019
Dec. 10, 2015
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]          
Number of shares paid under ESOP     358,042 359,203  
Employee Stock Ownership Plan Esop [Member]          
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]          
Minimum hours of service required     1000 hours    
Period of service to qualify for ESOP benefits     12 months    
Minimum age of employee to attain the plan     21 years    
Shares to be purchased for ESOP, from borrowed funds     384,900    
Shares to be purchased for ESOP, percentage of common stock     8.00%    
Repayment of loan on ESOP     20 years    
Percentage vested in accrued benefits     100.00%    
Vesting period     6 years    
Employee Stock Ownership Plan Esop [Member] | Employee Severance [Member]          
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]          
Number of shares paid under ESOP     1,161 6,360  
Employee Stock Ownership Plan Esop [Member] | Minimum [Member]          
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]          
Prorated vesting period     2 years    
Employee Stock Ownership Plan Esop [Member] | Maximum [Member]          
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]          
Prorated vesting period     5 years    
Equity Incentive Plan [Member]          
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]          
Shares authorized     673,575    
Equity Incentive Plan [Member] | Employee Stock Option [Member]          
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]          
Vesting period 7 years        
Shares authorized 167,000   481,125    
Restricted stock available for future grants     314,125    
Stock options granted     0    
Options vested during the period     22,286 22,286  
Total unrecognized compensation cost related to non-vested stock options     $ 24,000    
Weighted average recognition period for non-vested restricted stock awards     4 months 24 days    
Stock based compensation expense     $ 57,000 $ 57,000  
Tax benefit     $ 16,000 16,000  
Equity Incentive Plan [Member] | Restricted Stock And Restricted Stock Units Rsu [Member]          
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]          
Shares authorized     192,450    
Equity Incentive Plan [Member] | Restricted Stock [Member]          
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]          
Vesting period 10 years 8 years      
Shares authorized 85,500       16,900
Restricted stock available for future grants     90,050    
Weighted average recognition period for non-vested restricted stock awards     3 years 4 months 24 days    
Unrecognized compensation expense for non-vested restricted stock awards     $ 578,000    
Stock based compensation expense     169,000 169,000  
Tax benefit     $ 48,000 $ 48,000  
v3.20.2
Earnings Per Share ("EPS") - Factors Used in Earnings Per Common Share Computation (Detail) - USD ($)
$ / shares in Units, $ in Thousands
12 Months Ended
Jun. 30, 2020
Jun. 30, 2019
Earnings Per Share [Abstract]    
Net income $ 4,245 $ 3,558
Basic weighted average shares outstanding 3,324,657 3,716,924
Less: Average unallocated ESOP shares (221,318) (240,563)
Average shares outstanding 3,103,339 3,476,361
Diluted effect of restricted stock awards and stock options 44,693 53,856
Diluted average shares outstanding 3,148,032 3,530,217
Basic earnings per common share $ 1.37 $ 1.02
Diluted earnings per common share $ 1.35 $ 1.01
v3.20.2
Earnings Per Share ("EPS") - Additional Information (Detail) - $ / shares
2 Months Ended 12 Months Ended
Sep. 13, 2019
Jun. 30, 2020
Jun. 30, 2019
Jun. 12, 2019
Shares authorized to be repurchased   320,476   89,526
Percentage of current outstanding shares   9.00%   2.50%
Repurchase of shares in average price   $ 22.08 $ 21.22  
Stock Repurchase Plan [Member] | Third Repurchase Program [Member]        
Shares authorized to be repurchased 20,200      
Repurchase of shares in average price $ 21.17 $ 22.12    
v3.20.2
Disclosures about Fair Value of Assets and Liabilities - Fair Value Measurements of Assets Recognized on Recurring Basis (Detail) - USD ($)
$ in Thousands
Jun. 30, 2020
Jun. 30, 2019
Jun. 30, 2018
Available-for-sale securities:      
Available-for-sale securities, Fair Value $ 162,394 $ 146,291  
Mortgage servicing rights 715 853 $ 866
U.S. Government and Federal Agency and Government Sponsored Enterprises (GSEs) [Member]      
Available-for-sale securities:      
Available-for-sale securities, Fair Value 8,236 12,950  
Mortgage-backed Securities - GSE Residential [Member]      
Available-for-sale securities:      
Available-for-sale securities, Fair Value 148,855 125,510  
Small Business Administration [Member]      
Available-for-sale securities:      
Available-for-sale securities, Fair Value 3,640 4,935  
State and Political Subdivisions [Member]      
Available-for-sale securities:      
Available-for-sale securities, Fair Value 1,663 2,896  
Significant Other Observable Inputs (Level 2) [Member] | U.S. Government and Federal Agency and Government Sponsored Enterprises (GSEs) [Member]      
Available-for-sale securities:      
Available-for-sale securities, Fair Value 8,236 12,950  
Significant Other Observable Inputs (Level 2) [Member] | Mortgage-backed Securities - GSE Residential [Member]      
Available-for-sale securities:      
Available-for-sale securities, Fair Value 148,855 125,510  
Significant Other Observable Inputs (Level 2) [Member] | Small Business Administration [Member]      
Available-for-sale securities:      
Available-for-sale securities, Fair Value 3,640 4,935  
Significant Other Observable Inputs (Level 2) [Member] | State and Political Subdivisions [Member]      
Available-for-sale securities:      
Available-for-sale securities, Fair Value 1,663 2,896  
Significant Unobservable Inputs (Level 3) [Member]      
Available-for-sale securities:      
Mortgage servicing rights $ 715 $ 853  
v3.20.2
Disclosures about Fair Value of Assets and Liabilities - Reconciliation of Beginning and Ending Balances of Recurring Fair Value Measurements Recognized in Accompanying Balance Sheet (Detail) - Mortgage Servicing Rights [Member] - USD ($)
$ in Thousands
12 Months Ended
Jun. 30, 2020
Jun. 30, 2019
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]    
Beginning Balance $ 853 $ 866
Total realized and unrealized gains and losses included in net income (294) (45)
Servicing rights that result from asset transfers 255 144
Payments received and loans refinanced (99) (112)
Ending Balance 715 $ 853
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 $ (294)  
v3.20.2
Disclosures about Fair Value of Assets and Liabilities - Fair Value Measurement of Assets Recognized on Nonrecurring Basis (Detail) - Non-recurring [Member] - USD ($)
$ in Thousands
Jun. 30, 2020
Jun. 30, 2019
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]    
Impaired loans (collateral dependent)   $ 33
Foreclosed assets $ 200 512
Significant Unobservable Inputs (Level 3) [Member]    
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]    
Impaired loans (collateral dependent)   33
Foreclosed assets $ 200 $ 512
v3.20.2
Disclosures about Fair Value of Assets and Liabilities - (Losses)/Recoveries Recognized on Assets Measured on Non-Recurring Basis (Detail) - Non-recurring [Member] - USD ($)
$ in Thousands
12 Months Ended
Jun. 30, 2020
Jun. 30, 2019
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]    
Impaired loans (collateral dependent) $ 13 $ (20)
Foreclosed and repossessed assets held for sale $ (19) $ (196)
v3.20.2
Disclosures about Fair Value of Assets and Liabilities - Quantitative Information about Unobservable Inputs Used in Recurring and Nonrecurring Level 3 Fair Value Measurements (Detail)
$ in Thousands
12 Months Ended
Jun. 30, 2019
USD ($)
Jun. 30, 2020
USD ($)
Discount Rate [Member] | Discounted Cash Flow [Member]    
Fair Value, Off-balance Sheet Risks, Disclosure Information [Line Items]    
Mortgage servicing rights $ 853 $ 715
Marketability Discount [Member] | Market Comparable Properties [Member]    
Fair Value, Off-balance Sheet Risks, Disclosure Information [Line Items]    
Impaired loans (collateral dependent) $ 33  
Impaired loans (collateral dependent) 0.111  
Comparability Adjustments [Member] | Market Comparable Properties [Member]    
Fair Value, Off-balance Sheet Risks, Disclosure Information [Line Items]    
Foreclosed assets $ 512 $ 200
Foreclosed assets 0.78 0.111
Minimum [Member] | Discount Rate [Member] | Discounted Cash Flow [Member]    
Fair Value, Off-balance Sheet Risks, Disclosure Information [Line Items]    
Mortgage servicing rights, measurement input 0.095 0.095
Minimum [Member] | Constant Prepayment Rate [Member] | Discounted Cash Flow [Member]    
Fair Value, Off-balance Sheet Risks, Disclosure Information [Line Items]    
Mortgage servicing rights, measurement input 0.083 0.135
Minimum [Member] | Probability of Default [Member] | Discounted Cash Flow [Member]    
Fair Value, Off-balance Sheet Risks, Disclosure Information [Line Items]    
Mortgage servicing rights, measurement input 0.0005 0.0004
Maximum [Member] | Discount Rate [Member] | Discounted Cash Flow [Member]    
Fair Value, Off-balance Sheet Risks, Disclosure Information [Line Items]    
Mortgage servicing rights, measurement input 0.115 0.115
Maximum [Member] | Constant Prepayment Rate [Member] | Discounted Cash Flow [Member]    
Fair Value, Off-balance Sheet Risks, Disclosure Information [Line Items]    
Mortgage servicing rights, measurement input 0.11 0.177
Maximum [Member] | Probability of Default [Member] | Discounted Cash Flow [Member]    
Fair Value, Off-balance Sheet Risks, Disclosure Information [Line Items]    
Mortgage servicing rights, measurement input 0.0012 0.0012
Weighted Average [Member] | Discount Rate [Member] | Discounted Cash Flow [Member]    
Fair Value, Off-balance Sheet Risks, Disclosure Information [Line Items]    
Mortgage servicing rights, measurement input 0.095 0.095
Weighted Average [Member] | Constant Prepayment Rate [Member] | Discounted Cash Flow [Member]    
Fair Value, Off-balance Sheet Risks, Disclosure Information [Line Items]    
Mortgage servicing rights, measurement input 0.09 0.138
Weighted Average [Member] | Probability of Default [Member] | Discounted Cash Flow [Member]    
Fair Value, Off-balance Sheet Risks, Disclosure Information [Line Items]    
Mortgage servicing rights, measurement input 0.0011 0.0011
Weighted Average [Member] | Marketability Discount [Member] | Market Comparable Properties [Member]    
Fair Value, Off-balance Sheet Risks, Disclosure Information [Line Items]    
Impaired loans (collateral dependent) 0.111  
Weighted Average [Member] | Comparability Adjustments [Member] | Market Comparable Properties [Member]    
Fair Value, Off-balance Sheet Risks, Disclosure Information [Line Items]    
Foreclosed assets 0.78 0.111
v3.20.2
Disclosures about Fair Value of Assets and Liabilities - Estimated Fair Values of Financial Instruments and Level within Fair Value Hierarchy in which Fair Value Measurements Fall (Detail) - USD ($)
$ in Thousands
Jun. 30, 2020
Jun. 30, 2019
Jun. 30, 2018
Financial assets      
Cash and cash equivalents $ 33,467 $ 59,600 $ 4,754
Interest-bearing time deposits in banks 3,000 3,000  
Loans, net of allowance for loan losses 509,817 487,774  
Federal Home Loan Bank stock 3,028 1,174  
Accrued interest receivable 1,908 2,142  
Financial liabilities      
Deposits 601,700 607,023  
Repurchase agreements 3,738 2,015  
Federal Home Loan Bank advances 34,500 24,000  
Lines of credit 3,000    
Advances from borrowers for taxes and insurance 519 747  
Accrued interest payable 537 801  
Unrecognized financial instruments (net of contract amount)      
Commitments to originate loans  
Quoted Prices in Active Markets for Identical Assets (Level 1) [Member]      
Financial assets      
Cash and cash equivalents 33,467 59,600  
Interest-bearing time deposits in banks 3,000 3,000  
Unrecognized financial instruments (net of contract amount)      
Commitments to originate loans  
Lines of credit    
Significant Other Observable Inputs (Level 2) [Member]      
Financial assets      
Federal Home Loan Bank stock 3,028 1,174  
Accrued interest receivable 1,908 2,142  
Financial liabilities      
Deposits 320,209 276,738  
Repurchase agreements 3,738 2,015  
Federal Home Loan Bank advances 35,472 24,419  
Advances from borrowers for taxes and insurance 519 747  
Accrued interest payable 537 801  
Unrecognized financial instruments (net of contract amount)      
Commitments to originate loans  
Lines of credit 3,000  
Significant Unobservable Inputs (Level 3) [Member]      
Financial assets      
Loans, net of allowance for loan losses 513,221 480,479  
Financial liabilities      
Deposits 283,304 331,865  
Unrecognized financial instruments (net of contract amount)      
Commitments to originate loans  
Lines of credit    
v3.20.2
Commitments and Credit Risk - Additional Information (Detail) - USD ($)
12 Months Ended
Jun. 30, 2020
Jun. 30, 2019
Commitments And Contingencies Disclosure [Line Items]    
Outstanding commitments to originate loans amount $ 16,873,000 $ 5,430,000
Loan amount commitments at fixed rates of interest $ 5,178,000 $ 2,959,000
Weighted average interest rates for fixed rate loan commitments 3.49% 5.03%
Commercial [Member]    
Commitments And Contingencies Disclosure [Line Items]    
Lines of credit to borrowers $ 78,600,000 $ 44,070,000
Open End Consumer Lines [Member]    
Commitments And Contingencies Disclosure [Line Items]    
Lines of credit to borrowers $ 7,582,000 $ 6,726,000
v3.20.2
Condensed Financial Information (Parent Company Only) - Condensed Balance Sheet (Detail) - USD ($)
$ in Thousands
Jun. 30, 2020
Jun. 30, 2019
Jun. 30, 2018
Assets      
Cash and due from banks $ 31,529 $ 57,994  
Total assets 735,517 723,870  
Liabilities      
Line of credit 3,000    
Interest payable 537 801  
Other liabilities 5,653 3,904  
Total liabilities 652,953 641,409  
Stockholders' Equity 82,564 82,461 $ 81,675
Total liabilities and stockholders' equity 735,517 723,870  
Parent Company [Member]      
Assets      
Cash and due from banks 2,592 4,058  
Investment in common stock of subsidiary 80,631 75,920  
ESOP loan 2,469 2,628  
Total assets 85,692 82,606  
Liabilities      
Line of credit 3,000    
Interest payable 31    
Other liabilities 97 145  
Total liabilities 3,128 145  
Stockholders' Equity 82,564 82,461  
Total liabilities and stockholders' equity $ 85,692 $ 82,606  
v3.20.2
Condensed Financial Information (Parent Company Only) - Condensed Statement of Income and Comprehensive Income (Loss) (Detail) - USD ($)
$ in Thousands
12 Months Ended
Jun. 30, 2020
Jun. 30, 2019
Income    
Interest on ESOP loan $ 22,917 $ 22,833
Deposits with financial institutions 267 279
Total interest and dividend income 26,982 26,725
Expense    
Interest on line of credit 133  
Other expenses 1,677 2,013
Benefit for Income Taxes 1,639 1,293
Net Income 4,245 3,558
Comprehensive Income 7,883 7,231
Parent Company [Member]    
Income    
Interest on ESOP loan 141 136
Deposits with financial institutions
Total interest and dividend income 141 136
Expense    
Interest on line of credit 133  
Other expenses 203 183
Total expense 336 183
Loss Before Income Tax and Equity in Undistributed Income of Subsidiary (195) (47)
Benefit for Income Taxes (54) (11)
Loss Before Equity in Undistributed Loss of Subsidiary (141) (36)
Equity in Undistributed Income of Subsidiary 4,386 3,594
Net Income 4,245 3,558
Comprehensive Income $ 7,883 $ 7,231
v3.20.2
Condensed Financial Information (Parent Company Only) - Condensed Statement of Cash Flows (Detail) - USD ($)
$ in Thousands
12 Months Ended
Jun. 30, 2020
Jun. 30, 2019
Cash flows from operating activities    
Net income $ 4,245 $ 3,558
Items not requiring (providing) cash    
Net change accrued interest payable (264) 613
Net change in other liabilities 1,748 125
Net cash provided by operating activities 6,896 5,797
Cash flows from financing activities    
Stock purchase per stock repurchase plan (7,459) (6,222)
Dividends paid (939) (868)
Net cash provided by financing activities 1,274 76,184
Increase (Decrease) in Cash and Cash Equivalents (26,133) 54,846
Cash and Cash Equivalents, Beginning of Year 59,600 4,754
Cash and Cash Equivalents, End of Year 33,467 59,600
Parent Company [Member]    
Cash flows from operating activities    
Net income 4,245 3,558
Items not requiring (providing) cash    
Net change accrued interest payable 30  
Net change in other liabilities (48) 30
Earnings from subsidiary (4,386) (3,594)
Net cash provided by operating activities (159) (6)
Cash flows from financing activities    
Stock purchase per stock repurchase plan (7,459) (6,222)
Dividends paid (1,008) (930)
Dividends received 4,000 2,000
Loan for ESOP 159 156
Proceeds from CIBC line of credit 5,000  
Repayment of CIBC line of credit (2,000)  
Net cash provided by financing activities (1,308) (4,996)
Increase (Decrease) in Cash and Cash Equivalents (1,467) (5,002)
Cash and Cash Equivalents, Beginning of Year 4,058 9,060
Cash and Cash Equivalents, End of Year $ 2,591 $ 4,058