IF Bancorp(US:IROQ)2024-09-11 18:01Loan Portfolio and Credit Risk - As of June 30, 2024, the company's total loan portfolio included $200.0 million (30.9%) in commercial real estate loans, $126.0 million (19.5%) in multi-family loans, and $91.8 million (14.2%) in commercial business loans[164]. - The company's non-performing assets totaled $173,000 as of June 30, 2024, which includes non-accrual loans and loans 90 days or more delinquent[168]. - The allowance for credit losses was 1.16% of total loans as of June 30, 2024, indicating potential risks in loan repayment[171]. - Loan participations accounted for $51.8 million (8.0%) of the company's gross loans as of June 30, 2024, with most being within 100 miles of the primary lending market[167]. - The company faces increased credit risk as it continues to grow its commercial real estate, multi-family, and commercial business loans, which generally have higher risk than residential loans[164]. - The company adopted the CECL model for measuring credit losses effective July 1, 2023, which may impact the calculation of its allowance for credit losses[172]. - The allowance for credit losses is evaluated regularly and reflects significant judgment, impacting financial results[221]. - The company utilizes a current expected credit loss (CECL) methodology for estimating credit losses, focusing on pools of loans with similar risks[220]. - The consolidated allowance for credit losses (ACL) was $7.5 million as of June 30, 2024, reflecting management's estimates to cover potential credit losses[294]. - The company recorded a provision for credit losses on loans of $150,000 in 2024, compared to a credit of $(228,000) in 2023, indicating a shift in credit quality assessment[309]. Financial Performance - Net income for the year ended June 30, 2024, was $1.8 million, a decline from $4.7 million in 2023[214]. - Net income decreased by $2.9 million, or 61.6%, to $1.8 million for the year ended June 30, 2024, from $4.7 million for the year ended June 30, 2023[235]. - The efficiency ratio increased to 89.21% for the year ended June 30, 2024, compared to 76.86% for the year ended June 30, 2023[236]. - Return on average assets decreased to 0.20% for the year ended June 30, 2024, from 0.56% for the year ended June 30, 2023[235]. - Noninterest income increased by $317,000, or 7.8%, to $4.4 million for the year ended June 30, 2024, driven by gains on the sale of loans and insurance commissions[243]. - Noninterest expense decreased by $306,000, or 1.5%, to $19.7 million for the year ended June 30, 2024, with significant reductions in compensation and benefits[244]. - The company reported a comprehensive income of $2,879,000 in 2024, significantly higher than $358,000 in 2023[305]. Interest Income and Expenses - Net interest income decreased to $17.7 million for the year ended June 30, 2024, down from $22.0 million in 2023, with a net interest rate spread of 1.78% compared to 2.62% in the previous year[214]. - Interest and dividend income increased by $8.9 million, or 27.8%, to $41.0 million for the year ended June 30, 2024, from $32.1 million for the year ended June 30, 2023[237]. - Interest expense increased by $13.2 million, or 130.8%, to $23.3 million for the year ended June 30, 2024, from $10.1 million for the year ended June 30, 2023[238]. - The net interest margin fell to 2.10% in 2024, down from 2.80% in 2023, reflecting a decrease of 0.70%[247]. Asset and Equity Management - Total assets increased to $887.7 million as of June 30, 2024, from $848.976 million in 2023, reflecting growth from $377.2 million in 2009[212]. - Total equity rose to $73.9 million as of June 30, 2024, compared to $71.8 million in 2023[226]. - Total liabilities increased to $813,829,000 in 2024 from $777,223,000 in 2023, an increase of approximately 4.7%[299]. - The total amount of loans originated held for sale was $13,531,000 in 2024, compared to $7,554,000 in 2023, reflecting an increase of 79.5%[309]. Market and Economic Conditions - The State of Illinois faces significant financial difficulties, including pension funding shortfalls, which could adversely affect borrowers and the company's business operations[188]. - A deterioration in local economic conditions could lead to reduced demand for products and services, increased non-performing loans, and declining collateral values[190]. - Monetary policies and regulations from the Federal Reserve Board could adversely affect the company's financial condition and results of operations[192]. - The company operates in a highly competitive environment, which may limit growth and profitability due to aggressive pricing from competitors[194]. Regulatory and Compliance Issues - Regulatory changes from the Dodd-Frank Act may restrict business activities and adversely affect the performance of the company's loan and investment portfolios[195]. - The audit identified the valuation of the ACL as a critical audit matter due to the significant judgment required in estimating credit losses[295]. - The company’s management is responsible for the determination of the ACL, which involves subjective factors such as historical loss rates and risk grading[294]. Operational and Technological Risks - The company may face operational risks due to high transaction volumes and reliance on technology systems, which could impact financial performance[175]. - The company has established an Information Security Program to mitigate cybersecurity risks, which is reviewed and modified annually[201]. Dividends and Shareholder Returns - The company paid dividends of $0.20 per share in October 2023 and April 2024, with future payments dependent on various financial factors[210]. - The company paid dividends of $1,279,000 in 2024, slightly increasing from $1,269,000 in 2023[311]. Cash and Liquidity Management - Cash and cash equivalents totaled $9.6 million as of June 30, 2024[258]. - The liquidity ratio averaged 25.9% of total assets, down from 29.3% in 2023[257]. - The company has approximately $350,000 in cash exceeding federally insured limits, highlighting potential liquidity risks[318].