Marathon Bancorp Inc MD

Previous wording

Non-interest Income. Our primary sources of non-interest income are mortgage banking income, service charges on deposit accounts and net gains in the cash surrender value of bank owned life insurance. Other sources of non-interest income include net gain or losses on sales and calls of securities, net gain or loss on disposal of foreclosed assets and other income.

Current wording

Non-interest Income. Our primary sources of non-interest income are mortgage banking income, service charges on deposit accounts and net gains in the cash surrender value of bank owned life insurance. Other sources of non-interest income sometimes include net gain or losses on sales and calls of securities, net gain or loss on disposal of foreclosed assets and other income.

Previous wording

Provision for (Benefit from) Income Taxes. Our income tax expense (benefit) is the total of the current year income tax due or refundable and the change in deferred tax assets and liabilities. Deferred tax assets and liabilities are the expected future tax amounts for the temporary differences between the carrying amounts and the tax basis of assets and liabilities, computed using enacted tax rates. A valuation allowance, if needed, reduces deferred tax assets to the amounts expected to be realized.

Current wording

Provision for Income Taxes. Our income tax expense is the total of the current year income tax due or refundable and the change in deferred tax assets and liabilities. Deferred tax assets and liabilities are the expected future tax amounts for the temporary differences between the carrying amounts and the tax basis of assets and liabilities, computed using enacted tax rates. A valuation allowance, if needed, reduces deferred tax assets to the amounts expected to be realized.

Previous wording

Allowance for Credit Losses. We establish the allowance for credit losses through charges (credits) to earnings in the form of a provision for (recovery of) credit losses. Loan losses are charged against the allowance for credit losses for the difference between the carrying value of the loan and the estimated net realizable value or fair value of the collateral, if collateral dependent, when management believes that the collectability of the principal is unlikely. Subsequent recoveries, if any, are credited to the allowance.

Current wording

for the difference between the carrying value of the loan and the estimated net realizable value or fair value of the collateral, if collateral dependent, when management believes that the collectability of the principal is unlikely. Subsequent recoveries, if any, are credited to the allowance.

Previous wording

Provision for (Benefit from) Income Taxes. Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis. Deferred tax assets and liabilities are measured using enacted tax rates in effect for the year in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized.

Current wording

Provision for Income Taxes. Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis. Deferred tax assets and liabilities are measured using enacted tax rates in effect for the year in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized.

Previous wording

losses or other factors. In making this assessment, management considers the extent to which fair value is less than amortized cost, any changes to the rating of the security by a rating agency and adverse conditions specifically related to the security, among other factors. If this assessment indicates that a credit loss exists, the present value of cash flows expected to be collected from the security are compared to the amortized cost basis of the security. If the present value of cash flows expected to be collected is less than the amortized cost basis, a credit loss exists and an allowance for credit losses is recorded, limited by the amount that the fair value is less than the amortized cost basis. Any impairment that has not been recorded through an allowance for credit loss is recognized in other comprehensive income.

Current wording

Debt Securities. For available-for-sale and held to maturity debt securities in an unrealized loss position, the Company first assesses whether it intends to sell, or it is more likely than not that it will be required to sell the security before recovery of its amortized cost basis. If either of the criteria regarding intent or requirement to sell is met, the security’s amortized cost basis is written down to fair value through a provision for credit losses. For debt securities that do not meet the aforementioned criteria, the Company evaluates whether the decline in fair value has resulted from credit losses or other factors. In making this assessment, management considers the extent to which fair value is less than amortized cost, any changes to the rating of the security by a rating agency and adverse conditions specifically related to the security, among other factors. If this assessment indicates that a credit loss exists, the present value of cash flows expected to be collected from the security are compared to the amortized cost basis of the security. If the present value of cash flows expected to be collected is less than the amortized cost basis, a credit loss exists and an allowance for credit losses is recorded, limited by the amount that the fair value is less than the amortized cost basis. Any impairment that has not been recorded through an allowance for credit loss is recognized in other comprehensive income.

Previous wording

Debt Securities Available for Sale. Total debt securities available for sale decreased $2.0 million, or 22.4%, to $6.9 million at March 31, 2024 from $8.9 million at June 30, 2023. The decrease was primarily due to the call of $1.5 million in corporate bonds. Debt securities available for sale are carried at fair value with the unrealized gain or loss reflected in accumulated other comprehensive income (loss).

Current wording

Debt Securities Available for Sale. Total debt securities available for sale remained substantially unchanged at $6.6 million when comparing September 30, 2024 with June 30, 2024.

Previous wording

Loans. Gross loans decreased $6.2 million, or 3.1%, to $193.7 million at March 31, 2024 from $199.9 million at June 30, 2023. The decrease was primarily due to a decrease in all categories of loans with the exception of multi-family real estate loans which increased by $1.1 million, or 2.6%, to $45.3 million at March 31, 2024 from $44.2 million at June 30, 2023. Consumer loans decreased by $1.3 million, or 44.3%, primarily due to the payoff of a consumer loan which was secured by a $650,000 certificate of deposit account. The decrease in construction loans was primarily due to two construction loans totaling $613,000 which were converted to permanent financings. The remaining categories of loan decreases (commercial real estate, commercial and industrial and one-to-four-family residential) were primarily due to repayments exceeding new loan growth.

Current wording

Loans. Gross loans decreased $7.5 million, or 4.0%, to $177.8 million at September 30, 2024 from $185.3 million at June 30, 2024. The decrease was due to a decrease in all categories of loans. Commercial real estate loans decreased by $4.0 million or 5.3%. Multi-family real estate loans decreased by $1.4 million or 3.1%. Construction loans decreased by $1.3 million to no construction loans being held at September 30, 2024 compared to $1.3 million being held at June 30, 2024. The decrease in construction loans was primarily due to all construction loans being converted to permanent financings. The remaining categories of loan decreases (commercial real estate, multi-family real estate, commercial and industrial and one-to-four-family residential loans) were primarily due to repayments exceeding new loan growth.

Previous wording

The following tables set forth average balances, average yields and costs, and certain other information for the periods indicated. No tax-equivalent yield adjustments have been made, as the effects would be immaterial. All average balances are daily average balances. Non-accrual loans, if applicable, are included in the computation of average balances. The yields set forth below include the effect of deferred fees, discounts, and premiums that are amortized or accreted to interest income or interest expense, as applicable. Loan balances include loans held for sale.

Current wording

The following table sets forth average balances, average yields and costs, and certain other information for the periods indicated. No tax-equivalent yield adjustments have been made, as the effects would be immaterial. All average balances are daily average balances. Non-accrual loans, if applicable, are included in the computation of average balances. The yields set forth below include the effect of deferred fees, discounts, and premiums that are amortized or accreted to interest income or interest expense, as applicable. Loan balances include loans held for sale.

Previous wording

General*.*Net loss was $631,000 for the three months ended March 31, 2024, a decrease of $997,000, or 272.6%, from net income of $366,000 for the three months ended March 31, 2023. The decrease in net income for the three months ended March 31, 2024 was primarily attributable to an increase in expenses associated with foreclosed assets, net of $970,000, a decrease of $245,000 in net-interest income and a decrease in non-interest income of $112,000 offset by a recovery of credit losses of $122,000. Also, offsetting the net loss was the provision for (benefit from) income taxes which decreased by $261,000, from a provision for income taxes of $58,000 for the three months ended March 31, 2023 to a benefit from income taxes of $203,000 for the three months ended March 31, 2024.

Current wording

General*.*Net income was $175,000 for the three months ended September 30, 2024, an increase of $89,000, or 102.9%, from net income of $86,000 for the three months ended September 30, 2023. The increase in net income was primarily attributable to a decrease in the provision for (recovery of) credit losses from a provision for credit losses of $41,000 for the three months ended September 30, 2023 to a recovery of credit losses of $155,000 for the three months ended September 30, 2024. The provision for income taxes also decreased by $161,000. These increases were offset by a decrease in net interest income of $143,000, a decrease in non-interest income of $35,000 and an increase in non-interest expenses of $90,000.

Previous wording

Interest Income**.**Interest income increased by $35,000, or 1.5%, to $2.3 million for the three months ended March 31, 2024 as compared to the three months ended March 31, 2023 primarily due to an increase in loan interest income of $70,000 offset by a decrease in other interest income of $26,000.

Current wording

Interest Income**.**Interest income decreased by $93,000, or 3.9%, to $2.3 million for the three months ended September 30, 2024 as compared to $2.4 million for the three months ended September 30, 2023 primarily due to a decrease in loan interest income of $105,000 offset by an increase in other interest income of $23,000. Income from debt securities decreased slightly by $12,000.

Previous wording

Loan interest income increased by $70,000, or 3.4%, to $2.1 million for the three months ended March 31, 2024 as compared to the three months ended March 31, 2023, due to an increase in the average yield on loans offset by a decrease in the average balance of the loan portfolio. The average yield on the loan portfolio increased by 21 basis points from 4.32% for the three months ended March 31, 2023 to 4.53% for the three months ended March 31, 2024 as a result of rising interest rates. The average balance of the loan portfolio decreased by $4.5 million, or 2.3%, from $197.1 million for the three months ended March 31, 2023 to $192.6 million for the three months ended March 31, 2024.

Current wording

Loan interest income decreased by $105,000, or 4.8%, to $2.1 million for the three months ended September 30, 2024 as compared to $2.2 million for the three months ended September 30, 2023, due to a decrease in the average balance of the loan portfolio of $17.4 million, or 8.8%, which was offset by an increase in the average yield on loans of 20 basis points. The average balance of the loan portfolio decreased by $17.4 million, or 8.8%, to $179.7 million for the three months ended September 30, 2024 from $197.1 million for the three months ended September 30, 2023. The decrease in the average balance of the loan portfolio was primarily related to repayments exceeding new loan growth. The average yield on the loan portfolio increased by 20 basis points from 4.46% for the three months ended September 30, 2023 to 4.66% for the three months ended September 30, 2024 as a result of higher interest rates.

Previous wording

Interest Expense. Interest expense increased $279,000, or 43.9%, to $916,000 for the three months ended March 31, 2024 from $637,000 for the three months ended March 31, 2023, due to an increase of $73,000 in interest paid on deposits and an increase of $206,000 in interest paid on borrowings.

Current wording

Interest Expense. Interest expense increased $50,000, or 6.0%, to $892,000 for the three months ended September 30, 2024 from $842,000 for the three months ended September 30, 2023, due to an increase of $42,000 in interest paid on borrowings and an increase of $9,000 in interest paid on deposits.

Previous wording

Interest expense on deposits increased $73,000, or 11.6%, to $704,000 for the three months ended March 31, 2024 from $631,000 for the three months ended March 31, 2023 due to an increase in the average rate paid on all deposit categories except savings deposits. The increase in the average rate paid on all deposit categories except savings deposits was due to the Bank raising the interest rates on these deposit categories to maintain customers and keep the rates in line with those competitors are offering. The increase in interest expense related to the increase in the average rate paid on deposits was offset by a decrease in the average balances of all deposit categories. All categories of deposit average balances decreased when comparing the three months ended March 31, 2024 with the three months ended March 31, 2023. Average balances of certificates of deposit decreased the most by $14.6 million, or 17.2%. Average balances of demand, NOW and money market accounts also decreased by $9.4 million, or 18.1%. The decrease in the average balances of all deposits was related to customers who changed banks to obtain higher rates and the Bank being less aggressive in matching competitor interest rates. Finally, we had a $4.2 million brokered certificate of deposit that matured in March 2024 and a $4.5 million brokered certificate of deposit that matured at the end of September 2023.

Current wording

Interest expense on deposits increased $9,000, or 1.1%, to $771,000 for the three months ended September 30, 2024 from $763,000 for the three months ended September 30, 2023 due to an increase in the average rate paid on all deposit categories, offset by a decrease in the average balances of all deposit categories. The average rate paid on deposits increased by 27 basis points to 2.03% for the three months ended September 30, 2024 from 1.76% for the three months ended September 30, 2023. The increase in the average rate paid on all deposit categories was due to higher interest rates. All categories of deposit average balances decreased when comparing the three months ended September 30, 2024 with the three months ended September 30, 2023 with the average balance of deposits decreasing by $21.2 million, or 12.2%, to $152.0 million for the three months ended September 30, 2024. The decrease in the average balances of all deposits was related to customers who changed banks to obtain higher rates and the Bank being less aggressive in matching competitor interest rates. In addition, we had a $4.2 million brokered certificate of deposit that matured in March 2024.

Previous wording

Interest paid on FHLB borrowings increased $206,000, from $6,000 for the three months ended March 31, 2023 to $212,000 for the three months ended March 31, 2024. The increase in interest paid on borrowings was due to the average balance of FHLB advances increasing by $20.9 million and an increase in the average rate paid on borrowings of 94 basis points from 3.05% for the three months ended March 31, 2023 to 3.99% for the three months ended March 31, 2024. We were able to obtain more favorable borrowing rates from the FHLB than the rates that customers were requesting for certificates of deposit while also improving liquidity.

Current wording

Interest paid on FHLB borrowings increased $42,000, from $79,000 for the three months ended September 30, 2023 to $121,000 for the three months ended September 30, 2024. The increase in interest paid on borrowings was due to the average balance of FHLB advances increasing by $1.9 million to $11.6 million for the three months ended September 30, 2024 and an increase in the average rate paid on borrowings of 94 basis points from 3.25% for the three months ended September 30, 2023 to 4.19% for the three months ended September 30, 2024 due to an increase in borrowing costs.

Previous wording

Net Interest Income. Net interest income decreased by $245,000, or 14.9%, to $1.4 million for the three months ended March 31, 2024 from $1.6 million for the three months ended March 31, 2023. Net interest-earning assets decreased by $4.5 million, or 11.0%, to $35.9 million for the three months ended March 31, 2024 from $40.3 million for the three months ended March 31, 2023. Net interest rate spread decreased by 43 basis points to 2.39% for the three months ended March 31, 2024 from 2.82% for the three months ended March 31, 2023, reflecting a 71 basis points increase in the average rate paid on interest-bearing liabilities which was offset by a 28 basis points increase in the average yield on interest-earning assets. The net interest margin decreased by 33 basis points to 2.73% for the three months ended March 31, 2024 from 3.06% for the three months ended March 31, 2023. The increase in the average yield on interest earning assets for the three months ended March 31, 2024 compared to the three months ended March 31, 2023 was primarily due to an increase in the average yield of all interest-earning asset categories related to the increase in market interest rates over the past year. The increase in the average interest rate paid on interest-bearing liabilities was due to the Bank raising the interest rates on all deposit categories to maintain customers and keep the rates in line with what the competitors were offering and to attract new funds to the Bank.

Current wording

Net Interest Income. Net interest income decreased by $143,000, or 9.2%, to $1.4 million for the three months ended September 30, 2024 from $1.6 million for the three months ended September 30, 2023. Net interest-earning assets decreased by $735,000, or 2.0%, to $36.3 million for the three months ended September 30, 2024 from $37.1 million for the three months ended September 30, 2023. Net interest rate spread decreased by eight basis points to 2.49% for the three months ended September 30, 2024 from 2.57% for the three months ended September 30, 2023, reflecting a 34 basis points increase in the average rate paid on interest-bearing liabilities which was offset by a 26 basis points increase in the average yield on interest-earning assets. The net interest margin remained unchanged at 2.85% for the three months ended September 30, 2024 and September 30, 2023. The increase in the average yield on interest earning assets for the three months ended September 30, 2024 compared to the three months ended September 30, 2023 was primarily due to an increase in the average yield of all interest-earning asset categories related to the increase in market interest rates over the past year. The increase in the average interest rate paid on interest-bearing liabilities was due to the Bank raising the interest rates on all deposit categories to maintain customers and keep the rates in line with what the competitors were offering.

Previous wording

Based on our evaluation of the above factors, we recorded a recovery of credit losses of $122,000 for the three months ended March 31, 2024 compared to no provision for credit losses for the three months ended March 31, 2023. The recovery was related to an improvement in current and projected future economic conditions in our market area and the decline in the overall loan portfolio. We anticipate low unemployment and that the housing price index (HPI) will improve over the next two years due to continued high demand and the low inventory of residential real estate. These predictions align with the Bank’s historic charge-off history over the past 8-10 years.

Current wording

Based on our evaluation of the above factors, we recorded a recovery of credit losses of $155,000 for the three months ended September 30, 2024 compared to a provision for credit losses of $41,000 for the three months ended September 30, 2023. The recovery was related to the projected future economic conditions in our market area stabilizing over the next two years and a $7.5 million decline in the loan portfolio due primarily to repayments in the commercial real estate and multi-family real estate loan portfolios. These predictions align with the Bank’s historic charge-off history over the past 8-10 years.

Previous wording

The allowance for credit losses was $1.8 million, or 0.91%, of loans outstanding at March 31, 2024 and $2.1 million, or 1.01%, of loans outstanding at March 31, 2023.

Current wording

The allowance for credit losses was $1.6 million, or 0.92%, of loans outstanding at September 30, 2024 and $2.0 million, or 1.01%, of loans outstanding at September 30, 2023.

Previous wording

Non-interest income decreased by $112,000 to $147,000 for the three months ended March 31, 2024 from $259,000 for the three months ended March 31, 2023 due primarily to a gain on proceeds from life insurance death benefit of $88,000 for the three months ended March 31, 2023 compared to no gains for the three months ended March 31, 2024. Mortgage banking income also decreased by $23,000 primarily due to higher mortgage rates which led to less loan originations.

Current wording

Non-interest income decreased by $35,000 to $193,000 for the three months ended September 30, 2024 from $228,000 for the three months ended September 30, 2023 due primarily to a decrease in mortgage banking income which was related to higher mortgage rates which led to less loan originations.

Previous wording

state taxable income for loan and fee interest income from certain commercial and agricultural loans. Based upon the provisions of this new state tax law, management determined that the Company was highly unlikely to incur a material Wisconsin tax liability in the foreseeable future, instead generating Wisconsin net operating loss carryforwards that would never be realized. Since the state rate at which net deferred tax assets are expected to be realized is 0%, the Company eliminated its state net deferred tax asset balances as of July 1, 2023, resulting in deferred tax expense of approximately $112,000 for the nine months ended March 31, 2024.

Current wording

Provision for Income Taxes. Income tax expense was $41,000 for the three months ended September 30, 2024, a decrease of $160,000, as compared to income tax expense of $201,000 for the three months ended September 30, 2023. The decrease in income tax expense was primarily the result of a change in Wisconsin tax law that provides for a subtraction from the Bank’s state taxable income for loan and fee interest income from certain commercial and agricultural loans. Based upon the provisions of this new state tax law, management determined that the Company was highly unlikely to incur a material Wisconsin tax liability in the foreseeable future, instead generating Wisconsin net operating loss carryforwards that would never be realized. Since the state rate at which net deferred tax assets are expected to be realized is 0%, the Company eliminated its state net deferred tax asset balances as of July 1, 2023, resulting in deferred tax expense of approximately $112,000 for the three months ended September 30, 2023.

Previous wording

Non-performing assets includes other real estate owned of $1.4 million and $2.3 million, at March 31, 2024 and June 30, 2023, respectively. During the three months ended June 30, 2023, the Company foreclosed on collateral supporting a construction loan which was valued at $2.3 million and was included in foreclosed assets (OREO), net. The valuation was based on independent appraisals subject to certain discounts less estimated costs to sell. A subsequent independent appraisal was obtained in April 2024 resulting in a new valuation of $2.1 million subject to certain discounts less estimated costs to sell. After adjusting for estimated costs to sell, the revised valuation was $1.4 million resulting in a provision for valuation allowance of $937,000 being recorded during the three and nine months ended March 31, 2024. Non-performing assets also includes a multi-family real estate loan for $56,000 which was returned to accrual status in April 2024 upon renewal of the matured loan.

Current wording

Non-performing assets include other real estate owned of $1.4 million, at September 30, 2024 and June 30, 2024. During the three months ended June 30, 2023, the Company foreclosed on collateral supporting a construction loan which was valued at $2.3 million and was included in foreclosed assets, net. The valuation was based on independent appraisals subject to certain discounts less estimated costs to sell. A subsequent independent appraisal was obtained in April 2024 resulting in a new valuation of $2.1 million subject to certain discounts less estimated costs to sell. After adjusting for estimated costs to sell, the revised valuation was $1.4 million resulting in a provision for valuation allowance of $937,100 being recorded during the year ended June 30, 2024.

Previous wording

Classified Assets**.** Federal regulations provide for the classification of loans and other assets, such as debt and equity securities considered to be of lesser quality, as “substandard,” “doubtful” or “loss.” 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 characterized by the “distinct possibility” that the insured institution 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 classified as “loss” are those considered “uncollectible” and of such little value that their continuance as assets without the establishment of an allowance for credit loss is not warranted. Assets which do not currently expose the insured institution to sufficient risk to warrant classification in one of the aforementioned categories but possess weaknesses are designated as “special mention” or “Watch” by our management.

Current wording

Classified Assets**.** Federal regulations provide for the classification of loans and other assets, such as debt and equity securities considered to be of lesser quality, as “substandard,” “doubtful” or “loss.” 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 characterized by the “distinct possibility” that the insured institution 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 classified as “loss” are those considered “uncollectible” and of such little value that their continuance as assets without the establishment of an allowance for credit loss is not warranted. Assets which do not currently expose the insured institution to sufficient risk to warrant classification in one of the aforementioned categories but possess weaknesses are designated as “special mention” or “Watch” by our management. There were no loans classified as substandard, doubtful or loss in the Company’s loan portfolio as of September 30, 2024 or June 30, 2024.

Previous wording

The allowance for credit losses (“ACL”) at March 31, 2024 represents the Company’s current estimate of the lifetime credit losses expected from its loan portfolio. Management estimates the ACL by projecting a lifetime loss rate

Current wording

The allowance for credit losses (“ACL”) at September 30, 2024 represents the Company’s current estimate of the lifetime credit losses expected from its loan portfolio. Management estimates the ACL by projecting a lifetime loss rate conditional on a forecast of economic parameters and other qualitative adjustments, for the loans’ expected remaining term.

Previous wording

Although we believe that we use the best information available to establish the allowance for credit losses, future adjustments to the allowance may be necessary if economic conditions differ substantially from the assumptions used in making the evaluation. In addition, the FDIC and the WDFI, as an integral part of their examination process, periodically review our allowance for credit losses, and as a result of such reviews, we may have to adjust our allowance for credit losses. However, regulatory agencies are not directly involved in establishing the allowance for credit losses as

Current wording

Although we believe that we use the best information available to establish the allowance for credit losses, future adjustments to the allowance may be necessary if economic conditions differ substantially from the assumptions used in making the evaluation. In addition, the FDIC and the WDFI, as an integral part of their examination process, periodically review our allowance for credit losses, and as a result of such reviews, we may have to adjust our allowance for credit losses. However, regulatory agencies are not directly involved in establishing the allowance for credit losses as the process is our responsibility and any increase or decrease in the allowance is the responsibility of management. A large loss could deplete the allowance and require increased provisions to replenish the allowance, which would adversely affect earnings.

Previous wording

Liquidity describes our ability to meet the financial obligations that arise in the ordinary course of business. Liquidity is primarily needed to meet the borrowing and deposit withdrawal requirements of our customers and to fund current and planned expenditures. Our primary sources of funds are deposits, principal and interest payments on loans and securities, proceeds from the sale of loans, and proceeds from maturities of securities. We also have the ability to borrow from the Federal Home Loan Bank of Chicago. At March 31, 2024, we had a $82.0 million line of credit with the Federal Home Loan Bank of Chicago, which had $23.0 million in borrowings outstanding as of that date. The Bank also has $25.0 million available to borrow from the Federal Reserve Bank when pledging acceptable assets and an unsecured Federal Funds purchasing limit of $5.0 million with the Bank’s correspondent bank. At March 31, 2024, the Bank did not borrow any additional funds from the Federal Reserve or from the correspondent bank.

Current wording

Liquidity describes our ability to meet the financial obligations that arise in the ordinary course of business. Liquidity is primarily needed to meet the borrowing and deposit withdrawal requirements of our customers and to fund current and planned expenditures. Our primary sources of funds are deposits, principal and interest payments on loans and securities, proceeds from the sale of loans, and proceeds from maturities of securities. We also have the ability to borrow from the Federal Home Loan Bank of Chicago. At September 30, 2024, we had a $77.3 million line of credit with the Federal Home Loan Bank of Chicago, which had $10.0 million in borrowings outstanding as of that date. The Bank also has $25.0 million available to borrow from the Federal Reserve Bank when pledging acceptable assets and an unsecured Federal Funds purchasing limit of $5.0 million with the Bank’s correspondent bank. At September 30, 2024, the Bank did not borrow any additional funds from the Federal Reserve or from the correspondent bank.

Previous wording

Our cash flows are comprised of three primary classifications: cash flows from operating activities, investing activities, and financing activities. Net cash provided by operating activities was $188,000 and $1.3 million of cash provided by operating activities for the nine months ended March 31, 2024 and 2023, respectively. Net cash provided by (used in) investing activities, which consists primarily of disbursements for loan origination, the purchase of securities, and the purchase of premises and equipment offset by principal collections on loans, proceeds from the sale of securities and proceeds from maturing securities and pay downs on securities, was $8.7 million provided by investing activities compared to $16.9 million used in investing activities for the nine months ended March 31, 2024 and 2023, respectively. Net cash (used in) provided by financing activities, consisting of activity in deposit accounts and borrowings, was $12.6 million used in financing activities compared to $16.6 million being provided by financing activities for the nine months ended March 31, 2024 and 2023, respectively.

Current wording

Our cash flows are comprised of three primary classifications: cash flows from operating activities, investing activities, and financing activities. Net cash provided by operating activities was $945,000 and $367,000 of cash provided by operating activities for the three months ended September 30, 2024 and 2023, respectively. Net cash provided by (used in) investing activities, which consists primarily of disbursements for loan origination, the purchase of securities, and the purchase of premises and equipment offset by principal collections on loans, proceeds from the sale of securities and proceeds from maturing securities and pay downs on securities, was $7.5 million provided by investing activities compared to $1.5 million used in investing activities for the three months ended September 30, 2024 and 2023, respectively. Net cash used in financing activities, consisting of activity in deposit accounts and borrowings, was $3.9 million used in financing activities compared to $3.6 million being used in financing activities for the three months ended September 30, 2024 and 2023, respectively.

Previous wording

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. At March 31, 2024, we had outstanding commitments to originate loans of $4.8 million, and $1.2 million in outstanding commitments to sell loans. We anticipate that we will have sufficient funds available to meet our current lending commitments. Time deposits that are scheduled to mature in one year or less from March 31, 2024 totaled $44.3 million, which include $4.4 million in brokered certificates of deposit. Management expects that a substantial portion of the maturing time deposits will be renewed. However, if a substantial portion of these deposits is not retained, we may utilize additional Federal Home Loan Bank advances or other borrowings, which may result in higher levels of interest expense.

Current wording

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. At September 30, 2024, we had outstanding commitments to originate loans of $4.6 million, and $385,000 in outstanding commitments to sell loans. We anticipate that we will have sufficient funds available to meet our current lending commitments. Time deposits that are scheduled to mature in one year or less from September 30, 2024 totaled $46.3 million, which include $4.4 million in brokered certificates of deposit. Management expects that a substantial portion of the maturing time deposits will be renewed. However, if a substantial portion of these deposits is not retained, we may utilize additional Federal Home Loan Bank advances or other borrowings, which may result in higher levels of interest expense.