Marathon Bancorp Inc MD

Previous wording

This discussion and analysis reflects our consolidated financial statements and other relevant statistical data, and is intended to enhance your understanding of our financial condition and results of operations. The information in this section has been derived from the accompanying consolidated financial statements. You should read the information in this section in conjunction with the business and financial information regarding Marathon Bancorp, Inc. provided in this Form 10-Q and the Company’s Annual Report on Form 10-K for the year ended June 30, 2024 as filed with the Securities and Exchange Commission on September 26, 2024.

Current wording

This discussion and analysis reflects our consolidated financial statements and other relevant statistical data, and is intended to enhance your understanding of our financial condition and results of operations. The information in this section has been derived from the accompanying consolidated financial statements. You should read the information in this section in conjunction with the business and financial information regarding Marathon Bancorp, Inc. provided in this Quarterly Report on Form 10-Q and the Company’s Annual Report on Form 10-K for the year ended June 30, 2024 as filed with the Securities and Exchange Commission on September 26, 2024.

Previous 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.

Current wording

Allowance for Credit Losses-Available for Sale Debt Securities. For available-for-sale 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

Total Assets. Total assets decreased $2.8 million, or 1.3%, to $216.5 million at September 30, 2024 from $219.2 million at June 30, 2024. The decrease was primarily due to a decrease in net loans of $7.3 million, or 4.0%, which was offset by an increase in cash and cash equivalents of $4.5 million, or 43.4%. The remaining asset categories showed no significant changes when comparing September 30, 2024 with June 30, 2024.

Current wording

Total Assets. Total assets decreased $1.3 million, or 0.6%, to $217.9 million at December 31, 2024 from $219.2 million at June 30, 2024. The decrease was primarily due to a decrease in net loans of $6.5 million, or 3.6%, which was offset by an increase in cash and cash equivalents of $5.7 million, or 54.4%. Debt securities available for sale also decreased by $364,000, from $6.6 million at June 30, 2024 to $6.2 million at December 31, 2024. The remaining asset categories showed no significant changes when comparing December 31, 2024 with June 30, 2024.

Previous wording

Cash and Cash Equivalents. Total cash and cash equivalents increased $4.5 million, or 43.4%, to $15.0 million at September 30, 2024 from $10.5 million at June 30, 2024, primarily due to a decrease in net loans of $7.3 million which was offset by a decrease in borrowings of $3.0 million.

Current wording

Cash and Cash Equivalents. Total cash and cash equivalents increased $5.7 million, or 54.4%, to $16.2 million at December 31, 2024 from $10.5 million at June 30, 2024, primarily due to a decrease in net loans of $6.5 million which was offset by a decrease in borrowings of $3.0 million.

Previous 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.

Current wording

Loans. Gross loans decreased $6.7 million, or 3.6%, to $178.6 million at December 31, 2024 from $185.3 million at June 30, 2024. The decrease was due to a decrease in all categories of loans with the exception of consumer loans which increased slightly by $232,000. Commercial real estate loans decreased by $3.7 million, or 5.0% when comparing December 31, 2024 with June 30, 2024. Multi-family real estate loans decreased by $1.0 million, or 2.3% when comparing December 31, 2024 with June 30, 2024. Construction loans decreased by $1.3 million to no construction loans being held at December 31, 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. Commercial and industrial loans decreased by $444,000, or 8.6% when comparing December 31, 2024 with June 30, 2024. 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

Deposits. Total deposits decreased slightly by $815,000, or 0.5%, to $172.2 million at September 30, 2024 from $173.0 million at June 30, 2024. The decrease in deposits was related to customers who changed banks to obtain higher rates and the Bank being less aggressive in matching competitor interest rates. There was also a shift from non-interest bearing deposits to interest bearing deposits of approximately $2.0 million as customers moved their deposits to higher rate products at the Bank.

Current wording

Deposits. Total deposits increased slightly by $436,000, or 0.3%, to $173.4 million at December 31, 2024 from $173.0 million at June 30, 2024. There was also a shift from non-interest bearing deposits to interest bearing deposits of approximately $2.0 million as customers moved their deposits to higher rate products at the Bank.

Previous wording

Federal Home Loan Bank (FHLB) Advances. FHLB advances decreased $3.0 million to $10.0 million at September 30, 2024 compared to $13.0 million in FHLB advances at June 30, 2024 as the Bank paid down a term borrowing of $3.0 million that matured in August 2024.

Current wording

Federal Home Loan Bank (FHLB) Advances. FHLB advances decreased $3.0 million to $10.0 million at December 31, 2024 compared to $13.0 million June 30, 2024 as the Bank paid down a term borrowing of $3.0 million that matured in August 2024.

Previous wording

Stockholders’ Equity. Total stockholders’ equity increased by $292,000 when comparing September 30, 2024 with June 30, 2024 due to net income of $175,000 and a decrease in accumulated other comprehensive loss of $112,000 resulting from an increase in the fair market value of the debt securities available for sale portfolio due to favorable changes in market interest rates.

Current wording

Stockholders’ Equity. Total stockholders’ equity increased by $390,000 when comparing December 31, 2024 with June 30, 2024 due to net income of $226,000 and a decrease in accumulated other comprehensive loss, net of taxes of $118,000 resulting from an increase in the fair market value of the debt securities available for sale portfolio due to favorable changes in market interest rates.

Previous 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.

Current 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.

Previous 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.

Current wording

General*.*Net income was $51,000 for the three months ended December 31, 2024, a decrease of $221,000, or 81.2%, from net income of $272,000 for the three months ended December 31, 2023. The decrease in net income was primarily attributable to a change in the provision for (recovery of) credit losses of $143,000 from a recovery of credit losses of $135,000 for the three months ended December 31, 2023 to a provision for credit losses of $8,000 for the three months ended December 31, 2024. Net interest income also decreased by $80,000 and the provision for income taxes increased by $31,000. These decreases were offset by an increase in non-interest income of $4,000 and a decrease in non-interest expenses of $29,000.

Previous 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.

Current wording

Interest Income**.**Interest income decreased by $135,000, or 5.6%, to $2.3 million for the three months ended December 31, 2024 as compared to $2.4 million for the three months ended December 31, 2023 primarily due to a decrease in loan interest income of $152,000 offset by an increase in other interest income of $29,000. Income from debt securities decreased slightly by $12,000 during the three months ended December 31, 2024.

Previous wording

the average balance of debt securities to $7.1 million for the three months ended September 30, 2024 from $9.3 million for the three months ended September 30, 2023. Offsetting the decrease in average balance, was a ten basis points increase in the average yield on the debt securities portfolio to 2.60% for the three months ended September 30, 2024 from 2.50% for the three months ended September 30, 2023 as a result of the higher interest rate environment. The average balance of debt securities continued to decrease as a result of securities paydowns.

Current wording

Debt securities interest income decreased by $12,000, or 21.1%, to $45,000 for the three months ended December 31, 2024 from $57,000 for the three months ended December 31, 2023 due to a decrease of $1.9 million in the average balance of debt securities to $6.9 million for the three months ended December 31, 2024 from $8.8 million for the three months ended December 31, 2023. Offsetting the decrease in average balance, was a one basis point increase in the average yield on the debt securities portfolio to 2.61% for the three months ended December 31, 2024 from 2.60% for the three months ended December 31, 2023 as a result of the higher interest rate environment. The average balance of debt securities continued to decrease as a result of securities paydowns.

Previous 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.

Current wording

Interest expense on deposits increased $6,000, or 0.5%, to $764,000 for the three months ended December 31, 2024 from $759,000 for the three months ended December 31, 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 17 basis points to 2.02% for the three months ended December 31, 2024 from 1.85% for the three months ended December 31, 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 December 31, 2024 with the three months ended December 31, 2023 with the average balance of deposits decreasing by $12.6 million, or 7.7%, to $151.2 million for the three months ended December 31, 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 $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.

Current wording

Interest paid on FHLB borrowings decreased $61,000, from $158,000 for the three months ended December 31, 2023 to $97,000 for the three months ended December 31, 2024. The decrease in interest paid on borrowings was due to the average balance of FHLB advances decreasing by $6.3 million to $10.0 million for the three months ended December 31, 2024. Offsetting the decrease in average balance was an increase in the average rate paid on borrowings of seven basis points from 3.87% for the three months ended December 31, 2023 to 3.90% for the three months ended December 31, 2024 due to an increase in borrowing costs.

Previous 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.

Current wording

Net Interest Income. Net interest income decreased by $80,000, or 5.4%, to $1.4 million for the three months ended December 31, 2024 from $1.5 million for the three months ended December 31, 2023. Net interest-earning assets increased by $993,000, or 2.8%, to $36.4 million for the three months ended December 31, 2024 from $35.4 million for the three months ended December 31, 2023. Net interest rate spread increased by three basis points to 2.49% for the three months ended December 31, 2024 from 2.46% for the three months ended December 31, 2023, reflecting a 14 basis points increase in the average yield on interest-earning assets which was offset by an 11 basis points increase in the average rate paid on interest-bearing liabilities. The net interest margin increased to 2.85% for the three months ended December 31, 2024 from 2.76% for the three months ended December 31, 2023. The increase in the average yield on interest earning assets for the three months ended December 31, 2024 compared to the three months ended December 31, 2023 was primarily due to an increase in the average yield of all interest-earning asset categories (with the exception of cash and cash equivalents which decreased by 86 basis points due to a drop in the federal funds rate during the latter part of 2024) 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.

Previous 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.

Current wording

Based on our evaluation of the above factors, we recorded a provision for credit losses of $8,000 for the three months ended December 31, 2024 compared to a recovery of credit losses of $135,000 for the three months ended December 31, 2023. The recovery was related to the projected future economic conditions in our market area stabilizing over the next two years and a decline in the loan portfolio due primarily to repayments in the commercial real estate and multi-family real estate loan portfolios, which was impactful to the weighted average life of the loan portfolio. 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 $1.6 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.

Current wording

The allowance for credit losses was $1.7 million, or 0.92%, of loans outstanding at December 31, 2024 and $1.9 million, or 0.96%, of loans outstanding at December 31, 2023.

Previous 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.

Current wording

Loan interest income decreased by $256,000, or 5.9%, to $4.1 million for the six months ended December 31, 2024 as compared to $4.4 million for the six months ended December 31, 2023, due to a decrease in the average balance of the loan portfolio of $18.6 million, or 9.5%, which was offset by an increase in the average yield on loans of 19 basis points. The average balance of the loan portfolio decreased by $18.6 million, or 9.5%, to $177.7 million for the six months ended December 31, 2024 from $196.3 million for the six months ended December 31, 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 19 basis points from 4.46% for the six months ended December 31, 2023 to 4.65% for the six months ended December 31, 2024 as a result of higher interest rates.

Previous 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.

Current wording

Non-interest income decreased by $31,000 to $374,000 for the six months ended December 31, 2024 from $405,000 for the six months ended December 31, 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

Non-interest expenses were $1.6 million for the three months ended September 30, 2024 compared to $1.5 million for the three months ended September 30, 2023. The increase was primarily related to an increase in salaries and employee benefits and occupancy and equipment expenses related to the new branch which opened in January 2024.

Current wording

Non-interest expenses were $3.1 million for the six months ended December 31, 2024 compared to $3.0 million for the six months ended December 31, 2023. The increase was primarily related to an increase in salaries and employee benefits and occupancy and equipment expenses related to a new branch which opened in Brookfield, Wisconsin during January 2024.

Previous 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.

Current wording

Provision for Income Taxes. Income tax expense was $42,000 for the six months ended December 31, 2024, a decrease of $130,000, as compared to income tax expense of $172,000 for the six months ended December 31, 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 six months ended December 31, 2023.

Previous wording

When we acquire real estate as a result of foreclosure, the real estate is classified as real estate owned. Assets acquired through, or in lieu of, loan foreclosure are held for sale and are initially recorded at fair value less estimated 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 expenses from foreclosed assets. Costs relating to the development and improvement of the property, however, are capitalized to the extent of estimated fair value less estimated costs to sell.

Current wording

When we acquire real estate as a result of foreclosure, the real estate is classified as real estate owned. Assets acquired through, or in lieu of, loan foreclosure are held for sale and are initially recorded at fair value less estimated 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 expenses from

Previous 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.

Current wording

Non-performing assets include other real estate owned of $1.4 million, at December 31, 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

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 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.

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 December 31, 2024, we had a $75.7 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 December 31, 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 $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.

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 $1.1 million and $990,000 of cash provided by operating activities for the six months ended December 31, 2024 and 2023, respectively. Net cash provided by 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 $7.2 million provided by investing activities compared to $1.3 million provided by investing activities for the six months ended December 31, 2024 and 2023, respectively. Net cash used in financing activities, consisting of activity in deposit accounts and borrowings, was $2.6 million used in financing activities compared to $5.9 million being used in financing activities for the six months ended December 31, 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 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.

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 December 31, 2024, we had outstanding commitments to originate loans of $7.5 million, and $200,000 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 December 31, 2024 totaled $46.6 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.