The summary information presented below atDecember 31, 2019 andJune 30, 2019 and for the three and six months endedDecember 31, 2019 and 2018 is derived in part from the financial statements of TheEquitable Bank . The financial condition data atJune 30, 2019 is derived from the audited financial statements ofTEB Bancorp, Inc. The information as ofDecember 31, 2019 and for the three and six months endedDecember 31, 2019 and 2018 is derived from unaudited financial statements ofTEB Bancorp, Inc. forDecember 31, 2019 and TheEquitable Bank forDecember 31, 2018 and reflects only normal recurring adjustments that are, in the opinion of management, necessary for a fair presentation of the results for the interim period presented. The following information is only a summary, and should be read in conjunction with our audited financial statements and notes as of and for the year endedJune 30, 2019 and for the three and six months endedDecember 31, 2019 and 2018. The results of operations for the three and six months endedDecember 31, 2019 are not necessarily indicative of the results to be achieved for all of the year endingJune 30, 2020 .
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This quarterly report contains forward-looking statements, which 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," "potential," "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 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 quarterly report. The following factors, among others, could cause actual results to differ materially from the anticipated results or other expectations expressed in the forward-looking statements:
· general economic conditions, either nationally or in our market areas, that are
worse than expected;
· changes in the level and direction of loan delinquencies and write-offs and
changes in estimates of the adequacy of the allowance for loan losses;
· our ability to access cost-effective funding;
· fluctuations in real estate values and both residential and commercial real
estate market conditions;
· demand for loans and deposits in our market area;
· our ability to implement and change our business strategies;
· competition among depository and other financial institutions;
· inflation and changes in the interest rate environment that reduce our margins
and yields, our mortgage banking revenues, the fair value of financial instruments or our level of loan originations, or increase the level of defaults, losses and prepayments on loans we have made and make; 30 Table of Contents
· adverse changes in the securities or secondary mortgage markets;
· changes in laws or government regulations or policies affecting financial
institutions, including changes in regulatory fees and capital requirements;
· changes in the quality or composition of our loan or investment portfolios;
· technological changes that may be more difficult or expensive than expected, or
the failure or breaches of information technology security systems;
· the inability of third-party providers to perform as expected;
· our ability to manage market risk, credit risk and operational risk in the
current economic environment;
· our ability to enter new markets successfully and capitalize on growth
opportunities;
· our ability to successfully integrate into our operations any assets,
liabilities, customers, systems and management personnel we may acquire and our
ability to realize related revenue synergies and cost savings within expected
time frames, and any goodwill charges related thereto;
· changes in consumer spending, borrowing and savings habits;
· changes in accounting policies and practices, as may be adopted by the bank
regulatory agencies, the
and
· our ability to retain key employees; and
· changes in the financial condition, results of operations or future prospects
of issuers of securities that we own.
Critical Accounting Policies
There are no material changes to the critical accounting policies disclosed in
the Company's Annual Report on Form 10K for the year ended
Comparison of Financial Condition at
Total assets decreased$10.7 million , or 3.4%, to$301.5 million atDecember 31, 2019 from$312.2 million atJune 30, 2019 . The decrease in assets was due to a decrease of$7.4 million in net loans held for investment and a$3.5 million decrease in interest bearing deposits in banks, offset by an increase in available-for-sale securities of$1.8 million and$1.0 million in cash and cash equivalents. Cash and cash equivalents increased$1.0 million , or 18.3%, to$6.7 million atDecember 31, 2019 from$5.6 million atJune 30, 2019 . This fluctuation in cash and cash equivalents is a normal part of business operations. Net loans held for investment decreased$7.4 million , or 2.9%, to$252.5 million atDecember 31, 2019 from$259.9 million atJune 30, 2019 , primarily reflecting a decrease in one- to four-family owner occupied residential real estate loans of$13.2 million , or 10.6%, from$124.8 million atJune 30, 2019 to$111.6 million atDecember 31, 2019 . The decrease in one- to four-family owner occupied residential real estate loans resulted from loan payoffs and loan refinances during the six months ended. We currently sell the majority of the single family loans we originate. This decrease was partially offset by an increase in multifamily loans of$4.7 million , or 6.4%, to$77.9 million atDecember 31, 2019 from$73.2 million atJune 30, 2019 . 31
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Other real estate owned decreased$778,000 , or 19.1% to$3.3 million atDecember 31, 2019 from$4.1 million atJune 30, 2019 , due to the sale of four properties totaling$1.0 million , offset by two new properties added to other real estate owned totaling$137,000 .
Interest bearing deposits decreased
Available-for-sale securities increased$1.8 million , or 8.6%, to$22.3 million atDecember 31, 2019 from$20.5 million atJune 30, 2019 , due to the purchase of securities totaling$2.1 million , offset by maturities of$300,000 . Total deposits increased$14.1 million , or 6.0%, to$248.7 million atDecember 31, 2019 from$234.6 million atJune 30, 2019 . The increase was due to an increase in certificates of deposit of$8.9 million , or 10.3%, to$95.7 million atDecember 31, 2019 from$86.8 million atJune 30, 2019 . In recent periods prior to the termination of our amended Consent Order, we generally experienced certificate of deposit runoff at maturity because of our inability to pay competitive rates on deposits due to our classification as "adequately capitalized" for regulatory capital purposes, instead funding our operations with borrowings from theFederal Home Loan Bank of Chicago . Our classification as "adequately capitalized" (rather than "well-capitalized") for regulatory capital purposes restricted our ability to accept, renew or roll over brokered deposits, and further restricted us from paying interest rates on deposits that exceed 75 basis points above national rates, as posted by theFederal Deposit Insurance Corporation . Although we had received a waiver from theFederal Deposit Insurance Corporation that permitted us to use local market area rates instead of national rates as the baseline in determining interest rates we could pay on deposits, this restriction limited our ability to compete for deposits in our market area, based on interest rates, in the current market rate environment. As the amended Consent Order was terminated onJune 19, 2019 , we were able to pay competitive rates starting in the quarter endedSeptember 30, 2019 . Certificate of deposit specials were run during the last six months, contributing to the increase. Savings and Now accounts increased$1.8 million , or 2.6%, from$70.4 million atJune 30, 2019 to$72.2 million atDecember 31, 2019 . Borrowed funds, consisting solely ofFederal Home Loan Bank advances, decreased$23.7 million , or 53.6%, to$20.5 million atDecember 31, 2019 from$44.2 million atJune 30, 2019 . We have had to rely on borrowings to fund our operations in recent periods as a result of deposit runoff, described above. As we generated certificate of deposit growth during the period, the excess cash was used to repay borrowings.
Total stockholders' equity increased
Comparison of Operating Results for the Three Months Ended
General. Net income was$362,000 for the three months endedDecember 31, 2019 , compared to net loss of$47,000 for the three months endedDecember 31, 2018 . The change was primarily due to a$649,000 increase in gain on sales of mortgage loans, offset by a$220,000 increase in compensation and benefits expense, described in more detail below. Interest Income. Interest income decreased$95,000 , or 3.0%, to$3.0 million for the three months endedDecember 31, 2019 compared to$3.1 million for the three months endedDecember 31, 2018 . Interest income on loans, which is our primary source of interest income, decreased$91,000 , or 3.1%, to$2.8 million for the three months endedDecember 31, 2019 compared to$2.9 million for the three months endedDecember 31, 2018 . Our annualized average yield on loans increased three basis points to 4.53% for the three months endedDecember 31, 2019 from 4.50% for the three months endedDecember 31, 2018 , primarily due to an increase in interest income received on loans held for sale. The average balance of loans decreased$9.7 million , or 3.7%, to$250.8 million for the three months endedDecember 31, 2019 from$260.4 million for the three months endedDecember 31, 2018 . Interest Expense. Interest expense decreased$75,000 , or 11.7%, to$563,000 for the three months endedDecember 31, 2019 compared to$638,000 for the three months endedDecember 31, 2018 , due to decreases in market interest rates during the period. 32 Table of Contents Interest expense on deposits increased$102,000 , or 27.6%, to$474,000 for the three months endedDecember 31, 2019 from$371,000 for the three months endedDecember 31, 2018 . Specifically, interest expense on certificates of deposit increased$103,000 , or 29.7%, to$450,000 for the three months endedDecember 31, 2019 from$347,000 for the three months endedDecember 31, 2018 . The increase resulted from a 36 basis point increase in the annualized average rate we paid on certificates of deposit to 1.88% for the three months endedDecember 31, 2019 from 1.52% for the three months endedDecember 31, 2018 , reflecting recent increases in market interest rates. Also, a$4.2 million increase in the average balance of certificates of deposits to$95.6 million atDecember 31, 2019 from$91.4 million for the three months endedDecember 31, 2018 . Interest expense on FHLB borrowings decreased$177,000 to$89,000 for the three months endedDecember 31, 2019 from$267,000 for the three months endedDecember 31, 2018 . This decrease resulted from decreases in both the average balance of FHLB borrowings and the average rate we paid on FHLB borrowings. The average balance of borrowings decreased$24.8 million , or 56.5%, to$19.1 million for the three months endedDecember 31, 2019 from$43.8 million for the three months endedDecember 31, 2018 , and the annualized average rate we paid on borrowings decreased 55 basis points to 1.88% for the three months endedDecember 31, 2019 from 2.43% for the three months endedDecember 31, 2018 . As described above, in the past, we have relied on borrowings to fund our operations as a result of certificate of deposit runoff, but in the current quarter we generated more certificates of deposit and were able to reduce our borrowings. Net Interest Income. Net interest income decreased 20,000, or 0.8%, and was$2.5 million for each of the three months endedDecember 31, 2019 and 2018, primarily as a result of higher rates paid on certificates of deposit, as discussed above. In addition, our net interest rate spread increased by one basis point to 3.42% for the three months endedDecember 31, 2019 from 3.41% for the three months endedDecember 31, 2018 , and our net interest margin increased by seven basis points to 3.54% for the three months endedDecember 31, 2019 from 3.47% for the three months endedDecember 31, 2018 , due to changes in market interest rates. Provision for Loan Losses. Provisions for loan losses are charged to operations to establish an allowance for loan losses at a level necessary to absorb known and inherent losses in our loan portfolio that are both probable and reasonably estimable at the date of the financial statements. In evaluating the level of the allowance for loan losses, management analyzes several qualitative loan portfolio risk factors including, but not limited to, management's ongoing review and grading of loans, facts and issues related to specific loans, historical loan loss and delinquency experience, trends in past due and non-accrual loans, existing risk characteristics of specific loans or loan pools, changes in the nature, volume and terms of loans, the fair value of underlying collateral, changes in lending personnel, current economic conditions and other qualitative and quantitative factors which could affect potential credit losses. See "Summary of Significant Accounting Policies" for additional information. After an evaluation of these factors, we recorded no provision for loan losses for the three months endedDecember 31, 2019 or 2018. Our allowance for loan losses was$1.3 million atDecember 31, 2019 andSeptember 30, 2019 . The allowance for loan losses to total loans was 0.50% atDecember 31, 2019 and 0.51% atSeptember 30, 2019 , while the allowance for loan losses to non-performing loans was 113.45% atDecember 31, 2019 and 84.86% atSeptember 30, 2019 . To the best of our knowledge, we have recorded all loan losses that are both probable and reasonable to estimate atDecember 31, 2019 . However, future changes in the factors described above, including, but not limited to, actual loss experience with respect to our loan portfolio, could result in material increases in our provision for loan losses. In addition, the WDFI and theFederal Deposit Insurance Corporation , as an integral part of their examination process, will periodically review our allowance for loan losses, and as a result of such reviews, we may have to adjust our allowance for loan losses. Non-interest Income. Non-interest income increased$722,000 , or 124.4%, to$1.3 million for the three months endedDecember 31, 2019 compared to$581,000 for the three months endedDecember 31, 2018 . Gain on sale of mortgage loans (consisting solely of one- to four-family residential real estate loans) increased$649,000 , or 225.9%, to$937,000 for the three months endedDecember 31, 2019 compared to$287,000 for the three months endedDecember 31, 2018 . 33
Table of Contents
We originated for sale
Non-interest Expenses. Non-interest expenses increased$294,000 , or 9.5%, to$3.4 million for the three months endedDecember 31, 2019 from$3.1 million for the three months endedDecember 31, 2018 . Compensation and benefits expense increased$220,000 , or 12.1%, to$2.0 million for the three months endedDecember 31, 2019 from$1.8 million for the three months endedDecember 31, 2018 , as we experienced an increase in payroll expense due to higher loan officer compensation as a result of increased loan origination volume. The increase in compensation and benefits expense was offset by a decrease inFDIC assessment costs of$67,000 , or 56.6%, to$51,000 for the three months endedDecember 31, 2019 from$118,000 for the three months endedDecember 31, 2018 , as we are no longer subject to the Amended Order and ourFDIC insurance premium decreased, our accrual has also decreased to$58,400 for the three months endedDecember 31, 2019 from$122,250 for the three months endedDecember 31, 2018 . Other expenses increased$76,000 or 39.5% to$269,000 for the three months endedDecember 31, 2019 compared to$193,000 as ofDecember 31, 2018 due to increased costs of being a public company.
Income Tax Expense. We recognized no income tax expense or benefits for the
three months ended
Average Balance Sheets
The following table sets forth average balance sheets, average yields and costs, and certain other information at and for the periods indicated. No tax-equivalent yield adjustments have been made, as the effects would be immaterial. All average balances are daily average balances. Non-accrual loans were included in the computation of average balances. The yields set forth below include the effect of deferred fees, discounts, and premiums that are amortized or accreted to interest income or interest expense. Loan balances exclude loans held for sale. 34 Table of Contents For the Three Months Ended December 31, 2019 2018 Average Average Average Average Outstanding Yield/ Outstanding Yield/ Balance Interest Rate (1) Balance Interest Rate (1) Interest-earning assets: Loans$ 250,759,871 $ 2,837,250
4.53 %
21,804,777 152,457
2.80 % 20,954,682 149,603 2.86 %
1,115,516 15,124
5.42 % 2,032,571 27,527 5.42 % Other
3,805,111 13,881
1.46 % 1,556,801 7,503 1.93 % Total interest-earning assets 277,485,275 3,018,712 4.35 % 284,965,166 3,113,288 4.37 % Non-interest-earning assets
26,152,436 20,536,732 Total assets$ 303,637,711 $ 305,501,898 Interest-bearing liabilities: Demand deposits$ 49,897,476 $ 7,554 0.06 %$ 46,495,773 $ 7,066 0.06 % Savings and NOW deposits 76,457,585 16,166 0.08 % 83,226,423 17,193 0.08 % Certificates of deposit 95,616,025 449,996 1.88 % 91,366,799 347,030 1.52 % Total interest-bearing deposits 221,971,086 473,716 0.85 % 221,088,995 371,289 0.67 % Borrowings 19,056,846 89,376 1.88 % 43,811,900 266,593 2.43 % Total interest-bearing liabilities 241,027,932 563,092
0.93 % 264,900,895 637,882 0.96 % Non-interest-bearing liabilities 37,239,268
26,734,991 Total liabilities 278,267,200 291,635,886 Total equity 25,370,511 13,867,012 Total liabilities and equity$ 303,637,711 $ 305,502,898 Net interest income$ 2,455,620 $ 2,475,406 Net interest rate spread (2) 3.42 % 3.41 % Net interest-earning assets (3)$ 36,457,343 $ 20,064,271 Net interest margin (4) 3.54 % 3.47 % Average interest-earning assets to interest-bearing liabilities 115.13 % 107.57 %
--------------------------------------------------------------------------------
(1) Annualized
(2) Net interest spread represents the difference between the weighted average
yield on interest-earning assets and the weighted average rate of
interest-bearing liabilities.
(3) Net interest-earning assets represent total interest-earning assets less
total interest-bearing liabilities.
(4) Net interest margin represents net interest income divided by average total
interest-earning assets.
Comparison of Operating Results for the Six Months Ended
General. Net income was$930,000 for the six months endedDecember 31, 2019 , compared to net loss of$187,000 for the six months endedDecember 31, 2018 . The change was primarily due to a$1.6 million increase in gain on sales of mortgage loans, offset by a$550,000 increase in compensation and benefits expense, described in more detail below. Interest Income. Interest income decreased$85,000 , or 1.4%, and was$6.1 million for the six months endedDecember 31, 2019 and$6.2 million for the six months endedDecember 31, 2018 . Interest income on loans, which is our primary source of interest income, decreased$98,000 , or 1.7%, to$5.8 million for the six months endedDecember 31, 2019 compared to$5.9 million for the six months endedDecember 31, 2018 . Our annualized average yield on loans increased seven basis points to 4.55% for the six months endedDecember 31, 2019 from 4.48% for the six months endedDecember 31, 2018 , primarily due to an increase in interest income received on loans held for sale. The average balance of loans decreased$8.1 million , or 3.1%, to$253.5 million for the six months endedDecember 31, 2019 from$261.6 million for the six months endedDecember 31, 2018 . 35
Table of Contents
Interest Expense. Interest expense remained relatively
unchanged, decreasing
Interest expense on deposits increased$211,000 , or 29.1%, to$934,000 for the six months endedDecember 31, 2019 from$723,000 for the six months endedDecember 31, 2018 . Specifically, interest expense on certificates of deposit increased$213,000 , or 31.6%, to$887,000 for the six months endedDecember 31, 2019 from$674,000 for the six months endedDecember 31, 2018 . The increase resulted from a 44 basis point increase in the annualized average rate we paid on certificates of deposit to 1.88% for the six months endedDecember 31, 2019 from 1.44% for the six months endedDecember 31, 2018 , reflecting recent increases in market interest rates. The increase was also due to an increase in the average balance of certificates of deposit, which increased$520,000 , or 0.6%, to$94.4 million for the six months endedDecember 31, 2019 from$93.8 million for the six months endedDecember 31, 2018 . Interest expense on FHLB borrowings decreased$215,000 to$293,000 for the six months endedDecember 31, 2019 from$508,000 for the six months endedDecember 31, 2018 . This decrease resulted from decreases in both the average balance of FHLB borrowings and the average rate we paid on FHLB borrowings. The average balance of borrowings decreased$16.8 million , or 38.5%, to$26.8 million for the six months endedDecember 31, 2019 from$43.6 million for the six months endedDecember 31, 2018 , and the annualized average rate we paid on borrowings decreased 14 basis points to 2.19% for the six months endedDecember 31, 2019 from 2.33% for the six months endedDecember 31, 2018 . As described above, in the past, we have relied on borrowings to fund our operations as a result of certificate of deposit runoff, but in the current period we generated more certificates of deposit and were able to reduce our borrowings. Net Interest Income. Net interest income decreased$81,000 , or 1.6%, to$4.9 million for the six months endedDecember 31, 2019 from$5.0 million for the six months endedDecember 31, 2018 , primarily as a result of higher rates paid on certificates of deposit, as discussed above. In addition, our net interest rate spread decreased by six basis points to 3.37% for the six months endedDecember 31, 2019 from 3.43% for the six months endedDecember 31, 2018 , and our net interest margin increased by one basis point to 3.50% for the six months endedDecember 31, 2019 from 3.49% for the six months endedDecember 31, 2018 , due to changes in market interest rates. Provision for Loan Losses. Provisions for loan losses are charged to operations to establish an allowance for loan losses at a level necessary to absorb known and inherent losses in our loan portfolio that are both probable and reasonably estimable at the date of the financial statements. In evaluating the level of the allowance for loan losses, management analyzes several qualitative loan portfolio risk factors including, but not limited to, management's ongoing review and grading of loans, facts and issues related to specific loans, historical loan loss and delinquency experience, trends in past due and non-accrual loans, existing risk characteristics of specific loans or loan pools, changes in the nature, volume and terms of loans, the fair value of underlying collateral, changes in lending personnel, current economic conditions and other qualitative and quantitative factors which could affect potential credit losses. See "Summary of Significant Accounting Policies" for additional information. After an evaluation of these factors, we recorded no provision for loan losses for the six months endedDecember 31, 2019 or 2018. Our allowance for loan losses was$1.3 million atDecember 31, 2019 andJune 30, 2019 . The allowance for loan losses to total loans was 0.50% atDecember 31, 2019 and 0.50% atJune 30, 2019 , while the allowance for loan losses to non-performing loans was 113.45% atDecember 31, 2019 and 84.86% atJune 30, 2019 . To the best of our knowledge, we have recorded all loan losses that are both probable and reasonable to estimate atDecember 31, 2019 . However, future changes in the factors described above, including, but not limited to, actual loss experience with respect to our loan portfolio, could result in material increases in our provision for loan losses. In addition, the WDFI and theFederal Deposit Insurance Corporation , as an integral part of their examination process, will periodically review our allowance for loan losses, and as a result of such reviews, we may have to adjust our allowance for loan losses. Non-interest Income. Non-interest income increased$1.6 million , or 139.2%, to$2.8 million for the six months endedDecember 31, 2019 compared to$1.2 million for the six months endedDecember 31, 2018 . Gain on sale of mortgage loans (consisting solely of one- to four-family residential real estate loans) increased$1.6 million , or 251.8%, to$2.2 million for the six months endedDecember 31, 2019 compared to$622,000 for the six months endedDecember 31 , 36 Table of Contents
2018. We originated for sale
Non-interest Expenses. Non-interest expenses increased$445,000 , or 7.0%, to$6.8 million for the six months endedDecember 31, 2019 from$6.4 million for the six months endedDecember 31, 2018 . Compensation and benefits expense increased$550,000 , or 15.1%, to$4.2 million for the six months endedDecember 31, 2019 from$3.6 million for the six months endedDecember 31, 2018 , as we experienced an increase in payroll expense due to higher loan officer compensation as a result of increased loan origination volume. The increase in compensation and benefits expense was offset by a decrease inFDIC assessment costs of$213,000 , or 89.9%, to$24,000 for the six months endedDecember 31, 2019 from$237,000 for the six months endedDecember 31, 2018 , as a result of$79,000 in Small Bank Assessment Credits from theFDIC . Additionally, as we are no longer subject to the Amended Order and ourFDIC insurance premium decreased, our accrual has also decreased to$118,400 for the six months endedDecember 31, 2019 from$244,500 for the six months endedDecember 31, 2018 . Other expenses increased$118,000 or 30.5% to$506,000 for the six months endedDecember 31, 2019 compared to$388,000 as ofDecember 31, 2018 due to increased costs of being a public company. Income Tax Expense. We recognized no income tax expense or benefits for the six months endedDecember 31, 2019 and for the six months endedDecember 31, 2018 due to a full valuation allowance being recorded against the Company's deferred tax assets. Average Balance Sheets The following table sets forth average balance sheets, average yields and costs, and certain other information at and for the periods indicated. No tax-equivalent yield adjustments have been made, as the effects would be immaterial. All average balances are daily average balances. Non-accrual loans were included in the computation of average balances. The yields set forth below include the effect of deferred fees, discounts, and premiums that are amortized or accreted to interest income or interest expense. Loan balances exclude loans held for sale. 37 Table of Contents For the Six Months Ended December 31, 2019 2018 Average Average Average Average Outstanding Yield/ Outstanding Yield/ Balance Interest Rate (1) Balance Interest Rate (1) Interest-earning assets: Loans$ 253,519,689 $ 5,761,686
4.55 %
21,324,670 299,777
2.81 % 20,932,840 296,710 2.83 %
1,372,469 31,303
4.56 % 2,020,645 49,173 4.87 % Other
4,527,447 41,118
1.82 % 1,410,023 13,355 1.89 % Total interest-earning assets 280,744,275 6,133,884 4.37 % 286,003,694 6,219,372 4.35 % Non-interest-earning assets
26,150,138 19,995,317 Total assets$ 306,894,413 $ 305,999,011 Interest-bearing liabilities: Demand deposits$ 48,951,864 $ 14,289 0.06 %$ 46,597,127 $ 14,012 0.06 % Savings and NOW deposits 75,708,873 32,303 0.09 % 83,024,688 34,907 0.08 % Certificates of deposit 94,358,720 887,360 1.88 % 93,838,349 674,405 1.44 % Total interest-bearing deposits 219,019,457 933,952 0.85 % 223,460,164 723,324 0.65 % Borrowings 26,834,247 293,355 2.19 % 43,605,520 508,032 2.33 % Total interest-bearing liabilities 245,853,704 1,227,307
1.00 % 267,065,684 1,231,356 0.92 % Non-interest-bearing liabilities 35,964,495
24,945,311 Total liabilities 281,818,199 292,010,995 Total equity 25,076,214 13,988,016 Total liabilities and equity$ 306,894,413 $ 305,999,011 Net interest income$ 4,906,577 $ 4,988,016 Net interest rate spread (2) 3.37 % 3.43 % Net interest-earning assets (3)$ 34,890,571 $ 18,938,010 Net interest margin (4) 3.50 % 3.49 % Average interest-earning assets to interest-bearing liabilities 114.19 % 107.09 %
--------------------------------------------------------------------------------
(1) Annualized
(2) Net interest spread represents the difference between the weighted average
yield on interest-earning assets and the weighted average rate of
interest-bearing liabilities.
(3) Net interest-earning assets represent total interest-earning assets less
total interest-bearing liabilities.
(4) Net interest margin represents net interest income divided by average total
interest-earning assets.
Liquidity and Capital Resources
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 theFederal Home Loan Bank of Chicago and fromU.S. Bank . AtDecember 31, 2019 , we had a$125.8 million line of credit with theFederal Home Loan Bank of Chicago , and had$20.5 million of borrowings outstanding as of that date. We also had a$5.0 million line of credit withU.S. Bank , with no borrowings outstanding as of that date. While maturities and scheduled amortization of loans and securities are predictable sources of funds, deposit flows and loan prepayments are greatly influenced by general interest rates, economic conditions, and competition. Our most liquid assets are cash and short-term investments including interest-bearing demand deposits. The levels of these assets are dependent on our operating, financing, lending, and investing activities during any given period. 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$2.7 million for the six months endedDecember 31, 2019 and$3.2 million for the six months endedDecember 31, 2018 . Net cash provided by investing activities, which consists primarily of net receipts on disbursements for loan originations and the purchase of securities, offset by 38 Table of Contents principal collections on loans, and proceeds from maturing securities and pay downs on securities, was$10.9 million and net cash used in investing activities was$69,000 for the six months endedDecember 31, 2019 and the six months endedDecember 31, 2018 , respectively. Net cash used in financing activities, consisting of activity in deposit accounts and borrowings, was$12.5 million and$3.8 million for the six months endedDecember 31, 2019 and 2018, respectively. We are committed to maintaining a strong liquidity position. We monitor our liquidity position on a daily basis. We anticipate that we will have sufficient funds to meet our current funding commitments. Based on our deposit retention experience, current pricing strategy and regulatory restrictions, we anticipate that a substantial portion of maturing time deposits will be retained, and that we can supplement our funding with borrowings in the event that we allow these deposits to run off at maturity.
At
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