Breaking Down IF Bancorp, Inc. (IROQ) Financial Health: Key Insights for Investors

You're looking at IF Bancorp, Inc. (IROQ) and wondering if the recent surge in profitability is sustainable, a fair question given the regional banking landscape. Honestly, the numbers from the 2025 fiscal year are defintely compelling: the company reported a net income of $4.3 million and diluted earnings per share (EPS) of $1.37, marking a massive 140.4% jump in net income from the prior year, primarily driven by better net interest margins (the profit a bank makes from lending versus what it pays on deposits). But here's the quick math on the near-term risk: while net interest income for the quarter ended September 30, 2025, was strong at $6.2 million, total assets dropped to $862.3 million from $887.7 million just three months earlier, largely due to a dip in deposits. So, you have a bank with a great profitability story right now, but one that is still navigating the challenge of deposit retention and a softening noninterest income stream, which is why we need to dig into their strategic alliance with ServBank and what it means for their deposit base going forward.

Revenue Analysis

You need to know where IF Bancorp, Inc. (IROQ) makes its money, because in banking, the quality of revenue is everything. The direct takeaway is that in the 2025 fiscal year, the company delivered strong top-line growth, with total revenue hitting $26.46 million, an impressive year-over-year increase of 19.82% from the previous year's $22.08 million.

The primary revenue stream, by a significant margin, is Net Interest Income (NII)-the difference between what the bank earns on loans and investments (Interest Income) and what it pays out on deposits and borrowings (Interest Expense). For the fiscal year ended June 30, 2025, NII was $20.8 million, up from $17.7 million the year prior. That's the engine of the business, and it's running hotter.

Primary Revenue Sources and Segment Contribution

IF Bancorp, Inc., as a savings and loan holding company for Iroquois Federal Savings and Loan Association, primarily generates Interest Income from its loan portfolio. This includes one-to-four-family residential mortgage loans, multi-family mortgage loans, commercial real estate loans (including farm loans), and consumer loans. The total gross Interest Income for FY 2025 was $43.4 million.

Non-Interest Income is the second, smaller but growing, piece of the pie. Here's the quick math for the 2025 fiscal year:

The Non-Interest Income of $5.66 million is a defintely important component to watch, as it diversifies the revenue base away from pure interest rate risk. This income comes from several fee-based activities:

• Mortgage banking income and gain on sale of loans.
• Customer service fees.
• Insurance and brokerage commissions.

Analysis of Growth and Shifting Trends

The overall 19.82% revenue growth for FY 2025 is a strong signal. This was largely driven by an improved net interest margin (NIM), which means the company did a better job managing its funding costs relative to its lending returns. Honestly, improving NIM in a stable interest rate environment, as noted in the August 2025 earnings report, is a sign of efficient management. That's a good sign for profitability.

The Non-Interest Income segment also showed significant momentum, growing by 30.4% in the first half of fiscal year 2025 compared to the prior year period, primarily on gains in mortgage banking income and brokerage commissions. However, the most recent quarterly data (Q1 FY2026, ended September 30, 2025) shows a softening of this segment, with Noninterest Income decreasing to $1.1 million from $1.4 million in the year-ago quarter, partly due to a loss on securities sales. This suggests that while core lending is strong, the fee-based income can be volatile. It's a trend that requires close monitoring, but still, the core business is solid.

For a deeper dive into the strategic direction underpinning these numbers, you should review the Mission Statement, Vision, & Core Values of IF Bancorp, Inc. (IROQ).

Profitability Metrics

You need to know if IF Bancorp, Inc. (IROQ) is turning its assets into real profit, and the short answer for Fiscal Year 2025 (FY2025) is a definitive yes-profitability surged, driven by a recovering interest rate spread. The company reported a net income of $4.3 million for the year ended June 30, 2025, which is a massive 140.4% increase from the prior fiscal year.

For a bank, we look beyond the traditional gross profit (which doesn't exist) and focus on the core spread and operational efficiency. Here's the quick math on their key margins based on their total operating revenue of $25.7 million for FY2025 (Net Interest Income plus Noninterest Income):

• Gross Profit Margin (Net Interest Margin on Total Operating Revenue): The core spread, or Net Interest Income, was $20.8 million, resulting in a margin of approximately 80.93%. This shows the vast majority of their income still comes from the classic banking model: lending money at a higher rate than they borrow it.
• Operating Profit Margin (Pre-Provision Net Revenue Margin): This figure isolates core operational performance before factoring in credit losses or taxes. With Pre-Provision Net Revenue (PPNR) at $5.2 million, the margin stands at about 20.23%. This tells me the non-interest expense of $20.5 million is substantial but manageable against their total operating income.
• Net Profit Margin: The final takeaway is a strong 16.73%. For every dollar of operating revenue, IF Bancorp, Inc. kept about 17 cents as net profit.

Trends and Operational Efficiency

The trend is the key story here. The jump in net income was primarily due to an improved net interest margin (NIM), the spread between interest earned on loans and paid on deposits. Management has been successful in repricing their loan portfolio and managing funding costs, which is defintely a win in a difficult deposit environment.

Operational efficiency, measured by the cost management reflected in the PPNR margin, still has room for improvement. While the Net Interest Income rose to $20.8 million from $17.7 million in the prior year, noninterest expense also increased to $20.5 million from $19.7 million. The increase in operating costs slightly compressed the PPNR margin, but the significant boost came from a $701,000 credit for credit losses, a massive swing from a provision in the prior year, indicating strong credit quality and risk management in FY2025.

Industry Comparison: Where IROQ Stands

When we stack IF Bancorp, Inc. against its regional bank peers, its profitability metrics are competitive, especially considering the sector's recent challenges. Regional banks are expected to see double-digit annual earnings growth, specifically in the mid-to-high teens, for 2025. IF Bancorp, Inc.'s 140.4% net income growth for FY2025 far outpaces this industry expectation, though this is off a smaller base.

The industry average for Return on Equity (ROE) was around 11% in the third quarter of 2024. IF Bancorp, Inc.'s profitability is strong enough to warrant a deeper look at its capital structure and shareholder returns. For a detailed view on who is backing this performance, you should check out Exploring IF Bancorp, Inc. (IROQ) Investor Profile: Who's Buying and Why?

Here's a quick comparison of the key profitability drivers:

Debt vs. Equity Structure

You're looking at IF Bancorp, Inc. (IROQ)'s balance sheet, and the first thing to understand is that a bank's debt structure is fundamentally different from a manufacturer's. Banks use deposits and other borrowings as their primary funding source, which is why a higher debt-to-equity ratio (D/E) is normal here. The key takeaway for IF Bancorp, Inc. is that its reliance on debt financing has increased sharply in the near-term, moving it well above the regional bank average.

For the fiscal year ended June 30, 2025, IF Bancorp, Inc.'s total stockholders' equity stood at approximately $81.8 million. Total borrowings, which include repurchase agreements, were $72.9 million at that time. By the end of the next quarter on September 30, 2025, total equity had edged up to $84.5 million, but total borrowings jumped significantly to $87.3 million. This shift shows a clear, recent move toward debt-based funding.

• Total Borrowings (Debt, June 30, 2025): $72.9 million
• Stockholders' Equity (June 30, 2025): $81.8 million
• Long-Term Debt (September 2025): Approximately $69.12 million

Here's the quick math on leverage: The Debt-to-Equity (D/E) ratio for IF Bancorp, Inc. at the close of the 2025 fiscal year was 89.1% (or 0.891). That was already higher than the average D/E for the 'Banks - Regional' industry, which sits around 50% (or 0.5) as of November 2025. But honestly, the more important number is the recent spike: the D/E ratio hit 160.7% (or 1.607) in September 2025, which is a major jump in leverage. This is still within an acceptable range for a bank, but it signals a higher risk profile compared to peers.

The recent increase in leverage is largely tied to a strategic funding shift. The company's Federal Home Loan Bank (FHLB) advances, a common form of secured borrowing for banks, rose to $69.12 million at September 30, 2025, up from $54.12 million just three months prior. This is how the company balances its funding: when deposit flows slow down-deposits actually decreased in the first quarter of fiscal year 2026-they use institutional debt like FHLB advances to fund loan growth and operations. What this estimate hides is the cost of that new debt in the current interest rate environment, which can pressure their net interest margin.

You should also know that the long-term financing strategy is now overshadowed by a definitive merger agreement. ServBanc Holdco, Inc. is set to acquire IF Bancorp, Inc. for approximately $89.8 million in cash, or $27.20 per share, with the deal expected to close in the first quarter of 2026. This means the immediate risk of a long-term debt issuance or a major equity dilution is low, as the focus shifts to the cash-out transaction. For a deeper dive into the shareholder base impacted by this merger, you might want to read Exploring IF Bancorp, Inc. (IROQ) Investor Profile: Who's Buying and Why?

Liquidity and Solvency

You're looking at IF Bancorp, Inc. (IROQ)'s financial stability, and the most recent data from the quarter ended September 30, 2025, shows a classic regional bank balancing deposit volatility with strategic funding. The direct takeaway is this: while the core liquidity ratio is solid at 25.0% of total assets, the significant quarter-over-quarter drop in cash and deposits is a trend that requires close monitoring.

Honestly, for a bank, the traditional current and quick ratios are almost defintely misleading because of how a bank's balance sheet works-deposits are current liabilities, but most loans are long-term assets. Still, we calculate them to understand the immediate cash-to-short-term-debt position.

Here's the quick math for the quarter ended September 30, 2025, using a proxy for current assets (Cash and Investment Securities) against short-term funding (Deposits and Total Borrowings):

• Current Ratio (Proxy): Approximately 0.26 ($197.8 million / $767.6 million).
• Quick Ratio (Proxy): Approximately 0.01 ($8.0 million / $767.6 million).

These low numbers are normal for a bank; the assets that generate income (loans) are less liquid than the liabilities (deposits). What matters more is the bank's internal Liquidity Ratio, which management reported averaged 25.0% of total assets for the quarter ended September 30, 2025, confirming a sufficient buffer against unexpected needs.

Working Capital and Funding Shifts

The real story in the near-term liquidity picture is the shift in funding. Working capital, in the banking sense, is under pressure from deposit outflows. From June 30, 2025, to September 30, 2025, cash and cash equivalents dropped sharply, falling from $20.1 million to just $8.0 million-a $12.1 million decrease. This is a substantial draw on the most liquid asset.

The core reason? Deposits decreased by $41.0 million in the quarter, largely due to a seasonal withdrawal of approximately $59.3 million in public entity tax-collection funds. To fill that gap and fund the balance sheet, IF Bancorp, Inc. increased its total borrowings, including repurchase agreements, from $72.9 million to $87.3 million in the same period. This is a clear trade-off: replacing low-cost, albeit volatile, deposits with higher-cost borrowings.

Cash Flow Statement Overview

Looking at the cash flow statement for the three months ended September 30, 2025, shows this liquidity pressure in motion:

• Operating Cash Flow: Net cash used in operating activities was $(539,000), a swing from the $2.2 million provided in the same quarter last year. This is a minor negative, but it's a trend we don't want to see continue.
• Investing Cash Flow: This was primarily driven by proceeds from the sales and maturities of available-for-sale securities, which helped offset new loan originations and security purchases. In short, they were selling some liquid assets to fund new loans and investments.
• Financing Cash Flow: The major factor here was the net outflow from the deposit decrease, which was partially mitigated by the increase in Federal Home Loan Bank (FHLB) advances and other borrowings. The financing side is where the deposit volatility hits hardest.

The key risk here is the reliance on wholesale funding (borrowings) to replace lost deposits, which can compress the net interest margin. Still, the increase in stockholders' equity to $84.5 million at September 30, 2025, from $81.8 million at June 30, 2025, does provide a solid capital base to manage these funding shifts. For a deeper dive into who is betting on this capital base, you should read Exploring IF Bancorp, Inc. (IROQ) Investor Profile: Who's Buying and Why?

Finance: Track the cost of new borrowings versus the interest expense savings from the lost deposits in the next earnings report to confirm the margin impact.

Valuation Analysis

You're looking at IF Bancorp, Inc. (IROQ) right now, and the critical question isn't just about its past performance-it's about the near-term ceiling set by a definitive merger agreement. The direct takeaway is this: the stock is trading at a discount to its agreed-upon cash acquisition price, which fundamentally changes the risk-reward calculation for a short-term investor.

The company's valuation metrics, while solid for a regional bank, are now secondary to the announced acquisition by ServBanc Holdco, Inc. for $27.20 per share in cash, announced on October 30, 2025. Your potential return is now largely a function of the deal closing, not organic growth.

Is IF Bancorp, Inc. Overvalued or Undervalued?

Based on traditional metrics, IF Bancorp, Inc. looks reasonably valued to slightly undervalued, especially when you consider its Price-to-Book (P/B) ratio. However, the merger price of $27.20 per share is the true near-term valuation anchor. With the stock trading around $25.96 as of November 21, 2025, there's a clear, though small, arbitrage opportunity of about $1.24 per share if the deal closes as planned.

Here's the quick math on the core ratios using the latest available data, mostly from the fiscal year ended June 30, 2025:

• Price-to-Earnings (P/E): The trailing twelve months (TTM) P/E is approximately 16.29. This is slightly above the industry average for regional banks, suggesting the market is pricing in the strong 2025 fiscal year earnings of $1.37 per share, which surged 140.4% year-over-year.
• Price-to-Book (P/B): The P/B ratio is a compelling 0.97. For a bank, a P/B below 1.0 often suggests the stock is undervalued relative to its net asset value, or book value per share of $22.66 as of late 2024. This is defintely a strong indicator.
• Enterprise Value-to-EBITDA (EV/EBITDA): This ratio stands at 27.65. For a bank, this metric can be less relevant than P/B or P/E, but this high number reflects the low EBITDA typical of financial institutions.

Stock Trends and Shareholder Returns

The stock has had a solid run over the last 12 months, moving from a 52-week low of $21.00 to a high of $26.50, demonstrating a clear upward trend that accelerated after the merger announcement. The current price of $25.96 is near the top of that range, which is expected as the market prices in the acquisition. Still, that $5.50 difference between the low and the high shows significant appreciation even before the deal was struck.

For income-focused investors, IF Bancorp, Inc. maintains a modest but reliable dividend. The annualized dividend is $0.40 per share, translating to a current dividend yield of about 1.54%. Crucially, the dividend payout ratio is a very conservative 25.04%, meaning the dividend is well-covered by earnings and sustainable. This is the kind of stability you want, even during a merger process.

Analyst Consensus and Merger Reality

The Wall Street consensus on IF Bancorp, Inc. is currently a 'Hold.' This rating, based on the one analyst covering the stock, is a rational stance given the merger. When an acquisition is announced, the stock price typically moves close to the deal price, and analysts shift from fundamental valuation to an arbitrage view, often defaulting to a 'Hold' until the deal closes.

To be fair, the real risk here isn't a market downturn; it's the deal falling apart. But given the cash nature of the transaction and the lack of major regulatory hurdles for a regional bank merger, the probability of closing looks high. Your action is simple: if you believe the deal will close, the $27.20 price tag offers a guaranteed return over the current price. You can review the strategic rationale for the company's direction by reading their Mission Statement, Vision, & Core Values of IF Bancorp, Inc. (IROQ).

Next step: Monitor the closing conditions and regulatory approvals for the ServBanc Holdco, Inc. acquisition.

Risk Factors

You've seen the strong headline numbers for IF Bancorp, Inc. (IROQ), like the fiscal year 2025 net income surge to $4.3 million, a 140.4% jump from the prior year. That's great, but a seasoned analyst knows you must map the risks that could derail that momentum. For IROQ, the near-term landscape is dominated by a major strategic move and some persistent operational pressures.

The biggest risk right now isn't just the economy; it's the execution of their announced merger. Honestly, any merger introduces a ton of integration risk.

• Execute the merger.
• Manage deposit volatility.
• Control rising noninterest expenses.

The Overriding Strategic Risk: The ServBanc Merger

The most immediate and critical factor is the definitive agreement for ServBanc Holdco, Inc. to acquire IF Bancorp, Inc. for $27.20 per share in cash. This is expected to close in the first calendar quarter of 2026, but it's far from a done deal. The primary risks here are regulatory approval and shareholder action, which is already a live issue, given the shareholder alert/investigation announced in November 2025.

If the deal collapses, the stock will defintely take a hit, and the company will have incurred significant transaction costs, plus lost management focus. The other external risk is the competitive regional banking environment, where IROQ operates in the Illinois counties of Vermilion, Iroquois, and Champaign. They must continue to compete aggressively for loans and deposits against larger institutions, even while planning for a merger.

Operational and Financial Headwinds

Even with the strong net interest income of $20.8 million for FY 2025, two internal financial risks stand out in the recent filings. First, deposit stability is a concern. In the first quarter of fiscal year 2026 (ended September 30, 2025), total deposits fell to $680.3 million from $721.3 million at June 30, 2025. This $41 million decline was largely driven by a single, large withdrawal of approximately $59.3 million by a public entity.

Here's the quick math: losing a chunk of a public entity's tax-related deposits means IROQ has to replace that funding, and they did so by increasing total borrowings to $87.3 million, up from $72.9 million at the end of the fiscal year. That's a more expensive funding source, which pressures the net interest margin (NIM) over time. Also, noninterest expense rose to $5.5 million in the recent quarter, up from $5.0 million in the comparable prior-year quarter, largely due to compensation and equipment costs.

Mitigation Strategies and Oversight

The company does have a formal structure for managing these risks. They maintain a coordinated risk oversight role through their Board and committees, where risk discussions are reported to the full Board. The merger itself is a strategic mitigation, aiming to create a stronger, more diversified entity. However, the best near-term mitigation for the deposit risk is a clear plan to replace the volatile public entity deposits with sticky, lower-cost core deposits. For a deeper dive into the valuation, check out Breaking Down IF Bancorp, Inc. (IROQ) Financial Health: Key Insights for Investors.

Growth Opportunities

You're looking at IF Bancorp, Inc. (IROQ) right now, and the most critical near-term factor isn't a new product-it's a definitive acquisition. The future growth story for current shareholders is less about organic expansion and more about a clear, high-value cash-out event.

The company's strong financial performance in the fiscal year ended June 30, 2025, set the stage for this move. Net income surged to $4.3 million, a massive 140.4% increase from the prior year, driven largely by an improved net interest margin (NIM) despite stable interest rates. That's defintely a sign of solid operational management.

The ServBanc Holdco, Inc. Strategic Partnership

The single most important strategic initiative is the announced merger with ServBanc Holdco, Inc., the holding company for Servbank, National Association. This isn't just a partnership; it's a full acquisition, essentially defining the near-term value for investors. The transaction is expected to close in the first quarter of 2026, subject to regulatory and shareholder approval.

The deal offers IF Bancorp, Inc. shareholders approximately $27.20 per share in cash, valuing the company at about $89.8 million. For investors, this cash-out price replaces traditional future revenue growth projections, providing an immediate, measurable return. Servbank is strategically expanding its franchise into central Illinois, and the merger is a way to leverage the 'Servbank platform' for enhanced technology and innovative solutions.

2025 Performance and Core Growth Drivers

Before the merger, IF Bancorp, Inc.'s growth drivers were centered on efficient balance sheet management in a challenging interest rate environment. The core business demonstrated impressive top-line growth, with total revenue hitting $26.46 million in the 2025 fiscal year, a 19.82% jump.

Here's the quick math on their operational strength:

• Net Interest Income: Increased to $20.8 million in FY 2025, up from $17.7 million the year before.
• Credit Loss Improvement: The company recorded a credit for credit losses of $701,000, a significant swing from a provision for credit losses in the prior year.
• Shareholder Value: Book value per share finished the fiscal year at $24.42, and the company continues its commitment to dividends, declaring a $0.20 cash dividend per common share in August 2025.

Near-Term Risks and Competitive Positioning

While the merger is a clear upside, you still need to be a realist. The company faced challenges with deposit outflows, notably a seasonal withdrawal of approximately $59.3 million in public tax-collection funds early in fiscal year 2026. This reliance on higher-cost funding sources to maintain the balance sheet is a common issue for regional banks in a competitive deposit environment.

The competitive advantage for IF Bancorp, Inc. has historically been its community-oriented model, operating seven full-service banking offices in Illinois and a loan production office in Missouri. However, the merger itself is the ultimate strategic move, allowing shareholders to capitalize on the value created by the recent strong financial performance. You can read more about the company's long-term philosophy here: Mission Statement, Vision, & Core Values of IF Bancorp, Inc. (IROQ).

The next step is straightforward: monitor the regulatory approval process for the ServBanc Holdco, Inc. acquisition to ensure the $27.20 per share cash value is realized as expected in early 2026. That's the key action item.