IF Bancorp, Inc. (IROQ): 5 FORCES Analysis [Nov-2025 Updated]

You're looking to cut through the noise and see exactly where IF Bancorp, Inc. stands in this tough 2025 banking environment. Honestly, the landscape is a tug-of-war: while the company managed a stunning 140.4% net income surge in FY2025, you can see the pressure everywhere-from suppliers demanding better funding costs to customers ready to jump ship for a better rate. We're mapping out the five forces right now, including the strategic move of the announced merger with ServBanc Holdco, so you can see the real risks and opportunities facing IF Bancorp, Inc. as we head into the next fiscal year.

IF Bancorp, Inc. (IROQ) - Porter's Five Forces: Bargaining power of suppliers

When you look at the suppliers for IF Bancorp, Inc. (IROQ), you are really looking at the sources of its funding and the providers of its essential operational backbone-technology and regulatory approval. For a regional bank, these suppliers can exert significant pressure on margins and operational flexibility.

The reliance on wholesale funding sources has definitely been a factor in IF Bancorp, Inc.'s financial structure. The borrowings figure rose to $117.4 million by December 31, 2024, indicating an increased dependence on non-deposit funding markets to support operations or loan growth. By the third quarter of fiscal year 2026, specifically at September 30, 2025, total borrowings, which include repurchase agreements, stood at $87.3 million, down from $72.9 million at June 30, 2025, showing some fluctuation in this reliance. This dynamic is set against a backdrop where core deposits, the cheaper funding source, have been under pressure; deposits decreased to $680.3 million at September 30, 2025, from $721.3 million at June 30, 2025.

The deposit environment definitely remains competitive, which forces IF Bancorp, Inc. to manage interest expense carefully to attract and retain capital. For the three months ended September 30, 2025, interest expense was $4.9 million, which was lower than the $6.1 million paid in the same period of 2024. However, the overall cost of funding is always a negotiation. Here's a quick look at the funding mix shift:

Core technology vendors hold substantial leverage over IF Bancorp, Inc. because of the high switching costs inherent in core banking systems. General industry data suggests that technology represents a significant cost item for banks, absorbing, on average, more than 10% of revenues. For IF Bancorp, Inc., with 2025 revenue at $26.46 million, this implies a substantial annual spend on technology infrastructure. The complexity of legacy systems and the risk of disruption during migration mean that vendors providing core processing or critical specialized platforms can dictate terms, as the cost and risk of moving to a new provider often outweigh the savings from negotiating lower rates with the incumbent. Banks are trying to deconstruct and decouple their cores, but that process itself relies on specialized, often proprietary, vendor expertise.

Regulators, namely the FDIC and the OCC, act as a powerful supplier of the operating license and the compliance standards that govern every facet of IF Bancorp, Inc.'s business. Their rules are non-negotiable prerequisites for operation. Still, there is movement in the relationship. In late 2025, the FDIC and OCC advanced proposals to refocus supervision, which could ease some supplier-like pressure. Specifically, they proposed a rule to clarify and narrow the definition of an "unsafe or unsound practice" and establish uniform standards for issuing Matters Requiring Attention (MRAs). This action, if finalized, aims to direct examiner attention toward material financial risks rather than process minutiae, potentially reducing subjective compliance overhead. Furthermore, the OCC has tailored expectations for community banks, such as clarifying that they do not need to conduct annual model validations.

The supplier power dynamics for IF Bancorp, Inc. can be summarized by these key leverage points:

• Wholesale funding reliance is a constant negotiation point.
• Deposit outflows increase reliance on more expensive borrowings.
• Core tech vendors benefit from high system integration costs.
• Regulators set the fundamental rules of engagement.

Finance: draft a sensitivity analysis on a 10% increase in wholesale funding costs by Friday.

IF Bancorp, Inc. (IROQ) - Porter's Five Forces: Bargaining power of customers

When you look at IF Bancorp, Inc., the bargaining power of its customers is a significant factor shaping its operational strategy, especially given the competitive landscape for community banks. Honestly, for basic banking services, the switching costs for the average retail customer are defintely low; they can move their checking or savings account with relative ease if a competitor offers a better deal.

However, the power shifts dramatically when you consider your larger, more sophisticated clients. These customers have the scale to move substantial sums, and they have demonstrated it. For instance, in the first quarter of fiscal year 2026, which ended September 30, 2025, IF Bancorp, Inc. experienced a sharp outflow of $59.3 million in deposits from a single public entity client as tax monies were distributed. That single event highlights how concentrated risk can be when dealing with large depositors.

Here's a quick look at the deposit movement around that time, showing the immediate impact of customer actions:

This pressure on the funding side is compounded by evolving customer expectations. Buyers today, both retail and commercial, are constantly shopping around. They are highly price-sensitive, always seeking the best loan rates for their mortgages or commercial needs, and, critically, the highest possible yield on their deposit accounts. This forces IF Bancorp, Inc. to manage its net interest margin (NIM) carefully. You saw the results of that pressure in the first quarter of fiscal year 2026, where net interest income rose to $6.2 million compared to $4.8 million the year prior, showing the bank is fighting hard to maintain margin in a competitive rate environment.

The digital gap is another lever customers use to exert power. Customers today demand advanced digital services-think seamless mobile account opening and sophisticated treasury management tools-that many community banks, including IF Bancorp, Inc., often struggle to offer competitively against larger institutions. The industry context shows this clearly:

• - Customer switching costs for basic banking services are generally low.
• - Large customers have significant power, as evidenced by a $59.3 million public entity deposit withdrawal in Q1 FY2026.
• - Customers demand advanced digital services that community banks often struggle to offer competitively.
• - Buyers are highly price-sensitive, constantly seeking the best loan rates and high-yield deposit accounts.

To be fair, the very high capital costs associated with switching core service providers prevent many community banks from rapidly deploying the technology customers expect, leaving them exposed to those changing expectations. If onboarding takes 14+ days for a new service, churn risk rises. Finance: draft 13-week cash view by Friday to see how liquidity can support necessary tech upgrades.

IF Bancorp, Inc. (IROQ) - Porter's Five Forces: Competitive rivalry

You're looking at the competitive landscape for IF Bancorp, Inc. (IROQ) as of late 2025, and rivalry is definitely a defining feature of this market. High rivalry exists with larger regional and national banks that have superior scale and technology budgets. These bigger players can absorb higher fixed costs and deploy capital for digital enhancements that smaller institutions like IF Bancorp, Inc. find challenging to match dollar-for-dollar.

IF Bancorp, Inc. operates in a mature, regional market, leading to intense competition for loans and deposits. The company's footprint, serving customers across seven full-service banking offices in Illinois-specifically Watseka, Danville, Clifton, Hoopeston, Savoy, and Bourbonnais-plus a loan production office in Osage Beach, Missouri, puts it right in the thick of local competition. This regional focus means every basis point on a deposit rate or every loan origination fee is fiercely contested.

Still, the company showed it could fight back effectively in the latest full fiscal year. The company's net income surged 140.4% to $4.3 million in FY2025, signaling strong internal competition despite market pressures. That's a massive jump from the prior year's $1.8 million net income, showing management could drive margin improvement even when facing industry headwinds. Book value per share finished at $24.42 as of June 30, 2025, which is a solid anchor in a competitive environment.

The most concrete evidence of this rivalry and the resulting industry consolidation is the announced merger. The announced merger with ServBanc Holdco in late 2025 is a direct strategic response to industry consolidation and rivalry. On October 29, 2025, the definitive agreement was signed for ServBanc Holdco to acquire IF Bancorp, Inc. in an all-cash transaction. This move consolidates two regional entities to create a larger competitor, which is a common reaction when rivalry pressures become too great for smaller players to manage alone.

Here's a quick look at the scale of the players involved in this late-2025 strategic move:

The competitive intensity is also reflected in the balance sheet dynamics IF Bancorp, Inc. was managing:

• Net income for FY2025 was $4.3 million.
• Total assets stood at $887.7 million at the end of FY2025.
• Net loans receivable decreased to $619.3 million by September 30, 2025.
• Deposits were $680.3 million as of September 30, 2025.
• The company reported a 140.4% surge in net income for FY2025.

The merger, which is expected to close in the first quarter of 2026, effectively removes one competitor from the immediate market while creating a slightly larger entity to compete with the national banks. IF Bancorp, Inc. has already indefinitely postponed its 2025 annual shareholder meeting because of this pending deal. Finance: draft pro-forma asset comparison for Q1 2026 by next Tuesday.

IF Bancorp, Inc. (IROQ) - Porter's Five Forces: Threat of substitutes

You're looking at the competitive landscape for IF Bancorp, Inc. (IROQ) and the substitutes for its core banking services are more potent than ever. The threat here isn't just from the bank across the street; it's from digital-first alternatives that chip away at fee income and deposit bases.

Fintech companies offer specialized, low-cost substitutes for payments, lending, and investment services. The sheer scale of the non-bank digital payment ecosystem shows where customer preference is shifting. For a regional bank like IF Bancorp, Inc., which reported total assets of $862.3 million as of September 30, 2025, these market-wide trends represent a significant challenge to its traditional revenue streams.

Here's a quick look at the scale of the digital payment and lending competition:

Money market funds and direct investment platforms substitute for traditional deposit accounts. While IF Bancorp, Inc.'s total deposits stood at $680.3 million at the end of the third quarter of fiscal year 2026 (September 30, 2025), the broader market shows a massive pool of cash sitting in MMFs, which are not FDIC insured like bank deposits. As of May 2025, total US Money Market Fund assets were about $7 trillion, compared to total bank deposits (excluding large time deposits) of approximately $15 trillion. More recently, for the six-day period ended November 25, 2025, total MMF assets reached $7.57 trillion. This shows a substantial, liquid alternative for cash management that competes directly for IF Bancorp, Inc.'s core funding base.

Online lenders and mortgage brokers bypass the traditional bank model for loan origination. IF Bancorp, Inc.'s net loans receivable were $619.3 million as of September 30, 2025. The loan origination software market, which supports these digital competitors, was valued at $6,416 million in 2025. Furthermore, in the mortgage space, the market is heavily skewed toward high-credit borrowers, with 79.6% of originations through Q2 2025 going to super-prime borrowers (scores $\ge 720$). Digital platforms are optimized to capture this prime business efficiently.

Customers are adopting mobile wallets and non-bank payment apps as substitutes for traditional bank transactions. This shift erodes interchange fee revenue and reduces the frequency of customer interaction with the bank's core platforms. You see this adoption across age groups, not just among younger clients.

• By mid-2025, 65% of US adults were using a digital wallet, up from 57% in 2024.
• Weekly in-store mobile wallet use has more than doubled year-over-year as of late 2025.
• Digital wallets accounted for 39% of US e-commerce transactions in 2024.
• Competitors like PayPal and Cash App nearly doubled their user counts, narrowing the gap in overall adoption.
• The US mobile wallet market is projected to grow at a CAGR of 13.12% from 2025 to 2032.

IF Bancorp, Inc. (IROQ) - Porter's Five Forces: Threat of new entrants

You're looking at the barriers to entry for IF Bancorp, Inc. (IROQ) in late 2025, and honestly, the hurdles for a brand-new, full-service bank are incredibly high. The regulatory environment remains a fortress.

• - Regulatory requirements and the high capital needed to secure a bank charter are substantial barriers. For instance, while there is a proposal to lower the Community Bank Leverage Ratio (CBLR) to eight percent from nine percent in late 2025, a conditionally approved de novo charter in October 2025 was still required to maintain a minimum 12% Tier 1 leverage ratio prior to opening. The historical data clearly shows this effect: only six new banks were established in 2024, following eight in 2023, a stark contrast to the 144 charter applications approved annually between 2000 and 2007. The total number of FDIC-insured institutions stood at 4,487 as of December 31, 2024.
• - The need to build customer trust and a strong reputation in a local market is a slow, high barrier. This is evidenced by the continued consolidation; respondents considering acquisition offers doubled between 2024 and 2025, rising to 12%.
• - New entrants are more likely to be specialized FinTechs that partner with, rather than compete directly against, community banks. This is the path of least resistance for tech-focused competition. Nearly two-thirds of community banks and credit unions have already partnered with at least one FinTech in the past four years. Furthermore, 40% of surveyed community banks see FinTech partnerships as a promising opportunity over the next five years.
• - High costs for cybersecurity and advanced technology implementation deter smaller, de novo bank formation. Cybersecurity is the top internal risk for 28% of community financial professionals in 2025, with technology implementation costs ranking second. To keep pace, 88% of community bank executives expect to increase tech and IT spending by at least 10% in 2025. The financial risk is also massive; the average cost of a data breach in financial services reached $6.08 million in 2024.

Here's the quick math on how these cost and regulatory factors stack up against the historical difficulty of starting a new bank:

The threat from a traditional, full-scale competitor starting from scratch is minimal, but the indirect competition from FinTechs leveraging existing charters is definitely something IF Bancorp, Inc. (IROQ) must watch. If onboarding takes 14+ days, churn risk rises, which is exactly what FinTech partners try to avoid.