IF Bancorp’s Q4 Earnings: A Strategic Play in a Stabilizing Interest Rate Environment

In the fourth quarter of fiscal 2025, IF Bancorp delivered a striking performance, with net income surging 140.4% year-over-year to $4.3 million, driven by a 14.7% increase in net interest income and a $701,000 credit for credit losses [1]. This growth, however, must be contextualized within a broader financial landscape where interest rates have plateaued, and the Federal Reserve has signaled a cautious approach to future adjustments. For investors, the question is whether IF Bancorp’s earnings trajectory is sustainable in this environment—or if it reflects a temporary tailwind.

The answer lies in the bank’s net interest margin (NIM), which expanded from 2.10% in fiscal 2024 to 2.47% in fiscal 2025 [1]. This improvement was fueled by a $2.5 million rise in net interest income, driven by higher interest income ($43.4 million vs. $41.0 million) and lower interest expense ($22.6 million vs. $23.3 million). While the NIM remains modest compared to peers like FinWise Bancorp (10.61% in Q4 2023) [2], it reflects a strategic shift toward optimizing asset yields and managing deposit costs. This is critical in a stabilizing rate environment, where banks must rely on operational efficiency and balance sheet management rather than rate volatility to drive growth.

The Federal Reserve’s current stance—maintaining a target federal funds rate of 4.25% to 4.50% through mid-2025—provides a stable backdrop for IF Bancorp’s strategy [3]. While the Fed has hinted at gradual rate cuts by early 2027, the near-term stability allows banks to lock in higher yields on loans and securities without the risk of rapid repricing. For IF Bancorp, this means its 2.47% NIM is less exposed to compression risks than in a high-volatility environment. Moreover, the bank’s credit loss provisions turned positive in fiscal 2025, with a $701,000 credit for credit losses, suggesting improved asset quality and risk management [1]. This resilience is a key factor in earnings sustainability, as it reduces the drag from loan losses that often erode profitability during economic downturns.

Broader industry trends also support the case for IF Bancorp’s long-term viability. Deloitte projects that U.S. banks will see net interest income grow by 5.7% in 2025, with noninterest income rising to 1.5% of average assets due to fee-driven revenue streams [4]. IF Bancorp’s noninterest income increased to $4.9 million in fiscal 2025, up from $4.4 million in 2024 [1], aligning with this trend. Diversification into fee-based services—such as wealth management or digital banking—can insulate the bank from NIM fluctuations, a strategy that The Bancorp has successfully executed, with fintech partnerships boosting its revenue mix [5].

However, challenges remain. High deposit costs, a drag on NIMs across the sector, could pressure IF Bancorp’s margins if rates remain elevated for longer than anticipated. Additionally, the bank’s book value per share ($24.42) has grown, but its return on average assets (0.49%) lags behind industry benchmarks [1]. This suggests there is room for improvement in capital allocation and asset productivity.

For now, IF Bancorp’s earnings growth appears to be a calculated response to a stabilizing rate environment. By leveraging its balance sheet to capture higher yields, managing credit risk effectively, and diversifying revenue streams, the bank is positioning itself to thrive in a world where rate-driven booms are no longer the norm. As the Fed’s cautious approach continues, investors should watch for further evidence that IF Bancorp can sustain its momentum without relying on aggressive rate hikes.

Source:
[1] IF Bancorp, Inc. Announces Results for Fourth Quarter and Fiscal Year Ended June 30, 2025 [https://www.morningstar.com/news/business-wire/20250829426698/if-bancorp-inc-announces-results-for-fourth-quarter-and-fiscal-year-ended-june-30-2025]
[2] FinWise Bancorp Reports Fourth Quarter and Full Year 2023 [https://investors.finwisebancorp.com/news-releases/news-release-details/finwise-bancorp-reports-fourth-quarter-and-full-year-2023]
[3] The Fed - June 18, 2025: FOMC Projections materials [https://www.federalreserve.gov/monetarypolicy/fomcprojtabl20250618.htm]
[4] 2025 banking and capital markets outlook [https://www.deloitte.com/us/en/insights/industry/financial-services/financial-services-industry-outlooks/banking-industry-outlook.html]
[5] The Bancorp, Inc. Reports Second Quarter Financial Results [https://investors.thebancorp.com/press-releases/news-details/2025/The-Bancorp-Inc--Reports-Second-Quarter-Financial-Results/default.aspx]