2024 Journal of Community Bank Case Studies

SECOND PLACE: University of Illinois Springfield

that name meaning (Titone-Schaefer, “Every Brick”). Since then, INB has grown to include 13 branches around Central Illinois and to over $2 billion in assets. INB has also begun to expand into new markets, opening loan production offices in St. Louis, Missouri, then in Tampa and Miami, Florida. Part I: Financial Analysis

Figure 1: INB Net Operating Income (in Millions)

$10.0 $12.0 $14.0 $16.0 $18.0 $20.0

39.73%

13.25%

-11.18%

19.12%

-6.10%

$.0 $2.0 $4.0 $6.0 $8.0

2019

2020

2021

2022

2023

NOI

YoY %

Source: UBPR

Earnings Performance

For our financial analysis, we will look at various metrics, considering both year-over-year (YoY) performance using end-of-year numbers and compound annual growth rate (CAGR), when appropriate, for a five-year period. The Comptroller’s Handbook , issued by The Office of the Comptroller of the Currency (OCC), suggests that bank examiners use peer comparisons that more closely align to a bank’s business model than do the generic peer groups found on the UBPR (OCC, Earnings 2). To that end, we have created a custom peer group (CPG) for INB that considers three factors: • total assets: $1B to $3B • geography: Illinois based • asset concentration: commercial lender The resulting peer group has 25 banks compared to 511 banks in the FFIEC’s peer group 4, which only considered total assets i .

In 2023, INB posted a net operating income (NOI) of $18.4 million, a 39.7% increase from the previous year. INB has increased its NOI for four out of the past five years for a CAGR of 13.8% (UBPR). This is better than INB’s peer group, which had a five-year CAGR of 11.2% (FDIC BankFind ). To analyze this income, we can break down INB’s net operating income into interest and non-interest income and expense and see how each affects the key ratios of net interest margin (NIM) and efficiency ratio. Interest income accounts for 86.8% of INB’s gross income 1 . This is an increase over previous years, which brought it more in line with INB’s peers’ 89.9%. While INB and its peers have followed the same trend over the past five years, INB has consistently relied less on interest income than its peers: by almost 8 percentage points on average. This is part of INB’s strategy to have diverse income streams and reduce their exposure to some of the risks associated

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