2024 Journal of Community Bank Case Studies

SECOND PLACE: University of Illinois Springfield

in 2023, the four years proceeding still averaged 29.7 times coverage of losses (UBPR 1). Loan Portfolio Composition Loan portfolio composition is important to any bank, but perhaps more so to INB as loans make up a large percentage—95.0% in 2023— of total assets compared to its peers (81.5%). INB’s largest loan concentration is in real estate, making up 83.7% of all loans (CPG: 64.1%). INB has comparatively lower levels of commercial and industrial (C&I) loans and individual loans than its peers. See Figure 3. It is apparent that INB’s loan portfolio is less diversified than its peers’, with a strong concentration in commercial real estate (CRE). There are several factors, though, that mitigate the risk involved with CRE. First, CRE is a very broad asset class that includes retail; office buildings; industrial, such as manufacturing,

Ultimately, a bank’s earnings should be sufficient to provide for retained earnings and to cover losses.

warehousing, and distribution; hotels; land; mixed use; and special purpose. ( The 8 Types ). Also, CRE, like all real estate, has the benefit of having collateral built in. Finally, according to Nick Newton, who is an Assistant Vice President and Portfolio Manager for INB’s Commercial department, INB makes sure they are lending to quality borrowers (Interview, 1 March). This is evidenced by INB’s Allowance for Loan and Lease Losses, which, taken as percentage of total loans

Figure 3: INB Loan Portfolio Composition

CPG

2023

2022

2021

INB

2020

2019

0%

20%

40%

60%

80%

100%

Non-Farm Non-Res

Indiv Other

4 Fam Mult Fam C & Dev Farm Ag C&I

Real Estate

1–

Source: UBPR

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