Guys - I’m moving the INBK discussion to its own thread as it probably deserves direct attention.
Ok - background was:-
INBK knocked it out of the park with their results this time…
Q2 EPS of $0.61 beats by $0.06.
Revenue of $22.28M (+70.7% Y/Y)
Scores a hit this time after a hit and miss earnings track record. Massive bump in the share price as a result. Accelerating top line growth although bottom line EPS affected by share issuance end of 2016 (net inc increased 40%). P/E on an undemanding 14.7
First Internet (INBK)'s performance was absolutely incredible. The finance sector looks good right now especially with Interest Rates rising. If Nasdaq and tech does roll over, this has one of the lowest P/E and PEGs around and should find downside protection. Growth last Q was the fastest in history and they seem to have hit a rich vein in the public loan book.
I liked this and given the extreme valuation with high growth, loss making stocks and the increased market volatility, saw this as an opportunity to top up in a high growth, very undervalued company.
UtahChris - made a great point about:
Re: INBK, I like their numbers too but I get concerned about a story I’m telling myself about exposure to loans for retail. I mean, how many retail businesses are going to fail in the next 3 years as Amazon continues to eat their lunches? And what will happen to the value of the underlying retail property that is collateral? We had a similar discussion a few months ago re: SBNY and NYC retail, but I think it’s not unique to large metros.
Here is what I see on the books for INBK:
30-Jun-17 Amount Percent COMMERCIAL LOANS Commercial and industrial $ 110,379 6.5 % Owner-occupied commercial real estate 66,952 4 % Investor commercial real estate 10,062 0.6 % Construction 45,931 2.7 % Single tenant lease financing 747,790 44 % Public finance 179,873 10.6 % Total commercial loans 1,160,987 68.4 % CONSUMER LOANS Residential mortgage 292,997 17.3 % Home equity 33,312 2 % Trailers 94,036 5.5 % Recreational vehicles 63,514 3.7 % Other consumer loans 51,052 3 % Total consumer loans 534,911 31.5 % Net deferred loan fees, premiums and discounts 2,523 0.1 % Total loans $ 1,698,421 100 %
I assume that $750m of “single tenant lease financing” is in large part retail, right? I’ve read the press release but not their annual report recently.
I don’t think this scenario is certain but it is a risk. Do you share this concern or think it overblown? Thanks/Cheers.
My view was that
I actually didn’t necessary assume this was all retail per se. If it is then that’s a legitimate concern either from an amazonification threat or from a potential recession.
I actually took this to be a mix across office, retail, sole-trader type operations. I guess another question is whether these are hell and high water bound arrangements or triple net lease arrangements etc.
It’s certainly something to watch but I feel better about First Internet Bancorp (INBK) than I did about Bank of Internet (BOFI), Mitek (MITK) or Lending Club (LC) - which is not to say they are risk free.
In addition in case folks haven’t seen it, here’s their investor presentation showing how their quarter looked from every angle.
From the slides it seems that they have lowered their % exposure to single tenant in recent Q and in total loan book - down from 49% peak to 44%.