First Internet Bancorp (INBK) - Q2 results

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:

						Amount		Percent	
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	%
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%.