First Internet Bancorp (INBK) vs BOFI

I thought this post might be of interest. INBK only has a mkt cap slightly above $100M.

Does anyone have thoughts?

Thanks, Vic…



Thanks a bunch for posting this link here.

INBK is a very well run Internet bank, with strong insider shareholding, and its trading close to book value. Its a pretty conservatively run bank and is expanding into commercial real-estate and loans.

I got myself a starter position. I will post some notes later this week.



Fantastic Anirban.

I agree with you comments and am going to do the same. I believe Internet-only banking is the wave of the future, and there is plenty of room in the marketplace alongside BOFI (and others) for this company to prosper.

I look forward to your notes, and thanks in advance for doing so.


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Fletch posted a comprehensive review of INBK on the BOFI board today.…

I am curious as to how your notes compare to his.


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Wow, Fletch has done a great job! Thanks for sharing this link.

Overall, I agree with many of his points, but since INBK is trading at about 1.2x book value I just think there’s some downside protection with good upside opportunity given the bank is scaling up its operations.

I 'm not too concerned about the high efficiency ratios. INBK’s efficiency ratio has increased because of CRE and C&I lending additions. They also hired experienced bankers, so that added to the cost base but will likely pay off in the long run. I 'm thinking the efficiency ratio will come down to mid-40%'s as operations scale up and new initiatives take hold.

The management team, in particular the SVPs for Consumer and Mortgage, CRE, and C&I have tons of experience. I also like the fact that the founder has 10% ownership. I like the skin in the game thing.

I agree their net interest margin is not great. Its net interest margin is like BAC’s and not comparable to BOFI’s or WFC’s. This is an area that I find hard to understand, but looking at historical data it seems they have operated in the 2-3% range and it appears to be slowly creeping up. They probably can apply a range of asset and liability management tools, like increase the ratio of loans to deposits ratio, adjust rates on short term deposits etc to keep tweaking the net interest margin.

The final thing is that INBK is selling for about 1.2x book value, so I 'm thinking there’s some downside protection here. BOFI is selling for 3x and I agree it deserves the rich multiple for having a well-oiled machinery but if there was a financial hiccup, I wouldn’t be surprised to see a big cut to BOFI’s multiple, while I would think INBK would may be see a somewhat less severe cut. So I think there’s some downside protection because of the 1.2x book value.

All said, I don’t think INBK is a slam dunk winner. Its too early to tell but it appears to be making the right moves and moving slowly towards scaling up its operations. Given its trading close to book value, I see there’s some downside protection, so I 'm happy to invest some now. That’s how I 'm going to be interested in keeping up with the company and learning more about it … and I will look to invest more if I 'm positively influenced by what I learn. Right now, the risk - reward tradeoff looked good enough to me to start a small investment.




Thanks for your input.

I view INBK’s valuation/risk-reward tradeoff, growth potential and infrastructure similarly which is why I also started a position earlier in the week.

Will be fun to watch this play out.


Hi Vic,

FWIW, here are my notes on INBK, based on David Becker’s recent presentation. The notes are that well organised, but I put them together to keep following the company.

I like what I see. They are doing a great job with their niche consumer lending, where they provide loans for horse trailers and RV etc. They loan these to borrowers with high FICO scores. They have dramatically grown their commercial lending business over the past 3 years, such that the loan portfolio is 40% commercial loans and 60% consumer loans. Non-perfoming assets as a percentage of total assets is very low 0.9% now, and has steadily reduced over the past 3 years. That’s testament to their conservative credit policies. It appears most of their loans are concentrated between Indiana (not surprising as they started off as an Indiana bank) and California (again not surprising since CA is the most populous state in the US). However, this does point to the opportunity of growing both their loans and deposits base as Indiana is the 15th most populous state in the US. I also like the 10% insider ownership, which I hope will align management’s interests with us shareholders.

I 'm going to keep watching this and may be add on pull back (e.g., if the shares trade at parity with book value) or add on more news post earnings etc.


Financial data as of 31 Dec 2013 (data points rounded to nearest million where applicable)

Assets: $802 million
Net of loans held for sale: $496 million
Deposits: $673 million
Tangible common equity: $86 million

Shares outstanding: 4,448,326
Book value per share: $20.44
Share price (21 March 2014): $23.14
Insider ownership: 9.4%

Balance sheet growth (dollar value in ‘000)

Year      Assets       Loans       Deposits        Equity
2010     $503,915     $302,333     $422,703        $48,897  
2011     $585,440     $331,805     $486,665        $55,423
2012     $636,367     $354,490     $530,691       $61,350
2013     $802,342     $496,166     $673,095       $90,908

  • Assets GAGR: 16.8%
  • Loans CAGR: 18.0%
  • Deposits CAGR: 16.8%
  • Equity CAGR: 23%

Both loan and deposits have grown at a healthy clip. Banks take deposits and give out loans. The deposits are cheap funding for the loans they give out, because banks pay much less interest on the deposits than they charge for the loans. Healthy loan and deposit growth is crucial.

A bank counts its loans as assets. Other assets include cash, securities (which are held instead of holding large amount of cash, effectively providing liquidity while allowing for higher interest income), and PP&E. A bank would have most of its assets tied up in “interest earning” items such as loans and securities. Cash would constitute a small fraction of its total assets.

Assets breakdown for 2013

*Net loans: $524,337 (~65%)
*Cash and cash equivalents: $56,190 (~7%)
*Securities (available for sale + others): $181,409 + $2,943 = $ 183,452 (~23%)

  • Other assets: $28,359
  • Total: $802,342

Cash held may be a bit higher than other banks. Some articles note that banks typically hold 2-5% in cash. Conservative? But will impact returns?

Liabilities breakdown for 2013

*Deposits: $673,095

  • Total debts: $34,582
  • Other liabilities: $3,757
  • Total: $711,434

Asset to equity ratio: 8.82

The bank has steadily grown its book value; about 17% growth in 3 years.

2010 $17.42
2011 $19.74
2012 $21.79
2013 $20.44

Management team

You can look up details on the management team here:

  • CEO Becker is a serial entrepreneur but he doesn’t look like a bank/finance guy.

  • CFO Whitaker has been in the job only since Jan 2013, comes with 20+ years of banking/finance experience. 15 years at PwC, with focus on institutional accounts.

  • CCO (credit officer) Roebuck joined in Aug 2012 served 22 years at national city prior to its acquisition by PNC.

  • It appears Becker has been expanding the management the c-level team, bringing in people with many years of experience in the finance and banking industry. Its likely the Becker may be eventually looking to hand over the CEO role to Whitaker and just keep the Chairman role.

  • Side note: The team of 7 senior management folks include 3 women. Have to give credit for achieving gender balance!

Loan product offerings

  1. Niche consumer lending
  • RV and horse-trailers;
  • focussed on high-quality consumers with high credit scores (average of 762; credit scores range b/w 350 and 850)
  1. Residential mortgage and home equity line of credit (HELCO)
  • national platform for origination; award winning platform
  • majority of portfolio is adjustable rate
  • variable rate HELCOs
  1. CRE
  • interim real-estate financing for construction & development, acquisition, renovation, repositioning etc of offices, retail, industrial and multi-family properties
  • residential C&D with low loan to value ratios (50 - 60%); restricted to well-known, reputed, builders
  1. Credit tenant leasing (a method of financing real estate, where landlord finances property with rent form property pledged as security. Typically, credit tenants are organisations with large footprints.)
  • lessors include Walgreen, CVS, McDonalds, KFC, Taco Bell etc.
  1. Commercial & industrial
  • business line of credit, term loans, and owner occupied real-estate to middle market companies
  • treasury management services
  • SBA (US Gov backed loans) lending
  • Asset-based lending

Loan Portfolio Analysis as of 12/31/2013 (dollars in thousands)

Gross loans held: $496,166

  1. Niche consumer lending: $107,562
  • Approximately 21.7% of gross loans held
  • RV accounts for $35,096 (~ 7.1% of total loans)
  • Horse trailers account for $68,992 (~ 13.9% of total loans)
  • remainder is noted as “others"
  1. Residential mortgage and home equity line of credit (HELCO): $191,007
  • Approximately 38.5% of gross loans held
  • Family/residential home loans account for $153,101 (~ 30.9%)
  • HELCO accounts for $37,906 (~ 7.6%)

Effectively (1) + (2) account for about 60% of the loan book (call this non-commercial loans)

  1. CRE: $58,256 (~ 11.7% of loan portfolio)

  2. Credit tenant leasing: $84,197 (~17% of loan portfolio)

  3. Commercial & industrial: $55,168 (~11.1% of loan portfolio)

Effectively (3) + (4) + (5) accounts for about 40% of the loan portfolio (call this commercial loans)

Some key takeaway messages here:
i. The niche consumer lending aspect of INBK is unique. Its a leader in lending for RV and horse trailers. They claim to lend to credit worthy borrowers, e.g., those with very high FICO scores.

ii. Significant emphasis on growing commercial banking. Its now 40% of the loan book versus 8% in 2010. They are making significant investments to grow their commercial banking.

iii. Good yield on loan portfolio of about 4.78% in 2013.

Loans by geography:

  • IN ($126.8M) and CA ($117.5M) are the largest contributors; TX is third ($30.5M). As per 2013 population stats from wiki, CA is the most populous state in the US followed by TX, NY, and FL. IN is the 15th most populous state, yet the loan portfolio is skewed significantly to IN because of the bank’s IN origins. I guess this shows opportunity for growth in other states.

  • CRE and CI loans are more or less from IN ($80.1M out of the total of $113.4M); next is TX account for a measly $8.1M. Again, see this as an opportunity for growth.

  • CTL loans are more uniformly spread

  • IN: 17%

  • TX: 17%

  • WI, CA, FL: about 8% each

Non-performing assets (NPA): these are credit facility for which interest and/or principal payment has remained unpaid past some ‘due date’. Banks usually measure these with respect to their total Asset base. Of course, lower is better, and in INBK’s case the numbers look excellent.

2010 3.36%
2011 2.29%
2012 1.62%
2013 0.90%

Deposit Composition

As of 12/31/2013:

  • CDs account for 46%
  • Non-CDs account for 54%

In the past 3 years, deposits has grown by 59%, while the overall cost of deposits has decreased by 112 bps.

Commercial lending pipeline has been grown by growth in commercial deposits.

Readings - How to analyse banks?

Foolish take on understanding banks:………


Nice Job Anirban, lots of great information.


Hi Anirban,

Thank you so much for sharing your comprehensive INBK notes with me. They are fantastic…!

FWIW, I used to audit Banks back in the day, and these metrics are indeed shaping up very nicely from my perspective.

The things that I like the best are the asset quality, their drive to diversify loans and deposits geographically and categorically, having highly invested and increasingly experienced management, a very attractive valuation, and a nationwide banking platform already in place.

I agree with you about adding shares on irrational pullbacks down to or below book value. I often wonder whether INBK’s share movement will broadly follow BOFI’s trends, but it doesn’t seem that way yet, possibly due to the low volume and low institutional trading right now. I think we need a few more quarters of solid growth, and possibly an acquisition, so INBK starts increasingly showing up on investment radar screens. I LOVE that Wellington owns 9-10% of the shares (I think), as this does bring some credibility.

Let’s keep chatting about this. It is enormously helpful to have your involvement on this given the low level of available INBK information on the Fool boards and in the market in general.

All the best,


Thanks Andy. Glad you liked the information.


Hey Vic,

Thanks for the kind word! I 'm trying to learn more about banks, and have been closely following the banks recommended by Inside Value (WFC, BAC). My knowledge is very much rudimentary, but I 'm trying to learn more … Now, had I known you use to audit banks, I would have cajoled you to do a write-up. May be, you can help a bit with understanding some of the other efficiency metrics reported by INBK. My notes are based on INBK 8-K 3/6/2014.

I think I understood most of the content. However, I couldn’t quite figure out how to interpret the Reserves/NPLs, the Reserves/Gross Loans, and NCOs/Average Loans graphs. Can you explain these? The graphs are on page 16 of the PDF?



Now, had I known you use to audit banks, I would have cajoled you to do a write-up. May be, you can help a bit with understanding some of the other efficiency metrics reported by INBK.


I am happy to do so.

Represents the percentage of bed debt reserves to non-performing (bad) loans. NPL are those for which the Bank is having, or expects to have, credit/collection issues. High reserves are usually better here, as 293% means the bank has already provided for (expensed) nearly 3x the problematic loans in their portfolio. This basically means they are aggressively managing their bad assets and conservatively recognizing them in their financial statements. if they work our the associated credit issues for these bad loans/credit situations without adding additional new bad loans, they could then reduce reserves which would increase income for that given period. When considered in relation to the other ratios below, that this ratio has been materially trending upward during the past several years means increasing asset quality and proactive operational and financial management. A very good sign.

Reserves/Gross Loans
Represents the percentage of bad debt reserves to Non-performing loans. Lower is better here, and the declining percentages for the best three years is a sign of increasing loan growth and asset quality. That this ratio has been materially trending downward during the past several years means increasing asset quality. A very good sign.

NCOs/Average Loans
Represents the percentage of net charge-offs to average loan balances. Lower is better here, as this means they are essentially writing off a low level of loans for which they cannot collect on. That this ratio has been materially trending downward during the past several years means increasing asset quality. A very good sign.

Hope this helps.



Thanks a bunch Vic. Very helpful. Another illustration of the power of these boards.


INBK expands C&I lending to Southwest US, with a new team in Phoenix. C&I loans grew 287% in 2013…

First Internet Bank Expands Commercial Banking to Southwest US

First Internet Bank of Indiana (, a premier provider of online retail and business banking services nationwide, today announced the geographic expansion of its commercial and industrial (C&I) lending services to the Southwestern United States, with the addition of three seasoned bankers operating from the Bank’s Phoenix-area loan production office.

To lead the Tempe-based group, Scott Davis has joined First Internet Bank as Regional Vice President. Mr. Davis has over 35 years of experience in commercial lending, in C&I as well as commercial real estate (CRE) lending with national, super-regional and regional institutions. Mr. Davis has opened new markets in past positions. Mitch Langston has joined the Bank as Vice President. With over 20 years of experience in commercial banking with national and super-regional banks, Mr. Langston has an extensive understanding of business dynamics. Rounding out the team, Carol Dittmar brings 20 years of experience in commercial banking with a thorough knowledge of loan processing, closing policies, credit policies and approval processes to her role as Commercial Banking Coordinator. The three will work to deliver innovative, flexible financing solutions to manufacturers, distributors, small businesses, and non-profit and service organizations.

“The expansion allows First Internet Bank to continue to grow by generating high quality assets in a market where we see opportunity and where we already have a physical presence,” said David Becker, Chairman and CEO of First Internet Bank, referring to the Bank’s mortgage loan operation office in Tempe. “We have assembled a great team, with deep commercial banking experience and a passion for serving their customers.”

“I am very excited to work for First Internet Bank and open this new market,” Davis said. “I was drawn to the spirit of entrepreneurship at the Bank, and I think our culture will resonate with the many area businesses that feel disenfranchised from their current lenders. We will be able to provide clients the service they truly deserve, with flexible loan options and fast, responsive service.”


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We posted the same info :slight_smile: Mine was on a new thread …