Hi all,
The INBK 2013 AR is out. Available here:
http://www.firstinternetbancorp.com/Cache/23034084.PDF?Y=&am…
I liked reading the “Shareholder letter” from Mr. Becker. Some points from the letter, which I thought were worth taking home:
At $496
million at year end, our loan portfolio has climbed
to new heights. Our expanding loan portfolio
generated 10% more net interest income than in
2012. With nearly half of our portfolio in variable
rate loans at year end, the bank is well positioned in
the event of a rising interest rate environment.
I like the point about capitalising on rising interest rates. The interest rates are bound to rise in the near future, at least that’s what all the commentary seems to suggest.
Credit quality remained
high, with only 37 basis points of nonperforming
loans to total loans at year end. We are adequately
reserved for the potential of loan losses, with an
allowance nearly three times greater than the total
nonperforming loans at year end.
I like the focus on credit quality. These guys are not about growth at all costs, but rather about prudent, well-managed, growth.
We also broadened
our commercial lending
capabilities in 2013 when an
experienced team specializing
in asset based lending joined
the company. This group will
provide working capital to small
to medium sized companies, enabling
us to continue expanding our commercial
lending platform.
Emphasis on growing commercial lending is good news for growth. Not too long ago, commercial lending was only 8% of the loan portfolio, now its about 40% of the loan portfolio.
Anirban.
6 Likes
Anirban,
Thanks for pointing us to the 10K, I had been looking for it. I bought my first shares of INBK last week and will look to add more as I get a better feel for the company.
Anyone looking to buy shares needs to use limit orders to protect yourself, this is a very small company and if you place a market order, you alone could spike to the shares higher. It took me 3 days for my order to go through.
Notes from the 10K:
**For 2013 Total Assets grew 59% to $802.34M from $504.62M in 2012
**Total Loans increased to $495.73M from $305.44M
**Deposits grew to $673M from $411.63M
**INBK generated positive Net Income the past 4 yrs with $4.59M in 2013
**Nonperforming Assets to Total Assets was .9% with 1.06% allowance
**Average Size INBK checking account is $13K, nearly 4x national average
**Weighted average credit score of 772 for 2013
**They sell vast majority of conforming conventional loans (Fixed rate) to the secondary market, avoiding potential interest rate risks.
As management grows and learns, they have been able to make some major changes in the overall performance and financial health of the company:
**Allowance for loan losses in 2009 was $10,097 on $305,437 in loans.
For 2013 it was down to $5426 on loans of $495,727.
**Nonacccrual loans in 2009 was $10,300 and only $1,834 in 2013
**Charge offs in 2009 was $7,003 and $1,212 in 2013
**130 employees
**4,449,619 shares outstanding
**Pays an annual dividend of $0.24
In banking it is important to watch a banks Efficiency Ratio to truly understand the health of the company. As I am new at studying banks, I am not sure what levels we want our banks at…but I am pretty sure INBK is doing a good job.
2009 they had an efficiency ratio of 56.1%
20013 it had improved to 75.96%.
What say you?
David
MTH Ticker Guide
3 Likes
I go back and forth about limit orders vs market orders. I have settled into the following: for my first buy I use a market order to get shares, I have missed too many things for want of a few pennies. For adding to a position I do use limit orders and let them go for a few days. When I sell I generally use market orders, since I am usually selling to buy something else.
I think your point is important in knowing the size of the company buying or selling Amazon is very different than something like BOFI…
I also look at the chart to get an idea of the near term range.
I go back and forth about limit orders vs market orders. I have settled into the following: for my first buy I use a market order to get shares, I have missed too many things for want of a few pennies. For adding to a position I do use limit orders and let them go for a few days. When I sell I generally use market orders, since I am usually selling to buy something else.
Be very careful when trading thinly traded stocks. If the share volume is very low a market order can execute much higher than you wanted to buy or much lower than you wanted to sell.
2 Likes
Flygal5,
Instead of a market order for your first buy, you could place a limit order with the limit above the current market price, that way your trade is more likely to be triggered, but you don’t have to worry about your order filling at a higher than expected price. I think I often do that.
-Brandon
Hey David,
In banking it is important to watch a banks Efficiency Ratio to truly understand the health of the company. As I am new at studying banks, I am not sure what levels we want our banks at…but I am pretty sure INBK is doing a good job.
2009 they had an efficiency ratio of 56.1%
20013 it had improved to 75.96%.
Up-board, there was some very nice commentary on the various efficiency metrics. Vic use to audit banks … very knowledgeable and useful commentary from Vic. If you missed it, here’s the link:
http://discussion.fool.com/first-internet-bancorp-inbk-vs-bofi-3…
Regarding efficiency ratio, in its simplest form, I guess it measures cost as a fraction of the revenue (i.e., expenses/revenue, expressed as a percentage). This measures non-interest expenses as a proportion of operating revenue. Expenses include salaries, buildings, supplies, and administrative expenses, etc. Revenue includes net interest income (interest revenue minus interest expenses) plus fee income. There’s a nice TMF article discussing the pros and cons of some of these efficiency metrics:
http://www.fool.com/investing/dividends-income/2006/12/14/ba…
Now back to INBK. Its efficiency ratio has been creeping upwards. In 2013, it requires $0.76 to earn $1.00. For a supposed capital light Internet only bank, that isn’t looking very good, right? The 2009 efficiency measures are more inline with what one would expect to see in a capital light Internet-only business. However, based on readings of recent 8-K and 10-K documents, it appears that INBK has been investing a lot into the business - recruiting new people (e.g., in the commercial lending side of things), spending on IT, etc, so these expenses should help propel the business further.
Anirban
4 Likes