First Internet Bancorp (the “Company”) (NASDAQ:INBK), the parent company of First Internet Bank (www.firstib.com), today announced record annual net income for the twelve month period ended December 31, 2015.
David Becker, Chairman, President and Chief Executive Officer, commented, "We had a tremendous 2015. Executing our growth strategy, we increased loans by 30% and deposits by 26%. This drove net interest income up 38% for the year. On the bottom line, 2015 net income was up 106% and EPS was up 104% over 2014.
"Commercial loans grew by $232 million, or 66%, for the year and now make up more than 60% of our loan portfolio. Net interest income and our efficiency ratio improved each quarter. As we enter 2016, credit quality is solid and our pipeline is strong.
Book value was 22.24, up from 20.74 the year before.
I feel like I must be missing something with INBK. All of their metrics look great: substantial increase in net income, declining efficiency ratio, growing loans and deposits, etc.
But then I keep coming back to annual book value growth of only 7.2%, which is pedestrian at best. And if memory serves (I can’t find my notes at the moment) that has been a recurring theme. Improving - sometimes greatly improving - operating numbers every quarter that never quite seem to translate to substantial growth in per share book value.
What am I missing with this company? Is it just too early in the growth curve to expect the operational improvements to create commensurate increases in book value? Am I overlooking something so obvious as to make me feel a complete (f)ool when its pointed out to me?
Is it just too early in the growth curve to expect the operational improvements to create commensurate increases in book value?
Fletch, they noted they “increased loans by 30% and deposits by 26%”. So is the increase in book value subdued because they continue to increase deposits at nearly the same pace as loans?
Fletch, they noted they “increased loans by 30% and deposits by 26%”. So is the increase in book value subdued because they continue to increase deposits at nearly the same pace as loans?
Ultimately the book value should basically be the accumulated profits of the bank. More loans and deposits should equal more net income and more net income gnerally should mean more book value. Recall that BOFI has had plenty of quarters in which deposits and loans have increased roughly equally with no apparent detriment to TBV growth. And sure there is a lag between when a loan is made and when it starts generating profit, but INBK has had several quarters in a row now of increasing loans.
I think the answer is probably that the base numbers were so low, EPS can increase 30% or 40% for a while and it still isn’t a very meaningful number. One penny of earnings can be doubled to two pennies for a 100% increase and it still won’t have much of an impact to book value.
So it’s probably just still too early in the process. If they can keep up year-over-year NI growth of 30%+ for another year or two, my guess is that will create some meaningful TBV per share impact.
Of course I could probably answer my own questions with an hour and the last seven or eight 10-Qs, but I’m lazy, and not a shareholder
Their PE is now 12. Their rate of growth of earnings is (as we just pointed out) 104%.
Their rate of growth in 2016 will certainly be MUCH lower, but on the other hand their PE is only 12.
Saul,
P/E and PEG look excellent. But they are backward looking. Looking at the past 3 quarters, there has been zero sequential growth so when you say that growth will be MUCH lower do you mean it could be zero?
so when you say that growth will be MUCH lower do you mean it could be zero?
Hi Chris, I don’t really have a clue, but I’d doubt it would be zero. I was thinking more in the range of dropping from 104% to about 20-25%. But that’s a wild guess.
I don’t really have a clue, but I’d doubt it would be zero. I was thinking more in the range of dropping from 104% to about 20-25%. But that’s a wild guess.
So let’s say your guess is close. Then next year, assuming the stock doesn’t move from here, you would have a P/E of about 10 and a 1YRPEG of about 0.4.
I don’t really have a clue, but I’d doubt it would be zero. I was thinking more in the range of dropping from 104% to about 20-25%. But that’s a wild guess.
So let’s say your guess is close. Then next year, assuming the stock doesn’t move from here, you would have a P/E of about 10 and a 1YRPEG of about 0.4.
I think so. But I’m waiting for anirban’s evaluation as he seems to understand it better than anyone.
Your are right on the money. INBK’s retained earnings as of FY15 was $33m, while total common equity was $104.3m. So, shareholders investment in the company accounts for about 70% of the total equity.
INBK has a larger founder ownership that sometimes (IMO) puts its own
financial interests ahead of the shareholders. For example, they pay a dividend, and borrow money to do it. While this can give the short term
a flutter, their long term growth will be impeded. (and savvy folks like
you will notice the diference between growth in earnings and equity.
