Some of us here on this board have invested in INBK. I was revisiting some numbers and the INBK thesis. Management were scooping shares when stock was trading around $15 - $16. None of the insiders have sold any shares yet.
Let’s look at the table below, which shows Q1 13 through to Q4 14.
================================================ Quarter Net-II Non-II Non-IE EPS Net-II (QoQ) ================================================ Q4 14 $6,375 $2,098 $5,879 $0.32 28.42% Q3 14 $5,673 $1,943 $5,785 $0.28 30.26% Q2 14 $5,373 $1,622 $5,560 $0.22 26.84% Q1 14 $4,866 $1,511 $5,438 $0.13 27.45% Q4 13 $4,964 $1,171 $5,225 $0.19 Q313 $4,355 $1,641 $5,140 $0.25 Q2 13 $4,236 $3,719 $5,525 $0.59 Q1 13 $3,818 $3,145 $4,646 $0.77 ================================================
A few things jump out:
Let’s look at the net interest income (Net-II). This is the difference between the earnings from interest earning assets (e.g., loans) and the interest bearing liabilities (e.g., deposits). This has steadily grown over our observation period, and has lately been averaging around 28% quarter over quarter growth.
Let’s look at the non-interest income (Non-II). This is revenue generated from various ‘fees’ (account activity, inactivity, credit cards etc). Mortgage banking activity, including refinancing, can be a big contributor to the non-interest income and this can also contribute to non-interest income being variable (i.e., it can dry up if refinancing dries up). INBK’s non-interest income has been all over the board and has been economy dependent.
Let’s look at the third column, the non-interest expense (Non-IE). Think of this as “operating expenses”. This reflects the fixed costs of running the banking operation. This includes almost all operating and overhead expenses such as salaries and employee benefits, unemployment tax, insurance, etc. INBK’s non-interest expense has been growing very slowly in the recent quarters.
Combining points (1) and (3) above, what I really like is the bank’s ability to leverage its operation. It seems the investments in people and systems are paying off. With operating expenses flat-lining, the bank is still able to grow the net interest income at a decent 28% clip, quarter over quarter.
As things currently stand, the non-interest income is now all but gravy. This is great.
Now, if you look at the EPS column you notice some big drops (e.g., Q1 13 was $0.77, while Q1 14 was $0.13). There are two factors at work here. One was the dilution from the secondary offering in the quarter ending 12/2013. The other was the decline in mortgage refinancing activity. However, if we ignore these dilute effects and focus on the more recent four quarters we see the bank’s operating leverage at work with straight up increases in earnings.
INBK has a TTM EPS of $0.95 and a trailing PE of 18.9. It’s still less for less than book value, is still under the radar of most investors but it operationally doing all the right things.
Just remember that this is a micro-cap stock. Lots of potential here but it is volatile because the trading volume is low …