Long before the word “fintech” entered the vocabulary, First Internet Bancorp (INBK) was pioneering the concept of online banking without the need for a traditional brick-and-mortar branch. INBK’s subsidiary, First Internet Bank of Indiana, opened to the public in February 1999 and made history as the first state-chartered, FDIC-insured Internet bank. 

Over the years, INBK expanded to reach a national customer base. In 2007, it acquired Indianapolis-based Landmark Financial Corp., which brought a retail mortgage lending operation into its product mix. Commercial real estate and commercial and industrial lending services were later added. 

INBK does not get the level of attention lavished on other fintechs, although it has not been completely ignored – it was named one of the Best Banks to Work For by American Banker and Best Companies Group last October, and two months earlier it made the Indianapolis Star’s “Top Workplaces in Central Indiana” list, placing eighth within the medium-sized company category. While the company might be somewhat under-the-radar these days, it is hardly underperforming.

A Vibrant Balance Sheet

Last month’s Q2 and full-year 2020 earnings report saw INBK enjoying banner performances. INBK closed 2020 with $4.2 billion in assets, up from $4.1 billion at the end of 2019. Q4 net income was a company record of $11.1 million, or $1.12 diluted earnings per share, but from $7.1 million, or $0.72 diluted earnings per share, one year earlier.

For the full calendar year 2020, INBK’s net income was another company record at $29.5 million, while diluted earnings per share hit a record $2.99. One year before, INBK ended 2019 with net income of $25.2 million and diluted earnings per share of $2.51.

According to Chairman-President-CEO David Becker, INBK understood the market conditions of the pandemic period and focused on the growth areas amid a chaotic economy.

“Over the course of the year, we produced robust revenue growth, with our direct-to-consumer mortgage business delivering its best year in our history,” Becker said. Our bankers met the surge in demand brought on by low interest rates, winning business with a demonstrated commitment to consistent, excellent service. Our expanding national SBA platform also steadily gained momentum and drove higher gain-on-sale revenue, increasingly contributing to our success throughout the year. Our pipelines in these key business lines remain solid heading into 2021.”

Not everything went perfectly for INBK in 2020: Its 2020 results included a $2.1 million pre-tax write-down of commercial other real estate owned while total consumer loan balances were $482.3 million, down 23.9% year-over-year – INBK attributed that drop to “increased prepayment activity in the residential mortgage portfolio and seasonally lower production in the RV and trailer portfolios.” And while single tenant lease financing was down, commercial loan balances totaled $2.5 billion, up 3% from the previous year, with healthcare finance and construction lending mostly fueling this activity.

Trading Activity

INBK is currently trading at $31.56, just a few percent below its 52-week high of $32.86. The stock has been enjoying an upward trajectory since its Q3 earnings report from late October when it reported record quarterly net income of $8.4 million, record quarterly diluted earnings per share of $0.86 and $1.03 adjusted diluted earnings per share, and total revenue of $28.7 million, a 48.1% increase from the previous quarter.

Of the five Wall Street analysts that cover the stock, four rated it a Buy and one rated it a Hold. The analysts’ target price for INBK ranged from a high of $46.50 to a low of $36.

POWR RATINGS

INBK has an overall rating of B, which equates to Buy in our POWR Ratings system, and in the 55-stock Midwest Regional Banks industry, it is ranks #8. The POWR Ratings are calculated by considering 118 different factors with each factor weighted to an optimal degree.

Our proprietary rating system also evaluates INBK based on six other elements. Of these elements, INBK received B grades for Value, Stability and Sentiment.  To see INBK’s POWR Ratings for Growth, Quality, and Momentum,  click here.

Bottom Line

INBK lacks the flash of the New York financial institutions and the self-aggrandizement of the Silicon Valley fintechs. But in keeping with its Indiana roots, it is a no-nonsense, hard-working institution that quietly gets results. If its Q4 and 2020 earnings are any indication, it never relinquished the focus that enabled it to bring banking into cyberspace. This stock is a good addition to any portfolio.

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INBK shares rose $0.18 (+0.57%) in after-hours trading Wednesday. Year-to-date, INBK has gained 9.74%, versus a 2.13% rise in the benchmark S&P 500 index during the same period.

About the Author: Phil Hall

Phil is an experienced financial journalist responsible for generating original content on the weekly Fairfield County Business Journal and Westchester County Business Journal, plus their respective daily online news sites, podcasts and video interview series.  He is the winner of 2018, 2019 and 2020 Connecticut Press Club Awards and 2019 and 2020 Connecticut Society of Professional Journalists Award for editorial output. More...

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