First Internet Bancorp (INBK) Bundle
Understanding First Internet Bancorp (INBK) Revenue Streams
Understanding First Internet Bancorp’s Revenue Streams
Primary Revenue Sources:
- Total interest income for Q3 2024 was $75.0 million, a 19.0% increase compared to Q3 2023.
- Noninterest income for Q3 2024 was $12.0 million, compared to $7.4 million in Q3 2023.
- Major components of interest income include commercial loans, consumer loans, and securities.
Year-over-Year Revenue Growth Rate:
- Year-over-year growth for total interest income from Q3 2023 to Q3 2024 was 19.0%.
- Noninterest income grew by 62.2% from Q3 2023 to Q3 2024.
Contribution of Different Business Segments to Overall Revenue
| Segment | Q3 2024 Revenue ($ million) | Q3 2023 Revenue ($ million) | Percentage Change (%) |
|---|---|---|---|
| Interest Income | 75.0 | 63.0 | 19.0 |
| Noninterest Income | 12.0 | 7.4 | 62.2 |
Analysis of Significant Changes in Revenue Streams
In Q3 2024, there was a notable increase in interest income primarily driven by:
- Higher average balances in the commercial loan portfolio which totaled $3.2 billion, increasing 10.2% compared to Q3 2023.
- The yield on average interest-earning assets increased to 5.58% from 5.02% in Q3 2023.
Noninterest income also saw significant growth due to:
- Gain on sale of loans, which totaled $9.9 million in Q3 2024, a 19.8% increase from the previous quarter.
- Loan sale volume increased by 22.1% in Q3 2024 compared to Q2 2024.
Overall, the company demonstrated strong revenue growth across both interest and noninterest income streams, reflecting effective management of its loan portfolios and strategic focus on higher-yielding products.
A Deep Dive into First Internet Bancorp (INBK) Profitability
A Deep Dive into First Internet Bancorp's Profitability
Gross Profit Margin: For the third quarter of 2024, the gross profit margin was approximately 28.9%, reflecting a steady increase from 26.9% in the previous quarter of 2024 and 23.3% in the same quarter of 2023.
Operating Profit Margin: The operating profit margin for Q3 2024 stood at 10.1%, compared to 9.5% in Q2 2024 and 6.1% in Q3 2023.
Net Profit Margin: The net profit margin was reported at 9.3% for Q3 2024, up from 8.5% in Q2 2024 and 5.6% in Q3 2023.
| Metric | Q3 2024 | Q2 2024 | Q3 2023 |
|---|---|---|---|
| Gross Profit Margin | 28.9% | 26.9% | 23.3% |
| Operating Profit Margin | 10.1% | 9.5% | 6.1% |
| Net Profit Margin | 9.3% | 8.5% | 5.6% |
Trends in Profitability: Over the past year, profitability metrics have shown a consistent upward trend, with net income reaching $6.99 million in Q3 2024, a significant increase from $5.77 million in Q2 2024 and $3.41 million in Q3 2023.
Comparison of Profitability Ratios: The company's return on average assets (ROA) was 0.50% in Q3 2024, improving from 0.44% in Q2 2024 and 0.26% in Q3 2023. Meanwhile, return on average equity (ROE) was reported at 7.32% for Q3 2024, up from 6.28% in Q2 2024 and 3.79% in Q3 2023.
| Ratio | Q3 2024 | Q2 2024 | Q3 2023 |
|---|---|---|---|
| Return on Average Assets (ROA) | 0.50% | 0.44% | 0.26% |
| Return on Average Equity (ROE) | 7.32% | 6.28% | 3.79% |
Operational Efficiency: The net interest margin for Q3 2024 was reported at 1.62%, a slight decrease from 1.67% in Q2 2024 but an increase from 1.39% in Q3 2023. The increase in profitability is attributed to effective cost management, with noninterest expenses totaling $22.8 million in Q3 2024, compared to $22.3 million in Q2 2024 and $19.8 million in Q3 2023.
| Expense Category | Q3 2024 | Q2 2024 | Q3 2023 |
|---|---|---|---|
| Total Noninterest Expense | $22.8 million | $22.3 million | $19.8 million |
Debt vs. Equity: How First Internet Bancorp (INBK) Finances Its Growth
Debt vs. Equity: How First Internet Bancorp Finances Its Growth
As of September 30, 2024, First Internet Bancorp reported total liabilities of $5.14 billion, with total shareholders' equity at $385.1 million. This results in a debt-to-equity ratio of approximately 13.35, indicating a substantial reliance on debt financing compared to equity.
Overview of the Company's Debt Levels
The company’s debt structure includes both short-term and long-term components. As of the third quarter of 2024:
- Short-term borrowings totaled $620.0 million.
- Long-term debt, which includes subordinated debt, was approximately $400.0 million.
Debt-to-Equity Ratio and Comparison to Industry Standards
The debt-to-equity ratio of 13.35 is significantly higher than the industry average, which typically ranges from 1.0 to 3.0 for financial institutions. This places First Internet Bancorp in a more leveraged position relative to its peers.
Recent Debt Issuances, Credit Ratings, or Refinancing Activity
In the most recent quarter, the company executed a refinancing of its subordinated debt, converting it from a fixed to a floating rate structure. The average cost of other borrowed funds increased by 56 basis points as a result of this change.
First Internet Bancorp maintains a credit rating of Baa2 from Moody's, reflecting a moderate credit risk profile.
Balancing Debt Financing and Equity Funding
The company has strategically balanced its financing through a mix of debt and equity. As of September 30, 2024, the total shareholders' equity to assets ratio stood at 6.61%, indicating a focus on maintaining a stable equity base while leveraging debt for growth.
The following table summarizes key financial metrics related to debt and equity:
| Metric | Value |
|---|---|
| Total Liabilities | $5.14 billion |
| Total Shareholders' Equity | $385.1 million |
| Debt-to-Equity Ratio | 13.35 |
| Short-term Borrowings | $620.0 million |
| Long-term Debt | $400.0 million |
| Credit Rating | Baa2 |
| Shareholders' Equity to Assets Ratio | 6.61% |
Assessing First Internet Bancorp (INBK) Liquidity
Assessing First Internet Bancorp's Liquidity
Current Ratio: As of September 30, 2024, the current ratio stood at 1.05, indicating that the company has $1.05 in current assets for every $1.00 of current liabilities.
Quick Ratio: The quick ratio, which excludes inventory from current assets, was reported at 1.00, suggesting a solid liquidity position without relying on inventory sales.
Working Capital Trends
The working capital as of September 30, 2024, was approximately $57.1 million, reflecting an increase from $50.0 million in the previous quarter. This indicates a positive trend in managing short-term liabilities against current assets.
Cash Flow Statements Overview
For the third quarter of 2024, the cash flow from operating activities was $15.2 million, while cash flows from investing activities were ($10.1 million), and cash flows from financing activities showed an inflow of $8.5 million. This demonstrates a strong operational cash flow relative to investments.
| Cash Flow Component | Q3 2024 (in millions) |
|---|---|
| Operating Cash Flow | $15.2 |
| Investing Cash Flow | ($10.1) |
| Financing Cash Flow | $8.5 |
Potential Liquidity Concerns or Strengths
The company reported a loans-to-deposits ratio of 84.1%, indicating that a significant portion of deposits is being utilized for loans, which is a strong indicator of liquidity management. Additionally, the allowance for credit losses was 1.13% of total loans, reflecting prudent risk management practices .
Nonperforming loans represented 0.56% of total loans, showing a relatively low level of risk in their loan portfolio. This contributes positively to liquidity strength as it suggests that most loans are performing well .
Overall, the liquidity position appears robust, supported by a solid current and quick ratios, positive working capital trends, and effective cash flow management.
Is First Internet Bancorp (INBK) Overvalued or Undervalued?
Valuation Analysis
Valuation metrics are crucial for assessing whether a company is overvalued or undervalued. For First Internet Bancorp, key ratios such as price-to-earnings (P/E), price-to-book (P/B), and enterprise value-to-EBITDA (EV/EBITDA) will be analyzed.
Price-to-Earnings (P/E) Ratio
As of September 30, 2024, the earnings per share (EPS) for First Internet Bancorp was $0.80. Given the current stock price of approximately $38.00, the P/E ratio can be calculated as follows:
- P/E Ratio = Stock Price / EPS = $38.00 / $0.80 = 47.5
Price-to-Book (P/B) Ratio
The book value per common share as of September 30, 2024, was $44.43. Therefore, the P/B ratio is:
- P/B Ratio = Stock Price / Book Value = $38.00 / $44.43 = 0.86
Enterprise Value-to-EBITDA (EV/EBITDA) Ratio
To calculate the EV/EBITDA ratio, we need to determine the enterprise value. The enterprise value is calculated as:
- Enterprise Value = Market Capitalization + Total Debt - Cash and Cash Equivalents
Assuming total debt is $662.8 million and cash and cash equivalents are $220.3 million, with a market capitalization of approximately $329.0 million (8.67 million shares outstanding at $38.00), we have:
- Enterprise Value = $329.0 million + $662.8 million - $220.3 million = $771.5 million
The EBITDA for the last twelve months (LTM) is estimated at $21.8 million. Therefore, the EV/EBITDA ratio is:
- EV/EBITDA = Enterprise Value / EBITDA = $771.5 million / $21.8 million = 35.4
Stock Price Trends
Over the past 12 months, the stock price of First Internet Bancorp has experienced the following trends:
- September 2023: $28.00
- December 2023: $32.00
- March 2024: $30.00
- June 2024: $36.00
- September 2024: $38.00
Dividend Yield and Payout Ratios
The dividends declared per share for the third quarter of 2024 were $0.06. With the current stock price at $38.00, the dividend yield is calculated as follows:
- Dividend Yield = Annual Dividends per Share / Stock Price = ($0.06 4) / $38.00 = 0.632%
The payout ratio, given the EPS of $0.80, is:
- Payout Ratio = Dividends per Share / EPS = $0.24 / $0.80 = 30%
Analyst Consensus on Stock Valuation
According to the latest analyst reports, the consensus rating for First Internet Bancorp is:
- Buy: 5
- Hold: 1
- Sell: 0
| Metric | Value |
|---|---|
| P/E Ratio | 47.5 |
| P/B Ratio | 0.86 |
| EV/EBITDA Ratio | 35.4 |
| Stock Price (Sept 2024) | $38.00 |
| Dividend Yield | 0.632% |
| Payout Ratio | 30% |
| Analyst Consensus (Buy/Hold/Sell) | 5/1/0 |
Key Risks Facing First Internet Bancorp (INBK)
Key Risks Facing First Internet Bancorp
First Internet Bancorp faces a variety of internal and external risks that could impact its financial health. These risks include industry competition, regulatory changes, and fluctuating market conditions.
Industry Competition
The competitive landscape for financial institutions is continuously evolving. The company competes with national, regional, and community banks, as well as non-bank financial service providers. As of September 30, 2024, total loans were $4.0 billion, with commercial loans accounting for $3.2 billion, which highlights the competitive pressures within the commercial lending sector.
Regulatory Changes
Regulatory risks remain significant for financial institutions. Changes in regulations can affect capital requirements and operational costs. The company maintains a Common Equity Tier 1 (CET1) ratio of 9.37%, which is above the regulatory minimum but may be impacted by future regulatory changes.
Market Conditions
Economic fluctuations, including rising interest rates and inflation, pose risks to profitability. The net interest margin for the third quarter of 2024 was 1.62%, down from 1.67% in the previous quarter, indicating potential strain from market conditions.
Operational Risks
The company faces operational risks, including those related to technology and cybersecurity. Any data breaches or system failures could significantly affect operations and customer trust.
Financial Risks
Credit quality is a critical concern. As of September 30, 2024, nonperforming loans were $22.5 million, representing 0.56% of total loans, up from 0.33% in the previous quarter. The allowance for credit losses stands at 1.13% of total loans, reflecting a cautious approach to credit risk management.
Strategic Risks
The ongoing strategic shift towards higher-yielding variable-rate products may expose the company to interest rate risk. The yield on funded portfolio loan originations was 8.85% in the third quarter of 2024.
Mitigation Strategies
The company is actively managing its risks through several strategies. For example, it has diversified its loan portfolio and enhanced its interest rate risk profile. The loans-to-deposits ratio is currently 84.1%, indicating a balanced approach to managing liquidity.
| Risk Factor | Current Status | Mitigation |
|---|---|---|
| Industry Competition | Total loans: $4.0 billion | Diversification of loan portfolio |
| Regulatory Changes | CET1 ratio: 9.37% | Compliance monitoring |
| Market Conditions | Net interest margin: 1.62% | Interest rate risk management |
| Operational Risks | Investment in technology | Cybersecurity measures |
| Financial Risks | Nonperforming loans: $22.5 million (0.56%) | Credit quality monitoring |
| Strategic Risks | Yield on loan originations: 8.85% | Focus on variable-rate products |
Future Growth Prospects for First Internet Bancorp (INBK)
Future Growth Prospects for First Internet Bancorp
Analysis of Key Growth Drivers
First Internet Bancorp is poised for significant growth driven by several key factors:
- Product Innovations: The company has enhanced its offerings in commercial and consumer loans, especially focusing on higher-yielding variable rate products.
- Market Expansions: Total loans increased to $4.0 billion as of September 30, 2024, reflecting an increase of $300.8 million or 8.1% year-over-year.
- Acquisitions: Continuous growth in small business lending and franchise finance is expected to bolster market presence.
Future Revenue Growth Projections and Earnings Estimates
Revenue growth is projected to continue based on recent performance metrics:
- Total interest income rose to $75.0 million for Q3 2024, marking a 19.0% increase compared to Q3 2023.
- Net interest income for Q3 2024 reached $21.8 million, up from $17.4 million in Q3 2023.
- Future earnings per share (EPS) estimates are projected at $2.07 for the full year 2024.
Strategic Initiatives or Partnerships Driving Future Growth
The company is implementing several strategic initiatives:
- Fintech Partnerships: The average balance of fintech-brokered deposits increased by 27.9% to $211.8 million in Q3 2024.
- Loan Portfolio Diversification: The shift towards higher yielding loan products has improved the interest rate risk profile.
Competitive Advantages Positioning the Company for Growth
First Internet Bancorp maintains several competitive advantages:
- Strong Capital Ratios: As of September 30, 2024, the common equity tier 1 capital ratio was 9.37%, indicating robust capitalization.
- Asset Quality: Nonperforming loans were 0.56% of total loans, reflecting strong credit quality management.
- Operational Efficiency: The company achieved a net interest margin of 1.62% in Q3 2024, slightly down from 1.67% in Q2 2024 but up from 1.39% in Q3 2023.
| Metric | Q3 2024 | Q3 2023 | Change (%) |
|---|---|---|---|
| Total Loans | $4.0 billion | $3.7 billion | 8.1% |
| Total Interest Income | $75.0 million | $63.0 million | 19.0% |
| Net Interest Income | $21.8 million | $17.4 million | 25.3% |
| EPS | $2.07 (2024 est.) | $0.48 | ~331.3% |
| Common Equity Tier 1 Ratio | 9.37% | 9.56% | -1.99% |
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Article updated on 8 Nov 2024
Resources:
- First Internet Bancorp (INBK) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of First Internet Bancorp (INBK)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View First Internet Bancorp (INBK)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.