First Internet Bank, Indianapolis, IN (FIBP)

A Case of Full Steam Ahead on the Internet Highway


Given First Internet Bank's stellar performance over the past year I've been bullish on FIBP stock for some time. And now that the bank has hired prominent banker John Keech from Indiana Community Bank, I'd say FIBP just upgraded from steam engine to high-speed rail. If you want to ride this train to profit, there's still time to buy while stock is cheap!

Disclosure: As of this posting, I own shares of FIBP and may subsequently either dispose of them or purchase more.
    Prospective Buyers
    Bank of Internet, San Diego, CA (BOFI), as the leader in the more-or-less "branchless banking" space in which First Internet was born, would be a logical acquirer
    Fifth Third, Cincinnati, OH (FITB) has been expanding its internet bank offerings and has branches in First Internet's "home town" of Indianapolis
    Financial Snapshot
    (as of 09/30/2012)

    Total assets:
    $628M
    Tangible book value per share:
    $29.93
    NPAs to assets:
    1.9%
    Price to book:
    61.7%
    Market cap:
    $37.4M
    Dividend yield:
    0%
    Trailing 12-month return on assets:
    0.85%
    Trailing 12-month return on equity:
    8.96%
    TARP:
    $0M
    Luminaries
    David B. Becker, Chairman, President, and CEO
    Laurinda A. Swank, Senior VP, Secretary, and CFO

    Gold Stars
    The FIBP money train
    • FIBP is an "Internet Bank" in the truest sense, that is, it offers almost exclusively online banking services and products, with little to no reliance on physical bank branch locations
    • The engineer on board is a unique leader. More of a "tech guy" than a conventional banker, David Becker has been bringing fresh thinking to the game for years, for which he earned a prestigious Sagamore of the Wabash award 
    • Like the famous Wabash express, FIBP is physically headquartered in Indiana, between Detroit and St. Louis, although it mostly operates "virtually"
    On the right track
    • FIBP earnings have grown for the past 5 quarters, and more than doubled: from $765K (or $.40 a share) in Q3 2011 to $1.6M (or $.85 a share) in Q3 2012
    • First Internet is doing banking right — adding loans, expanding business, holding expenses
    • Although FIBP stock has doubled, at current prices of 65% of book value, or 7.8 times its past 12 months earnings, it's still cheap
    Picking up steam
    • FIBP recently added an impressive woman executive to its board, Ann Murtlow, Director of the Federal Reserve Bank of Chicago and former President and CEO of Indianapolis Power and Light
    • I highly anticipate that new hire John Keech will bring assets and lending talent to FIBP from Indiana Community Bank (INCB), which was recently acquired by Old National (ONB), given how other banks have profited by snapping up talent in the wake of Old National's acquisitions
    Overtaking the competition
    • FIBP would need to more than double book value to overtake its primary competitor, Bank of Internet (BOFI), which is currently trading at about 170% of book
    • Opportunities abound for FIBP to improve its offer, website, and brand to be less confusing and more compelling in an environment where nearly every bank now offers Internet Banking
    • Similarly, it looks to me like even a little investment in PR, search engine optimization, and social media would dramatically raise FIBP's brand within its actual target market — the nation's most "wired" Internet users
    Sources