First Internet Bancorp (INBK): Boston Consulting Group Matrix [10-2024 Updated]

In the dynamic landscape of the financial sector, First Internet Bancorp (INBK) stands out with its diverse portfolio, characterized by various growth potential and challenges. This blog post delves into the Boston Consulting Group Matrix to categorize INBK's business segments into Stars, Cash Cows, Dogs, and Question Marks. Discover how the bank's strong earnings, stable income sources, and emerging fintech strategies position it within this analytical framework, and what that means for its future trajectory.

Background of First Internet Bancorp (INBK)

First Internet Bancorp is a bank holding company that has established itself as a pioneer in the branchless delivery of banking services. The company was founded in 1999 and operates primarily through its wholly-owned subsidiary, First Internet Bank. As of September 30, 2024, First Internet Bancorp reported total assets of approximately $5.8 billion .

First Internet Bank offers a range of financial services, including consumer and small business deposit accounts, SBA financing, franchise finance, and various loan products such as commercial real estate loans and construction loans. The bank serves customers on a national scale while focusing on commercial and industrial loans and treasury management services regionally .

The company's common stock is traded on the Nasdaq Global Select Market under the symbol INBK, and it is also a component of the Russell 2000® Index . Over the years, First Internet Bancorp has leveraged technology to enhance customer experience and operational efficiency, aligning with its strategy to maintain a competitive edge in the evolving financial services landscape .

In its most recent financial performance report for the third quarter of 2024, First Internet Bancorp achieved a net income of $6.99 million, representing an increase from $5.78 million in the previous quarter. The bank's focus on diversifying revenue streams and optimizing its balance sheet has contributed to its solid financial standing, as indicated by key metrics such as a return on average assets of 0.50% and a return on average shareholders' equity of 7.32% for the same period .

As of September 30, 2024, the bank reported total loans of approximately $4.0 billion, with a significant portion attributed to commercial loans . The management has emphasized a strategic shift in its loan mix towards higher-yielding products, which reflects its commitment to enhancing profitability while maintaining asset quality .

First Internet Bancorp (INBK) - BCG Matrix: Stars

Strong Earnings Growth

Adjusted diluted EPS was $0.80 in Q3 2024, reflecting a significant increase from $0.67 in Q2 2024 and $0.39 in Q3 2023.

Net Income Increase

Net income for the third quarter of 2024 increased to $6.99 million, up from $5.78 million year-over-year (YoY).

Return on Average Assets

The return on average assets stood at 0.50%, indicating efficient use of assets compared to 0.44% in the previous quarter.

Total Loans Growth

Total loans reached $4.04 billion, marking a 7% increase YoY.

Commercial Loans Expansion

There was significant growth in commercial loan balances, particularly in the franchise and public finance sectors. As of September 30, 2024, total commercial loans reached $3.2 billion, reflecting a 10.2% increase compared to the same quarter last year.

Conclusion

Overall, First Internet Bancorp's strong earnings growth, increasing net income, and robust loan portfolio position it as a standout in the BCG Matrix as a Star. The company's focus on commercial loans, especially in growing sectors, underlines its potential for future growth and profitability.

First Internet Bancorp (INBK) - BCG Matrix: Cash Cows

Consistent Net Interest Income

The net interest income for First Internet Bancorp for the nine months ended September 30, 2024, was $63.83 million. This reflects a steady income generation, indicative of a strong cash cow position within the banking sector.

Net Interest Margin

The bank reported a solid net interest margin of 1.62% for the third quarter of 2024. This margin indicates stable profitability from interest-earning assets, underscoring the bank's effective management of its interest income and expenses.

Total Deposits

Total deposits at First Internet Bancorp grew to $4.80 billion as of September 30, 2024. This growth in deposits provides a reliable funding source, essential for maintaining liquidity and supporting lending activities.

Dividend Yield

The bank declared dividends of $0.06 per share. This healthy dividend yield reflects the bank’s commitment to returning value to its shareholders while maintaining sufficient capital for operational needs.

Return on Equity

First Internet Bancorp achieved a strong return on equity of 7.32%, demonstrating effective capital management. This figure illustrates the bank’s ability to generate profits from shareholders' equity, reinforcing its status as a cash cow in the competitive banking industry.

First Internet Bancorp (INBK) - BCG Matrix: Dogs

Nonperforming Loans

Nonperforming loans increased to $22.48 million as of September 30, 2024, signaling potential credit risk. This represents an increase from $13.0 million as of June 30, 2024, and $5.9 million as of September 30, 2023 .

Low Growth in Consumer Loans

Total consumer loan balances were $803.4 million as of September 30, 2024, reflecting an increase of only $2.9 million or 0.4% from the previous quarter and $16.9 million or 2.1% year-over-year . The growth was primarily driven by a higher balance in the trailers portfolio, offset by declines in the residential mortgage and home equity portfolios .

Limited Market Share

First Internet Bancorp has limited market share in competitive consumer banking segments, particularly in home equity loans, which totaled $20.26 million as of September 30, 2024, down from $21.41 million in the previous quarter . This indicates a struggle to compete effectively in a saturated market, impacting overall business performance.

Declining Noninterest-Bearing Deposits

Noninterest-bearing deposits dropped to $111.59 million as of September 30, 2024, down from $126.44 million in the previous quarter . This decline suggests potential liquidity issues, as the bank may rely more heavily on interest-bearing deposits, which carry higher costs.

High Cost of Funds

The cost of interest-bearing deposits was relatively stable at 4.30% during the third quarter of 2024, compared to 4.29% in the previous quarter . However, the average balance of interest-bearing deposits increased by $211.1 million, or 5.1%, indicating a growing reliance on higher-cost funding sources . This high cost of funds is impacting the bank's profitability, which recorded a net interest margin of 1.62% for the third quarter of 2024 .

First Internet Bancorp (INBK) - BCG Matrix: Question Marks

Emerging focus on fintech and digital banking solutions, yet to gain significant traction.

As of September 30, 2024, First Internet Bancorp reported total loans of $4.0 billion, with a notable portion attributed to fintech partnerships, particularly in the demand deposits segment, which increased by $37.3 million (7.9%) from the previous quarter. However, the fintech-related offerings are still in the early stages of market penetration, resulting in a low overall market share.

New product offerings in healthcare finance showing potential but lacking substantial market presence.

The healthcare finance portfolio had total balances of $190.3 million, representing 4.7% of total commercial loans as of September 30, 2024. Despite this, the product line remains underdeveloped compared to other segments, indicating a need for strategic marketing initiatives to increase visibility and market share.

Uncertain impact of economic factors on loan performance and interest rates.

In the third quarter of 2024, First Internet Bancorp experienced total interest income of $75.0 million, with a yield on average interest-earning assets of 5.58%. Economic fluctuations, particularly in interest rates, could affect the performance of these question mark segments, leading to potential volatility in loan demand and profitability.

Need for strategic initiatives to enhance market competitiveness in underserved areas.

First Internet Bancorp's overall market strategy includes targeting underserved areas; however, its market share in these regions remains low. The total nonperforming loans as of September 30, 2024, were 0.56% of total loans, up from 0.33% in the prior quarter. This increase signals possible challenges in maintaining competitiveness without enhanced strategic initiatives.

Ongoing investments in technology and infrastructure with uncertain short-term returns.

Investments in technology and infrastructure have increased operational costs, with total noninterest expenses reaching $22.8 million in Q3 2024, a rise of 15.4% year-over-year. While these investments are aimed at long-term growth, the immediate returns are unclear, making it critical for the company to monitor and adjust its approach to ensure sustainability.

In summary, First Internet Bancorp (INBK) presents a mixed portfolio within the BCG Matrix framework. Its Stars demonstrate robust growth, evidenced by an adjusted diluted EPS of $0.80 in Q3 2024 and a significant increase in commercial loans. The Cash Cows provide stable profitability with consistent net interest income and a solid return on equity. However, the Dogs highlight areas of concern, particularly the rise in nonperforming loans and low growth in consumer lending. Meanwhile, the Question Marks signal potential for future growth in fintech and healthcare finance, although they require strategic focus to capitalize on emerging opportunities. Balancing these elements will be crucial for INBK's sustained success in a competitive banking landscape.

Article updated on 8 Nov 2024

Resources:

1. 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.
2. 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.