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 Company
Profile:
www.firstib.com
First Internet Bancorp’s subsidiary,
First Internet Bank, was established in 1999 as the first state-chartered,
FDIC-insured Internet bank. The company has grown organically and in 2007
acquired Indianapolis-based Landmark Financial Corporation, adding
significantly to the Bank’s portfolio of quality loans and deposits. During
the past several years, the Bank has invested in operational infrastructure
to maintain leading-edge customer service and processing capabilities, and
in personnel to support lending growth. Capitalizing on its strong deposit
base and minimal exposure to legacy commercial real estate (CRE) loans, the
Bank established a CRE lending group in 2010 and launched a C&I (commercial
and industrial) lending group in 2012 to meet the needs of high-quality,
underserved borrowers.
First Internet Bank’s
deposit services include checking accounts, regular and money market savings
accounts with industry-leading interest rates, CDs and IRAs. First IB also
offers commercial and consumer loans, conforming mortgages, jumbo mortgages,
home equity loans and lines of credit.
 David
B. Becker – President, Chief Executive Officer and Chairman of the Board
Mr. Becker has served as
Chairman of the Board and Chief Executive Officer of First IB since its
inception and has served as President since January 2007. Mr. Becker has a
history of successful start-up companies in financial services and
technology. In 1981, he founded re:Member Data Services to provide
electronic data processing services to credit unions throughout the United
States.
He served as CEO of re:Member Data Services until the company was acquired
by Open Solutions Inc. (NASDAQ:OPEN) in 2004. In 1995, he founded VIFI,
which provided Internet services to financial institutions and corporations
from 1995 until it was acquired by Digital Insight Corporation (NASDAQ:DGIN)
in 2002. Mr. Becker also founded, and remains actively involved as CEO of,
three other Indianapolis-based companies: OneBridge, a credit and debit card
processing firm; DyKnow, a company specializing in educational technology
for interactive learning experiences; and RICS, a firm that provides
inventory control and POS systems for retailers via the Web.
Mr. Becker was the first chairman and remains on the board of TechPoint, a
change agent for Indiana's technology industry. Mr. Becker is also a past
chairman and member of the board of the TechPoint Foundation for Youth,
promoting STEM education programs for students in the state. Mr. Becker is
the outgoing Chairman of the Central Indiana Community Foundation (CICF), a
public charity established to improve philanthropic services supporting the
central Indiana region, and has also served on the board of the Central
Indiana Corporate Partnership, an alliance of CEOs and university presidents
working to promote economic growth.
A firm believer in the value of higher education, Mr. Becker has supported a
number of Indiana universities. He is currently a member of the Dean's
Advisory Council for the School of Informatics at Indiana University (IUPUI)
and the advisory board for The Robert C. McDermond Center for Management and
Entrepreneurship. He has previously served on an advisory board for the IT
Associates Program at DePauw University as well as the Board of Trustees at
Vincennes University.
Mr. Becker is a 2001 recipient of the Ernst & Young Entrepreneur of the Year
award and a 2002 recipient of the TechPoint Trailblazer in Technology award.
In 2004, he was named Sagamore of the Wabash by Indiana Governor Joe Kernan.
In 2008, he was inducted into the Junior Achievement-sponsored Central
Indiana Business Hall of Fame.
Mr. Becker is a graduate of DePauw University. |
Financial
Regional – Midwest Banks
(FIBP-OTCBB)
First Internet Bancorp
9200 Keystone Crossing, Suite 800
Indianapolis, IN 46240
Phone: 317-532-7900
www.firstib.com
FIBP-Print Version
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Interview
conducted by: Lynn Fosse, Senior Editor, CEOCFO Magazine, Published –
February 24, 2012
CEOCFO:
Mr. Becker, what was your vision when the
bank started and where are you today?
Mr. Becker:
The vision almost 13 years ago was to create the true virtual financial
institution, with no traditional brick and mortar, no real infrastructure
compared to a normal community or regional bank. We launched in February
1999, and within 90 days we had a customer in all 50 states across the US. I
honestly thought at this point in time we would be closer to at least $1
billion in assets. We are sitting at about $600 million today. I guess the
entrepreneur in me would always like to be bigger/better. However, with the
economic times we faced – from the tech bubble in the early 2000’s to the
melt-down in 2008-2009 – we are really in pretty rock-solid shape and the
bank has done very well weathering two really pretty crazy economic times.
CEOCFO: How did you know that online
banking was going to be viable and that people would be willing to place
financial info through the net?
Mr. Becker:
Part of it was that I did in technology services industry for over 30 years
dealing with credit unions and banks across the country; I’m not a banker
per se by trade. I saw the evolution watching the credit union industry
accept direct pay, the advent of the credit/debit card usage and kind of
that paper structure. All the external pieces were falling away in all the
need for the brick and mortar infrastructure. If you look at us, consumers
today, over 95% of what they do is done electronically or remotely. You
write a check, do electronic bill-pay, and you use a credit/debit card. You
only as a general rule go to the financial institution if Aunt Matilda sends
you a check and you do not want to deposit it through the ATM. To do a loan,
you still have to go to some institutions and meet someone face to face to
close a loan. However, it just seems like a natural evolution to me watching
my children as they grew up doing more and more things on the web. There’s a
visual component of electronic bill pay. The one that nobody likes to do is
pay bills, and if you can go down with a few clicks of a mouse and pay six
or seven vendors in a matter of seconds or minutes versus writing checks,
doing stamps, yada, yada, yada; it just seemed to me like a natural
evolution for consumers.
CEOCFO: You have said that it is a
watershed year for First Internet Bancorp; what has happened over the last
year or two to put you on the landscape a little differently?
Mr. Becker:
Two things have really helped the bank tremendously in the last couple of
years. One, about 6 years ago we acquired Landmark Savings Bank here in
Indianapolis and picked up the mortgage expertise and the knowledge base of
that institution. That was kind of when the whole mortgage industry was in
shambles, with brokers and all the economic crisis created by the bad
mortgage pools and the secondary market sales. As the mortgage industry was
imploding we got a good team, a good knowledge base, so we were able to add
our internet spin to that and push that business forward. Even four to six
years ago about 80% of the consumers were finding their homes via the
internet or doing some kind of research on a house and setting up
appointments. At the market space, mortgage applications and loan closings
were not that active, but again it was one of those kind of visions that was
coming our way. Therefore, we purchased Landmark, got that internal
intelligence on the processes, invested about a half a million dollars in
revamping websites and obviously with all-time low interest rates right now,
it is a buyers’ market. Four or five years ago when the mortgage markets
started to implode there were thousands more independent, nonbank mortgage
brokers across the United States. Today, a lot of that competition is gone.
Consumers are even more friendly with the internet today than they have been
in the past and it has worked all the way around. That move into the
mortgage arena helped us tremendously over the last couple of years get past
the crisis as the discussion I had with the regulators as we were getting
into commercial real estate (lending), we were getting into C&I (commercial
& industrial lending), when the other banks are all getting out, running
away like the house is on fire. In my mind the house has burnt down and we
are picking up the leftover assets and commercial real estate. People are
still buying and trading businesses. Commercial and industrial businesses
are still growing and still need bankers. By not having any of the problem
loans and the economic overhang from 2008-2009, it has enabled us to be
pretty aggressive in the market place with very few competitors.
CEOCFO:
There are many banks now with an online presence, how do people find you and
who is using your services?
Mr. Becker:
When we first launched everybody figured it would be the college students
with no cash and in reality in the early days we were a 50-plus year old
male professional, high net-worth, high income. That is intriguing, because
in most banking situations the female of the household is the banker. We are
still predominantly male, but we have moved that demographic to about an
average age in the 30’s. Our credit scores are very high, and our average
account balances are about four to five times what a traditional bank’s
average balance is. Our base clients who came on ten years ago were early
adopters, I think today we have the professional internet banker who has
tried other services and either had frustrations because they were half
internet and half traditional, so it was not really a full service suite. As
with any internet product today you shop effectively over the internet to
find comparisons on rates and fees and structure. We always paid
traditionally above market interest rates on all our savings products, and
we are a little below market on some of our lending products. We have a full
breadth of services online. We can do credit cards, debit cards and
mortgages; literally anything but coin and currency that you would do at a
traditional bank you can do in ours. The systems are all interconnected. You
can make an advance on a credit card on a Sunday afternoon, put it in your
checking account and walk out the door and get cash from an ATM. Even in
larger banks today, not all of those sub-systems are interconnected. You can
see them, but they do not work effectively, so if you tried that transaction
on a Sunday you would not see it until Tuesday morning after everything
updated Monday night. Therefore, it is the power of the products that we
have and the integration that we have and again better rates and virtually
no fees make us a very good product for consumers across the US.
CEOCFO: How do you ensure user-friendly
applications?
Mr. Becker:
One of the bases for it is twelve or fifteen years ago when we kind of put
the programs together, I came from the technology side and I preached to my
programmers for years and years that we needed to make this
consumer-friendly. We need to go to the lowest element; just because it is
wiz bang and it is neat, it does not mean anything if the average consumer
cannot use it. That was kind of our mantra from the beginning. We wanted to
be very convenient, and try to keep the customer from doing more than two
clicks deep into the site to get exactly to where they wanted to go. Even
with the advent of additional products and services over the years, we have
been able to keep that pretty true to form. You can get to almost any
product or service in the website within probably three clicks today; we
still try to keep it to two, but that does not always happen.
We had a media inquiry the other day asking, “Why are all (other) bank
disclosures written in four-point Type?” We try to give the consumer the
right protections. We try to put it into legible format, and we try to make
it user-friendly. We have had interactive chat for thirteen years – since
the day we launched. We have a FAQ portion of the site that is dynamic.
Based upon a quarter end, there are a lot of questions about how much
interest did I get on my CD, or accounts etcetera. Those numbers kind of pop
up to the top, so it moves based on the inquiries and activities of the
consumer.
From day one we preached internally that the real differentiator for us is
customer service. There are a lot of banks, and there are a lot of folks
competitive in the internet space. You have our rates and our services, but
it really is that customer service component that makes us different from
the rest of the world. We have harped on that from the day that we came on
board. We have very knowledgeable banking specialists on the backend.
Actually now with our interactive chat, if you become accustomed to working
with a particular customer service rep, you can go to a page on our site and
seek out that particular rep. You will see their image. It is not a direct
photo, but kind of a character of them on the website and if it is grayed
out it means they are busy with another person or on the phone. We try to
put a lot of human element in a very sterile internet environment and I
think we have been very successful. We have done a couple loyalty surveys of
our client base over the years and the outside firms that we hire we just
absolutely blow people away with 80% to 90% percent loyalty factors and
customers that just love the product and services.
CEOCFO: Do people tend to take advantage
of all of your services?
Mr. Becker:
A lot of people will come in on a single front, such as folks who have moved
and are getting a mortgage. We work with a lot of people on the mortgage
product because with the search on the web we have very attractive mortgage
rates and we are very efficient at turning the product around for consumers
on either a new purchase or a refinance. They get to looking at that and
then they realize that since they are moving they are going to have to
change banks anyway. We have a lot of customers in the RV industry. We are
the natural bank as they buy and finance the RV with us, to be the bank that
they sign up with, because we go wherever they go. They change banks once
and from that point forward we are right there with them. The mobility and
connectivity has really played out well for us.
CEOCFO:
Security is an ongoing question; why should people feel really safe banking
with First Internet Bank?
Mr. Becker:
In the financial arena we have security features and things built into the
website probably much stronger than the retail community. In a lot of
respects, we are perpetually checking the systems and trying to stay one
step ahead of the trouble makers. The thing that I tell people when you
really think about internet banking, it is a pretty closed loop system. When
we launched the bank and I was doing a lot of media tours around the country
or talking to radio personalities or folks like yourself, I would actually
give the consumer my account number and my pin to log in, because the
reality is, I could go change the pin as soon as our call was over. You
could not see it, but to get you into the site and lead you around it
enabled people to do it and if somebody steals my log-in and access an ID,
they really cannot do anything with it. They can mess with my accounts, move
money around, but if they set up a new bill-pay and they are trying to pay
themselves or a vendor of theirs, I would get an email message that says it
has happened. I get email alerts. If there is a large transfer of funds or
some strange activity that I am not anticipating then I will get an email
alert from the system telling me that something has happened on my account.
Therefore, there are a lot of safeguards. If I want a check, it is going to
be mailed to my home address. I cannot initiate a wire transfer. I can make
the request of a wire transfer, but we still go back to talk to the true
account holder before that wire is consummated, so it really is a pretty
closed loop system. Other than making your life a little bit miserable they
cannot do anything to mess with your finances and really get your cash.
CEOCFO:
Are there any products or services you are not offering that you would like
to add?
Mr. Becker:
We have such a great service via the web, we are probably a little later to
market than a lot of folks have been adding the phone access through the
smart phone with an iPhone or iPad or Android app. Our web connectivity is
so robust that we did not want to take a step back, so we had to wait until
the apps caught up with the feature functionality. Obviously, people with
smartphones and web access have been able to do all their banking and
bill-pay. We are rolling apps out over the course of the next two or three
months. We had remote image capture, so as the consumer gets the check from
Aunt Matilda, they can literally from their home scanner plug it on and send
it to use electronically. You do not even have to mail us deposits anymore.
We are going to step that up to the iPhone or the camera capture and those
applications are coming here over the next couple of months. That is
probably the last big consumer facing piece that we do not have
interactively but it is right on the horizon.
CEOCFO: What is the financial picture
like today for First Internet Bancorp?
Mr. Becker:
The bank is doing great. We had the best year in the history of the bank
this past year in part because of the additional services that we have been
able to add the commercial real estate, the small business lending and the
C&I programs. Almost from day one, probably 95% of our business had been
retail banking and consumers, and we are now adding some of that business
component. The mortgage services side of things, the mortgage origination,
we sell probably 98% of those mortgages on the secondary market, but that
fee income and the process we have created has been a great revenue. To give
you an idea of the feature functionality of the system, we originated more
loans last month than Landmark would do in a calendar year with less staff
than Landmark Savings Bank had. It is really a smooth efficient system both
from our origination and from the processing/underwriting side, and we are
offering that all across the United States, so it truly is a national
program. That has just helped us elevate our position. The fee income from
mortgage lending has been tremendous for us, but historically we did earn a
lot of fee income from retail banking. Most banks make about two-thirds of
their income from fees off the consumer and we just never had done that, so
we had a gap and we were playing on the spreads. We were trying to pay
consumers very high rates, yet at the same time we had a low infrastructure
cost, so we were able to do that. Now with the services income and the fee
income on the outside and some of the more traditional income off the
commercial side of things, it has really helped the bank’s bottom line.
CEOCFO: Do you work with small
businesses as well?
Mr. Becker:
We just started that. We hired a young lady, Connie Shepherd, back on the 1st
of November to build out the traditional small business C&I (Commercial and
Industrial) team. We just added two new employees, so now I have a team of
five and that is a little bit more the traditional way. That is kind of a
regional, central Indiana type product. We cannot roll that out nationally.
In the small business arena we learned you still need to have that kind of
face-to-face contact with the business person and go out and kick the tires.
You read all the stories of fraud and somebody is financing an empty lot
thinking that it is a multi-story building. You still need a little
footprint and presence. That is not saying that we could not regionalize
that over time and put some loan production officers out. For all the
reasons it is a great banking product for the consumers, it will be a great
banking product for the small business. Small business owners focus on their
customer in their world of eight to five. Their hours do not necessarily
match with the banking world, so by being able to electronically deposit
funds at eight at night or six in the morning or whatever and scan my checks
in, they can manage their balances. I have four or five small companies of
my own still; I can go in, look at a cash position at any point in time, and
move funds between the accounts. It really is a phenomenally convenient
service.
CEOCFO:
In closing, as the investment community paid attention to First Internet
Bancorp and what would you say to them?
Mr. Becker:
I would say no. We are kind of lumped in the mass. Historically, back in
1999 and 2000, a lot of internet banks launched and a lot of them failed for
a myriad of reasons. We are one of the last standing institutions around the
country and we are lumped in with the banks in total. We had a great year
last year, our book value at the bank is north of $26 a share and were
trading in the nines and tens; we are now up in the mid twelve’s. We are
trading at less than 50% of the book and honestly, the book value in the
bank is $26 a share. We could sell deposits, we could sell off the assets,
we could liquidate the bank and probably return $24 to $25 to a shareholder,
so that is a double return. That is the worst case scenario – if we close
the doors. We are a clean, solid financial institution. We have one or two
small REO (real estate owned) properties. We are a lean, clean machine, yet
we are kind of lumped in with the banking world. But we can improve on that
with time. If we add a person we can leverage them probably five to one over
what a traditional bank has, so as the economy comes back and stabilizes and
with most of the woes behind us, we are only going to get better with time.
We are very actively trying to pursue the billion dollar mark by 2015 and
our economies of scale there will be staggering. First Internet Bancorp
stock is a great deal today and it will be a better deal tomorrow.
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