First Internet Bank entered into a loan and asset purchase agreement to acquire the small business lending division of First Colorado National Bank.
As of March 31, 2019, the balance of loans outstanding to be acquired was approximately $39 million, comprised primarily of SBA 7(a) loans. First Internet will also acquire a servicing portfolio consisting of guaranteed SBA 7(a) loans sold in the secondary market, which had a balance of approximately $112 million as of March 31, 2019. The SBA division professionals joining the bank will include loan production, credit, portfolio management and servicing personnel and operate out of two Chicago-area offices as well as one Indianapolis-area office.
David Becker, First Internet chairman, president and CEO, commented, “We are excited about this acquisition as it will significantly accelerate our efforts to expand access to affordable loans and serve our nation’s entrepreneurs. Last year, we began building a team with deep SBA experience because we see a tremendous opportunity to promote economic growth and job creation through government-guaranteed loan programs, while diversifying our sources of revenue in a capital efficient manner. We welcome the SBA civision professionals to First Internet, where they will be able to focus on leveraging the resources of a larger balance sheet and a more robust suite of banking services to support small business owners.”
At closing, total consideration for the acquisition of the SBA division and its assets will be paid in cash through a combination of cash on hand and proceeds from loan sales planned for the second quarter of 2019. The portfolio to be acquired consists primarily of adjustable rate loans and has a current weighted average coupon of 7.30%. First Internet expects to sell the guaranteed portion of new loans originated by the SBA division in the secondary market, which should enhance noninterest income through gains on the sales’ of those loans and servicing fee income.
The transaction is expected to close early in the third quarter of 2019, subject to customary closing conditions and the receipt of any required governmental and regulatory approvals.
Hovde Group is serving as financial advisor to First Internet and Faegre Baker Daniels as its legal advisor. The Capital Corporation is serving as financial and legal advisor to First Colorado.
Founded in 1999, First Internet Bank Bancorp was an industry pioneer in the branchless delivery of banking services. The bank provides consumer and small business deposit, consumer loan, residential mortgage, and specialty finance services nationally as well as commercial real estate loans, commercial and industrial loans, SBA financing and treasury management services. Its holding company has assets of $3.7 billion as of March 31, 2019.
