First Internet Bancorp: Turnaround Banking Story Taking Shape
Their mortgage banking business gained ground in Q3, with 23.2% QoQ growth in origination volume compared to 1.01% growth nationwide. Total assets grew 25.5% and net loans grew 59% YoY, while Tier 1 leverage ratio increased. A confluence of tailwinds down the road, including higher net interest margin, mortgage banking business growth, and more. This turnaround banking story is now taking shape, which bodes well for a great 2015 and beyond. The stock is trading at only 0.79x book value and 0.84x tangible book value (as of 12/9/2014)…
Q3 was indeed a blowout quarter for the company. Even though net interest income of $5.67 million missed consensus estimate of $5.85 million slightly by 3%, pretax net income of $1.94 million exceeded consensus ($1.23 million) by 58% while net income beat by 50% ($1.28 million actual versus $0.85 million projected). And EPS diluted of $0.28 was 47% above consensus estimate of $0.19.
The 3% miss in net interest income was largely due to the timing of certain commercial loans, as the company explained below.
A significant portion of the production did not close until late in the quarter, so the impact on average loan balances for the quarter was minimal but does leave us well positioned to continue our trend of strong net interest income growth entering the fourth quarter. Furthermore, the pipeline of commercial originations at the end of the third quarter was up substantially over levels as of June 30, 2014.
A credit recovery of $0.459 million (pretax) and gain on sale of securities of $0.054 million (pretax) helped boost net income, more than offsetting a $0.14 million (pretax, calculated) or so salaries and benefits charge during the quarter. Excluding these special items, however, pretax income ($1.57 million) would still have beat consensus by 28%, net income ($1.036 million) by 22% and EPS diluted ($0.23) by 21%.
Year-over-year, net interest income grew 30%, noninterest income 18%, revenue 27%, net income 76%, and EPS diluted 12%. The much subdued growth on EPS compared to net income was due to the dilutive impact of a secondary public offering conducted in 4Q13. Excluding special items, net income would still have grown 42%. However, EPS diluted would have declined 8%, again due to the dilutive impact just mentioned…
and lots and lots more