INBK reports earnings up 200% over prior year

Haven’t had a chance to read through all the details but here’s the release:

INDIANAPOLIS–(BUSINESS WIRE)-- First Internet Bancorp (NASDAQ:INBK), the parent company of First Internet Bank (www.firstib.com), a premier nationwide provider of online retail banking services and commercial banking services, announced today financial and operational results for the first quarter 2015.

First quarter net income was a record $2.1 million and diluted earnings per share were $0.46. This compares with fourth quarter 2014 net income of $1.5 million and diluted earnings per share of $0.32 and first quarter 2014 net income of $0.6 million and diluted earnings per share of $0.13.

David Becker, Chairman, President and Chief Executive Officer, commented, "Thanks to the hard work and dedication of our talented teams, we produced earnings growth for the fourth consecutive quarter. With focus and shared vision, we reached two significant milestones during the quarter.

"First, we surpassed $1.0 billion in total assets. As our organization grows, we expect to realize economies of scale that should allow us to generate higher returns. We continued our trend of strong loan growth as our commercial lending teams had another excellent quarter of production. Our investment in commercial lending is paying strong dividends, as commercial balances have increased $152.1 million, or 62.6%, over the past year and now represent more than 50% of our total loans. The commercial pipeline at the end of the first quarter is higher than it was at the end of the fourth quarter and looks extremely strong, leaving us optimistic about our ability to continue generating high quality assets. Furthermore, we generated strong deposit growth as balances increased $62.6 million, or 8.2%, and drove balance sheet expansion during the quarter.

“Second, we achieved a record level of quarterly net income, with quarterly earnings per share growth of 43.8% and significantly improved profitability compared to the fourth quarter 2014. Loan growth drove net interest income higher while operating expenses, excluding seasonal and equity-related compensation costs, were essentially flat quarter-over-quarter.”

Highlights for the first quarter 2015 included:

Diluted earnings per share increased $0.14, or 43.8%, compared to the linked quarter and $0.33, or 253.8%, compared to the first quarter 2014
Improved quarterly performance
Return on average assets of 0.84% compared to 0.62% in the linked quarter and 0.30% in the first quarter 2014
Return on average shareholders’ equity of 8.55% compared to 6.07% in the linked quarter and 2.64% in the first quarter 2014
Return on average tangible common equity of 8.98% compared to 6.38% in the linked quarter and 2.79% in the first quarter 2014
Continued strong revenue growth
Net interest income increased $0.4 million, or 6.3%, compared to the linked quarter and $1.9 million, or 39.2%, compared to the first quarter 2014
Mortgage banking revenue increased $1.0 million, or 56.7%, compared to the linked quarter and $2.0 million, or 220.7%, compared to the first quarter 2014
Total loan growth of $35.3 million, or 4.8%, compared to December 31, 2014 and $235.4 million, or 44.2%, compared to March 31, 2014
Continued strong performance in single tenant lease financing with balances increasing $34.6 million, or 18.0%, compared to the linked quarter and $121.4 million, or 114.7%, compared to March 31, 2014
C&I and owner-occupied CRE balances increased $10.9 million on a combined basis, or 9.7%, compared to the linked quarter and $34.0 million, or 38.5%, compared to March 31, 2014
Net interest margin (“NIM”) increased to 2.84%, or 6 bps compared to the linked quarter and 33 bps compared to the first quarter 2014
NIM benefited from the recapture of $0.1 million of interest related to a loan recovery during the quarter
NIM was negatively impacted by the conversion of $40.0 million of variable rate short term borrowings to long term fixed rate funding
Capital levels remain solid and continue to support loan growth
Tangible common equity to tangible assets of 9.18%
Common equity tier 1 capital ratio of 11.99%
Tier 1 capital ratio of 11.99%
Total risk-based capital ratio of 13.18%
Asset quality remains strong
Nonperforming loans to total loans receivable declined to 0.03% from 0.04% and nonperforming assets to total assets declined to 0.47% from 0.50% compared to the linked quarter.
The allowance for loan losses (“ALLL”) increased $0.6 million, or 10%, compared to the linked quarter with the ratio of ALLL to total loans increasing to 0.83% compared to 0.79% as of December 31, 2014.
Net Interest Income and Net Interest Margin

Net interest income for the first quarter was $6.8 million compared to $6.4 million for the fourth quarter 2014 and $4.9 million for the first quarter 2014. Compared to the linked quarter, total interest income increased $0.6 million, or 6.5%, and total interest expense increased $0.2 million, or 7.3%. The increase in total interest income was driven by a $37.4 million, or 5.3%, increase in average loans receivable and an increase in the yield earned on the loan portfolio as well as a $15.5 million, or 12.0%, increase in the average balance of securities available for sale and an increase in the yield earned on the securities portfolio. Total interest income also benefited from the recapture of $0.1 million of interest related to a loan recovery during the quarter.

The increase in interest expense during the quarter was due primarily to an increase in the cost of funds related to advances from the Federal Home Loan Bank. Early in the first quarter, $40.0 million of variable rate short term advances were converted to longer term funding with a six year maturity and a cost of funds of 1.67%. Additionally, interest expense related to deposits increased modestly due to a $36.2 million, or 5.0%, increase in the average balance of interest-bearing deposits.

Net interest margin was 2.84% for the first quarter compared to 2.78% for the fourth quarter 2014 and 2.51% for the first quarter 2014. Compared to the prior quarter, the yield on interest-earning assets increased 9 bps to 3.85%. Excluding the impact of the interest income associated with the loan recovery, the yield on interest-earning assets increased 3 bps to 3.79% compared to the prior quarter, driven by higher yields earned on commercial loans and investment securities, partially offset by lower yields on consumer loans and mortgage loans held for sale. The cost of interest-bearing liabilities during the quarter increased 3 bps to 1.12% driven primarily by the increase in the cost of funds related to Federal Home Loan Bank advances, offset by a slight decline in deposit funding costs.

Noninterest Income

Noninterest income for the first quarter was $3.1 million compared to $2.1 million for the fourth quarter 2014 and $1.5 million for the first quarter 2014. The increase of $1.0 million, or 50.0%, compared to the linked quarter was driven by an increase of $1.0 million, or 56.7%, in mortgage banking revenue resulting from an improvement in gain on sale margin and higher origination volumes.

Noninterest Expense

Noninterest expense for the first quarter was $6.3 million compared to $5.9 million for the fourth quarter 2014 and $5.4 million for the first quarter 2014. The increase of $0.4 million, or 6.4%, compared to the linked quarter was due to higher salaries and employee benefits and marketing expenses. The increase in salaries and employee benefits was driven primarily by equity compensation expense and seasonal resets on payroll taxes and other employee benefits. The increase in marketing expense was due primarily to higher online channel origination costs resulting from increased mortgage activity.

Income Taxes

Income tax expense was $1.2 million for the first quarter, resulting in an effective tax rate of 36.0%, compared to $0.7 million and an effective tax rate of 33.6% for the linked quarter and $0.2 million and an effective tax rate of 24.2% for the first quarter 2014. The increase in the effective tax rate compared to the linked quarter was due primarily to additional income tax expense associated with the vesting of certain equity compensation awards.

Loans and Credit Quality

Total loans as of March 31, 2015 were $767.7 million, increasing $35.3 million, or 4.8%, compared to December 31, 2014 and $235.4 million, or 44.2%, compared to March 31, 2014. Total commercial loans increased $43.9 million, or 12.5%, compared to the linked quarter driven by continued strong production in single tenant lease financing as well as solid growth in the commercial and industrial and owner-occupied commercial real estate portfolios.

Credit quality continues to remain strong as nonperforming loans to total loans receivable declined to 0.03% from 0.04% as of December 31, 2014 and 0.25% as of March 31, 2014. Additionally, nonperforming assets to total assets declined to 0.47% from 0.50% as of December 31, 2014 and 0.81% as of March 31, 2014. The allowance for loan losses was $6.4 million as of March 31, 2015 compared to $5.8 million as of December 31, 2014 and $5.4 million as of March 31, 2014. The allowance as a percentage of total nonperforming loans increased to 2,592.7% as of March 31, 2015 from 1,959.5% as of December 31, 2014 and 398.5% as of March 31, 2014.

Net recoveries of $0.1 million were recognized during the first quarter, resulting in net recoveries to average loans of 0.07% compared to net charge-offs to average loans of 0.03% for the fourth quarter 2014 and 0.15% for the first quarter 2014. The net recoveries during the first quarter were driven by a $0.4 million recovery of a residential mortgage loan, of which $0.3 million related to the recapture of principal previously charged off.

Capital

During the first quarter, total shareholders’ equity increased $2.6 million due primarily to net income earned for the quarter and the change in the unrealized gain/loss related to the investment portfolio, partially offset by declared dividends. As of March 31, 2015, the Company’s common equity tier 1, tier 1 and total risk-based capital ratios declined to 11.99%, 11.99% and 13.18% from 12.55%, 12.55% and 13.75% as of December 31, 2014, respectively, due to an increase in risk-weighted assets resulting from the strong commercial loan growth for the quarter. Tangible common equity to tangible assets declined 36 bps during the first quarter to 9.18% due to strong asset growth while tangible book value per share increased to $21.11 from $20.74 as of December 31, 2014.

Read more: http://www.nasdaq.com/press-release/first-internet-bancorp-r…

11 Likes

Hi all,

I had only a very quick look.

Some thoughts. I was looking for efficiency ratio to get to 65%. Well, they went to 63% (here lower is better), powered by a strong showing in mortgage banking revenue (non-interest income). It’s also encouraging to see net interest income cover non-interest income. This means the bank actually made money lending monies. Net interest margin also ticked up, so overall this looks like another quarter of solid execution.

This is an underfollowed company still trading at a good discount to book value. Clearly, market participants are skeptical but the execution looks measured, one that is looking to achieve long term growth.

Anirban.

6 Likes

Anirban, Great results on INBK! Thanks for suggesting it some time ago and keeping me interested and in it.
Saul

2 Likes

I love it Anirban. You and I identified this stock at the very beginning, and it is now starting to come around. This could move very quickly if they can grow and execute like BOFI. This remains a very solid investment value in my opinion and I remain optimistic for very significant growth with a 4% position in it.

Best,
Vic

1 Like