Looks like a good report. I will be back with a thorough analysis, but till then here’s the earnings 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 fourth quarter 2014 and for the twelve month period ended December 31, 2014.
Fourth quarter net income was $1.5 million and diluted earnings per share were $0.32. This compares with third quarter net income of $1.3 million and diluted earnings per share of $0.28 and fourth quarter 2013 net income of $0.7 million and diluted earnings per share of $0.19. For the twelve month period ended December 31, 2014, net income was $4.3 million and diluted earnings per share were $0.96 compared to net income of $4.6 million and diluted earnings per share of $1.51 for the twelve month period ended December 31, 2013. The comparability of diluted earnings per share between fourth quarter and twelve month periods in 2014 and 2013 is impacted by the effect on average diluted shares outstanding resulting from the Company’s offering of 1,587,000 shares of common stock occurring in the fourth quarter 2013.
Diluted earnings per share increased $0.04, or 14.3%, compared to the linked quarter and $0.13, or 68.4%, compared to the fourth quarter 2013
Continued strong revenue growth
Net interest income increased $0.7 million, or 12.4%, quarter-over-quarter and $1.4 million, or 28.4%, compared to the fourth quarter 2013
Mortgage banking revenue increased $0.2 million, or 12.5%, compared to the linked quarter and $0.9 million, or 101.3%, compared to the fourth quarter 2013
Total loan growth of $36.5 million, or 5.2%, compared to the linked quarter and $231.3 million, or 46.1%, compared to December 31, 2013
Strong performance in credit tenant lease financing with balances increasing 16.2% compared to the linked quarter and 128.8% year-over-year
Continued growth in C&I / owner-occupied CRE, increasing on a combined basis 7.5% compared to the linked quarter and 52.1% compared to December 31, 2013
Increased activity in construction real estate lending also contributed to the growth with balances increasing 38.7% compared to the linked quarter
Net interest margin improved 10 bps to 2.78% compared to the linked quarter driven by a 12 bps decline in the cost of interest-bearing liabilities
Capital levels remain solid while continuing to support loan growth
Tangible common equity to tangible assets of 9.54%
Tier 1 capital ratio of 12.55%
Total risk-based capital ratio of 13.75%
Strong asset quality continues to improve
Nonperforming loans declined $0.1 million, or 26.0%, with nonperforming loans to total loans declining 2 bps to 0.04% from 0.06% for the linked quarter
Nonperforming assets declined $0.2 million, or 4.0%, compared to the linked quarter and $2.3 million, or 32.3%, compared to December 31, 2013
David Becker, Chairman, President and Chief Executive Officer, commented, “We ended 2014 on an extremely positive note as the fourth quarter’s results represent our strongest performance of the year. Continued growth in net interest income and solid performance in mortgage banking drove an 11.3% increase in total revenue, net of interest expense, compared to the third quarter. When combined with our ability to effectively manage our operating costs, the revenue growth translated into quarterly earnings growth exceeding 14% and continued improvement in profitability metrics.
“We posted another excellent quarter of loan growth. Our elevated commercial pipeline at the end of September resulted in total commercial loan balances increasing $43.1 million, or 14.0%, during the quarter even though we experienced the early payoff of some larger credits. Our commercial real estate team continued to produce in credit tenant lease financing and capitalized on its relationships in construction originations. Additionally, our commercial and industrial team wrapped up the year with a solid quarter of new C&I and owner-occupied CRE originations and strong year-over-year growth. The level of new business opportunities continues to grow and we remain confident in our asset generating capabilities moving forward.
“Our mortgage banking team had another solid quarter. Our re-focused business model emphasizing purchase mortgage business produced consistent results, despite seasonal headwinds, while allowing us the flexibility to capitalize on increased refinance activity. Origination activity constantly improved throughout the year and our improved sales and marketing capabilities combined with the low interest rate environment provide significant momentum heading into 2015.
“We were especially pleased with the continued growth in net interest margin which expanded 10 bps during the quarter. We significantly reduced our cost of funds by actively managing the liability side of our balance sheet. While we remain focused on continuing to improve net interest margin, we took advantage of low interest rates and converted $40 million of short term borrowings to longer term funding in early 2015. This may negatively impact net interest margin growth in the near term but will leave us well positioned to benefit when rates begin to rise.”
Net Interest Income and Net Interest Margin
Net interest income for the fourth quarter was $6.4 million compared to $5.7 million for the third quarter and $5.0 million for the fourth quarter 2013. Compared to the linked quarter, total interest income increased $0.7 million, or 8.5%, and total interest expense declined less than $0.1 million, or 1.1%. The increase in total interest income was driven by a $75.7 million increase, or 12.0%, in average loans receivable balances, partially offset by a decline in the yield earned on the loan portfolio. Additionally, the impact of the loan growth was offset by a decline of $9.9 million, or 7.1%, in the average balance of the investment portfolio as well as a decline of 6 bps in the yield earned on investments. The decline in average investment balances was the result of portfolio restructuring efforts made in 2014, which concluded in the third quarter, to increase the liquidity profile and reduce the interest rate risk and duration of the portfolio.
The slight decrease in interest expense during the quarter was due primarily to a 3 bp decline in the cost of interest-bearing deposits driven by a lower cost of funds related to certificates of deposit. The decrease in interest expense related to deposits was partially offset by a small increase in expense related to borrowed funds resulting from an increase in advances from the Federal Home Loan Bank.
Net interest margin was 2.78% for the fourth quarter compared to 2.68% for the third quarter and 2.70% for the fourth quarter 2013. Compared to the prior quarter, the yield on interest-earning assets remained consistent at 3.76% as the growth in average loan balances and the migration of interest-earning assets from lower-yielding investment securities to higher-yielding commercial loans offset declines in the yields earned on the loan and investment portfolios. The cost of interest-bearing liabilities during the quarter declined 12 bps to 1.09% driven primarily by lower deposit costs and significantly lower funding costs related to borrowings.
Noninterest income for the fourth quarter was $2.1 million compared to $1.9 million for the third quarter and $1.2 million for the fourth quarter 2013. The increase of $0.2 million, or 8.0%, compared to the linked quarter was driven by an increase of $0.2 million, or 12.5%, in mortgage banking revenue. The increase in mortgage banking revenue was primarily a result of higher origination volumes as purchase originations were supplemented by increased refinance activity when interest rates dropped early in the fourth quarter.
Noninterest expense for the fourth quarter was $5.9 million compared to $5.8 million for the third quarter and $5.3 million for the fourth quarter 2013. The increase of $0.1 million, or 1.6%, compared to the linked quarter was due to higher consulting and professional fees and other noninterest expenses, offset by lower salaries and employee benefits, marketing costs and loan expenses.
Income tax expense was $0.7 million for the fourth quarter, resulting in an effective tax rate of 33.6%, compared to $0.7 million and an effective tax rate of 34.0% for the third quarter.
Loans and Credit Quality
Total loans as of December 31, 2014 were $732.4 million, increasing $36.5 million, or 5.2%, compared to the third quarter and $231.3 million, or 46.1%, compared to December 31, 2013. Total commercial loans increased $43.1 million, or 14.0%, compared to the linked quarter driven by continued strong production in credit tenant lease financing as well as solid growth in the commercial and industrial, construction real estate and owner-occupied commercial real estate portfolios.
Credit quality continues to remain strong as nonperforming loans to total loans receivable declined to 0.04% from 0.06% as of September 30, 2014 and 0.37% as of December 31, 2013. Additionally, nonperforming assets to total assets declined to 0.50% from 0.55% as of September 30, 2014 and 0.90% as of December 31, 2013. Compared to the linked quarter, total nonperforming loans declined $0.1 million, or 26.0%, and total nonperforming assets declined $0.2 million, or 4.0%, due primarily to lower levels of nonaccrual and delinquent loans and a modest decline in other real estate owned.
The allowance for loan losses was $5.8 million as of December 31, 2014 compared to $5.5 million as of September 30, 2014 and $5.4 million as of December 31, 2013. The allowance as a percentage of total nonperforming loans increased to 1,959.5% as of December 31, 2014 from 1,366.0% as of September 30, 2014 and 293.0% as of December 31, 2013.
During the fourth quarter, total shareholders’ equity increased $2.0 million due 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 December 31, 2014, the Company’s tier 1 and total capital ratios declined to 12.55% and 13.75% from 13.22% and 14.45% as of September 30, 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 23 bps during the fourth quarter to 9.54% due to strong asset growth while tangible book value per share increased to $20.74 from $20.29 as of September 30, 2014.