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.

About First Internet Bancorp

First Internet Bancorp is the parent company of First Internet Bank, which opened for business in 1999 as the nation's first state-chartered, FDIC-insured institution to operate solely via the Internet. With customers in all 50 states, First Internet Bank offers consumers services including checking, savings, money market, certificates of deposit and IRA accounts as well as consumer loans, residential mortgages, residential construction loans and home equity products. For commercial clients, it provides commercial real estate loans, commercial and industrial loans, asset-based lending and treasury management services. First Internet Bank has been recognized as one of the "Best Banks to Work For" by American Banker Magazine as well as a "Top Workplace" by The Indianapolis Star. Additional information about the Company is available at www.firstinternetbancorp.com and additional information about the Bank, including its products and services, is available at www.firstib.com.

Safe Harbor Statement

This press release may contain forward-looking statements with respect to the financial condition, results of operations, plans, objectives, future performance or business of the Company. Forward-looking statements are generally identifiable by the use of words such as "believe," "expect," "anticipate," "plan," "intend," "estimate," "may," "will," "would," "could," "should" or other similar expressions. Forward-looking statements are not a guarantee of future performance or results, are based on information available at the time the statements are made and involve known and unknown risks, uncertainties and other factors that could cause actual results to differ materially from the information in the forward-looking statements. Factors that may cause such differences include: failures of or interruptions in the communications and information systems on which we rely to conduct our business; our plans to grow our commercial real estate and commercial and industrial loan portfolios; competition with national, regional and community financial institutions; the loss of any key members of senior management; fluctuations in interest rates; general economic conditions; risks relating to the regulation of financial institutions; and other factors identified in reports we file with the SEC. All statements in this press release, including forward-looking statements, speak only as of the date they are made, and the Company undertakes no obligation to update any statement in light of new information or future events.

Non-GAAP Financial Measures

This press release contains financial information determined by methods other than in accordance with U.S. generally accepted accounting principles ("GAAP"). Non-GAAP financial measures, specifically tangible common equity, tangible assets, tangible book value per common share, return on average tangible common equity and tangible common equity to tangible assets are used by the Company's management to measure the strength of its capital and its ability to generate earnings on tangible capital invested by its shareholders. Although management believes these non-GAAP measures provide a greater understanding of its business, they should not be considered a substitute for financial measures determined in accordance with GAAP, nor are they necessarily comparable to non-GAAP performance measures that may be presented by other companies. Reconciliations of these non-GAAP financial measures to the most directly comparable GAAP financial measures are included in the table at the end of this release under the caption "Reconciliation of Non-GAAP Financial Measures."
     
First Internet Bancorp
Summary Financial Information (unaudited)
Amounts in thousands, except per share data  
     
Three Months Ended
March 31, December 31, March 31,
2015 2014 2014
Net income $ 2,063 $ 1,465 $ 600
 
Per share and share information
Earnings per share - basic $ 0.46 $ 0.33 $ 0.13
Earnings per share - diluted 0.46 0.32 0.13
Dividends declared per share 0.06 0.06 0.06
Book value per common share 22.16 21.80 20.60
Tangible book value per common share 21.11 20.74 19.54
Common shares outstanding 4,484,513 4,439,575 4,449,619
Average common shares outstanding:
Basic 4,516,776 4,499,316 4,494,670
Diluted 4,523,246 4,514,505 4,501,705
Performance ratios
Return on average assets 0.84 % 0.62 % 0.30 %
Return on average shareholders' equity 8.55 % 6.07 % 2.64 %
Return on average tangible common equity 8.98 % 6.38 % 2.79 %
Net interest margin 2.84 % 2.78 % 2.51 %
Capital ratios 1
Tangible common equity to tangible assets 9.18 % 9.54 % 10.31 %
Tier 1 leverage ratio 9.52 % 9.87 % 10.88 %
Common equity tier 1 capital ratio 11.99 % 12.55 % 15.14 %
Tier 1 capital ratio 11.99 % 12.55 % 15.14 %

Total risk-based capital ratio
13.18 % 13.75 % 16.57 %
Asset quality
Nonperforming loans $ 246 $ 296 $ 1,352
Nonperforming assets 4,818 4,866 6,912
Nonperforming loans to loans receivable 0.03 % 0.04 % 0.25 %
Nonperforming assets to total assets 0.47 % 0.50 % 0.81 %
Allowance for loan losses to:
Loans receivable 0.83 % 0.79 % 1.01 %
Nonperforming loans 2,592.7 % 1,959.5 % 398.5 %
Net charge-offs (recoveries) to average
loans receivable (0.07 %) 0.03 % 0.15 %
Average balance sheet information
Loans receivable $ 745,454 $ 708,053 $ 515,946
Securities available for sale 145,241 129,692 151,454
Other earning assets 41,643 34,242 97,432
Total interest-earning assets 967,186 909,495 786,506
Total assets 995,851 938,685 819,010
Noninterest-bearing deposits 22,265 21,118 18,159
Interest-bearing deposits 761,917 725,740 679,962
Total deposits 784,182 746,858 698,121
Shareholders' equity 97,844 95,832 92,054

1 Regulatory capital ratios are preliminary pending filing of the Company's regulatory reports
     
First Internet Bancorp
Condensed Consolidated Balance Sheets (unaudited, except for December 31, 2014)
Amounts in thousands
   
March 31, December 31, March 31,
2015 2014 2014
Assets
Cash and due from banks $ 1,472 $ 1,940 $ 2,762
Interest-bearing demand deposits 38,100 26,349 54,698
Interest-bearing time deposits 2,000 2,000 2,500
Securities available for sale, at fair value 163,676 137,518 204,869
Loans held-for-sale 27,584 34,671 17,273
Loans receivable 767,682 732,426 532,249
Allowance for loan losses   (6,378 )   (5,800 )   (5,388 )
Net loans receivable 761,304 726,626 526,861
Accrued interest receivable 3,040 2,833 2,662
Federal Home Loan Bank of Indianapolis stock 5,350 5,350 2,943
Cash surrender value of bank-owned life insurance 12,423 12,325 12,031
Premises and equipment, net 7,040 7,061 6,836
Goodwill 4,687 4,687 4,687
Other real estate owned 4,488 4,488 4,651
Accrued income and other assets   4,513     4,655     5,346  
Total assets $ 1,035,677   $ 970,503   $ 848,119  
 
Liabilities
Non-interest bearing deposits $ 19,178 $ 21,790 $ 17,047
Interest-bearing deposits   801,991     736,808     710,605  
Total deposits 821,169 758,598 727,652
Advances from Federal Home Loan Bank 106,921 106,897 21,819
Subordinated debt 2,894 2,873 2,809
Accrued interest payable 104 97 83
Accrued expenses and other liabilities   5,227     5,253     4,112  
Total liabilities   936,315     873,718     756,475  
Shareholders' equity
Voting common stock 72,032 71,774 71,378
Retained earnings 26,938 25,146 22,233
Accumulated other comprehensive income (loss)   392     (135 )   (1,967 )
Total shareholders' equity   99,362     96,785     91,644  
Total liabilities and shareholders' equity $ 1,035,677   $ 970,503   $ 848,119  
 
     
First Internet Bancorp
Condensed Consolidated Statements of Income (unaudited)
Amounts in thousands, except per share data
     
Three Months Ended
March 31, December 31, March 31,
2015 2014 2014
Interest income
Loans $ 8,390 $ 7,957 $ 6,129
Securities - taxable 722 615 750
Securities - non-taxable - - 58
Other earning assets   75     51     96  
Total interest income   9,187     8,623     7,033  
Interest expense
Deposits 1,953 1,913 1,860
Other borrowed funds   460     335     307  
Total interest expense   2,413     2,248     2,167  
Net interest income 6,774 6,375 4,866
Provision for loan losses 442 387 147
Net interest income after provision      
for loan losses   6,332     5,988     4,719  
Noninterest income
Service charges and fees 176 174 167
Mortgage banking activities 2,886 1,842 900
Gain on sale of securities - - 359
Loss on asset disposals (14 ) (19 ) (13 )
Other   100     101     98  
Total noninterest income   3,148     2,098     1,511  
Noninterest expense
Salaries and employee benefits 3,578 3,129 3,007
Marketing, advertising and promotion 452 307 380
Consulting and professional fees 592 595 433
Data processing 248 277 234
Loan expenses 181 168 114
Premises and equipment 642 733 701
Deposit insurance premium 150 154 144
Other   414     516     425  
Total noninterest expense   6,257     5,879     5,438  
Income before income taxes 3,223 2,207 792
Income tax provision   1,160     742     192  
Net income $ 2,063   $ 1,465   $ 600  
 
Per common share data
Earnings per share - basic $ 0.46 $ 0.33 $ 0.13
Earnings per share - diluted $ 0.46 $ 0.32 $ 0.13
Dividends declared per share $ 0.06 $ 0.06 $ 0.06

All periods presented have been reclassified to conform to the current period classification.
                 
First Internet Bancorp
Average Balances and Rates (unaudited)
Amounts in thousands
     
Three Months Ended
March 31, 2015 December 31, 2014 March 31, 2014
Average Interest / Yield / Average Interest / Yield / Average Interest / Yield /
Balance Dividends Cost Balance Dividends Cost Balance Dividends Cost
Assets
Interest-earning assets
Loans, including loans held for sale $ 780,302 $ 8,390 4.36 % $ 745,561 $ 7,957 4.23 % $ 537,620 $ 6,129 4.62 %
Securities - taxable 145,241 722 2.02 % 129,692 615 1.88 % 144,213 750 2.11 %
Securities - non-taxable - - 0.00 % - - 0.00 % 7,241 58 3.25 %
Other earning assets   41,643     75 0.73 %   34,242     51 0.59 %   97,432     96 0.40 %
Total interest-earning assets 967,186 9,187 3.85 % 909,495 8,623 3.76 % 786,506 7,033 3.63 %
 
Allowance for loan losses (5,883 ) (5,535 ) (5,450 )
Noninterest earning-assets   34,548     34,725     37,954  
Total assets $ 995,851   $ 938,685   $ 819,010  
 
Liabilities
Interest-bearing liabilities
Regular savings accounts $ 22,099 $ 32 0.59 % $ 19,545 $ 29 0.59 % $ 18,541 $ 28 0.61 %
Interest-bearing demand deposits 75,405 102 0.55 % 68,968 95 0.55 % 70,347 95 0.55 %
Money market accounts 274,312 492 0.73 % 274,015 502 0.73 % 262,982 474 0.73 %
Certificates and brokered deposits   390,101     1,327 1.38 %   363,212     1,287 1.41 %   328,092     1,263 1.56 %
Total interest-bearing deposits 761,917 1,953 1.04 % 725,740 1,913 1.05 % 679,962 1,860 1.11 %
Other borrowed funds   109,787     460 1.70 %   91,700     335 1.45 %   25,156     307 4.95 %
Total interest-bearing liabilities 871,704 2,413 1.12 % 817,440 2,248 1.09 % 705,118 2,167 1.25 %
 
Noninterest-bearing deposits 22,265 21,118 18,159
Other noninterest-bearing liabilities   4,038     4,295     3,679  
Total liabilities 898,007 842,853 726,956
 
Shareholders' equity   97,844     95,832     92,054  
Total liabilities and shareholders' equity $ 995,851   $ 938,685   $ 819,010  
     
Net interest income $ 6,774 $ 6,375 $ 4,866
 
Interest rate spread 2.73 % 2.67 % 2.38 %
 
Net interest margin 2.84 % 2.78 % 2.51 %
 
           
First Internet Bancorp
Loans and Deposits (unaudited)
Amounts in thousands
     
March 31, 2015 December 31, 2014 March 31, 2014
Amount Percent Amount Percent Amount Percent
Commercial loans
Commercial and industrial $ 83,849 11.0 % $ 77,232 10.5 % $ 63,373 11.9 %
Owner-occupied commercial real estate 38,536 5.0 % 34,295 4.7 % 24,976 4.7 %
Investor commercial real estate 18,491 2.4 % 22,069 3.0 % 26,219 4.9 %
Construction 26,847 3.5 % 24,883 3.4 % 22,460 4.2 %
Single tenant lease financing   227,229 29.6 %   192,608 26.3 %   105,847 19.9 %
Total commercial loans 394,952 51.5 % 351,087 47.9 % 242,875 45.6 %
 
Consumer loans
Residential mortgage 215,910 28.1 % 220,612 30.1 % 143,355 26.9 %
Home equity 54,838 7.2 % 58,434 8.0 % 36,676 6.9 %
Trailers 63,638 8.3 % 63,288 8.7 % 67,340 12.7 %
Recreational vehicles 31,023 4.0 % 30,605 4.2 % 33,892 6.4 %
Other consumer loans   2,531 0.3 %   3,201 0.4 %   3,462 0.6 %
Total consumer loans 367,940 47.9 % 376,140 51.4 % 284,725 53.5 %
 
Net deferred loan fees, premiums and discounts 4,790 0.6 % 5,199 0.7 % 4,649 0.9 %
           
Total loans receivable $ 767,682 100.0 % $ 732,426 100.0 % $ 532,249 100.0 %
 
 
March 31, 2015 December 31, 2014 March 31, 2014
Amount Percent Amount Percent Amount Percent
Deposits
Regular savings accounts $ 23,367 2.8 % $ 20,776 2.7 % $ 21,790 3.0 %
Noninterest-bearing deposits 19,178 2.3 % 21,790 2.9 % 17,047 2.3 %
Interest-bearing demand deposits 82,982 10.1 % 74,238 9.8 % 76,447 10.5 %
Money market accounts 280,740 34.2 % 267,046 35.2 % 271,698 37.3 %
Certificates of deposits 401,347 48.9 % 361,202 47.6 % 322,883 44.4 %
Brokered deposits   13,555 1.7 %   13,546 1.8 %   17,787 2.5 %
Total deposits $ 821,169 100.0 % $ 758,598 100.0 % $ 727,652 100.0 %
 
     
First Internet Bancorp
Reconciliation of Non-GAAP Financial Measures
Amounts in thousands, except per share data
 
Three Months Ended
March 31, December 31, March 31,
2015 2014 2014
Total equity - GAAP $ 99,362 $ 96,785 $ 91,644
Adjustments:
Goodwill   (4,687 )   (4,687 )   (4,687 )
Tangible common equity $ 94,675   $ 92,098   $ 86,957  
 
Total assets - GAAP $ 1,035,677 $ 970,503 $ 848,119
Adjustments:
Goodwill   (4,687 )   (4,687 )   (4,687 )
Tangible assets $ 1,030,990   $ 965,816   $ 843,432  
 
Common shares outstanding 4,484,513 4,439,575 4,449,619
 
Book value per common share $ 22.16 $ 21.80 $ 20.60
Effect of goodwill   (1.05 )   (1.06 )   (1.06 )
Tangible book value per common share $ 21.11   $ 20.74   $ 19.54  
 
Total shareholders' equity to assets ratio 9.59 % 9.97 % 10.81 %
Effect of goodwill   (0.41 %)   (0.43 %)   (0.50 %)
Tangible common equity to tangible assets ratio   9.18 %   9.54 %   10.31 %
 
Total average equity - GAAP $ 97,844 $ 95,832 $ 92,054
Adjustments:
Average goodwill   (4,687 )   (4,687 )   (4,687 )
Average tangible common equity $ 93,157   $ 91,145   $ 87,367  
 
Return on average shareholders' equity 8.55 % 6.07 % 2.64 %
Effect of goodwill   0.43 %   0.31 %   0.15 %
Return on average tangible common equity   8.98 %   6.38 %   2.79 %

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