First Internet Bancorp Reports First Quarter 2020 Results

Mittwoch, 22.04.20 22:52
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FISHERS, Ind. –

First Internet Bancorp (the “Company”) (Nasdaq: INBK), the parent company of First Internet Bank (the “Bank”), announced today financial and operational results for the first quarter of 2020. Net income for the first quarter of 2020 was $6.0 million, or $0.62 diluted earnings per share. This compares to net income of $7.1 million, or $0.72 diluted earnings per share, for the fourth quarter of 2019, and net income of $5.7 million, or $0.56 diluted earnings per share, for the first quarter of 2019.

“The current public health crisis confronting our country has required a dramatic shift in our operations as well as in those of our customers,” said David Becker, Chairman, President and Chief Executive Officer. “Our most important priority in this unprecedented environment is the health of our team, customers and shareholders.

“While the duration of the coronavirus pandemic still remains unknown, we have the financial strength to serve our valued customers throughout this difficult period.

“We have proactively implemented a payment deferral program that allows impacted clients to preserve cash and liquidity. Additionally, our lending teams have been enrolling small business clients in the SBA Paycheck Protection Program, which will provide much needed capital and liquidity to many of our small business entrepreneurs. As of April 16, we had received approvals from the SBA for 268 loans totaling $45.0 million. This was accomplished in 10 days through an all-hands-on-deck effort by the First Internet team, who have been working tirelessly for our customers.

Chairman Becker added, “I am pleased with our first quarter financial performance as well as our efforts to date in April. I thank the entire First Internet team for their resilience and dedication during these challenging times. The high level of engagement throughout the organization remains the key to our ongoing success.”

Net Interest Income and Net Interest Margin

Net interest income for the first quarter of 2020 was $15.0 million, compared to $15.4 million for the fourth quarter of 2019 and $16.2 million for the first quarter of 2019. On a fully-taxable equivalent basis, net interest income for the first quarter was $16.6 million, compared to $17.0 million for the fourth quarter of 2019 and $17.8 million for the first quarter of 2019.

Total interest income for the first quarter of 2020 was $36.2 million, a decrease of 4.3%, compared to the fourth quarter of 2019, and an increase of 3.6% compared to the first quarter of 2019. On a fully-taxable equivalent basis, total interest income for the first quarter was $37.8 million, a decrease of 4.3% compared to the fourth quarter of 2019, and an increase of 3.4% compared to the first quarter of 2019. The decline in total interest income compared to the fourth quarter of 2019 was driven primarily by an 11 basis point (“bp”) decrease in the yield on average interest-earning assets, as the average balance of those assets was down slightly quarter-over-quarter. The yield on interest-earning assets for the first quarter of 2020 declined to 3.62% from 3.73% in the prior quarter due primarily to the decline in short term rates during the quarter following the Federal Reserve rate cut in the fourth quarter of 2019 and additional rate cuts during the first quarter of 2020, which negatively impacted the yields earned on variable rate loans and securities as well as cash balances, which remained elevated throughout the quarter.

Total interest expense for the first quarter of 2020 was $21.2 million, a decrease of 5.7% compared to the fourth quarter of 2019, and an increase of 13.2% compared to the first quarter of 2019. The decrease in interest expense compared to the linked quarter was due mainly to a decline of 11 bps in the cost of interest-bearing deposits and a decrease of $21.5 million, or 0.6%, in the average balance of these deposits. The decrease in average interest-bearing deposit balances was due primarily to a $132.1 million, or 6.0%, decrease in the average balance of certificates and brokered deposits but was partially offset by a $113.7 million, or 15.1%, increase in the average balance of money market accounts. The decrease in deposit costs reflects a decline in the rates paid on money market accounts and certificates and brokered deposits as well as a shift in the deposit mix due to the growth in money market accounts. During the first quarter of 2020, the cost of money market deposits decreased by 18 bps and the cost of certificates and brokered deposits decreased 4 bps as rates paid on new production and renewals were below the rates paid on maturing time deposits.

Net interest margin (“NIM”) was 1.50% for the first quarter of 2020, compared to 1.51% for the fourth quarter of 2019 and 1.86% for the first quarter of 2019. On a fully-taxable equivalent basis, NIM decreased 2 bps to 1.65% for the first quarter of 2020, from 1.67% for the fourth quarter of 2019, and was down from 2.04% for the first quarter of 2019. The decrease in fully-taxable equivalent NIM compared to the linked quarter was due mainly to the decline in loan yields, which had a negative impact of 7 bps, and the lower yields earned on elevated cash balances, which had a negative impact of 5 bps. Additionally, other interest-earning assets and other interest-bearing liabilities had a combined negative impact of 2 bps. These were partially offset by deposit costs and the securities portfolio, which had a positive impact of 9 bps and 3 bps, respectively.

Noninterest Income

Noninterest income for the first quarter of 2020 was $6.2 million, up from $5.4 million for the fourth quarter of 2019, and up from $2.4 million for the first quarter of 2019. The increase compared to the fourth quarter of 2019 was driven primarily by an increase in revenue from mortgage banking activities, the gain on sale of loans sold during the quarter and loan servicing revenue, but partially offset by a decrease in the valuation of the servicing asset. The increase in mortgage banking revenue of $0.7 million, or 24.2%, was due mainly to an increase in origination volumes as mortgage interest rates continued to decline during the quarter. During the first quarter of 2020, the Company sold $99.9 million of public finance, single tenant lease financing and U.S. Small Business Administration (“SBA”) 7(a) guaranteed loans at premiums to book value. The Company also sold $90.8 million of portfolio residential mortgage loans, which included seasoned lower-yielding loans, at a modest discount to book value. Related to the increase in loan servicing revenue, the Company earned a full quarter’s worth of revenue from the SBA servicing portfolio acquired during the fourth quarter of 2019, which was partially offset by the loan servicing asset revaluation recognized during the quarter.

Noninterest Expense

Noninterest expense for the first quarter of 2020 was $13.5 million, compared to $12.6 million for the fourth quarter of 2019 and $11.1 million for the first quarter of 2019. The increase from the fourth quarter of 2019 was due primarily to a $0.6 million increase in salaries and employee benefits and a $0.3 million increase in loan expenses, but partially offset by a $0.1 million decrease in deposit insurance premium. The increase of $0.6 million in salaries and employee benefits was due mainly to seasonal resets of employee benefits and incentive compensation accruals, an increase in headcount which includes a full quarter’s impact of personnel growth in the Company’s small business lending platform and higher mortgage incentive compensation. The increase of $0.3 million in loan expenses was driven primarily by costs associated with nonperforming loans. The decline in deposit insurance premium was due primarily to a decline in the Bank’s one-year asset growth rate which is a component of the formula used to determine the premium amount.

Income Taxes

The Company reported income tax expense of $0.3 million for the first quarter of 2020 and an effective tax rate of 4.2%, compared to income tax expense of $0.6 million and an effective tax rate of 7.8% for the fourth quarter of 2019 and income tax expense of $0.5 million and an effective tax rate of 8.5% for the first quarter of 2019. Compared to the linked quarter, the decline in income tax expense and the effective tax rate was primarily due to a tax law change associated with the Coronavirus Aid, Relief and Economic Security (“CARES”) Act that now allows recognition of certain prior period net operating losses, partially offset by tax expense associated with the annual vesting of equity compensation.

Loans and Credit Quality

Total loans as of March 31, 2020 were $2.9 billion, a decrease of $71.5 million, or 2.4%, compared to December 31, 2019 and an increase of $52.2 million, or 1.8%, compared to March 31, 2019. Total commercial loan balances were $2.3 billion as of March 31, 2020, consistent with December 31, 2019 and an increase of $190.9 million, or 9.1%, compared to March 31, 2019. Compared to the linked quarter, production in healthcare finance, small business lending and construction was offset by lower balances in the single tenant lease financing and public finance loan portfolios due primarily to sales of $94.4 million of loans in these categories during the quarter.

Total consumer loan balances were $539.2 million as of March 31, 2020, a decrease of $94.3 million, or 14.9%, compared to December 31, 2019 and a decrease of $178.7 million, or 24.9%, compared to March 31, 2019. The decline in consumer loan balances from December 31, 2019 was due primarily to the sale of $90.8 million of portfolio residential mortgage loans, which included seasoned lower-yielding loans.

Total delinquencies 30 days or more past due increased to 0.32% of total loans as of March 31, 2020, up from 0.24% as of December 31, 2019 and 0.18% as of March 31, 2019. The increase in delinquencies compared to the linked quarter was due primarily to a residential mortgage loan with a balance of $0.9 million and a commercial real estate loan with a balance of $0.7 million becoming past due. Overall credit quality remained relatively stable as nonperforming loans to total loans was 0.26% as of March 31, 2020, compared to 0.23% at December 31, 2019 and 0.12% as of March 31, 2019.

The allowance for loan losses as a percentage of total loans was 0.79% as of March 31, 2020, compared to 0.74% as of December 31, 2019 and 0.66% as of March 31, 2019. While total loan balances declined $71.5 million, or 2.4%, compared to the linked quarter, the Company made adjustments to qualitative factors related to economic conditions in its allowance model to reflect the economic uncertainty resulting from the COVID-19 pandemic crisis. As a result, both the amount of the allowance for loan losses and the allowance as a percentage of total loans increased compared to December 31, 2019.

Net charge-offs of $0.4 million were recognized during the first quarter of 2020, resulting in net charge-offs to average loans of 0.06%, compared to 0.04% for the fourth quarter of 2019 and 0.05% for the first quarter of 2019. The provision for loan losses in the first quarter of 2020 was $1.5 million, compared to $0.5 million for the fourth quarter of 2019 and $1.3 million for the first quarter of 2019. The increase of $1.0 million, or 212.2%, compared to the linked quarter was due primarily to the adjustments to the economic qualitative factors in the allowance model discussed above.

Capital

As of March 31, 2020, total shareholders’ equity was $305.1 million, an increase of $0.2 million, or 0.1%, compared to December 31, 2019, primarily due to the net income earned during the quarter, partially offset by an increase in accumulated other comprehensive loss due to the net impact of fair value adjustments to the securities portfolio and interest rate swaps designated as cash flow hedges used for long term funding purposes. As a result of the COVID-19 pandemic crisis, the fixed income and interest rate markets experienced a significant level of volatility during March 2020 which negatively impacted the fair values of these financial instruments. Book value per common share decreased slightly to $31.13 as of March 31, 2020, down from $31.30 as of December 31, 2019 and up from $29.03 as of March 31, 2019. Tangible book value per share at March 31, 2020 was $30.65, down from $30.82 and up from $28.57, each as of the same reference dates.

The following table presents the Company’s and the Bank’s regulatory and other capital ratios as of March 31, 2020.

As of March 31, 2020

Company

Bank

 

Total shareholders' equity to assets

7.32%

8.03%

Tangible common equity to tangible assets 1

7.22%

7.93%

Tier 1 leverage ratio 2

7.82%

8.54%

Common equity tier 1 capital ratio 2

10.78%

11.79%

Tier 1 capital ratio 2

10.78%

11.79%

Total risk-based capital ratio 2

13.90%

12.56%

1 This information represents a non-GAAP financial measure. For a discussion of non-GAAP financial measures, see the section below entitled "Non-GAAP Financial Measures."
2 Regulatory capital ratios are preliminary pending filing of the Company's and the Bank's regulatory reports.

Conference Call and Webcast

The Company will host a conference call and webcast at 12:00 p.m. Eastern Time on Thursday, April 23, 2020 to discuss its quarterly financial results. The call can be accessed via telephone at (888) 348-3664. A recorded replay can be accessed through May 23, 2020 by dialing (877) 344-7529; passcode: 10142059.

Additionally, interested parties can listen to a live webcast of the call on Company's website at www.firstinternetbancorp.com. An archived version of the webcast will be available in the same location shortly after the live call has ended.

About First Internet Bancorp

First Internet Bancorp is a bank holding company with assets of $4.2 billion as of March 31, 2020. The Company’s subsidiary, First Internet Bank, opened for business in 1999 as 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 in select geographies. First Internet Bancorp’s common stock trades on the Nasdaq Global Select Market under the symbol “INBK” and is a component of the Russell 2000® Index. 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.

Forward-Looking Statements

This press release may contain forward-looking statements with respect to the financial condition, results of operations, trends in lending policies, timing of pending acquisitions, plans, objectives, future performance or business of the Company. Forward-looking statements are generally identifiable by the use of words such as “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “pending,” “plan,” “position,” “preliminary,” “remain,” “should,” “will,” “would” 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. The COVID-19 pandemic crisis is adversely affecting us, our customers, counterparties, employees, and third-party service providers, and the ultimate extent of the impacts on our business, financial position, results of operations, liquidity, and prospects remains uncertain. Continued deterioration in general business and economic conditions, including further increases in unemployment rates, or turbulence in domestic or global financial markets could adversely affect our revenues and the values of our assets and liabilities, reduce the availability of funding, lead to a tightening of credit, and further increase stock price volatility. In addition, changes to statutes, regulations, or regulatory policies or practices as a result of, or in response to COVID-19, could affect us in substantial and unpredictable ways. Other factors that may cause such differences include: failures or breaches of or interruptions in the communications and information systems on which we rely to conduct our business; failure of our plans to grow our commercial real estate, commercial and industrial, public finance, SBA and healthcare finance 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; failure to close any pending acquisitions; failure to satisfy or waive closing condition; and other factors identified in reports we file with the U.S. Securities and Exchange Commission. 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, tangible common equity to tangible assets, return on average tangible common equity, total interest income – FTE, net interest income – FTE, and net interest margin – FTE, are used by the Company’s management to measure the strength of its capital and analyze profitability, including its ability to generate earnings on tangible capital invested by its shareholders. Although management believes these non-GAAP measures are useful to investors by providing 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)
Dollar amounts in thousands, except per share data
 
 

Three Months Ended

March 31,

 

December 31,

 

March 31,

2020

 

2019

 

2019

 
Net income

$

6,019

$

7,096

$

5,696

 
Per share and share information
Earnings per share - basic

$

0.62

$

0.72

$

0.56

Earnings per share - diluted

 

0.62

 

0.72

 

0.56

Dividends declared per share

 

0.06

 

0.06

 

0.06

Book value per common share

 

31.13

 

31.30

 

29.03

Tangible book value per common share 1

 

30.65

 

30.82

 

28.57

Common shares outstanding

 

9,801,825

 

9,741,800

 

10,128,587

Average common shares outstanding:
Basic

 

9,721,485

 

9,825,784

 

10,217,637

Diluted

 

9,750,528

 

9,843,829

 

10,230,531

Performance ratios
Return on average assets

 

0.59%

 

0.69%

 

0.64%

Return on average shareholders' equity

 

7.78%

 

9.46%

 

7.91%

Return on average tangible common equity 1

 

7.90%

 

9.61%

 

8.04%

Net interest margin

 

1.50%

 

1.51%

 

1.86%

Net interest margin - FTE 1,2

 

1.65%

 

1.67%

 

2.04%

Capital ratios 3
Total shareholders' equity to assets

 

7.32%

 

7.44%

 

8.01%

Tangible common equity to tangible assets 1

 

7.22%

 

7.33%

 

7.89%

Tier 1 leverage ratio

 

7.82%

 

7.64%

 

8.34%

Common equity tier 1 capital ratio

10.78%

 

10.84%

 

11.66%

Tier 1 capital ratio

10.78%

 

10.84%

 

11.66%

Total risk-based capital ratio

13.90%

 

13.99%

 

13.68%

Asset quality
Nonperforming loans

$

7,443

$

6,732

$

3,432

Nonperforming assets

 

9,622

 

8,872

 

6,071

Nonperforming loans to loans

 

0.26%

 

0.23%

 

0.12%

Nonperforming assets to total assets

 

0.23%

 

0.22%

 

0.17%

Allowance for loan losses to:
Loans

 

0.79%

 

0.74%

 

0.66%

Nonperforming loans

 

307.1%

 

324.4%

 

549.0%

Net charge-offs to average loans

 

0.06%

 

0.04%

 

0.05%

Average balance sheet information
Loans

$

2,931,108

$

2,936,144

$

2,760,164

Total securities

 

630,879

 

597,049

 

523,265

Other earning assets

 

415,927

 

452,945

 

246,732

Total interest-earning assets

 

4,024,800

 

4,031,327

 

3,544,849

Total assets

 


Quelle: Business Wire



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