First Internet Bancorp (OTCBB:FIBP), parent company of First Internet Bank of Indiana (www.firstib.com), a premier provider of online retail and business banking services nationwide, today announced unaudited results for the quarter and first half ended June 30, 2012.
“First Internet Bank continues to build its reputation as the premier Web-based resource for residential mortgage loans,” stated David Becker, chairman and CEO. “In today’s interest rate environment, mortgage refinancings comprise the majority of our mortgages originated. Our accelerated Web-based marketing, however, is building First Internet’s visibility among homebuyers as well, resulting in those borrowers turning to us as a leading resource for their mortgage loans. We anticipate this trend will continue, which will be a positive for creating balance in our mortgage business.
“From mortgages to everyday banking services, our retail customers tend to be technologically savvy, mobile, and maintain balances significantly above average,” said Becker. “We definitely see customers looking for an alternative to the largest banks – one that gives them the convenience of leading-edge Internet capabilities combined with high quality service and fewer and lower transaction and account fees. We don’t want to depend on service charges and fees to generate income. We strive to offer a lending and banking experience with no surprises and lots of satisfaction.”
He explained First Internet Bank’s efficient Internet-based operational model has enabled the bank to offer competitive rates and options such as no-fee and interest-bearing checking accounts. Without any bricks and mortar locations, the bank can profitably work with a lower net interest margin than can traditional community banks. He pointed out that by operating in all 50 states, First Internet can target particularly promising markets for both loans and deposits.
Income Statement, Investment and Margins
Net income for second quarter 2012 was $1.28 million or $0.67 per fully diluted share compared with $828,000 or $0.43 per fully diluted share in second quarter 2011. Net interest income after provision for loan losses was $3.27 million in second quarter 2012 compared with $3.16 million in second quarter 2011.
By re-pricing accounts to reflect the continuing low-interest rate environment and a reduced use of wholesale deposits, the company lowered its total interest expense in second quarter 2012 to $2.16 million compared with $2.47 million in second quarter 2011.
Becker commented: “We are generating tremendous growth while maintaining a very acceptable net interest margin in an environment with significant margin pressure. Because we don’t have to support a bricks and mortar network, we can accept lower margins than community banks and still generate strong profits.”
Total noninterest income in second quarter 2012 was $2.24 million compared with $601,000 in second quarter 2011, primarily reflecting growth in gain on loans sold of $2.03 million compared with $407,000 in the prior year’s second quarter.
Total noninterest expense in second quarter 2012 was $3.80 million compared with $2.71 million in second quarter 2011. Non-interest expense in first half 2012 was $7.68 million compared with $5.36 million in first half 2011. Becker explained this increase was due to an increase in marketing expenditures to drive mortgage growth, new hires, performance-based compensation increases, and a one-time restructuring expense of approximately $400,000 taken in first half.
“While keeping our operations extremely efficient, we have hired a number of loan processors and account representatives to drive growth in our residential mortgage business and handle the increased volume of incoming loan requests,” said Becker. “We have also built an outstanding commercial and industrial and commercial real estate team to serve high quality mid-sized commercial customers.
“As the economy recovers, there is tremendous opportunity to serve businesses that have been stripped of borrowing options,” Becker remarked. “The large banks have focused on the largest customers, while many community banks lack the capital to make commercial loans. We’ve hired experienced commercial bankers eager to work with what has now become a very underserved market.”
He said the company anticipates that, over time, increased commercial lending will add balance to the loan portfolio and may contribute to non-interest bearing deposits. “It’s a relatively small percentage of our business at this time,” he explained, “but the team has well exceeded its benchmarks. Between current market conditions and our strong capital base, we believe we are poised for growth and success.”
Balance Sheet Growth and Capital Position
The company’s reported assets of $623.95 million was an all-time high for First Internet Bancorp and represented a 15.9% increase over total assets of $538.49 million at June 30, 2011. Net loans after allowance for loan losses were $341.57 million at June 30, 2012 compared with $343.55 million at June 30, 2011. This reflected the company’s focus on originating and selling residential loans to the secondary market, rather than retaining those loans.
Becker said the company’s asset quality, which has been consistently higher than many peers’ because the company did not engage in speculative or high-risk real estate lending in past years, continues to improve. Nonperforming loans plus past due loans as a percentage of total assets was 1.77% at June 30, 2012 compared with 2.07% at June 30, 2011. As a percentage of total loans, nonperforming loans plus past due loans declined to 2.90% at June 30, 2012 compared with 3.10% at June 30, 2011.
“We’re at the point where our non-performing assets are approaching the parameters of what’s expected in a robust and healthy loan portfolio,” Becker noted. “Most of our mortgage originations are sold to the secondary market, and we believe the continuing strong demand for these originated loans reflects the quality of the loans we generate through our strong credit culture and risk management procedures.”
First Internet is well capitalized under regulatory capital guidelines, with Tier 1 capital to average assets ratio of 8.34% at the bank and 8.54% at the holding company.
About First Internet Bancorp
First Internet Bancorp (OTC Bulletin Board: FIBP), the parent company of First Internet Bank of Indiana, is privately capitalized with over 220 private and corporate investors. First Internet Bank opened for business in 1999. The Bancorp became effective March 21, 2006.
About First Internet Bank
First Internet Bank of Indiana (First IB) is the first state-chartered, FDIC-insured institution to operate solely via the Internet and has customers in all 50 states. Deposit services include checking accounts, regular and money market savings accounts with industry-leading interest rates, CDs and IRAs. First IB also offers consumer loans, conforming mortgages, jumbo mortgages, home equity loans and lines of credit, and commercial loans. First IB is a wholly owned subsidiary of First Internet Bancorp.
Safe Harbor Statement
Statements in this press release which express “belief,” “intention,” “expectation,” and similar expressions, identify forward-looking statements. Such forward-looking statements are based on the beliefs of the Company’s management, as well as assumptions made by, and information currently available to, such management. Such statements are inherently uncertain and there can be no assurance that the underlying assumptions will prove to be accurate. Actual results could differ materially from those contemplated by the forward-looking statements. Any forward-looking statements in this release are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995.
Financial Tables Follow
|Consolidated Balance Sheet ($000s) (Unaudited1)|
|Cash and due from banks||623||1,344|
|Securities - AFS||150,267||182,670|
|Loans held for sale||9,529||34,960|
|Net deferred (fees)/expenses||3,881||3,954|
|Allowance for loan losses||(6,080||)||(5,727||)|
|Accrued interest receivable||2,187||2,263|
|Bank owned life insurance||8,013||11,346|
|Other real estate owned||2,293||750|
|Non-interest bearing demand deposits||12,784||13,588|
|Interest bearing demand deposits||57,357||64,458|
|Savings and money market deposits||160,226||200,287|
|Accrued interest payable||116||115|
|Accrued payroll and related expenses||954||1,140|
|Total liabilities & equity||538,485||623,945|
|Consolidated Income Statement ($000s) (Unaudited1)|
|Quarter Ended June 30|
|Other interest income||17||19|
|Total interest income||5,972||5,993|
|Deposit interest expense||2,139||1,826|
|Other interest expense||335||338|
|Total interest expense||2,474||2,164|
|Net interest income||3,498||3,829|
|Provision for loan losses||336||564|
|Net interest income after provision||3,162||3,265|
|Service charges and fees||298||228|
|Gain on loans sold||407||2,034|
|Other-than-temporary impairment loss||(150||)||(92||)|
|Loss on asset disposals||(30||)||(31||)|
|Other non-interest income||76||98|
|Total non-interest income||601||2,237|
|Salaries and employee benefits||1,283||1,929|
|Marketing, advertising and promotion||190||341|
|Consulting and professional fees||170||272|
|Premises and equipment||313||350|
|Deposit insurance premiums||251||121|
|Other non-interest expense||184||241|
|Total non-interest expense||2,714||3,795|
|Income before taxes||1,049||1,707|
|Weighted average shares||1,905,595||1,911,842|
|Income per share: Basic and diluted||0.43||0.67|
|Consolidated Income Statement ($000s) (Unaudited1)|
|Six Months Ended June 30|
|Other interest income||32||37|
|Total interest income||11,896||12,084|
|Deposit interest expense||4,307||3,646|
|Other interest expense||670||677|
|Total interest expense||4,977||4,323|
|Net interest income||6,919||7,761|
|Provision for loan losses||859||1,134|
|Net interest income after provision||6,060||6,627|
|Service charges and fees||592||493|
|Gain on loans sold||790||3,785|
|Other-than-temporary impairment loss||(433||)||(92||)|
|Loss on asset disposals||(179||)||(101||)|
|Other non-interest income||150||190|
|Total non-interest income||920||4,275|
|Salaries and employee benefits||2,504||3,920|
|Marketing, advertising and promotion||294||732|
|Consulting and professional fees||337||599|
|Premises and equipment||680||762|
|Deposit insurance premiums||499||219|
|Other non-interest expense||365||489|
|Total non-interest expense||5,355||7,677|
|Income before taxes||1,625||3,225|
|Weighted average shares||1,904,917||1,910,866|
|Income per share: Basic and diluted||0.71||1.27|
1 Financial results for the Bancorp are audited by external accountants on an annual basis; however, external auditors are not engaged to review quarterly information.