First Internet Bancorp Announces Fourth Quarter, Full Year 2011 Earnings

Published on Monday, 06 February 2012 09:20 Written by TradersHuddle Staff

INDIANAPOLIS-( Business Wire )-

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 full year ended December 31, 2011.

Highlights:

• The company grew total assets by 14% to $585.44 million at December 31, 2011, up from $503.92 million at December 31, 2010.
• Net loans rose 10% at year-end 2011 compared with year-end 2010 to $329.57 million, fueled by mortgage loan growth. Loans held for sale of $45.09 million at year-end compared with $5.01 million at year-end 2010.
• Allowance for Loan Loss / Non-accrual Assets + Past Due Loans at 46.7%.
• Total deposits grew 15% year-over-year, reflecting growth in core deposits.
• Tangible book value increased to $26.61 per share at December 31, 2011 versus $23.22 per share at December 31, 2010.
• Ongoing investments in technology, marketing outreach and hiring proven mortgage and commercial loan producers impacted earnings but supported new revenue growth.
• Commercial real estate (CRE) lending team, added in August 2010, exceeded targets in 2011 and is now complemented by a commercial & industrial lending team established in November 2011.
• Strong capital ratios and no TARP or SBLF funds accepted.

First Internet Bancorp reported 2011 net income of $3.19 million or $1.67 per diluted share, compared with $4.96 million or $2.61 per diluted share in 2010. For the quarter ended December 31, 2011, the company reported net income of $1.06 million or $0.56 per fully diluted share compared with $703,000 or $0.37 per fully diluted share in fourth quarter 2010.

“This was a watershed year for First Internet Bank,” said David Becker, chairman and CEO. “We achieved record assets, grew loans and built deposits while spending money judiciously to add people and capabilities that we expect will generate growth and diversify our loan and deposit portfolios. Our ability to attract additional core deposits helped First Internet Bank maintain net interest margin and continue to offer some of the most competitive lending rates in the nation.

“Our new team members in mortgage lending helped us keep pace with a high demand for mortgage loans. We closed 22% more loans in 2011 than the previous year, and have entered 2012 on a similar pace. Asset quality remained high, with loss reserves to nonperforming loans of 65.6%. We enter 2012 with the capital strength, asset quality and expanded lending teams that will allow us to pursue quality lending opportunities on a number of fronts.”

Income Statement, Investment and Margins

Net interest income after provision for loan losses for the year ended December 31, 2011, was $11.88 million compared with $13.58 million for the year ended December 31, 2010. The lower year-over-year total primarily reflected the lower interest rate environment for both assets and liabilities as well as a loan loss provision of $2.45 million in 2011 compared with $927,000 in 2010. The change in the loan loss provision, however, reflects a one-time reversal of a $2.374 million loss provision in 2010 when a commercial credit was re-collateralized, which contributed to 2010 net income and significantly reduced the company’s 2010 loss provision. Total interest income in 2011 was $23.94 million compared with $25.30 million in 2010, reflecting a highly competitive interest rate environment in mortgage lending.

“Our primary goal in 2011, which we successfully accomplished, was to drive revenue from loan originations,” explained Becker. “Most of these were 15- and 30-year fixed rate loans, which we prefer to place in the secondary market. We primarily retained high quality adjustable rate mortgages, which are currently set at historically low levels but which offer upside opportunity when interest rates begin to rise. These new loans made an important contribution to asset growth, which was a key goal for us in 2011.”

Total noninterest income in 2011 was up 25% to $4.56 million compared with $3.44 million in 2010. Gains on loans sold in 2011 increased 19% to $3.69 million compared with $3.10 million in 2010, reflecting strong growth in originated mortgage loans, particularly in second half 2011. Total noninterest income was impacted by a $367,500 non-cash write-off related to an investment in a startup bank. The company does not hold any other similar investments.

Total noninterest expense in 2011 was $11.48 million compared with $10.37 million in 2010, primarily reflecting increases in salaries and employee benefits resulting from new hires in mortgage and commercial lending, and accelerated spending for marketing.

For the quarter ended December 31, 2011, net interest income after loan loss provision was $2.75 million compared with $2.11 million for the quarter ended December 31, 2010, driven by lower interest expense and a decline in the provision for loan losses to $947,000 from $1.30 million. Total interest income in fourth quarter 2011 was $5.94 million compared with $5.95 million in fourth quarter 2010.

Total noninterest income in fourth quarter 2011 was $1.82 million compared with $1.57 million in fourth quarter 2010, primarily reflecting an increase in gain on loans sold to $2.26 million in fourth quarter 2011 compared with $1.57 million in the prior year’s fourth quarter.

“Our fourth quarter gains from loans sold demonstrates the strong demand we experienced in the second half of the year,” explained Becker. “This increased demand reflected strong word-of-mouth referrals and greater visibility resulting from our investment in web-based marketing initiatives, including Internet mortgage lender referral sites. We believe First Internet Bank offers one of the country’s most user-friendly web-based interfaces, backed by a team of experienced lending professionals who can provide superior service and response. The result is a high success rate in qualifying and closing our prospects.”

Balance Sheet Growth and Capital Position

Net loans after allowance for loan losses rose 10% to $329.57 million in 2011, compared with net loans after loss allowance of $299.55 million in 2010. The company had $45.09 million in closed loans held for sale at year-end 2011 compared with $5.01 million in 2010. The gains on these closed loans were recognized in the company’s 2011 noninterest income. At December 31, 2011 total deposits were $486.67 million, up 15% compared with $422.70 million at December 31, 2010.

Becker commented: “Growth in total deposits was particularly gratifying because throughout 2011, we significantly reduced First Internet Bank’s use of brokered deposits. Although brokered funds have played an important role in supporting lending, the cost benefit of replacing these with core deposits is clear.

“Our 2012 initiatives include expanding customer relationships to capture more deposit account opportunities. We feel there is a tremendous untapped opportunity in this area. We are also focused on growing direct deposit accounts with business customers as we expand commercial lending. Our success in this area could have a significant positive impact on total deposits and our cost of funds.”

In November 2011, First Internet Bank hired Connie J. Shepherd as Senior Vice President to lead the bank’s commercial and industrial lending effort. Previously, Ms. Shepherd has held senior loan management positions with Mellon Bank, National City Bank, and M&I Bank. The C&I lending initiative complements the Bank’s commercial real estate lending team, which was announced in August 2010.

First Internet Bancorp is well-capitalized under regulatory capital guidelines, with Tier 1 capital to average assets ratio of 8.54% at the bank and 8.74% at the holding company. Tier 1 to risk-based capital ratio was 10.89% at the bank and 11.15% at the holding company.

Becker concluded: “In 2011, we continued to invest in people and capabilities that will directly and positively impact growth and superior service. In addition to numerous hires of experienced professionals in commercial and mortgage lending, we upgraded technological and customer service capabilities in areas such as our mortgage lending platform. Adding cash management tools for our growing number of business customers and an updated consumer lending platform will take place in 2012. We plan to selectively add experienced personnel to drive revenues in mortgage and commercial lending, and maintain a more aggressive level of marketing.

“Although the nationwide economic recovery is slow, and the housing market remains soft, we serve customers in all 50 states because we aren’t tied to a particular market by bricks and mortar. We are able to identify promising markets and borrowers throughout the country, and we see enough promising improvement in the economy and home sales to feel confident we can significantly improve on our record number of 1,257 mortgage loans closed in 2011.

“We have been very pleased with the downward trend in loan delinquencies, particularly in second half 2011, which gives us confidence we can maintain high asset quality. I believe First Internet Bancorp has now achieved a size and scope to leverage our capacity and capital strength to rapidly grow revenue.”

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 240 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)
			December 31
			2010					2011
Cash and due from banks			2,354					1,582
Interest-bearing deposits			30,063					33,196
Securities - AFS			136,936					149,270
Loans held for sale			5,008					45,091
Gross loans			302,333					331,805
Net deferred (fees)/expenses			4,057					3,421
Allowance for loan losses			(6,845	)				(5,656	)
Net loans			299,545					329,570
Accrued interest receivable			2,095					2,129
FHLB stock			3,259					2,943
Bank owned life insurance			7,869					8,161
Goodwill			4,687					4,687
Other real estate owned			2,207					1,511
Other assets			9,892					7,300
Total Assets			503,915					585,440
Non-interest bearing demand deposits			9,893					15,870
Interest bearing demand deposits			58,075					64,006
Savings and money market deposits			139,415					173,334
Time deposits			215,320					233,455
Total deposits			422,703					486,665
FHLB advances			30,455					40,573
Accrued interest payable			126					120
Accrued payroll and related expenses			563					1,153
Other liabilities			1,171					1,506
			455,018					530,017
Common stock			41,246					41,306
Accumulated earnings			9,711					12,897
Accumulated OCI			(2,060	)				1,220
Shareholder’s Equity			48,897					55,423
Total Liabilities & Equity			503,915					585,440

Consolidated Income Statement ($000s) (Unaudited1)
			Quarter Ended December 31
			2010					2011
Securities income			1,283					1,151
Loan income			4,644					4,764
Other interest income			26					20
Total interest income			5,953					5,935
Deposit interest expense			2,220					1,895
Other interest expense			325					342
Total interest expense			2,545					2,237
Net interest income			3,408					3,698
Provision for loan losses			1,297					947
Net interest income after provision			2,111					2,751
Service charges and fees			315					282
Gain on loans sold			1,570					2,263
Other-than-temporary impairment loss			(224	)				(70	)
Loss on asset disposals			(166	)				(729	)
Other non-interest income			77					77
Total non-interest income			1,572					1,823
Salaries and employee benefits			1,312					1,440
Marketing, advertising and promotion			57					399
Consulting and professional fees			200					264
Data processing			240					220
Loan expenses			321					154
Premises and equipment			284					345
Deposit insurance premiums			237					119
Other non-interest expense			221					238
Total non-interest expense			2,872					3,179
Income before taxes			811					1,395
Tax provision			108					334
Net Income			703					1,061
Weighted average shares			1,902,284					1,908,323
Income per share: Basic and diluted			0.37					0.56

Consolidated Income Statement ($000s) (Unaudited1)
			Year Ended December 31
			2010					2011
Securities income			5,362					5,128
Loan income			19,868					18,752
Other interest income			66					64
Total interest income			25,296					23,944
Deposit interest expense			9,254					8,266
Other interest expense			1,531					1,355
Total interest expense			10,785					9,621
Net interest income			14,511					14,323
Provision for loan losses			927					2,440
Net interest income after provision			13,584					11,883
Service charges and fees			1,267					1,157
Gain on loans sold			3,098					3,690
Other-than-temporary impairment loss			(909	)				(626	)
Loss on asset disposals			(326	)				(968	)
Other non-interest income			307					306
Total non-interest income			3,437					3,559
Salaries and employee benefits			4,795					5,311
Marketing, advertising and promotion			269					936
Consulting and professional fees			729					777
Data processing			964					915
Loan expenses			735					526
Premises and equipment			1,150					1,481
Deposit insurance premiums			939					727
Other non-interest expense			789					810
Total non-interest expense			10,370					11,483
Income before taxes			6,651					3,959
Tax provision			1,696					773
Net Income			4,955					3,186
Weighted average shares			1,898,919					1,906,289
Income per share: Basic and diluted			2.61					1.67

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.

First Internet BancorpLaurinda Swank, 317-532-7909