First Internet Bancorp Reports Strong Earnings Growth in Second Quarter, Record First Half Results

First Internet Bancorp Reports Strong Earnings Growth in Second Quarter, Record First Half Results

INDIANAPOLIS--(BUSINESS WIRE)-- First Internet Bancorp (NAS: INBK) , parent company of First Internet Bank of Indiana (www.firstib.com), a premier nationwide provider of online retail banking services and commercial banking services, today announced unaudited financial results for the three months and six months ended June 30, 2013.

"We are reporting strong second quarter results," said David Becker, Chairman and CEO. "Year over year, second quarter net income rose 34%, our commercial loan portfolio grew 66%, and non-interest income increased 76%."


Highlights for the quarter ended June 30, 2013:

  • Net income was a record $1.71 million or $0.59 per diluted share in the second quarter 2013 compared with $1.28 million or $0.45 per diluted share in the second quarter 2012.

  • Return on average assets in second quarter 2013 increased to 1.07% from 0.83% in the prior year's second quarter, and return on average equity rose to 10.86% compared with 8.92% in second quarter 2012.

  • Total assets were $656.77 million at June 30, 2013, the highest in the company's history, compared with $623.95 million at June 30, 2012.

  • Mortgage originations grew 25% to $232.54 million in second quarter 2013 compared to $186.06 in the second quarter 2012.

  • The company's second quarter dividend of $0.06, following the company's 3-for-2 stock split in second quarter 2013, was the equivalent of a 50% increase of its quarterly cash dividend paid in first quarter 2013.

  • First Internet Bancorp common stock was added to the Russell Microcap Index, the MSCI USA Micro Cap Index and the ABA NASDAQ Community Bank Index.

Highlights for the six months ended June 30, 2013:

  • For the six months ended June 30, 2013, net income was $3.20 million or $1.11 per diluted share, a company record for first half earnings.

  • Commercial real estate and commercial & industrial loan activity was strong, with $45.54 million in commercial loans closed in first half 2013 compared with $26.21 million in first half 2012.

  • Total non-interest income, driven by gain on loans sold, rose to $6.89 million in first half 2013 compared with $4.14 million in first half 2012.

"First Internet's second quarter and first half results reflect the continuing expansion of the bank and progress toward our goal of being a strong national presence in retail and commercial banking," said David Becker, Chairman and CEO. "We have added experienced talent to our retail and commercial lending teams and have also strengthened our finance and support teams to enhance efficiency, risk management and regulatory compliance."

Second Quarter Income Statement Reflects Year-Over-Year Growth in Interest and Non-Interest Income

For the quarter ended June 30, 2013, net income was $1.71 million or $0.59 per diluted share. Net interest income after provision for loan losses was $4.21 million in second quarter 2013, up 27% over second quarter 2012.

Total interest expense in second quarter 2013 declined to $1.92 million compared with $2.16 million in second quarter 2012. The company held interest rates on deposits steady as core deposits climbed, allowing the company to reduce its use of higher-cost Federal Home Loan Bank borrowings. The company's average cost of funds was 1.35% in second quarter 2013, compared with 1.58% in second quarter 2012.

Net interest margin increased to 2.78% at June 30, 2013 compared with 2.63% at June 30, 2012. Loan growth, lower interest expense and management of the company's investment portfolio contributed to the increase.

Total non-interest income in second quarter 2013 increased 76% to $3.82 million over second quarter 2012. Gains on loans sold and secondary market hedges contributed to the increase.

Total non-interest expense in second quarter 2013 was $5.62 million compared with $3.80 million in second quarter 2012. Increased salaries and benefits expense reflected continued investment in experienced talent, primarily in mortgage lending and commercial banking. To support mortgage lending growth, the company established a residential mortgage loan processing center in Tempe, Arizona, and expanded facilities in the Indianapolis area.

Becker stated: "While we remain committed to our efficient and highly scalable operating model with minimal reliance on brick and mortar facilities, supporting current and future growth requires investments in quality people and critical facilities."

Balance Sheet, Deposit Growth, Loan Activity and Asset Quality Highlights

The company's total assets of $656.77 million at June 30, 2013 demonstrated steady year-over-year growth, up from $623.95 million at June 30, 2012. Total deposits at June 30, 2013 were up 7.5%, to $561.16 million over the same quarter in the prior year.

Net loans after allowance for loan losses were $360.80 million at June 30, 2013 compared with $341.57 million at June 30, 2012, with the portfolio showing strong growth in commercial loans. Commercial loans comprised 35% of the company's total loan portfolio at June 30, 2013 compared with 22% at June 30, 2012. Commercial real estate loans increased 64% to $112.68 million at June 30, 2013, compared with $68.90 million at June 30, 2012. Commercial & industrial lending grew to $15.13 million at June 30, 2013, compared with $8.12 million at June 30, 2012. The company's commercial banking business, which in the first half was augmented with cash management services and a business credit card, continued to demonstrate gains.

Residential mortgage originations demonstrated positive year-over-year and consecutive quarter trends. The total value of mortgages originated grew to $232.54 million in second quarter 2013 compared with $186.06 million in the second quarter 2012. Purchase mortgages accounted for 24% of the company's residential loan originations.

The company's loan and asset quality remained strong, with non-performing loans at June 30, 2013 declining to $2.89 million from $8.37 million at June 30, 2012. The ratio of non-performing loans to total assets was 0.71% in second quarter 2013 compared with 2.19% in second quarter 2012.

Capital Position

The bank and holding company continue to exceed all regulatory capital requirements, with a Tier 1 leverage ratio of 9.00% at the bank and 9.13% at the holding company.

Outlook

Becker commented: "We have a robust pipeline for commercial loans. Somewhat improved economic conditions seem to be having a positive impact on commercial real estate lending opportunities, with higher levels of activity in construction and income properties. First Internet's C&I business is performing well, and while we face considerable competition, we are committed to making quality loans."

About First Internet Bancorp

First Internet Bancorp (NAS: INBK) is the parent company of First Internet Bank of Indiana. First Internet Bank opened for business in 1999. The Bancorp became the parent of the Bank effective March 21, 2006.

About First Internet Bank

First Internet Bank of Indiana 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 Internet Bank also offers consumer loans, conforming mortgages, jumbo mortgages, home equity loans and lines of credit, and commercial loans. The bank is a wholly owned subsidiary of First Internet Bancorp.

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: changes in interest rates; risks associated with the regulation of financial institutions and holding companies, including capital requirements and the costs of regulatory compliance; failures or interruptions in communications and information systems; general economic conditions and conditions in the lending markets; competition; the plans to grow commercial lending; the loss of key members of management and other matters discussed in the press release. For a further list and description of such risks and uncertainties, see our periodic reports filed with the U.S. Securities and Exchange Commission. We disclaim any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be set forth in our periodic reports.

First Internet Bancorp

Consolidated Balance Sheets (unaudited)

(in thousands)

June 30, 2013

June 30, 2012

Cash and due from banks

1,355

1,344

Interest-bearing demand deposits

14,093

34,658

Total cash and cash equivalents

15,448

36,002

Interest bearing time deposits

2,500

-

Securities - AFS

193,934

182,671

Loans held for sale

42,271

34,960

Gross loans

362,983

343,340

Net deferred expenses

3,344

3,954

Allowance for loan losses

(5,527)

(5,727)

Net loans

360,800

341,567

Accrued interest receivable

2,271

2,264

FHLB stock

2,943

2,943

Bank owned life insurance

11,735

11,346

Goodwill

4,687

4,687

Other real estate owned

5,156

750

Premises and equipment

6,740

894

Other assets

8,280

5,861

Total assets

656,765

623,945

Non-interest bearing demand deposits

16,915

13,588

Interest bearing demand deposits

73,321

64,458

Savings and money market deposits

230,977

200,287

Time deposits

239,949

243,692

Total deposits

561,162

522,025

FHLB advances

23,740

40,629

Subordinated debt

2,745

-

Accrued interest payable

100

115

Accrued payroll and related expenses

1,469

1,140

Other liabilities

6,371

1,786

Total liabilities

595,587

565,695

Common stock

41,826

41,346

Retained earnings

20,938

15,323

Accumulated other comprehensive

(1,586)

1,581

income / (loss)

Shareholders' equity

61,178

58,250

Total liabilities & equity

656,765

623,945

First Internet Bancorp

Consolidated Statements of Income (unaudited)

(in thousands, except share data)

Quarter Ended

June 30, 2013

June 30, 2012

Securities income

1,277

1,320

Loan income

4,861

4,716

Other interest income

21

19

Total interest income

6,159

6,055

Deposit interest expense

1,656

1,826

Other interest expense

267

338

Total interest expense

1,923

2,164

Net interest income

4,236

3,891

Provision for loan losses

24

564

Net interest income after provision

4,212

3,327

Service charges and fees

179

166

Gain on loans sold

2,249

2,034

Gain on secondary marketing hedge

1,208

-

Other-than-temporary impairment loss

-

(92)

Loss on asset disposals

(4)

(31)

Other non-interest income

186

98

Total non-interest income

3,818

2,175

Salaries and employee benefits

2,846

1,929

Marketing, advertising and promotion

455

341

Consulting and professional fees

561

272

Data processing

232

238

Loan expenses

285

303

Premises and equipment

715

350

Deposit insurance premiums

115

121

Other non-interest expense

415

241

Total non-interest expense

5,624

3,795

Income before taxes

2,406

1,707

Tax provision

694

428

Net Income

1,712

1,279

Diluted weighted average shares

2,888,260

2,867,763

Diluted EPS

0.59

0.45

First Internet Bancorp

Consolidated Statements of Income (unaudited)

(in thousands, except share data)

Six Months Ended

June 30, 2013

June 30, 2012

Securities income

2,046

2,666

Loan income

9,903

9,513

Other interest income

39

37

Total interest income

11,988

12,216

Deposit interest expense

3,284

3,646

Other interest expense

575

677

Total interest expense

3,859

4,323

Net interest income

8,129

7,893

Provision for loan losses

158

1,134

Net interest income after provision

7,971

6,759

Service charges and fees

338

361

Gain on loans sold

5,260

3,785

Gain on secondary marketing hedge

1,208

-

Other-than-temporary impairment loss

(34)

(92)

Loss on asset disposals

(268)

(101)

Other non-interest income

384

190

Total non-interest income

6,888

4,143

Salaries and employee benefits

5,225

3,920

Marketing, advertising and promotion

827

732

Consulting and professional fees

1,214

599

Data processing

446

468

Loan expenses

365

488

Premises and equipment

1,116

762

Deposit insurance premiums

227

219

Other non-interest expense

850

489

Total non-interest expense

10,270

7,677

Income before taxes

4,589

3,225

Tax provision

1,389

800

Net Income

3,200

2,425

Diluted weighted average shares