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First Internet Bancorp Reports Record Earnings in 2012

First Internet Bancorp (OTCQB:FIBP), 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 quarter and year ended December 31, 2012.

“We achieved our goal of consistent earnings growth throughout the year, continuing the strong trends of growing our mortgage origination business and building nationwide visibility of the First Internet franchise,” said David Becker, Chairman and CEO.

Highlights for the year ended December 31, 2012:

  • Net income increased to $5.61 million or $2.93 per diluted share, up 76% compared with $3.19 million or $1.67 per diluted share in 2011. Net income for the fourth quarter was $1.55 million or $0.81 per diluted share, compared with $1.06 million or $0.56 per diluted share in fourth quarter 2011.
  • Return on average assets increased to 0.91% from 0.59% in the prior year, and return on average equity rose to 9.56% in 2012 compared with 6.13% in 2011.
  • Total assets increased to $636.37 million, compared with $585.44 million at December 31, 2011. Commercial real estate and commercial & industrial loan portfolios grew to $107.45 million compared with $45.71 million at December 31, 2011.
  • Net interest income in 2012, primarily reflecting retail and commercial loan growth and lower interest expense, was $15.59 million, up 9% compared with net interest income of $14.32 million in 2011.
  • Non-interest income for the year ended December 31, 2012 was $11.74 million, compared with $3.56 million for the year ended December 31, 2011.
  • The company continued to build shareholder value, with tangible book value at December 31, 2012 of $29.46 per share, compared with $26.57 per share at December 31, 2011, a 10.8% increase. In the fourth quarter, the company paid a special dividend of $0.25, the first time in company history.
  • The company filed a Form 10 with the SEC and applied to list its common stock on the NASDAQ Capital Market.

“First Internet grew and diversified its sources of revenue while retaining strong capital ratios, high credit quality, and our efficient Internet banking model. We focused on increasing shareholder value in 2012 by strategically deploying resources to expand the First Internet Bank franchise. We strengthened our leadership team and launched new services.

“Beyond simply fulfilling our strategy to expand and diversify the bank’s revenue stream, the success of our commercial banking initiative exceeded our expectations as we more than doubled the size of our commercial loan portfolio and built relationships to include business checking and savings products to help drive down our cost of funds. We are adding treasury management and ACH products and services to further boost our fee income sources. We anticipate continued growth in non-interest bearing commercial deposits which will contribute to the reduction in our cost of funds.

“We are exploring options for rebalancing our available for sale investment securities portfolio as we look to expand our margin. The recent addition of Kay Whitaker as our chief financial officer will greatly expand the company’s expertise in actively managing its securities portfolio to maximize its yield, while mitigating risk to the company.

“We maintained our focus on interest rate risk management by continuing our practice of selling longer-term, lower-yielding, fixed-rate mortgages to the secondary market, and adding high quality adjustable-rate commercial and residential loans to our portfolio. This positions the bank well for a rising interest rate environment in the future.

“Our strong performance enabled First Internet Bancorp to generate additional stockholder value and to pay a special dividend of $0.25 per common share. We continued to invest in leading-edge technology to support growth and efficiency, and increased strategic marketing expenditures to drive more traffic to our website and loan sales staff. We also continued to invest in experienced individuals to support growth in mortgage and commercial services. We hired a veteran chief credit officer and chief financial officer to our management ranks, and expanded our board of directors with two new appointments.”

Edward A. Roebuck, previously a Senior Vice President and Chief Credit Officer with National City Bank, joined First Internet Bank in August 2012 in the newly created position of Chief Credit Officer and Senior Vice President. Kay Whitaker, who served as CFO at Central Indiana Community Foundation and was named 2012 CFO of the Year in the not-for-profit sector by the Indianapolis Business Journal, joined First Internet Bank as Chief Financial Officer and Senior Vice President in January 2013.

In November 2012, John K. Keach, Jr., the former President, CEO, and Chairman of Indiana Community Bancorp and Indiana Bank & Trust Company, and a former Director of the Federal Home Loan Bank of Indianapolis, was appointed to the company’s board of directors. Ann Murtlow, a former Director of the Federal Reserve Bank of Chicago and past President and CEO of Indianapolis Power & Light Company from 2002 to 2011, also joined First Internet Bancorp’s board in January 2013.

This press release is being issued concurrently with the filing of the bank's Call Report for the fourth quarter of 2012 with the FDIC. The 2012 financial information is unaudited and is expected to be finalized later in the quarter.

Income Statement Reflects Growth in Interest and Non-interest Income Businesses

Net income in 2012 of $5.61 million was the highest annual income in the company’s history, and fourth quarter net income of $1.55 million was a company record for net income in a single quarter. For the year ended December 31, 2012, net interest income after provision for loan losses was $12.73 million, compared with $11.88 million in 2011. The growth in net interest income for both periods reflected increased income from a growing loan portfolio. Gross loans grew $22.69 million year-over-year; however, the continued low interest rate environment kept total interest income growth at a modest level.

As a result of the bank re-pricing accounts to reflect the continuing low-interest rate environment, and a reduced use of wholesale deposits, the bank lowered its total interest expense in 2012 to $8.53 million, compared with $9.62 million in 2011. Deposit interest expense declined 13.2% for the year ended December 31, 2012 compared with 2011.

As noted in the highlight section, total non-interest income in fourth quarter 2012 and full-year 2012 grew dramatically, primarily reflecting gains on mortgages sold. Fourth quarter 2012 non-interest income was $3.94 million, compared with $1.82 million in fourth quarter 2011.

“Our non-interest income reflects success in growing our mortgage origination business from coast to coast,” said Becker. “We have a strong loan pipeline and with our growing reputation and increasing visibility on the Internet, we anticipate we’ll continue to win new loan business. We will continue to add sales and support staff to our mortgage lending team and will selectively add talent to our commercial team to expand our CRE and C&I lending business lines.”

Total non-interest expense in 2012 was $16.68 million, compared with $11.48 million in 2011. The increase primarily reflected increased salaries and benefits as the company’s head count increased 31%, primarily in mortgage lending and commercial banking. In 2012 the bank upped its marketing expenditures (primarily web-based) to boost its visibility and position among Internet mortgage referral sites. Expenses in 2012 also included a one-time $400,000 restructuring expense.

Net interest margin was 2.65% during at December 31, 2012, compared with 2.76% in 2011. The bank’s average cost of funds was 1.56% in 2012, compared with 2.00% in 2011. Becker explained that the decrease in the bank’s mortgage backed securities portfolio contributed to the compression in margin.

Balance Sheet, Deposit Growth and Asset Quality

The company’s total assets of $636.37 million at December 31, 2012 represented an all-time high for First Internet Bancorp. Net loans after allowance for loan losses were $352.33 million, compared with $329.57 million at December 31, 2011.

The company grew total deposits to $530.69 million at December 31, 2012, compared with $486.67 million at December 31, 2011, primarily reflecting growth in interest bearing checking and savings accounts. Becker explained the bank’s lack of brick and mortar facilities enables it to attract core deposits with competitive rates to support its lending activities. The company remains committed to further reducing the bank’s cost of funds and expects to see an increase in non-interest bearing deposit accounts through expanded business customer relationships.

A primary driver of loan growth was the bank’s commercial lending team. CRE loans increased to $82.76 million in at December 31, 2012, compared with $45.71 million in 2011. C&I lending, a new offering in fourth quarter 2011, grew to $24.69 million during the year.

Non-performing loans at December 31, 2012 were $3.91 million, compared with $8.62 million at December 31, 2011. Loans 30 to 89 days past due declined to $1.17 million at December 31, 2012, compared with $3.36 million in the prior year.

“We believe the company’s strong credit, risk management and underwriting practices will enable us to maintain low levels of non-performing assets. Our business model provides for both geographic and lending product type diversification, which we believe reduces our dependence on a single banking marketplace,” said Ed Roebuck, the company’s chief credit officer.

Becker added the company’s asset quality has been consistently higher than many peers’. Non-performing plus past due loans as a percentage of total assets declined to 0.87% at December 31, 2012, compared with 2.07% at December 31, 2011. The allowance for loans and lease losses as a percent of total loans was 1.63% at December 31, 2012, compared with 1.69% at December 31, 2011.

Capital Position

First Internet is well capitalized under regulatory capital guidelines, with a tier 1 capital to average assets ratio of 8.77% at the bank and 8.89% at the holding company, with no TARP or SBLF obligations. The total risk based capital ratio was 10.82% at the bank and 10.97% at the holding company.

Outlook

Becker concluded: “We anticipate further growth in our national residential mortgage origination business in 2013. The combination of continued low interest rates and rising home values may provide for even higher levels of mortgage refinancing activity during the year. As a healthy and well-capitalized bank, we also continue to prudently grow our loan portfolio, with a particular focus on commercial & industrial, commercial real estate, and niche lending categories.

“Our focus on building shareholder value through retained earnings, continued growth, and prudent risk management practices remains a top priority. The company previously announced its application for listing on the NASDAQ exchange and we expect trading on the exchange to commence in first quarter 2013. We are excited about the company’s future and look forward to continuing a strong dialogue with our loyal shareholders.”

The company's listing application is subject to review and approval by NASDAQ's listing qualifications department for compliance with all NASDAQ Capital Market standards.

About First Internet Bancorp

First Internet Bancorp (OTCQB: 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

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: the Company's ability to meet all of the requirements for listing on the NASDAQ Capital Market; 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. 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.

Financial Tables Follow

 
Consolidated Balance Sheet ($000s) (Unaudited)
     
December 31
2011 2012
 
Cash and due from banks 1,582 2,881
Interest-bearing deposits 33,196 29,632
Securities - AFS 149,270 156,693
Loans held for sale 45,091 63,234
 
Gross loans 331,805 354,490
Net deferred (fees)/expenses 3,421 3,671
Allowance for loan losses (5,656 )   (5,833 )
Net loans 329,570 352,328
 
Accrued interest receivable 2,129 2,196
FHLB stock 2,943 2,943
Bank owned life insurance 8,161 11,539
Goodwill 4,687 4,687
Other real estate owned 1,511 3,666
Other assets 7,300 6,568
 
Total Assets 585,440 636,367
 
 
Non-interest bearing demand deposits 15,870 13,187
Interest bearing demand deposits 64,006 73,660
Savings and money market deposits 173,334 213,971
Time deposits 233,455     229,873  
Total deposits 486,665 530,691
 
FHLB advances 40,573 40,686
Accrued interest payable 120 120
Accrued payroll and related expenses 1,153 948
Other liabilities 1,506     2,572  
Total liabilities 530,017 575,017
 
 
Common stock 41,306 41,508
Accumulated earnings 12,897 18,024
Accumulated OCI 1,220     1,818  
Shareholder's equity 55,423 61,350
 
Total liabilities & equity 585,440 636,367
 
 
Consolidated Income Statement ($000s) (Unaudited)
   
 
Quarter Ended
December 31
2011   2012
 
Securities income 1,151 1,017
Loan income 4,764 5,035
Other interest income 20     14  
Total interest income 5,935 6,066
 
Deposit interest expense 1,895 1,697
Other interest expense 342     341  
Total interest expense 2,237 2,038
 
Net interest income 3,698 4,028
 
Provision for loan losses 947 744
 
Net interest income after provision 2,751 3,284
 
Service charges and fees 282 223
Gain on loans sold 2,263 3,656
Other-than-temporary impairment loss (70 ) (47 )
Gain(Loss) on asset disposals (729 ) (58 )
Other non-interest income 77     163  
Total non-interest income 1,823 3,937
 
Salaries and employee benefits 1,440 2,462
Marketing, advertising and promotion 399 353
Consulting and professional fees 264 385
Data processing 220 215
Loan expenses 154 228
Premises and equipment 345 683
Deposit insurance premiums 119 114
Other non-interest expense 238     453  
Total non-interest expense 3,179 4,893
 
Income before taxes 1,395 2,328
 
Tax provision 334 774
 
Net Income 1,061 1,554
 
Weighted average shares 1,908,323 1,916,078
 
EPS 0.56 0.81
 
 
Consolidated Income Statement ($000s) (Unaudited)
   
 
Year Ended
December 31
2011   2012
 
Securities income 5,128 4,745
Loan income 18,752 19,303
Other interest income 64     69  
Total interest income 23,944 24,117
 
Deposit interest expense 8,266 7,172
Other interest expense 1,355     1,360  
Total interest expense 9,621 8,532
 
Net interest income 14,323 15,585
 
Provision for loan losses 2,440 2,852
 
Net interest income after provision 11,883 12,733
 
Service charges and fees 1,157 942
Gain on loans sold 3,690 10,647
Other-than-temporary impairment loss (626 ) (252 )
Gain(Loss) on asset disposals (968 ) (45 )
Other non-interest income 306     452  
Total non-interest income 3,559 11,744
 
Salaries and employee benefits 5,311 8,529
Marketing, advertising and promotion 936 1,362
Consulting and professional fees 777 1,422
Data processing 915 897
Loan expenses 526 1,097
Premises and equipment 1,481 1,775
Deposit insurance premiums 727 455
Other non-interest expense 810     1,140  
Total non-interest expense 11,483 16,677
 
Income before taxes 3,959 7,800
 
Tax provision 773 2,194
 
Net Income 3,186 5,606
 
Weighted average shares 1,906,289 1,912,910
 
EPS 1.67 2.93

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