First Internet Bancorp Reports Fourth Quarter and Full Year 2021 Results
Fishers, Indiana, January 25, 2023 – First Internet Bancorp (the “Company”) (Nasdaq: INBK), the parent company of First Internet Bank (the “Bank”), announced today financial and operational results for the fourth quarter and full year ended December 31, 2022.
Fourth Quarter and Full Year 2022 Commentary
Market forces and the economic climate, both driven in part by the post-pandemic recovery, had a significant impact on the Company’s 2022 financial results and frame the Company’s strategy for 2023 and beyond.
Loan demand was strong throughout the year. Total loan portfolio balances increased 7.5% from the third quarter of 2022 and 21.2% from the fourth quarter of 2021. However, intense competition for deposits through the most rapid set of Federal Funds rate hikes since the late 1980s drove interest expense higher and pressured net interest margin. Average loan portfolio yields were up 39 bps in the fourth quarter compared to the linked quarter, while the cost of interest-bearing deposits was up 104 bps. The Company recorded a higher provision for loan loss expense in the fourth quarter based primarily upon loan growth while credit quality remained excellent with nonperforming ratios well below industry averages.
The Company has healthy loan pipelines and will focus its 2023 origination efforts on its floating rate loan products, notably commercial construction and small business lending, as well as its higher-yielding fixed rate programs, such as franchise finance.
While other lending lines have strong demand, the combination of housing prices, housing supply, economic uncertainty and interest rates have caused mortgage applications nationally to plunge to their lowest level in 26 years. Due to the steep decline in mortgage volumes and the negative outlook for mortgage lending over the next several years, the Company decided to exit its consumer mortgage business during the first quarter of 2023. This includes its nationwide digital direct-to-consumer mortgage platform that originates residential loans for sale in the secondary market as well as its local traditional consumer mortgage and construction-to-permanent business. (The Company’s commercial construction and land development business will not be affected by this decision and will remain an important part of the Company’s lending strategy, as noted above.)
This action is expected to reduce total annual noninterest expense by approximately $6.8 million and increase annualized pre-tax income by approximately $2.7 million, with 80% of the benefit realized in 2023 and 100% thereafter. The Company estimates that it will incur total pre-tax expense of approximately $3.3 million in the first and second quarters of 2023 associated with exiting this line of business.
While navigating market headwinds, management remains committed to creating shareholder value. The Company repurchased 284,286 shares in the fourth quarter at an average price of $25.16. For the year, the Company repurchased over 800,000 shares at an average price well below tangible book value. Tangible book value reached its highest value to date, at $39.74 as of December 31, 2022.
The following information was filed by First Internet Bancorp (INBK) on Wednesday, January 25, 2023 as an 8K 2.02 statement, which is an earnings press release pertaining to results of operations and financial condition. It may be helpful to assess the quality of management by comparing the information in the press release to the information in the accompanying 10-K Annual Report statement of earnings and operation as management may choose to highlight particular information in the press release.