First Internet Bank of Indiana (First IB) today announced net income of $116,426 for the quarter ended March 31, 2003. Net income before taxes decreased $357,043 from the same quarter in the previous year.
Bank management attributed a portion of the decrease in earnings to narrower net interest margins. In response to declining interest rates, First IB lowered loan rates over the past several quarters. Interest rates paid on deposits and the Bank’s overall cost of funds were also reduced but not as significantly, resulting in the decrease in net interest margin.
“Although we are not satisfied with the first quarter results, they are indicative of a difficult interest rate environment,” said David B. Becker, Chairman and CEO of First IB. “The significant decrease in home mortgage and other consumer interest rates over the last two years has had a positive effect on many consumers. However, loan refinancing activity has increased loan prepayments, causing significant inflows of funds for the Bank that have been reinvested month after month at lower interest rates. The result is a negative effect on net interest margin and, ultimately, on earnings.”
Also in the first quarter, First IB continued to take a conservative approach to reserving for credit losses, recognizing a credit provision expense of $469,034 related to the loan portfolio and providing for loss related to a small number of large commercial and consumer loans. First IB’s conservative approach to loss reserves help to position the Bank with a strong balance sheet moving into future periods. First IB’s loan portfolio has grown by more than 55% as compared to the same quarter in the previous year, and Bank management considers the Bank’s overall credit quality to be very good.
As of March 31, 2003, First IB held $250.6 million in deposits, a 20% increase over deposits as of March 31, 2002. Despite the increase in deposits, overhead expenses remained consistent with prior quarters.
| Selected Balance Sheet Information | |||
| March 31 | |||
| 2002 (Unaudited) |
2003 (Unaudited) |
||
| Cash Equivalents | 7,365,523 | 3,111,696 | |
| Investment Securities | 132,711,523 | 145,896,656 | |
| Loans, net of Reserve | 108,960,299 | 169,794,215 | |
| Other Assets | 3,542,984 | 4,960,569 | |
| Total Assets | 252,580,329 | 323,763,136 | |
| Deposits | 209,490,804 | 250,573,749 | |
| FHLB Advances | 3,500,000 | 31,750,000 | |
| Other Liabilities | 1,150,779 | 921,168 | |
| Shareholder’s Equity | 38,438,746 | 40,518,219 | |
| Total Liabilities & Equity | 252,580,329 | 323,763,136 | |
| Selected Income Statement Information | |||
| March 31 | |||
| 2002 (Unaudited) |
2003 (Unaudited) |
||
| Net Interest Income | 1,747,197 | 1,358,084 | |
| Non-Interest Income | 174,794 | 227,630 | |
| Provision for Loan and Lease Losses | (144,496) | (469,034) | |
| Non-Interest Expense | (1,247,210) | (1,211,092) | |
| Gain on Sale of Investments | – | 267,654 | |
| Net Income Before Taxes | 530,285 | 173,242 | |
| Tax Benefit (Expense) | 258,450 | (56,816) | |
| Net Income | 798,735 | 116,426 | |
| Income per share: | |||
| Basic | 0.40 | 0.06 | |
| Weighted average of shares outstanding: | |||
| Basic | 2,005,079 | 2,009,160 | |
With $323 million in assets, 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. Services include interest-bearing checking accounts, regular and money market savings accounts with industry-leading interest rates, CDs, IRAs, credit cards, and check cards that can be used instead of cash or checks. First IB also offers personal lines of credit, installment loans, unique real-time transfers between accounts, and the ability to display checking, savings and loan information on a single screen. First IB is a privately capitalized institution with over 400 private and corporate investors.