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Section 1: 8-K (8-K)

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549

FORM 8‑K

CURRENT REPORT PURSUANT
TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934

Date of report (Date of earliest event reported): July 29, 2019
First Internet Bancorp
(Exact Name of Registrant as Specified in Its Charter)
 
 
 
 
 
Indiana
(State or Other Jurisdiction of Incorporation)
 
 
 
 
 
001-35750
 
20-3489991
(Commission File Number)
 
(IRS Employer Identification No.)
 
 
 
 
 
11201 USA Parkway
 
46037
Fishers, Indiana
 
(Address of Principal Executive Offices)
 
(Zip Code)
 
 
 
 
 
(317) 532-7900
(Registrant's Telephone Number, Including Area Code)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

o    Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o    Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Securities registered pursuant to Section 12(b) of the Act:
Title of each class
 
Trading Symbols
 
Name of each exchange on which registered
Common Stock, without par value
 
INBK
 
The Nasdaq Stock Market LLC
6.0% Fixed to Floating Subordinated Notes due 2026
 
INBKL
 
The Nasdaq Stock Market LLC
6.0% Fixed to Floating Subordinated Notes due 2029
 
INBKZ
 
The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company ¨

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨





Item 7.01
Regulation FD Disclosure

First Internet Bancorp (the “Company”) has updated its investor presentation, a copy of which is furnished as Exhibit 99.1 to this current report on Form 8-K and incorporated by reference herein. The Company intends to use the presentation, in whole or in part, in one or more meetings with investors and analysts.
The information contained in this Item 7.01 and Exhibit 99.1 is being furnished, and shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to liability under Section 18. Furthermore, the information contained in this Item 7.01 and Exhibit 99.1 shall not be deemed to be incorporated by reference into the Company's filings under the Securities Act of 1933, as amended, or the Exchange Act.

Item 9.01    Financial Statements and Exhibits

Number
 
Description
 
Method of filing
 
 
Furnished electronically









SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
 
 
Dated:
July 29, 2019
 
 
 
 
 
 
 
FIRST INTERNET BANCORP
 
 
 
 
 
 
 
By:
/s/ Kenneth J. Lovik
 
 
 
Kenneth J. Lovik, Executive Vice President & Chief Financial Officer



(Back To Top)

Section 2: EX-99.1 (EXHIBIT 99.1)

inbkinvestorpresentation
Investor Presentation Second Quarter 2019 Exhibit 99.1


 
Forward-Looking Statements This presentation may contain forward-looking statements with respect to the financial condition, results of operations, trends in lending policies, plans, objectives, future performance or business of the Company. Forward-looking statements are generally identifiable by the use of words such as “anticipate,” “believe,” “could,” “estimate,” “expect,” “intend,” “may,” “pending,” “plan,” “preliminary,” “remain,” “should,” “will,” “would” 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: failures or breaches of or interruptions in the communications and information systems on which we rely to conduct our business; failure of our plans to grow our commercial real estate, commercial and industrial, public finance and healthcare finance loan portfolios; competition with national, regional and community financial institutions; the loss of any key members of senior management; fluctuations in interest rates; general economic conditions; risks relating to the regulation of financial institutions; failure to close any pending acquisitions; and other factors identified in reports we file with the U.S. Securities and Exchange Commission. All statements in this presentation, 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. 2


 
Non-GAAP Financial Measures This presentation contains financial information determined by methods other than in accordance with U.S. generally accepted accounting principles (“GAAP”). Non-GAAP financial measures, specifically adjusted net income, adjusted diluted earnings per share, average tangible common equity, adjusted return on average assets, return on average tangible common equity (“ROATCE”), adjusted ROATCE, tangible common equity (“TCE”), tangible assets (“TA”), tangible book value (“TBV”) per common share, tangible common equity to tangible assets, net interest income – FTE, adjusted noninterest expense/average assets and adjusted efficiency ratio are used by the Company’s management to measure the strength of its capital and analyze profitability, including its ability to generate earnings on tangible capital invested by its shareholders. Although management believes these non-GAAP measures are useful to investors by providing a greater understanding of its business, they should not be considered a substitute for financial measures determined in accordance with GAAP, nor are they necessarily comparable to non-GAAP financial measures that may be presented by other companies. Reconciliations of these non-GAAP financial measures to the most directly comparable GAAP financial measures are included in the table at the end of this presentation under the caption “Reconciliation of Non-GAAP Financial Measures.” 3


 
A Pioneer in Branchless Banking • Digital bank with unique business model and over 20 years of operations • Highly scalable technology driven business • Nationwide deposit gathering and asset generation platforms • Attractive lending niches with growth opportunities • History of strong growth and a pathway to greater profitability $4.0B Assets $2.9B Loans $3.0B Deposits 4


 
Nationwide Branchless Deposit Franchise $441.8 million $3.0 Billion 14.7% Total Deposits* $525.5 million 17.5% $1,310.2 million 43.6% 32% 5-year CAGR* Nationwide consumer, $498.0 million $230.8 million small business and 7.7% 16.5% commercial deposit base Innovative technology and convenience supported by exceptional service * As of June 30, 2019; $255 million of brokered deposits and $1.9 million of balances in US territories/Armed Forces included in headquarters/Midwest balance 5


 
Multiple Opportunities to Grow Deposits . Capitalize on the enduring trend toward branchless banking – consumers and small business are increasingly moving their banking business online . Generate an increased level of lower-cost deposits as expansion of small-business, municipal and commercial relationships continue . Selectively target consumer deposits in tech-centric markets – building off success with Gen-Xers . Draw on over 20 years of branchless banking experience to attract more customers with best practices such as dedicated online relationship bankers delivering a superior client experience 6


 
National and Regional Asset Generation Platform DIVERSIFIED ASSET GENERATION PLATFORM Commercial - National Commercial - Regional . C&I – Central Indiana . Single tenant lease financing . C&I – Arizona . SBA – Central Indiana / Arizona . Public finance . Investor CRE – Central Indiana . Healthcare finance (via relationship with . Construction – Central Indiana Lendeavor) Consumer - National . Digital direct-to-consumer mortgages . Specialty lending – horse trailers and RVs 7


 
Attractive Loan Growth Opportunities . Entrance into new verticals – complement existing lines and add diversity . SBA lending – recent hiring of experienced professionals to build this line of business . Further market penetration of niche specialty lending . Public finance – geographic and product expansion; increased network of origination sources . Healthcare finance – geographic and product expansion . Focus includes specialty lending lines that are relatively low-risk and rooted in sustainable industries . Historic strong credit performance and/or favorable regulatory capital treatment . Long-term commitment to our specialty-line customers as major competitors often move in and out of these sectors . First Internet’s consistent market presence builds brand reputation within its niche markets 8


 
Small Business, Big Opportunity . Complementary to existing business lines . Diversifies revenue in a capital efficient manner . Opportunities on both sides of the balance sheet Enhanced Treasury Upgraded Digital SBA Lending Management Capabilities Account Access 9


 
Entrepreneurial Culture Key to Success First Internet Bank has been recognized for its innovation and is consistently ranked among the best banks to work for, enhancing its ability to attract and retain top talent . American Banker’s “Best Banks to Work For”  Six years in a row . “Top Workplaces in Indianapolis” The Indianapolis Star  Six years in a row including being #1 in 2019, #4 in 2018 and #2 on the list in 2017 . “Best Places to Work in Indiana”  Five of last seven years . Top Rated Online Business Bank in 2017 – Advisory HQ . TechPoint 2016 Mira Award “Tech-enabled Company of the Year” . Top 10 finalist – 2016 Indiana Public Company of the year presented by the CFA Society and FEI . Magnify Money ranked #1 amongst 2016 Best Banking Apps (Banker’s “Online Direct Banks”) . Mortgage Technology 2013 awarded top honors in the Online Mortgage Originator category 10


 
History of Strong Organic Growth Execution of the business strategy has driven consistent and sustained balance sheet growth Total Assets Total Loans Dollars in millions Dollars in millions $3,959 1 $3,542 1 $2,861 CAGR: 32.5% vs. Peers at 13.1% CAGR: 31.3% vs. Peers at 16.4% $2,716 $2,768 $2,091 $1,854 $1,251 $1,270 $954 $971 $732 2014 2015 2016 2017 2018 2Q19 2014 2015 2016 2017 2018 2Q19 Total Deposits Shareholders’ Equity Dollars in millions Dollars in millions $3,006 $296 1 $289 CAGR: 31.7% vs. Peers at 14.0% $2,671 CAGR: 25.0% $224 $2,085 $1,463 $154 $956 $97 $104 $759 2014 2015 2016 2017 2018 2Q19 2014 2015 2016 2017 2018 2Q19 1 Source: SNL Financial; Small Cap US Banks. Peer data represents median value of publically traded Small Cap banks with a market capitalization between $250 million and $1.0 billion as of 03/31/19. 11


 
Profitability Driven by Capital Deployment Capital has been deployed into new loan verticals, driving earnings growth Net Income1,2,3 Diluted EPS1,2,3 Dollars in thousands $23,814 $23,595 $2.30 $2.50 $2.39 $2.30 $21,900 $1.96 $17,072 $21,681 $2.30 $2.13 $2.12 $12,074 $15,226 $8,929 $0.96 $4,324 2014 2015 2016 2017 2018 TTM 2Q19 2014 2015 2016 2017 2018 TTM 2Q19 Return on Average Assets1,2,3 Return on Average Tangible Common Equity1,2,3 0.81% 0.74% 0.74% 0.78% 0.71% 10.12% 9.84% 9.33% 9.35% 0.72% 8.24% 0.50% 0.66% 0.65% 8.77% 8.60% 7.57% 4.85% 2014 2015 2016 2017 2018 TTM 2Q19 2014 2015 2016 2017 2018 TTM 2Q19 1 See Reconciliation of Non-GAAP Financial Measures. 2 2017 reported net income of $15.2 million included the revaluation of the Company’s net deferred tax asset which reduced net income by $1.8 million and negatively impacted Net Income, EPS, ROAA and ROATCE. 3 2018 reported net income of $21.9 million and TTM 2Q19 net income of $21.6 million included a write-down of legacy other real estate owned which 12 reduced net income by $1.9 million and negatively impacted Net Income, EPS, ROAA and ROATCE.


 
Growth Drives Economies of Scale Scalable, technology-driven model has delivered increasing efficiency and is a key component driving improved operating leverage Net Interest Income - FTE1 Noninterest Expense / Average Assets2 Dollars in millions $17.8 $16.9 $16.6 $17.3 $16.9 $17.7 1.50% 1.52% $15.5 $16.4 1.45% 1.47% 1.40% 1.27% 1.24% 1.23% 1.23% 3Q17 4Q17 1Q18 2Q18 3Q18 4Q18 1Q19 2Q19 3Q17 4Q17 1Q18 2Q18 3Q18 4Q18 1Q19 2Q19 Efficiency Ratio2 Total Assets Per FTE Dollars in millions $18.4 72.9% $17.6 $17.6 59.7% 54.2% 54.2% 56.9% 57.7% 55.9% 58.3% $15.1 $15.6 $13.4 $14.0 59.1% $12.9 3Q17 4Q17 1Q18 2Q18 3Q18 4Q18 1Q19 2Q19 3Q17 4Q17 1Q18 2Q18 3Q18 4Q18 1Q19 2Q19 1 See Reconciliation of Non-GAAP Financial Measures 2 4Q18 results included a write-down of legacy other real estate owned which increased noninterest expense by $2.4 million. 13


 
Capital Markets History . Following the IPO in late 2013, the Company deployed capital to fund commercial loan growth which resulted in strong revenue growth and improved earnings . Capital offerings: . 2Q19: raised $37.0 million of subordinated debt . 2Q18: raised $57.5 million of common equity . 3Q17: raised $55.0 million of common equity . 2016: raised $74.9 million in combination of common equity and subordinated debt . The Company has produced consistent growth in tangible book value per share . Insider ownership ensures board, management and shareholder interests are aligned Tangible Common Equity1 Regulatory Capital Ratios $29.10 15.9% $28.57 15.4% $27.80 $27.93 14.7% 14.5% 14.3% $27.25 14.1% 14.0% 13.7% 12.7% $25.70 $26.09 $26.05 13.5% 13.1% $24.43 12.4% 11.9% 11.4% 11.4% 11.7% 11.1% 9.7% 9.9% 8.9% 8.9% 9.4% 8.2% 7.9% 7.7% 8.0% 7.9% 8.9% 9.0% 7.4% 8.5% 6.7% 8.2% 8.3% 8.1% 7.5% 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 4Q18 1Q19 2Q19 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 4Q18 1Q19 2Q19 Tier 1 Leverage Tier 1 Capital Total Capital TBV Per Share TCE / TA 1 See Reconciliation of Non-GAAP Financial Measures 14


 
Capital and Balance Sheet Management . Combination of lower risk asset profile and top quartile asset quality performance provides ability to maximize capital leverage . Announced a stock repurchase program in 4Q18 to repurchase up to $10.0 million in common stock . Through the date of the Company’s 2Q19 earnings release, 246,174 shares have been repurchased at an aggregate amount of $5.1 million . Active balance sheet management to ensure growth and capital are managed efficiently . Repositioning of loan, securities and wholesale borrowings portfolios to improve net interest margin and EPS . Sold $148.4 million of loans in 2Q19 . Existing capital levels provides capacity to handle balance sheet growth Risk-Weighted Assets / Nonperforming Loans / Nonperforming Assets / Total Assets Total Loans1 Total Assets1 78% 0.95% 0.73% 70% 0.19% 0.20% INBK Peers2 Source: S&P Global Intelligence 1 Nonperforming loans and nonperforming assets include current troubled debt restructurings 2 Peer group includes publicly traded banks with assets of $3.0 billion to $5.0 billion; data as of March 31, 2019 15


 
Deposit Composition . Total deposits increased $612.0 million, or 25.6%, since 2Q18 . Strategies to increase business money market accounts resulted in $34 million of new balances in 2Q19 . Approximately $1.0 billion of CDs with a weighted average cost of 2.74% mature over the next 12 months – provides a significant opportunity to lower deposit costs in a declining rate environment Total Deposits - $3.0 Billion Total Non-Time Deposits - $810.0 Million As of June 30, 2019 As of June 30, 2019 1 $44.0 $31.4 2% $126.7 1% 4% $227.7 $607.9 28% 20% $391.3 48% $2,196.3 $114.5 73% 14% $76.5 10% Noninterest-bearing deposits Treasury management Public funds Interest-bearing demand deposits Small business Consumer Savings accounts 1 Total non-time deposits excludes brokered non-time deposits 16


 
Loan Portfolio Overview Strategic loan growth has led to a more diversified portfolio $2,861.2 $2,839.9 $2,716.2 Dollars in millions 7% 7% $2,493.6 7% 2% 2% $2,374.0 2% 8% 1 Commercial and Industrial 8% 2% $2,091.2 2% 35% 36% Commercial Real Estate 9% 34% 2% 35% Single Tenant Lease Financing 37% $1,250.8 38% Public Finance 25% 13% 26% 25% Healthcare Finance 5% 24% 24% 22% 4% 6% Residential Mortgage/HE/HELOCs 49% 4% 8% 3% 2% 16% 15% 15% 16% 12% Consumer 16% 19% 11% 11% 10% 10% 14% 11% 11% 2016 2017 2Q18 3Q18 4Q18 1Q19 2Q19 . Growth driven by expansion of existing markets and investments in new asset generation channels . Achieved growth and diversity while maintaining strong asset quality 1 Includes commercial and industrial and owner-occupied commercial real 17 estate balances


 
Commercial Real Estate Commercial real estate balances increased Single Tenant Lease Financing $153.3 million, or 16.7%, since 2Q18 Portfolio Diversity Red Lobster As of % of 7.0% Dollars in millions June 30, 2019 total 6.0% Walgreen's Single tenant lease financing $1,001.2 93.5% 5.2% Construction 47.8 4.5% Bob Evans 4.5% Investor commercial real estate 21.2 2.0% 4.1% Total commercial real estate $1,070.2 100.0% Intl Car Wash Grp Single tenant lease financing overview: 73.2% CVS . Long term lease financing of single tenant All others properties occupied by financially strong lessees . Originations / commitments over the past twelve Texas 17.2% months exceeded $253 million Ohio . Nationwide platform provides ability to capitalize on 7.1% Florida national correspondent network 6.3% Georgia . Expertise in asset class with streamlined execution 59.0% 5.5% and credit process North 4.9% Carolina . Strong historical credit performance All others . Average portfolio LTV of approximately 52% 18


 
Commercial & Industrial Commercial & industrial overview: . Originations / commitments over the past As of % of Dollars in millions June 30, 2019 total twelve months exceeded $124 million Commercial & industrial $110.1 56.7% . Primarily serves the borrowing and treasury Owner-occupied CRE 84.0 43.3% management needs of small and middle- Total commercial & industrial $194.1 100.0% market businesses . Seasoned banking team leverages market knowledge and experience to serve clients in a relationship-based approach Commercial & Industrial Balances Dollars in millions $202.4 . Business line built organically, adding select $198.7 $194.1 personnel with specialized product or market $160.1 $146.5 $75.8 expertise $88.0 $84.0 $44.5 $57.7 . Indiana team focuses on Central Indiana and adjacent Midwestern markets $122.9 $102.0 $102.4 $114.4 $110.1 . Added to Arizona team to further enhance origination efforts 2015 2016 2017 2018 2Q19 . Strong credit performance to date Commercial & industrial Owner-occupied CRE 19


 
Public Finance Public finance originations/commitments Portfolio Composition 2.6% 2.1% during the past twelve months exceeded 3.0% 0.1% General Obligation Essential use equipment $209 million 4.0% loans Water & sewer revenue 5.8% Public Finance Balances Lease rental revenue Dollars in millions 38.6% $708.8 $706.2 Tax Incremental $706.3 11.6% Financing (TIF) districts $566.2 $610.9 Sales tax, food and beverage tax, hotel tax Public higher education 14.0% facilities Income Tax supported loans 18.2% Gaming revenues Short term cash flow 2Q18 3Q18 4Q18 1Q19 2Q19 financing (BAN) Borrower Credit Rating Public finance overview: 1.1% 2.2% . Launched in January 2017 AAA/Aaa AA+/Aa1 . Provides a range of credit solutions for government and not- 14.4% for-profit entities AA/Aa2 32.7% AA-/Aa3 . Borrowers’ needs include short-term financing, debt 7.6% refinancing, infrastructure improvements, economic A+/A1 development and equipment financing A/A2 A-/A3 . Initial efforts have focused on borrowers in Indiana and are 20.1% now expanding to other geographic areas of the U.S. BBB+/Ba1 2.6% BB/Ba2 . Recent team additions will strengthen efforts in equipment 7.2% 3.2% Not rated and energy finance and build out nationwide platform 8.9% 20


 
Healthcare Finance Healthcare finance originations/commitments over Portfolio Composition the past twelve months exceeded $162 million 4.7% 0.9%0.2% Practice Refinance Healthcare Finance Balances or Acquisition 13.4% Dollars in millions Owner Occupied Dollars in millions $212.4$65.6 CRE $158.8 $48.9 Projects $117.0 80.8% $89.5 $31.6 $65.6 Equipment $12.4 Start Up 2Q18 3Q18 4Q18 1Q19 2Q19 3Q17 4Q17 1Q18 2Q18 California Healthcare finance overview: . Launched in second quarter 2017 Texas . Strategic partnership with San Francisco–based 35.8% 38.3% Lendeavor Arizona . Currently focused on dental and veterinary practices Michigan . Borrowers’ needs include practice finance or acquisition, acquiring or refinancing owner-occupied commercial real Utah estate and equipment purchases 13.7% 3.6% . 3.5% All Others Initial efforts have primarily focused on west coast with 5.1% plans to expand nationwide 21


 
Residential Mortgage . Award-winning national online origination platform Well Diversified Mortgage Originations* . Direct-to-consumer originations managed by sales and underwriting personnel located in Indiana- based corporate HQ 20.5% 17.5% . Geographic diversity 32.0% provides opportunity to benefit from strengths in certain regions when there is weakness in others 19.4% . Highly efficient application 10.6% and underwriting process . Full range of residential mortgage and home equity products . Central-Indiana based construction loan program *Last 12 months mortgage originations 22


 
Excellent Asset Quality Asset quality remains among the best in the industry driven by a strong credit culture and lower-risk asset classes NPAs / Total Assets NPLs / Total Loans 0.50% 0.37% 0.31% 0.21% 0.20% 0.19% 0.10% 0.09% 0.04% 0.02% 0.04% 0.03% 2014 2015 2016 2017 2018 2Q19 2014 2015 2016 2017 2018 2Q19 Allowance for Loan Losses / NPLs Net Charge-Offs (Recoveries) / Average Loans 5,000.6% 1959.5% 1,784.3% 2,013.1% 1,013.9% 0.15% 370.9% 0.00% (0.07%) 0.05% 0.04% 0.04% 2014 2015 2016 2017 2018 2Q19 2014 2015 2016 2017 2018 2Q19 23


 
Interest Rate Risk Management . 2Q19 FTE net interest margin of 1.91%1 declined 13 bps compared to 1Q19 . Decline driven by CD volume and replacement cost and the decline in three-month LIBOR . Initiated hedging strategy in 2017 to enhance interest rate sensitivity of longer term fixed rate assets and extend the duration of supplemental funding sources . Total notional value of $523.7 million pay fixed / receive variable swaps against assets . Total notional value of $210.0 million of pay fixed / receive variable swaps against funding . No additional swaps executed during 2019 due to current interest rate environment . Strategies to improve net interest margin include sales of lower yielding loans, disciplined loan pricing/price floors, lower deposit rates and repositioning the securities and wholesale funding portfolios . Interest rate sensitivity in instantaneous parallel shift downward rate scenarios and CD beta assumption of 90%: % Change for Parallel Shift in Interest Rates - 25 bps - 50 bps - 100 bps Net interest income: year 1 (1.17)% (2.38)% (5.07)% Net interest income: year 2 10.14% 9.61% 7.85% 1 See Reconciliation of Non-GAAP Financial Measures. 24


 
Drivers of Value Creation Management has aligned interests and is committed to building shareholder value . Further extend the scope and market penetration in specialty lending lines . Diversify the revenue stream with additional sources of noninterest income . Expand deposit channels and drive mix toward an increase in low-cost deposits . Deepen niche business relationships to attract more deposits . Build upon entrepreneurial culture to attract and retain top talent 25


 
Appendix 26


 
Second Quarter 2019 Highlights . Quarterly net income of $6.1 million and diluted EPS of $0.60 . Quarterly net interest income of $16.1 million, up 4.2% from 2Q18 . Quarterly net interest income – FTE1 of $17.7 million, up 6.6% from 2Q18 . Quarterly revenue of $19.6 million, up 10.9% from 2Q18 . Mortgage banking revenue of $2.7 million, up 66.8% from 2Q18 . Significant balance sheet management activities executed during the quarter to preserve capital and help improve NIM and profitability . Sold $148.4 million of loans with a weighted average FTE yield of 3.90% . Sold $30.6 million of securities with a weighted average yield of 1.88% . Refinanced $55.0 million of FHLB advances resulting in savings of 34 bps related to these borrowings . Nonperforming loans to total loans of 0.19% . Net charge-offs to average loans of 0.04% 1 See Reconciliation of Non-GAAP Financial Measures 27


 
Loan Portfolio Composition Dollars in thousands 2016 2017 2Q18 3Q18 4Q18 1Q19 2Q19 Commercial loans Commercial and industrial $ 102,437 $ 122,940 $ 107,394 $ 105,489 $ 114,382 $ 112,146 $ 110,143 Owner-occupied commercial real estate 57,668 75,768 86,068 93,568 87,962 87,482 83,979 Investor commercial real estate 13,181 7,273 6,185 5,595 5,391 11,188 21,179 Construction 53,291 49,213 46,769 38,228 39,916 42,319 47,849 Single tenant lease financing 606,568 803,299 863,981 883,372 919,440 975,841 1,001,196 Public finance - 438,341 566,184 610,858 706,342 708,816 706,161 Healthcare finance - 31,573 65,605 89,525 117,007 158,796 212,351 Total commercial loans 833,145 1,528,407 1,742,186 1,826,635 1,990,440 2,096,588 2,182,858 Consumer loans Residential mortgage 205,554 299,935 337,143 362,574 399,898 404,869 318,678 Home equity 35,036 30,554 28,826 28,713 28,735 27,794 26,825 Trailers 81,186 101,369 120,957 129,571 136,620 140,548 144,704 Recreational vehicles 52,350 69,196 79,946 85,821 91,912 95,871 100,518 Other consumer loans 39,913 56,968 59,261 55,175 51,239 48,840 49,029 Total consumer loans 414,039 558,022 626,133 661,854 708,404 717,922 639,754 Net def. loan fees, prem., disc. and other 1 3,605 4,764 5,716 5,133 17,384 25,418 38,544 Total loans $ 1,250,789 $ 2,091,193 $ 2,374,035 $ 2,493,622 $ 2,716,228 $ 2,839,928 $ 2,861,156 1 Includes carrying value adjustments of $22.2 million, $11.5 million, $5.0 million, ($5.2) million, ($2.5) million, $0.3 million, and $0.0 million as of June 30, 2019, March 31, 2019, December 31, 2018, September 30, 2018, June 30, 2018, December 31, 2017 and December 31, 2016, respectively, related to interest rate swaps associated with public finance loans. 28


 
Reconciliation of Non-GAAP Financial Measures 2014 2015 2016 2017 2018 TTM 2Q19 Net income - GAAP $4,324 $8,929 $12,074 $15,226 $21,900 $21,681 Adjustments: Write-down of other real estate owned - - - - 1,914 1,914 Net deferred tax asset revaluation - - - 1,846 - - Adjusted net income $4,324 $8,929 $12,074 $17,072 $23,814 $23,595 Diluted average common shares outstanding 4,507,995 4,554,219 5,239,082 7,149,302 9,508,653 10,231,906 Diluted earnings per share - GAAP $0.96 $1.96 $2.30 $2.13 $2.30 $2.12 Adjustments: Effect of write-down of other real estate owned - - - - 0.20 0.18 Effect of net deferred tax asset revaluation - - - 0.26 - - Adjusted diluted earnings per share $0.96 $1.96 $2.30 $2.39 $2.50 $2.30 Total average equity - GAAP $93,796 $100,428 $124,023 $178,212 $259,416 $291,021 Adjustments: Average goodwill (4,687) (4,687) (4,687) (4,687) (4,687) (4,687) Average tangible common equity $89,109 $95,741 $119,336 $173,525 $254,729 $286,334 Return on average assets 0.50% 0.81% 0.74% 0.66% 0.72% 0.62% Effect of write-down of other real estate owned 0.00% 0.00% 0.00% 0.00% 0.06% 0.06% Effect of net deferred tax asset revaluation 0.00% 0.00% 0.00% 0.08% 0.00% 0.00% Adjusted return on average assets 0.50% 0.81% 0.74% 0.74% 0.78% 0.68% Return on average shareholders' equity 4.61% 8.89% 9.74% 8.54% 8.44% 7.45% Effect of goodwill 0.24% 0.44% 0.38% 0.23% 0.16% 0.12% Return on average tangible common equity 4.85% 9.33% 10.12% 8.77% 8.60% 7.57% Return on average tangible common equity 4.85% 9.33% 10.12% 8.77% 8.60% 7.57% Effect of write-down of other real estate owned 0.00% 0.00% 0.00% 0.00% 0.75% 0.67% Effect of net deferred tax asset revaluation 0.00% 0.00% 0.00% 1.07% 0.00% 0.00% Adjusted return on average tangible common equity 4.85% 9.33% 10.12% 9.84% 9.35% 8.24% 29


 
Reconciliation of Non-GAAP Financial Measures Dollars in thousands 3Q17 4Q17 1Q18 2Q18 3Q18 4Q18 1Q19 2Q19 Total equity - GAAP $220,867 $224,127 $224,824 $282,087 $287,740 $288,735 $294,013 $296,120 Adjustments: Goodwill (4,687) (4,687) (4,687) (4,687) (4,687) (4,687) (4,687) (4,687) Tangible common equity $216,180 $219,440 $220,137 $277,400 $283,053 $284,048 $289,326 $291,433 Total assets - GAAP $2,633,422 $2,767,687 $2,862,728 $3,115,773 $3,202,918 $3,541,692 $3,670,176 $3,958,829 Adjustments: Goodwill (4,687) (4,687) (4,687) (4,687) (4,687) (4,687) (4,687) (4,687) Tangible assets $2,628,735 $2,763,000 $2,858,041 $3,111,086 $3,198,231 $3,537,005 $3,665,489 $3,954,142 Common shares outstanding 8,411,077 8,411,077 8,450,925 10,181,675 10,181,675 10,170,778 10,128,587 10,016,458 Book value per common share $26.65 $26.73 $33.38 $28.26 $28.36 $28.91 $29.03 $29.56 Effect of goodwill (0.56) (0.56) (0.56) (0.46) (0.46) (0.46) (0.46) (0.46) Tangible book value per common share $25.70 $26.09 $26.05 $27.25 $27.80 $27.93 $28.57 $29.10 Total shareholders' equity to assets 8.10% 7.85% 9.05% 8.98% 8.15% 8.01% 8.01% 7.48% Effect of goodwill (0.16%) (0.15%) (0.13%) (0.13%) (0.12%) (0.12%) (0.12%) (0.11%) Tangible common equity to tangible assets 8.22% 7.94% 7.70% 8.92% 8.85% 8.03% 7.89% 7.37% Net interest income $14,191 $15,360 $15,415 $15,461 $15,970 $15,421 $16,244 $16,105 Adjustments: Fully-taxable equivalent adjustments 1 1,280 1,555 1,018 1,164 1,351 1,477 1,557 1,612 Net interest income - FTE $15,471 $16,915 $16,433 $16,625 $17,321 $16,898 $17,801 $17,717 Noninterest expense/average assets 1.50% 1.45% 1.47% 1.40% 1.27% 1.52% 1.24% 1.23% Effect of write-down of other real estate owned 0.00% 0.00% 0.00% 0.00% 0.00% 0.29% 0.00% 0.00% Adjusted noninterest expense/average assets 1.50% 1.45% 1.47% 1.40% 1.27% 1.23% 1.24% 1.23% Efficiency ratio 54.2% 54.2% 56.9% 57.7% 55.9% 72.9% 59.7% 58.3% Effect of write-down of other real estate owned 0.0% 0.0% 0.0% 0.0% 0.0% 13.8% 0.0% 0.0% Adjusted efficiency ratio 54.2% 54.2% 56.9% 57.7% 55.9% 59.1% 59.7% 58.3% 1 Assuming a 21% tax rate beginning in 2018 and a 35% tax rate prior to 2018 30


 
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