Denver, CO – February 14, 2020 – InBankshares, Corp (OTCQX: INBC) (the “Company”), parent company of InBank (the “Bank”), today reports its earnings results for the quarter ending December 31, 2019.
“We are pleased with our fourth quarter financial performance and remain confident in our trajectory for 2020. Our bankers added 39 new relationships in the quarter adding to the velocity of our non-interest bearing DDA growth of $13.3 million. In addition, we saw earning assets increase by $28 million led by very strong loan growth of $18.4 million,” says Ed Francis, Chairman of the Board, President and Chief Executive Officer of the Company and the Bank.
**Amounts in thousands
Balance Sheet Summary
Total assets were $396 million as of December 31, 2019, which represented an increase of $27.8 million or 7.6% over the previous quarter and an increase of $38.2 million or 10.7% over the same period last year. The quarter over quarter increase was primarily due to an increase in loans and interest-bearing balances offset by a reduction in investment securities. Total interest-bearing balances were up $19.6 million for the quarter. Total gross loans and leases were $232.6 million, representing an $18.4 million or an 8.6% increase over September 30, 2019. Investment securities fell $10 million for the quarter solely due to normal run-off in the portfolio which helped to provide liquidity for loan fundings.
Total liabilities increased $28.9 million to $331 million during the three months ended December 31, 2019. This was attributable to an increase in total deposits and borrowed funds. Total deposits were $293.5 million, up $21.8 million for the quarter. The Company saw strong demand deposit growth of $13.3 million over the previous quarter end as well as increases of $3.6 million and $5.0 million in interest-bearing and brokered deposits, respectively. The increase in deposits was concentrated in new relationships primarily in the Denver market. Noninterest bearing deposits make up 35.4% of total deposits as of December 31, 2019. Borrowed funds increased $8.0 million for the quarter primarily through FHLB advances.
Stockholder’s equity of $64.4 million declined by $1.0 million from September 30, 2019. This was a result of the $646 thousand loss for the quarter as well as a $649 thousand reduction in the market value of the securities available for sale offset by a $255 thousand increase in surplus due to equity-based compensation. At December 31, 2019, book value per common share and tangible book value per common share were $9.10 and $7.37, respectively, and the Bank exceeded the “well capitalized” requirements under applicable regulatory guidelines. The Bank’s tier 1 and total risk-based capital ratios were 12.75% and 13.02%, respectively, as of December 31, 2019. The Bank’s tier 1 leverage ratio was 12.52% as of December 31, 2019, with the Company continuing to maintain additional capital reserves to support future balance sheet growth.
Income Statement Review
Interest income totaled $4.3 million for the three months ending December 31, 2019, up $35 thousand when compared to the linked quarter. Loan fees continued to be strong and positively impacted the Bank’s loan yield. The cash flow run-off in the investment portfolio has helped fund loan growth but has led to a reduction in interest income on securities and interest-bearing balances. Despite the increase in costing liabilities over the prior quarter, the Company’s interest expense fell by $9 thousand. Total cost of funds in the fourth quarter was 75 basis points, which was a decline of 4 basis points when compared to the third quarter. This, combined with the previously mentioned increase in interest income, resulted in an improvement in net interest margin of $44 thousand over the linked quarter.
Provision expense was $270 thousand for the most recent quarter. This was an increase of $200 thousand over the linked quarter. The increase reflected the strong loan growth for the quarter as well as provision recognized on five impaired credits recognized during the quarter. Provision for 2019 was $550 thousand compared to the 2018 provision of $374 thousand, which represented an increase of $176 thousand year over year. On a pre-provision pre-tax basis, the Company lost $413 thousand for the quarter ending December 31, 2019.
Noninterest income totaled $416 thousand for the quarter, which was down $55 thousand from the three months ending September 30, 2019. Service charge and debit card income declined $76 thousand and $69 thousand, respectively. This was offset by increases of $53 thousand in treasury management revenue and $37 thousand in other income.
Noninterest expense totaled $4.4 million for the three months ending December 31, 2019, which was a $33 thousand decrease from the previous quarter. Salaries and employee benefit expenses increased $91 thousand as new revenue generating positions were added during the quarter. Occupancy and equipment expenses were down $40 thousand compared to the prior quarter primarily in the depreciation expense category. Other noninterest expense was down $83 thousand primarily in the ATM and FDIC expense categories.
Asset Quality Summary
The Bank’s past due loan balances were up slightly from last quarter from 0.60% to 0.86% primarily due to one large agricultural loan that has been brought current in 2020. During the quarter, past due loans increased by just over $700 thousand. During the same period, classified loans increased due to the downgrade of three loans in the bank’s southern region. Classified assets currently total $6.1 million, an increase of $67 thousand during the quarter. Non-accrual loans totaled $1.4 million as of the end of the quarter, or 0.59% of total loans, continuing the downward trend for 2019 of non-accruals as a percentage of total loans. Other Real Estate Owned (OREO) increased $138 thousand during the quarter, the result of two new foreclosed properties added to the bank’s OREO portfolio. The Bank’s overall non-performing asset level was down as of the end of the quarter due in large part to the positive trends in non-accrual loans.
Management continues to carefully monitor allocation of capital to Commercial Real Estate (CRE) and is very selective on CRE credits. During the quarter Construction and Land loans increased from 91.58% of the bank’s total capital to 115.17%. The increase is primarily due to funding of existing credits and not the result of new business development. Management and the Board continue to focus our bankers’ efforts on Commercial and Industrial (C&I) business development, which has resulted in $3.6 million of C&I and Owner Occupied Commercial Real Estate (OOCRE) loan growth during the quarter. Credit exposure in CRE lending will continue to be monitored to purposefully develop a more diverse loan portfolio and avoid concentrations in speculative for-sale properties and other high risk CRE segments.
Opportunity for growth has been predominately in the Colorado market and over the past year and a half and the Bank’s asset mix has been focused on Colorado opportunities as shown below.
The Bank’s Allowance for Loan and Lease Losses (ALLL) totaled $971 thousand at the end of the quarter. This included a provision expense of $270 thousand. ALLL represents 0.42% of total loans, and, if combined with the Bank’s loan purchase accounting discount of $4.9 million of total loans, would have equaled 2.27% at the end of the quarter.
About InBankshares, Corp
InBankshares, Corp is the holding company for InBank, an independent commercial bank serving the Denver Metro Area, southern Colorado and northern New Mexico. Established as International Bank in 1918, the bank was founded by a young Italian immigrant and built upon his entrepreneurial spirit. With a modern vision for the next 100 years, InBank is committed to delivering a new generation of personalized banking services and to the mission of positively impacting the lives of our customers, communities and associates. For more information, visit www.InBank.com.
This press release contains, among other things, certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including, without limitation, statements preceded by, followed by, or that include the words “may,” “could,” “should,” “would,” “believe,” “anticipate,” “estimate,” “expect,” “intend,” “plan,” “projects,” “outlook” or similar expressions. These statements are based upon the current belief and expectations of the Company’s management team and are subject to significant risks and uncertainties that are subject to change based on various factors (many of which are beyond the Company’s control). Although the Company believes that the assumptions underlying the forward-looking statements are reasonable, any of the assumptions could prove to be inaccurate. Therefore, the Company can give no assurance that the results contemplated in the forward-looking statements will be realized. The inclusion of this forward-looking information should not be construed as a representation by the Company or any person that the future events, plans, or expectations contemplated by the Company will be achieved.
All subsequent written and oral forward-looking statements attributable to the Company or any person acting on its behalf are expressly qualified in their entirety by the cautionary statements above. The Company does not undertake any obligation to update any forward-looking statement to reflect circumstances or events that occur after the date the forward-looking statements are made, except as required by law.
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