Strong finish to a transformational year with full year earnings per share up 133% to prior year

Denver, CO – January 27, 2023 – InBankshares, Corp (OTCQX: INBC) (the “Company”), parent company of InBank (“InBank” or the “Bank”), today announced its unaudited financial results for the quarter and year ended December 31, 2022. The Company reported consolidated net income of $3.1 million, or $0.27 per share, for the fourth quarter of 2022 compared to $3.1 million, or $0.27 per share, for the third quarter of 2022, and $690,000, or $0.09 per share, for the fourth quarter of 2021. Full year net income was $8.8 million, or $0.84 per share, an increase of $6.1 million, or 220.6% from the prior year.

Net income for the fourth quarter of 2022 includes pre-tax acquisition costs of $451,000, compared to $1.0 million for the third quarter of 2022, and $292,000 for the fourth quarter of 2021 related to the acquisition of Legacy Bank (“Legacy”), which was completed on April 29, 2022. These acquisition costs reduced earnings per common share by $0.03 in the fourth quarter of 2022, $0.07 in the third quarter of 2022, and $0.03 in the fourth quarter of 2021.

Highlights for the fourth quarter and full year 2022:

  • Core loans at December 31, 2022 increased $49.6 million, or 6.2%, compared to September 30, 2022 and increased $430.3 million, or 103.4%, compared to December 31, 2021
  • Total deposits at December 31, 2022 increased $6.3 million, or 0.6%, compared to September 30, 2022 and increased $432.6 million, or 68.9%, compared to December 31, 2021
  • Net income for the quarter was $3.1 million, flat to the linked quarter, and increased $2.4 million compared to the fourth quarter of 2021
  • Full year net income for 2022 was $8.8 million, an increase of $6.1 million, or 220.6% compared to the prior year
  • Basic earnings per share (“EPS”) was $0.27 for the quarter, compared to $0.27 for the linked quarter, and $0.09 for the fourth quarter of 2021; EPS for the full year 2022 was $0.84, an increase of $0.48, or 133.3%, compared to $0.36 for the prior year
  • ROAA was 1.01% for the quarter, compared to 1.01% for the linked quarter, and 0.37% for the fourth quarter of 2021; ROAA for the full year 2022 was 0.82%, compared to 0.39% for the prior year
  • Net interest margin was 4.43% for the quarter, compared to 4.56% in the linked quarter, and 3.31% in the fourth quarter of 2021; full year 2022 net interest margin was 4.17%, compared to 3.61% for the prior year
  • Pre-provision, pre-tax net revenue (“PPNR”) for the quarter was $5.2 million, compared to $5.4 million for the linked quarter, and $1.4 million for the fourth quarter of 2021; full year PPNR was $15.9 million, compared to $4.9 million for the prior year
  • Nonperforming assets at December 31, 2022 remained flat at $1.3 million, or 0.11% of total assets, compared to September 30, 2022, and increased slightly from $948,000, or 0.13% of total assets at December 31, 2021
  • Tangible book value per share increased 4.7% to $7.18 at December 31, 2022, compared to $6.86 at September 30, 2022, and decreased 14.6% from $8.41 at December 31, 2021

“The fourth quarter of 2022 was another strong quarter in a transformational year for InBankshares, with continued organic growth and the merger with Legacy Bank that closed in the second quarter of 2022,” said Ed Francis, Chairman of the Board, President and Chief Executive Officer of the Company and InBank. “I am proud of what the InBank team was able to accomplish. With a combination of organic and acquired growth, we grew total assets 67% in 2022. Our full year organic core loan growth of 32.3% and organic deposit growth of 2.4% during a year when we integrated Legacy customers and completed a core conversion reflects our teams’ commitment to winning market share.”

“As we scaled the Company, we benefited from positive operating leverage and significantly improved our efficiency and profitability. We are pleased to see our full year PPNR more than triple and our full year earnings per share increase 133%, despite recording $2.5 million in one-time merger and acquisition expenses in 2022. In addition, the Company’s strong liquidity position allowed us to significantly expand our
net interest margin, despite the pressure of rising funding costs seen throughout the industry during the fourth quarter.”

Results of Operations
Net income for the fourth quarter of 2022 was $3.1 million or $0.27 per share, unchanged from third quarter of 2022, and increased $2.4 million, or $0.18 per share, compared to the same quarter last year. The increase over the same quarter last year was significantly impacted by the acquisition of Legacy during the second quarter of 2022. The acquisition resulted in favorable variances in net interest income and
noninterest income, which were partially offset by unfavorable variances in provision for loan loss, noninterest expense, and income tax expense. Net income for the full year 2022 was $8.8 million, or $0.84 per share, representing an increase of $6.1 million, or 220.6%, compared to $2.7 million, or $0.36 per share, for the prior year

Net interest income for the fourth quarter of 2022 was $12.8 million, a decrease of $402,000, or 3.0%, over the linked quarter, and an increase of $6.9 million, or 116.0%, over the same quarter last year. The decrease in net interest income compared to the linked quarter was due to a $683,000 increase in interest expense, partially offset by a $281,000 increase in interest income. The increase in net interest income compared to the same quarter last year was primarily a result of the impact of the Legacy acquisition and increases in market interest rates.

  •  Interest income increased $281,000, or 2.0%, to $14.3 million during the fourth quarter of 2022, compared to $14.1 million during the linked quarter, and increased $7.9 million, or 123.5%, compared to $6.4 million during the same quarter last year.
    o The increase from the linked quarter was primarily due a change in the mix of earning assets. Average loans increased $21.2 million with an average yield of 5.55%, while interest bearing cash and investments decreased by $21.5 million with an average yield of 3.44%.
    o During the third quarter of 2022, the Bank sold a $4.5 million nonaccrual real estate loan, resulting in a recognition of loan interest and fee income of $983,000.
    o The increase in interest income compared to the same quarter last year was primarily due to an increase of $435.8 million in average interest earning assets and higher yields on investments and core loans, partially offset by a decrease in PPP loan interest and fee
    income of $291,000.
    o Accretion of the purchase discount on acquired loans was $1.0 million in the fourth quarter of 2022, compared to $706,000 in the linked quarter, and $206,000 in the fourth quarter of 2021.
  • Interest expense was $1.5 million in the fourth quarter of 2022, an increase of $683,000, or 79.7%, compared to $857,000 during the linked quarter, and an increase of $1.0 million, or 213.0% compared to $492,000 during the same quarter last year.
    o The increase over the linked quarter was primarily due to a 25 basis point increase in the cost of funds.
    o The increase from the same quarter last year was due to an increase of $251.0 million in average interest-bearing deposits and a 26 basis point increase in the cost of funds. In the fourth quarter of 2021, the Company issued $20 million of subordinated debentures.

Net interest margin (NIM), expressed as net interest income as a percentage of average earning assets, was 4.43% during the fourth quarter of 2022, compared to 4.56% during the linked quarter, and 3.31% during the same quarter last year. Adjusting the third quarter of 2022 for the one-time loan interest recognition described above, NIM would have been 4.22%. Excluding this one-time item, NIM during the fourth quarter increased 21 basis points as a result of increases in yields on earning-assets due to higher market interest rates, partially offset by higher funding costs. Net interest margin for the full year 2022 was 4.17%, compared to 3.61% for the prior year. Margin expansion year-over-year was primarily attributable to an increase in loan and investment balances as a percentage of earning assets and an increase in higher market rates, partially offset by higher funding costs.

Noninterest income for the fourth quarter of 2022 was $1.4 million, an increase of $239,000, or 21.3%, over the linked quarter, and an increase of $425,000, or 45.5%, from the same quarter last year. The increase over the linked quarter was primarily due to an increase in gain on sale of other assets of $235,000, mostly resulting from the sale of a branch building in the fourth quarter of 2022 and an increase in other noninterest income. These increases were partially offset by a decrease in mortgage fees and gains on sale and a decrease on gain on sale of SBA loans. The increase from the same quarter last year was primarily due to an increase in service charge income and fees, including credit and debit card income, an increase in a net gain on sale of other assets described above, and an increase in other noninterest income, including bank owned life insurance income, partially offset by a decrease in gain on sale of SBA and CRE loans and a decrease in mortgage fees and gains on sale.

For the full year 2022, noninterest income increased $811,000, or 23.2%, primarily due to increases in service charge and fee income, including credit and debit card income, an increase in net gain on sale of OREO and other assets, and an increase in other noninterest income, partially offset by a decrease in gain on sale of SBA and CRE loans, a decrease in mortgage fees and gains on sale, and a decrease on gain on sale of investment securities.

Noninterest expense for the fourth quarter of 2022 was $9.4 million, a decrease of $515,000, or 5.2%, when compared to the linked quarter, and an increase of $3.7 million, or 63.9%, from the same quarter last year. The increase over the linked quarter was primarily due to a $563,000 decrease in merger and acquisition expense and a $286,000 decrease in salaries and employee benefits, mostly due to decreases in bonuses and payroll taxes, partially offset by an increase in deferred loan costs. These decreases were partially offset by a $298,000 increase in other noninterest expense, primarily due to a $500,000 write-down of an equity investment held by the Company and an increase in data processing expense. The increase in noninterest expense compared to the same quarter in the prior year was due to a $3.2 million increase across all categories of operating expenses due to the Legacy acquisition and organic growth, a $321,000 increase in intangible amortization in connection with the Legacy transaction, and a $159,000 increase in non-core merger and acquisition expense. Full-time equivalent employees were 168 at December 31, 2022, compared to 168 at September 30, 2022 and 113 at December 31, 2021.

For the full year 2022, noninterest expense increased $10.0 million, or 43.3%, primarily due to increases across all categories of operating expenses due to the Legacy acquisition and organic growth, a $829,000 increase in intangible amortization in connection with the Legacy transaction, and a $2.2 million increase in non-core merger and acquisition expense.

The Company’s core efficiency ratio, which excludes gain on sales of securities and merger and acquisition expense, was 63.1% in the fourth quarter of 2022, compared with 62.0% in the linked quarter and 79.2% in the fourth quarter of 2021. The large year-over-year decrease was related to the benefits of operating leverage from the Legacy transaction.

Balance Sheet Summary
Total assets were $1.25 billion at December 31, 2022, an increase of $35.2 million, or 2.9%, from $1.21 billion at September 30, 2022. During the quarter, net loans increased $48.7 million, partially offset by a decrease of $5.6 million in cash and cash equivalents, a $5.0 million decrease in investment securities, and a $2.9 million decrease in premises and equipment. At December 31, 2022, investment securities were $319.6 million and total cash and equivalents were $18.3 million, which combined represented 27.1% of total assets. Total assets increased $501.3 million, or 67.3%, from $745.2 million at December 31, 2021, primarily as a result of the Legacy acquisition and strong organic loan growth.

Total deposits were $1.06 billion at December 31, 2022, an increase of $6.3 million, or 0.6%, compared to the linked quarter and increased $432.6 million, or 68.9% compared to the same quarter in the prior year. Noninterest-bearing deposits declined by 1.7% from the linked quarter, and increased by 73.6% from December 31, 2021, representing 41.8% of total deposits at December 31, 2022. The fair value of the
deposits acquired as part of the Legacy transaction was $417.2 million. Organic deposit growth, excluding acquired deposits, totaled $15.4 million, an increase of 2.4% compared to December 31, 2021.

Total loans held-for-investment (“HFI”), which excluded loans held-for-sale (“HFS”), were $846.7 million at December 31, 2022, compared to $797.1 million at September 30, 2022, which was an increase of $49.6 million, or 6.2%. Total loans HFI increased $415.5 million, or 96.3%, from December 31, 2021.

  • SBA Paycheck Protection Program (“PPP”) loan balances were $117,000 at December 31, 2022 and September 30, 2022, and $15.0 million at December 31, 2021. As of December 31, 2022, all fees on PPP loans were recognized.
  • Excluding PPP loans, core loans were $846.6 million at December 31, 2022, an increase of $430.3 million, or 103.4% from December 31, 2021.
  • Organic core loan growth, excluding a decrease in PPP loans of $15.0 million and acquired loans of $295.8 million, totaled $134.6 million, an increase of 32.3% compared to December 31, 2021.

Subordinated debentures and other borrowings, combined, were $52.6 million at December 31, 2022, an increase of $25.0 million compared to the linked quarter, and increased $28.1 million compared to December 31, 2021. During the second quarter of 2022, the Company entered into a loan agreement for a $5 million revolving line of credit, and the Company had $3.0 million outstanding on the line as of December 31, 2022 and September 30, 2022. The Bank increased its short-term Federal Home Loan Bank (“FHLB”) borrowings to $25.0 million at December 31, 2022 from zero at September 30, 2022 and December 31, 2021.

Asset Quality
Nonperforming assets, which include nonperforming loans and OREO, were $1.3 million, or 0.11% of total assets at December 31, 2022 and September 30, 2022, Nonperforming loans and OREO increased $366,000 from $948,000 or 0.13% of total assets at December 31, 2021. Nonperforming loans, which include non-accrual loans and loans more than 90 days past due and still accruing, were $1.3 million, or 0.16% of total loans HFI at December 31, 2022 and September 30, 2022.

Loans delinquent (past due) 30-89 days were $957,000, or 0.11% of total loans HFI at December 31, 2022, com pared to $1.2 million, or 0.15% of total loans HFI at September 30, 2022. The allowance for loan and lease losses (“ALLL”) totaled $5.7 million, or 0.67% of total loans HFI atDecember 31, 2022. As of December 31, 2022, the Company also had $7.3 million in purchase discounts on loans acquired in the acquisition of Legacy in the second quarter of 2022 and the Bank in 2018. When combined, the purchase discounts and ALLL represented 1.52% of total loans HFI plus purchase discounts at the end of the quarter. Provision for loan losses expense for the quarter ended December 31, 2022, totaled $900,000, compared to $525,000 for the quarter ended September 30, 2022, and $240,000 for the quarter ended December 31, 2021. The Company recorded $5,000 of net charge-offs for the fourth quarter of 2022.

Capital
Capital ratios of the Company and InBank continue to exceed the “well-capitalized” regulatory thresholds. At December 31, 2022, InBank’s leverage ratio was 9.79% and the total risk-based capital ratio was 11.42%. At December 31, 2022, the Company had tangible common equity of $83.8 million and tangible book value per share (“TBVPS”) of $7.18, with 11,672,362 shares of common stock issued and outstanding as of the same date. Tangible common equity increased $3.8 million and TBVPS increased $0.32, or 4.7%, compared to September 30, 2022, mostly due to an increase in surplus and retained earnings of $3.3 million, while accumulated other comprehensive income (“AOCI”) on investment securities was flat compared to the linked quarter. Year-over-year, the TBVPS decreased $1.23, or 14.6%, compared to December 31, 2021 primarily due to a decrease in the AOCI of $10.1 million, or $0.87 per share, or 10.3%. The balance of the year-over-year
decrease in TBVPS of $0.36, or 4.3%, was primarily due to the acquisition of Legacy, partially offset by an increase in retained earnings.

The Company’s tangible common equity to tangible assets ratio was 6.87% at December 31, 2022. The Company paid no dividends during the fourth quarter of 2022. The Bank paid $450,000 in dividends to the Company during the fourth quarter of 2022.

Non-GAAP Financial Measures
Some of the financial measures included in this press release are not measures of financial performance recognized in accordance with generally accepted accounting principles in the United States (“GAAP”). These non-GAAP financial measures include: (i) tangible common equity, (ii) tangible assets, (iii) tangible common equity to tangible assets, (iv) tangible book value per share, (v) return on average tangible common equity, (vi) pre-provision pre-tax net revenue, or PPNR, (vii) core efficiency ratio, (viii) adjusted return on average assets excluding M&A, (ix) core loans, and (x) core noninterest expense to average assets. Tangible common equity is computed by subtracting goodwill and core deposit intangibles from total stockholders’ equity. Tangible assets is computed by subtracting goodwill and core deposit intangibles from total assets. Tangible common equity to tangible assets is computed by dividing tangible common equity by tangible assets. Tangible book value per share is computed by dividing tangible common equity by common shares outstanding. Return on average tangible common equity is computed by dividing net income, less intangible amortization, tax effected, by average stockholders’ equity less average intangible assets. PPNR is computed by adding provision for loan losses expense, merger and acquisition expense, and income tax expense to net income. Core efficiency ratio is computed by dividing noninterest expense, less merger and acquisition expense, by the sum of noninterest income exclusive of gain/loss on sale of securities and net interest income. Adjusted return on average assets excluding M&A is computed by dividing net income, less merger and acquisition expense, tax effected, by average assets. Core loans is computed by subtracting
PPP loans from total loans held for investment. Core noninterest expense to average assets is computed by dividing noninterest expense, less merger and acquisition expense, by average assets. The Company believes these non-GAAP financial measures provide both management and investors a more complete understanding of the Company’s financial position and performance. These non-GAAP financial measures
are supplemental and are not a substitute for any analysis based on GAAP financial measures. Not all companies use the same calculation of these measures; therefore, this presentation may not be comparable to other similarly titled measures as presented by other companies.

About InBankshares, Corp
InBankshares, Corp is the holding company for InBank, an independent commercial bank growing throughout the Colorado Front Range and serving southern Colorado and northern New Mexico markets. InBank offers a full suite of commercial, business, personal and mortgage banking solutions with a focus on personalized service, technology, and local decision-making. InBank was built on the entrepreneurial spirit and is led by a team of experienced banking professionals committed to the mission of positively impacting the lives of its customers,  communities, and associates. For more information, visit www.InBank.com.