Company achieved continued core loan and deposit growth and improved core earnings
Denver, CO – July 27, 2021 – InBankshares, Corp (OTCQX: INBC) (the “Company”), parent company of InBank (“InBank” or the “Bank”), today reported its financial results for the quarter ended June 30, 2021. All results are unaudited.
Highlights for the quarter:
- Net income of $778,000, or $0.10 per share, compared to $661,000, or $0.09 per share for the linked quarter and $1.1 million, or $0.16 for Q2-2020
- Net interest income of $6.2 million, compared to $6.1 million for the linked quarter and $5.8 million for Q2-2020
- Excluding SBA Paycheck Protection Program (“PPP”) loans, core loan growth of $21.3 million, or 6.3%, when compared to the linked quarter and up $79.4 million, or 28.4%, compared to Q2-2020
- Deposit growth of $6.0 million, or 1.0%, when compared to the linked quarter and up $180.7 million, or 45.1%, compared to Q2-2020
- Net interest margin was 3.73%, compared to 3.98% for the linked quarter and 4.62% for Q2-2020
- Funding costs declined to 0.24% in the quarter, a decrease of 5 basis points from the linked quarter and a decrease of 23 basis points from Q2-2020
- Non-performing assets were 0.16% of assets, up 1 basis point from 0.15% in the linked quarter, and decreased 58 basis points from 0.74% in Q2-2020
- All InNeed loan modifications have returned to normal payments
“Our growth and earnings momentum continues,” said Ed Francis, Chairman of the Board, President and Chief Executive Officer of the Company and InBank. “The earnings run rate, excluding one-time events, is the strongest it has been since the acquisition of the bank in 2018 and we believe it will continue to grow as core loan growth replaces PPP loan runoff. We are also seeing strong progress in our treasury, SBA and payments businesses and continue to be optimistic about their contribution to our earnings.”
Results of Operations
Net income for the second quarter of 2021 was $778,000, or $0.10 per share, compared to net income of $661,000, or $0.09 per share, for the linked quarter, and $1.1 million, or $0.16 per share, for the same quarter last year. The increase over the linked quarter was primarily the result of increases in noninterest income and net interest income, partially offset by an increase in provision for loan losses expense. The decrease from the same quarter last year was primarily the result of a $664,000 one-time gain on sale of investment securities in the second quarter of 2020. Net income for the six months ended June 30, 2021 was $1.4 million, or $0.19 per share, representing an increase of 41.0% compared to $1.0 million, or $0.14 per share for the same period in 2020.
Net interest margin, expressed as net interest income as a percentage of average earning assets, was 3.73% during the second quarter of 2021, compared to 3.98% during the linked quarter, and 4.62% during the same quarter last year.
Net interest income for the second quarter of 2021 was $6.2 million, an increase of $89,000, or 1.5%, over the linked quarter, and an increase of $445,000, or 7.7%, over the same quarter last year.
- Interest income increased to $6.6 million from $6.5 million during the linked quarter and $6.3 million during the same quarter last year.
- The increase over the linked quarter was primarily the result of increases in loan and investment portfolio volumes, partially offset by a decrease in the earning asset yield.
- The increase compared to same quarter last year was again primarily the result of increases in loan and investment portfolio volumes, partially offset by a decrease in the earning asset yield.
- Interest expense decreased to $377,000 from $410,000 during the linked quarter and $550,000 during the same quarter last year.
- The decrease was primarily the result of the Company’s cost of funds decreasing to 0.24%, from 0.29% during the linked quarter, and from 0.47% in the same quarter last year.
Noninterest income for the second quarter of 2021 was $804,000, an increase of $236,000, or 41.50%, over the linked quarter, and a decrease of $195,000, or 19.5%, from the same quarter last year. The increase over the linked quarter was primarily due to increases in commercial, treasury and card fees, and gains on sales of SBA loans, partially offset by lower mortgage banking fees and lower gains on sales of mortgage loans. The current quarter did not have any realized gains on sale of investment securities, compared to $664,000 during the same quarter last year.
Noninterest expense for the second quarter of 2021 was $5.7 million, a decrease of $71,000, or 1.2% when compared to the linked quarter, and an increase of 16.4% from $4.9 million for the same quarter last year. The increase over the same quarter last year was mostly due to an increase in salaries and employee benefits expense as we continued to hire and invest in new personnel to support our growth plans.
The Company’s efficiency ratio was 80.7% in the second quarter of 2021, compared with 85.6% in the linked quarter and 79.7% in the second quarter of 2020.
Balance Sheet Summary
Total assets were $708.4 million at June 30, 2021, an increase of $10.4 million or 1.5% from $698.1 million at March 31, 2021. During the quarter there was an increase in investment securities of $19.7 million, an increase in cash and cash equivalents of $8.3 million, and a decrease in total loans of $19.4 million due to PPP loan decreases of $40.8 million. Investment securities were $192.3 million and total cash and equivalents were $68.4 million at June 30, 2021, which combined represented 36.8% of total assets. Total assets increased $130.7, or 22.6%, over the same quarter last year, primarily as a result of increases in investments and cash and equivalents funded by deposit growth.
Total deposits were $581.7 million at June 30, 2021, an increase of $6.0 million, or 1.0%, from $575.7 million at March 31, 2021, and increased by $180.7 million, or 45.1%, compared to $400.9 million at June 30, 2020. Noninterest-bearing deposits grew by 39.4% from June 30, 2020 and represented 39.0% of total deposits at June 30, 2021.
Total loans, which excluded loans held-for-sale (“HFS”), were $418.2 million at June 30, 2021, compared to $437.6 million at March 31, 2021, which was a decrease of $19.4 million, or 4.4%. Total loans increased $23.6 million, or 6.0%, from June 30, 2020.
- PPP loan balances were $59.7 million at June 30, 2021 compared to $100.4 million at March 31, 2021 and $115.5 million at June 31, 2020.
- During the quarter, the Company continued to assist its customers through the loan forgiveness application process on the PPP loans originated in 2020 from the first round of the PPP program (“PPP1”) and started to assist customers with forgiveness on the second round of the PPP program (“PPP2”). As of June 30, 2021, there was approximately $1.1 million remaining in fees to be recognized upon forgiveness or repayment of SBA PPP loans.
- Excluding PPP loans, core loans were $358.5 million at June 30, 2021, an increase of $21.3 million, or 6.3% (annualized growth of approximately 25.3%), during the quarter.
- Core loans increased $79.4 million, or 28.4%, from June 30, 2020.
Nonperforming assets, which include nonperforming loans and other real estate owned (“OREO”), marginally increased $82,000 to $1.1 million, or 0.16% of total assets at June 30, 2021, compared to $1.1 million, or 0.15% of total assets at March 31, 2021, and compared to $4.3 million, or 0.74% of total assets at June 30, 2020. Nonperforming loans, which include non-accrual loans and loans more than 90 days past due and still accruing, were $728,000, or 0.17% of total loans (excluding HFS) at June 30, 2021, compared to $486,000, or 0.11% of total loans at March 31, 2021. This increase was due to a single loan that was in the process of renewal, which was completed after quarter end. OREO balances decreased $160,000 to $415,000 at June 30, 2021, compared to $575,000 at March 31, 2021 as the result of one property sale. Remaining OREO consists of three small properties.
Loans delinquent (past due) 30-89 days were $4.9 million, or 1.17% of total loans (excluding HFS) at June 30, 2021, compared to $1.6 million, or 0.37% of total loans at March 31, 2021. This was primarily due to a single loan reaching maturity with additional information needed to reset. The subject loan is currently in the process of being renewed and expected to be completed in early Q3.
The allowance for loan and lease losses (“ALLL”) totaled $2.7 million, or 0.64% of total loans (excluding HFS) at June 30, 2021. If PPP loans are excluded, the ALLL represents 0.75% of total loans (excluding HFS). As of June 30, 2021 the Company also had $3.8 million in purchase discounts on loans acquired in the acquisition of the Bank in 2018. When combined, the purchase discounts and ALLL represent 1.55% of total loans (excluding HFS) at the end of the quarter. Provision for loan losses expense for the quarter ended June 30, 2021 totaled $375,000, compared to $129,000 for the quarter ended March 31, 2021 and $422,000 for the quarter ended June 30, 2020. Net charge-offs/recoveries of $14,000 were recorded as a recovery for the second quarter of 2021.
Loan modification programs: during the second quarter of 2020, InBank rolled out InNeed, two programs for loan deferrals for borrowers that were adversely affected by the COVID-19 pandemic. The programs allowed an interest-only option for 90 days or a 90-day total payment deferral (interest and principal). The programs were discontinued during the first quarter of 2021. All 15 borrowers who participated in the interest-only program and each of the 42 borrowers in the total payment deferral program have returned to normal payments.
The Bank is tracking the recovery of accrued interest on these loans and as of June 30, 2021, 33 of the loans had repaid the interest accrual and were making principal and interest payments. Seven loans still had an accrued interest balance and the accrued interest is expected to be recovered by the first quarter of 2022. Two loans have paid in full.
Capital Ratios of the Company and InBank continue to exceed the “well-capitalized” regulatory thresholds. At June 30, 2021, InBank’s leverage ratio was 8.76% and the total risk-based capital ratio was 12.84%.
At June 30, 2021, the Company had tangible common equity (total stockholders’ equity less intangible assets) of $67.0 million and $8.43 tangible book value per share, with 7,946,858 shares of common stock issued and outstanding as of the same date. During the quarter the Company raised capital through the sale of shares of the Company’s common stock to existing shareholders which led to the issuance of 610,000 shares for gross proceeds of $5,002,000. The shares of common stock were issued in a private placement pursuant to Section 4(a)(2) of the Securities Act of 1933, as amended. The Company and the Bank paid no dividends during the quarter.
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 “efficiency ratio,” “tangible common equity,” “tangible common equity to tangible assets,” and “tangible book value per common share.” Efficiency ratio is computed by dividing noninterest expense by the sum of net interest income and noninterest income, excluding gain on sale of investment securities. Tangible common equity is computed by subtracting goodwill and core deposit intangibles from total stockholders’ equity. Tangible common equity to tangible assets is computed by dividing total assets, less goodwill and core deposit intangibles, by tangible common equity. Tangible book value per share is computed by dividing tangible common equity by common shares outstanding. 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.
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.