INSBANK Parent InsCorp Reports Annual Profits
Steady Growth Defines the 4th Quarter for the Nashville Lender
NASHVILLE, Tenn., Jan. 29, 2024 /PRNewswire/ — Today InsCorp (OTCQX: IBTN) reported a net profit of $2,267,000, or $0.79 per share, in the fourth quarter of 2023 compared to respective levels of $2,319,000 and $0.80 for the fourth quarter of 2022. For the year, net profit of $8,404,000, or $2.92 per share, in 2023 compared to $10,336,000, which benefited from a one-time $2,900,000 gain, or $3.59 per share, in 2022. InsCorp generated a ROA of 1.06% and ROE of 12.8% in 2023.
INSBANK has demonstrated relative stability in a volatile environment over the past couple of years. “While we were pleased to report a meaningful increase in loan originations in the fourth quarter and loan growth of 5%, this progress was somewhat offset by the rational behavior of our customers to deploy portions of their liquidity into interest-bearing accounts,” said Jim Rieniets, President and CEO of INSBANK. “Despite the optics of a decline in aggregate non-interest-bearing deposits, for the year active operating accounts grew 6% while treasury services fee income grew 20%. This is reflective of both smart customers and capable bankers, the latter of which are garnering new relationship deposits with virtually all new loans.” President and CEO Rieniets further added, “Our credit discipline, proactive management, and a focus on high quality commercial borrowers resulted in de minimis charge offs in 2023, 30-day past dues of 0.03% of loans, nonperforming loans of 0.16% of loans, and the return in the aggregate level of our watch list loans to pre-pandemic levels, as of December 31, 2023.”
Net interest income decreased 1% to $6,481,000 in the fourth quarter and increased 5% for the year to $25,430,000. Although the Company benefited from an increase in loan yields of 105 basis points on a year-over-year basis and of 23 basis points on a linked-quarter to 6.59% in the quarter, the average cost of interest bearing funds increased 178 basis points during the quarter on a year-over-year basis and 33 basis points on a linked-quarter basis to 3.87% in the fourth quarter. Meanwhile, an increase in the mix of interest bearing cash and securities limited the expansion in the earning asset yield to 100 basis points on a year-over-year and 16 basis points on a linked-quarter basis to 6.47% in the quarter. The Bank’s net interest margin performance on a cycle to date basis has reflected prudent interest rate risk management, as the Bank’s net interest margin of 3.34% in 2023 compared to 3.53% in 2022 and 3.21% in 2021. Going forward, net interest margin comparisons with prior periods will likely reflect more pressure for another couple of quarters given the change in deposit mix favoring certificates of deposit, higher renewal rates on certificates of deposit, and a smaller relative benefit from improved loan yields.
Although the bank continued to experience elevated pay-off activity in the quarter—including two large payoffs related to sales of a business and real estate—outstanding balances increased 5% year-over-year and 5% on a linked-quarter annualized basis, as the bank’s commercial bankers originated $48 million of loan commitments in the quarter compared to $26 million in the previous quarter.
Asset quality remained very strong for the Bank, as 30-day past due loans and nonperforming loans represented 0.03% and 0.16% of loans, respectively, as of December 31. Net chargeoffs were de minimis during the quarter and in 2023. The Allowance for Credit Losses (“ACL”) increased to $9,565,000, or 1.40% of total loans outstanding, compared to $8,778,000, or 1.35%, a year ago. The increase in the ACL reflected an adjustment of $493,000 related to the adoption of the Current Expected Credit Loss methodology earlier in the year, with provision expense of $315,000, and $21,000 of net chargeoffs in 2023.
Measures of liquidity risk remain healthy, as on-balance sheet liquidity ended the year at approximately $118 million compared to $92 million a quarter ago and $57 million a year ago. Estimated uninsured deposits were approximately 22% of total deposits at quarter-end compared to 32% a year ago. Balance sheet liquidity and $121 million in reciprocal deposit capacity provide ample risk mitigation strategies.
The mark to market adjustment on the carrying values of derivatives used in the management of the Bank’s interest rate risk benefitted EPS by $0.01 in 4Q23 and decreased EPS by $0.01 in 4Q22. For the year, the mark to market adjustment adversely affected EPS by $0.12 in 2023 in contrast to an EPS benefit of $0.77 in 2022. The gain recognized in 2022 was related to the value of interest rate caps that were purchased in 2021 to insulate the Bank against a significant increase in interest rates, while the negative mark to market in 2023 represented the decline in value of interest rate floors purchased in the first nine months of 2023 to protect against a potential significant drop in short-term interest rates.
Tangible book value increased 10.7%, or $2.32 per share, on a year-over-year basis, and 9.5% annualized, or $0.56 per share, on a linked-quarter basis to $24.02, as of December 31, 2023. Accumulated Other Comprehensive Income was ($838,000), or less than 1% of bank-level capital of $94,075,000. Tier-1 risk-based capital was 12.4% and total risk-based capital was 13.6%. On a consolidated basis, tangible common equity was 8.3%.
The Company’s board of directors also recently approved the payment of a quarterly dividend compared to its previous policy of declaring and paying dividends on a semi-annual basis. Shareholders of record on February 16, 2024, will receive a dividend of $0.10 per common share payable on March 8, 2024, which represents an increase in the annualized rate of 17.6%. “As our company continues to grow, increasing the frequency of dividend distribution is a logical step for our shareholders,” said Mike Qualls, Chairman of InsCorp. “We’re pleased to increase the dividend while retaining sufficient capital to fuel near-term growth as well as previously authorized stock repurchases,” Qualls continued.
Highlights of the quarter and the year include:
Earnings per share were $0.79 for the quarter ended December 31, 2023, compared to $0.80 for the quarter ended September 30, 2023, and $0.80 for the quarter ended December 31, 2022.Annualized return on tangible common equity was 12.8% in 2023 compared to 17.7% in 2022.Tangible book value increased 10.7% to $24.02 at year-end compared to $21.70 a year ago.Loans grew $33.2 million, or 5.1%, on a year-over-year basis, and 4.9% on a linked-quarter annualized basis, as of December 30, 2023.Total assets grew $84.9 million or 11.3% on a year-over-year basis, and 11.6% on a linked-quarter annualized basis, as of December 31, 2023.Total deposits grew $109.7 million, or 19.0%, compared to December 31, 2022, and by $23.6 million, or 18.1% on a linked-quarter annualized basis in the quarter.Noninterest expense to total average assets increased to 1.91% in the quarter compared to 1.77% in 3Q23 and 2.08% in 4Q23. The linked-quarter increase reflected compensation accrual expense and an increase in the FDIC assessment. All compared favorably to the bank’s FDIC peer group average of 2.33%.Assets per employee increased 11.3% year-over-year to $14.9 million, which doubled the FDIC peer group level of $7.4 million.Cost of all interest bearing funds was 3.87% in the fourth quarter of 2023 compared to 2.09% for the same period in 2022.The percentage of loans past due >90 days, nonaccrual, and other real estate to gross loans was 0.16% compared to 0.35% for peers.The allowance for credit losses increased to 1.40% of loans compared to 1.35% a year ago.Accumulated Other Comprehensive Income (AOCI) of ($838,000) compared to ($413,000) a year ago. The change was primarily due to an increase in the securities portfolio.
About INSBANK
Since 2000, INSBANK has offered its clients highly personalized service provided by experienced relationship managers, while positioning itself as an innovator, utilizing technologies to deliver those services efficiently and conveniently. In addition to its commercial focused operation, INSBANK operates three divisions, Medquity, TMA Medical Banking and Finworth. Medquity offers healthcare banking solutions to physicians, partnerships, and practices nationwide, while TMA Medical Banking provides banking services specifically to members of the Tennessee Medical Association. Finworth offers nationally available virtual private client services for interest bearing deposits. INSBANK is owned by InsCorp, Inc., a Tennessee bank holding company. The bank is headquartered in Nashville at 2106 Crestmoor Road and has an office in Brentwood at 5614 Franklin Pike Circle. For more information, please visit www.insbank.com.
InsCorp, Inc.
Consolidated Balance Sheets
(000’s)
(unaudited)
December 31,
December 31,
2023
2022
Assets
Cash and Cash Equivalents
$ 7,689
$ 5,412
Interest Bearing Deposits
49,757
18,226
Securities
58,162
38,285
Loans
681,558
648,382
Allowance for Loan Losses
(9,565)
(8,778)
Net Loans
671,993
639,604
Premises and Equipment, net
12,715
13,028
Bank Owned Life Insurance
14,065
13,721
Restricted Equity Securities
8,890
10,996
Goodwill and Related Intangibles, net
1,091
1,091
Other Assets
12,703
11,827
Total Assets
$ 837,065
$ 752,190
Liabilities and Shareholders’ Equity
Liabilities
Deposits
Non-interest-bearing
$ 70,417
$ 87,842
Interest-bearing
615,779
488,685
Total Deposits
686,196
576,527
Federal Home Loan Bank Advances
45,000
67,000
Paycheck Protection Program Liquidity Fund
–
Subordinated Debentures
17,500
17,500
Line of Credit
8,750
7,500
Federal Funds Purchased
–
15,000
Other Liabilities
9,500
4,823
Total Liabilities
766,946
688,350
Shareholders’ Equity
Common Stock
33,112
32,656
Treasury Stock
(3,869)
(3,200)
Accumulated Retained Earnings
41,714
34,797
Accumulated Other Comprehensive Income
(838)
(413)
Total Stockholders’ Equity
70,119
63,840
Total Liabilities & Shareholders’ Equity
$ 837,065
$ 752,190
Tangible Book Value
$ 24.02
$ 21.70
InsCorp, Inc.
Consolidated Statements of Income
(000’s)
(Unaudited)
Three Months Ended
Twelve Months Ended
December 31, 2023
December 31, 2022
December 31, 2023
December 31, 2022
Interest Income
$ 12,145
$ 9,426
$ 46,208
$ 30,730
Interest Expense
5,664
2,879
20,778
6,517
Net Interest Income
6,481
6,547
25,430
24,213
Provision for Loan Losses
150
75
315
670
Non-Interest Income
Service Charges on Deposit Accounts
60
41
252
209
Bank Owned Life Insurance
91
82
345
322
Other
414
330
1,379
1,131
Non-Interest Expense
Salaries and Benefits
2,627
2,336
9,434
8,402
Occupancy and equipment
424
350
1,562
1,563
Data Processing
87
302
382
858
Marketing and Advertising
165
150
519
524
Other
642
598
2,576
2,266
Net income from Operations
2,951
3,189
12,618
11,592
Gain (Loss) on Interest Rate Hedges
53
(25)
(432)
2,814
Interest Expense-Holding Co. Debt
391
343
1,509
1,095
Income Before Income Taxes
2,613
2,821
10,677
13,311
Income Tax Expense
(346)
(502)
(2,273)
(2,975)
Net Income
$ 2,267
$ 2,319
$ 8,404
$ 10,336
Return on Weighted Average Common Shares
$ 0.79
$ 0.80
$ 2.92
$ 3.59
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SOURCE INSBANK