Integrated Financial Holdings, Inc. First Quarter 2021 Financial Results

Rhea-AI Summary

Integrated Financial Holdings, Inc. (OTC PINK: IFHI) reported robust first-quarter financial results for 2021, achieving a net income of $3.9 million or $1.76 per diluted share, a significant turnaround from a $832,000 loss in Q1 2020. Loan processing and servicing revenue surged to $8.8 million, up from $1.7 million year-over-year. Total assets reached $408.2 million, while total deposits increased 4%. The company attributed its success to high activity in its PPP loans and government guaranteed lending. However, noninterest expenses rose sharply by 110% due to increased software costs for loan processing.

Positive

• Net income increased to $3.9 million from a loss of $832,000 year-over-year.
• Loan processing and servicing revenue rose to $8.8 million, up 415%.
• Total assets grew by 5% to $408.2 million.
• Total deposits increased by 4%.

Negative

• Noninterest expenses increased by 110% from $6.0 million to $12.7 million, primarily due to software costs.

RALEIGH, N.C., May 06, 2021 (GLOBE NEWSWIRE) -- Integrated Financial Holdings, Inc. (OTC PINK: IFHI) (the “Company” or “IFH”), the financial holding company for West Town Bank & Trust (“the Bank”), released its financial results for the three months ended March 31, 2021. Highlights include the following:

• First quarter net income of $3.9 million or $1.76 per diluted share compared to 2020 first quarter net loss of $832,000 or ($0.37) per diluted share.  
• Provision for loan losses of $622,000 for the first quarter of 2021 compared to $3.5 million for the same period in 2020.
• Return on average assets of 3.99%, compared to (1.06%) for the first quarter of 2020.
• Return on average common equity of 20.30%, compared to (4.88%) for the first quarter of 2020.
• Return on average tangible common equity (a non-GAAP financial measure) of 27.28%, compared to (7.02%) for the first quarter of 2020.
• Loan processing and servicing revenue of $8.8 million, compared to $1.7 million for the first quarter of 2020.
• Mortgage origination and sales revenue of $1.7 million as compared to $1.4 million for the same period in 2020.
• Other noninterest income of $2.2 million compared to $635,000 for the same period in 2020.

“The Company’s strong first quarter earnings to start the year can be attributed to Windsor’s recent PPP loan processing revenue and continued strong results from our Mortgage and Government Guaranteed Lending departments,” said Eric Bergevin, President & CEO. “In particular, we are very pleased with Windsor’s continued growth, having processed nearly $1 billion in PPP loans during the first quarter of 2021 alone, as well as growing it’s servicing portfolio as the result of increased government guaranteed lending activity from both new and existing financial institution clients. In addition, the Bank’s management team continues to perform exceptionally well in terms of addressing credit concerns related to the pandemic. Our strategy around proactive communication efforts with our existing business clients has led to improvements in asset quality across the board, including fewer charge-offs, positive trends in reserve allocations and a decrease in overall non-performing assets. With increased economic activity expected nationwide as we begin to see businesses reopen that have been significantly impacted by COVID-19, we feel confident that we will continue to experience positive trends in earnings, growth and asset quality going forward.”

BALANCE SHEET
At March 31, 2021, the Company’s total assets were $408.2 million, net loans held for investment were $272.6 million, loans held for sale were $17.7 million, total deposits were $311.7 million and total shareholders’ equity attributable to IFH was $80.7 million. Compared with December 31, 2020, total assets increased $19.0 million or 5%, net loans held for investment increased $19.7 million or 8%, loans held for sale decreased $8.6 million or 33%, total deposits increased $10.8 million or 4%, and total shareholders’ equity attributable to IFH increased $4.1 million or 5%. The increases in assets and loans reflect the Bank’s continued growth in its Government Guaranteed Loans (“GGL”) program as well as participation in the Paycheck Protection Program (“PPP”). The Bank funded $12.4 million of Round 2 PPP loans for its existing customers during 2021 with $7.3 million outstanding balances from 2020 Round 1 of PPP still on the balance sheet at quarter end. The Bank originated $56.3 million in Government Guaranteed Loans (“GGL”) during the first quarter. The Bank sold $12.6 million in GGL loans during the quarter ended March 31, 2021. The Bank has continued to see strong growth in deposits primarily as a result of corresponding growth in in GGL loans, many of which require customer deposits, as well as continued execution of a strategic advance into the hemp banking space (trademarked “Hemp Banks Here”). The increase in total shareholders’ equity was primarily a result of net income posted for the year.

During the first quarter of 2021, the Company issued 49,898 shares associated with various stock-based compensation programs and option exercises and repurchased 7,200 shares of its voting common stock.

CAPITAL LEVELS
At March 31, 2021, the regulatory capital ratios of West Town Bank & Trust exceeded the minimum thresholds established for well-capitalized banks under applicable banking regulations.

	"Well Capitalized" Minimum	Basel III Fully Phased-In	West Town Bank & Trust
Tier 1 common equity ratio	6.50%	7.00%	12.00%
Tier 1 risk-based capital ratio	8.00%	8.50%	12.00%
Total risk-based capital ratio	10.00%	10.50%	13.26%
Tier 1 leverage ratio	5.00%	4.00%	9.72%

The Company’s book value per common share increased from $30.25 at March 30, 2020 to $36.08 at March 31, 2021. The Company’s tangible book value per common share (a non-GAAP financial measure) increased from $20.88 at March 31, 2020 to $27.16 at March 31, 2021, primarily as a result of the net income of the Company.

ASSET QUALITY
The Company’s nonperforming assets to total assets ratio decreased from 2.74% at December 31, 2020 to 2.14% at March 31, 2021, as management continued to address credit concerns surrounding the potential economic impact of COVID-19 and the widespread societal responses to the pandemic. Nonaccrual loans decreased $1.2 million or 14% as compared to December 31, 2020 while foreclosed assets decreased $995,000 or 42% during the same period. Patriarch, LLC, a subsidiary of the Company formed to expedite the liquidation and recovery of certain Bank assets, held $1.4 million in foreclosed assets while the Bank held no such assets. The Company regularly conducts impairment analyses on all nonperforming assets with updated appraisals to ensure the assets are carried at the lower of fair market value (less cost to sell) or book value.

The Company recorded a $622,000 provision for loan losses during the first quarter of 2021, as compared to a provision of $3.5 million in first quarter 2020, as the problem loan portfolio decreased for the period. The Company has granted 139 deferrals since June 30, 2020 totaling $71.1 million. However, as of March 31, 2021, there are only 27 loans in deferral status with net exposure of $18.9 million. Expected loss estimates consider the impacts of decreased economic activity and higher unemployment, partially offset by the mitigating benefits of government stimulus and industry-wide loan modification efforts. The Company recorded $156,000 net charge-offs during the first quarter of 2021.

(Dollars in thousands)	3/31/21			12/31/20			9/30/20			6/30/20			3/31/20
Nonaccrual loans	$	7,341		$	8,506		$	8,790		$	7,799		$	7,732
Foreclosed assets		1,377			2,372			3,522			4,464			5,243
90 days past due and still accruing		-			-			-			-			-
Total nonperforming assets	$	8,718		$	10,878		$	12,312		$	12,263		$	12,975
Net charge-offs	$	156		$	96		$	2		$	667		$	2,390
Annualized net charge-offs to total average portfolio loans		0.24	%		0.14	%		0.00	%		1.13	%		4.39	%
Ratio of total nonperforming assets to total assets		2.14	%		2.74	%		3.29	%		3.45	%		4.16	%
Ratio of total nonperforming loans to total loans, net
of allowance		2.69	%		3.26	%		3.66	%		3.33	%		3.66	%
Ratio of total allowance for loan losses to total loans		2.02	%		1.94	%		2.05	%		2.05	%		2.27	%

NET INTEREST INCOME AND MARGIN
Net interest income for the three months ended March 31, 2021 increased $47,000 or 1% in comparison to the first quarter of 2020 as loan growth year over year offset the decrease in margin as a result of the low interest rate environment. The net interest margin was 4.40% for the first quarter of 2021 compared to 5.66% for the same period in 2020. Interest-earning asset yields decreased from 7.09% to 5.22% while interest-bearing liabilities cost decreased from 2.09% to 1.23% year-over-year between March 31, 2021 and 2020. The overall decrease in both yield on assets and rates on liabilities are reflective of the rate decreases by the Federal Open Market Committee (“FOMC”) in the first quarter of 2020 in response to the pandemic.  

	Three Months Ended
(Dollars in thousands)	3/31/21		12/31/20		9/30/20		6/30/20		3/31/20
Average balances:
Loans	$	288,700	$	285,969	$	270,897	$	250,125	$	226,683
Available-for-sale securities		27,366		25,200		25,581		24,743		23,861
Other interest-bearing balances		35,981		21,305		22,596		22,326		17,046
Total interest-earning assets		352,047		332,474		319,074		297,194		267,590
Total assets		399,774		382,574		371,395		353,179		313,476
Noninterest-bearing deposits		80,626		81,552		77,857		64,617		56,329
Interest-bearing liabilities:
Interest-bearing deposits		228,726		212,636		204,204		185,507		166,567
Borrowed funds		4,000		5,838		6,793		23,459		16,475
Total interest-bearing liabilities		232,726		218,474		210,997		208,966		183,042
Common shareholders' equity		78,639		75,774		73,970		71,035		68,445
Tangible common equity (1)		58,505		55,454		53,463		50,343		47,570
Interest income/expense:
Loans	$	4,442	$	4,250	$	4,394	$	4,283	$	4,559
Investment securities		50		52		64		72		95
Interest-bearing balances and other		35		38		35		36		76
Total interest income		4,527		4,340		4,493		4,391		4,730
Deposits		704		759		855		835		845
Borrowings		-		2		1		70		109
Total interest expense		704		761		856		905		954
Net interest income	$	3,823	$	3,579	$	3,637	$	3,486	$	3,776
(1) See reconciliation of non-GAAP financial measures.

	Three Months Ended
	3/31/21	12/31/20	9/30/20	6/30/20	3/31/20
Average yields and costs:
Loans	6.24%	5.90%	6.44%	6.87%	8.07%
Available-for-sale securities	0.73%	0.83%	1.00%	1.16%	1.59%
Interest-bearing balances and other	0.39%	0.71%	0.61%	0.65%	1.79%
Total interest-earning assets	5.22%	5.18%	5.59%	5.93%	7.09%
Interest-bearing deposits	1.25%	1.42%	1.66%	1.81%	2.03%
Borrowed funds	0.00%	0.14%	0.06%	1.20%	2.65%
Total interest-bearing liabilities	1.23%	1.38%	1.61%	1.74%	2.09%
Cost of funds	0.91%	1.01%	1.18%	1.33%	1.60%
Net interest margin	4.40%	4.27%	4.52%	4.70%	5.66%

NONINTEREST INCOME
Noninterest income for the three months ended March 31, 2021 was $14.6 million, an increase of $9.9 million or 214% as compared to the three months ended March 31, 2020. Specific items to note include:

• Windsor, a subsidiary of the Company which offers an SBA and USDA loan servicing platform, had processing and servicing revenue totaling $8.8 million, an increase of $7.1 million or 415% as compared to the $1.7 million in income earned from the investment in Windsor during the same prior year period. The increase is directly attributable to PPP fee related income and increased volume of the servicing portfolio from new and existing clients.     
• Mortgage revenue totaled $1.7 million, an increase of $288,000 or 20% as compared to the first quarter 2020. Mortgage loans originated to sell to the secondary market increased from $20.9 million in the first quarter 2020 to $39.4 million in the first quarter 2021. The increase in both the revenue and origination volume can be attributable to the decrease in market rates tied to the FOMC decision to decrease rates.
• GGL revenue was $1.3 million in the first quarter of 2021, an increase of $570,000 or 75% in comparison to the same period in 2020. GGL volume was impacted by increased economic activity nationwide.
• Other noninterest income totaled $2.2 million in the first quarter or 2021, an increase $1.6 million or 214% in comparison to the same period in 2020. The Company recognized a gain of $2.0 million in the share value in its investment in Dogwood State Bank after a successful capital raise by Dogwood Bank in the first quarter of 2021.

NONINTEREST EXPENSE
Noninterest expense for the first quarter of 2021 was $12.7 million, an increase of $6.6 million or 110%, from $6.0 million for the first quarter of 2020. The primary cause for the year-over-year increase was the cost of the software needed to process the PPP loans in the first quarter of 2021. Software costs at Windsor, the subsidiary that does the majority of the PPP loan processing, increased from $75,000 in the first quarter of 2020 to $3.1 million in the same period in 2021. However, the corresponding revenues of Windsor increased during that same period by $7.1 million. The increases in all noninterest expense categories, including compensation, occupancy, special assets, data processing, software, communications and other operating expenses are primarily related to the overall growth of the Company and its new business initiatives including the addition of West Town Payments in the third quarter of 2020 as well as a year-over-year increase in mortgage related compensation tied to the increase in revenues.

ABOUT INTEGRATED FINANCIAL HOLDINGS, INC.
Integrated Financial Holdings, Inc. is a financial holding company based in Raleigh, North Carolina. The Company changed its name from West Town Bancorp, Inc. in the third quarter of 2020. The Company is the holding company for West Town Bank & Trust, an Illinois state-chartered bank. West Town Bank & Trust provides banking services through its full-service office located in the greater Chicago area. The Company is also the parent company of: Windsor Advantage, LLC, a loan servicing company; West Town Insurance Agency, Inc., an insurance agency; Patriarch, LLC, a real estate management company; SBA Loan Documentation Services, LLC, a loan documentation origination company; and Glenwood Structured Finance, LLC, a loan broker and large loan syndication company. The Company is registered with and supervised by the Federal Reserve. West Town Bank & Trust’s primary regulators are the Illinois Department of Financial and Professional Regulation and the FDIC.

For more information, visit https://ifhinc.com/.

Important Note Regarding Forward-Looking Statements
This release contains certain forward-looking statements with respect to the financial condition, results of operations, and business of the Company. These forward-looking statements involve risks and uncertainties and are based on the beliefs and assumptions of the management of the Company and on the information available to management at the time this release was prepared. These statements can be identified by the use of words such as "expect," "anticipate," "estimate," "believe," variations of these words, and other similar expressions. Readers should not place undue reliance on forward-looking statements as a number of important factors could cause actual results to differ materially from those in the forward-looking statements. Factors that could cause a difference include, among others: changes in the national and local economies or market conditions; changes in interest rates, deposit flows, loan demand, and asset quality, including real estate and other collateral values; changes in Small Business Administration rules, regulations, or loan products, including the section 7(a) program; changes in other government guaranteed loan programs or our ability to participate in such programs; changes in tax law, including the impact of such changes on our tax assets and liabilities; future governmental shutdowns that may impact revenues associated with our lending and other operations that are dependent on government guaranteed loan programs; changes in banking regulations and accounting principles, policies, or guidelines; the inability to realize cost savings or revenues or to implement integration plans and other consequences associated with the Company’s acquisition and divesture activities; the failure of our strategic investments or acquisitions to perform as anticipated and the impact of any impairments to our intangible assets, such as goodwill; the impact of our strategic initiatives on our ability to retain key employees, and the impact of competition from traditional or new sources. These, and other factors that may emerge, could cause decisions and actual results to differ materially from current expectations. The Company assumes no obligation to revise, update, or clarify forward-looking statements to reflect events or conditions after the date of this release.        

Consolidated Balance Sheets
				Ending Balance
(Dollars in thousands, unaudited)				3/31/21			12/31/20			9/30/20			6/30/20			3/31/20
Assets
Cash and due from banks				$	3,217		$	4,268		$	6,007		$	6,183		$	5,928
Interest-bearing deposits					30,224			28,657			13,294			11,644			8,518
	Total cash and cash equivalents				33,441			32,925			19,301			17,827			14,446
Interest-bearing time deposits					2,746			2,746			2,746			2,746			2,746
Available-for-sale securities					28,215			25,711			24,462			26,081			24,946
Loans held for sale					17,735			26,308			35,743			23,072			11,839
Loans held for investment					278,200			258,454			244,994			238,926			216,423
	Allowance for loan and lease losses				(5,609	)		(5,144	)		(5,029	)		(4,906	)		(4,907	)
		Loans held for investment, net			272,591			253,310			239,965			234,020			211,516
Premises and equipment, net					4,651			4,658			4,628			4,761			4,740
Foreclosed assets					1,377			2,372			3,522			4,464			5,243
Loan servicing assets					3,428			3,456			3,265			3,262			3,528
Bank-owned life insurance					5,161			5,136			5,109			5,082			5,048
Accrued interest receivable					1,656			1,556			1,705			1,422			1,067
Goodwill					13,161			13,161			13,161			13,161			13,161
Other intangible assets, net					6,851			7,037			7,224			7,409			7,596
Other assets					17,176			10,833			13,186			12,349			6,370
			Total assets	$	408,189		$	389,209		$	374,017		$	355,656		$	312,246
Liabilities and Shareholders' Equity
Liabilities
Deposits:
	Noninterest-bearing			$	77,167		$	80,854		$	78,849		$	66,874		$	59,360
	Interest-bearing				234,523			220,036			206,913			198,108			162,059
		Total deposits			311,690			300,890			285,762			264,982			221,419
Borrowings					4,000			4,000			4,000			6,000			17,649
Accrued interest payable					454			427			396			391			433
Other liabilities					11,347			7,139			8,845			10,771			5,735
	Total liabilities				327,491			312,456			299,003			282,144			245,236
Shareholders' equity:
Common stock, voting					2,223			2,181			2,181			2,193			2,193
Common stock, non-voting					22			22			22			22			22
Additional paid in capital					24,568			24,361			24,220			24,357			24,162
Retained earnings					54,015			50,079			48,349			46,629			40,371
Accumulated other comprehensive income					164			271			308			311			262
	Total IFH, Inc. shareholders' equity				80,992			76,914			75,080			73,512			67,010
Noncontrolling interest					(294	)		(161	)		(66	)		-			-
	Total shareholders' equity				80,698			76,753			75,014			73,512			67,010
			Total liabilities and shareholders' equity	$	408,189		$	389,209		$	374,017		$	355,656		$	312,246

Consolidated Statements of Income
	Three Months Ended
(Dollars in thousands except per share data; unaudited)	3/31/21			12/31/20			9/30/20			6/30/20			3/31/20
Interest income
Loans	$	4,442		$	4,250		$	4,394		$	4,283		$	4,559
Available-for-sale securities and other		85			90			99			108			171
Total interest income		4,527			4,340			4,493			4,391			4,730
Interest expense
Interest on deposits		704			759			855			835			845
Interest on borrowings		-			2			1			70			109
Total interest expense		704			761			856			905			954
Net interest income		3,823			3,579			3,637			3,486			3,776
Provision for loan losses		622			210			125			665			3,460
Noninterest income
Loan processing and servicing
revenue		8,838			2,291			2,579			14,186			1,713
Mortgage		1,706			1,398			2,400			1,573			1,418
Government guaranteed lending		1,325			1,815			571			37			755
SBA documentation preparation fees		434			57			195			423			74
Bank-owned life insurance		32			20			15			34			27
Service charges on deposits		25			26			28			11			19
Other noninterest income		2,196			491			771			(56	)		635
Total noninterest income		14,556			6,098			6,559			16,208			4,641
Noninterest expense
Compensation		6,016			5,250			4,422			5,682			3,753
Occupancy and equipment		303			286			289			211			256
Loan and special asset expenses		1,002			655			1,013			816			242
Professional services		680			559			534			676			490
Data processing		221			196			187			165			148
Software		3,391			492			415			2,221			249
Communications		107			94			83			82			89
Advertising		109			128			109			215			55
Amortization of intangibles		186			186			186			186			186
Other operating expenses		644			792			545			593			562
Total noninterest expense		12,659			8,638			7,783			10,847			6,030
Income (loss) before income taxes		5,098			829			2,288			8,182			(1,073	)
Income tax expense (benefit)		1,296			(805	)		634			1,924			(241	)
Net income (loss)		3,802			1,634			1,654			6,258			(832	)
Noncontrolling interest		(134	)		(96	)		(66	)		-			-
Net income (loss) attributable
to IFH, Inc.	$	3,936		$	1,730		$	1,720		$	6,258		$	(832	)
Basic earnings (loss) per common share	$	1.80		$	0.80		$	0.79		$	2.87		$	(0.38	)
Diluted earnings (loss) per common share	$	1.76		$	0.78		$	0.78		$	2.84		$	(0.37	)
Weighted average common shares
outstanding		2,185			2,169			2,176			2,177			2,193
Diluted average common shares
outstanding		2,240			2,212			2,206			2,204			2,232

Performance Ratios
		Three Months Ended
		3/31/21			12/31/20			9/30/20			6/30/20			3/31/20
PER COMMON SHARE
	Basic earnings (loss) per common share	$	1.80		$	0.80		$	0.79		$	2.87		$	(0.38	)
	Diluted earnings (loss) per common share		1.76			0.78			0.78			2.84			(0.37	)
	Book value per common share		36.08			34.91			34.08			33.19			30.25
	Tangible book value per common share (2)		27.16			25.74			24.83			23.90			20.88
FINANCIAL RATIOS (ANNUALIZED)
	Return on average assets		3.99	%		1.79	%		1.84	%		7.11	%		-1.06	%
	Return on average common shareholders'
	equity		20.30	%		9.06	%		9.23	%		35.34	%		-4.88	%
	Return on average tangible common
	equity (2)		27.28	%		12.38	%		12.76	%		49.86	%		-7.02	%
	Net interest margin		4.40	%		4.27	%		4.52	%		4.70	%		5.66	%
	Efficiency ratio (1)		68.9	%		89.3	%		76.3	%		55.1	%		71.6	%
	(1) Efficiency ratio is calculated by dividing noninterest expense less transaction-related costs by the sum of net interest income and noninterest income, less gains or losses on sale of securities.
	(2) See reconciliation of non-GAAP measures

Loan Concentrations

The top ten commercial loan concentrations as of March 31, 2021 were as follows:

			% of
			Commercial
(in millions)	Amount		Loans
Solar electric power generation	$	56.6	28%
Power and communication line and related structures construction		29.2	14%
Lessors of nonresidential buildings (except miniwarehouses)		19.2	9%
Hotels (except casino hotels) and motels		14.0	7%
Lessors of other real estate property		11.0	5%
Other activities related to real estate		8.5	4%
Lessors of residential buildings and dwellings		7.8	4%
General freight trucking, local		5.2	3%
Golf courses and country clubs		4.1	2%
Colleges, universities, and professional schools		3.5	2%
	$	159.1	78%

Reconciliation of Non-GAAP Measures

(In thousands except book value per share)	3/31/21			12/31/20			9/30/20			6/30/20			3/31/20
Tangible book value per common share
Total IFH, Inc. shareholders' equity	$	80,992		$	76,914		$	75,080		$	73,512		$	67,010
Less: Goodwill		13,161			13,161			13,161			13,161			13,161
Less Other intangible assets, net		6,851			7,037			7,224			7,409			7,596
Total tangible common equity	$	60,980		$	56,716		$	54,695		$	52,942		$	46,253
Ending common shares outstanding		2,245			2,203			2,203			2,215			2,215
Tangible book value per common share	$	27.16		$	25.74		$	24.83		$	23.90		$	20.88
	Three Months Ended
(Dollars in thousands)	3/31/21			12/31/20			9/30/20			6/30/20			3/31/20
Return on average tangible common equity
Average IFH, Inc. shareholders' equity	$	78,639		$	76,723		$	73,970		$	71,035		$	68,445
Less: Average goodwill		13,161			13,161			13,161			13,161			13,157
Less Average other intangible assets, net		6,973			7,037			7,346			7,531			7,718
Average tangible common equity	$	58,505		$	56,525		$	53,463		$	50,343		$	47,570
Net income attributable to IFH, Inc.	$	3,936		$	1,730		$	1,720		$	6,258		$	(832	)
Return on average tangible common equity		27.28	%		12.14	%		12.76	%		49.86	%		-7.02	%

Contact: Eric Bergevin, 252-482-4400

FAQ

What was Integrated Financial Holdings' net income for Q1 2021?

Integrated Financial Holdings reported a net income of $3.9 million for the first quarter of 2021.

How much did IFHI earn per diluted share in the first quarter of 2021?

IFHI earned $1.76 per diluted share in the first quarter of 2021.

What is the total asset value of IFHI as of March 31, 2021?

As of March 31, 2021, the total asset value of IFHI was $408.2 million.

What was the loan processing revenue for IFHI in Q1 2021?

IFHI's loan processing and servicing revenue for the first quarter of 2021 was $8.8 million.

What was the increase in noninterest expenses for IFHI in Q1 2021?

Integrated Financial Holdings experienced a 110% increase in noninterest expenses in the first quarter of 2021.