First Internet Bancorp Reports Third Quarter 2020 Results
10/21/2020 - 04:14 PM
FISHERS, Ind.--(BUSINESS WIRE )--First Internet Bancorp (the “Company”) (Nasdaq: INBK), the parent company of First Internet Bank (the “Bank”), announced today financial and operational results for the third quarter of 2020. Net income for the third quarter of 2020 was a record $8.4 million , or $0.86 diluted earnings per share. This compares to net income of $3.9 million , or $0.40 diluted earnings per share, for the second quarter of 2020, and net income of $6.3 million , or $0.63 diluted earnings per share, for the third quarter of 2019.
“We generated record net income in the quarter, driven by very strong revenue growth, an improvement in net interest margin, and moderate loan growth. We are very pleased with our ability to navigate the challenges imposed by the pandemic and deliver for our customers and shareholders,” said David Becker, Chairman, President and Chief Executive Officer. “Additionally, we continued to experience a significant reduction in loan deferrals, and by quarter-end, over 99% of our borrowers who needed payment relief early in the pandemic had resumed making payments. We are proud to support our customers in their time of need and are glad that nearly all have been able to return to their normal payment schedules in such short order.
“Our direct-to-consumer mortgage business had a record quarter, almost tripling revenue compared to the second quarter. We capitalized on the ongoing market strength created by historically low mortgage rates, and our mortgage pipeline remains strong heading into the fourth quarter. Furthermore, our SBA business gained additional traction during the quarter, as our accelerated national expansion contributed to increased loan production and higher gain-on-sale revenue. Our SBA pipeline is robust, and we anticipate driving increased fee income in the quarters to come as this government-guaranteed lending business continues to ramp-up.”
Mr. Becker concluded, “As always, I would like to thank the entire First Internet team for their very hard work in delivering record revenue and earnings performance during these challenging times. Our employees are the key to our success, and we are proud of the strong culture and workplace environment we have created. First Internet was recognized for the seventh consecutive year on The Indianapolis Star’s 'Top Workplaces in Central Indiana' list, placing in the top ten in the medium-sized company category.”
Net Interest Income and Net Interest Margin
Net interest income for the third quarter of 2020 was $16.2 million , compared to $14.4 million for the second quarter of 2020, and $15.2 million for the third quarter of 2019. On a fully-taxable equivalent basis, net interest income for the third quarter of 2020 was $17.7 million , compared to $15.9 million for the second quarter of 2020, and $16.8 million for the third quarter of 2019.
Total interest income for the third quarter of 2020 was $32.8 million , a decrease of 4.3% , compared to the second quarter of 2020, and a decrease of 13.1% compared to the third quarter of 2019. On a fully-taxable equivalent basis, total interest income for the third quarter of 2020 was $34.2 million , a decrease of 4.2% compared to the second quarter of 2020, and a decrease of 13.0% compared to the third quarter of 2019. The decline in total interest income compared to the second quarter of 2020 was driven primarily by a decrease in income from the securities portfolio due to accelerated premium amortization and continued declines in short term interest rate indices.
Total interest expense for the third quarter of 2020 was $16.5 million , a decrease of 16.6% , compared to the second quarter of 2020, and a decrease of 26.4% compared to the third quarter of 2019. The decrease in total interest expense compared to the linked quarter was due primarily to a 43 bp decline in the cost of interest-bearing deposits. The decrease in deposit costs reflects a continued decline in the rates paid on interest-bearing deposits as well as a shift in the deposit mix due to the growth in money market accounts.
During the third quarter of 2020, the cost of money market deposits decreased by 56 bps while the average balance of these deposits grew $206.2 million , or 18.9% . Furthermore, the cost of certificates and brokered deposits decreased 22 bps and average balances decreased $222.3 million , or 11.1% . During the third quarter, new certificates and brokered deposits were originated at a weighted average cost of 84 bps while maturing deposits had a weighted average cost of 225 bps; a difference of 141 bps.
Net interest margin (“NIM”) improved to 1.53% for the third quarter of 2020, up from 1.37% for the second quarter of 2020 and relatively stable with 1.54% for the third quarter of 2019. Fully-taxable equivalent NIM (“FTE NIM”) increased by 17 bps to 1.67% for the third quarter of 2020, up from 1.50% for the second quarter of 2020 and relatively stable with 1.70% for the third quarter of 2019. The increases in NIM and FTE NIM compared to the linked quarter were driven primarily by lower interest-bearing deposit costs, which more than offset the impact of the lower interest rate environment on interest-earning asset yields and the continued effect of elevated cash balances.
Noninterest Income
Noninterest income for the third quarter of 2020 was $12.5 million , compared to $5.0 million for the second quarter of 2020 and $5.6 million for the third quarter of 2019. The increase compared to the linked quarter was driven primarily by an increase in revenue from mortgage banking activities and gain on sale of loans. Mortgage banking revenue totaled $9.6 million for the third quarter of 2020, increasing $6.2 million , or 182.6% , compared to the prior quarter on increased loan sale volume and higher margins as mortgage interest rates continued to decline during the quarter. Gain on sale of loans totaled $2.0 million for the quarter, increasing $1.3 million compared to the second quarter of 2020 driven by a higher amount of U.S. Small Business Administration (“SBA”) 7(a) guaranteed loan sales in the quarter as well as a gain on the sale of a portfolio of single tenant lease financing loans.
Noninterest Expense
Noninterest expense for the third quarter of 2020 was $16.4 million , compared to $13.2 million for the second quarter of 2020 and $11.2 million for the third quarter of 2019. The increase from the second quarter of 2020 was due primarily to a $2.1 million write-down of two legacy commercial OREO properties and a $1.7 million increase in salaries and employee benefits but was partially offset by a $0.4 million decrease in other expense and a $0.3 million decrease in consulting and professional fees. The higher salaries and employee benefits expense was due mainly to higher incentive compensation related to the increased mortgage production as well as an increase in headcount and incentive compensation in the Company’s small business lending division.
Income Taxes
Income tax expense was $1.4 million , reflecting an effective tax rate of 14.2% , for the third quarter of 2020, compared to an income tax benefit of $0.3 million for the second quarter of 2020 and a $0.4 million expense and an effective tax rate of 6.6% for the third quarter of 2019. The increase in income taxes during the quarter was due primarily to the increase in pre-tax earnings driven by a higher proportion of taxable revenue from mortgage banking and gain on sale of loans.
Loans and Credit Quality
Total loans as of September 30, 2020 were $3.0 billion , an increase of $39.2 million , or 1.3% , compared to June 30, 2020, and an increase of $131.6 million , or 4.6% , compared to September 30, 2019. Total commercial loan balances were $2.4 billion as of September 30, 2020, an increase of $56.2 million , or 2.4% , compared to June 30, 2020 and an increase of $248.7 million , or 11.3% , compared to September 30, 2019. Compared to the linked quarter, the growth in commercial loan balances was driven largely by production in healthcare finance and construction lending as businesses resumed operations following limited activity in the second quarter.
Total consumer loan balances were $507.7 million as of September 30, 2020, a decrease of $15.3 million , or 2.9% , compared to June 30, 2020 and a decrease of $134.4 million , or 20.9% , compared to September 30, 2019. The decline in consumer loan balances from June 30, 2020 was due primarily to increased prepayment activity across the portfolio.
Total delinquencies 30 days or more past due decreased to 0.22% of total loans as of September 30, 2020, down from 0.25% as of June 30, 2020 and up from 0.13% as of September 30, 2019. Overall credit quality remained relatively stable as nonperforming loans to total loans was 0.32% as of September 30, 2020, compared to 0.28% at June 30, 2020 and 0.20% as of September 30, 2019.
The allowance for loan losses as a percentage of total loans was 0.89% as of September 30, 2020, or 0.91% when excluding SBA PPP loans, compared to 0.82% as of June 30, 2020 and 0.75% as of September 30, 2019. During the quarter, the Company continued to make additional adjustments to qualitative factors in its allowance model to reflect the continued economic uncertainty resulting from the COVID-19 pandemic. As a result, both the amount of the allowance for loan losses and the allowance as a percentage of total loans increased compared to June 30, 2020.
Net charge-offs of $0.1 million were recognized during the third quarter of 2020, resulting in net charge-offs to average loans of 0.01% , as compared to 0.12% in the second quarter of 2020 and 0.15% in the third quarter of 2019. The provision for loan losses in the third quarter of 2020 was $2.5 million , consistent with the second quarter of 2020 and down from $2.8 million for the third quarter of 2019.
Capital
As of September 30, 2020, total shareholders’ equity was $318.1 million , an increase of $10.4 million , or 3.4% , compared to June 30, 2020, due primarily to the net income earned during the quarter and an increase in the after-tax valuations of the Company’s available-for-sale securities portfolio and cash flow hedges. Book value per common share increased to $32.46 as of September 30, 2020, up from $31.40 as of June 30, 2020 and $30.30 as of September 30, 2019. Tangible book value per common share increased to $31.98 , up from $30.92 and $29.82 , each as of the same reference dates.
The following table presents the Company’s and the Bank’s regulatory and other capital ratios as of September 30, 2020.
As of September 30, 2020
Company
Bank
Total shareholders' equity to assets
7.34%
8.12%
Tangible common equity to tangible assets 1
7.24%
8.02%
Tier 1 leverage ratio 2
7.72%
8.50%
Common equity tier 1 capital ratio 2
11.13%
12.27%
Tier 1 capital ratio 2
11.13%
12.27%
Total risk-based capital ratio 2
14.38%
13.17%
1 This information represents a non-GAAP financial measure. For a discussion of non-GAAP financial measures, see the section below entitled "Non-GAAP Financial Measures."
2 Regulatory capital ratios are preliminary pending filing of the Company's and the Bank's regulatory reports.
Conference Call and Webcast
The Company will host a conference call and webcast at 12:00 p.m. Eastern Time on Thursday, October 22, 2020 to discuss its quarterly financial results. The call can be accessed via telephone at (888) 348-3664. A recorded replay can be accessed through November 22, 2020 by dialing (877) 344-7529; passcode: 10148690.
Additionally, interested parties can listen to a live webcast of the call on the Company's website at www.firstinternetbancorp.com . An archived version of the webcast will be available in the same location shortly after the live call has ended.
About First Internet Bancorp
First Internet Bancorp is a bank holding company with assets of $4.3 billion as of September 30, 2020. The Company’s subsidiary, First Internet Bank, opened for business in 1999 as an industry pioneer in the branchless delivery of banking services. The Bank provides consumer and small business deposit, consumer loan, residential mortgage, and specialty finance services nationally as well as commercial real estate loans, commercial and industrial loans, SBA financing and treasury management services. First Internet Bancorp’s common stock trades on the Nasdaq Global Select Market under the symbol “INBK” and is a component of the Russell 2000® Index. Additional information about the Company is available at www.firstinternetbancorp.com and additional information about the Bank, including its products and services, is available at www.firstib.com .
Forward-Looking Statements
This press release may contain forward-looking statements with respect to the financial condition, results of operations, trends in lending policies, plans, objectives, future performance or business of the Company. Forward-looking statements are generally identifiable by the use of words such as “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “outlook,” “pending,” “plan,” “position,” “preliminary,” “remain,” “should,” “will,” “would” or other similar expressions. Forward-looking statements are not a guarantee of future performance or results, are based on information available at the time the statements are made and involve known and unknown risks, uncertainties and other factors that could cause actual results to differ materially from the information in the forward-looking statements. The COVID-19 pandemic has resulted in deterioration of general business and economic conditions and continued to impact us, our customers, counterparties, employees, and third-party service providers. Sustained deterioration in market conditions could adversely affect our revenues and the values of our assets and liabilities, reduce the availability of funding, lead to a tightening of credit and further increase stock price volatility. In addition, changes to statutes, regulations, or regulatory policies or practices as a result of, or in response to COVID-19, could affect us in substantial and unpredictable ways. The ultimate magnitude and duration of the pandemic is still unknown at this time, therefore, the extent of the impact on our business, financial position, results of operations, liquidity and prospects remains uncertain. Other factors that may cause such differences include: failures or breaches of or interruptions in the communications and information systems on which we rely to conduct our business; failure of our plans to grow our commercial real estate, commercial and industrial, public finance, SBA and healthcare finance loan portfolios; competition with national, regional and community financial institutions; the loss of any key members of senior management; fluctuations in interest rates; general economic conditions; risks relating to the regulation of financial institutions; and other factors identified in reports we file with the U.S. Securities and Exchange Commission. All statements in this press release, including forward-looking statements, speak only as of the date they are made, and the Company undertakes no obligation to update any statement in light of new information or future events.
Non-GAAP Financial Measures
This press release contains financial information determined by methods other than in accordance with U.S. generally accepted accounting principles (“GAAP”). Non-GAAP financial measures, specifically tangible common equity, tangible assets, tangible book value per common share, tangible common equity to tangible assets, average tangible common equity, return on average tangible common equity, total interest income – FTE, net interest income – FTE, net interest margin – FTE, allowance for loan losses to loans, excluding PPP loans, adjusted income before income taxes, adjusted income tax provision (benefit), adjusted net income, adjusted diluted earnings per share, adjusted return on average assets, adjusted return on shareholders’ equity, adjusted return on average tangible common equity and adjusted effective income tax rate are used by the Company’s management to measure the strength of its capital and analyze profitability, including its ability to generate earnings on tangible capital invested by its shareholders. Although management believes these non-GAAP measures are useful to investors by providing a greater understanding of its business, they should not be considered a substitute for financial measures determined in accordance with GAAP, nor are they necessarily comparable to non-GAAP performance measures that may be presented by other companies. Reconciliations of these non-GAAP financial measures to the most directly comparable GAAP financial measures are included in the table at the end of this release under the caption “Reconciliation of Non-GAAP Financial Measures.”
First Internet Bancorp Summary Financial Information (unaudited) Dollar amounts in thousands, except per share data
Three Months Ended
Nine Months Ended
September 30, 2020
June 30, 2020
September 30, 2019
September 30, 2020
September 30, 2019
Net income
$
8,411
$
3,932
$
6,326
$
18,362
$
18,143
Per share and share information
Earnings per share - basic
$
0.86
$
0.40
$
0.63
$
1.87
$
1.79
Earnings per share - diluted
0.86
0.40
0.63
1.87
1.79
Dividends declared per share
0.06
0.06
0.06
0.18
0.18
Book value per common share
32.46
31.40
30.30
32.46
30.30
Tangible book value per common share 1
31.98
30.92
29.82
31.98
29.82
Common shares outstanding
9,800,569
9,799,047
9,741,800
9,800,569
9,741,800
Average common shares outstanding:
Basic
9,773,175
9,768,227
9,979,603
9,825,683
10,114,303
Diluted
9,773,224
9,768,227
9,980,612
9,827,182
10,116,507
Performance ratios
Return on average assets
0.78
%
0.37
%
0.63
%
0.58
%
0.64
%
Return on average shareholders' equity
10.67
%
5.15
%
8.40
%
7.90
%
8.20
%
Return on average tangible common equity 1
10.83
%
5.23
%
8.53
%
8.02
%
8.33
%
Net interest margin
1.53
%
1.37
%
1.54
%
1.47
%
1.70
%
Net interest margin - FTE 1,2
1.67
%
1.50
%
1.70
%
1.61
%
1.87
%
Capital ratios 3
Total shareholders' equity to assets
7.34
%
7.12
%
7.21
%
7.34
%
7.21
%
Tangible common equity to tangible assets 1
7.24
%
7.01
%
7.10
%
7.24
%
7.10
%
Tier 1 leverage ratio
7.72
%
7.49
%
7.66
%
7.72
%
7.66
%
Common equity tier 1 capital ratio
11.13
%
10.94
%
10.93
%
11.13
%
10.93
%
Tier 1 capital ratio
11.13
%
10.94
%
10.93
%
11.13
%
10.93
%
Total risk-based capital ratio
14.38
%
14.13
%
14.17
%
14.38
%
14.17
%
Asset quality
Nonperforming loans
$
9,774
$
8,195
$
5,783
$
9,774
$
5,783
Nonperforming assets
9,782
10,304
8,497
9,782
8,497
Nonperforming loans to loans
0.32
%
0.28
%
0.20
%
0.32
%
0.20
%
Nonperforming assets to total assets
0.23
%
0.24
%
0.21
%
0.23
%
0.21
%
Allowance for loan losses to:
Loans
0.89
%
0.82
%
0.75
%
0.89
%
0.75
%
Loans, excluding PPP loans 1
0.91
%
0.84
%
0.75
%
0.91
%
0.75
%
Nonperforming loans
275.4
%
298.5
%
374.9
%
275.4
%
374.9
%
Net charge-offs to average loans
0.01
%
0.12
%
0.15
%
0.06
%
0.08
%
Average balance sheet information
Loans
$
2,996,641
$
2,943,165
$
2,865,258
$
2,957,116
$
2,838,685
Total securities
633,552
657,622
561,780
640,659
547,940
Other earning assets
552,058
594,296
469,454
520,875
322,544
Total interest-earning assets
4,216,634
4,241,690
3,933,315
4,161,245
3,735,286
Total assets
4,307,819
4,330,174
4,015,433
4,246,201
3,817,408
Noninterest-bearing deposits
75,901
73,758
43,972
70,060
43,035
Interest-bearing deposits
3,279,621
3,270,720
3,031,095
3,213,372
2,880,701
Total deposits
3,355,522
3,344,478
3,075,067
3,283,432
2,923,736
Shareholders' equity
313,611
306,868
298,782
310,506
295,963
1 Refer to "Non-GAAP Financial Measures" section above and "Reconciliation of Non-GAAP Financial Measures" below
2 On a fully-taxable equivalent ("FTE") basis assuming a 21% tax rate
3 Regulatory capital ratios are preliminary pending filing of the Company's regulatory reports
First Internet Bancorp Condensed Consolidated Balance Sheets (unaudited) Amounts in thousands
September 30, 2020
June 30, 2020
September 30, 2019
Assets
Cash and due from banks
$
5,804
$
7,016
$
6,283
Interest-bearing deposits
482,649
491,603
410,119
Securities available-for-sale, at fair value
528,311
589,017
544,742
Securities held-to-maturity, at amortized cost
68,254
68,295
46,807
Loans held-for-sale
76,208
38,813
41,119
Loans
3,012,914
2,973,674
2,881,272
Allowance for loan losses
(26,917
)
(24,465
)
(21,683
)
Net loans
2,985,997
2,949,209
2,859,589
Accrued interest receivable
17,768
21,093
16,652
Federal Home Loan Bank of Indianapolis stock
25,650
25,650
25,650
Cash surrender value of bank-owned life insurance
37,714
37,474
36,764
Premises and equipment, net
31,262
23,939
14,512
Goodwill
4,687
4,687
4,687
Servicing asset
2,818
2,522
-
Other real estate owned
-
2,065
2,619
Accrued income and other assets
66,502
63,217
85,948
Total assets
$
4,333,624
$
4,324,600
$
4,095,491
Liabilities
Noninterest-bearing deposits
$
86,088
$
82,864
$
50,560
Interest-bearing deposits
3,286,303
3,297,925
3,097,682
Total deposits
3,372,391
3,380,789
3,148,242
Advances from Federal Home Loan Bank
514,914
514,913
514,908
Subordinated debt
69,758
69,681
69,452
Accrued interest payable
1,249
1,073
2,635
Accrued expenses and other liabilities
57,210
50,433
65,114
Total liabilities
4,015,522
4,016,889
3,800,351
Shareholders' equity
Voting common stock
220,951
220,418
219,013
Retained earnings
116,241
108,431
93,182
Accumulated other comprehensive loss
(19,090
)
(21,138
)
(17,055
)
Total shareholders' equity
318,102
307,711
295,140
Total liabilities and shareholders' equity
$
4,333,624
$
4,324,600
$
4,095,491
First Internet Bancorp Condensed Consolidated Statements of Income (unaudited) Amounts in thousands, except per share data
Three Months Ended
Nine Months Ended
September 30, 2020
June 30, 2020
September 30, 2019
September 30, 2020
September 30, 2019
Interest income
Loans
$
29,560
$
29,730
$
30,594
$
89,698
$
90,654
Securities - taxable
2,240
3,276
3,468
9,135
10,332
Securities - non-taxable
381
457
639
1,410
1,991
Other earning assets
569
759
2,993
2,973
6,560
Total interest income
32,750
34,222
37,694
103,216
109,537
Interest expense
Deposits
12,428
15,763
18,363
45,399
50,896
Other borrowed funds
4,090
4,033
4,087
12,141
11,048
Total interest expense
16,518
19,796
22,450
57,540
61,944
Net interest income
16,232
14,426
15,244
45,676
47,593
Provision for loan losses
2,509
2,491
2,824
6,461
5,498
Net interest income after provision
for loan losses
13,723
11,935
12,420
39,215
42,095
Noninterest income
Service charges and fees
224
182
211
618
672
Loan servicing revenue
274
255
-
780
-
Loan servicing asset revaluation
(103
)
(90
)
-
(372
)
-
Mortgage banking activities
9,630
3,408
4,307
16,706
8,588
Gain on sale of loans
2,033
762
523
4,596
353
Gain (loss) on sale of securities
98
-
-
139
(458
)
Other
339
456
517
1,212
2,229
Total noninterest income
12,495
4,973
5,558
23,679
11,384
Noninterest expense
Salaries and employee benefits
9,533
7,789
6,883
25,096
19,846
Marketing, advertising and promotion
426
411
456
1,212
1,391
Consulting and professional fees
614
932
778
2,723
2,427
Data processing
388
339
381
1,102
1,026
Loan expenses
408
399
247
1,406
853
Premises and equipment
1,568
1,602
1,506
4,795
4,503
Deposit insurance premium
440
435
-
1,360
1,302
Write-down of other real estate owned
2,065
-
-
2,065
-
Other
970
1,337
952
3,383
2,673
Total noninterest expense
16,412
13,244
11,203
43,142
34,021
Income before income taxes
9,806
3,664
6,775
19,752
19,458
Income tax provision (benefit)
1,395
(268
)
449
1,390
1,315
Net income
$
8,411
$
3,932
$
6,326
$
18,362
$
18,143
Per common share data
Earnings per share - basic
$
0.86
$
0.40
$
0.63
$
1.87
$
1.79
Earnings per share - diluted
$
0.86
$
0.40
$
0.63
$
1.87
$
1.79
Dividends declared per share
$
0.06
$
0.06
$
0.06
$
0.18
$
0.18
All periods presented have been reclassified to conform to the current period classification.
First Internet Bancorp Average Balances and Rates (unaudited) Dollar amounts in thousands
Three Months Ended
September 30, 2020
June 30, 2020
September 30, 2019
Average Balance
Interest / Dividends
Yield / Cost
Average Balance
Interest / Dividends
Yield / Cost
Average Balance
Interest / Dividends
Yield / Cost
Assets
Interest-earning assets
Loans, including loans held-for-sale 1
$
3,031,024
$
29,560
3.88
%
$
2,989,772
$
29,730
4.00
%
$
2,902,081
$
30,594
4.18
%
Securities - taxable
539,154
2,240
1.65
%
560,947
3,276
2.35
%
462,490
$
3,468
2.97
%
Securities - non-taxable
94,398
381
1.61
%
96,675
457
1.90
%
99,290
$
639
2.55
%
Other earning assets
552,058
569
0.41
%
594,296
759
0.51
%
469,454
$
2,993
2.53
%
Total interest-earning assets
4,216,634
32,750
3.09
%
4,241,690
34,222
3.24
%
3,933,315
37,694
3.80
%
Allowance for loan losses
(25,347
)
(23,388
)
(20,050
)
Noninterest-earning assets
116,532
111,872
102,168
Total assets
$
4,307,819
$
4,330,174
$
4,015,433
Liabilities
Interest-bearing liabilities
Interest-bearing demand deposits
$
154,275
$
228
0.59
%
$
137,487
$
237
0.69
%
$
126,130
$
233
0.73
%
Savings accounts
45,466
79
0.69
%
37,204
92
0.99
%
32,434
91
1.11
%
Money market accounts
1,295,249
2,442
0.75
%
1,089,063
3,541
1.31
%
639,181
3,261
2.02
%
Certificates and brokered deposits
1,784,631
9,679
2.16
%
2,006,966
11,893
2.38
%
2,233,350
14,778
2.63
%
Total interest-bearing deposits
3,279,621
12,428
1.51
%
3,270,720
15,763
1.94
%
3,031,095
18,363
2.40
%
Other borrowed funds
584,634
4,090
2.78
%
584,543
4,033
2.77
%
584,308
4,087
2.78
%
Total interest-bearing liabilities
3,864,255
16,518
1.70
%
3,855,263
19,796
2.07
%
3,615,403
22,450
2.46
%
Noninterest-bearing deposits
75,901
73,758
43,972
Other noninterest-bearing liabilities
54,052
94,285
57,276
Total liabilities
3,994,208
4,023,306
3,716,651
Shareholders' equity
313,611
306,868
298,782
Total liabilities and shareholders' equity
$
4,307,819
$
4,330,174
$
4,015,433
Net interest income
$
16,232
$
14,426
$
15,244
Interest rate spread
1.39
%
1.17
%
1.34
%
Net interest margin
1.53
%
1.37
%
1.54
%
Net interest margin - FTE 2,3
1.67
%
1.50
%
1.70
%
1 Includes nonaccrual loans
2 On a fully-taxable equivalent ("FTE") basis assuming a 21% tax rate
3 Refer to "Non-GAAP Financial Measures" section above and "Reconciliation of Non-GAAP Financial Measures" below
First Internet Bancorp Average Balances and Rates (unaudited) Dollar amounts in thousands
Nine Months Ended
September 30, 2020
September 30, 2019
Average Balance
Interest / Dividends
Yield / Cost
Average Balance
Interest / Dividends
Yield / Cost
Assets
Interest-earning assets
Loans, including loans held-for-sale 1
$
2,999,711
$
89,698
3.99
%
$
2,864,802
$
90,654
4.23
%
Securities - taxable
543,699
9,135
2.24
%
450,898
10,332
3.06
%
Securities - non-taxable
96,960
1,410
1.94
%
97,042
1,991
2.74
%
Other earning assets
520,875
2,973
0.76
%
322,544
6,560
2.72
%
Total interest-earning assets
4,161,245
103,216
3.31
%
3,735,286
109,537
3.92
%
Allowance for loan losses
(23,605
)
(19,191
)
Noninterest-earning assets
108,561
101,313
Total assets
$
4,246,201
$
3,817,408
Liabilities
Interest-bearing liabilities
Interest-bearing demand deposits
$
138,288
$
684
0.66
%
$
117,811
$
659
0.75
%
Savings accounts
37,700
249
0.88
%
36,241
304
1.12
%
Money market accounts
1,084,411
9,726
1.20
%
598,410
9,009
2.01
%
Certificates and brokered deposits
1,952,973
34,740
2.38
%
2,128,239
40,924
2.57
%
Total interest-bearing deposits
3,213,372
45,399
1.89
%
2,880,701
50,896
2.36
%
Other borrowed funds
584,547
12,141
2.77
%
558,141
11,048
2.65
%
Total interest-bearing liabilities
3,797,919
57,540
2.02
%
3,438,842
61,944
2.41
%
Noninterest-bearing deposits
70,060
43,035
Other noninterest-bearing liabilities
67,716
39,568
Total liabilities
3,935,695
3,521,445
Shareholders' equity
310,506
295,963
Total liabilities and shareholders' equity
$
4,246,201
$
3,817,408
Net interest income
$
45,676
$
47,593
Interest rate spread
1.29
%
1.51
%
Net interest margin
1.47
%
1.70
%
Net interest margin - FTE 2,3
1.61
%
1.87
%
1 Includes nonaccrual loans
2 On a fully-taxable equivalent ("FTE") basis assuming a 21% tax rate
3 Refer to "Non-GAAP Financial Measures" section above and "Reconciliation of Non-GAAP Financial Measures" below
First Internet Bancorp Loans and Deposits (unaudited) Dollar amounts in thousands
September 30, 2020
June 30, 2020
September 30, 2019
Amount
Percent
Amount
Percent
Amount
Percent
Commercial loans
Commercial and industrial
$
77,116
2.6
%
$
81,687
2.7
%
$
83,481
2.9
%
Owner-occupied commercial real estate
89,095
3.0
%
86,897
2.9
%
86,357
3.0
%
Investor commercial real estate
13,084
0.4
%
13,286
0.4
%
11,852
0.4
%
Construction
92,154
3.1
%
77,591
2.6
%
54,131
1.9
%
Single tenant lease financing
960,505
31.9
%
980,292
33.0
%
1,008,247
35.0
%
Public finance
625,638
20.8
%
647,107
21.8
%
686,622
23.8
%
Healthcare finance
461,740
15.3
%
380,956
12.8
%
251,530
8.6
%
Small business lending
123,168
4.1
%
118,526
4.0
%
11,597
0.4
%
Total commercial loans
2,442,500
81.2
%
2,386,342
80.2
%
2,193,817
76.0
%
Consumer loans
Residential mortgage
203,041
6.7
%
208,728
7.0
%
320,451
11.1
%
Home equity
22,169
0.7
%
22,640
0.8
%
25,042
0.9
%
Trailers
145,775
4.8
%
147,326
5.0
%
145,600
5.1
%
Recreational vehicles
96,910
3.2
%
102,088
3.4
%
102,698
3.6
%
Other consumer loans
39,765
1.3
%
42,218
1.4
%
48,275
1.7
%
Total consumer loans
507,660
16.7
%
523,000
17.6
%
642,066
22.4
%
Net deferred loan fees, premiums, discounts and other 1
62,754
2.1
%
64,332
2.2
%
45,389
1.6
%
Total loans
$
3,012,914
100.0
%
$
2,973,674
100.0
%
$
2,881,272
100.0
%
September 30, 2020
June 30, 2020
September 30, 2019
Amount
Percent
Amount
Percent
Amount
Percent
Deposits
Noninterest-bearing deposits
$
86,088
2.6
%
$
82,864
2.5
%
$
50,560
1.6
%
Interest-bearing demand deposits
155,054
4.6
%
152,391
4.5
%
122,551
3.9
%
Savings accounts
49,890
1.5
%
43,366
1.3
%
34,886
1.1
%
Money market accounts
1,359,178
40.3
%
1,241,874
36.7
%
698,077
22.2
%
Certificates of deposits
1,360,575
40.3
%
1,470,905
43.5
%
1,681,377
53.4
%
Brokered deposits
361,606
10.7
%
389,389
11.5
%
560,791
17.8
%
Total deposits
$
3,372,391
100.0
%
$
3,380,789
100.0
%
$
3,148,242
100.0
%
1 Includes carrying value adjustments of $44.3 million and $46.0 million related to terminated interest rate swaps associated with public finance loans as of September 30, 2020 and June 30, 2020, respectively, and $27.6 million as of September 30, 2019 related to interest rate swaps associated with public finance loans.
First Internet Bancorp Reconciliation of Non-GAAP Financial Measures Dollar amounts in thousands, except per share data
Three Months Ended
Nine Months Ended
September 30, 2020
June 30, 2020
September 30, 2019
September 30, 2020
September 30, 2019
Total equity - GAAP
$
318,102
$
307,711
$
295,140
$
318,102
$
295,140
Adjustments:
Goodwill
(4,687
)
(4,687
)
(4,687
)
(4,687
)
(4,687
)
Tangible common equity
$
313,415
$
303,024
$
290,453
$
313,415
$
290,453
Total assets - GAAP
$
4,333,624
$
4,324,600
$
4,095,491
$
4,333,624
$
4,095,491
Adjustments:
Goodwill
(4,687
)
(4,687
)
(4,687
)
(4,687
)
(4,687
)
Tangible assets
$
4,328,937
$
4,319,913
$
4,090,804
$
4,328,937
$
4,090,804
Common shares outstanding
9,800,569
9,799,047
9,741,800
9,800,569
9,741,800
Book value per common share
$
32.46
$
31.40
$
30.30
$
32.46
$
30.30
Effect of goodwill
(0.48
)
(0.48
)
(0.48
)
(0.48
)
(0.48
)
Tangible book value per common share
$
31.98
$
30.92
$
29.82
$
31.98
$
29.82
Total shareholders' equity to assets
7.34
%
7.12
%
7.21
%
7.34
%
7.21
%
Effect of goodwill
(0.10
%)
(0.11
%)
(0.11
%)
(0.10
%)
(0.11
%)
Tangible common equity to tangible assets
7.24
%
7.01
%
7.10
%
7.24
%
7.10
%
Total average equity - GAAP
$
313,611
$
306,868
$
298,782
$
310,506
$
295,963
Adjustments:
Average goodwill
(4,687
)
(4,687
)
(4,687
)
(4,687
)
(4,687
)
Average tangible common equity
$
308,924
$
302,181
$
294,095
$
305,819
$
291,276
Return on average shareholders' equity
10.67
%
5.15
%
8.40
%
7.90
%
8.20
%
Effect of goodwill
0.16
%
0.08
%
0.13
%
0.12
%
0.13
%
Return on average tangible common equity
10.83
%
5.23
%
8.53
%
8.02
%
8.33
%
Total interest income
$
32,750
$
34,222
$
37,694
$
103,216
$
109,537
Adjustments:
Fully-taxable equivalent adjustments 1
1,424
1,437
1,595
4,396
4,764
Total interest income - FTE
$
34,174
$
35,659
$
39,289
$
107,612
$
114,301
Net interest income
$
16,232
$
14,426
$
15,244
$
45,676
$
47,593
Adjustments:
Fully-taxable equivalent adjustments 1
1,424
1,437
1,595
4,396
4,764
Net interest income - FTE
$
17,656
$
15,863
$
16,839
$
50,072
$
52,357
Net interest margin
1.53
%
1.37
%
1.54
%
1.47
%
1.70
%
Effect of fully-taxable equivalent adjustments 1
0.14
%
0.13
%
0.16
%
0.14
%
0.17
%
Net interest margin - FTE
1.67
%
1.50
%
1.70
%
1.61
%
1.87
%
Allowance for loan losses
$
26,917
$
24,465
$
21,683
$
26,917
$
21,683
Loans
$
3,012,914
$
2,973,674
$
2,881,272
$
3,012,914
$
2,881,272
Adjustments:
PPP loans
(58,337
)
(58,948
)
-
(58,337
)
-
Loans, excluding PPP loans
$
2,954,577
$
2,914,726
$
2,881,272
$
2,954,577
$
2,881,272
Allowance for loan losses to loans
0.89
%
0.82
%
0.75
%
0.89
%
0.75
%
Effect of PPP loans
0.02
%
0.02
%
0.00
%
0.02
%
0.00
%
Allowance for loan losses to loans, excluding PPP loans
0.91
%
0.84
%
0.75
%
0.91
%
0.75
%
1 Assuming a 21% tax rate
First Internet Bancorp Reconciliation of Non-GAAP Financial Measures Amounts in thousands, except per share data
Three Months Ended
Nine Months Ended
September 30, 2020
June 30, 2020
September 30, 2019
September 30, 2020
September 30, 2019
Income before income taxes - GAAP
$
9,806
$
3,664
$
6,775
$
19,752
$
19,458
Adjustments:
Write-down of other real estate owned
2,065
-
-
2,065
-
Adjusted income before income taxes
$
11,871
$
3,664
$
6,775
$
21,817
$
19,458
Income tax provision (benefit) - GAAP
$
1,395
$
(268
)
$
449
$
1,390
$
1,315
Adjustments:
Write-down of other real estate owned
434
-
-
434
-
Adjusted income tax provision (benefit)
$
1,829
$
(268
)
$
449
$
1,824
$
1,315
Net income - GAAP
$
8,411
$
3,932
$
6,326
$
18,362
$
18,143
Adjustments:
Write-down of other real estate owned
1,631
-
-
1,631
-
Adjusted net income
$
10,042
$
3,932
$
6,326
$
19,993
$
18,143
Diluted average common shares outstanding
9,773,224
9,768,227
9,980,612
9,827,182
10,116,507
Diluted earnings per share - GAAP
$
0.86
$
0.40
$
0.63
$
1.87
$
1.79
Adjustments:
Effect of write-down of other real estate owned
0.17
-
-
0.16
-
Adjusted diluted earnings per share
$
1.03
$
0.40
$
0.63
$
2.03
$
1.79
Return on average assets
0.78
%
0.37
%
0.63
%
0.58
%
0.64
%
Effect of write-down of other real estate owned
0.15
%
0.00
%
0.00
%
0.05
%
0.00
%
Adjusted return on average assets
0.93
%
0.37
%
0.63
%
0.63
%
0.64
%
Return on average shareholders' equity
10.67
%
5.15
%
8.40
%
7.90
%
8.20
%
Effect of write-down of other real estate owned
2.07
%
0.00
%
0.00
%
0.70
%
0.00
%
Adjusted return on average shareholders' equity
12.74
%
5.15
%
8.40
%
8.60
%
8.20
%
Return on average tangible common equity
10.83
%
5.23
%
8.53
%
8.02
%
8.33
%
Effect of write-down of other real estate owned
2.10
%
0.00
%
0.00
%
0.71
%
0.00
%
Adjusted return on average tangible common equity
12.93
%
5.23
%
8.53
%
8.73
%
8.33
%
Effective income tax rate
14.2
%
(7.3
%)
6.6
%
7.0
%
6.8
%
Effect of write-down of other real estate owned
1.2
%
0.0
%
0.0
%
1.4
%
0.0
%
Adjusted effective income tax rate
15.4
%
(7.3
%)
6.6
%
8.4
%
6.8
%