First Internet Bancorp (the “Company”) (Nasdaq: INBK), the parent company of First Internet Bank (the “Bank”), announced today financial and operational results for the fourth quarter and full year ended December 31, 2018. Net income for the fourth quarter of 2018 was $3.6 million, or $0.35 diluted earnings per share. This compares to net income of $6.3 million, or $0.61 diluted earnings per share, for the third quarter of 2018, and net income of $3.5 million, or $0.41 diluted earnings per share, for the fourth quarter of 2017.

The fourth quarter’s results included a $2.4 million pre-tax write-down of commercial other real estate owned (“OREO”). Excluding this charge, adjusted net income for the quarter was $5.5 million and adjusted diluted earnings per share was $0.53.

For the twelve month period ended December 31, 2018, net income was a record $21.9 million and diluted earnings per share were $2.30 compared to net income of $15.2 million and diluted earnings per share of $2.13 for the twelve month period ended December 31, 2017.

“First Internet Bancorp had another successful year during 2018 as we reported record annual net income, driven by full year loan growth of 30%, excellent credit quality and well-managed expenses,” said David Becker, Chairman, President and Chief Executive Officer. “We generated strong growth in both commercial and consumer loans, particularly in a number of our specialty lending areas, including single tenant lease financing, public finance, healthcare finance and horse trailer and recreational vehicle lending.

“Looking to 2019, we continue to see opportunities to expand our market share across our collection of specialty lending franchises, as well as adding new areas of lending to further diversify and improve our revenue mix. We continue to take a disciplined approach to capital deployment and will actively manage the balance sheet to drive profitable growth,” Becker added. “As always, I would like to thank the entire First Internet team who worked very hard to deliver these record 2018 results. Their dedication and efforts will continue to be the key to our ongoing growth and success.”

Net Interest Income and Net Interest Margin

Net interest income for the fourth quarter of 2018 was $15.4 million, compared to $16.0 million for the third quarter of 2018. On a fully-taxable equivalent basis, net interest income for the fourth quarter was $16.9 million, compared to $17.3 million for the third quarter. Net interest income was flat on a reported and fully-taxable equivalent basis, when compared to the fourth quarter of 2017.

Total interest income for the fourth quarter of 2018 was $31.8 million, an increase of 5.4%, compared to the third quarter of 2018, and an increase of 29.3% compared to the fourth quarter of 2017. On a fully-taxable equivalent basis, total interest income for the fourth quarter was $33.3 million, an increase of 5.5% compared to the third quarter, and an increase of 27.2% compared to the fourth quarter of 2017. The increase in total interest income compared to the third quarter of 2018 was driven primarily by a $158.7 million, or 5.2%, increase in average interest-earning assets. Compared to the linked quarter, the yield on interest-earning assets for the fourth quarter was flat at 3.90% as increases in the yields earned on securities and other earning assets were offset by a decline in the yield earned on the loan portfolio, including loans held for sale. The decline in the yield earned on the loan portfolio was due primarily to significantly lower prepayment fees.

Total interest expense for the fourth quarter of 2018 was $16.4 million, an increase of 15.3%, compared to the third quarter of 2018, and an increase of 77.1% compared to the fourth quarter of 2017. The increase in total interest expense compared to the third quarter of 2018 was driven primarily by a $104.0 million increase in average interest-bearing deposit balances, combined with the effect of a 19 basis point increase in the cost of funds related to those deposits. Deposit costs were impacted during the quarter by the continued rise in short term interest rates as well as the use of longer duration structures to mitigate long term interest rate risk. In addition, the average balance of Federal Home Loan Bank advances increased by $60.4 million and the interest rate on those advances increased by 16 basis points compared to the third quarter of 2018.

Net interest margin (“NIM”) was 1.89% for the fourth quarter of 2018, compared to 2.06% for the third quarter of 2018 and 2.35% for the fourth quarter of 2017. On a fully-taxable equivalent basis, NIM decreased 16 basis points to 2.07% for the fourth quarter of 2018, from 2.23% for the third quarter of 2018, and was down from 2.59% for the fourth quarter of 2017. Compared to the linked quarter, the decline in NIM was due primarily to the higher cost of funds during the quarter and the decline in loan prepayment fees.

Noninterest Income

Noninterest income for the fourth quarter of 2018 was $2.0 million which was essentially flat when compared to the third quarter of 2018, and down from $2.5 million for the fourth quarter of 2017. During the fourth quarter, the Company had seasonally lower revenue from mortgage banking activities as mandatory pipeline volumes were down compared to the third quarter of 2018, which was offset by increases in gain on sale of loans and other noninterest income. The increase in gain on sale of loans was due to the Company selling $15.4 million of seasoned single tenant lease financing loans at a slight premium to par.

Noninterest Expense

Noninterest expense for the fourth quarter of 2018 was $12.7 million, compared to $10.0 million for the third quarter of 2018 and $9.7 million for the fourth quarter of 2017. The increase from the third quarter was due primarily to a $2.4 million write-down of two commercial OREO properties. The revaluation of the OREO was driven by deteriorating conditions in the market where the properties are located and the commencement of a marketing strategy to move the properties off the Company’s balance sheet.

Income Taxes

The Company reported an income tax benefit of $0.3 million for the fourth quarter of 2018, compared to income tax expense of $0.7 million and an effective tax rate of 10.6% for the third quarter of 2018 and $3.5 million and an effective tax rate of 50.2% for the fourth quarter of 2017. The income tax benefit reported in the fourth quarter of 2018 is primarily related to the write-down of the OREO properties. When excluding the income tax benefit related to the OREO write-down, the Company’s adjusted effective income tax rate was 3.1%, reflecting the continued growth in the public finance portfolio and the proportion of tax-exempt income relative to overall pre-tax income.

Loans and Credit Quality

Total loans as of December 31, 2018 were $2.7 billion, an increase of $222.6 million, or 8.9%, compared to September 30, 2018 and $625.0 million, or 29.9%, compared to December 31, 2017. Total commercial loan balances were $2.0 billion as of December 31, 2018, an increase of $163.8 million, or 9.0%, compared to September 30, 2018 and $462.0 million, or 30.2%, compared to December 31, 2017. The growth in commercial loan balances was driven largely by production in public finance, healthcare finance and single tenant lease financing.

Total consumer loan balances were $708.4 million as of December 31, 2018, an increase of $46.6 million, or 7.0%, compared to September 30, 2018 and $150.4 million, or 26.9%, compared to December 31, 2017. The growth in consumer loan balances was driven primarily by increased draw-downs on residential construction loans and production in portfolio residential mortgages, horse trailers and recreational vehicles.

Total delinquencies 30 days or more past due increased to 0.15% of total loans as of December 31, 2018, up from 0.02% as of September 30, 2018 and 0.05% as of December 31, 2017. The increase in delinquencies was due primarily to one seasoned residential mortgage loan with an unpaid principal balance of $3.1 million and a collateral value of $5.3 million based on a recent appraisal. Overall credit quality remained solid as nonperforming loans to total loans remained low at 0.03% as of December 31, 2018, compared to 0.01% at September 30, 2018 and down from 0.04% as of December 31, 2017.

The allowance for loan losses as a percentage of total loans was 0.66% as of December 31, 2018, compared to 0.67% as of September 30, 2018 and 0.72% as of December 31, 2017. The decline in the allowance as a percentage of total loans was due primarily to the continued growth in the public finance portfolio, as well as growth in the residential mortgage portfolio, as these loan categories generally have lower loss reserve factors than other loan types.

Net charge-offs of $0.3 million were recognized during the fourth quarter of 2018, resulting in net charge-offs to average loans of 0.05%, compared to 0.04% for the third quarter and 0.06% for the fourth quarter of 2017. The provision for loan losses in the fourth quarter was $1.5 million, compared to $0.9 million for the third quarter and $1.2 million for the fourth quarter of 2017. The increase in the provision for loan losses compared to the third quarter of 2018 was driven primarily by the loan growth discussed above.

Balance Sheet Management

To increase asset sensitivity and reduce long term interest rate risk, the Company maintained its asset hedging strategy that was initiated in the fourth quarter of 2017. As of December 31, 2018, the Company had a total notional value of $435.9 million of pay fixed / receive variable interest rate swaps in place to hedge public finance loans, representing 61.7% of the total public finance loan balances outstanding. Including $88.2 million of notional value interest rate swaps in place to hedge fixed rate investment securities, the Company had swaps with a total notional value of $524.1 million in place at the end of the fourth quarter of 2018 to effectively convert long term fixed rate assets to variable rate and mitigate the impact of higher short-term interest rates on deposit and funding costs.

The Company also maintained its liability hedging strategy using pay fixed / receive variable interest rate swaps, extending the duration of short term FHLB advances and brokered variable rate money market deposits to lessen the impact of future short term interest rate increases on deposit pricing. As of December 31, 2018, the Company had $210.0 million of notional value interest rate swaps related to these funding sources. Similar to the asset hedging strategy, these swaps are intended to improve asset sensitivity and reduce long term interest rate risk.

Capital

As of December 31, 2018, total shareholders’ equity was $288.7 million, increasing $1.0 million, or 0.3%, compared to September 30, 2018, primarily due to the net income earned during the quarter. Tangible book value per share increased to $27.93 as of December 31, 2018, from $27.80 as of September 30, 2018 and $26.09 as of December 31, 2017.

In connection with the announced stock repurchase program, the Company repurchased 10,897 shares during the fourth quarter at an average price of $19.83 per share. Subsequent to quarter-end, the Company repurchased an additional 17,101 shares at an average price of $23.07.

The following table presents the Company’s and the Bank’s regulatory and other capital ratios as of December 31, 2018.

  As of December 31, 2018
Company   Bank
 
Total shareholders' equity to assets 8.15 % 7.75 %
Tangible common equity to tangible assets 1 8.03 % 7.63 %
Tier 1 leverage ratio 2 9.00 % 8.57 %
Common equity tier 1 capital ratio 2 12.39 % 11.81 %
Tier 1 capital ratio 2 12.39 % 11.81 %
Total risk-based capital ratio 2 14.53 % 12.55 %

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, January 24, 2019 to discuss its quarterly financial results. The call can be accessed via telephone at (888) 317-6016. A recorded replay can be accessed through February 24, 2019 by dialing (877) 344-7529; passcode: 10127579.

Additionally, interested parties can listen to a live webcast of the call on 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 $3.5 billion as of December 31, 2018. 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 now 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 and treasury management services in select geographies. 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 “believe,” “expect,” “anticipate,” “plan,” “intend,” “estimate,” “may,” “will,” “would,” “could,” “should” 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. 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 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, return on average tangible common equity, total interest income – FTE, net interest income – FTE, net interest margin – FTE, adjusted income before income taxes, adjusted income tax provision, adjusted net income, adjusted diluted earnings per share, adjusted return on average assets, adjusted return on average 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)
Amounts in thousands, except per share data
               
Three Months Ended Twelve Months Ended
December 31, September 30, December 31, December 31, December 31,
2018 2018 2017 2018 2017
Net income $ 3,576 $ 6,288 $ 3,498 $ 21,900 $ 15,226
 
Per share and share information
Earnings per share - basic $ 0.35 $ 0.61 $ 0.41 $ 2.31 $ 2.14
Earnings per share - diluted 0.35 0.61 0.41 2.30 2.13
Dividends declared per share 0.06 0.06 0.06 0.24 0.24
Book value per common share 28.39 28.26 26.65 28.39 26.65
Tangible book value per common share 27.93 27.80 26.09 27.93 26.09
Common shares outstanding 10,170,778 10,181,675 8,411,077 10,170,778 8,411,077
Average common shares outstanding:
Basic 10,263,086 10,261,967 8,490,951 9,490,506 7,118,628
Diluted 10,275,040 10,273,766 8,527,599 9,508,653 7,149,302
Performance ratios
Return on average assets 0.43 % 0.79 % 0.52 % 0.72 % 0.66 %
Return on average shareholders' equity 4.89 % 8.75 % 6.23 % 8.44 % 8.54 %
Return on average tangible common equity 4.98 % 8.89 % 6.37 % 8.60 % 8.77 %
Net interest margin 1.89 % 2.06 % 2.35 % 2.09 % 2.39 %
Net interest margin - FTE 1 2.07 % 2.23 % 2.59 % 2.25 % 2.57 %
Capital ratios 2
Total shareholders' equity to assets 8.15 % 8.98 % 8.10 % 8.15 % 8.10 %
Tangible common equity to tangible assets 8.03 % 8.85 % 7.94 % 8.03 % 7.94 %
Tier 1 leverage ratio 9.00 % 9.40 % 8.45 % 9.00 % 8.45 %
Common equity tier 1 capital ratio 12.39 % 13.14 % 11.43 % 12.39 % 11.43 %
Tier 1 capital ratio 12.39 % 13.14 % 11.43 % 12.39 % 11.43 %
Total risk-based capital ratio 14.53 % 15.38 % 14.07 % 14.53 % 14.07 %
Asset quality
Nonperforming loans $ 889 $ 256 $ 839 $ 889 $ 839
Nonperforming assets 3,508 5,304 5,892 3,508 5,892
Nonperforming loans to loans 0.03 % 0.01 % 0.04 % 0.03 % 0.04 %
Nonperforming assets to total assets 0.10 % 0.17 % 0.21 % 0.10 % 0.21 %
Allowance for loan losses to:
Loans 0.66 % 0.67 % 0.72 % 0.66 % 0.72 %
Nonperforming loans 2,013.1 % 6,525.0 % 1,784.3 % 2,013.1 % 1,784.3 %
Net charge-offs to average loans 0.05 % 0.04 % 0.06 % 0.04 % 0.05 %
Average balance sheet information
Loans $ 2,577,584 $ 2,440,982 $ 1,970,994 $ 2,364,336 $ 1,661,813
Total securities 494,256 483,900 500,627 486,030 496,143
Other earning assets 148,311 131,306 95,049 116,074 79,461
Total interest-earning assets 3,236,144 3,077,415 2,588,677 2,984,608 2,257,853
Total assets 3,320,850 3,148,230 2,650,583 3,055,224 2,313,469
Noninterest-bearing deposits 48,779 44,921 40,618 45,562 35,043
Interest-bearing deposits 2,472,443 2,368,472 1,963,405 2,272,037 1,713,603
Total deposits 2,521,222 2,413,393 2,004,023 2,317,599 1,748,646
Shareholders' equity 289,844 285,207 222,670 259,416 178,212

1

  

On a fully-taxable equivalent ("FTE") basis assuming a 21% tax rate in 2018 and a 35% tax rate in 2017

2

Regulatory capital ratios are preliminary pending filing of the Company's regulatory reports

 
 
First Internet Bancorp
Condensed Consolidated Balance Sheets (unaudited, except for December 31, 2017)
Amounts in thousands
         
December 31, September 30, December 31,
2018 2018 2017
Assets
Cash and due from banks $ 7,080 $ 3,517 $ 4,539
Interest-bearing deposits 181,632 82,273 43,442
Securities available-for-sale, at fair value 481,345 468,997 473,275
Securities held-to-maturity, at amortized cost 22,750 20,200 19,209
Loans held-for-sale 18,328 23,493 51,407
Loans 2,716,228 2,493,622 2,091,193
Allowance for loan losses   (17,896 )   (16,704 )   (14,970 )
Net loans 2,698,332 2,476,918 2,076,223
Accrued interest receivable 16,822 14,472 11,944
Federal Home Loan Bank of Indianapolis stock 23,625 22,050 19,575
Cash surrender value of bank-owned life insurance 36,059 35,819 35,105
Premises and equipment, net 10,697 10,041 10,058
Goodwill 4,687 4,687 4,687
Other real estate owned 2,619 5,041 5,041
Accrued income and other assets   37,716     35,410     13,182  
Total assets $ 3,541,692   $ 3,202,918   $ 2,767,687  
 
Liabilities
Noninterest-bearing deposits $ 43,301 $ 42,750 $ 44,686
Interest-bearing deposits   2,628,050     2,403,814     2,040,255  
Total deposits 2,671,351 2,446,564 2,084,941
Advances from Federal Home Loan Bank 525,153 425,160 410,176
Subordinated debt 33,875 33,837 36,726
Accrued interest payable 1,108 887 311
Accrued expenses and other liabilities   21,470     8,730     11,406  
Total liabilities   3,252,957     2,915,178     2,543,560  
Shareholders' equity
Voting common stock 227,587 227,454 172,043
Retained earnings 77,689 74,733 57,103
Accumulated other comprehensive loss   (16,541 )   (14,447 )   (5,019 )
Total shareholders' equity   288,735     287,740     224,127  
Total liabilities and shareholders' equity $ 3,541,692   $ 3,202,918   $ 2,767,687  
 
 
First Internet Bancorp
Condensed Consolidated Statements of Income (unaudited, except for the twelve months ended December 31, 2017)
Amounts in thousands, except per share data
               
Three Months Ended Twelve Months Ended
December 31, September 30, December 31, December 31, December 31,
2018 2018 2017 2018 2017
Interest income
Loans $ 27,249 $ 26,019 $ 20,971 $ 99,082 $ 70,465
Securities - taxable 2,927 2,659 2,521 10,630 10,036
Securities - non-taxable 701 698 696 2,810 2,786
Other earning assets   972     847   450   2,945   1,410
Total interest income   31,849     30,223   24,638   115,467   84,697
Interest expense
Deposits 13,338 11,650 7,358 42,484 23,975
Other borrowed funds   3,090     2,603   1,920   10,716   6,740
Total interest expense   16,428     14,253   9,278   53,200   30,715
Net interest income 15,421 15,970 15,360 62,267 53,982
Provision for loan losses   1,487     888   1,179   3,892   4,872

Net interest income after provision for loan losses

  13,934     15,082   14,181   58,375   49,110
Noninterest income
Service charges and fees 237 236 231 934 888
Mortgage banking activities 1,141 1,402 1,530 5,718 7,836
Gain on sale of loans 89 - 395 503 395
Other   580     356   383   1,605   1,422
Total noninterest income   2,047     1,994   2,539   8,760   10,541
Noninterest expense
Salaries and employee benefits 5,738 5,704 5,701 23,174 21,164
Marketing, advertising and promotion 543 601 590 2,468 2,393
Consulting and professional fees 862 709 617 3,055 3,091
Data processing 320 368 242 1,233 971
Loan expenses 204 241 303 942 1,027
Premises and equipment 1,307 1,244 1,125 4,996 4,183
Deposit insurance premium 570 441 420 1,956 1,410
Write-down of other real estate owned 2,423 - - 2,423 -
Other   772     737   703   2,936   2,484
Total noninterest expense   12,739     10,045   9,701   43,183   36,723
Income before income taxes 3,242 7,031 7,019 23,952 22,928
Income tax (benefit) provision   (334 )   743   3,521   2,052   7,702
Net income $ 3,576   $ 6,288 $ 3,498 $ 21,900 $ 15,226
 
Per common share data
Earnings per share - basic $ 0.35 $ 0.61 $ 0.41 $ 2.31 $ 2.14
Earnings per share - diluted $ 0.35 $ 0.61 $ 0.41 $ 2.30 $ 2.13
Dividends declared per share $ 0.06 $ 0.06 $ 0.06 $ 0.24 $ 0.24
All periods presented have been reclassified to conform to the current period classification.
 
 
First Internet Bancorp
Average Balances and Rates (unaudited)
Amounts in thousands
                       
Three Months Ended
December 31, 2018 September 30, 2018 December 31, 2017
Average Interest / Yield / Average Interest / Yield / Average Interest / Yield /
Balance Dividends Cost Balance Dividends Cost Balance Dividends Cost
Assets
Interest-earning assets
Loans, including loans held-for-sale 1 $ 2,593,577 $ 27,249 4.17 % $ 2,462,209 $ 26,019 4.19 % $ 1,993,001 $ 20,971 4.17 %
Securities - taxable 402,179 2,927 2.89 % 389,880 2,659 2.71 % 403,905 2,521 2.48 %
Securities - non-taxable 92,077 701 3.02 % 94,020 698 2.95 % 96,722 696 2.85 %
Other earning assets   148,311     972 2.60 %   131,306     847 2.56 %   95,049     450 1.88 %
Total interest-earning assets 3,236,144 31,849 3.90 % 3,077,415 30,223 3.90 % 2,588,677 24,638 3.78 %
 
Allowance for loan losses (17,065 ) (16,312 ) (14,486 )
Noninterest-earning assets   101,771     87,127     76,392  
Total assets $ 3,320,850   $ 3,148,230   $ 2,650,583  
 
Liabilities
Interest-bearing liabilities
Interest-bearing demand deposits $ 89,234 $ 182 0.81 % $ 87,102 $ 133 0.61 % $ 86,744 $ 119 0.54 %
Savings accounts 42,694 123 1.14 % 51,557 147 1.13 % 52,092 132 1.01 %
Money market accounts 518,421 2,575 1.97 % 527,715 2,206 1.66 % 479,201 1,428 1.18 %
Certificates and brokered deposits   1,822,094     10,458 2.28 %   1,702,098     9,164 2.14 %   1,345,368     5,679 1.67 %
Total interest-bearing deposits 2,472,443 13,338 2.14 % 2,368,472 11,650 1.95 % 1,963,405 7,358 1.49 %
Other borrowed funds   499,877     3,090 2.45 %   439,412     2,603 2.35 %   411,283     1,920 1.85 %
Total interest-bearing liabilities 2,972,320 16,428 2.19 % 2,807,884 14,253 2.01 % 2,374,688 9,278 1.55 %
 
Noninterest-bearing deposits 48,779 44,921 40,618
Other noninterest-bearing liabilities   9,907     10,218     12,607  
Total liabilities 3,031,006 2,863,023 2,427,913
 
Shareholders' equity   289,844     285,207     222,670  
Total liabilities and shareholders' equity $ 3,320,850   $ 3,148,230   $ 2,650,583  
     
Net interest income $ 15,421 $ 15,970 $ 15,360
 
Interest rate spread 1.71 % 1.89 % 2.23 %
 
Net interest margin 1.89 % 2.06 % 2.35 %
 
Net interest margin - FTE 2 2.07 % 2.23 % 2.59 %

1

  

Includes nonaccrual loans

2

On a fully-taxable equivalent ("FTE") basis assuming a 21% tax rate in 2018 and a 35% tax rate in 2017

 
 
First Internet Bancorp
Average Balances and Rates (unaudited)
Amounts in thousands
                 
Twelve Months Ended
December 31, 2018 December 31, 2017
Average Interest / Yield / Average Interest / Yield /
Balance Dividends Cost Balance Dividends Cost
Assets
Interest-earning assets
Loans, including loans held-for-sale 1 $ 2,382,504 $ 99,082 4.16 % $ 1,682,249 $ 70,465 4.19 %
Securities - taxable 391,958 10,630 2.71 % 400,449 $ 10,036 2.51 %
Securities - non-taxable 94,072 2,810 2.99 % 95,694 $ 2,786 2.91 %
Other earning assets   116,074     2,945 2.54 %   79,461   $ 1,410 1.77 %
Total interest-earning assets 2,984,608 115,467 3.87 % 2,257,853 84,697 3.75 %
 
Allowance for loan losses (16,097 ) (12,964 )
Noninterest-earning assets   86,713     68,580  
Total assets $ 3,055,224   $ 2,313,469  
 
Liabilities
Interest-bearing liabilities
Interest-bearing demand deposits $ 90,229 $ 583 0.65 % $ 89,081 $ 488 0.55 %
Savings accounts 51,333 585 1.14 % 39,393 342 0.87 %
Money market accounts 544,802 8,803 1.62 % 415,910 4,227 1.02 %
Certificates and brokered deposits   1,585,673     32,513 2.05 %   1,169,219     18,918 1.62 %
Total interest-bearing deposits 2,272,037 42,484 1.87 % 1,713,603 23,975 1.40 %
Other borrowed funds   468,411     10,716 2.29 %   376,470     6,740 1.79 %
Total interest-bearing liabilities 2,740,448 53,200 1.94 % 2,090,073 30,715 1.47 %
 
Noninterest-bearing deposits 45,562 35,043
Other noninterest-bearing liabilities   9,798     10,141  
Total liabilities 2,795,808 2,135,257
 
Shareholders' equity   259,416     178,212  
Total liabilities and shareholders' equity $ 3,055,224   $ 2,313,469  
   
Net interest income $ 62,267 $ 53,982
 
Interest rate spread 1.93 % 2.28 %
 
Net interest margin 2.09 % 2.39 %
 
Net interest margin - FTE 2 2.25 % 2.57 %

1

  

Includes nonaccrual loans

2

On a fully-taxable equivalent ("FTE") basis assuming a 21% tax rate in 2018 and a 35% tax rate in 2017

 
 
First Internet Bancorp
Loans and Deposits (unaudited)
Amounts in thousands
                 
 
December 31, 2018 September 30, 2018 December 31, 2017
Amount Percent Amount Percent Amount Percent
Commercial loans
Commercial and industrial $ 114,382 4.2 % $ 105,489 4.2 % $ 122,940 5.9 %
Owner-occupied commercial real estate 87,962 3.2 % 93,568 3.8 % 75,768 3.6 %
Investor commercial real estate 5,391 0.2 % 5,595 0.2 % 7,273 0.4 %
Construction 39,916 1.5 % 38,228 1.5 % 49,213 2.4 %
Single tenant lease financing 919,440 33.8 % 883,372 35.4 % 803,299 38.4 %
Public finance 706,342 26.0 % 610,858 24.5 % 438,341 21.0 %
Healthcare finance   117,007 4.4 %   89,525 3.7 %   31,573 1.5 %
Total commercial loans 1,990,440 73.3 % 1,826,635 73.3 % 1,528,407 73.2 %
 
Consumer loans
Residential mortgage 399,898 14.7 % 362,574 14.5 % 299,935 14.3 %
Home equity 28,735 1.1 % 28,713 1.2 % 30,554 1.5 %
Trailers 136,620 5.0 % 129,571 5.2 % 101,369 4.8 %
Recreational vehicles 91,912 3.4 % 85,821 3.4 % 69,196 3.3 %
Other consumer loans   51,239 1.9 %   55,175 2.2 %   56,968 2.7 %
Total consumer loans 708,404 26.1 % 661,854 26.5 % 558,022 26.6 %

Net deferred loan fees, premiums, discounts and other 1

   17,384 0.6 %   5,133 0.2 %   4,764 0.2

%

Total loans $ 2,716,228 100.0 % $ 2,493,622 100.0 % $ 2,091,193 100.0 %
 
 
December 31, 2018 September 30, 2018 December 31, 2017
Amount Percent Amount Percent Amount Percent
Deposits
Noninterest-bearing deposits $ 43,301 1.6 % $ 42,750 1.7 % $ 44,686 2.1 %
Interest-bearing demand deposits 121,055 4.5 % 94,681 3.9 % 94,674 4.5 %
Savings accounts 38,489 1.4 % 47,033 1.9 % 49,939 2.4 %
Money market accounts 528,533 19.9 % 478,548 19.6 % 499,501 24.0 %
Certificates of deposits 1,292,883 48.4 % 1,252,690 51.2 % 1,319,488 63.3 %

Brokered deposits 2

   647,090 24.2 %   530,862 21.7 %   76,653 3.7 %
Total deposits $ 2,671,351 100.0 % $ 2,446,564 100.0 % $ 2,084,941 100.0 %

1

  

Includes carrying value adjustments of $5.0 million, <$5.2> million and $0.3 million as of December 31, 2018, September 30, 2018 and December 31, 2017, respectively, related to interest rate swaps associated with public finance loans.

2

As of March 31, 2018, $116.3 million of public fund deposits originated through an investment advisor who manages fixed income portfolios for municipalities were reclassified from certificates of deposit to brokered deposits per regulatory guidance.

 
 
First Internet Bancorp
Reconciliation of Non-GAAP Financial Measures
Amounts in thousands, except per share data
             
Three Months Ended Twelve Months Ended
December 31, September 30, December 31, December 31, December 31,
2018 2018 2017 2018 2017
Total equity - GAAP $ 288,735 $ 287,740 $ 224,127 $ 288,735 $ 224,127
Adjustments:
Goodwill   (4,687 )   (4,687 )   (4,687 )   (4,687 )   (4,687 )
Tangible common equity $ 284,048   $ 283,053   $ 219,440   $ 284,048   $ 219,440  
 
Total assets - GAAP $ 3,541,692 $ 3,202,918 $ 2,767,687 $ 3,541,692 $ 2,767,687
Adjustments:
Goodwill   (4,687 )   (4,687 )   (4,687 )   (4,687 )   (4,687 )
Tangible assets $ 3,537,005   $ 3,198,231   $ 2,763,000   $ 3,537,005   $ 2,763,000  
 
Common shares outstanding 10,170,778 10,181,675 8,411,077 10,170,778 8,411,077
 
Book value per common share $ 28.39 $ 28.26 $ 26.65 $ 28.39 $ 26.65
Effect of goodwill   (0.46 )   (0.46 )   (0.56 )   (0.46 )   (0.56 )
Tangible book value per common share $ 27.93   $ 27.80   $ 26.09   $ 27.93   $ 26.09  
 
Total shareholders' equity to assets ratio 8.15 % 8.98 % 8.10 % 8.15 % 8.10 %
Effect of goodwill   (0.12 %)   (0.13 %)   (0.16 %)   (0.12 %)   (0.16 %)
Tangible common equity to tangible assets ratio   8.03 %   8.85 %   7.94 %   8.03 %   7.94 %
 
Total average equity - GAAP $ 289,844 $ 285,207 $ 222,670 $ 259,416 $ 178,212
Adjustments:
Average goodwill   (4,687 )   (4,687 )   (4,687 )   (4,687 )   (4,687 )
Average tangible common equity $ 285,157   $ 280,520   $ 217,983   $ 254,729   $ 173,525  
 
Return on average shareholders' equity 4.89 % 8.75 % 6.23 % 8.44 % 8.54 %
Effect of goodwill   0.09 %   0.14 %   0.14 %   0.16 %   0.23 %
Return on average tangible common equity   4.98 %   8.89 %   6.37 %   8.60 %   8.77 %
 
Total interest income $ 31,849 $ 30,223 $ 24,638 $ 115,467 $ 84,697
Adjustments:
Fully-taxable equivalent adjustments 1   1,477     1,351     1,555     5,010     4,053  
Total interest income - FTE $ 33,326   $ 31,574   $ 26,193   $ 120,477   $ 88,750  
 
Net interest income $ 15,421 $ 15,970 $ 15,360 $ 62,267 $ 53,982
Adjustments:
Fully-taxable equivalent adjustments 1   1,477     1,351     1,555     5,010     4,053  
Net interest income - FTE $ 16,898   $ 17,321   $ 16,915   $ 67,277   $ 58,035  
 
Net interest margin 1.89 % 2.06 % 2.35 % 2.09 % 2.39 %
Effect of fully-taxable equivalent adjustments 1   0.18 %   0.17 %   0.24 %   0.16 %   0.18 %
Net interest margin - FTE   2.07 %   2.23 %   2.59 %   2.25 %   2.57 %

1

  

Assuming a 21% tax rate in 2018 and a 35% tax rate in 2017

 
 
First Internet Bancorp
Reconciliation of Non-GAAP Financial Measures
Amounts in thousands, except per share data
             
Three Months Ended Twelve Months Ended
December 31, September 30, December 31, December 31, December 31,
2018 2018 2017 2018 2017
 
Income before income taxes - GAAP $ 3,242 $ 7,031 $ 7,019 $ 23,952 $ 22,928
Adjustments:
Write-down of other real estate owned 2,423 - - 2,423 -
Net deferred tax asset revaluation   -     -     -     -     -  
Adjusted income before income taxes $ 5,665   $ 7,031   $ 7,019   $ 26,375   $ 22,928  
 
Income tax (benefit) provision - GAAP $ (334 ) $ 743 $ 3,521 $ 2,052 $ 7,702
Adjustments:
Write-down of other real estate owned 509 - - 509 -
Net deferred tax asset revaluation   -     -     (1,846 )   -     (1,846 )
Adjusted income tax provision $ 175   $ 743   $ 1,675   $ 2,561   $ 5,856  
 
Net income - GAAP $ 3,576 $ 6,288 $ 3,498 $ 21,900 $ 15,226
Adjustments:
Write-down of other real estate owned 1,914 - - 1,914 -
Net deferred tax asset revaluation   -     -     1,846     -     1,846  
Adjusted net income $ 5,490   $ 6,288   $ 5,344   $ 23,814   $ 17,072  
 
Diluted average common shares outstanding 10,275,040 10,273,766 8,527,599 9,508,653 7,149,302
 
Diluted earnings per share - GAAP $ 0.35 $ 0.61 $ 0.41 $ 2.30 $ 2.13
Adjustments:
Effect of write-down of other real estate owned 0.18 - - 0.20
Effect of net deferred tax asset revaluation   -     -     0.22     -     0.26  
Adjusted diluted earnings per share $ 0.53   $ 0.61   $ 0.63   $ 2.50   $ 2.39  
 
Return on average assets 0.43 % 0.79 % 0.52 % 0.72 % 0.66 %
Effect of write-down of other real estate owned 0.23 % 0.00 % 0.00 % 0.06 % 0.00 %
Effect of net deferred tax asset revaluation   0.00 %   0.00 %   0.28 %   0.00 %   0.08 %
Adjusted return on average assets   0.66 %   0.79 %   0.80 %   0.78 %   0.74 %
 
Return on average shareholders' equity 4.89 % 8.75 % 6.23 % 8.44 % 8.54 %
Effect of write-down of other real estate owned 2.62 % 0.00 % 0.00 % 0.74 % 0.00 %
Effect of net deferred tax asset revaluation   0.00 %   0.00 %   3.29 %   0.00 %   1.04 %

Adjusted return on average shareholders' equity

  7.51 %   8.75 %   9.52 %   9.18 %   9.58 %
 
Return on average tangible common equity 4.98 % 8.89 % 6.37 % 8.60 % 8.77 %
Effect of write-down of other real estate owned 2.66 % 0.00 % 0.00 % 0.75 % 0.00 %
Effect of net deferred tax asset revaluation   0.00 %   0.00 %   3.36 %   0.00 %   1.07 %
Adjusted return on average tangible common equity   7.64 %   8.89 %   9.73 %   9.35 %   9.84 %
 
Effective income tax rate (10.3 %) 10.6 % 50.2 % 8.6 % 33.6 %

Effect of write-down of other real estate owned

13.4 % 0.0 %

0.0

%

1.1 % 0.0 %
Effect of net deferred tax asset revaluation   0.0 %  

0.0

%

 

(26.3

%)

  0.0 %   (8.1 %)
Adjusted effective income tax rate   3.1 %   10.6 %   23.9 %   9.7 %   25.5 %