First Internet Bancorp : Reports Fourth Quarter and Full Year 2019 Results

Highlights for the fourth quarter and full year 2019 include: Record annual net income and diluted earnings per share of $25.2 million and $2.51, respectively Record quarterly net income of $7.1 million, compared to $6.3 million for the third quarter of 2019 and $3.6 million for the fourth quarter of 2018 Record quarterly diluted earnings per share of $0.72, compared to $0.63 diluted earnings per share for the third quarter of 2019 and $0.35 diluted earnings per share for the fourth quarter of 2018 Total quarterly revenue of $20.8 million, consistent with the third quarter of 2019 and an 18.9% increase from the fourth quarter of 2018

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, 2019. Net income for the fourth quarter of 2019 was a record $7.1 million, or $0.72 diluted earnings per share. This compares to net income of $6.3 million, or $0.63 diluted earnings per share, for the third quarter of 2019, and net income of $3.6 million, or $0.35 diluted earnings per share, for the fourth quarter of 2018. The fourth quarter of 2018 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, or $0.53 adjusted diluted earnings per share.

For the twelve month period ended December 31, 2019, net income was a record $25.2 million and diluted earnings per share were a record $2.51 compared to net income of $21.9 million and diluted earnings per share of $2.30 for the twelve month period ended December 31, 2018. Excluding the OREO write-down described above, adjusted net income for the full year 2018 was $23.8 million, or $2.50 adjusted diluted earnings per share.

“First Internet Bancorp produced strong 2019 results, highlighted by record annual net income that was driven by full-year revenue growth of 12%, well-managed expenses and disciplined balance sheet management,” said David Becker, Chairman, President and Chief Executive Officer. “We generated strong production in both commercial and consumer loans, particularly in a number of our specialty lending areas, including single-tenant lease financing, healthcare finance and horse trailer and recreational vehicle lending. Additionally, we capitalized on the lower interest rate environment to drive strong origination growth in our direct-to-consumer mortgage business.

“Looking to 2020, we continue to see opportunities for growth within our collection of lending franchises and to further implement strategies to diversify our revenue and enhance margins in a capital efficient manner,” Becker added. “In 2019, we made significant progress with our expansion into small business banking, capitalizing on attractive opportunities on both sides of our balance sheet. During the fourth quarter, we completed our acquisition of the small business lending division of First Colorado National Bank. This transaction, combined with the experienced professionals we brought on board during the year, positions us to accelerate our efforts to build a nationwide platform that offers a full suite of services to small business entrepreneurs.”

Mr. Becker concluded, “As always, I would like to thank the entire First Internet team for their very hard work to deliver record revenue and earnings performance again in 2019. Their dedication and efforts are the key to our ongoing growth and success.”

Net Interest Income and Net Interest Margin

Net interest income for the fourth quarter of 2019 was $15.4 million, compared to $15.2 million for the third quarter of 2019. On a fully-taxable equivalent basis, net interest income for the fourth quarter was $16.9 million, compared to $16.8 million for the third quarter. Net interest income on both a reported and fully-taxable equivalent basis, was consistent with the fourth quarter of 2018.

Total interest income for the fourth quarter of 2019 was $37.9 million, an increase of 0.5%, compared to the third quarter of 2019, and an increase of 18.9% compared to the fourth quarter of 2018. On a fully-taxable equivalent basis, total interest income for the fourth quarter was $39.4 million, an increase of 0.4% compared to the third quarter, and an increase of 18.4% compared to the fourth quarter of 2018. The slight increase in total interest income compared to the third quarter of 2019 was driven primarily by a $98.0 million, or 2.5%, increase in average interest-earning assets, partially offset by a 7 basis point (“bp”) decrease in the yield on those assets. The yield on interest-earning assets for the fourth quarter of 2019 declined to 3.73% from 3.80% in the prior quarter due primarily to the decline in short term rates during the quarter following Federal Reserve rate cuts in September and October, which negatively impacted the yields earned on cash balances, securities and other earning assets. Additionally, cash balances remained elevated as time deposit renewal rates exceeded expectations, which also negatively affected the yield on earning assets. Partially offsetting this was a 2 bp increase in the yield earned on the loan portfolio, including loans held for sale, which benefitted from the acquisition of Small Business Administration (“SBA”) loans and strong healthcare finance production during the quarter.

Total interest expense for the fourth quarter of 2019 was $22.5 million, relatively consistent with the third quarter of 2019, and an increase of 37.0% compared to the fourth quarter of 2018. During the fourth quarter, average interest-bearing deposit balances increased by $79.4 million, compared to the third quarter, while the cost of funds related to those deposits declined 5 bps. The increase in average interest-bearing deposit balances was due primarily to a $113.8 million, or 17.8%, increase in average money market account balances but was partially offset by a $32.1 million, or 1.4%, decrease in the average balance of certificates and brokered deposits. The decrease in deposit costs reflects a decrease in the rates paid on money market accounts and certificates of deposit (“CDs”) as well as a shift in the deposit mix from CDs to money market accounts. During the fourth quarter, the cost of money market deposits decreased by 10 bps and the cost of certificates and brokered deposits decreased 3 bps as rates paid on new CD production and renewals were below the rates paid on maturing CDs.

Net interest margin (“NIM”) was 1.51% for the fourth quarter of 2019, compared to 1.54% for the third quarter of 2019 and 1.89% for the fourth quarter of 2018. On a fully-taxable equivalent basis, NIM decreased 3 basis points to 1.67% for the fourth quarter of 2019, from 1.70% for the third quarter of 2019, and was down from 2.07% for the fourth quarter of 2018. Compared to the linked quarter, deposit costs had a positive impact of 4 bps on NIM while loan yields provided a benefit of 2 bps. However, these benefits were offset by the lower yields earned on elevated cash balances, which had a negative impact of 7 bps, and on other interest-earning assets, which had a negative impact of 2 bps.

Noninterest Income

Noninterest income for the fourth quarter of 2019 was $5.4 million, down from $5.6 million for the third quarter of 2019, and up from $2.0 million for the fourth quarter of 2018. Compared to the linked quarter, a decline in mortgage banking revenue was essentially offset by higher gain on sale of loans and loan servicing revenue. Mortgage banking revenue decreased $1.4 million, or 31.4%, as mandatory pipeline volumes and margins declined due to seasonal factors following an extraordinarily strong third quarter. The increase of $1.2 million in gain on sale of loans was driven by sales of $53.7 million of single tenant lease financing and public finance loans and the Company’s first sales of SBA 7(a) guaranteed loans, which included $9.2 million of balances. The Company also began earning loan servicing revenue from the acquired SBA servicing portfolio, recognizing $0.2 million during the fourth quarter.

Noninterest Expense

Noninterest expense for the fourth quarter of 2019 was $12.6 million, compared to $11.2 million for the third quarter of 2019 and $12.7 million for the fourth quarter of 2018. The increase from the third quarter was due primarily to a $0.6 million increase in deposit insurance premium, a $0.5 million increase in consulting and professional fees and a $0.3 million increase in salaries and employee benefits. Deposit insurance premium expense resumed in the fourth quarter after not incurring any expense in the third quarter of 2019 as a result of the small bank assessment credit applied by the Federal Deposit Insurance Corporation. The increase in consulting and professional fees was due to higher recruiting fees and third party loan review fees while salaries and employee benefits expense increased due to the headcount growth in the Company’s SBA lending business.

Income Taxes

The Company reported an income tax expense of $0.6 million for the fourth quarter of 2019 and an effective tax rate of 7.8%, compared to income tax expense of $0.4 million and an effective tax rate of 6.6% for the third quarter of 2019 and an income tax benefit of $0.3 million for the fourth quarter of 2018. The income tax benefit reported in the fourth quarter of 2018 primarily related to the write-down of the OREO property and the continued growth in the public finance portfolio, which increased the proportion of tax-exempt income relative to overall total pre-tax income. When excluding the income tax benefit related to the OREO write-down, the Company’s adjusted effective income tax rate for the fourth quarter of 2018 was 3.1%.

Loans and Credit Quality

Total loans as of December 31, 2019 were $3.0 billion, an increase of $82.3 million, or 2.9%, compared to September 30, 2019 and an increase of $247.3 million, or 9.1%, compared to December 31, 2018. Total commercial loan balances were $2.3 billion as of December 31, 2019, an increase of $93.5 million, or 4.3%, compared to September 30, 2019 and an increase of $296.9 million, or 14.9%, compared to December 31, 2018. Compared to the linked quarter, the growth in commercial loan balances was driven largely by production in healthcare finance and the acquisition of the SBA loan portfolio. These increases were partially offset by the sale of $53.7 million of single tenant lease financing and public finance loans discussed above.

Total consumer loan balances were $633.5 million as of December 31, 2019, a decrease of $8.6 million, or 1.3%, compared to September 30, 2019 and a decrease of $74.9 million, or 10.6%, compared to December 31, 2018. The decline in consumer loan balances from September 30, 2019 was driven primarily by increased early payoffs on portfolio residential mortgage loans.

Total delinquencies 30 days or more past due increased to 0.24% of total loans as of December 31, 2019, up from 0.13% as of September 30, 2019 and 0.15% as of December 31, 2018. The increase in delinquencies compared to the linked and prior year quarters was due primarily to the single tenant lease financing relationship that was placed on nonaccrual status in the third quarter of 2019 becoming past due. Overall credit quality remained solid as nonperforming loans to total loans remained low at 0.23% as of December 31, 2019, compared to 0.20% at September 30, 2019 and 0.03% as of December 31, 2018.

The allowance for loan losses as a percentage of total loans was 0.74% as of December 31, 2019, compared to 0.75% as of September 30, 2019 and 0.66% as of December 31, 2018. The slight decline in the coverage ratio compared to the linked quarter was due primarily to lower specific reserves in the commercial and industrial portfolio.

Net charge-offs of $0.3 million were recognized during the fourth quarter of 2019, resulting in net charge-offs to average loans of 0.04%, compared to 0.15% for the third quarter and 0.05% for the fourth quarter of 2018. The provision for loan losses in the fourth quarter was $0.5 million, compared to $2.8 million for the third quarter and $1.5 million for the fourth quarter of 2018. The third quarter’s results included a specific reserve of $1.7 million recognized on the single tenant lease financing relationship mentioned above and a $0.8 million commercial loan charge-off. The provision for the fourth quarter was driven primarily by growth in the healthcare finance portfolio and net charge-offs, partially offset by the loan sale activity.

Capital

As of December 31, 2019, total shareholders’ equity was $304.9 million, an increase of $9.8 million, or 3.3%, compared to September 30, 2019, primarily due to the net income earned during the quarter and a decrease in accumulated other comprehensive loss. Book value per common share increased to $31.30 as of December 30, 2019, up from $30.30 as of September 30, 2019 and $28.39 as of December 31, 2018. Tangible book value per share increased to $30.82, up from $29.82 and $27.93, 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 December 31, 2019.

		As of December 31, 2019
		Company		Bank
Total shareholders' equity to assets		7.44%		8.11%
Tangible common equity to tangible assets 1		7.33%		8.01%
Tier 1 leverage ratio 2		7.64%		8.32%
Common equity tier 1 capital ratio 2		10.84%		11.80%
Tier 1 capital ratio 2		10.84%		11.80%
Total risk-based capital ratio 2		14.00%		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 23, 2020 to discuss its quarterly financial results. The call can be accessed via telephone at [phone]. A recorded replay can be accessed through February 23, 2020 by dialing [phone]; passcode: 10138147.

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 $4.1 billion as of December 31, 2019. 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 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, timing of pending acquisitions, 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,” “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. 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; failure to close any pending acquisitions; failure to satisfy or waive closing condition; 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 adjusted net income, adjusted diluted earnings per share, 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)
Dollar amounts in thousands, except per share data
					Three Months Ended												Twelve Months Ended
					December 31,				September 30,				December 30,				December 31,					December 30,
					2019				2019				2018				2019					2018
Net income					$	7,096			$	6,326			$	3,576			$	25,239				$	21,900
Per share and share information
	Earnings per share - basic				$	0.72			$	0.63			$	0.35			$	2.51				$	2.31
	Earnings per share - diluted					0.72				0.63				0.35				2.51					2.30
	Dividends declared per share					0.06				0.06				0.06				0.24					0.24
	Book value per common share					31.30				30.30				28.39				31.30					28.39
	Tangible book value per common share 1					30.82				29.82				27.93				30.82					27.93
	Common shares outstanding					9,741,800				9,741,800				10,170,778				9,741,800					10,170,778
	Average common shares outstanding:
		Basic				9,825,784				9,979,603				10,263,086				10,041,581					9,490,506
		Diluted				9,843,829				9,980,612				10,275,040				10,044,483					9,508,653
Performance ratios
	Return on average assets					0.69	%			0.63	%			0.43	%			0.65	%				0.72	%
	Return on average shareholders' equity					9.46	%			8.40	%			4.89	%			8.52	%				8.44	%
	Return on average tangible common equity 1					9.61	%			8.53	%			4.98	%			8.65	%				8.60	%
	Net interest margin					1.51	%			1.54	%			1.89	%			1.65	%				2.09	%
	Net interest margin - FTE 1,2					1.67	%			1.70	%			2.07	%			1.82	%				2.25	%
Capital ratios 3
	Total shareholders' equity to assets					7.44	%			7.21	%			8.15	%			7.44	%				8.15	%
	Tangible common equity to tangible assets 1					7.33	%			7.10	%			8.03	%			7.33	%				8.03	%
	Tier 1 leverage ratio					7.64	%			7.66	%			9.00	%			7.64	%				9.00	%
	Common equity tier 1 capital ratio				10.84		%			10.93	%			12.39	%		10.84			%			12.39	%
	Tier 1 capital ratio				10.84		%			10.93	%			12.39	%		10.84			%			12.39	%
	Total risk-based capital ratio				14.00		%			14.17	%			14.53	%		14.00			%			14.53	%
Asset quality
	Nonperforming loans				$	6,732			$	5,783			$	889			$	6,732				$	889
	Nonperforming assets					8,872				8,497				3,508				8,872					3,508
	Nonperforming loans to loans					0.23	%			0.20	%			0.03	%			0.23	%				0.03	%
	Nonperforming assets to total assets					0.22	%			0.21	%			0.10	%			0.22	%				0.10	%
	Allowance for loan losses to:
		Loans				0.74	%			0.75	%			0.66	%			0.74	%				0.66	%
		Nonperforming loans				324.4	%			374.9	%			2,013.1	%			324.4	%				2,013.1	%
	Net charge-offs to average loans					0.04	%			0.15	%			0.05	%			0.07	%				0.04	%
Average balance sheet information
	Loans				$	2,936,144			$	2,865,258			$	2,577,584			$	2,863,250				$	2,364,336
	Total securities					597,049				561,780				494,256				560,317					486,030
	Other earning assets					452,945				469,454				148,311				355,412					116,074
	Total interest-earning assets					4,031,327				3,933,315				3,236,144				3,809,903					2,984,608
	Total assets					4,108,216				4,015,433				3,320,850				3,890,708					3,055,224
	Noninterest-bearing deposits					49,570				43,972				48,779				44,682					45,562
	Interest-bearing deposits					3,110,501				3,031,095				2,472,443				2,938,622					2,272,037
	Total deposits					3,160,071				3,075,067				2,521,222				2,983,304					2,317,599
	Shareholders' equity					297,623				298,782				289,844				296,382					259,416

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, except for December 31, 2018)
Amounts in thousands
				December 31,				September 30,				December 30,
				2019				2019				2018
Assets
	Cash and due from banks			$	5,061			$	6,283			$	7,080
	Interest-bearing deposits				322,300				410,119				181,632
	Securities available-for-sale, at fair value				540,852				544,742				481,345
	Securities held-to-maturity, at amortized cost				61,878				46,807				22,750
	Loans held-for-sale				56,097				41,119				18,328
	Loans				2,963,547				2,881,272				2,716,228
	Allowance for loan losses				(21,840	)			(21,683	)			(17,896	)
		Net loans			2,941,707				2,859,589				2,698,332
	Accrued interest receivable				18,607				16,652				16,822
	Federal Home Loan Bank of Indianapolis stock				25,650				25,650				23,625
	Cash surrender value of bank-owned life insurance				37,002				36,764				36,059
	Premises and equipment, net				14,630				14,512				10,697
	Goodwill				4,687				4,687				4,687
	Servicing asset				2,481				-				-
	Other real estate owned				2,065				2,619				2,619
	Accrued income and other assets				67,066				85,948				37,716
		Total assets		$	4,100,083			$	4,095,491			$	3,541,692
Liabilities
	Noninterest-bearing deposits			$	57,115			$	50,560			$	43,301
	Interest-bearing deposits				3,096,848				3,097,682				2,628,050
		Total deposits			3,153,963				3,148,242				2,671,351
	Advances from Federal Home Loan Bank				514,910				514,908				525,153
	Subordinated debt				69,528				69,452				33,875
	Accrued interest payable				3,767				2,635				1,108
	Accrued expenses and other liabilities				53,002				65,114				21,470
		Total liabilities			3,795,170				3,800,351				3,252,957
Shareholders' equity
	Voting common stock				219,423				219,013				227,587
	Retained earnings				99,681				93,182				77,689
	Accumulated other comprehensive loss				(14,191	)			(17,055	)			(16,541	)
		Total shareholders' equity			304,913				295,140				288,735
		Total liabilities and shareholders' equity		$	4,100,083			$	4,095,491			$	3,541,692

First Internet Bancorp
Condensed Consolidated Statements of Income (unaudited, except for the twelve months ended December 31, 2018)
Amounts in thousands, except per share data
					Three Months Ended										Twelve Months Ended
					December 31,			September 30,			December 31,				December 31,				December 31,
					2019			2019			2018				2019				2018
Interest income
	Loans				$	31,574		$	30,594		$	27,249			$	122,228			$	99,082
	Securities - taxable					3,475			3,468			2,927				13,807				10,630
	Securities - non-taxable					604			639			701				2,595				2,810
	Other earning assets					2,224			2,993			972				8,784				2,945
		Total interest income				37,877			37,694			31,849				147,414				115,467
Interest expense
	Deposits					18,417			18,363			13,338				69,313				42,484
	Other borrowed funds					4,086			4,087			3,090				15,134				10,716
		Total interest expense				22,503			22,450			16,428				84,447				53,200
		Net interest income				15,374			15,244			15,421				62,967				62,267
Provision for loan losses						468			2,824			1,487				5,966				3,892
		Net interest income after provision for loan losses				14,906			12,420			13,934				57,001				58,375
Noninterest income
	Service charges and fees					213			211			237				885				934
	Loan servicing revenue					166			-			-				166				-
	Mortgage banking activities					2,953			4,307			1,141				11,541				5,718
	Gain on sale of loans					1,721			523			89				2,074				503
	Loss on sale of securities					-			-			-				(458	)			-
	Other					352			517			580				2,581				1,605
		Total noninterest income				5,405			5,558			2,047				16,789				8,760
Noninterest expense
	Salaries and employee benefits					7,168			6,883			5,738				27,014				23,174
	Marketing, advertising and promotion					409			456			543				1,800				2,468
	Consulting and professional fees					1,242			778			862				3,669				3,055
	Data processing					312			381			320				1,338				1,233
	Loan expenses					289			247			204				1,142				942
	Premises and equipment					1,556			1,506			1,307				6,059				4,996
	Deposit insurance premium					601			-			570				1,903				1,956
	Write-down of other real estate owned					-			-			2,423				-				2,423
	Other					1,036			952			772				3,709				2,936
		Total noninterest expense				12,613			11,203			12,739				46,634				43,183
Income before income taxes						7,698			6,775			3,242				27,156				23,952
Income tax provision						602			449			(334	)			1,917				2,052
Net income					$	7,096		$	6,326		$	3,576			$	25,239			$	21,900
Per common share data
Earnings per share - basic					$	0.72		$	0.63		$	0.35			$	2.51			$	2.31
Earnings per share - diluted					$	0.72		$	0.63		$	0.35			$	2.51			$	2.30
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)
Dollar amounts in thousands
					Three Months Ended
					December 31, 2019										September 30, 2019										December 31, 2018
					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			$	2,981,333			$	31,574		4.20	%		$	2,902,081			$	30,594		4.18	%		$	2,593,577			$	27,249		4.17	%
		Securities - taxable				497,739				3,475		2.77	%			462,490				3,468		2.97	%			402,179				2,927		2.89	%
		Securities - non-taxable				99,310				604		2.41	%			99,290				639		2.55	%			92,077				701		3.02	%
		Other earning assets				452,945				2,224		1.95	%			469,454				2,993		2.53	%			148,311				972		2.60	%
			Total interest-earning assets			4,031,327				37,877		3.73	%			3,933,315				37,694		3.80	%			3,236,144				31,849		3.90	%
	Allowance for loan losses					(21,967	)									(20,050	)									(17,065	)
	Noninterest-earning assets					98,856										102,168										101,771
		Total assets			$	4,108,216									$	4,015,433									$	3,320,850
Liabilities
	Interest-bearing liabilities
		Interest-bearing demand deposits			$	122,031			$	223		0.73	%		$	126,130			$	233		0.73	%		$	89,234			$	182		0.81	%
		Savings accounts				34,298				94		1.09	%			32,434				91		1.11	%			42,694				123		1.14	%
		Money market accounts				752,941				3,653		1.92	%			639,181				3,261		2.02	%			518,421				2,575		1.97	%
		Certificates and brokered deposits				2,201,231				14,447		2.60	%			2,233,350				14,778		2.63	%			1,822,094				10,458		2.28	%
			Total interest-bearing deposits			3,110,501				18,417		2.35	%			3,031,095				18,363		2.40	%			2,472,443				13,338		2.14	%
		Other borrowed funds				584,386				4,086		2.77	%			584,308				4,087		2.78	%			499,877				3,090		2.45	%
			Total interest-bearing liabilities			3,694,887				22,503		2.42	%			3,615,403				22,450		2.46	%			2,972,320				16,428		2.19	%
	Noninterest-bearing deposits					49,570										43,972										48,779
	Other noninterest-bearing liabilities					66,136										57,276										9,907
		Total liabilities				3,810,593										3,716,651										3,031,006
Shareholders' equity						297,623										298,782										289,844
Total liabilities and shareholders' equity					$	4,108,216									$	4,015,433									$	3,320,850
Net interest income									$	15,374									$	15,244									$	15,421
Interest rate spread												1.31	%									1.34	%									1.71	%
Net interest margin												1.51	%									1.54	%									1.89	%
Net interest margin - FTE 2,3												1.67	%									1.70	%									2.07	%

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
					Twelve Months Ended
					December 31, 2019										December 31, 2018
					Average				Interest /			Yield /			Average				Interest /			Yield /
					Balance				Dividends			Cost			Balance				Dividends			Cost
Assets
	Interest-earning assets
		Loans, including loans held-for-sale 1			$	2,894,174			$	122,228		4.22	%		$	2,382,504			$	99,082		4.16	%
		Securities - taxable				462,704				13,807		2.98	%			391,958				10,630		2.71	%
		Securities - non-taxable				97,613				2,595		2.66	%			94,072				2,810		2.99	%
		Other earning assets				355,412				8,784		2.47	%			116,074				2,945		2.54	%
			Total interest-earning assets			3,809,903				147,414		3.87	%			2,984,608				115,467		3.87	%
	Allowance for loan losses					(19,891	)									(16,097	)
	Noninterest-earning assets					100,696										86,713
		Total assets			$	3,890,708									$	3,055,224
Liabilities
	Interest-bearing liabilities
		Interest-bearing demand deposits			$	118,874			$	882		0.74	%		$	90,229			$	583		0.65	%
		Savings accounts				35,751				398		1.11	%			51,333				585		1.14	%
		Money market accounts				637,360				12,661		1.99	%			544,802				8,803		1.62	%
		Certificates and brokered deposits				2,146,637				55,372		2.58	%			1,585,673				32,513		2.05	%
			Total interest-bearing deposits			2,938,622				69,313		2.36	%			2,272,037				42,484		1.87	%
		Other borrowed funds				564,757				15,134		2.68	%			468,411				10,716		2.29	%
			Total interest-bearing liabilities			3,503,379				84,447		2.41	%			2,740,448				53,200		1.94	%
	Noninterest-bearing deposits					44,682										45,562
	Other noninterest-bearing liabilities					46,265										9,798
		Total liabilities				3,594,326										2,795,808
Shareholders' equity						296,382										259,416
Total liabilities and shareholders' equity					$	3,890,708									$	3,055,224
Net interest income									$	62,967									$	62,267
Interest rate spread												1.46	%									1.93	%
Net interest margin												1.65	%									2.09	%
Net interest margin - FTE 2,3												1.82	%									2.25	%

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
					December 31, 2019						September 30, 2019						December 31, 2018
					Amount			Percent			Amount			Percent			Amount			Percent
Commercial loans
	Commercial and industrial				$	96,420		3.3	%		$	82,791		2.9	%		$	107,405		4.0	%
	Owner-occupied commercial real estate					73,392		2.5	%			76,197		2.6	%			77,569		2.9	%
	Investor commercial real estate					12,567		0.4	%			11,852		0.4	%			5,391		0.2	%
	Construction					60,274		2.0	%			54,131		1.9	%			39,916		1.5	%
	Single tenant lease financing					995,879		33.6	%			1,008,247		35.0	%			919,440		33.8	%
	Public finance					687,094		23.2	%			686,622		23.8	%			706,342		26.0	%
	Healthcare finance					300,612		10.1	%			251,530		8.6	%			117,007		4.4	%
	Small business lending					61,121		2.1	%			22,447		0.8	%			17,370		0.5	%
		Total commercial loans				2,287,359		77.2	%			2,193,817		76.0	%			1,990,440		73.3	%
Consumer loans
	Residential mortgage					313,849		10.6	%			320,451		11.1	%			399,898		14.7	%
	Home equity					24,306		0.8	%			25,042		0.9	%			28,735		1.1	%
	Trailers					146,734		5.0	%			145,600		5.1	%			136,620		5.0	%
	Recreational vehicles					102,702		3.5	%			102,698		3.6	%			91,912		3.4	%
	Other consumer loans					45,873		1.5	%			48,275		1.7	%			51,239		1.9	%
		Total consumer loans				633,464		21.4	%			642,066		22.4	%			708,404		26.1	%
Net deferred loan fees, premiums, discounts and other 1						42,724		1.4	%			45,389		1.6	%			17,384		0.6	%
Total loans					$	2,963,547		100.0	%		$	2,881,272		100.0	%		$	2,716,228		100.0	%
					December 31, 2019						September 30, 2019						December 31, 2018
					Amount			Percent			Amount			Percent			Amount			Percent
Deposits
	Noninterest-bearing deposits				$	57,115		1.8	%		$	50,560		1.6	%		$	43,301		1.6	%
	Interest-bearing demand deposits					129,020		4.1	%			122,551		3.9	%			121,055		4.5	%
	Savings accounts					29,616		0.9	%			34,886		1.1	%			38,489		1.4	%
	Money market accounts					786,390		24.9	%			698,077		22.2	%			528,533		19.9	%
	Certificates of deposits					1,613,453		51.2	%			1,681,377		53.4	%			1,292,883		48.4	%
	Brokered deposits					538,369		17.1	%			560,791		17.8	%			647,090		24.2	%
Total deposits					$	3,153,963		100.0	%		$	3,148,242		100.0	%		$	2,671,351		100.0	%

1 Includes carrying value adjustments of $21.4 million, $27.6 million and $5.0 million as of December 31, 2019, September 30, 2019 and December 31, 2018, respectively, 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												Twelve Months Ended
				December 31,				September 30,				December 30,				December 31,				December 30,
				2019				2019				2018				2019				2018
Total equity - GAAP				$	304,913			$	295,140			$	288,735			$	304,913			$	288,735
Adjustments:
		Goodwill			(4,687	)			(4,687	)			(4,687	)			(4,687	)			(4,687	)
Tangible common equity				$	300,226			$	290,453			$	284,048			$	300,226			$	284,048
Total assets - GAAP				$	4,100,083			$	4,095,491			$	3,541,692			$	4,100,083			$	3,541,692
Adjustments:
		Goodwill			(4,687	)			(4,687	)			(4,687	)			(4,687	)			(4,687	)
Tangible assets				$	4,095,396			$	4,090,804			$	3,537,005			$	4,095,396			$	3,537,005
Common shares outstanding					9,741,800				9,741,800				10,170,778				9,741,800				10,170,778
Book value per common share				$	31.30			$	30.30			$	28.39			$	31.30			$	28.39
Effect of goodwill					(0.48	)			(0.48	)			(0.46	)			(0.48	)			(0.46	)
Tangible book value per common share				$	30.82			$	29.82			$	27.93			$	30.82			$	27.93
Total shareholders' equity to assets					7.44	%			7.21	%			8.15	%			7.44	%			8.15	%
Effect of goodwill					(0.11	%)			(0.11	%)			(0.12	%)			(0.11	%)			(0.12	%)
Tangible common equity to tangible assets					7.33	%			7.10	%			8.03	%			7.33	%			8.03	%
Total average equity - GAAP				$	297,623			$	298,782			$	289,844			$	296,382			$	259,416
Adjustments:
		Average goodwill			(4,687	)			(4,687	)			(4,687	)			(4,687	)			(4,687	)
Average tangible common equity				$	292,936			$	294,095			$	285,157			$	291,695			$	254,729
Return on average shareholders' equity					9.46	%			8.40	%			4.89	%			8.52	%			8.44	%
Effect of goodwill					0.15	%			0.13	%			0.09	%			0.13	%			0.16	%
Return on average tangible common equity					9.61	%			8.53	%			4.98	%			8.65	%			8.60	%
Total interest income				$	37,877			$	37,694			$	31,849			$	147,414			$	115,467
Adjustments:
		Fully-taxable equivalent adjustments 1			1,570				1,595				1,477				6,334				5,010
Total interest income - FTE				$	39,447			$	39,289			$	33,326			$	153,748			$	120,477
Net interest income				$	15,374			$	15,244			$	15,421			$	62,967			$	62,267
Adjustments:
		Fully-taxable equivalent adjustments 1			1,570				1,595				1,477				6,334				5,010
Net interest income - FTE				$	16,944			$	16,839			$	16,898			$	69,301			$	67,277
Net interest margin					1.51	%			1.54	%			1.89	%			1.65	%			2.09	%
Effect of fully-taxable equivalent adjustments 1					0.16	%			0.16	%			0.18	%			0.17	%			0.16	%
Net interest margin - FTE					1.67	%			1.70	%			2.07	%			1.82	%			2.25	%

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												Twelve Months Ended
				December 31,				September 30,				December 30,				December 31,				December 30,
				2019				2019				2018				2019				2018
Income before income taxes - GAAP				$	7,698			$	6,775			$	3,242			$	27,156			$	23,952
Adjustments:
		Write-down of other real estate owned			-				-				2,423				-				2,423
Adjusted income before income taxes				$	7,698			$	6,775			$	5,665			$	27,156			$	26,375
Income tax provision (benefit) - GAAP				$	602			$	449			$	(334	)		$	1,917			$	2,052
Adjustments:
		Write-down of other real estate owned			-				-				509				-				509
Adjusted income tax provision				$	602			$	449			$	175			$	1,917			$	2,561
Net income - GAAP				$	7,096			$	6,326			$	3,576			$	25,239			$	21,900
Adjustments:
		Write-down of other real estate owned			-				-				1,914				-				1,914
Adjusted net income				$	7,096			$	6,326			$	5,490			$	25,239			$	23,814
Diluted average common shares outstanding					9,843,829				9,980,612				10,275,040				10,044,483				9,508,653
Diluted earnings per share - GAAP				$	0.72			$	0.63			$	0.35			$	2.51			$	2.30
Adjustments:
		Effect of write-down of other real estate owned			-				-				0.18				-				0.20
Adjusted diluted earnings per share				$	0.72			$	0.63			$	0.53			$	2.51			$	2.50
Return on average assets					0.69	%			0.63	%			0.43	%			0.65	%			0.72	%
		Effect of write-down of other real estate owned			0.00	%			0.00	%			0.23	%			0.00	%			0.06	%
Adjusted return on average assets					0.69	%			0.63	%			0.66	%			0.65	%			0.78	%
Return on average shareholders' equity					9.46	%			8.40	%			4.89	%			8.52	%			8.44	%
		Effect of write-down of other real estate owned			0.00	%			0.00	%			2.62	%			0.00	%			0.74	%
Adjusted return on average shareholders' equity					9.46	%			8.40	%			7.51	%			8.52	%			9.18	%
Return on average tangible common equity					9.61	%			8.53	%			4.98	%			8.65	%			8.60	%
		Effect of write-down of other real estate owned			0.00	%			0.00	%			2.66	%			0.00	%			0.75	%
Adjusted return on average tangible common equity					9.61	%			8.53	%			7.64	%			8.65	%			9.35	%
Effective income tax rate					7.8	%			6.6	%			(10.3	%)			7.1	%			8.6	%
		Effect of write-down of other real estate owned			0.0	%			0.0	%			13.4	%			0.0	%			1.1	%
Adjusted effective income tax rate					7.8	%			6.6	%			3.1	%			7.1	%			9.7	%

 

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