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MarketScreener Homepage  >  Equities  >  Nasdaq  >  First Internet Bancorp    INBK

FIRST INTERNET BANCORP

(INBK)
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First Internet Bancorp : Third Quarter 2020 Investor Presentation

11/19/2020 | 05:29pm EST

Investor Presentation

Third Quarter 2020

Forward-Looking Statements

This presentation 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 presentation, 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.

2

Non-GAAP Financial Measures

This presentation 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 common equity to tangible assets, net interest income - FTE, net interest margin - FTE, adjusted noninterest expense, adjusted noninterest expense/average assets, adjusted net income, adjusted diluted earnings per share, average tangible common equity, adjusted return on average assets, return on average tangible common equity, adjusted return on average tangible common equity, tangible book value per common share and allowance for loan losses to loans, excluding PPP loans 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 on the slide at the end of this presentation entitled "Reconciliation of Non-GAAP Financial Measures."

3

A Pioneer in Branchless Banking

  • Digital bank with unique business model and over 20 years of operations
  • Highly scalable technology driven business
  • Nationwide deposit gathering and asset generation platforms
  • Attractive lending niches with growth opportunities
  • History of strong growth and a clear pathway to greater profitability

$4.3B Assets

$3.0B Loans

$3.4B Deposits

4

Nationwide Branchless Deposit Franchise

$523.8 million

$3.4 Billion

$702.2 million

15.5%

Total Deposits*

20.8%$1,263.8 million

37.5%

$593.1 million

$289.5 million

17.6%

8.6%

  • As of September 30, 2020; $168 million of brokered deposits and $1.7 million of balances in US territories/Armed Forces included in headquarters/Midwest balance

30.5% 5-year CAGR

Nationwide consumer, small business and commercial deposit base

Innovative technology and convenience supported by exceptional service

Digital business model minimized operational disruptions due to COVID-19

5

Multiple Opportunities to Grow Deposits

  • Capitalize on the enduring trend toward branchless banking - consumers and small business are increasingly moving their banking business online, especially following the experience of COVID-19

Generate an increased level of lower-cost deposits as expansion of small-business, municipal and commercial relationships continue

  • Selectively target consumer deposits in tech-centric markets - building off success with Gen-Xers
  • Draw on over 20 years of branchless banking experience to attract more customers with best practices such as dedicated online relationship bankers delivering a superior client experience

6

National and Regional Asset Generation Platform

DIVERSIFIED ASSET GENERATION PLATFORM

Commercial - National

  • Single tenant lease financing
  • Small business lending

Public finance

  • Healthcare finance (via relationship with Lendeavor)

Commercial - Regional

  • C&I - Central Indiana
  • C&I - Arizona
  • Investor CRE - Central Indiana
  • Construction - Central Indiana

Consumer - National

Digital direct-to-consumer mortgages

Specialty lending - horse trailers

and RVs

7

Small Business, Big Opportunity

  • Complementary to existing business lines
  • Diversifies revenue in a capital efficient manner
  • Opportunities on both sides of the balance sheet

Enhanced Treasury

Upgraded Digital

SBA Lending

Management Capabilities

Account Access

8

Entrepreneurial Culture Key to Success

First Internet Bank has been recognized for its innovation and is consistently ranked among the best banks to work for, enhancing its ability to attract and retain top talent

American Banker's "Best Banks to Work For"

Eight years in a row

"Top Workplaces in Indianapolis" The Indianapolis Star

Seven years in a row including being #8 in

2020, #1 in 2019, #4 in 2018 and #2 on the list

in 2017

"Best Places to Work in Indiana"

Five of last seven years

"Best Small Business Checking Account" - Newsweek

ranking of "America's Best Banks 2021"

Top Rated Online Business Bank in 2017 - Advisory

HQ

TechPoint 2016 Mira Award "Tech-enabled Company

of the Year"

Top 10 finalist - 2016 Indiana Public Company of the

year presented by the CFA Society and FEI

Magnify Money ranked #1 amongst 2016 Best Banking

Apps (Banker's "Online Direct Banks")

Mortgage Technology 2013 awarded top honors in the

9

Online Mortgage Originator category

Credit Update

  • Loan deferral balances have moved significantly lower since peaking in late- May at $647.2 million
    • Loans on deferral are down to $19.9 million as of October 30 2020, or 0.7% of the total loan portfolio
  • Significant reduction of single tenant lease financing and healthcare finance loans on deferral from earlier in the year
    • All borrowers coming off deferral programs have made October payments
    • As of October 31, 2020, deferrals in these portfolios declined to represent only 0.26% of the total loan portfolio.
  • All other borrowers coming off deferral programs have resumed making scheduled loan payments without delinquency

10

Loan Deferral Summary

Deferrals

As of

As of

As of

As of

As of

As of

April 17,

May 15,

June 19,

July 17,

August 28,

October 30,

% of Balances

(Dollars in millions)

2020

2020

2020

2020

2020

2020

with Deferrals1

Commercial and

$15.4

$15.9

$15.9

$1.7

$0.5

$0.7

0.9%

industrial

Single tenant lease

$11.8

$259.0

$273.7

$276.8

$27.8

$5.4

0.6%

financing

Owner-occupied CRE

$6.0

$16.2

$16.2

$19.3

$5.7

-

0.0%

Investor CRE

$0.0

$0.4

$0.4

$0.4

$0.4

-

0.0%

Healthcare finance

$289.1

$297.0

$192.0

$57.8

$7.7

$2.3

0.5%

Small business

$21.7

$23.7

$23.8

$1.8

-

$8.6

7.0%

Total commercial

$344.0

$612.2

$522.0

$357.8

$42.1

$17.0

0.7%

Residential mortgage

$8.9

$12.0

$10.2

$5.6

$2.2

$2.5

1.3%

Home equity

$0.3

$0.4

$0.4

$0.2

$0.1

-

0.0%

Other consumer

$7.8

$9.0

$4.6

$2.2

$0.8

$0.4

0.2%

Total consumer

$17.0

$21.4

$15.2

$8.0

$3.1

$2.9

0.5%

Total loans with

$361.0

$633.6

$537.2

$365.8

$45.2

$19.9

0.7%

deferrals

As a % of total loans

12.5%

21.9%

18.6%

12.6%

1.6%

0.7%

1 As of August 28, 2020

11

Near-term Profitability Drivers

  • Continued deposit repricing opportunity combined with stabilized asset yields provides significant opportunity to increase net interest income and net interest margin
    • Annual interest expense savings in excess of $22 million expected for 2021
  • Accelerated build-out of SBA platform is six months ahead of the original plan - sales and operations hiring increased due to competitor dislocation in the marketplace
    • SBA gain on sale revenue expected to be in the range of $12 million - $14 million for 2021
  • Residential mortgage originations expected to remain strong in the continued low interest rate environment
  • Continue to remain cautiously optimistic regarding the impact of the COVID-19 pandemic on the credit quality of the loan portfolio

12

Third Quarter 2020 Highlights

Earnings

Key Operating

Trends

Disciplined

Balance Sheet

Management

Liquidity and

Capital

  • Record diluted EPS of $0.86
  • Adjusted diluted EPS of $1.031 excluding write-down of legacy OREO
  • Record quarterly net income of $8.4 million
  • Total revenue of $28.7 million, an increase of 48.1% from 2Q20
  • Cost of interest-bearing deposits declined 43 bps from 2Q20 to 1.51%
  • FTE net interest margin increased 17 bps to 1.67%
  • Allowance for loan losses / total loans, excluding PPP, increased to 0.91%1
  • Asset quality remained solid with NPAs to total assets of 0.23%
  • Portfolio loan balances increased by $39.2 million, or 1.3% from 2Q20
  • SBA loan sales contributed $1.7 million in fee revenue
  • Sold $12.2 million of single tenant lease financing loans at a gain of $0.4 million
  • Regulatory capital ratios increased from 2Q20 and remain strong
  • Continued strong on- and off-balance sheet liquidity to manage impact of COVID-19 environment
  • Deposit balances relatively stable from 2Q20

1 See Reconciliation of Non-GAAP Financial Measures in the Appendix

13

13

History of Strong Organic Growth

Execution of the business strategy has driven consistent and sustained balance sheet growth

Total Assets

Total Loans

Dollars in millions

$4,334

Dollars in millions

$4,100

CAGR: 29.4%

vs. Peers1 at 13.6%

CAGR: 27.0%

vs. Peers1 at 15.3%

$2,964

$3,013

$2,768

$3,542

$2,091

$2,716

$1,854

$1,251

$1,270

$954

2015

2016

2017

2018

2019

3Q20

2015

2016

2017

2018

2019

3Q20

Total Deposits

Shareholders' Equity

Dollars in millions

$3,372

Dollars in millions

$289

$305

$318

CAGR: 30.5%

vs. Peers1 at 14.3%

$3,154

CAGR: 25.7%

$2,085

$2,671

$154

$224

$1,463

$104

$956

2015

2016

2017

2018

2019

3Q20

2015

2016

2017

2018

2019

3Q20

1

Source: S&P Global Intelligence; peer data represents median value of publically traded Small Cap banks with a market capitalization between

$250 million and $1.0 billion as of September 30, 2020.

14

Profitability Driven by Capital Deployment

Capital has been deployed into new loan verticals, driving earnings growth

Net Income1,2,3

Diluted EPS1,2,3

Dollars in thousands

$27,089

$2.50

$2.51

$2.77

$25,239

$2.39

$23,814

$2.30

$1.96

$2.60

$25,458

$2.30

$17,072

$21,900

$2.13

$12,074

$15,226

$8,929

2015

2016

2017

2018

2019

TTM3Q20

2015

2016

2017

2018

2019

TTM3Q20

Return on Average Assets1,2,3

Return on Average Tangible Common Equity1,2,3

0.81%

0.74%

0.74%

0.78%

10.12%

9.84%

0.65%

0.64%

9.33%

9.35%

8.65%

8.95%

0.72%

0.66%

0.60%

8.77%

8.60%

8.41%

2015

2016

2017

2018

2019

TTM3Q20

2015

2016

2017

2018

2019

TTM3Q20

1 See Reconciliation of Non-GAAP Financial Measures in the Appendix.

2 2017 reported net income of $15.2 million included the revaluation of the Company's

net deferred tax asset which reduced net income by $1.8 million and negatively

impacted Net Income, EPS, ROAA and ROATCE.

3 2018 reported net income of $21.9 million included a write-down of legacy other real

estate owned which reduced net income by $1.9 million and negatively impacted Net

Income, EPS, ROAA and ROATCE.

15

4 2020 reported net income of $25.5 million included a write-down of legacy other real

estate owned which reduced net income by $1.6 million and negatively impacted Net Income, EPS, ROAA and ROATCE.

Growth Drives Economies of Scale

Scalable, technology-driven model has delivered increasing efficiency and is a key component driving improved operating leverage

Noninterest Income

Noninterest Expense1,2

Dollars in millions

$12.5

Dollars in millions

$16.4

$12.7

$13.5

$13.2

$11.1

$11.7

$11.7

$12.6

$14.3

$5.6

$5.4

$6.2

$5.0

$3.5

$10.3

$2.0

$2.4

4Q18

1Q19

2Q19

3Q19

4Q19

1Q20

2Q20

3Q20

4Q18

1Q19

2Q19

3Q19

4Q19

1Q20

2Q20

3Q20

Noninterest Expense / Average Assets1,2

Total Assets Per FTE

1.52%

1.51%

Dollars in millions

$18.4

$18.6

1.24%

1.31%

$17.6

$17.6

$17.9

$17.4

$17.4

$17.4

1.23%

1.11%

1.22%

1.21%

1.32%

1.23%

4Q18

1Q19

2Q19

3Q19

4Q19

1Q20

2Q20

3Q20

4Q18

1Q19

2Q19

3Q19

4Q19

1Q20

2Q20

3Q2020

  1. See Reconciliation of Non-GAAP Financial Measures in the Appendix.
  2. 4Q18 results included a write-down of legacy other real estate owned

which increased noninterest expense by $2.4 million.

3

3Q20 results included a write-down of legacy other real estate owned

16

which increased noninterest expense by $2.1 million.

Net Interest Income and Net Interest Margin

  • FTE net interest margin improved by 17 bps from 2Q20
  • Interest expense on deposits declined as: 1) higher cost CDs matured and were either replaced at lower rates or not renewed; and 2) money market rates were lowered substantially
  • Interest income earned on securities was impacted by accelerated premium amortization and continued declines in short term interest rate indices

Yield on Loans and Cost of Deposits

Net Interest Income - GAAP and FTE1

Dollars in millions

GAAP

FTE

$16.8

$16.9

$16.6

$15.9

$17.7

$15.2

$15.4

$15.0

$14.4

$16.2

3Q19

4Q19

1Q20

2Q20

3Q20

NIM - GAAP and FTE1

GAAP FTE

4.18%

4.20%

4.11%

4.00%

3.88%

1.70%

1.67%

1.65%

1.67%

1.50%

2.40% 2.35% 2.24%

1.94%

1.51%

3Q19

4Q19

1Q20

2Q20

3Q20

Yield on loans Cost of interest-bearing deposits

1.54%

1.51%

1.50%

1.37%

1.53%

3Q19

4Q19

1Q20

2Q20

3Q20

17

1 See Reconciliation of Non-GAAP Financial Measures in the Appendix

Net Interest Margin Drivers

  • Linked quarter NIM improvement was primarily attributable to the continued impact of lower deposit costs
    • Interest-earningasset yields expected to stabilize
  • Significant opportunity to continue lowering deposit costs
    • $931 million of CDs with a weighted average cost of 2.02% mature in the next twelve months - replacement cost is currently in the range of 0.50%
    • Lowered money market rates 30 - 50 bps during the quarter and another 10 bps so far in 4Q20

NIM - FTE1 Linked-Quarter Change

Monthly Rate Paid on Interest-Bearing Deposits

+32 bps

-3 bps

2.16%

2.10%

-11 bps

1.67%

-1 bp

1.50%

1.93%

1.80%

1.59%

1.50%

1.42%

Mar-20Apr-20May-20Jun-20Jul-20Aug-20Sep-20

18

1 See Reconciliation of Non-GAAP Financial Measures in the Appendix

Deposit Composition

  • Total deposits declined $8.4 million, or 0.2%, compared to 2Q20, and increased $224.1 million, or 7.1%, year-over-year
  • Quarterly money market growth of $117.3 million, including $87.3 million in small business deposits
  • CD and brokered deposit balances decreased $138.1 million compared to 2Q20
  • Cost of interest-bearing deposits declined 43 bps from 2Q20 to 1.51%

Total Deposits - $3.4 Billion

As of September 30, 2020

$86.1 3%

$1,722.0

$155.1

$50.0

5%

1%

51%

$1,359.2

40%

Noninterest-bearing deposits

Interest-bearing demand deposits

Savings accounts

Money market accounts

Certificates and brokered deposits

19

1 Total non-time deposits excludes brokered non-time deposits

Total Non-Time Deposits - $1.7 Billion

As of September 30, 20201

$251.2

$546.5

15%

$99.2

33%

6%

$753.3 46%

Commercial

Public funds

Small business

Consumer

Liquidity and Capital

  • Regulatory capital ratios remained strong at the Company and Bank levels
  • Strong capital generation during the quarter resulted in the tangible common equity to tangible assets ratio increasing 23 bps to 7.24%
  • Continue to have sufficient liquidity to handle the current economic impact of COVID-19

Tangible Book Value Per Share1

Regulatory Capital Ratios - September 30, 2020

$30.82

$31.98

CompanyBank

$27.93

$26.09

$22.24 $23.04

$20.74

$19.38

2013

2014

2015

2016

2017

2018

2019

3Q20

Total shareholders' equity to assets

7.34%

8.12%

Tangible common equity to tangible assets1

7.24%

8.02%

Tier 1 leverage ratio

7.72%

8.50%

Common equity tier 1 capital ratio

11.13%

12.27%

Tier 1 capital ratio

11.13%

12.27%

Total risk-based capital ratio

14.38%

13.17%

1 See Reconciliation of Non-GAAP Financial Measures

20

Loan Portfolio Overview

  • Total portfolio loans increased $39.2 million, or 1.3%, compared to 2Q20, and increased $131.6 million, or 4.6%, year-over-year
  • Commercial loan balances increased $56.2 million, or 2.4%, compared to 2Q20 as growth in healthcare finance and construction lending resumed following limited activity in the second quarter
  • Consumer loan balances declined $15.3 million, or 2.9%, due primarily to increased prepayment activity across the portfolio

Loan Portfolio Mix

Dollars in millions

$2,963.5

$3,012.9

$2,716.2

6%

6%

4%

1

7%

2%

Commercial and Industrial

2%

32%

Commercial Real Estate

$2,091.0

34%

34%

9%

Single Tenant Lease Financing

2%

Public Finance

$1,250.8

38%

21%

Healthcare Finance

23%

26%

13%

Small Business Lending

5%

4%

15%

22%

10%

Residential Mortgage/HE/HELOCs

49%

2%

1%

2%

4%

16%

Consumer

19%

16%

11%

8%

11%

10%

10%

10%

14%

2016

2017

2018

2019

3Q20

21

1 Includes commercial and industrial and owner-occupied commercial real estate balances

Single Tenant Lease Financing

  • $960.5 million in balances as of September 30, 2020
  • Long term financing of single tenant properties occupied by historically strong national and regional tenants
  • Weighted-averageportfolio LTV of 49%
  • Weighted-averageloan size of $1.4 million
  • Strong historical credit performance
  • Only $5.4 million in loan balances remain on deferral; all other loans came off deferral and resumed payments
  • No delinquencies for performing loans

Portfolio mix by major vertical

2% 1%

1%

Quick Service

Restaurants

6%

Full Service

Restaurants

9%

23%

Auto Parts/

Repair/Car Wash

Convenience/Fuel

9%

Pharmacies

Specialty Retailers

11%

22%

Dollar Stores

Medical

16%

Bank Branches

Other

Portfolio mix by major tenant

Red Lobster

7%

ICWG

7%

Wendy's

6%

Burger King

Walgreens

5%

55%

Bob Evans

4%

Dollar General

4%

CVS

4%

United Pacific

4%

Caliber

2%

Collision

2%

Other

Portfolio mix by geography

6%

12%

21%

24% 37%

22

Public Finance

  • $625.6 million in balances as of September 30, 2020
  • Provides a range of credit solutions for government and not-for-profit entities
  • Borrowers' needs include short-term financing, debt refinancing, infrastructure improvements, economic development and equipment financing
  • Federal stimulus funds provide relief from tax revenue declines and/or delays caused by the COVID-19 crisis
  • No delinquencies or losses since inception
  • No borrowers currently receiving payment deferrals

Portfolio mix by repayment source

2.7%5.2%

General Obligation

2.8%

Essential use equipment

3.0%

loans

Utilities Revenue

5.1%

31.8%

Lease rental revenue

Public higher ed facilities -

6.1%

Revenue

Tax Incremental Financing

6.2%

(TIF) districts

Sales tax, food and bev tax,

hotel tax

10.4%

Income Tax supported loans

15.9%

Public higher ed facilities -

G.O.

10.8%

Municipally owned health

care facilities

Others

23

Borrower mix by credit rating

1.2%

2.9%5.0%

AAA/Aaa

4.6%

AA+/Aa1

AA/Aa2

47.0%

AA-/Aa3

21.4%

A+/A1

A/A2

A-/A3

BBB+/Baa1

BBB/Baa2

6.3% 4.7%

BB+/Ba1

1.3%

BB/Ba2

3.0%

0.7%1.9%

Non-Rated

Portfolio mix by state

12.4%

IN

OK

3.3%

IA

OH

3.3%

3.6%

55.2% MO

MI

4.0%

5.7%

MS

GA

5.9%

6.6%

Other

Healthcare Finance

  • $461.7 million in balances as of September 30, 2020
  • Loan portfolio focused primarily on dental practices with some exposure to veterinary practices and other specialties
  • Borrowers' needs include practice finance or acquisition, acquiring or refinancing owner-occupied CRE, equipment purchases and project loans
  • Average loan size of $630,000
  • Balances on deferral programs represent 0.5% of portfolio, down from late-May peak of approximately 79%

Portfolio mix by borrower use

1%

4%

Practice Refi or

14%

Acquisition

81%

Owner

Occupied CRE

Project

Equipment and other

24

Portfolio mix by borrower

1% 2%

7%

Dentists

Veterinarians

Physicians

90%

Other

Portfolio mix by State

CA

TX

39%

28%

NY

AZ

FL

NJ

12%

Other

3% 4%5% 6%

C&I and Owner-Occupied Commercial Real Estate

  • $166.2 million in combined balances as of September 30, 2020
  • Current C&I LOC utilization of 46%
  • Average loan sizes
    • C&I: $354,000
    • Owner-occupiedCRE: $958,000
  • Exited relationships totaling in excess of $65 million over the last two years to de-risk the portfolio
  • 0.41% of balances are on payment deferral programs as of October 30, 2020

Portfolio by Loan Type

Portfolio Mix by State

2% 8%

IN

5%

AZ

6%

IL

52%

OH

27%

MD

Other

Portfolio Mix by Major Industry

10%

36%54%

Owner Occupied

CRE

C&I - Term Loans

C&I - Lines of

Credit

25

Services

25%

31%

Construction

Real Estate and

Rental and Leasing

9%

Retail Trade

10%

14%

Manufacturing

11%

Other

Small Business Lending

  • $123.2 million in balances as of September 30, 2020
  • Current balance of $58.3 million outstanding under the Paycheck Protection Program consisting of 447 loans made to existing clients
  • 7.0% of balances are on payment deferral programs as of October 30, 2020
  • SBA sales team now consists of 11 Business Development Officers and origination volumes are ramping up

Managed SBA 7(a) Loans1

Dollars in millions

$231.1

$173.5

$34.8

$151.8

$157.9

$113.9

$131.5

$103.9

$104.0

$64.9

$11.6

$59.6

$54.1

$47.8

3Q19

4Q19

1Q20

2Q20

3Q20

Retained Balance

Servicing Portfolio

Held For Sale

1 Excludes PPP loans

26

Portfolio Mix by State

IN

IL

22%

41%

AZ

CA

4%

4%

FL

TX

4%

9%

Other

17%

Portfolio Mix by Major Industry

24%

24%

Services

Health Care and

Social Assistance

Accommodation and

Food Services

9%

16%

Retail Trade

11%

16%

Construction

Other

Residential Mortgage

  • $225.2 million in balances as of September 30, 2020 (includes home equity balances)
  • Direct-to-consumeroriginations centrally located at corporate headquarters
  • Focused on high quality borrowers
    • Avg. loan size of $182,000
    • Avg. credit score at orig. of 756
    • Avg. LTV at origination of 68%
  • Strong historical credit performance
  • Approximately 1% of balances are on payment deferral programs as of October 30, 2020

Concentration by State

State

Percentage

Indiana

54%

California

17%

New York

4%

Florida

2%

Colorado

2%

All other states

21%

27

National Portfolio with

Midwest Concentration

23%

9%

59%

3%6%

Concentration by Loan Type

Loan Type

Percentage

Single Family Residential

73%

SFR Construction to

Permanent

17%

Home Equity - LOC

8%

Home Equity - Closed End

2%

Specialty Consumer

  • $282.5 million in balances as of September 30, 2020
  • Direct-to-consumerand nationwide dealer network originations
  • Focused on high quality borrowers
    • Avg. credit score at orig. of 778
    • Avg. loan size of $19,370
  • Strong historical credit performance
  • Less than 0.2% of balances are on payment deferral programs as of October 30, 2020

Concentration by State

State

Percentage

Texas

15%

California

12%

Florida

6%

North Carolina

4%

Colorado

4%

All other states

59%

Geographically Diverse Portfolio

22%

10%

18%

22%28%

Concentration by Loan Type

Loan Type

Percentage

Trailers

52%

Recreational Vehicles

34%

Other consumer

14%

28

Excellent Asset Quality

Asset quality remains among the best in the industry driven by a strong credit culture and lower-risk asset classes

NPAs / Total Assets

NPLs / Total Loans

0.37%

0.31%

0.23%

0.21%

0.22%

0.10%

2014

2015

2016

2017

2019

3Q20

Allowance for Loan Losses / NPLs

5,001%

1,784% 2,013%

1,014%

324% 275%

2014

2015

2016

2017

2019

3Q20

0.32%

0.23%

0.02%

0.09%

0.04%

0.03%

2014

2015

2016

2017

2019

3Q20

Net Charge-Offs (Recoveries) / Average Loans

(0.07%)

0.15%

0.05%

0.04%

0.04%

0.01%

2014

2015

2016

2017

2019

3Q20

29

Appendix

30

Loan Portfolio Composition

Dollars in thousands

2017

2018

2019

1Q20

2Q20

3Q20

Commercial loans

Commercial and industrial

$

122,940

$

107,405

$

96,420

$

95,227

$

81,687

$

77,116

Owner-occupied commercial real estate

75,768

77,569

86,726

87,956

86,897

89,095

Investor commercial real estate

7,273

5,391

12,567

13,421

13,286

13,084

Construction

49,213

39,916

60,274

64,581

77,591

92,154

Single tenant lease financing

803,299

919,440

995,879

972,275

980,292

960,505

Public finance

438,341

706,342

687,094

627,678

647,107

625,638

Healthcare finance

31,573

117,007

300,612

372,266

380,956

461,740

Small business lending

4,870

17,370

47,787

54,056

118,526

123,168

Total commercial loans

1,528,407

1,990,440

2,287,359

2,287,460

2,386,342

2,442,500

Consumer loans

Residential mortgage

299,935

399,898

313,849

218,730

208,728

203,041

Home equity

30,554

28,735

24,306

23,855

22,640

22,169

Trailers

101,369

136,620

146,734

148,700

147,326

145,775

Recreational vehicles

69,196

91,912

102,702

103,868

102,088

96,910

Other consumer loans

56,968

51,239

45,873

44,037

42,218

39,765

Total consumer loans

558,022

708,404

633,464

539,190

523,000

507,660

Net def. loan fees, prem., disc. and other1

4,764

17,384

42,724

65,443

64,332

62,754

Total Loans

$

2,091,193

$

2,716,228

$

2,963,547

$

2,892,093

$

2,973,674

$

3,012,914

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 $44.6 million, $21.4 million, $5.0 million and $0.3 million as of March 31, 2020, December 31, 2019, December 31, 2018 and December 31, 2017, respectively, related to interest rate swaps associated with public finance loans.

31

Reconciliation of Non-GAAP Financial Measures

Dollars in thousands

4Q18

1Q19

2Q19

3Q19

4Q19

1Q20

2Q20

3Q20

Total equity - GAAP

$288,735

$294,013

$296,120

$295,140

$304,913

$305,127

$307,711

$318,102

Adjustments:

Goodwill

(4,687)

(4,687)

(4,687)

(4,687)

(4,687)

(4,687)

(4,687)

(4,687)

Tangible common equity

$284,048

$289,326

$291,433

$290,453

$300,226

$300,440

$303,024

$313,415

Total assets - GAAP

$3,541,692

$3,670,176

$3,958,829

$4,095,491

$4,100,083

$4,168,146

$4,324,600

$4,333,624

Adjustments:

Goodwill

(4,687)

(4,687)

(4,687)

(4,687)

(4,687)

(4,687)

(4,687)

(4,687)

Tangible assets

$3,537,005

$3,665,489

$3,954,142

$4,090,804

$4,095,396

$4,163,459

$4,319,913

$4,328,937

Common shares outstanding

10,170,778

10,128,587

10,016,458

9,741,800

9,741,800

9,801,825

9,799,047

9,800,569

Total shareholders' equity to assets

8.01%

8.01%

7.48%

7.21%

7.44%

7.32%

7.12%

7.34%

Effect of goodwill

(0.12%)

(0.12%)

(0.11%)

(0.11%)

(0.11%)

(0.10%)

(0.11%)

(0.10%)

Tangible common equity to tangible assets

8.03%

7.89%

7.37%

7.10%

7.33%

7.22%

7.01%

7.24%

Net interest income

$15,421

$16,244

$16,105

$15,244

$15,374

$15,018

$14,426

$16,232

Adjustments:

Fully-taxable equivalent adjustments 1

1,477

1,557

1,612

1,595

1,570

1,535

1,437

1,424

Net interest income - FTE

$16,898

$17,801

$17,717

$16,839

$16,944

$16,553

$15,863

$17,656

Net interest margin

1.89%

1.86%

1.73%

1.54%

1.51%

1.50%

1.37%

1.53%

Adjustments:

Effect of fully-taxable equivalent adjustments 1

0.18%

0.18%

0.18%

0.16%

0.16%

0.15%

0.13%

0.14%

Net interest margin - FTE

2.07%

2.04%

1.91%

1.70%

1.67%

1.65%

1.50%

1.67%

Noninterest expense

$12,709

$11,109

$11,709

$11,203

$12,613

$13,486

$13,244

$16,412

Adjustments:

Write-down of other real estate owned

2,423.00

-

-

-

-

-

-

2,065

Adjusted noninterest expense

$10,286

$11,109

$11,709

$11,203

$12,613

$13,486

$13,244

$14,347

Noninterest expense/average assets

1.52%

1.24%

1.23%

1.11%

1.22%

1.32%

1.23%

1.51%

Effect of write-down of other real estate owned

0.29%

0.00%

0.00%

0.00%

0.00%

0.00%

0.00%

0.19%

Adjusted noninterest expense/average assets

1.23%

1.24%

1.23%

1.11%

1.22%

1.32%

1.23%

1.32%

1 Assuming a 21% tax rate

32

Reconciliation of Non-GAAP Financial Measures

2015

2016

2017

2018

2019

TTM 3Q20

Net income - GAAP

$8,929

$12,074

$15,226

$21,900

$25,239

$25,458

Adjustments:

Write-down of other real estate owned

-

-

-

1,914

-

1,631

Net deferred tax asset revaluation

-

-

1,846

-

-

-

Adjusted net income

$25,239

$27,089

$8,929

$12,074

$17,072

$23,814

Diluted average common shares outstanding

4,554,219

5,239,082

7,149,302

9,508,653

10,044,483

9,773,224

Diluted earnings per share - GAAP

$1.96

$2.30

$2.13

$2.30

$2.51

$2.60

Adjustments:

Effect of write-down of other real estate owned

-

-

-

0.20

-

0.17

Effect of net deferred tax asset revaluation

-

-

0.26

-

-

-

Adjusted diluted earnings per share

$2.50

$2.51

$2.77

$1.96

$2.30

$2.39

Total average equity - GAAP

$100,428

$124,023

$178,212

$259,416

$296,382

$307,277

Adjustments:

Average goodwill

(4,687)

(4,687)

(4,687)

(4,687)

(4,687)

(4,687)

Average tangible common equity

$254,729

$291,695

$302,590

$95,741

$119,336

$173,525

Return on average assets

0.81%

0.74%

0.66%

0.72%

0.65%

0.60%

Effect of write-down of other real estate owned

0.00%

0.00%

0.00%

0.06%

0.00%

0.04%

Effect of net deferred tax asset revaluation

0.00%

0.00%

0.08%

0.00%

0.00%

0.00%

Adjusted return on average assets

0.78%

0.65%

0.64%

0.81%

0.74%

0.74%

Return on average shareholders' equity

8.89%

9.74%

8.54%

8.44%

8.52%

8.29%

Effect of goodwill

0.44%

0.38%

0.23%

0.16%

0.13%

0.12%

Return on average tangible common equity

8.60%

8.65%

8.41%

9.33%

10.12%

8.77%

Return on average tangible common equity

9.33%

10.12%

8.77%

8.60%

8.65%

8.41%

Effect of write-down of other real estate owned

0.00%

0.00%

0.00%

0.75%

0.00%

0.54%

Effect of net deferred tax asset revaluation

0.00%

0.00%

1.07%

0.00%

0.00%

0.00%

Adjusted return on average tangible common equity

9.35%

8.65%

8.95%

9.33%

10.12%

9.84%

33

Reconciliation of Non-GAAP Financial Measures

Dollars in thousands

2013

2014

2015

2016

2017

2018

2019

3Q20

Total equity - GAAP

$90,908

$96,785

$104,330

$153,942

$224,127

$288,735

$304,913

$318,102

Adjustments:

Goodwill

(4,687)

(4,687)

(4,687)

(4,687)

(4,687)

(4,687)

(4,687)

(4,687)

Tangible common equity

$86,221

$92,098

$99,643

$149,255

$219,440

$284,048

$300,226

$313,415

Common shares outstanding

4,448,326

4,439,575

4,481,347

6,478,050

8,411,077

10,170,778

9,741,800

9,800,569

Book value per common share

$20.44

$21.80

$23.28

$23.76

$26.65

$28.39

$31.30

$32.46

Effect of goodwill

(1.06)

(1.06)

(1.04)

(0.72)

(0.56)

(0.46)

(0.48)

(0.48)

Tangible book value per common share

$19.38

$20.74

$22.24

$23.04

$26.09

$27.93

$30.82

$31.98

Allowance for loan losses

$

5,426

$

5,800

$

8,351

$

10,981

$

14,970

$

17,896

$

21,840

$

26,917

Loans

501,153

732,426

953,859

1,250,789

2,091,193

2,716,228

2,963,547

3,012,914

Adjustments:

PPP loans

-

-

-

-

-

-

-

(58,334)

Loans, excluding PPP loans

$

501,153

$

732,426

$

953,859

$

1,250,789

$

2,091,193

$

2,716,228

$

2,963,547

$

2,954,580

Allownace for loan losses to loans

1.08%

0.79%

0.88%

0.88%

0.72%

0.66%

0.74%

0.89%

Effect of PPP loans

0.00%

0.00%

0.00%

0.00%

0.00%

0.00%

0.00%

0.02%

Allowance for loan losses to loans, excluding PPP loans

1.08%

0.79%

0.88%

0.88%

0.72%

0.66%

0.74%

0.91%

34

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First Internet Bancorp published this content on 13 November 2020 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 19 November 2020 22:28:01 UTC


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