First Internet Bancorp Reports First Quarter 2023 Results

Rhea-AI Summary

First Internet Bancorp (Nasdaq: INBK) reported a net loss of $1.3 million for Q1 2023, resulting in a diluted loss per share of $0.14. Despite this, the bank saw a deposit growth of $181 million, equating to a 5.3% increase from the previous quarter. The company’s net interest income was $19.6 million, down from $21.7 million in Q4 2022, with a net interest margin of 1.76%. Total loans increased by 3.1% to $3.6 billion, driven by commercial loans. The bank's capital ratios remain strong, with a CET1 ratio of 10.35% and tangible book value per share at $39.43. Although there were unrealized securities losses impacting tangible equity, management emphasized proactive liquidity and capital management during market changes. The bank repurchased 161,691 shares in Q1 as part of its stock repurchase program.

Positive

• Deposit growth of $181 million, a 5.3% increase from Q4 2022.
• Adjusted net income of $4.8 million, or $0.53 adjusted diluted EPS.
• Total loans increased by 3.1% to $3.6 billion.
• CET1 ratio of 10.35%, indicating strong capital levels.
• Successful repurchase of 161,691 shares at an average price of $24.50.

Negative

• Net loss of $1.3 million, with diluted loss per share of $0.14.
• Net interest income decreased to $19.6 million from $21.7 million in Q4 2022.
• Net interest margin declined to 1.76% from 2.09% in Q4 2022.
• Nonperforming loans increased to 0.32%, up from 0.22% in Q4 2022.

FISHERS, Ind.--(BUSINESS WIRE)-- First Internet Bancorp (the “Company”) (Nasdaq: INBK), the parent company of First Internet Bank (the “Bank”), announced today financial and operational results for the first quarter ended March 31, 2023.

Addressing Recent Market Events

• Deposit growth of $181.0 million in the first quarter, a 5.3% increase from the fourth quarter of 2022
• Estimated uninsured deposits represented 26% of total deposits at March 31, 2023, and 19% of total deposits after adjusting for insured/collateralized public funds and contractual deposits
• No additional borrowing from either the FHLB or the Federal Reserve during the first quarter; total borrowing availability of $628 million across all facilities at quarter end
• Office commercial real estate exposure represents less than 1% of total loan balances and is primarily limited to suburban and medical offices
• Total after-tax unrealized securities losses in both the available-for-sale and held-to-maturity portfolios represented 13.3% of tangible shareholders’ equity at quarter end
• Tangible common equity to tangible assets of 7.47%; CET1 ratio of 10.35%; tangible book value per share of $39.43

First Quarter 2023 Financial Highlights

• Net loss of $1.3 million and a diluted loss per share of $0.14
• Net loss was impacted by a partial charge-off of $4.7 million related to one C&I participation loan
• Adjusted net income of $4.8 million, or $0.53 adjusted diluted earnings per share, when excluding (i) net pre-tax costs of $3.0 million incurred as a result of the previously announced exit of the Bank's consumer mortgage operations and (ii) the aforementioned $4.7 million partial charge-off of the C&I participation loan
• Net interest margin of 1.76% and fully-taxable equivalent net interest margin of 1.89%, compared to 2.09% and 2.22%, respectively, for the fourth quarter of 2022
• Repurchased 161,691 shares

“Our active management of liquidity, capital and revenue streams in preparation for a dynamic economic environment positioned us to effectively withstand the recent challenges to the banking system,” said David Becker, Chairman and Chief Executive Officer. “Early in the first quarter, we focused on growing deposits and building liquidity, which we successfully accomplished despite intense competition amid the overall decline in system-wide deposits. While we experienced a modest decline in deposits from mid-March through quarter-end, balances have rebounded and are up $135 million thus far in April.

“We remain focused on our strategies to bolster the resilience of our balance sheet and our revenue channels. We continue to improve the composition of the loan portfolio towards a more favorable mix of variable rate and higher yielding loans. New origination yields were up significantly during the quarter, positioning us to achieve stronger earnings and profitability once deposit costs stabilize. In addition, our SBA lending team generated a very strong quarter with gain on sale revenue up over 40% compared to the fourth quarter.”

Mr. Becker concluded, “Despite an issue late in the quarter on one commercial participation loan, our exposure to similar-type loans is very limited and all others are performing well. Our overall asset quality remains solid, and our capital levels are strong.”

Net Interest Income and Net Interest Margin

Net interest income for the first quarter of 2023 was $19.6 million, compared to $21.7 million for the fourth quarter of 2022, and $25.8 million for the first quarter of 2022. On a fully-taxable equivalent basis, net interest income for the first quarter of 2023 was $21.0 million, compared to $23.1 million for the fourth quarter of 2022, and $27.1 million for the first quarter of 2022.

Total interest income for the first quarter of 2023 was $52.0 million, an increase of 13.9% compared to the fourth quarter of 2022, and an increase of 44.4% compared to the first quarter of 2022. On a fully-taxable equivalent basis, total interest income for the first quarter of 2023 was $53.4 million, an increase of 13.5% compared to the fourth quarter of 2022, and an increase of 43.0% compared to the first quarter of 2022. The increase from the linked quarter was due primarily to growth in interest income earned on loans, other earning assets and securities. The yield on average interest-earning assets for the first quarter of 2023 increased to 4.69% from 4.40% for the fourth quarter of 2022 due primarily to a 24 basis point (“bp”) increase in the average loan yield, a 94 bp increase in the yield earned on other earning assets and a 36 bp increase in the yield earned on securities. Compared to the linked quarter, average loan balances increased $191.9 million, or 5.7%, while the average balance of other earning assets increased $181.4 million, or 121.0%, and the average balance of securities increased $6.7 million, or 1.2%.

Interest income earned on commercial loans was higher due to increased average balances and the positive impact of higher rates in the variable rate SBA, construction and investor commercial real estate portfolios, as well as strong growth and higher new origination yields in the franchise finance portfolio. This was partially offset by lower average balances and prepayment fees in the healthcare finance portfolio, as well as lower prepayment fees in the single tenant lease financing portfolio.

In the consumer portfolio, interest income was up due to higher new origination yields, increases in the average balance of residential mortgage, trailers and recreational vehicles portfolios, and higher rates in the variable rate home equity portfolio.

The yield on funded portfolio originations was 7.76% in the first quarter, an increase of 161 bps compared to the fourth quarter of 2022 and an increase of 297 basis points compared to the first quarter of 2022. Because of the fixed-rate nature of certain larger portfolios, there is a lagging impact of origination yields on the portfolio, which are expected to increase over time.

Interest earned on cash and other interest-earning balances increased $2.4 million, or 171.6%, during the quarter due to the impact of higher short-term interest rates on cash balances as well as a $181.4 million increase, or 152.5%, in average cash balances. Furthermore, interest income earned on securities increased $0.5 million, or 12.3%, during the first quarter of 2023 as the yield on the portfolio increased 36 bps to 3.05% driven primarily by variable rate securities resetting higher, slower prepayment speeds and an increase in the average balance of the portfolio.

Total interest expense for the first quarter was $32.5 million, an increase of $8.5 million, or 35.2%, compared to the linked quarter, due to increases in both market interest rates and average interest-bearing deposit balances throughout the quarter. Interest expense related to interest-bearing deposits increased $8.5 million, or 45.0%, driven primarily by higher costs on CD and brokered deposits and money market accounts. Average CD balances increased $261.4 million, or 32.9%, while the cost of funds increased 108 bps, as the Company took advantage of strong consumer and small business demand during the quarter and pulled forward origination activity planned for later in the year. The average balance of brokered deposits increased $165.1 million, or 38.6%, driven by a full quarter’s impact of brokered CD issuances in late 2022, and the cost of funds increased 71 bps. Additionally, while average money market balances decreased $64.0 million, or 4.4%, during the quarter, the cost of these deposits increased 73 bps due to the impact of continued Federal Reserve rate increases.

The average balance of BaaS – brokered deposits increased by $10.2 million, reaching $25.7 million by quarter-end. In total, BaaS deposits were $82.4 million as of March 31, 2023 as Fintech programs were onboarded and existing programs grew during the quarter.

Net interest margin (“NIM”) was 1.76% for the first quarter of 2023, down from 2.09% for the fourth quarter of 2022 and 2.56% for the first quarter of 2022. Fully-taxable equivalent NIM (“FTE NIM”) was 1.89% for the first quarter of 2023, down from 2.22% for the fourth quarter of 2022 and 2.69% for the first quarter of 2022. The decreases in NIM and FTE NIM compared to the linked quarter were driven primarily by the effect of higher interest-bearing deposit costs, partially offset by higher yields on loans, other earning assets and securities.

Noninterest Income

Noninterest income for the first quarter of 2023 was $5.4 million, down $0.4 million, or 6.2%, from the fourth quarter of 2022, and down $1.4 million, or 20.1%, from the first quarter of 2022. Gain on sale of loans totaled $4.1 million for the first quarter of 2023, up $1.2 million, or 41.9%, from the linked quarter. Gain on sale revenue in the quarter consisted entirely of gain on the sales of U.S. Small Business Administration (“SBA”) 7(a) guaranteed loans, which increased due to a higher volume of loan sales, as well as higher net premiums. Other income totaled $0.4 million for the first quarter of 2023, down $1.2 million compared to the linked quarter due to distributions received on certain Small Business Investment Company and venture capital fund investments in the fourth quarter. Mortgage banking revenue totaled only $0.1 million for the first quarter as the Company immediately began winding down its existing pipeline following its announced exit from the consumer mortgage business in January 2023.

Noninterest Expense

Noninterest expense for the first quarter of 2023 was $21.0 million, up $2.4 million, or 13.2%, from the fourth quarter of 2022 and up $2.2 million, or 11.6%, from the first quarter of 2022. Excluding $3.1 million of mortgage operations and exit costs, adjusted noninterest expense totaled $17.9 million for the first quarter, declining $0.6 million, or 3.3%, compared to the linked quarter. Excluding the mortgage operations and exit costs, salaries and employee benefits expense decreased by $0.8 million compared to the linked quarter due to lower incentive compensation and bonus accruals. Also, marketing, advertising and promotion expense, consulting and professional fees, premises and equipment costs and other expenses decreased from the linked quarter, while loan expenses and deposit insurance premiums were higher. The increase in loan expenses reflects higher third party loan servicing costs related to franchise finance loan volume. The increase in deposit insurance premium was due primarily to asset growth, as well as the composition of loans and deposits.

Income Taxes

The Company recognized an income tax benefit of $1.8 million for the first quarter of 2023, compared to an income tax expense of $0.5 million and an effective tax rate of 7.3% for the fourth quarter of 2022 and an income tax expense of $1.8 million and an effective tax rate of 13.8% for the first quarter of 2022. The income tax benefit in the first quarter of 2023 reflects the net loss resulting from the partial charge-off of the participation loan and the recognition of mortgage exit costs described above.

Loans and Credit Quality

Total loans as of March 31, 2023 were $3.6 billion, an increase of $110.1 million, or 3.1%, compared to December 31, 2022, and an increase of $728.7 million, or 25.3%, compared to March 31, 2022. Total commercial loan balances were $2.8 billion as of March 31, 2023, an increase of $88.7 million, or 3.3%, compared to December 31, 2022, and an increase of $468.0 million, or 20.0%, compared to March 31, 2022. Compared to the linked quarter, the increase in commercial loan balances was driven primarily by growth in franchise finance, single tenant lease financing and small business lending balances, as well as combined growth in investor commercial real estate and construction balances. These items were partially offset by a decrease in the public finance portfolio as well as continued runoff in the healthcare finance portfolio.

Total consumer loan balances were $756.4 million as of March 31, 2023, an increase of $23.1 million, or 3.1%, compared to December 31, 2022, and an increase of $267.6 million, or 54.7%, compared to March 31, 2022. The increase compared to the linked quarter was due primarily to higher balances in the recreational vehicles and trailers loan portfolios as well as funded residential mortgages that were in the pipeline prior to the announced exiting of the business.

Total delinquencies 30 days or more past due were 0.13% of total loans as of March 31, 2023, compared to 0.17% at December 31, 2022 and 0.03% as of March 31, 2022. The decrease in delinquencies during the first quarter of 2023 was due primarily to a construction loan that became current in the first quarter of 2023. Nonperforming loans to total loans was 0.32% as of March 31, 2023, compared to 0.22% at December 31, 2022 and 0.25% as of March 31, 2022. Nonperforming loans totaled $11.4 million at March 31, 2023, up from $7.5 million at December 31, 2022. The increase was due primarily to one commercial and industrial (“C&I”) credit with a balance of $9.8 million that was moved to nonaccrual status late in the quarter. The Company subsequently recognized a partial charge-off of $4.7 million related to this loan due to negative developments following quarter end.

The allowance for credit losses (“ACL”) as a percentage of total loans was 1.02% as of March 31, 2023, compared to 0.91% as of December 31, 2022 and 0.98% as of March 31, 2022. The increase in the ACL reflects the day one Current Expected Credit Losses (“CECL”) adjustment of $3.0 million, as well as overall growth in the loan portfolio and changes in certain economic forecasts that impacted quantitative factors for certain portfolios.

Net charge-offs were $5.0 million in the first quarter of 2023, compared to net charge-offs of $0.2 million in the fourth quarter 2022. The increase was due almost wholly to the C&I participation loan discussed above. Net charge-offs to average loans totaled 57 bps in the first quarter.

The provision for loan losses in the first quarter was $7.2 million, compared to $2.1 million for the fourth quarter of 2022. The increase in provision for the quarter reflects the partial charge-off of the C&I participation loan discussed above as well as growth in the loan portfolio and the impact of economic forecasts on certain portfolios mentioned above.

Capital

As of March 31, 2023, total shareholders’ equity was $357.3 million, a decrease of $7.7 million, or 2.1%, compared to December 31, 2022, and a decrease of $17.4 million, or 4.6%, compared to March 31, 2022. The decrease in shareholders’ equity during the first quarter of 2023 was due primarily to stock repurchase activity, the day one CECL adjustment and the net loss during the quarter, partially offset by a decrease in accumulated other comprehensive loss. Book value per common share was $39.95 as of March 31, 2023, down from $40.26 as of December 31, 2022 and up from $38.69 as of March 31, 2022. Tangible book value per share was $39.43, down from $39.74 as of December 31, 2022 and up from $38.21 as of March 31, 2022.

In connection with its previously announced stock repurchase program, the Company repurchased 161,691 shares of its common stock during the first quarter of 2023 at an average price of $24.50 per share. The Company has repurchased $36.2 million of stock under its authorized programs to-date.

The following table presents the Company’s and the Bank’s regulatory and other capital ratios as of March 31, 2023.

		As of March 31, 2023
		Company		Bank
Total shareholders' equity to assets		7.56%		9.32%
Tangible common equity to tangible assets 1		7.47%		9.23%
Tier 1 leverage ratio 2		8.14%		9.92%
Common equity tier 1 capital ratio 2		10.35%		12.63%
Tier 1 capital ratio 2		10.35%		12.63%
Total risk-based capital ratio 2		14.17%		13.62%
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 2:00 p.m. Eastern Time on Thursday, April 27, 2023 to discuss its quarterly financial results. The call can be accessed via telephone at (833) 470-1428; access code: 192191. A recorded replay can be accessed through May 27, 2023 by dialing (866) 813-9403; access code: 451912.

Additionally, interested parties can listen to a live webcast of the call on the Company's website at www.firstinternetbancorp.com. An archived version of the webcast will be available in the same location shortly after the live call has ended.

About First Internet Bancorp

First Internet Bancorp is a financial holding company with assets of $4.7 billion as of March 31, 2023. The Company’s subsidiary, First Internet Bank, opened for business in 1999 as an industry pioneer in the branchless delivery of banking services. First Internet Bank provides consumer and small business deposit, SBA financing, franchise finance, consumer loans, and specialty finance services nationally as well as commercial real estate loans, construction loans, commercial and industrial loans, and treasury management services on a regional basis. 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 First Internet Bank, including its products and services, is available at www.firstib.com.

Forward-Looking Statements

This press release contains forward-looking statements within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, including statements with respect to the financial condition, results of operations, trends in lending policies and loan programs, plans and prospective business partnerships, objectives, future performance and business of the Company. Forward-looking statements are generally identifiable by the use of words such as “achieve,” “anticipate,” “believe,” “build,” “continue,” “could,” “estimate,” “expect,” “growth,” “help,” “improve,” “may,” “opportunities,” “pending,” “plan,” “position,” “preliminary,” “remain,” “should,” “stabilize,” “strategies,” “thereafter,” “well-positioned,” “will,” 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. Such statements are subject to certain risks and uncertainties including: our business and operations and the business and operations of our vendors and customers: general economic conditions, whether national or regional, and conditions in the lending markets in which we participate that may have an adverse effect on the demand for our loans and other products; our credit quality and related levels of nonperforming assets and loan losses, and the value and salability of the real estate that is the collateral for our loans. 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 and industrial, construction, SBA, and franchise finance loan portfolios; competition with national, regional and community financial institutions; the loss of any key members of senior management; the anticipated impacts of inflation and rising interest rates on the general economy; risks relating to the regulation of financial institutions; and other factors identified in reports we file with the U.S. Securities and Exchange Commission. All statements in this press release, including forward-looking statements, speak only as of the date they are made, and the Company undertakes no obligation to update any statement in light of new information or future events.

Non-GAAP Financial Measures

This press release contains financial information determined by methods other than in accordance with U.S. generally accepted accounting principles (“GAAP”). Non-GAAP financial measures, specifically tangible common equity, tangible assets, tangible book value per common share, tangible common equity to tangible assets, average tangible common equity, return on average tangible common equity, total interest income – FTE, net interest income – FTE, net interest margin – FTE, adjusted total revenue, adjusted noninterest income, adjusted noninterest expense, adjusted income before income taxes, adjusted income tax (benefit) 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
	March 31,				December 31,				March 31,
		2023				2022				2022
Net (loss) income	$	(1,305	)		$	6,351			$	11,209
Per share and share information
(Loss) earnings per share - basic	$	(0.14	)		$	0.68			$	1.14
(Loss) earnings per share - diluted		(0.14	)			0.68				1.14
Dividends declared per share		0.06				0.06				0.06
Book value per common share		39.95				40.26				38.69
Tangible book value per common share 1		39.43				39.74				38.21
Common shares outstanding		8,943,477				9,065,883				9,683,727
Average common shares outstanding:
Basic		9,024,072				9,281,309				9,790,122
Diluted		9,051,890				9,343,533				9,870,394
Performance ratios
Return on average assets		(0.11	%)			0.59	%			1.08	%
Return on average shareholders' equity		(1.46	%)			6.91	%			11.94	%
Return on average tangible common equity 1		(1.48	%)			7.00	%			12.09	%
Net interest margin		1.76	%			2.09	%			2.56	%
Net interest margin - FTE 1,2		1.89	%			2.22	%			2.69	%
Capital ratios 3
Total shareholders' equity to assets		7.56	%			8.03	%			8.87	%
Tangible common equity to tangible assets 1		7.47	%			7.94	%			8.77	%
Tier 1 leverage ratio		8.14	%			9.06	%			9.26	%
Common equity tier 1 capital ratio		10.35	%			10.93	%			13.16	%
Tier 1 capital ratio		10.35	%			10.93	%			13.16	%
Total risk-based capital ratio		14.17	%			14.75	%			17.62	%
Asset quality
Nonperforming loans	$	11,432			$	7,529			$	7,084
Nonperforming assets		11,557				7,571				7,085
Nonperforming loans to loans		0.32	%			0.22	%			0.25	%
Nonperforming assets to total assets		0.24	%			0.17	%			0.17	%
Allowance for credit losses - loans to:
Loans		1.02	%			0.91	%			0.98	%
Nonperforming loans		322.6	%			421.5	%			398.8	%
Net charge-offs to average loans		0.57	%			0.03	%			0.05	%
Average balance sheet information
Loans	$	3,573,852			$	3,382,212			$	2,947,924
Total securities		585,270				578,608				648,728
Other earning assets		331,294				149,910				455,960
Total interest-earning assets		4,499,806				4,119,897				4,080,725
Total assets		4,647,175				4,263,246				4,214,918
Noninterest-bearing deposits		134,988				135,702				112,248
Interest-bearing deposits		3,411,969				3,041,022				3,071,420
Total deposits		3,546,957				3,176,724				3,183,668
Shareholders' equity		363,292				364,657				380,767
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, 2022)
Dollar amounts in thousands
	March 31,				December 31,				March 31,
		2023				2022				2022
Assets
Cash and due from banks	$	27,741			$	17,426			$	20,976
Interest-bearing deposits		276,231				239,126				496,573
Securities available-for-sale, at fair value		395,833				390,384				465,288
Securities held-to-maturity, at amortized cost, net of allowance for credit losses		210,761				189,168				163,370
Loans held-for-sale		18,144				21,511				33,991
Loans		3,609,454				3,499,401				2,880,780
Allowance for credit losses - loans		(36,879	)			(31,737	)			(28,251	)
Net loans		3,572,575				3,467,664				2,852,529
Accrued interest receivable		22,322				21,069				15,263
Federal Home Loan Bank of Indianapolis stock		28,350				28,350				25,219
Cash surrender value of bank-owned life insurance		40,105				39,859				39,133
Premises and equipment, net		74,248				72,711				68,632
Goodwill		4,687				4,687				4,687
Servicing asset		7,312				6,255				5,249
Other real estate owned		106				-				-
Accrued income and other assets		44,616				44,894				34,487
Total assets	$	4,723,031			$	4,543,104			$	4,225,397
Liabilities
Noninterest-bearing deposits	$	140,449			$	175,315			$	119,196
Interest-bearing deposits		3,481,841				3,265,930				3,098,783
Total deposits		3,622,290				3,441,245				3,217,979
Advances from Federal Home Loan Bank		614,929				614,928				514,923
Subordinated debt		104,608				104,532				104,306
Accrued interest payable		2,592				2,913				1,532
Accrued expenses and other liabilities		21,328				14,512				12,002
Total liabilities		4,365,747				4,178,130				3,850,742
Shareholders' equity
Voting common stock		189,202				192,935				214,473
Retained earnings		199,335				205,675				183,043
Accumulated other comprehensive loss		(31,253	)			(33,636	)			(22,861	)
Total shareholders' equity		357,284				364,974				374,655
Total liabilities and shareholders' equity	$	4,723,031			$	4,543,104			$	4,225,397

First Internet Bancorp
Condensed Consolidated Statements of Income (unaudited)
Dollar amounts in thousands, except per share data
	Three Months Ended
	March 31,				December 31,				March 31,
		2023				2022				2022
Interest income
Loans	$	43,843			$	40,354			$	33,188
Securities - taxable		3,606				3,222				2,221
Securities - non-taxable		798				699				249
Other earning assets		3,786				1,394				376
Total interest income		52,033				45,669				36,034
Interest expense
Deposits		27,270				18,807				6,097
Other borrowed funds		5,189				5,193				4,187
Total interest expense		32,459				24,000				10,284
Net interest income		19,574				21,669				25,750
Provision for credit losses		7,204				2,109				791
Net interest income after provision
for credit losses		12,370				19,560				24,959
Noninterest income
Service charges and fees		209				226				316
Loan servicing revenue		785				715				585
Loan servicing asset revaluation		(55	)			(539	)			(297	)
Mortgage banking activities		76				1,010				1,873
Gain on sale of loans		4,061				2,862				3,845
Other		370				1,533				498
Total noninterest income		5,446				5,807				6,820
Noninterest expense
Salaries and employee benefits		11,794				10,404				9,878
Marketing, advertising and promotion		844				837				756
Consulting and professional fees		926				914				1,925
Data processing		659				567				449
Loan expenses		1,977				1,018				1,582
Premises and equipment		2,777				2,921				2,540
Deposit insurance premium		543				355				281
Other		1,434				1,497				1,369
Total noninterest expense		20,954				18,513				18,780
(Loss) income before income taxes		(3,138	)			6,854				12,999
Income tax (benefit) provision		(1,833	)			503				1,790
Net (loss) income	$	(1,305	)		$	6,351			$	11,209
Per common share data
(Loss) earnings per share - basic	$	(0.14	)		$	0.68			$	1.14
(Loss) earnings per share - diluted	$	(0.14	)		$	0.68			$	1.14
Dividends declared per share	$	0.06			$	0.06			$	0.06
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
	March 31, 2023										December 31, 2022										March 31, 2022
	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	$	3,583,242			$	43,843		4.96	%		$	3,391,379			$	40,354		4.72	%		$	2,976,037			$	33,188		4.52	%
Securities - taxable		511,923				3,606		2.86	%			508,725				3,222		2.51	%			567,776				2,221		1.59	%
Securities - non-taxable		73,347				798		4.41	%			69,883				699		3.97	%			80,952				249		1.25	%
Other earning assets		331,294				3,786		4.63	%			149,910				1,394		3.69	%			455,960				376		0.33	%
Total interest-earning assets		4,499,806				52,033		4.69	%			4,119,897				45,669		4.40	%			4,080,725				36,034		3.58	%
Allowance for credit losses - loans		(35,075	)									(30,543	)									(27,974	)
Noninterest-earning assets		182,444										173,892										162,167
Total assets	$	4,647,175									$	4,263,246									$	4,214,918
Liabilities
Interest-bearing liabilities
Interest-bearing demand deposits	$	333,642			$	900		1.09	%		$	326,102			$	628		0.76	%		$	318,281			$	412		0.52	%
Savings accounts		38,482				82		0.86	%			47,799				104		0.86	%			60,616				53		0.35	%
Money market accounts		1,377,600				12,300		3.62	%			1,441,583				10,508		2.89	%			1,454,436				1,503		0.42	%
BaaS - brokered deposits		14,741				138		3.80	%			4,563				13		1.13	%			12,111				6		0.20	%
Certificates and brokered deposits		1,647,504				13,850		3.41	%			1,220,975				7,554		2.45	%			1,225,976				4,123		1.36	%
Total interest-bearing deposits		3,411,969				27,270		3.24	%			3,041,022				18,807		2.45	%			3,071,420				6,097		0.81	%
Other borrowed funds		719,499				5,189		2.92	%			712,465				5,193		2.89	%			619,191				4,187		2.74	%
Total interest-bearing liabilities		4,131,468				32,459		3.19	%			3,753,487				24,000		2.54	%			3,690,611				10,284		1.13	%
Noninterest-bearing deposits		134,988										135,702										112,248
Other noninterest-bearing liabilities		17,427										9,400										31,292
Total liabilities		4,283,883										3,898,589										3,834,151
Shareholders' equity		363,292										364,657										380,767
Total liabilities and shareholders' equity	$	4,647,175									$	4,263,246									$	4,214,918
Net interest income					$	19,574									$	21,669									$	25,750
Interest rate spread								1.50	%									1.86	%									2.45	%
Net interest margin								1.76	%									2.09	%									2.56	%
Net interest margin - FTE 2,3								1.89	%									2.22	%									2.69	%
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
	March 31, 2023							December 31, 2022							March 31, 2022
	Amount				Percent			Amount				Percent			Amount				Percent
Commercial loans
Commercial and industrial	$	115,410			3.2	%		$	126,108			3.6	%		$	99,808			3.5	%
Owner-occupied commercial real estate		59,643			1.7	%			61,836			1.8	%			56,752			2.0	%
Investor commercial real estate		142,174			3.9	%			93,121			2.7	%			34,627			1.2	%
Construction		158,147			4.4	%			181,966			5.2	%			149,662			5.2	%
Single tenant lease financing		952,533			26.3	%			939,240			26.8	%			852,519			29.6	%
Public finance		604,898			16.8	%			621,032			17.7	%			587,817			20.4	%
Healthcare finance		256,670			7.1	%			272,461			7.8	%			354,574			12.3	%
Small business lending		136,382			3.8	%			123,750			3.5	%			97,040			3.4	%
Franchise finance		382,161			10.6	%			299,835			8.6	%			107,246			3.7	%
Total commercial loans		2,808,018			77.8	%			2,719,349			77.7	%			2,340,045			81.3	%
Consumer loans
Residential mortgage		392,062			10.9	%			383,948			11.0	%			191,153			6.6	%
Home equity		26,160			0.7	%			24,712			0.7	%			18,100			0.6	%
Trailers		172,640			4.8	%			167,326			4.8	%			148,870			5.2	%
Recreational vehicles		128,307			3.6	%			121,808			3.5	%			93,458			3.2	%
Other consumer loans		37,186			1.0	%			35,464			1.0	%			28,002			1.0	%
Tax refund advance loans		-			0.0	%			-			0.0	%			9,177			0.3	%
Total consumer loans		756,355			21.0	%			733,258			21.0	%			488,760			16.9	%
Net deferred loan fees, premiums, discounts and other 1		45,081			1.2	%			46,794			1.3	%			51,975			1.8	%
Total loans	$	3,609,454			100.0	%		$	3,499,401			100.0	%		$	2,880,780			100.0	%
	March 31, 2023							December 31, 2022							March 31, 2022
	Amount				Percent			Amount				Percent			Amount				Percent
Deposits
Noninterest-bearing deposits	$	140,449			3.9	%		$	175,315			5.1	%		$	119,197			3.7	%
Interest-bearing demand deposits		351,641			9.7	%			335,611			9.8	%			334,723			10.4	%
Savings accounts		32,762			0.9	%			44,819			1.3	%			66,320			2.1	%
Money market accounts		1,254,013			34.6	%			1,418,599			41.2	%			1,475,857			45.8	%
BaaS - brokered deposits		25,725			0.7	%			13,607			0.4	%			50,006			1.6	%
Certificates of deposits		1,170,094			32.3	%			874,490			25.4	%			889,789			27.6	%
Brokered deposits		647,606			17.9	%			578,804			16.8	%			282,087			8.8	%
Total deposits	$	3,622,290			100.0	%		$	3,441,245			100.0	%		$	3,217,979			100.0	%
1 Includes carrying value adjustments of $31.5 million, $32.5 million and $36.4 million related to terminated interest rate swaps associated with public finance loans as of March 31, 2023, December 31, 2022 and March 31, 2022, respectively.

First Internet Bancorp
Reconciliation of Non-GAAP Financial Measures
Dollar amounts in thousands, except per share data
	Three Months Ended
	March 31,				December 31,				March 31,
		2023				2022				2022
Total equity - GAAP	$	357,284			$	364,974			$	374,655
Adjustments:
Goodwill		(4,687	)			(4,687	)			(4,687	)
Tangible common equity	$	352,597			$	360,287			$	369,968
Total assets - GAAP	$	4,723,031			$	4,543,104			$	4,225,397
Adjustments:
Goodwill		(4,687	)			(4,687	)			(4,687	)
Tangible assets	$	4,718,344			$	4,538,417			$	4,220,710
Common shares outstanding		8,943,477				9,065,883				9,683,727
Book value per common share	$	39.95			$	40.26			$	38.69
Effect of goodwill		(0.52	)			(0.52	)			(0.48	)
Tangible book value per common share	$	39.43			$	39.74			$	38.21
Total shareholders' equity to assets		7.56	%			8.03	%			8.87	%
Effect of goodwill		(0.09	%)			(0.09	%)			(0.10	%)
Tangible common equity to tangible assets		7.47	%			7.94	%			8.77	%
Total average equity - GAAP	$	363,292			$	364,657			$	380,767
Adjustments:
Average goodwill		(4,687	)			(4,687	)			(4,687	)
Average tangible common equity	$	358,605			$	359,970			$	376,080
Return on average shareholders' equity		(1.46	%)			6.91	%			11.94	%
Effect of goodwill		(0.02	%)			0.09	%			0.15	%
Return on average tangible common equity		(1.48	%)			7.00	%			12.09	%
Total interest income	$	52,033			$	45,669			$	36,034
Adjustments:
Fully-taxable equivalent adjustments 1		1,383				1,384				1,314
Total interest income - FTE	$	53,416			$	47,053			$	37,348
Net interest income	$	19,574			$	21,669			$	25,750
Adjustments:
Fully-taxable equivalent adjustments 1		1,383				1,384				1,314
Net interest income - FTE	$	20,957			$	23,053			$	27,064
Net interest margin		1.76	%			2.09	%			2.56	%
Effect of fully-taxable equivalent adjustments 1		0.13	%			0.13	%			0.13	%
Net interest margin - FTE		1.89	%			2.22	%			2.69	%
1 Assuming a 21% tax rate

First Internet Bancorp
Reconciliation of Non-GAAP Financial Measures
Dollar amounts in thousands, except per share data
	Three Months Ended
	March 31,				December 31,				March 31,
	2023				2022				2022
Total revenue - GAAP	$	25,020			$	27,476			$	32,570
Adjustments:
Mortgage-related revenue		(65	)			-				-
Adjusted total revenue	$	24,955			$	27,476			$	32,570
Noninterest income - GAAP	$	5,446			$	5,807			$	6,820
Adjustments:
Mortgage-related revenue		(65	)			-				-
Adjusted noninterest income	$	5,381			$	5,807			$	6,820
Noninterest expense - GAAP	$	20,954			$	18,513			$	18,780
Adjustments:
Mortgage-related costs		(3,052	)			-				-
Acquisition-related expenses		-				-				(170	)
Nonrecurring consulting fee		-				-				(875	)
Adjusted noninterest expense	$	17,902			$	18,513			$	17,735
(Loss) income before income taxes - GAAP	$	(3,138	)		$	6,854			$	12,999
Adjustments:1
Mortgage-related revenue		(65	)			-				-
Mortgage-related costs		3,052				-				-
Acquisition-related expenses		-				-				170
Nonrecurring consulting fee		-				-				875
Partial charge-off of C&I participation loan		4,703				-				-
Adjusted income before income taxes	$	4,552			$	6,854			$	14,044
Income tax (benefit) provision - GAAP	$	(1,833	)		$	503			$	1,790
Adjustments:1
Mortgage-related revenue		(14	)			-				-
Mortgage-related costs		641				-				-
Acquisition-related expenses		-				-				36
Nonrecurring consulting fee		-				-				184
Partial charge-off of C&I participation loan		988				-				-
Adjusted income tax (benefit) provision	$	(218	)		$	503			$	2,010
Net (loss) income - GAAP	$	(1,305	)		$	6,351			$	11,209
Adjustments:
Mortgage-related revenue		(51	)			-				-
Mortgage-related costs		2,411				-				-
Acquisition-related expenses		-				-				134
Nonrecurring consulting fee		-				-				691
Partial charge-off of C&I participation loan		3,715				-				-
Adjusted net income	$	4,770			$	6,351			$	12,034
1 Assuming a 21% tax rate

First Internet Bancorp
Reconciliation of Non-GAAP Financial Measures
Dollar amounts in thousands, except per share data
	Three Months Ended
	March 31,				December 31,				March 31,
		2023				2022				2022
Diluted average common shares outstanding		9,051,890				9,343,533				9,870,394
Diluted (loss) earnings per share - GAAP	$	(0.14	)		$	0.68			$	1.14
Adjustments:
Effect of mortgage-related revenue		(0.01	)			-				-
Effect of mortgage-related costs		0.27				-				-
Effect of acquisition-related expenses		-				-				0.01
Effect of nonrecurring consulting fee		-				-				0.07
Effect of partial charge-off of C&I participation loan		0.41				-				-
Adjusted diluted (loss) earnings per share	$	0.53			$	0.68			$	1.22
Return on average assets		(0.11	%)			0.59	%			1.08	%
Effect of mortgage-related revenue		0.00	%			0.00	%			0.00	%
Effect of mortgage-related costs		0.21	%			0.00	%			0.00	%
Effect of acquisition-related expenses		0.00	%			0.00	%			0.01	%
Effect of nonrecurring consulting fee		0.00	%			0.00	%			0.07	%
Effect of partial charge-off of C&I participation loan		0.32	%			0.00	%			0.00	%
Adjusted return on average assets		0.42	%			0.59	%			1.16	%
Return on average shareholders' equity		(1.46	%)			6.91	%			11.94	%
Effect of mortgage-related revenue		(0.06	%)			0.00	%			0.00	%
Effect of mortgage-related costs		2.69	%			0.00	%			0.00	%
Effect of acquisition-related expenses		0.00	%			0.00	%			0.14	%
Effect of nonrecurring consulting fee		0.00	%			0.00	%			0.74	%
Effect of partial charge-off of C&I participation loan		4.15	%			0.00	%			0.00	%
Adjusted return on average shareholders' equity		5.32	%			6.91	%			12.82	%
Return on average tangible common equity		(1.48	%)			7.00	%			12.09	%
Effect of mortgage-related revenue		(0.06	%)			0.00	%			0.00	%
Effect of mortgage-related costs		2.73	%			0.00	%			0.00	%
Effect of acquisition-related expenses		0.00	%			0.00	%			0.14	%
Effect of nonrecurring consulting fee		0.00	%			0.00	%			0.75	%
Effect of partial charge-off of C&I participation loan		4.20	%			0.00	%			0.00	%
Adjusted return on average tangible common equity		5.39	%			7.00	%			12.98	%

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20230424005810/en/

Investors/Analysts

Paula Deemer

Director of Corporate Administration

(317) 428-4628

investors@firstib.com

Media

Nicole Lorch

President & Chief Operating Officer

(317) 532-7906

nlorch@firstib.com Investors/Analysts                                            

Source: First Internet Bancorp

FAQ

What were the quarterly financial results for First Internet Bancorp (INBK) for Q1 2023?

First Internet Bancorp reported a net loss of $1.3 million and a diluted loss per share of $0.14 for Q1 2023.

How much did deposits grow in Q1 2023 for INBK?

Deposits grew by $181 million, a 5.3% increase from the previous quarter.

What is the CET1 ratio for First Internet Bancorp (INBK)?

The CET1 ratio for First Internet Bancorp is 10.35% as of March 31, 2023.

What was the net interest margin for INBK in Q1 2023?

The net interest margin for First Internet Bancorp in Q1 2023 was 1.76%.

How many shares did INBK repurchase in Q1 2023?

First Internet Bancorp repurchased 161,691 shares during the first quarter of 2023.