First Internet Bancorp Reports Third Quarter 2020 Results

Rhea-AI Summary

First Internet Bancorp (Nasdaq: INBK) reported record net income of $8.4 million, or $0.86 diluted earnings per share, for Q3 2020, a significant increase from $3.9 million in Q2 2020. Revenue growth was attributed to strong performance in mortgage banking and improved net interest margins. Loan deferrals fell significantly, and over 99% of borrowers resumed payments. Total loans reached $3 billion, and noninterest income surged to $12.5 million. Despite an increase in noninterest expenses, the overall financial outlook remains positive heading into Q4.

Positive

• Record net income of $8.4 million for Q3 2020.
• Significant revenue increase from the mortgage banking sector, almost tripling from Q2 2020.
• Net interest income rose to $16.2 million, up from $14.4 million in Q2 2020.
• Over 99% of borrowers who sought payment relief resumed normal payments.
• Total loans increased by $39.2 million (1.3%) in Q3 2020.

Negative

• Total interest income decreased by 4.3% compared to Q2 2020.
• Total noninterest expense rose to $16.4 million, an increase from $13.2 million in Q2 2020.

FISHERS, Ind.--(BUSINESS WIRE)--First Internet Bancorp (the “Company”) (Nasdaq: INBK), the parent company of First Internet Bank (the “Bank”), announced today financial and operational results for the third quarter of 2020. Net income for the third quarter of 2020 was a record $8.4 million, or $0.86 diluted earnings per share. This compares to net income of $3.9 million, or $0.40 diluted earnings per share, for the second quarter of 2020, and net income of $6.3 million, or $0.63 diluted earnings per share, for the third quarter of 2019.

“We generated record net income in the quarter, driven by very strong revenue growth, an improvement in net interest margin, and moderate loan growth. We are very pleased with our ability to navigate the challenges imposed by the pandemic and deliver for our customers and shareholders,” said David Becker, Chairman, President and Chief Executive Officer. “Additionally, we continued to experience a significant reduction in loan deferrals, and by quarter-end, over 99% of our borrowers who needed payment relief early in the pandemic had resumed making payments. We are proud to support our customers in their time of need and are glad that nearly all have been able to return to their normal payment schedules in such short order.

“Our direct-to-consumer mortgage business had a record quarter, almost tripling revenue compared to the second quarter. We capitalized on the ongoing market strength created by historically low mortgage rates, and our mortgage pipeline remains strong heading into the fourth quarter. Furthermore, our SBA business gained additional traction during the quarter, as our accelerated national expansion contributed to increased loan production and higher gain-on-sale revenue. Our SBA pipeline is robust, and we anticipate driving increased fee income in the quarters to come as this government-guaranteed lending business continues to ramp-up.”

Mr. Becker concluded, “As always, I would like to thank the entire First Internet team for their very hard work in delivering record revenue and earnings performance during these challenging times. Our employees are the key to our success, and we are proud of the strong culture and workplace environment we have created. First Internet was recognized for the seventh consecutive year on The Indianapolis Star’s 'Top Workplaces in Central Indiana' list, placing in the top ten in the medium-sized company category.”

Net Interest Income and Net Interest Margin

Net interest income for the third quarter of 2020 was $16.2 million, compared to $14.4 million for the second quarter of 2020, and $15.2 million for the third quarter of 2019. On a fully-taxable equivalent basis, net interest income for the third quarter of 2020 was $17.7 million, compared to $15.9 million for the second quarter of 2020, and $16.8 million for the third quarter of 2019.

Total interest income for the third quarter of 2020 was $32.8 million, a decrease of 4.3%, compared to the second quarter of 2020, and a decrease of 13.1% compared to the third quarter of 2019. On a fully-taxable equivalent basis, total interest income for the third quarter of 2020 was $34.2 million, a decrease of 4.2% compared to the second quarter of 2020, and a decrease of 13.0% compared to the third quarter of 2019. The decline in total interest income compared to the second quarter of 2020 was driven primarily by a decrease in income from the securities portfolio due to accelerated premium amortization and continued declines in short term interest rate indices.

Total interest expense for the third quarter of 2020 was $16.5 million, a decrease of 16.6%, compared to the second quarter of 2020, and a decrease of 26.4% compared to the third quarter of 2019. The decrease in total interest expense compared to the linked quarter was due primarily to a 43 bp decline in the cost of interest-bearing deposits. The decrease in deposit costs reflects a continued decline in the rates paid on interest-bearing deposits as well as a shift in the deposit mix due to the growth in money market accounts.

During the third quarter of 2020, the cost of money market deposits decreased by 56 bps while the average balance of these deposits grew $206.2 million, or 18.9%. Furthermore, the cost of certificates and brokered deposits decreased 22 bps and average balances decreased $222.3 million, or 11.1%. During the third quarter, new certificates and brokered deposits were originated at a weighted average cost of 84 bps while maturing deposits had a weighted average cost of 225 bps; a difference of 141 bps.

Net interest margin (“NIM”) improved to 1.53% for the third quarter of 2020, up from 1.37% for the second quarter of 2020 and relatively stable with 1.54% for the third quarter of 2019. Fully-taxable equivalent NIM (“FTE NIM”) increased by 17 bps to 1.67% for the third quarter of 2020, up from 1.50% for the second quarter of 2020 and relatively stable with 1.70% for the third quarter of 2019. The increases in NIM and FTE NIM compared to the linked quarter were driven primarily by lower interest-bearing deposit costs, which more than offset the impact of the lower interest rate environment on interest-earning asset yields and the continued effect of elevated cash balances.

Noninterest Income

Noninterest income for the third quarter of 2020 was $12.5 million, compared to $5.0 million for the second quarter of 2020 and $5.6 million for the third quarter of 2019. The increase compared to the linked quarter was driven primarily by an increase in revenue from mortgage banking activities and gain on sale of loans. Mortgage banking revenue totaled $9.6 million for the third quarter of 2020, increasing $6.2 million, or 182.6%, compared to the prior quarter on increased loan sale volume and higher margins as mortgage interest rates continued to decline during the quarter. Gain on sale of loans totaled $2.0 million for the quarter, increasing $1.3 million compared to the second quarter of 2020 driven by a higher amount of U.S. Small Business Administration (“SBA”) 7(a) guaranteed loan sales in the quarter as well as a gain on the sale of a portfolio of single tenant lease financing loans.

Noninterest Expense

Noninterest expense for the third quarter of 2020 was $16.4 million, compared to $13.2 million for the second quarter of 2020 and $11.2 million for the third quarter of 2019. The increase from the second quarter of 2020 was due primarily to a $2.1 million write-down of two legacy commercial OREO properties and a $1.7 million increase in salaries and employee benefits but was partially offset by a $0.4 million decrease in other expense and a $0.3 million decrease in consulting and professional fees. The higher salaries and employee benefits expense was due mainly to higher incentive compensation related to the increased mortgage production as well as an increase in headcount and incentive compensation in the Company’s small business lending division.

Income Taxes

Income tax expense was $1.4 million, reflecting an effective tax rate of 14.2%, for the third quarter of 2020, compared to an income tax benefit of $0.3 million for the second quarter of 2020 and a $0.4 million expense and an effective tax rate of 6.6% for the third quarter of 2019. The increase in income taxes during the quarter was due primarily to the increase in pre-tax earnings driven by a higher proportion of taxable revenue from mortgage banking and gain on sale of loans.

Loans and Credit Quality

Total loans as of September 30, 2020 were $3.0 billion, an increase of $39.2 million, or 1.3%, compared to June 30, 2020, and an increase of $131.6 million, or 4.6%, compared to September 30, 2019. Total commercial loan balances were $2.4 billion as of September 30, 2020, an increase of $56.2 million, or 2.4%, compared to June 30, 2020 and an increase of $248.7 million, or 11.3%, compared to September 30, 2019. Compared to the linked quarter, the growth in commercial loan balances was driven largely by production in healthcare finance and construction lending as businesses resumed operations following limited activity in the second quarter.

Total consumer loan balances were $507.7 million as of September 30, 2020, a decrease of $15.3 million, or 2.9%, compared to June 30, 2020 and a decrease of $134.4 million, or 20.9%, compared to September 30, 2019. The decline in consumer loan balances from June 30, 2020 was due primarily to increased prepayment activity across the portfolio.

Total delinquencies 30 days or more past due decreased to 0.22% of total loans as of September 30, 2020, down from 0.25% as of June 30, 2020 and up from 0.13% as of September 30, 2019. Overall credit quality remained relatively stable as nonperforming loans to total loans was 0.32% as of September 30, 2020, compared to 0.28% at June 30, 2020 and 0.20% as of September 30, 2019.

The allowance for loan losses as a percentage of total loans was 0.89% as of September 30, 2020, or 0.91% when excluding SBA PPP loans, compared to 0.82% as of June 30, 2020 and 0.75% as of September 30, 2019. During the quarter, the Company continued to make additional adjustments to qualitative factors in its allowance model to reflect the continued economic uncertainty resulting from the COVID-19 pandemic. As a result, both the amount of the allowance for loan losses and the allowance as a percentage of total loans increased compared to June 30, 2020.

Net charge-offs of $0.1 million were recognized during the third quarter of 2020, resulting in net charge-offs to average loans of 0.01%, as compared to 0.12% in the second quarter of 2020 and 0.15% in the third quarter of 2019. The provision for loan losses in the third quarter of 2020 was $2.5 million, consistent with the second quarter of 2020 and down from $2.8 million for the third quarter of 2019.

Capital

As of September 30, 2020, total shareholders’ equity was $318.1 million, an increase of $10.4 million, or 3.4%, compared to June 30, 2020, due primarily to the net income earned during the quarter and an increase in the after-tax valuations of the Company’s available-for-sale securities portfolio and cash flow hedges. Book value per common share increased to $32.46 as of September 30, 2020, up from $31.40 as of June 30, 2020 and $30.30 as of September 30, 2019. Tangible book value per common share increased to $31.98, up from $30.92 and $29.82, each as of the same reference dates.

The following table presents the Company’s and the Bank’s regulatory and other capital ratios as of September 30, 2020.

		As of September 30, 2020
		Company		Bank
Total shareholders' equity to assets		7.34%		8.12%
Tangible common equity to tangible assets 1		7.24%		8.02%
Tier 1 leverage ratio 2		7.72%		8.50%
Common equity tier 1 capital ratio 2		11.13%		12.27%
Tier 1 capital ratio 2		11.13%		12.27%
Total risk-based capital ratio 2		14.38%		13.17%
1 This information represents a non-GAAP financial measure. For a discussion of non-GAAP financial measures, see the section below entitled "Non-GAAP Financial Measures."
2 Regulatory capital ratios are preliminary pending filing of the Company's and the Bank's regulatory reports.

Conference Call and Webcast

The Company will host a conference call and webcast at 12:00 p.m. Eastern Time on Thursday, October 22, 2020 to discuss its quarterly financial results. The call can be accessed via telephone at (888) 348-3664. A recorded replay can be accessed through November 22, 2020 by dialing (877) 344-7529; passcode: 10148690.

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

About First Internet Bancorp

First Internet Bancorp is a bank holding company with assets of $4.3 billion as of September 30, 2020. The Company’s subsidiary, First Internet Bank, opened for business in 1999 as an industry pioneer in the branchless delivery of banking services. The Bank provides consumer and small business deposit, consumer loan, residential mortgage, and specialty finance services nationally as well as commercial real estate loans, commercial and industrial loans, SBA financing and treasury management services. First Internet Bancorp’s common stock trades on the Nasdaq Global Select Market under the symbol “INBK” and is a component of the Russell 2000® Index. Additional information about the Company is available at www.firstinternetbancorp.com and additional information about the Bank, including its products and services, is available at www.firstib.com.

Forward-Looking Statements

This press release may contain forward-looking statements with respect to the financial condition, results of operations, trends in lending policies, plans, objectives, future performance or business of the Company. Forward-looking statements are generally identifiable by the use of words such as “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “outlook,” “pending,” “plan,” “position,” “preliminary,” “remain,” “should,” “will,” “would” or other similar expressions. Forward-looking statements are not a guarantee of future performance or results, are based on information available at the time the statements are made and involve known and unknown risks, uncertainties and other factors that could cause actual results to differ materially from the information in the forward-looking statements. The COVID-19 pandemic has resulted in deterioration of general business and economic conditions and continued to impact us, our customers, counterparties, employees, and third-party service providers. Sustained deterioration in market conditions could adversely affect our revenues and the values of our assets and liabilities, reduce the availability of funding, lead to a tightening of credit and further increase stock price volatility. In addition, changes to statutes, regulations, or regulatory policies or practices as a result of, or in response to COVID-19, could affect us in substantial and unpredictable ways. The ultimate magnitude and duration of the pandemic is still unknown at this time, therefore, the extent of the impact on our business, financial position, results of operations, liquidity and prospects remains uncertain. Other factors that may cause such differences include: failures or breaches of or interruptions in the communications and information systems on which we rely to conduct our business; failure of our plans to grow our commercial real estate, commercial and industrial, public finance, SBA and healthcare finance loan portfolios; competition with national, regional and community financial institutions; the loss of any key members of senior management; fluctuations in interest rates; general economic conditions; risks relating to the regulation of financial institutions; and other factors identified in reports we file with the U.S. Securities and Exchange Commission. All statements in this press release, including forward-looking statements, speak only as of the date they are made, and the Company undertakes no obligation to update any statement in light of new information or future events.

Non-GAAP Financial Measures

This press release contains financial information determined by methods other than in accordance with U.S. generally accepted accounting principles (“GAAP”). Non-GAAP financial measures, specifically tangible common equity, tangible assets, tangible book value per common share, tangible common equity to tangible assets, average tangible common equity, return on average tangible common equity, total interest income – FTE, net interest income – FTE, net interest margin – FTE, allowance for loan losses to loans, excluding PPP loans, adjusted income before income taxes, adjusted income tax provision (benefit), adjusted net income, adjusted diluted earnings per share, adjusted return on average assets, adjusted return on shareholders’ equity, adjusted return on average tangible common equity and adjusted effective income tax rate are used by the Company’s management to measure the strength of its capital and analyze profitability, including its ability to generate earnings on tangible capital invested by its shareholders. Although management believes these non-GAAP measures are useful to investors by providing a greater understanding of its business, they should not be considered a substitute for financial measures determined in accordance with GAAP, nor are they necessarily comparable to non-GAAP performance measures that may be presented by other companies. Reconciliations of these non-GAAP financial measures to the most directly comparable GAAP financial measures are included in the table at the end of this release under the caption “Reconciliation of Non-GAAP Financial Measures.”

First Internet Bancorp Summary Financial Information (unaudited) Dollar amounts in thousands, except per share data
		Three Months Ended												Nine Months Ended
		September 30, 2020				June 30, 2020				September 30, 2019				September 30, 2020				September 30, 2019
Net income		$	8,411			$	3,932			$	6,326			$	18,362			$	18,143
Per share and share information
Earnings per share - basic		$	0.86			$	0.40			$	0.63			$	1.87			$	1.79
Earnings per share - diluted			0.86				0.40				0.63				1.87				1.79
Dividends declared per share			0.06				0.06				0.06				0.18				0.18
Book value per common share			32.46				31.40				30.30				32.46				30.30
Tangible book value per common share 1			31.98				30.92				29.82				31.98				29.82
Common shares outstanding			9,800,569				9,799,047				9,741,800				9,800,569				9,741,800
Average common shares outstanding:
Basic			9,773,175				9,768,227				9,979,603				9,825,683				10,114,303
Diluted			9,773,224				9,768,227				9,980,612				9,827,182				10,116,507
Performance ratios
Return on average assets			0.78	%			0.37	%			0.63	%			0.58	%			0.64	%
Return on average shareholders' equity			10.67	%			5.15	%			8.40	%			7.90	%			8.20	%
Return on average tangible common equity 1			10.83	%			5.23	%			8.53	%			8.02	%			8.33	%
Net interest margin			1.53	%			1.37	%			1.54	%			1.47	%			1.70	%
Net interest margin - FTE 1,2			1.67	%			1.50	%			1.70	%			1.61	%			1.87	%
Capital ratios 3
Total shareholders' equity to assets			7.34	%			7.12	%			7.21	%			7.34	%			7.21	%
Tangible common equity to tangible assets 1			7.24	%			7.01	%			7.10	%			7.24	%			7.10	%
Tier 1 leverage ratio			7.72	%			7.49	%			7.66	%			7.72	%			7.66	%
Common equity tier 1 capital ratio			11.13	%			10.94	%			10.93	%			11.13	%			10.93	%
Tier 1 capital ratio			11.13	%			10.94	%			10.93	%			11.13	%			10.93	%
Total risk-based capital ratio			14.38	%			14.13	%			14.17	%			14.38	%			14.17	%
Asset quality
Nonperforming loans		$	9,774			$	8,195			$	5,783			$	9,774			$	5,783
Nonperforming assets			9,782				10,304				8,497				9,782				8,497
Nonperforming loans to loans			0.32	%			0.28	%			0.20	%			0.32	%			0.20	%
Nonperforming assets to total assets			0.23	%			0.24	%			0.21	%			0.23	%			0.21	%
Allowance for loan losses to:
Loans			0.89	%			0.82	%			0.75	%			0.89	%			0.75	%
Loans, excluding PPP loans 1			0.91	%			0.84	%			0.75	%			0.91	%			0.75	%
Nonperforming loans			275.4	%			298.5	%			374.9	%			275.4	%			374.9	%
Net charge-offs to average loans			0.01	%			0.12	%			0.15	%			0.06	%			0.08	%
Average balance sheet information
Loans		$	2,996,641			$	2,943,165			$	2,865,258			$	2,957,116			$	2,838,685
Total securities			633,552				657,622				561,780				640,659				547,940
Other earning assets			552,058				594,296				469,454				520,875				322,544
Total interest-earning assets			4,216,634				4,241,690				3,933,315				4,161,245				3,735,286
Total assets			4,307,819				4,330,174				4,015,433				4,246,201				3,817,408
Noninterest-bearing deposits			75,901				73,758				43,972				70,060				43,035
Interest-bearing deposits			3,279,621				3,270,720				3,031,095				3,213,372				2,880,701
Total deposits			3,355,522				3,344,478				3,075,067				3,283,432				2,923,736
Shareholders' equity			313,611				306,868				298,782				310,506				295,963
1 Refer to "Non-GAAP Financial Measures" section above and "Reconciliation of Non-GAAP Financial Measures" below
2 On a fully-taxable equivalent ("FTE") basis assuming a 21% tax rate
3 Regulatory capital ratios are preliminary pending filing of the Company's regulatory reports

First Internet Bancorp Condensed Consolidated Balance Sheets (unaudited) Amounts in thousands
		September 30, 2020				June 30, 2020				September 30, 2019
Assets
Cash and due from banks		$	5,804			$	7,016			$	6,283
Interest-bearing deposits			482,649				491,603				410,119
Securities available-for-sale, at fair value			528,311				589,017				544,742
Securities held-to-maturity, at amortized cost			68,254				68,295				46,807
Loans held-for-sale			76,208				38,813				41,119
Loans			3,012,914				2,973,674				2,881,272
Allowance for loan losses			(26,917	)			(24,465	)			(21,683	)
Net loans			2,985,997				2,949,209				2,859,589
Accrued interest receivable			17,768				21,093				16,652
Federal Home Loan Bank of Indianapolis stock			25,650				25,650				25,650
Cash surrender value of bank-owned life insurance			37,714				37,474				36,764
Premises and equipment, net			31,262				23,939				14,512
Goodwill			4,687				4,687				4,687
Servicing asset			2,818				2,522				-
Other real estate owned			-				2,065				2,619
Accrued income and other assets			66,502				63,217				85,948
Total assets		$	4,333,624			$	4,324,600			$	4,095,491
Liabilities
Noninterest-bearing deposits		$	86,088			$	82,864			$	50,560
Interest-bearing deposits			3,286,303				3,297,925				3,097,682
Total deposits			3,372,391				3,380,789				3,148,242
Advances from Federal Home Loan Bank			514,914				514,913				514,908
Subordinated debt			69,758				69,681				69,452
Accrued interest payable			1,249				1,073				2,635
Accrued expenses and other liabilities			57,210				50,433				65,114
Total liabilities			4,015,522				4,016,889				3,800,351
Shareholders' equity
Voting common stock			220,951				220,418				219,013
Retained earnings			116,241				108,431				93,182
Accumulated other comprehensive loss			(19,090	)			(21,138	)			(17,055	)
Total shareholders' equity			318,102				307,711				295,140
Total liabilities and shareholders' equity		$	4,333,624			$	4,324,600			$	4,095,491

First Internet Bancorp Condensed Consolidated Statements of Income (unaudited) Amounts in thousands, except per share data
		Three Months Ended											Nine Months Ended
		September 30, 2020				June 30, 2020				September 30, 2019			September 30, 2020				September 30, 2019
Interest income
Loans		$	29,560			$	29,730			$	30,594		$	89,698			$	90,654
Securities - taxable			2,240				3,276				3,468			9,135				10,332
Securities - non-taxable			381				457				639			1,410				1,991
Other earning assets			569				759				2,993			2,973				6,560
Total interest income			32,750				34,222				37,694			103,216				109,537
Interest expense
Deposits			12,428				15,763				18,363			45,399				50,896
Other borrowed funds			4,090				4,033				4,087			12,141				11,048
Total interest expense			16,518				19,796				22,450			57,540				61,944
Net interest income			16,232				14,426				15,244			45,676				47,593
Provision for loan losses			2,509				2,491				2,824			6,461				5,498
Net interest income after provision
for loan losses			13,723				11,935				12,420			39,215				42,095
Noninterest income
Service charges and fees			224				182				211			618				672
Loan servicing revenue			274				255				-			780				-
Loan servicing asset revaluation			(103	)			(90	)			-			(372	)			-
Mortgage banking activities			9,630				3,408				4,307			16,706				8,588
Gain on sale of loans			2,033				762				523			4,596				353
Gain (loss) on sale of securities			98				-				-			139				(458	)
Other			339				456				517			1,212				2,229
Total noninterest income			12,495				4,973				5,558			23,679				11,384
Noninterest expense
Salaries and employee benefits			9,533				7,789				6,883			25,096				19,846
Marketing, advertising and promotion			426				411				456			1,212				1,391
Consulting and professional fees			614				932				778			2,723				2,427
Data processing			388				339				381			1,102				1,026
Loan expenses			408				399				247			1,406				853
Premises and equipment			1,568				1,602				1,506			4,795				4,503
Deposit insurance premium			440				435				-			1,360				1,302
Write-down of other real estate owned			2,065				-				-			2,065				-
Other			970				1,337				952			3,383				2,673
Total noninterest expense			16,412				13,244				11,203			43,142				34,021
Income before income taxes			9,806				3,664				6,775			19,752				19,458
Income tax provision (benefit)			1,395				(268	)			449			1,390				1,315
Net income		$	8,411			$	3,932			$	6,326		$	18,362			$	18,143
Per common share data
Earnings per share - basic		$	0.86			$	0.40			$	0.63		$	1.87			$	1.79
Earnings per share - diluted		$	0.86			$	0.40			$	0.63		$	1.87			$	1.79
Dividends declared per share		$	0.06			$	0.06			$	0.06		$	0.18			$	0.18
All periods presented have been reclassified to conform to the current period classification.

First Internet Bancorp Average Balances and Rates (unaudited) Dollar amounts in thousands
		Three Months Ended
		September 30, 2020										June 30, 2020										September 30, 2019
		Average Balance				Interest / Dividends			Yield / Cost			Average Balance				Interest / Dividends			Yield / Cost			Average Balance				Interest / Dividends			Yield / Cost
Assets
Interest-earning assets
Loans, including loans held-for-sale 1		$	3,031,024			$	29,560		3.88	%		$	2,989,772			$	29,730		4.00	%		$	2,902,081			$	30,594		4.18	%
Securities - taxable			539,154				2,240		1.65	%			560,947				3,276		2.35	%			462,490			$	3,468		2.97	%
Securities - non-taxable			94,398				381		1.61	%			96,675				457		1.90	%			99,290			$	639		2.55	%
Other earning assets			552,058				569		0.41	%			594,296				759		0.51	%			469,454			$	2,993		2.53	%
Total interest-earning assets			4,216,634				32,750		3.09	%			4,241,690				34,222		3.24	%			3,933,315				37,694		3.80	%
Allowance for loan losses			(25,347	)									(23,388	)									(20,050	)
Noninterest-earning assets			116,532										111,872										102,168
Total assets		$	4,307,819									$	4,330,174									$	4,015,433
Liabilities
Interest-bearing liabilities
Interest-bearing demand deposits		$	154,275			$	228		0.59	%		$	137,487			$	237		0.69	%		$	126,130			$	233		0.73	%
Savings accounts			45,466				79		0.69	%			37,204				92		0.99	%			32,434				91		1.11	%
Money market accounts			1,295,249				2,442		0.75	%			1,089,063				3,541		1.31	%			639,181				3,261		2.02	%
Certificates and brokered deposits			1,784,631				9,679		2.16	%			2,006,966				11,893		2.38	%			2,233,350				14,778		2.63	%
Total interest-bearing deposits			3,279,621				12,428		1.51	%			3,270,720				15,763		1.94	%			3,031,095				18,363		2.40	%
Other borrowed funds			584,634				4,090		2.78	%			584,543				4,033		2.77	%			584,308				4,087		2.78	%
Total interest-bearing liabilities			3,864,255				16,518		1.70	%			3,855,263				19,796		2.07	%			3,615,403				22,450		2.46	%
Noninterest-bearing deposits			75,901										73,758										43,972
Other noninterest-bearing liabilities			54,052										94,285										57,276
Total liabilities			3,994,208										4,023,306										3,716,651
Shareholders' equity			313,611										306,868										298,782
Total liabilities and shareholders' equity		$	4,307,819									$	4,330,174									$	4,015,433
Net interest income						$	16,232									$	14,426									$	15,244
Interest rate spread									1.39	%									1.17	%									1.34	%
Net interest margin									1.53	%									1.37	%									1.54	%
Net interest margin - FTE 2,3									1.67	%									1.50	%									1.70	%
1 Includes nonaccrual loans
2 On a fully-taxable equivalent ("FTE") basis assuming a 21% tax rate
3 Refer to "Non-GAAP Financial Measures" section above and "Reconciliation of Non-GAAP Financial Measures" below

First Internet Bancorp Average Balances and Rates (unaudited) Dollar amounts in thousands
		Nine Months Ended
		September 30, 2020										September 30, 2019
		Average Balance				Interest / Dividends			Yield / Cost			Average Balance				Interest / Dividends			Yield / Cost
Assets
Interest-earning assets
Loans, including loans held-for-sale 1		$	2,999,711			$	89,698		3.99	%		$	2,864,802			$	90,654		4.23	%
Securities - taxable			543,699				9,135		2.24	%			450,898				10,332		3.06	%
Securities - non-taxable			96,960				1,410		1.94	%			97,042				1,991		2.74	%
Other earning assets			520,875				2,973		0.76	%			322,544				6,560		2.72	%
Total interest-earning assets			4,161,245				103,216		3.31	%			3,735,286				109,537		3.92	%
Allowance for loan losses			(23,605	)									(19,191	)
Noninterest-earning assets			108,561										101,313
Total assets		$	4,246,201									$	3,817,408
Liabilities
Interest-bearing liabilities
Interest-bearing demand deposits		$	138,288			$	684		0.66	%		$	117,811			$	659		0.75	%
Savings accounts			37,700				249		0.88	%			36,241				304		1.12	%
Money market accounts			1,084,411				9,726		1.20	%			598,410				9,009		2.01	%
Certificates and brokered deposits			1,952,973				34,740		2.38	%			2,128,239				40,924		2.57	%
Total interest-bearing deposits			3,213,372				45,399		1.89	%			2,880,701				50,896		2.36	%
Other borrowed funds			584,547				12,141		2.77	%			558,141				11,048		2.65	%
Total interest-bearing liabilities			3,797,919				57,540		2.02	%			3,438,842				61,944		2.41	%
Noninterest-bearing deposits			70,060										43,035
Other noninterest-bearing liabilities			67,716										39,568
Total liabilities			3,935,695										3,521,445
Shareholders' equity			310,506										295,963
Total liabilities and shareholders' equity		$	4,246,201									$	3,817,408
Net interest income						$	45,676									$	47,593
Interest rate spread									1.29	%									1.51	%
Net interest margin									1.47	%									1.70	%
Net interest margin - FTE 2,3									1.61	%									1.87	%
1 Includes nonaccrual loans
2 On a fully-taxable equivalent ("FTE") basis assuming a 21% tax rate
3 Refer to "Non-GAAP Financial Measures" section above and "Reconciliation of Non-GAAP Financial Measures" below

First Internet Bancorp Loans and Deposits (unaudited) Dollar amounts in thousands
		September 30, 2020							June 30, 2020							September 30, 2019
		Amount			Percent				Amount			Percent				Amount			Percent
Commercial loans
Commercial and industrial		$	77,116			2.6	%		$	81,687			2.7	%		$	83,481			2.9	%
Owner-occupied commercial real estate			89,095			3.0	%			86,897			2.9	%			86,357			3.0	%
Investor commercial real estate			13,084			0.4	%			13,286			0.4	%			11,852			0.4	%
Construction			92,154			3.1	%			77,591			2.6	%			54,131			1.9	%
Single tenant lease financing			960,505			31.9	%			980,292			33.0	%			1,008,247			35.0	%
Public finance			625,638			20.8	%			647,107			21.8	%			686,622			23.8	%
Healthcare finance			461,740			15.3	%			380,956			12.8	%			251,530			8.6	%
Small business lending			123,168			4.1	%			118,526			4.0	%			11,597			0.4	%
Total commercial loans			2,442,500			81.2	%			2,386,342			80.2	%			2,193,817			76.0	%
Consumer loans
Residential mortgage			203,041			6.7	%			208,728			7.0	%			320,451			11.1	%
Home equity			22,169			0.7	%			22,640			0.8	%			25,042			0.9	%
Trailers			145,775			4.8	%			147,326			5.0	%			145,600			5.1	%
Recreational vehicles			96,910			3.2	%			102,088			3.4	%			102,698			3.6	%
Other consumer loans			39,765			1.3	%			42,218			1.4	%			48,275			1.7	%
Total consumer loans			507,660			16.7	%			523,000			17.6	%			642,066			22.4	%
Net deferred loan fees, premiums, discounts and other 1			62,754			2.1	%			64,332			2.2	%			45,389			1.6	%
Total loans		$	3,012,914			100.0	%		$	2,973,674			100.0	%		$	2,881,272			100.0	%
		September 30, 2020							June 30, 2020							September 30, 2019
		Amount			Percent				Amount			Percent				Amount			Percent
Deposits
Noninterest-bearing deposits		$	86,088			2.6	%		$	82,864			2.5	%		$	50,560			1.6	%
Interest-bearing demand deposits			155,054			4.6	%			152,391			4.5	%			122,551			3.9	%
Savings accounts			49,890			1.5	%			43,366			1.3	%			34,886			1.1	%
Money market accounts			1,359,178			40.3	%			1,241,874			36.7	%			698,077			22.2	%
Certificates of deposits			1,360,575			40.3	%			1,470,905			43.5	%			1,681,377			53.4	%
Brokered deposits			361,606			10.7	%			389,389			11.5	%			560,791			17.8	%
Total deposits		$	3,372,391			100.0	%		$	3,380,789			100.0	%		$	3,148,242			100.0	%
1 Includes carrying value adjustments of $44.3 million and $46.0 million related to terminated interest rate swaps associated with public finance loans as of September 30, 2020 and June 30, 2020, respectively, and $27.6 million as of September 30, 2019 related to interest rate swaps associated with public finance loans.

First Internet Bancorp Reconciliation of Non-GAAP Financial Measures Dollar amounts in thousands, except per share data
		Three Months Ended												Nine Months Ended
		September 30, 2020				June 30, 2020				September 30, 2019				September 30, 2020				September 30, 2019
Total equity - GAAP		$	318,102			$	307,711			$	295,140			$	318,102			$	295,140
Adjustments:
Goodwill			(4,687	)			(4,687	)			(4,687	)			(4,687	)			(4,687	)
Tangible common equity		$	313,415			$	303,024			$	290,453			$	313,415			$	290,453
Total assets - GAAP		$	4,333,624			$	4,324,600			$	4,095,491			$	4,333,624			$	4,095,491
Adjustments:
Goodwill			(4,687	)			(4,687	)			(4,687	)			(4,687	)			(4,687	)
Tangible assets		$	4,328,937			$	4,319,913			$	4,090,804			$	4,328,937			$	4,090,804
Common shares outstanding			9,800,569				9,799,047				9,741,800				9,800,569				9,741,800
Book value per common share		$	32.46			$	31.40			$	30.30			$	32.46			$	30.30
Effect of goodwill			(0.48	)			(0.48	)			(0.48	)			(0.48	)			(0.48	)
Tangible book value per common share		$	31.98			$	30.92			$	29.82			$	31.98			$	29.82
Total shareholders' equity to assets			7.34	%			7.12	%			7.21	%			7.34	%			7.21	%
Effect of goodwill			(0.10	%)			(0.11	%)			(0.11	%)			(0.10	%)			(0.11	%)
Tangible common equity to tangible assets			7.24	%			7.01	%			7.10	%			7.24	%			7.10	%
Total average equity - GAAP		$	313,611			$	306,868			$	298,782			$	310,506			$	295,963
Adjustments:
Average goodwill			(4,687	)			(4,687	)			(4,687	)			(4,687	)			(4,687	)
Average tangible common equity		$	308,924			$	302,181			$	294,095			$	305,819			$	291,276
Return on average shareholders' equity			10.67	%			5.15	%			8.40	%			7.90	%			8.20	%
Effect of goodwill			0.16	%			0.08	%			0.13	%			0.12	%			0.13	%
Return on average tangible common equity			10.83	%			5.23	%			8.53	%			8.02	%			8.33	%
Total interest income		$	32,750			$	34,222			$	37,694			$	103,216			$	109,537
Adjustments:
Fully-taxable equivalent adjustments 1			1,424				1,437				1,595				4,396				4,764
Total interest income - FTE		$	34,174			$	35,659			$	39,289			$	107,612			$	114,301
Net interest income		$	16,232			$	14,426			$	15,244			$	45,676			$	47,593
Adjustments:
Fully-taxable equivalent adjustments 1			1,424				1,437				1,595				4,396				4,764
Net interest income - FTE		$	17,656			$	15,863			$	16,839			$	50,072			$	52,357
Net interest margin			1.53	%			1.37	%			1.54	%			1.47	%			1.70	%
Effect of fully-taxable equivalent adjustments 1			0.14	%			0.13	%			0.16	%			0.14	%			0.17	%
Net interest margin - FTE			1.67	%			1.50	%			1.70	%			1.61	%			1.87	%
Allowance for loan losses		$	26,917			$	24,465			$	21,683			$	26,917			$	21,683
Loans		$	3,012,914			$	2,973,674			$	2,881,272			$	3,012,914			$	2,881,272
Adjustments:
PPP loans			(58,337	)			(58,948	)			-				(58,337	)			-
Loans, excluding PPP loans		$	2,954,577			$	2,914,726			$	2,881,272			$	2,954,577			$	2,881,272
Allowance for loan losses to loans			0.89	%			0.82	%			0.75	%			0.89	%			0.75	%
Effect of PPP loans			0.02	%			0.02	%			0.00	%			0.02	%			0.00	%
Allowance for loan losses to loans, excluding PPP loans			0.91	%			0.84	%			0.75	%			0.91	%			0.75	%
1 Assuming a 21% tax rate

First Internet Bancorp Reconciliation of Non-GAAP Financial Measures Amounts in thousands, except per share data
		Three Months Ended												Nine Months Ended
		September 30, 2020				June 30, 2020				September 30, 2019				September 30, 2020				September 30, 2019
Income before income taxes - GAAP		$	9,806			$	3,664			$	6,775			$	19,752			$	19,458
Adjustments:
Write-down of other real estate owned			2,065				-				-				2,065				-
Adjusted income before income taxes		$	11,871			$	3,664			$	6,775			$	21,817			$	19,458
Income tax provision (benefit) - GAAP		$	1,395			$	(268	)		$	449			$	1,390			$	1,315
Adjustments:
Write-down of other real estate owned			434				-				-				434				-
Adjusted income tax provision (benefit)		$	1,829			$	(268	)		$	449			$	1,824			$	1,315
Net income - GAAP		$	8,411			$	3,932			$	6,326			$	18,362			$	18,143
Adjustments:
Write-down of other real estate owned			1,631				-				-				1,631				-
Adjusted net income		$	10,042			$	3,932			$	6,326			$	19,993			$	18,143
Diluted average common shares outstanding			9,773,224				9,768,227				9,980,612				9,827,182				10,116,507
Diluted earnings per share - GAAP		$	0.86			$	0.40			$	0.63			$	1.87			$	1.79
Adjustments:
Effect of write-down of other real estate owned			0.17				-				-				0.16				-
Adjusted diluted earnings per share		$	1.03			$	0.40			$	0.63			$	2.03			$	1.79
Return on average assets			0.78	%			0.37	%			0.63	%			0.58	%			0.64	%
Effect of write-down of other real estate owned			0.15	%			0.00	%			0.00	%			0.05	%			0.00	%
Adjusted return on average assets			0.93	%			0.37	%			0.63	%			0.63	%			0.64	%
Return on average shareholders' equity			10.67	%			5.15	%			8.40	%			7.90	%			8.20	%
Effect of write-down of other real estate owned			2.07	%			0.00	%			0.00	%			0.70	%			0.00	%
Adjusted return on average shareholders' equity			12.74	%			5.15	%			8.40	%			8.60	%			8.20	%
Return on average tangible common equity			10.83	%			5.23	%			8.53	%			8.02	%			8.33	%
Effect of write-down of other real estate owned			2.10	%			0.00	%			0.00	%			0.71	%			0.00	%
Adjusted return on average tangible common equity			12.93	%			5.23	%			8.53	%			8.73	%			8.33	%
Effective income tax rate			14.2	%			(7.3	%)			6.6	%			7.0	%			6.8	%
Effect of write-down of other real estate owned			1.2	%			0.0	%			0.0	%			1.4	%			0.0	%
Adjusted effective income tax rate			15.4	%			(7.3	%)			6.6	%			8.4	%			6.8	%