First Internet Bancorp Reports Third Quarter 2023 Results

Rhea-AI Summary

First Internet Bancorp announces financial results for Q3 2023

Positive

• Net income of $3.4 million and diluted earnings per share of $0.39
• Deposit growth of $229.2 million, a 5.9% increase from Q2 2023
• Loan growth of $88.2 million, a 2.4% increase from Q2 2023
• Nonperforming loans declined to 0.16% of total loans
• Tangible common equity to tangible assets of 6.64%
• CET1 ratio of 9.59%
• Tangible book value per share of $39.57

Negative

• Net interest margin decreased to 1.39% from 1.53% in Q2 2023
• Total interest expense increased by $5.7 million, or 14.2%
• Net interest margin of 1.39%, down from 2.40% in Q3 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 third quarter ended September 30, 2023.

Third Quarter 2023 Financial Highlights

• Net income of $3.4 million and diluted earnings per share of $0.39
• Deposit growth of $229.2 million, a 5.9% increase from the second quarter of 2023
• Loan growth of $88.2 million, a 2.4% increase from the second quarter of 2023
• The loans to deposits ratio was 91.5%, compared to 94.6% at the prior quarter-end
• Net interest margin of 1.39% and fully-taxable equivalent net interest margin of 1.49%, compared to 1.53% and 1.64%, respectively, for the second quarter of 2023
• Nonperforming loans declined to 0.16% of total loans
• Repurchased 97,834 common shares at an average price of $18.29 per share
• Tangible common equity to tangible assets of 6.64%; CET1 ratio of 9.59%
• Tangible book value per share of $39.57, compared to $39.85 at the prior quarter-end

“We experienced strong deposit growth and bolstered our balance sheet liquidity during the third quarter,” said David Becker, Chairman and Chief Executive Officer. “At the same time, we further optimized our loan portfolio composition and overall balance sheet mix as new origination yields continued to improve while the pace of deposit cost increases and the compression in our net interest margin was the slowest it has been in five quarters.

“Growth in noninterest income was fueled by our SBA lending team, which delivered another strong quarter with gain on sale revenue up 14% from the prior quarter. We ended the SBA fiscal year among the top ten most active lenders. I am proud of the continued success of this team.

“Amidst economic and geopolitical uncertainty, our stalwart foundation remains intact. Overall asset quality is sound. Our capital position is strong. Our teams are focused. We believe we are well-positioned to improve our earnings and profitability profile as funding costs stabilize.”

Net Interest Income and Net Interest Margin

Net interest income for the third quarter of 2023 was $17.4 million, compared to $18.1 million for the second quarter of 2023, and $24.0 million for the third quarter of 2022. On a fully-taxable equivalent basis, net interest income for the third quarter of 2023 was $18.6 million, compared to $19.5 million for the second quarter of 2023, and $25.3 million for the third quarter of 2022.

Total interest income for the third quarter of 2023 was $63.0 million, an increase of 8.4% compared to the second quarter of 2023, and an increase of 61.2% compared to the third quarter of 2022. On a fully-taxable equivalent basis, total interest income for the third quarter of 2023 was $64.3 million, an increase of 8.1% compared to the second quarter of 2023, and an increase of 59.2% compared to the third quarter of 2022. The yield on average interest-earning assets for the third quarter of 2023 increased to 5.02% from 4.89% for the second quarter of 2023 due to a 29 basis point (“bp”) increase in the yield earned on other earning assets, a 9 bp increase in the yield earned on loans, and a 20 bp increase in the yield earned on securities. Compared to the linked quarter, the average balance of other earning assets increased $142.1 million, or 27.8%, while average loan balances increased $44.9 million, or 1.2%, and the average balance of securities increased $18.0 million, or 3.0%.

Interest income earned on commercial loans was higher due to increased average balances and the positive impact of higher rates in the variable rate construction and small business lending portfolios, as well as growth and higher yields on new originations in the franchise finance portfolio. This was partially offset by lower average balances in the public finance, healthcare finance, single tenant lease financing and investor commercial real estate portfolios. The shift in loan mix is the result of a strategic initiative to focus on variable rate and higher-yielding products during a historic period of rapidly rising rates.

In the consumer loan portfolio, interest income was up due to higher yields on new originations and growth in the average balances of trailers, recreational vehicles and other consumer loans portfolios.

The yield on funded portfolio loan originations was 8.92% in the third quarter of 2023, an increase of 50 bps compared to the second quarter of 2023, and an increase of 362 bps compared to the third quarter of 2022. Because certain larger portfolios consist of longer duration, fixed rate loans, new origination yields have a gradual effect on the overall loan portfolio.

Interest earned on cash and other earning asset balances increased $2.4 million, or 36.5%, during the quarter due to the impact of higher short-term interest rates on cash balances as well as a $142.1 million, or 29.6%, increase in average cash balances. Furthermore, interest income earned on securities increased $0.5 million, or 11.0%, during the third quarter of 2023 due to an increase in the yield earned on the portfolio and an increase in average balances. The yield on the securities portfolio increased 20 bps to 3.32%, driven primarily by variable rate securities repricing higher and increased yields on new purchases.

Total interest expense for the third quarter of 2023 was $45.6 million, an increase of $5.7 million, or 14.2%, compared to the linked quarter, due to increases in both deposit rates and average interest-bearing deposit balances throughout the quarter. Interest expense related to interest-bearing deposits increased $5.7 million, or 16.3%, driven primarily by higher costs on CDs, interest-bearing demand deposits and money market accounts. The cost of interest-bearing deposits was 4.09% for the third quarter of 2023, compared to 3.75% for the second quarter of 2023. The pace of increase in deposit costs during the third quarter was the slowest experienced by the Company in the past five quarters.

Average CD balances increased $273.1 million, or 21.2%, while the cost of funds increased 53 bps. Early in the quarter, the Company strategically bolstered its liquidity position ahead of the anticipated Fed Funds rate increase in late July. The average balance of interest-bearing demand deposits increased $27.5 million, or 7.7%, due to higher average Banking-as-a-Service balances, while the cost of funds increased 50 bps.

These increases were partially offset by lower average brokered deposit balances, which decreased $63.6 million, or 8.6%, from the second quarter of 2023, as the Company reduced the balance of higher cost brokered funding over the last two quarters.

Net interest margin (“NIM”) was 1.39% for the third quarter of 2023, down from 1.53% for the second quarter of 2023, and 2.40% for the third quarter of 2022. Fully-taxable equivalent NIM (“FTE NIM”) was 1.49% for the third quarter of 2023, down from 1.64% for the second quarter of 2023, and 2.53% for the third 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. Higher cash balances, which the Company continued to carry given the volatility in the banking industry over the last several months, were estimated to have negatively impacted both NIM and FTE NIM by 10 to 12 bps.

Noninterest Income

Noninterest income for the third quarter of 2023 was $7.4 million, up $1.5 million, or 26.2%, from the second quarter of 2023, and up $3.1 million, or 71.6%, from the third quarter of 2022. Gain on sale of loans totaled $5.6 million for the third quarter of 2023, up $0.7 million, or 14.4%, from the linked quarter. Gain on sale revenue in the quarter, which consisted entirely of sales of U.S. Small Business Administration (“SBA”) 7(a) guaranteed loans, increased due to a higher volume of loan sales, partially offset by modestly lower net premiums. The Company’s SBA lending team closed out the SBA fiscal year ended September 30, 2023 as the ninth most active 7(a) lender in the nation by loan dollars. Net loan servicing revenue increased $0.3 million during the quarter due to growth in the servicing portfolio as well as a lower fair value adjustment to the loan servicing asset. Other income increased $0.5 million from the prior quarter due primarily to income from fund investments.

Noninterest Expense

Noninterest expense for the third quarter of 2023 was $19.8 million, up $1.1 million, or 5.8%, from the second quarter of 2023, and up $1.8 million, or 9.8%, from the third quarter of 2022. Salaries and employee benefits expense increased $1.1 million, or 9.9%, compared to the second quarter of 2023 due mainly to higher benefit plan costs as well as higher incentive compensation in SBA and construction lending. Loan expenses increased from the linked quarter due to higher third party loan servicing fees and other miscellaneous lending costs. Data processing costs increased due to variable deposit activity-based expenses. These increases were partially offset by declines in premises and equipment, marketing expenses and consulting and professional fees.

Income Taxes

The Company recognized an income tax benefit of $0.3 million for the third quarter of 2023, compared to an income tax benefit of $0.2 million for the second quarter of 2023, and an income tax expense of $1.0 million and an effective tax rate of 10.5% for the third quarter of 2022. The income tax benefit in the third quarter of 2023 reflects the benefit of tax-exempt income relative to the amount of stated pre-tax income.

Loans and Credit Quality

Total loans as of September 30, 2023 were $3.7 billion, an increase of $88.2 million, or 2.4%, compared to June 30, 2023, and an increase of $479.2 million, or 14.7%, compared to September 30, 2022. Total commercial loan balances were $2.9 billion as of September 30, 2023, an increase of $77.2 million, or 2.7%, compared to June 30, 2023, and an increase of $373.2 million, or 14.7%, compared to September 30, 2022. Compared to the linked quarter, the increase in commercial loan balances was driven primarily by strategic growth in higher yielding franchise finance, construction and small business lending balances. These items were partially offset by planned decreases in the fixed-rate public finance, single tenant lease financing and investor commercial real estate portfolios as well as continued runoff in the healthcare finance portfolio.

Total consumer loan balances were $786.5 million as of September 30, 2023, an increase of $13.8 million, or 1.8%, compared to June 30, 2023, and an increase of $114.3 million, or 17.0%, compared to September 30, 2022. The increase compared to the linked quarter was due primarily to higher balances in the trailers, recreational vehicles and other consumer loans portfolios.

Total delinquencies 30 days or more past due were 0.22% of total loans as of September 30, 2023, compared to 0.09% at June 30, 2023, and 0.06% as of September 30, 2022. Nonperforming loans were 0.16% of total loans as of September 30, 2023, compared to 0.17% as of June 30, 2023, and 0.18% as of September 30, 2022. Nonperforming loans totaled $5.9 million at September 30, 2023, down from $6.2 million at June 30, 2023. The decrease was due primarily to an owner-occupied commercial real estate relationship that was returned to accrual status during the third quarter of 2023.

The allowance for credit losses (“ACL”) as a percentage of total loans was 0.98% as of September 30, 2023, compared to 0.99% as of June 30, 2023, and 0.92% as of September 30, 2022. The slight decrease in the ACL reflects the positive impact of economic data on forecasted loss rates and adjustments to qualitative factors on certain portfolios, partially offset by specific reserves placed on certain loans.

Net charge-offs of $1.5 million were recognized during the third quarter of 2023, resulting in net charge-offs to average loans of 0.16%, compared to $1.6 million, or 0.17%, for the second quarter of 2023 and $0.2 million, or 0.02%, for the third quarter of 2022. Net charge-offs during the third quarter of 2023 were driven primarily by small business lending as well as a loss on the sale of a commercial and industrial participation loan executed by the lead bank.

The provision for credit losses in the third quarter was $1.9 million, compared to $1.7 million for the second quarter of 2023 and $0.9 million for the third quarter of 2022. The provision for the quarter was driven primarily by net charge-offs as well as increases in specific reserves and unfunded commitments, partially offset by the positive impact of economic forecasts on certain portfolios.

Capital

As of September 30, 2023, total shareholders’ equity was $347.7 million, a decrease of $6.6 million, or 1.9%, compared to June 30, 2023, and a decrease of $13.1 million, or 3.6%, compared to September 30, 2022. The decrease in shareholders’ equity during the third quarter of 2023 was due primarily to an increase in accumulated other comprehensive loss and stock repurchase activity, partially offset by net income earned during the quarter. Book value per common share was $40.11 as of September 30, 2023, compared to $40.38 as of June 30, 2023, and $38.84 as of September 30, 2022. Tangible book value per share was $39.57, compared to $39.85 as of June 30, 2023 and $38.34 as of September 30, 2022.

In connection with its previously announced stock repurchase program, the Company repurchased 97,834 shares of its common stock during the third quarter of 2023 at an average price of $18.29 per share. The Company has repurchased $40.7 million of stock under its authorized programs since November of 2021.

The following table presents the Company’s and the Bank’s regulatory and other capital ratios as of September 30, 2023.

		As of September 30, 2023
		Company			Bank
Total shareholders' equity to assets		6.73	%		8.35	%
Tangible common equity to tangible assets 1		6.64	%		8.26	%
Tier 1 leverage ratio 2		7.31	%		8.97	%
Common equity tier 1 capital ratio 2		9.59	%		11.77	%
Tier 1 capital ratio 2		9.59	%		11.77	%
Total risk-based capital ratio 2		13.18	%		12.71	%
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, October 26, 2023 to discuss its quarterly financial results. The call can be accessed via telephone at (888) 259-6580; access code: 53091613. A recorded replay can be accessed through November 24, 2023 by dialing (877) 674-7070; access code: 091613.

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 $5.2 billion as of September 30, 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”. 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 “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “growth,” “help,” “may,” “opportunities,” “pending,” “plan,” “position,” “preliminary,” “remain,” “should,” “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, and adjusted return on average tangible common equity 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,				June 30,				September 30,				September 30,				September 30,
		2023				2023				2022				2023				2022
Net income		$	3,409			$	3,882			$	8,436			$	4,274			$	29,190
Per share and share information
Earnings per share - basic		$	0.39			$	0.44			$	0.89			$	0.48			$	3.04
Earnings per share - diluted			0.39				0.44				0.89				0.48				3.01
Dividends declared per share			0.06				0.06				0.06				0.18				0.18
Book value per common share			40.11				40.38				38.84				40.11				38.84
Tangible book value per common share 1			39.57				39.85				38.34				39.57				38.34
Common shares outstanding			8,669,673				8,774,507				9,290,885				8,669,673				9,290,885
Average common shares outstanding:
Basic			8,744,385				8,903,213				9,458,259				8,889,532				9,615,039
Diluted			8,767,217				8,908,180				9,525,855				8,907,748				9,681,742
Performance ratios
Return on average assets			0.26	%			0.32	%			0.82	%			0.12	%			0.94	%
Return on average shareholders' equity			3.79	%			4.35	%			9.01	%			1.59	%			10.40	%
Return on average tangible common equity 1			3.84	%			4.40	%			9.13	%			1.61	%			10.53	%
Net interest margin			1.39	%			1.53	%			2.40	%			1.55	%			2.52	%
Net interest margin - FTE 1,2			1.49	%			1.64	%			2.53	%			1.66	%			2.65	%
Capital ratios 3
Total shareholders' equity to assets			6.73	%			7.16	%			8.46	%			6.73	%			8.46	%
Tangible common equity to tangible assets 1			6.64	%			7.07	%			8.36	%			6.64	%			8.36	%
Tier 1 leverage ratio			7.31	%			7.63	%			9.49	%			7.31	%			9.49	%
Common equity tier 1 capital ratio			9.59	%			10.10	%			11.72	%			9.59	%			11.72	%
Tier 1 capital ratio			9.59	%			10.10	%			11.72	%			9.59	%			11.72	%
Total risk-based capital ratio			13.18	%			13.87	%			15.73	%			13.18	%			15.73	%
Asset quality
Nonperforming loans		$	5,885			$	6,227			$	6,006			$	5,885			$	6,006
Nonperforming assets			6,069				6,397				6,006				6,069				6,006
Nonperforming loans to loans			0.16	%			0.17	%			0.18	%			0.16	%			0.18	%
Nonperforming assets to total assets			0.12	%			0.13	%			0.14	%			0.12	%			0.14	%
Allowance for credit losses - loans to:
Loans			0.98	%			0.99	%			0.92	%			0.98	%			0.92	%
Nonperforming loans			619.4	%			579.1	%			497.3	%			619.4	%			497.3	%
Net charge-offs to average loans			0.16	%			0.17	%			0.02	%			0.38	%			0.04	%
Average balance sheet information
Loans		$	3,700,410			$	3,653,839			$	3,161,850			$	3,643,156			$	3,036,532
Total securities			622,220				604,182				606,329				604,026				624,995
Other earning assets			653,375				511,295				188,467				499,835				321,262
Total interest-earning assets			4,976,667				4,771,623				3,970,650				4,751,104				4,004,025
Total assets			5,137,474				4,927,712				4,105,688				4,905,910				4,138,866
Noninterest-bearing deposits			127,540				117,496				124,067				126,647				115,142
Interest-bearing deposits			3,911,696				3,713,086				2,961,327				3,680,746				3,016,652
Total deposits			4,039,236				3,830,582				3,085,394				3,807,393				3,131,794
Shareholders' equity			356,701				358,312				371,303				359,405				375,190

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)
Dollar amounts in thousands
		September 30,				June 30,				September 30,
		2023				2023				2022
Assets
Cash and due from banks		$	3,595			$	9,503			$	14,743
Interest-bearing deposits			517,610				456,128				206,309
Securities available-for-sale, at fair value			450,827				379,394				393,565
Securities held-to-maturity, at amortized cost, net of allowance for credit losses			231,928				230,605				191,057
Loans held-for-sale			31,669				32,001				23,103
Loans			3,735,068				3,646,832				3,255,906
Allowance for credit losses - loans			(36,452	)			(36,058	)			(29,866	)
Net loans			3,698,616				3,610,774				3,226,040
Accrued interest receivable			23,761				24,101				16,918
Federal Home Loan Bank of Indianapolis stock			28,350				28,350				28,350
Cash surrender value of bank-owned life insurance			40,619				40,357				39,612
Premises and equipment, net			74,197				73,525				70,747
Goodwill			4,687				4,687				4,687
Servicing asset			9,579				8,252				5,795
Other real estate owned			106				106				-
Accrued income and other assets			53,479				49,266				43,498
Total assets		$	5,169,023			$	4,947,049			$	4,264,424
Liabilities
Noninterest-bearing deposits		$	125,265			$	119,291			$	142,875
Interest-bearing deposits			3,958,280				3,735,017				3,049,769
Total deposits			4,083,545				3,854,308				3,192,644
Advances from Federal Home Loan Bank			614,933				614,931				589,926
Subordinated debt			104,761				104,684				104,456
Accrued interest payable			2,968				3,338				1,887
Accrued expenses and other liabilities			15,072				15,456				14,654
Total liabilities			4,821,279				4,592,717				3,903,567
Shareholders' equity
Voting common stock			185,085				186,545				200,123
Retained earnings			203,856				200,973				199,877
Accumulated other comprehensive loss			(41,197	)			(33,186	)			(39,143	)
Total shareholders' equity			347,744				354,332				360,857
Total liabilities and shareholders' equity		$	5,169,023			$	4,947,049			$	4,264,424

First Internet Bancorp
Condensed Consolidated Statements of Income (unaudited)
Dollar amounts in thousands, except per share data
		Three Months Ended												Nine Months Ended
		September 30,				June 30,				September 30,				September 30,				September 30,
		2023				2023				2022				2023				2022
Interest income
Loans		$	48,898			$	46,906			$	34,643			$	139,647			$	100,246
Securities - taxable			4,301				3,835				2,701				11,742				7,489
Securities - non-taxable			912				860				491				2,570				1,068
Other earning assets			8,904				6,521				1,264				19,211				2,436
Total interest income			63,015				58,122				39,099				173,170				111,239
Interest expense
Deposits			40,339				34,676				10,520				102,285				23,025
Other borrowed funds			5,298				5,301				4,585				15,788				12,790
Total interest expense			45,637				39,977				15,105				118,073				35,815
Net interest income			17,378				18,145				23,994				55,097				75,424
Provision for credit losses			1,946				1,698				892				13,059				2,868
Net interest income after provision
for credit losses			15,432				16,447				23,102				42,038				72,556
Noninterest income
Service charges and fees			208				218				248				635				845
Loan servicing revenue			1,064				850				653				2,699				1,858
Loan servicing asset revaluation			(257	)			(358	)			(333	)			(670	)			(1,100	)
Mortgage banking activities			-				-				871				76				4,454
Gain on sale of loans			5,569				4,868				2,713				14,498				8,510
Other			823				293				164				1,486				883
Total noninterest income			7,407				5,871				4,316				18,724				15,450
Noninterest expense
Salaries and employee benefits			11,767				10,706				10,439				34,267				31,149
Marketing, advertising and promotion			500				705				1,041				2,049				2,717
Consulting and professional fees			552				711				790				2,189				3,912
Data processing			701				520				483				1,880				1,422
Loan expenses			1,336				1,072				1,142				4,385				3,417
Premises and equipment			2,315				2,661				2,808				7,753				7,767
Deposit insurance premium			1,067				936				229				2,546				797
Other			1,518				1,359				1,063				4,311				3,579
Total noninterest expense			19,756				18,670				17,995				59,380				54,760
Income before income taxes			3,083				3,648				9,423				1,382				33,246
Income tax (benefit) provision			(326	)			(234	)			987				(2,892	)			4,056
Net income		$	3,409			$	3,882			$	8,436			$	4,274			$	29,190
Per common share data
Earnings per share - basic		$	0.39			$	0.44			$	0.89			$	0.48			$	3.04
Earnings per share - diluted		$	0.39			$	0.44			$	0.89			$	0.48			$	3.01
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, 2023										June 30, 2023										September 30, 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		$	3,701,072			$	48,898		5.24	%		$	3,656,146			$	46,906		5.15	%		$	3,175,854			$	34,643		4.33	%
Securities - taxable			550,208				4,301		3.10	%			531,040				3,835		2.90	%			532,470				2,701		2.01	%
Securities - non-taxable			72,012				912		5.02	%			73,142				860		4.72	%			73,859				491		2.64	%
Other earning assets			653,375				8,904		5.41	%			511,295				6,521		5.12	%			188,467				1,264		2.66	%
Total interest-earning assets			4,976,667				63,015		5.02	%			4,771,623				58,122		4.89	%			3,970,650				39,099		3.91	%
Allowance for credit losses - loans			(35,601	)									(36,671	)									(29,423	)
Noninterest-earning assets			196,408										192,760										164,461
Total assets		$	5,137,474									$	4,927,712									$	4,105,688
Liabilities
Interest-bearing liabilities
Interest-bearing demand deposits		$	387,517			$	2,131		2.18	%		$	359,969			$	1,509		1.68	%		$	342,116			$	551		0.64	%
Savings accounts			26,221				56		0.85	%			29,915				64		0.86	%			57,700				111		0.76	%
Money market accounts			1,230,746				12,537		4.04	%			1,274,453				12,314		3.88	%			1,369,783				4,581		1.33	%
BaaS - brokered deposits			31,891				348		4.33	%			22,918				230		4.03	%			153,936				859		2.21	%
Certificates and brokered deposits			2,235,321				25,267		4.48	%			2,025,831				20,559		4.07	%			1,037,792				4,418		1.69	%
Total interest-bearing deposits			3,911,696				40,339		4.09	%			3,713,086				34,676		3.75	%			2,961,327				10,520		1.41	%
Other borrowed funds			719,655				5,298		2.92	%			719,577				5,301		2.95	%			637,877				4,585		2.85	%
Total interest-bearing liabilities			4,631,351				45,637		3.91	%			4,432,663				39,977		3.62	%			3,599,204				15,105		1.67	%
Noninterest-bearing deposits			127,540										117,496										124,067
Other noninterest-bearing liabilities			21,882										19,241										11,114
Total liabilities			4,780,773										4,569,400										3,734,385
Shareholders' equity			356,701										358,312										371,303
Total liabilities and shareholders' equity		$	5,137,474									$	4,927,712									$	4,105,688
Net interest income						$	17,378									$	18,145									$	23,994
Interest rate spread									1.11	%									1.27	%									2.24	%
Net interest margin									1.39	%									1.53	%									2.40	%
Net interest margin - FTE 2,3									1.49	%									1.64	%									2.53	%

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, 2023										September 30, 2022
		Average				Interest /			Yield /			Average				Interest /			Yield /
		Balance				Dividends			Cost			Balance				Dividends			Cost
Assets
Interest-earning assets
Loans, including loans held-for-sale 1		$	3,647,243			$	139,647		5.12	%		$	3,057,768			$	100,246		4.38	%
Securities - taxable			531,197				11,742		2.96	%			547,759				7,489		1.83	%
Securities - non-taxable			72,829				2,570		4.72	%			77,236				1,068		1.85	%
Other earning assets			499,835				19,211		5.14	%			321,262				2,436		1.01	%
Total interest-earning assets			4,751,104				173,170		4.87	%			4,004,025				111,239		3.71	%
			-
Allowance for credit losses - loans			(35,784	)									(28,671	)
Noninterest-earning assets			190,590										163,512
Total assets		$	4,905,910									$	4,138,866
Liabilities
Interest-bearing liabilities
Interest-bearing demand deposits		$	360,573			$	4,540		1.68	%		$	336,311			$	1,429		0.57	%
Savings accounts			31,494				202		0.86	%			61,647				232		0.50	%
Money market accounts			1,293,728				37,151		3.84	%			1,416,984				8,006		0.76	%
BaaS - brokered deposits			23,246				716		4.12	%			79,613				1,019		1.71	%
Certificates and brokered deposits			1,971,705				59,676		4.05	%			1,122,097				12,339		1.47	%
Total interest-bearing deposits			3,680,746				102,285		3.72	%			3,016,652				23,025		1.02	%
Other borrowed funds			719,577				15,788		2.93	%			613,609				12,790		2.79	%
Total interest-bearing liabilities			4,400,323				118,073		3.59	%			3,630,261				35,815		1.32	%
Noninterest-bearing deposits			126,647										115,142
Other noninterest-bearing liabilities			19,535										18,273
Total liabilities			4,546,505										3,763,676
Shareholders' equity			359,405										375,190
Total liabilities and shareholders' equity		$	4,905,910									$	4,138,866
Net interest income						$	55,097									$	75,424
Interest rate spread									1.28	%									2.39	%
Net interest margin									1.55	%									2.52	%
Net interest margin - FTE 2,3									1.66	%									2.65	%

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, 2023						June 30, 2023						September 30, 2022
		Amount			Percent			Amount			Percent			Amount			Percent
Commercial loans
Commercial and industrial		$	114,265		3.1	%		$	112,423		3.1	%		$	104,780		3.2	%
Owner-occupied commercial real estate			58,486		1.6	%			59,564		1.6	%			58,615		1.8	%
Investor commercial real estate			129,831		3.5	%			137,504		3.8	%			91,021		2.8	%
Construction			252,105		6.7	%			192,453		5.3	%			139,509		4.3	%
Single tenant lease financing			933,873		25.0	%			947,466		25.9	%			895,302		27.4	%
Public finance			535,960		14.3	%			575,541		15.8	%			614,139		18.9	%
Healthcare finance			235,622		6.3	%			245,072		6.7	%			293,686		9.0	%
Small business lending			192,996		5.2	%			170,550		4.7	%			113,001		3.5	%
Franchise finance			455,094		12.2	%			390,479		10.6	%			225,012		6.8	%
Total commercial loans			2,908,232		77.9	%			2,831,052		77.5	%			2,535,065		77.7	%
Consumer loans
Residential mortgage			393,501		10.5	%			396,154		10.9	%			337,565		10.4	%
Home equity			23,544		0.6	%			24,375		0.7	%			22,114		0.7	%
Trailers			186,424		5.0	%			178,035		4.9	%			162,161		5.0	%
Recreational vehicles			140,205		3.8	%			133,283		3.7	%			115,694		3.6	%
Other consumer loans			42,822		1.1	%			40,806		1.1	%			34,657		1.1	%
Total consumer loans			786,496		21.0	%			772,653		21.3	%			672,191		20.8	%
Net deferred loan fees, premiums, discounts and other 1			40,340		1.1	%			43,127		1.2	%			48,650		1.5	%
Total loans		$	3,735,068		100.0	%		$	3,646,832		100.0	%		$	3,255,906		100.0	%
		September 30, 2023						June 30, 2023						September 30, 2022
		Amount			Percent			Amount			Percent			Amount			Percent
Deposits
Noninterest-bearing deposits		$	125,265		3.1	%		$	119,291		3.1	%		$	142,635		4.5	%
Interest-bearing demand deposits			374,915		9.2	%			398,899		10.3	%			337,765		10.6	%
Savings accounts			23,811		0.6	%			28,239		0.7	%			52,228		1.6	%
Money market accounts			1,222,511		29.9	%			1,232,719		32.0	%			1,378,087		43.2	%
BaaS - brokered deposits			41,884		1.0	%			25,549		0.7	%			96,287		3.0	%
Certificates of deposits			1,624,447		39.8	%			1,366,409		35.5	%			773,040		24.2	%
Brokered deposits			670,712		16.4	%			683,202		17.7	%			412,602		12.9	%
Total deposits		$	4,083,545		100.0	%		$	3,854,308		100.0	%		$	3,192,644		100.0	%

1 Includes carrying value adjustments of $29.0 million, $30.5 million and $33.9 million related to terminated interest rate swaps associated with public finance loans as of September 30, 2023, June 30, 2023 and September 30, 2022, respectively.

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,				June 30,				September 30,				September 30,				September 30,
		2023				2023				2022				2023				2022
Total equity - GAAP		$	347,744			$	354,332			$	360,857			$	347,744			$	360,857
Adjustments:
Goodwill			(4,687	)			(4,687	)			(4,687	)			(4,687	)			(4,687	)
Tangible common equity		$	343,057			$	349,645			$	356,170			$	343,057			$	356,170
Total assets - GAAP		$	5,169,023			$	4,947,049			$	4,264,424			$	5,169,023			$	4,264,424
Adjustments:
Goodwill			(4,687	)			(4,687	)			(4,687	)			(4,687	)			(4,687	)
Tangible assets		$	5,164,336			$	4,942,362			$	4,259,737			$	5,164,336			$	4,259,737
Common shares outstanding			8,669,673				8,774,507				9,290,885				8,669,673				9,290,885
Book value per common share		$	40.11			$	40.38			$	38.84			$	40.11			$	38.84
Effect of goodwill			(0.54	)			(0.53	)			(0.50	)			(0.54	)			(0.50	)
Tangible book value per common share		$	39.57			$	39.85			$	38.34			$	39.57			$	38.34
Total shareholders' equity to assets			6.73	%			7.16	%			8.46	%			6.73	%			8.46	%
Effect of goodwill			(0.09	%)			(0.09	%)			(0.10	%)			(0.09	%)			(0.10	%)
Tangible common equity to tangible assets			6.64	%			7.07	%			8.36	%			6.64	%			8.36	%
Total average equity - GAAP		$	356,701			$	358,312			$	371,303			$	359,405			$	375,190
Adjustments:
Average goodwill			(4,687	)			(4,687	)			(4,687	)			(4,687	)			(4,687	)
Average tangible common equity		$	352,014			$	353,625			$	366,616			$	354,718			$	370,503
Return on average shareholders' equity			3.79	%			4.35	%			9.01	%			1.59	%			10.40	%
Effect of goodwill			0.05	%			0.05	%			0.12	%			0.02	%			0.13	%
Return on average tangible common equity			3.84	%			4.40	%			9.13	%			1.61	%			10.53	%
Total interest income		$	63,015			$	58,122			$	39,099			$	173,170			$	111,239
Adjustments:
Fully-taxable equivalent adjustments 1			1,265				1,347				1,280				3,995				3,971
Total interest income - FTE		$	64,280			$	59,469			$	40,379			$	177,165			$	115,210
Net interest income		$	17,378			$	18,145			$	23,994			$	55,097			$	75,424
Adjustments:
Fully-taxable equivalent adjustments 1			1,265				1,347				1,280				3,995				3,971
Net interest income - FTE		$	18,643			$	19,492			$	25,274			$	59,092			$	79,395
Net interest margin			1.39	%			1.53	%			2.40	%			1.55	%			2.52	%
Effect of fully-taxable equivalent adjustments 1			0.10	%			0.11	%			0.13	%			0.11	%			0.13	%
Net interest margin - FTE			1.49	%			1.64	%			2.53	%			1.66	%			2.65	%

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												Nine Months Ended
		September 30,				June 30,				September 30,				September 30,				September 30,
		2023				2023				2022				2023				2022
Total revenue - GAAP		$	24,785			$	24,016			$	28,310			$	73,821			$	90,874
Adjustments:
Mortgage-related revenue			-				-				-				-				-
Adjusted total revenue		$	24,785			$	24,016			$	28,310			$	73,821			$	90,874
Noninterest income - GAAP		$	7,407			$	5,871			$	4,316			$	18,724			$	15,450
Adjustments:
Mortgage-related revenue			-				-				-				(65	)			-
Adjusted noninterest income		$	7,407			$	5,871			$	4,316			$	18,659			$	15,450
Noninterest expense - GAAP		$	19,756			$	18,670			$	17,995			$	59,380			$	54,760
Adjustments:
Mortgage-related costs			-				-				-				(3,052	)			-
Acquisition-related expenses			-				-				-				-				(273	)
Write-down of software			-				-				(125	)			-				(125	)
Nonrecurring consulting fee			-				-				-				-				(875	)
Discretionary inflation bonus			-				-				-				-				(531	)
Accelerated equity compensation			-				-				-				-				(289	)
Adjusted noninterest expense		$	19,756			$	18,670			$	17,870			$	56,328			$	52,667
Income before income taxes - GAAP		$	3,083			$	3,648			$	9,423			$	1,382			$	33,246
Adjustments:1
Mortgage-related revenue			-				-				-				(65	)			-
Mortgage-related costs			-				-				-				3,052				-
Partial charge-off of C&I participation loan			-				-				-				6,914				-
Acquisition-related expenses			-				-				-				-				273
Write-down of software			-				-				125				-				125
Nonrecurring consulting fee			-				-				-				-				875
Discretionary inflation bonus			-				-				-				-				531
Accelerated equity compensation			-				-				-				-				289
Adjusted income before income taxes		$	3,083			$	3,648			$	9,548			$	11,283			$	35,339
Income tax (benefit) provision - GAAP		$	(326	)		$	(234	)		$	987			$	(2,892	)		$	4,056
Adjustments:1
Mortgage-related revenue			-				-				-				(14	)			-
Mortgage-related costs			-				-				-				641				-
Partial charge-off of C&I participation loan			-				-				-				1,452				-
Acquisition-related expenses			-				-				-				-				57
Write-down of software			-				-				26				-				26
Nonrecurring consulting fee			-				-				-				-				184
Discretionary inflation bonus			-				-				-				-				112
Accelerated equity compensation			-				-				-				-				61
Adjusted income tax (benefit) provision		$	(326	)		$	(234	)		$	1,013			$	(813	)		$	4,496
Net income- GAAP		$	3,409			$	3,882			$	8,436			$	4,274			$	29,190
Adjustments:
Mortgage-related revenue			-				-				-				(51	)			-
Mortgage-related costs			-				-				-				2,411				-
Partial charge-off of C&I participation loan			-				-				-				5,462				-
Acquisition-related expenses			-				-				-				-				216
Write-down of software			-				-				99				-				99
Nonrecurring consulting fee			-				-				-				-				691
Discretionary inflation bonus			-				-				-				-				419
Accelerated equity compensation			-				-				-				-				228
Adjusted net income		$	3,409			$	3,882			$	8,535			$	12,096			$	30,843

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												Nine Months Ended
		September 30,				June 30,				September 30,				September 30,				September 30,
		2023				2023				2022				2023				2022
Diluted average common shares outstanding			8,767,217				8,908,180				9,525,855				8,907,748				9,681,742
Diluted earnings per share - GAAP		$	0.39			$	0.44			$	0.89			$	0.48			$	3.01
Adjustments:
Effect of mortgage-related revenue			-				-				-				(0.01	)			-
Effect of mortgage-related costs			-				-				-				0.27				-
Effect of partial charge-off of C&I participation loan			-				-				-				0.61				-
Effect of acquisition-related expenses			-				-								-				0.02
Effect of write-down of software			-				-				0.01				-				0.01
Effect of nonrecurring consulting fee			-				-				-				-				0.07
Effect of discretionary inflation bonus			-				-				-				-				0.04
Effect of accelerated equity compensation			-								-				-				0.02
Adjusted diluted earnings per share		$	0.39			$	0.44			$	0.90			$	1.35			$	3.17
Return on average assets			0.26	%			0.32	%			0.82	%			0.12	%			0.94	%
Effect of mortgage-related revenue			0.00	%			0.00	%			0.00	%			0.00	%			0.00	%
Effect of mortgage-related costs			0.00	%			0.00	%			0.00	%			0.07	%			0.00	%
Effect of partial charge-off of C&I participation loan			0.00	%			0.00	%			0.00	%			0.15	%			0.00	%
Effect of acquisition-related expenses			0.00	%			0.00	%			0.00	%			0.00	%			0.01	%
Effect of write-down of software			0.00	%			0.00	%			0.01	%			0.00	%			0.00	%
Effect of nonrecurring consulting fee			0.00	%			0.00	%			0.00	%			0.00	%			0.02	%
Effect of discretionary inflation bonus			0.00	%			0.00	%			0.00	%			0.00	%			0.01	%
Effect of accelerated equity compensation			0.00	%			0.00	%			0.00	%			0.00	%			0.01	%
Adjusted return on average assets			0.26	%			0.32	%			0.83	%			0.34	%			0.99	%
Return on average shareholders' equity			3.79	%			4.35	%			9.01	%			1.59	%			10.40	%
Effect of mortgage-related revenue			0.00	%			0.00	%			0.00	%			(0.02	%)			0.00	%
Effect of mortgage-related costs			0.00	%			0.00	%			0.00	%			0.90	%			0.00	%
Effect of partial charge-off of C&I participation loan			0.00	%			0.00	%			0.00	%			2.03	%			0.00	%
Effect of acquisition-related expenses			0.00	%			0.00	%			0.00	%			0.00	%			0.08	%
Effect of write-down of software			0.00	%			0.00	%			0.11	%			0.00	%			0.04	%
Effect of nonrecurring consulting fee			0.00	%			0.00	%			0.00	%			0.00	%			0.25	%
Effect of discretionary inflation bonus			0.00	%			0.00	%			0.00	%			0.00	%			0.15	%
Effect of accelerated equity compensation			0.00	%			0.00	%			0.00	%			0.00	%			0.08	%
Adjusted return on average shareholders' equity			3.79	%			4.35	%			9.12	%			4.50	%			11.00	%
Return on average tangible common equity			3.84	%			4.40	%			9.13	%			1.61	%			10.53	%
Effect of mortgage-related revenue			0.00	%			0.00	%			0.00	%			(0.02	%)			0.00	%
Effect of mortgage-related costs			0.00	%			0.00	%			0.00	%			0.91	%			0.00	%
Effect of partial charge-off of C&I participation loan			0.00	%			0.00	%			0.00	%			2.06	%			0.00	%
Effect of acquisition-related expenses			0.00	%			0.00	%			0.00	%			0.00	%			0.08	%
Effect of write-down of software			0.00	%			0.00	%			0.11	%			0.00	%			0.04	%
Effect of nonrecurring consulting fee			0.00	%			0.00	%			0.00	%			0.00	%			0.25	%
Effect of discretionary inflation bonus			0.00	%			0.00	%			0.00	%			0.00	%			0.15	%
Effect of accelerated equity compensation			0.00	%			0.00	%			0.00	%			0.00	%			0.08	%
Adjusted return on average tangible common equity			3.84	%			4.40	%			9.24	%			4.56	%			11.13	%

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20231023839498/en/

Investors/Analysts

Paula Deemer

Director of Corporate Administration

(317) 428-4628

investors@firstib.com

Media

BLASTmedia for First Internet Bank

Ryan Hecker

firstib@blastmedia.com

Source: First Internet Bancorp

FAQ

What were the financial results of First Internet Bancorp for Q3 2023?

Net income was $3.4 million with diluted earnings per share of $0.39. Deposit growth was $229.2 million, a 5.9% increase from Q2 2023. Loan growth was $88.2 million, a 2.4% increase from Q2 2023.

What was the nonperforming loan ratio for First Internet Bancorp?

The nonperforming loans declined to 0.16% of total loans.

What is the tangible common equity to tangible assets ratio for First Internet Bancorp?

The tangible common equity to tangible assets ratio is 6.64%.

What is the CET1 ratio for First Internet Bancorp?

The CET1 ratio is 9.59%.

What is the tangible book value per share for First Internet Bancorp?

The tangible book value per share is $39.57.

What is the net interest margin for First Internet Bancorp in Q3 2023?

The net interest margin was 1.39%, down from 1.53% in Q2 2023.

How much did the total interest expense increase for First Internet Bancorp?

The total interest expense increased by $5.7 million, or 14.2%.

What was the net interest margin for First Internet Bancorp in Q3 2022?

The net interest margin was 2.40% in Q3 2022.