8-K
First Internet Bancorp (INBK)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8‑K
CURRENT REPORT PURSUANT
TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported): October 21, 2020
| First Internet Bancorp | |
|---|---|
| (Exact Name of Registrant as Specified in Its Charter) | |
| Indiana | |
| (State or Other Jurisdiction of Incorporation) | |
| 001-35750 | 20-3489991 |
| (Commission File Number) | (IRS Employer Identification No.) |
| 11201 USA Parkway | 46037 |
| Fishers, Indiana | |
| (Address of Principal Executive Offices) | (Zip Code) |
| (317) 532-7900 | |
| (Registrant's Telephone Number, Including Area Code) |
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbols | Name of each exchange on which registered |
|---|---|---|
| Common Stock, without par value | INBK | The Nasdaq Stock Market LLC |
| 6.0% Fixed to Floating Subordinated Notes due 2026 | INBKL | The Nasdaq Stock Market LLC |
| 6.0% Fixed to Floating Subordinated Notes due 2029 | INBKZ | The Nasdaq Stock Market LLC |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ¨
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
Item 2.02 Results of Operations and Financial Condition
On October 21, 2020, First Internet Bancorp (the "Company") issued a press release announcing financial results for the quarter ended September 30, 2020. A copy of the press release is furnished as Exhibit 99.1 to this report and is incorporated by reference herein.
On October 22, at 12:00 p.m. (Eastern Time), the Company will host a conference call and webcast to discuss financial results for the quarter ended September 30, 2020. The electronic presentation slides, which will accompany the call and webcast, are furnished as Exhibit 99.2 and are incorporated by reference herein.
Item 9.01 Financial Statements and Exhibits
| Number | Description | Method of filing |
|---|---|---|
| 99.1 | Press release dated October 21, 2020 | Furnished herewith |
| 99.2 | Presentation Slides dated October 21, 2020 | Furnished herewith |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| Dated: | October 21, 2020 |
|---|---|
| FIRST INTERNET BANCORP | |
| By: | /s/ Kenneth J. Lovik |
| Kenneth J. Lovik, Executive Vice President & Chief Financial Officer |
Document
First Internet Bancorp Reports Third Quarter 2020 Results
Highlights for the third quarter include:
•Record quarterly net income of $8.4 million, and adjusted net income of $10.0 million when excluding a $2.1 million pre-tax write-down of legacy other real estate owned (“OREO”)
•Record quarterly diluted earnings per share of $0.86 and $1.03 adjusted diluted earnings per share, excluding the OREO write-down
•Total revenue of $28.7 million, a 48.1% increase from the second quarter, driven by record mortgage banking revenue, higher net interest income and increased SBA loan sales
•Net interest margin and fully-taxable equivalent net interest margin increased 16 and 17 basis points (“bps”), respectively, from the second quarter, driven by a 43 bp decrease in the cost of interest-bearing deposits
•As of October 16, 2020, loan balances of $20.8 million, or 0.7% of total loans, remained on deferral programs, down significantly from $365.8 million on July 17, 2020
Fishers, Indiana, October 21, 2020 – 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.”
| Contact Information: | ||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Investors/Analysts | Media | |||||||||||||||
| Paula Deemer | Nicole Lorch | |||||||||||||||
| Director of Corporate Administration | Executive Vice President & Chief Operating Officer | |||||||||||||||
| (317) 428-4628 | (317) 532-7906 | |||||||||||||||
| investors@firstib.com | nlorch@firstib.com | |||||||||||||||
| First Internet Bancorp | ||||||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Summary Financial Information (unaudited) | ||||||||||||||||
| Dollar amounts in thousands, except per share data | ||||||||||||||||
| Three Months Ended | Nine Months Ended | |||||||||||||||
| September 30,<br>2020 | June 30,<br>2020 | September 30,<br>2019 | September 30,<br>2020 | September 30,<br>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,<br>2020 | June 30,<br>2020 | September 30,<br>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,<br>2020 | June 30,<br>2020 | September 30,<br>2019 | September 30,<br>2020 | September 30,<br>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 <br>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,<br>2020 | June 30,<br>2020 | September 30,<br>2019 | September 30,<br>2020 | September 30,<br>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 | ||||||||||||||||
| Dollar amounts in thousands, except per share data | ||||||||||||||||
| Three Months Ended | Nine Months Ended | |||||||||||||||
| September 30,<br>2020 | June 30,<br>2020 | September 30,<br>2019 | September 30,<br>2020 | September 30,<br>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 shared 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 | % |
inbk3q20earningspresenta
Financial Results Third Quarter 2020 Exhibit 99.2
Forward-Looking Statements & Non-GAAP Financial Measures This presentation may contain forward-looking statements with respect to the financial condition, results of operations, trends in lending policies, plans, objectives, future performance or business of the Company. Forward-looking statements are generally identifiable by the use of words such as “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “outlook,” “pending,” “plan,” “position,” “preliminary,” “remain,” “should,” “will,” “would” or other similar expressions. Forward-looking statements are not a guarantee of future performance or results, are based on information available at the time the statements are made and involve known and unknown risks, uncertainties and other factors that could cause actual results to differ materially from the information in the forward-looking statements. The COVID-19 pandemic has resulted in deterioration of general business and economic conditions and continued to impact us, our customers, counterparties, employees, and third-party service providers. Sustained deterioration in market conditions could adversely affect our revenues and the values of our assets and liabilities, reduce the availability of funding, lead to a tightening of credit and further increase stock price volatility. In addition, changes to statutes, regulations, or regulatory policies or practices as a result of, or in response to COVID-19, could affect us in substantial and unpredictable ways. The ultimate magnitude and duration of the pandemic is still unknown at this time, therefore, the extent of the impact on our business, financial position, results of operations, liquidity and prospects remains uncertain. Other factors that may cause such differences include: failures or breaches of or interruptions in the communications and information systems on which we rely to conduct our business; failure of our plans to grow our commercial real estate, commercial and industrial, public finance, SBA and healthcare finance loan portfolios; competition with national, regional and community financial institutions; the loss of any key members of senior management; fluctuations in interest rates; general economic conditions; risks relating to the regulation of financial institutions; and other factors identified in reports we file with the U.S. Securities and Exchange Commission. All statements in this presentation, including forward-looking statements, speak only as of the date they are made, and the Company undertakes no obligation to update any statement in light of new information or future events. This presentation contains financial information determined by methods other than in accordance with U.S. generally accepted accounting principles (“GAAP”). Non-GAAP financial measures, specifically tangible common equity, tangible assets, tangible book value per common share, tangible common equity to tangible assets, net interest income – FTE, net interest margin – FTE, allowance for loan losses to loans, excluding PPP loans, adjusted noninterest expense, adjusted noninterest expense/average assets, 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 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 on the slide at the end of this presentation entitled “Reconciliation of Non-GAAP Financial Measures.” 2
Third Quarter 2020 Highlights . Record diluted EPS of $0.86 . Adjusted diluted EPS of $1.031 excluding write-down of legacy OREO Earnings . Record quarterly net income of $8.4 million . Total revenue of $28.7 million, an increase of 48.1% from 2Q20 . Cost of interest-bearing deposits declined 43 bps from 2Q20 to 1.51% Key Operating . FTE net interest margin increased 17 bps to 1.67% Trends . Allowance for loan losses / total loans, excluding PPP, increased to 0.91%1 . Asset quality remained solid with NPAs to total assets of 0.23% . Disciplined Portfolio loan balances increased by $39.2 million, or 1.3% from 2Q20 Balance Sheet . SBA loan sales contributed $1.7 million in fee revenue Management . Sold $12.2 million of single tenant lease financing loans at a gain of $0.4 million . Regulatory capital ratios increased from 2Q20 and remain strong Liquidity and . Continued strong on- and off-balance sheet liquidity to manage impact of Capital COVID-19 environment . Deposit balances relatively stable from 2Q20 1 See Reconciliation of Non-GAAP Financial Measures in the Appendix 3 3
Near-term Profitability Drivers . Continued deposit repricing opportunity combined with stabilized asset yields provides significant opportunity to increase net interest income and net interest margin . Annual interest expense savings in excess of $22 million expected for 2021 . Accelerated build-out of SBA platform is six months ahead of the original plan – sales and operations hiring increased due to competitor dislocation in the marketplace . SBA gain on sale revenue expected to be in the range of $12 million - $14 million for 2021 . Residential mortgage originations expected to remain strong in the continued low interest rate environment . Continue to remain cautiously optimistic regarding the impact of the COVID-19 pandemic on the credit quality of the loan portfolio 4
Loan Portfolio Overview . Total portfolio loans increased $39.2 million, or 1.3%, compared to 2Q20, and increased $131.6 million, or 4.6%, year-over-year . Commercial loan balances increased $56.2 million, or 2.4%, compared to 2Q20 as growth in healthcare finance and construction lending resumed following limited activity in the second quarter . Consumer loan balances declined $15.3 million, or 2.9%, due primarily to increased prepayment activity across the portfolio Loan Portfolio Mix Dollars in millions $2,963.5 $3,012.9 6% $2,716.2 6% 4% 7% 2% Commercial and Industrial1 2% 32% Commercial Real Estate $2,091.0 34% 9% 34% Single Tenant Lease Financing 2% Public Finance 38% 21% Healthcare Finance $1,250.8 23% 13% 26% Small Business Lending 5% 15% 22% 4% 10% Residential Mortgage/HE/HELOCs 49% 1% 2% 4% 2% 16% Consumer 16% 11% 8% 19% 14% 11% 10% 10% 10% 2016 2017 2018 2019 3Q20 5 1 Includes commercial and industrial and owner-occupied commercial real estate balances
Deposit Composition . Total deposits declined $8.4 million, or 0.2%, compared to 2Q20, and increased $224.1 million, or 7.1%, year-over-year . Quarterly money market growth of $117.3 million, including $87.3 million in small business deposits . CD and brokered deposit balances decreased $138.1 million compared to 2Q20 . Cost of interest-bearing deposits declined 43 bps from 2Q20 to 1.51% Total Deposits - $3.4 Billion Total Non-Time Deposits - $1.7 Billion As of September 30, 2020 As of September 30, 20201 $86.1 3% $251.2 $155.1 $50.0 15% $1,722.0 5% 1% $546.5 $99.2 51% 33% 6% $1,359.2 $753.3 40% 46% Noninterest-bearing deposits Interest-bearing demand deposits Savings accounts Money market accounts Commercial Public funds Small business Consumer Certificates and brokered deposits 1 Total non-time deposits excludes brokered non-time deposits 6
Net Interest Income and Net Interest Margin . FTE net interest margin improved by 17 bps from Net Interest Income – GAAP and FTE1 2Q20 Dollars in millions GAAP FTE . Interest expense on deposits declined as: 1) higher $17.7 $16.8 $16.9 cost CDs matured and were either replaced at $16.6 $15.9 lower rates or not renewed; and 2) money market rates were lowered substantially $16.2 $15.2 $15.4 $15.0 $14.4 . Interest income earned on securities was impacted by accelerated premium amortization and continued declines in short term interest rate indices 3Q19 4Q19 1Q20 2Q20 3Q20 Yield on Loans and Cost of Deposits NIM – GAAP and FTE1 GAAP FTE 4.18% 4.20% 4.11% 4.00% 3.88% 1.70% 1.67% 1.65% 1.67% 1.50% 2.40% 2.35% 2.24% 1.94% 1.54% 1.51% 1.53% 1.51% 1.50% 1.37% 3Q19 4Q19 1Q20 2Q20 3Q20 Yield on loans Cost of interest-bearing deposits 3Q19 4Q19 1Q20 2Q20 3Q20 7 1 See Reconciliation of Non-GAAP Financial Measures in the Appendix
Net Interest Margin Drivers . Linked quarter NIM improvement was primarily attributable to the continued impact of lower deposit costs . Interest-earning asset yields expected to stabilize . Significant opportunity to continue lowering deposit costs . $931 million of CDs with a weighted average cost of 2.02% mature in the next twelve months – replacement cost is currently in the range of 0.50% . Lowered money market rates 30 - 50 bps during the quarter and another 10 bps so far in 4Q20 NIM – FTE1 Linked-Quarter Change Monthly Rate Paid on Interest-Bearing Deposits +32 bps 2.16% -3 bps 2.10% 1.93% 1.67% -11 bps 1.80% -1 bp 1.50% 1.59% 1.50% 1.42% Mar-20 Apr-20 May-20 Jun-20 Jul-20 Aug-20 Sep-20 8 1 See Reconciliation of Non-GAAP Financial Measures in the Appendix
Noninterest Income . Noninterest income of $12.5 million compared to $5.0 million in 2Q20 and $5.6 million in 3Q19 . Mortgage banking revenue of $9.6 million on strong origination volumes and higher margins . Gain on sale of loans of $2.0 million, up $1.3 million from 2Q20 . Revenue of $1.7 million for SBA 7(a) guaranteed loans in 3Q20, up $0.9 million from 2Q20 . Sold $12.2 million of single tenant lease financing loans at a gain of $0.4 million Noninterest Income Noninterest Income 3Q20 Dollars in millions $12.5 $0.2 $0.5 $0.2 $9.6 $2.0 $6.2 $5.6 $5.4 $5.0 Mortgage banking activities Gain on sale of loans Service charges and fees Net loan servicing revenue 3Q19 4Q19 1Q20 2Q20 3Q20 Other 9
Noninterest Expense . Noninterest expense of $16.4 million compared to $13.2 million in 2Q20 and $11.2 million in 3Q19 . Includes $2.1 million write-down of legacy OREO . Higher salaries and employee benefits due mainly to higher incentive compensation and growth in SBA platform . Partially offset by lower consulting and professional fees and other expenses . Noninterest expense / average assets remains well below the industry average Noninterest Expense Noninterest Expense / Average Assets Dollars in millions Core OREO write-down 1 Core OREO write-down $16.4 1 1.52% $13.5 $12.6 $13.2 1.32% 1.22% 1.22% $11.2 1.11% $14.3 1.33% 3Q19 4Q19 1Q20 2Q20 3Q20 3Q19 4Q19 1Q20 2Q20 3Q20 1 Noninterest expense includes the $2.1 million write-down of other real estate owned; see Reconciliation of Non-GAAP Financial Measures in 10 the Appendix
Asset Quality . Asset quality metrics remain among the industry’s best, driven by a strong credit culture and lower-risk asset classes . Allowance for loan losses to total loans increased to 0.89% in 3Q20, or 0.91% excluding PPP loans1, due primarily to adjustments to qualitative factors . Quarterly provision for loan losses of $2.5 million . Net charge-offs to average loans of 0.01%, down from 0.12% in 2Q20 . Delinquencies 30 days or more past due declined to 0.22%. NPLs / Total Loans NPAs / Total Assets Net Charge-Offs / Average Loans 0.32% 0.27% 0.26% 0.23% 0.24% 0.23% 0.21% 0.22% 0.23% 0.20% 0.15% 0.12% 0.06% 0.04% 0.01% 3Q19 4Q19 1Q20 2Q20 3Q20 3Q19 4Q19 1Q20 2Q20 3Q20 3Q19 4Q19 1Q20 2Q20 3Q20 1 See Reconciliation of Non-GAAP Financial Measures in the Appendix 11
Liquidity and Capital . Regulatory capital ratios remained strong at the Company and Bank levels . Strong capital generation during the quarter resulted in the tangible common equity to tangible assets ratio increasing 23 bps to 7.24% . Continue to have sufficient liquidity to handle the current economic impact of COVID-19 Tangible Book Value Per Share1 Regulatory Capital Ratios – September 30, 20202 $31.98 Company Bank $30.82 Total shareholders' equity to assets 7.34% 8.12% $27.93 $26.09 Tangible common equity to tangible assets1 7.24% 8.02% $23.04 Tier 1 leverage ratio 7.72% 8.50% $22.24 $20.74 Common equity tier 1 capital ratio 11.13% 12.27% $19.38 Tier 1 capital ratio 11.13% 12.27% Total risk-based capital ratio 14.38% 13.17% 2013 2014 2015 2016 2017 2018 2019 3Q20 1 See Reconciliation of Non-GAAP Financial Measures 2 Regulatory capital ratios are preliminary pending filing of the Company’s and Bank’s regulatory reports 12
Loan Deferral Summary . Loan deferral balances are now less than 1% of total loans since peaking in late-May at 22% . All borrowers coming off deferral programs have resumed making scheduled loan payments without delinquency Deferrals As of As of As of As of As of April 17, May 15, July 17, August 28, October 16, % of Balances (Dollars in millions) 2020 2020 2020 2020 2020 with Deferrals1 Commercial and industrial $15.4 $15.9 $1.7 $0.5 $0.7 0.9% Single tenant lease financing $11.8 $259.0 $276.8 $27.8 $5.4 0.6% Owner-occupied CRE $6.0 $16.2 $19.3 $5.7 $6.2 7.0% Investor CRE $0.0 $0.4 $0.4 $0.4 - - Healthcare finance $289.1 $297.0 $57.8 $7.7 $2.3 0.5% Small business $21.7 $23.7 $1.8 - $3.4 2.7% Total commercial $344.0 $612.2 $357.8 $42.1 $18.0 0.7% Residential mortgage $8.9 $12.0 $5.6 $2.2 $2.3 1.1% Home equity $0.3 $0.4 $0.2 $0.1 - - Other consumer $7.8 $9.0 $2.2 $0.8 $0.5 0.2% Total consumer $17.0 $21.4 $8.0 $3.1 $2.8 0.5% Total loans with deferrals $361.0 $633.6 $365.8 $45.2 $20.8 0.7% As a % of total loans 12.5% 21.9% 12.6% 1.6% 0.7% 13 1 Deferral balances as of October 16, 2020 and total loan balances as of September 30, 2020
Single Tenant Lease Financing Portfolio mix by major tenant . $960.5 million in balances as of September 30, 2020 Red Lobster . Long term financing of single tenant properties occupied 7% ICWG by historically strong national and regional tenants 7% Wendy's . Burger King Weighted-average portfolio LTV of 49% 6% Walgreens . Weighted-average loan size of $1.4 million 5% Bob Evans . 55% Strong historical credit performance 4% Dollar General . Only $5.4 million in loan balances remain on deferral; all 4% CVS other loans came off deferral and resumed payments 4% United Pacific . No delinquencies for performing loans 4% Caliber 2% Collision 2% Other Portfolio mix by major vertical Portfolio mix by geography 2% 1% 1% Quick Service Restaurants Full Service 6% Restaurants 9% 23% Auto Parts/ Repair/Car Wash 12% 6% Convenience/Fuel 21% Pharmacies 9% Specialty Retailers Dollar Stores 24% 37% 11% 22% Medical Bank Branches 16% Other 14
Public Finance Borrower mix by credit rating . $625.6 million in balances as of September 30, 2020 1.2% . Provides a range of credit solutions for government and 2.9%5.0% AAA/Aaa 4.6% not-for-profit entities AA+/Aa1 . Borrowers’ needs include short-term financing, debt AA/Aa2 AA-/Aa3 refinancing, infrastructure improvements, economic 47.0% A+/A1 development and equipment financing 21.4% A/A2 . Federal stimulus funds provide relief from tax revenue A-/A3 declines and/or delays caused by the COVID-19 crisis BBB+/Baa1 BBB/Baa2 . No delinquencies or losses since inception 6.3% 4.7% BB+/Ba1 BB/Ba2 . No borrowers currently receiving payment deferrals 1.3% Non-Rated 3.0% 1.9% 0.7% Portfolio mix by repayment source Portfolio mix by state General Obligation 2.7%5.2% 2.8% Essential use equipment 12.4% IN OK 3.0% loans Utilities Revenue 3.3% Lease rental revenue 3.3% IA OH 5.1% 31.8% Public higher ed facilities - 3.6% Revenue 6.1% Tax Incremental Financing 4.0% 55.2% MO MI (TIF) districts 6.2% Sales tax, food and bev tax, 5.7% hotel tax MS GA Income Tax supported loans 5.9% 10.4% Public higher ed facilities - 15.9% G.O. Other Municipally owned health 6.6% 10.8% care facilities Others 15
Healthcare Finance Portfolio mix by borrower . $461.7 million in balances as of September 30, 2020 1% 2% . Loan portfolio focused primarily on dental practices with 7% some exposure to veterinary practices and other specialties Dentists . Borrowers’ needs include practice finance or acquisition, acquiring or refinancing owner-occupied CRE, equipment Veterinarians purchases and project loans . Average loan size of $630,000 Physicians . Balances on deferral programs less than 1% of portfolio 90% down from late-May peak of approximately 79% Other Portfolio mix by borrower use Portfolio mix by State 1% 4% CA TX Practice Refi or 14% Acquisition 39% 28% NY AZ Owner 81% Occupied CRE FL NJ Project 12% Other Equipment and 3% 4% 6% other 5% 16
C&I and Owner-Occupied Commercial Real Estate . $166.2 million in combined balances as of September 30, 2020 Portfolio Mix by State . Current C&I LOC utilization of 46% 2% 8% IN . Average loan sizes 5% . C&I: $354,000 AZ 6% IL . Owner-occupied CRE: $958,000 52% . Exited relationships totaling in excess of $65 million over the OH last two years to de-risk the portfolio 27% MD . 4.4% of balances are on payment deferral programs as of October 16, 2020 Other Portfolio by Loan Type Portfolio Mix by Major Industry Services 10% 25% Construction Owner Occupied 31% CRE Real Estate and C&I - Term Loans Rental and Leasing 36% 54% Retail Trade C&I - Lines of 9% Credit 10% 14% Manufacturing 11% Other 17
Small Business Lending . $123.2 million in balances as of September 30, 2020 Portfolio Mix by State . Current balance of $58.3 million outstanding under the Paycheck Protection Program consisting of 447 loans made to existing IN IL clients 22% 41% CA AZ . 2.7% of balances are on payment deferral programs as of 4% October 16, 2020 4% FL TX . SBA sales team now consists of 11 Business Development 4% Officers and origination volumes are ramping up 9% Other 17% Managed SBA 7(a) Loans1 Dollars in millions $231.1 Portfolio Mix by Major Industry $34.8 $173.5 $157.9 $151.8 Services $131.5 24% 24% $113.9 Health Care and $104.0 $103.9 Social Assistance Accommodation and Food Services $64.9 $11.6 $47.8 $54.1 $59.6 9% Retail Trade 16% 3Q19 4Q19 1Q20 2Q20 3Q20 11% Construction Retained Balance Servicing Portfolio Held For Sale 16% Other 1 Excludes PPP loans 18
Residential Mortgage . $225.2 million in balances as of September 30, 2020 National Portfolio with (includes home equity balances) Midwest Concentration . Direct-to-consumer originations centrally located at corporate headquarters . Focused on high quality borrowers 23% 9% 59% . Avg. loan size of $182,000 . Avg. credit score at orig. of 756 . Avg. LTV at origination of 68% . Strong historical credit performance 3% 6% . Approximately 1% of balances are on payment deferral programs as of October 16, 2020 Concentration by State Concentration by Loan Type State Percentage Loan Type Percentage Indiana 54% Single Family Residential 73% California 17% SFR Construction to New York 4% Permanent 17% Florida 2% Home Equity – LOC 8% Colorado 2% Home Equity – Closed End 2% All other states 21% 19
Specialty Consumer . $282.5 million in balances as of September 30, 2020 Geographically Diverse Portfolio . Direct-to-consumer and nationwide dealer network originations . Focused on high quality borrowers 22% 10% . Avg. credit score at orig. of 778 18% . Avg. loan size of $19,370 . Strong historical credit performance . Less than 0.5% of balances are on payment deferral 22% 28% programs as of October 16, 2020 Concentration by State Concentration by Loan Type State Percentage Loan Type Percentage Texas 15% Trailers 52% California 12% Recreational Vehicles 34% Florida 6% Other consumer 14% North Carolina 4% Colorado 4% All other states 59% 20
Appendix 21
Loan Portfolio Composition Dollars in thousands 2017 2018 2019 1Q20 2Q20 3Q20 Commercial loans Commercial and industrial $ 122,940 $ 107,405 $ 96,420 $ 95,227 $ 81,687 $ 77,116 Owner-occupied commercial real estate 75,768 77,569 86,726 87,956 86,897 89,095 Investor commercial real estate 7,273 5,391 12,567 13,421 13,286 13,084 Construction 49,213 39,916 60,274 64,581 77,591 92,154 Single tenant lease financing 803,299 919,440 995,879 972,275 980,292 960,505 Public finance 438,341 706,342 687,094 627,678 647,107 625,638 Healthcare finance 31,573 117,007 300,612 372,266 380,956 461,740 Small business lending 4,870 17,370 47,787 54,056 118,526 123,168 Total commercial loans 1,528,407 1,990,440 2,287,359 2,287,460 2,386,342 2,442,500 Consumer loans Residential mortgage 299,935 399,898 313,849 218,730 208,728 203,041 Home equity 30,554 28,735 24,306 23,855 22,640 22,169 Trailers 101,369 136,620 146,734 148,700 147,326 145,775 Recreational vehicles 69,196 91,912 102,702 103,868 102,088 96,910 Other consumer loans 56,968 51,239 45,873 44,037 42,218 39,765 Total consumer loans 558,022 708,404 633,464 539,190 523,000 507,660 Net def. loan fees, prem., disc. and other1 4,764 17,384 42,724 65,443 64,332 62,754 Total Loans $ 2,091,193 $ 2,716,228 $ 2,963,547 $ 2,892,093 $ 2,973,674 $ 3,012,914 1 Includes carrying value adjustments of $44.3 million and $46.0 million related to terminated interest rate swaps associated with public finance loans as of September 30, 2020 and June 30, 2020, respectively, and $44.6 million, $21.4 million, $5.0 million and $0.3 million as of March 31, 2020, December 31, 2019, December 31, 2018 and December 31, 2017, respectively, related to interest rate swaps associated with public finance loans. 22
Reconciliation of Non-GAAP Financial Measures Dollars in thousands 3Q19 4Q19 1Q20 2Q20 3Q20 Total equity - GAAP $295,140 $304,913 $305,127 $307,711 $318,102 Adjustments: Goodwill (4,687) (4,687) (4,687) (4,687) (4,687) Tangible common equity $290,453 $300,226 $300,440 $303,024 $313,415 Tota l a sse ts - GAAP $4,095,491 $4,100,083 $4,168,146 $4,324,600 $4,333,624 Adjustments: Goodwill (4,687) (4,687) (4,687) (4,687) (4,687) Tangible assets $4,090,804 $4,095,396 $4,163,459 $4,319,913 $4,328,937 Common shares outstanding 9,741,800 9,741,800 9,801,825 9,799,047 9,800,569 Book value per common share $30.30 $31.30 $31.13 $31.40 $32.46 Effect of goodwill (0.48) (0.48) (0.48) (0.48) (0.48) Tangible book value per common share $29.82 $30.82 $30.65 $30.92 $31.98 Total shareholders' equity to assets 7.21% 7.44% 7.32% 7.12% 7.34% Effect of goodwill (0.11%) (0.11%) (0.10%) (0.11%) (0.10%) Tangible common equity to tangible assets 7.10% 7.33% 7.22% 7.01% 7.24% Net interest income $15,244 $15,374 $15,018 $14,426 $16,232 Adjustments: Fully-taxable equivalent adjustments 1 1,595 1,570 1,535 1,437 1,424 Net interest income - FTE $16,839 $16,944 $16,553 $15,863 $17,656 Net interest margin 1.54% 1.51% 1.50% 1.37% 1.53% Adjustments: Effect of fully-taxable equivalent adjustments 1 0.16% 0.16% 0.15% 0.13% 0.14% Net interest margin - FTE 1.70% 1.67% 1.65% 1.50% 1.67% 1 Assuming a 21% tax rate 23
Reconciliation of Non-GAAP Financial Measures Dollars in thousands 3Q19 4Q19 1Q20 2Q20 3Q20 Allowance for loan losses $21,683 $21,840 $22,857 $24,465 $26,917 Loans $2,881,272 $2,963,547 $2,892,093 $2,973,674 $3,012,914 Adjustments: PPP loans - - - (58,948) (58,337) Loans, excluding PPP loans $2,881,272 $2,963,547 $2,892,093 $2,914,726 $2,954,577 Allowance for loan losses to loans 0.75% 0.74% 0.79% 0.82% 0.89% Effect of PPP loans 0.00% 0.00% 0.00% 0.02% 0.02% Allowance for loan losses to loans, excluding PPP loans 0.75% 0.74% 0.79% 0.84% 0.91% Noninterest expense $11,203 $12,613 $13,486 $13,244 $16,412 Adjustments: Write-down of other real estate owned - - - - 2,065 Adjusted noninterest expense $11,203 $12,613 $13,486 $13,244 $14,347 Noninterest expense/average assets 1.11% 1.22% 1.32% 1.22% 1.53% Effect of write-down of other real estate owned 0.00% 0.00% 0.00% 0.00% 0.19% Adjusted noninterest expense/average assets 1.11% 1.22% 1.32% 1.22% 1.34% 1 Assuming a 21% tax rate 24
Reconciliation of Non-GAAP Financial Measures Dollars in thousands 3Q19 4Q19 1Q20 2Q20 3Q20 Income before income taxes - GAAP $6,775 $7,698 $6,282 $3,664 $9,806 Adjustments: Write-down of other real estate owned - - - - 2,065 Adjusted income before income taxes $6,775 $7,698 $6,282 $3,664 $11,871 Income tax provision (benefit) - GAAP $ 449 $ 602 $ 263 $ (268) $ 1,395 Adjustments: Write-down of other real estate owned - - - - 434 Adjusted income tax provision (benefit) $ 449 $ 602 $ 263 $ (268) $ 1,829 Net income - GAAP $6,326 $7,096 $6,019 $3,932 $8,411 Adjustments: Write-down of other real estate owned - - - - 1,631 Adjusted net income $6,326 $7,096 $6,019 $3,932 $10,042 Diluted average common shares outstanding 9,980,612 9,843,829 9,750,528 9,768,227 9,773,224 Diluted earnings per share - GAAP $ 0.63 $ 0.72 $ 0.62 $ 0.40 $ 0.86 Adjustments: Effect of write-down of other real estate owned - - - - 0.17 Adjusted diluted earnings per share $0.63 $0.72 $0.62 $0.40 $1.03 1 Assuming a 21% tax rate 25
Reconciliation of Non-GAAP Financial Measures Dollars in thousands 3Q19 4Q19 1Q20 2Q20 3Q20 Return on average assets 0.63% 0.69% 0.59% 0.37% 0.78% Effect of write-down of other real estate owned 0.00% 0.00% 0.00% 0.00% 0.15% Adjusted return on average assets 0.63% 0.69% 0.59% 0.37% 0.93% Return on average shareholders' equity 8.40% 9.46% 7.78% 5.15% 10.67% Effect of write-down of other real estate owned 0.00% 0.00% 0.00% 0.00% 2.07% Adjusted return on average shareholders' equity 8.40% 9.46% 7.78% 5.15% 12.74% Return on average tangible common equity 8.53% 9.61% 7.90% 5.23% 10.83% Effect of write-down of other real estate owned 0.00% 0.00% 0.00% 0.00% 2.10% Adjusted return on average tangible common equity 8.53% 9.61% 7.90% 5.23% 12.93% Effective income tax rate 6.6% 7.8% 4.2% (7.3%) 14.2% Effect of write-down of other real estate owned 0.0% 0.0% 0.0% 0.0% 1.2% Adjusted effective income tax rate 6.6% 7.8% 4.2% (7.3%) 15.4% 1 Assuming a 21% tax rate 26