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): April 22, 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 April 22, 2020, First Internet Bancorp (the "Company") issued a press release announcing financial results for the quarter ended March 31, 2020. A copy of the press release is furnished as Exhibit 99.1 to this report and is incorporated by reference herein.
On April 23, at 12:00 p.m. (Eastern Time), the Company will host a conference call and webcast to discuss financial results for the quarter ended March 31, 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 April 22, 2020 | Furnished herewith |
| 99.2 | Presentation Slides dated April 22, 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: | April 22, 2020 |
|---|---|
| FIRST INTERNET BANCORP | |
| By: | /s/ Kenneth J. Lovik |
| Kenneth J. Lovik, Executive Vice President & Chief Financial Officer |
Exhibit
First Internet Bancorp Reports First Quarter 2020 Results
Highlights for the first quarter include:
| ▪ | Diluted earnings per share of $0.62, an increase of 10.7% over first quarter of 2019 |
|---|---|
| ▪ | Net income of $6.0 million, an increase of 5.7% over first quarter of 2019 |
| --- | --- |
| ▪ | Total revenue of $21.2 million, an increase of 14.0% over first quarter of 2019, driven by strong mortgage banking activity |
| --- | --- |
| ▪ | Total loans of $2.9 billion, up 1.8% from the first quarter of 2019 |
| --- | --- |
COVID-19 Response:
| ▪ | Ensuring the health and safety of our employees through alternative work practices, expanded benefits and enhanced engagement programs |
|---|---|
| ▪ | Supporting our customers through payment deferral programs |
| --- | --- |
| ▪ | Enrolling customers in the SBA Paycheck Protection Program |
| --- | --- |
| • | As of April 16, 2020, have received approvals from the SBA for 268 loans totaling $45.0 million |
| --- | --- |
Fishers, Indiana, April 22, 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 first quarter of 2020. Net income for the first quarter of 2020 was $6.0 million, or $0.62 diluted earnings per share. This compares to net income of $7.1 million, or $0.72 diluted earnings per share, for the fourth quarter of 2019, and net income of $5.7 million, or $0.56 diluted earnings per share, for the first quarter of 2019.
“The current public health crisis confronting our country has required a dramatic shift in our operations as well as in those of our customers,” said David Becker, Chairman, President and Chief Executive Officer. “Our most important priority in this unprecedented environment is the health of our team, customers and shareholders.
“While the duration of the coronavirus pandemic still remains unknown, we have the financial strength to serve our valued customers throughout this difficult period. We have proactively implemented a payment deferral program that allows impacted clients to preserve cash and liquidity. Additionally, our lending teams have been enrolling small business clients in the SBA Paycheck Protection Program, which will provide much needed capital and liquidity to many of our small business entrepreneurs. As of April 16, we had received approvals from the SBA for 268 loans totaling $45.0 million. This was accomplished in 10 days through an all-hands-on-deck effort by the First Internet team, who have been working tirelessly for our customers.
Chairman Becker added, “I am pleased with our first quarter financial performance as well as our efforts to date in April. I thank the entire First Internet team for their resilience and dedication during these
challenging times. The high level of engagement throughout the organization remains the key to our ongoing success.”
Net Interest Income and Net Interest Margin
Net interest income for the first quarter of 2020 was $15.0 million, compared to $15.4 million for the fourth quarter of 2019 and $16.2 million for the first quarter of 2019. On a fully-taxable equivalent basis, net interest income for the first quarter was $16.6 million, compared to $17.0 million for the fourth quarter of 2019 and $17.8 million for the first quarter of 2019.
Total interest income for the first quarter of 2020 was $36.2 million, a decrease of 4.3%, compared to the fourth quarter of 2019, and an increase of 3.6% compared to the first quarter of 2019. On a fully-taxable equivalent basis, total interest income for the first quarter was $37.8 million, a decrease of 4.3% compared to the fourth quarter of 2019, and an increase of 3.4% compared to the first quarter of 2019. The decline in total interest income compared to the fourth quarter of 2019 was driven primarily by an 11 basis point (“bp”) decrease in the yield on average interest-earning assets, as the average balance of those assets was down slightly quarter-over-quarter. The yield on interest-earning assets for the first quarter of 2020 declined to 3.62% from 3.73% in the prior quarter due primarily to the decline in short term rates during the quarter following the Federal Reserve rate cut in the fourth quarter of 2019 and additional rate cuts during the first quarter of 2020, which negatively impacted the yields earned on variable rate loans and securities as well as cash balances, which remained elevated throughout the quarter.
Total interest expense for the first quarter of 2020 was $21.2 million, a decrease of 5.7% compared to the fourth quarter of 2019, and an increase of 13.2% compared to the first quarter of 2019. The decrease in interest expense compared to the linked quarter was due mainly to a decline of 11 bps in the cost of interest-bearing deposits and a decrease of $21.5 million, or 0.6%, in the average balance of these deposits. The decrease in average interest-bearing deposit balances was due primarily to a $132.1 million, or 6.0%, decrease in the average balance of certificates and brokered deposits but was partially offset by a $113.7 million, or 15.1%, increase in the average balance of money market accounts. The decrease in deposit costs reflects a decline in the rates paid on money market accounts and certificates and brokered deposits as well as a shift in the deposit mix due to the growth in money market accounts. During the first quarter of 2020, the cost of money market deposits decreased by 18 bps and the cost of certificates and brokered deposits decreased 4 bps as rates paid on new production and renewals were below the rates paid on maturing time deposits.
Net interest margin (“NIM”) was 1.50% for the first quarter of 2020, compared to 1.51% for the fourth quarter of 2019 and 1.86% for the first quarter of 2019. On a fully-taxable equivalent basis, NIM decreased 2 bps to 1.65% for the first quarter of 2020, from 1.67% for the fourth quarter of 2019, and was down from 2.04% for the first quarter of 2019. The decrease in fully-taxable equivalent NIM compared to the linked quarter was due mainly to the decline in loan yields, which had a negative impact of 7 bps, and the lower yields earned on elevated cash balances, which had a negative impact of 5 bps. Additionally, other interest-earning assets and other interest-bearing liabilities had a combined negative impact of 2 bps. These were partially offset by deposit costs and the securities portfolio, which had a positive impact of 9 bps and 3 bps, respectively.
Noninterest Income
Noninterest income for the first quarter of 2020 was $6.2 million, up from $5.4 million for the fourth quarter of 2019, and up from $2.4 million for the first quarter of 2019. The increase compared to the fourth quarter of 2019 was driven primarily by an increase in revenue from mortgage banking activities, the gain on sale of loans sold during the quarter and loan servicing revenue, but partially offset by a decrease in the valuation of the servicing asset. The increase in mortgage banking revenue of $0.7 million, or 24.2%, was due mainly to an increase in origination volumes as mortgage interest rates continued to decline during the quarter. During the first quarter of 2020, the Company sold $99.9 million of public finance, single tenant lease financing and U.S. Small Business Administration (“SBA”) 7(a)
guaranteed loans at premiums to book value. The Company also sold $90.8 million of portfolio residential mortgage loans, which included seasoned lower-yielding loans, at a modest discount to book value. Related to the increase in loan servicing revenue, the Company earned a full quarter’s worth of revenue from the SBA servicing portfolio acquired during the fourth quarter of 2019, which was partially offset by the loan servicing asset revaluation recognized during the quarter.
Noninterest Expense
Noninterest expense for the first quarter of 2020 was $13.5 million, compared to $12.6 million for the fourth quarter of 2019 and $11.1 million for the first quarter of 2019. The increase from the fourth quarter of 2019 was due primarily to a $0.6 million increase in salaries and employee benefits and a $0.3 million increase in loan expenses, but partially offset by a $0.1 million decrease in deposit insurance premium. The increase of $0.6 million in salaries and employee benefits was due mainly to seasonal resets of employee benefits and incentive compensation accruals, an increase in headcount which includes a full quarter’s impact of personnel growth in the Company’s small business lending platform and higher mortgage incentive compensation. The increase of $0.3 million in loan expenses was driven primarily by costs associated with nonperforming loans. The decline in deposit insurance premium was due primarily to a decline in the Bank’s one-year asset growth rate which is a component of the formula used to determine the premium amount.
Income Taxes
The Company reported income tax expense of $0.3 million for the first quarter of 2020 and an effective tax rate of 4.2%, compared to income tax expense of $0.6 million and an effective tax rate of 7.8% for the fourth quarter of 2019 and income tax expense of $0.5 million and an effective tax rate of 8.5% for the first quarter of 2019. Compared to the linked quarter, the decline in income tax expense and the effective tax rate was primarily due to a tax law change associated with the Coronavirus Aid, Relief and Economic Security (“CARES”) Act that now allows recognition of certain prior period net operating losses, partially offset by tax expense associated with the annual vesting of equity compensation.
Loans and Credit Quality
Total loans as of March 31, 2020 were $2.9 billion, a decrease of $71.5 million, or 2.4%, compared to December 31, 2019 and an increase of $52.2 million, or 1.8%, compared to March 31, 2019. Total commercial loan balances were $2.3 billion as of March 31, 2020, consistent with December 31, 2019 and an increase of $190.9 million, or 9.1%, compared to March 31, 2019. Compared to the linked quarter, production in healthcare finance, small business lending and construction was offset by lower balances in the single tenant lease financing and public finance loan portfolios due primarily to sales of $94.4 million of loans in these categories during the quarter.
Total consumer loan balances were $539.2 million as of March 31, 2020, a decrease of $94.3 million, or 14.9%, compared to December 31, 2019 and a decrease of $178.7 million, or 24.9%, compared to March 31, 2019. The decline in consumer loan balances from December 31, 2019 was due primarily to the sale of $90.8 million of portfolio residential mortgage loans, which included seasoned lower-yielding loans.
Total delinquencies 30 days or more past due increased to 0.32% of total loans as of March 31, 2020, up from 0.24% as of December 31, 2019 and 0.18% as of March 31, 2019. The increase in delinquencies compared to the linked quarter was due primarily to a residential mortgage loan with a balance of $0.9 million and a commercial real estate loan with a balance of $0.7 million becoming past due. Overall credit quality remained relatively stable as nonperforming loans to total loans was 0.26% as of March 31, 2020, compared to 0.23% at December 31, 2019 and 0.12% as of March 31, 2019.
The allowance for loan losses as a percentage of total loans was 0.79% as of March 31, 2020, compared to 0.74% as of December 31, 2019 and 0.66% as of March 31, 2019. While total loan balances declined $71.5 million, or 2.4%, compared to the linked quarter, the Company made adjustments to qualitative factors related to economic conditions in its allowance model to reflect the economic uncertainty resulting
from the COVID-19 pandemic crisis. As a result, both the amount of the allowance for loan losses and the allowance as a percentage of total loans increased compared to December 31, 2019.
Net charge-offs of $0.4 million were recognized during the first quarter of 2020, resulting in net charge-offs to average loans of 0.06%, compared to 0.04% for the fourth quarter of 2019 and 0.05% for the first quarter of 2019. The provision for loan losses in the first quarter of 2020 was $1.5 million, compared to $0.5 million for the fourth quarter of 2019 and $1.3 million for the first quarter of 2019. The increase of $1.0 million, or 212.2%, compared to the linked quarter was due primarily to the adjustments to the economic qualitative factors in the allowance model discussed above.
Capital
As of March 31, 2020, total shareholders’ equity was $305.1 million, an increase of $0.2 million, or 0.1%, compared to December 31, 2019, primarily due to the net income earned during the quarter, partially offset by an increase in accumulated other comprehensive loss due to the net impact of fair value adjustments to the securities portfolio and interest rate swaps designated as cash flow hedges used for long term funding purposes. As a result of the COVID-19 pandemic crisis, the fixed income and interest rate markets experienced a significant level of volatility during March 2020 which negatively impacted the fair values of these financial instruments. Book value per common share decreased slightly to $31.13 as of March 31, 2020, down from $31.30 as of December 31, 2019 and up from $29.03 as of March 31, 2019. Tangible book value per share at March 31, 2020 was $30.65, down from $30.82 and up from $28.57, 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 March 31, 2020.
| As of March 31, 2020 | ||
|---|---|---|
| Company | Bank | |
| Total shareholders’ equity to assets | 7.32% | 8.03% |
| Tangible common equity to tangible assets ^1^ | 7.22% | 7.93% |
| Tier 1 leverage ratio ^2^ | 7.82% | 8.54% |
| Common equity tier 1 capital ratio ^2^ | 10.78% | 11.79% |
| Tier 1 capital ratio ^2^ | 10.78% | 11.79% |
| Total risk-based capital ratio ^2^ | 13.90% | 12.56% |
| ^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, April 23, 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 May 23, 2020 by dialing (877) 344-7529; passcode: 10142059.
Additionally, interested parties can listen to a live webcast of the call on 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 $4.2 billion as of March 31, 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 in select geographies. 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, timing of pending acquisitions, 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,” “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 crisis is adversely affecting us, our customers, counterparties, employees, and third-party service providers, and the ultimate extent of the impacts on our business, financial position, results of operations, liquidity, and prospects remains uncertain. Continued deterioration in general business and economic conditions, including further increases in unemployment rates, or turbulence in domestic or global financial markets 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. 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; failure to close any pending acquisitions; failure to satisfy or waive closing condition; 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, return on average tangible common equity, total interest income - FTE, net interest income - FTE, and net interest margin - FTE, 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 |
| Investor Relations | 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 | |||||||||
| March 31, <br>2020 | December 31, <br>2019 | March 31, <br>2019 | |||||||
| Net income | $ | 6,019 | $ | 7,096 | $ | 5,696 | |||
| Per share and share information | |||||||||
| Earnings per share - basic | $ | 0.62 | $ | 0.72 | $ | 0.56 | |||
| Earnings per share - diluted | 0.62 | 0.72 | 0.56 | ||||||
| Dividends declared per share | 0.06 | 0.06 | 0.06 | ||||||
| Book value per common share | 31.13 | 31.30 | 29.03 | ||||||
| Tangible book value per common share ^1^ | 30.65 | 30.82 | 28.57 | ||||||
| Common shares outstanding | 9,801,825 | 9,741,800 | 10,128,587 | ||||||
| Average common shares outstanding: | |||||||||
| Basic | 9,721,485 | 9,825,784 | 10,217,637 | ||||||
| Diluted | 9,750,528 | 9,843,829 | 10,230,531 | ||||||
| Performance ratios | |||||||||
| Return on average assets | 0.59 | % | 0.69 | % | 0.64 | % | |||
| Return on average shareholders' equity | 7.78 | % | 9.46 | % | 7.91 | % | |||
| Return on average tangible common equity ^1^ | 7.90 | % | 9.61 | % | 8.04 | % | |||
| Net interest margin | 1.50 | % | 1.51 | % | 1.86 | % | |||
| Net interest margin - FTE ^1,2^ | 1.65 | % | 1.67 | % | 2.04 | % | |||
| Capital ratios^3^ | |||||||||
| Total shareholders' equity to assets | 7.32 | % | 7.44 | % | 8.01 | % | |||
| Tangible common equity to tangible assets ^1^ | 7.22 | % | 7.33 | % | 7.89 | % | |||
| Tier 1 leverage ratio | 7.82 | % | 7.64 | % | 8.34 | % | |||
| Common equity tier 1 capital ratio | 10.78 | % | 10.84 | % | 11.66 | % | |||
| Tier 1 capital ratio | 10.78 | % | 10.84 | % | 11.66 | % | |||
| Total risk-based capital ratio | 13.90 | % | 13.99 | % | 13.68 | % | |||
| Asset quality | |||||||||
| Nonperforming loans | $ | 7,443 | $ | 6,732 | $ | 3,432 | |||
| Nonperforming assets | 9,622 | 8,872 | 6,071 | ||||||
| Nonperforming loans to loans | 0.26% | 0.23% | 0.12 | % | |||||
| Nonperforming assets to total assets | 0.23% | 0.22% | 0.17 | % | |||||
| Allowance for loan losses to: | |||||||||
| Loans | 0.79% | 0.74% | 0.66 | % | |||||
| Nonperforming loans | 307.1% | 324.4% | 549.0 | % | |||||
| Net charge-offs to average loans | 0.06% | 0.04% | 0.05 | % | |||||
| Average balance sheet information | |||||||||
| Loans | $ | 2,931,108 | $ | 2,936,144 | $ | 2,760,164 | |||
| Total securities | 630,879 | 597,049 | 523,265 | ||||||
| Other earning assets | 415,927 | 452,945 | 246,732 | ||||||
| Total interest-earning assets | 4,024,800 | 4,031,327 | 3,544,849 | ||||||
| Total assets | 4,099,932 | 4,108,216 | 3,627,508 | ||||||
| Noninterest-bearing deposits | 60,456 | 49,570 | 42,551 | ||||||
| Interest-bearing deposits | 3,089,045 | 3,110,501 | 2,728,674 | ||||||
| Total deposits | 3,149,501 | 3,160,071 | 2,771,225 | ||||||
| Shareholders' equity | 311,005 | 297,623 | 291,883 |
^1^ Refer to "Non-GAAP Financial Measures" section above and "Reconciliation of Non-GAAP Financial Measures" below
^2^ On a fully-taxable equivalent (“FTE”) basis assuming a 21% tax rate
^3^ Regulatory capital ratios are preliminary pending filing of the Company's regulatory reports
| First Internet Bancorp | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| Condensed Consolidated Balance Sheets (unaudited, except for December 31, 2019) | |||||||||
| Amounts in thousands | |||||||||
| March 31, <br>2020 | December 31, <br>2019 | March 31, <br>2019 | |||||||
| Assets | |||||||||
| Cash and due from banks | $ | 5,726 | $ | 5,061 | $ | 5,708 | |||
| Interest-bearing deposits | 345,542 | 322,300 | 124,786 | ||||||
| Securities available-for-sale, at fair value | 608,682 | 540,852 | 520,382 | ||||||
| Securities held-to-maturity, at amortized cost | 66,331 | 61,878 | 31,222 | ||||||
| Loans held-for-sale | 52,394 | 56,097 | 13,706 | ||||||
| Loans | 2,892,093 | 2,963,547 | 2,839,928 | ||||||
| Allowance for loan losses | (22,857 | ) | (21,840 | ) | (18,841 | ) | |||
| Net loans | 2,869,236 | 2,941,707 | 2,821,087 | ||||||
| Accrued interest receivable | 16,960 | 18,607 | 17,217 | ||||||
| Federal Home Loan Bank of Indianapolis stock | 25,650 | 25,650 | 23,625 | ||||||
| Cash surrender value of bank-owned life insurance | 37,238 | 37,002 | 36,293 | ||||||
| Premises and equipment, net | 18,883 | 14,630 | 13,737 | ||||||
| Goodwill | 4,687 | 4,687 | 4,687 | ||||||
| Servicing asset | 2,415 | 2,481 | — | ||||||
| Other real estate owned | 2,065 | 2,065 | 2,619 | ||||||
| Accrued income and other assets | 112,337 | 67,066 | 55,107 | ||||||
| Total assets | $ | 4,168,146 | $ | 4,100,083 | $ | 3,670,176 | |||
| Liabilities | |||||||||
| Noninterest-bearing deposits | $ | 70,562 | $ | 57,115 | $ | 45,878 | |||
| Interest-bearing deposits | 3,107,944 | 3,096,848 | 2,765,230 | ||||||
| Total deposits | 3,178,506 | 3,153,963 | 2,811,108 | ||||||
| Advances from Federal Home Loan Bank | 514,911 | 514,910 | 495,146 | ||||||
| Subordinated debt | 69,605 | 69,528 | 33,911 | ||||||
| Accrued interest payable | 3,293 | 3,767 | 1,549 | ||||||
| Accrued expenses and other liabilities | 96,704 | 53,002 | 34,449 | ||||||
| Total liabilities | 3,863,019 | 3,795,170 | 3,376,163 | ||||||
| Shareholders' equity | |||||||||
| Voting common stock | 219,893 | 219,423 | 226,235 | ||||||
| Retained earnings | 105,100 | 99,681 | 81,946 | ||||||
| Accumulated other comprehensive loss | (19,866 | ) | (14,191 | ) | (14,168 | ) | |||
| Total shareholders' equity | 305,127 | 304,913 | 294,013 | ||||||
| Total liabilities and shareholders' equity | $ | 4,168,146 | $ | 4,100,083 | $ | 3,670,176 |
| First Internet Bancorp | ||||||||
|---|---|---|---|---|---|---|---|---|
| Condensed Consolidated Statements of Income (unaudited) | ||||||||
| Amounts in thousands, except per share data | ||||||||
| Three Months Ended | ||||||||
| March 31, <br>2020 | December 31, <br>2019 | March 31, <br>2019 | ||||||
| Interest income | ||||||||
| Loans | $ | 30,408 | $ | 31,574 | $ | 29,218 | ||
| Securities - taxable | 3,619 | 3,475 | 3,324 | |||||
| Securities - non-taxable | 572 | 604 | 684 | |||||
| Other earning assets | 1,645 | 2,224 | 1,773 | |||||
| Total interest income | 36,244 | 37,877 | 34,999 | |||||
| Interest expense | ||||||||
| Deposits | 17,208 | 18,417 | 15,386 | |||||
| Other borrowed funds | 4,018 | 4,086 | 3,369 | |||||
| Total interest expense | 21,226 | 22,503 | 18,755 | |||||
| Net interest income | 15,018 | 15,374 | 16,244 | |||||
| Provision for loan losses | 1,461 | 468 | 1,285 | |||||
| Net interest income after provision <br>for loan losses | 13,557 | 14,906 | 14,959 | |||||
| Noninterest income | ||||||||
| Service charges and fees | 212 | 213 | 236 | |||||
| Loan servicing revenue | 251 | 166 | — | |||||
| Loan servicing asset revaluation | (179 | ) | — | — | ||||
| Mortgage banking activities | 3,668 | 2,953 | 1,617 | |||||
| Gain (loss) on sale of loans | 1,801 | 1,721 | (104 | ) | ||||
| Gain on sale of securities | 41 | — | — | |||||
| Other | 417 | 352 | 623 | |||||
| Total noninterest income | 6,211 | 5,405 | 2,372 | |||||
| Noninterest expense | ||||||||
| Salaries and employee benefits | 7,774 | 7,168 | 6,321 | |||||
| Marketing, advertising and promotion | 375 | 409 | 469 | |||||
| Consulting and professional fees | 1,177 | 1,242 | 814 | |||||
| Data processing | 375 | 312 | 317 | |||||
| Loan expenses | 599 | 289 | 314 | |||||
| Premises and equipment | 1,625 | 1,556 | 1,500 | |||||
| Deposit insurance premium | 485 | 601 | 555 | |||||
| Other | 1,076 | 1,036 | 819 | |||||
| Total noninterest expense | 13,486 | 12,613 | 11,109 | |||||
| Income before income taxes | 6,282 | 7,698 | 6,222 | |||||
| Income tax provision | 263 | 602 | 526 | |||||
| Net income | $ | 6,019 | $ | 7,096 | $ | 5,696 | ||
| Per common share data | ||||||||
| Earnings per share - basic | $ | 0.62 | $ | 0.72 | $ | 0.56 | ||
| Earnings per share - diluted | $ | 0.62 | $ | 0.72 | $ | 0.56 | ||
| Dividends declared per share | $ | 0.06 | $ | 0.06 | $ | 0.06 |
All periods presented have been reclassified to conform to the current period classification
| First Internet Bancorp | |||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Average Balances and Rates (unaudited) | |||||||||||||||||||||
| Dollar amounts in thousands | |||||||||||||||||||||
| Three Months Ended | |||||||||||||||||||||
| March 31, 2020 | December 31, 2019 | March 31, 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^ | $ | 2,977,994 | $ | 30,408 | 4.11 | % | $ | 2,981,333 | $ | 31,574 | 4.20 | % | $ | 2,774,852 | $ | 29,218 | 4.27 | % | |||
| Securities - taxable | 531,046 | 3,619 | 2.74 | % | 497,739 | 3,475 | 2.77 | % | 429,020 | 3,324 | 3.14 | % | |||||||||
| Securities - non-taxable | 99,833 | 572 | 2.30 | % | 99,310 | 604 | 2.41 | % | 94,245 | 684 | 2.94 | % | |||||||||
| Other earning assets | 415,927 | 1,645 | 1.59 | % | 452,945 | 2,224 | 1.95 | % | 246,732 | 1,773 | 2.91 | % | |||||||||
| Total interest-earning assets | 4,024,800 | 36,244 | 3.62 | % | 4,031,327 | 37,877 | 3.73 | % | 3,544,849 | 34,999 | 4.00 | % | |||||||||
| Allowance for loan losses | (22,059 | ) | (21,967 | ) | (18,229 | ) | |||||||||||||||
| Noninterest-earning assets | 97,191 | 98,856 | 100,888 | ||||||||||||||||||
| Total assets | $ | 4,099,932 | $ | 4,108,216 | $ | 3,627,508 | |||||||||||||||
| Liabilities | |||||||||||||||||||||
| Interest-bearing liabilities | |||||||||||||||||||||
| Interest-bearing demand deposits | $ | 122,925 | $ | 219 | 0.72 | % | $ | 122,031 | $ | 223 | 0.73 | % | $ | 109,453 | $ | 212 | 0.79 | % | |||
| Savings accounts | 30,345 | 78 | 1.03 | % | 34,298 | 94 | 1.09 | % | 38,853 | 108 | 1.13 | % | |||||||||
| Money market accounts | 866,605 | 3,743 | 1.74 | % | 752,941 | 3,653 | 1.92 | % | 563,106 | 2,752 | 1.98 | % | |||||||||
| Certificates and brokered deposits | 2,069,170 | 13,168 | 2.56 | % | 2,201,231 | 14,447 | 2.60 | % | 2,017,262 | 12,314 | 2.48 | % | |||||||||
| Total interest-bearing deposits | 3,089,045 | 17,208 | 2.24 | % | 3,110,501 | 18,417 | 2.35 | % | 2,728,674 | 15,386 | 2.29 | % | |||||||||
| Other borrowed funds | 584,465 | 4,018 | 2.76 | % | 584,386 | 4,086 | 2.77 | % | 540,705 | 3,369 | 2.53 | % | |||||||||
| Total interest-bearing liabilities | 3,673,510 | 21,226 | 2.32 | % | 3,694,887 | 22,503 | 2.42 | % | 3,269,379 | 18,755 | 2.33 | % | |||||||||
| Noninterest-bearing deposits | 60,456 | 49,570 | 42,551 | ||||||||||||||||||
| Other noninterest-bearing liabilities | 54,961 | 66,136 | 23,695 | ||||||||||||||||||
| Total liabilities | 3,788,927 | 3,810,593 | 3,335,625 | ||||||||||||||||||
| Shareholders' equity | 311,005 | 297,623 | 291,883 | ||||||||||||||||||
| Total liabilities and shareholders' equity | $ | 4,099,932 | $ | 4,108,216 | $ | 3,627,508 | |||||||||||||||
| Net interest income | $ | 15,018 | $ | 15,374 | $ | 16,244 | |||||||||||||||
| Interest rate spread | 1.30% | 1.31% | 1.67 | % | |||||||||||||||||
| Net interest margin | 1.50% | 1.51% | 1.86 | % | |||||||||||||||||
| Net interest margin - FTE ^2,3^ | 1.65% | 1.67% | 2.04 | % |
^1^Includes nonaccrual loans
^2^ On a fully-taxable equivalent (“FTE”) basis assuming a 21% tax rate
^3^ Refer to "Non-GAAP Financial Measures" section above and "Reconciliation of Non-GAAP Financial Measures" below
| First Internet Bancorp | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Loans and Deposits (unaudited) | ||||||||||||
| Dollar amounts in thousands | ||||||||||||
| March 31, 2020 | December 31, 2019 | March 31, 2019 | ||||||||||
| Amount | Percent | Amount | Percent | Amount | Percent | |||||||
| Commercial loans | ||||||||||||
| Commercial and industrial | $ | 95,227 | 3.3 | % | $ | 96,420 | 3.3 | % | $ | 110,560 | 3.8 | % |
| Owner-occupied commercial real estate | 74,737 | 2.6 | % | 73,392 | 2.5 | % | 75,317 | 2.7 | % | |||
| Investor commercial real estate | 13,421 | 0.5 | % | 12,567 | 0.4 | % | 11,188 | 0.4 | % | |||
| Construction | 64,581 | 2.2 | % | 60,274 | 2.0 | % | 42,319 | 1.5 | % | |||
| Single tenant lease financing | 972,275 | 33.6 | % | 995,879 | 33.6 | % | 975,841 | 34.3 | % | |||
| Public finance | 627,678 | 21.7 | % | 687,094 | 23.2 | % | 708,816 | 25.0 | % | |||
| Healthcare finance | 372,266 | 12.9 | % | 300,612 | 10.1 | % | 158,796 | 5.6 | % | |||
| Small business lending | 67,275 | 2.3 | % | 61,121 | 2.1 | % | 13,751 | 0.5 | % | |||
| Total commercial loans | 2,287,460 | 79.1 | % | 2,287,359 | 77.2 | % | 2,096,588 | 73.8 | % | |||
| Consumer loans | ||||||||||||
| Residential mortgage | 218,730 | 7.6 | % | 313,849 | 10.6 | % | 404,869 | 14.3 | % | |||
| Home equity | 23,855 | 0.8 | % | 24,306 | 0.8 | % | 27,794 | 1.0 | % | |||
| Trailers | 148,700 | 5.1 | % | 146,734 | 5.0 | % | 140,548 | 4.9 | % | |||
| Recreational vehicles | 103,868 | 3.6 | % | 102,702 | 3.5 | % | 95,871 | 3.4 | % | |||
| Other consumer loans | 44,037 | 1.5 | % | 45,873 | 1.5 | % | 48,840 | 1.7 | % | |||
| Total consumer loans | 539,190 | 18.6 | % | 633,464 | 21.4 | % | 717,922 | 25.3 | % | |||
| Net deferred loan fees, premiums, discounts and other ^1^ | 65,443 | 2.3 | % | 42,724 | 1.4 | % | 25,418 | 0.9 | % | |||
| Total loans | $ | 2,892,093 | 100.0 | % | $ | 2,963,547 | 100.0 | % | $ | 2,839,928 | 100.0 | % |
| March 31, 2020 | December 31, 2019 | March 31, 2019 | ||||||||||
| Amount | Percent | Amount | Percent | Amount | Percent | |||||||
| Deposits | ||||||||||||
| Noninterest-bearing deposits | $ | 70,562 | 2.2 | % | $ | 57,115 | 1.8 | % | $ | 45,878 | 1.6 | % |
| Interest-bearing demand deposits | 123,233 | 3.9 | % | 129,020 | 4.1 | % | 111,626 | 4.0 | % | |||
| Savings accounts | 32,485 | 1.0 | % | 29,616 | 0.9 | % | 41,958 | 1.5 | % | |||
| Money market accounts | 930,698 | 29.3 | % | 786,390 | 24.9 | % | 573,895 | 20.4 | % | |||
| Certificates of deposits | 1,493,644 | 47.0 | % | 1,613,453 | 51.2 | % | 1,464,543 | 52.1 | % | |||
| Brokered deposits | 527,884 | 16.6 | % | 538,369 | 17.1 | % | 573,208 | 20.4 | % | |||
| Total deposits | $ | 3,178,506 | 100.0 | % | $ | 3,153,963 | 100.0 | % | $ | 2,811,108 | 100.0 | % |
^1^ Includes carrying value adjustments of $44.6 million, $21.4 million and $11.5 million as of March 31, 2020, December 31, 2019 and March 31, 2019, respectively, 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 | |||||||||
| March 31, <br>2020 | December 31, <br>2019 | March 31, <br>2019 | |||||||
| Total equity - GAAP | $ | 305,127 | $ | 304,913 | $ | 294,013 | |||
| Adjustments: | |||||||||
| Goodwill | (4,687 | ) | (4,687 | ) | (4,687 | ) | |||
| Tangible common equity | $ | 300,440 | $ | 300,226 | $ | 289,326 | |||
| Total assets - GAAP | $ | 4,168,146 | $ | 4,100,083 | $ | 3,670,176 | |||
| Adjustments: | |||||||||
| Goodwill | (4,687 | ) | (4,687 | ) | (4,687 | ) | |||
| Tangible assets | $ | 4,163,459 | $ | 4,095,396 | $ | 3,665,489 | |||
| Common shares outstanding | 9,801,825 | 9,741,800 | 10,128,587 | ||||||
| Book value per common share | $ | 31.13 | $ | 31.30 | $ | 29.03 | |||
| Effect of goodwill | (0.48 | ) | (0.48 | ) | (0.46 | ) | |||
| Tangible book value per common share | $ | 30.65 | $ | 30.82 | $ | 28.57 | |||
| Total shareholders' equity to assets | 7.32 | % | 7.44 | % | 8.01 | % | |||
| Effect of goodwill | (0.10 | %) | (0.11 | %) | (0.12 | %) | |||
| Tangible common equity to tangible assets | 7.22 | % | 7.33 | % | 7.89 | % | |||
| Total average equity - GAAP | $ | 311,005 | $ | 297,623 | $ | 291,883 | |||
| Adjustments: | |||||||||
| Average goodwill | (4,687 | ) | (4,687 | ) | (4,687 | ) | |||
| Average tangible common equity | $ | 306,318 | $ | 2,292,936 | $ | 287,196 | |||
| Return on average shareholders' equity | 7.78 | % | 9.46 | % | 7.91 | % | |||
| Effect of goodwill | 0.12 | % | 0.15 | % | 0.13 | % | |||
| Return on average tangible common equity | 7.90 | % | 9.61 | % | 8.04 | % | |||
| Total interest income | $ | 36,244 | $ | 37,877 | $ | 34,999 | |||
| Adjustments: | |||||||||
| Fully-taxable equivalent adjustments ^1^ | 1,535 | 1,570 | 1,557 | ||||||
| Total interest income - FTE | $ | 37,779 | $ | 39,447 | $ | 36,556 | |||
| Net interest income | $ | 15,018 | $ | 15,374 | $ | 16,244 | |||
| Adjustments: | |||||||||
| Fully-taxable equivalent adjustments ^1^ | 1,535 | 1,570 | 1,557 | ||||||
| Net interest income - FTE | $ | 16,553 | $ | 16,944 | $ | 17,801 | |||
| Net interest margin | 1.50 | % | 1.51 | % | 1.86 | % | |||
| Effect of fully-taxable equivalent adjustments ^1^ | 0.15 | % | 0.16 | % | 0.18 | % | |||
| Net interest margin - FTE | 1.65 | % | 1.67 | % | 2.04 | % |
^1^ Assuming a 21% tax rate
inbk1q20earningspresenta
Financial Results First 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, timing of pending acquisitions, 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,” “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 crisis is adversely affecting us, our customers, counterparties, employees, and third-party service providers, and the ultimate extent of the impacts on our business, financial position, results of operations, liquidity, and prospects remains uncertain. Continued deterioration in general business and economic conditions, including further increases in unemployment rates, or turbulence in domestic or global financial markets 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. 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; failure to close any pending acquisitions; failure to satisfy or waive closing condition; 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. 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 and net interest margin – FTE 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.” 2
First Quarter 2020 Highlights . Diluted EPS of $0.62, up 10.7% from 1Q19 Earnings . Net income of $6.0 million, up 5.7% from 1Q19 . Total revenue of $21.2 million, up 14.0% from 1Q19 . Cost of interest-bearing deposits declined 11 bps from 4Q19 to 2.24% Key Operating . Allowance for loan losses / total loans increased to 0.79% and provision Trends for loan losses of $1.5 million, up 212.2% from 4Q19 . Asset quality remained solid with NPAs to total assets of 0.23% . Sold $99.9 million of single tenant lease financing, public finance and SBA Disciplined 7(a) loans at a premium Balance Sheet Management . Sold $90.8 million of portfolio residential mortgage loans, including seasoned lower-yielding loans . Strong on- and off-balance sheet liquidity to manage impact of COVID- 19 environment Liquidity and Capital . Increased deposits by $24.5 million from 4Q19 . Regulatory capital ratios remain strong 3 3
Loan Portfolio Overview . Total loans decreased $71.4 million, or 2.4%, compared to 4Q19 and increased $52.2 million, or 1.8%, year-over-year . Overall commercial loan balances were stable as growth in healthcare finance was offset by sales of single tenant lease financing and public finance loans . Consumer loan balances declined due primarily to the sale of $90.8 million of portfolio residential mortgage loans Loan Portfolio Mix Dollars in millions $2,963.5 $2,892.1 $2,716.2 6% 2% 7% 7% 3% 1 2% Commercial and Industrial Commercial Real Estate $2,091.0 34% 34% 9% 34% Single Tenant Lease Financing 2% Public Finance Healthcare Finance 38% $1,250.8 24% 22% Small Business Lending 13% 26% 5% Residential Mortgage/HE/HELOCs 22% 4% 10% 13% Consumer 49% 1% 2% 2% 2% 16% 12% 16% 8% 19% 14% 11% 10% 10% 11% 2016 2017 2018 2019 1Q20 4 1 Includes commercial and industrial and owner-occupied commercial real estate balances
Deposit Composition . Total deposits increased $24.5 million, or 0.8%, compared to 4Q19 and $367.4 million, or 13.1%, year- over-year . Strong quarterly money market growth of $144.3 million, including $52.5 million in small business . CD and brokered deposit balances decreased $130.3 million compared to 4Q19 . Cost of interest-bearing deposits declined 11 bps compared to 4Q19 Total Deposits - $3.2 Billion Total Non-Time Deposits - $1.2 Billion As of March 31, 2020 As of March 31, 20201 $70.6 2% $123.2 $32.5 4% 1% $394.2 $2,021.5 $485.8 34% 64% 42% $930.7 29% $97.5 $179.5 8% 16% 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 5
Net Interest Income and Net Interest Margin . Interest income earned on loans and cash Net Interest Income – GAAP and FTE1 balances declined primarily due to the impact of Dollars in millions lower interest rates following successive Federal GAAP FTE $17.8 $17.7 Reserve rate cuts $16.8 $16.9 $16.6 . Interest expense on deposits declined as well due to the decrease in the cost of funds as $16.2 $16.1 $15.2 $15.4 $15.0 higher cost CDs matured and were replaced with deposits at lower rates 1Q19 2Q19 3Q19 4Q19 1Q20 Yield on Loans and Cost of Deposits NIM – GAAP and FTE1 GAAP FTE 4.27% 4.24% 4.18% 4.20% 4.11% 2.04% 1.91% 1.70% 1.67% 1.65% 2.29% 2.39% 2.40% 2.35% 2.24% 1.86% 1.73% 1.54% 1.51% 1.50% 1Q19 2Q19 3Q19 4Q19 1Q20 1Q19 2Q19 3Q19 4Q19 1Q20 Yield on loans Cost of interest-bearing deposits 6 1 See Reconciliation of Non-GAAP Financial Measures in the Appendix
Net Interest Margin Drivers . Linked quarter NIM decline was primarily attributable to the impact of falling short term interest rates on loans yields and cash balances, which remained elevated during the quarter – 12 bp negative impact . Lower deposit costs and improved deposit mix had a positive impact of 9 bps . Securities portfolio added 3 bps . Meaningful opportunity to continue lowering deposit costs . $1.2 billion of CDs with a weighted average cost of 2.45% mature in the next twelve months – replacement cost is currently in the range of 1.15% - 1.20% NIM – FTE1 Linked-Quarter Change Monthly Rate Paid on Interest-bearing Deposits +3 bps 2.38% 2.34% +9 bps 2.33% 2.30% 2.27% -7 bps 1.67% 1.65% -5 bps -2 bps 2.16% Oct-19 Nov-19 Dec-19 Jan-20 Feb-20 Mar-20 7 1 See Reconciliation of Non-GAAP Financial Measures in the Appendix
Noninterest Income . Noninterest income of $6.2 million compared to $5.4 million in 4Q19 and $2.4 million in 1Q19 . Continued strong mortgage banking revenue of $3.7 million . Gain on sale of loans of $1.8 million, up slightly from 4Q19 . Sales of $99.9 million of single tenant lease financing, public finance and SBA 7(a) loans at premiums . Sale of $90.8 million of portfolio residential mortgage loans, including seasoned lower-yielding balances, at a slight discount Noninterest Income Noninterest Income 1Q20 Dollars in millions $0.1 $0.4 $6.2 $0.2 $5.6 $5.4 $1.8 $3.7 $3.5 $2.4 Mortgage banking activities Gain on sale of loans Service charges and fees Net loan servicing revenue 1Q19 2Q19 3Q19 4Q19 1Q20 Other 8 8
Noninterest Expense . Noninterest expense of $13.5 million compared to $12.6 million in 4Q19 . Higher salaries and employee benefits expense due primarily to seasonality, full quarter of SBA personnel additions and higher mortgage incentive compensation . Increased loan expenses due mainly to administrative costs associated with nonperforming loans . Noninterest expense / average assets remains well below the industry average Noninterest Expense Noninterest Expense / Average Assets Dollars in millions $13.5 1.32% $12.6 1.24% 1.23% 1.22% $11.1 $11.7 $11.2 1.11% 1Q19 2Q19 3Q19 4Q19 1Q20 1Q19 2Q19 3Q19 4Q19 1Q20 9
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 0.79% in 1Q20 from 0.74% in 4Q19, while total loan balances declined 2.4%, due primarily to adjustments to economic qualitative factors . Quarterly provision for loan losses of $1.5 million, up from $0.5 million in 4Q19, due mainly to increasing the allowance for loan losses . Net charge-offs to average loans of 0.06% - in line with historical results NPLs / Total Loans NPAs / Total Assets Net Charge-Offs / Average Loans 0.26% 0.22% 0.23% 0.23% 0.21% 0.20% 0.15% 0.19% 0.20% 0.17% 0.12% 0.06% 0.05% 0.04% 0.04% 1Q19 2Q19 3Q19 4Q19 1Q20 1Q19 2Q19 3Q19 4Q19 1Q20 1Q19 2Q19 3Q19 4Q19 1Q20 10
Liquidity and Capital . Regulatory capital ratios are strong at the Company and Bank level . More than sufficient liquidity, supplemented by access to multiple funding sources, to handle an extended economic impact of COVID-19 . Tangible book value per share was impacted by volatility in the fixed income and interest rate markets due to the COVID-19 pandemic crisis Tangible Book Value Per Share1 Change Regulatory Capital Ratios – March 31, 2020 + $0.42 Company Bank + $0.62 Total shareholders' equity to assets 7.32% 8.03% Tangible common equity to tangible assets 7.22% 7.93% $30.82 $30.65 - $1.01 Tier 1 leverage ratio 7.82% 8.54% - $0.14 - $0.06 Common equity tier 1 capital ratio 10.78% 11.79% Tier 1 capital ratio 10.78% 11.79% Total risk-based capital ratio 13.90% 12.56% 1 See Reconciliation of Non-GAAP Financial Measures 11
COVID-19 Response Supporting communities, clients and colleagues Committed to serving our stakeholders during challenging times Caring for Communities: Serving Clients: Supporting Colleagues: . Focusing on leveraging core . Stepping up client interactions to . Stressing health and well-being best serve their financial needs business and philanthropic . Approximately 60% of employees initiatives to support communities . Prudently extending credit to company-wide are working from . Announced $250,000 grant to commercial and consumer clients home provide financial stimulus to small . Offering loan payment deferrals . Increased cleaning efforts and businesses and nonprofits in to customers experiencing frequency at all company Marion and Hamilton Counties financial hardship locations . Branchless delivery model is . Participant in the SBA’s Paycheck . Telehealth visits are free until safest in the pandemic Protection Program (PPP) and June 14, 2020 other low-interest loan programs . Supported local restaurants by . Expanded Emergency Sick pay to providing all employees with . Notifying clients of heightened cover 100% of employees’ regular bonuses for takeout/delivery of a fraudulent online activity to help rate of pay who are caring for meal protect their accounts children at home due to closure of schools/daycare . Augmented engagement efforts to keep remote employees connected with teams and the organization 12
COVID-19 Summary Impact Single Tenant Small Loan Exposure to impacted industries Lease C&I & Business (As of March 31, 2020, dollars in millions) Financing OOCRE Lending Construction Quick service restaurants $215.7 $2.9 Full service restaurants $213.0 $2.4 $5.8 Hotels / accommodations $10.1 $2.5 Healthcare and social assistance $10.7 $1.8 $8.6 Consumer services (education, childcare, $25.1 $10.0 religious orgs., arts and entertainment) Total $428.7 $38.2 $30.6 $11.1 No exposure to airlines, cruise ships, oil & gas, multifamily, shopping malls and office buildings 13
COVID-19 Summary Impact Supporting clients through payment deferrals % of Balances (Dollars in millions) Deferrals1 with Deferrals Commercial and industrial $15.4 16.2% Single tenant lease financing $11.8 1.2% Owner-occupied CRE $6.0 8.0% Healthcare finance $289.1 75.9% Small business $21.7 30.6% Total commercial $344.0 15.0% Residential mortgage $8.9 4.0% Home equity $0.3 1.2% Other consumer $7.8 2.6% Total consumer $17.0 3.1% Total loans $361.0 12.5% 14 1 As of April 17, 2020
Single Tenant Lease Financing Single tenant lease financing overview: Portfolio mix by major tenant . $972.3 million in balances as of March 31, 2020 Int. Car Wash 7% Red Lobster . Long term financing of single tenant properties occupied 7% Wendy's by financially strong national and regional tenants 5% Walgreens . All loans collateralized by subject real estate Burger King 5% . Average portfolio LTV of 50% 55% Bob Evans 4% Dollar General . Average loan size of $1.4 million 4% CVS . No loan term extends beyond tenant lease term 4% Kum & Go . All borrowers but one made their April payments 4% 3% United Pacific 2% . Strong historical credit performance Other Portfolio mix by major vertical Portfolio mix by geography 2% 1% 1% Quick Service Restaurant Full Service 6% Restaurant Auto Parts/ 8% 23% Repair/Car Wash 13% 6% Convenience/Fuel 22% Pharmacies 10% Specialty Retailers Dollar Stores 21% 38% 11% 22% Medical Bank Branches 16% Other 15
Public Finance Public finance overview: Borrower mix by credit rating . $627.7 million in balances as of March 31, 2020 1%3% 6% AAA/Aaa . Provides a range of credit solutions for government and 5% AA+/Aa1 not-for-profit entities AA/Aa2 . Borrowers’ needs include short-term financing, debt 43% AA-/Aa3 refinancing, infrastructure improvements, economic 22% A+/A1 A/A2 development and equipment financing A-/A3 . Federal Reserve’s Municipal Liquidity Facility provides BBB+/Baa1 BBB/Baa2 support to the public sector in COVID-19 crisis 7% BB+/Ba1 6% . No delinquencies or losses since inception BB/Ba2 3% 1% Non-Rated 2% 1% Portfolio mix by repayment source Portfolio mix by state General Obligation 3% 4% IN OK 3% Essential use equipment 19% 3% loans Utilities Revenue 1% OH MO Lease rental revenue 5% 31% 2% Tax Incremental Financing 3% MI GA 6% (TIF) districts 55% Public higher ed facilities - 4% Revenue 7% Sales tax, food and bev tax, 4% LA WI hotel tax Municipally owned health 5% care facilities 10% Income Tax supported loans Other 17% 7% Public higher ed facilities - 11% G.O. Others 16
Healthcare Finance Portfolio mix by borrower Healthcare finance overview: 1% . $372.3 million in balances as of March 31, 2020 5% . Loan portfolio focused primarily on dental practices with Dentists some exposure to veterinary practices and other specialties . Borrowers’ needs include practice finance or acquisition, acquiring or refinancing owner-occupied CRE, equipment 94% purchases and project loans Veterinarians . Average loan size of $611,000 . No delinquencies or losses since inception Other Portfolio mix by borrower use Portfolio mix by state 1% <1% CA 4% Practice Refi or Acquisition 13% TX Owner 27% Occupied NY CRE 46% 81% Projects AZ Equipment 13% OR All others Start Up 6% 3% 5% 17
Specialty Consumer . $296.6 million in balances as of March 31, 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 17% . Avg. loan size of $19,100 . Strong historical credit performance . Annualized NCOs/average loans have 23% 28% averaged less than 0.35% over the last two years Concentration by State Concentration by Loan Type State Percentage Loan Type Percentage Texas 16% Trailers 50% California 12% Recreational Vehicles 35% Florida 6% Other consumer 15% North Carolina 4% Colorado 4% All other states 58% 18
Residential Mortgage Diversified Portfolio with . $242.6 million in balances as of March 31, 2020 (includes home equity balances) Midwest Concentration . Direct-to-consumer originations centrally located at corporate headquarters 24% 10% . Focused on high quality borrowers 55% . Avg. loan size of $162,700 . Avg. credit score at orig. of 757 . Avg. LTV at origination of 72% 4% 7% . Strong historical credit performance . Annualized NCOs/average loans have averaged less than 0.03% over the last two years Concentration by State Concentration by Loan Type State Percentage Loan Type Percentage Indiana 51% Single Family Residential 75% California 18% SFR Construction to New York 4% Permanent 16% Florida 3% Home Equity – LOC 7% Arizona 2% Home Equity – Closed End 2% All other states 22% 19
Small Business Lending . $67.3 million in balances as of March 31, 2020 Portfolio Mix by State . SBA will be making scheduled loan payments for 7(a) 2% IN program borrowers for a six month period 10% . These payments will be made following deferral 6% IL programs offered to borrowers impacted by COVID- 19 55% AZ 27% . Paycheck Protection Program approvals for 268 loans CO totaling $45.0 million (as of April 16, 2020) All others PPP Approvals by Customer Type Portfolio Mix by Major Industry 6% Food and C&I 15% Lodging Services 17% 28% 5% SMB/Commercial Retail Deposits 7% 53% Real Estate Healthcare 9% Manufacturing 24% Finance 21% 15% Construction SBA All others 20
Long-term Strategy . Manage balance sheet growth and deploy excess liquidity to fund loan growth and/or higher-cost deposit runoff . Continued loan production combined with loan sales to enhance noninterest income and improve mix of earning assets . Build capital through improved profitability and disciplined balance sheet management . Net interest margin expansion through lower deposit costs, managing loan pricing and portfolio composition . Continue to build out nationwide SBA platform, capitalizing on opportunities on both sides of the balance sheet . Increase noninterest income through SBA gain of sale and loan servicing revenue . Retain higher yielding loan balances . Continue to grow small business deposits . Following successful results in mortgage, implement technology to enhance the customer experience and workflow process in commercial and small business lending . Maintain top quartile asset quality 21
Appendix 22
Loan Portfolio Composition Dollars in thousands 2017 2018 1Q19 2Q19 3Q19 4Q19 1Q20 Commercial loans Commercial and industrial$ 121,966 $ 107,405 $ 110,560 $ 106,517 $ 88,874 $ 96,420 $ 95,227 Owner-occupied commercial real estate 71,872 77,569 75,317 71,908 74,384 73,392 74,737 Investor commercial real estate 7,273 5,391 11,188 21,179 11,852 12,567 13,421 Construction 49,213 39,916 42,319 47,849 54,131 60,274 64,581 Single tenant lease financing 803,299 919,440 975,841 1,001,196 1,008,247 995,879 972,275 Public finance 438,341 706,342 708,816 706,161 686,622 687,094 627,678 Healthcare finance 31,573 117,007 158,796 212,351 251,530 300,612 372,266 Small business lending 4,870 17,370 13,751 15,697 18,177 61,121 67,275 Total commercial loans 1,528,407 1,990,440 2,096,588 2,182,858 2,193,817 2,287,359 2,287,460 Consumer loans Residential mortgage 299,935 399,898 404,869 318,678 320,451 313,849 218,730 Home equity 30,554 28,735 27,794 26,825 25,042 24,306 23,855 Trailers 101,369 136,620 140,548 144,704 145,600 146,734 148,700 Recreational vehicles 69,196 91,912 95,871 100,518 102,698 102,702 103,868 Other consumer loans 56,968 51,239 48,840 49,029 48,275 45,873 44,037 Total consumer loans 558,022 708,404 717,922 639,754 642,066 633,464 539,190 Net def. loan fees, prem., disc. and other 1 4,764 17,384 25,418 38,544 45,389 42,724 65,443 Total loans$ 2,091,193 $ 2,716,228 $ 2,839,928 $ 2,861,156 $ 2,881,272 $ 2,963,547 $ 2,892,093 1 Includes carrying value adjustments of $44.6 million, $21.4 million, $27.6 million, $22.2 million, $11.5 million, $5.0 million and $0.3 million as of March 31, 2020, December 31, 2019, September 30, 2019, June 30, 2019, March 31, 2019, December 31, 2018 and December 31, 2017, respectively, related to interest rate swaps associated with public finance loans. 23
Reconciliation of Non-GAAP Financial Measures Dollars in thousands 1Q19 2Q19 3Q19 4Q19 1Q20 Total equity - GAAP $294,013 $296,120 $295,140 $304,913 $305,127 Adjustments: Goodwill (4,687) (4,687) (4,687) (4,687) (4,687) Tangible common equity $289,326 $291,433 $290,453 $300,226 $300,440 Total assets - GAAP $3,670,176 $3,958,829 $4,095,491 $4,100,083 $4,168,146 Adjustments: Goodwill (4,687) (4,687) (4,687) (4,687) (4,687) Tangible assets $3,665,489 $3,954,142 $4,090,804 $4,095,396 $4,163,459 Common shares outstanding 10,128,587 10,016,458 9,741,800 9,741,800 9,801,825 Book value per common share $29.03 $29.56 $30.30 $31.30 $31.13 Effect of goodwill (0.46) (0.46) (0.48) (0.48) (0.48) Tangible book value per common share $28.57 $29.10 $29.82 $30.82 $30.65 Total shareholders' equity to assets 8.01% 7.48% 7.21% 7.44% 7.32% Effect of goodwill (0.12%) (0.11%) (0.11%) (0.11%) (0.10%) Tangible common equity to tangible assets 7.89% 7.37% 7.10% 7.33% 7.22% Net interest income $16,244 $16,105 $15,244 $15,374 $15,018 Adjustments: Fully-taxable equivalent adjustments 1 1,557 1,612 1,595 1,570 1,535 Net interest income - FTE $17,801 $17,717 $16,839 $16,944 $16,553 Net interest margin 1.86% 1.73% 1.54% 1.51% 1.50% Adjustments: Effect of fully-taxable equivalent adjustments 1 0.18% 0.18% 0.16% 0.16% 0.15% Net interest margin - FTE 2.04% 1.91% 1.70% 1.67% 1.65% 1 Assuming a 21% tax rate 24