First Internet Bancorp Reports Fourth Quarter and Full Year 2022 Results

First Internet Bancorp (the “Company”) (Nasdaq: INBK), the parent company of First Internet Bank (the “Bank”), announced today financial and operational results for the fourth quarter and full year ended December 31, 2022.

Fourth Quarter and Full Year 2022 Commentary

Market forces and the economic climate, both driven in part by the post-pandemic recovery, had a significant impact on the Company’s 2022 financial results and frame the Company’s strategy for 2023 and beyond.

Loan demand was strong throughout the year. Total loan portfolio balances increased 7.5% from the third quarter of 2022 and 21.2% from the fourth quarter of 2021. However, intense competition for deposits through the most rapid set of Federal Funds rate hikes since the late 1980s drove interest expense higher and pressured net interest margin. Average loan portfolio yields were up 39 bps in the fourth quarter compared to the linked quarter, while the cost of interest-bearing deposits was up 104 bps. The Company recorded a higher provision for loan loss expense in the fourth quarter based primarily upon loan growth while credit quality remained excellent with nonperforming ratios well below industry averages.

The Company has healthy loan pipelines and will focus its 2023 origination efforts on its floating rate loan products, notably commercial construction and small business lending, as well as its higher-yielding fixed rate programs, such as franchise finance.

While other lending lines have strong demand, the combination of housing prices, housing supply, economic uncertainty and interest rates have caused mortgage applications nationally to plunge to their lowest level in 26 years. Due to the steep decline in mortgage volumes and the negative outlook for mortgage lending over the next several years, the Company decided to exit its consumer mortgage business during the first quarter of 2023. This includes its nationwide digital direct-to-consumer mortgage platform that originates residential loans for sale in the secondary market as well as its local traditional consumer mortgage and construction-to-permanent business. (The Company’s commercial construction and land development business will not be affected by this decision and will remain an important part of the Company’s lending strategy, as noted above.)

This action is expected to reduce total annual noninterest expense by approximately $6.8 million and increase annualized pre-tax income by approximately $2.7 million, with 80% of the benefit realized in 2023 and 100% thereafter. The Company estimates that it will incur total pre-tax expense of approximately $3.3 million in the first and second quarters of 2023 associated with exiting this line of business.

While navigating market headwinds, management remains committed to creating shareholder value. The Company repurchased 284,286 shares in the fourth quarter at an average price of $25.16. For the year, the Company repurchased over 800,000 shares at an average price well below tangible book value. Tangible book value reached its highest value to date, at $39.74 as of December 31, 2022.

Fourth Quarter and Full Year 2022 Financial Highlights

Highlights for the fourth quarter and full year include:

Annual net income and diluted earnings per share of $35.5 million and $3.70, compared to $48.1 million and $4.82, respectively, for the full year of 2021
Quarterly net income of $6.4 million and $0.68 diluted earnings per share, compared to $8.4 million and $0.89 diluted earnings per share for the third quarter of 2022, and $12.5 million and $1.25 diluted earnings per share for the fourth quarter of 2021
Loan growth of $243.5 million in the fourth quarter, a 7.5% increase from the third quarter of 2022 and an increase of $611.7 million, or 21.2%, from the fourth quarter of 2021
Quarterly net interest margin of 2.09% and fully-taxable equivalent net interest margin of 2.22%

“We satisfied strong, high quality loan demand in our commercial and consumer lending businesses in the fourth quarter, capping off a year of robust loan growth and annual growth in net interest income,” said David Becker, Chairman and Chief Executive Officer. “While higher deposit costs impacted earnings in the fourth quarter, we were pleased with the increase in income generated by our loan portfolio and the strong finish to the year by our small business lending team. As a result of investments we made during 2021 and 2022 in government guaranteed lending talent, we continue to move up the rankings, placing in the top 30 of 7(a) program lenders for the SBA’s 2022 fiscal year, and are in the top 15 for the 2023 fiscal year-to-date.

“We are also beginning to realize the rewards from important investments in our Banking-as-a-Service efforts. We made significant progress in the fourth quarter, going live with our platform partner, Increase, and providing payments services to power the small business bill pay product from Ramp, a leading corporate card and spend management platform. We have two additional fintech partners in the pilot phase, another four approaching the pilot phase and one in due diligence. We also expect our partnership with the platform Treasury Prime to be fully implemented during the first quarter of 2023 with the first associated fintech program to be on-boarded in the second quarter.

“As we enter 2023, we believe our increasing mix of variable rate loans, combined with new loan production coming on at higher rates, will help to offset the pressure of higher deposit costs. If interest rates follow the market’s expectations, deposit costs should stabilize later this year and decline thereafter, setting the stage to achieve higher earnings and profitability in 2024. Furthermore, our balance sheet and capital levels are strong and asset quality remains high, leaving us well-positioned for any changes in the broader economic environment.”

Mr. Becker concluded, “I want to thank the entire First Internet team for their hard work and unwavering commitment to client service throughout 2022, which are the keys to our ongoing success and the reason we are confident in our future.”

Net Interest Income and Net Interest Margin

Net interest income for the fourth quarter of 2022 was $21.7 million, compared to $24.0 million for the third quarter of 2022, and $23.5 million for the fourth quarter of 2021. On a fully-taxable equivalent basis, net interest income for the fourth quarter of 2022 was $23.1 million, compared to $25.3 million for the third quarter of 2022, and $24.9 million for the fourth quarter of 2021.

Total interest income for the fourth quarter of 2022 was $45.7 million, an increase of 16.8% compared to the third quarter of 2022, and an increase of 33.6% compared to the fourth quarter of 2021. On a fully-taxable equivalent basis, total interest income for the fourth quarter of 2022 was $47.1 million, an increase of 16.5% compared to the third quarter of 2022, and an increase of 32.4% compared to the fourth quarter of 2021. The sequential increase was due primarily to growth in interest income earned on the commercial and consumer loan portfolios as well as from the securities portfolio and other earning assets. The yield on average interest-earning assets for the fourth quarter of 2022 increased to 4.40% from 3.91% in the linked quarter due primarily to a 39 basis point (“bp”) increase in the average loan yield, a 60 bp increase in the yield earned on securities and a 103 bp increase in the yield earned on other earning assets. Compared to the linked quarter, average loan balances increased $215.5 million, or 6.8%, while the average balance of securities decreased $27.7 million, or 4.6%, and the average balance of other earning assets decreased $38.6 million, or 20.5%.

Interest income earned on commercial loans was positively impacted by higher rates and average balances in the variable rate small business lending, construction and commercial and industrial portfolios as well as strong growth and higher new origination yields in the franchise finance portfolio. Other portfolios also benefitted from higher average balances and increases in new origination yields as well as higher prepayment fees. In the consumer portfolio, interest income was up due to the combination of higher new origination yields and growth in the residential mortgage, trailers and recreational vehicles portfolios.

New funded portfolio origination yields increased 84 bps compared to the third quarter, and for the full year 2022 were approximately 118 bps higher than for 2021. Because of the fixed rate nature of certain larger portfolios, there is a lagging impact of the higher origination yields on the portfolio.

The Federal Reserve increased the federal funds (“Fed Funds”) target rate 425 bps in 2022. During the course of the year, the Company increased the rates paid on consumer, small business and commercial interest-bearing demand deposits. While money market deposit pricing was relatively rational during the first half of the year, competition in both the digital banking space and local markets intensified in the third quarter and continued into the fourth quarter, and deposit betas increased as a result.

Total interest expense for the fourth quarter of 2022 was $24.0 million, an increase of 58.9% compared to the third quarter of 2022, and an increase of 124.6% compared to the fourth quarter of 2021. During the fourth quarter of 2022, the average balance of interest-bearing deposits increased $79.7 million, or 2.7%, compared to the third quarter of 2022 and the cost of these deposits increased 104 bps. The increase in average interest-bearing deposit balances was due to an increase in average certificates and brokered deposit balances, which increased $183.2 million, or 17.7%, during the quarter while the cost of these deposits increased 76 bps. Additionally, the average balance of money market accounts increased $71.8 million, or 5.2%, compared to the third quarter of 2022 while the cost of these deposits increased 156 bps.

The average balance of noninterest-bearing deposits increased $11.6 million, or 9.4%, during the fourth quarter compared to the linked quarter, driven by deposits related to growth in construction lending. The average balance of BaaS – brokered deposits declined significantly as a large relationship was exited early in the quarter. However, deposits related to the program with Ramp on-boarded during the quarter began to see deposit inflows in December, which totaled $13.6 million at year end and are priced significantly lower than the exited relationship.

Additionally, with the inverted yield curve, the Company used medium- and longer-term brokered deposits, as well as longer-term FHLB advances, to supplement funding needs, manage long term interest rate risk and offset the impact of further increases in Fed Funds and other short term interest rates.

Net interest margin (“NIM”) was 2.09% for the fourth quarter of 2022, down from 2.40% for the third quarter of 2022 and 2.30% for the fourth quarter of 2021. Fully-taxable equivalent NIM (“FTE NIM”) was 2.22% for the fourth quarter of 2022, down from 2.53% for the third quarter of 2022 and 2.43% for the fourth quarter of 2021. The decreases in NIM and FTE NIM compared to the linked quarter were driven primarily by the effect of higher interest-bearing deposit costs, partially offset by higher yields on loans, securities and other earning assets and higher average loan balances.

Noninterest Income

Noninterest income for the fourth quarter of 2022 was $5.8 million, up $1.5 million, or 34.5%, from the third quarter of 2022, and down $1.9 million, or 24.5%, from the fourth quarter of 2021. Gain on sale of loans totaled $2.9 million for the fourth quarter of 2022, up $0.1 million, or 5.5%, from the linked quarter. Gain on sale revenue in the quarter consisted entirely of gain on the sales of U.S. Small Business Administration (“SBA”) 7(a) guaranteed loans. The increase in revenue related to SBA loan sales was due to a higher volume of sales, partially offset by lower net gain on sale premiums. Other income totaled $1.5 million for the fourth quarter of 2022, increasing $1.4 million compared to the linked quarter due to distributions received on certain Small Business Investment Company and venture capital fund investments. Mortgage banking revenue totaled $1.0 million for the fourth quarter of 2022 as the higher interest rate environment and other economic factors continued to impact interest rate lock and sold loan volume as well as gain on sale margins.

Noninterest Expense

Noninterest expense for the fourth quarter of 2022 was $18.5 million, up $0.5 million, or 2.9%, from the third quarter of 2022 and up $1.6 million, or 9.2%, from the fourth quarter of 2021. Other expense, consulting and professional fees, deposit insurance premium and premises and equipment costs increased from the linked quarter, while marketing, advertising and promotion costs and loan expenses were lower. The increases in other expense and premises and equipment were due to several items, none of which were individually significant. The increase in consulting and professional fees was due primarily to the timing of third party loan review. The increase in deposit insurance premium was due primarily to year-over-year asset growth as well as the composition of loans and deposits. The decreases in marketing costs and loan expenses were due primarily to lower mortgage origination activity.

Income Taxes

The Company reported an income tax expense of $0.5 million for the fourth quarter of 2022 and an effective tax rate of 7.3%, compared to an income tax expense of $1.0 million and an effective tax rate of 10.5% for the third quarter of 2022 and an income tax expense of $2.0 million and an effective tax rate of 13.8% for the fourth quarter of 2021. The lower effective tax rate for the fourth quarter of 2022 reflects the impact of the decline in taxable income during the second half of the year compared to estimates earlier in the year.

Loans and Credit Quality

Total loans as of December 31, 2022 were $3.5 billion, an increase of $243.5 million, or 7.5%, compared to September 30, 2022, and an increase of $611.7 million, or 21.2%, compared to December 31, 2021. Total commercial loan balances were $2.7 billion as of December 31, 2022, an increase of $184.3 million, or 7.3%, compared to September 30, 2022, and an increase of $355.5 million, or 15.0%, compared to December 31, 2021. Compared to the linked quarter, the increase in commercial loan balances was driven primarily by growth in franchise finance, single tenant lease financing, construction, commercial and industrial and small business lending balances. These items were partially offset by continued runoff in the healthcare finance portfolio.

Total consumer loan balances were $733.3 million as of December 31, 2022, an increase of $61.1 million, or 9.1%, compared to September 30, 2022, and an increase of $263.3 million, or 56.0%, compared to December 31, 2021. The increase compared to the linked quarter was due to higher balances in the residential mortgage, recreational vehicles and trailers loan portfolios.

Total delinquencies 30 days or more past due were 0.17% of total loans as of December 31, 2022, compared to 0.06% at September 30, 2022 and 0.04% as of December 31, 2022. The increase in delinquencies during the fourth quarter of 2022 was due to one construction loan that was brought current subsequent to year end. Overall credit quality remained strong during the quarter as nonperforming loans to total loans was 0.22% as of December 31, 2022, compared to 0.18% at September 30, 2022 and 0.26% as of December 31, 2021. Nonperforming loans totaled $7.5 million at December 31, 2022, up from $6.0 million at September 30, 2022.

The allowance for loan losses as a percentage of total loans was 0.91% as of December 31, 2022, compared to 0.92% as of September 30, 2022 and 0.96% as of December 31, 2021. While growth in the allowance for loan losses was generally in-line with overall loan portfolio growth, the slight decline in the allowance coverage ratio compared to the linked quarter reflects the removal of a specific reserve due to positive developments on a certain monitored loan, growth in certain portfolios with lower coverage ratios and the continued decline in healthcare finance balances that have a higher coverage ratio.

Net charge-offs of $0.2 million were recognized during the fourth quarter of 2022, resulting in net charge-offs to average loans of 0.03%, compared to net charge-offs to average loans of 0.02% for the third quarter of 2022 and net recoveries to average loans of 0.01% for the fourth quarter of 2021.

The provision for loan losses in the fourth quarter of 2022 was $2.1 million, compared to a provision of $0.9 million for the third quarter of 2022 and a benefit of $0.2 million for the fourth quarter of 2021. The provision for the quarter was driven by the overall growth in the loan portfolio, partially offset by the reduction in specific reserves mentioned above.

During the first quarter of 2023, the Company will be replacing its incurred loss model for recognizing credit losses with an expected loss model referred to as the current expected credit losses (“CECL”) model. As a result, the Company expects its initial adjustment to the allowance for credit losses to be in the range of $2.5 million to $3.0 million.

Capital

As of December 31, 2022, total shareholders’ equity was $365.0 million, an increase of $4.1 million, or 1.1%, compared to September 30, 2022, and a decrease of $15.4 million, or 4.0%, compared to December 31, 2021. The increase in shareholders’ equity during the fourth quarter of 2022 was due primarily to the net income earned during the quarter and a decrease in accumulated other comprehensive loss resulting from an increase in the value of the available-for-sale securities portfolio caused by the decline in long-term interest rates during the quarter. This was partially offset by a decrease in the fair value of interest rate swaps classified as cash flow hedges and stock repurchase activity. Book value per common share increased to $40.26 as of December 31, 2022, up from $38.84 as of September 30, 2022 and $38.99 as of December 31, 2021. Tangible book value per share was $39.74, up from $38.34 as of September 30, 2022 and $38.51 as of December 31, 2021.

In connection with its previously announced stock repurchase program, the Company repurchased 284,286 shares of its common stock during the fourth quarter of 2022 at an average price of $25.16 per share. Including shares repurchased during the fourth quarter of 2021, the Company has repurchased $32.2 million of stock under its authorized programs.

The following table presents the Company’s and the Bank’s regulatory and other capital ratios as of December 31, 2022.

As of December 31, 2022

Company

Bank

Total shareholders' equity to assets

8.03

9.72

Tangible common equity to tangible assets 1

7.94

9.62

Tier 1 leverage ratio 2

9.06

10.84

Common equity tier 1 capital ratio 2

10.93

13.10

Tier 1 capital ratio 2

10.93

13.10

Total risk-based capital ratio 2

14.75

13.99

1 This information represents a non-GAAP financial measure. For a discussion of non-GAAP financial measures, see the section below entitled "Non-GAAP Financial Measures."

2 Regulatory capital ratios are preliminary pending filing of the Company's and the Bank's regulatory reports.

Conference Call and Webcast

The Company will host a conference call and webcast at 2:00 p.m. Eastern Time on Thursday, January 26, 2023 to discuss its quarterly financial results. The call can be accessed via telephone at (844) 200-6205; access code: 960605. A recorded replay can be accessed through February 25, 2023 by dialing (866) 813-9403; access code: 361353.

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

About First Internet Bancorp

First Internet Bancorp is a financial holding company with assets of $4.5 billion as of December 31, 2022. The Company’s subsidiary, First Internet Bank, opened for business in 1999 as an industry pioneer in the branchless delivery of banking services. First Internet Bank provides consumer and small business deposit, SBA financing, franchise finance, consumer loans, and specialty finance services nationally as well as commercial real estate loans, construction loans, commercial and industrial loans, and treasury management services on a regional basis. First Internet Bancorp’s common stock trades on the Nasdaq Global Select Market under the symbol “INBK” and is a component of the Russell 2000® Index. Additional information about the Company is available at www.firstinternetbancorp.com and additional information about First Internet Bank, including its products and services, is available at www.firstib.com.

Forward-Looking Statements

This press release contains forward-looking statements within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, including statements with respect to the financial condition, results of operations, trends in lending policies and loan programs, plans and prospective business partnerships, objectives, future performance and business of the Company. Forward-looking statements are generally identifiable by the use of words such as “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “growth,” “help,” “may,” “opportunities,” “pending,” “plan,” “position,” “preliminary,” “remain,” “should,” “thereafter,” “well-positioned,” “will,” or other similar expressions. Forward-looking statements are not a guarantee of future performance or results, are based on information available at the time the statements are made and involve known and unknown risks, uncertainties and other factors that could cause actual results to differ materially from the information in the forward-looking statements. Such statements are subject to certain risks and uncertainties including: our business and operations and the business and operations of our vendors and customers: general economic conditions, whether national or regional, and conditions in the lending markets in which we participate that may have an adverse effect on the demand for our loans and other products; our credit quality and related levels of nonperforming assets and loan losses, and the value and salability of the real estate that is the collateral for our loans. Other factors that may cause such differences include: failures or breaches of or interruptions in the communications and information systems on which we rely to conduct our business; failure of our plans to grow our commercial and industrial, construction, SBA, and franchise finance loan portfolios; competition with national, regional and community financial institutions; the loss of any key members of senior management; the anticipated impacts of inflation and rising interest rates on the general economy; risks relating to the regulation of financial institutions; and other factors identified in reports we file with the U.S. Securities and Exchange Commission. All statements in this press release, including forward-looking statements, speak only as of the date they are made, and the Company undertakes no obligation to update any statement in light of new information or future events.

Non-GAAP Financial Measures

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

First Internet Bancorp Summary Financial Information (unaudited) Dollar amounts in thousands, except per share data

Three Months Ended

Twelve Months Ended

December 31,

September 30,

December 31,

2022

2021

2022

2021

Net income

6,351

8,436

12,478

35,541

48,114

Per share and share information Earnings per share - basic

0.68

0.89

1.26

3.73

4.85

Earnings per share - diluted

0.68

0.89

1.25

3.70

4.82

Dividends declared per share

0.06

0.24

Book value per common share

40.26

38.84

38.99

40.26

38.99

Tangible book value per common share 1

39.74

38.34

38.51

39.74

38.51

Common shares outstanding

9,065,883

9,290,885

9,754,455

9,065,883

9,754,455

Average common shares outstanding: Basic

9,281,309

9,458,259

9,903,856

9,530,921

9,918,083

Diluted

9,343,533

9,525,855

9,989,951

9,595,115

9,976,261

Performance ratios Return on average assets

0.59

0.82

1.19

0.85

1.14

Return on average shareholders' equity

6.91

9.01

13.14

9.53

13.44

Return on average tangible common equity 1

7.00

9.13

13.30

9.65

13.61

Net interest margin

2.09

2.40

2.30

2.41

2.11

Net interest margin - FTE 1,2

2.22

2.53

2.43

2.54

2.25

Capital ratios 3 Total shareholders' equity to assets

8.03

8.46

9.03

8.03

9.03

Tangible common equity to tangible assets 1

7.94

8.36

8.93

7.94

8.93

Tier 1 leverage ratio

9.06

9.49

9.22

9.06

9.22

Common equity tier 1 capital ratio

10.93

11.72

12.93

10.93

12.93

Tier 1 capital ratio

10.93

11.72

12.93

10.93

12.93

Total risk-based capital ratio

14.75

15.73

17.37

14.75

17.37

Asset quality Nonperforming loans

7,529

6,006

7,401

7,529

7,401

Nonperforming assets

7,571

6,006

8,618

7,571

8,618

Nonperforming loans to loans

0.22

0.18

0.26

0.22

0.26

Nonperforming assets to total assets

0.17

0.14

0.20

0.17

0.20

Allowance for loan losses to: Loans

0.91

0.92

0.96

0.91

0.96

Loans, excluding PPP loans 1

0.91

0.92

0.97

0.91

0.97

Nonperforming loans

421.5

497.3

376.2

421.5

376.2

Net charge-offs (recoveries) to average loans

0.03

0.02

(0.01

0.03

0.09

Average balance sheet information Loans

3,382,212

3,161,850

2,914,858

3,123,972

2,972,224

Total securities

578,608

606,329

677,580

613,303

629,095

Other earning assets

149,910

188,467

431,621

278,073

466,608

Total interest-earning assets

4,119,897

3,970,650

4,056,254

4,033,542

4,094,935

Total assets

4,263,246

4,105,688

4,177,578

4,170,526

4,205,926

Noninterest-bearing deposits

135,702

124,067

113,887

120,325

101,825

Interest-bearing deposits

3,041,022

2,961,327

3,032,435

3,022,794

3,098,706

Total deposits

3,176,724

3,085,394

3,146,322

3,143,119

3,200,531

Shareholders' equity

364,657

371,303

376,832

372,844

358,105

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, 2021) Dollar amounts in thousands December 31, September 30, December 31,

2022

2021

Assets Cash and due from banks

17,426

14,743

7,492

Interest-bearing deposits

239,126

206,309

435,468

Securities available-for-sale, at fair value

390,384

393,565

603,044

Securities held-to-maturity, at amortized cost

189,168

191,057

59,565

Loans held-for-sale

21,511

23,103

47,745

Loans

3,499,401

3,255,906

2,887,662

Allowance for loan losses

(31,737

)

(29,866

)

(27,841

)

Net loans

3,467,664

3,226,040

2,859,821

Accrued interest receivable

21,069

16,918

16,037

Federal Home Loan Bank of Indianapolis stock

28,350

25,650

Cash surrender value of bank-owned life insurance

39,859

39,612

38,900

Premises and equipment, net

72,711

70,747

59,842

Goodwill

4,687

Servicing asset

6,255

5,795

4,702

Other real estate owned

1,188

Accrued income and other assets

44,894

43,498

46,853

Total assets

4,543,104

4,264,424

4,210,994

Liabilities Noninterest-bearing deposits

175,315

142,875

117,531

Interest-bearing deposits

3,265,930

3,049,769

3,061,428

Total deposits

3,441,245

3,192,644

3,178,959

Advances from Federal Home Loan Bank

614,928

589,926

514,922

Subordinated debt

104,532

104,456

104,231

Accrued interest payable

2,913

1,887

2,018

Accrued expenses and other liabilities

14,512

14,654

30,526

Total liabilities

4,178,130

3,903,567

3,830,656

Shareholders' equity Voting common stock

192,935

200,123

218,946

Retained earnings

205,675

199,877

172,431

Accumulated other comprehensive loss

(33,636

)

(39,143

)

(11,039

)

Total shareholders' equity

364,974

360,857

380,338

Total liabilities and shareholders' equity

4,543,104

4,264,424

4,210,994

First Internet Bancorp Condensed Consolidated Statements of Income (unaudited, except for the twelve months ended December 31, 2021) Dollar amounts in thousands, except per share data Three Months Ended Twelve Months Ended December 31, September 30, December 31, December 31, December 31,

2022

2021

2022

2021

Interest income Loans

40,354

34,643

31,621

140,600

123,467

Securities - taxable

3,222

2,701

1,973

10,711

7,970

Securities - non-taxable

699

491

236

1,767

1,017

Other earning assets

1,394

1,264

362

3,830

1,429

Total interest income

45,669

39,099

34,192

156,908

133,883

Interest expense Deposits

18,807

10,520

6,399

41,832

29,822

Other borrowed funds

5,193

4,585

4,288

17,983

17,505

Total interest expense

24,000

15,105

10,687

59,815

47,327

Net interest income

21,669

23,994

23,505

97,093

86,556

Provision (benefit) for loan losses

2,109

892

(238

)

4,977

1,030

Net interest income after provision (benefit) for loan losses

19,560

23,102

23,743

92,116

85,526

Noninterest income Service charges and fees

226

248

292

1,071

1,114

Loan servicing revenue

715

653

544

2,573

1,934

Loan servicing asset revaluation

(539

)

(333

)

(400

)

(1,639

)

(1,069

)

Mortgage banking activities

1,010

871

2,776

5,464

15,050

Gain on sale of loans

2,862

2,713

4,137

11,372

11,598

Gain on sale of premises and equipment

2,523

Other

1,533

164

345

2,416

1,694

Total noninterest income

5,807

4,316

7,694

21,257

32,844

Noninterest expense Salaries and employee benefits

10,404

10,439

10,183

41,553

38,223

Marketing, advertising and promotion

837

1,041

896

3,554

3,261

Consulting and professional fees

914

790

1,262

4,826

4,054

Data processing

567

483

425

1,989

1,649

Loan expenses

1,018

1,142

654

4,435

2,112

Premises and equipment

2,921

2,808

2,188

10,688

7,063

Deposit insurance premium

355

229

283

1,152

1,213

Other

1,497

1,063

1,064

5,076

4,223

Total noninterest expense

18,513

17,995

16,955

73,273

61,798

Income before income taxes

6,854

9,423

14,482

40,100

56,572

Income tax provision

503

987

2,004

4,559

8,458

Net income

6,351

8,436

12,478

35,541

48,114

Per common share data Earnings per share - basic

0.68

0.89

1.26

3.73

4.85

Earnings per share - diluted

0.68

0.89

1.25

3.70

4.82

Dividends declared per share

0.06

0.24

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 December 31, 2022 September 30, 2022 December 31, 2021 Average Interest / Yield / Average Interest / Yield / Average Interest / Yield / Balance Dividends Cost Balance Dividends Cost Balance Dividends Cost Assets Interest-earning assets Loans, including loans held-for-sale 1

3,391,379

40,354

4.72

3,175,854

34,643

4.33

2,947,053

31,621

4.26

Securities - taxable

508,725

3,222

2.51

532,470

2,701

2.01

595,024

1,973

1.32

Securities - non-taxable

69,883

699

3.97

73,859

491

2.64

82,556

236

1.13

Other earning assets

149,910

1,394

3.69

188,467

1,264

2.66

431,621

362

0.33

Total interest-earning assets

4,119,897

45,669

4.40

3,970,650

39,099

3.91

4,056,254

34,192

3.34

Allowance for loan losses

(30,543

)

(29,423

)

(27,946

)

Noninterest-earning assets

173,892

164,461

149,270

Total assets

4,263,246

4,105,688

4,177,578

Liabilities Interest-bearing liabilities Interest-bearing demand deposits

326,102

628

0.76

342,116

551

0.64

210,283

158

0.30

Savings accounts

47,799

104

0.86

57,700

111

0.76

63,575

0.36

Money market accounts

1,441,583

10,508

2.89

1,369,783

4,581

1.33

1,453,447

1,507

0.41

BaaS - brokered deposits

4,563

1.13

153,936

859

2.21

0.00

Certificates and brokered deposits

1,220,975

7,554

2.45

1,037,792

4,418

1.69

1,305,130

4,676

1.42

Total interest-bearing deposits

3,041,022

18,807

2.45

2,961,327

10,520

1.41

3,032,435

6,399

0.84

Other borrowed funds

712,465

5,193

2.89

637,877

4,585

2.85

619,115

4,288

2.75

Total interest-bearing liabilities

3,753,487

24,000

2.54

3,599,204

15,105

1.67

3,651,550

10,687

1.16

Noninterest-bearing deposits

135,702

124,067

113,887

Other noninterest-bearing liabilities

9,400

11,114

35,309

Total liabilities

3,898,589

3,734,385

3,800,746

Shareholders' equity

364,657

371,303

376,832

Total liabilities and shareholders' equity

4,263,246

4,105,688

4,177,578

Net interest income

21,669

23,994

23,505

Interest rate spread

1.86

2.24

2.18

Net interest margin

2.09

2.40

2.30

Net interest margin - FTE 2,3

2.22

2.53

2.43

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 Twelve Months Ended December 31, 2022 December 31, 2021 Average Interest / Yield / Average Interest / Yield / Balance Dividends Cost Balance Dividends Cost Assets Interest-earning assets Loans, including loans held-for-sale 1

3,142,166

140,600

4.47

2,999,232

123,467

4.12

Securities - taxable

537,921

10,711

1.99

544,613

7,970

1.46

Securities - non-taxable

75,382

1,767

2.34

84,482

1,017

1.20

Other earning assets

278,073

3,830

1.38

466,608

1,429

0.31

Total interest-earning assets

4,033,542

156,908

3.89

4,094,935

133,883

3.27

Allowance for loan losses

(29,143

)

(29,068

)

Noninterest-earning assets

166,127

140,059

Total assets

4,170,526

4,205,926

Liabilities Interest-bearing liabilities Interest-bearing demand deposits

333,737

2,056

0.62

195,699

583

0.30

Savings accounts

58,156

336

0.58

56,967

203

0.36

Money market accounts

1,423,185

18,513

1.30

1,434,829

5,892

0.41

BaaS - brokered deposits

60,699

1,033

1.70

0.00

Certificates and brokered deposits

1,147,017

19,894

1.73

1,411,211

23,144

1.64

Total interest-bearing deposits

3,022,794

41,832

1.38

3,098,706

29,822

0.96

Other borrowed funds

638,526

17,983

2.82

600,035

17,505

2.92

Total interest-bearing liabilities

3,661,320

59,815

1.63

3,698,741

47,327

1.28

Noninterest-bearing deposits

120,325

101,825

Other noninterest-bearing liabilities

16,037

47,255

Total liabilities

3,797,682

3,847,821

Shareholders' equity

372,844

358,105

Total liabilities and shareholders' equity

4,170,526

4,205,926

Net interest income

97,093

86,556

Interest rate spread

2.26

1.99

Net interest margin

2.41

2.11

Net interest margin - FTE 2,3

2.54

2.25

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 December 31, 2022 September 30, 2022 December 31, 2021 Amount Percent Amount Percent Amount Percent Commercial loans Commercial and industrial

126,108

3.6

104,780

3.2

96,008

3.3

Owner-occupied commercial real estate

61,836

1.8

58,615

1.8

66,732

2.3

Investor commercial real estate

93,121

2.7

91,021

2.8

28,019

1.0

Construction

181,966

5.2

139,509

4.3

136,619

4.7

Single tenant lease financing

939,240

26.8

895,302

27.4

865,854

30.0

Public finance

621,032

17.7

614,139

18.9

592,665

20.5

Healthcare finance

272,461

7.8

293,686

9.0

387,852

13.4

Small business lending

123,750

3.5

113,001

3.5

108,666

3.8

Franchise finance

299,835

8.6

225,012

6.8

81,448

2.8

Total commercial loans

2,719,349

77.7

2,535,065

77.7

2,363,863

81.8

Consumer loans Residential mortgage

383,948

11.0

337,565

10.4

186,770

6.5

Home equity

24,712

0.7

22,114

0.7

17,665

0.6

Trailers

167,326

4.8

162,161

5.0

146,267

5.1

Recreational vehicles

121,808

3.5

115,694

3.6

90,654

3.1

Other consumer loans

35,464

1.0

34,657

1.1

28,557

1.0

Total consumer loans

733,258

21.0

672,191

20.8

469,913

16.3

Net deferred loan fees, premiums, discounts and other 1

46,794

1.3

48,650

1.5

53,886

1.9

Total loans

3,499,401

100.0

3,255,906

100.0

2,887,662

100.0

December 31, 2022 September 30, 2022 December 31, 2021 Amount Percent Amount Percent Amount Percent Deposits Noninterest-bearing deposits

175,315

5.1

142,635

4.5

117,531

3.7

Interest-bearing demand deposits

335,611

9.8

337,765

10.6

247,967

7.8

Savings accounts

44,819

1.3

52,228

1.6

59,998

1.9

Money market accounts

1,418,599

41.2

1,378,087

43.2

1,483,936

46.7

BaaS - brokered deposits

13,607

0.4

96,287

3.0

0.0

Certificates of deposits

874,490

25.4

773,040

24.2

970,107

30.5

Brokered deposits

578,804

16.8

412,602

12.9

299,420

9.4

Total deposits

3,441,245

100.0

3,192,644

100.0

3,178,959

100.0

1 Includes carrying value adjustments of $32.5 million, $33.9 million and $37.5 million related to terminated interest rate swaps associated with public finance loans as of December 31, 2022, September 30, 2022 and December 31, 2021, respectively. First Internet Bancorp Reconciliation of Non-GAAP Financial Measures Dollar amounts in thousands, except per share data Three Months Ended Twelve Months Ended December 31, September 30, December 31, December 31, December 31,

2022

2021

2022

2021

Total equity - GAAP

364,974

360,857

380,338

364,974

380,338

Adjustments: Goodwill

(4,687

)

(4,687

)

(4,687

)

(4,687

)

(4,687

)

Tangible common equity

360,287

356,170

375,651

360,287

375,651

Total assets - GAAP

4,543,104

4,264,424

4,210,994

4,543,104

4,210,994

Adjustments: Goodwill

(4,687

)

(4,687

)

(4,687

)

(4,687

)

(4,687

)

Tangible assets

4,538,417

4,259,737

4,206,307

4,538,417

4,206,307

Common shares outstanding

9,065,883

9,290,885

9,754,455

9,065,883

9,754,455

Book value per common share

40.26

38.84

38.99

40.26

38.99

Effect of goodwill

(0.52

)

(0.50

)

(0.48

)

(0.52

)

(0.48

)

Tangible book value per common share

39.74

38.34

38.51

39.74

38.51

Total shareholders' equity to assets

8.03

8.46

9.03

8.03

9.03

Effect of goodwill

(0.09

(0.10

(0.09

(0.10

Tangible common equity to tangible assets

7.94

8.36

8.93

7.94

8.93

Total average equity - GAAP

364,657

371,303

376,832

372,844

358,105

Adjustments: Average goodwill

(4,687

)

(4,687

)

(4,687

)

(4,687

)

(4,687

)

Average tangible common equity

359,970

366,616

372,145

368,157

353,418

Return on average shareholders' equity

6.91

9.01

13.14

9.53

13.44

Effect of goodwill

0.09

0.12

0.16

0.12

0.17

Return on average tangible common equity

7.00

9.13

13.30

9.65

13.61

Total interest income

45,669

39,099

34,192

156,908

133,883

Adjustments: Fully-taxable equivalent adjustments 1

1,384

1,280

1,348

5,355

5,453

Total interest income - FTE

47,053

40,379

35,540

162,263

139,336

Total interest income - FTE

47,053

40,379

35,540

162,263

139,336

Adjustments: Income from tax refund advance loans

(3,013

)

Adjusted total interest income - FTE

47,053

40,379

35,540

159,250

139,336

Net interest income

21,669

23,994

23,505

97,093

86,556

Adjustments: Fully-taxable equivalent adjustments 1

1,384

1,280

1,348

5,355

5,453

Net interest income - FTE

23,053

25,274

24,853

102,448

92,009

Net interest income

21,669

23,994

23,505

97,093

86,556

Adjustments: Subordinated debt redemption cost

810

Income from tax refund advance loans

(3,013

)

Adjusted net interest income

21,669

23,994

23,505

94,080

87,366

Net interest income

21,669

23,994

23,505

97,093

86,556

Adjustments: Fully-taxable equivalent adjustments 1

1,384

1,280

1,348

5,355

5,453

Subordinated debt redemption cost

810

Income from tax refund advance loans

(3,013

)

Adjusted net interest income - FTE

23,053

25,274

24,853

99,435

92,819

December 31,

September 30,

December 31,

2022

2021

2022

2021

Net interest margin

2.09

2.40

2.30

2.41

2.11

Effect of fully-taxable equivalent adjustments 1

0.13

0.14

Net interest margin - FTE

2.22

2.53

2.43

2.54

2.25

Net interest margin

2.09

2.40

2.30

2.41

2.11

Effect of subordinated debt redemption cost

0.00

0.02

Effect of income from tax refund advance loans

0.00

(0.07

0.00

Adjusted net interest margin

2.09

2.40

2.30

2.34

2.13

Net interest margin

2.09

2.40

2.30

2.41

2.11

Effect of fully-taxable equivalent adjustments 1

0.13

0.14

Effect of subordinated debt redemption cost

0.00

0.02

Effect of income from tax refund advance loans

0.00

(0.07

0.00

Adjusted net interest margin - FTE

2.22

2.53

2.43

2.47

2.27

Provision (benefit) for loan losses

2,109

892

(238

)

4,977

1,030

Adjustments: Provision for tax refund advance loans losses

(1,860

)

Provision (benefit) for loan losses, excluding tax refund advance loans

2,109

892

(238

)

3,117

1,030

Average loans

3,382,212

3,161,850

2,914,858

3,123,972

2,972,224

Adjustments: Average tax refund advance loans

(15,712

)

Average loans, excluding tax refund advance loans

3,382,212

3,161,850

2,914,858

3,108,260

2,972,224

Net charge-offs (recoveries) to average loans

0.03

0.02

(0.01

0.03

0.09

Adjustments: Effect of tax refund advance lending net charge-offs (recoveries) to average loans

0.00

(0.06

0.00

Net charge-offs (recoveries) to average loans, excluding tax refund advance loans

0.03

0.02

(0.01

(0.03

0.09

Allowance for loan losses

31,737

29,866

27,841

31,737

27,841

Loans

3,499,401

3,255,906

2,887,662

3,499,401

2,887,662

Adjustments: PPP loans

(3,152

)

(3,152

)

Loans, excluding PPP loans

3,499,401

3,255,906

2,884,510

3,499,401

2,884,510

Allowance for loan losses to loans

0.91

0.92

0.96

0.91

0.96

Effect of PPP loans

0.00

0.01

0.00

0.01

Allowance for loan losses to loans, excluding PPP loans

0.91

0.92

0.97

0.91

0.97

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 Twelve Months Ended December 31, September 30, December 31, December 31, December 31,

2022

2021

2022

2021

Total revenue - GAAP

27,476

28,310

31,199

118,350

119,400

Adjustments: Gain on sale of premises and equipment

(2,523

)

Subordinated debt redemption cost

810

Adjusted total revenue

27,476

28,310

31,199

118,350

117,687

Noninterest income - GAAP

5,807

4,316

7,694

21,257

32,844

Adjustments: Gain on sale of premises and equipment

(2,523

)

Adjusted noninterest income

5,807

4,316

7,694

21,257

30,321

Noninterest expense - GAAP

18,513

17,995

16,955

73,273

61,798

Adjustments: Acquisition-related expenses

(163

)

(273

)

(163

)

Write-down of software

(125

)

(125

)

IT Termination fee

(475

)

(475

)

Nonrecurring consulting fee

(875

)

Discretionary inflation bonus

(531

)

Accelerated equity compensation

(289

)

Adjusted noninterest expense

18,513

17,870

16,317

71,180

61,160

Income before income taxes - GAAP

6,854

9,423

14,482

40,100

56,572

Adjustments: 1 Gain on sale of premises and equipment

(2,523

)

Acquisition-related expenses

163

273

163

Write-down of software

125

IT Termination fee

475

Subordinated debt redemption cost

810

Nonrecurring consulting fee

875

Discretionary inflation bonus

531

Accelerated equity compensation

289

Adjusted income before income taxes

6,854

9,548

15,120

42,193

55,497

Income tax provision - GAAP

503

987

2,004

4,559

8,458

Adjustments:1 Gain on sale of premises and equipment

(530

)

Acquisition-related expenses

Write-down of software

IT Termination fee

100

Subordinated debt redemption cost

170

Nonrecurring consulting fee

184

Discretionary inflation bonus

112

Accelerated equity compensation

Adjusted income tax provision

503

1,013

2,138

4,999

8,232

Net income - GAAP

6,351

8,436

12,478

35,541

48,114

Adjustments: Gain on sale of premises and equipment

(1,993

)

Acquisition-related expenses

129

216

129

Write-down of software

IT Termination fee

375

Subordinated debt redemption cost

640

Nonrecurring consulting fee

691

Discretionary inflation bonus

419

Accelerated equity compensation

228

Adjusted net income

6,351

8,535

12,982

37,194

47,265

Diluted average common shares outstanding

9,343,533

9,525,855

9,989,951

9,595,115

9,976,261

Diluted earnings per share - GAAP

0.68

0.89

1.25

3.70

4.82

Adjustments: Effect of gain on sale of premises and equipment

(0.19

)

Effect of acquisition-related expenses

0.01

0.02

0.01

Effect of write-down of software

0.01

Effect of IT termination fee

0.04

Effect of nonrecurring consulting fee

0.07

Effect of subordinated debt redemption cost

0.06

Effect of discretionary inflation bonus

0.04

Effect of accelerated equity compensation

0.02

Adjusted diluted earnings per share

0.68

0.90

1.30

3.86

4.74

Return on average assets

0.59

0.82

1.19

0.85

1.14

Effect of gain on sale of premises and equipment

0.00

(0.05

Effect of acquisition-related expenses

0.00

0.01

0.00

Effect of write-down of software

0.00

0.01

0.00

Effect of IT termination fee

0.00

0.04

0.00

0.01

Effect of nonrecurring consulting fee

0.00

0.02

0.00

Effect of subordinated debt redemption cost

0.00

0.02

Effect of discretionary inflation bonus

0.00

0.01

0.00

Effect of accelerated equity compensation

0.00

0.01

0.00

Adjusted return on average assets

0.59

0.83

1.24

0.90

1.12

2022

2021

2022

2021

Return on average shareholders' equity

6.91

9.01

13.14

9.53

13.44

Effect of gain on sale of premises and equipment

0.00

(0.56

Effect of acquisition-related expenses

0.00

0.14

0.06

0.04

Effect of write-down of software

0.00

0.11

0.00

0.03

0.00

Effect of IT termination fee

0.00

0.39

0.00

0.10

Effect of nonrecurring consulting fee

0.00

0.19

0.00

Effect of subordinated debt redemption cost

0.00

0.18

Effect of discretionary inflation bonus

0.00

0.11

0.00

Effect of accelerated equity compensation

0.00

0.06

0.00

Adjusted return on average shareholders' equity

6.91

9.12

13.67

9.98

13.20

Return on average tangible common equity

7.00

9.13

13.30

9.65

13.61

Effect of gain on sale of premises and equipment

0.00

(0.56

Effect of acquisition-related expenses

0.00

0.14

0.06

0.04

Effect of write-down of software

0.00

0.11

0.00

0.03

0.00

Effect of IT termination fee

0.00

0.40

0.00

0.10

Effect of nonrecurring consulting fee

0.00

0.19

0.00

Effect of subordinated debt redemption cost

0.00

0.18

Effect of discretionary inflation bonus

0.00

0.11

0.00

Effect of accelerated equity compensation

0.00

0.06

0.00

Adjusted return on average tangible common equity

7.00

9.24

13.84

10.10

13.37

Effective income tax rate

7.3

10.5

13.8

11.4

15.0

Effect of gain on sale of premises and equipment

0.0

(0.4

Effect of acquisition-related expenses

0.0

0.1

0.0

Effect of write-down of software

0.0

0.3

0.0

0.1

0.0

Effect of IT termination fee

0.0

0.2

0.0

0.1

Effect of nonrecurring consulting fee

0.0

0.4

0.0

Effect of subordinated debt redemption cost

0.0

0.1

Effect of discretionary inflation bonus

0.0

0.3

0.0

Effect of accelerated equity compensation

0.0

0.1

0.0

Adjusted effective income tax rate

7.3

10.8

14.1

12.4

14.8

Income before income taxes - GAAP

6,854

9,423

14,482

40,100

56,572

Adjustments: Income from tax refund advance lending

(3,013

)

Provision for tax refund advance lending losses

1,860

Tax refund advance lending servicing fee

930

Income before income taxes, excluding tax refund advance loans

6,854

9,423

14,482

39,877

56,572

Income tax provision - GAAP

503

987

2,004

4,559

8,458

Adjustments:1 Income from tax refund advance lending

(633

)

Provision for tax refund advance lending losses

391

Tax refund advance lending servicing fee

195

Income tax provision, excluding tax refund advance loans

503

987

2,004

4,512

8,458

Net income - GAAP

6,351

8,436

12,478

35,541

48,114

Adjustments: Income from tax refund advance lending

(2,380

)

Provision for tax refund advance lending losses

1,469

Tax refund advance lending servicing fee

735

Net income, excluding tax refund advance loans

6,351

8,436

12,478

35,365

48,114

1 Assuming a 21% tax rate

View source version on businesswire.com: https://www.businesswire.com/news/home/20230123005798/en/

Investors/Analysts Paula Deemer Director of Corporate Administration (317) 428-4628 investors@firstib.com Media Nicole Lorch President & Chief Operating Officer (317) 532-7906 nlorch@firstib.com

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