First Internet Bancorp [INBK] Filings

10-Q 1 inbk-20220331.htm 10-Q inbk-20220331

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)


☑			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period ended March 31, 2022


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Transition Period From ________ to ________.

Commission File Number 001-35750


First Internet Bancorp
(Exact Name of Registrant as Specified in Its Charter)


Indiana						20-3489991
(State or Other Jurisdiction of Incorporation or Organization)						(I.R.S. Employer Identification No.)

8701 East 116th Street Fishers, IN						46038
(Address of Principal Executive Offices)						(Zip Code)


			(317) 532-7900
			(Registrant’s Telephone Number, Including Area Code)

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 2029

INBKZ

The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No ¨

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes þ No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large Accelerated Filer ¨			Accelerated Filer þ
Non-accelerated Filer ¨			Smaller Reporting Company ☑
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. ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No þ

As of May 6, 2022, the registrant had 9,655,480 shares of common stock issued and outstanding.

Cautionary Note Regarding Forward-Looking Statements

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of the federal securities laws. These statements are not historical facts, but rather statements based on the current expectations of First Internet Bancorp and its consolidated subsidiaries (the “Company,” “we,” “our,” or “us”) regarding its business strategies, intended results and future performance, including without limitation statements concerning 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 preceded by terms such as “anticipate,” “attempt,” “believe,” “can,” “continue,” “could,” “effort,” “estimate,” “expect,” “intend,” “likely,” “may,” “objective,” “optimistic,” “pending,” “plan,” “position,” “potential,” “preliminary,” “remain,” “should,” “will,” “would” or other similar expressions. Such statements are subject to certain risks and uncertainties including: the continued or potential effects of the COVID-19 global pandemic and related variants and mutations and other adverse public health developments on the economy, our business and operations and the business and operations of our vendors and customers; the war in Ukraine and potential adverse global economic effects; other 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 we own or that is the collateral for our loans; failures or breaches of or interruptions in the communication and information systems on which we rely to conduct our business that could reduce our revenues, increase our costs or lead to disruptions in our business; our plans to continue originating and growing our commercial real estate, commercial and industrial, public finance, U.S. Small Business Administration (“SBA”), healthcare finance and franchise finance loan portfolios, which may carry greater risks of non-payment or other unfavorable consequences; our dependence on capital distributions from First Internet Bank of Indiana (“the Bank”); results of examinations of us by our regulators, including the possibility that our regulators may, among other things, require us to increase our allowance for loan losses or to write-down assets; changing bank regulatory conditions, policies or programs, whether arising as new legislation or regulatory initiatives, that could lead to restrictions on activities of banks generally, or the Bank in particular; more restrictive regulatory capital requirements; increased costs, including deposit insurance premiums; regulation or prohibition of certain income producing activities or changes in the secondary market for loans and other products; changes in market rates and prices that may adversely impact the value of securities, loans, deposits and other financial instruments and the interest rate sensitivity of our balance sheet; our liquidity requirements being adversely affected by changes in our assets and liabilities; the effect of legislative or regulatory developments, including changes in laws concerning taxes, banking, securities, insurance and other aspects of the financial services industry; competitive factors among financial services organizations, including product and pricing pressures and our ability to attract, develop and retain qualified banking professionals; changes in applicable tax laws; the growth and profitability of noninterest or fee income being less than expected; the loss of any key members of senior management; the effect of changes in accounting policies and practices, as may be adopted by the Financial Accounting Standards Board, the Securities and Exchange Commission (the “SEC”), the Public Company Accounting Oversight Board and other regulatory agencies; and the effect of fiscal and governmental policies of the United States federal government. Additional factors that may affect our results include those discussed in this Quarterly Report on Form 10-Q and our most recent Annual Report on Form 10-K under the heading “Risk Factors” and in other reports filed with the SEC. We caution readers not to place undue reliance on any such forward-looking statements, which speak only as of the date made. The factors listed above could affect our financial performance and could cause our actual results for future periods to differ materially from any opinions or statements expressed with respect to future periods in any current statements.

Except as required by law, we do not undertake, and specifically disclaim any obligation, to publicly release the result of any revisions that may be made to any forward-looking statements to reflect events or circumstances after the date of such statements or to reflect the occurrence of anticipated or unanticipated events.

PART I

ITEM 1. FINANCIAL STATEMENTS

First Internet Bancorp

Condensed Consolidated Balance Sheets

(Amounts in thousands except share data)


	March 31, 2022		December 31, 2021
	(Unaudited)
Assets
Cash and due from banks	$	20,976	$	7,492
Interest-bearing deposits	496,573		435,468
Total cash and cash equivalents	517,549		442,960

Securities available-for-sale, at fair value (amortized cost of $486,632 and $606,507 in 2022 and 2021, respectively)	465,288		603,044
Securities held-to-maturity, at amortized cost (fair value of $159,971 and $61,468 in 2022 and 2021, respectively)	163,370		59,565
Loans held-for-sale (includes $17,364 and $23,233 at fair value in 2022 and 2021, respectively)	33,991		47,745
Loans	2,880,780		2,887,662
Allowance for loan losses	(28,251)		(27,841)
Net loans	2,852,529		2,859,821
Accrued interest receivable	15,263		16,037
Federal Home Loan Bank of Indianapolis stock	25,219		25,650
Cash surrender value of bank-owned life insurance	39,133		38,900
Premises and equipment, net	68,632		59,842
Goodwill	4,687		4,687
Servicing asset, at fair value	5,249		4,702
Other real estate owned	—		1,188
Accrued income and other assets	34,487		46,853
Total assets	$	4,225,397	$	4,210,994
Liabilities and Shareholders’ Equity
Liabilities
Noninterest-bearing deposits	$	119,196	$	117,531
Interest-bearing deposits	3,098,783		3,061,428
Total deposits	3,217,979		3,178,959
Advances from Federal Home Loan Bank	514,923		514,922
Subordinated debt, net of unamortized debt issuance costs of $2,694 and $2,769 in 2022 and 2021, respectively	104,306		104,231
Accrued interest payable	1,532		2,018
Accrued expenses and other liabilities	12,002		30,526
Total liabilities	3,850,742		3,830,656
Commitments and Contingencies
Shareholders’ Equity
Preferred stock, no par value; 4,913,779 shares authorized; issued and outstanding - none	—		—
Voting common stock, no par value; 45,000,000 shares authorized; 9,683,727 and 9,754,455 shares issued and outstanding in 2022 and 2021, respectively	214,473		218,946
Nonvoting common stock, no par value; 86,221 shares authorized; issued and outstanding - none	—		—
Retained earnings	183,043		172,431
Accumulated other comprehensive loss	(22,861)		(11,039)
Total shareholders’ equity	374,655		380,338
Total liabilities and shareholders’ equity	$	4,225,397	$	4,210,994

See Notes to Condensed Consolidated Financial Statements

First Internet Bancorp

Condensed Consolidated Statements of Income – Unaudited

(Amounts in thousands except share and per share data)


	Three Months Ended
	March 31, 2022		March 31, 2021
Interest Income
Loans	$	33,188	$	30,885
Securities – taxable	2,221		1,779
Securities – non-taxable	249		281
Other earning assets	376		335
Total interest income	36,034		33,280
Interest Expense
Deposits	6,097		8,628
Other borrowed funds	4,187		4,127
Total interest expense	10,284		12,755
Net Interest Income	25,750		20,525
Provision for Loan Losses	791		1,276
Net Interest Income After Provision for Loan Losses	24,959		19,249
Noninterest Income
Service charges and fees	316		266
Loan servicing revenue	585		422
Loan servicing asset revaluation	(297)		(155)
Mortgage banking activities	1,873		5,750



Gain on sale of loans	3,845		1,723


Other	498		369
Total noninterest income	6,820		8,375
Noninterest Expense
Salaries and employee benefits	9,878		9,492
Marketing, advertising and promotion	756		680
Consulting and professional services	1,925		986
Data processing	449		462
Loan expenses	1,582		534
Premises and equipment	2,540		1,601
Deposit insurance premium	281		425

Other	1,369		1,137
Total noninterest expense	18,780		15,317
Income Before Income Taxes	12,999		12,307
Income Tax Provision	1,790		1,857
Net Income	$	11,209	$	10,450
Income Per Share of Common Stock
Basic	$	1.14	$	1.06
Diluted	$	1.14	$	1.05
Weighted-Average Number of Common Shares Outstanding
Basic	9,790,122		9,899,230
Diluted	9,870,394		9,963,036
Dividends Declared Per Share	$	0.06	$	0.06

See Notes to Condensed Consolidated Financial Statements

First Internet Bancorp

Condensed Consolidated Statements of Comprehensive Income – Unaudited

(Amounts in thousands except per share data)


	Three Months Ended March 31,
	2022		2021
Net income	$	11,209	$	10,450
Other comprehensive (loss) income
Securities available-for-sale
Net unrealized holding losses recorded within other comprehensive income before income tax	(17,881)		(2,195)

Income tax benefit	(4,077)		(508)
Net effect on other comprehensive (loss) income	(13,804)		(1,687)

Securities held-to-maturity
Reclassification of securities from available-for-sale to held-to-maturity	(5,402)		—
Amortization of net unrealized holding losses on securities transferred from available-for-sale to held-to-maturity	119		—
Income tax benefit	(1,249)		—
Net effect on other comprehensive (loss) income	(4,034)		—

Cash flow hedges
Net unrealized holding gains on cash flow hedging derivatives recorded within other comprehensive income before income tax	9,334		6,280
Income tax provision	3,318		1,317
Net effect on other comprehensive (loss) income	6,016		4,963

Total other comprehensive (loss) income	(11,822)		3,276
Comprehensive (loss) income	$	(613)	$	13,726

See Notes to Condensed Consolidated Financial Statements

First Internet Bancorp

Condensed Consolidated Statements of Changes in Shareholders’ Equity - Unaudited

Three Months Ended March 31, 2022 and 2021

(Amounts in thousands except per share data)


	Voting and Nonvoting Common Stock		Retained Earnings		Accumulated Other Comprehensive Loss		Total Shareholders’ Equity
Balance, January 1, 2022	$	218,946	$	172,431	$	(11,039)	$	380,338

Net income	—		11,209		—		11,209

Other comprehensive loss	—		—		(11,822)		(11,822)
Dividends declared ($0.06 per share)	—		(597)		—		(597)

Recognition of the fair value of share-based compensation	640		—		—		640
Repurchase of common stock	(5,118)		—		—		(5,118)
Deferred stock rights and restricted stock units issued in lieu of cash dividends payable on outstanding deferred stock rights and restricted stock units	5		—		—		5


Balance, March 31, 2022	$	214,473	$	183,043	$	(22,861)	$	374,655

Balance, January 1, 2021	$	221,408	$	126,732	$	(17,196)	$	330,944
Net income	—		10,450		—		10,450

Other comprehensive income	—		—		3,276		3,276
Dividends declared ($0.06 per share)	—		(607)		—		(607)

Recognition of the fair value of share-based compensation	692		—		—		692

Deferred stock rights and restricted stock units issued in lieu of cash dividends payable on outstanding deferred stock rights and restricted stock units	6		—		—		6
Common stock redeemed for the net settlement of share-based awards	(195)		—		—		(195)

Balance, March 31, 2021	$	221,911	$	136,575	$	(13,920)	$	344,566

See Notes to Condensed Consolidated Financial Statements

First Internet Bancorp

Condensed Consolidated Statements of Cash Flows – Unaudited

(Amounts in thousands except per share data)


	Three Months Ended March 31,
	2022		2021
Operating Activities
Net income	$	11,209	$	10,450
Adjustments to reconcile net income to net cash used in operating activities:
Depreciation and amortization	7,721		283
Increase in cash surrender value of bank-owned life insurance	(233)		(233)
Provision for loan losses	791		1,276
Share-based compensation expense	640		692


Loans originated for sale	(184,067)		(223,880)
Proceeds from sale of loans	202,011		241,589
Gain on loans sold	(5,907)		(9,222)

Decrease in fair value of loans held-for-sale	489		862
(Gain) loss on derivatives	(2,565)		881

Loan servicing asset revaluation	297		(248)

Net change in accrued income and other assets	10,399		10,695
Net change in accrued expenses and other liabilities	(7,999)		(2,012)
Net cash provided by operating activities	32,786		31,133
Investing Activities
Net loan activity, excluding purchases	32,510		47,653
Proceeds from sale of other real estate owned	1,188		—

Maturities and calls of securities available-for-sale	27,848		55,901

Purchase of securities available-for-sale	(16,453)		(21,279)

Purchase of securities held-to-maturity	(2,000)		—

Redemption of Federal Home Loan Bank of Indianapolis stock	431		—

Purchase of premises and equipment	(9,808)		(5,697)

Loans purchased	(40,059)		(47,234)
Net proceeds from sale of portfolio loans	14,466		—
Other investing activities	374		—
Net cash provided by investing activities	8,497		29,344
Financing Activities
Net increase (decrease) in deposits	39,020		(53,282)

Cash dividends paid	(596)		(601)
Repayment of subordinated debt	—		(10,000)

Repurchase of common stock	(5,118)		—
Proceeds from advances from Federal Home Loan Bank	110,000		110,000
Repayment of advances from Federal Home Loan Bank	(110,000)		(110,000)

Other, net	—		(195)
Net cash provided by (used in) financing activities	33,306		(64,078)
Net Increase (Decrease) in Cash and Cash Equivalents	74,589		(3,601)
Cash and Cash Equivalents, Beginning of Period	442,960		419,806
Cash and Cash Equivalents, End of Period	$	517,549	$	416,205
Supplemental Disclosures


Cash paid during the period for interest	10,770		12,777
Cash paid during the period for taxes	50		10

Loans transferred to held-for-sale from portfolio	14,049		—
Cash dividends declared, paid in subsequent period	581		592
Securities purchased during the period, settled in subsequent period	—		2,035
Transfer of available-for-sale mortgage-backed securities to held-to-maturity mortgage-backed securities	107,168		—

See Notes to Condensed Consolidated Financial Statements

First Internet Bancorp

Notes to Condensed Consolidated Financial Statements – Unaudited

(Table amounts in thousands except share and per share data)

Note 1: Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in conformity with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”). Accordingly, they do not include all of the information or footnotes necessary for a complete presentation of financial condition, results of operations, changes in shareholders’ equity, or cash flows in accordance with GAAP. In our opinion, all adjustments (consisting only of normal recurring adjustments) necessary for a fair presentation have been included. The results of operations for the three months ended March 31, 2022 are not necessarily indicative of the results expected for the year ending December 31, 2022 or any other period. The March 31, 2022 condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes included in the First Internet Bancorp Annual Report on Form 10-K for the year ended December 31, 2021.

The preparation of the condensed consolidated financial statements in conformity with GAAP requires management to make estimates, judgments, or assumptions that could have a material effect on the carrying value of certain assets and liabilities. These estimates, judgments, and assumptions affect the amounts reported in the condensed consolidated financial statements and the disclosures provided. The determination of the allowance for loan losses, valuations and impairments of investment securities, valuation of the servicing asset and the accounting for income tax expense are highly dependent upon management’s estimates, judgments, and assumptions, and changes in any of these could have a significant impact on the condensed consolidated financial statements.

The condensed consolidated financial statements include the accounts of First Internet Bancorp (the “Company”), its wholly owned subsidiary, First Internet Bank of Indiana (the “Bank”), and the Bank’s three wholly owned subsidiaries, First Internet Public Finance Corp., JKH Realty Services, LLC and SPF15, Inc. All significant intercompany accounts and transactions have been eliminated in consolidation.

The Company is subject to claims and lawsuits that arise primarily in the ordinary course of business. It is the opinion of management that the disposition or ultimate resolution of such claims and lawsuits will not have a material adverse effect on the consolidated financial position, results of operations, and cash flows of the Company.

Note 2: Earnings Per Share

Earnings per share of common stock are based on the weighted-average number of basic shares and dilutive shares outstanding during the period.

The following is a reconciliation of the weighted-average common shares for the basic and diluted earnings per share computations for the three months ended March 31, 2022 and 2021.


(dollars in thousands, except per share data)	Three Months Ended March 31,
	2022		2021
Basic earnings per share
Net income	$	11,209	$	10,450
Weighted-average common shares	9,790,122		9,899,230
Basic earnings per common share	$	1.14	$	1.06
Diluted earnings per share
Net income	$	11,209	$	10,450
Weighted-average common shares	9,790,122		9,899,230

Dilutive effect of equity compensation	80,272		63,806
Weighted-average common and incremental shares	9,870,394		9,963,036
Diluted earnings per common share (1)	$	1.14	$	1.05

(1) Potential dilutive common shares are excluded from the computation of diluted EPS in the periods where the effect would be antidilutive. Excluded from the computation of diluted EPS were weighted-average antidilutive shares totaling 661 for the three months ended March 31, 2022. There were no weighted-average antidilutive shares for the three months ended March 31, 2021.

Note 3: Securities

The following tables summarize securities available-for-sale and securities held-to-maturity as of March 31, 2022 and December 31, 2021.


	March 31, 2022
	Amortized		Gross Unrealized				Fair
(in thousands)	Cost		Gains		Losses		Value
Securities available-for-sale
U.S. Government-sponsored agencies	$	45,335	$	—	$	(1,488)	$	43,847
Municipal securities	72,420		557		(173)		72,804
Agency mortgage-backed securities - residential	276,392		88		(18,798)		257,682
Agency mortgage-backed securities - commercial	24,815		6		(665)		24,156
Private label mortgage-backed securities - residential	15,090		6		(278)		14,818
Asset-backed securities	5,000		—		(14)		4,986
Corporate securities	47,580		299		(884)		46,995

Total available-for-sale	$	486,632	$	956	$	(22,300)	$	465,288


	March 31, 2022
	Amortized		Gross Unrealized				Fair
(in thousands)	Cost		Gains		Losses		Value
Securities held-to-maturity
Municipal securities	$	13,981	$	157	$	(45)	$	14,093
Mortgage-backed securities - residential	95,982		—		(3,043)		92,939
Mortgage-backed securities - commercial	5,847		—		(427)		5,420
Corporate securities	47,560		338		(379)		47,519
Total held-to-maturity	$	163,370	$	495	$	(3,894)	$	159,971


	December 31, 2021
	Amortized		Gross Unrealized				Fair
(in thousands)	Cost		Gains		Losses		Value
Securities available-for-sale
U.S. Government-sponsored agencies	$	50,013	$	164	$	(1,137)	$	49,040
Municipal securities	75,158		1,940		(65)		77,033
Agency mortgage-backed securities - residential	377,928		960		(5,652)		373,236
Agency mortgage-backed securities - commercial	36,024		441		(139)		36,326
Private label mortgage-backed securities - residential	15,902		122		(3)		16,021
Asset-backed securities	5,000		4		—		5,004
Corporate securities	46,482		597		(695)		46,384

Total available-for-sale	$	606,507	$	4,228	$	(7,691)	$	603,044


	December 31, 2021
	Amortized		Gross Unrealized				Fair
(in thousands)	Cost		Gains		Losses		Value
Securities held-to-maturity
Municipal securities	$	13,992	$	717	$	—	$	14,709
Corporate securities	45,573		1,186		—		46,759
Total held-to-maturity	$	59,565	$

First Internet Bancorp [INBK] Filings
First Internet Bancorp [INBKZ] Filings
10-Q	[2022-05-09]
10-K	[2022-03-15]
10-Q	[2021-11-09]
10-Q	[2021-08-09]
10-Q	[2021-05-10]
10-K	[2021-03-15]
10-Q	[2020-11-05]
10-Q	[2020-08-06]
10-Q	[2020-05-08]
10-K	[2020-03-12]
10-Q	[2019-11-08]
10-Q	[2019-08-07]
10-Q	[2019-05-08]
10-K	[2019-03-14]
10-Q	[2018-11-09]
10-Q	[2018-08-08]
10-Q	[2018-05-08]
10-K	[2018-03-08]
10-Q	[2017-11-07]
10-Q	[2017-08-03]
10-Q	[2017-05-03]
10-K	[2017-03-14]
10-Q	[2016-11-07]
10-Q	[2016-08-02]
10-Q	[2016-05-04]
10-K	[2016-03-10]
10-Q	[2015-11-03]
10-Q	[2015-08-05]
10-Q	[2015-05-07]
10-K	[2015-03-13]
10-Q	[2014-11-12]
10-Q	[2014-08-12]
10-Q	[2014-05-14]
10-K	[2014-03-31]
10-Q	[2013-11-04]
S-1	[2013-09-30]
10-Q	[2013-08-14]
10-Q	[2013-05-15]
10-K	[2013-03-28]

First Internet Bancorp [INBK] Filings

First Internet Bancorp [INBKZ] Filings