[Second Quarter 2025 Financial Performance](index=1&type=section&id=Second%20Quarter%202025%20Financial%20Performance) This section provides an overview of the company's financial results for Q2 2025, including CEO commentary and key financial metrics [CEO Statement](index=1&type=section&id=CEO%20Statement) CEO David Becker noted ongoing credit issue resolution, sound asset quality, rising net interest income, and robust fintech deposit growth - Continued efforts to address credit issues in franchise finance and small business loan portfolios, with **encouraging signs for Q3 2025**[3](index=3&type=chunk) - Overall asset quality and capital levels remain sound[3](index=3&type=chunk) - Delivered **seven straight quarters of rising net interest income**, driven by increased yields on earning assets and lower funding costs[5](index=5&type=chunk) - Experienced **robust growth in fintech deposits**, maintaining solid balance sheet liquidity[6](index=6&type=chunk) [Key Financial Metrics](index=1&type=section&id=Key%20Financial%20Metrics) Q2 2025 saw net income of $0.2 million, diluted EPS of $0.02, 17.2% YoY PTPP growth, and improved net interest margin Key Financial Metrics (in millions, except EPS and percentages) | Metric | Q2 2025 | Q1 2025 | Q2 2024 | Change QoQ | Change YoY | | :-------------------------------- | :------ | :------ | :------ | :--------- | :--------- | | Net income | $0.2 million | $0.9 million | $5.8 million | -77.8% | -96.6% | | Diluted EPS | $0.02 | $0.11 | $0.67 | -81.8% | -97.0% | | Pre-tax, pre-provision income (PTPP) | $11.7 million | $11.9 million | $10.0 million | -1.8% | +17.2% | | Net interest income | $28.0 million | $25.1 million | $21.3 million | +11.5% | +31.5% | | Fully-taxable net interest income | $29.1 million | $26.3 million | $22.5 million | +10.6% | +29.3% | | Net interest margin | 1.96% | 1.82% | 1.67% | +14 bps | +29 bps | | Fully-taxable equivalent net interest margin | 2.04% | 1.91% | 1.76% | +13 bps | +28 bps | | Loan growth (QoQ) | $108.2 million | - | - | +2.5% | - | | Deposit growth (QoQ) | $353.2 million | - | - | +7.1% | - | | Loans to deposits ratio | 82.3% | - | - | - | - | | Nonperforming loans to total loans | 1.00% | - | - | - | - | | Net charge-offs to average loans | 1.31% | - | - | - | - | | Allowance for credit losses to total loans | 1.07% | - | - | - | - | | Tangible common equity to tangible assets | 6.35% | - | - | - | - | | CET1 ratio | 8.90% | - | - | - | - | | Tangible book value per share | $44.25 | $44.04 | $42.37 | +0.5% | +4.4% | [Credit Update](index=2&type=section&id=Credit%20Update) This section details the company's credit performance, focusing on charge-offs, nonperforming loans, and specific portfolio updates [Overall Credit Performance](index=2&type=section&id=Overall%20Credit%20Performance) Q2 2025 net charge-offs were $14.3 million, nonperforming loans rose to $43.5 million, but total delinquencies improved - Net charge-offs of **$14.3 million** in Q2 2025, primarily in small business lending and franchise finance, with **$7.3 million of specific reserves**[9](index=9&type=chunk) - Nonperforming loans increased **$9.3 million** from Q1 2025 to **$43.5 million (1.00% of total loans)** as of June 30, 2025, in line with banking industry-wide NPLs[9](index=9&type=chunk) - Total delinquencies 30 days or more past due (excluding nonperforming loans) declined to **0.62% of total performing loans**, down from 0.77% as of March 31, 2025[9](index=9&type=chunk) [Franchise Finance Update](index=2&type=section&id=Franchise%20Finance%20Update) Franchise finance saw $12.6 million in nonaccruals, modest delinquency increase, and no loans on deferral by Q2 2025 - Moved **$12.6 million in franchise finance loans to nonaccrual** in Q2 2025 with related specific reserves of **$4.5 million**[9](index=9&type=chunk) - Delinquencies up modestly from March 31, 2025, but loan count is low (**9 loans out of 633 total in the portfolio**)[9](index=9&type=chunk) - **No loans on deferral** as of June 30, 2025, down from 22 loans at the end of 2024, indicating a positive trend in problem loan indicators[9](index=9&type=chunk) [Small Business Lending Update](index=2&type=section&id=Small%20Business%20Lending%20Update) Small business lending credit performance aligns with SBA 7(a) data, with 2022-2023 vintages elevated but recent improvements noted - Credit experience in the Company's portfolio is consistent with publicly disclosed data regarding the SBA 7(a) program portfolio for all lenders[9](index=9&type=chunk) - Nonaccrual loans and net charge-offs elevated in the **2022-2023 vintages**, with select industries underperforming[9](index=9&type=chunk) - Successive refinements to credit approval criteria and processes since 2023 have led to **improved performance**, with nonaccrual loans appearing to have plateaued and delinquencies significantly reduced[9](index=9&type=chunk) [Financial Outlook](index=3&type=section&id=Financial%20Outlook) This section presents the company's financial projections for Q3 2025, Q4 2025, and FY 2026, covering key performance indicators [Financial Outlook Summary](index=3&type=section&id=Financial%20Outlook%20Summary) The company projects continued loan growth, expanding net interest income and margin, and stable noninterest income and expense through FY 2026 Financial Outlook (in millions, except percentages) | Metric | 3Q25 Outlook | 4Q25 Outlook | FY 2026 Outlook | | :------------------------ | :----------- | :----------- | :-------------- | | Loan growth | ~2% (not annualized) | ~2% (not annualized) | 5% - 7% | | Net interest income (FTE) | ~$33.5 million | ~$35.5 million | $158 - $163 million | | Net interest margin (FTE) | 2.20% - 2.25% | 2.30% - 2.35% | 2.50% - 2.60% | | Noninterest income | ~$13.25 million | ~$13.25 million | $51 - $54 million | | Noninterest expense | ~$27 million | ~$27 million | $108 - $112 million | | Provision for credit losses | $10 - $11 million | $10 - $11 million | $37 - $40 million | - Continued uncertainty around global and domestic economic policy may impact outlook[10](index=10&type=chunk) [Detailed Financial Performance](index=3&type=section&id=Detailed%20Financial%20Performance) This section provides an in-depth analysis of the company's income statement components, including net interest income, noninterest income, and expenses [Net Interest Income and Net Interest Margin](index=3&type=section&id=Net%20Interest%20Income%20and%20Net%20Interest%20Margin) Net interest income rose 11.5% QoQ to $28.0 million, with NIM improving to 1.96% due to higher yields and lower deposit costs Net Interest Income and Net Interest Margin (in millions, except percentages) | Metric | Q2 2025 | Q1 2025 | Q2 2024 | Change QoQ | Change YoY | | :-------------------------------- | :------ | :------ | :------ | :--------- | :--------- | | Net interest income | $28.0 million | $25.1 million | $21.3 million | +11.5% | +31.5% | | Fully-taxable equivalent net interest income | $29.1 million | $26.3 million | $22.5 million | +10.6% | +29.3% | | Net interest margin | 1.96% | 1.82% | 1.67% | +14 bps | +29 bps | | Fully-taxable equivalent net interest margin | 2.04% | 1.91% | 1.76% | +13 bps | +28 bps | - NIM and FTE NIM increases reflect deploying cash balances into higher-yielding loans and securities, and continued improvement in the cost of deposits[21](index=21&type=chunk) - Company has delivered **seven straight quarters of rising net interest income**[5](index=5&type=chunk) [Interest Income Analysis](index=3&type=section&id=Interest%20Income%20Analysis) Interest income increased to $80.9 million, with yield on average interest-earning assets rising to 5.65% Interest Income Analysis (in millions, except percentages) | Metric | Q2 2025 | Q1 2025 | Q2 2024 | Change QoQ | Change YoY | | :------------------------ | :------ | :------ | :------ | :--------- | :--------- | | Total interest income | $80.9 million | $76.8 million | $71.0 million | +5.3% | +14.0% | | FTE total interest income | $82.0 million | $78.0 million | $72.1 million | +5.2% | +13.7% | | Yield on average interest-earning assets | 5.65% | 5.57% | 5.54% | +8 bps | +11 bps | | Average loan balances (incl. HFS) | +3.9% QoQ | - | - | - | - | | Average securities balances | +3.7% QoQ | - | - | - | - | | Yield on funded portfolio loan originations | 7.55% | 7.78% | 8.88% | -23 bps | -133 bps | - Commercial loan interest income increased due to growth in small business lending, construction, single tenant lease financing, commercial and industrial, and investor commercial real estate portfolios[13](index=13&type=chunk) - Consumer loan interest income was up modestly due to higher average balances in the trailers portfolio[15](index=15&type=chunk) [Interest Expense Analysis](index=4&type=section&id=Interest%20Expense%20Analysis) Total interest expense was $52.9 million, while the cost of interest-bearing liabilities and deposits decreased Interest Expense Analysis (in millions, except percentages) | Metric | Q2 2025 | Q1 2025 | Q2 2024 | Change QoQ | Change YoY | | :------------------------ | :------ | :------ | :------ | :--------- | :--------- | | Total interest expense | $52.9 million | $51.7 million | $49.6 million | +2.2% | +6.7% | | Cost of interest-bearing liabilities | 3.96% | 4.02% | 4.14% | -6 bps | -18 bps | | Interest expense on deposits | $46.8 million | $47.6 million | $44.5 million | -1.7% | +5.2% | | Cost of interest-bearing deposits | 3.92% | 4.01% | 4.29% | -9 bps | -37 bps | | Average interest-bearing demand deposits | +28.2% QoQ | - | - | - | - | | Average brokered deposits | -$206.7 million | - | - | -38.2% | - | - Growth in fintech deposits drove a **28.2% increase in average interest-bearing demand deposits**[19](index=19&type=chunk) - Strong deposit growth later in the quarter allowed the Company to pay down all short term FHLB advances prior to quarter end[20](index=20&type=chunk) [Noninterest Income](index=4&type=section&id=Noninterest%20Income) Noninterest income fell 46.5% QoQ to $5.6 million, mainly due to a temporary decline in gain on sale of loans Noninterest Income (in millions, except percentages) | Metric | Q2 2025 | Q1 2025 | Q2 2024 | Change QoQ | Change YoY | | :------------------------ | :------ | :------ | :------ | :--------- | :--------- | | Total noninterest income | $5.6 million | $10.4 million | $11.0 million | -46.5% | -49.1% | | Gain on sale of loans | $1.7 million | $8.6 million | $8.3 million | -80.7% | -79.5% | | Other noninterest income | +$2.1 million | - | - | +289.9% | - | - Decline in gain on sale of loans was due to a temporary process change to hold SBA loans held-for-sale longer, expected to revert to normalized levels in Q3 2025[23](index=23&type=chunk) - Increase in other noninterest income was primarily due to a planned distribution from a fund investment[23](index=23&type=chunk) [Noninterest Expense](index=5&type=section&id=Noninterest%20Expense) Noninterest expense decreased 7.5% QoQ to $21.8 million, driven by lower compensation and professional fees Noninterest Expense (in millions, except percentages) | Metric | Q2 2025 | Q1 2025 | Q2 2024 | Change QoQ | Change YoY | | :------------------------ | :------ | :------ | :------ | :--------- | :--------- | | Total noninterest expense | $21.8 million | $23.6 million | $22.3 million | -7.5% | -2.2% | - Decrease in salaries and employee benefits driven primarily by a reduction in incentive compensation[24](index=24&type=chunk) - Decrease in consulting and professional fees due mainly to lower outsourced audit fees and seasonally higher legal expense in the linked quarter[24](index=24&type=chunk) - Increase in other noninterest expense due primarily to higher fintech volume activity[24](index=24&type=chunk) [Income Taxes](index=5&type=section&id=Income%20Taxes) Q2 2025 saw an income tax benefit of $2.1 million, an increase from the prior quarter's benefit Income Tax (Benefit) Provision (in millions, except percentages) | Metric | Q2 2025 | Q1 2025 | Q2 2024 | Change QoQ | Change YoY | | :------------------------ | :------ | :------ | :------ | :--------- | :--------- | | Income tax (benefit) provision | $(2.1) million | $(0.9) million | $0.2 million | +127.8% | -1150.0% | [Loans and Credit Quality](index=5&type=section&id=Loans%20and%20Credit%20Quality) This section analyzes the company's loan portfolio composition, delinquency trends, nonperforming assets, and credit loss allowances [Loan Portfolio Composition](index=5&type=section&id=Loan%20Portfolio%20Composition) Total loans grew 2.5% QoQ to $4.4 billion, with commercial loan growth in real estate and small business lending Loan Portfolio Composition (in billions/millions, except percentages) | Metric | June 30, 2025 | March 31, 2025 | June 30, 2024 | Change QoQ | Change YoY | | :------------------------ | :------------ | :------------- | :------------ | :--------- | :--------- | | Total loans | $4.4 billion | $4.3 billion | $4.0 billion | +2.5% | +10.1% | | Commercial loans | $3.5 billion | $3.4 billion | $3.1 billion | +3.2% | +13.2% | | Consumer loans | $797.2 million | $797.7 million | $800.5 million | -0.1% | -0.4% | - Commercial loan growth driven primarily by investor commercial real estate, commercial and industrial, and small business lending balances[26](index=26&type=chunk) - Decrease in construction balances due to projects completed and transferred to investor commercial real estate[26](index=26&type=chunk) [Delinquencies and Nonperforming Loans](index=5&type=section&id=Delinquencies%20and%20Nonperforming%20Loans) Total delinquencies decreased to 0.62%, but nonperforming loans increased to $43.5 million, primarily from franchise and small business lending Delinquencies and Nonperforming Loans (in millions, except percentages) | Metric | June 30, 2025 | March 31, 2025 | June 30, 2024 | Change QoQ | Change YoY | | :-------------------------------- | :------------ | :------------- | :------------ | :--------- | :--------- | | Total delinquencies (30+ days past due, excl. NPLs) | 0.62% | 0.77% | 0.56% | -15 bps | +6 bps | | Nonperforming loans | $43.5 million | $34.2 million | $13.0 million | +27.2% | +234.6% | | Nonperforming loans to total loans | 1.00% | 0.80% | 0.33% | +20 bps | +67 bps | - Increase in nonperforming loans due primarily to franchise finance and small business lending loans placed on nonaccrual[30](index=30&type=chunk) - Specific reserves of **$8.9 million** held against nonperforming loans as of June 30, 2025[30](index=30&type=chunk) [Allowance for Credit Losses and Net Charge-offs](index=6&type=section&id=Allowance%20for%20Credit%20Losses%20and%20Net%20Charge-offs) ACL decreased to 1.07%, while net charge-offs were elevated at $14.3 million due to problem loan resolutions Allowance for Credit Losses and Net Charge-offs (in millions, except percentages) | Metric | June 30, 2025 | March 31, 2025 | June 30, 2024 | Change QoQ | Change YoY | | :-------------------------------- | :------------ | :------------- | :------------ | :--------- | :--------- | | Allowance for credit losses (ACL) to total loans | 1.07% | 1.11% | 1.10% | -4 bps | -3 bps | | Net charge-offs | $14.3 million | $9.7 million | $1.4 million | +47.4% | +921.4% | | Net charge-offs to average loans | 1.31% | 0.92% | 0.14% | +39 bps | +117 bps | | Provision for credit losses | $13.6 million | $11.9 million | $4.0 million | +14.3% | +240.0% | - ACL decrease reflects removal of **$7.4 million in specific reserves** related to small business and franchise finance charge-offs, partially offset by new specific reserves and loan growth[31](index=31&type=chunk) - Net charge-offs were elevated as the Company continued to take action to resolve problem loans in the small business lending and franchise finance portfolios[32](index=32&type=chunk) [Capital](index=6&type=section&id=Capital) This section reviews the company's capital structure, including shareholders' equity, book value, and regulatory capital ratios [Shareholders' Equity and Book Value](index=6&type=section&id=Shareholders'%20Equity%20and%20Book%20Value) Shareholders' equity increased to $390.2 million, with book value and tangible book value per share also rising Shareholders' Equity and Book Value (in millions, except per share amounts and percentages) | Metric | June 30, 2025 | March 31, 2025 | June 30, 2024 | Change QoQ | Change YoY | | :------------------------ | :------------ | :------------- | :------------ | :--------- | :--------- | | Total shareholders' equity | $390.2 million | $387.7 million | $372.0 million | +0.6% | +4.9% | | Book value per common share | $44.79 | $44.58 | $42.91 | +0.5% | +4.4% | | Tangible book value per share | $44.25 | $44.04 | $42.37 | +0.5% | +4.4% | - Increase in total shareholders' equity primarily due to the decrease in accumulated other comprehensive loss[34](index=34&type=chunk) [Regulatory Capital Ratios](index=6&type=section&id=Regulatory%20Capital%20Ratios) The company maintained strong regulatory capital ratios, with CET1 at 8.90% and total risk-based capital at 12.16% Regulatory Capital Ratios (in percentages) | Capital Ratio | Company (June 30, 2025) | Bank (June 30, 2025) | | :-------------------------------- | :---------------------- | :------------------- | | Total shareholders' equity to assets | 6.43% | 7.60% | | Tangible common equity to tangible assets | 6.35% | 7.53% | | Tier 1 leverage ratio | 6.77% | 8.02% | | Common equity tier 1 capital ratio | 8.90% | 10.56% | | Tier 1 capital ratio | 8.90% | 10.56% | | Total risk-based capital ratio | 12.16% | 11.63% | - Regulatory capital ratios are preliminary pending filing of the Company's and the Bank's regulatory reports[36](index=36&type=chunk) [Corporate Information](index=7&type=section&id=Corporate%20Information) This section provides details on the company's conference call, background, forward-looking statements, non-GAAP measures, and contact information [Conference Call and Webcast](index=7&type=section&id=Conference%20Call%20and%20Webcast) A conference call and webcast are scheduled for July 24, 2025, to discuss quarterly financial results - Conference call and webcast scheduled for **Thursday, July 24, 2025, at 2:00 p.m. ET**[37](index=37&type=chunk) - Access via telephone at **(800) 549-8228 (access code: 77870)** or live webcast on www.firstinternetbancorp.com[37](index=37&type=chunk)[38](index=38&type=chunk) [About First Internet Bancorp](index=7&type=section&id=About%20First%20Internet%20Bancorp) First Internet Bancorp, with $6.1 billion in assets, pioneered branchless banking and offers diverse financial services nationally - Bank holding company with assets of **$6.1 billion** as of June 30, 2025[39](index=39&type=chunk) - Subsidiary, First Internet Bank, opened in 1999 as an industry pioneer in branchless banking services[39](index=39&type=chunk) - Provides consumer and small business deposit, SBA financing, franchise finance, consumer loans, and specialty finance services nationally, plus commercial real estate, construction, C&I, and treasury management services regionally[39](index=39&type=chunk) [Forward-Looking Statements](index=7&type=section&id=Forward-Looking%20Statements) Forward-looking statements are subject to various known and unknown risks, including economic conditions and regulatory changes - Forward-looking statements are subject to known and unknown risks, uncertainties, and other factors that could cause actual results to differ materially[40](index=40&type=chunk) - Risks include general economic conditions, credit quality, operational failures, competition, loss of key management, inflation, rising interest rates, and regulatory changes[40](index=40&type=chunk) [Non-GAAP Financial Measures](index=7&type=section&id=Non-GAAP%20Financial%20Measures) Non-GAAP financial measures are used for capital and profitability assessment, with reconciliations provided for investor clarity - Non-GAAP financial measures are used by management to measure capital strength and analyze profitability[41](index=41&type=chunk)[42](index=42&type=chunk) - These measures should not be considered a substitute for GAAP financial measures and may not be comparable to those presented by other companies[42](index=42&type=chunk) - Reconciliations of non-GAAP financial measures to comparable GAAP measures are included in the release[42](index=42&type=chunk) [Contact Information](index=8&type=section&id=Contact%20Information) Contact information is provided for investor/analyst and media inquiries - Investors/Analysts contact: Paula Deemer, Director of Corporate Administration, **(317) 428-4628, investors@firstib.com**[43](index=43&type=chunk) - Media contact: Zach Weismiller, PANBlast, **firstib@panblastpr.com**[43](index=43&type=chunk) [Unaudited Financial Statements and Reconciliations](index=9&type=section&id=Unaudited%20Financial%20Statements%20and%20Reconciliations) This section presents unaudited financial statements and reconciliations of non-GAAP measures to GAAP, offering detailed financial data [Summary Financial Information](index=9&type=section&id=Summary%20Financial%20Information) This table summarizes key financial metrics, including net income, EPS, book values, and performance ratios for Q2 2025 and comparable periods Summary Financial Information (in thousands, except EPS and percentages) | Metric | June 30, 2025 (3 Months) | March 31, 2025 (3 Months) | June 30, 2024 (3 Months) | June 30, 2025 (6 Months) | June 30, 2024 (6 Months) | | :-------------------------------- | :----------------------- | :------------------------ | :----------------------- | :----------------------- | :----------------------- | | Net income | $193 | $943 | $5,775 | $1,136 | $10,956 | | Earnings per share - diluted | $0.02 | $0.11 | $0.67 | $0.13 | $1.25 | | Book value per common share | $44.79 | $44.58 | $42.91 | $44.79 | $42.91 | | Tangible book value per common share | $44.25 | $44.04 | $42.37 | $44.25 | $42.37 | | Return on average assets | 0.01% | 0.07% | 0.44% | 0.04% | 0.42% | | Net interest margin | 1.96% | 1.82% | 1.67% | 1.89% | 1.67% | | Nonperforming loans to loans | 1.00% | 0.80% | 0.33% | 1.00% | 0.33% | | Net charge-offs to average loans | 1.31% | 0.92% | 0.14% | 1.12% | 0.10% | | Total assets (average) | $5,924,144 | $5,770,380 | $5,332,776 | $5,847,687 | $5,270,356 | | Total deposits (average) | $4,945,955 | $4,951,856 | $4,289,915 | $4,948,890 | $4,195,132 | [Condensed Consolidated Balance Sheets](index=10&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) This table presents condensed consolidated balance sheets, detailing assets, liabilities, and equity as of June 30, 2025, and prior periods Condensed Consolidated Balance Sheets (in thousands) | Metric | June 30, 2025 | March 31, 2025 | June 30, 2024 | | :-------------------------------- | :------------ | :------------- | :------------ | | Total assets | $6,072,573 | $5,851,608 | $5,343,302 | | Loans held-for-sale | $126,533 | $31,738 | $19,384 | | Net loans | $4,316,045 | $4,207,174 | $3,917,741 | | Total deposits | $5,298,789 | $4,945,625 | $4,273,922 | | Advances from Federal Home Loan Bank | $264,500 | $395,000 | $575,000 | | Total liabilities | $5,682,334 | $5,463,861 | $4,971,349 | | Total shareholders' equity | $390,239 | $387,747 | $371,953 | [Condensed Consolidated Statements of Income](index=11&type=section&id=Condensed%20Consolidated%20Statements%20of%20Income) This table outlines condensed consolidated statements of income, showing revenue, expenses, and net income for Q2 2025 and comparable periods Condensed Consolidated Statements of Income (in thousands, except per share amounts) | Metric | June 30, 2025 (3 Months) | March 31, 2025 (3 Months) | June 30, 2024 (3 Months) | June 30, 2025 (6 Months) | June 30, 2024 (6 Months) | | :-------------------------------- | :----------------------- | :------------------------ | :----------------------- | :----------------------- | :----------------------- | | Total interest income | $80,886 | $76,829 | $70,961 | $157,715 | $139,126 | | Total interest expense | $52,896 | $51,733 | $49,634 | $104,629 | $97,065 | | Net interest income | $27,990 | $25,096 | $21,327 | $53,086 | $42,061 | | Provision for credit losses | $13,608 | $11,933 | $4,031 | $25,541 | $6,479 | | Total noninterest income | $5,557 | $10,427 | $11,033 | $15,984 | $19,380 | | Total noninterest expense | $21,800 | $23,556 | $22,336 | $45,357 | $43,359 | | Net income | $193 | $943 | $5,775 | $1,136 | $10,956 | | Diluted earnings per share | $0.02 | $0.11 | $0.67 | $0.13 | $1.25 | [Average Balances and Rates](index=12&type=section&id=Average%20Balances%20and%20Rates) These tables detail average balances and rates for interest-earning assets and interest-bearing liabilities, illustrating net interest income drivers Average Balances and Rates (in thousands, except percentages) | Metric | June 30, 2025 (3 Months) | March 31, 2025 (3 Months) | June 30, 2024 (3 Months) | | :-------------------------------- | :----------------------- | :------------------------ | :----------------------- | | Average interest-earning assets | $5,739,019 | $5,590,131 | $5,150,305 | | Yield on interest-earning assets | 5.65% | 5.57% | 5.54% | | Average loans (incl. HFS) | $4,407,196 | $4,242,933 | $3,936,723 | | Yield on loans | 6.07% | 5.99% | 5.83% | | Average interest-bearing liabilities | $5,360,514 | $5,217,278 | $4,825,152 | | Cost of interest-bearing liabilities | 3.96% | 4.02% | 4.14% | | Average interest-bearing deposits | $4,792,939 | $4,815,978 | $4,172,976 | | Cost of interest-bearing deposits | 3.92% | 4.01% | 4.29% | | Net interest margin | 1.96% | 1.82% | 1.67% | [Loans and Deposits](index=14&type=section&id=Loans%20and%20Deposits) This table provides a detailed breakdown of loan and deposit portfolios by type and percentage for recent periods Loans and Deposits (in thousands, except percentages) | Loan Type | June 30, 2025 (Amount) | June 30, 2025 (Percent) | March 31, 2025 (Amount) | March 31, 2025 (Percent) | June 30, 2024 (Amount) | June 30, 2024 (Percent) | | :-------------------------------- | :----------------------- | :---------------------- | :----------------------- | :----------------------- | :----------------------- | :----------------------- | | **Commercial loans:** | | | | | | | | Commercial and industrial | $174,475 | 4.0% | $140,239 | 3.3% | $115,585 | 2.9% | | Investor commercial real estate | $513,411 | 11.8% | $297,874 | 7.0% | $188,409 | 4.8% | | Construction | $332,658 | 7.6% | $471,082 | 11.1% | $328,922 | 8.3% | | Single tenant lease financing | $970,042 | 22.3% | $950,814 | 22.4% | $927,462 | 23.4% | | Small business lending | $383,455 | 8.8% | $353,408 | 8.3% | $270,129 | 6.8% | | Franchise finance | $479,757 | 11.0% | $514,700 | 12.1% | $551,133 | 13.9% | | **Consumer loans:** | | | | | | | | Residential mortgage | $358,922 | 8.2% | $367,722 | 8.6% | $382,549 | 9.7% | | Trailers | $228,786 | 5.2% | $220,012 | 5.2% | $197,738 | 5.0% | | **Total loans** | **$4,362,562** | **100.0%** | **$4,254,412** | **100.0%** | **$3,961,146** | **100.0%** | | **Deposit Type** | **June 30, 2025 (Amount)** | **June 30, 2025 (Percent)** | **March 31, 2025 (Amount)** | **March 31, 2025 (Percent)** | **June 30, 2024 (Amount)** | **June 30, 2024 (Percent)** | | :-------------------------------- | :----------------------- | :---------------------- | :----------------------- | :----------------------- | :----------------------- | :----------------------- | | Noninterest-bearing deposits | $145,166 | 2.7% | $151,815 | 3.1% | $126,438 | 3.0% | | Interest-bearing demand deposits | $1,458,123 | 27.5% | $1,103,540 | 22.3% | $480,141 | 11.2% | | Certificates of deposits | $2,146,356 | 40.5% | $2,029,801 | 41.0% | $1,829,644 | 42.8% | | Brokered deposits | $317,282 | 6.0% | $346,602 | 7.0% | $452,703 | 10.6% | | **Total deposits** | **$5,298,789** | **100.0%** | **$4,945,625** | **100.0%** | **$4,273,922** | **100.0%** | [Reconciliation of Non-GAAP Financial Measures](index=15&type=section&id=Reconciliation%20of%20Non-GAAP%20Financial%20Measures) These tables reconcile non-GAAP financial measures like tangible common equity and pre-tax, pre-provision income to GAAP equivalents Reconciliation of Non-GAAP Financial Measures (in thousands, except per share amounts and percentages) | Metric | June 30, 2025 (3 Months) | March 31, 2025 (3 Months) | June 30, 2024 (3 Months) | June 30, 2025 (6 Months) | June 30, 2024 (6 Months) | | :-------------------------------- | :----------------------- | :------------------------ | :----------------------- | :----------------------- | :----------------------- | | Total equity - GAAP | $390,239 | $387,747 | $371,953 | $390,239 | $371,953 | | Tangible common equity | $385,552 | $383,060 | $367,266 | $385,552 | $367,266 | | Total assets - GAAP | $6,072,573 | $5,851,608 | $5,343,302 | $6,072,573 | $5,343,302 | | Tangible assets | $6,067,886 | $5,846,921 | $5,338,615 | $6,067,886 | $5,338,615 | | Book value per common share | $44.79 | $44.58 | $42.91 | $44.79 | $42.91 | | Tangible book value per common share | $44.25 | $44.04 | $42.37 | $44.25 | $42.37 | | Net interest income - FTE | $29,147 | $26,265 | $22,502 | $55,412 | $44,426 | | Pre-tax, pre-provision income | $11,747 | $11,967 | $10,024 | $23,713 | $18,082 | | Adjusted net income | $193 | $943 | $6,227 | $1,136 | $11,408 | - Reconciliations are provided for non-GAAP measures such as tangible common equity, tangible assets, tangible book value per common share, and pre-tax, pre-provision income[50](index=50&type=chunk)[51](index=51&type=chunk) - Fully-taxable equivalent adjustments are applied assuming a **21% tax rate** for interest income and net interest income[50](index=50&type=chunk)

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[Cover Page & General Information](index=1&type=section&id=Cover%20Page%20%26%20General%20Information) This section provides general information and filing details for the Company's Quarterly Report on Form 10-Q [Form 10-Q Filing Details](index=1&type=section&id=Form%2010-Q%20Filing%20Details) This section details the Quarterly Report on Form 10-Q for First Internet Bancorp, including its accelerated filer status and outstanding common stock as of May 2, 2025 - Filing Type: **Quarterly Report on Form 10-Q** for the period ended March 31, 2025[2](index=2&type=chunk) - Registrant: **First Internet Bancorp** (Commission File Number 001-35750)[3](index=3&type=chunk) - Filer Status: **Accelerated Filer**[5](index=5&type=chunk) Common Stock Issued & Outstanding | Metric | Value | |:---|:---| | Common Stock Issued & Outstanding (as of May 2, 2025) | 8,697,085 shares | [Cautionary Note Regarding Forward-Looking Statements](index=2&type=section&id=Cautionary%20Note%20Regarding%20Forward-Looking%20Statements) This section advises on the forward-looking nature of statements within the report and the inherent risks and uncertainties [Forward-Looking Statements Disclosure](index=2&type=section&id=Forward-Looking%20Statements%20Disclosure) This section advises readers that the report contains forward-looking statements based on current expectations regarding business strategies, results, and future performance - The report contains forward-looking statements about business strategies, results, and future performance[7](index=7&type=chunk) - Statements are subject to risks and uncertainties including economic conditions, interest rate changes, credit quality, regulatory changes, and competitive factors[7](index=7&type=chunk) - The Company disclaims any obligation to publicly release revisions to forward-looking statements[8](index=8&type=chunk) [PART I. FINANCIAL INFORMATION](index=3&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) This part presents the unaudited condensed consolidated financial statements and management's discussion and analysis of the Company's financial condition and results of operations [ITEM 1. FINANCIAL STATEMENTS](index=3&type=section&id=ITEM%201.%20FINANCIAL%20STATEMENTS) This section presents the unaudited condensed consolidated financial statements of First Internet Bancorp, including balance sheets, income statements, and cash flows - Unaudited condensed consolidated financial statements are presented in conformity with U.S. GAAP for interim financial information[24](index=24&type=chunk) - Management's estimates and judgments, particularly for the allowance for credit losses, could materially affect financial statements[25](index=25&type=chunk) - The consolidated statements include First Internet Bancorp, First Internet Bank of Indiana, and its three wholly-owned subsidiaries[26](index=26&type=chunk) [Condensed Consolidated Balance Sheets](index=3&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) The condensed consolidated balance sheets provide a snapshot of the Company's financial position as of March 31, 2025, and December 31, 2024 Condensed Consolidated Balance Sheets | Metric | March 31, 2025 (in thousands) | December 31, 2024 (in thousands) | Change (in thousands) | % Change | |:---|:---|:---|:---|:---| | Total assets | $5,851,608 | $5,737,859 | $113,749 | 2.0% | | Total deposits | $4,945,625 | $4,933,206 | $12,419 | 0.3% | | Total liabilities | $5,463,861 | $5,353,796 | $110,065 | 2.1% | | Total shareholders' equity | $387,747 | $384,063 | $3,684 | 1.0% | | Net loans | $4,207,174 | $4,125,877 | $81,297 | 2.0% | | Securities available-for-sale | $681,785 | $587,355 | $94,430 | 16.1% | | Securities held-to-maturity | $276,542 | $249,796 | $26,746 | 10.7% | [Condensed Consolidated Statements of Income](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Income) The condensed consolidated statements of income show a significant decrease in net income for the three months ended March 31, 2025, compared to the same period in 2024 Condensed Consolidated Statements of Income | Metric | Three Months Ended March 31, 2025 (in thousands) | Three Months Ended March 31, 2024 (in thousands) | Change (in thousands) | % Change | |:---|:---|:---|:---|:---| | Total interest income | $76,829 | $68,165 | $8,664 | 12.7% | | Total interest expense | $51,733 | $47,431 | $4,302 | 9.1% | | Net Interest Income | $25,096 | $20,734 | $4,362 | 21.1% | | Provision for credit losses - loans | $12,121 | $2,582 | $9,539 | 369.4% | | Total noninterest income | $10,427 | $8,347 | $2,080 | 24.9% | | Total noninterest expense | $23,556 | $21,023 | $2,533 | 12.0% | | Net Income | $943 | $5,181 | $(4,238) | -81.8% | | Basic EPS | $0.11 | $0.60 | $(0.49) | -81.7% | | Diluted EPS | $0.11 | $0.59 | $(0.48) | -81.4% | | Dividends Declared Per Share | $0.06 | $0.06 | $0.00 | 0.0% | [Condensed Consolidated Statements of Comprehensive Income](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Income) Comprehensive income for the three months ended March 31, 2025, was $4.4 million, slightly down from $4.5 million in the prior year Condensed Consolidated Statements of Comprehensive Income | Metric | Three Months Ended March 31, 2025 (in thousands) | Three Months Ended March 31, 2024 (in thousands) | |:---|:---|:---| | Net income | $943 | $5,181 | | Net effect on other comprehensive income (loss) - Securities available-for-sale | $3,407 | $(1,599) | | Net effect on other comprehensive income - Securities held-to-maturity | $89 | $177 | | Net effect on other comprehensive income - Cash flow hedges | $0 | $695 | | Total other comprehensive income (loss) | $3,496 | $(727) | | Comprehensive income | $4,439 | $4,454 | [Condensed Consolidated Statements of Changes in Shareholders' Equity](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Changes%20in%20Shareholders'%20Equity) Shareholders' equity increased to $387.7 million as of March 31, 2025, from $384.1 million at the beginning of the year Condensed Consolidated Statements of Changes in Shareholders' Equity | Metric | Balance, January 1, 2025 (in thousands) | Balance, March 31, 2025 (in thousands) | |:---|:---|:---| | Voting and Nonvoting Common Stock | $186,094 | $185,873 | | Retained Earnings | $230,622 | $231,031 | | Accumulated Other Comprehensive Loss | $(32,653) | $(29,157) | | Total Shareholders' Equity | $384,063 | $387,747 | - Net income contributed **$943 thousand** to retained earnings[20](index=20&type=chunk) - Other comprehensive income added **$3,496 thousand** to shareholders' equity[20](index=20&type=chunk) - Dividends declared (**$0.06 per share**) reduced retained earnings by **$534 thousand**[20](index=20&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Net cash provided by operating activities significantly increased to $32.8 million for Q1 2025, while investing activities used more cash and financing activities decreased Condensed Consolidated Statements of Cash Flows | Activity | Three Months Ended March 31, 2025 (in thousands) | Three Months Ended March 31, 2024 (in thousands) | Change (in thousands) | |:---|:---|:---|:---|\ | Net cash provided by operating activities | $32,825 | $2,791 | $30,034 | | Net cash used in investing activities | $(216,446) | $(93,267) | $(123,179) | | Net cash provided by financing activities | $111,665 | $165,842 | $(54,177) | | Net (Decrease) Increase in Cash and Cash Equivalents | $(71,956) | $75,366 | $(147,322) | | Cash and Cash Equivalents, End of Period | $394,454 | $481,264 | $(86,810) | - Cash paid for interest increased to **$52.6 million** in Q1 2025 from **$47.9 million** in Q1 2024[23](index=23&type=chunk) [Notes to Condensed Consolidated Financial Statements](index=8&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) This section provides detailed disclosures and explanations for the condensed consolidated financial statements, covering accounting policies, estimates, and specific financial instrument details [Note 1: Basis of Presentation](index=8&type=section&id=Note%201%3A%20Basis%20of%20Presentation) The unaudited condensed consolidated financial statements are prepared in accordance with U.S. GAAP for interim financial information and SEC rules - Financial statements conform to **U.S. GAAP** for interim reporting and SEC regulations[24](index=24&type=chunk) - Preparation involves significant estimates and judgments, especially for the allowance for credit losses[25](index=25&type=chunk) - Consolidated entities include First Internet Bancorp, First Internet Bank of Indiana, and its three wholly-owned subsidiaries[26](index=26&type=chunk) [Note 2: Earnings Per Share](index=9&type=section&id=Note%202%3A%20Earnings%20Per%20Share) Earnings per share calculations are based on weighted-average basic and diluted shares outstanding, showing a significant decrease in Q1 2025 Earnings Per Share | Metric | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | |:---|:---|:---| | Net income | $943 | $5,181 | | Weighted-average common shares (Basic) | 8,715,655 | 8,679,429 | | Basic earnings per common share | $0.11 | $0.60 | | Weighted-average common and incremental shares (Diluted) | 8,784,970 | 8,750,297 | | Diluted earnings per common share | $0.11 | $0.59 | - **3,916 weighted-average antidilutive shares** were excluded from diluted EPS computation for Q1 2025[30](index=30&type=chunk) [Note 3: Securities](index=10&type=section&id=Note%203%3A%20Securities) The Company's securities portfolio includes available-for-sale (AFS) and held-to-maturity (HTM) securities, with unrealized losses primarily due to interest rate changes Securities Portfolio Fair Value | Security Type | March 31, 2025 (Fair Value, in thousands) | December 31, 2024 (Fair Value, in thousands) | |:---|:---|:---| | Total available-for-sale | $681,785 | $587,355 | | Total held-to-maturity | $259,116 | $228,851 | - Approximately **94% of mortgage-backed securities** (AFS and HTM) are issued by U.S. government-sponsored entities, with no recorded ACL due to low credit loss history[34](index=34&type=chunk) - Unrealized losses on AFS securities are primarily due to **interest rate changes**, not credit quality, and the Company does not intend to sell them before recovery of amortized cost[35](index=35&type=chunk)[41](index=41&type=chunk)[42](index=42&type=chunk) Securities in Unrealized Loss Position | Metric | March 31, 2025 (in thousands) | December 31, 2024 (in thousands) | |:---|:---|:---| | Total AFS & HTM securities in unrealized loss position (Fair Value) | $677,000 | $603,900 | | Number of AFS & HTM positions in unrealized loss | 487 | 482 | [Note 4: Loans](index=15&type=section&id=Note%204%3A%20Loans) Total loans increased to $4.25 billion as of March 31, 2025, with commercial loans constituting 80.7% of the portfolio Loan Portfolio Composition | Loan Category | March 31, 2025 (in thousands) | December 31, 2024 (in thousands) | % of Total Loans (Mar 31, 2025) | |:---|:---|:---|:---| | Commercial loans | $3,432,059 | $3,342,585 | 80.7% | | Consumer loans | $797,696 | $801,381 | 18.7% | | Total loans | $4,254,412 | $4,170,646 | 100.0% | - ACL methodology uses a **one-year reasonable and supportable forecast**, reverting to historical averages, and includes qualitative adjustments for changing conditions[59](index=59&type=chunk)[60](index=60&type=chunk)[61](index=61&type=chunk) - Loans are charged off when no longer considered bankable, typically at **120-180 days past due** depending on loan type[68](index=68&type=chunk) Loan Quality Metrics | Metric | March 31, 2025 (in thousands) | December 31, 2024 (in thousands) | |:---|:---|:---| | Allowance for credit losses - loans | $47,238 | $44,769 | | Total nonperforming loans | $34,243 | $28,421 | | Total nonperforming assets | $35,921 | $28,905 | | ACL to total loans | 1.11% | 1.07% | | ACL to nonaccrual loans | 142.2% | 172.5% | | Net charge-offs (Q1 2025) | $9,652 | $9,407 (Q4 2024) | | Net charge-offs to average loans (annualized, Q1 2025) | 0.92% | 0.91% (Q4 2024) | - The Company had **two loan modifications** for borrowers experiencing financial difficulty in Q1 2025, totaling **$2.7 million**[88](index=88&type=chunk)[89](index=89&type=chunk) - Other Real Estate Owned (OREO) increased to **$1.5 million** (two SBA properties) at March 31, 2025, from **$0.3 million** (one residential mortgage property) at December 31, 2024[91](index=91&type=chunk) [Note 5: Premises and Equipment](index=29&type=section&id=Note%205%3A%20Premises%20and%20Equipment) Net premises and equipment decreased slightly to $70.5 million at March 31, 2025, from $71.5 million at December 31, 2024 Premises and Equipment, Net | Category | March 31, 2025 (in thousands) | December 31, 2024 (in thousands) | |:---|:---|:---| | Total Premises and equipment, net | $70,461 | $71,453 | [Note 6: Goodwill](index=29&type=section&id=Note%206%3A%20Goodwill) The carrying amount of goodwill remained stable at $4.7 million as of March 31, 2025, with no impairment identified Goodwill | Metric | March 31, 2025 (in thousands) | December 31, 2024 (in thousands) | |:---|:---|:---| | Goodwill | $4,687 | $4,687 | - No changes in goodwill carrying amount for Q1 2025 or Q1 2024[94](index=94&type=chunk) - Qualitative assessment as of August 31, 2024, found **no goodwill impairment**[95](index=95&type=chunk) [Note 7: Servicing Asset](index=29&type=section&id=Note%207%3A%20Servicing%20Asset) The servicing asset increased to $17.4 million at March 31, 2025, with increased loan servicing revenue offset by revaluation adjustments Servicing Asset Activity | Metric | Three Months Ended March 31, 2025 (in thousands) | Three Months Ended March 31, 2024 (in thousands) | |:---|:---|:---|\ | Balance, beginning of period | $16,389 | $10,567 | | Originated additions | $2,237 | $1,627 | | Paydowns subtractions | $(964) | $(612) | | Loan servicing asset revaluation | $(1,181) | $(434) | | Balance, end of period | $17,445 | $11,760 | Unpaid Principal Balance of SBA Guaranteed Loans Serviced | Metric | March 31, 2025 (in thousands) | December 31, 2024 (in thousands) | |:---|:---|:---| | Unpaid principal balance of SBA guaranteed loans serviced for others | $939,362 | $862,089 | - Loan servicing revenue was **$2.0 million** in Q1 2025, up from **$1.3 million** in Q1 2024[99](index=99&type=chunk) [Note 8: Subordinated Debt](index=30&type=section&id=Note%208%3A%20Subordinated%20Debt) The Company has $107.0 million in principal amount of subordinated debt outstanding, consisting of 2029, 2030, and 2031 Notes Subordinated Debt Outstanding | Subordinated Debt | Principal (March 31, 2025, in thousands) | Unamortized Discount and Debt Issuance Costs (March 31, 2025, in thousands) | |:---|:---|:---| | 2029 Notes | $37,000 | $(664) | | 2030 Note | $10,000 | $(131) | | 2031 Notes | $60,000 | $(977) | | Total | $107,000 | $(1,772) | - All subordinated debt is unsecured and intended to qualify as **Tier 2 capital**[101](index=101&type=chunk)[102](index=102&type=chunk)[103](index=103&type=chunk) [Note 9: Benefit Plans](index=31&type=section&id=Note%209%3A%20Benefit%20Plans) The Company has employment agreements with key executives and equity incentive plans for stock-based awards, with share-based compensation expense significantly lower in Q1 2025 - Employment agreements for CEO, President/COO, and EVP/CFO include base salaries, annual bonuses, and termination benefits[106](index=106&type=chunk)[107](index=107&type=chunk) - The **2022 Equity Incentive Plan** authorized **400,000 new shares** for awards to employees, consultants, advisors, and non-employee directors[108](index=108&type=chunk) Share-Based Compensation Expense | Metric | Three Months Ended March 31, 2025 (in thousands) | Three Months Ended March 31, 2024 (in thousands) | |:---|:---|:---| | Share-based compensation expense (2022 Plan) | < $0.1 million | $0.1 million | | Share-based compensation expense (2013 Plan) | < $0.1 million | $0.4 million | - Total unrecognized compensation cost for unvested 2022 Plan awards was **$3.3 million** with a **2.2-year recognition period** as of March 31, 2025[111](index=111&type=chunk) - The Directors Deferred Stock Plan granted **48 additional deferred stock rights** in Q1 2025 in lieu of cash dividends[118](index=118&type=chunk) [Note 10: Commitments and Credit Risk](index=33&type=section&id=Note%2010%3A%20Commitments%20and%20Credit%20Risk) The Company had outstanding loan commitments totaling $626.2 million as of March 31, 2025, a decrease from December 31, 2024 Outstanding Loan Commitments | Metric | March 31, 2025 (in thousands) | December 31, 2024 (in thousands) | |:---|:---|:---| | Outstanding loan commitments | $626,200 | $667,700 | [Note 11: Fair Value of Financial Instruments](index=33&type=section&id=Note%2011%3A%20Fair%20Value%20of%20Financial%20Instruments) This note details the Company's fair value measurements, categorizing assets and liabilities into a three-level hierarchy based on input observability - Fair value hierarchy categorizes inputs into **Level 1** (quoted prices in active markets), **Level 2** (observable inputs other than Level 1 prices), and **Level 3** (unobservable inputs)[124](index=124&type=chunk) - Available-for-sale securities are primarily **Level 2**, valued using matrix pricing[123](index=123&type=chunk) - Servicing asset fair value is based on discounted cash flows using market-based prepayment speeds and discount rates (**Level 3**)[126](index=126&type=chunk)[138](index=138&type=chunk) - Collateral dependent loans are measured for impairment based on the fair value of underlying collateral (**Level 3**)[133](index=133&type=chunk)[135](index=135&type=chunk)[138](index=138&type=chunk) Fair Value Measurements | Asset/Liability | March 31, 2025 Fair Value (in thousands) | Level | |:---|:---|:---|\ | Total available-for-sale securities | $681,785 | Level 2 | | Servicing asset | $17,445 | Level 3 | | Interest rate swap agreements - assets (back-to-back) | $308 | Level 2 | | Interest rate swap agreements - liabilities (back-to-back) | $(308) | Level 2 | Collateral Dependent Loans | Asset | March 31, 2025 Fair Value (in thousands) | Level | |:---|:---|:---|\ | Collateral dependent loans | $1,844 | Level 3 | [Note 12: Derivative Financial Instruments](index=39&type=section&id=Note%2012%3A%20Derivative%20Financial%20Instruments) The Company uses interest rate swaps to manage interest rate risk, primarily through back-to-back swaps not designated as hedging instruments - Company uses derivative financial instruments to manage interest rate risk[156](index=156&type=chunk) - Back-to-back swap agreements are used to offset each other, providing fixed interest payments for customers on variable rate loans[157](index=157&type=chunk) - All fair value and cash flow hedges matured or were terminated in 2024, with no such hedges remaining as of March 31, 2025[158](index=158&type=chunk)[159](index=159&type=chunk)[251](index=251&type=chunk) Derivative Financial Instruments | Derivative Type | Notional Amount (March 31, 2025, in thousands) | Fair Value (March 31, 2025, in thousands) | |:---|:---|:---|\ | Back-to-back swaps (Asset Derivatives) | $34,106 | $308 | | Back-to-back swaps (Liability Derivatives) | $34,106 | $(308) | [Note 13: Accumulated Other Comprehensive Loss](index=41&type=section&id=Note%2013%3A%20Accumulated%20Other%20Comprehensive%20Loss) Accumulated other comprehensive loss decreased to $(29.2) million at March 31, 2025, primarily due to unrealized gains on debt securities Accumulated Other Comprehensive Loss | Component | Balance, January 1, 2025 (in thousands) | Balance, March 31, 2025 (in thousands) | |:---|:---|:---|\ | Unrealized Losses On Debt Securities | $(30,413) | $(27,006) | | Unrealized Losses On Debt Securities Transferred From Available-For-Sale To Held-To Maturity | $(2,240) | $(2,151) | | Cash Flow Hedges | $0 | $0 | | Total | $(32,653) | $(29,157) | - Other comprehensive income before reclassifications was **$4.4 million** for Q1 2025[170](index=170&type=chunk) [Note 14: Segment Information](index=42&type=section&id=Note%2014%3A%20Segment%20Information) The Company operates as a single reportable segment, with the Chief Operating Decision Maker (CODM) evaluating performance on a consolidated basis - The Company operates as a **single reportable segment**[172](index=172&type=chunk) - The Finance Committee, comprising top management, acts as the CODM, evaluating consolidated performance and allocating resources[174](index=174&type=chunk) [Note 15: Recent Accounting Pronouncements](index=42&type=section&id=Note%2015%3A%20Recent%20Accounting%20Pronouncements) The Company is evaluating the impact of two new ASUs: ASU 2023-09 (Income Taxes) and ASU 2024-03 (Income Statement-Reporting Comprehensive Income - Expense Disaggregations Disclosures) - ASU 2023-09 (Income Taxes) enhances income tax disclosures, effective for annual periods after December 15, 2024[175](index=175&type=chunk) - ASU 2024-03 (Income Statement-Reporting Comprehensive Income) requires additional expense disaggregation disclosures, effective for annual periods after December 15, 2026[176](index=176&type=chunk) - The Company is currently evaluating the impact of both ASUs[175](index=175&type=chunk)[176](index=176&type=chunk) [ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS](index=42&type=section&id=ITEM%202.%20MANAGEMENT'S%20DISCUSSION%20AND%20ANALYSIS%20OF%20FINANCIAL%20CONDITION%20AND%20RESULTS%20OF%20OPERATIONS) This section provides management's perspective on the Company's financial condition and results of operations, highlighting key trends, significant changes, and future outlook [Overview](index=43&type=section&id=Overview) First Internet Bancorp operates primarily through its wholly-owned subsidiary, First Internet Bank of Indiana, offering a wide range of banking products digitally and through strategic partnerships - First Internet Bancorp operates through First Internet Bank of Indiana, the first state-chartered, FDIC-insured Internet bank, established in 1999[178](index=178&type=chunk) - The Bank offers commercial, small business, consumer, and municipal banking products primarily through digital channels nationwide, without traditional branch offices[180](index=180&type=chunk) - The Company is a top **SBA 7(a) lender**, closing **$113.8 million** in Q1 2025 and ranking 8th largest for the SBA's fiscal year-to-date 2025[182](index=182&type=chunk) - Strategic partnerships with fintech companies are utilized to diversify revenue, acquire deposits, and generate assets[183](index=183&type=chunk) Consolidated Financial Snapshot | Metric | March 31, 2025 (in thousands) | |:---|:---|\ | Consolidated assets | $5,900,000 | | Consolidated deposits | $4,900,000 | | Stockholders' equity | $387,700 | [Results of Operations](index=44&type=section&id=Results%20of%20Operations) Net income for Q1 2025 significantly decreased by 81.8% to $0.9 million ($0.11 diluted EPS) compared to Q1 2024 Net Income and EPS | Metric | Q1 2025 (in thousands) | Q1 2024 (in thousands) | Change (in thousands) | % Change | |:---|:---|:---|:---|:---|\ | Net income | $943 | $5,181 | $(4,238) | -81.8% | | Diluted EPS | $0.11 | $0.59 | $(0.48) | -81.4% | - Decrease in net income primarily driven by a **$9.5 million (387.5%) increase** in provision for credit losses and a **$2.5 million (12.0%) increase** in noninterest expense[186](index=186&type=chunk) - Partially offset by a **$4.4 million (21.0%) increase** in net interest income and a **$2.1 million (24.9%) increase** in noninterest income, plus a **$1.3 million income tax benefit**[186](index=186&type=chunk) Profitability Ratios | Metric | Q1 2025 | Q1 2024 | |:---|:---|:---|\ | Return on average assets (ROAA) | 0.07% | 0.40% | | Return on average shareholders' equity (ROAE) | 0.98% | 5.64% | | Return on average tangible common equity (ROATCE) | 0.99% | 5.71% | Pre-tax, Pre-provision Income | Metric | Q1 2025 (in thousands) | Q1 2024 (in thousands) | Change (in thousands) | % Change | |:---|:---|:---|:---|:---|\ | Pre-tax, pre-provision income (PTPP) | $12,000 | $8,100 | $3,900 | 48.5% | [Consolidated Average Balance Sheets and Net Interest Income Analyses](index=45&type=section&id=Consolidated%20Average%20Balance%20Sheets%20and%20Net%20Interest%20Income%20Analyses) Net interest income for Q1 2025 increased by 21.0% to $25.1 million, driven by higher interest income and an improved net interest margin Net Interest Income Analysis | Metric | Q1 2025 (in thousands) | Q1 2024 (in thousands) | Change (in thousands) | % Change | |:---|:---|:---|:---|:---|\ | Net Interest Income | $25,096 | $20,734 | $4,362 | 21.0% | | Total Interest Income | $76,829 | $68,165 | $8,664 | 12.7% | | Total Interest Expense | $51,733 | $47,431 | $4,302 | 9.1% | - Increase in interest income due to **26 bps increase in loan yield** and **9.0% ($350.3 million) increase in average loan balance**, plus **28.2% ($198.4 million) increase in average securities balance** and **29 bps increase in securities yield**[194](index=194&type=chunk) - New origination yields (**7.78% in Q1 2025**) remained above overall loan portfolio yield, despite 100 bps Fed rate cuts in H2 2024[194](index=194&type=chunk) - Increase in interest expense primarily from interest-bearing demand deposits (up **$4.9 million, 233.5%**) and certificates/brokered deposits (up **$2.9 million, 10.8%**), partially offset by decreases in money market accounts and other borrowed funds[195](index=195&type=chunk) - Overall cost of total interest-bearing liabilities decreased **4 bps to 4.02%** in Q1 2025[196](index=196&type=chunk) Net Interest Margin | Metric | Q1 2025 | Q1 2024 | Change (bps) | |:---|:---|:---|:---|\ | Net Interest Margin (NIM) | 1.82% | 1.66% | 16 | | Net Interest Margin - FTE | 1.91% | 1.75% | 16 | [Noninterest Income](index=47&type=section&id=Noninterest%20Income) Noninterest income increased by 24.9% to $10.4 million in Q1 2025, primarily driven by a significant increase in gain on sale of loans Noninterest Income Breakdown | Metric | Q1 2025 (in thousands) | Q1 2024 (in thousands) | Change (in thousands) | % Change | |:---|:---|:---|:---|:---|\ | Total noninterest income | $10,427 | $8,347 | $2,080 | 24.9% | | Gain on sale of loans | $8,647 | $6,536 | $2,111 | 32.3% | | Loan servicing revenue | $1,983 | $1,323 | $660 | 49.9% | | Loan servicing asset revaluation | $(1,181) | $(434) | $(747) | 172.1% | - Increase in gain on sale of loans due to **36.2% increase in SBA 7(a) guaranteed loan sales volume**, partially offset by **36 bps decrease in net premium**[199](index=199&type=chunk) [Noninterest Expense](index=47&type=section&id=Noninterest%20Expense) Noninterest expense increased by 12.0% to $23.6 million in Q1 2025, mainly due to higher salaries, professional services, and premises costs Noninterest Expense Breakdown | Metric | Q1 2025 (in thousands) | Q1 2024 (in thousands) | Change (in thousands) | % Change | |:---|:---|:---|:---|:---|\ | Total noninterest expense | $23,556 | $21,023 | $2,533 | 12.0% | | Salaries and employee benefits | $13,107 | $11,796 | $1,311 | 11.1% | | Consulting and professional services | $1,228 | $853 | $375 | 44.0% | | Premises and equipment | $3,115 | $2,826 | $289 | 10.2% | | Deposit insurance premium | $1,398 | $1,145 | $253 | 22.1% | - Increase in salaries and employee benefits due to higher small business lending incentive compensation and staff additions[201](index=201&type=chunk) - Increase in consulting and professional fees due to increased legal and audit fees[201](index=201&type=chunk) [Financial Condition](index=48&type=section&id=Financial%20Condition) Total assets increased by 2.0% to $5.9 billion at March 31, 2025, driven by deposit growth, which funded loan growth and securities purchases Financial Condition Summary | Metric | March 31, 2025 (in thousands) | December 31, 2024 (in thousands) | Change (in thousands) | % Change | |:---|:---|:---|:---|:---|\ | Total assets | $5,851,608 | $5,737,859 | $113,749 | 2.0% | | Total shareholders' equity | $387,747 | $384,063 | $3,684 | 1.0% | | Tangible common equity | $383,060 | $379,376 | $3,684 | 1.0% | - Asset increase primarily due to deposit growth from fintech partnerships, used to fund loan growth, securities purchases, and pay down higher-cost CDs/brokered deposits[204](index=204&type=chunk) Equity Ratios and Book Value | Metric | March 31, 2025 | December 31, 2024 | Change | |:---|:---|:---|:---|\ | Total shareholders' equity to total assets | 6.63% | 6.69% | -0.06% | | Tangible common equity to tangible assets | 6.55% | 6.62% | -0.07% | | Book value per common share | $44.58 | $44.31 | $0.27 | | Tangible book value per share | $44.04 | $43.77 | $0.27 | [Loan Portfolio Analysis](index=49&type=section&id=Loan%20Portfolio%20Analysis) Total loans grew by 2.0% to $4.3 billion at March 31, 2025, with commercial loans increasing and consumer loans decreasing Loan Portfolio Growth | Loan Category | March 31, 2025 (in thousands) | December 31, 2024 (in thousands) | Change (in thousands) | % Change | |:---|:---|:---|:---|:---|\ | Total loans | $4,254,412 | $4,170,646 | $83,766 | 2.0% | | Total commercial loans | $3,432,059 | $3,342,585 | $89,474 | 2.7% | | Total consumer loans | $797,696 | $801,381 | $(3,685) | -0.5% | - Commercial loan growth driven by construction, investor commercial real estate, small business lending, and commercial and industrial portfolios[208](index=208&type=chunk) - Offset by decreases in franchise finance, healthcare finance, owner-occupied commercial real estate, and public finance portfolios[208](index=208&type=chunk) - Consumer loan decrease primarily due to residential mortgage portfolio runoff, partially offset by other consumer loan originations[208](index=208&type=chunk) [Asset Quality](index=50&type=section&id=Asset%20Quality) Total nonperforming loans increased by 20.5% to $34.2 million at March 31, 2025, and total nonperforming assets increased by 24.3% to $35.9 million Nonperforming Assets | Metric | March 31, 2025 (in thousands) | December 31, 2024 (in thousands) | Change (in thousands) | % Change | |:---|:---|:---|:---|:---|\ | Total nonperforming loans | $34,243 | $28,421 | $5,822 | 20.5% | | Total nonperforming assets | $35,921 | $28,905 | $7,016 | 24.3% | | Nonaccrual loans | $33,208 | $25,955 | $7,253 | 27.9% | | Past Due 90 days and accruing loans | $1,035 | $2,466 | $(1,431) | -58.0% | | Other real estate owned | $1,518 | $272 | $1,246 | 458.1% | - Increase in nonperforming loans primarily in franchise finance and small business lending[211](index=211&type=chunk) - OREO increased to **$1.5 million** (two SBA properties) from **$0.3 million** (one residential mortgage property)[211](index=211&type=chunk) Nonperforming Ratios | Ratio | March 31, 2025 | December 31, 2024 | |:---|:---|:---|\ | Total nonperforming loans to total loans | 0.80% | 0.68% | | Total nonperforming assets to total assets | 0.61% | 0.50% | [Allowance for Credit Losses - Loans](index=51&type=section&id=Allowance%20for%20Credit%20Losses%20-%20Loans) The Allowance for Credit Losses (ACL) increased to $47.2 million at March 31, 2025, reflecting specific reserves for problem loans and overall portfolio growth Allowance for Credit Losses Activity | Metric | March 31, 2025 (in thousands) | December 31, 2024 (in thousands) | Change (in thousands) | % Change | |:---|:---|:---|:---|:---|\ | Balance, beginning of period | $44,769 | $45,721 | $(952) | -2.1% | | Provision charged to expense | $12,121 | $8,455 | $3,666 | 43.4% | | Total losses charged off | $9,841 | $9,481 | $360 | 3.8% | | Total recoveries | $189 | $74 | $115 | 155.4% | | Balance, end of period | $47,238 | $44,769 | $2,469 | 5.5% | | Net charge-offs | $9,652 | $9,407 | $245 | 2.6% | - ACL increase reflects specific reserves for franchise finance (**$2.5 million**) and small business lending (**$0.8 million**) loans placed on nonaccrual, and overall loan portfolio growth[213](index=213&type=chunk) ACL Ratios | Ratio | March 31, 2025 | December 31, 2024 | |:---|:---|:---|\ | ACL as a percentage of total loans | 1.11% | 1.07% | | ACL as a percentage of nonperforming loans | 138.0% | 157.5% | - Net charge-offs of **$9.7 million** in Q1 2025 (**0.92% of average loans**) were elevated due to actions to resolve problem loans in small business lending and franchise finance[214](index=214&type=chunk) - Provision for credit losses - loans increased to **$12.1 million** in Q1 2025 from **$2.6 million** in Q1 2024, driven by elevated net charge-offs, additional specific reserves, and loan portfolio growth[215](index=215&type=chunk)[216](index=216&type=chunk) [Investment Securities Portfolio](index=53&type=section&id=Investment%20Securities%20Portfolio) The fair value of available-for-sale (AFS) investment securities increased by 16.1% to $681.8 million at March 31, 2025, primarily due to new purchases Investment Securities Portfolio | Metric | March 31, 2025 (in thousands) | December 31, 2024 (in thousands) | Change (in thousands) | % Change | |:---|:---|:---|:---|:---|\ | Total available-for-sale (Fair Value) | $681,785 | $587,355 | $94,430 | 16.1% | | Total held-to-maturity (Net Carrying Value) | $276,542 | $249,796 | $26,746 | 10.7% | - Increase in AFS securities primarily from purchases of **variable-rate agency mortgage-backed securities - residential**[219](index=219&type=chunk) - Increase in HTM securities primarily from purchases of **CRA-eligible agency mortgage-backed securities - residential**[219](index=219&type=chunk) [Accrued Income and Other Assets](index=54&type=section&id=Accrued%20Income%20and%20Other%20Assets) Accrued income and other assets increased by 6.0% to $66.8 million at March 31, 2025, mainly due to increases in equity fund investments and prepaid assets Accrued Income and Other Assets | Metric | March 31, 2025 (in thousands) | December 31, 2024 (in thousands) | Change (in thousands) | % Change | |:---|:---|:---|:---|:---|\ | Accrued income and other assets | $66,757 | $63,001 | $3,756 | 6.0% | - Increase primarily due to **$4.1 million in equity fund investments**, **$0.8 million in prepaid assets**, and **$0.1 million in deferred tax assets and derivative assets**[220](index=220&type=chunk) [Accrued Expenses and Other Liabilities](index=54&type=section&id=Accrued%20Expenses%20and%20Other%20Liabilities) Accrued expenses and other liabilities decreased by 8.8% to $16.4 million at March 31, 2025, primarily due to a decrease in accrued salary and benefits Accrued Expenses and Other Liabilities | Metric | March 31, 2025 (in thousands) | December 31, 2024 (in thousands) | Change (in thousands) | % Change | |:---|:---|:---|:---|:---|\ | Accrued expenses and other liabilities | $16,363 | $17,945 | $(1,582) | -8.8% | - Decrease primarily due to **$3.1 million decrease in accrued salary and benefits**[221](index=221&type=chunk) [Deposits](index=54&type=section&id=Deposits) Total deposits increased by 0.3% to $4.9 billion at March 31, 2025, driven by growth in interest-bearing demand, money market, and noninterest-bearing deposits Deposit Composition | Deposit Type | March 31, 2025 (in thousands) | December 31, 2024 (in thousands) | Change (in thousands) | % Change | |:---|:---|:---|:---|:---|\ | Total deposits | $4,945,625 | $4,933,206 | $12,419 | 0.3% | | Noninterest-bearing deposits | $151,815 | $136,451 | $15,364 | 11.3% | | Interest-bearing demand deposits | $1,103,540 | $896,661 | $206,879 | 23.1% | | Money market accounts | $1,292,235 | $1,183,789 | $108,446 | 9.2% | | Brokered deposits | $346,602 | $563,027 | $(216,425) | -38.4% | | Certificates of deposits | $2,029,801 | $2,133,455 | $(103,654) | -4.9% | - Growth in interest-bearing demand deposits primarily from **fintech partnership deposits**[223](index=223&type=chunk) - Uninsured deposit balances represented **27% of total deposits** at March 31, 2025 (adjusted to **22%** after excluding Indiana municipal deposits and large accounts with withdrawal restrictions)[224](index=224&type=chunk) [Regulatory Capital Requirements](index=54&type=section&id=Regulatory%20Capital%20Requirements) The Company and the Bank maintain capital ratios above the minimum Basel III requirements and well-capitalized thresholds as of March 31, 2025 - Company and Bank are subject to **Basel III Capital Rules**, fully phased in on January 1, 2019[226](index=226&type=chunk)[227](index=227&type=chunk) - Minimum ratios include **7.0% Common Equity Tier 1**, **8.5% Tier 1**, **10.5% Total capital** (including 2.5% capital conservation buffer), and **4.0% Leverage Ratio**[227](index=227&type=chunk) Consolidated Capital Ratios | Capital Ratio (Consolidated) | Actual (March 31, 2025) | Minimum Required - Basel III | |:---|:---|:---|\ | Common equity tier 1 capital to risk-weighted assets | 9.15% | 7.00% | | Tier 1 capital to risk-weighted assets | 9.15% | 8.50% | | Total capital to risk-weighted assets | 12.52% | 10.50% | | Leverage ratio | 6.87% | 4.00% | - The Company elected to delay the impact of ASC 326 adoption on regulatory capital, phasing in adjustments over three years[230](index=230&type=chunk) [Shareholders' Dividends](index=56&type=section&id=Shareholders'%20Dividends) The Board of Directors declared a cash dividend of $0.06 per share for Q1 2025, with future dividends subject to discretion and restrictions Cash Dividend Declared | Metric | Q1 2025 | |:---|:---|\ | Cash dividend declared per share | $0.06 | - Future dividends are subject to Board discretion, financial condition, capital requirements, and regulatory/contractual restrictions[233](index=233&type=chunk) - Agreements governing **$107.0 million subordinated debt** prohibit dividend payments if an event of default occurs and is continuing[234](index=234&type=chunk) [Capital Resources](index=56&type=section&id=Capital%20Resources) The Company believes it has sufficient liquidity and capital for the next twelve months and beyond, with a stock repurchase program having expired in 2024 - Company believes it has sufficient liquidity and capital resources for the next twelve months and longer[235](index=235&type=chunk) - A stock repurchase program, authorizing up to **$25.0 million**, expired on December 31, 2024[236](index=236&type=chunk) Stock Repurchase Program Summary | Metric | Value | |:---|:---|\ | Shares repurchased under program | 559,522 shares | | Average repurchase price | $19.06 | | Total investment in repurchases | $10.7 million | [Liquidity](index=57&type=section&id=Liquidity) The Company manages liquidity through deposits, loan/security payments, and wholesale funding, with $2.1 billion in total available funds as of March 31, 2025 - Primary sources of funds include deposits, loan/investment payments, maturing assets, and wholesale funding (FHLB advances, brokered deposits)[238](index=238&type=chunk) Liquid Assets | Metric | March 31, 2025 (in thousands) | |:---|:---|\ | Cash and cash equivalents | $394,454 | | Investment securities available-for-sale | $681,785 | | Loans held-for-sale | $31,738 | | Total liquid assets | ~$1,107,977 | - Additional borrowing capacity of **$1.7 billion** from FHLB, Federal Reserve, and correspondent bank lines[239](index=239&type=chunk) - Total available funds (cash + borrowing capacity) of **$2.1 billion**, representing **194% of adjusted uninsured deposit balances**[239](index=239&type=chunk) - Outstanding loan commitments and unused lines of credit totaled **$626.2 million**[241](index=241&type=chunk) - Certificates of deposits and brokered deposits maturing in one year or less totaled **$1.4 billion**[241](index=241&type=chunk) [Reconciliation of Non-GAAP Financial Measures](index=58&type=section&id=Reconciliation%20of%20Non-GAAP%20Financial%20Measures) This section provides reconciliations of non-GAAP financial measures, such as tangible common equity and FTE net interest income/margin, to their most directly comparable GAAP measures - Non-GAAP measures like tangible common equity, tangible assets, and FTE net interest income/margin are used to assess capital strength and profitability[244](index=244&type=chunk) - These measures are not GAAP substitutes but provide greater understanding and facilitate peer comparisons[244](index=244&type=chunk) Non-GAAP Financial Measures Reconciliation | Metric | March 31, 2025 (in thousands) | December 31, 2024 (in thousands) | |:---|:---|:---|\ | Tangible common equity | $383,060 | $379,376 | | Tangible assets | $5,846,921 | $5,733,172 | | Tangible book value per common share | $44.04 | $43.77 | | Tangible common equity to tangible assets | 6.55% | 6.62% | | Net interest income - FTE | $26,265 | $24,703 | | Net interest margin - FTE | 1.91% | 1.75% | [Critical Accounting Policies and Estimates](index=61&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) There have been no material changes to the Company's critical accounting policies or estimates from those disclosed in its Annual Report on Form 10-K for the year ended December 31, 2024 - No material changes to critical accounting policies or estimates since the 2024 Annual Report on Form 10-K[249](index=249&type=chunk) [Recent Accounting Pronouncements](index=61&type=section&id=Recent%20Accounting%20Pronouncements) Refers to Note 15 of the condensed consolidated financial statements for details on recent accounting pronouncements - Refer to Note 15 for details on recent accounting pronouncements[250](index=250&type=chunk) [Off-Balance Sheet Arrangements](index=61&type=section&id=Off-Balance%20Sheet%20Arrangements) The Company engages in off-balance sheet arrangements, primarily loan commitments and interest rate swap agreements, with no fair value or cash flow hedges as of March 31, 2025 - Off-balance sheet arrangements include commitments to extend credit and interest rate swap agreements[251](index=251&type=chunk) - No interest rate swaps were classified as fair value or cash flow hedges at March 31, 2025, as all matured or were terminated in 2024[251](index=251&type=chunk) [ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK](index=62&type=section&id=ITEM%203.%20QUANTITATIVE%20AND%20QUALITATIVE%20DISCLOSURES%20ABOUT%20MARKET%20RISK) This section details the Company's management of market risk, primarily interest rate risk, through income simulation and Economic Value of Equity (EVE) sensitivity analysis [Market Risk Management](index=62&type=section&id=Market%20Risk%20Management) The Company's primary market risk is interest rate risk, managed through income simulation models and Economic Value of Equity (EVE) sensitivity analysis - Primary market risk is **interest rate risk**, affecting earnings and equity value[253](index=253&type=chunk) - Interest rate risk is monitored using income simulation models (forecasting NII) and EVE sensitivity analysis (impact on long-term cash flows, income, and capital)[254](index=254&type=chunk) NII and EVE Sensitivity (Instantaneous Shift) | Metric | Implied Forward Curve -200 Basis Points | Implied Forward Curve -100 Basis Points | Base Implied Forward Curve | Implied Forward Curve +50 Basis Points | Implied Forward Curve +100 Basis Points | |:---|:---|:---|:---|:---|:---|\ | NII - Year 1 (Instantaneous Shift) | 13.76% | 7.60% | N/A | (4.76%) | (9.00%) | | EVE (Instantaneous Shift) | 20.39% | 12.49% | N/A | (7.52%) | (15.00%) | NII and EVE Sensitivity (Gradual Shift) | Metric | Implied Forward Curve -200 Basis Points | Implied Forward Curve -100 Basis Points | Base Implied Forward Curve | Implied Forward Curve +50 Basis Points | Implied Forward Curve +100 Basis Points | |:---|:---|:---|:---|:---|:---|\ | NII - Year 1 (Gradual Shift) | 3.18% | 0.73% | N/A | (3.37%) | (5.00%) | | EVE (Gradual Shift) | 18.99% | 11.67% | N/A | (6.85%) | (14.00%) | - Balance sheet strategies to manage NII and EVE volatility include increasing variable-rate loans, selling fixed-rate loans, increasing low-cost deposits, extending wholesale funding duration, and using derivative strategies[260](index=260&type=chunk) [ITEM 4. CONTROLS AND PROCEDURES](index=63&type=section&id=ITEM%204.%20CONTROLS%20AND%20PROCEDURES) This section confirms the effectiveness of the Company's disclosure controls and procedures and reports no material changes in internal control over financial reporting [Evaluation of Disclosure Controls and Procedures](index=63&type=section&id=Evaluation%20of%20Disclosure%20Controls%20and%20Procedures) The Company's management concluded that its disclosure controls and procedures were effective at a reasonable assurance level as of March 31, 2025 - Disclosure controls and procedures are designed to provide reasonable assurance of timely and accurate reporting under the Exchange Act[256](index=256&type=chunk) - Management concluded that disclosure controls and procedures were **effective at a reasonable assurance level** as of March 31, 2025[257](index=257&type=chunk) - No material changes in internal control over financial reporting during Q1 2025[258](index=258&type=chunk) [PART II. OTHER INFORMATION](index=64&type=section&id=PART%20II.%20OTHER%20INFORMATION) This part covers various other information, including legal proceedings, risk factors, sales of equity securities, defaults, mine safety, and exhibits [ITEM 1. LEGAL PROCEEDINGS](index=64&type=section&id=ITEM%201.%20LEGAL%20PROCEEDINGS) Neither the Company nor its subsidiaries are party to any material legal proceedings, though the Bank is involved in legal actions arising from normal business activities - No material legal proceedings for the Company or its subsidiaries[261](index=261&type=chunk) - The Bank is a party to legal actions arising from normal business activities[261](index=261&type=chunk) [ITEM 1A. RISK FACTORS](index=64&type=section&id=ITEM%201A.%20RISK%20FACTORS) There have been no material changes to the risk factors previously disclosed in the Company's Annual Report on Form 10-K for the year ended December 31, 2024 - No material changes to risk factors since the 2024 Annual Report on Form 10-K[262](index=262&type=chunk) [ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS](index=64&type=section&id=ITEM%202.%20UNREGISTERED%20SALES%20OF%20EQUITY%20SECURITIES%20AND%20USE%20OF%20PROCEEDS) This section states that there were no unregistered sales of equity securities or use of proceeds to report - None[263](index=263&type=chunk) [ITEM 3. DEFAULTS UPON SENIOR SECURITIES](index=64&type=section&id=ITEM%203.%20DEFAULTS%20UPON%20SENIOR%20SECURITIES) This section states that there were no defaults upon senior securities to report - None[264](index=264&type=chunk) [ITEM 4. MINE SAFETY DISCLOSURES](index=64&type=section&id=ITEM%204.%20MINE%20SAFETY%20DISCLOSURES) This section states that mine safety disclosures are not applicable to the Company - Not Applicable[265](index=265&type=chunk) [ITEM 5. OTHER INFORMATION](index=64&type=section&id=ITEM%205.%20OTHER%20INFORMATION) This section states that there is no other information to report - None[266](index=266&type=chunk) [ITEM 6. EXHIBITS](index=64&type=section&id=ITEM%206.%20EXHIBITS) This section lists the exhibits filed with the Form 10-Q, including articles of incorporation, bylaws, certifications, and Inline XBRL documents - Exhibits include Amended and Restated Articles of Incorporation and Bylaws[267](index=267&type=chunk) - Certifications from the Chief Executive Officer and Chief Financial Officer (Rule 13a-14(a)/15d-14(a) and Section 1350) are filed electronically[267](index=267&type=chunk) - Inline XBRL documents (Instance, Schema, Calculation, Definition, Label, Presentation Linkbases) are filed electronically[267](index=267&type=chunk) [SIGNATURES](index=65&type=section&id=SIGNATURES) The report is duly signed on May 7, 2025, by David B. Becker, Chairman and Chief Executive Officer, and Kenneth J. Lovik, Executive Vice President and Chief Financial Officer - Report signed by David B. Becker, Chairman and CEO, and Kenneth J. Lovik, EVP and CFO[271](index=271&type=chunk) - Signing date: May 7, 2025[271](index=271&type=chunk)

Financial Data and Key Metrics Changes - The company reported total operating revenue growth of over 2% quarter-over-quarter and more than 22% year-over-year [13][14] - Net interest income for the first quarter was $25.1 million, up 6.6% from the previous quarter [42] - The net interest margin for the first quarter was 1.82%, representing an increase of 15 basis points compared to the linked quarter [43] Business Line Data and Key Metrics Changes - Small business lending originations were down compared to the fourth quarter, but year-over-year origination and loan sale volume were up 223% and 236%, respectively [20][19] - The weighted average rate on funded originations was 7.78%, up 50 basis points from the prior quarter [18] - Construction and investor commercial real estate balances increased by $86 million, with nearly $70 million in new commitments originated [28] Market Data and Key Metrics Changes - Total deposits from fintech partners were up 37% from the fourth quarter, totaling $881 million at quarter end [36] - The average balance of deposits increased by $111 million or over 2% during the first quarter [35] - Nonperforming loans to total loans were 80 basis points, with an increase attributed to franchise finance and small business lending [24] Company Strategy and Development Direction - The company aims to continue improving its loan mix and reduce deposit costs, positioning itself for stronger earnings in the coming quarters [137] - The focus remains on expanding fintech partnerships and enhancing revenue diversification [137] - The company anticipates loan yields to increase and deposit costs to decline, projecting a 40% increase in net interest income over 2024's full-year amount [55] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the ongoing improvement of net interest income and net interest margin throughout 2025, assuming no further rate actions from the Fed [16] - The elevated provision for loan losses was acknowledged, with management indicating a cautious approach to problem loans [21][60] - There is optimism regarding a slowdown in new delinquencies, suggesting potential moderation in the provision for credit losses in the second half of the year [60] Other Important Information - The company recognized $9.7 million in net charge-offs during the quarter, primarily related to franchise finance and small business lending portfolios [21] - Noninterest income for the quarter was $10.4 million, down 35% from the fourth quarter, largely due to lower net servicing revenue [47] - The tangible common equity ratio was 6.55%, with a common equity Tier one ratio of 9.16% [53] Q&A Session Summary Question: Expected one-time impact on fees in Q2 - Management estimated a range of $5 million to $6 million for the quarter, with a return to normalized levels in the latter half of the year [63] Question: Average loan size and impact of SBA fees - The average loan size is just over $1 million, and the company does not expect significant impact from the reinstated fees on smaller loans [68] Question: Impact of a 25 basis point rate cut on NII - A 25 basis point rate cut would result in an annualized impact of about $3.6 million on net interest income [71] Question: Updated thoughts on SBA loss assumptions - Management indicated that while the higher rate environment affects payments, economic uncertainty is a more significant factor influencing loss assumptions [80] Question: Share buybacks and balance sheet growth - The company is preparing to consider share buybacks if the stock price remains below 50% of book value [89] Question: Update on fintech partnerships and pipeline - The company is experiencing strong growth in fintech partnerships, with expectations to expand existing relationships rather than significantly increase the number of programs [124][127]

Financial Data and Key Metrics Changes - The company reported net interest income of $25.1 million, up 6.6% from the previous quarter, and $26.3 million on a fully taxable equivalent basis, reflecting a strong performance [27] - Total operating revenue grew over 2% quarter-over-quarter and more than 22% year-over-year, driven by a 7% increase in net interest income compared to the fourth quarter and 20% compared to the first quarter of 2024 [8][9] - Net income for the quarter was $900,000, with diluted earnings per share of $0.11, significantly impacted by elevated provisions for loan losses [13] Business Line Data and Key Metrics Changes - Small business lending origination yields remained strong, with a weighted average rate on funded originations at 7.78%, up 50 basis points from the prior quarter [11] - The construction and commercial real estate team originated almost $70 million in new commitments, contributing to an 8% annualized loan growth [18] - Noninterest income for the quarter was $10.4 million, down 35% from the fourth quarter, primarily due to lower net servicing revenue [29] Market Data and Key Metrics Changes - Total deposits increased by $111 million or over 2% during the first quarter, driven by growth in FinTech partnership deposits [22] - Non-maturity deposits rose almost $335 million or 15%, reflecting the increase in FinTech partnership deposits [22] - Total FinTech partnership revenue was over $1.1 million in the first quarter, up 30% from the fourth quarter [22] Company Strategy and Development Direction - The company aims to continue improving its loan mix and anticipates a reduction in deposit costs, positioning itself for stronger earnings in the coming quarters [102] - The focus remains on expanding existing FinTech partnerships and exploring new lending opportunities, with a cautious approach to the number of new programs [92] - The company is committed to maintaining a strong asset quality and managing credit risks effectively, particularly in the small business lending and franchise finance portfolios [17][80] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the continued growth of net interest income and net interest margin throughout 2025, assuming no further rate actions from the Fed [10] - The company acknowledged economic uncertainties but noted a slowdown in new delinquencies, providing optimism for moderating provisions for credit losses in the second half of the year [38] - Management highlighted the importance of controlling expenses and maintaining strong operational performance despite challenges in the credit environment [9][17] Other Important Information - The allowance for credit losses as a percentage of total loans was 1.11% at the end of the first quarter, reflecting specific reserves taken on certain loan relationships [31] - The tangible common equity ratio was 6.55%, with a common equity Tier one capital ratio of 9.16%, indicating solid capital levels [34] Q&A Session Summary Question: Expected one-time impact on fees in Q2 - Management estimated a total noninterest income for Q2 to be around $5 million to $6 million, with expectations to return to previous levels in the latter half of the year [44] Question: Average loan size in SBA - The average loan size is just over $1 million, indicating that the reinstated fees for smaller loans do not significantly impact the company [47] Question: Impact of a 25 basis point rate cut on NII - A 25 basis point rate cut would result in an annualized impact of approximately $3.6 million on net interest income, with a gradual ramp-up over the year [49] Question: Updated thoughts on SBA loss assumptions - Management noted that while loss rates have been elevated, they expect a decline in charge-offs as economic conditions stabilize [56] Question: Share buybacks and balance sheet growth - The company is preparing to consider share buybacks if the stock price remains below 50% of book value, while also managing balance sheet growth effectively [63] Question: Update on fintech partnerships - The company is experiencing strong growth in existing fintech partnerships and is cautiously optimistic about expanding these relationships [92]

Financial Data and Key Metrics Changes - The company reported net interest income of $25.1 million, up 6.6% from the previous quarter, and $26.3 million on a fully taxable equivalent basis, reflecting a strong performance [26][27] - Total operating revenue grew over 2% quarter-over-quarter and more than 22% year-over-year, driven by strong loan growth and declining deposit costs [8][9] - Net income for the quarter was $900,000, with diluted earnings per share of $0.11, significantly impacted by elevated provisions for loan losses [13][14] Business Line Data and Key Metrics Changes - Small business lending origination yields remained strong, with a weighted average rate on funded originations at 7.78%, up 50 basis points from the prior quarter [11][12] - The construction and commercial real estate team originated nearly $70 million in new commitments, contributing to an 8% annualized loan growth [17][19] - Noninterest income for the quarter was $10.4 million, down 35% from the previous quarter, primarily due to lower net servicing revenue [29][30] Market Data and Key Metrics Changes - Total deposits increased by $111 million or over 2% during the first quarter, driven by growth in FinTech partnership deposits [21][22] - Non-maturity deposits rose almost $335 million or 15%, reflecting the increase in FinTech partnership deposits [21][22] - Total FinTech partnership revenue was over $1.1 million in the first quarter, up 30% from the fourth quarter, indicating strong growth in this segment [22][94] Company Strategy and Development Direction - The company aims to continue diversifying revenue streams through embedded finance partnerships and expects to drive revenue growth and enhanced profitability [19][102] - The focus remains on controlling costs and managing credit quality, particularly in small business lending and franchise finance portfolios [9][16] - The company anticipates continued growth in net interest income and net interest margin throughout 2025, assuming no further rate actions from the Federal Reserve [10][34] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the ongoing improvement of loan origination yields and the ability to manage deposit costs effectively [10][34] - The economic environment remains uncertain, but there are signs of improvement in borrower interactions and delinquencies [56][74] - The company expects a temporary decline in gain on sale revenue due to changes in SBA loan processes but anticipates a return to normalized levels in the second half of the year [35][36] Other Important Information - The allowance for credit losses as a percentage of total loans was 1.11%, reflecting specific reserves taken on certain loan relationships [31] - The tangible common equity ratio was 6.55%, indicating solid capital levels despite a slight decline [33] - The company has a strong liquidity position with cash and unused borrowing capacity of $2.1 billion [25] Q&A Session Summary Question: Expected one-time impact on fees in Q2 - Management estimates a one-time impact on noninterest income for Q2 to be in the range of $5 million to $6 million, with a return to normal levels expected in the latter half of the year [43][45] Question: Average loan size in SBA and impact of reinstated fees - The average loan size is just over $1 million, meaning reinstated fees on smaller loans will not significantly impact the company [46][47] Question: Impact of a 25 basis point rate cut on net interest income - A 25 basis point rate cut would result in an annualized decrease of approximately $3.6 million in net interest income, with a gradual ramp-up effect over the year [48][49] Question: Updated thoughts on SBA loss assumptions - Management noted that while loss rates have been elevated, they expect a decline in charge-off activity moving forward, with current delinquencies showing improvement [56][59] Question: Share buyback plans - The company is considering share buybacks if the stock price remains below 50% of book value, indicating a potential opportunity to return capital to shareholders [62] Question: Update on fintech partnerships and pipeline - The company is experiencing strong growth in existing fintech partnerships and is cautiously optimistic about new opportunities, focusing on quality over quantity [91][94]

Financial Results First Quarter 2025 Forward-Looking Statements & Non-GAAP Financial Measures This presentation 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 statem ...

Core Viewpoint - First Internet Bancorp reported a revenue increase of 22.2% year-over-year for Q1 2025, but fell short of analyst expectations in both revenue and earnings per share (EPS) [1][2]. Financial Performance - Revenue for the quarter was $35.52 million, which was a surprise of -3.21% compared to the Zacks Consensus Estimate of $36.7 million [1]. - EPS was reported at $0.11, significantly lower than the consensus estimate of $0.75, resulting in an EPS surprise of -85.33% [1]. - Net Interest Margin was recorded at 1.8%, slightly below the estimated 1.9% [4]. - Net Interest Income was $25.10 million, compared to the average estimate of $25.35 million [4]. - Total noninterest income was $10.43 million, which also fell short of the average estimate of $11.39 million [4]. Stock Performance - Over the past month, shares of First Internet Bancorp have returned -7.8%, underperforming the Zacks S&P 500 composite's -6.6% change [3]. - The stock currently holds a Zacks Rank 3 (Hold), indicating it may perform in line with the broader market in the near term [3].

分组1 - First Internet Bancorp (INBK) reported quarterly earnings of $0.11 per share, missing the Zacks Consensus Estimate of $0.75 per share, and down from $0.59 per share a year ago, representing an earnings surprise of -85.33% [1] - The company posted revenues of $35.52 million for the quarter ended March 2025, missing the Zacks Consensus Estimate by 3.21%, compared to year-ago revenues of $29.08 million [2] - First Internet shares have declined approximately 30.2% since the beginning of the year, while the S&P 500 has decreased by -10.1% [3] 分组2 - The current consensus EPS estimate for the coming quarter is $1.01 on revenues of $40.6 million, and for the current fiscal year, it is $4.11 on revenues of $163.75 million [7] - The Zacks Industry Rank for Banks - Northeast is currently in the top 23% of over 250 Zacks industries, indicating a favorable outlook for the industry [8]

Total interest income for the first quarter of 2025 was $76.8 million, a decrease of 1.2% compared to the fourth quarter of 2024, and an increase of 12.7% compared to the first quarter of 2024. On a fully- taxable equivalent basis, total interest income for the first quarter of 2025 was $78.0 million, a decrease of 1.2% compared to the fourth quarter of 2024, and an increase of 12.5% compared to the first quarter of 2024. The yield on average interest-earning assets for the first quarter of 2025 increased t ...