First Internet Bancorp(INBK) - 2024 Q1 - Quarterly Report

PART I FINANCIAL INFORMATION This section presents the company's unaudited condensed consolidated financial statements, management's discussion and analysis, market risk disclosures, and controls and procedures Item 1. Financial Statements This section presents First Internet Bancorp's unaudited condensed consolidated financial statements and detailed notes on accounting policies Condensed Consolidated Financial Statements The company reported total assets of $5,340.7 million and net income of $5.2 million for Q1 2024, a turnaround from a $3.0 million net loss in Q1 2023 | Financial Metric | March 31, 2024 | December 31, 2023 | | :--- | :--- | :--- | | Assets | | | | Total Cash and Cash Equivalents | $481.3 million | $405.9 million | | Net Loans | $3,868.9 million | $3,801.4 million | | Total Assets | $5,340.7 million | $5,167.6 million | | Liabilities & Equity | | | | Total Deposits | $4,273.8 million | $4,067.0 million | | Total Liabilities | $4,973.9 million | $4,804.8 million | | Total Shareholders' Equity | $366.7 million | $362.8 million | | Income Statement Item | Three Months Ended Mar 31, 2024 | Three Months Ended Mar 31, 2023 | | :--- | :--- | :--- | | Net Interest Income | $20.7 million | $19.6 million | | Provision for Credit Losses | $2.5 million | $9.4 million | | Noninterest Income | $8.3 million | $5.4 million | | Noninterest Expense | $21.0 million | $21.0 million | | Net Income (Loss) | $5.2 million | ($3.0 million) | | Diluted EPS | $0.59 | ($0.33) | - Net cash provided by financing activities was $165.8 million, driven by a $206.8 million increase in deposits, partially offset by $40.0 million in FHLB repayments, while net cash used in investing activities was $93.3 million[21] Notes to Condensed Consolidated Financial Statements These notes detail accounting policies, securities and loan portfolio composition, credit loss allowance, subordinated debt, and fair value measurements | Security Type | Amortized Cost (Mar 31, 2024) | Fair Value (Mar 31, 2024) | | :--- | :--- | :--- | | Available-for-Sale | $523.0M | $482.4M | | Agency mortgage-backed securities - residential | $253.2M | $220.5M | | U.S. Government-sponsored agencies | $93.3M | $92.1M | | Held-to-Maturity | $236.0M | $214.2M | | Agency mortgage-backed securities - residential | $178.8M | $161.9M | | Loan Category | Balance (Mar 31, 2024) | Balance (Dec 31, 2023) | | :--- | :--- | :--- | | Total Commercial Loans | $3,081.1M | $3,005.9M | | Single tenant lease financing | $941.6M | $936.6M | | Franchise finance | $543.1M | $525.8M | | Public finance | $498.3M | $521.8M | | Total Consumer Loans | $793.4M | $796.9M | | Residential mortgage | $390.0M | $395.6M | | Other consumer loans | $380.7M | $377.6M | | Total Loans | $3,909.8M | $3,840.2M | - The Allowance for Credit Losses (ACL) increased to $40.9 million from $38.8 million, with a Q1 2024 provision of $2.6 million and net charge-offs of $0.5 million[72] - The company had $107.0 million in subordinated debt outstanding as of March 31, 2024, qualifying as Tier 2 capital[103][104][105] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses Q1 2024 financial performance, highlighting a significant increase in net income driven by reduced credit loss provision and higher noninterest income, covering financial condition, asset quality, and capital Results of Operations Net income for Q1 2024 was $5.2 million, a significant improvement from a prior-year loss, driven by reduced credit loss provision and increased noninterest income, despite NIM compression | Performance Metric | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Net Income (Loss) | $5.2 million | ($3.0 million) | | Diluted EPS | $0.59 | ($0.33) | | Return on Average Assets (ROAA) | 0.40% | (0.26%) | | Return on Average Shareholders' Equity (ROAE) | 5.64% | (3.37%) | - Q1 2023 results were impacted by a $6.9 million C&I loan charge-off and $3.1 million in mortgage business exit costs; adjusted net income for Q1 2023 would have been $4.8 million[203] - Noninterest income increased 53.3% year-over-year to $8.3 million in Q1 2024, primarily due to a $2.5 million (60.9%) increase in gain on sale of loans from higher SBA 7(a) loan sales[214] - Noninterest expense remained flat at $21.0 million year-over-year, with a $0.6 million increase in deposit insurance premium offset by a $0.5 million decrease in loan expenses[216] Financial Condition Total assets grew by $173.1 million to $5,340.7 million, funded by a $206.8 million increase in deposits, with total loans rising to $3,909.8 million and tangible book value per share increasing to $41.83 | Balance Sheet Item | March 31, 2024 | December 31, 2023 | | :--- | :--- | :--- | | Total Assets | $5,340.7M | $5,167.6M | | Total Loans | $3,909.8M | $3,840.2M | | Total Deposits | $4,273.8M | $4,067.0M | | Total Shareholders' Equity | $366.7M | $362.8M | - Book value per common share increased to $42.37 and tangible book value per share increased to $41.83 as of March 31, 2024[223] Asset Quality Asset quality deteriorated with nonperforming loans increasing to $13.1 million (0.33% of total loans), and the allowance for credit losses (ACL) rising to $40.9 million (1.05% of total loans) | Asset Quality Metric | March 31, 2024 | December 31, 2023 | | :--- | :--- | :--- | | Total Nonperforming Loans | $13.1M | $10.0M | | Total Nonperforming Assets | $13.4M | $10.4M | | Nonperforming Loans to Total Loans | 0.33% | 0.26% | | Allowance for Credit Losses (ACL) | $40.9M | $38.8M | | ACL to Total Loans | 1.05% | 1.01% | - Net charge-offs for Q1 2024 were $0.5 million (0.05% of average loans), a significant decrease from $7.2 million (0.82% of average loans) in Q1 2023[231][232] Liquidity and Capital Resources The company maintains strong liquidity with $1.7 billion in available sources and all regulatory capital ratios well above 'well-capitalized' thresholds, continuing its stock repurchase program | Regulatory Capital Ratios (Consolidated) | March 31, 2024 | Minimum Required (w/ buffer) | | :--- | :--- | :--- | | Common Equity Tier 1 Capital Ratio | 9.52% | 7.00% | | Tier 1 Capital Ratio | 9.52% | 8.50% | | Total Capital Ratio | 13.18% | 10.50% | | Leverage Ratio | 7.33% | 4.00% | - As of March 31, 2024, the Bank had the ability to borrow an additional $1.3 billion from the FHLB, Federal Reserve, and correspondent banks[257] - The company repurchased 10,500 shares of common stock in Q1 2024 at an average price of $26.94 per share, with approximately $14.3 million remaining for repurchase under the current program[254][282] Item 3. Quantitative and Qualitative Disclosures About Market Risk The company's primary market risk is interest rate risk, monitored via NII and EVE sensitivity, with the balance sheet positioned to benefit from rate decreases and negatively impacted by increases | Instantaneous Parallel Rate Shock | % Change in NII (Year 1) | % Change in EVE | | :--- | :--- | :--- | | +100 bps | (7.0%) | (15.0%) | | +50 bps | (4.0%) | (7.6%) | | -100 bps | +10.5% | +17.3% | | -200 bps | +18.6% | +30.4% | Item 4. Controls and Procedures Management concluded that disclosure controls and procedures were effective as of March 31, 2024, with no material changes to internal control over financial reporting during the quarter - The company's management concluded that disclosure controls and procedures were effective as of March 31, 2024[274] - No material changes to internal control over financial reporting occurred during the quarter ended March 31, 2024[275] PART II OTHER INFORMATION This section provides additional information including legal proceedings, risk factors, and details on unregistered sales of equity securities and use of proceeds Item 1. Legal Proceedings The company and its subsidiaries are not party to any material legal proceedings, with the Bank occasionally involved in routine legal actions - There are no material legal proceedings against the company or its subsidiaries[278] Item 1A. Risk Factors No material changes to the company's risk factors have been reported since the Annual Report on Form 10-K for December 31, 2023 - No material changes to risk factors were reported since the last Annual Report on Form 10-K[279] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds This section details the company's common stock repurchase activity, including 10,500 shares bought in Q1 2024, with $14.3 million remaining under the current program | Period | Total Shares Purchased | Average Price Paid Per Share | | :--- | :--- | :--- | | Jan 1 - Jan 31, 2024 | 10,500 | $26.94 | | Feb 1 - Feb 29, 2024 | 0 | $0.00 | | Mar 1 - Mar 31, 2024 | 0 | $0.00 | | Total Q1 2024 | 10,500 | $26.94 | - As of March 31, 2024, approximately $14.3 million remained available for repurchase under the existing stock repurchase program[282]