[July 23, 2015]

First Internet Bancorp Reports Another Quarterly Net Income Record

First Internet Bancorp (NASDAQ:INBK), the parent company of First Internet Bank (www.firstib.com), announced today financial and operational results for the second quarter 2015. Second quarter net income was a record $2.3 million and diluted earnings per share were $0.50. This compares with first quarter net income of $2.1 million and diluted earnings per share of $0.46 and second quarter 2014 net income of $1.0 million and diluted earnings per share of $0.22.

David Becker, Chairman, President and Chief Executive Officer, commented, "We have now produced five consecutive quarters of earnings growth. What's more, our second quarter results exceeded the record net income we reported in the prior quarter.

"We continued to achieve our objective of expanding our balance sheet to realize economies of scale, and - once again - net interest income was the fundamental driver of our results. We successfully bolstered our diversified loan portfolio. In spite of an elevated level of early paydowns and a competitive market, our commercial lending teams delivered another solid performance in the second quarter. Going into the third quarter, our commercial pipelines remain strong. Consumer loan activity picked up in the second quarter as well. Credit quality was exceptional across all facets of our lending units.

"Through strategic growth and disciplined expense management, we demonstrated our commitment to improved profitability. Our lines of business are performing well and providing exemplary service to our geographically disperse customer base. I am particularly proud of our second quarter results."

Highlights for the second quarter 2015 included:

• Diluted earnings per share increased $0.04, or 8.7%, compared to the linked quarter and $0.28, or 127.3%, compared to the second quarter 2014. During the second quarter, the Company recognized $0.2 million of pre-tax expenses and asset writedowns associated with staffing-related changes which negatively impacted diluted earnings per share by $0.02.
• Improved quarterly performance
  • Return on average assets of 0.84%; 0.87% as adjusted for the items noted above
  • Return on average shareholders' equity of 9.15%; 9.56% as adjusted for the items noted above
  • Return on average tangible common equity of 9.60%; 10.03% as adjusted for the items noted above
• Continued strong growth in net interest income, increasing $0.8 million, or 11.8%, compared to the linked quarter and $2.2 million, or 40.9%, compared to the second quarter 2014
• Total loan growth of $46.6 million, or 6.1%, compared to March 31, 2015 and $182.6 million, or 28.9%, compared to June 30, 2014
  • Strong performance in single tenant lease financing with balances increasing 23.2% compared to the linked quarter and 95.0% year-over-year
  • Continued growth in C&I / owner-occupied CRE loans, increasing 5.2% on a combined basis compared to the linked quarter and 30.5% compared to June 30, 2014
  • Quarterly loan growth was enhanced by performance in consumer lending as trailer and recreational vehicle balances increased 6.1%, on a combined basis
• Net interest margin ("NIM") increased to 2.87%, or 3 bps, compared to the linked quarter and 26 bps compared to the second quarter 2014
• Capital levels remain solid and continue to support loan growth
  • Tangible common equity to tangible assets of 8.66%
  • Common equity tier 1 capital ratio of 11.12%
  • Tier 1 capital ratio of 11.12%
  • Total risk-based capital ratio of 12.28%
• Asset quality remains strong
  • Nonperforming loans to total loans receivable declined to 0.02% from 0.03% as of March 31, 2015 and 0.19% as of June 30, 2014
  • Recognized net recoveries to average loans receivable of 0.20% during the second quarter

Net Interest Income and Net Interest Margin

Net interest income for the second quarter was $7.6 million compared to $6.8 million for the first quarter and $5.4 million for the second quarter 2014. Compared to the linked quarter, total interest income increased $0.9 million, or 10.3%, and total interest expense increased $0.1 million, or 6.0%. The increase in total interest income was driven by a $41.9 million, or 5.6%, increase in average loans receivable and a $36.6 million, or 25.2%, increase in average investment balances. Additionally, compared to the linked quarter the yield earned on the loan portfolio, including mortgage loans held for sale, increased 3 bps and the yield earned on the investment portfolio increased 19 bps.

The increase in interest expense during the quarter was due to a $60.8 million, or 8.0%, increase in average interest-bearing deposit balances. Partially offsetting the impact of higher interest expense associated with increased deposit balances was a decline in expense related to other borrowings, due primarily to a lower cost of funds related to Federal Home Loan Bank advances.

Net interest margin was 2.87% for the second quarter compared to 2.84% for the first quarter and 2.61% for the second quarter 2014. The yield on interest-earning assets for the second quarter was 3.85%, which was consistent with the linked quarter. However, excluding the impact of interest income associated with a loan recovery in the first quarter, the yield on interest-earning assets increased 6 bps during the second quarter, driven by higher yields earned on commercial loans and investment securities. The cost of interest-bearing liabilities for the second quarter declined 5 bps compared to the linked quarter due to the lower cost of funds related to Federal Home Loan Bank advances.

Noninterest Income

Noninterest income for the second quarter was $2.5 million compared to $3.1 million for the first quarter and $1.6 million for the second quarter 2014. The decrease of $0.7 million, or 21.3%, compared to the linked quarter was driven by a decline of $0.7 million, or 23.3%, in mortgage banking revenue resulting primarily from lower origination volumes.

Noninterest Expense

Noninterest expense for the second quarter was $6.3 million compared to $6.2 million for the first quarter and $5.6 million for the second quarter 2014. The increase of $0.1 million, or 1.1%, compared to the linked quarter was due to higher salaries and employee benefits and premises and equipment expenses, partially offset by lower marketing expenses, consulting and professional fees and other expenses. Excluding the expense impact of the staffing-related changes noted above, salaries and employee benefits increased $0.1 million, or 2.0%, and total noninterest expense declined $0.1 million, or 1.2%, compared to the linked quarter.

Income Taxes

Income tax expense was $1.2 million for the second quarter, resulting in an effective tax rate of 33.7%, compared to $1.2 million and an effective tax rate of 36.0% for the linked quarter and $0.5 million and an effective tax rate of 35.2% for the second quarter 2014. The decrease in the effective tax rate compared to the linked quarter was due primarily to additional income tax expense associated with the vesting of certain equity compensation awards recognized in the first quarter.

Loans and Credit Quality

Total loans as of June 30, 2015 were $814.2 million, increasing $46.6 million, or 6.1%, compared to March 31, 2015 and $182.6 million, or 28.9%, compared to June 30, 2014. Total commercial loan balances were $448.9 million, increasing $54.0 million, or 13.7%, compared to the linked quarter and $163.9 million, or 57.5%, compared to June 30, 2014. Continued strong production in single tenant lease financing balances contributed significantly to the growth as balances increased $52.7 million, or 23.2%, compared to the first quarter and $136.3 million, or 95.0%, compared to the second quarter 2014. Commercial and industrial and owner-occupied commercial real estate production was solid as balances increased $6.3 million on a combined basis, or 5.2%, compared to the linked quarter and $30.1 million, or 30.5%, compared to June 30, 2014. Also contributing to quarterly growth was increased production in consumer lending as balances for trailers and recreational vehicles increased $5.8 million, or 6.1%, on a combined basis.

Credit quality continues to remain strong as nonperforming loans to total loans receivable declined to 0.02% as of June 30, 2015 from 0.03% as of March 31, 2015 and 0.19% as of June 30, 2014. Additionally, nonperforming assets to total assets declined to 0.43% as of June 30, 2015 from 0.47% as of March 31, 2015 and 0.69% as of June 30, 2014. The allowance for loan losses was $7.1 million as of June 30, 2015 compared to $6.4 million as of March 31, 2015 and $5.1 million as of June 30, 2014. The allowance as a percentage of total nonperforming loans increased to 3,762.2% as of June 30, 2015 from 2,592.7% as of March 31, 2015 and 436.7% as of June 30, 2014. The allowance as a percentage of total loans receivable increased to 0.87% as of June 30, 2015 compared to 0.83% as of March 31, 2015 and 0.81% as of June 30, 2014.

Net recoveries of $0.4 million were recognized during the second quarter, resulting in net recoveries to average loans of 0.20% compared to net recoveries to average loans of 0.07% for the first quarter and net charge-offs to average loans of 0.12% for the second quarter 2014. The net recoveries during the second quarter were driven primarily by a $0.5 million recovery of a commercial real estate loan that had been previously charged-off.

Capital

During the second quarter, total shareholders' equity increased $0.5 million due primarily to net income earned during the quarter, partially offset by the change in the unrealized gain/loss related to the investment portfolio and declared dividends. As of June 30, 2015, the Company's common equity tier 1, tier 1 and total risk-based capital ratios declined to 11.12%, 11.12% and 12.28% from 11.99%, 11.99% and 13.18% as of March 31, 2015, respectively, due to an increase in risk-weighted assets resulting primarily from the commercial and consumer loan growth for the quarter. Tangible common equity to tangible assets declined 52 bps during the second quarter to 8.66% due primarily to strong asset growth while tangible book value per share increased to $21.23 as of June 30, 2015 from $21.11 as of March 31, 2015.

About First Internet Bancorp

First Internet Bancorp is the parent company of First Internet Bank, which opened for business in 1999 as the nation's first state-chartered, FDIC-insured institution to operate solely via the Internet. With customers in all 50 states, First Internet Bank offers consumers services including checking, savings, money market, certificates of deposit and IRA accounts as well as consumer loans, residential mortgages, residential construction loans and home equity products. For commercial clients, it provides commercial real estate loans, commercial and industrial loans and treasury management services. First Internet Bank has been recognized as one of the "Best Banks to Work For" by American Banker Magazine as well as a "Top Workplace" by The Indianapolis Star. Additional information about the Company is available at www.firstinternetbancorp.com and additional information about the Bank, including its products and services, is available at www.firstib.com.

Safe Harbor Statement

This press release may contain forward-looking statements with respect to the financial condition, results of operations, plans, objectives, future performance or business of the Company. Forward-looking statements are generally identifiable by the use of words such as "believe," "expect," "anticipate," "plan," "intend," "estimate," "may," "will," "would," "could," "should" or other similar expressions. Forward-looking statements are not a guarantee of future performance or results, are based on information available at the time the statements are made and involve known and unknown risks, uncertainties and other factors that could cause actual results to differ materially from the information in the forward-looking statements. Factors that may cause such differences include: failures of or interruptions in the communications and information systems on which we rely to conduct our business; our plans to grow our commercial real estate and commercial and industrial loan portfolios; competition with national, regional and community financial institutions; the loss of any key members of senior management; fluctuations in interest rates; general economic conditions; risks relating to the regulation of financial institutions; and other factors identified in reports we file with the SEC. All statements in this press release, including forward-looking statements, speak only as of the date they are made, and the Company undertakes no obligation to update any statement in light of new information or future events.

Non-GAAP Financial Measures

This press release contains financial information determined by methods other than in accordance with U.S. generally accepted accounting principles ("GAAP"). Non-GAAP financial measures, specifically tangible common equity, tangible assets, tangible book value per common share, average tangible common equity, return on average tangible common equity, tangible common equity to tangible assets, adjusted return on average assets, adjusted return on average shareholders' equity and adjusted return on average tangible common equity are used by the Company's management to measure the strength of its capital and its ability to generate earnings on tangible capital invested by its shareholders. Although management believes these non-GAAP measures provide a greater understanding of its business, they should not be considered a substitute for financial measures determined in accordance with GAAP, nor are they necessarily comparable to non-GAAP performance measures that may be presented by other companies. Reconciliations of these non-GAAP financial measures to the most directly comparable GAAP financial measures are included in the table at the end of this release under the caption "Reconciliation of Non-GAAP Financial Measures."

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