First Internet Bancorp current report, 26 October 2020

Business Context and Reporting Period

Company: First Internet Bancorp
Filing Type: Form 8-K (Current Report)
Date of Report: October 26, 2020
Event: Issuance of subordinated notes and material modification to rights of security holders.

Key Financial Metrics and Transaction Details

This filing reports a specific capital transaction rather than periodic financial results (revenue, profit, or cash flow).

  • New Debt Issuance: $10.0 million aggregate principal amount of 6.0% Fixed-to-Floating Rate Subordinated Notes due 2030 ("2030 Notes").
  • Interest Rate Structure: Fixed at 6.0% per annum until November 1, 2025; thereafter, floating rate based on Three-Month Term SOFR plus 5.795%.
  • Capital Classification: Intended to qualify as Tier 2 capital under regulatory guidelines.
  • Use of Proceeds: Net proceeds are intended to redeem an existing term note of $10.0 million bearing 6.4375% interest, maturing October 1, 2025.
  • Redemption Timeline: Expected completion on or before January 15, 2021, subject to regulatory approval.

Material Changes Versus Prior Period

The filing details a refinancing transaction designed to extend the maturity of existing debt and reduce the interest rate cost.

  • Interest Rate Reduction: Replacement of a 6.4375% fixed-rate note with a new 6.0% fixed-rate note (for the initial five-year period).
  • Maturity Extension: Extension of the debt maturity from October 1, 2025, to November 1, 2030.
  • Debt Structure: The new notes are general unsecured, subordinated obligations ranking equal to existing subordinated indebtedness.

Guidance, Outlook, Risks, and Contingencies

Management Commentary: The Company intends to use proceeds to refinance existing debt, subject to Federal Reserve Board approval for redemption.

Risks and Contingencies:

  • Regulatory Approval: Redemption of the existing note and potential early redemption of the new notes are subject to regulatory approval.
  • Forward-Looking Statements: The filing includes standard disclaimers regarding the uncertainty of future performance.
  • COVID-19 Impact: The Company notes that the pandemic has deteriorated general business conditions, potentially affecting revenues, asset values, funding availability, and credit tightening.
  • Operational Risks: Risks include system failures, competition, loss of key management, interest rate fluctuations, and regulatory changes.

Important Facts for Investor Verification

  • Verify the receipt of Federal Reserve Board approval required to redeem the existing $10.0 million term note.
  • Confirm the actual completion date of the redemption of the 6.4375% note (expected by January 15, 2021).
  • Monitor the impact of the floating rate reset (SOFR + 5.795%) after November 1, 2025, on future interest expense.
  • Review subsequent filings for any updates on the impact of the COVID-19 pandemic on the Company's liquidity and asset quality.