INBK — First Internet Bancorp

Summary of First Internet Bancorp (INBK) Q1 2026 Earnings Call

1. Key Financial Results and Metrics

• Net Income: $2.5 million, or $0.29 per diluted share.
• Total Revenue: $43.1 million, a 21% increase year-over-year.
• Net Interest Income: $31.6 million, up 26% year-over-year; fully taxable equivalent net interest margin improved to 2.45%, a 54 basis point increase from the previous year.
• Pre-Provision Net Revenue: $18.1 million, up 51% year-over-year.
• Total Loans: $3.8 billion, a slight increase of $29.1 million from the previous quarter but a decrease of $479 million (11%) year-over-year.
• Total Deposits: $5 billion, an increase of $142 million (3%) from the prior quarter.
• Provision for Credit Losses: $16.3 million, slightly better than expectations, with net charge-offs of $15.8 million.

2. Strategic Updates and Business Highlights

• Credit Quality: Improvement in delinquencies and nonperforming loans, particularly in the SBA portfolio due to enhanced underwriting and monitoring.
• Commercial Lending: Strong production in construction and single-tenant lease financing; robust pipelines across multiple verticals.
• Banking-as-a-Service: Continued growth in fintech partnerships, with average fintech deposits increasing by 186% year-over-year to $2.4 billion.
• Technology Investments: Ongoing investments in AI and digital capabilities to enhance customer experience and operational efficiency.
• SBA Business: Shift towards prioritizing credit quality over volume, with a focus on long-term growth despite a seasonal slowdown in loan production.

3. Forward Guidance and Outlook

• Loan Growth: While commercial pipelines remain strong, the full-year loan growth target may be ambitious due to higher-than-expected payoffs and macroeconomic uncertainties.
• Net Interest Margin: Expected to improve by 10-15 basis points per quarter through the end of the year, assuming no rate cuts from the Fed.
• Credit Losses: Anticipated to remain elevated in Q2 but expected to improve in the latter half of the year.
• Overall Strategy: Management remains confident in their diversified business model and ability to navigate macroeconomic challenges while positioning for profitability growth in 2026 and beyond.

4. Bad News, Challenges, or Points of Concern

• Loan Payoffs: Higher-than-expected early payoffs in certain portfolios, particularly Franchise Finance, impacted overall loan growth.
• Nonperforming Loans: Increased to $61.6 million (1.63% of total loans), though some are backed by government guarantees, mitigating loss exposure.
• Macroeconomic Uncertainty: Heightened risks from volatile energy prices and geopolitical developments may affect future performance and loan growth.
• Expense Management: While expenses are well-managed, the need for ongoing investments in technology and handling problem loans may pressure margins.

5. Notable Q&A Insights

• Charge-Offs: Management indicated that Q1 may represent the worst quarter for charge-offs, with expectations for improvement in subsequent quarters.
• Margin Trajectory: The company is optimistic about maintaining a favorable margin trajectory despite potential Fed rate cuts, driven by lower-cost fintech deposits.
• SBA Revenue: Anticipated to ramp up throughout the year, with a strong pipeline suggesting growth in the latter half.
• Fintech Operations: Fee income from fintech partnerships has doubled year-over-year, with ongoing due diligence on new programs expected to contribute positively to future earnings.

Overall, First Internet Bancorp demonstrated solid performance in Q1 2026, with strong revenue growth and improvements in credit quality, while also navigating challenges related to loan growth and macroeconomic uncertainties.