INBK

First Internet Bancorp Q1 2026 Filing Summary

Business Context and Reporting Period

This Quarterly Report on Form 10-Q covers the period ended March 31, 2026. First Internet Bancorp is a bank holding company headquartered in Fishers, Indiana, operating primarily through its wholly-owned subsidiary, First Internet Bank of Indiana. The Company functions as an internet bank with no traditional branch offices, focusing on commercial, small business, consumer, and municipal banking products delivered through digital channels and strategic fintech partnerships.

Key Financial Metrics

Material Changes vs. Prior Period

• Profitability Surge: Net income increased 166% year-over-year, driven by a 25.9% increase in Net Interest Income (NII) and a 10.5% increase in Noninterest Income.
• Net Interest Margin Expansion: NIM improved by 54 basis points to 2.36% (2.45% FTE), resulting from higher loan yields and a 50 basis point decrease in the cost of interest-bearing liabilities.
• Deposit Growth: Total deposits grew by $141.8 million (2.9%) quarter-over-quarter, primarily due to a $237.2 million increase in interest-bearing demand deposits from fintech partnerships. This growth allowed the Company to pay down higher-cost certificates of deposit and brokered deposits.
• Asset Quality Deterioration: Nonperforming loans increased to $61.6 million (1.63% of total loans) from $58.5 million. Net charge-offs rose to $15.8 million (1.65% annualized), up from $9.7 million in Q1 2025, driven by elevated losses in small business lending and franchise finance portfolios.
• Provision Increase: The provision for credit losses increased to $16.6 million to cover higher net charge-offs and specific reserves in the franchise finance segment.

Outlook, Risks, and Management Commentary

• Strategic Focus: Management continues to leverage fintech partnerships to acquire low-cost deposits and diversify revenue streams. The Company closed $72.5 million in SBA 7(a) loans during the quarter.
• Capital Position: The Company remains well-capitalized under Basel III rules. Common Equity Tier 1 capital ratio was 8.97% (Consolidated) and 10.86% (Bank), exceeding the 7.0% minimum requirement plus conservation buffer.
• Share Repurchases: The Board authorized a $25.0 million share repurchase program in October 2025. As of March 31, 2026, the Company repurchased approximately 28,000 shares for $0.5 million.
• Key Risks:
  • Credit Risk: Elevated charge-offs in small business and franchise finance segments remain a primary concern.
  • Interest Rate Risk: While NIM has improved, the Company monitors sensitivity to rate changes. Economic Value of Equity (EVE) analysis shows a 10.18% decrease in EVE under a +100 basis point instantaneous rate shock scenario.
  • Liquidity: The Company maintains $1.4 billion in cash and available-for-sale securities, plus $1.5 billion in off-balance sheet custodial deposits, providing robust liquidity coverage.

Investor Verification Checklist

• Verify Charge-off Trends: Confirm if the elevated net charge-off rate (1.65%) in small business and franchise finance is a temporary spike or a structural shift in credit quality.
• Assess Deposit Stability: Review the composition of the $237 million increase in demand deposits to ensure fintech partnership flows are sustainable and not subject to rapid outflows.
• Monitor Provision Adequacy: Evaluate if the $16.6 million provision is sufficient to cover future losses given the increase in nonperforming loans to $61.6 million.
• Review Non-GAAP Reconciliations: Cross-check the reported Return on Average Tangible Common Equity (ROATCE) of 2.75% against GAAP metrics to understand the impact of goodwill adjustments.
• Check Regulatory Capital Buffers: Ensure the Company maintains sufficient capital buffers to support the ongoing share repurchase program and dividend payments ($0.06/share) amidst potential credit stress.