First Internet Bancorp 10-Q Summary: Q2 2026
Business Context and Reporting Period
This Quarterly Report on Form 10-Q covers the period ended June 30, 2026. First Internet Bancorp (INBK) is a bank holding company headquartered in Fishers, Indiana, operating primarily through its wholly-owned subsidiary, First Internet Bank of Indiana. The Company is an internet-based bank with no traditional branch offices, focusing on commercial, small business, consumer, and municipal banking products nationwide.
Key Financial Metrics
| Metric | Q2 2026 (Three Months) | Q2 2025 (Three Months) | YTD 2026 (Six Months) | YTD 2025 (Six Months) |
|---|---|---|---|---|
| Net Income | $2.4 million | $0.2 million | $4.9 million | $1.1 million |
| Diluted EPS | $0.27 | $0.02 | $0.55 | $0.13 |
| Net Interest Income | $32.4 million | $28.0 million | $64.0 million | $53.1 million |
| Net Interest Margin (FTE) | 2.47% | 2.04% | 2.46% | 1.97% |
| Noninterest Income | $8.7 million | $5.6 million | $20.2 million | $16.0 million |
| Noninterest Expense | $26.1 million | $21.8 million | $51.1 million | $45.4 million |
| Provision for Credit Losses | $13.5 million | $13.6 million | $30.1 million | $25.7 million |
| Total Assets | $5.56 billion | $5.92 billion (Avg) | $5.56 billion | $5.85 billion (Avg) |
| Total Deposits | $4.83 billion | $4.79 billion (Avg) | $4.83 billion | $4.80 billion (Avg) |
| Shareholders' Equity | $363.5 million | $390.2 million | $363.5 million | $390.2 million |
| Return on Avg. Equity (ROAE) | 2.56% | 0.20% | 2.64% | 0.58% |
Material Changes vs. Prior Period
- Profitability Surge: Net income increased 1,126% year-over-year for Q2 2026, driven by a 15.9% increase in net interest income and a 56.3% increase in noninterest income.
- Net Interest Margin Expansion: NIM (FTE) improved by 43 basis points to 2.47% in Q2 2026. This was achieved through a 51 basis point decrease in the cost of interest-bearing liabilities (to 3.45%) and higher loan yields, despite a decrease in total interest income due to lower loan volumes.
- Loan Portfolio Shifts: Total loans increased 1.7% to $3.81 billion. Growth was driven by single-tenant lease financing, investor commercial real estate, and construction loans. Conversely, the Company is strategically running off franchise finance and healthcare finance portfolios.
- Asset Quality: Nonperforming loans increased slightly to $60.1 million (1.58% of total loans). Net charge-offs were $16.9 million in Q2 2026 (1.77% annualized), primarily driven by elevated charge-offs in the franchise finance portfolio.
- Deposit Mix: Total deposits remained flat at $4.83 billion. However, the mix shifted significantly with a 33.2% increase in interest-bearing demand deposits (driven by fintech partnerships), offsetting declines in certificates of deposit and brokered deposits.
Guidance, Outlook, and Risks
- Strategic Focus: Management continues to pivot away from franchise finance and healthcare finance, replacing this volume with growth in single-tenant lease financing, investor CRE, construction, and small business lending.
- Fintech Partnerships: The Company is leveraging fintech partnerships to acquire deposits and diversify revenue, evidenced by the growth in fintech-brokered deposits and related fee income.
- Capital Management: The Company maintains a strong capital position with a Common Equity Tier 1 ratio of 8.90% (Consolidated). A stock repurchase program authorized for up to $25.0 million remains active, with $0.5 million utilized YTD.
- Key Risks:
- Credit Risk: Elevated charge-offs in the franchise finance portfolio and potential deterioration in small business lending (SBA) due to economic conditions.
- Interest Rate Risk: Sensitivity analysis indicates Net Interest Income (NII) could decrease by 2.44% to 4.71% in a rising rate scenario (+50 to +100 bps).
- Goodwill Impairment: Risk of impairment charges if forecasted operating results decline materially, particularly due to elevated net charge-offs.
- Liquidity: Dependence on capital distributions from the Bank and the ability to manage deposit outflows in a competitive rate environment.
Investor Verification Checklist
- Franchise Finance Run-off: Verify the pace of the franchise finance portfolio decline and the adequacy of specific reserves against the elevated charge-offs ($11.7 million in Q2).
- Fintech Deposit Stability: Assess the stickiness of the new fintech-driven demand deposits and the associated fee revenue sustainability.
- Small Business Lending (SBA) Quality: Monitor delinquency trends in the SBA portfolio, which saw an increase in nonaccruals and past-due loans.
- Cost of Funds Trajectory: Confirm if the reduction in deposit costs (down 51 bps) is sustainable as competitive pressures on CD rates evolve.
- Goodwill Valuation: Review the assumptions used in the goodwill impairment test, specifically regarding forecasted growth rates and charge-off levels.