First Internet Bancorp Q4 Earnings Call Highlights

First Internet Bancorp (NASDAQ:INBK) executives used the company’s fourth-quarter and full-year 2025 earnings call to highlight revenue growth, improving net interest margin, and expanding fintech partnerships, while also addressing elevated credit costs tied to two specific loan portfolios and outlining a higher provision outlook for 2026.

Management highlights: revenue growth, balance sheet repositioning, and fintech momentum

Chairman and CEO David Becker said the company closed 2025 with “strong fourth quarter results” and noted quarterly revenue rose 21% versus the prior-year period. Becker pointed to 30% year-over-year net interest income growth for 2025, net interest margin expansion throughout the year, and “disciplined expense management.”

Becker also emphasized the strategic sale of approximately $850 million in single-tenant lease financing loans to Blackstone, which he said strengthened capital, improved the bank’s rate-risk profile, reduced exposure to lower-yielding fixed-rate assets, and increased balance sheet flexibility.

On banking-as-a-service (BaaS), Becker said initiatives generated over $1.3 billion in new deposits during 2025—more than triple the prior year—and the bank processed more than $165 billion in payments volume, up over 225% from 2024. He described these partnerships as “strategic revenue drivers” through transaction fees, program management fees, and interest income.

In SBA, Becker said the bank maintained its position as a top 10 SBA 7(a) lender, with nearly $580 million in funded originations in 2025, despite industry challenges that included a government shutdown. He also noted leadership changes and additions in underwriting and portfolio management.

Becker said the company returned $2.7 million to shareholders through dividends and share repurchases, including buying 27,998 shares during the quarter at an average price of $18.64.

Credit: isolated issues in SBA and franchise finance drive higher 2026 provisioning

Becker said credit concerns are “isolated to two specific portfolios,” SBA and franchise finance, and added that other lending verticals were performing in line with peers. He said the bank implemented enhanced risk management processes, prudent underwriting, and advanced analytics to identify issues earlier and engage borrowers proactively.

Importantly, Becker said the company is guiding to a higher provision for 2026 than it initially estimated, with the aim of cleaning up remaining problem areas. He said management expects credit to improve gradually in the second half of the year as problem loans resolve and are replaced with higher-quality loans, adding that the bank’s capital and liquidity position can support the effort. He cited a total capital ratio of 12.44% and a Common Equity Tier 1 ratio of 8.93%.

President and COO Nicole Lorch added that the bank tightened and refined underwriting standards, streamlined processes to detect problem loans earlier, and improved collections. In franchise finance, she said the company stopped purchasing loans and the portfolio has been shrinking, leaving borrowers that tend to be stronger multi-unit operators. She also said ApplePie Capital supports collection efforts as an intermediary and provides brand support.

In SBA, Lorch said credit remains challenging, largely because lending has been concentrated in business acquisition loans that carry transition risk as ownership changes hands. She said internal analysis, supported by external data and analytics, suggests “more pain to come” as the bank works through loans originated in late 2024 and early 2025 under prior guidelines, while the outlook is more encouraging in the second half of 2026. She also noted certain loan recoveries in the fourth quarter and into January came in higher than expected.

Fourth-quarter financial performance: margin expansion and stable expenses

CFO Ken Lavik reported fourth-quarter net income of $5.3 million, or $0.60 per diluted share. Results included a pre-tax loss of $400,000 related to the sale of an additional $14.3 million of single-tenant lease financing loans tied to the larger third-quarter transaction. Excluding the loan sale impact, adjusted net income was $5.6 million and adjusted EPS was $0.64.

Adjusted total revenue was $42.1 million, up 21% from the fourth quarter of 2024. Adjusted pre-provision net revenue was $17.9 million, up 66% year-over-year.

• Net interest income: $30.3 million (or $31.5 million on a fully taxable equivalent basis), up about 29% and 27% year-over-year, respectively.
• Net interest margin: 2.22% (2.30% FTE), up 18 basis points from the prior quarter and 55 basis points year-over-year.
• Asset yields and funding costs: Yield on average interest-earning assets increased to 5.71% from 5.52% a year earlier, while the cost of interest-bearing deposits declined to 3.68% from 4.30%.

Adjusted non-interest income was $11.8 million, down from the prior quarter due to higher SBA loan sale volumes in the third quarter, and up from $11.2 million in the prior-year period. Lavik said fintech partnership fee revenue increased during the quarter, continuing a trend of quarterly growth during the year. Non-interest expense was $24.2 million, compared with $24.0 million a year earlier, with increases tied to investments in technology and AI and costs related to working out problem loans, offset by lower incentive compensation.

Balance sheet, credit metrics, and 2026 outlook

Lavik said the fourth-quarter provision for credit losses was $12 million, consisting primarily of $16 million of net charge-offs partially offset by a net decrease in specific reserves. Non-performing loans increased to $58.5 million, with the NPL-to-total loans ratio rising to 1.56% from 1.48% in the prior quarter; he said the increase was almost entirely SBA guaranteed balances and fully collateralized SBA unguaranteed balances. Excluding guaranteed balances, the NPL ratio was 1.20%.

At quarter-end, the allowance for credit losses (ACL) was 1.49% of total loans (1.67% excluding the public finance portfolio). Lavik said the small business lending ACL to unguaranteed balances was 7.34%.

Total loans were $3.7 billion at Dec. 31, 2025, up 4% from the prior quarter but down 10% from a year earlier, reflecting the single-tenant lease financing loan sale. Deposits were $4.8 billion, down 2% from both the prior quarter and prior year. Lavik said fintech deposit growth allowed higher-cost CDs and broker deposits to mature, and that the bank’s ability to move fintech deposits off balance sheet provided flexibility following the loan sale.

For 2026, management guided to:

• Loan growth: 15%–17%.
• Net interest margin: 2.75%–2.80% by the fourth quarter of 2026.
• FTE net interest income: $155 million–$160 million for the full year.
• Non-interest income: $33 million–$35 million, reflecting lower SBA originations and gain-on-sale revenue as more guaranteed balances are retained, partially offset by BaaS growth and higher loan servicing revenue.
• Operating expenses: $111 million–$112 million.
• Provision for credit losses: $50 million–$53 million for the year, with first-quarter provision expected at $17 million–$19 million and second-quarter at $14 million–$16 million; management expects improvement in the second half.
• Earnings per share: $2.35–$2.45.

During Q&A, management discussed deposit repricing, noting continued expected declines in deposit costs, including CD maturities over the next six to 12 months at costs above current production. Lavik also said the company models interest reversals, estimating roughly $300,000 to $400,000 in the fourth quarter. Becker said the bank has seen increased M&A-related outreach, noting it has been approached multiple times in the past half year, but added nothing was “remotely close” at the time of the call.

About First Internet Bancorp (NASDAQ:INBK)

First Internet Bancorp is the bank holding company for First Internet Bank of Indiana, a pioneer in digital banking in the United States. Established with a focus on online-only operations, the company offers fully integrated, web-based financial solutions without the overhead of physical branches. Headquartered in Indianapolis, Indiana, First Internet Bancorp leverages technology to deliver streamlined banking services to customers across the country.

The company’s core offerings include a range of deposit products such as checking accounts, savings accounts, money market accounts, certificates of deposit (CDs) and individual retirement accounts (IRAs).