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    INBK
    Earnings call· Jun 2026(Q2 FY26)

    First Internet Bancorp Q2 FY26 earnings call INBK

    Jul 30, 2026 Source

    Executive summary

    First Internet Bancorp Q2 FY26 — Significant Credit Improvement and Margin Expansion

    First Internet Bancorp reported a significant inflection point in its credit trajectory in Q2 FY26, driven by improved underwriting and portfolio management, leading to lower delinquencies and non-performing loans. The company also achieved strong revenue growth and margin expansion, supported by strategic fintech partnerships and efficient capital deployment, positioning it for continued profitability despite a smaller balance sheet. Management expressed confidence that the hardest part of the credit cycle is behind them.

    Highlights

    6

    • Total revenue grew 23% year over year to $41.1 million.

    • Pre-provision net revenue was up 28% year over year to $15 million.

    • Earnings per share (EPS) of $0.27, up significantly from the prior year period.

    • Net charge-offs in the SBA portfolio were down almost 50% from the first quarter to $4.8 million.

    • Total small business lending delinquencies declined to $1.5 million from $13.3 million in the prior quarter.

    • Net interest margin improved to 2.39% (2.47% FTE), up more than 40 basis points from a year ago.

    Concerns

    4

    • Net charge-offs totaled $16.9 million, up modestly from the prior quarter.

    • Linked-quarter revenue was down primarily due to lower gain on sale revenue.

    • Average loan balances were down about 1% linked-quarter.

    • Higher cash balances tempered the pace of margin expansion on a sequential basis.

    Guidance & targets

    8
    CategoryTargetConfidence
    Full-year EPS forecast
    $2.35 to $2.45
    high materiality
    High
    Full-year loan growth
    approximately 4% to 6%
    medium materiality
    Medium
    Fully taxable equivalent net interest margin (FTE NIM)
    2.75% to 2.80%
    high materiality
    High
    Full-year fully taxable equivalent net interest income (FTE NII)
    $141 million to $142 million
    medium materiality
    Medium
    Full-year non-interest income
    $40.5 million to $41 million
    medium materiality
    Medium
    Full-year non-interest expense
    $106 million to $107 million
    medium materiality
    Medium
    Full-year provision for credit losses
    $47 million to $48 million
    high materiality
    High
    Provision expense trajectory
    improve sequentially
    high materiality
    High

    Operational metrics

    31
    Total revenue growth
    23%YoY
    Q2 FY26
    Pre-provision net revenue growth
    28%YoY
    Q2 FY26
    Fintech payments volume growth
    256%YoY
    TTM
    Fintech fee revenue growth
    222%YoY
    TTM
    Cost of interest-bearing deposits
    3.38%down from 3.92% a year ago
    Q2 FY26

    Benefiting from CD repricing and growth in lower-cost fintech deposits.

    Weighted average cost of CDs maturing in Q2
    4.11%
    Q2 FY26
    Average cost of on-balance sheet fintech deposits
    3.19%
    Q2 FY26
    Cost of new and renewing CDs
    3.63%
    Q2 FY26
    Weighted average cost of CDs maturing in Q3
    4.04%
    Q3 FY26

    Particularly large maturity quarter.

    Weighted average cost of CDs maturing in H2
    3.94%
    H2 FY26
    CD renewal rate
    40%down from 60%-70% historically
    Q2 FY26

    Indicates larger amount of higher-cost CDs rolling off.

    Loan portfolio variable rate
    42%
    Q2 FY26

    Provides ability to maintain and increase yields on interest-earning assets.

    SBA net charge-offs
    $4.8Mdown significantly from $9.1M in Q1 FY26
    Q2 FY26
    Franchise finance net charge-offs
    $11.6M
    Q2 FY26
    Non-performing loans (excluding government guaranteed)
    1.07%down from 1.22% in Q1 FY26
    Q2 FY26
    Total non-accrual loans decline
    19%from year-end
    Q2 FY26

    Second consecutive quarter of decline.

    Total delinquencies decline
    26%from Q1 FY26
    Q2 FY26

    Total delinquencies were $29.1M.

    Early-stage franchise delinquencies decline
    >75%from beginning of year
    Q2 FY26
    SBA industry growth
    down 18%YoY
    YTD

    Reflects a slower industry trend.

    BaaS partners
    153 added YTD
    Q2 FY26
    BaaS programs
    21
    Q2 FY26

    2 more programs expected to come online before year-end 2026.

    Jaris retained production
    $4.5M-$5M
    H1 FY26
    Jaris acquired/retained balances
    $45M-$50M
    H2 FY26

    Expected combined with retained production.

    Jaris net yield
    12%-15%
    Ongoing

    Net yield after full reserves, processing, servicing, and fees.

    RIA owner average age
    66
    Current

    Driving demand for wealth advisory lending for ownership transition.

    Bill payments cleared (Ramp)
    >$1B
    per day

    Cleared on June 30th and July 1st.

    Fintech revenue forecast
    >$10M
    FY26

    Expected to easily pass $10M, up from prior forecast of $8M.

    NII sensitivity to rate hike
    $2.4Mreduction
    Annual

    Company is liability sensitive.

    NII sensitivity to rate cut
    $2.2Mincrease
    Annual

    Company is liability sensitive.

    Effective tax rate assumption (low end of EPS guide)
    6%-6.25%
    FY26
    Effective tax rate assumption (high end of EPS guide)
    8%-8.5%
    FY26

    Industry KPIs

    10
    MetricValueDetails
    Loans$3.80BUSD
    Deposits—
    Fee income lines$40.5M to $41MUSD
    Allowance reserves$6.7MUSD
    Net interest income$32.4MUSD
    Net interest margin2.39%%
    Net charge offs npls$16.9MUSD
    Total operating expenses$106M to $107MUSD
    Provision for credit losses$13.4MUSD
    Efficiency ratio operating leveragePositive

    Deals & partnerships

    1
    JarisExpanded embedded finance technology partnershipOngoing

    Historically, First Internet Bancorp funded loans originated on Jaris's platform and retained a small portion (10-12%), selling the majority to a fund managed by Jaris. Beginning in June, the company now retains all originations going forward. This expanded arrangement reflects trust and collaboration.

    Risks & headwinds

    3
    Macroeconomic uncertainty and geopolitical environmentOngoing

    Unquantified

    Mitigation: Navigating with prudent strategy and appropriate discipline; executing from a position of genuine momentum; belief that the hardest part of the credit cycle is behind them.

    Elevated early payoffs in loan portfolioOngoing

    Impacted period-end and average loan balances; seen for the past couple quarters.

    Mitigation: Modeling into forecasts; advance notice from borrowers helps in replacement; seen particularly in franchise finance portfolio.

    Lower gain on sale revenueQ2 FY26

    Primary driver for linked-quarter revenue decline.

    Mitigation: Secondary market premiums remain strong; production levels picked up in the back half of Q2; origination volumes expected to increase in H2 FY26.

    What to watch in Q3 FY26

    5

    Provision for credit losses trajectory

    Q3 FY26
    Current$13.4M
    TargetSequential improvement

    Why it matters

    Management expects continued sequential improvement, signaling a sustained positive credit trajectory and reduced credit costs.

    Based on the improving trends in non-accrual loans and delinquencies, we expect provision expense to improve sequentially from the second quarter to the third quarter and again from the third quarter to the fourth quarter.

    Q&A highlights

    8

    Asked for confirmation on funding cost decline (15bps) and earning asset yield increase (25-30bps) for NII guide, and Jaris's contribution to higher earning asset yields.

    Ken confirmed the ballpark figures for funding costs and asset yields. He explained the CD repricing opportunity (4.04% CDs replaced by 3.15-3.20% fintech deposits), strong commercial lending pipelines (SOFR+3, single-tenant at 6.40-6.60% yield), and Jaris's impact (acquiring $45M-$50M in H2 at 12-15% net yield).

    “I mean, I think you're in the ballpark, Brett. I mean, I think if you think about the deposit repricing opportunity, right, as we mentioned in the prepared comments, we have a lot of CDs that are coming due here in the third quarter.”

    asked by Brett Rabatin · answered by Kenneth Lovik

    2 min read5 chapters

    Detailed Narrative

    01

    Credit Trajectory Inflection

    The company reported a significant turning point in its credit cycle, with provision for credit losses declining to $13.4 million from $16.3 million quarter-over-quarter. Net charge-offs in the SBA portfolio decreased by almost 50% to $4.8 million, and total non-accrual loans declined for the second consecutive quarter, down 19% from year-end. Early-stage delinquencies saw a sharp drop, with total small business lending delinquencies falling from $13.3 million to $1.5 million. Management expressed confidence that the hardest part of the credit cycle is behind them.

    02

    Strategic Portfolio Optimization

    First Internet Bancorp is actively optimizing its loan portfolio by allowing runoff in existing portfolios such as healthcare finance and residential mortgage, and experiencing elevated payoffs in franchise finance. This capacity is being redeployed into higher risk-adjusted return areas including construction, investor commercial real estate, single-tenant lease financing, small business lending, wealth advisory lending, and embedded finance. The goal is to achieve better risk-adjusted returns and more efficient use of the balance sheet.

    03

    Expanded Fintech Partnerships

    The relationship with Jaris, an embedded finance technology partner, has been significantly expanded. Beginning in June, the company now retains all originations from Jaris's platform, moving from retaining only a small portion previously. These short-duration, high-yielding assets are expected to be accretive to net interest income, with an expected $45 million to $50 million in balances acquired/retained in the second half of FY26, yielding 12-15% net. Two additional embedded finance partners are in the queue to go live by year-end 2026.

    04

    NIM Expansion Drivers

    Net interest margin improved to 2.39% (2.47% FTE), up over 40 basis points year-over-year, primarily due to funding cost improvements. The cost of interest-bearing deposits declined to 3.38% from 3.92% year-over-year, benefiting from CD repricing and growth in lower-cost fintech deposits. Significant CD maturities in Q3 ($445 million at 4.04% weighted average cost) and H2 ($700 million at 3.94%) are expected to further support net interest income and margin expansion.

    05

    Operational Enhancements and Technology Investment

    Over the past 18 months, the company has strengthened underwriting standards, enhanced portfolio monitoring, expanded special assets capabilities, and invested in predictive analytics and early warning tools. These efforts have led to greater separation between portfolio management and problem loan resolution, contributing to the improved credit outcomes. As pioneers in branchless banking, First Internet Bancorp continues to invest in technology and automation, focusing on initiatives that improve customer experience, strengthen risk management, enhance efficiency, and generate appropriate returns, including leveraging AI.

    AI-generated summary of the company’s earnings call. Not investment advice.