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First Internet Bancorp (INBK) Q2 FY26 earnings call: guidance and Q&A

Earnings call· Jun 2026 (Q2 FY26)· Financials· Jul 30, 2026

Source: earnings call transcript

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

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

Deals & partnerships

Jaris Expanded embedded finance technology partnership Ongoing

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

Macroeconomic uncertainty and geopolitical environment Ongoing

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 portfolio Ongoing

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 revenue Q2 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

Provision for credit losses trajectory

Q3 FY26
Current $13.4M
Target Sequential 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.

Find out whether INBK delivers this. Inve re-checks your case every morning.

Q&A highlights

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 read 5 chapters

Detailed narrative

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.

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.

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.

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.

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.

Summary of the company's earnings call; see how call summaries are prepared. Not investment advice.