First Internet Bancorp (INBK) Q4 2025 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings call presents a mixed picture. Financial performance shows growth in fintech deposits and payment volumes, but total deposits decreased. The Q&A reveals some concerns about criticized loans and unclear management responses. However, the company expects margin expansion and loan growth. The lack of market cap data limits prediction precision, but the mixed financial results and management's optimism suggest a neutral sentiment, with potential for slight positive movement if fintech growth continues.
Key Financial Performance
Quarterly Revenue $42.1 million, a 21% increase over the fourth quarter of 2024. This growth was attributed to strong operational execution and sustained business momentum across core segments.
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. The increase was driven by higher rates on new originations and declining funding costs.
Net Interest Margin 2.22% (or 2.30% on a fully taxable equivalent basis), up 18 basis points from the prior quarter and 55 basis points year-over-year. This improvement was due to rising yields on interest-earning assets and declining costs of interest-bearing deposits.
Noninterest Income $11.8 million, up from $11.2 million in the prior year period. The increase was driven by higher net loan servicing revenue and fee revenue from fintech partnerships.
Provision for Credit Losses $12 million, primarily due to $16 million of net charge-offs, partially offset by a net decrease in specific reserves.
Nonperforming Loans $58.5 million, with a ratio of nonperforming loans to total loans at 1.56%, compared to 1.48% in the linked quarter. The increase was mainly due to SBA guaranteed balances and fully collateralized SBA unguaranteed balances.
Total Loans $3.7 billion as of December 31, 2025, a decrease of 10% compared to December 31, 2024. The decline was driven by the large single-tenant lease financing loan sale, offset by growth in construction, commercial and industrial, and small business lending.
Total Deposits $4.8 billion as of December 31, 2025, a decrease of 2% compared to December 31, 2024. The decline was due to the maturity of higher-cost CDs and broker deposits, offset by growth in fintech deposits.
Net Income $5.3 million or $0.60 per diluted share. Adjusted net income was $5.6 million or $0.64 per diluted share, excluding the impact of a loan sale.
Banking-as-a-Service (BaaS) Deposits Over $1.3 billion in new deposits for 2025, more than tripling the amount from the prior year. This growth was attributed to fintech partnerships and increased payment processing volumes.
Payments Volume $165 billion in payments volume for 2025, an increase of over 225% from 2024. This growth was driven by fintech partnerships and expanded payment processing capabilities.
SBA Loan Originations Nearly $580 million in funded originations during 2025. Despite industry challenges, the company maintained its position as a top 10 SBA 7(a) lender.
Shareholder Returns $2.7 million returned to shareholders through dividends and share repurchases. The company executed a share buyback program, purchasing 27,998 shares at an average price of $18.64 per share.
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Operating Highlights
Banking-as-a-Service (BaaS) growth: Generated over $1.3 billion in new deposits for 2025, tripling the amount from the prior year. Processed over $165 billion in payments volume, a 225% increase from 2024.
SBA lending: Maintained position as a top 10 SBA 7(a) lender with $580 million in funded originations during 2025. Enhanced underwriting standards and servicing capabilities.
AI-driven solutions: Implemented AI-powered origination and underwriting support, as well as customer-facing support to improve efficiency and credit management.
Strategic sale of loans: Completed sale of $850 million in single-tenant lease financing loans to Blackstone, strengthening capital position and enhancing rate risk profile.
Fintech partnerships: Facilitated $65 billion in payments for fintech partners in Q4 2025, up 40% from Q3. Maintained $2 billion in deposits, with a significant portion off balance sheet.
Operational efficiency: Achieved 30% net interest income growth year-over-year and consistent net interest margin expansion throughout 2025.
Credit management: Addressed credit issues in SBA and franchise finance portfolios with enhanced risk management and analytics. Guided to higher provisions for 2026 to clean up problem portfolios.
SBA realignment: Strategically realigned SBA production with enhanced underwriting guidelines, prioritizing credit quality over volume for sustainable growth.
Balance sheet optimization: Repositioned balance sheet by reducing exposure to lower-yielding fixed rate assets and optimizing asset mix.
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Risk or Challenges
Credit Challenges in SBA and Franchise Finance Portfolios: The company faced credit issues isolated to two specific portfolios: SBA and franchise finance. Enhanced risk management processes and prudent underwriting standards are being implemented to address these issues. However, the company is guiding to a higher provision for 2026 to clean up these problem portfolios.
Government Shutdown Impact on SBA Business: The longest federal government shutdown in history impacted SBA operations, requiring adjustments in underwriting guidelines and a strategic realignment of SBA production to prioritize credit quality over volume.
Provision for Credit Losses: The company recognized a provision for credit losses of $12 million in Q4 2025, primarily due to $16 million of net charge-offs. Elevated provisions are expected to continue in the first half of 2026.
Decline in Gain on Sale Revenue: Gain on sale revenue is expected to decrease in 2026 due to a strategic shift to retain a larger portion of SBA production on balance sheet, impacting fee income but improving net interest income.
Operational and Credit Risks in SBA Lending: SBA lending, primarily in business acquisition, faces elevated levels of transition risk as new owners take over. Loans originated under previous guidelines in late 2024 and early 2025 may pose additional challenges.
Franchise Finance Portfolio Risks: The franchise finance portfolio is being reduced in size, with remaining borrowers being stronger multi-unit operators. However, credit issues persist, requiring enhanced collection efforts and support from intermediaries like ApplePie Capital.
Increased Investment in Technology and AI: The company is investing in AI-driven solutions for document collection, portfolio predictive analytics, and risk management. While these investments aim to improve efficiency and credit quality, they also contribute to higher operational expenses.
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Guidance & Outlook
Credit Improvement: The company expects credit to improve gradually in the second half of 2026 as problem loans are resolved and replaced with higher quality loans. Enhanced underwriting standards and advanced analytics are expected to stabilize credit performance.
Loan Growth: Projected loan growth of 15% to 17% for 2026, driven by strong pipelines across commercial lending verticals.
Net Interest Margin Expansion: Net interest margin is expected to expand, reaching 2.75% to 2.80% by Q4 2026, supported by ongoing deposit repricing and optimized asset mix.
Net Interest Income: Fully taxable equivalent net interest income is projected at $155 million to $160 million for 2026.
Noninterest Income: Noninterest income is projected at $33 million to $35 million, reflecting lower SBA originations and gain on sale revenue but offset by growth in Banking-as-a-Service (BaaS) and increased loan servicing revenue.
Operating Expenses: Operating expenses are projected at $111 million to $112 million, including investments in technology and AI to support revenue and risk management initiatives.
Provision for Credit Losses: Guidance for provision for credit losses is $50 million to $53 million for 2026, with elevated provisions in the first half of the year and improvement expected in the second half.
Earnings Per Share: Earnings per share for 2026 are projected at $2.35 to $2.45, with a midpoint of $2.40 per share.
SBA Loan Production: SBA loan production is expected to be approximately $500 million for 2026, reflecting a focus on credit quality over volume.
Gain on Sale Revenue: Gain on sale revenue is estimated at $19 million to $20 million for 2026, down from $29.4 million in 2025, as the company plans to retain a larger portion of production on balance sheet.
Banking-as-a-Service (BaaS) Growth: Continued robust growth in BaaS platform, with increasing demand for sponsorship and program oversight capabilities, including real-time payments and ACH processing.
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Shareholder Return Plan
Total amount returned to shareholders through dividends: $2.7 million
Dividend program details: The company returned $2.7 million to shareholders through dividends as part of its balanced capital allocation strategy.
Total shares repurchased: 27,998 shares
Average price per share repurchased: $18.64 per share
Share buyback program details: The company executed its share buyback program during the quarter, purchasing 27,998 shares at an average price of $18.64 per share, capitalizing on temporary market dislocation.
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Key Q&A
Q:What is the expected impact of SBA loans on the balance sheet and loan yield throughout the year?
A:The company plans to retain an additional $94 million of SBA loans on the balance sheet, priced at prime plus 1.5%. New loan origination rates are expected to be in the high 6% to low 7% range, which is above the current portfolio yield.
Q:What are the repricing opportunities for CDs in the first half of the year?
A:Approximately $850 million of CDs maturing in the next 6 months have a weighted average cost of 4.15%, while new CDs are being issued at 3.65%, resulting in a 50 basis point pickup. Over the next 12 months, $1.4 billion of CDs maturing have a weighted average cost of 4.11%, also providing a 50 basis point pickup.
Q:What is the status of criticized loans, particularly in the SBA and franchise finance buckets?
A:Criticized loans increased by about $16 million (10-11%), mostly in the SBA and franchise categories. Most of these loans are in the special mention category, not substandard. The company is proactively monitoring and reaching out to borrowers to address potential issues.
Q:Were there any interest reversals impacting the margin in the fourth quarter?
A:Yes, there were $300,000 to $400,000 in interest reversals, equivalent to 3-5 basis points, consistent with prior quarters.
Q:What are the net charge-off expectations relative to the provision guidance for the year?
A:The provision guidance of $50 million to $53 million includes assumptions for charge-offs and specific reserves. The allowance for credit losses (ACL) is expected to grow by $20 million to $30 million by year-end, driven by loan growth and specific reserves.
Q:What is the company's approach to M&A given its current valuation?
A:The company has been approached by multiple parties, including international organizations, but no deals are close. They are open to discussions and are also exploring opportunities for specialty lending programs.
Q:What is the impact of fintech and BaaS on earnings and deposit growth?
A:Fintech efforts generated $6.7 million in gross revenue, more than double the previous year. Deposit growth is primarily driven by existing fintech partners, with selective onboarding of new programs. The company is launching a new program, Pool Money, to offer group deposit accounts.
Q:What are the expectations for balance sheet growth and funding for loan growth?
A:Loan growth is expected to be 15-17%, funded by 8-10% deposit growth, deployment of cash on the balance sheet, and securities cash flows. The company has flexibility due to a low loan-to-deposit ratio and plans to use fintech deposits for funding if needed.
Q:What is the expected margin trajectory for the year?
A:The margin is expected to expand by 10-15 basis points per quarter, with a larger increase in the first quarter due to the full impact of two Fed rate cuts.
Q:What is the tax rate expectation for the year?
A:The tax rate is expected to be 7-8.5% in the first half of the year and 10-12% in the second half as earnings improve.
Q:What is the company's strategy for addressing SBA credit quality issues?
A:The company is using data from Lumos and Redwood for predictive analytics and has refined credit guidelines. They are proactively reaching out to borrowers to address potential issues early, particularly in the 12-18 month window when problems are most likely to arise.
Q:Review of Unclear Management Responses
A:Management avoided directly addressing the question about why the quarter's results were not as clean as expected despite prior efforts to address loan issues. The response focused on qualitative factors and did not provide specific quantitative insights.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
ACH
AI
BaaS
Full
Internet Bank
analytics
approach
capability
card
collection process
core
credit challenge
credit problem
customer
depth
efficiency
experience
fee
fintech partner
flexibility
government shutdown
guideline
institution
issue portfolio
lending vertical
liquidity
loan credit
model
network
partnership
payment processing
portion
position SBA
production
quality borrower
risk process
solution
technology
top
transaction
underwriting standard
INBK Transcript
First Internet Bancorp (INBK) Q4 2025 Earnings Call Transcript
Unknown1-29
The earnings call presents a mixed picture. Financial performance shows growth in fintech deposits and payment volumes, but total deposits decreased. The Q&A reveals some concerns about criticized loans and unclear management responses. However, the company expects margin expansion and loan growth. The lack of market cap data limits prediction precision, but the mixed financial results and management's optimism suggest a neutral sentiment, with potential for slight positive movement if fintech growth continues.
First Internet Bancorp (INBK) Q3 2025 Earnings Call Transcript
Positive10-23
The earnings call highlights strong financial performance with a significant increase in income and yield on assets. Positive developments include a decrease in delinquencies, proactive loan management, and optimistic credit outlook. The company's strategic focus on higher-yielding opportunities and share buyback plans further boost sentiment. However, increased credit loss allowances and nonperforming loans are concerns. Overall, the positive financial metrics, strategic initiatives, and shareholder return plans suggest a positive stock price movement.
First Internet Bancorp (INBK) Q2 2025 Earnings Call Transcript
Unknown7-24
The earnings call presents a mixed picture. Positives include improved loan metrics, strong net income growth, and promising fintech partnerships. However, noninterest income decline, cautious provision guidance, and unclear management responses on key issues like charge-offs and stock buybacks temper enthusiasm. The market may react neutrally due to these conflicting signals, with no significant partnerships or guidance changes to sway sentiment strongly.
Earnings call transcript: First Internet Bancorp Q1 2025 misses EPS forecast
Unknown4-24
The earnings call presents mixed signals: strong loan growth, increased net interest income, and fintech partnerships are positive, but significant noninterest income decline, franchise finance challenges, and elevated loan loss provisions are concerning. The Q&A reveals management's reluctance to provide clear guidance, which adds uncertainty. The share buyback intention could support the stock price, but economic uncertainties and operational challenges balance the outlook. Overall, the sentiment remains neutral.
INBK Slides
INBK Report
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