First Internet Bancorp ((INBK)) has held its Q3 earnings call. Read on for the main highlights of the call.
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The recent earnings call for First Internet Bancorp presented a mixed outlook. While the company celebrated strong growth in net interest income and fruitful fintech partnerships, challenges in credit quality and a reported net loss due to strategic loan sales were notable concerns. Despite these challenges, the company is taking proactive steps to address credit issues and is strategically positioned for future growth, although uncertainty from the government shutdown remains a lingering concern.
Eighth Consecutive Quarter of Net Interest Income Growth
First Internet Bancorp reported an impressive eighth consecutive quarter of net interest income growth. The income increased by over 8% compared to the previous quarter and saw a 40% rise from the third quarter of 2024. This growth was primarily driven by higher earning asset yields and lower deposit costs, showcasing the company’s effective financial strategies.
SBA Loan Sale Success
The company achieved significant success in its SBA loan sales, generating $10.6 million in gain on sale revenue. With a robust pipeline of $260 million, First Internet Bancorp is well-positioned for future gains in this area, highlighting its strategic focus on leveraging SBA loans.
Strong Performance in Fintech Partnerships
Fintech partnerships have proven to be a strong revenue stream for First Internet Bancorp, with total revenue from these initiatives increasing by 14% compared to the second quarter and a remarkable 130% from the third quarter of 2024. This underscores the company’s successful integration and expansion in the fintech sector.
Improved Credit Quality Indicators
The company reported improved credit quality indicators, with total delinquencies reduced to 35 basis points as of September 30th. This marks a significant improvement from 62 basis points in the second quarter and 77 basis points in the first quarter, reflecting the company’s efforts to enhance credit quality.
Net Loss Reported
Despite the positive developments, First Internet Bancorp reported a net loss of $41.6 million, or $0.0476 per diluted share. This was primarily due to a $37.8 million pretax loss on the sale of STL loans, highlighting the financial impact of strategic loan sales.
Provision for Credit Losses
A substantial provision for credit losses amounting to $34.8 million was recognized, including $21 million of net charge-offs. This was mainly related to small business lending and franchise finance portfolios, indicating areas where the company is focusing on managing risks.
Increase in Nonperforming Loans
Nonperforming loans increased to $53.3 million at the end of the third quarter, up by $9.7 million from the previous quarter. This rise was mainly driven by franchise finance loans, pointing to ongoing challenges in managing loan performance.
Impact of Government Shutdown
The ongoing U.S. government shutdown is affecting the company’s SBA loan sales into the secondary market, potentially impacting their ability to execute loan sales during the quarter. This adds a layer of uncertainty to the company’s operations.
Forward-Looking Guidance
Looking ahead, First Internet Bancorp expects loan balances to rise by 4-6% in the fourth quarter, driven by higher loan origination yields and declining deposit costs. The company anticipates continued revenue growth, despite the net loss reported due to strategic actions. Improved capital ratios and a reduction in delinquencies to 35 basis points are positive indicators for future performance.
In summary, First Internet Bancorp’s earnings call highlighted a mixed sentiment with strong growth in certain areas but challenges in others. The company is making strategic moves to address credit quality and is poised for future growth, though external factors like the government shutdown pose potential risks. Investors and stakeholders will be keenly watching how these dynamics unfold in the coming quarters.