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First Internet Bancorp (INBK)·Q2 2025 Earnings Summary

Executive Summary

  • Q2 2025 delivered stronger core banking trends (net interest income up 11.5% q/q; GAAP NIM up 14 bps to 1.96%), but headline EPS fell to $0.02 on elevated provision and sharply lower SBA gain-on-sale; management acknowledged disappointment and focused call on credit and outlook .
  • EPS missed S&P Global consensus (actual $0.02 vs $0.31 consensus; revenue definitions differ—see Estimates Context), driven by a $13.6M provision (+$1.7M q/q) and a one-quarter pause in SBA secondary sales that cut gain-on-sale to $1.7M from $8.6M q/q .
  • Guidance introduced: FTE NIM targeted to 2.20–2.25% in Q3 and 2.30–2.35% in Q4; noninterest income ~$13.25M each quarter; provision $10–11M per quarter; FY2026 FTE NIM 2.50–2.60% and FTE net interest income $158–163M .
  • Potential stock catalysts: resumption of SBA sales in Q3 (already $52M guaranteed sold in July for ~$3.7M gain), continued deposit cost declines, and visible NIM expansion; offsets include franchise finance/SBA credit clean-up and sustained elevated provisions through year-end .

What Went Well and What Went Wrong

What Went Well

  • Net interest income rose to $28.0M (+11.5% q/q; +31% y/y), with GAAP/FTE NIM up to 1.96%/2.04% as loan yields climbed and deposit costs fell (interest-bearing deposit cost 3.92% vs 4.01% q/q) .
  • Robust deposit growth: +$353.2M (+7.1% q/q) led by fintech partnerships; loans-to-deposits improved to 82.3%, providing liquidity to reduce FHLB advances by $130.5M by quarter end .
  • Management execution pivot: paused SBA sales to align with SOP, held loans longer (loans HFS up to $126.5M from $31.7M), and already resumed normalized pace in Q3 with $52M sold and expected ~$3.7M gain .
  • Quote: “We have now delivered seven straight quarters of rising net interest income… increased yields on our earning assets and lower funding costs” — David Becker, CEO .

What Went Wrong

  • Credit pressure persisted: provision climbed to $13.6M (vs $11.9M q/q; $4.0M y/y), and net charge-offs rose to $14.3M (1.31% of avg loans) concentrated in SBA and franchise finance .
  • Noninterest income fell to $5.6M (−46.7% q/q; −49% y/y), primarily from SBA gain-on-sale dropping to $1.7M due to the one-quarter sale pause; this drove the EPS shortfall .
  • NPLs increased to 1.00% of loans ($43.5M) from 0.80% q/q, with franchise finance adding $12.6M to nonaccrual (specific reserves $4.5M); ACL decreased to 1.07% owing to charge-offs of previously reserved loans .
  • Analyst concern: management expects elevated provisions (~$10–11M per quarter) to persist through Q4, reflecting caution despite improving early indicators (delinquencies down to 0.62%) .

Financial Results

MetricQ2 2024Q1 2025Q2 2025
Total Revenue (GAAP, $USD Millions)$32.360 $35.523 $33.547
Net Interest Income (GAAP, $USD Millions)$21.327 $25.096 $27.990
Net Interest Income (FTE, $USD Millions)$22.502 $26.265 $29.147
Net Interest Margin (GAAP, %)1.67% 1.82% 1.96%
Net Interest Margin (FTE, %)1.76% 1.91% 2.04%
Noninterest Income ($USD Millions)$11.033 $10.427 $5.557
Gain on Sale of Loans ($USD Millions)$8.292 $8.647 $1.673
Provision for Credit Losses ($USD Millions)$4.031 $11.933 $13.608
Net Income ($USD Millions)$5.775 $0.943 $0.193
Diluted EPS ($USD)$0.67 $0.11 $0.02

Segment loan balances (end of period):

Segment ($USD Thousands)Q2 2024Q1 2025Q2 2025
Investor Commercial Real Estate$188,409 $297,874 $513,411
Construction$328,922 $471,082 $332,658
Single Tenant Lease Financing$927,462 $950,814 $970,042
Public Finance$486,200 $482,558 $476,339
Small Business Lending (SBA)$270,129 $353,408 $383,455
Franchise Finance$551,133 $514,700 $479,757

KPIs and balance-sheet metrics:

KPIQ2 2024Q1 2025Q2 2025
Yield on Loans (avg)5.83% 5.99% 6.07%
Cost of Interest-Bearing Deposits4.29% 4.01% 3.92%
Loans-to-Deposits Ratio92.6% (3,961,146/4,273,922) 86.0% 82.3%
Total Loans (end, $USD Thousands)$3,961,146 $4,254,412 $4,362,562
Total Deposits (end, $USD Thousands)$4,273,922 $4,945,625 $5,298,789
Nonperforming Loans / Loans0.33% 0.80% 1.00%
Net Charge-offs / Avg Loans0.14% 0.92% 1.31%
ACL / Loans1.10% 1.11% 1.07%
TCE / TA6.88% 6.55% 6.35%
CET1 Ratio9.47% 9.16% 8.90%

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Loan Growth (unannualized)Q3 2025N/A~2% New
Loan Growth (unannualized)Q4 2025N/A~2% New
Net Interest Income (FTE, $M)Q3 2025N/A~$33.5 New
Net Interest Income (FTE, $M)Q4 2025N/A~$35.5 New
Net Interest Margin (FTE, %)Q3 2025N/A2.20–2.25% New
Net Interest Margin (FTE, %)Q4 2025N/A2.30–2.35% New
Noninterest Income ($M)Q3 2025N/A~$13.25 New
Noninterest Income ($M)Q4 2025N/A~$13.25 New
Noninterest Expense ($M)Q3 2025N/A~$27 New
Noninterest Expense ($M)Q4 2025N/A~$27 New
Provision for Credit Losses ($M)Q3 2025N/A$10–11 New
Provision for Credit Losses ($M)Q4 2025N/A$10–11 New
FY Net Interest Income (FTE, $M)FY 2026N/A$158–163 New
FY Net Interest Margin (FTE, %)FY 2026N/A2.50–2.60% New
FY Noninterest Income ($M)FY 2026N/A$51–54 New
FY Noninterest Expense ($M)FY 2026N/A$108–112 New
FY Provision ($M)FY 2026N/A$37–40 New
FY EPS ($)FY 2026N/A~$5.20–$6.30 (scenario range) New

Earnings Call Themes & Trends

TopicPrevious Mentions (Q4 2024, Q1 2025)Current Period (Q2 2025)Trend
NIM trajectoryFTE NIM rose to 1.75% on deposit cost declines; Fed cuts support repricing FTE NIM 2.04%; targeted to 2.20–2.35% in H2 Improving
Deposit costs and mixDeposit cost down to 4.13% in Q4; fintech reclassified to demand deposits and growing Deposit cost 3.92%; fintech deposits drove +$353M deposits, enabled FHLB paydown Improving
SBA 7(a) gain-on-saleQ4 GOS $8.6M; timing impacted volumes GOS $1.7M after SOP-aligned pause; resumed in Q3 with $52M sold, ~$3.7M gain Rebounding in Q3
Credit—franchise financeNPLs rose in Q4; specific reserves applied $12.6M moved to nonaccrual; $4.5M specific reserves; workout recoveries ~75% Stabilizing (early signs)
Credit—SBA portfolioElevated vintages 2022–2023; specific reserves added in Q1 Delinquencies −48% vs Q1; deferrals down to $3.7M; repurchase cycle decelerating Improving
Provision outlookQ4/Q1 rising provisions (to $11.9M in Q1) Expect $10–11M per quarter in H2; conservative stance Elevated but tempering
Fintech partnershipsFintech deposit growth in Q4/Q1 Ramp payments processed $10B in June; SMB savings nearing $500M; fintech deposits >$1B Scaling
Capital & buybacksCET1 ~9–11%; TCE/TA ~6.6–7.9%; no buyback BUYBACK only if stock falls into teens; focus on building capital ratios Cautious

Management Commentary

  • “We are reporting $0.02 of diluted earnings per share for the quarter… due mostly to credit issues and to a lesser extent changes in non-interest income” — David Becker, CEO .
  • “With lower CD pricing across the curve, we expect further declines in deposit costs throughout 2025… this should support ongoing growth in net interest income and margin” — Ken Lovik, CFO .
  • “We implemented changes to our loan sale process to align with SBA’s SOP… held originated loans longer before selling… we have already sold $52 million in guaranteed balances for a total of $3.7 million in gain on sale month to date in July” — Nicole Lorch, President & COO .
  • “We processed $10 billion worth of payments [for Ramp] in June… fintechs as a whole were north of $1 billion in total deposits” — David Becker, CEO .
  • “If we stay above $20 [stock price], we probably won’t [buy back]. Teens will be in a buyback position for sure” — David Becker, CEO .

Q&A Highlights

  • Provision strategy: Management guided to $10–11M per quarter in H2, preferring conservative reserves to avoid future misses; ACL coverage expected to grow over time .
  • SBA SOP changes: Temporary pause reduced Q2 gain-on-sale by ~$7M; process enhancements aim to protect guarantees; premiums softened to ~7% net vs >8% historically .
  • Franchise finance underwriting: Cash-flow lending with minimum ~1.25x DSCR, personal guarantees and collateral; new originations/purchases paused since January; balances down ~10% YTD .
  • Deposit/CD repricing: ~$800M CDs maturing in H2 at >4.60% weighted cost; roll rates currently mid-4.20s; fintech growth allows further CD rate management .
  • Capital allocation: Emphasis on rebuilding capital ratios before buybacks; would consider repurchases only if valuation falls markedly .

Estimates Context

MetricQ1 2025Q2 2025Q3 2025 (next)
EPS Consensus Mean ($)0.7425*0.31*0.64*
EPS Actual ($)0.11 0.02 —
Revenue Consensus Mean ($USD Millions)26.733*30.350*33.250*
Revenue Actual ($USD Millions)35.523 33.547 —
  • Q2 EPS was a significant miss versus consensus (0.02 vs 0.31), primarily on credit costs and SBA sale pause; Q2 total revenue (company GAAP) was above the S&P consensus revenue figure, noting definitional differences for bank “revenue” between S&P and company reporting .
  • Management’s H2 guide (FTE NIM rising, resumed SBA sales) suggests upward revision potential for net interest income but provisions likely cap near-term EPS; watch for estimate resets around provision trajectory and SBA premiums .

Values marked with * retrieved from S&P Global.

Key Takeaways for Investors

  • Core trajectory intact: NIM expansion and deposit cost declines are broad-based and should continue through H2, supporting net interest income growth even in a flat-rate scenario .
  • SBA normalization is underway: July sales already booked; expect noninterest income to revert to ~$13M per quarter as sale volume resumes; monitor premium levels and guarantee protection .
  • Credit clean-up ongoing: Franchise finance and SBA vintages (2022–2023) still driving elevated provisions (~$10–11M/quarter); early indicators (delinquencies, deferrals) improving—follow NPL migration and workout recoveries .
  • Liquidity and funding flexibility are strong: Fintech deposit growth and CD repricing create levers to lower funding costs while funding loan growth at higher yields; FHLB reductions reduce interest expense risk .
  • Capital build over buybacks near term: Management prioritizes ratio improvement over repurchases, with buyback only if valuation falls to “teens”—aligns with de-risking posture .
  • Tactical focus: Near-term trading likely keyed to evidence of SBA revenue rebound (monthly sale updates), realized deposit cost declines, and provision trendline vs guidance; medium-term thesis hinges on sustained margin expansion and normalized credit .
  • Watch segments: Investor CRE growth (portfolio shift), franchise finance stabilization, and construction drawdowns; segment mix impacts asset yields and credit profile .

Additional Data Points and References

  • Loans held-for-sale increased to $126.5M from $31.7M, positioning for Q3 sales .
  • Ending FHLB advances fell to $264.5M from $395.0M q/q (−33%), aided by deposit inflows .
  • Tangible book value per share rose to $44.25 (+0.5% q/q) .

Methodology Notes

  • Company “Total revenue (GAAP)” combines net interest income and noninterest income; S&P consensus “Revenue” may differ in definition for banks. EPS comparisons are like-for-like. All company figures cited from the Q2 2025 press release and exhibits; guidance confirmed on call .
  • Non-GAAP metrics (FTE NIM, PTPP, TCE/TA) referenced where management provides reconciliations .