Sign in

You're signed outSign in or to get full access.

FI

First Internet Bancorp (INBK)·Q3 2025 Earnings Summary

Executive Summary

  • GAAP net loss of $41.6M (-$4.76 diluted EPS) driven by a $37.8M pre-tax loss on an $836.9M single-tenant lease financing loan sale and a $34.8M provision for credit losses; adjusted diluted EPS was -$1.43 on adjusted pre-tax, pre-provision income of $18.1M, up 54% QoQ .
  • Adjusted total revenue rose ~30% QoQ to $43.5M; net interest income increased 8% to $30.4M (FTE $31.5M), with NIM expanding to 2.04% (FTE 2.12%), marking the eighth consecutive quarter of NII growth .
  • Proactive credit actions in SBA and franchise finance lowered delinquencies to 35 bps (lowest in a year) and reduced franchise delinquencies ~79% QoQ; ACL rose to 1.65% of loans, NCOs to 1.89% of average loans as credit clean-up progressed .
  • Board authorized up to $25M share repurchase through September 30, 2027; deposit flexibility via BaaS/Intrafi enables off-balance-sheet management to support capital and NIM trajectory .
  • Q4 2025 outlook: FTE NIM 2.4–2.5%, FTE NII $32.75–$33.5M, noninterest income $10.5–$11.5M, and expenses $26–$27M; management reiterated confidence in NII trajectory and 2026 planning despite SBA secondary-market shutdown risk .

What Went Well and What Went Wrong

What Went Well

  • Eight consecutive quarters of net interest income growth; NIM expanded to 2.04% (FTE 2.12%) on higher asset yields and lower funding costs, with new loan originations at ~7.50% .
  • SBA gain on sale rebounded to $10.6M as volumes normalized and premiums improved; loan pipelines remained strong across CRE/construction, C&I, and SBA .
  • Asset quality indicators improved in forward-looking measures: total delinquencies fell to 35 bps (best in a year); franchise finance delinquencies dropped ~79% QoQ, with specific resolutions recovering ~90% on certain loans .
  • CEO quote: “We have now achieved eight consecutive quarters of increasing net interest income… [and] are now well-positioned to grow earnings and accelerate our ability to achieve a ROAA of 1%” .

What Went Wrong

  • GAAP results suffered from strategic actions: $37.8M pre-tax loss on the STLF loan sale and a $34.8M provision for credit losses (primarily SBA and franchise finance); NCOs were $21.0M .
  • Noninterest income was -$24.6M due to the loan sale loss; adjusted noninterest income was $13.2M (+137% QoQ) after excluding the sale impact .
  • NPL ratio rose to 1.47% (from 1.00% in Q2) largely from nine franchise loans moved to nonaccrual; tangible book value per share fell ~9.9% QoQ to $39.88 following the loan sale .
  • Analyst concern: SBA secondary-market sales paused by government shutdown could reduce Q4 loan sale volume; management prepared by securing authorizations and highlighted contingency impacts to guidance ranges .

Financial Results

Core metrics vs prior periods and consensus

MetricQ3 2024Q2 2025Q3 2025
Net Interest Income (GAAP) ($M)21.765 27.990 30.352
Net Interest Income (FTE) ($M)22.898 29.147 31.510
Net Interest Margin (GAAP) (%)1.62 1.96 2.04
Net Interest Margin (FTE) (%)1.70 2.04 2.12
Total Revenue (GAAP) ($M)33.794 33.547 5.705
Adjusted Total Revenue ($M)33.794 33.547 43.528
Diluted EPS (GAAP) ($)0.80 0.02 -4.76
Adjusted Diluted EPS ($)0.80 0.02 -1.43
Provision for Credit Losses ($M)3.390 13.608 34.789
Noninterest Income ($M)12.029 5.557 -24.647

Notes:

  • Q3 2025 GAAP revenue was depressed by the $37.8M loan sale loss; adjusted revenue more closely reflects core performance .
  • EPS adjusted metric aligns with “Primary EPS” used by consensus; see Estimates Context for comparison.

Balance sheet and credit KPIs

KPIQ3 2024Q2 2025Q3 2025
Total Loans ($M)4,035.880 4,362.562 3,630.385
Total Deposits ($M)4,797.710 5,298.789 4,915.434
Loans/Deposits Ratio (%)—82.3 73.9
NPLs / Loans (%)0.56 1.00 1.47
Net Charge-offs / Avg Loans (%)0.15 1.31 1.89
ACL / Loans (%)1.13 1.07 1.65
CET1 Ratio (%)9.37 8.90 9.24
Tangible Book Value/Share ($)43.89 44.25 39.88

Segment loan composition (period-end)

Segment ($M)Q3 2024Q2 2025Q3 2025
C&I111.199 174.475 206.301
Investor CRE260.614 513.411 644.184
Construction340.954 332.658 300.291
Single-Tenant Lease Financing932.148 970.042 135.025
Public Finance462.730 476.339 480.119
Healthcare Finance190.287 160.073 150.522
Small Business Lending298.645 383.455 401.628
Franchise Finance550.442 479.757 450.340
Consumer (Total)803.353 797.171 788.085

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
FTE NIM (%)Q4 20252.30–2.35 (from Q2 release) 2.40–2.50 Raised
FTE Net Interest Income ($M)Q4 2025~35.5 32.75–33.5 Lowered (reflects shutdown/loan sale timing)
Noninterest Income ($M)Q4 2025~13.25 10.5–11.5 Lowered
Noninterest Expense ($M)Q4 2025~27 26–27 Maintained/Narrowed
Loan Growth (unannualized)Q4 2025~2% (Q3 outlook) 4–6% Raised (from lower base post-sale)
Share Repurchase AuthorizationThrough 9/30/2027None disclosed priorUp to $25M New

Earnings Call Themes & Trends

TopicPrevious Mentions (Q1 & Q2)Current Period (Q3)Trend
NII/NIM trajectoryQ1: NIM 1.82%; FTE NII $26.3M; deposit repricing tailwinds NIM 2.04% (FTE 2.12%); FTE NII $31.5M; higher loan yields (~7.50%) Improving
SBA program & GOSQ1 GOS $8.6M; Q2 $1.7M as sales deferred GOS $10.6M; pipeline $260M; shutdown risk acknowledged Rebounded; near-term risk
Credit clean-upElevated NCOs; rising NPLs; tightening standards Provision $34.8M; delinquencies down to 35 bps; franchise NPL adds with specific reserves Proactive clean-up; forward indicators better
Deposit strategy/BaaSStrong fintech deposit growth; CD/brokered repricing >$700M moved off balance sheet; Intrafi mechanics; cost down to 3.87% Flexibility increased
Balance sheet optimizationFocus on higher-yielding, variable-rate assets STLF sale ($836.9M); enhances NIM and capital Executed
AI/technologyOngoing process improvements noted AI-driven analytics for SBA; Parlay Finance LIS deployed Accelerating adoption
Macro/tariffsRate-cut sensitivity; consumer stable Tariff commentary; SBA industry defaults up ~2.3x vs 2022 Mixed macro; tighter credit

Management Commentary

  • CEO: “We delivered our eighth consecutive quarter of net interest income growth… completed a major loan sale… [and] are now well-positioned to… achieve a ROAA of 1%” .
  • COO: “We made strategic investments in technology platforms, including AI-driven analytics… introduced loan-level predictive analytics to bolster portfolio management and problem loan identification” .
  • CFO: “For the fourth quarter, we expect the net interest margin (FTE) to increase to 2.4%–2.5% and FTE NII to $32.75–$33.5M… deposit costs declined 5 bps; loan yields rose 11 bps” .
  • On deposits flexibility: “We can push higher-cost fintech deposits off balance sheet… and bring them back… to fund loan growth or CD outflows” .
  • On share repurchases: authorization up to $25M through 9/30/27; may act post-blackout depending on share levels .

Q&A Highlights

  • Credit outlook: management believes franchise finance “worst of the worst” largely addressed; SBA ACL more than doubled to ~$27.5M; delinquencies down to 35 bps, with franchise delinquent loans at four accounts .
  • SBA shutdown: company pre-secured ~$94M authorizations; ~$73–75M in closings underway; warned shutdown duration could limit Q4 loan sales .
  • Franchise finance audit: external audit (Crowe) reviewed >90% of loans with “no downgrades and two upgrades,” and internal controls shifted to in-house collections .
  • Deposits/Intrafi: clarified mechanics and fee economics; highlighted ability to manage balance sheet size and cost of funds proactively .
  • Portfolio mix evolution: potential to add higher-yield leasing and forward flow opportunities; expect different mix in 18 months .
  • Rate sensitivity: slightly liability-sensitive; each 25 bps cut adds ~$1.4M annualized NII; comfortable with 2026 NII estimates (GAAP ~$149–150M; +$4.4M FTE) .

Estimates Context

  • Q3 2025 consensus EPS vs actual: Primary EPS consensus $0.64* vs actual -$1.43 (adjusted diluted EPS); GAAP diluted EPS was -$4.76, indicating a significant miss versus Street expectations .
  • Q3 2025 consensus revenue vs actual: Revenue consensus ~$33.25M* vs company-reported GAAP total revenue $5.705M; adjusted revenue was $43.528M. The divergence reflects the loan sale loss and differing revenue definitions used by analysts versus company GAAP metrics .
  • Q4 2025 consensus: Primary EPS $0.49*; Revenue ~$32.8M*; company outlook implies FTE NII $32.75–$33.5M and noninterest income $10.5–$11.5M, with SBA sale timing a swing factor .

Values marked with * were retrieved from S&P Global.

Key Takeaways for Investors

  • Core earnings power improved: NIM expansion and eighth consecutive NII growth, with deposit cost tailwinds and higher new origination yields underpinning margin trajectory into Q4 and 2026 .
  • Strategic reset executed: STLF loan sale boosts capital ratios and should enhance portfolio yield/NIM; TBV per share decline is the near-term trade-off .
  • Credit clean-up largely front-loaded: Elevated provision/NCOs reflect decisive actions; leading indicators (delinquencies) improved materially, reducing forward risk concentration to SBA/franchise finance .
  • Liquidity optionality is a differentiator: Off-balance-sheet BaaS/Intrafi capabilities provide cost-of-funds control and balance sheet flexibility to fund growth or shrink opportunistically .
  • Near-term catalysts: FTE NIM guidance raise, potential SBA sales resumption post-shutdown, and buyback authorization could support sentiment as credit metrics stabilize .
  • Watch items: SBA secondary market timing, franchise finance workout execution, and macro/tariff impacts on small business borrowers; management’s AI/analytics investments aim to mitigate emerging risks .
  • Medium-term thesis: A more optimized, higher-yielding asset mix with deposit cost flexibility positions INBK for sustained NII/NIM expansion and improved ROAA as credit normalization progresses .

Appendix: Additional Q3 2025 Press Releases

  • Parlay Finance partnership: First Internet Bank deployed an AI-native Loan Intelligence System to streamline SBA intake, document validation, and decisioning, targeting up to a 50% efficiency gain; complements management’s AI analytics initiatives cited on the call .