First Internet Bancorp NASDAQ: INBK reported first-quarter 2026 results that management said reflected “strong momentum” across the company’s diversified model, highlighted by revenue growth, net interest margin expansion and what executives described as improving trends in two challenged credit portfolios.
Revenue growth and margin expansion
Chairman and CEO David Becker said the company delivered “strong first quarter results” despite an “uncertain macroeconomic environment,” pointing to revenue growth, operating leverage and progress in credit quality. Total revenue was $43.1 million, up 21% year-over-year, driven by a 26% increase in net interest income, according to management.
Executive Vice President and CFO Kenneth Lovik reported net income of $2.5 million, or $0.29 per diluted share. Net interest income totaled $31.6 million, or $32.8 million on a fully taxable equivalent basis, up about 26% and 25% year-over-year, respectively. The net interest margin improved to 2.36% (2.45% on an FTE basis), up 14–15 basis points from the prior quarter and 54 basis points from a year ago.
Lovik attributed the quarterly yield on average interest-earning assets rising to 5.67% (from 5.57% a year ago) to higher rates on new loan originations, which he said more than offset the impact of Federal Reserve rate cuts in late 2025. At the same time, he said funding costs declined meaningfully, with the cost of interest-bearing deposits falling 56 basis points to 3.45%.
On the outlook for margin, Becker told analysts the company expects continued improvement even if the Fed remains on hold, citing deposit mix changes and the repricing of higher-cost CDs. Becker said management views “a 10 to 15 basis point improvement per quarter through the end of the year” as achievable, and suggested the margin “could be up in that $290 range by the end of the year,” referring to approximately 2.90%.
Fees, fintech partnerships and Banking-as-a-Service activity
Non-interest income totaled $11.5 million, up almost 11% year-over-year, with Lovik citing growth in fintech partnership fee revenue and higher net loan servicing revenue following a servicing-retained sale of single-tenant lease financing loans in 2025.
President and COO Nicole Lorch highlighted momentum in Banking-as-a-Service, noting the company processed more than $82 billion in payments volume during the quarter, up more than 260% year-over-year. Lorch said the bank is “constantly evaluating new partnership opportunities while ensuring we maintain the highest standards of compliance and risk management.”
During the Q&A, management discussed how fintech-related economics show up across the income statement. Lorch said deposits moved off balance sheet “are not showing up in the interest income or interest expense, but those are showing up in non-interest income.” Lovik added that fintech fees appear in “the other line item” and also in “service charges and fees.” He quantified “pure fee income” at a little over $1.5 million in the first quarter of 2026 versus a little over $1.0 million in the fourth quarter.
On partner onboarding, Lorch said the company was in due diligence with “half a dozen programs,” including lending and deposit programs, and emphasized that First Internet is “one of the tougher due diligence programs out there.” She said one program was moving close to approval and “would be a second quarter onboarding event,” with additional programs potentially arriving in the third quarter depending on complexity and whether they involve conversions from other sponsor banks.
Loan growth, deposit mix and balance sheet positioning
Total loans ended the quarter at $3.8 billion, up $29.1 million (1%) from the prior quarter but down $479 million (11%) from March 31, 2025, Lovik said. He cited stronger origination activity across commercial and consumer businesses, offset by payoffs and maturities in franchise finance, public finance and recreational vehicles, as well as early payoffs in investor commercial real estate, including a large payoff at quarter-end.
On deposits, total deposits were $5.0 billion, up $142 million (3%) from the prior quarter and up $36 million (1%) from a year ago. Becker said the company continues to see growth in lower-cost fintech deposits, allowing it to let higher-cost CDs and brokered deposits mature without replacement. Average fintech deposits were $2.4 billion, which Becker said was up more than 186% from the first quarter of 2025. He also said approximately $1.5 billion of these deposits had been moved off balance sheet at quarter-end to optimize asset size while maintaining customer relationships and fee income streams.
Lovik detailed the repricing opportunity in deposits, noting average CD and brokered deposit balances fell by more than $180 million from the prior quarter. He said the weighted average cost of maturing CDs in the first quarter was 4.19%, compared with an average cost of fintech deposits of 3.19% and the cost of new CDs of 3.62%. Lovik said the cost of maturing CDs in the second quarter is 4.11% and 4.06% in the third quarter, which he said provides a path to “drive funding costs lower throughout the year.”
Asked about the loan-to-deposit ratio, Lovik said the company expects the ratio to rise over the year, potentially moving from the mid-70% range toward 85%–90% by the fourth quarter as excess cash is deployed, while keeping overall balance sheet growth relatively limited.
Credit trends, provisioning and problem portfolio actions
Management focused on progress in SBA and franchise finance credit issues. Becker said the company is seeing “improving trends” with delinquencies and non-performing loans “headed in the right direction,” citing enhanced underwriting, stronger monitoring and problem loan resolution. Lorch said delinquencies in the SBA portfolio improved 118 basis points quarter-over-quarter and 126 basis points year-over-year as of March 31.
Provision for credit losses was $16.3 million in the first quarter, which Lovik said was “a little better than our initial expectations.” The provision included net charge-offs of $15.8 million and additional specific reserves in franchise finance. Lovik said the lighter provision versus the company’s original forecast reflected lower loan balances and unfunded commitments and updates to CECL assumptions.
Non-performing loans increased to $61.6 million, or 1.63% of total loans, though Lovik noted part of the increase reflected fully guaranteed SBA 7(a) balances; excluding fully guaranteed balances, the ratio would be 1.22%. He also said about $6 million of the increase related to one relationship expected to pay off in full in the second quarter. The allowance for credit losses ended the quarter at $56.5 million, or 1.5% of total loans. The allowance-to-non-performing-loans coverage ratio was 92% (122% excluding fully guaranteed SBA balances), Lovik said.
On the path for charge-offs and provisioning, management told analysts it still expects elevated credit costs in the second quarter before improving in the second half of 2026. In response to a question from Piper Sandler’s Nathan Race, management said first quarter was “probably going to be the worst of the quarters,” with resolution activity expected in the second quarter and “far more moderate” credit costs by year-end.
In franchise finance, Lorch said the special assets team resolved several credits during the quarter. While net charge-offs remained elevated, she said they “more than offset non-performing loan formation,” and non-accrual franchise finance loans fell to their lowest level in four quarters.
In SBA, Lorch said seasonality and a deliberate shift toward credit quality reduced originations, lowering loan sale volume and gain-on-sale revenue versus the linked quarter. She said the company expects to retain more production on balance sheet as premiums on certain higher-quality deals may be less attractive in the secondary market, which she said would pressure gain-on-sale revenue but be “highly additive to net interest income and net interest margin in future periods.” She added that, barring macroeconomic deterioration, management remains optimistic about previously shared full-year production and gain-on-sale targets. Becker also said the company promoted Gary Carter to National Sales Manager for SBA.
Looking to the rest of 2026, Lovik said the company is “broadly maintaining the guidance” provided in January but is taking a measured approach due to “heightened macroeconomic uncertainty,” including volatile energy prices and geopolitical developments. He said the full-year loan growth target “could prove ambitious” given higher-than-expected payoffs and potential underwriting tightening, while management reiterated confidence in improving profitability in the second half of the year and into 2027.
About First Internet Bancorp NASDAQ: INBK
First Internet Bancorp is the bank holding company for First Internet Bank of Indiana, a pioneer in digital banking in the United States. Established with a focus on online-only operations, the company offers fully integrated, web-based financial solutions without the overhead of physical branches. Headquartered in Indianapolis, Indiana, First Internet Bancorp leverages technology to deliver streamlined banking services to customers across the country.
The company's core offerings include a range of deposit products such as checking accounts, savings accounts, money market accounts, certificates of deposit (CDs) and individual retirement accounts (IRAs).
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