First Internet Bancorp Q1 FY2026 earnings call

Commercial Lending

• Solid first quarter activity in commercial real estate with strong production in construction and single tenant lease financing; emerging verticals like wealth advisory lending and equipment finance had higher balances. Pipeline remains healthy with disciplined underwriting and good yields on new commitments.

SBA

• Deliberate shift prioritizing credit quality over volume led to lower originations and loan sale volume in the quarter. Gain on sale revenue impacted but expected to be additive to net interest income and margin in future periods. Delinquencies in SBA portfolio improved 118 basis points quarter over quarter and 126 basis points year over year. Focus on durability and consistency rather than near-term volume with operational changes fully embedded.

Banking as a Service

• Strong momentum with FinTech partners, processed over $82 billion in payments volume during the quarter, an increase of over 260% year over year. Constantly evaluating new partnership opportunities while ensuring compliance and risk management. Invested in AI and automation to drive efficiency and enhance customer service, with third-party AI capabilities deployed and virtual customer service agent resolving approximately 45% of inquiries.

Credit

• Provision for credit losses was $16.3 million, a little better than initial expectations. Allowance for credit losses at quarter end was $56.5 million, or 1.5% of total loans. Non-performing loans increased but excluding fully guaranteed SBA balances and one relationship, it was lower. Special assets team working through problem loans.

Total revenue reached $43.1 million in the first quarter, up 21% year over year. Net interest income was $31.6 million, or $32.8 million on a fully taxable equivalent basis, up about 26% and 25% respectively year-over-year. Net interest margin improved to 2.36% or 2.45% on a fully taxable equivalent basis. Pre-provision net revenue grew 51% year over year to $18.1 million. Total loans increased to $3.8 billion. Total deposits reached $5 billion, up from $4.8 billion in the prior quarter. Average FinTech deposits totaled $2.4 billion, an increase of over 186% from the first quarter of 2025. At quarter end, approximately $1.5 billion of these deposits were moved off balance sheet.

Broadly maintaining the guidance provided in January. Acknowledging heightened macroeconomic uncertainty. Recognizing full-year loan growth target could be ambitious due to higher than expected loan payoffs and evolving macro headwinds. Expect net interest margin to have 10 to 15 basis point improvement per quarter through the end of the year. SBA originations expected to ramp up throughout the year with third and fourth quarters higher than first and second.

Q: Unpack charge-offs and visibility into charge-offs for the rest of the year.

A: Charge-offs were 15 to 16 million in the quarter. Bulk of provisioning expected in second half with first quarter likely worst. Special assets team working on resolving non-performing loans.

Q: Margin trajectory with Fed on pause.

A: CDs maturing and running off, new CDs and fintech deposits helping. Expect 10 to 15 basis point improvement per quarter.

Q: Guidance tweaks.

A: Slightly conservative on loan growth target. Expense guidance kept for conservatism with offsets. Fee income has levers.

Q: RV portfolio and fuel prices.

A: Not seeing any impact on delinquencies or problem loans in consumer book from fuel prices. Originations solid.

Q: FinTech fee income momentum.

A: Seeing momentum with negative net revenue churn, retention, and increased fee structure. Doubled fees year over year.

Q: FinTech partners in pipeline.

A: Couple of lending and deposit programs in due diligence, some expected in next quarters.

Q: Loan-to-deposit ratio.

A: Expected to increase over the year as excess cash deployed into loans.

Q: Tax benefit and rate.

A: Driven by low pre-tax income and tax-exempt businesses; tax rate varies with pre-tax income.

Q: SBA revenue cadence.

A: Originations expected to ramp up throughout the year with third and fourth quarters higher than first and second, pipeline building.