First Internet Bancorp (INBK) Q1 2025 earnings summary

Executive summary

• Net income for Q1 2025 was $0.9 million ($0.11 per diluted share), down sharply year-over-year and sequentially, primarily due to higher credit loss provisions and noninterest expenses, despite growth in net interest and noninterest income.

• Pre-tax, pre-provision income increased 10.8% sequentially and 48.5% year-over-year, driven by core revenue growth and net interest margin expansion.

• Loan portfolio grew 2.0% from Q4 2024, with strong origination yields and deposit growth driven by fintech partnerships.

• The company remains a leading SBA 7(a) lender, closing $113.8 million in SBA loans in Q1 2025 and ranking 8th nationally for the SBA's fiscal year.

Financial highlights

• Net interest income increased to $25.1 million, up 6.6% from Q4 2024 and 21.1% year-over-year; net interest margin improved to 1.82% (up 16 bps sequentially and year-over-year).

• Noninterest income was $10.4 million, down 34.6% sequentially due to prior quarter's nonrecurring swap gains; gain on sale of loans was $8.6 million.

• Noninterest expense was $23.6 million, down 1.7% from the prior quarter, with lower incentive compensation offsetting higher consulting and loan collection costs.

• Provision for credit losses surged to $12.1 million, reflecting elevated net charge-offs and specific reserves for franchise finance and small business lending.

• Net charge-offs were $9.7 million (0.92% of average loans), up from $0.5 million (0.05%) a year ago, mostly from franchise finance and small business lending.

Outlook and guidance

• Management expects continued benefit from lower deposit costs, strong loan production yields, and fintech-driven deposit growth, with NIM projected to reach 2.35%-2.45% by Q4 2025.

• Full-year net interest income is expected to increase 40% or more over 2024.

• Deposit cost improvements are anticipated following the paydown of $200 million in higher-cost brokered deposits.

• Annual noninterest expense is expected to rise 10%-15% over 2024.

• Temporary one-quarter decline in SBA loan gain on sale revenue is anticipated, with normalization in the second half.