10-Q: First Internet Bancorp Reports Lower Q1 2025 Earnings Due to Increased Provision for Credit Losses

Sentiment:

Quarterly Report 7 May 2025 4:19 PM

First Internet Bancorp's net income decreased significantly in Q1 2025 compared to Q1 2024, primarily due to a substantial increase in the provision for credit losses.

Worse than expectedNet income was significantly lower due to a substantial increase in the provision for credit losses.ROAA, ROAE, and ROATCE were all lower compared to the same period last year.

Summary

First Internet Bancorp's net income for Q1 2025 was $0.9 million, or $0.11 diluted earnings per share, a decrease from $5.2 million, or $0.59 diluted earnings per share, in Q1 2024.
The decrease in net income is primarily attributed to a $9.5 million increase in the provision for credit losses and a $2.5 million increase in noninterest expense.
These increases were partially offset by a $4.4 million increase in net interest income and a $2.1 million increase in noninterest income, as well as a $1.3 million income tax benefit.
Return on average assets (ROAA) was 0.07% in Q1 2025, compared to 0.40% in Q1 2024.
Return on average shareholders equity (ROAE) was 0.98% in Q1 2025, compared to 5.64% in Q1 2024.
Return on average tangible common equity (ROATCE) was 0.99% in Q1 2025, compared to 5.71% in Q1 2024.
Pre-tax, pre-provision income (PTPP) increased to $12.0 million, up from $8.1 million in Q1 2024.
Total assets increased to $5.9 billion at March 31, 2025, compared to $5.7 billion at December 31, 2024.
Total loans were $4.3 billion as of March 31, 2025, an increase of $83.8 million from December 31, 2024.
Total deposits increased slightly to $4.9 billion as of March 31, 2025, compared to $4.9 billion as of December 31, 2024.
The company's board declared a cash dividend of $0.06 per share of common stock.

Sentiment

Score: 4

Explanation: The sentiment is slightly negative due to the significant decrease in net income and increase in credit losses, despite some positive trends in revenue and asset growth.

Positives

Net interest income increased by $4.4 million, or 21.0%, compared to the first quarter of 2024.
Noninterest income increased by $2.1 million, or 24.9%, compared to the first quarter of 2024.
Pre-tax, pre-provision income (PTPP) increased by 48.5% from $8.1 million to $12.0 million.
Total assets increased by $113.7 million, or 2.0%, to $5.9 billion.
The company is one of the fastest-growing lenders in the Small Business Administration (SBA) 7(a) program.
Net interest margin (NIM) increased to 1.82% for the first quarter 2025 compared to 1.66% for the first quarter 2024.

Negatives

Net income decreased by $4.2 million, or 81.8%, compared to the first quarter of 2024.
The provision for credit losses increased by $9.5 million, or 387.5%, compared to the first quarter of 2024.
Noninterest expense increased by $2.5 million, or 12.0%, compared to the first quarter of 2024.
Return on average assets (ROAA) decreased from 0.40% to 0.07%.
Return on average shareholders equity (ROAE) decreased from 5.64% to 0.98%.
Return on average tangible common equity (ROATCE) decreased from 5.71% to 0.99%.

Risks

The company's performance is subject to risks and uncertainties, including economic conditions, credit quality, regulatory changes, and competition.
The company's forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from expectations.
The company's ability to pay dividends is subject to the discretion of the Board of Directors and regulatory restrictions.
The company's nonperforming loans increased $5.8 million, or 20.5%, to $34.2 million as of March 31, 2025 compared to $28.4 million as of December 31, 2024 due primarily to an increase in nonperforming loans in franchise finance and small business lending during the year.

Future Outlook

The Company expects to continue to pay cash dividends on a quarterly basis; however, the declaration and amount of any future cash dividends will be subject to the sole discretion of the Board of Directors and will depend upon many factors.

Industry Context

The document indicates a challenging environment for First Internet Bancorp, with increased credit losses impacting profitability, while the company is still growing its loan portfolio and deposit base. The company is focusing on variable rate and higher-yielding products.

Comparison to Industry Standards

The document does not provide enough information to make a detailed comparison to industry standards.
To perform a thorough comparison, we would need data from comparable banks, such as regional banks with a similar asset size and business model.
Key metrics to compare would include net interest margin, efficiency ratio, return on assets, return on equity, and asset quality ratios.
Additionally, comparing the company's SBA lending activity to other SBA lenders would provide valuable insights.

Stakeholder Impact

Shareholders will experience lower earnings per share and a reduced return on equity.
Employees may face increased pressure to improve performance and manage credit risk.
Customers may see changes in lending policies and pricing as the company adjusts to the changing economic environment.
The company's financial condition could impact its ability to support local communities and invest in new initiatives.

Next Steps

The Company may explore strategic alternatives, including additional asset, deposit or revenue generation channels that complement our small business, commercial and consumer banking platforms, which may require additional capital.

Key Dates

Date	Description
1999	First Internet Bank of Indiana commenced banking operations.
2005-09-15	First Internet Bancorp was incorporated.
2006-03-21	First Internet Bancorp acquired all outstanding shares of First Internet Bank of Indiana.
2015-01-01	Basel III Capital Rules became effective for the Company and the Bank.
2019-01-01	Basel III Capital Rules were fully phased in.
2019-06	The Company issued $37.0 million aggregate principal amount of 6.0% Fixed-to-Floating Rate Subordinated Notes due 2029 (the 2029 Notes) in a public offering.
2020-10	The Company entered into a term loan in the principal amount of $10.0 million, evidenced by a term note due 2030 (the 2030 Note).
2021-07	The Company's franchise finance business was established in conjunction with our business relationship with ApplePie Capital.
2021-08	The Company issued $60.0 million aggregate principal amount of 3.75% Fixed-to-Floating Rate Subordinated Notes due 2031 (the 2031 Notes) in a private placement.
2021-Q3	Provide, Inc. (formerly known as Lendeavor, Inc.) was acquired by a super-regional financial institution.
2021-12-30	We completed an exchange of $59.3 million principal amount of the unregistered 2031 Notes for registered 2031 Notes in satisfaction of our obligations under the registration rights agreement.
2022-05-16	The First Internet Bancorp 2022 Equity Incentive Plan (the 2022 Plan) was approved by our Board of Directors and ratified by our shareholders.
2022-12-19	The Company's Board of Directors approved a new stock repurchase program to replace the prior program.
2024-12-31	The stock repurchase authorization expired.
2025-03-31	End of the quarterly period.
2025-04-15	Cash dividend of $0.06 per share of common stock payable to shareholders of record as of March 31, 2025.
2025-05-02	As of May 2, 2025, the registrant had 8,697,085 shares of common stock issued and outstanding.
2029-06-30	The 2029 Notes are scheduled to mature.
2030-11-01	The 2030 Note is scheduled to mature.
2031-09-01	The 2031 Notes are scheduled to mature.

Keywords

First Internet Bancorp, financial results, net income, credit losses, loans, deposits, SBA lending, interest income, noninterest income, regulatory capital

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