First Internet Bancorp forecasts Q4 EPS of $1.02-$1.07 as it targets 2.75%-2.80% NIM

Earnings Call Insights: First Internet Bancorp (INBK) Q3 2026

Management View

• "The fundamental earnings power of First Internet Bancorp continues to improve. We generated record revenue in the third quarter. We expanded net interest margin for the fourth consecutive quarter." (Chairman & CEO David Becker)

• "For the third quarter, we are reporting earnings of $0.54 per diluted share. Excluding nonrecurring expenses, adjusted earnings per share rose to $0.57." (Chairman & CEO David Becker)

• "Late in the quarter, the borrower's financial condition deteriorated... We moved the relationship to nonaccrual. We established a $2.6 million specific reserve and reversed $600,000 of interest income." (Chairman & CEO David Becker)

• "Fintech deposits increased just over $1 billion during the quarter to $4.7 billion, including $2.9 billion held off balance sheet at quarter end." (President, COO & Corporate Secretary Nicole Lorch)

• "Fintech fee revenue increased 13% from the second quarter and is up more than 190% on a trailing 12-month basis." (President, COO & Corporate Secretary Lorch)

• "We expect SBA originations and gain-on-sale revenue to remain lower in the fourth quarter." (President, COO & Corporate Secretary Lorch)

• "We reported third quarter net income of $4.8 million or $0.54 per diluted share... Total revenue reached a record $43.9 million." (Executive VP & CFO Kenneth Lovik)

Outlook

• "We continue to expect fully taxable equivalent net interest margin of 2.75% to 2.80% and fully taxable equivalent net interest income of around $38.5 million" and "noninterest income of around $7.5 million" and "noninterest expense should come in around $26.5 million." (Executive VP & CFO Kenneth Lovik)

• "Based on the improving delinquency trends and the franchise finance actions taken this quarter, we expect provision expense of $7.5 million to $8 million" and "fourth quarter diluted earnings per share of approximately $1.02 to $1.07." (Executive VP & CFO Lovik)

• "Our fully taxable equivalent net interest margin outlook remains in the range of 2.75% to 2.80% by the fourth quarter" appeared in the prior-quarter call as a year-end target, while the current call reiterated that range and paired it with explicit Q4 2026 net interest income, noninterest income, expense, provision, and EPS expectations. (Executive VP & CFO Lovik)

Financial Results

• "Total revenue reached a record $43.9 million, up 7% sequentially" and "net interest income was also a record at $34.7 million or $35.9 million on a fully taxable equivalent basis." (Executive VP & CFO Kenneth Lovik)

• "Net interest margin expanded 8 basis points to 2.47% or 2.55% on a fully taxable equivalent basis" and "strong growth in net interest income was achieved despite $1.2 million of interest reversals... which reduced net interest margin by approximately 9 basis points." (Executive VP & CFO Lovik)

• "Provision expense declined to $11.6 million from $13.4 million in the second quarter" and "nonperforming loans increased as additional franchise finance balances moved to nonaccrual, including $6.6 million related to the large relationship." (Executive VP & CFO Lovik)

• "Actions taken on this relationship reduced pretax earnings by approximately $3.2 million or $0.29 per diluted share." (Executive VP & CFO Lovik)

Q&A

• Tim Switzer, KBW: "Did you say 125 basis point rate hike would have about a 2% to 3% impact on annualized NII in '27?" Executive VP & CFO Lovik: "No, it was 2 rate hikes" and "The most punitive scenarios indicate about a negative impact of 2.5% to 3% on forecasted net interest income over the course of 2027."

• Brett Rabatin, StoneX: asked whether Q4 margin guidance implied "15 basis points up" in earning-asset yields and "15 basis points down" in funding costs. Executive VP & CFO Lovik: "Deposit costs will probably be flattish, but the earning asset yields should be up" and "those did impact margin in the past -- in third quarter by 9 basis points."

• Brett Rabatin, StoneX: pressed on whether credit deterioration was broader in "franchise finance or the SBA portfolio" and asked for an update on criticized CRE. Chairman & CEO Becker: "Two of the 4 credits" were "back to performing" and "there's no big change other than things are getting better in the SBA and the franchise pools."

• Nathan Race, Piper Sandler: asked about Q4 deposit growth, cash levels, and loan growth. Executive VP & CFO Lovik: "our cash balance was elevated" and "we do expect that cash balance to start coming down" and "loan growth should be higher than deposit growth because we are putting that cash -- excess cash to work."

• Nathan Race, Piper Sandler: asked about share repurchases and capital targets. Chairman & CEO Becker: "rather than buying back shares, I'd rather throw out some more loans and make some more money" and "rather than buyback, I think we'll use it to expand the balance sheet."

Sentiment Analysis

• "you obviously had the franchise finance issue this quarter that would seem to be a bit unexpected" and questions on rate-hike sensitivity, margin mechanics, credit trajectory, and capital deployment reflected a neutral-to-slightly negative analyst tone focused on downside scenarios and credit containment. (Brett Rabatin, StoneX; Tim Switzer, KBW; Nathan Race, Piper Sandler)

• "We are confident in the direction of the business" and "we're really pleased with the progress that we made this past quarter" reflected a positive management tone in prepared remarks, while responses in Q&A stayed firm and occasionally defensive on credit breadth, including "it's a great customer... and we think we're going to recover." (Chairman & CEO David Becker)

• In the prior quarter, management framed credit as "a meaningful inflection point" and "a clear turning point in this cycle," while the current call maintained that arc but acknowledged a discrete late-quarter franchise finance downgrade and reserve, alongside claims that "credit normalization... is on track." (Chairman & CEO Becker)

Quarter-over-Quarter Comparison

• "We generated record revenue" and "adjusted earnings per share rose to $0.57" contrasted with the prior quarter’s "earnings per share of $0.27" framing, while the current call also introduced a specific relationship hit: "We established a $2.6 million specific reserve." (Chairman & CEO David Becker)

• SBA messaging shifted from Q2’s "we expect origination volumes to increase in the second half of the year" to Q3’s "production here has been softer than we expected" and "we expect SBA originations and gain-on-sale revenue to remain lower in the fourth quarter." (Executive VP & CFO Kenneth Lovik; President, COO & Corporate Secretary Nicole Lorch)

• Fintech scaling remained central in both calls, with Q3 emphasizing balance sheet and fee momentum: "Fintech deposits increased just over $1 billion" and "fintech fee revenue increased 13% from the second quarter." (President, COO & Corporate Secretary Lorch)

Risks and Concerns

• "We moved the relationship to nonaccrual" and "reversed $600,000 of interest income" highlighted borrower-specific downside risk in franchise finance, with management’s mitigation summarized as "the prudent course of action was to recognize the deterioration." (Chairman & CEO David Becker)

• "We remain modestly liability sensitive" and modeled "a negative impact of 2.5% to 3% on forecasted net interest income over the course of 2027" under punitive scenarios reflected rate-risk sensitivity, with mitigation described as "continued execution of our lending and deposit strategies significantly reduces the modeled effect." (Executive VP & CFO Kenneth Lovik)

• "With industry activity subdued" the company said SBA revenue could stay pressured near term, while insisting "We are not going to manufacture loan growth by compromising credit discipline." (President, COO & Corporate Secretary Nicole Lorch)

Final Takeaway

Management presented Q3 as a quarter of stronger core earnings momentum—record revenue, continued margin expansion, and accelerating fintech funding and fee contribution—while acknowledging a late-quarter franchise finance credit event that drove a $2.6 million specific reserve and interest reversals. For Q4, management tied strategy to explicit targets for fully taxable equivalent net interest margin of 2.75% to 2.80%, net interest income around $38.5 million, provision of $7.5 million to $8 million, and diluted EPS of approximately $1.02 to $1.07, while describing SBA as a near-term headwind due to softer-than-expected production and tighter underwriting standards.

Read the full Earnings Call Transcript

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