First Internet's Provision Eases as Credit Metrics Improve

The Tip Desk · July 30, 2026 · 4 min read

The branchless lender booked a $13.4 million provision in the second quarter and forecast full-year diluted EPS of $2.35–$2.45.

First Internet Bancorp (INBK), the branchless digital bank holding company, cut its second-quarter provision for credit losses to $13.4 million from $16.3 million in the first quarter, a $2.9 million decline after the first quarter’s $4.3 million increase from $12.0 million in the fourth quarter of 2025.

Net income was $2.4 million, or $0.27 a share, versus $0.2 million and $0.02 a share a year earlier. Chairman and CEO David Becker said the quarter showed “strong momentum across the business, paired with a meaningful and encouraging improvement in our credit trends.”

Nonaccrual loans declined for a second consecutive quarter and were down 14% from the first quarter. Delinquencies 30 days or more past due fell to 0.78% of total performing loans from 1.06%, which the company attributed to a significant decline in small business lending delinquencies. Nonperforming loans to total loans were 1.58%, down from 1.63%; excluding fully-guaranteed balances, that ratio was 1.07%. The allowance for credit losses on loans was 1.39% of loans and covered 88% of NPLs.

Net charge-offs to average loans rose to 1.77% from 1.65% in the first quarter. The company said the increase reflected resolution of nonperforming franchise finance loans, partially offset by a significant decline in small business lending net charge-offs.

Fully-taxable-equivalent net interest margin expanded 43 basis points year-over-year to 2.47%, after a 54 bps year-over-year expansion to 2.45% in the first quarter. GAAP net interest margin was 2.39%. Net interest income rose 16% year-over-year to $32.4 million, or $33.6 million on an FTE basis, slowing from a 26% year-over-year increase to $31.6 million in the first quarter.

The cost of interest-bearing deposits fell 54 bps year-over-year to 3.38% on average interest-bearing deposits of $4.78 billion. Loan yield increased 27 bps year-over-year to 6.34% on average loans of $3.84 billion.

Total revenue was $41.1 million, up 23% from a year earlier. Pre-provision net revenue was $15.0 million, up 28%. Noninterest income was $8.7 million, up 56% year-over-year, after a 10% year-over-year increase to $11.5 million in the first quarter. The company said fee revenue from its Banking-as-a-Service platform increased 172% from the prior-year period as it added fintech partners and expanded existing relationships, including an expanded relationship with jaris under which it will retain all small business loans originated through that platform.

Period-end loans were $3.81 billion, up $35.2 million, or 1%, from the first quarter. Commercial loans were $3.01 billion, including $670.0 million of investor commercial real estate and $288.7 million of single-tenant lease financing. The company said solid loan production was partially offset by elevated payoffs and maturities and that pipelines were solid. Deposits were $4.83 billion, down $150.3 million, or 3%, from the first quarter. Certificates of deposit were $1.68 billion and brokered deposits $235.7 million. About $2.4 billion of fintech deposits moved off-balance sheet into a deposit network.

Preliminary CET1 was 8.90% and the total capital ratio 12.22%. Tangible common equity to tangible assets was 6.46%.

For the full year 2026, the company expects diluted earnings per share of $2.35 to $2.45, loan growth of 4% to 6%, FTE net interest margin of 2.75% to 2.80% by the fourth quarter, FTE net interest income of $141 million to $142 million, noninterest income of $40.5 million to $41 million, noninterest expense of $106 million to $107 million, and a provision for credit losses of $47 million to $48 million. It said the outlook reflects early payoffs in commercial lending and lower retention of small business lending balances as secondary-market premiums remain attractive, and that continual improvement is expected throughout the second half of 2026.