First Internet Bancorp Q3 2024 Financial Results

First Internet Bancorp (NASDAQ: INBK) has posted significant financial growth in Q3 2024, achieving its fourth consecutive quarter of double-digit earnings expansion. The bank reported a 21% increase in net income from the previous quarter, attributed to a revenue surge and strong loan performance.

Key Takeaways

• Net Income: Rose to $7 million, up 21% from the previous quarter, with diluted earnings per share increasing 19% to $0.80.
• Operating Revenue: Increased 4% quarter-over-quarter and 36% year-over-year, driven by net interest income and non-interest income, notably from SBA lending.
• Loan Performance: Loan origination yields remained steady at 8.85%, net interest income rose 25% year-over-year, and the loan-to-deposit ratio improved to 84%.
• Deposit Growth: Average deposits increased by 5% since the previous quarter, mainly due to fintech partnerships and CD production.
• SBA Lending: Year-to-date SBA loan originations jumped 35%, solidifying the bank's position as the eighth largest SBA 7(a) lender in the U.S.
• Credit Quality: Remained stable, though there was a slight rise in nonperforming loans, now at 56 basis points of total loans.
• Tangible Book Value: Increased by 3.6% in Q3 and nearly 11% year-over-year.

Company Outlook

• Management expects continued earnings growth into Q4, bolstered by a favorable loan portfolio and reductions in deposit costs following Federal Reserve rate cuts.
• Projected loan balances to increase by 1.5% to 2% in Q4 2024, with net interest income anticipated to rise by 10% to 15%.
• Net interest margin expected between 1.8% to 1.85%, with SBA originations forecasted to grow 15% to 20% in 2025.

Challenges

• Bearish Highlights: Slight uptick in nonperforming loans and a rise in non-interest expenses due to staffing costs. Secondary market price drops may impact loan sales, yet management maintains liquidity confidence.
• Positive Highlights: A thriving SBA platform shows a 35% increase in loan originations, and potential margin expansion is expected in 2025 through acquisitions of FinTech firms.

Summary

• Net Income & Expenses: Reported net income of $7 million with a manageable rise in expenses, primarily on salaries tied to SBA growth.

Conclusion

First Internet Bancorp showcased strong Q3 results and a confident outlook for the future, with strategic advantages poised to capitalize on emerging market opportunities.

Earnings Conference Call Summary

Management expressed optimism about maintaining strong earnings momentum, focusing on effective capital allocation, and enhancing the digital consumer experience through technology investments. The meeting ended on a positive note regarding the bank's growth prospects amidst economic fluctuations.