First Internet Bancorp ((INBK)) has held its Q4 earnings call. Read on for the main highlights of the call.
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The latest earnings call for First Internet Bancorp was marked by an overall optimistic sentiment, highlighting robust financial growth across various sectors. The company reported substantial increases in net income, revenue, and loan originations, particularly in the Small Business Administration (SBA) sector. However, the discourse did not shy away from addressing significant challenges, notably the rise in SBA charge-offs and an uptick in non-performing loans, which the company is actively managing.
Significant Revenue Growth
The earnings call spotlighted an impressive surge in First Internet Bancorp’s financial metrics, with net income and diluted earnings per share tripling compared to 2023. There was a notable increase of over 60% in gain on sale revenue, substantially boosting non-interest income by 81% from the previous year. This led to a remarkable total adjusted revenue growth of nearly 30%, which outpaced their expense increases.
Strong Loan and Deposit Growth
First Internet Bancorp experienced significant growth in both loan and deposit balances. Loans surged by $330 million, marking a 9% increase over 2023, with notable expansions in construction, investor commercial real estate, and small business lending. The increase in deposits enabled the company to significantly reduce Federal Home Loan Bank borrowings while maintaining a robust liquidity position.
SBA Lending Success
The company achieved notable success in its SBA lending, originating nearly $540 million in SBA loans, which is a 45% increase over the prior year. This achievement positioned First Internet Bancorp as the eighth largest SBA 7(a) lender in the nation for the SBA’s 2024 fiscal year.
Positive Margin Trends
First Internet Bancorp reported favorable trends in net interest income, which rose by 17% compared to the fourth quarter of 2023, marking the fifth consecutive quarter of growth. Additionally, the net interest margin improved by 5 basis points, indicating a positive trend in the company’s profitability.
SBA Portfolio Challenges
Despite the successes, the company faced challenges in its SBA portfolio, recognizing $9.4 million in net charge-offs, primarily related to this sector. Net charge-offs to average loans totaled 91 basis points, with approximately $3.4 million of these charge-offs tied to loans with existing specific reserves.
Non-Performing Asset Increase
There was a concerning increase in non-performing loans, with figures reaching 68 basis points of total loans and 50 basis points of total assets. This increase was attributed to additions in franchise finance and small business lending sectors.
Franchise Finance Concerns
The franchise finance portfolio also showed an increase in non-performing loans, where current originations merely offset paydowns rather than contributing to growth.
Forward-Looking Guidance
Looking forward to 2025, First Internet Bancorp remains optimistic about future growth. The company anticipates further improvements in net interest income and margin, targeting a 10-12% increase in loan growth. They project annual net interest income to rise by mid-30% over 2024, building on the substantial growth already achieved.
In conclusion, First Internet Bancorp’s earnings call highlighted a period of robust financial growth, with significant achievements in revenue, loan origination, and SBA lending. While challenges such as increased charge-offs and non-performing loans were acknowledged, the company is proactively addressing these issues. Looking ahead, First Internet Bancorp is poised for continued growth and profitability, underpinned by strategic loan and deposit management.
