First Internet Bancorp (INBK) Q3 2024 earnings summary

Executive summary

• Net income for Q3 2024 was $7.0 million ($0.80/diluted share), up 21% sequentially and 105% year-over-year, with operating revenues increasing for the fifth consecutive quarter, driven by higher net interest income and record SBA loan sale gains.

• Total operating revenue grew over 4% from the prior quarter and 36% year-over-year, with strong non-interest income from record SBA gain on sale revenue of $9.9 million, and SBA loan sale volume up 22.1% sequentially.

• Robust deposit growth, up 12.3% from Q2 and 17.5% year-over-year, improved liquidity and interest rate risk profile, with a deliberate shift in loan mix and the strongest loan-to-deposit ratio in recent history.

• Tangible book value per share increased to $43.89, up 3.6% in Q3 and nearly 11% year-over-year, continuing a five-year growth streak.

• Capital position remains solid, with CET1 ratio at 9.37% and tangible common equity to tangible assets at 6.54%.

Financial highlights

• Net interest income was $21.8 million, up 2.1% from Q2 and 25% year-over-year; net interest margin was 1.62%, down 5 bps sequentially but up 21 bps year-over-year.

• Noninterest income reached $12.0 million, up 9% from Q2 and 62% year-over-year, driven by SBA gain on sale revenue of $9.9 million.

• Noninterest expense was $22.8 million, up 2.1% from Q2 and 15% year-over-year, mainly due to higher commissions, staffing, and incentive compensation.

• Allowance for credit losses was 1.13% of loans, up three basis points from Q2, with provision for credit losses at $3.4 million.

• Nonperforming loans to total loans increased to 0.56% from 0.33% in Q2, mainly in franchise finance and small business lending.

Outlook and guidance

• Management expects Q4 2024 loan growth of 1.5%-2% (not annualized), with net interest income projected to increase 10%-15% sequentially and net interest margin to rebound to 1.8%-1.85%.

• SBA origination growth targeted at 15%-20% for 2025, with $600 million in originations as the goal.

• Expense growth for 2025 projected at 7%-10%, driven by continued investment in SBA and technology.

• Tax rate expected to rise from high 8% to 11%-12% over 2025 as earnings increase.

• Management expects to continue scaling small business lending and fintech partnerships to drive future earnings, with quarterly cash dividends of $0.06/share expected to continue.