Overview of Financial Performance

First Internet Bancorp, a regional bank holding company, reported strong financial results for the year ended December 31, 2024. The company generated net income of $25.3 million, or $2.88 per diluted share, compared to $8.4 million, or $0.95 per diluted share, in the prior year. This significant increase in profitability was driven by growth in both net interest income and noninterest income.

Revenue and Profit Trends

Net interest income, the difference between interest earned on loans and investments and interest paid on deposits and borrowings, grew by 16.7% to $87.4 million in 2024. This was due to a 21.9% increase in total interest income, which outpaced a 24.3% rise in total interest expense. The net interest margin, a key measure of profitability, expanded to 1.65% from 1.56% the prior year.

Noninterest income, which includes fees and other revenue not directly tied to lending, surged 81.2% to $47.3 million. This was primarily attributable to a $12.8 million increase in gains on the sale of loans, particularly Small Business Administration (SBA) 7(a) loans, as well as $7.1 million in higher other income from investment fund distributions and gains on interest rate swaps and FHLB advance prepayments.

The combination of strong net interest income growth and the substantial increase in noninterest income led to a 67.2% jump in total revenue to $134.7 million. However, noninterest expense also rose 13.4% to $90.1 million, driven by higher salaries, benefits, premises costs, and deposit insurance premiums.

As a result, income before taxes increased 457.5% to $27.5 million. After accounting for income taxes, net income reached $25.3 million, a 200.3% improvement over the prior year.

Strengths and Weaknesses

A key strength of First Internet Bancorp is its diversified loan portfolio, which includes commercial real estate, construction, single-tenant leasing, public finance, healthcare, small business, and consumer lending. This diversification helps mitigate risk and provides multiple avenues for growth. The bank’s focus on variable-rate and higher-yielding commercial products has also supported its expanding net interest margin.

Another strength is the bank’s robust deposit franchise, which grew 21.3% in 2024 to $4.9 billion. This includes strong growth in interest-bearing demand deposits, particularly from fintech partnerships, as well as a 32.9% increase in certificates of deposit. The bank has been able to leverage its deposit base to fund loan growth and pay down higher-cost wholesale borrowings.

However, asset quality has deteriorated, with nonperforming loans increasing from 0.26% of total loans to 0.68%. This was driven by higher levels of nonaccrual small business and franchise finance loans. The allowance for credit losses, while increasing to 1.07% of total loans, only covers 157.5% of nonperforming loans, down from 389.2% the prior year. This bears watching, as elevated problem assets could pressure earnings if the trend continues.

Another potential weakness is the bank’s reliance on wholesale funding sources like brokered deposits and Federal Home Loan Bank advances, which comprised 54.6% of total funding at year-end 2024. While the bank has ample liquidity, a over-dependence on non-core funding sources can increase interest rate and refinancing risk.

Outlook and Conclusion

Looking ahead, First Internet Bancorp is well-positioned for continued growth and profitability. The bank’s diverse lending capabilities, expanding net interest margin, and strong deposit franchise provide a solid foundation. However, the deterioration in asset quality and high reliance on wholesale funding are areas that warrant close monitoring and potential mitigation strategies.

Overall, First Internet Bancorp delivered impressive financial results in 2024, with robust revenue growth, expanding margins, and a significant increase in net income. The bank’s diversified business model and focus on higher-yielding commercial lending have been key drivers of its success. As long as the bank can maintain disciplined credit underwriting and manage its funding mix, First Internet Bancorp appears poised for continued strong performance in the years ahead.