Financial Performance Overview

First Internet Bancorp, a leading regional bank, has reported its financial results for the past three years, providing insights into the company’s performance and outlook. The bank has navigated a challenging economic environment, demonstrating resilience and strategic focus to deliver solid results for its shareholders.

Revenue and Profit Trends

During the 12 months ended December 31, 2024, First Internet Bancorp reported net income of $25.3 million, or $2.88 per diluted share. This represents a significant increase of $16.9 million, or 201.2%, compared to the previous year’s net income of $8.4 million, or $0.95 per diluted share.

The improvement in net income was driven by several factors. First, the bank experienced an 81.2% increase in noninterest income, reaching $47.3 million, primarily due to higher gains on the sale of loans and other income sources. Additionally, net interest income grew by 16.7% to $87.4 million, as the bank was able to capitalize on the rising interest rate environment and grow its loan portfolio.

However, these positive trends were partially offset by a 13.4% increase in noninterest expense, which reached $90.1 million, as the bank invested in talent, technology, and infrastructure to support its growth. The bank also saw a 2.5% increase in provision for credit losses, which reached $18.8 million, reflecting the bank’s prudent approach to managing credit risk.

In the previous year, 2023, the bank’s net income declined by $27.1 million, or 76.3%, to $8.4 million, or $0.95 per diluted share. This decrease was primarily due to a 22.9% drop in net interest income, an increase of 234.6% in provision for loan losses, and an 8.4% rise in noninterest expense. The bank’s decision to exit its consumer mortgage business and a partial charge-off related to a commercial loan also contributed to the decline in profitability.

Strengths and Weaknesses

One of First Internet Bancorp’s key strengths is its diversified loan portfolio, which includes commercial and consumer loans across various sectors. The bank has demonstrated its ability to navigate changing market conditions and adapt its lending strategies accordingly. For example, the bank has focused on growing its variable-rate and higher-yielding loan products, which has helped to offset the impact of rising interest rates on its funding costs.

Another strength is the bank’s strong liquidity position, with $1.1 billion in cash, cash equivalents, and investment securities available-for-sale as of December 31, 2024. This provides the bank with ample flexibility to meet its financial commitments and take advantage of growth opportunities as they arise.

However, the bank’s reliance on deposits, particularly brokered deposits and fintech-related deposits, could be considered a potential weakness. While these deposits have been a source of growth, they also expose the bank to higher funding costs and potential volatility. The bank will need to carefully manage its deposit mix and funding sources to maintain a competitive advantage.

Additionally, the bank’s nonperforming loans have increased significantly, from $10.0 million, or 0.26% of total loans, as of December 31, 2023, to $28.4 million, or 0.68% of total loans, as of December 31, 2024. This increase in nonperforming assets could put pressure on the bank’s profitability and capital levels if not properly managed.

Outlook and Future Prospects

Looking ahead, First Internet Bancorp remains cautiously optimistic about its future prospects. The bank’s focus on variable-rate and higher-yielding loan products, as well as its efforts to manage funding costs, are expected to continue supporting its net interest margin and profitability.

The bank also plans to maintain its disciplined approach to credit risk management, with a focus on monitoring and addressing any potential asset quality issues. Additionally, the bank will likely continue to invest in technology and talent to enhance its operational efficiency and customer experience.

However, the bank will need to navigate a challenging economic environment, including the potential for a slowdown in economic growth and increased competition in the banking industry. The bank’s ability to adapt to these changes and execute its strategic initiatives will be crucial in determining its long-term success.

Overall, First Internet Bancorp has demonstrated its resilience and ability to navigate a complex operating environment. While the bank faces some challenges, its diversified business model, strong liquidity position, and strategic focus provide a solid foundation for future growth and profitability.