First Internet Bancorp reported second quarter 2026 financial results that significantly exceeded analyst expectations, driven by a sharp recovery in net income and accelerating revenue momentum. Diluted earnings per share reached $0.27, beating the consensus estimate of $0.15 by 80%, while total revenue of $41.124 million surpassed the $36.588 million forecast by 12.40%. The strong performance marks a 1,250% year-over-year increase in earnings per share from $0.02 in the prior year period.

Earnings and Revenue Beat

The company’s ability to outperform market estimates was underpinned by expanding net interest margins and robust fee income growth from its Banking-as-a-Service (BaaS) platform. Net interest income grew 16% year-over-year to $32.4 million, with the fully taxable equivalent (FTE) net interest margin widening 43 basis points to 2.47%. This expansion was fueled by a 27 basis point increase in loan portfolio yield to 6.34% and a 54 basis point decline in the cost of interest-bearing deposits to 3.38%.

Noninterest income surged 56% year-over-year to $8.7 million, largely due to a 172% jump in BaaS fee revenue. The company selectively expanded its fintech partner base and deepened existing relationships, including an expanded partnership with jaris that allows First Internet Bank to retain all small business loans originated through that platform.

Balance Sheet and Credit Quality

Total loan balances stood at $3.8 billion as of June 30, 2026, with commercial loans comprising 79% of the portfolio. Growth was led by construction/investor commercial real estate and single tenant lease financing. Total deposits were $4.8 billion, down 3% quarter-over-quarter as the company allowed higher-cost certificates of deposit and brokered deposits to mature. Approximately $2.4 billion of fintech deposits moved off-balance sheet into a deposit network, enhancing balance sheet flexibility.

Credit quality metrics showed meaningful improvement. The provision for credit losses declined 18% to $13.4 million from $16.3 million in the first quarter. Nonaccrual loans fell 14% for the second consecutive quarter, driven primarily by lower nonaccrual franchise finance loans. Net charge-offs to average loans rose slightly to 1.77% from 1.65%, reflecting the resolution of nonperforming franchise finance loans, partially offset by a significant decline in small business lending charge-offs.

Outlook and Capital Position

First Internet Bancorp maintained a solid capital position with a CET1 ratio of 8.90% and a total capital ratio of 12.22%. Tangible book value per share increased to $41.09 from $40.87 in the prior quarter.

For full year 2026, the company provided guidance for diluted EPS between $2.35 and $2.45, with loan growth expected at 4% to 6%. It anticipates FTE net interest margin expansion to reach 2.75% to 2.80% by the fourth quarter, supported by ongoing deposit repricing and an optimized asset mix. Pre-provision net revenue is projected to benefit from controlled noninterest expenses, guided at $106 million to $107 million for the year.

First Internet Bank announced on July 28, 2026, the launch of a secure integration that connects customer accounts with major AI assistants, enabling personalized financial analysis through natural language queries. The initiative allows business and personal customers to interact with platforms such as OpenAI’s ChatGPT and Anthropic’s Claude to derive insights from their own banking data. By leveraging the Model Context Protocol (MCP), the bank provides a read-only interface that transforms complex financial data into actionable information without requiring manual spreadsheet reviews or dedicated planning resources.

The integration is designed to democratize access to sophisticated financial analysis, which David Becker, Chairman and Chief Executive Officer of First Internet Bank, noted was previously limited to organizations with specialized teams. Customers can now ask specific questions regarding their financial health, such as cash flow trends over the last 90 days or sufficient funds for upcoming payroll. For personal banking users, the tool helps identify recurring subscriptions, track dining expenses, and monitor savings progress throughout the year.

Security remains a central component of the architecture. The connection is strictly read-only, meaning AI assistants cannot move money, initiate transactions, or modify account settings. First Internet Bank emphasized that customer banking data is not used to train AI models. Users retain full control over what information is shared and can update or revoke permissions at any time. The feature is currently available for Claude Pro, Max, Team, and Enterprise plans, as well as ChatGPT Pro, Business, and Enterprise plans.

Supported Account Types

The AI-powered insights are accessible across a range of deposit products offered by the bank. Below are the account types supported by the new integration:

First Internet Bank, a wholly-owned subsidiary of First Internet Bancorp (NASDAQ: INBK), reported assets of $5.7 billion as of March 31, 2026. Established in 1999 as a pioneer in branchless banking, the institution offers consumer and small business deposits, consumer loans, specialty finance services, commercial real estate loans, commercial and industrial loans, SBA financing, and treasury management services nationally. The bank is a Member FDIC.

Strategic Implications

The launch signals a shift toward embedded AI within retail and small business banking interfaces. By restricting the AI’s capability to read-only access and ensuring data privacy through non-training protocols, First Internet Bank addresses key security concerns associated with generative AI in finance. This approach allows customers to leverage advanced language models for decision-making while maintaining strict control over sensitive financial data.