First Internet Bancorp in Fishers, Ind., reported a plunge in net income as it tackles issues in its small-business lending and franchise finance portfolios.
The $5.9 billion-asset company only earned $193,000 in the second quarter, a sharp decline from $5.8 million a year earlier.
First Internet set aside $13.6 million in the recent quarter, more than triple the amount from a year earlier. The company reported $14.3 million of net chargeoffs, which included $11.9 million tied to small business loans and $2.2 million associated with franchise finance loans.
The company, which moved $12.6 million of franchise finance loans to nonaccrual status in the second quarter, said it is actively working on resolution strategies with identified problem loans. The pace of new delinquencies in that portfolio has slowed, while nonaccruals in the small-business lending portfolio “appear to have plateaued.”
Most issues in the small-business lending portfolio involve loans made in 2022 and 2023, after which point the company refined its credit approval criteria and processes.
“We continued to address credit issues in our franchise finance and our small business loan portfolios; the work we did here is evident in our provision expense as well as our bottom line results,” David Becker, the company’s chairman and CEO, said in the release. “Entering the third quarter, we see encouraging signs in both portfolios. Further, our overall asset quality and capital levels remain sound.