Prepared remarks
My name is Trevor and I will be your conference operator today. At this time, I would like to welcome everyone to the First Internet Bancorp earnings conference call for the second quarter 2026. Please note that this event is being recorded. It is now my pleasure to turn the call over to Julia Ferrara from ICR. You may begin your conference.
Thank you, operator. Hello, everyone, and thank you for joining us to discuss First Internet Bancorp's second quarter 2026 financial results. The company issued its earnings press release earlier this afternoon, and it is available on the company's website at www.firstinternetbancorp.com. In addition, the company has included a slide presentation that you can refer to during the call. You can also access these slides on the website. Joining us from the management team today are Chairman and CEO, David Becker; President and COO, Nicole Lorch; and Executive Vice President and CFO, Ken Lovik. David and Nicole will provide an overview and Ken will discuss the financial results, and then we'll open the call up for your questions. Before we begin, I'd like to remind you that this conference call contains forward-looking statements with respect to the future performance and financial condition of First Internet Bancorp that involves risks and uncertainties. Various factors could cause actual results to be materially different from any future results expressed or implied by such forward-looking statements. These factors are discussed in the company's SEC filings, which are available on the company's website. The company disclaims any obligation to update any forward-looking statements during the call. Additionally, management may refer to non-GAAP measures which are intended to supplement but not substitute for the most directly comparable GAAP measures. The press release available on the website contains the financial and other quantitative information to be discussed today, as well as the reconciliation of the GAAP to non-GAAP measures. At this time, I'd like to turn the call over to David.
Thank you, Julia. Good afternoon, and thank you for joining us. We're excited to report solid second quarter results with total revenue growing 23% year over year, pre-provision net revenue up 28%, and earnings per share of $0.27, up significantly from the prior year period. More importantly, this quarter marks a meaningful inflection point in our credit trajectory. For the past several quarters, credit has been the primary overhang on our results and on our stock. This quarter, that story began to turn. Over the past 18 months, we took a hard look at the credit outcomes we experienced and made meaningful changes to our underwriting, servicing, portfolio management, and resolution processes. Our disciplined actions are now translating into clear, measurable improvement, and we believe the credit trends we are seeing today mark a clear turning point in this cycle. Let me walk through why we feel confident in that conclusion. First, provision for credit losses, while still elevated on a historical basis, declined significantly from the prior quarter. Net charge-offs in our SBA portfolio were down almost 50% from the first quarter, reflecting the enhanced underwriting, servicing, and early warning capabilities we built over the past year. Second, non-performing loans declined from the first quarter, and total non-accrual loans declined for the second consecutive quarter, down 19% from year-end. Furthermore, non-performing loans, excluding government guaranteed balances, declined to 1.07% of total loans, down from 1.22% in the prior quarter. And third, perhaps most encouraging of all, delinquencies fell significantly during the quarter. We experienced a sharp drop in early-stage delinquencies, and total small business lending delinquencies declined to $1.5 million from $13.3 million in the prior quarter. The reduction in provision expense demonstrates that our credit performance is improving today. The decline in non-performing loan formation and delinquency gives us conviction that credit costs will continue to moderate as we move through the second half of the year. At the same time, we continue to optimize the loan portfolio. Continued runoff in existing portfolios, such as healthcare finance and residential mortgage, combined with elevated payoffs in franchise finance is creating capacity that we are redeploying into construction, investor commercial real estate, single-tenant lease financing, small business lending, and emerging verticals such as wealth advisory lending and embedded finance, where we see better risk-adjusted returns and more efficient use of our balance sheet. A good example is the evolution of our relationship with Jaris, an embedded finance technology partner that helps payment processors and ISOs modernize their platforms through capabilities such as digital onboarding, instant payouts, and business financing solutions. Historically, we funded loans originated on Jaris's platform and retained a small portion of that production, selling the majority to a fund managed by Jaris. Beginning in June, we took that relationship a meaningful step further and are now retaining all originations going forward. The short duration, high-yielding assets should be accretive to net interest income, and the expanded arrangement reflects the trust and depth of collaboration we have built with Jaris over time. Looking ahead, we are navigating the current macro and geopolitical environment with prudent strategy and appropriate discipline. Our credit trends and earnings are moving in the right direction while we continue to deepen high-value fintech partnerships and invest in the technology and talent that differentiate our platform. We believe this combination of improving credit, disciplined capital deployment, and expanding non-interest income positions us well to maximize growth and profitability in future periods. While the financial results speak for themselves, what gives us confidence in the future is the operational progress occurring throughout the company. I will now turn the call over to Nicole for additional perspective on the changes we've made and why we believe they position First Internet for continued improvement in the quarters ahead.
Thank you, David. One of the most encouraging takeaways from this quarter is that the improvement we're seeing across the business is the result of a sustained organizational effort over the last several quarters. We challenged longstanding processes, invested in new capabilities, and asked teams across the company to work differently. The numerical improvement in credit is evident in our results, and the strength of the underlying processes producing those results lays the groundwork for improved performance in the future. Over the past 18 months, we've strengthened underwriting standards, enhanced portfolio monitoring, expanded special assets capabilities, and invested in predictive analytics and early warning tools that allow us to identify borrower stress sooner and engage customers earlier. We also created greater separation and specialization between portfolio management and problem loan resolution, allowing both teams to operate more effectively. In small business lending, net charge-offs declined significantly from the first quarter, delinquency trends improved meaningfully, and new delinquency formations slowed during the quarter. That reinforces our view that the portfolios we're originating today are performing in line with expectations and that our actions are producing durable improvements in credit quality. In franchise finance, our focus remains on disciplined execution and timely resolution of legacy problem credits. During the quarter, our special assets team took action on several relationships that drove elevated charge-off activity. However, the pace of loans moving to non-accrual status slowed dramatically, and early-stage delinquencies have declined over 85% since year-end. I want to thank our credit administration and portfolio management teams for their tireless execution. While work remains, the evidence suggests the remaining issues are manageable and increasingly concentrated. We've also become more deliberate about how and where we deploy capital. Over the last year, we evaluated major business lines through the lens of risk-adjusted returns, capital efficiency, and long-term growth potential. That process led us to lean more heavily into businesses where we believe we possess durable competitive advantages, including banking as a service, embedded finance partnerships, and select commercial lending verticals. The expanded Jaris relationship is a good example of that approach in practice. We continue to see opportunities to deepen relationships with partners that value our compliance expertise, technical capabilities, and ability to operate at scale. In many cases, those opportunities allow us to generate attractive returns while using capital more efficiently than traditional balance sheet growth alone. Another area where we continue to invest is technology and automation. As pioneers in branchless banking, technology has been central to our business model from the beginning. But our technology strategy is grounded in business outcomes, not in chasing what is novel or interesting. Every investment is evaluated based on its ability to improve the customer experience, strengthen risk management, enhance efficiency, and generate an appropriate return on capital. Looking ahead, what excites me most is not any single business line or individual metric. It is that we are seeing progress across multiple dimensions of the company simultaneously. Credit trends are improving. Our funding profile continues to strengthen. Fintech and fee-based revenue streams are growing, and our teams are executing with discipline. There is no finish line when it comes to building a better bank, but the operational foundation we have built over the last several years positions us well for continued improvement in profitability and long-term shareholder value creation. And now I'll turn it over to Ken for additional insight into our second quarter performance and 2026 outlook.
Thanks, Nicole. As David mentioned, we delivered solid second quarter results with net income of $2.4 million, or $0.27 per diluted share, both up significantly from the prior year period. Before discussing operating trends, I want to provide additional color on credit. Provision for credit losses was $13.4 million in the second quarter, down from $16.3 million in the first quarter. Net charge-offs totaled $16.9 million, up modestly from the prior quarter, but with important positive trends beneath the headline number. Net charge-offs in small business lending totaled $4.8 million, down significantly from $9.1 million in the first quarter. Franchise finance net charge-offs totaled $11.6 million, $6.7 million of which were covered under specific reserves previously applied to these loans, and as Nicole noted, the pace of franchise finance loans moving to non-accrual status slowed dramatically. Non-performing loans were $60.1 million, or 1.58% of total loans, down from $61.6 million, or 1.63%, in the linked-quarter, the first sequential decline we have reported in several quarters. Total non-accrual loans declined for the second consecutive quarter, which was partially offset by an increase in franchise finance loans 90 days past due as certain loans worked through the resolution process. We expect our efforts to ultimately result in the full collection of principal and interest related to these loans. The most encouraging data point was delinquencies, which declined to 78 basis points of total performing loans as of June 30th, down from 106 basis points at the end of the first quarter and 101 basis points at year-end. In dollars, total delinquencies declined 26% from the first quarter to $29.1 million, and early-stage delinquencies declined significantly. Taken together, lower provision for credit losses, the continued decline in non-accrual loans, and the significant drop in delinquencies support our expectation for continued improvement in credit costs throughout the remainder of 2026. Turning to operating trends, total revenue was $41.1 million, a 23% increase over the prior period. When combined with well-managed expenses, pre-provision net revenue totaled $15 million, up 28% year over year, driving continued positive operating leverage. Linked-quarter revenue was down primarily due to lower gain on sale revenue from seasonally lighter SBA origination volumes and our more disciplined underwriting approach. As we think about what to expect in the third and fourth quarters, I would note that secondary market premiums remain strong, production levels picked up in the back half of the quarter, and we expect origination volumes to increase in the second half of the year. The decline in gain on sale revenue was partially offset by sustained growth in fee revenue from our fintech partners. Payments volume and fee revenue continued to build on a trailing 12-month basis, up 256% and 222%, respectively. Net interest income was $32.4 million or $33.6 million on a fully taxable equivalent basis, up 16% and 15% year over year, respectively. Net interest margin improved to 2.39% or 2.47% on a fully taxable equivalent basis, both up more than 40 basis points from a year ago. Margin expansion was driven primarily by continued improvement on the funding side of the balance sheet as the cost of interest-bearing deposits declined to 3.38% from 3.92% a year ago, benefiting from CD repricing and growth in lower-cost fintech deposits. On the other hand, earning asset yields were essentially stable. While period-end loan balances were up from the prior quarter, average balances were down about 1%. Growth in construction and investor commercial real estate, single-tenant lease financing, trailers, and emerging verticals, such as wealth advisory lending and embedded finance, was more than offset by early paydowns and lighter small business lending originations earlier in the quarter. As a result, we carried higher cash balances, which tempered the pace of margin expansion on a sequential basis. Looking forward, pipelines are strong across several commercial lending areas, and small business lending production is expected to increase significantly in the second half of the year. In addition, the increased retention of embedded finance loans is expected to further enhance net interest income and margin. Deposit repricing remains a meaningful tailwind. CD and brokered deposit balances declined more than $200 million from the prior quarter as we continued replacing higher-cost funding with lower-cost fintech deposits. The weighted average cost of CDs maturing during the second quarter was approximately 4.11%, while the average cost of on-balance sheet fintech deposits was 3.19%, and the cost of new and renewing CDs was 3.63%. The third quarter is a particularly large maturity quarter with more than $445 million of CDs coming due at a weighted average cost of 4.04%, and $700 million in total maturing in the second half of the year at a weighted average cost of 3.94%. With fintech deposit and CD replacement costs at significantly lower levels, we expect this dynamic to continue supporting net interest income and margin. To summarize our outlook on net interest income and net interest margin, lending pipelines are strong heading into the back end of the year. We continue to optimize the loan portfolio with the composition now about 42% variable rate providing the ability to maintain and increase yields on interest-earning assets. When combined with the ongoing ability to drive deposit costs lower, we expect to see sustained expansion of net interest income and margin throughout the remainder of the year. Regarding our outlook for the remainder of 2026, we remain comfortable with our full-year EPS forecast of $2.35 to $2.45. However, with a smaller balance sheet and continued opportunities to grow fee income, the mix between net interest income and non-interest income has shifted somewhat, along with a revised outlook on operating expenses. We now expect full-year loan growth of approximately 4% to 6%, reflecting elevated early payoffs, lighter first-half small business production, and, as secondary market premiums remain attractive, lower retention of guaranteed SBA balances, with stronger pipelines expected to support growth in the second half of the year. Our fully taxable equivalent net interest margin outlook remains in the range of 2.75% to 2.80% by the fourth quarter based on the dynamics I mentioned earlier and excludes any interest rate cuts or increases. With a smaller balance sheet, we now expect full year fully taxable equivalent net interest income of $141 million to $142 million. This revision is partially offset by strength in gain on sale premiums and continued fintech fee income growth, enabling us to raise our non-interest income outlook to $40.5 million to $41 million. Additionally, we are lowering our non-interest expense outlook to $106 million to $107 million, reflecting lower compensation costs, while maintaining investment in technology and AI to support revenue and risk management initiatives. Finally, we expect provision for credit losses of $47 million to $48 million for the full year. Based on the improving trends in non-accrual loans and delinquencies, we expect provision expense to improve sequentially from the second quarter to the third quarter and again from the third quarter to the fourth quarter. With that, I'll turn it back to the operator for questions.
Your first question comes from the line of Brett Rabatin with StoneX.
Questions and answers
First, I wanted to talk about the dynamic on the NII guide in the back half of the year, particularly given where you're expecting the margin to be by the end of the year. And if I'm just doing kind of some rough math, right, it basically implies that your funding costs decline about 15 basis points and your earning asset yields are up about 25 to 30 basis points. Is that a fair way to think about it? And then maybe can you talk about how much Jaris and these other things might contribute to higher earning asset yields.
Yes, I think you're in the ballpark, Brett. If you think about the deposit repricing opportunity, as we mentioned in the prepared comments, we have a lot of CDs that are coming due here in the third quarter. Right now in the CD market, we are not very competitively priced. What historically was a renewal rate in, call it anywhere from 60% to 70%, is now down in the 40% range. We're seeing a larger amount of these higher-cost CDs rolling off and simply being replaced generally by fintech deposits that are somewhere in the 3.15% to 3.20% range, or small business checking, which are much cheaper. We expect continued deposit leverage throughout the rest of the year, more in the third quarter than the fourth quarter. In the second quarter our deposit cost outlook was largely where we expected, and we came up short a little bit on the lending side. As we mentioned, average loan balances were down and some of the dynamics that drove that included lighter SBA originations earlier in the quarter, offset by strong growth in construction and investor commercial real estate and single-tenant lease financing. Looking forward into the third and fourth quarters, our pipelines in construction and investor CRE are very strong. We expect a lot of draw activity in the third and fourth quarters. We have many investor CRE projects that we expect to fund. Those are generally priced at a SOFR plus 3 range. Single-tenant pipeline is very strong. Given where long rates have gone recently, we're pricing single-tenant loans at some of the highest yields in quite some time. Those are priced at a 225 to 240 basis point spread over the 5-year Treasury, so loans pricing today are coming on the books at roughly 6.40% to 6.60% yields. On the Jaris side, we're excited about that partnership because historically we'd retained about 10% to 12% of their origination volumes. From January through May that might have been $4.5 million to $5 million retained, so not very large balances. We were providing senior credit to their fund at around SOFR plus 3 or 4. Earlier in July, as they wound down their funds, we acquired a pool of loans from Jaris of about $15 million, and our expectation is that combined with retained production we'll have balances we acquire in the $45 million to $50 million range. Those loans have very strong gross yields. They typically turn in about seven months, are very structured similar to factoring—the faster they pay, the higher the yield—and the gross yield on those is very high. As those assets scale and lower-yielding portfolios such as healthcare finance and mortgage that yield 4% or lower continue to roll off, the replacement dynamic combined with originations in higher-yield categories and increased SBA originations create a visible pathway to a higher overall loan portfolio yield when you put the pieces together.
That's all really helpful color, Ken. Appreciate that. And then just on the credit side, obviously the SBA portfolio is having lower net charge-offs, delinquencies are down 20-plus basis points linked-quarter, dealing with the franchise finance portfolio. I just wanted to hear do you think you have your hands around all the issues that could be in those portfolios or have you seen anything new come up here in the past quarter with some things that were originated in the '21 to '23 vintages, or do you feel like you have your hands around all those potential problems?
As it relates to SBA, Brett, we feel the changes we implemented in underwriting, as well as the changes that we have made to portfolio management throughout the end of 2025 and into this year, are really starting to show up. The vintages of 2021 to 2023, we believe we have worked through the worst of that. It's always possible that something pops up with a small business, but at this point we believe problems tend to show up in about the first 18 to 24 months with small business, especially in business acquisition cases. What we are seeing is much better performance from the 2025 vintage and the 2026 year-to-date vintage. We're feeling very confident that the changes we have made to underwriting guidelines, expectations of borrower strength, and the changes within portfolio management are going to yield much better results going forward.
Speaking on the franchise side, as we continue to work down the portfolio, we charged off a number of non-performing, non-accrual loans this quarter, which reduced our specific reserves. The inflows to the non-accrual bucket have been significantly reduced. Net-net, non-accrual franchise finance loans declined quite a bit. We also noted declines in SBA delinquencies, and even in early-stage franchise delinquencies from the beginning of the year, that number is down over 75%. Non-performing loan formation has slowed dramatically. There are probably still some loans we are watching, but the pool of loans where borrowers are habitual 30-day late payers has declined significantly since the beginning of the year.
In fact, just this afternoon we received a check on a loan that we had marked as doubtful. We had charged it down to about $600,000 remaining on the books, and we received a check for $600,000. That speaks to our ability to measure the recoverability of these loans, which gives us additional confidence going forward.
Okay. Really helpful.
Our next question comes from the line of Emily Lee with KBW.
This is Emily stepping in for Tim Switzer. End of period and average loan balances were impacted by early payoffs this quarter. What are your expectations for payoffs going forward?
We think based on what we've seen this year that payoffs will continue to pop up from time to time. When a borrower gives us notice, it helps a lot; for example, we received notice earlier this week that a construction or investor CRE loan maturing in 2027 will likely be paid down at the end of August. Advance notice allows us to factor that into our models and to replace the balance elsewhere. We've seen elevated payoffs in the franchise finance portfolio on performing loans, and we've begun to model that because we've seen it over the past couple of quarters. It will likely continue to happen, and we are trying to capture it in our modeling.
I understand. That's helpful. And then this quarter, you increased the number of fintech partners. I'm just wondering if you could talk about expectations for growth from the BaaS platform going forward and how the partner pipeline is looking now. Do you still look to continue opportunistically adding more partners as you see fit, or what are your plans there?
Sure. We have added three partners year-to-date and are now at 15 partners and 21 programs. We expect two more programs to come online before the end of 2026, and our pipeline of potential programs is healthy behind that. I don't expect us to grow into the triple digits next year. We are very careful about how we curate our partnerships and have some terrific partners. Four of the 15 have expanded their relationship with us in the last year, which speaks to the relationships we are forming and our capacity to grow alongside them. In terms of fintech partnership revenue, we expect growth from interest income on lending programs and a moderate increase from fees we collect, whether transaction fees or oversight fees. Our revenue and transactions have grown—revenue is up about 220% year over year—so we do see a lot of runway there.
Great to hear.
Our next question comes from the line of Nathan Race with Piper Sandler.
Just in terms of thinking about the reserve trajectory going forward, I know it's difficult to predict in terms of what's going to be underlying the provisioning assumptions for the back half of this year, but I was curious if you could shed more light on how specific reserves are trending, particularly against the SBA and franchise finance portfolios, and what that suggests in terms of loss content expectations over the next couple of quarters.
We charged off about $11.5 million of non-performing franchise loans, which reduced our specific reserves by $6.7 million. When thinking about the provision outlook, sometimes it's agnostic whether it's a charge-off or a specific reserve, but we continue to feel confident that with the enhancements Nicole mentioned to SBA portfolio management and special assets, and given where we see the pool of potential franchise problem loans, we expect continued decline in those areas. We expect net charge-offs to come down significantly from the levels in the first and second quarters. Timing is hard to predict—third quarter could be a little higher and fourth lower—but we believe the trajectory is down in the back half of the year.
To add to that, with our enhanced portfolio management efforts and being proactive with borrowers, we're providing more solutions when customers contact us earlier. Over the last 18 months there's a notable difference in how we communicate, which gives us more visibility into the likelihood of loss. The communication between portfolio management and finance is very strong, and that helps prevent surprises.
Regarding Nicole's comment about the $600,000 payment, we also have a significant franchise loan with a little over $6 million outstanding where we've already reserved 30%. We expect it to pay off in full, which would result in recovery of that 30% reserve this quarter and removal of the full $6 million from delinquency and the balance sheet. The special assets group's work has enabled us to reach out and touch literally everyone in the SBA and franchise pools, checking in on how they're doing. With the economic uncertainty, we're actively reaching out so if things deteriorate, borrowers will contact us early rather than run from us. There are many options we can offer when we catch borrowers early. When they get to the point of bankruptcy court, it becomes much harder. We're confident we have the right people in the right roles executing the right actions now, and it's on time.
Indeed, that's really helpful. Just going back to the margin discussion. I appreciate all the color around what you have maturing on the CD front in the back half of this year. The expectation is that those CDs will largely be replaced by some of the lower-cost deposit gathering programs you have with partners? Or what are the incremental replacement costs on some of those CDs, to the extent it's not backfilled with those other relationship deposits?
The easiest way to think about it is replacing CDs costing us 4.04% on a weighted average basis in the third quarter with fintech deposits at roughly 3.15% to 3.20%. That replacement drives cost savings. Why we think we'll get more deposit cost savings in the back half of the year, especially the third quarter, is the renewal rate on CDs. If we are renewing CDs today, that renewal rate is around 3.60%, so you're still looking at about a 40 basis point pickup even on renewals, but that renewal rate is going down. As we backfill more with fintech deposit growth, we will capture more cost savings.
We're not feeling the pressure that a lot of peers are feeling as the deposit market heats up and they must pay more for CDs and deposits. With $2.5 billion off balance sheet in cash broadly, if many of those CDs roll off, we'll be in a position to take in lower-cost deposits. For example, if a significant portion of higher-cost CDs roll off, we can bring in $200 million at roughly 3.18% versus prior costs around 4.20%, so we're in an enviable position given current market dynamics and excess cash.
If we were to get a rate hike later this year, can you update us on what the NII or margin sensitivity would be?
On a static balance sheet, we remain slightly liability sensitive. A rate hike on a static balance sheet is approximately a $2.4 million annual reduction to NII. Conversely, a 25 basis point rate cut would add about $2.2 million in NII.
Okay, great. And then just lastly, Ken, what's the tax rate assumptions underpinning the EPS guide for this year?
The full-year tax rate varies across the EPS range. On the low end it's roughly 6% to 6.25%. On the higher end it's roughly 8% to 8.5% for the full year. With expectations of stronger performance in the third and fourth quarters, quarterly rates will vary, but the full-year expectation is in that range—probably more around 12% to 15% for certain quarterly math when you back into it, but full-year guidance aligns with the lower single-digit percentages I mentioned earlier.
Okay, alright, sounds good. I appreciate all the color.
Our next question comes from the line of George Sutton with Craig-Hallum.
You mentioned wealth advisory and embedded finance as new focus areas. I wonder if you could give us a little more picture on what the wealth advisory practice is lending to. And on the embedded finance side, is that broader than just Jaris or are you specifically focused on Jaris there?
I'll handle the wealth advisory piece. Wealth advisory lending is to registered investment advisors generally, for the purpose of ownership transition and succession. Many advisors are nearing retirement and there is ownership transition activity where a senior partner sells to a junior partner. These loans finance acquisitions or succession transitions in the advisor space.
On embedded finance, Jaris is by far the biggest near-term opportunity. We have two other partners in the queue, one finishing due diligence and final testing and expected to go live between now and year-end. Historically we bought about 10% of Jaris's production and the rest went to the fund; we bought out that fund and retention will increase. We did about $5 million with Jaris in the first half of the year and expect $10 million to $15 million in the second half. Those assets are short-term factoring-like structures with very high top-line gross yields; net yield to us after reserves, processing, servicing, and fees is still in the 12% to 15% range, which is significantly higher than other assets on the books. Pricing for similar partners coming on in the second half will be comparable.
You had historic BaaS growth. I'm just curious how much of that would be Ramp specific versus others?
We're spread out across partners. Ramp has been a strong source of deposit growth and some fee revenue through products like bill pay. We started that bill pay product with M-Squared a little over two years ago. On June 30th and July 1st, we cleared over $1 billion per day in bill payments, though those are small pennies-per-item fees. Ramp's main impact has been deposit growth rather than large processing fees. Other partners have strong processing economics. We've adjusted fees across the board with clients and have seen a nice growth spurt. We're selective in who we partner with and prioritize compliance and regulatory strength, which can make us tougher to work with but is ultimately a strength. Our fintech revenue has grown substantially; a few years back we went from $1 million to $2 million to $4 million in revenue, and we had forecasted $8 million. I expect fintech revenue will pass $10 million this year, so everything is increasing rapidly.
One quick one for Nicole, if I could on SBA. Historically, you've talked about your market ranking and goals for material growth. Is that not necessarily the focus now?
Thanks for the question, George. We want to help small businesses and support their goals when it makes sense. We needed to retool our credit underwriting guidelines and build stronger portfolio management processes so we could scale responsibly. With those two things addressed, we see a good opportunity to ramp volume back up, but we will do that judiciously, focusing on quality rather than quantity. It's painful when a business closes, and we want to put the right borrowers in the right businesses to be a strong partner. We're feeling much better about our ability to scale volume again, and we expect some improvement in volume in the second half of this year. Our lending teams are growing slightly, and we have new referral sources and more loans with real estate collateral, which command a better premium. The retooling we've done will help in future periods.
The SBA industry as a whole is down about 18% year-to-date compared to last year. We remain in the top 10 originators in the 7(a) market and will likely stay there through the year. As Nicole said, pipelines are strong and second-half volume should be better than the first half.
Perfect. Okay.
There are no further questions at this time. I will now turn the call back to David Becker for closing remarks.
Thanks, Trevor, and thanks everybody for joining us today and for your interest in First Internet Bancorp. This was a quarter we've been working toward for some time and we're proud of the progress our teams have made on credit as well as the increasingly capital-efficient, fee-generating direction of our business. We remain mindful of all the macroeconomic uncertainty in the world, but we are executing from a position of genuine momentum, and we believe the hardest part of our credit cycle is truly behind us. We appreciate your support. Feel free to reach out to any of us if you have further questions. Thank you, and have a good evening.
This concludes today's call. Thank you for attending. You may now disconnect.