INBK - Earnings call transcript Q3 2019

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Good day, everyone, and welcome to the First Internet Bancorp's Third Quarter 2019 Financial Results Conference Call. [Operator Instructions]. And please note that today's event is being recorded.

I would like to now turn the conference over to Larry Clark from Financial Profiles Inc. Please go ahead, Mr. Clark.

Larry Clark

XXXX. afternoon, First thank for Internet quarter September Good us for the Operator. ended discuss to Bancorp's XX, you, everyone, you and joining third Thank financial results

are your Joining then the Chairman, and us we'll Vice CFO, will open and and questions. call Lovik. President the quarter discuss today management the Executive President CEO, third David from and Becker; David Ken to Ken up team results and

forward-looking the any implied update that are contains with Before expressed condition factors or which that the future website. and to I'd this results the statements. we performance respect available by on from the uncertainties. be These statements actual like company forward-looking results call. you future to call begin, to remind of SEC discussed obligation to company's conference First involves disclaims Various statements any and company's financial materially filings, cause Internet forward-looking could different during Bancorp in made The any such factors risks are

the information to may here the release substitute not and as to intended the be comparable management which of website are reconciliation quantitative discussed GAAP well non-GAAP but Additionally, most the contains on measures. the measures. other The supplement, directly available to GAAP press non-GAAP be the measures, as financial today refer to

call the At turn I'd over to David. this to like time,

David Becker

very today. and which Larry, Thank with and were us growth continued for We're results pleased by well-managed revenue you, in Thank good everyone. third driven afternoon, our joining expenses. the quarter, you

quarter strategies, seasoned implementing approach which deployment of lower-yielding management and our sheet take included to We sales a while disciplined capital the continue during the third loans. balance to

the increased quarter, business direct-to-consumer our demand market. in mortgage had mortgage Additionally, driven conventional stellar by another refinancing

of performance a benefited the program. of earnings count for lower record $X.XX, second due from to X.X% quarter quarter, share the highlights repurchase which income from our per second million, increase X% quarter. net from Diluted the increase share $X.X an were of include Our an share

the Total which second from million revenue was share banking quarter-over-quarter, from was income noninterest share driven increase $XX.XX million, benefited value revenues. repurchase $X higher activity. Furthermore, book and $X.X quarter to X.X% the also increased mortgage by our $XX.X million, a our tangible per X.X% up

Ongoing be balance continues through management strong we achieve primary One a to that our with of sheet capital focus managing the the a either also lower-yielding loan enhance way is seasoned this sales, single objective tenant sales we capital redeploy profitability public as loans. lease increasing our to loans. us higher-yielding through enable or finance revenue, the into fee loans our These margins while financing additional efficiently.

benefit the An marketplace origination helps with it able sales. the to proceeds our new asset in to asset added team’s fund keep loans the being by is from that

net allowing recognizing of of million the a $XX.X we loans, us During to sold during million free of quarter, quarter. million up to new the $XXX the production liquidity $X.X gain fund

anticipate activity another was We mortgage Our positioned which by another well strong capitalize quarter were we quarter the on as direct-to-consumer had country, mortgage lower on the refinancing increased spurred great business across to factors. refinancing quarter from down expected low fourth third the to volumes origination activity due remain the in are quarter as although are come at to expected to pace, continue high and a rates seasonal to rates.

Turning to deposits.

and in by third $XX.X checking account the or business million deposits and money and opportunities These $XX traditional of over commercial expansion savings in increased checking Total We gain quarter. market, deposit small small from gathering funding to included almost continue market quarter the XX%, consumers. through relationships continue our on the as and million low-cost traction accounts. as to strong during generate money well focus initiatives to municipal business,

diversify meaningfully now that forward. see a interest in efficient manner. generation nationwide those we and potential rates in combined asset we important deposits make also we rolling to We committed of we CD CDs net going to our as gathering an success impacted balance continue trending pay business the inflection is sheet platform particular, is that quarter to production the building small with progress is on In challenge great who Ken channels Overall, a margin to but management negatively our during banks in capital this economy The where as on strategies revenue our sheet. offering space our are when of the services more and NIM. regarding believe believe here differentiate sheet. from get about We the we with small attractive balance will that we sides a in than good a activities, larger other short-term crossing it ourselves lower with into simply our today. on NIM, CDs business detail the point are of created have prioritizing a suite to our of our who excess significant feel which floor hit I'll amount opportunities new balance are quarter, of full the say and on we this cash aren't emerging that entrepreneurs backbone can both

of leadership new two is and head SBA SBA from Colorado up look the to month. expanding Indianapolis. in seasoned expected to our we're Colorado, professionals to national also cover acquisition Chicago in National consists previously We close the excited Bank of welcoming First forward and business team lending Midwest, offices who our program small the appointed recently here of which First announced next division that We

expect we SBA loans portfolio $XXX to up of million and $XX in portfolio closing, In servicing million. a of pick excess

on comments make to like I'd Now few credit. a

to only Our our leasing credit remains specialty underwriting, businesses. public as us allow as withstand focus our certain in to strong sized Compared should disciplined ability comparably our classes also and asset but tenant it turn. total to other also our is our that level our lines such group asset economy the lower continues our of blanks, on recessionary culture by remained risk-weighted and the assets average. percentage target confidence size this well assets only manage approach of finance as efficiently nonperformers among below driven industry to than not finance capital to the gives single well lending similar risk environment traded in the but our us does and Not more a best quality public institutions, to peer

the That we credit being where said, the loans got is almost we our single good during quarter, experienced billion. since and just taken line over Due lease parts funded market continually our feel our current secondary tenant event very Since time, business This purchase about ago. to $X as to lease we at single $X.X tenant and this our we these quality over portfolio a large of pools over an outstanding premium million loans written it return. eight years two the single risk-adjusted write This that into the solid billion of We time has and credit portfolio portfolio. so in $XXX in all we've the we financing over inquiries isolated years. us first down, in tenant loan. receive enabled down have is sell past have does to in

call a of and new dedication our relationships provide say that result to financial Ken our company. the to I'd direct over business ongoing turn win to our is on I the customers our to employee’s ability details like additional grow success Before to and performance, existing of

to American recognized again employee unique Our our Best the culture, which the the by of seventh naming of Work us engagement contributed was once Banks high For, has consecutive year. Banker, to for level one

we our continued to that to As deliver worked Internet service our provides rate. $X.X First always, strong access, and municipalities success. results competitive deposit effort to and and have consumers, businesses, keys billion nationwide commitment Together, team thank customer built with like very branchless have remain I deposit would hard commercial franchise a small high the clients and technology, whose entire the convenient innovative that

collection diversify to channels strength basis. asset and specialty franchises, continue our nationwide regional both our and on and a of lending We generation grow with

We what also in their technology in to and number initiatives our of of have customers’ I'm a services improve proud continue to our as ability team finances. to invest manage has accomplished. place we products

over Ken the to turn in to like our I'd Ken? discuss that, with detail. results financial call And more to

Kenneth Lovik

David, today. Thanks, for everyone, thank us and joining you,

quarter. David income the during overall demonstrating loan pleased activity and especially we for growth were manage As to our loan through the were conducted ability we the with the while the mentioned, the net very record results growth sale EPS with happy quarter. We continued

during total prepayment activity. appeared elevated the that loan asset end inflows once out which quarter, strong received sales of will While again growth for quarter, loan point outpaced quarter net the and production, cash deposit as strong we at I were balances

increase from at total the Overall, $X.X the $XX quarter billion, third of quarter. of end an were loans million or X.X% outstanding second the

the lease linked and health due and to public and sale driven of $XX finance particular, lease loan In offset composition, an portfolio single billion up $XX tenant million loans financing, $XX or by financing million level X.X% loans declined to tenant of production terms prepayment elevated and early primarily care were commercial balances industrial total pay-offs. of In activity. of the compared by largely commercial finance single partially in quarter

Total trailers activity. the quarter, of consumer in loans mortgage due portfolios mainly the were up net slightly to during vehicles, prepayment and residential recreational new originations

lease pool quarter other was loans. a pools finance million $XX.X As was seasoned noted strategies. we financing loans gain of earlier, excess balance recognized loans of million sold in lower tenant Combined, in from public One sheet of $XX.X with loans. connection the $XX.X million yielding during the single the two We we and of transactions. sold our management these $XXX,XXX a pool of

of helping of balance sale net loans, order demand mentioned, to also both expect there in a growth to capital, for and sheet pursuing loans these David healthy continue types is manage so these improve opportunities margin while profitability. interest both As -- we of and loan to

funding. to deposits and on Moving

CD rates cost and To CD throughout CD in of During the of maturing continue of the quarter, the during increased new decline maturing third CDs weighted in to quarter, cost below new production the you inflection above X.XX%. modestly new CDs. as interest-bearing cost the year, the dropped reached X have to the average was maturing to related rate deposits on funds the CDs moved was rates X.XX% quarter give point third third the on sense a as cost the CDs. the compared how rates quarter by of basis of We late of the point only production

incremental X was fourth cost the Back spread XXXX, the was XXX basis basis quarter points. of points. in So this

in costs. can you real see we the have CD So experienced convergence

maturing X%. at new at further X.XX%, Furthermore, rates new a whereas, at CD of XX of and CDs have declined weighted rolled off cost coming on are spread points. on around a basis now current September, In X.XX%, came CDs positive

in success we excess the XXXX we XX growing of this recent this weighted with a you and deposit with next at where we liquidity CDs maturing small flexibility heading head our cost into the of out $X.X and combine balance XXXX. average costs our environment billion and When months, we Over about the have approximately very X.XX%. position feel our confident rate deposits, sheet as in business declining are close have

Turning margin. to interest net

a basis on FTE were X.XX%, we Our estimating a basis. came quarter for from NIM than was fully lower second declined XX taxable which equivalent quarter. what points at to the in The little NIM the

quarter's from full we issued the to subordinated the X basis contributed impact expected which to in an notes decline. have the June points effect, We

We impact month hedges erosion. X for asset three which also our decline affect the to continued of in on margin, the that points expect basis accounted of LIBOR

cash impact in driving the of quarter X basis decline interest was were the the during contributed The the million second balances single item quarter, higher decrease. $XXX largest average than in the carrying which and to higher net over points margin

significant as pleased relatively of we in nominal and decline quarter, were the basis in well was the and only yields this which the a impact that included C&I higher-yielding decline activity short and was deposit portfolio, interest the asset had in both point The remainder While of rates prepayment the on accounted costs for the driven impact loans. decrease. by decrease X margin long-term as

trend interest any in we from about here outpace asset third margin floor declines repricing and net as respect good in deposit it feel that expected to with very should is the yields. where We quarter a to hit believe

interest sheet margin rate environment. balance well a forward, and the Our And we XXXX. positioned expect fourth looking is quarter to expanding net for in throughout declining begin

Just income. quick regarding noninterest word a our

likely continues and to robust as our the direct-to-consumer quarter, business we factors. third David experience mentioned, but expect strong quarter to solid As demand another not as due seasonal mortgage

low the the performer remain rates for a improve we experience interest quarters. long-term as enhancements, made long technology to As gain with customer and several next to mortgage has the the solid the operating combined business potential have remain efficiencies,

past, the rate ahead another fees the as optimistic in down giving generated hedge very environment activity to to reason we the have natural we as a banking from act feel us As discussed our in mortgage XXXX. great look

expenses, incurring pretax would've in With respect second to we $XXX,XXX deposit to and second the have it quarter, would assessment was due basis, been The quarter during credit noninterest expense the on as down our any as the related by bank compensation expense due employee production. the the were which higher about down compared incentive mortgage applied decline Had benefits $XXX,XXX a of higher insurance premium partially offset to result by deposit $XXX,XXX increased a salaries mainly almost from they this quarter. premium the mainly to during recorded to not expense quarter, the FDIC. small been

quality. Now turning to asset

some during we solid, again, was, quarter. the quality credit overall experienced While volatility

were recorded an we by which delinquencies in in this to of a was million of borrower brought status with we $XXX,XXX. some million. nonaccrual the portion of balance quarter. commercial the end as loan the in the activity associated constructed financing relationship $X.X And to down, due Offsetting principal the was to fourth paid $X.X on a result, early side, nonaccrual off of balance. on second $XXX,XXX on was amount in relationship $X.X lease reserve total that mortgage the On placed relationship from was developments a outstanding and unpaid significant residential mainly Furthermore, quarter and reserve placed pay on current was specific was quarter. with full the a that the positive The million down this tenant specific that single status we a a able reduced had

we time tenant down a As written loans. history financing over billion $X.X originating David in tenant loan mentioned, that single single the first of this of is have our lease

of based experience the due principal I believe approach in lease remain reserve. we decline our the We to to reporting borrower our wanted this payments, in interest point track the overall tenant record and what any circumstances, relationship, with underwriting space, quality this portfolio that took on the out and single our conservative be and possible with issues front is proactive strong this confident our in of of and in would associated certain stay current value like potential we in specific disciplined a standards. years still to to properties but a including of

the nonperforming of to average increased third In net the point nonperforming to during points in second $XXX,XXX basis a $XXX,XXX loans million commercial ratio about loans points due $X.X relationship. were charge-offs to net primarily increase aggregate, and of X in increased total the loans charge-offs of quarter, The on to to total basis in X X.X%. quarter. Net resulting recognized the loan XX basis an was charge-offs loans as compared charge-offs

consistent with charge-offs net was points Excluding performance. and this item, to average our basis X loans historical

commercial charge-off $X.XX. by total, negatively loan In the the loan tenant on the of specific the taken single and reserve EPS impacted

capital, With remained capital levels to our sound. overall respect

equity to assets a at X.X%, cash attributed the be declined to balances of decline higher large tangible to tangible portion can the end. quarter While common

the for forecast management XXXX, our organic we loan As the range a growth, X.XX% to tangible X.XX% to capital and to by our and we by deploy ratio capital capital internal during liquidity towards manage continue support build up sheet activities. finalize this Furthermore, balance sale growth opportunities year-end. our and ratio supplemented goal sheet this the balance range excess TCE as through is generation, the from perspective to equity common fourth move of quarter is to keep within pursue objective

representing results approximately pleased per at share. as our -- XXX,XXX to per share of XXXX, and average of program earnings cost purchased was December shares shares book tangible both accretive were average average completed tangible XX%. $XX.XX share. to total discount this we our our an price tangible with since an the value outstanding very at total, third repurchase at X% the we of and purchasing $XX value finally, to $XX.XX, an And We under book quarter, about program shares it have almost of In in million XXX,XXX just of

I to take can operator turn it the so that, back With will Operator? we questions. your

Operator

Instructions]. [Operator

Berning question Craig-Hallum. Brad with first comes Our from

Bradley Berning

on you the as be, what line detail Congrats stuff congrats two in base real And think the the little fourth perspective touch do you liquidity XXXX? about you touch about And business, some ramped, early bit CDs from think more team you working to thoughts progress your from also kind expect on is XXXX initiatives have question contribution on the you mix bottom Can your moving want that on of quarter how much as forward quarter think issues the of I to as bit of you're over the you a a contribute? you but and now you top and do get think on on quick. you that on, SBA that some can second how the little team excess initiatives. from course and the about business both fourth perspective, getting further. of a both a

Kenneth Lovik

side? to handle you of side Do SBA the I'll want revenue the take cost and

David Becker

Yes. Sure thing.

what alone that. we're the next bring portfolio, week up X% for proposition as program couple about getting with On probably cost, onboard portfolio, million We probably the to to everything $XXX team, the side getting million somewhere servicing Brad, portfolio next between course to pick a of I incur in in here earnings be about November/December should a servicing we're and outlined, and of of anticipate and two. for, think, million $XX us, up It'll $X with closes their but calendar team $X think could the pick we year million breakeven in we'll $XX a a the We'll bottom over a pick and which SBA year will in XXXX. million a month Ken depending of -- in up going line that a production the or little fee through setup.

premium the off, that now portfolio, and We also we the the year folks the we've of the other about on sheet. somewhere maintaining the anticipate and million loans getting Right XXXX the uninsured in calendar somewhere $XXX with we're to Mark sales. selling adding sold of couple the balance SBA in in on portions the insured during XX% portions in recently XX% originate vicinity obviously, could

kind working math, but that's at bottom all maybe of a a sales said, the still of give we're we're what the So as he can't line operational can fill in through more end, the side. from side figure, Ken little I the, you the kind top and looking on

Kenneth Lovik

Yes.

the structure be on bringing I mid-quarter. cost think on team here, this we'll

in the initiatives for the on on depending for probably $X of probably, so in quarter, to probably we're million call between at about, looking And or Chicago overhead it an next models the is So where somewhere basis shake $X.X year. fourth probably annually are all-in is total out of expense. team million terms annual $XXX,XXX talking hiring

for low fee lot So and overhead of income a relatively increased upside side. interest on the revenue

David Becker

so shuffle a and world October, for the about month-to-date we've other success on the Brad, had, on $X new community. $XX added a a averaging ago, such and product from in new almost then to a of the new question balances $X the money great a million you of On having, about and million play. been introduced have we're back feel new in that's six business basis in in only in at for time months liquidity, the deposit pull the significantly brought north community. small CDs service And the current we month kind here give business in you in CD small outside market of million accounts kind over balances the excess We checking us, we've

should In brokered quarter. Reality quarter. when course decline fact, We a the from have and listing the fourth not going in million show buying out, $XXX the book brokered on give you get have, CDs a have out don't way They're of the the CDs through service but is they and that as they the we detail still net CD, regulators pointed of Ken we we're the same telling CDs. classify somebody it. that's as us opinion a

kind the not the after cash and the the component really out of CDs in the So CD to market cover go away generated of taken side, small buying need we're organically near it's term. chunks to all business has

Bradley Berning

on And so that. far just that's as up awesome. I think And as -- just following

So that for mix of CDs do XXXX, a take you should down funding coming way over that the come then, as the I portion down your will meaningful of mix it overall see course materially?

David Becker

Yes.

small materially. we the think to activity -- to done how SBA than of insight We've Yes, uptick. we've to in business in I the team, it's going in the a business come even back I as is through current no going done we there end depends community months expand on small see to years it more and continue significant operation. last think we're six our our XX

The we'll continue market checking X%, as markets interest today play nice there. money going little if So the well. them, come drop rates bit I see say money to at think are we're a XX the points, down basis to will the account climb, but some

checking we'll being. the long let as the can on side, it produce for and the time CDs So we market yes, money as off run

Operator

Janney. The Rodis comes with next John question from

John Rodis

sort you or but see over -- the just just can you of stay just said here, your can give going thoughts up Ken, know sort you on you maybe I move the think do the it's as for and a while? forward? from next think now stable right the maybe it quarters, you margin sort it of bottomed it potential of increase magnitude little few of

Kenneth Lovik

No.

we're to basis steady points think and of, X quarter? back Is XXXX anywhere say, expansion basis some upticks. points get quarter. I we incremental it, increase nice think basis but quarterly from, a it No, quarter on now, are a -- fourth to X of per through see next call should going as of I forecasting XX we

as some next probably anywhere said, of this even again, over do months we XX to year, million I of it's $XX maturing honest, $X.X a fairly billion think, of I do, has -- the to be course have call to it's a distribution with the million CDs we throughout $XX it month. -- So the and

So as come to books those But bit off them those and liquidity CD over run off. of five improvement with it some doesn't a XX or new time the are basically in all quarters see reprice gradually at immediately, pay play at pickup takes just either and use to course down replace delever volume it we'll cost least. point and deposit next that basis NIM its way the through the excess

John Rodis

Ken, when basis cuts? that fed quarter, any up points X assume you say additional rate does X a to

Kenneth Lovik

assumes, That does. there. we of model that mean, kind forward the curve of Yes, I

that -- rate into assumes forward cuts baked more you look at the baked week. there cut rate much couple a over a end -- curve And in next are forward that XXXX, So -- pretty there's implied forward -- next rates the as through curve. of

John Rodis

Okay.

thoughts about the Can the on Okay, you go relates that, as doing target? it good. earlier another Ken, your comment your to that, call over buyback. Just about TCE. back

Kenneth Lovik

our forecasting due mean, I to than TCE higher-than-average was is, lower we I little Yes. objective cash -- goal as again, balances. bit a the said, were our

at be the the throughout in maintaining act range our on And self-generating organic we the X.XX% in share this it, buyback same we have in X.XX% budget We're minds all but it's course to the bring a throughout to excess support ratio of the back and capital there. our We the range $XX solid, TCE finalizing Board by keep looking always up TCE certainly approved that balancing for goal because completed expect us, call of quarter. say, to XXXX capital of our year really on XXXX share and the -- to XXXX. The TCE versus of growth budget. is repurchase of, of next year process end TCE, million is our into don't

plan share that repurchase we share -- will that's repurchase through the we revisit So forecast, any the of as -- part once get process.

David Becker

high traction to one. loans of hits real points down of of other Obviously, one other some We shorter-term books. the side keep our sale yields from business that little too. the end higher great also The adjustable that that and lower-cost small all the grade -- getting community, want side loans rates whereas on which fee powder a the and deposits we're up quick on in income

position we assets want if on in can yield put have a So manage pull we we to are in that some it to by run capital play. obviously that ourselves other don't that. off lower need excess that back We really selling XXXX trying team on running. Ken need see can with said, as we're what to months formulating of -- put still get our touches belt But finishing in we here the budget, SBA to and they couple produce a to the get to

go for back not So and don't position to growth. capital markets we the to want to we're in keep the -- a little room that want can't -- obviously, a organic we

Operator

from The KBW. next Perito Michael with question comes

Michael Perito

I to prior questions. a margin. of clarify wanted Couple the on question

But confines or give back points X make the I -- there point in of data X some as helpful, CD next is that think are so basis from that to though playing is Ken. snap well estimate? range additional repricing us, sense and the quarter X liquidity Just you points to X you some incorporating in basis that of kind out of

Kenneth Lovik

do why sometimes try That's to that's mean, think I -- a And estimate. as out I do what it good to mean, get more, bit sheet have we a to where closer might quarters to than going quarter. balance be mix with we some is in little that are the any eight there four. XXXX, we quarterly on then is I provide to forecasted incorporated just I range particular a basis. is into It's that through

Michael Perito

into be get think and modest to liquidity way those quarter's from right but about and rather? repricing picks some to liability CD driven benefit you impact normalizing, then benefit the full repricing, repricing but the as there's also that more of XXXX some quarter up get based the more X of from you there'll So that X next CD events

Kenneth Lovik

Yes.

to I say. think that's fair

Michael Perito

expense, the near-term a Okay. little And the expense then drill on if more. bit down run rate I

were So million at you this quarter. guys $XX.X

$XXX,XXX XXX had, FDIC think, normal was expense -- below. $XXX,XXX, You I your

You have from hire. SBA coming I higher in another $XXX,XXX think some of

place team Is from $XX.X for layer million of maybe the have kind the annual So quarter expense XX $X $X.X be million and mean, in to other closer I to the -- other to million to then the you about fourth for to it, beyond SBA growth some -- way that in that to as be guys put it? to have any numbers addition you thinking just well more is right other might around the side, XXXX the

Kenneth Lovik

so. I think

million it think million a I reported $XXX,XXX, $XXX,XXX FDIC estimate. we as which comments down been mentioned would have last to this in again, And, expense I from $XX.X fair quarter. the about had is is quarter think $XX the that, I

growth second that take the don't in if FDIC assess the to benefit the insurance. on you that of calculation, insurance math managed which continued is to that we've growth sheet apply -- the component are from overall with a And as year-to-year side. year-over-year on the getting and asset any we're balance math because So has a balance down familiar uses basis significant sheet to and at quarter go a

$XXX,XXX using number want in better than $XXX,XXX. plug for you So that to a probably if

Michael Perito

bit clean, I a while. tenant there's the Got has steps leasing I'm you different south for little the of lastly in it. credits the single to was And those few been before I it And go ones. remember And tenant that? to just had a haven't one, guys of if think, how recall, you just we migrating one about a quarter, you providing of to in in one be then on that first ask reserve guys provided so not kind the do which back have extra story give kind you if what mean, just think of process was against background, honest totally But kind I recall last but know, the curious about of to drove to of what particular credit or the of many us actual I steps them. instance, I this borrower the can underwriting is I'm guess, because the that more the -- really details portfolio I

David Becker

of in on the deal. loan us. October conservativism a three is way kind and are the there's stores not to pay new empty current position loan trying missed never precautionary tenants He take He Michael, in on in And delinquent all the a has the the this that come October loan XX. get us had our through stores our It's Midwest XX, two to loan. not re-lease a by process. trigger He to in any this move at taking time, but part not that's trying the did The payment. and going today. is issues he's to the involved mature we're on year it's loan He never one, is to inform a position. been Customers off is -- the not he with play, a

still gone on quarter, share because -- per took there, we but earnings So though on was impact something less our properties, on this the be to prudent personal really had value completely side He the we the it that's the of did in take reserve. to we market to a do. that's the Even we've we're them trying we is right $X.XX obviously, is are a thought on his and guarantee might daily out have stores lights customer. It caution. be reverse ultraconservative we'd ultimate thought thing the It's still we and talking next as quarter, basis. it first still what put one, was kind valuation liquidation south it that it a

feel on To had health review cetera. We completed portfolio. no by the any regulators our the had loan comments questions come through. the of external portfolio, no audit a we care, on on absolutely about third-party and give tenant, concerns, they the annual an et Had single municipal, quality just products, of you portfolios

one a it's fundamental or those that on It's and of ultraconservative up flaw So came issue. it. we're being handling not we're fundamental just how

Michael Perito

in. sneak to one helpful, And I'm more then that's And actually going David. just

sheet that we kind could move expectations about sense you seem -- sheet your of could which limit that capital and about buybacks, and guys Just into kind attractive the put help as on curious XXXX? it growth about really growth capital, for preserve SBA, of we at on might I balance about some up balance overall should be make we that would conceptually have are much that with I'm are what it I what's but aspect, mean, overall to to are? buybacks, sheet I maybe would the how some sale thinking mean, me capital, balance free But thoughts too talked pressure levels. these you the how we think guys expectations. do gain which updated about talked on talked

Kenneth Lovik

I'd to we back that we earlier end keep it flat is goal to it get the to of at keep course year the relatively comments and Mike, go back yes, I to made the on ratio, where wanted that XXXX. here to capital, of once our TCE Well, -- that is our throughout

that that more the our on again, conduct balance of fee the even ability -- next to perhaps a do in TCE premium a the sheet going and to is drift complement I single balance doesn't more say, in to manage sheet, to our that sell to of ratio business So the sure be aggressive, organic bit we terms to seven. tenant capital we're a be at maintain, loans year going That where think nice activity closer bit just make revenue. maintaining growth, going loan can growth governor little of But a sale our forward.

Michael Perito

be mean, Got kind fairly growth balance minimal, it. then ready to to commit a guess, but of certain should I sheet I conceptually level? not

Kenneth Lovik

to to going we're said, that that think migration, shift main overall TCE be internal we're is the liquidity. retain organic talking I the activities the have some that loan somewhere balance There between And in growth that growth in probably I think excess some the probably of and the sheet. the you of making to X% on sure, overall But course, higher-yielding self-financing you're growth from on mix may lower-yielding with we balance look to profitability. deploying differences XX% as with Yes. governor capital management I sheet again, sure balance the kind mean, be -- to at shifting in help what if generation. portfolio sheet, products I the making ratio the and

Operator

Andrew next from question comes The with Liesch O'Neill. Sandler

Andrew Liesch

on here. up discussion Just kind the of sheet section balance following or

the the that in how buying liquidity in do it's it's be With some balance on on, to dwindle mean maybe had a over last you're best you now funding right great that securities environment you've I way. much growth you and kind capital not the you and could lower of the deposit maintain sitting maybe you probably if rates look bring blow and a and sheet, too had securities, cash of the lot that interest-bearing you've case come as don't but that that the few deposit security of liquidity at maybe book much cash to kind quarters carrying and need all just and or

kind Just cash should book and of curious size you the at we be bring in? of how securities looking the the

Kenneth Lovik

lot quarter, cash balance are we third that satisfy look that's long held-for-sale. good for investments regulators, And vice environment great Andrew, to our with the some here securities, short be sheet our it's securities are a make to some a come into term purchases We out putting out at you great mortgage loans money portfolio. but a great certain and maintain that liquidity securities tell term, as for too, on or did don't invest the the to there, great there's you treasury there to a point team obviously, I'll versa. downside in Well, opportunities in really have some not and myself amount of whether of that not a investment

the goal balance in what that assets to of kind is Our call maintain sheet. kind of liquid we'll XX% of

very could -- scenario books it the could balance a on just in back quarter is you'll kind at quarter without number we necessarily year by do to kind that. our I we mean, than a replacing than have And not sheet end and overall here put have the in them. excess to well today. Probably being the that able and of where some we, a this but have that loan sales roll balance execute is smaller math manage and to just liquidity huge to put the fund of or excuse letting to the me, comes some to higher little what bit we third sheet that, that our provide use work. some fourth continue CDs amount, contraction liquidity to that about you the excess sheet again, balance again, And of off of could business if delevering see liquidity of So comments as growth new is through

Andrew Liesch

if them, alleviate balance And off, of some replacing just higher cost and some the that sheet deposits Great. of not declines. it's rolling well the like could the while have as overall you

Kenneth Lovik

costs. a pickup the that's on just amount the Yes. And deposit additionally, really nice dollar of

Andrew Liesch

Yes.

reasonable we So I X% then reasonable? a I your to with some margin back pretty the outlook, year. X get mean, basis margin point that points at Is could mean, just it's looking next with that a to X quarter.

Kenneth Lovik

I think so.

probably SBA have the a -- -- are balance we sheet, the up pieces on added from depending very the and those unguaranteed will depend business nature of plus that on loans the that X.XX% Some of bit with prime the can borrower. an on that lift if we those get retain the nice

So all sales us the closer blowout blowout, points FTE that that and have if to year, X more team closer be the we have means, gets build by margin. could to balances a and we a X% we thereby, basis

Operator

question-and-answer This closing session. turn to concludes back the like I for conference to our any Mr. remarks. would over Becker

David Becker

great We're lot We're down, about move moving parts. set rates we term. that a we've Very joining put at quarter, we quarter. hopefully think gotten well third good deal, We're continues opportunities we're today. really solid environment quarter, Fed us. positive We to excited really, appreciate us a thankful And near it's the to bed in of here in everybody looking rate about the SBA. Colorado the the had excited we interest Like the said, November. for if for early all down fourth

So today. again, time again to to Thank appreciate soon. forward you talking you. Look your

Operator

today's Thank The attending you presentation. conference has now concluded. for

now You may disconnect.

First Internet Bancorp (INBK) 24 Oct 192019 Q3 Earnings call transcript