Earnings call transcript Q4 2022

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Operator

Good day, everyone, and welcome to the First Internet Bancorp Earnings Conference Call for the Fourth Quarter and Full Year 2022. [Operator Instructions] Please note that today's event is being recorded.

I would now like to turn the conference over to Nick Talboys from Financial Profiles, Inc. Please

go ahead, Mr. Talboys.

Nick Talboys

day, First thank Internet Good us for Hanna. discuss to you, everyone, you and joining Thank

press and Bancorp's and website The earnings full results at year yesterday financial for XXXX. company the www.firstinternetbancorp.com. issued the available on is fourth quarter release company's afternoon its

refer In the can included the call. presentation that a addition, during slide has you company to

You can website. also access the these slides on

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

we Before by materially Internet different involve actual expressed risks respect like with to be that you the factors results or results implied and future to statements. uncertainties. Bancorp this that Various forward-looking financial remind could First conference begin, performance cause from contains of statements I'd call future forward-looking and such any to condition

the the SEC which any obligation These factors company statements website. company's any filings, on are during are made the to forward-looking disclaims update The company's call. in discussed available

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

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

David Becker

everyone. And results. fourth Good for afternoon, our XXXX quarter as you, Thank year discussed us full Nick. thanks joining today and we

share per net fourth $X.X quarter in of of earnings the we $X.XX. reported income For XXXX million

strong earnings $XX.X we and up in $XX.X XXXX. XXXX. interest was $X.XX XXXX, for million for $X.XX of full teams full diluted income Net respectively, year For reported 'XX. of net had year to lending in million our compared income Most the respectively XX.X% production year and to compared share the per and

with along balances from rise growth, fund the higher in driving the average throughout As interest higher cash loan to balances deploy rates loan we loan yields year.

balances quarter increasing X.X% fourth compared Loan year demand in portfolio was X.X ago. particularly XX% at compared billion year and the as third totaled to quarter the to one strong in

During the or our the commercial in up led construction, XXX And for quarter, printouts we're growth lending growth the by industrial. were leasing, commercial across lending, balances million posted XXX and or board the areas where saw both business small X.X%. year. we strong million for single tenant up We and XX%

due XXXX. about our than balances or quality, offs XXX mortgage way. of the RVs compared or remained the XXXX. loan prior points Our increased all entire X grew Or loan year throughout only to consumer in was loan of million loan growth commitment the proven losses balances, for in the year. the million quarter by XX% full to million increase credit fourth low, average for X% our with points the as without and exceptional about basis achieve XX X.X growth Again, strong primarily for this higher leading to was quarters, basis net loan provision only quarter charge residential X We sacrificing the and the for prior and trailers

are representing points total a XX assets improved which loans, assets averages. just In basis on and industry fact, of end XX representing of year-over-year well just nonperforming loans both quality with year our below of basis, asset basis at nonperforming total points

XX Resulting increased portfolio portfolio in the origination quarter-over-quarter. able we increasing yields a loans, yield rates With prior the XX as basis new increase during been increase to to in the total fourth rates the as points basis interest on quarter year, points compared throughout have quarter.

interest rate also driven on be loan products, margin. most origination rate To variable the hikes pressuring However net net notably finance will mix margin XXXX business production pressure and defend the federal of variable with commercial other consumer expense set focused through competition has rapid construction and believe on to small franchise efforts loan costs. and will interest deposit offset coming our intense for such decades asset lending. funds, combined higher increasing on deposits of side, higher the We rate lending. loans portfolios And higher new help rates high then interest yielding loan of at the as

thereafter. expectations, Setting profitability in to follow higher deposit later for rates us in year interest costs the should XXXX. achieve market earnings the If stabilize and this stage decline

in economic caused housing to the Turning and of lending to mortgage business. applications other volume, level have lending Due housing lowest interest to we demand, supply, uncertainty, over combination the to nationally exiting yesterday outlook prices, the steep our XX mortgage mortgage, mortgage for in that while rates strong years, coming mortgage lines we unfavorable has the consumer the are years. plunge announced decline

as This includes and ultimately consumer mortgage in firm business. loans construction was difficult our local direct-to-consumer a our secondary originates the market, well sale but as decision. business This mortgage that nationwide residential traditional necessary to for

prolong the banking. Given have points every we outlook sluggishness mortgage economic across to reviewed

Excluding hard to income a the homeowners. in million dedication company. mortgage will And higher and earnings an costs, a I and on more work we estimate XXXX. our want of the to thank pre-tax over for from stronger, onetime and remove everyone we be deliver X.X volatility element longer team approximately horizon efficient

providing to each them are new We help into tools opportunities. with them of resources transition and

We positions lending might and land culture, our up business final excellent decision, credit like also our commercial lending regardless economic believe to strong To underwriting our any that that make remains construction and want discussion quality part credit point capital strong this we by to is affected an wavered of the asset from and addition our never as on note market weather standards to slowdown to be have in not that horizon. one well conditions. levels, our development would be important of I and wrap will the I strategy.

partnership and initiatives. provide banking on Lastly, I update our want to a an as service fintech

went spend launch our increase with and with corporate During partnership partner platform we first fintech. the live quarter through management program our card that ramp, the fourth and

for services between bill ramps in about of million payment and offering customers payment currently, to now providing daily their day a $X volume. are We million to processing $XX are XX%

also a pilot provider diligence. neobank a in have payroll have due We other and and approaching more phase, pilot the two are the we phase, one fintechs, that in four fintechs and

We weekly increase are also a with betting on new opportunities basis.

implemented partnerships a in other treasury our expect with also first of prime the 'XX. be quarter to We fully platform

to with treasury crime. With new get in the be we live are boarded second our Similar partner the opportunities go at first with to to fintech as we partnership ready increase, looking on quarter. regularly

the two this up both mixture decades. of wrap the of comments year course, we a always still built past last proud challenges. prepared is To I'm was have that of my successes over there And work and to business do.

to we interest to is We build stream resilient economic are control and on earnings focused what in rate environment. can an that changes the controlling

a may continuous value. strong have at We shareholder are to capitalized, you throw us. balance improvement us whatever sheet are we the well are economy allowing and shareholders Like withstand challenges to committed creating we and and

I'd our it their hard to entire like turn for internet customers Before and both to the I work commitment to team thank our over Ken, and first shareholders.

identify ninth we innovation. by and ability provider. opportunities our in for financial is work leading profile, fosters our elevate diversify consecutive why services collective a I'm one as our technology that a that confident business our new for developed to funding That and teamwork to culture that's Banker lines, why champion have year, the American named further best and compelling of will were status We forward and banks the improve

over call quarter. Ken to With to the for that, I'd financial like results discuss our to turn the

Ken Lovik

David. Thanks,

The spoke exit about mortgage the impact of earlier. first that David start is with thing financial will I decision business the to the discussing

to We income approximately approximately by expect expense annualized reduce total this million increase in $X.X million. noninterest by $X.X annual pre-tax

in the XXXX about realize subsequent XXX% to and years. of expect XX% in We improvement annualized

business quarter. next second in four five Aaron remain Therefore, subdued will be a of decision will estimate million we to years. this the expected to of the for of the this Beck to The pre-tax is majority quarter forecast the be in associated of quarters with recognized total remaining line of first that this the we amount and business. is a XXXX of three expense exit with approximately the line $X.X Additionally, in between exiting otherwise incur that

perspective, Slide Now yields up turning basis the the lines active year-over-year. X, third growth lending XX to all the quarter up from new were the in portfolio David XXX rates we and including origination originations, across funded covered board Throughout a basis increased loan quarter XXXX, the our fourth highlights points quarter on business. points from for of

out coming on higher the north setting a been cases is increase priced focus drag Fed, and our yielding with higher classes many that majority higher, did fund pipeline, were in of XXXX production at the rates, which new for average and yields the lower loans of certain loan created much of in cleaned with fed the have stage during yields. in pipeline yields and September origination X% quarter therefore these were beyond. rate The loans on on before new the asset We

XXXX growth loan lower was we While growth than to quarter, for fourth it very was expect XXXX. be strong overall portfolio during in the

the to total financed we that higher the of Our course flows as book. loan from pipelines. by is rate of be remixed yielding the year have the variable cash expected continued solid over to portfolios channels and much composition growth But of other

on the with deposits Non-maturity money of $XX the X, linked service deposit deposits or to balances quarter. were end as way banking million market leading million. Moving XX by the the accounts from a on up overall were million, up excluding increased Slide which quarter, compared third X.X% $XXX to deposits, broker

were a from majority bearing construction driven borrowers. deposits almost nice increase noninterest of which of $XX million, also had deposits the commercial by in our We

deposits fintech quarter As to down we winding previewed we in third relationship. the expected the significant the call and earnings broker deposit of bass a experienced during decline quarter we in a due

of partially referred this deposits services was million were new David to by that ramp earlier. offset payment to over the related $XX to providing However, just

about interest-bearing within demand from relationship of also are We $XX deposit in which deposits million increase, our brought item. classified line with the

duration to grow partners the to expand opportunities fintech were inverted as funding new channel, of the take we deposit million to rate production due in while market on longer to curve advantage number quarter balances for in compared wholesale the we of access hikes of As $XXX yield and these continued increased impact over types prior the future. offset up to million deposit the broker costs. expect consumer help fed the $XXX deposits of CD the we

appear market and grow and betas maturity non in the and deposits. system the with saw combined continued in from XXX%. fed continue XX% bank digital the checking quarter of challenges both leaving money fourth In overall trend ongoing to to business space range the banking digital deposits rate present Competition increases markets to small we the

the total the With basis points the since in March fourth XXX XXX point increase in quarter. funds XXXX, including basis rate fed

date money of results and a pricing beta in market current Our cycle products about to XX%.

result from XXX basis interest and a during all cost the bearing increased of deposits As by third the quarter, of interest rate deposit activity the fourth our points the quarter.

Slides X.X% the and X.X% interest the on was X million for million to income equivalent a Net fully respectively $XX.X from quarter quarter. and down Turning and third taxable XX. $XX.X basis,

earned yield Our quarter, yield in a increase X.XX% on a earning basis basis loan earned point in increase other linked yield average to X.XX% due securities increase in assets increased and interest point average yield from in the XXX the XX assets. on the point the XX on basis to primarily

equivalent in was the margin the points in X.XX% middle third call. for XX points loan interest Deposit produced the down guided cost quarter's recorded also the X.XX% however taxable top-line increasing The in on higher income and resulting growth the compared to interest to of on And combined net We fully increased XX a decline pace, to decrease average last in basis income. with the we right quarter, balances yields interest of at basis the margin of assets range linked the quarter growth net quarter. fourth interest and interest from solid earning faster quarter. net a that XX.X%

interest net drivers during XX in change of the the roll The tax on highlights net interest quarter. fully margin the equivalent forward margin Slide

new to income. XX priced XX%, and For full continue construction rate of for to expect another the quarter, the will level drive higher With on originations first XX% income repricing growth draws assets portfolio XXXX, increase up higher to the of around that loan for the be commitments in basis to interest interest compared the up do year of variable XXXX. XX% XX% points loan and total we compared and of the high XX strong we to feel confident the to to quarter fourth Currently, range yield XXXX. combination the additional on loan

rate funding the on with higher language side forward rates the feds On regarding inflation. based expectations and continued

to increases fed increase. magnitude the rate pace We on also the terminal increases, costs of and rate. heavily as of it The maintains well competition long as expect deposit will price for depend how

Assuming early total expect points the cost increase the up rates in the fed interest with increase XX%. expense XX deposit of to basis XX quarter in XX% first to the XXXX, to continues we funding range to of in

terms expect compress much margin how elevated interest impacts XXXX. this further net In of of taxable we equivalent for deposit will fully costs margin,

interest hits However, the we and terminal of the of be first in stabilize as to would year. interest the in of during quarters of margins the fed to tax composition equivalent higher rate range should the in XXXX. we back margin the stabilized amount three of realized a XXXX, quarter us we the improve during the expense dollar quarter, the portfolio, get see through X.XX% the loan its net what of range X.XX% If which fourth fourth fully should

noninterest of quarter. million entirely $X.X of on the consisting for U.S. up $X.X was loans up of XX. sales from quarter Business X.X loans. income third and Gain Administration quarter on Small XA third for million on sale gains totaled to Noninterest guaranteed the Turning over the slightly quarter income Slide million

year closed was sold XX% team volume well over loan SBA Our out as third the quarter. the up

XXX Mortgage premiums distributions to revenue of the for fourth income over however, capital the uncertain the totaled other basis quarter and of million Net were banking offsetting fund impact $X volume. gain due up on totaled received sales the almost greater and XXXX quarter, SBIC investments. for $X.X sale down venture million points, third significantly quarter fourth

$XXX,XXX for quarter. quarter up noninterest to Moving from million was fourth the XX, third the $XX.X Slide expense

turn to XX. quality asset Now let's on Slide

loans continues quality remain excellent credit earlier, to as mentioned nonperforming David ratios As low. asset nonperforming and remain

quarter, one its there determined When XX mechanic's a XX, it days of are charge loan basis loans total the X more September make resulting X delay of during low, referenced case, recognized of were average as to fourth this the mortgage offs due XX delinquencies points a December the points offs Net compared David delinquencies $XXX,XXX were basis of as loans points charge to Total in net basis or earlier. past loan when XXth. to at on XXX had just to loan construction we difference. this to it takes lien for permanent converting a In property. was C&I was

the end, loan was year to subsequent construction However, brought current.

the from quarter for third provision in in up $XXX,XXX The losses was $X.X about loan the million, quarter.

As earlier, positive to the specific growth partially This loan. in overall was a developments in increase commented reduction was primarily certain by offset portfolio. the monitored by driven on related David reserves a loan

loans the or for million $X.X million, to allowance at allowance basis to losses the The loan total X.XX%. end, increased X.X% while quarter $XX.X decreased to of ratio point X

growth, the in I coverage decline slight also removal the with continued mentioned. allowance mortgage coverage reserve the has of have the reflects lower that that While the in portfolio a just decline was the ratio and health coverage higher balances loan in ratio. overall Growth ratio the care a specific line growth finance in residential generally in

We credit be the quarter CECL of losses model will during implementing the expected XXXX. or first current

the in to capital, allowance to to expect XX. we on the As adjustment shown initial a With be respect range credit losses for million. $X million $X.X Slide to result, our of as

capital strong. levels and bank both overall company and Our the the remain

quarter, the ratio as comprehensive sheet other earned total the balance repurchases, tangible and increased and terms amount, during the in combination the declined the equity of offset common shareholder's our X.XX% accumulated share decrease net growth loss. dollar to income effect in equity While of of

stock we shares During repurchase the of at per as authorized part stock repurchase of fourth average quarter our program. share XXX,XXX of $XX.XX common an price our

For we the of over per an XXXX, average year repurchase shares at full share. XXX,XXX price $XX.XX just

Along can the control. we controlling lines what of

in to quarter be at we $XX.XX a shares flexibility over far share helping our the us per what value quarter. book allowed X.X% position increase be end, capital solid tangible franchise the believe below to market to Our repurchasing our third to up price the at value,

would I some net for costs earnings. wrap deposit Before like comments, provide margin. loan and outlook on I provided I yields, my our comments Earlier thoughts some to interest up on forward

be plan of on $X.XX exiting $X.XX in there, around business, basis, the will so noise first should But With range mortgage to XXXX. to annualized there an results. quarter's from the accretive forward earnings some of in the the the cents for impact XX to going be

The exiting a excluding costs will when the of be million. $X.X expense, impact of largest non interest onetime mortgage

to X.X% the XXXX XXXX which full of expect previous twos much total year Compared growth the lower X.X%. non-interest is expense for for on year. to in range gave we guidance increase We expense the to results, than

from side, two's will from a fully income. non-interest in margin of On equivalent line original expectations the flip XXXX be the net the discussed forecast the income down In total interest range tax with earlier. XX% non-interest decline

income remain We third costs. increased the remain quarter to as expect and the asset from help interest XXXX through the quarter quarter's higher consistent earning growth offset and first with results net deposit loan fourth to yields the stable

year. forward double back in the curve digit If income net expect costs during as interest see stabilize low growth in suggest, we quarter deposit fourth to end the would of the the

share second For be with are cost exit the excluding quarters. in year, roughly with do first earnings line in to the the to estimate be full in of the $X.XX operating per third range we per and improving to and quarter average expecting mortgage share the $X.XX the

in we business, in are the earnings $X.XX deposit seasonality continues fourth the expecting Combined of income significantly to stabilize loan $X.XX. and range grow. the share with results to SBA quarter improved costs the of As per with

that take XXXX, annualize are if estimates. it, and simply to of range the significantly the than end Looking current XXXX low the higher you results ahead

of back Some XXXX speeds follow upside they fed a next premiums the dot factors expectations as averages To may as and up that historical service line income to beginning and costs may deposit with begins plot, fed rates dot provide and an decline well, end at impact or down reductions additional perspective, market's positive results wrap income down plot. the per meaningful continue expected pace the curve When gain from fed we're prepayment than sale should whether banking to and expectations as share. provide might the tunnel. bring in reverting of the should light SBA see activities. come include to earnings higher opposed fed from quarters forward to noninterest the several rates and challenges to the the with a on net the to earnings significantly,

the I'll With operator so take it back can questions. your that, turn to we

Operator

[Operator Brett Rabatin from Instructions] question line the first of with Group. The Hovde is

Brett Rabatin

authorization Wanted with then how Thanks. to you $XX the buyback is and how might stock the start with year, given opportunity just firstly, much it think million how much where wonder is active you think left this I or the had you presently? the and be

David Becker

in of first since the average about the XXXX year day buying on to Brett, the and intend we're that. had been market a continue shares

Brett Rabatin

that this think an have purchase you much do you capital David, year? how or volume might you to this retargeted how year of about or ratio idea, the Would might

David Becker

ratio, capital close want targeted X% stay Well to that to we pretty level.

first there's quarter. in noise Ken here as the So little said,

act, the start come second to the same be share probably you probably between way and as We're year. and that the XX to And out million as said buyback $X,XXX our getting TCE things forecasting the definitely the quarter. for XX second out year million balancing buybacks. by in But half range, to. we'll end we'll then of So the figure of in

Brett Rabatin

front, those us that this various for on phase well to others think I just lot some four And soon. the of what pilot or expectations the gave got fintech two then you sure on two make us contribute fintechs any give a how the of Can the as year? made thoughts and as be understood wanted color fintechs implications the about metrics? that treasury could the on that Any might you've then call and you've to progress prime in and

David Becker

one bill XX% discussed ramp, services, doing live the Well, that Card and their in now onto about which there that that National November our Credit their of program, payments in we've converted we're and side. came is customers we between November back the

and same account. deposit So day clearing the should a that neobank payments that million them, day of of we balance two going The hoped things payroll with the X plus pilot months. small in and maybe way a go and kind XX in $XX have million friends to That up next a family pilot phase phase triple to and we're second few in The that's it's is offsetting we launching live quarter. clearing from beginning system, other is are a that some side business a of the down.

a million So the forecasts rollout a this conservative couple opportunities forward couple being but probably final is The running us, strong with could an treasury stuff on got homerun our by stable, up a the on backed phenomenally to play, doing some prime. the looking on a income the park, it's we're credit and and could well. fintech we're income say, of XXX kick the, two hopefully really phase pretty be you million live side, overall it's out it That year candidates be quarter this a and of and West Neobank the million with with it's interface, Coast. of cost for in VCs They second of about to one card somewhere we'll like in hit, as pretty think the from XXX,XXX deposits low of them good one or portion be testing their the I in off.

Brett Rabatin

in loan you you growth, and close the be XXX% from you where much might the adjusted risk a guys on on one to to Are specifically, here basis last would growth one in growth, sneak could I if And expect how construction construction the capital? portfolio?

David Becker

because XXX%, the We I to be that's won't Brett. close at remember, bank the level, even done

in capital we this do But at we year we had a construction our a obviously, billion great mean, we and I do, the year over half originations got will have team those with So expect, fund. bank. well

pulled fund funding that construction the around had We expect is of land than our expected. around piece good I year, some really part we've out earlier guess we from market revolving from is the historically forward we deals started next here base. balances range some a that, actually development the a maintain this But about in home But we construction, residential a in low we're here. XX starting mean, million-ish as quarter build I

So, under construction we if well even hit portfolio and total portfolio capital our targets is for that loan under next year, limits. the of still XX%

Operator

question is The line the George with Sutton next of from Craig-Hallum.

George Sutton

I just smaller the to mortgage a versus be when back wondered do? thing you to pulling market business able the exit being right through just seemed could if walk that reenter to it to decision to level the the

David Becker

to no we days George, way back we get was doing trying a together. to it just even of to basis. shell kinds There all there, last probably spent marketing hold of XX efforts, the close couldn't cutting configurations breakeven on sales, staffing, get

staring a that's solid far even losses out not. mortgage and to at years whether doing, Jenny no come next So and three mean, I or X rebound everybody's know as going forecasting they potentially don't idea. XXXX, plus and is the as in Annie over million

of But assuming it the period for it they sense market that Consumers mortgages everybody make a to it time. a The are X% credit off getting can all kind out dramatically couldn't that used side loss doesn't that a part rate, have else bad is that's we And great. get. going about fell on when long it. out so interest is to for other give mortgage of and at that us of

damned where of kind you don't. do one you damned those products it's of you're So if if

me a, believe in my made probably it from my perspective, toughest career. I've decision business So was the XX-year

tough. still It's tremendous the really group it's years. them of for nationally it almost XX been working now And a as And some tough, blowing market know, loved is just up. them of is you with individuals really,

the I've it staring face industry a the close great now for lot been not So seen has XX in been in I've four opportunities, of XX the is country years. years. XX they've cycles And I've been in for the there's that mortgage and of this years a to around my to and part probably the worst that in cyclical. we've worst but or seen them three and far by seen lifetime,

George Sutton

I you're just doing doing can to you if you get appreciate perspective, things your and you're one see, to mention, of we picture this to it we which value you buyback, into love be your well because the find part that mentioned a I below in value, see of act wanted but what I to franchise franchise believe you're what be?

David Becker

are of There, ourselves bucks from as a we're we at full position, out capital doing keep recession know and use I we're we're bad the what to want shares again, months with portfolio be booked value franchise of that's see, by obviously good capital. in and comfortable we $XX of to everything should will my our in $XX But put today, coming from TCE blown knows And walls year. don't below end be And back to XX and value. it's use perspective, six here. be we we're on We who the least of we from almost quality might when below risk think a the that, now But a down. great think buying of the it's capital.

Operator

from question with is of line Sandler. The Nathan Piper next Race the

Nathan Race

late. paused I little a Apologize

shooting? of the get Look We for As was you're first twice. then, margin? your can around grades the and the know half through, the comments worried We I going

David Becker

Hey, Nat, you're cutting out.

Nathan Race

Yes. hear me Again I apologize. I wondering. was Can better? you just

Ken Lovik

really. Not

David Becker

third every about get we Yes, word.

Operator

line John of a from with is Janney. question Rodis next The

John Rodis

loan down about and we growth talking sort XX% in are what think, discussion, my than XX? of comments Are talking your by Ken you can for we little XX%? What to would growth your I be XX% a the loan math less about? you said I mean, up? I were think more? loans said narrow we Or you mean, growth, XX%, talking said XX. you XX I bit XX%? are

Ken Lovik

the of and construction we're, and we we we and in But kind to cash talking both loan And lot mean, our cases, rate be re higher the has on is is about put other maybe still mixing of and have financing variable focusing, range both of consumer the variable just mean, John, us. are the the bit. don't book. rates. composition rate X% of amortization franchised we're still that portfolio. done of SBA overall, just competition just still rates parts the that on, market rates going have that lending some I I that right great through from very, and very I'll higher we talked work within and opportunities of flows a probably so in as some to There's have elaborate areas for low to X%. a No, now the

in within areas other So be to probably I we're year see mean, balances of that million lower going some there's going residential over roughly to there's and $XXX combination say year. mortgage

a again, asset the book, reshuffling higher you to is So, just lot class the of focus of going if be loan will. a that yielding on

David Becker

quarter activity, normal XX%, fourth up Elkhart, Indiana 'XX year, and John the One of XX%. of the growth quarter tremendous Northern caught horse to sales those the getting Indiana close lending is fourth versus pipelines pandemic the down on industry. RV for a consumer other demand RV of the 'XX up, that they're getting kind are there, sales The think the there trailers the in last for about and issues is are had was lot pent units. back I of out demand heartland to side, because Their we

follow-up. and the to million over over plus next year, So that's that'll of the up 'XX drop going to tremendously down were we course XXX

Ken as said, volume could, we portfolios going growth new lot to a repayment is again, and status wind overall we're repayment the healthcare So and of down existing, loans, going a between that total be but sheet still do not huge. balance that to the of of

John Rodis

amount expect just securities year, loan you year of I was too? Canada similar XX%, growth XX% And then this fund sort down that would think portfolio next to a

Ken Lovik

down we got a have somewhat to little we We better it. or bit. we'll of mean, we still keep right perhaps it Because I'll probably I now, got keep liquidity certain in flattish kind to tell to in or backs. Well, right got fed on than balance you But buying maintain funds then of better mortgage cash keeping the just off a amount sheet. be might now, it

probably couple see at maybe expect, higher might than the quarter would balances you've end seen I in past here, what So cash you quarters.

John Rodis

And then so of X.X%, X.X% million. other based notes. the to expenses Is for on up the guidance, X.X set couple expense a Ken that On just year, XX quick you your total million? excluding

Ken Lovik

Yes.

John Rodis

interest fourth right? write you think quarters. income? was quarter, Is just on of sorry, that to the quarter net while first for I'm talking, said trying sort and but sort I with it spread flat the of first three I the you're then stable

David Becker

Yes.

John Rodis

see guess in you said? expect quarters I to And you then where would fourth some ramp the

David Becker

income interest We'd growing is of kind like we assuming that what able we it costs start as net we'll it. the that's quarter. will there said. the Yes, think hit and deposit to in keeps begin Yes, the start fed stabilize fourth terminal will again the be best, rate to and

Operator

The next Tim is line from with of Please KBW. Switzer proceed. question the

Unidentified Analyst

a clarifying first quick. [indiscernible]. question I had on real I'm for

mortgage million balances only the are paying $XXX and like that the the of in like… residential year-over-year of mentioned like or to portfolio You all some lower the, reference off was portfolios

David Becker

resi got earlier is down. doing balance comments finance win below we're spread there, markets financing would deals right David in portfolios. that's care we're or a we're that not well, going anything in chasing, about competitive, probably expect declines health among not public lease might as basically, that simply floors talked finance four new three I the originating are No, tenant and we not to different That's, now is to there. of see single But deal every X%. we those now just and and then. so my price just some be

So when hard. that it's when you get can't we

So you'd those see in decline some portfolios. expect to

Unidentified Analyst

the just at yes, end little. making sure seems That the that Okay, year. just mortgage. a residential That's the like wasn't of

you're about what talking So XXX?

David Becker

just I Yes, year-over-year. talking

Unidentified Analyst

revenue? long-term? income, few guys the get could you as like initiatives mix or the that idea have bass if like realistic the is actions, And with kind program, the have all like a you over an the look look years, And Converse going and we of over anything have trying spreading out fee of taken what you next target a to what then, on of

David Becker

Well, like small in opportunity with I we're everybody ramp question and partnerships great couple fortune Tim, if ago, tremendous was bass to or play. make I that that everybody's do organization XX folks could and on it a two The could had now from there the of with. a months is be working days worlds darling crystal mentioned three a articles American Banker the world, that, prediction. last ball the we There in run bass that should XX, is,

Now, pay banks diligence there the due handle those had on we're is prior sure which a order reasons the regulators, a have there. the lot services. we not to overseeing us of of we in in issues, of team, out compliance lot the wanted a we the to people with because little they're build the because bill trouble great and acquisition had the on given There's our than and doing fintechs, proper house Obviously, would one getting to it, market make slower could other a that. we and opportunity are

we're that. So that find can about just one income, we in princess. used that's fees, lot I And of frogs several a that that companies a term talked think the ton be the calls up. to the the the could on thoughtful, were can The ago, out that of just I've of be a And pipeline. minute come very kissing limiting that's absolute, neobank it unicorn there's very things deposits, times judicious. an the very good blows

in some be a position could very And, see their just up that in settled. they the because are again, a could exit that forward. conservative were regulatory a things some by. a might in pipeline. to we on in that signed, market as into for that million we in, got might delivered of to the programs. from some we well customers pick half the side And probably better the some established little million year other and with we'll how 'XX. goes institutions to revenue we that sealed, have That a be of the are move bit have So issues There But handle to pick up

to So year. X and that get million these we and as to in more we a come and go, probably on and going of And better million update grow we'll numbers a can't much on, they're you we'll quarterly revenue give guidance, have handle this him basis. kind X.X for how

Unidentified Analyst

is minus expectation how get of ball crystal is But He's asked a still realistic of But I range? priced side? it's for it on need I more, the deposits they how funding vast you deposits and Or what too. maybe if know, at your now. small on or these one sort funds a help are And a cost can part business the coming something, right what should? fed like,

David Becker

for have would and companies to tow And path them I dollars, you a very lot get have much to these make the profitability. getting to of much to all anything. are profit. fintech smart. a money, an bass all the like folks HOA that they The companies cost and would, never I continue survive the VC tell to But $X,XXX, bass These institution historically, were zero historically funds class. like a funds have

side. value fed minus They have not can't I giving So that funds them it's value? money. Most free any funds. pay I'd away between didn't somewhere well, positive them. take deposit Neobank, minus are -- I fed have other drawing get be of it's we of would But not them, Ken know ours base account, were do the XX. for minus probably settlement to still Fed back that are they are the about two above say XX, are were say The But they going yes, If that But the now to XX, talked payments range in XX. a that's Funds minus against accounts both just a funds those where we're somewhere on free. free. if with

Operator

is next follow-up of Piper Sandler. from The a question Race Nathan with line question the

Nathan Race

major asked A the the questions this kind or any CECL you about absolute to the at curious over basis of are the trajectory, lot think think on my the or if percentage just about point. kind adjustment been have reserve of first guess get of dollar trajectory offs in quarter. and XXXX? about a maybe you But I just charge course on of how after I'm one horizon, answered the reserve guys

David Becker

the on horizon question the Well, I is guess no.

things the portfolio credit given top the closely We teams on have real continue uncertainty. of to all our and try to stay at and looking of admin

When delinquency, coverage the closer loan ratio their finance. because that you very size is we a in, call everything or If that is kind the especially don't have add up, with is nature in for had XX I go you, had a that of in of ratio that's why XX% it what is banks I public basis also the would the banks, so most and of XXX is its portfolio, repayment XX coverage going points. range so, released, are is I low. credit a guess That in just out you there loss, - point number sources the portfolio see XX. guys to portfolio that and never exclude we've public reserve never would threw to of finance the to though, basis

coverage a maybe though losses, credit ball, or So think, crystal think us credit with of have again, bit, even unforeseen a charge none I but losses increase offs lines little I the net about up the in maybe take increase is. in factoring I we're the lines, the where commercial in coverage that we at are CECL where feel with think and our plus consumer pretty with what ratios good

Operator

the question from a Brett Rabatin line [Operator next of Group. question with Hovde follow-up The Instructions] is

Brett Rabatin

in could. quarter One a topics repricing loans first funding first I it's guess costs. on I about many how How I points? basis of the if yields XX to just that wanted you the follow-up first increase and you on point linked a quarter? loan couple yields talk in of Can in loan XX the to of increase first I the in part or the just that. quarter. bucket guess loans basis get

David Becker

you're because in Well, there, markets that fed if increases about figure I We do Brett. now, the got a it's couple you talking mean, combination 'XX, a construction, right correct? mean, have I

Brett Rabatin

Correct.

David Becker

coming component between, C&I, I virtually finance -- of we Yes, that, our And virtually have the FBA pipelines that's There's in also variable, is variable. portfolio is variable. that construction all Okay. a mean, again, franchise in all Those pricing. other really now some and lending strong. pipeline eights, good certain areas, really are we're in continues yields we not And can high again, on sevens, get to remain unless nines case.

So it's off stuff or new yield, cash paying yielding production, continued and just higher flowing. lower amortize

higher. combination it's of portfolio that drive all a those just, to should So overall yield it's the factors continue

Ken Lovik

to it get that's fourth the a last the we issue came is lot to end. done loans in a quarter Brett first in on of in weeks, things everybody that two before trying was year those the make other going The added little stronger quarter

So to balances, we'll on have days a run the five full fourth those we seven only last them XX quarter of the quarter. for which had

part of that that's two. those So

Brett Rabatin

the color commercial? of but then, market of be And retail the looks at like sort same from on the versus And out any those maybe rate, XXX-ish that XX helpful. perspective, you're then the current side, thinking I XXX assume the to commercial X.X quarter. I Can funding When money topic you're topped retail to of me is fourth maybe the an how basis at that, XX you rates money kind have the of see in it for versus would look the on I on remind points. the those close for market, average and that rates, XXX, billion NMDA on the much

David Becker

and again, pace week betas we X/X XXX. hike increases I Yes. on remainder has of The there, roughly X/X we, breakdown XX% bit. is small what model. markets commercial. I biggest that have expected, certain as bucket if we pricing is we'll But and a X/X I we consumer mean, excuse to have above the got balance business one. say know in higher would rate -- up a say, a of do pretty But would you're of amount seemed the are, say call the there rate. increase fed single do money the pace of still and commercial I'll maybe a some I high two me, tiers another what down. -- run late, rate we of through commercial to in But is or probably here slow coming And in those slowed current possibly kind that our XX% is the getting your to

and I in think, fourth the a a basis going of points what So do. yet basis guess, be, on obviously, the don't is over of could maximum points increases whereas, the quarter. minimum fed last XX to Again, your think on in increase of fed XXX we I it of XXX saw about quarter, view XXX, this depending

to I was as this high would, So, fed the suggests be in quarter I mean, as is expected last quarter-over-quarter shouldn't our increase the what did just what by the time. versus of did do they virtue it fourth quarter. of, pace forecast that

Brett Rabatin

helpful. That's

David Becker

four the five we you I one guess just thing, end we the probably a else, relative took that thing, I more that up, brokered did, in And where go because probably three, of again, one the rates blended what continued and long rate deposit some the than we advantage my were as some short to did what prepared as funding comments, balance and well, forward pulled CDs at add go saw to, said of And up. to deposits year funds. of lower I'd fed curve that's broker probably

rate trying pulling market to good do is that risk, as plus go quarter. the fed funding some in also of some that to out interest the give So, but us and opposed to wholesale stability, more for in forward, funds good long-term

Brett Rabatin

color and cetera. one. one maybe to et on predict, the sound the full necessarily on the the that notes. gain keep I given to last an SBA to know year? around margins, commentary I easy I the lower contribute SBA, might Any year. that's any not on trying much missed up were, income was then what this business But how for color with And expectations

David Becker

performing We we continue within some videos. Yes. still of the the have, later The we brought thing to year. on on high part bring is,

now. sale very service I and gain quarter that in low. to premiums go you mean, place any premiums right the I in But range. X.X, in They're net XXX fourth staff the tell will not forecast, that year-over-year. assumptions on from And on up up. have perspective, were making You sale we're we have our gain our those originations

full just and sale and We down. XXX, of cases that the for in on that, front year. than higher premiums, getting we of some the we're So end were higher came on year getting were the XXXX gain XXX

year. gain by origination A have do we really lot on numbers lower for assuming the is sale while growth of the full offset we're, So for that year. just

I mean, bit. modeling flat we’re for we number for down entirely gain year probably probably But be right now that premium. that think recognized a the to So that we're right XXXX, little modeling on sell full now by driven to

Ken Lovik

quick. Real

to million million. XX XX.X Just

Operator

be up the Janney. Next from with line Rodis will question John question of follow a

John Rodis

is just Ken year my on back fee notes XX% the you I fee fee say did in income? income that income, down total for Or did –

Ken Lovik

is total Yes. That non-interest income.

we million that if – XXXX So the take XX% – just estimating. cut XX.X and we’re that’s probably that’s for

number obviously we going mortgage that think expectations the talked from conservative forecasting on did we’re year. by, as some talk to mortgage that’s out. we year David be not our have this but our we removing about is this for piece down what did revenue So the flattish, here just revenue biggest about to increase we’re just SPA being be – And here

John Rodis

low for the Ken, fourth question quarter rate other next year? we made in kind one just new what then tax And should of use

Ken Lovik

about the to use in for reason isn’t the the tax taxes, time, do trying is to quarter we’re I quarter will we Yes. fourth do I’ll necessarily is at the to when done calculation low you a end guide XX, – started Fed rate you earlier one earnings year. impact the raising why was XX before you back in will tell for a what earning tell rates the of the having on we the I back couple subsequent the forecast and in quarters in of income the year first estimates the year we’re taxable and back rapidly

net Our taxes, we were income. estimating higher

get I the is, come can it that tax affective it the term is that’s but maybe – line true-up for us full rate I with like takes in So to for best year. use really really what up all to our don’t taxes the word

to So again, probably that I to a back XX% and probably will XX% be just guide estimate. reasonable the you

Operator

at you, Rodis. no Mr. Thank waiting time. questions There this additional are

the Becker David I So for remarks. turn to call will any over closing

David Becker

to thank and today’s of all falls shareholders to have are we very discipline we’ll joining preserve tools on like improved And to again in and good use I’d fellow call, earnings you to XXXX. committed your out Everyone ability shareholder just for remain time exercise that Thank for afternoon. value. and you us driving continue enhance a profit

Operator

That -- concludes today’s

First Internet Bancorp (INBK) 26 Jan 232022 Q4 Earnings call transcript