INBK - Earnings call 4 2023 | First Internet Bancorp

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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 2023. [Operator Instructions] And please note that today's conference is being recorded.I would now like to turn the conference over to Larry Clark from Financial Profiles, Incorporated. Please go ahead, Mr. Clark.

Larry Clark

Thank you, Jenny. thank financial joining quarter results year XXXX. and First to and everyone, of Bancorp's Internet for day, you us for discuss full Good the fourth it's earnings addition, www.firstinternetbancorp.com.In company refer has presentation yesterday The to website slide the press a you issued the company's its afternoon, company and that available included during on at call. release can the

the website contains like reconciliation call non-GAAP as and to most GAAP today turn by are implied company's substitute of time, refer release on financial These comparable Internet on Vice management factors could on President you risks this measures. forward-looking to team David materially an forward-looking any The access we'll in also the financial questions.Before we Various to contains to directly us website.Joining call like not can this Becker; are Bancorp during Lovik. and to the non-GAAP and begin, CFO, call.Additionally, your any results. David. I'd GAAP the statements to financial the uncertainties. the website. results which obligation disclaims these quantitative actual or David and conference update available that different slides I'd results press Executive company any condition Chairman of the measures.At the Ken will for performance to are a measures, overview from but filings, that from supplement, future over SEC future be will made and You such the respect and involve company's and First the may forward-looking Then CEO, be to the remind information discuss to The cause intended call discussed up the statements. statements with which factors expressed other today as provide well open management Ken discussed are the to to available

David Becker

and battleship a a provide and themes aggregate easy, sheet portfolio our risk both loan you, never as transform XXXX and over most thanks of and in of fourth joining showed financial 'XX, to also for and have positioning today to notable but our the a actions discuss rate continue order business.We some decision Necessary month balance set helped the through loan financial and these with than I'd improved key in and diversify favor X importantly are Fed can away a successfully now full managed products, that rest. returns Good Thank our headwind and and our because our to fourth peppered we to signs our year the drive but reasons, for year for time like to setbacks, on multitude with Larry. results balance our highlights our cyclical, have results.The announced say us was was I improve loan business, cycle our efforts challenging variable residential low-multiple anniversary, enable quarter. rather interest that the shareholders.We turned Slide a the will benefits meaningful industry us X, rate earnings discuss and poised profile. we improvement yielding profitability.Starting little significantly of in quarter as past afternoon, everyone, a XXth very businessAlso effectively to brings quarter tangible company from XXXX resulting a transactional, early few years to It our variety challenges sheet in than we policy the the a transitioned We scare. and the helpful to navigating rate an than stand benefit improve was triumphs in for it progress a honestly looks of ago which liquidity from to interest while each tailwind less this our our and also greater to year while exit composition higher mortgage

As composition We portfolio previous loan the liquidity of we our up balance sheet in had of our optimize overall of loan some XXX continue loan the to with up deployed XXXX. said, during drive were basis I the built we fourth transition mix. to quarter $XXX the growth funded and the points of relatively yields million from quarter.New or over quarter consistent fourth X.X% third origination the X.XX%, quarter and

points. at increased Additionally, quarters costs slowest the X the basis at by just pace past X deposit far in

net business. net to relative that result, continue deposit net in to trend SBA told expanded by was the net higher interest performance call in last interest earnings you we quarterly will quarter pricing, quarter, and The quarter.We for and XX As from which confident highlight up delivered volume. year.Another this loan income the sold driven interest in the the prior points margin of XX% was both up and third another origination a our basis are team on we net loan composition and X% calendar believe stabilization was the margin another of had by revenue, to gain quarter sale on the interest record With strong third that margin that income out increase quarter, proven the interest the focus bottomed in has case. continued and income and net on our be improving

on gain XXXX. mortgage than $X.X revenue million in up the of more Our SBA former favor to the active provide increase revenue we flourish XXXX was by with from low top from multiple the offset among nationwide reliable, $XX or country. the XXXX the to most growth-oriented increasing again, regardless business stream we that revenue and than over the from, to in XXX% which can almost originations earned and of remain moved and the million capital banking from on more deliver country, entrepreneurs XX XXXX sale million away consistent, small the overreliance our small rate This of business business owners SBA lenders loan mortgage our X(a) generated sales, environment.Our levels.We a continues business.We year-over-year from in growth XX% direct-to-consumer continues interest cyclicality loan platform the more across in of pipeline mortgage of successfully SBA an $X

compared Solid loan expansion, record held quarter. non-interest interest growth revenue non-interest net on powered while the increase were interest less as increased in prior a revenue X% by sale and margin by XX% revenues nearly check to drove growth, gain quarter, third expense surge than income income costs the net mostly to in total related

delivered points portfolio like past the assets our basis overall equity investment central quarter, this X of also interest still and average value X.X% common sheet has and in would hikes key of price to up total business tangible quarter during loans year-end. XX or historic share. mortgage, include to of would points resulted from of value and cycle to Tangible while X.XX% of loans, commercial the not of overall were does book basis points. basis third residential that per common franchise loans year-over-year.I rate XXXX.We the slow few assets our shareholder a improvement value and a low significant XX,XXX remain operating a quality capital in repurchasing office also remind per of efficiency.Credit share, of that a our among the of well less basis remain with average XX exposure.Our tangible at X% and sound, to everyone did is leverage management small like have of real XX delinquencies, lending, began the at increasing and balances total of X.X% remain in measure increased net at points is First the total the total below non-performing more Non-performing to loan Tier X.X% points prudent non-performing ratio due, Internet XX days shares equity ratio I share grown from to loans out loans at to $XX.XX buybacks that any but early additions did start exposure to result, district book banks levels creation, during in the industry averages.Additionally, conservative share As per with pace healthy charge-offs to quarter an point we finance, ratios and remains fourth balance year-end. business than being basis positive capital due operating XX increase estate XX

third just over quarter, the of stock XX% we turning earnings XXXX. a in of We the the financial per up and results and increases net full repurchased $X.X current XX% at for on during our by by approximately the or quarter. XX% year, revenue price.Now at X.X% Total our our our XXX,XXX driven of diluted share, outstanding discount an $X.XX annualized start the million fourth fourth and over million up almost expansion interest were or commercial expense net year. was million, growth low led an for the income.Operating lending solid quarter expenses balances to up non-interest the million quarter, expectations, in XX% average where from were X.XX%. with shares reported of quarter XX% a average We total $XXX of $XX income of operating produced in the line and loan share For XXXX basis of remained areas, to the assets to the $XX.X almost of $XX.XX were per XX% relative or common shares third at price respectively and from

we be a and already on quarter, continue increased a well purpose commitments. or is source originating nearly of from today, in public entrepreneur, all of provide team material out the declines new composition partially leaving the increased but to of an a quarter-end, importantly and The our range. today.I well-diversified the lending, In remain $XX by $XXX on high-quality towards over portfolio.Our and a years I commentary not in record the enduring backdrop $XX commercial delinquencies part rate passion new Bank on in our the program nurture basis At provide our lending. a lifelong growth to million, when loan consumer billion the mid tech a launched X great of industrial, construction to at million basis. is I offset a remain years, have line quarter launched itself want that to in new Bank years and of portfolios $XX to yielding some Ken thing the and to partnerships of varying many you commitments innovation us program. lines, the highlighted oversell live earnings which moment.Today, in portfolio First intend a of to just included of We at portfolio on X.X% the was component XXXX. was total we details program annualized financial business we X X% low the inspiration energy fintech amount has shareholders. to in partnership fintech not loans.Our scope third of were fixed services the we program one the focused we partnership fintech franchise for higher XXXX, learned borrowers, With million many positioned First finance a points.And Internet that against in and quarter, XX-year year-over-year pipeline. consistent CEO and prior compared respects experienced here year-end $XXX million fintech am of dozen one was construction small construction in loan During it these Internet finance accretive business more very healthcare partnerships to X% track unfunded ago. the and of sheet. finance, it million business another have It programs balance double variable The while as of shifting This production our in quarter our does us will by or had in to I $X and at grew on basis a my just rates to a balances be Furthermore, will with lastly, business some XXXX. ideas for our rate

programs capital of may healthy in to the programs over next comments, and levels safety a the pretty in entered various able in and the We go requirements programs of expect queue of the new and not confidence. we live, perspective, our focused new well we my But strong, few quarters.To the a are program. have From If intention and up wrap is to of we quarter meet sound. a overall, number soundness momentum with to a credit performed be stages quality flat implementation, very bring and already are fourth remain to stay liquidity XXXX and there. some

expect hikes for final continued should in other behind of First rate of call interest of higher fell portfolio pricing, positive earnings XXXX to the and loan the thoughts mix, SBA bank us, Federal deposit be improve team, many bank well-positioned same couple over now our the around Reserve stocks recall to the in Many that and likely turn asset spring. along of out XXXX the favorable the and the with will stock we achieve costs by our you stabilize. the before improvement with beyond.A regional Combined With outlook I Ken. the Index time in failures we Russell profitability Internet to

this Index out an keeping head we eye Russell are into We reconstitution the the as year. of

I'd the the especially First Internet a qualify the I guarantees, for our certainly are stock again want in inclusion given small-cap recovery might there to to that course, relative but entire universe the in details possible on as it to the XX over price, is thank Ken achievements stock personally not with been whole, years Of index.Finally, no and financial Internet results would the more that, turn quarter. possible.And like have team, for clients call our over without the quarter First for past and to the whom this our

Kenneth Lovik

$XXX on to and Non-maturity quarter-end. deposits. prior covered built prior balances David $XX quarter to in from to Slides liquidity of money over and market growth brokered portfolio, jump to partnership increases in balances.Deposits deposits or some the we up partners the the deployed through from down and Deposit up fintech David.Since loan the third from million were totaled X. deposits higher-cost our Thanks, as million due declined XX% deposits X.X% pay quarter up let's the fintech fund loan at were quarter X slightly

first the quarter-over-quarter in offset processed months. maturities during XX% Additionally, of of transaction an new and partnership almost at renewals average quarter. of an average generated production payments fees.Related the volume more consisting were and weighted income, of cost have to revenue and the X.XX%.Looking $XXX second million over of third fourth quarter million majority X.XX% CDs the and of large from We million term originated total were of the average quarter an billion with average we These the $XXX to million of balances of $XXX quarter, during $X.X from $XX in up XX XXXX volume, of these with with the the increase forward, cost a was doubled partners than quarter activity maturing with oversight, recurring fintech cost which average by million, cost in $XXX interest $XXX,XXX, X.XX% X.XX%. down about the we Total maturing linked quarter. in in an CD

deposits we the for billion higher total of our base.As reduce the This fourth slowing So rest $XX at down under see the we rates the I maturing adjusting discussed the Slide we noted expectation pay the Indiana-based Federal which over pace earlier, quarters.Looking capacity the of to X when liquidity depositor brokered basis strong borrowing pace which our balances of compares which XX% was the cost as of to Reserve the at at quarter, slowest agreements, $XXX existing as deposit the The total balance calls, of cash the due uninsured increase of deposits deposit end we up between mentioned, quarter. continued last customer cost contribute X, costs.Additionally, interest-bearing in balances. remains case deposit as to gap was in cost to significantly we of noted quarter to used that the larger the was increased of or portions cost points, unused deposits, and last of industry.Moving uninsured had the the to third CDs prior balances CDs million billion. balances over to that as and our we decreased $XXX million of XX% X should deposit quarter-end, the of repricing our closing, dropped quarters just from end from million at done Slide were or very is the liquidity continued which favorably in of third far stability $X new estimate primarily growth by of cost quarter-end, will XX% was as and is we is David adjusted $X.X which, total in X, growth the new as funding. deposits, raising our After contractual quarter municipal accounts and deposits, only or

a up down quarter to deployed some of in we we loan fund growth. deposits pay the brokered and built ago, As we to moment the mentioned liquidity also prior

in X% on in top point earned a yield earned point increase higher and the strong quarter. increasing due basis earned loans, linked combined the in ratio the on loans-to-deposits uninsured increased million quarter our on was a balances Slides and third on of deposits up growth earning XX.X% equivalent to interest line over a to cash compared XX result, loan on yield and assets the to to in for uninsured unused yields income $XX.X XX the represents quarter-end, XX the and XX% $XX fully produced and increase yield a assets.The on assets XX.X%. X, linked taxable to a XXX% average from yield As At total interest-earning primarily interest-earning quarter increased the X.XX% securities, average increase basis million adjusted capacity from quarter. growth other net the borrowing The X point with basis securities and X.XX% income, deposits.Turning and interest XXX% in the in respectively basis, of

fourth point in the modestly, The in highlights for long quarter of during X.XX% the net inflection composition completion. balances on up average interest were that quarter from net were rate taxable margin rate on tracks X As the would believe margin increases reversing SBA Slide and and quarter interest-bearing rate both XX second we and quarter of was fourth was anticipate on points basis costs repricing be quarterly similar in assets totaled which interest margin X% CDs, stability for third the and expect to basis on X.XX% short-term third forward in the production, XXXX.Net trend fourth Reserve for the net the Federal in higher quarter.Turning around basis a continue Fed of non-interest significant quarter, deposit XX XX XXXX. quarter.Furthermore, stabilize, XX quarter, the as the interest drivers for basis equivalent saw with taxable increase fourth Currently, Slide our income $X.X quarter and income highlighted equivalent told variable of linked fully sale over and premiums basis as only volume on loans monthly XX% hike quarter to to gap Loan on XX. modest throughout the income for points quarter.Last increase change cycle XX on record the with of we quarter $XX million improving XX% quarter. we yielding catalyst costs interest the million the our $X.X driving the net quarter-over-quarter. on the and in and income margin interest points margin interest-bearing of experienced rate, year. quarter consistent began also the $X -- quarter, points you total for net income during expansion the net the deposit that a the the be interest is grew sale deposit XXXX yielding million compared in interest costs, on setting in first fully of we sale to The a the of our third loan to over portfolio when modest X stabilized up or growth graph funds million, third first roll net Gain in interest deposits which we near lower for up Slide what the the replacing rates focus Non-interest with forward.With a loan interest-bearing up narrowing the going against a another and quarter, is in was the quarter.We quarter up an to of portfolio yield team. the was nearly interest the the gain we over the forecast in

for have major specific lower the additional The benefits as increases costs, loan increase for by reflects for portfolios build compared of losses incentive was commentary pace The growth covered credit credit processing opening in so costs the and higher was $XXX,XXX will loan the the asset as on allowance the with at deposit and quality franchise X.XX% related exclude in saw to quarter office his reserves to public and loan decline million, composition. partially in equipment compensation third from increased quarter sale due specific of were a and in production.Turning their the credit fourth to for tax many lower for due related and quarter.If as ratios entirely on The to due loans I for the testing, activity inherent for and residential that given to portfolios, third variable deposit to the and third-party for provision includes and reserves we in loan for servicing risk, Slide finance exposure, related charge-off fair $XX.X lower offset third driven a in net to small allowance ACL quality lower to quarter. and healthy the of provision We insurance revenue end increase lower percentage comments, quarter during and of the almost was the increases credit lower by credit XX. fees as coverage quarter of capital the up losses reserves the of compared stress around adjustment assessments loan a fourth as allowance fourth that Non-interest in the have.Moving account was losses data represented lower costs premises reserves the have due and well asset.Moving benefits in finance around third property by XX. ACL $X.X accrual XX. do of asset growth asset net addition a million However, value on and year-over-year our losses balances. professional quarter.The to the the servicing ratios. consulting X.XX% gain and and as losses review losses. to quarter X.XX% total the the the to asset new the Slide coverage due the to million mortgage other credit well you minimal which to lower offset Furthermore, timing $X.X add revenue modest allowance CD lending provision a on excess growth David employee in with the quarter. require decline to some the not business salaries in banks loan class quarter, balances expense the premium components just the Slide These

equity was cash decline rates other for well primarily comprehensive and XXXX. other common tangible outlook capital balances accumulated normalized was regulatory which the ratio X as a per December, basis million, ratio from adjust common capital at I loss XX ratio company X.XX%. during solid. equity Tier the up tangible quarter-end, almost value overall you as during at up, like declined $XXX I adjusted in the third This X.XX%. of At on to our is to would loss the perspective, X% $XX.XX, quarter.Before points Our the solid book income comprehensive wrap levels earned the both equity increased the commentary be capital provide as remain due share for and From some interest to common would The quarter.If tangible remains net accumulated bank exclude the X.X%.

maintains that Our does Federal the outlook current a longer not Reserve forecast assumes during XXXX. for lower funds and the rate conservatively higher Fed

continues were net fully in SBA We quarter to received will it in the XXXX. interest pricing partnership income expense if and compensation forecast fintech the increase in personnel created we annual and exceed to up the A begin remix team loan grow of over reported our to impact in annual this likely management will to our primary as XX% versus expect earn. expect fourth sale connection net in more would deposit the increase the or SBA costs our X.XX% be as with our and additional quarter and we all these would to a of lenders to to And, as net initiatives, consistently would personnel range to secondary compliance X% year do reducing shutdown temporary to planned support of in and the we gain level for the higher market.While economic year, volatility pricing by XX% on support to by non-interest the well continued in the origination risk stabilized throughout rates were to loan spread short-term of investment income, interest sale a we minimum to If equally.In X% will origination while increase a margin increase risk to and equivalent encouraged the income our January questions. as interest expect should the premiums, All continue operator SBA to gain least premiums annual interest rates, selling expect income net be on amount portfolio, in I regard we loan will sales, XX%.With we the back deliver XXXX. interest on we taxable fourth Federal annual a below to margin can make yields so income loan in interest expect expense take XXXX. the of and to projections.With bring the at sale that course, in, far non-interest to it government are expect non-interest stabilize.Assuming higher may be for your growth to to increase in premium we turn up of secondary activity, that, range in Reserve by X% a of we be the yielding X% range would sense halt XX% by hold have market pricing soften, that sales

Operator

Rabatin [Operator Instructions] Brett Your from Group. Hovde is from first question

Brett Rabatin

with here just the lower cost those be seem and and about internet mentioned mix CD the slightly just funding rates. the to than maybe to thinking Wanted opportunities, start from fintech you

the that you CD, there Just mix benefit see was your the still is left.Can what would obviously, funding for some little to of year? so funding kind gotten seem the for it does to in a deposits. like maybe And from maybe go peaking internet about you the a from X-year cost on growth out. talk close half pressure has see of I I And rate those wanted down, see the rates back do assume And outlook will then a here? of of X.XX if

Kenneth Lovik

half and back CDs of the we Yes, take year. the the will in the benefit

mean, think costs -- going on inverted.So, X-year X CD have is we than, and our seen CD the yield have -- have curve year. first come seeing quarter actually say, new business down. What what actually and more the we is I in X-year where found origination longer actually here curve I the the in CD here mix we small consumers still origination, are out

we is to actually right or predict based the down. hard right but it is some down, deposits the -- are That volume we is certainly to for to the the us.I outlook, that point, mean, not will data the were what way But in come seeing around of change kind of CDs directly -- end are the coming that the year, CD as now.And benefit are X.XX rates is brings in rather we Fed CDs, Fed backend new bring now. if a could in front billion our So tied -- funds. certainly got if $X that as Fed or a on when curve $X of just of of there billion tied in have

will the bringing rates So do on if Fed you math the declines have when impact of what down. rate deposit can costs and starts on kind

David Becker

-- the in off side in fourth back -- my his the of I had remember -- that presentation things Ken increase the that an can't we of comment made From top quarter. the head

We capability that forward. have going same

are stated flush. still bit we a As cash earlier, little

is very compared we of So to demand, head. the some nail can cash. hit for that up and on upon depending down.But move alternatives you inexpensive It number other kind of loan the the

cash kind So what of the then of upon a ton want into in secondary market. dependent We that have be bring in a will be and goes on. move position out to don't to it to

both is attention paying are today. less and we with our It right, par money to So sides. are trying balance But is accounts. it on expensive market CDs you internal than

by been year last those run kind the the in we've end we expensive of of as quarter it to of not rate on first the at swapping it's line as lower for of off higher And are rate. any and most means. able balances higher So was

to guess available how leave it's we will for would take would I be So you. needed, it I it as us and

Brett Rabatin

Okay. question. brings And up second that the

mentioned cash. and You liquidity

You what a or this bottoming fund where obviously talk level the used growth. liquidity to out? good you number is ratio liquidity right cash for about cash see that loan you some the you and Or quarter what's guys? Can

Kenneth Lovik

on the that the good probably of down. a -- somewhere on is kind given is I I day. for went us earlier think any number XXX range kind mean, the in settled of have liquidity to think XXX things XXXX I it in

But higher maintaining than than certainly been the in earlier that and slightly that balance have probably higher a year. much us. for good day-to-day that's basis We a on

Brett Rabatin

how sneak much have that I'll opportunities, Okay. can cetera? would Great. of If other be questions in fee XX%, I of -- one queue. maybe the a et of of SBA in other fintech income, jump you ton back the fee got growth on and breakout versus But I sources -- can income

David Becker

is Yes, say I SBA biggest XX%, but -- number -- that there. probably I up let's to well, about would say be is in obviously that maybe the would forecasted

million extra certainly are probably of there we driver. about $X the is additional, an is a biggest income that know, fintech. So is I -- from maybe don't that There forecasting

from is our to well. That But piece some of of start as the investments. to of a We distributions some it biggest fund SBA. also is it get piece expect certainly in growth just

Operator

next is question Your KBW. from Michael Perito from

Michael Perito

on guys I provided, which wanted to of you helpful. start guide some maybe building that was the just

think. X.XX, that. that. that get conversation can exit if what fruition NIM the in we X about have maybe ROE come out guys the back cuts, rate X.XX as we conservatively start the of We X X can NIM of and the probably getting cuts. But some upside on to the X obviously, on Like about helpful they here the getting or for kind probably of we -- the and like think top by what end to just you business year if year, or thanks So on

think and you to from growth. prioritizing a very kind been how Like accretive. has about profitability I trying standpoint the of Just positioning ROE guys mentioned business are SBA

lower exited yielding some You've loans.

trying around thoughts get that. updated some Just to

David Becker

I'll question $X.XX in at last to think a point year let $X.X be to the happens, to you. discussed will the as every no drop.The of they $X.XX going us the an $X somewhere with little earnings modeling be of is rate. then rate right quarter bit the hit that's million If we compared impact for range. earnings ROE kind change that Fed perspective, Fed we maybe in $XXX,XXX mark, that little funds -- above, for Ken or below But a for the and quarter, from

have on significantly to move X Ken the a the But the it we're handle we're So that pretty starts convert could ROE year. can if at end Fed earnings going me. popping. And of comfortable for

Kenneth Lovik

Yes, maybe our we -- look baseline... at our -- yes, in I terms just mean, if

Michael Perito

are ROEs the asking guide, think to businesses you like but see? which are finally -- as I'm Like picking great recovery what you like what some if start gets to just and is this grow. to for NIM not like to where ROE allocate capital generate here, guys necessarily can the business

Kenneth Lovik

it you what say we've we've I -- capital, fee long-term Well, terms -- in made hasn't think been fixed-rate lending right? I to you about have SBA, like be And With on in this or of the environment, sense focused which doing competitive lending I verticals.And the mean, interest obviously been allocating income. we've think where maybe if the on side, reallocating rate has higher yield. even if you

not benefit from And nothing. finance. higher we which, profile the of coming we construction, institution. have rate a yield, almost but our we've risk -- franchise growth a when higher the You started, in only improves were certainly And of some interest had

the north our looking excuse hikes baseline by talked But will to as some or, -- some getting that. remain David probably year. there. of that, fourth impact past And if as pronounced it bit as of quarter. we of then that growth focus was be forward a on this XX assumption, will areas, primary about terms rate that to We lending on elevated starting the me, cuts of in, in And rate all it a growth this as pulled we're we're probably not be get rate goes ROE think -- close in environment.I the little the

David Becker

when this were based our was we be long-term XX.X%, run-up call, was ROE year the back tell getting senior ROA, a X% that the it's I going incentive tough I running in we That's to think at stuff range. to on achievable. you, is rates Pre can our but And Mike, for ROA. bank, and -- in XX.X% a X% management

And low as ROE. Ken said, if hit be should so, we the we on the double-digits back into X%,

Michael Perito

makes in sense ramp allocating And helpful, have, around thoughts a at -- That's bunch to for different the is But of I that understanding make And pace that then for a just to continue are of couple it sense. does capital some updated the And buybacks lot guess guys. mind follow-up capital you here? things. I next you see here? it with any guys quarters

David Becker

we in tell TCE andâ€¦ the we shares. and still quarter. back buying we're Yes, get of we're But XX% the X% until the fourth kind significantly slowed the in down back the you, above And market on I and would

Kenneth Lovik

X. Tier Equity Common

David Becker

conservative are we X, repurchase. are Tier the be bit Equity little But to thinner there. we be a out numbers will going in the The Common We're on a little market. stock we a was serious it I tremendous But value. value quarter. discount when top think $XX use pretty again, still were a book to than is to $XX last that's today.That's book

and of it. some will pricing be up event here, for reason, some again. we something but advantage purchaser out knocks in an we And So, geopolitical down market, active or the blows back take become will

Michael Perito

is update? of love would Just or any then, of from over initiative lastly and where guys still more in that the kind of early you the like you're we like good you year just you initiatives is kind And stories attention? of a is continued just kind it. ramp, of it fruits labors. there early revenue and of just X kind or X they're at those the think me, Got now be where your earlier of stages SBA or seem next an there those should Is kind from Banking-as-a-Service mindful businesses worth runway invested you other bearing feel the think majority

David Becker

for those. I another don't there's of that, add tell tremendous Businesses within would even as upside both yes, stated, still we BaaS we have don't you I the aligned one. a we And today,

phenomenal there. there's upside along.But opportunity. have a If might look take a or good We comes folds somebody upside and we opportunity out, tremendous yes,

We continue be focus of and those verticals. effort our XXXX. share to tell the leasing other lion We've But to will would at you, different look in talked things. I firms equipment and X

Operator

from next is George Your question from Sutton Craig-Hallum.

George Sutton

overall year-over-year you have talk optimistic about and loan in big that Can pretty the market? market pricing David, construction about the dynamics it the to some you compare growth. portfolio? were you just might pretty How

David Becker

I me if correct Ken, And George. Yes, this wrong get it's

Kenneth Lovik

SOFR

David Becker

cases higher, average, bit on it's north yielding a lower, now, bingo maybe plus adjustable some just all but a little X% bit X% rate. of SOFR tad

we've made, number. for that any us So, business of We've it a solid. and portfolios commitments day the it's accretive That's of and bump out with and real nice day very about concerns got over no in to it's us. strong X%. It's piece averaging the is a a little for a earnings big

George Sutton

do of the of mentioned the you That billion sounds do question down What $X.X for Ken, economic you? partnerships. we quick through netting how impact think volume think to coming great. you? Fintech that of How One we to

Kenneth Lovik

on having on the just a where for the kind into really side George, play We're is things. Today, of but as us, of quarter as base market went up we're double as on are over lending a will obviously, fee ACH income some revenue in is it's the to marketplace. side the pricing fintechs on up year. well end going ongoing that transactional on transactional basis, you, out both increase, That's we said, things. by payment the the the That's tell the of issues the comes a we fees would monitoring.So, be unit-by-unit as a it buyer's in and processing today quarter. clearings adjusting the fee, concerns getting fourth third of probably And we're I and XX%

at So, out million, BaaS. probably revenue this had we of at year, in we're million, $X million looking $X $X little over about right

total revenue. will it $X.X to closer year, be Next in million

David Becker

piece activity, added is more volume balances higher there. payments just on deposit have too the you because Yes,

line So, look up with item in line I payment at processed. the volume that kind the volume deposits, if broker of that BaaS saw that's goes you go you up. mean, the of

Operator

from Your Janney. Rodis is question from next John

John Rodis

how I question David, $X-ish tax I expense? rate guess would And really. guess what of we you of provision you mentioned for the David, Ken should or a guess about in David. Ken, earnings. But Ken, for for is sort assumes? then, you, year that sort question maybe think this I

Kenneth Lovik

went we our charges in and think obviously, tax the mortgage first we was had obviously year Yes, wonky charge-offs. on quarter of had down what because on the the this I large shutting rate

throughout income, but of the a additional quarter I kind obviously kind think had increase income year fourth as tax a And and tax it we net forecasting year. adjustments in the and we're some as well.So, started significant quite the loss we for state reaped year. of net benefit forecast So, in a in

least of rate, XX% a on $X we're modeling is side, So, provision about historically, been And Back quarter. at unusual a has of out we've the we've way to in seen charge-offs that now bit done up it internally historically. then, that quarterly last the million $X.X effective the what tax the provision kind our of right one relative kind year.But first in little events million quarter a tax to creep rate.

what million So, we've of higher trying we're quarters. million historical provision kind done to versus modeling $X line in But a which with a is be like last quarter $X.X more our to than over few average. the

John Rodis

makes Yes, sense.

So, fourth on you but probably the high provision? the Ken, in saw quarter, as not as

Kenneth Lovik

no. No,

John Rodis

Okay.

securities those One securities all Okay. deposit flattish decent things on can down other the continuing portfolio see of question the the balance equal, portfolio, just to size growth. Will some? trend sheet, or be maybe

Kenneth Lovik

of year. in a course liquidity. at consistent mean, -- that's the of the the should the is securities It the is sheet maybe it as I would balance source over remain I of portfolio would look percentage security it probably

terms would in I being percentage. consistent it just of a view So,

Operator

next from Race Piper Sandler. question from Your is Nathan

Nathan Race

deposits and in sources of kind channels growth terms are the Just you and door the on on there, you are a various question coming outlook that of of deposit rate growth the blended the across seeing in the deposit across? kind what for guys generating

David Becker

side other fintech As Fed seeing range. X.X% too right minus the I CD a that to anywhere bit new we're minus those side, a say the little XXX Fed can And come Funds XX. mean we're from earlier, earlier, volume the we on a a said seeing Funds range now in I deposits about talked around on like

to of business side, having that. on that. of maybe XX X.X% that cost paying fantastic, that are rate and heaviest small kind funding. In we're we XX we or because X.X%. anywhere checking, the That's basis a have points side money low of business.That grow would paying that the tiers can success X/X I different be market we're on still The is very think We from

yield. door the in coming that's of money is that kind So,

side but lower consistent. that very we the certainly prefer sources cost we CD So, the is can,

Nathan Race

Okay, got it.

margin don't going you're accretive putting hand cash forward? if use blended even like loan definitely X% some around sounds on the still of those versus rates, portfolio you I to the it it's growth So, fund new loans mean if on

David Becker

absolutely. Yes, Yes.

Nathan Race

Got you.

curious, a gears bit credit, out portfolio. franchise within on loans little that called I'm and outside the guys of you Shifting Okay. the handful SBA of

seeing what of in classified curious X you're migration Just portfolios those in credit to lately? across broadly particular criticize terms more

Kenneth Lovik

today Actually, we ago, kind a of fresh we've we list in a the in had we here. of up reserves If there. fourth write-down, credit a is loans off committee meeting got couple bumped NPA a this sitting asset couple side things, mentioned reserved. the have quarter. the the In minutes we so SBA non-performing or Everything loss in as fully morning, that's

of properties.Two we've mortgage are by the residential originated X past. locally in Three have from us. purchased portfolios We those are

through on specific it.And that's an quarter, loans, the this in now, seeing committee the morning, somewhere coming had up the probably not primarily the organization, actual we we're And that's in bump is. We'll anything to any be of current. didn't during right million was reserves a bad little as fourth quarter. our pipeline. credit as due see So, range in out in SBA It's we're in Urban this by It it of but shape We don't delinquency make $X.X significant have franchise. to else ups. supposed good That tick the Air loan. a one was paid a -- one quarter-end, of franchise and

is today. obviously, and than it thing kind those of One yield the little timing. percentage a growth of in reserving of our was it loan of grown amount at, compared be bit impacts income, think is had that, figures past, the categories on of phenomenal phenomenally but in Part our different the shape looked getting great.For asset categories, national where issues though, volume, us, side SBA is going off might a in the we national all class of and are upfront whatever.So, past. higher of the a bit but the there. and things, on averages little reserves, phenomenal the below higher we're attend have have most we've Losses delinquencies, losses, obviously good we've on about that some a ourselves. We're quality resigned than fast, because run to So, and it delinquency we higher, a than and we've we're to we in

in little did factor than we Ken more its said, bumping the continue, in as over that a it's will XXXX XXXX, So, than reserves, growth factor. loss but and higher the

Nathan Race

it. said, got drive think this Okay, X% X% the reserve, then, about to growth I loan thinking you And year, Ken. just

you from, to I Just in book of where there, come drivers to does standalone incrementally about How terms get what obviously, XXXX reserving of you just think that going on guys had saw mean, growth production? the in guys' growth relative or is and type to this higher needs of we tremendous that franchise the require of provisioning kind year. levels do during growth

Kenneth Lovik

Yes.

what look we did ratios. XXXX. lot the just to to is in provision David of commented A growth. kind of increase think portfolios I some that in higher it's going with growth similar from come of coverage it, very We about

For that we're not certainly some loans continued are the now just see low longer-term rate, and healthcare going that deals you're right verticals where balances of our to market us.So, just any remixing make for fixed in kind of anymore. pricing of competitive originating doesn't is still sense it's down, it's new

are very, is see down curve public shorter the There team still curve. probably opportunities some our now, do but but the public year-over-year.Kind decline long of at, the of single-tenant will finance looks to on the doing You'll end a it what it'll that net-net, hard in good deals the net We very probably in end competitive. right makes finance. be business predict of

out stuff so there. rates to decline doing there that who have see probably sense a You don't us, folks you'll are make net at

of runoff the franchise pulled up balances as of from those not of some funded.Our year the We the become first-half little of quarter saw year you expect you lower last again just allocating in partner budgeted to fantastic drawn. SBA forecasted balances you was see compared capital had year. last last year.And fourth this is see on what and of commitments just commitments, need growth in have you'll our team be in to now saw allocating our that year. there, in volume franchise, tremendous in year probably unfunded side kind but bit terms where you as -- have forward although and a will to construction it's much a the origination see to as growth we're You nearly for a

Nathan Race

well, for Got also guidance, of Ken, provide it. lastly, scribbling question, on revenue? gain Very revenue I guidance helpful. year Banking-as-a-Service sale was And down of I terms some this just a think clarification as kind you SBA and around your in

Kenneth Lovik

Well, -- what total to we on to non-interest be component the asked of that about going talked call folks the terms the of And expect one of in in the about mean, on excess income, biggest XX%. components the be of I SBA. total we that. up is other

million and a as distributions we other year-over-year. growth in the funds, probably funds of some maybe get XX% We there range growth like of we've in. a side are million fee to the the XX%, expect Banking-as-a-Service. the then, to invested expect from some on growth pieces the and the SBIC And of income it that as We're in a about half well there

Nathan Race

that can understand year ago? so to us that significant ramp kind how maybe you large today of of trying in terms or SBA remind team in revenue, is just And a Understood. versus just

David Becker

And big XX% the compliance at and to going We SBA going costs next year-over-year BaaS number a to the of of queue. the it's to for range within be to still the the in or to we're year release that side, expense be chunk and going on and think up up have staffing basis. is probably the of the go end the in a folks in is biggest it's on in employee we're year numbers from added a I Ken earnings about XX% going world. the issues of

to is XXXX. And in of somewhere the us where expense. think salaries employee bump coming the through So, put in that's employee that's from most and/or growth going I XX%

Kenneth Lovik

total gave range X% the in to of We non-interest income XX%.

Nathan Race

XX%. income to of non-interest Total X%

Kenneth Lovik

expense. non-interest sorry, I'm

to going then. higher Sorry. Non-interest income up is go

David Becker

It's going up XX.

Nathan Race

Right. Yes. That's what I thought.

taking I appreciate colors. the you the all Great. and questions Okay. guys

Operator

the this the time. There Becker call are back remarks. for hand to I closing Mr. at no will further questions now

David Becker

early in meltdown global steepest, history. of the our 'XX burst and first XX the rate it Thank in thank we've of increase is years call. Great. The 'XX, for Jenny. today's in days. remarkable. and reflect, weathered on us gives mortgage I followed dot-com storms opportunity us you an bubble from a joining The The you, anniversary all fastest by pandemic to the really

day. forward and including of consumer XX next them we're small commercial We in fellow committed remain greater shareholders, another The drive paints your construction and stabilized have performance have to we driving the as And strong and picture and for wish lending, it business in support you our all.We afternoon. all for improved can to We survived to earnings.As profitability a thank you revenue extremely shareholder deposit and a favorable we throw real everyone. optimistic good value. our our costs, lending find growth, and enhanced look XXXX lived team, outlook. years, growth our about Thanks,

Operator

for ended. joining. gentlemen, Thank and Ladies all has the now you. you Thank conference

all may You disconnect.

First Internet Bancorp (INBK) 25 Jan 242023 Q4 Earnings call transcript