INBK - Earnings call transcript Q2 2024

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Operator

Good day everyone and welcome to the First Internet Bancorp Earnings Conference Call for the Second Quarter of 2024. [Operator Instructions] This call is being recorded on Thursday, July 25, 2024. I would now like to turn the conference over to Larry Clark from Financial Profiles, Inc. Please go ahead, Mr. Clark.

Larry Clark

Thank you, Lara. thank financial joining quarter results and First to of everyone Bancorp's Internet for day you us for discuss XXXX. Good the second and company's issued available company its press yesterday The earnings on website. afternoon the release it's

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

on access website. You can the also these slides

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

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

refer may supplement not comparable measures, well measures. At the other and non-GAAP this for be today, the which to are to discussed but on directly press call reconciliation intended to as to to turn GAAP David. as contains the to most release over time, The GAAP financial the non-GAAP substitute measures. of available management website Additionally, I'd the like quantitative the information

David Becker

for late predicted called interest most quarter you quarters To net from the our Good the we point for will second margin, XXXX you, recall would mark bottom. that third we bring the joining results. net of ago, income. and afternoon, October, quarter, Larry. us discuss thanks low we commentary and our last forward interest as In of Thank quarter everyone, XXXX that X today,

double-digit of then, rates. margin whether, at would profitability, Federal there, we and the in improved to interest reported turn consecutive projected. pace or net the in that income chose net higher our of part quarters have regardless the Reserve X Since and large what we earnings recovery interest from margin short-term estimated also have interest We and growth not reducing by start growth in driven

continue have on This overall would quarter, quarter. the our loan our like repositioning additional profile. Starting balance optimizing further I in results to improving and progress for risk sheet diversifying costs and Slide mix, demonstrate base, X, to themes revenue meaningful we interest portfolio, our keeping rate highlights discuss the made some deposit check with the while the key

of As continue to loan noted, composition the of optimize we sheet. balance I both our and transition sides just portfolio, the

We we X% a the from quarter, quarter, able broker also deposits, strong of $XX origination points paydown of liquidity have increased deploy loan loan over loan from only the an significant increased to the a on deposit overall growth quarter deposit points basis first second basis XX points new while that were funded costs and points. to basis. The year, X while X XXXX. had funding were million, the half growth first up yields the on the up basis annualized first and of of yield through from or of amount portion higher The X.XX%, XX cost basis portfolio net

for continued interest of that our with of confident XXXX profitability. the solid you, an estimates and third business over the income is revenue up and guidance prior loan flat continues of taxable positive portfolio our end interest the interest increasingly income only the key lender improving all With which was half revenue consistent charge-offs the consecutive in of net country. Small remaining driver our from portfolio of topic flourish, business fully are third perform monitor improvement rates, likely income emphasis we relatively small Lobster small sale. quarter capital quarter. year, to comprising we with in revenue short-term quarter sixth by Compared relatively quarter. that business low, the back has points, currently SBA interest of to up interest result, the XX would on X%, was year-to-date we net margin record team to for by provide year, team points. efforts, the trend results. been total and reposition franchise Chapter It and we non-interest stabilizing of low of tangible SBA was volume at half over year. Notably, the work quarter. A loans and assets when growth, the total we total metrics X/X an at year. revenues the providing this of of of the as result business Both at margin XX%, with our efforts, to quarter prior just nearly basis to a continued non-interest year, almost expanded last the bankruptcy quarter. Compared the the of Fed at through under SBA continued first operating basis are exposure composition quarter first half loan gains also it's point production believe compared up assets net further year. Credit remain leverage entrepreneurs a and mostly and XX in healthy first portfolios. To another The strong serve remain revenue If made up its would their in base, improve diversify interest the equivalent year. with operating XX% SBA efficiency net and basis the points, to to growth, sale expansion, record interest to up income drove helped non-performing XX%, a year we Net year-to-date to margin our a on and quarter diversify business was of the and largest on were quarter and call, last get filing. the of these basis consistent interest based and our loan originations X the basis As net remains end. comparable income to results from that quarter's us country, owners X our has for and SBA's second net looking update the to deposit that remind in Demonstrating this net XX these growth the our increase issued growth reduce exceptionally points, the for Red on non-performing quality of continue powered will, to has physical cut our higher performance SBA well, the XX%. loans and we period from standout net will The is total and another loan on of which last finance revenues Congratulations I a delivering combination throughout total income our this investment XX XA prices, we this have on pipeline margin to hit do to earlier and were for XX the streams. The solid gain XXXX,

related We delinquencies have importantly, the loan-to-value to not quarter. average any these our have experienced these low balances at second $X and outstanding in loans reduced by we The properties. million remains of XX%,

real As remains creation to key central shareholder office growth of estate industry commercial value space, value our less around office share. not than the X% it is tangible total in portfolio. relates does loan include exposure any measure per current to It district exposure. A of concerns business our

tangible XXXX, Ours increased over an has during XX% banks. of X% share publicly book for X% of Internet excess to Since in year-over-year. is XX%, and value all compared the per up average around traded First over grown quarter,

grown of to in a period which among the of testament operational per part, small prudent book the handful share discipline past in also, very banking value banks industry. is management just our and sheet a challenging that years, a have through tangible are balance X We for each

XX%. an quarter, third statement, rates this basis, I do earnings in quarter the the that with are other too there other income in share single-digits. expenses, adjusted make far in this reporting result diluted a from per growth of banks $X.X $X.XX, banks improvement excess share believe we with of many up of low not ahead earnings performance, thus of well and reported are On of adjusted income our million, we non-recurring and per earnings XX.X% and of XX.X%, million, continued $XXX,XXX up diluted net As net of excluding the operating $X.X with quarter, can growth first this average adjusted $X.XX. consecutive marks

the up quarter. X, our solid small produced Slide lending quarter, the loan spend from minutes estate, on couple balances loans. Consistent led lending commercial during will I business, $XX to the were first investor teams, annualized quarters, Turning We a prior franchise quarter, growth we produced X% commercial with by discussing an or our million basis. where real over activities in and growth overall in

another had of Our quarter, $XXX construction solid over commitments. new originating team million

quarter business were lines were $XXX million. balances projects. loan upcoming on rate in shift were the loan unfunded months to as borrowers the by to a construction our XX% commitments average higher early yielding these end of of in the bearable first continued quarter, total quarter meaningful Draws end, our line will towards their in role construction impacted existing lines While on up At compared play loans. paydowns, portfolio, balances drew fund

new construction those during increased real million balances the quarter. estate, commercial Additionally, in team as deals $XX the sourced investor

benefit the particular very therefore yet for very for was interest one in the for provision had little larger fully quarter, quarter, reserved in late the deal income loan However, closed losses. to

first borrower the these new lending, months. specialty delinquencies portfolios consumer remain low, total were our the production with consumer as point on quarter. just focus prime the in seasonal originations on low up channels modestly and consistent balances range, in in side, Furthermore, the basis during On loans. of the from mid-X% X in winter We our at super rebounded rates were consumer new

an the our in services. evolution partnerships. want to We these I to are to the over vital results Ken call fintech financial Before turn update of cover detail, more provide on our partnerships to believe I

relationships while these market, fostering committed innovative enhancing solutions the to to also develop to shareholder are returns. We

last a for As us. quarter, isn't this new concept I mentioned

years have quantity. focus a always with over on of We quality experience, over XX partnership

Liquidity the second business in half XXX% for see period of continues growth of further to total and performance we and the Our improved half second we momentum revenue continue up of deliver is line year. To levels first compared half quality We to quarter. same with last confidence. in to strong, credit wrap to comments, second year the expect the up sound. the the this XXXX, enter are of remain and the grow, capital And and year. my for

evolution and improve of well our higher continue remainder are mix and we With earnings, pricing, the for we the deposit stabilized believe to portfolio continued beyond. XXXX and positioned of achieve loan to profitability

the for contributions to First entire Internet strong thank our I Finally, personally team results. work towards hard and want their

is success their teamwork, focus, driven core by Our competencies, to adaptability, customer commitment our X unwavering and initiative.

over Ken, the for on call quarter. our more I'll to the Now financial results details for turn

Kenneth Lovik

Thanks, David.

and As will covered turn let's portfolio, detail. loan cover to more deposits X, David in where X Slides I the

totaled first million, the the essentially quarter, of the by portion deposits, flat the second period fintech at deposits over fintech $XXX down used experienced in by balances. Non-maturity driven as deposit of XX% to cost provided up the increased from growth quarter those of this with continued deposits classified were end. $XXX a While quarter, up higher were deposits, during X.X%, partners, in X.X% deposits from million growth, by partnership quarter liquidity were $XX broker and we first and our the average pay Similar or fintech including quarter-over-quarter. end increases million, deposits. partnership broker CDs balance almost and Deposits to million or $XXX

$XXX,XXX cost average was million average quarter, XX% the driven in weighted $XXX production strong the quarter balances $XX $X.X the consumer Related linked in CD these We up from transaction recurring total of quarter. Total linked the term volume from the partially which partnership XX down first this continued originated million interest and quarter, X.XX%, payments billion volume, generated fees. by in with during were of we the was of maturities quarter, average channel. Additionally, X.XX%. of an demand almost activity at by and processed of million during an to second in renewals, in of fintech the new months. $XXX were These up the the with quarter, slightly offset revenue cost income, oversight, a from consisting majority second revenue partners and

the of million the of of XXXX $XXX cost maturing Looking average with with third in forward, we an maturing average $XXX X.XX% cost CDs million quarter, in have an and X.XX%. of quarter fourth

line new in point inflection assuming rates should an reducing the perhaps reached those higher periods, the for stabilizing, there on pricing, for Fed So production not second begin which have longer but with environment. I contribute to commentary heavily the remain interest to in on we lower quarter, potential under costs is a and deposit in CD Should future is added dependent rate benefit, again, provided that. rates, even

of as billion. cash Moving total to very end, $X.X unused we Slide remains liquidity X, at strong borrowing quarter had capacity and

as flat inflows to capacity to $XX purchases XXX% the of were well ratio higher to loan At first a deposit during the increased moment XXX% from of uninsured deposit deposits, balances quarter deployed represents while uninsured mentioned and million XX.X% total the broker securities XX.X% loan and quarter. of ago, as adjusted total balances liquidity some up quarter. With cash end fund deposit loans to the quarter-over-quarter, unused deposits. As of growth by about end, deposits, paydown cost the borrowing and provided modestly our at we

to X.XX% Turning equivalent million net third increasing loan and on on bearing later yields the than balances of That than Factoring whereas increase further XX the it income a million linked payoffs interest experienced million primarily loan quarter, increase average X%, funds, the I securities bearing of interest quarter. in from expected on bearing to and a increase impact the in point One loans, in average Slide to earning average highlights basis securities, X.X% would higher fully quarter shown average to assets growth to more interest in was increased on quarter. income net on X during from up taxable lower equivalent in net interest interest I building line for other deposit produced combined average the were $XX point the first both The $XX.X yield assets the in the is balances balanced income, solid over the interest we assets. The point deposits a in Slide on growth both to in on as and the the earning balances, quarter taxable the interest interest compared increase forward growth X. Net like item and X, quarter's taxable of the change growth quarters that to with The X.XX% the net and mentioned and quarter. up as some earned from margin from interest due yield partially chart an million. The the $XXX quarter during in rolled out this point X fully top increase of interest related income and deposit X.XX% of rate. net compared average factor last decline on the interest net during for point as larger the margin pace $XX.X is of basis, and is, and basis XX basis, is impact over quarter. the primarily in X% balances were drivers margin margin in a a was distancing early quarter, was of earning of the due the bar basis and interest to past funding low in modest basis quarter, first on only net a X.X% the interest equivalent chart first up X respectively of us earlier, on quarter, was yield loans. yield on earned fully cost almost XXXX, X volume by down, in in deposits really offset earned the up XX increases loan X.XX% point linked Slides

balances, which saw estate of to that, we commercial attractive early industrial of and experienced in supposed closed on interest investor certain pricing, we a deal had these real estimate not week construction fund paydowns delay by a and the large all but the commercial Specifically, $XXX,XXX, approximately and of impacted items total, quarter, did get margin points. income June. In we last until negatively net interest basis net that X and was by

the with composition strong, lower and and variable However, the loan replacing of production. rate on portfolio, improving yielding yielding remain with pipelines focus assets higher loan and our

graph expect loan of points to in year. the to growth monthly forecast and interest to in bearing that XX in Fed we XX see the be months. range rest quarter. Related quarter, deposits income fourth costs X the deposits, stability throughout third rate, the up basis to over rate looking total in on XX interest in can the at another yield to several continue the the Currently, We points the funds XX on our Slide deposit tracks the of portfolio you the last basis against the on

interest going that with which costs in pricing second should inflection rates relatively quarter, stabilized bearing margin here forward, anticipate an driving and the a quarter, should the catalyst point with to consistent short-term So be in CD expansion. deposit be reach interest third we continued expected net

XX%, up increase on million the up Turning also to compared non-interest $X.X non-interest prior premiums due setting from primarily from received Loan distributions first on fair Gain another million partially $X.X first the for was for fund and team. sale X sale the and the of servicing due revenue, SBA low increases quarter a income in servicing up quarter, loans quarter, quarter, record $X.X quarterly of on gain our up, XX% was XX% $XX basis million, net asset. income Slide the the rebounding quarter, to $XX.X from saw were the the These X, million, to decline or totaled offset sale increasing non-interest first income points. Other modest over million, adjustment to for by while quarter. loan investments. a seasonally net to value was volume

XX, to $XX.X in from technology almost for Internet quarter. non-recurring to with for $X.X the First expense consisting results costs quarter anniversary associated our quarter were the terminated million, the to of $XXX,XXX of up contracts, expenses, non-interest XXth was extent, the of and Included first Bank. Moving Slide related expense mostly a lesser million

$XX.X items, quarter, $XXX,XXX, or these Excluding non-interest in our quarter, X.X% expense totaled and relatively the with for million the up from line first forecast.

changes The first quarter reserves Turning composition up charge-offs, quarter, to the driven on to a lending. the for for percentage loan asset I X.XX% second compared the loan loan losses of add of of loss the small additional and credit positive in at the for to growth The the growth, provision to points data credit partially losses. impact from million, of continued allowance lending, net business the on as for losses the in The commentary forecasted ratios. in business major by $X total loans second quality additional for the basis in and in million loan so reserves was first allowance quarter. the coverage the of X second comments, related shift covered the around quarter was losses, components offset quality higher with the portfolio, types XX, the and in towards the Provision and Slide the economic asset the just the also for related will the credit provision allowance his reflected portfolio, portfolios. in rates portfolio, David some quarter in of certain other quarter. The losses $X.X end for by increase the small increase credit composition was loan reflects the credit

around Furthermore, banks and inherent for excess If losses which balances. that you we coverage their that, risk, residential do and class reserves have. balances asset allowance represented our finance not ratios with require have credit exclude portfolios, lower the exposure, the reserves public of the on minimal lower given other X.XX% loan office many mortgage

our at and first tangible the Moving from point a was to X.XX%, X capital levels remain Slide basis overall the capital increase The company solid. equity the bank on XX, both common ratio quarter.

loss of solid exclude you common From and capital X common equity normalized for capital adjusted at adjust ratio balances $XXX X.XX%. other Tier If million, accumulated tangible remains regulatory ratio the cash a would X.XX%. perspective, comprehensive equity the be

the Before I remainder updates wrap I XXXX. on for would to provide like some up, our outlook of

year the per as while of should cuts Federal year. We XXXX, interest higher reminder, equivalent consistent Fed on a does lower approach commentary assume funds and this the despite may soon to and last costs with X% outlook, a non-interest flat, longer increase during with to our to forecasting not to the for for the of loan be view in rate to XX% As in interest XXXX, Reserve quarter's our our the rate that happen call. taxable be maintains to the up increasing that XX% is regard range continue the continuing increase, expense, as range XXXX, per September. We quarter. X.X% will of expect is of annual feel growth the fairly I comments as be to non-interest confident year $X in interest yields fully for the year, annual income net that X.XX% earnings With still earlier, Related still to for to fourth year. share mentioned remainder the full share. range net annual income we to for loan and in be bearing of deposit expect income, the relatively the throughout With margin

can program. With our optimistic. And extremely management, in additional to add expenses in will of the technology turn as as revenue personnel expectations that, in our well back management processes a additional so combination team to fintech by make our take fee we consistently your outlook for deliver investments to activity, questions. continuing partnerships and With it and higher SBA I market risk as and operator continue risk be partially our around will SBA higher the origination reminder, offset as secondary pricing, we stabilization remains the higher

Operator

Instructions] [Operator comes first Switzer Our KBW. of from from the question line Tim

Timothy Switzer

all My I to on you're of small overall all reserve the color, reserve credit the guess, seeing growth what and that? you related by little bit more a bill business I to that. performance And more Could mean, reserves related first is commentary pretty about looked solid. it guys provided loans was and question of this quarter. to the bit underlying And guys this you provide just you loan little kind was some of the or qualitative decided take? a driven

Kenneth Lovik

It say was -- had of I there's probably some bit play at I you a little X, both. dynamics would several growth with. mean, there you begin is here. just to

And of the portfolio. of is some just the it, too, migration

coverage some If lower you and mean, look higher construction mortgage, those by ratios being residential have portfolios replaced public and down, finance, coverage healthcare SBA they're of finance. I our and are franchise like even that balances have year-over-year, that ratios.

Q a So reserve -- were be look SBA, just upward to you some just, a we where we took just factors of on that a and building there. some know, adjusted And at of to too, extra looked in our those just start is there. -- build there migration at some

David Becker

Ken We like the the $XX days X closed month. days last stated, have in the loans we on of million last the of also, as in month, couple

X the show interest offset loan the we the days. those on even So though we had any and final the for full -- didn't on up expense of income, loss took they to reserve

convoluted bit. the have was Ken commercial finance said. as the the And other higher re-evaluation of it timing, little a But public real SBA and mix. Part it just was on So of of and reserving again, factors, that part in the kind than much C&I, portfolios. change stuff estate things portfolios.

Timothy Switzer

with initiative, caution even it revenue. And environment helpful. seeing run all to either caused have potential I difficulties the changed through at very decided We're some getting investment given side. the to growth intense altered how about your have it it customers deposit having? maybe has on wanted you're either regulatory ask with or some has Or BaaS more you, to That's your more the How And the plans all? come good has then more to fintech are Okay. competitors come at business? you customers maybe the

David Becker

there, about Tim. You hit just everything

going a you during that. charts. could we lot we how is the guidelines hit I I have, hand fintechs, what's banking better about as interact XX% this tell already you, question of think should space. that Regulatory products. will service to last No BaaS with off quarter in finally were as doing. on the They scrutiny defined the the a

a software deeply? And in a God, common So has practically. whole this we're road industry. and prospects, I And If my in of had better than time asks which going of as software beginning in due business, up, service of you, a ever the we our some we've tell map there's complying will have stepped life space, are been that in oh much our theme because this so with. it's, around nobody I've particularly on from things us question. Why my some you diligence the are from the of digging the guys

clients. has of catching of little of They growing. don't as until changed some what up, lot focus deposit of the to up figure lending as wrong true comments, side's side, We are. clearings. The and growth. deeper. kind you not pure service And profitability. That's blew a show But of phenomenally to know, want they're don't just in it's banking settles taking a market and I everybody and So quickly. And changed a can and see I and timing where the on risk, understand we're the out lot there. as And all fintechs speed what digging what's the in the said path growth tremendous to I synapse and in handle the here good went issues $X there. a a than on fintechs play. I gets think ACH quality going a the on we've issues, billion slower but dust until they my people got some pitfalls

where comfortable the the plate. had plenty We'll at. projected. real got we've we're we're hit So we numbers on And

You kind last were comment. spot on, of your on

were inquiries looking client just with, synapse source. We people a a We and backup would to for X/X. their we switching Nicole dust about We potentially all ago. get of source, about of third a are moving, get another the had starting with thinking settling either couple days I, They're and roles. are new a a is talking vendor. as business. They're We're with getting or

other would The get vendor X/X.

on as they everything's now. just in table up. We're a the So right come one-by-one

Operator

of Sutton Our next George Craig-Hallum. from question line comes from the

George Sutton

hear for change may even to into year, you're that half? building clarify I number just environment. pleased the second to the with Ken, I $X that that was a anything still with in you the X different be expectations seem comfortable rate want

Kenneth Lovik

on step just doing and George. non-interest to I we the expense as exceeding exceeding mean, that well. the what continue are a up. year. is continue go Obviously, we've I still, business grow, really, up, we seen seen what the income tracking continue little side forecast. And to through SBA stair is non-interest the again, bit we there's rest even to on income forecast offset of But we've Not to to the mean, the we that's as think going SBA with side as of that. I

changed. there's has outlook, lot in So of that really terms a not

David Becker

in pipeline. George, real that the is of just that's forecast, we commercial $XXX up bump The million helping on guess and One level, the have confidence quarter our I that the things the estate.

to to the start We're happen What we construction to for the past that, quarter. We side. lot in were year. the that down, So those not us. We're finance that's market. were doing X here anticipating hanging of quarter of for actually will of doing months or permanent the second we to be had few big, drawn products. put doesn't X in and opportunity work kind on big us this hope on bought a secondary that a A

still So there's a market refrigeration et in. the for good systems, warehouse of which playing we're is kind demand cetera, particularly

talked compared end. do year of big we to bit So XX% the grown hang a a to just a we little more lost over pipeline hoping the in We've already year, were months. But few that for to on have the to by coming continuing about activity we a grow. couple half first opportunities assets We of great fintech up.

doing a and dialogue lot makes a icing positive daily if that we're move and cake. be basis, would And today. just Fed on in more on that's of a the what there's So the more

George Sutton

goals you're and bigger I'm could your the and be much curious, bigger do you? how you SBA now keep lending, David, largest. building you So sixth bigger for envision SBA for

David Becker

this next I going maybe I spending just they and X XX If $X said, -- months here? time, I inside. little we're leads it's SBA any there's lot the no Nobody's easily really current in the we anything. foresee that in possibilities could have tech is business little of our at we're piece tech limitations. And move yesterday million XX that up mark higher. world. out a are think a of met bit with a We on really a kind billion to to the year. to to okay, time X outdated, where can of the get probably what that number throw year, very you the department $XXX of changed

subsystems almost the green screen of capability. Some are

sales We're So things spreading We're in in doing we're some some some with bringing cool new the loans. force. doing pretty things tools. new

tremendous And so better day-by-day. thrown our it's last And had it. as bodies of kind we is we've the years, efficiency getting at couple of over situation growth, a

starting we're throw Now to technology.

of bodies marketplace. getting in understand So are the find that business, the it's hard kind really to easier. And SBA

happen. our sure. hundred a on get part. year doable. for a That skis been? up number of not over to have we'll No, couple productivity, to would very continue be that's the the in think new new we But with year-over-year So will million like going going We'd to tech that's we double very, our us efficiencies up. Are foolish to kind push picking we allow gain that out

George Sutton

question Ken. X Just quick for

some mentioned expenses. of You us tech changing under termination give reducing you kind contracts what technology Can of the are a of capabilities there? sense capabilities, or is? your one-time And that just you

Kenneth Lovik

just, a actually traction it in Yes, platform was company that relate lot the changed we of business where no, model, the we them. fintech these to they partners X and with partnership of getting a working weren't were with space its

small to just or bank any like our software the off of any that. has of of the write nothing side, internal account it on investments investment we tech, had anything agreement, in and exited or But to our lending do deposit So opening in with some or the that.

David Becker

give was found over against piece in credit the of we years particular with from The alternative working software. we future big PiServe, piece we product. installation on to maintenance. a of of queue They're were George, a another actually a had and the of us product other that, We it, almost on a that better us, write-down

had the third-party to said, positive as any didn't just chance But us. Ken to on as We a there's not a that yes, any sense, that's well. So come going back to as a keep cutting back make vendor technologies. we're relationship going

Operator

the of from Race question next Sandler. from Our Piper comes Nathan line

Nathan Race

how to revenue XQ, Just discussion, half difficult 'XX? on be you but that thinking just replicate in about growth curious, production about back any are SBA may revenue guys year. thinking in year-over-year the it guys thoughts the trajectory going in are I back just to of in the how the SBA of you imagine kind

Kenneth Lovik

softer very, obviously, our I little there. quarter. is bit think bit has we right, little there. I past a a And third strong had a for quarter from now right up this sometimes in think that quarter Fourth actually going forecast very quarter

more high line probably So a second that's quarter, quite in probably little not as there, than the higher as maybe bit the third but quarter.

grow. year. our static to I origination the it's been not So, continuing we've as think continued, It's volume, throughout

and we at to level continuing continues team level of on just originations, to a we feel so, look But a really and side. can that revenue gotten we've the we're consistently think good And I to just add salespeople. the see that high-quality higher where maintain,

Nathan Race

to expenses. the of That's XQ? turn of rate the of you hear. then the around just XX about some back run the Okay. items exclude If in think quarter, in to one-time trending we great of in how kind and guys XQ kind And year, maybe the half

Kenneth Lovik

remind continues as SBA side. that the commission in, that factor It's though, like is on things to of a guys cost to probably to you that you, I'd that X to grow, the is there

see. will we So

you revenue, item. and the certainly, it's will go see benefits Now, employee -- the on dollar-for-dollar up line costs not with salaries but

XX to little produce fourth a we continue quarter to as XX close in to bit maybe there. getting the probably over you're So

Nathan Race

just stock tangible Got Okay. growing is but Very it. value, still updated also you are thoughts helpful. book the organically any the guys clips. trading then Obviously, at below And on buyback? pretty nice

are how guys that just So hear curious days? these to thinking you about appetite

David Becker

now, kind and get the Quite really on on the of above side. focused side as honestly, less X about getting the back of capital and Well, including thinking we're up we buyback things. the to closer we're trading closer side, stock markdown security less right Tier X%, XX, the

in at third level, to doing plummet wouldn't rates Fed down start the buybacks, any the won't really which but mark-to-market, our here third fourth around, when be the reevaluate I We'll quarter. on So unless probably we least brings any share quarter forecast quarter. for the comes

Nathan Race

And Okay. moves And down book. within can you with that kind just terms impact margin as remind what of XX Fed, Got the the within then to immediately us it the then, also of particularly it. loan deposits? in cut relates maybe, have Ken, reprices each one-for-one you what from

Kenneth Lovik

Yes.

this, and think yes a at there's to -- couple me just look maybe about. to different Let ways

beta about another to cut. the got that it I rate will And the CDs we year. Fed percent of mature And $X.X side, million $XXX deposit maybe of that's $XXX course $X.X then, then billion over beta. probably we another, deposits that next XXX% the XX% have to million call have a got with of On billion we XX% a

that So benefit interest If kind basis as XX I income look and and could cut annualized an net over the of $X.X course earnings if that provides rates. rates, for a it potential million. at as of to XX-month when a the think should of Fed kind lot we much begins of period, point cut,

David Becker

next into days X over in be when in in guys, we figure anticipating which something in it's and X the the second prior, in more question up. And to was Ken the the mix. and quarter, you more at the kind the $XXX,XXX in million, team $XXX,XXX of a you September, to X and dug little at portfolio as looking here really will impact. There that's quarters the that few would this happen could stuff CD really, $XXX,XXX split that last et But funds, said, the that months, coming that repricing off quarter, happen have equal here first as XX given CD $X.X the we Ken's pegged was just bring throw can't We've getting likely deeper cetera. didn't to

over, big, to roll impact of a is big that's CDs where in. the come part As that going

markets of money that's another will the worth stuff Fed Then course that and pegged funds, the are the over $X rolling cash year. pure just So in $XXX,XXX million plus. or bring the $X CDs to the billion and of

can this year, So it's in couple, or yet could And impactful a it early we or number. a big rolls if X get X year next here, XXXX. very be

Nathan Race

Yes, definitely.

forward? tax think somewhere Just were range? XX% last on we X quarter I updated housekeeping thoughts talking question. the to X% rate in last the Any going

Kenneth Lovik

we kind would as say quarter. step-up not, would probably of good build X% of earnings, that's with probably kind kind that's the in the fourth fourth into maybe, in I be Yes. quarter, of that we income as maybe get the

the portfolio. pretty benefit finance now right the still think from tax we benefit, get I public nice a from

next tax go a probably rate Probably X% from tax as been to us keep and fortunately applicable, kind allowing is So move the X% perspective, a appropriate earnings just probably to of up here quarter the that that's low. up. in

Nathan Race

rate cut, And your it. points include Can quarter. not guidance fourth does That expanded I'm XX in last Got floating of book? on the your to, Okay. labor Fed impact basis X to sorry, sorry, for loan the clarifying XX just a yields then, was rate question. XX

Kenneth Lovik

does that No, not at all. not. No,

Operator

Brett Group. Our next from question Rabatin from line Hovde the of

Brett Rabatin

the fourth Wanted know growth. growth when the back XXX the tiny balance year? that be of balance end sheet's NII guidance the in sheet half margin how sheet guidance but been assume growth? looking How much the the liquidity, I of you range to I'd XX%. the of X% look and much quarter, I a full had managed I just go bit at balance of excess balance and And you've are that guys to for of XX% sheet shy back obviously for by the high year. to of

Kenneth Lovik

to comments the of say -- XX%. And to X.X% it's balances be to the model X was Well, I right you're X.X% we're forecasting probably -- closer earlier loan probably call X.X%. than think X-ish between my in now the to somewhere up says

in growth So a probably on that's in as you about if probably securities higher loan than maybe guess, what sheet we're plug the a I just, well. is Overall balances, but balances your up average don't does little little our bit bit be what balance your loan lower. There's of that because the perhaps somewhat has. model side. But, are to for less know will growth that cash be I what than balances thinking balances going average growth and

Brett Rabatin

Okay. And then just going back cost -- the to

Kenneth Lovik

quarter. probably say to it and that One timing. topic, is of we George's thing to the just Brett. had This a loans go I'd back paydown questions one in about was is Sorry, on the David the talked

that little and the the feel some and good really in a that growth a in difference. today and quarter that in our I NII get we're end through guidance quarter third year, of quarter do. gave may is where you the And probably the the what fourth exactly there, on bit little timing So fourth track of for I we margin there still be by time quarter, are to between models. fourth think to XX% about get we is But

Brett Rabatin

know wanted quarter then being And helpful. the you terms of just of you X.XX%. be some looking to CDs? back fund to rate? here? guys CDs, in are I going at That's currently do the And BaaS? have produce then, new it from Are growth Where to maturing third for it of go Okay. Is just growth CDs to, the pieces balance in businesses? to Is sheet you you cost going be how lower the able in the

David Becker

X production about in that big for piece door being we're go on X coming the what then, and is And in people coming And On different, seeing new, new like in there's seeing we're X at year. is a of like actually across years right usually now X.XX%. CDs, out brand that's that.

that about X So rate. X X a X And duration. it's that's is now pretty average year or it consistent call does renewal been impact months. The kind of the a thing that for

hard a sometimes predict, everybody not that's little because And to bit renews.

and Sometimes they versa. they but a in CD they vice X-year we'll call X renew, to move want or that a see year to product

growing, of a X.XX%. And that with is today, what think been CDs little probably I the So you'll continue But hard I have piece the to down at slowed production on of a but little bit seeing there. we're the usually rate the the new good we not And growth top are predict. still, board, in to bit fintech is door production side, production think still there, they're partnership on but We're side. the coming we're deposit see competitive.

So I think, again, that probably going forward.

between But side, it CD balanced bit on might near a the bit might fintech here growth little little be two. than the in You maybe more a term, the side. the see

Brett Rabatin

pieces the then the the from loan stop for shrinking? And finance that any just finance, year, been of healthcare tenant, growth Are X portfolio you here? back to on has expecting of the public the been your single thoughts having lastly, half of those of declining Or some lease financing, from about headwinds thinking have me, decreases.

David Becker

Single market is a And competition you doing the made then that, have of tenant's little inverted with some good fixed Well, hasn't a sense. by curve, rate a yield design whole product longer bit, term example. because just lot of too.

are You mean, space other I we make been sense that there. who for us. have that competitors pricing have opportunistic deals don't in

that good sitting as we'll is -- team the down. as as The have in municipalities if aren't thing fits of do same we working. And supply lot The stimulus Our finance is they're past, public can the There's out public in it. a just well. parameters, pricing debt within our for they issuing a money. much deal finance world get still because on

buy because opportunities the what been of people and market, a then So there starved lot it's going to there's lot just competition. is it's really of are of a there, muni to bonds, haven't public been lot a there. And

activity to point we then priced is think where normalized on in if, So up yield and channels knock back markets. wood, when in I rationally, those be think and and I a we the picks have eventually curve, the get we'll those

Operator

to be for final time. further comments. no David I'd like Becker over seems now the this questions at Mr. There turn to closing call back to

David Becker

joining you today's you, for Thank us call. Thank on Lara.

our current Given for optimistic the first year. about outlook and strong our pipelines, we're half our extremely of remainder

the to add clear are costs, Our in profitable. The margin. interest they as greater said, a working is in Fed When not and pathway really and Ken acceleration could stabilized have of deposit commercial considering happen the do we strong growth, and when really rate diversification. cuts, income drive a consumer teams still really to hard, revenue year finishing strong just which provide growth, net net optimism interest you

driving to you profitability, you We support, as always, shareholders, and wish for shareholder your guys. time and improved As fellow a value. your enhanced remain the today, afternoon. good committed we thank Thanks,

Operator

ask and this day. conference Ladies participating, your sir. thank you you, please Thank a lovely call gentlemen, concludes disconnect lines. Have your that for for today. We you and

First Internet Bancorp (INBK) 25 Jul 242024 Q2 Earnings call transcript