First Internet Bancorp(US:INBK)2023-07-27 22:50Financial Data and Key Metrics Changes - The company reported net income of $3.9 million and diluted earnings per share of $0.44, with total revenue at $24 million, down from $25 million in the first quarter [15][34] - The net interest margin decreased to 1.53%, down 23 basis points from the first quarter, while the fully taxable equivalent net interest margin was 1.64%, down 25 basis points [36][40] - The yield on new loan originations increased to 8.42%, up 66 basis points from the first quarter [13] Business Line Data and Key Metrics Changes - The SBA team achieved its highest quarterly gain on sale revenue, up 20% over the prior quarter, with year-to-date originations up 216% compared to the same period in 2022 [6][41] - Consumer lending, including trailers and recreational vehicles, increased by almost $14 million, with delinquency rates remaining low at just 4 basis points [16][17] - Construction lending saw over $115 million in new commitments, contributing to a total of $450 million in unfunded commitments [8] Market Data and Key Metrics Changes - Total deposits increased by $232 million or 6.4% from the end of the first quarter, primarily driven by strong demand for CDs [26] - Uninsured deposit balances were $938 million or 24% of total deposits, down from 26% at the end of the first quarter [31] - The company’s liquidity stood at $1.2 billion, representing 127% of total uninsured deposits [33] Company Strategy and Development Direction - The company aims to optimize its loan portfolio by focusing on higher yielding and variable rate lines of business while managing deposit costs [13][22] - The Banking-as-a-Service initiative is seen as a vital resource for expanding capabilities, with total deposits from partners up 86% from the first quarter [18][20] - The company is optimistic about future revenue growth, expecting non-interest income to be in the range of $6 million to $7 million in the third and fourth quarters [47] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence that once the Federal Reserve stabilizes interest rates, revenue will rebound, leading to accelerated growth and profitability [22][48] - The company noted that credit quality remains strong, with non-performing loans to total loans declining to 17 basis points [17][44] - Management highlighted that the current economic environment is favorable, with no significant concerns regarding credit quality [70] Other Important Information - The tangible common equity ratio declined to 7.07% due to share repurchase activity and increased cash balances [45][46] - The company repurchased over 200,000 shares during the quarter, increasing tangible book value per share to $39.85, up almost 4% year-over-year [46] Q&A Session Summary Question: What are the KPIs behind the $3 EPS for 2024? - Management indicated that once the Fed reaches its terminal rate, deposit costs will stabilize, allowing for higher loan growth and improved net interest income [54][56] Question: What is the outlook for the SBA business? - The SBA pipeline remains strong, with a focus on business acquisitions rather than startups, contributing to a robust future outlook [62] Question: Any updates on credit quality and stress tests? - Management conducted a review of the commercial real estate portfolio, finding no significant issues, and noted that the overall credit quality remains solid [66][70]