First Internet Bancorp(US:INBK)2022-10-20 19:38Financial Data and Key Metrics Changes - For Q3 2022, the company reported net income of $8.4 million and earnings per share of $0.89, with adjusted net income of $8.5 million and adjusted diluted earnings per share of $0.90 [8][9] - The return on average assets was 0.83% and return on tangible common equity was 9.24% [9] - The tangible common equity ratio at the end of the quarter was 8.36%, maintaining strong capital levels [11][57] Business Line Data and Key Metrics Changes - Total loan balances increased by $174 million, a nearly 6% growth from the prior quarter, reaching an all-time high of almost $3.3 billion [12][37] - Loan originations for the quarter were $491.3 million, a 47% increase from the second quarter, with new funded originations totaling $272.5 million, up 9% from the prior quarter [12][14] - The construction lending team sourced nearly $190 million in new originations, with unfunded commitments in construction lending totaling $367 million, up over 74% compared to the previous quarter [14][12] Market Data and Key Metrics Changes - The company experienced lower gain on sale premiums in the second and third quarters of 2022 compared to previous years, forecasting SBA gain on sale revenue to be in the range of $10.5 million to $11 million for the year [16][18] - The competitive environment for deposits intensified, with a record outflow of $370 billion in deposits for the banking system in the second quarter, leading to increased competition for deposits [25][26] Company Strategy and Development Direction - The company is focusing on banking-as-a-service partnerships, with expectations to onboard its first relationship in early 2023, aiming to drive non-interest income [28][29] - The company plans to apply more pricing discipline in the fourth quarter to mitigate pressure on net interest margin, with expectations for higher average loan yields in future periods [27][48] Management's Comments on Operating Environment and Future Outlook - Management expressed disappointment in net interest income and net interest margin performance but highlighted strong growth in construction lending and SBA lending [31][33] - The company anticipates continued increases in deposit costs and a potential decline in net interest margin due to competitive pressures [48][49] Other Important Information - The company repurchased 120,000 shares of common stock at an average price of $36.56 per share, with a total of $25.1 million repurchased under the authorized program [58][59] - The company was named one of the Best Banks to Work For by American Banker for the ninth consecutive year, reflecting its commitment to workplace culture [34][35] Q&A Session Summary Question: Regarding BaaS deposits and pricing dynamics - Management explained that pricing on BaaS opportunities has increased, and the specific partnership faced challenges due to changing business models and market rates [62][63] Question: Future growth and stock performance - Management indicated a focus on maintaining solid margins rather than pursuing growth for its own sake, with expectations for loan activity to be more measured [72][74] Question: Loan growth outlook - Management stated that loan growth would be selective, with expectations for mid-single digit growth, focusing on higher yielding assets [92][94]