First Internet Bancorp(INBK) - 2025 Q1 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The company reported net interest income of $25.1 million, up 6.6% from the previous quarter, and $26.3 million on a fully taxable equivalent basis, reflecting a strong performance [27] - Total operating revenue grew over 2% quarter-over-quarter and more than 22% year-over-year, driven by a 7% increase in net interest income compared to the fourth quarter and 20% compared to the first quarter of 2024 [8][9] - Net income for the quarter was $900,000, with diluted earnings per share of $0.11, significantly impacted by elevated provisions for loan losses [13] Business Line Data and Key Metrics Changes - Small business lending origination yields remained strong, with a weighted average rate on funded originations at 7.78%, up 50 basis points from the prior quarter [11] - The construction and commercial real estate team originated almost $70 million in new commitments, contributing to an 8% annualized loan growth [18] - Noninterest income for the quarter was $10.4 million, down 35% from the fourth quarter, primarily due to lower net servicing revenue [29] Market Data and Key Metrics Changes - Total deposits increased by $111 million or over 2% during the first quarter, driven by growth in FinTech partnership deposits [22] - Non-maturity deposits rose almost $335 million or 15%, reflecting the increase in FinTech partnership deposits [22] - Total FinTech partnership revenue was over $1.1 million in the first quarter, up 30% from the fourth quarter [22] Company Strategy and Development Direction - The company aims to continue improving its loan mix and anticipates a reduction in deposit costs, positioning itself for stronger earnings in the coming quarters [102] - The focus remains on expanding existing FinTech partnerships and exploring new lending opportunities, with a cautious approach to the number of new programs [92] - The company is committed to maintaining a strong asset quality and managing credit risks effectively, particularly in the small business lending and franchise finance portfolios [17][80] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the continued growth of net interest income and net interest margin throughout 2025, assuming no further rate actions from the Fed [10] - The company acknowledged economic uncertainties but noted a slowdown in new delinquencies, providing optimism for moderating provisions for credit losses in the second half of the year [38] - Management highlighted the importance of controlling expenses and maintaining strong operational performance despite challenges in the credit environment [9][17] Other Important Information - The allowance for credit losses as a percentage of total loans was 1.11% at the end of the first quarter, reflecting specific reserves taken on certain loan relationships [31] - The tangible common equity ratio was 6.55%, with a common equity Tier one capital ratio of 9.16%, indicating solid capital levels [34] Q&A Session Summary Question: Expected one-time impact on fees in Q2 - Management estimated a total noninterest income for Q2 to be around $5 million to $6 million, with expectations to return to previous levels in the latter half of the year [44] Question: Average loan size in SBA - The average loan size is just over $1 million, indicating that the reinstated fees for smaller loans do not significantly impact the company [47] Question: Impact of a 25 basis point rate cut on NII - A 25 basis point rate cut would result in an annualized impact of approximately $3.6 million on net interest income, with a gradual ramp-up over the year [49] Question: Updated thoughts on SBA loss assumptions - Management noted that while loss rates have been elevated, they expect a decline in charge-offs as economic conditions stabilize [56] Question: Share buybacks and balance sheet growth - The company is preparing to consider share buybacks if the stock price remains below 50% of book value, while also managing balance sheet growth effectively [63] Question: Update on fintech partnerships - The company is experiencing strong growth in existing fintech partnerships and is cautiously optimistic about expanding these relationships [92]