First Internet Bancorp(US:INBK)2024-04-25 21:49Financial Data and Key Metrics Changes - Net interest income for the quarter was $20.7 million, up 4.7% from the previous quarter, and fully taxable equivalent net interest margin expanded by 7 basis points [39][87] - The yield on average interest-earning assets increased to 5.45% from 5.28%, primarily due to a 23-basis point increase in the yield earned on loans [39][87] - Non-performing loans increased to 33 basis points of total loans, while net charge-offs remained low at just five basis points [88][131] Business Line Data and Key Metrics Changes - The loan portfolio grew by $70 million or over 7% on an annualized basis, with significant contributions from commercial lending, construction, and small business lending [99][132] - SBA originations and sold loan volume were up 27% and 55% respectively compared to the previous year, indicating strong performance in the SBA segment [100] - Non-interest income for the quarter was $8.3 million, up $900,000 from the previous quarter, with gain on sale of loans totaling $6.5 million, setting a quarterly record for the SBA team [106] Market Data and Key Metrics Changes - Deposit balances grew by $206.8 million or 5.1% from the prior quarter, driven by strong demand across the customer base [9] - Uninsured deposit balances were $1.1 billion or 26% of total deposits, up $76 million from the end of the fourth quarter [9] - The loans to deposits ratio declined to 91.5% from 94.4% at the end of 2023, reflecting strong deposit growth outpacing loan growth [105] Company Strategy and Development Direction - The company aims to optimize the loan portfolio and balance sheet mix while managing deposit costs and improving interest rate risk profile [4][5] - There is a focus on enhancing FinTech partnerships, with expectations for FinTech partnership revenue to be about three times last year's revenue [72][102] - The company is committed to maintaining high liquidity levels and is positioned to capitalize on opportunities arising from market volatility [71][120] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the trajectory of net interest income and net interest margin, expecting them to trend higher for the remainder of the year [5][41] - The company anticipates annual earnings per share for 2024 to be in the range of $3 per share, with loan yields expected to continue increasing [41][95] - Management noted that credit quality remains healthy, with minimal exposure to office real estate, which is a concern in the current market [131] Other Important Information - The tangible book value per share was $41.83, up 1% from the fourth quarter and nearly 7% year over year [41] - The common equity tier one capital ratio remains solid at 9.52%, indicating strong capital levels [41][131] - The company has been recognized for its operational discipline and prudent balance sheet management during challenging periods for the banking industry [6] Q&A Session Summary Question: Impact of potential rate cuts on NII and NIM - Management indicated that a 25-basis point rate cut could reduce net interest income by approximately $1 million on an annualized basis [14] Question: FinTech partner pipeline and growth expectations - Management noted a strong pipeline with expectations for revenue growth, but cautioned against expecting the same growth rate as the previous quarter [24][72] Question: Loan growth expectations and deposit growth consistency - Management expects loan growth to be in the range of 5% to 10% for the year, with deposit growth anticipated to keep pace with loan growth [58][126] Question: Tax rate expectations - The effective tax rate for the quarter was 7.5%, with expectations to rise to 10% to 12% in the future as income grows [129] Question: SBA performance and risk management - Management emphasized strong credit underwriting standards in the SBA segment, maintaining a low risk profile compared to industry standards [48][116]