First Internet Bank to Exit Consumer Loan Business – Inside Indiana Business

Fishers-based First Internet Bank says it is exiting the consumer mortgage business due to a weak housing market. The bank announced the news as part of its fourth-quarter and year-end 2022 financial reports released Wednesday afternoon.

First Internet said in a report, “With a sharp decline in mortgage transaction volume and a bleak outlook for mortgages over the next few years, the company will exit the consumer mortgage business during the first quarter of 2023. decided,” he said.

Mortgage exits include First Internet’s nationwide digital D2C mortgage platform that produces mortgages for sale in the secondary market. This includes local traditional consumer mortgage lending and construction to permanent lending. Does not include First Internet’s commercial construction and land development business.

Mortgage originations for one- to four-family homes totaled $2.25 billion last year, down from $4.44 billion in 2021, according to the Mortgage Bankers Association. The association projects $1.89 billion in mortgage originations this year, $2.28 billion in 2024 and $2.47 billion in 2025. .

First Internet said it has a strong pipeline of other types of loans and plans to focus its lending efforts on variable rate loan products such as commercial construction and small business loans this year. High-yield, fixed-rate activities such as franchise loans.

Most of First Internet’s lending activity is focused on the commercial sector. As of December 31, the bank’s total loan portfolio was $3.5 billion, of which 77.7% was commercial loans. Another 11%, or $383.9 million, was mortgages.

First Internet said it expects the exit from mortgages will reduce the company’s annual non-interest expenses by about $6.8 million and increase annualized pre-tax earnings by about $2.7 million. The company also said it expects to incur pre-tax charges of approximately $3.3 million in the first and second quarters of this year related to mortgage exits.

If we turn to First Internet’s financial reporting, it looks like this:

The bank reported full-year earnings of $35.5 million, or $3.70 per share, for 2022, compared to $48.1 million, or $4.82 per share, in 2021.

Fourth-quarter earnings of $6.4 million, or 68 cents per diluted share, were slightly below analyst expectations of 70 cents per share. At the same time a year ago, the bank reported him earning $12.5 million, or $1.25 per share.

First Internet shares traded at $25.46 on Thursday morning, up 54 cents from Wednesday’s close.