First Internet Bancorp (FIB), parent of First Internet Bank, recently announced that it will exit its consumer mortgage business during the first quarter of 2023.
The bank made the announcement when it released its fourth-quarter and year-end earnings for 2022 on Jan. 25.
“While other lending lines have strong demand, the combination of housing prices, housing supply, economic uncertainty, and interest rates have caused mortgage applications nationally to plunge to their lowest level in 26 years,” the bank said in its earnings report. “Due to the steep decline in mortgage volumes and the negative outlook for mortgage lending over the next several years, the company decided to exit its consumer mortgage business during the first quarter of 2023.”
The statement continued, “This includes its nationwide digital direct-to-consumer mortgage platform that originates residential loans for sale in the secondary market, as well as its local traditional consumer mortgage and construction-to-permanent business.”
FIB said its commercial construction and land development business will not be affected by the decision and will remain an important part of its lending strategy.
The bank said closing the business is expected to reduce total annual noninterest expenses by about $6.8 million, while increasing annualized pre-tax income by about $2.7 million, with 80% of the benefit realized in 2023 and 100% thereafter.
FIB estimated that it would incur total pre-tax expenses associated with exiting this line of business of about $3.3 million in the first and second quarters of 2023.
The company did not specify how many employees would be affected by the decision to exit the consumer mortgage business. A company spokesperson did not immediately reply to a request for comment.
The company reported net income in the fourth-quarter of last year of $6.35 million or 68 cents per diluted share, down about 25% from $8.44 million or 89 cents per diluted share in the third quarter. The results were also down 82% from $35.54 million in the fourth quarter a year earlier.
The bank reported that its residential mortgage loan balance as of Dec. 31 was $383.9 million, up 13.7% from the previous quarter and more than 51% higher at the end of 2021. It reported a home-equity loan balance of $24.7 million in the quarter, up 11.7% from the third quarter and up 40% a year earlier.
FIB Chairman & CEO David Becker said the decision to exit the consumer mortgage business was “difficult but ultimately necessary, given [that] every economic outlook we have reviewed points to prolonged sluggishness across mortgage banking.”
He said the decision “over a longer horizon [will] remove an element of volatility from our earnings,” making the bank “a stronger, more efficient company.”
