First Internet Bancorp Q1 FY2021 Earnings Call

Good day, everyone, and welcome to the First Internet Bancorp Earnings Conference Call for the First Quarter of 2021. Please note that today's event is being recorded. I would now like to turn the conference over to Larry Clark from Financial Profiles, Inc. Please go ahead, Mr. Clark.

Thank you, Cary. Good day, everyone, and thank you for joining us to discuss First Internet Bancorp's financial results for the first quarter of 2021. The company issued its earnings press release yesterday afternoon, and it's available on the company's website at www.firstinternetbancorp.com. In addition, the company has included a slide presentation that you can refer to during the call. You can also access these slides on the website. Joining us today from the management team are Chairman, President and CEO, David Becker; and Executive Vice President and CFO, Ken Lovik. David will provide a company update, and Ken will discuss the financial results. Then we'll open the call up to your questions. Before we begin, I'd like to remind you that this conference call contains forward-looking statements regarding the future performance and financial condition of First Internet Bancorp that involve risks and uncertainties. Various factors could cause actual results to be materially different from any future results expressed or implied by such forward-looking statements. These factors are discussed in the company's SEC filings, which are available on the company's website. The company disclaims any obligation to update any forward-looking statements made during the call. Additionally, management may refer to non-GAAP measures, which are intended to supplement but not substitute the most directly comparable GAAP measures. The press release available on the website contains the financial and other quantitative information to be discussed today as well as a reconciliation of the GAAP to non-GAAP measures. At this time, I'd like to turn the call over to David.

Thank you, Larry, and good afternoon, everyone. Thanks for joining us today. We are very pleased with the first quarter financial performance. We produced strong earnings and solid momentum to start 2021. Driven by net interest margin expansion, continued healthy production in our direct-to-consumer mortgage business, and strong credit performance. Growth in net interest income, combined with our strategies to build sustainable fee revenue, paid off as we generated an average return on assets of 1.02% for the second straight quarter and strengthened our capital base, increasing our tangible common equity to tangible assets ratio by 43 basis points to just over 8%. We delivered these solid results while the pandemic continued to impact certain sectors of the economy. Families and businesses are gradually returning to their routines, and in many cases, to a new normal way of life. Our unique workplace culture promotes innovation, collaboration, and customer focus, collectively guiding us forward. Our technology-enabled workforce was uniquely positioned to adapt to the changes of the past year while maintaining operations at the highest level, serving our customers, and supporting one another. Despite the historically low interest rate environment, we generated a significantly improved net interest margin. This was a key highlight of the quarter. We did this through a combination of higher-than-average loan yields and low average deposit costs. The higher yields were due in part to our ongoing pricing discipline; the benefits of having diversified loan origination channels allow us not to chase rates down while we are at the bottom of the interest rate cycle. We continue to look for growth opportunities to capitalize on; however, any new opportunities we explore must provide a strong risk-adjusted return that enhances profitability and earnings. As you know, we have been proactively managing our deposit costs lower as we allow higher cost CDs and broker deposit balances to decline. We are placing them with much more attractively priced money market accounts and lower rate CDs. Revenue for the first quarter totaled $28.9 million, up 36% from the first quarter of 2020, as we continue to benefit from a more diversified revenue stream, an important strategic goal for us. Our SBA team is a big part of this. The team is fully engaged, and we are well on our way to building a leading national platform. Not only are we assisting clients with the new PPP loans as part of the most recent phase of that program, but we also continue to meet the demand for traditional SBA 7(a) loans. These loans are the bread and butter of our SBA program. While 7(a) volumes were lighter in January and February, we maintained our competitive position as the overall SBA market was slower to start the year. However, SBA 7(a) activity began to pick up in March, and the pipeline is building daily. Despite the lighter volume in the quarter, we are still targeting SBA originations in the range of $200 million-plus for 2021, and they are expected to produce a gain on sale revenue between $14 million to $15 million for the full year. We have the infrastructure in place to continue to ramp up this important part of our business and look forward to a strong year, providing financing for the entrepreneurs and small businesses that drive job creation across the country. Our direct-to-consumer mortgage business continued to produce solid results as well. We are capitalizing on the ongoing demand fueled by low interest rates and a strong nationwide housing market. We are winning new business with our unwavering commitment to exceptional service and the enhanced customer experience that our technology-driven online mortgage application process provides. Our credit quality remains among the best in the industry. We have a strong credit culture, a disciplined approach to underwriting, and a focus on specialty lending lines that target lower risk asset classes. Unlike many banks that have reported so far, we continue to build the allowance for loan losses during the quarter, even as net charge-offs remain low. We expect to maintain and perhaps even continue to build our allowance coverage ratio and do not foresee releasing any reserves in the near term. We did experience an uptick in nonperforming loans during the quarter due primarily to one C&I relationship. We recorded a specific reserve of $600,000 against this relationship and believe we are well collateralized on the remaining exposure. Even with the increase in nonperforming loans, our nonperforming loan level to total loans and nonperforming assets to total assets remain relatively low at 0.46% and 0.34%, respectively. Additionally, remaining loans on deferral programs are relatively low at this point, representing just 20 basis points of total loans at the end of the quarter. As we look forward to the remainder of 2021 and beyond, we will continue to focus on some key areas of value creation. One, continue to scale our SBA business to take advantage of the operational infrastructure we put in place; two, look for new, innovative, technology-driven partners to enhance our existing lines of business or to capitalize on opportunities to further diversify revenue in a capital-efficient manner; three, continue to improve the efficiency of our business while enhancing the customer experience for both existing and prospective clients. We have been successful in doing this in the past through collaborative partnerships with fintech companies that have helped us in our direct-to-consumer mortgage business as well as in our consumer and small business deposit gathering and account opening efforts. Four, I would like to take a moment to recognize that today, April 22, is the 51st anniversary of Earth Day. At First Internet Bank, we are working to develop an ESG strategy that incorporates our existing commitment to the environment and the communities and stakeholders we serve, as well as advance the diversity, equity, and inclusion initiatives within the organization. Supporting our community is a high priority at First Internet. And during the first quarter, we made a $250,000 contribution to a local foundation that supports not-for-profits and community-based initiatives in the marketplace. In summary, we are pleased with the first quarter performance, which was driven by the consistently excellent work over the entire First Internet team, and we're excited about the year ahead of us. We are in great financial shape and well positioned to serve our customers as the country emerges from the pandemic and businesses work to fully reopen. As always, I want to thank all of our employees for their efforts and once again delivering on our goal. A high level of commitment throughout the organization remains the key to our ongoing success. We are confident in the strength of our franchise and the potential for ongoing growth in the year ahead. With that, I'd like to turn the call over to Ken to discuss our financial results for the quarter.

Thanks, David. As David mentioned, we were very happy with our performance for the first quarter, delivering near-record revenue, net income, and earnings per share. We generated these strong results with a relatively stable balance sheet during the quarter, which is consistent with our focus on improving profitability through net interest margin expansion, diversified fee income, and deploying capital in an efficient manner. Our financial results for the quarter continue to reflect solid execution of this plan. Now let's turn to the details of our results for the first quarter. We reported diluted earnings per share of $1.05, down 6% from our record fourth quarter results, but up 69% from the first quarter of 2020. Profitability was strong, with fully tax equivalent net interest margin increasing 27 basis points sequentially to 2.18%, a return on average assets of 1.02% for the second quarter in a row, and a return on average tangible common equity of 12.61%. We have been able to successfully navigate the low-rate environment and challenges created by the pandemic to deliver outstanding results, including a significantly improved net interest margin through lower deposit pricing and stabilized asset yield, strong revenue growth, and excellent credit quality. Looking at Slide 4. We saw these trends continue in the first quarter and when all results are reported, we believe our performance relative to similarly sized institutions will once again compare favorably. Looking at Slide 6. Total portfolio loans at the end of the first quarter were $3.1 billion, relatively consistent with December 31, 2020, and an increase of $167 million or 5.8% compared to March 31, 2020. During the quarter, commercial loans increased slightly, due primarily to production in public finance, construction, and small business lending. This growth was partially offset by lower single-tenant lease financing and healthcare finance balances due mostly to elevated prepayment activity. Consumer loans decreased slightly compared to the fourth quarter, due primarily to increased prepayment activity across the RV and trailer portfolios. Moving on to deposits on Slide 7. While overall deposit balances were down 2% from the end of the fourth quarter, we again saw improvement in the composition of the deposit base. During the quarter, CDs and broker deposits decreased $110 million or 6.9% on a combined basis, while total non-time deposits increased $56 million or 3.4% on a combined basis. CDs and broker deposit balances declined as higher cost CD maturities were either funded with on-balance sheet liquidity or replaced with much more attractively priced money market accounts and lower-rate CDs. This lowered our cost of interest-bearing deposits by 17 basis points in the quarter, and we see further opportunity to reduce deposit costs over the remainder of 2021. Compared to the first quarter of 2020, deposit costs were down $8.6 million, essentially cut in half. And we continue to expect interest expense savings of approximately $25 million for 2021 based on the current deposit pricing environment. Turning to net interest income and net interest margin on Slides 8 and 9. Net interest income and net interest margin, on both a GAAP and a fully taxable equivalent basis, once again showed strong improvement compared to last quarter. And net interest income was up in excess of 30% compared to the first quarter of 2020. As you can see from the net interest margin bridge on Slide 9, deposits and loans continued to have a positive impact on margin during the quarter. While the average balance of interest-earning assets was down 3.4% from the fourth quarter, interest income from earning assets was down only 1.1%, due mostly to a 14 basis point increase in the yield on those assets. The yield on interest-earning assets for the first quarter of 2021 increased to 3.31% from 3.17% in the prior quarter due primarily to changes in the composition of interest-earning assets, supplemented by prepayment fees. Average loan balances were down $25 million or just under 1% from the fourth quarter, due mainly to lower average balances in single-tenant lease financing, public finance, and small business lending, but partially offset by an increase in the average balances of construction lending and healthcare finance. As we've mentioned before, we continue to expect our yield on interest-earning assets to remain relatively stable during 2021 as we deploy liquidity to fund new loan originations. Overall, we are very pleased to have delivered a 27 basis point improvement in our full tax equivalent net interest margin during the quarter and expect the upward trend to continue throughout 2021, though likely at a slower pace. Turning to noninterest income on Slide 10. Noninterest income for the quarter was $8.4 million, down from the record $12.7 million in the fourth quarter. The decrease was primarily driven by lower revenues from mortgage banking activities and a decrease in gain on sale of loans. Mortgage banking revenue totaled $5.8 million for the first quarter, down $2.2 million from the prior quarter due primarily to a decrease in interest rate lock volume and a decrease in margins as competition in the market increased. Gain on sale of loans totaled $1.7 million for the quarter, decreasing $2 million compared to the prior quarter due to a lower amount of U.S. Small Business Administration 7(a) guaranteed loan sales in the quarter. David covered the market factors impacting SBA revenue for the quarter, but reaffirmed that our outlook remains optimistic in this important and growing line of business. With respect to noninterest expenses, shown on Slide 11, the increase on a linked-quarter basis was driven primarily by an increase in salaries and employee benefits, marketing, advertising and promotion expense, and consulting and professional fees. The increase in salaries and employee benefits was due mainly to higher medical claims experience, share-based compensation, and seasonal resets of employee benefits and payroll taxes. The increase in marketing expenses was due to higher mortgage lead generation costs and increased digital marketing initiatives. The increase in consulting and professional fees included seasonally higher legal expenses related to year-end reporting and the preparation of materials for our annual meeting of shareholders. Additionally, David also mentioned the $250,000 contribution we made to a local community-based foundation that was recognized in the first quarter's expenses. Now let's turn to asset quality on Slide 12. The allowance for loan losses increased $1.2 million from the fourth quarter to $30.6 million, resulting in the allowance to total loans increasing to 1% or 1.02%, excluding PPP loans, up 4 basis points from the linked quarter. While the balance of total loans was relatively flat compared to the prior quarter, we continue to make additional adjustments to qualitative factors in our allowance model and recorded specific reserves on 2 commercial relationships totaling $1.1 million in the aggregate. These increases to the allowance were partially offset by loan portfolio composition changes that included declines in certain portfolios with higher coverage ratios and growth in portfolios with lower coverage ratios. As a result of the continued reserve build, we recognized a loan loss provision of $1.3 million for the first quarter. As David mentioned earlier, overall credit quality remained strong during the quarter as nonperforming loans to total loans was 0.46% at quarter end, and net charge-offs remained low at $100,000, resulting in net charge-offs to average loans of 2 basis points. As shown on Slide 13, our overall capital levels improved and remained healthy at both the company and bank levels. With the solid earnings performance for the quarter, our tangible common equity to tangible assets ratio increased 43 basis points to 8.12% from 7.69% in the fourth quarter and is well on track to exceed our forecast from earlier in the year. Additionally, we continued our trend of consistently growing tangible book value per share, which increased to $34.60, up from $33.29 in the fourth quarter and up nearly 13% from one year ago. To summarize some of the key points mentioned on this call, we remain confident that we are well-positioned for the current low interest rate environment and continue to expect approximately $25 million of annual deposit interest expense savings compared to 2020. When combining this interest expense savings and our expectation that earning asset yield should remain relatively stable, this should drive consistent growth in net interest income and further expansion in net interest margin. In terms of noninterest income, although our SBA 7(a) originations and sales came in lighter than expected for the first quarter, we remain confident in our previous guidance of $14 million to $15 million of SBA gain on sale revenue for 2021. Additionally, we're optimistic that mortgage banking revenue will remain solid and above historical levels but likely down from the record revenue recognized during 2020 as refinance activity is beginning to slow and housing inventory remains tight. Consistent with our view about credit last quarter, we continue to be vigilant in our monitoring and underwriting procedures and do not see elevated credit losses on the horizon at this time. As a result, we remain confident in our ability to generate a quarterly return on average in the range of 1% throughout 2021. And finally, we are forecasting increased capital levels with tangible common equity to tangible assets in the range of 8.6% to 8.9% by the end of 2021. With that, I will turn it back to the operator so we can take your questions.

The first question will be from John Rodis with Janney.

You altered the language regarding the mortgage business from strong in the near term to solid. My question is, do you think the first quarter will be the highest quarter for the year, considering that mortgage activity is down year-over-year, or do you anticipate that the second quarter might be seasonally stronger?

I believe it will follow its usual seasonal trends. The second and third quarters should be strong, while in the fourth quarter, we may return to the typical seasonal pattern where activity declines between Thanksgiving and Christmas. The main concern at the moment is the availability of housing. Recently, an article highlighted that there are more real estate agents in the U.S. than homes for sale, which is quite astonishing. One of our finance team members has been searching for a house for three months and ended up having to find one that wasn't officially on the market yet through a realtor. This issue is significant in today's market. As Ken and I mentioned, refinancing is down while new home activity is increasing. In our local area of Central Indiana, new housing permits have risen by 33% compared to this time last year, highlighting the supply-demand dynamic affecting the market.

Okay. Makes sense. And then, Ken, one other question on the tax rate, it dipped back down to about 15% this quarter. How should we think about that going forward?

Yes. There were a couple of factors there. First of all, it's just that pretax income was down quarter-over-quarter and probably one of the factors that drove it up at the end of last year was obviously the strong mortgage revenue and the strong SBA revenue, which carry a fully baked tax rate on that. Those numbers were down a bit. And we've made some adjustments to our state tax accrual as well, the rate for interstate taxes. So I think probably a good number with SBA coming back and mortgage remaining solid is probably somewhere in that 15% to 17% range.

15% to 17%. Okay.

The next question is from Michael Perito of KBW.

I wanted to start by asking you, Ken, if you could provide more insight into the exit NIM at the end of the first quarter in March. I appreciate your comments on margin and ROA, and while we can derive some figures on our own, having a clearer sense of that exit NIM would help us understand the direction we might be headed in the near term.

In March, we had a really strong performance, but I should note that there was a fairly high amount of prepayment fees included, which may have made the numbers seem higher than our typical run rate. By the fourth quarter, we feel optimistic that our net interest margin will be around 2.40%. Additionally, we anticipate a quarterly increase of 5 to 10 basis points for the rest of the year.

Got it. So certainly, that makes the target of staying above 100 on the ROA, a lot easier to achieve...

Yeah, absolutely. Obviously, improving NIM combined again with just the enhanced fee revenue, it creates a very easy pathway for us to maintain that 1% ROA.

I understand. I have a couple of broader questions. We've been inquiring about your capital-building plans for the past two to three years, and I'm pleased to ask this differently now. As you approach 9% on the tangible common equity, what do you see as the tipping point where the capital strategy might shift? Could that involve being open to a bit of balance sheet growth or considering actions like repurchases? How do you view the evolution of your capital situation? It's clear that you're making significant strides in building, and I'm interested in your thoughts on this matter. At what point might we expect you to change your approach from the capital preservation mindset you've maintained for the last couple of years?

Everybody is focused on me here, Michael. I want to emphasize that we are evaluating opportunities daily. When the right chances arise, we certainly take advantage of them. During the past few calls, there have been inquiries about share repurchases; that's not currently on our agenda. Our strategy is to effectively utilize excess capital. We have a few opportunities in progress that can significantly achieve this before the end of the year. We aim to maintain our position, intending to stay above the 7% range. We're becoming more comfortable trying to hold it around 8%, but we definitely have the potential to reach 9% to 10%, and we will put that capital to work.

When you mention opportunities, does that involve hiring people, which would contribute to more balance sheet growth? Is that perhaps...

Balance sheet growth. Balance sheet growth. We're pretty well set internally. We still have some things to do with the SBA team, but the rest of the organization, we staffed up in the latter half of 2020. So we're pretty solid across the board with a couple more additions in the SBA team.

Understood. The first quarter seemed to be one of the better periods for valuation that you have experienced recently. As we aim to maintain this positive momentum, it appears that digital disruption in the banking industry remains significant. I'm sure your team is considering strategies to keep your customers engaged, particularly those who use your mobile app for consumer deposits. Are there any plans or resources allocated to enhance the product offerings in mobile banking? With other digital disruption business models introducing features like robo-advisers or savings tools, could you share any insights on how you are approaching the product strategy for consumer deposit banking at this time?

Yes, we are actively considering all of those aspects. We are working on some internal projects and regularly engaging with external partners. Our CTO would tell you that he has more projects than he can manage in the next year, but it keeps him busy and productive. We are focusing on both the consumer market and small businesses. We believe there are many opportunities to enhance our small business product to make it even more appealing. Therefore, we are investing significant time and resources into both areas.

Next question is from Nathan Race with Piper Sandler.

Going back to the kind of outlook for the balance sheet growth over the near term, I understand that's kind of the main avenue you guys are looking to deploy excess capital to some extent over the next few quarters. So just kind of thinking about the margin outlook expanding further from here, how should we kind of think about just the overall earning asset base side? And should we just expect the average balances of excess liquidity to continue to come down over the next few quarters and just see that mix improvement to also support the margin or how should we kind of just be thinking about loan growth and the size of the securities portfolio going forward?

Well, I think probably from an overall perspective, you probably see mid-single-digit type balance sheet growth. But again, if you look at the balance sheet, you'll see that we have quite a bit of cash on hand. I know a lot of other banks are experiencing the same issue as us. But really, I think we can grow the loan portfolio without necessarily growing the balance sheet at a higher than average rate. It's just putting cash to work, whether it's cash on hand or the securities portfolio continues to spit off a fair amount of cash. So I think we'll continue to see earning asset growth. I would say the one wildcard on that is just the level of prepayment activity. Sometimes that's a little bit hard to project. But as longer rates start to go up a bit, we may see that kind of pull back a little bit. But I think it's a matter of the loan portfolio continuing to increase and maybe the composition in there changing a little bit; maybe you'll see more a little bit higher rate of growth in the construction portfolio, which has been an area of emphasis for us. We have quite a bit of unfunded commitments in there. And obviously, we expect small business to start picking back up here over the remainder of the year. But really, it's going to be putting liquidity to use in kind of a little bit of a shift in the mix and composition of the loan book.

One of the things we've discussed is that there is a lot of liquidity in the marketplace, and many banks are feeling pressured. Some banks are making unwise decisions, such as financing long-term deals at short-term rates. We're not going to compromise our pricing just to maintain volume. Instead, we're finding opportunities in different markets and have remained consistent with our pricing, which has allowed us to maintain a healthy net interest margin with lower funding costs and solid interest income from loans. We plan to continue on this path. As the year progresses and the effects of COVID decrease, we expect to see more market activity, leading everyone to return to more reasonable pricing and covenant structures for loans. As mentioned, we may not see significant growth in the first half of the year due to reasons such as cash on the balance sheet, but we anticipate strong growth in the second half.

Yes. On the other side of the balance sheet, while discussing earning asset growth in loans, it's important to remember that excess liquidity can also be utilized by funding CDs that don't mature. Not renewing some of those CDs and allowing some of the historically seasoned higher-rate institutional and public fund CDs to roll off without renewal can also improve margins through continued lower deposit costs.

Yes, absolutely. Makes sense. I appreciate all that color, guys. Maybe changing gears and just thinking about the expense growth for this year. I think in the past, you've kind of talked about mid- to high-single digits. I guess, just as we kind of think about and extrapolate the 1Q run rate, is that still kind of a good target to think about with some of the work that's left on the SBA front that you guys want to accomplish over the next quarter or two?

Yes, that's likely a good run rate. It might increase slightly. In the first quarter, we incur some seasonal costs that will probably be offset by adding more staff in SBA. Additionally, we're continuing to grow in other areas of the bank. So, there might be some offset there. Overall, the first quarter showed some minor growth in various areas, and I believe that it's a reasonable run rate to consider, with the possibility of slight growth throughout the year.

The next question is from George Sutton of Craig-Hallum.

I wanted to focus a little more on the SBA side. You defined your goal here to become a leading national platform. That's not something I've heard you specifically say in the past. So I wondered if you could give a little bit more of a vision there. And then you also mentioned on the demand side, things started slow in the quarter. I believe they picked up a bit by the end of the quarter, and you're still very encouraged by what you're seeing. I wondered if you could just give us a little bit better sense of what you're seeing to give you that confidence.

Sure, George. The SBA's fiscal year ended on September 30 last year. We were ranked 40th in the country for 7(a) loan originations. As of today or yesterday, we are around 41st, maintaining our position. Our growth in the SBA space has slowed due to the emergence of PPP3 and the associated chaos at the beginning of the year, which created confusion regarding forms and processes. Many individuals held back deals, expecting an additional six months of prepayment, delaying their closings until March when payment amounts reduced. There was a lot of uncertainty in the program, but we saw a solid increase in March and currently have strong pipelines and new activity. The fourth quarter tends to see an influx due to the fiscal year-end of September 30, which boosts numbers typical of year-end closings. All of that activity was sold in the secondary market during the fourth quarter. We aim to become one of the top 10 producers of 7(a) loans in the country, which would require us to triple the volume from last year. We still believe we can reach the $200 million mark, ideally growing towards $350 million or $400 million over time. We want to be a significant player in both the SBA and the small business sector overall, which has provided tremendous opportunities for growth in savings and checking accounts at low-cost funds. We plan to enhance our platform to offer a more comprehensive product. We received recognition from Newsweek at the end of the year as having the Best Small Business Checking Account in America and are developing credit card options. In the last six months of 2020 and the first three months of this year, we saw more new companies formed than in the previous two decades, indicating a revival in small businesses. Many individuals may not return to their offices as they've started new ventures. We've learned a great deal in the second half of the year about how to better serve the small business market. We previously mentioned that we were among the banks that gained from the pandemic, as millions of small businesses and consumers who had never used online banking were forced to adapt when branches closed. They discovered they could operate without a physical branch and found superior products and opportunities. This presents a significant chance for us to integrate this into a core aspect of our organization.

One other thing for me. You mentioned putting the excess capital to work 2 or 3 opportunities to do that by year-end. I know you don't want to go into any specific details, but I'm just curious, are we talking about vertical additions? Or are we talking about these would be within your current specific areas of focus? Just curious from that perspective.

A little bit of both, some new channels in areas that we're already in and a couple of verticals that we're not in.

The next question is from Brett Rabatin of Hovde Group.

I wanted just to follow-up on the SBA. We had talked about the SBA rule changes that are temporary and have been hearing that some players were indicating that the rule change was really driving increased demand. I'm curious if that's changed at all for you guys and if you anticipate that being a part of the opportunity here in the next few months, in particular?

It's certainly a significant part of the opportunity. Within the SBA organization, they processed more PPP loans in a short span of 45 to 60 days than they had in the last 15 years combined. I believe the SBA has adopted a different approach, incorporating new technologies that simplify operations. We've also implemented some technologies to improve efficiency. One major issue for small business owners dealing with the SBA is the time it takes from loan request to approval. We are enhancing automation and tools to expedite underwriting and processing within the SBA system. I expect there will be strong demand for SBA products, especially as businesses begin to recover from the pandemic. The restaurant sector is receiving various grants and aid from federal and state sources to support their resurgence. As the year progresses and businesses reopen, I anticipate a robust demand.

Okay. That's helpful. And then the other thing I'm just curious about was we look at the fintech space, in particular, and the valuations are a lot different than where you guys are. And I'm sure that puts somewhat of a chip on your shoulder. I'm curious as your capital builds, is there any conceptual thought to maybe pairing up with a fintech partner, adding one on to the platform, any kind of partnerships that you might do that would be fintech-oriented that would maybe improve the valuation?

Yes, we are constantly exploring opportunities in the fintech sector, where the current companies have high valuations. The only time I feel positive about our stock price is when our employee purchase plan buys shares at the end of the month. It’s challenging to reflect on our achievements and understand why we’re not receiving similar valuations. We regularly evaluate these companies and have considered various opportunities to provide banking as a service. However, the reality is that dealing with a large number of accounts with minimal balances doesn't yield substantial returns and often leads to significant overhead and challenges. Therefore, we are carefully assessing opportunities on a weekly basis, and we’ll definitely identify one or more as they arise. Additionally, as Ken mentioned earlier, we are collaborating with numerous fintechs to enhance our internal services and programs. We recently invested in a bank-backed venture capital fund aimed at supporting fintech start-ups across the country with initial seed funding. This gives us a prime opportunity to not only invest but also to gain early access to their software, products, and services to see how they can benefit our banks. We remain focused on this area consistently.

Okay, I'm curious about the 1% ROA target. Given the path that you're on, is there a reason you're not updating that or providing a longer-term goal? It seems like you'll easily be above that level for the foreseeable future.

Yes. Our long-term goal is to achieve an ROA above 1%, targeting around 1.10% or 1.15%. It's difficult to predict the long-term without knowing future tax rates, but we are confident in our capability to exceed 1% ROA as we continue to expand our SBA. As David mentioned, we aspire to become a nationwide platform in SBA, and considering the potential revenue increase from scaling originations from $50 million to $100 million to $200 million and beyond, the boost in revenue and profitability clearly outlines a pathway to maintaining an ROA above 1%. This is our goal, and we believe it's attainable.

We are still making significant investments to reach that level. The investments we are making today should start to show some positive results towards the end of this year and definitely in the first half of next year.

And this concludes our question-and-answer session. I would now like to turn the conference back over to David Becker for any closing remarks.

Guys, we appreciate all of you joining us today. We hope you have a nice day. Some parts of the country have jumped back into winter instead of springtime and summer here, but stay safe and enjoy it. And we'll continue to push the success forward here in 2021. Thank you very much for your time.

Thank you. The conference has now concluded. Thank you all for attending today's presentation. You may now disconnect your lines. Have a great day.