First Internet Bancorp (NASDAQ:INBK) Q4 2020 Earnings Conference Call January 21, 2021 12:00 PM ET

Company Participants

Larry Clark - Senior Vice President of Financial Profiles, Inc.
David Becker - Chairman, President and Chief Executive Officer
Kenneth Lovik - Executive Vice President and Chief Financial Officer

Conference Call Participants

Brett Rabatin - Hovde Group, LLC
Nathan Race - Piper Sandler & Co.
George Sutton - Craig-Hallum Capital Group LLC
Michael Schiavone - Keefe, Bruyette, & Woods, Inc.

Operator

Good day, everyone, and welcome to the First Internet Bancorp Earnings Conference Call for the Fourth Quarter and Full-Year 2020. All participants will be in a listen-only mode. [Operator Instructions] Please note, this event is being recorded.

I'd now like to turn the conference over to Larry Clark from Financial Profiles, Inc. Please go ahead, Mr. Clark.

Larry Clark

Thank you, operator. Good day, everyone, and thank you for joining us to discuss First Internet Bancorp's financial results for the fourth quarter and full-year 2020. The Company issued its earnings press release yesterday afternoon, and it is 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 up the call to your questions.

Before we begin, I'd like to remind you that this conference call contains forward-looking statements with respect to 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 the reconciliation of the GAAP to non-GAAP measures.

At this time, I'd like to turn the call over to David.

David Becker

Thank you, Larry, and good afternoon, and thank you, everyone for joining us today. We are very pleased with the fourth quarter and full-year results. The pandemic created some substantial challenges during the year, as you all know, but we adapted to the conditions, helped our customers navigate the impact of the pandemic and continue to identify and capitalized on growth opportunities.

We delivered record net income and record earnings per share in both the fourth quarter and for the calendar year, driven by very strong revenue growth, higher net interest income, robust mortgage banking revenue and increased SBA loan sales. Our significant earnings growth throughout a historically low interest rate environment and uneven economy demonstrated the power of our business model and our increasingly diverse revenue streams.

Over the course of the year, we drove down our interest cost through favorable deposit repricing opportunities that lifted profitability as our fourth quarter fully taxable equivalent net interest margin expanded 24 basis points from a year earlier. Additionally, we maintained strong credit quality even as we took extraordinary steps in the form of loan deferrals to help our clients weather the public health crisis.

Nearly all of our borrowers who needed payment relief resumed payments well before the year ended. As of January 15th, we had only $8.3 million of loan balances remaining on deferrals are well under 1% of the total portfolio, down from a peak of almost $647 million in late May, which was about 22% of the portfolio.

We deepened ties with our clients through this experience and remain optimistic in our customers’ collective ability to fully bounce back and succeed in the year ahead. Our credit metrics remain among the best in the industry because of our strong credit culture and disciplined approach to underwriting. We also focused on certain specialty lending lines that target lower-risk asset classes, such as our public finance, single-tenant lease financing and healthcare finance business.

During the quarter and for the full-year, non-performing loans and net charge-offs remained low. We also continued to build reserves conservatively positioning the bank to begin 2021. Finally, we delivered on a key strategic priority by strengthening earnings generated capital throughout the course of the year. Our team delivered annual net income of $29.5 million and fourth quarter net income of a $11.1 million. Each company records as we boosted profitability throughout 2020.

Revenue in the first quarter of 2020 increased 52% from a year earlier to $31.5 million, driven by continued strength in our direct-to-consumer mortgage business. Our bankers met the surge in demand brought on by low interest rates, winning business with a demonstrated commitment to excellent customer service.

Our mortgage pipeline is strong heading into 2021, and we expect this business line to remain an important component of our profitability as interest rates remain low and both the purchase and refinance markets continue to experience high demand all across the country.

Our small business lending area was another vital contributor to our growth. We built more momentum during the fourth quarter as the accelerated build-out of our national platform in 2020 resulted in increased loan production and higher gain-on-sale revenue. There is tremendous potential in this business unit with attractive opportunities on both sides of our balance sheet.

We brought on talent and expertise in 2020 that will help drive further growth and originations in 2021. We are forecasting originations of around $225 million this year. The majority of which are SBA 7(a) loans that are expected to produce gain-on-sale revenue of between $14 million to $15 million for the full-year.

SBA lending is an important element of our long-term strategy and we are proud to play a leading role in providing financing for the entrepreneurs and small businesses that drive job creation across our country. As I noted, our asset quality remains strong and we are cautiously optimistic about 2021.

To be sure, the pandemic continues to present substantial difficulties for many Americans, we are monitoring our loan portfolio closely and working with our clients to help them bridge from this challenging environment to what we anticipate will be a strong economic rebound once we as a country achieved widespread virus inoculations.

As we look ahead, we are confident in the strength of our franchise and our growth potential. Despite the pandemic, our digital business model enables us to serve our customers without interruption and allows our team to focus on our core lines of business and earnings growth.

As always, I would like to thank the entire First Internet Bank team for their hard work and dedication to excellent customer service. Their collected effort and teamwork are ultimately the reasons for our record performance in 2020 and our optimistic outlook for the year ahead.

Our employees are at the heart of our strong workplace culture. They are the reason First Internet was recognized for the 7th consecutive year on The Indianapolis Star's Top Workplaces in Central Indiana list.

With that, I'd like to turn the call over to Ken to discuss our financial results for the quarter.

Kenneth Lovik

Thanks, David. As David mentioned, we were very happy with our performance for the fourth quarter and full-year, delivering record revenue, net income and earnings per share. We generated these strong results with very modest balance sheet growth during the quarter and the year, which is consistent with our disciplined balance sheet management strategy. Our business model emphasizes capital efficiency and increasingly diverse revenue streams that drive increased profitability and our financial results reflect solid execution of this plan.

Now let's turn to details of our results for the fourth quarter. We recorded record diluted earnings per share of $1.12, an increase of 30% from our third quarter results and up 56% from the fourth quarter of 2019. Profitability improved significantly with fully taxable equivalent net interest margin increasing 24 basis points to 1.91%, our return on average assets of 1.02% and a return on average tangible common equity of 13.84%.

Over the last 12 months, we had to adapt to a swiftly changing operating environment related to the COVID-19 pandemic. With interest rates falling to record lows and uncertainty about the economy and credit quality, we were able to successfully navigate these challenges and deliver outstanding results, including a rapidly improving net interest margin through lower deposit pricing and stabilized asset yields, strong revenue growth and excellent credit quality.

Looking at Slide 4, we saw these trends begin to develop in the third quarter and once fourth quarter results are all reported, we believe our performance relative to similarly sized institutions will compare even more favorably.

Looking at Slide 6, total portfolio loans at the end of the fourth quarter were $3.1 billion, an increase of $46.3 million or 1.5% from the third quarter. Commercial loans increased to $73.1 million or 3% compared with the third quarter, due primarily to production in healthcare finance and construction lending. This growth was partially offset by lower single-tenant lease financing and public finance balances, due mostly to prepayment activity in the single-tenant portfolio and the sale of some public finance loans during the quarter.

Consumer loans decreased $25.3 million or 5% compared to the third quarter, due primarily to increased prepayment activity in the residential mortgage portfolio and seasonally lower production in the recreational vehicle and trailer portfolios.

Moving on to deposits on Slide 7, while overall deposit balances were down 3% from the end of the third quarter, we saw continued improvement in the composition of the deposit base. During the quarter, CDs and broker deposits decreased $130.5 million or 7.6% on a combined basis, while non-interest-bearing and interest-bearing deposits increased $44.3 million or 18.4% on a combined basis.

CDs and broker deposit balances declined as higher cost CD maturities were largely funded with on balance sheet liquidity or were replaced with much more attractively priced money market accounts and lower rates CDs. This activity lowered our cost of interest-bearing deposits to 22 basis points in the quarter and we still see opportunity to reduce deposit costs in 2021. Due to the combination of significantly lower money market pricing and the continued CD repricing opportunity, we are forecasting 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 fully taxable equivalent basis showed strong improvement compared to last quarter. As you can see from the net interest margin bridge on Slide 9, deposits and loans had the largest positive impact on margin during the quarter.

Although the average balance of interest earning assets was essentially flat from the third quarter, interest income from earning assets was up about 3%, driven mostly by more favorable mix of assets, reflecting the deployment of on balance sheet liquidity and the redeployment of cash from the securities portfolio to fund new commercial loan originations.

Average loan balances were up about $73 million or over 2% from the third quarter, due mainly to growth in healthcare finance and construction lending, as well as higher average balances and small business lending. In addition to the shift in loan mix, we also recognized the higher level of prepayment fees, both of which helped drive loan yields higher during the quarter.

In the near-term, we expect our yield on interest earning assets to remain relatively stable as we continue to deploy liquidity to fund new loan originations. We are pleased to have delivered a 24 basis point improvement in our fully taxable equivalent net interest margin during the quarter, and expect the upward trend to continue next quarter and throughout 2021.

Turning to non-interest income on Slide 10. Non-interest income for the quarter was $12.7 million, up slightly from the third quarter. The increase was driven primarily by increased gain-on-sale of loans, which was due mainly to a higher amount of SBA 7(a) guaranteed loan sales in the quarter, as well as the sale of public finance loans that I mentioned earlier.

Mortgage banking revenue was strong again during the quarter, but declined modestly from the record level we generated in the third quarter. With respect to small business lending activities, our increased origination activity translated into 100% growth in SBA gain-on-sale revenue from the third quarter. With the accelerated build-out of our small business lending platform, we expect that the fourth quarter’s level of fee revenue from SBA loan sales is a reasonable run rate for the near-term. And as David mentioned, we are targeting total revenue from this line of business to be in the range of $14 million to $15 million for the full-year of 2021.

Looking forward into 2021, while we expect mortgage revenue to remain strong in the near-term, we are not forecasting it to be at the record level achieved in 2020. That being said, we are not forecasting a drop in annual non-interest income as the decline in mortgage revenue should be offset by our expectations for increased gain-on-sale revenue from SBA lending activities.

With respect to non-interest expenses as shown on Slide 11, the decrease of $14.5 million was mainly the result of last quarter’s $2.1 million write-down of two legacy commercial OREO properties. Excluding that impact, non-interest expenses increased slightly on a linked-quarter basis, driven primarily by a $200,000 increase in loan expenses and a $200,000 increase in consulting and professional fees, but was partially offset by a $400,000 decrease in salaries and employee benefits.

The increase in loan expenses was due primarily to costs associated with the non-performing loan relationship and professional fees were up due to the timing of third-party loan reviews and some other smaller consulting fees. The lower salaries and employee benefits expense was due mainly to the timing of incentive compensation in the company’s small business lending division and lower incentive compensation in the mortgage banking division due to lower mortgage production quarter-over-quarter.

Now let’s turn to asset quality on Slide 12. The allowance for loan losses increased $2.6 million or almost 10% to $29.5 million, resulting in an increase in the allowance to total loans to 96 basis points or 98 basis points excluding Paycheck Protection Program loans, which are both up 7 basis points from the linked quarter.

As growth in the loan portfolio was modest during the quarter, the increase in the allowance for loan losses was driven primarily by changes in portfolio composition, as well as further modifications to qualitative factors in our allowance model to reflect the ongoing economic uncertainty related to the COVID-19 pandemic. In addition, we increased the specific reserve on an existing non-performing single-tenant lease financing relationship by $1.1 million.

As a result of the continued reserve build, we recognized the loan loss provision of $2.9 million for the fourth quarter, up 14% from the third quarter. Overall, credit quality remained stable during the quarter as non-performing loans to total loans of 33 basis points was comparable to 32 basis points at the end of the third quarter.

Net charge-offs of $300,000 were recognized during the quarter, resulting in net charge-offs to average loans of 4 basis points as compared to 1 basis point in the prior quarter. For the full-year 2020, net charge-offs to average loans was a relatively low 6 basis points.

While we continue to build our reserves out of an abundance of caution in this ongoing uncertain environment related to the pandemic, we also still feel very good about our asset quality and credit performance as evidenced by the modest amount of net charge-offs to-date.

With respect to liquidity and capital, as shown on Slide 13, our overall capital levels remain 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 to 7.69% from 7.24% in the third quarter. Additionally, tangible book value per share increased to $33.29, up from $31.98 in the third quarter.

In terms of our outlook for 2021, we believe we are extremely well positioned for the lower interest rate environment and there are a few things I want to reiterate and summarize for you. As mentioned earlier, we are forecasting approximately $25 million of interest expense savings for the year from deposit repricing. When you combine that with stabilized asset yields, which should improve slightly in future periods due to a better asset mix, we are expecting significant growth in net interest income and expansion and net interest margin for 2021. We also expect to maintain a strong level of non-interest income going forward.

As mentioned earlier, we are forecasting $14 million to $15 million of gain-on-sale revenue from SBA loan sales next year, which will be supplemented by increased servicing revenue as our managed SBA portfolio grows. When combined with a solid outlook for mortgage banking revenue, we feel confident in our ability to generate a similar level of annual non-interest income again in 2021.

We remain cautiously optimistic regarding the impact of the pandemic on the credit quality of the loan portfolio. We are vigilant in our monitoring and underwriting procedures and do not see elevated credit losses on the horizon at this point. Because of these earnings drivers, we anticipate improved profitability in 2021 with quarterly return on average assets in the range of 95 basis points to 1%, although the first quarter maybe a little bit lower due to annual expense resets primarily in salaries and employee benefits.

And finally, with increased profitability and modest balance sheet growth expectations, we are forecasting increased capital levels with tangible common equity to tangible assets expected to be in the range of 8.4% by the end of 2021.

With that, I will turn it back over to the operator so we can take your questions.

Question-and-Answer Session

Operator

We will now begin the question-and-answer session. [Operator Instructions] The first question comes from Brett Rabatin with Hovde Group. Please go ahead.

Brett Rabatin

Hey. Good afternoon, everyone.

David Becker

Hey, Brett.

Kenneth Lovik

Hi, Brett.

Brett Rabatin

I wanted to just to start with – maybe you talked about, there's obviously still some savings to come on the interest expense side of the equation, but you also managed the balance sheet that aided the margin in the fourth quarter. Can we just talk for a second about the expectations for loan growth in 2021? And then one of the things you might be doing with the balance sheet to help manage that margin higher?

Kenneth Lovik

Yes. I mean, on the loan side, what we expect to do is, like many other institutions out there, we have quite a bit of excess liquidity still on the balance sheet, a lot of cash. And that will allow us to really grow the loan portfolio without necessarily growing the balance sheet. So we continue to deploy. As you've seen, we had – we grew the healthcare finance portfolio that portfolio may not grow as much year-over-year, but we still expect some solid growth there.

We are having a lot of success on the construction side, which has higher yielding product there and the small business lending side as well. Even though we are selling quite a bit of the guaranteed piece of that, we'll still grow the unguaranteed piece, and those are coming on at, yields of 5.50% to 6%. So really the – managing the loan yield on that side, and I guess the all-in earning asset yield is really going to be a function of deploying excess liquidity, some more renewable cash into the portfolio.

Brett Rabatin

Okay. That's helpful. I mean, it looks to me like the margin can get to kind of a 2.25 run rate at some point this year. Does that seem fair to you guys?

David Becker

Yes. That's a good forecast, Brett.

Brett Rabatin

Okay. And then the other thing I wanted to just touch on was expectations for expenses. I know you're going to have somewhat of a reset in the first quarter. Can you just talk about the expense bill this year, which you might be investing in? How we should think about managing the efficiency ratio?

Kenneth Lovik

Yes. I mean, on the personnel side, you're going to see an increase in compensate. If you look at year-over-year forecast for annual compensation cost, you're going to see an increase there just simply because of the investments we've made in the small business unit. We've brought on a lot of talent there over the course of the year. Obviously that's not fully baked into a 2020 number. But you're going to see an increase in compensation there.

And again, we also continue to add folks in other areas across the bank as well. But that comp in salaries number will be up. And we obviously continue to invest in. We'll have some marketing initiatives on the table this year to help build some of the – contribute to the small business checking and small business money market growth. Probably marketing may go up a little bit this year as well. Even though we expect mortgage to remain strong, we’ll probably have to increase some marketing costs on the mortgage side as well.

Brett Rabatin

Okay. That's helpful. And then if I – I want to make sure I heard the number correctly. I thought I heard you say the ROI you’re expecting was at 95 to 105?

Kenneth Lovik

Yes, 95 to 1. We’ll probably be, like I said, first quarter, we'll have probably some of the expense resets that you normally see a lot of them on the salary and the comp side of things with employee benefit resets, merit increases that that type of thing. So first quarter maybe a little bit lighter, but certainly as we get into the second and in the back half of the year, third and fourth quarter are looking at a solid kind of one range.

David Becker

One other issue that might bump was just that we did in the first quarter on the SBA side. Everybody knows there's another round of PPP coming to the marketplace for both first time and second time. Folks on the borrowing sides are redoing some of the rules on the 7(a) programs, a little bit of confusion in the marketplace right now and focus on the SBA side. They're also going to come back on new loans after the 1st of February with some payment deferrals or payments being actually made by the federal government, not really deferrals. So they'll make cash payments like they did last spring.

So a lot of folks are kind of setting on their hands right now and the SBA world and they're also helping insurance levels to 90% of the loans, et cetera. So a lot of activity there on the back office side, that might slowdown a little bit of origination, but when it's all said and done, we think it'll help tremendously in the balance of the year. So it might be just a tad bit of a slow start, but it should come on strong in the second, third and fourth quarters.

Brett Rabatin

Okay. Thanks for all the color and congrats on a great quarter.

David Becker

Thank you.

Kenneth Lovik

Thanks, Brett.

Operator

The next question comes from Nathan Race with Piper Sandler. Please go ahead.

Nathan Race

Yes. Hi, guys. Good afternoon.

David Becker

Good afternoon, Nate.

Nathan Race

I was hoping to start on credit. I got on kind of late. I apologize. But we're still looking for any other details on that single-tenant relationship that went over to where you allocated that specific reserve in the quarter, and just any other thoughts on just the provision outlook as we enter 2021?

David Becker

Technically it was not a new relationship, Nate. It’s the one that we had put reserves against back in the early part of last year at couple of ShopKo Stores that had closed. We have a personal guarantee and we validated that the owner of the properties is more than able to cover that personal guarantee on the loans. So we did not reserve against that. Year-end regulators or year-end auditors came in and didn't like our position. So just to back it up in safety, we added another $1 million in reserve on that loan, but we do anticipating getting that full $1 million back from the owner of the properties. So it's really not a new problem. It's a old loan that the audit team just wanted us to reclassify a little bit.

Nathan Race

Okay. Great. That’s helpful.

Kenneth Lovik

And I was going to say, Nate, just for the outlook for the year on the reserve or on the provision levels, I think, we've done a pretty good job of bumping our coverage levels over the course of the year with the allowance in terms of gross dollars as well as the coverage going up almost a third. Also as we said in the prepared comments, net charge-offs has remained relatively low and right now we're not necessarily forecasting a lot of credit losses on the horizon. So I would expect, at least, as we sit here today, probably the level of provisioning will be down relative to what we did this year, but we still expect to continue building the reserve and expect by year-end, we'll be well above coverage ratio in excess of 100 basis points on the portfolio.

Nathan Race

Okay. Great. Very helpful. And then just switching over to fees, I think the [NDAs] forecasting volumes to be down 20%, 22% in 2021. Any expectations just in terms of, you guys need you can kind of outperform that level or just generally how you're thinking about that line entering 2021?

Kenneth Lovik

Yes. I think when we look at the forecast for this year, obviously, we did $23 million plus of mortgage revenue this year. In our forecast and some of the numbers we provided earlier on ROA outlooks and stuff, we are certainly not forecasting that. In fact, we have our cut, we're cutting it by a third in our forecast this year. A lot of that, again has to do with the NDA outlook as well as just more competition in the market. Last year, there was so much demand out there that mortgage originators were able to [indiscernible] margins a little bit and just to dial back just to be able to handle the workload and with originations forecasted to be down this year, probably margins will come down a bit too.

So we're trying to take, even though I think our forecast for 2021 on mortgage is still – it would be extremely strong by historical standards. It's coming down from what we did this year. And fortunately, we're in a position with the investments we've made in SBA that we have a clear pathway to backfilling that. So as I said in the comments, we really don't see a decline in overall non-interest income. It's just the mix in those line items is going to be a little different.

Nathan Race

Got it. That's helpful. Makes sense. And if I could just ask one more housekeeping question on the tax rate going forward. Is the 4Q level a good run rate to use going forward?

Kenneth Lovik

It is probably a little bit inflated just when you think about, we had record pre-tax earnings and record revenue and taxes in the first part of the year were pretty light. So there was a little bit of catch up there this quarter. I think the run rate going forward is probably a high teen number, is probably the right number to put in your model.

Nathan Race

Okay. Perfect. Congrats on a great quarter guys and a great year. Thank you.

Kenneth Lovik

Great. Thanks, Nate.

David Becker

Thank you, Nate.

Operator

The next question is from George Sutton with Craig-Hallum. Please go ahead.

George Sutton

Thank you. David, in your prepared comments, you mentioned that you continue to identify and capitalized on opportunities last year. And I would point out SBA and PPP were two of those. I'm curious how you're thinking about particularly on the identification of opportunities and what sort of other things you might be pursuing this year that might not be obvious to us?

David Becker

George, we continue to look at opportunities. Obviously, there's a lot of verticals we're not in, in kind of specialty finance lending side of things. We're chatting with a group in California at the current time about potentially another vertical. So we're actively looking and tell all you guys, have you got somebody out there, send them our direction, particularly anything that can be done on a national footprint basis like we've done with SBA and the other verticals that healthcare services that we've gotten into.

I know there's a lot of forecasts in the industry about the stepped up M&A activity here in 2021. For us to go, as we discussed in the past, pick up a traditional bank doesn't make a lot of sense, but there are a lot of banks that have a particular franchise and a given vertical of lending and/or specialty finance companies out here, we're continually – we probably signed one to two NDAs a month of opportunities we’re taking a look at. Some of them have some very inflated pricing, but we're constantly looking at opportunities. I would tell you that the current time there's nothing close to being finalized. But Ken and I spend a lot of time looking at new space and new opportunities for us.

George Sutton

So let me ask the same question in a different way. I now give you good credit for running the bank on a very conservative basis last year given the pandemic and economic challenges. But with things starting to prove, I think what I'm hearing from you is a willingness to potentially hit the accelerator, just hitting the accelerator if you find the right opportunities. Is that a fair way to summarize it?

David Becker

That's a fair way to summarize it. Yes.

George Sutton

Perfect. Thanks guys.

David Becker

Thank you.

Kenneth Lovik

Thanks, George.

Operator

The next question comes from Michael Schiavone with KBW. Please go ahead.

Michael Schiavone

Hi, good afternoon.

David Becker

Good morning or good afternoon, Michael.

Michael Schiavone

Regarding the deposit portfolio, when you look at other, like digital challenger banks, many of them offer checking and high yield savings accounts as opposed to CDs. I was just wondering if there is any opportunity or any strategic plans to accelerate the remix of the deposit portfolio towards more of that makeup.

David Becker

That's kind of taken place through the course of 2020. I don’t know whether you caught it about a month ago, the Newsweek magazine rated us as the Best Small Business Checking Account in America. We put on a concentrated effort to bring in money market in small business checking accounts. Consumer checking accounts, we spent a fair amount of money at the latter part of 2019 to upgrade the onboarding process for new accounts. We had some pretty antiquated software from Fiserv that was taking 17 to 20 minutes for a person to get through an application. We've now got that down to three to five. We brought those same tools over to the small business product in the latter half of 2020. So if you go back and look the CDs as Ken reported in his statistics, dropped, and the checking and money market accounts are picking up.

If you look at most of the FinTech opportunities out there, our products are very, very comparable to those. We're not able to go quite up the food chain that they are on some of them because of the cost of funds. And obviously you guys are looking for a bottom line from our side that doesn't have brackets on it that they have. So the marketing expense and the fees, quite honestly the rates that they're paying today, that will make sense for us.

But there is still millions of consumers out here, particularly in the consumer small business because of the pandemic. Over the course of the past year, millions and millions of people could not get to the branch had to move to the Internet or the mobile phone, electronic devices to get access to the financial information. Obviously, we've been doing that for 20 years plus. As I stated, we didn't have to worry about all of the branch problems this past year that our peers did. So that enabled us to stay focused on the business, make some good money and increase our customer base.

So as those consumers and there's a number of surveys out here show that 90% of them do not want to go back to banking the way they used to pre-pandemic. So once they figure out that their institution doesn't really have feature functionality that they're looking for, we're picking them up, we’re setting records on new account openings and services through the second half of the year. So I think that's going to continue into 2021 and you'll see that product mix even shuffle a little bit more.

Michael Schiavone

Thanks for that color. And you guys mentioned $14 million to $15 million number for SBA gain-on-sale in 2021, but can you just provide some color on your long-term growth expectations for that business line, say two, three years?

David Becker

At the current time, I was asked the same question by one of the employees on a meet the CEO call yesterday afternoon. I don't think we really have a cap on the small business opportunity. As Ken and I have stated in previous calls, as the SBA comes onboard, we have the option of selling the insured piece, which generates non-interest income or we can maintain it. We're picking up account balances. The SBA product just fits our bank phenomenally well. And I think that customer mix is great for us.

From a personal standpoint, being a 40-year entrepreneur myself, I love the idea of helping small businesses all across the country. So we went from about a $100 million this year to $225 million next year. I think Mark Gibson who kind of heads up our sales team is on this call. If I tell you it's going to be $300 million plus, a year after that he's probably feigning on the other end of the line right now. But I really don't think we have a limit. And if we can continue to find good people and good opportunities, that one really fits.

We can grow SBA exponentially without straining our capital, without straining the balance sheet and just continue to put great earnings to the bottom line. So it's a tremendous niche for us and we've product that has a lot of niches, and there's a lot we can do with that, and I anticipated growing pretty geometrically over the next few years.

Michael Schiavone

Great. Thanks for taking my questions and happy new year.

Kenneth Lovik

Great. Thanks, Michael.

David Becker

Thank you.

Operator

[Operator Instructions] This concludes our question-and-answer session. I would like to turn the conference back over to David Becker for any closing remarks.

David Becker

Well guys, I'd just like to say thank you for joining our call today. Obviously, these calls are a lot more fun when it's all good news. But I hope you enjoyed it as much as we did, and we hope everyone remains healthy and safe during these challenging times. Have a great day. We appreciate you being here. Thank you.

Operator

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.