Thank you for standing by. My name is Trevor and I will be your conference operator today. At this time, I would like to welcome everyone to the first Internet Bancorp earnings conference call for the third quarter 2026. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question, please press star one to raise your hand. To withdraw your question, press star one again. Please note that this event is being recorded. It is now my pleasure to turn the call over to Julia Ferreira from ICR. You may begin your conference.

Thank you, operator. Good afternoon, everyone, and thank you for joining us to discuss First Internet Bancorp's third quarter 2026 financial results. The company issued its earnings press release earlier this 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 from the management team today are Chairman and CEO David Becker, President and COO Nicole Lorch, and Executive Vice President and CFO Ken Lovik. David and Nicole will provide an overview and Ken will discuss the financial results and then we'll open up the call for 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 conditions of First Internet Bancorp that involves risk 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 for 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 and non-GAAP measures. At this time, I'd like to turn the call over to David.

Thank you, Julia. Good afternoon, everyone, and thank you for joining us. Let me start with a headline. The fundamental earnings power of First Internet Bancorp continues to improve. We generated record revenue in the third quarter. We expanded net interest margin for the fourth consecutive quarter. We grew adjusted pre-provision net revenue 14% from the second quarter. We continue to improve the mix of loans and deposits while deploying capital efficiently. At the same time, the overall credit normalization we discussed last quarter is on track, with net charge-offs and delinquencies declining meaningfully. For the third quarter, we are reporting earnings of 54 cents per diluted share, excluding non-reoccurring expenses. Adjusted earnings per share rose to 57 cents, more than double what we reported last quarter. We also had one significant credit relationship move against us late in the quarter. I want to address that one directly. Earlier in the quarter, we were working with a franchise finance borrower on a forbearance arrangement. It was intended to give the borrower time to refinance with another lender. Late in the quarter, the borrower's financial condition deteriorated and it became clear that refinancing was no longer viable in the near term. We moved the relationship to non-accrual. We established a $2.6 million specific reserve and reversed $600,000 of interest income. For this relationship, we believe there remains a path to repayment. However, based on what we knew at quarter end, including the delinquent status of the related loans, the prudent course of action was to recognize the deterioration, and we did. That's the bad news in the quarter, but it is important not to lose sight of what happened everywhere else in the business. Provision expense declined sequentially. Net charge-offs fell by more than half. delinquencies fell to 48 basis points from 78 in the second quarter. That includes a significant drop in franchise finance delinquencies. Those are meaningful improvements, and they show the broader credit trends are moving in the direction we expected. More importantly, our operating performance gave us the capacity to absorb the impact of this relationship. We produced record revenue, record net interest income, and continued margin expansion. and we still grew adjusted pre-provision earnings by double digits. That's what I mean when I say the fundamental earnings power of this company is improving. We are confident in the direction of the business as we execute on our strategy with foresight and discipline. Nicole will talk about how that strategy is changing the economics of our business for the better and then Ken will walk through the financial results and what we expect in the fourth quarter. Nicole.

Thanks, David. The way I would characterize this quarter is simple. The business model is working. We're seeing the benefit of decisions we've made over multiple quarters about where we deploy capital, how we fund the balance sheet, and which businesses can generate attractive returns without requiring traditional balance sheet growth. Start with lending. We continue to move capital out of lower yielding or exited portfolios and into businesses where we see stronger risk-adjusted returns. New funded originations came onto the balance sheet this quarter at a weighted average yield of 7.51%. That is the strategy in action. As lower yielding loans pay down, we redeploy that capital into opportunities with better returns. Quarter by quarter, that is changing the economics of the portfolio. This quarter, the overall portfolio yield increased another eight basis points to 6.42%. The point isn't simply that loans grew, it is what is growing and what is shrinking. Construction and investor commercial real estate, single-tenant lease financing, wealth advisory lending, and embedded finance grew during the quarter. At the same time, healthcare finance, franchise finance, and residential mortgage continued to run off. That remixing lets us grow interest income faster than the balance sheet. We don't need outsized balance sheet growth to grow earnings. That's exactly what we've been working toward. Our FinTech partnerships business adds another dimension to that model. FinTech deposits increased just over $1 billion during the quarter to $4.7 billion, including $2.9 billion held off balance sheet at quarter end. Average on balance sheet FinTech deposits increased 40%. giving us additional capacity to replace higher cost CDs and broker deposits with lower cost FinTech funding. But the value of the FinTech franchise goes well beyond funding. FinTech fee revenue increased 13% from the second quarter and is up more than 190% on a trailing 12 month basis. We added two partners during the quarter and have additional partners in the onboarding pipeline across payments, deposits and lending. So FinTech is doing multiple jobs for us. It is improving our funding mix. It is generating fee income. And through embedded lending, it is creating another avenue to deploy capital and grow interest income. Those pieces reinforce one another, making the business more valuable as we scale it. Now, SBA. Production here has been softer than we expected. Originations increased 14% sequentially, but overall activity did not reach the level we anticipated. Industry volume has been weaker and we've also deliberately tightened our own underwriting standards over the past several quarters. Let me be clear about the trade-off we're making. We are not going to manufacture loan growth by compromising credit discipline. The SBA changes that became effective October 1 reinforced several of the underwriting principles we've been applying for the last year. With industry activity subdued and our underwriting standards tighter, We expect SBA originations and gain on sale revenue to remain lower in the fourth quarter. We can live with that on a short-term basis. Yes, we want the volume, but we want the right volume. And the credit trends David discussed tell us the changes we have made in underwriting, servicing, and portfolio management are having the intended effect. And this quarter illustrates something important about the company we have built. SBA production was below our expectations and yet we generated record revenue. That does not mean SBA matters less to us. It demonstrates that our sources of revenue are steadily diversifying. Finally, I want to spend a moment on operating leverage because this is just as central to where we're taking the company. Our technology strategy is not about implementing AI for the sake of AI. The objective is straightforward. used technology to support more customer activity, more revenue, and more growth without requiring expenses to increase at the same rate. We're beginning to see tangible evidence of that. During the third quarter, we completed a multi-phase project to automate significant portions of SBA origination. At current usage levels, we estimate that work creates approximately 620 hours of annual lender and processor capacity. Manual data entry has been reduced by more than 80% and median SBA approval time in the measured comparison improved by roughly 10 days. We're now looking at how to apply similar capabilities elsewhere in the company. Step back and the picture is clear. We're generating higher returns from the loan portfolio. We're lowering our funding costs through FinTech deposits. We're growing fee generating businesses that don't depend entirely on balance sheet growth. and we're creating operating capacity to support growth without a commensurate increase in expense. We have more ways to generate revenue, more ways to fund growth and more places to put capital to work at attractive returns than we did just a few years ago. That diversification matters. We are building a company with multiple sources of revenue and growth that build on one another. The result is a broader, more durable revenue engine and a business model with more levers for creating value. That is what we mean when we say the business model is working. Ken will now tie these strategies into our financial results and what they mean for the fourth quarter. Ken?

Thanks, Nicole. We reported third quarter net income of $4.8 million, or 54 cents per diluted share, excluding $400,000 of non-recurring severance expense, adjusted net income was $5.1 million, or 57 cents per diluted share. Total revenue reached a record $43.9 million, up 7% sequentially. Combined with well-managed expenses, adjusted pre-provisioned net revenue increased 14% from the second quarter to $17.1 million. Net interest income was also a record at $34.7 million, or 35.9 million on a fully taxable equivalent basis, up 7% sequentially and 14% year over year. Net interest margin expanded eight basis points to 2.47% or 2.55% on a fully taxable equivalent basis. Strong growth in net interest income was achieved despite $1.2 million of interest reversals associated with franchise finance loans moved to non-accrual status. which reduced net interest margin by approximately nine basis points. Half of those reversals are related to the relationship David discussed. The underlying margin drivers remain favorable on both sides of the balance sheet. Loan yields increased eight basis points sequentially to 6.42% as we continue to redeploy capital from lower yielding portfolios into our core and emerging lending businesses. At the same time, the cost of interest bearing deposits declined six basis points to 3.32% as FinTech deposits replaced higher cost CDs and broker deposits. That's the balance sheet strategy David and Nicole described, and you're now seeing it flow through the income statement. As we look at the interest rate environment going forward, we remain modestly liability sensitive, but materially less so than we were two years ago. Our loan portfolio is now 57% fixed rate, 43% adjustable rate compared with 75% fixed and 25% adjustable in September 2024. We have also emphasized shorter duration securities as we reinvest cash flows. We analyzed several rate scenarios on a static balance sheet assuming two more Fed rate increases over the next several months ranging from parallel and ramped rate shocks to a bear flattener scenario with rate increases in December 2026 and March 2027. The most punitive scenarios indicate about a negative impact of 2.5% to 3% on forecasted net interest income over the course of 2027, which we do expect to be up substantially over 2026. Importantly, though, these are static assumptions. continued execution of our lending and deposit strategies significantly reduces the modeled effect. Turning to credit, provision expense declined to $11.6 million from $13.4 million in the second quarter, reflecting lower net charge-offs, partially offset by higher specific reserves on franchise finance loans. That large relationship accounted for $2.6 million of specific reserves, including the associated interest reversal Actions taken on this relationship reduced pre-tax earnings by approximately $3.2 million, or 29 cents per diluted share. Outside of that relationship, the broader trend improved. Net charge-offs and delinquencies both declined materially during the quarter, while non-performing loans increased as additional franchise finance balances moved to non-accrual, including $6.6 million related to the large relationship. Now let me turn to our outlook for the fourth quarter. We continue to expect fully taxable equivalent net interest margin of 2.75% to 2.80% and fully taxable equivalent net interest income of around $38.5 million, driven by continued portfolio optimization and stable deposit costs, assuming a 25 basis point increase in the fed funds rate in December. We expect non-interest income of around $7.5 million, incorporating our revised expectation for lower SBA originations, but offset by continued growth in FinTech fee revenue. Additionally, non-interest expense should come in around $26.5 million. And based on the improving delinquency trends and the franchise finance actions taken this quarter, we expect provision expense of $7.5 million to $8 million. Those assumptions lead us to expect fourth quarter diluted earnings per share of approximately $1.02 to $1.07. In the second quarter, we reported diluted earnings per share of 27 cents. This quarter, operating earnings per share more than doubled. We believe it will nearly double again in the fourth quarter. We believe that outlook demonstrates the underlying earnings trajectory we have been discussing today. Continued growth in net interest income, continued margin expansion, growing FinTech fee revenue, disciplined expenses, and moderating credit costs. With that, I'll turn it back to the operator for questions.

We will now begin the question and answer session. If you would like to ask a question, please press star one to raise your hand. To withdraw your question, press star one again. We ask that you pick up your handset when asking a question to allow for optimum sound quality. If you are muted locally, please remember to unmute your device. Please stand by while we compile the Q&A roster. Our first question comes from the line of Brett Rabaton with Stonex. Brett, your line is open.

Hey, good afternoon, everyone. Thanks for the questions. Wanted us to start with, Ken, maybe just some color around the guidance. When I think about the margin guidance for the fourth quarter, you could kind of do it a couple different ways, but essentially you're kind of implying a 15 basis point increase in earning asset yields and a 15 basis point increase in or decrease in funding.

My apologies, sorry to interrupt. This is Trevor, the Q4 moderator. We're just having a technical issue on our end. We're going to pause the podcast briefly for technical issues. Please stand by while we resolve the issue. Thank you.