First Internet Bancorp

Good day, everyone, and welcome to the first InternetBank Corp earnings conference call for the fourth quarter and full year 2021. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing star then zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on a touch-tone phone. To withdraw your question, please press star then two. And 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, Matt. Good day, everyone, and thank you for joining us to discuss First Internet Bancorp's financial results for the fourth quarter and full year 2021. The company issued its earnings press release yesterday afternoon, and it's available on the company's website. In addition, the company's 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 and CEO, David Becker, and Executive Vice President and CFO, Ken Lovick. David will provide an overview and 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 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.

Thank you, Larry. Good afternoon, everyone, and thanks for joining us today. 2021 was a year of significant achievements for First Internet. As you've seen, we had a strong fourth quarter. We generated record numbers. annual net income for 2021, highlighted by advances in key business lines and exceptionally low credit costs. Net income for the year was $48.1 million, and diluted earnings per share were $4.82, both up over 60 percent compared to the 2020 results. This strong performance was driven by substantial growth in net interest income and net interest margin expansion. Our fully taxable equivalent net interest margin for the year was 225, up 57 basis points from 168 in 220. This was primarily the result of lower deposit costs as higher cost CDs matured and our deposit composition shifted towards lower cost non-maturity deposits. We continued to exhibit stellar credit quality in 2021, The balance in non-performing loans decreased 27% over the course of the year, leading to a ratio of non-performing loans to total loans of just 26 basis points at year end, down from 33 basis points at the end of 2020. Net charge-offs for the year were only nine basis points. Our strong performance in 2021 helped us generate a return on average assets of 1.14% for the year, a 45 basis point improvement over 2020. Additionally, the strong earnings allowed us to continue building capital as our tangible common equity to tangible assets ratio increased to 8.93% year-end. While delivering these results is a full team effort, I'd like to highlight a few areas where we are seeing strong growth. We continue to build our national SBA platform steadily gained traction and contributed to our year-over-year revenue growth. Originations were particularly strong during the quarter, and I'm proud to announce that First Internet was ranked among the top 25 lenders for the first quarter of SBA's 2020-2022 year. SBA's first quarter, 22, is our fourth quarter, 21. SBA loan pipelines remain robust heading into January, which will provide a fantastic start to 2022. Our recently formed franchise finance business unit got off to a great start in 2021, funding over $80 million in loans since its launch in July. Our partner, Apple Pie Capital, is one of the leading providers of growth financing to franchise owners. Pipelines in this line of business remain strong as well. We are targeting origination volumes in the range of $115 million for 2022. Our pipelines in construction lending and single-tenant lease financing are also looking very good. In total, compared to the third quarter, our commercial pipeline is up 22%, and unfunded commitments in our construction businesses are up 45%. In addition to our core banking and lending businesses, we have recently announced two strategic initiatives to expand our capabilities. As you know, we announced a transformational acquisition of First Century Bancorp during the fourth quarter of 2021. With the addition of First Century's team, we will acquire four highly scalable business lines that bring fee revenue and additional funding diversification with low-cost deposit platforms. These four business lines include payments, tax product lending, sponsored card programs, and homeowners association services. With our much larger balance sheet, additional dedicated resources, and access to greater sources of liquidity, we plan to aggressively pursue growth opportunities across each of these business lines. We are in conversations with first century's key business partners and are excited about the ability to deepen and expand these relationships. Based on what we know today, we feel as good, if not better, about the forward estimates for the combined company than when we announced the transaction. The year ahead will be one dedicated in part to getting the first century transaction closed. And I would like to thank the teams from First Internet as well as First Century who have been diligently planning the integration of our respective organizations in a manner that will allow us to capitalize on the opportunities that will drive meaningful growth for us in 2023 and beyond. Another area of strategic focus for us in 2022 will be to invest in FinTech partnerships. With the rapid evolution of technology that enables consumers and small businesses to manage their finances digitally, fintechs are addressing a significantly growing marketplace. Partnering with these innovators will benefit First Internet in two ways. First, as we have discussed before, fintechs have created robust digital offerings unburdened by legacy tech impediments that meet and exceed customer expectations. Our teams have been systematically overhauling our digital service delivery capabilities with the introduction of carefully selected partners. We believe these tools will enhance our ability to win and retain consumer and small business relationships well into the future. Second, a growing number of FinTech partners seek to take their products directly to consumers and small businesses. These entrepreneurs need banking expertise and capabilities to go to market. First Internet has now almost 23 years of experience in delivering digital services, including numerous sponsorships that would have been called banking as a service had the term existed at the time. Given both our history and forward-looking vision, we believe First Internet is well-positioned to exceed in the banking as a service space. Earlier this week, we announced a formal agreement with SyncTera, a leading technology platform and matchmaker for bank FinTech partnerships. The relationship will enable us to manage a multitude of partners on a single platform, making it highly scalable and enabling us to drive new revenue streams, acquire lower cost deposits, and pursue additional asset generation capabilities. Banks offering banking as a service partnerships with FinTechs are growing quicker and more efficiently than the overall industry. We believe there is and will be for some time more demand for banking as a service, than the banks can meet, giving us a high degree of confidence that there is a long runway as a banking as a service provider. We are actively working with three FinTechs on the banking as a service front that we will provide a combination of low-cost deposits and non-interest income. We expect to begin announcing these partnerships as we get closer to the formal launch dates. We also continue to have discussions with additional FinTech partners through our own efforts as well as through the relationship with Sync Terra as we build out this attractive line of business. And finally, I want to once again acknowledge our inaugural Environmental, Social, and Governance Report, otherwise known as ESG, which we published in 2021. The report highlights a company's ongoing practices and achievements in four primary areas, governance and leadership, environmental management, human capital, and social responsibility. It chronicles our existing commitments and future priorities around mindful governance and responsible corporate citizenry. By advancing our ESG initiatives, we hold ourselves accountable for effectively managing risk while also facilitating financial inclusion. Before I turn it over to Ken, I would like to thank the entire First Internet team for their hard work and commitment throughout the year. We celebrate innovation and collaboration here We have built a workplace culture that continuously develops the people who embody these strengths. It is the reason why we were named one of the best banks to work for by American Banker for the ninth consecutive year. Our team's talent and dedication are why we are confident in our franchise's ability to capitalize on these new opportunities. With that, I'd like to turn the call over to Ken to discuss our financial results for the quarter.