First Internet Bancorp

the second quarter of 2025. At this time, please note that all lines are in the listen-only mode. Following the presentation, we will conduct a question and answer session. And if at any time during this call you require immediate assistance, please press star zero for the operator. Also note that today's event is being recorded. I would now like to turn the conference over to Ben Brodkiewicz from Financial Profiles, Inc. Please go ahead.

Thank you, Operator. Hello, everyone, and thank you for joining us to discuss First Internet Bancorp's second quarter financial results. 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 and CEO David Becker, President and COO, Nicole Lorch, and Executive Vice President and CFO, Ken Levick. David and Nicole will provide an update on credit in certain lines of business, and Ken will discuss some of the financial details for the quarter, as well as an outlook for the remainder of the year and for 2026. Then we'll open the call to answer your questions. Before we begin, I would like to remind you that this conference call contains forward-looking statements with respect to the future performance and financial condition a First Internet bank order that involves 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 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 to non-GAAP measures. At this time, I will turn the call over to David.

Thanks, Ben. Good afternoon, and thank you for joining us on the call today. In the second quarter, interest income was up, interest expense was down, Net interest margin on a tax-effective basis rose above 2%. These are all positive outcomes that we had expected. And yet, due mostly to credit issues and to a lesser extent changes in non-interest income, we are reporting two cents of diluted earnings per share for the quarter. We're not happy about that, and we know you are not happy about that as well. To address your concerns head-on, we're going to run this call a little differently than we have in the past. Rather than walk you through every element of our income statement in detail, we're going to start with an update on credit. Then we'll walk you through our forecast for the second half of this year and all of 2026. Then we'll take your questions. There is a lot, a lot of detail in the deck that we don't plan to speak to today unless you have specific questions on it. So let's go to credit. For the third consecutive quarter, we are talking about elevated provision expense and non-performing loans. once again in our franchise finance and small business lending portfolios. With other lending verticals that have a sterling track record, like single-tenant public finance, our overall credit quality is sound and is in line with industry norms. The Federal Reserve reported non-performing loans to total loans for all banks at 1% at the end of 2024 and again at the end of the first quarter of 2025, and that's exactly where we are. Across our loan portfolios, our delinquencies, which serve as an early warning indicator, declined to 62 basis points, a 15 basis point improvement in the last 90 days. I'll give you additional color on the franchise finance portfolio, then I'll hand it over to Nicole to talk about what we see in SBA. In the second quarter, we moved $12.6 million of franchise finance loans to non-performing status. with related specific reserves of about 4.5 million. At the end of the quarter, 5% of the franchise portfolio was on non-accrual, and about a third of those balances are covered by specific reserves. So clearly we still have some wood to chop, but we believe this portfolio, which consists of loans purchased from and serviced by Apple Pie Capital, is headed in the right direction. There are 633 total loans in this portfolio, And as of June 30th, none of them were on deferral, and only nine of them were past due. Additionally, the pace of new delinquencies has slowed, and with a now more active servicing role that we talked about last quarter, early intervention creates more opportunity for us to pursue solutions that minimize losses. We have had recent success in workout strategies with borrowers leading to improved recovery rates. We believe the steps we have taken and continue to take have resulted in a significant progress towards de-risking the portfolio. With a very small pool of delinquent borrowers and a slowing pace of new delinquencies, we see promising signs for improvement in future periods. The vast majority of the portfolio is performing well, with an average yield over 7% that has contributed towards our continued growth in net interest income and net interest margins. Now I'll turn it over to Nicole to talk about small business lending.