First Internet Bancorp
For the period ended Jun 30, 2024. Filed Aug 7, 2024.
View on SEC.govAbout this filing
A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Jun 30, 2024 · Filed Aug 7, 2024
INBK$25.37-1.6%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-03-31; filed 2024-05-08.
0001562463-24-000036
Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSCurrent report: 10-Q
Period ended 2024-06-30; filed 2024-08-07.
0001562463-24-000066
Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 92 previous paragraphs and 108 current paragraphs.
53 unchanged; 38 reworded; 11 added; 0 removed; 1 previous and 6 current paragraphs rearranged.
Tables are not compared: 17 previous and 19 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (11)
Current report
The $10.1 million increase in net income for the six months ended June 30, 2024 compared to the six months ended June 30, 2023 was due primarily to an $8.1 million, or 71.2%, increase in noninterest income, a $4.3 million, or 11.5%, increase in net interest income and a $4.6 million, or 41.7%, decrease in provision for credit losses, partially offset by increases of $3.7 million, or 9.4%, in noninterest expense and $3.2 million in income tax expense.
Current report
During the six months ended June 30, 2024, the Company recognized $0.5 million in IT termination fees and $0.1 million in anniversary expenses. Excluding these items, adjusted net income for the six months ended June 30, 2024 was $11.4 million and adjusted diluted earnings per share was $1.30. Additionally, for the six months ended June 30, 2024, adjusted ROAA, adjusted ROAE and adjusted ROATCE were 0.43%, 6.20% and 6.29%, respectively.
Current report
Due to the steep decline in consumer mortgage volumes and the negative outlook for consumer mortgage lending, the Company decided to exit its consumer mortgage business during the first quarter 2023. This included its nationwide digital direct-to-consumer mortgage platform that originated residential loans for sale in the secondary market, as well as its local traditional consumer mortgage and construction-to-permanent business. In connection with this decision, the Company recognized $3.1 million of mortgage operations and exit costs during the six months ended June 30, 2023. The Company also recognized $0.1 million of mortgage banking revenue during the six months ended June 30, 2023.
Current report
Additionally, during the six months ended June 30, 2023, the Company recognized a partial charge-off of $6.9 million related to a commercial and industrial participation loan with a balance of $9.8 million, prior to the partial charge-off, that was moved to nonaccrual status late in the first quarter 2023. The Company received payment for the remaining balance of the participation loan during the second quarter 2023.
Current report
Excluding the impact of exiting consumer mortgage and the partial charge-off, adjusted net income for the six months ended June 30, 2023 was $8.7 million and adjusted diluted earnings per share was $0.97. Additionally, for the six months ended June 30, 2023, adjusted ROAA, adjusted ROAE and adjusted ROATCE were 0.37%, 4.85% and 4.92%, respectively
Current report
Net interest income for the six months ended June 30, 2024 was $42.1 million, an increase of $4.3 million, or 11.5%, compared to $37.7 million for the six months ended June 30, 2023. The increase in net interest income was the result of a $29.0 million, or 26.3%, increase in total interest income to $139.1 million for the six months ended June 30, 2024 from $110.2 million for the six months ended June 30, 2023. The increase in total interest income was partially offset by a $24.6 million, or 34.0%, increase in total interest expense to $97.1 million for the six months ended June 30, 2024 from $72.4 million for the six months ended June 30, 2023.
Current report
Overall, the cost of total interest-bearing liabilities for the second quarter 2024 increased 52 bps to 4.14% from 3.62% for the second quarter 2023. The cost of total interest-bearing liabilities for the six months ended June 30, 2024 increased 69 bps to 4.10% from 3.41% for the six months ended June 30, 2023. The increase in the cost of funds for the three and six months ended June 30, 2024 reflects the impact of the continued elevated interest rate environment throughout 2023 and 2024.
Current report
1.64% for the six months ended June 30, 2023, an increase of 3 bps. FTE NIM was 1.76% for both the six months ended June 30, 2024 and 2023.
Current report
The increase in the second quarter 2024 NIM and FTE NIM compared to the second quarter 2023 reflects the increase in earning asset yields noted above outpacing the increase in the cost of interest-bearing liabilities. The increase in NIM and stability in FTE NIM for the six months ended June 30, 2024 compared to the six months ended June 30, 2023 reflects the decelerating pace of increase in the cost of interest-bearing deposits and the Company’s focus on shifting the loan composition towards variable rate and higher-yielding products.
Current report
Noninterest expense for the second quarter 2024 was $22.3 million, compared to $18.7 million for the second quarter 2023. The increase of $3.7 million, or 19.6%, was due primarily to increases of $1.8 million in salaries and employee benefits, $0.5 million in loan expenses, $0.5 million in premises and equipment, $0.4 million in other expenses and $0.3 million in consulting and professional fees. The increase in salaries and employee benefits was due primarily to continued staffing growth and higher incentive compensation in small business lending, as well as non-recurring anniversary expenses. The increase in loan expenses was due primarily to higher third-party loan servicing fees and other miscellaneous lending costs. The increase in premises and equipment was due primarily to non-recurring IT termination fees. The increase in other expenses was due to various expenses, none of which were individually significant. The increase in consulting and professional fees was due primarily to increased consulting and audit fees.
Current report
During the six months ended June 30, 2024, the Company recorded net charge-offs of $1.9 million, compared to net charge-offs of $8.8 million during the six months ended June 30, 2023. The decrease in net charge-offs for the six months ended June 30, 2024 was driven primarily by a $6.9 million partial charge-off of a C&I participation loan that was placed on nonaccrual status and subsequently charged off during the first quarter 2023, as well as a decrease in net charge-offs in small business lending, partially offset by increases in net charge-offs in franchise finance and single tenant lease financing.
Reworded paragraphs (38)
Previous wording
First Internet Bancorp is a financial holding company headquartered in Fishers, Indiana that conducts its primary business activities through its wholly-owned subsidiary, First Internet Bank of Indiana, an Indiana chartered bank. The Bank was the first state-chartered, Federal Deposit Insurance Corporation (“FDIC”) insured Internet bank and commenced banking operations in 1999. First Internet Bancorp was incorporated under the laws of the State of Indiana on September 15, 2005. On March 21, 2006, we consummated a plan of exchange by which we acquired all of the outstanding shares of the Bank.
Current wording
First Internet Bancorp is a bank holding company headquartered in Fishers, Indiana that conducts its primary business activities through its wholly-owned subsidiary, First Internet Bank of Indiana (the “Bank”), an Indiana chartered bank. The Bank was the first state-chartered, Federal Deposit Insurance Corporation (“FDIC”) insured Internet bank and commenced banking operations in 1999. First Internet Bancorp was incorporated under the laws of the State of Indiana on September 15, 2005. On March 21, 2006, we consummated a plan of exchange by which we acquired all of the outstanding shares of the Bank.
Previous wording
Our commercial banking products and services are delivered through a relationship banking model or through strategic partnerships and include commercial and industrial (“C&I”), construction and investor commercial real estate, single tenant lease financing, public finance, healthcare finance, small business lending, franchise finance and commercial deposits and treasury management. Our C&I team provides credit solutions such as lines of credit, term loans, owner-occupied commercial real estate loans and corporate credit cards on a regional basis to commercial borrowers primarily in the Midwest and Southwest regions of the United States. We offer construction, investor commercial real estate loans, as well as single tenant lease financing on a nationwide basis. Our public finance team provides a range of public and municipal lending and leasing products to government entities on a nationwide basis. Our healthcare finance team was established in conjunction with our strategic partnership with Provide, Inc. (formerly known as Lendeavor, Inc.), a San Francisco-based technology-enabled lender to healthcare practices, which provided lending on a nationwide basis for healthcare practice finance or acquisition, acquisition or refinancing of owner-occupied commercial real estate and equipment purchases. In the third quarter 2021, Provide was acquired by a super-regional financial institution. Subsequent to Provide being acquired, the acquiring institution has retained most, if not all, of Provide’s loan origination activity and our healthcare finance loan balances have declined. Our franchise finance business was established in July 2021 in conjunction with our business relationship with ApplePie Capital, a company that specializes in providing financing to franchisees in various industry segments across the United States. Our commercial deposits and treasury management team works with the other commercial teams to provide deposit products and treasury management services to our commercial and municipal lending customers as well as pursues commercial deposit opportunities in business segments where we have no credit relationships.
Current wording
Our commercial banking products and services are delivered through a relationship banking model or through strategic partnerships and include commercial and industrial (“C&I”), construction and investor commercial real estate, single tenant lease financing, public finance, healthcare finance, small business lending, franchise finance and commercial deposits and treasury management. Our C&I team provides credit solutions such as lines of credit, term loans, owner-occupied commercial real estate loans and corporate credit cards on a regional basis to commercial borrowers primarily in the Midwest and Southwest regions of the United States. We offer construction and investor commercial real estate loans, as well as single tenant lease financing, on a nationwide basis. Our public finance team provides a range of public and municipal lending and leasing products to government entities on a nationwide basis. Our healthcare finance team was established in conjunction with our strategic partnership with Provide, Inc. (formerly known as Lendeavor, Inc.), a San Francisco-based technology-enabled lender to healthcare practices, which provided lending on a nationwide basis for healthcare practice finance or acquisition, acquisition or refinancing of owner-occupied commercial real estate and equipment purchases. In the third quarter 2021, Provide was acquired by a super-regional financial institution. Subsequent to Provide being acquired, the acquiring institution has retained most, if not all, of Provide’s loan origination activity and our healthcare finance loan balances have declined. Our franchise finance business was established in July 2021 in conjunction with our business relationship with ApplePie Capital, a company that specializes in providing financing to franchisees in various industry segments across the United States. Our commercial deposits and treasury management team works with the other commercial teams to provide deposit products and treasury management services to our commercial and municipal lending customers as well as pursues commercial deposit opportunities in business segments where we have no credit relationships.
Previous wording
We believe that we differentiate ourselves from larger financial institutions by providing a full suite of services to emerging small businesses and entrepreneurs on a nationwide basis. We are one of the fastest-growing lenders in the Small Business Administration (“SBA”) 7(a) program, closing more than $98.3 million in SBA 7(a) loans during the three months ended March 31, 2024, and currently rank as one of the top 10 largest SBA 7(a) lenders for the SBA’s year-to-date 2024 fiscal year. We also offer a top-ranked small business checking account product to our country’s entrepreneurs. We continue to scale up this business with the goal of driving increased earnings and profitability in future periods.
Current wording
We believe that we differentiate ourselves from larger financial institutions by providing a full suite of services to emerging small businesses and entrepreneurs on a nationwide basis. We are one of the fastest-growing lenders in the Small Business Administration (“SBA”) 7(a) program, closing $223.8 million in SBA 7(a) loans during the six months ended June 30, 2024, and currently rank as the 6th largest SBA 7(a) lenders for the SBA’s year-to-date 2024 fiscal year. We also offer a top-ranked small business checking account product to our country’s entrepreneurs. We continue to scale up this business with the goal of driving increased earnings and profitability in future periods.
Previous wording
We also offer payment, deposit, card and lending products and services through partnerships with financial technology companies and platforms (“fintechs”). With the rapid evolution of technology that enables consumers and small businesses to manage their finances digitally, fintechs are addressing a significantly growing marketplace. Fintechs have created robust digital offerings, unburdened by legacy technology architecture, to address growing customer expectations. Through partnerships with selected fintechs, we believe our ability to win and retain consumer and small business relationships will be significantly enhanced. Furthermore, we believe partnering with select fintechs will allow us to further diversify our revenue sources, acquire lower-cost deposits and pursue additional asset generation capabilities.
Current wording
We also offer payment, deposit, card and lending products and services through partnerships with financial technology companies and platforms (“fintechs”). With the rapid evolution of technology that enables small businesses to manage their finances digitally, fintechs are addressing a significantly growing marketplace. Fintechs have created robust digital offerings, unburdened by legacy technology architecture, to address growing customer expectations. Through partnerships with selected fintechs, we believe our ability to win and retain small business relationships will be significantly enhanced. Furthermore, we believe partnering with select fintechs will allow us to further diversify our revenue sources, acquire deposits and pursue additional asset generation capabilities.
Previous wording
As of March 31, 2024, the Company had consolidated assets of $5.3 billion, consolidated deposits of $4.3 billion and stockholders’ equity of $366.7 million.
Current wording
As of June 30, 2024, the Company had consolidated assets of $5.3 billion, consolidated deposits of $4.3 billion and stockholders’ equity of $372.0 million.
Previous wording
During the first quarter 2024, net income was $5.2 million, or $0.59 diluted earnings per share, compared to a net loss of $3.0 million, or $0.33 diluted loss per share, during the first quarter 2023, representing an increase in net income of $8.2 million and an increase in diluted earnings per share of $0.92.
Current wording
During the second quarter 2024, net income was $5.8 million, or $0.67 diluted earnings per share, compared to a net income of $3.9 million, or $0.44 diluted earnings per share, during the second quarter 2023, representing an increase in net income of $1.9 million and an increase in diluted earnings per share of $0.23. During the six months ended June 30, 2024, net income was $11.0 million, or $1.25 diluted earnings per share, compared to the six months ended June 30, 2023 net income of $0.9 million, or $0.10 per diluted share, resulting in an increase in net income of $10.1 million and an increase in diluted earnings per share of $1.15.
Previous wording
The $8.2 million increase in net income for the first quarter 2024 compared to the first quarter 2023 was due primarily to a $7.0 million, or 74.0%, decrease in the provision for credit losses, an increase of $2.9 million, or 53.3%, in noninterest income and a $1.2 million, or 5.9%, increase in net interest income, partially offset by a $2.8 million increase in income tax expense.
Current wording
The $1.9 million increase in net income for the second quarter 2024 compared to the second quarter 2023 was due primarily to a $5.2 million, or 87.9%, increase in noninterest income and a $3.2 million, or 17.5%, increase in net interest income, partially offset by increases of $3.7 million, or 19.6%, in noninterest expense, $2.3 million, or 137.4%, in the provision for credit losses and $0.5 million in income tax expense.
Previous wording
During the first quarter 2024, return on average assets (“ROAA”), return on average shareholders’ equity (“ROAE”), and return on average tangible common equity (“ROATCE”) were 0.40%, 5.64%, and 5.71%, respectively, compared to (0.26%), (3.37%), and (3.41%), respectively, for the first quarter 2023.
Current wording
During the second quarter 2024, return on average assets (“ROAA”), return on average shareholders’ equity (“ROAE”), and return on average tangible common equity (“ROATCE”) were 0.44%, 6.28%, and 6.36%, respectively, compared to 0.32%, 4.35%, and 4.40%, respectively, for the second quarter 2023. During the six months ended June 30, 2024, ROAA, ROAE and ROATCE were 0.42%, 5.96%, and 6.04%, respectively, compared to 0.04%, 0.48%, and 0.49%, respectively, for the six months ended June 30, 2023.
Previous wording
During the first quarter 2023, the Company had a partial charge-off of a C&I participation loan of $6.9 million, $3.1 million of mortgage operations and exit costs and $0.1 million of mortgage revenue. Excluding these items, adjusted net income for the first quarter 2023 was $4.8 million and adjusted diluted earnings per share was $0.53. Additionally, for the first quarter 2023, adjusted ROAA, adjusted ROAE and adjusted ROATCE were 0.43%, 5.36% and 5.44%, respectively.
Current wording
During the second quarter 2024, the Company recognized $0.5 million in IT termination fees and $0.1 million in anniversary expenses. Excluding these items, adjusted net income for the second quarter 2024 was $6.2 million and adjusted diluted earnings per share was $0.72. Additionally, for the second quarter 2024, adjusted ROAA, adjusted ROAE and adjusted ROATCE were 0.48%, 6.77% and 6.85%, respectively.
Previous wording
Net interest income for the first quarter 2024 was $20.7 million, an increase of $1.2 million, or 5.9%, compared to $19.6 million for the first quarter 2023. The increase in net interest income was the result of a $16.1 million, or 31.0%, increase in total interest income to $68.2 million for the first quarter 2024 from $52.0 million for the first quarter 2023, partially offset by a $15.0 million, or 46.1%, increase in total interest expense to $47.4 million for the first quarter 2024 from $32.5 million for the first quarter 2023.
Current wording
Net interest income for the second quarter 2024 was $21.3 million, an increase of $3.2 million, or 17.5%, compared to $18.1 million for the second quarter 2023. The increase in net interest income was the result of a $12.8 million, or 22.1%, increase in total interest income to $71.0 million for the second quarter 2024 from $58.1 million for the second quarter 2023, partially offset by a $9.7 million, or 24.2%, increase in total interest expense to $49.6 million for the second quarter 2024 from $40.0 million for the second quarter 2023.
Previous wording
The increase in total interest income for the first quarter 2024 compared to first quarter 2023 was due primarily to an increase in interest earned on loans, resulting from an increase of 77 bps in the yield on loans, including loans held-for-sale, as well as an increase of $309.4 million, or 8.6%, in the average balance of loans, including loans held-for-sale. The yield earned on other earning assets also increased 99 bps and the average balance of other earning assets increased $102.8 million, or 31.0%. The increase in the average balance of other earning assets was due primarily to carrying higher cash balances. The average balance of securities increased $118.2 million, or 20.2%, while the yield earned on the securities portfolio increased 76 bps for the first quarter 2024 compared to the first quarter 2023. The increase in the yields earned on loans, other earning assets and securities was due to the impact of the continued elevated interest rate environment on both existing and newly-originated interest-earnings assets. As a result of the higher interest rate environment, the yield on funded portfolio originations was 8.84% in the first quarter 2024, an increase of 108 bps compared to the first quarter 2023.
Current wording
The increase in total interest income for the second quarter 2024 compared to second quarter 2023 was due primarily to an increase in interest earned on loans, resulting from an increase of 68 bps in the yield on loans, including loans held-for-sale, as well as an increase of $280.6 million, or 7.7%, in the average balance of loans, including loans held-for-sale. Additionally, the average balance of securities increased $140.4 million, or 23.2%, and the yield earned on the securities portfolio increased 90 bps for the second quarter 2024 compared to the second quarter 2023. The increase in the yields earned on loans and securities was due to the impact of the continued elevated interest rate environment on both existing and newly-originated interest-earning assets. As a result of the higher interest rate environment, the yield on funded portfolio loan originations was 8.88% for the second quarter 2024, an increase of 46 bps compared to the second quarter 2023.
Previous wording
The increase in total interest expense for the first quarter 2024 compared to the first quarter 2023 was due primarily to increases of $12.5 million, or 90.5%, in interest expense associated with certificates and brokered deposits. The increase in interest expense related to certificates and brokered deposits was driven by an increase of 132 bps in the cost of these deposits, as well as an increase of $598.5 million, or 36.3%, in the average balance of these deposits. The increase in the average balance of these deposits was driven by strong consumer and small business demand for certificates of deposits, partially offset by lower brokered deposit balances as the Company used on-balance sheet liquidity to pay down balances throughout 2023 and the first quarter 2024. Overall, the cost of total interest-bearing liabilities for the first quarter 2024 increased 87 bps to 4.06% from 3.19% for the first quarter 2023. The increase in the cost of funds for the three months ended March 31, 2024 reflects the impact of the continued elevated interest rate environment throughout 2023 and into 2024.
Current wording
The increase in total interest expense for the second quarter 2024 compared to the second quarter 2023 was due primarily to increases of $6.9 million, or 33.8%, in interest expense associated with certificates and brokered deposits, $1.1 million, or 464.8%, in interest expense associated with BaaS - brokered deposits and $1.1 million, or 70.1%, in interest expense associated with interest-bearing demand deposits. The increase in interest expense related to certificates and brokered deposits was driven by an increase of 71 bps in the cost of these deposits, as well as an increase of $287.4 million, or 14.2%, in the average balance of these deposits. The increase in the average balance of these deposits was driven by strong consumer and small business demand for certificates of deposits, partially offset by lower brokered deposit balances as the Company used on-balance sheet liquidity to pay down higher-cost balances throughout 2023 and 2024. The increase in interest expense related to BaaS - brokered deposits was driven by an increase of 34 bps in the cost of these deposits, as well as an increase of $96.7 million, or 422.1%, in the average balance of these deposits. The increase in interest expense related to interest-bearing demand deposits was driven by an increase of 50 bps in the cost of these deposits, as well as an increase of $114.2 million, or 31.7%, in the average balance of these deposits. The increase in the cost of funds reflects the impact of the continued elevated interest rate environment throughout 2023 and 2024.
Previous wording
Net interest margin (“NIM”) was 1.66% for the first quarter 2024 compared to 1.76% for the first quarter 2023, a decrease of 10 bps. On a fully-taxable equivalent (“FTE”) basis, NIM was 1.75% for the first quarter 2023 compared to 1.89% for the first quarter 2023, a decrease of 14 bps. The decrease in the first quarter 2024 NIM and FTE NIM compared to the first quarter 2023 reflects the increase in the cost of interest-bearing liabilities of 87 bps, partially offset by the increase in earning asset yields noted above.
Current wording
Net interest margin (“NIM”) was 1.67% for the second quarter 2024 compared to 1.53% for the second quarter 2023, an increase of 14 bps. On a fully-taxable equivalent (“FTE”) basis, NIM was 1.76% for the second quarter 2024 compared to 1.64% for the second quarter 2023, an increase of 12 bps. NIM was 1.67% for the six months ended June 30, 2024 compared to
Previous wording
The following table presents noninterest income for the last five completed fiscal quarters.
Current wording
The following table presents noninterest income for the last five completed fiscal quarters and the six months ended June 30, 2024 and 2023.
Previous wording
During the first quarter 2024, noninterest income was $8.3 million, representing an increase of $2.9 million, or 53.3%, compared to $5.4 million for the first quarter 2023. The increase in noninterest income was due primarily to increases in gain on sale of loans, other income and net loan servicing revenue, partially offset by a decrease in revenue from mortgage banking activities. The increase of $2.5 million, or 60.9%, in gain on sale of loans was due to an increase in U.S. Small Business Administration (“SBA”) 7(a) guaranteed loan sales, as well as an increase in gain on sale margins. The increase of $0.3 million, or 89.7%, in other income is due primarily to income from fund investments. The increase in loan servicing revenue was due primarily to growth in the balance of the Company’s SBA 7 (a) servicing portfolio. The decrease in mortgage banking revenue was due to the Company’s exit from the mortgage business in the first quarter 2023.
Current wording
During the six months ended June 30, 2024, noninterest income was $19.4 million, an increase of $8.1 million, or 71.2%, compared to $11.3 million for the six month ended June 30, 2023. The increase in noninterest income was due primarily to increases in gain on sale of loans, other income and net loan servicing revenue. The increase of $5.9 million, or 66.1%, in gain on sale of loans was due primarily to an increase in SBA 7(a) guaranteed loan sales. The increase of $1.9 million, or 285.5%, in other income is due primarily to distributions from fund investments. The increase in loan servicing revenue was due primarily to growth in the balance of the Company’s SBA 7 (a) servicing portfolio.
Previous wording
The following table presents noninterest expense for the last five completed fiscal quarters.
Current wording
The following table presents noninterest expense for the last five completed fiscal quarters and the six months ended June 30, 2024 and 2023.
Previous wording
Noninterest expense for the first quarter 2024 and 2023 was $21.0 million, comparable to the first quarter 2023. The increase of less than $0.1 million, or 0.3%, was due primarily to a $0.6 million increase in deposit insurance premium and a $0.2 million increase in other, partially offset by a $0.5 million decrease in loan expenses, $0.1 million decrease in marketing, advertising and promotion expense and a $0.1 million decrease in data processing. The increase in deposit insurance premium was due primarily to year-over-year asset growth and changes in the composition of the loans and deposit portfolios. The increase in other expense was due to various expenses, none of which were individually significant. The decrease in loan expenses was due primarily to expenses incurred in the first quarter 2023 as a result of the Company’s exit from the mortgage business, partially offset by higher third-party loan servicing fees and other miscellaneous lending costs. The decrease in marketing, advertising and promotion expense was due primarily to cost savings from the Company’s exit from the mortgage business in the first quarter 2023. The decrease in data processing was due primarily to variable deposit activity-based expenses.
Current wording
Noninterest expense for the six months ended June 30, 2024 was $43.4 million, compared to $39.6 million for the six months ended June 30, 2023. The increase of $3.7 million, or 9.4%, was due primarily to increases of $1.8 million in salaries and employee benefits, $0.8 million in deposit insurance premiums, $0.6 million in other expenses and $0.5 million in premises and equipment. In the first quarter 2023, the Company incurred $2.2 million in severance costs as a result of its decision to exit the mortgage business. In the second quarter 2024, the Company incurred $0.1 million in non-recurring anniversary expenses. Excluding these costs, salaries and employee benefits increased $3.8 million, or 18.7%. The increase in salaries and employee benefits was due primarily to continued staffing growth and higher incentive compensation in small business lending, as well as higher incentive compensation accruals based on the increase in net income for the six months ended June 30, 2024 compared to the six months ended June 30, 2023. The increase in deposit insurance premium was due primarily to year-over-year asset growth and changes in the composition of the loan and deposit portfolios. The increase in other expenses is primarily due to various expenses, none of which were individually significant. The increase in premises and equipment was due primarily to non-recurring IT termination fees.
Previous wording
The Company recorded an income provision tax provision of $0.4 million and an effective tax rate of 7.6% for the first quarter 2024, compared to an income tax benefit of $2.3 million for the first quarter 2023.
Current wording
The Company recorded an income provision tax provision of $0.2 million and an effective tax rate of 3.6% for the second quarter 2024, compared to an income tax benefit of $0.2 million for the second quarter 2023. The Company recorded an income tax provision of $0.6 million and an effective tax rate of 5.6% for the six months ended June 30, 2024, compared to an income tax benefit of $2.6 million for the six months ended June 30, 2023. The income tax benefits recognized during 2023 reflect the benefit of tax exempt income relative to stated pre-tax income, as well as the impact on pre-tax income from mortgage exit costs and the partial charge-off of a commercial and industrial participation loan during the six months ended June 30, 2023.
Previous wording
Total assets increased $173.1 million, or 3.3%, to $5.3 billion at March 31, 2024 compared to $5.2 billion at December 31, 2023. The increase was due primarily to increases in cash balances and loans, driven by growth in deposit balances of $206.8 million, or 5.1%.
Current wording
Total assets increased $175.7 million, or 3.4%, to $5.3 billion at June 30, 2024 compared to $5.2 billion at December 31, 2023. The increase was due primarily to increases in loans and securities, driven by growth in deposit balances of $206.9 million, or 5.1%.
Previous wording
As of March 31, 2024, total shareholders’ equity was $366.7 million, an increase of $3.9 million, or 1.1%, compared to December 31, 2023. The increase in shareholders’ equity was due primarily to the net income earned during the quarter, partially offset by an increase in accumulated other comprehensive loss. Tangible common equity totaled $362.1 million as of March 31, 2024, representing an increase of $3.9 million, or 1.1%, compared to December 31, 2023. The ratio of total shareholders’ equity to total assets decreased to 6.87% as of March 31, 2024 from 7.02% as of December 31, 2023, and the ratio of tangible common equity to tangible assets decreased to 6.79% as of March 31, 2024 from 6.94% as of December 31, 2023.
Current wording
As of June 30, 2024, total shareholders’ equity was $372.0 million, an increase of $9.2 million, or 2.5%, compared to December 31, 2023. The increase in shareholders’ equity was due primarily to the net income earned during the six months ended June 30, 2024, partially offset by a modest increase in accumulated other comprehensive loss. Tangible common equity totaled $367.3 million as of June 30, 2024, representing an increase of $9.2 million, or 2.6%, compared to December 31, 2023. The ratio of total shareholders’ equity to total assets decreased to 6.96% as of June 30, 2024 from 7.02% as of December 31, 2023, and the ratio of tangible common equity to tangible assets decreased to 6.88% as of June 30, 2024 from 6.94% as of December 31, 2023.
Previous wording
Book value per common share increased 1.0% to $42.37 as of March 31, 2024 from $41.97 as of December 31, 2023. Tangible book value per share increased 1.0% to $41.83 as of March 31, 2024 from $41.43 as of December 31, 2023. The increase in both book value per common share and tangible book value per share was driven primarily by the increase in total shareholders’ equity and tangible common equity. Refer to the “Reconciliation of Non-GAAP Financial Measures” section of Part I, Item 2 of this report, Management’s Discussion and Analysis of Financial Condition and Results of Operations for additional information.
Current wording
Book value per common share increased 2.2% to $42.91 as of June 30, 2024 from $41.97 as of December 31, 2023. Tangible book value per share increased 2.3% to $42.37 as of June 30, 2024 from $41.43 as of December 31, 2023. The increase in both book value per common share and tangible book value per share was driven primarily by the increases in total shareholders’ equity and tangible common equity. Refer to the “Reconciliation of Non-GAAP Financial Measures” section of Part I, Item 2 of this report, Management’s Discussion and Analysis of Financial Condition and Results of Operations for additional information.
Previous wording
1 Includes carrying value adjustments of $26.9 million, $27.8 million, $29.0 million, $30.5 million and $31.5 million related to terminated interest rate swaps associated with public finance loans as of March 31, 2024, December 31, 2023, September 30, 2023, June 30, 2023 and March 31, 2023, respectively.
Current wording
1 Includes carrying value adjustments of $25.6 million, $26.9 million, $27.8 million, $29.0 million and $30.5 million related to terminated interest rate swaps associated with public finance loans as of June 30, 2024, March 31, 2024, December 31, 2023, September 30, 2023 and June 30, 2023, respectively.
Previous wording
Total loans were $3.9 billion as of March 31, 2024, an increase of $69.6 million, or 1.8%, compared to December 31, 2023. Total commercial loan balances were $3.1 billion as of March 31, 2024, up $75.2 million, or 2.5%, from December 31, 2023. Total consumer loan balances were $793.4 million as of March 31, 2024, a decrease of $3.5 million, or 0.4%, compared to December 31, 2023. Compared to December 31, 2023, the increase in commercial loan balances was driven by growth in the construction, small business lending and franchise finance portfolios. These increases were partially offset by a decrease in the fixed-rate public finance portfolio, as well as continued runoff in the healthcare finance portfolio. The slight decrease in consumer loan balances was due primarily to a decrease in the residential mortgage portfolio, partially offset by an increase in the trailers portfolio.
Current wording
Total loans were $4.0 billion as of June 30, 2024, an increase of $120.9 million, or 3.2%, compared to December 31, 2023. Total commercial loan balances were $3.1 billion as of June 30, 2024, up $122.1 million, or 4.1%, from December 31, 2023. Total consumer loan balances were $800.5 million as of June 30, 2024, an increase of $3.6 million, or 0.5%, compared to December 31, 2023. Compared to December 31, 2023, in connection with the Company’s focus on variable rate and higher-yielding products, the increase in commercial loan balances was driven by growth in the construction, investor commercial real estate, small business lending and franchise finance portfolios. These increases were partially offset by decreases in the public finance and single tenant lease financing portfolios, as well as continued runoff in the healthcare finance portfolio. Additionally, commercial and industrial balances declined due primarily to early payoffs. The slight increase in consumer loan balances was due primarily to new origination activity in the other consumer loans portfolios, partially offset by a decrease in the residential mortgage portfolio.
Previous wording
2 Includes the impact of nonperforming small business lending loans, which are guaranteed by the U.S. government.
Current wording
2 Includes the impact of nonperforming small business lending loans, which are partially guaranteed by the U.S. government.
Previous wording
Total nonperforming loans increased $3.1 million, or 31.0%, to $13.1 million as of March 31, 2024 compared to $10.0 million as of December 31, 2023 due primarily to an increase in nonperforming loans in small business lending and residential mortgage loans during the quarter. Total nonperforming assets increased $3.1 million, or 30.0%, to $13.4 million as of March 31, 2024, compared to $10.4 million as of December 31, 2023, due primarily to the increases in nonperforming small business lending and residential mortgage loans mentioned above. The Company had two residential mortgage properties in OREO with a carrying value of $0.4 million at both March 31, 2024 and December 31, 2023.
Current wording
Total nonperforming loans increased $3.0 million, or 30.3%, to $13.0 million as of June 30, 2024 compared to $10.0 million as of December 31, 2023 due primarily to an increase in nonperforming loans in small business lending during the quarter. Total nonperforming assets increased $2.7 million, or 26.0%, to $13.1 million as of June 30, 2024, compared to $10.4 million as of December 31, 2023, due primarily to the increase in nonperforming loans in small business lending mentioned above. As of June 30, 2024, the Company did not own any OREO. As of December 31, 2023, the Company had two residential mortgage properties in OREO with a carrying value of $0.4 million.
Previous wording
The following table provides a rollforward of the allowance for credit losses for the last five completed fiscal quarters.
Current wording
The following table provides a rollforward of the allowance for credit losses for the last five completed fiscal quarters and the six months ended June 30, 2024 and 2023.
Previous wording
The allowance for credit losses - loans (“ACL”) was $40.9 million as of March 31, 2024, compared to $38.8 million as of December 31, 2023. The increase in the ACL reflects the addition of specific reserves on nonperforming small business lending loans, as well as loan growth, partially offset by the positive impact of economic data on forecasted loss rates and qualitative factors on other portfolios. The ACL as a percentage of total loans was 1.05% at March 31, 2024, compared to 1.01% at December 31, 2023. The ACL as a percentage of nonperforming loans decreased to 333.4% as of March 31, 2024, compared to 425.0% as of December 31, 2023, due primarily to the increase in the nonperforming loans.
Current wording
The allowance for credit losses - loans (“ACL”) was $43.4 million as of June 30, 2024, compared to $38.8 million as of December 31, 2023. The increase in the ACL reflects growth and higher coverage ratios in certain portfolios, as well as additional reserves for nonperforming small business lending loans, partially offset by the positive impact of economic data on forecasted loss rates and qualitative factors for other portfolios. The ACL as a percentage of total loans was 1.10% at June 30, 2024, compared to 1.01% at December 31, 2023. The ACL as a percentage of nonperforming loans decreased to 334.5% as of June 30, 2024, compared to 389.2% as of December 31, 2023, due primarily to the increase in nonperforming loans.
Previous wording
Net charge-offs of $0.5 million were recognized during the first quarter 2024, resulting in net charge-offs to average loans of 0.05%, compared to net charge-offs of $7.2 million, or 0.82% of average loans, for the first quarter 2023. The decrease in net charge-offs was due primarily to a $6.9 million partial charge-off of a C&I participation loan that was placed on nonaccrual status during the first quarter 2023, partially offset by an increase in charge-offs in small business lending.
Current wording
Net charge-offs of $1.4 million were recognized during the second quarter 2024, resulting in net charge-offs to average loans of 0.14%, compared to net charge-offs of $1.6 million, or 0.17% of average loans, for the second quarter 2023. The decrease in net charge-offs was due primarily to a decrease in charge-offs for small business lending, partially offset by an increase in charge-offs for franchise finance loans.
Previous wording
The provision for credit losses - loans in the first quarter 2024 was $2.6 million, compared to $9.4 million for the first quarter 2023. The decrease in the provision for credit losses - loans for the first quarter 2024 was driven primarily by the partial charge-off of the C&I participation loan mentioned above that occurred in the first quarter 2023, partially offset by the specific reserves related to small business lending and growth in certain loan portfolios.
Current wording
The provision for credit losses - loans in the second quarter 2024 was $3.9 million, compared to $0.8 million for the second quarter 2023. The increase in the provision for credit losses - loans for the second quarter 2024 was driven primarily by growth and higher coverage ratios in certain loan portfolios as well as additional reserves related to small business lending, partially offset by the positive impact of economic data on forecasted loss rates and qualitative factors on other portfolios.
Previous wording
The approximate fair value of available-for-sale investment securities increased $7.6 million, or 1.6%, to $482.4 million as of March 31, 2024, compared to $474.9 million as of December 31, 2023. The increase was due primarily to increases of $13.8 million in agency mortgage-backed securities - residential, $1.5 million in private label mortgage-backed securities - residential, partially offset by decreases of $3.1 million in U.S. Government-sponsored agencies, $2.2 million in corporate securities, and $1.0 million in municipal securities. This increase was caused primarily by new purchase activity within certain available-for-sale portfolios, partially offset by a decline in fair value resulting from an increase in market interest rates, as well as net paydown activity. As of March 31, 2024, the Company had securities with a net carrying value of $235.7 million designated as held-to-maturity compared to $227.2 million as of December 31, 2023. The increase was due primarily to purchases of CRA-eligible agency mortgage-backed securities - residential.
Current wording
The approximate fair value of available-for-sale investment securities increased $13.7 million, or 2.9%, to $488.6 million as of June 30, 2024, compared to $474.9 million as of December 31, 2023. The increase was due primarily to increases of $23.4 million in agency mortgage-backed securities - residential, $4.9 million in private label mortgage-backed securities - residential, partially offset by decreases of $7.4 million in U.S. Government-sponsored agencies, $4.0 million in municipal securities, $2.0 million in agency mortgage-backed securities - commercial and $1.4 million in corporate securities. This increase was caused primarily by new purchase activity within certain available-for-sale portfolios, partially offset by net paydown activity. As of June 30, 2024, the Company had securities with a net carrying value of $270.3 million designated as held-to-maturity compared to $227.2 million as of December 31, 2023. The increase was due primarily to purchases of CRA-eligible agency mortgage-backed securities - residential.
Previous wording
Accrued income and other assets increased $12.3 million, or 24.0%, to $63.4 million at March 31, 2024 compared to $51.1 million at December 31, 2023. The increase was due primarily to a $6.6 million increase in equity investments and a $1.2 million increase in prepaid assets.
Current wording
Accrued income and other assets increased $11.9 million, or 23.2%, to $63.0 million at June 30, 2024 compared to $51.1 million at December 31, 2023. The increase was due primarily to increases of $9.6 million in equity investments and $2.5 million in prepaid assets, partially offset by a decrease of $0.6 million in derivative assets.
Previous wording
Accrued expenses and other liabilities increased $2.7 million, or 19.3%, to $16.9 million at March 31, 2024, compared to $14.2 million at December 31, 2023. The increase was due primarily to an increase of $4.4 million in accrued expenses related to a security that was purchased in the first quarter 2024, but settled in the subsequent quarter, partially offset by decreases of $1.2 million in accrued salary and benefits and $0.5 million in derivative liability due to changes in fair value.
Current wording
Accrued expenses and other liabilities decreased $0.2 million, or 1.2%, to $14.0 million at June 30, 2024, compared to $14.2 million at December 31, 2023.
Previous wording
Total deposits increased $206.8 million, or 5.1%, to $4.3 billion as of March 31, 2024, compared to $4.1 billion as of December 31, 2023. This increase was due primarily to increases of $133.8 million, or 8.3%, in certificates of deposits, $33.5 million, or 45.0%, in BaaS - brokered deposits and $20.6 million, or 5.1%, in interest-bearing demand deposits. The increase in certificates of deposits and brokered deposits was due primarily to strong consumer and small business demand for certificates of deposits in 2024. The increase in interest-bearing demand deposits was due primarily to growth in fintech partnership deposits. The increase in BaaS - brokered deposits was driven by higher payments volumes.
Current wording
Total deposits increased $206.9 million, or 5.1%, to $4.3 billion as of June 30, 2024, compared to $4.1 billion as of December 31, 2023. The increase was due primarily to increases of $224.5 million, or 14.0%, in certificates of deposits, $77.2 million, or 19.2%, in interest-bearing demand deposits and $65.8 million, or 88.4%, in BaaS - brokered deposits, partially offset by decreases of $138.6 million, or 23.4%, in brokered deposits and $26.1 million, or 2.1%, in money market accounts. The increase in certificates of deposits was due primarily to strong consumer and small business demand throughout 2024. The increase in interest-bearing demand deposits was due primarily to growth in fintech partnership deposits. The increase in BaaS - brokered deposits was driven by higher payments volumes from our fintech partners. Using liquidity created by the growth in these deposit channels, the Company was able to pay down higher-cost brokered deposits during 2024.
Previous wording
Uninsured deposit balances represented 26% of total deposits at March 31, 2024, up from 25% at December 31, 2023. These balances include Indiana-based municipal deposits, which are insured by the Indiana Board for Depositories, as well as larger balance accounts under contractual agreements that only allow withdrawal under certain conditions. After subtracting these types of deposits, the adjusted uninsured deposit balance drops to 20%, compared to 19% as of December 31, 2023.
Current wording
Uninsured deposit balances represented 26% of total deposits at June 30, 2024, up from 25% at December 31, 2023. These balances include Indiana-based municipal deposits, which are insured by the Indiana Board for Depositories, as well as larger balance accounts under contractual agreements that only allow withdrawal under certain conditions. After subtracting these types of deposits, the adjusted uninsured deposit balance drops to 20% as of June 30, 2024, compared to 19% as of December 31, 2023.
Previous wording
The Company holds cash and investment securities that qualify as liquid assets to maintain adequate liquidity to ensure safe and sound operations and meet its financial commitments. At March 31, 2024, on a consolidated basis, the Company had $963.7 million in cash and cash equivalents and investment securities available-for-sale and $22.6 million in loans held-for-sale that were generally available for its cash needs. The Company can also generate funds from wholesale funding sources and collateralized borrowings. At March 31, 2024, the Bank had the ability to borrow an additional $1.3 billion from the FHLB, the Federal Reserve and correspondent bank Fed Funds lines of credit, which when combined with cash balances, totaled $1.7 billion and represented 203% of adjusted uninsured deposit balances.
Current wording
The Company holds cash and investment securities that qualify as liquid assets to maintain adequate liquidity to ensure safe and sound operations and meet its financial commitments. At June 30, 2024, on a consolidated basis, the Company had $885.4 million in cash and cash equivalents and investment securities available-for-sale and $19.4 million in loans held-for-sale that were generally available for its cash needs. The Company can also generate funds from wholesale funding sources and collateralized borrowings. At June 30, 2024, the Bank had the ability to borrow an additional $1.3 billion from the FHLB, the Federal Reserve and correspondent bank Fed Funds lines of credit, which when combined with cash balances, totaled $1.7 billion and represented 197% of adjusted uninsured deposit balances.
Previous wording
The Company is a separate legal entity from the Bank and must provide for its own liquidity. In addition to its operating expenses, the Company is responsible for paying any dividends declared to its common shareholders and interest and principal on outstanding debt. The Company’s primary sources of funds are cash maintained at the holding company level and dividends from the Bank, the payment of which is subject to regulatory limits. At March 31, 2024, the Company, on an unconsolidated basis, had $7.0 million in cash for debt servicing and operating expenses.
Current wording
The Company is a separate legal entity from the Bank and must provide for its own liquidity. In addition to its operating expenses, the Company is responsible for paying any dividends declared to its common shareholders and interest and principal on outstanding debt. The Company’s primary sources of funds are cash maintained at the holding company level and dividends from the Bank, the payment of which is subject to regulatory limits. At June 30, 2024, the Company, on an unconsolidated basis, had $8.2 million in cash for debt servicing and operating expenses.
Previous wording
The Company uses its sources of funds primarily to meet ongoing financial commitments, including withdrawals by depositors, credit commitments to borrowers, operating expenses and capital expenditures. At March 31, 2024, approved outstanding loan commitments, including unused lines of credit and standby letters of credit, amounted to $726.5 million. Certificates of deposits and brokered deposits scheduled to mature in one year or less at March 31, 2024 totaled $1.3 billion.
Current wording
The Company uses its sources of funds primarily to meet ongoing financial commitments, including withdrawals by depositors, credit commitments to borrowers, operating expenses and capital expenditures. At June 30, 2024, approved outstanding loan commitments, including unused lines of credit and standby letters of credit, amounted to $715.0 million. Certificates of deposits and brokered deposits scheduled to mature in one year or less at June 30, 2024 totaled $1.3 billion.
Previous wording
In the ordinary course of business, the Company enters into financial transactions to extend credit, interest rate swap agreements and forms of commitments that may be considered off-balance sheet arrangements. Interest rate swaps are arranged to receive hedge accounting treatment and are classified as either fair value or cash flow hedges. Fair value hedges are purchased to convert certain fixed rate assets to floating rate. Cash flow hedges are used to convert certain variable rate liabilities into fixed rate liabilities. At both March 31, 2024 and December 31, 2023, the Company had interest rate swaps with notional amounts of $200.0 million. Refer to Note 13 to the condensed consolidated financial statements for additional information about derivative financial instruments.
Current wording
In the ordinary course of business, the Company enters into financial transactions to extend credit, interest rate swap agreements and forms of commitments that may be considered off-balance sheet arrangements. Interest rate swaps are arranged to receive hedge accounting treatment and are classified as either fair value or cash flow hedges. Fair value hedges are purchased to convert certain fixed rate assets to floating rate. Cash flow hedges are used to convert certain variable rate liabilities into fixed rate liabilities. The Company had interest rate swaps with notional amounts of $180.0 million at June 30, 2024, and $200.0 million at December 31, 2023. Refer to Note 13 to the condensed consolidated financial statements for additional information about derivative financial instruments.
Rearranged current paragraphs (6)
Current report — wording carried from elsewhere
1 Yield on total interest-earning assets minus cost of total interest-bearing liabilities.
Current report — wording carried from elsewhere
2 Net interest income divided by total average interest-earning assets (annualized).
Current report — wording carried from elsewhere
3 On an FTE basis assuming a 21% tax rate. Net interest income is adjusted to reflect income from assets such as municipal loans and securities that are exempt from Federal income taxes. This is to recognize the income tax savings that facilitates a comparison between taxable and tax-exempt assets. The Company believes that it is a standard practice in the banking industry to present net interest margin and net interest income on a fully-taxable equivalent basis, as these measures provide useful information to make peer comparisons. Net interest margin - FTE represents a non-GAAP financial measure. See “Reconciliation of Non-GAAP Financial Measures” for a reconciliation of this measure to its most directly comparable GAAP measure.
Current report — wording carried from elsewhere
The increase in total interest income for the six months ended June 30, 2024 compared to the six months ended June 30, 2023 was due primarily to an increase in interest earned on loans resulting from an increase of 72 bps in the yield on loans, including loans held-for-sale, as well as an increase of $294.8 million, or 8.1%, in the average balance of loans, including loans held-for-sale. Additionally, the average balance of securities increased $129.2 million, or 21.7%, and the yield earned on the securities portfolio increased 152 bps for the six months ended June 30, 2024 compared to the six months ended June 30, 2023. Furthermore, the yield on other earning assets increased 63 bps and the average balance of other earning assets increased $30.0 million, or 7.1%. The increase in the yield earned on loans, securities and other earning assets was due to the impact of the continued elevated interest rate environment on both existing and newly-originated interest-earning assets. The yield on funded portfolio loan originations was 8.76% for the six months ended June 30, 2024, an increase of 76 bps compared to the six months ended June 30, 2023.
Current report — wording carried from elsewhere
The increase in total interest expense for the six months ended June 30, 2024 compared to the six months ended June 30, 2023 was due primarily to increases of $19.5 million, or 56.6%, in interest expense associated with certificates and brokered deposits, $2.2 million, or 93.4%, in interest expense associated with interest-bearing demand deposits, $1.9 million, or 506.0%, in interest expense associated with BaaS - brokered deposits, and $1.1 million, or 4.6%, in interest expense associated with money market accounts. The increase in interest expense related to certificates and brokered deposits was driven by an increase of 97 bps in the cost of these deposits, as well as an increase of $441.9 million, or 24.1%, in the average balance of these deposits. The increase in the average balance of these deposits was driven by strong consumer and small business demand for certificates of deposits in 2024. The increase in interest expense related to interest-bearing demand deposits was due primarily to a 71 bp increase in the cost of these deposits, as well as an increase of $97.7 million, or 28.2%, in the average balance of these deposits. The increase in interest expense related to BaaS - brokered deposits was driven primarily by an increase of 43 bps in the cost of these deposits, as well as an increase of $83.7 million, or 443.8%, in the average balance of these deposits. The increase in interest expense related to money market accounts was driven primarily by an increase of 47 bps in the cost of these deposits, partially offset by a decrease of $95.3 million, or 7.2%, in the average balance of these deposits. The increase in the cost of funds reflects the impact of the continued elevated interest rate environment throughout 2023 and 2024.
Current report — wording carried from elsewhere
During the second quarter 2024, noninterest income was $11.0 million, representing an increase of $5.2 million, or 87.9%, compared to $5.9 million for the second quarter 2023. The increase in noninterest income was due primarily to increases in gain on sale of loans and other income. The increase of $3.4 million, or 70.3%, in gain on sale of loans was due primarily to an increase in U.S. Small Business Administration (“SBA”) 7(a) guaranteed loan sales. The increase of $1.6 million, or 532.8%, in other income is due primarily to distributions from fund investments.
Rearranged previous paragraphs (1)
Previous report — wording carried elsewhere
In the first quarter 2023, the Company incurred $2.2 million in severance costs as a result of its decision to exit the mortgage business. Excluding these costs, salaries and employee benefits increased $2.2 million, or 22.4%, in the first quarter 2024, compared to the first quarter 2023. The increase was due primarily to continued staffing growth and higher incentive compensation in small business lending, as well as higher incentive compensation accruals based on the increase in net income in the first quarter 2024 compared to first quarter 2023.