First Internet Bancorp

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 $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.

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 $371.0 million in SBA 7(a) loans during the nine months ended September 30, 2024, and ranked as the 8th largest SBA 7(a) lender for the SBA’s 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

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.

Current wording

As of September 30, 2024, the Company had consolidated assets of $5.8 billion, consolidated deposits of $4.8 billion and stockholders’ equity of $385.1 million.

Previous 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.

Current wording

During the third quarter 2024, net income was $7.0 million, or $0.80 diluted earnings per share, compared to net income of $3.4 million, or $0.39 diluted earnings per share, during the third quarter 2023, representing an increase in net income of $3.6 million, or 105.0%, and an increase in diluted earnings per share of $0.41, or 105.1%. During the nine months ended September 30, 2024, net income was $17.9 million, or $2.05 diluted earnings per share, compared to the nine months ended September 30, 2023 net income of $4.3 million, or $0.48 per diluted share, resulting in an increase in net income of $13.7 million, or 319.9%, and an increase in diluted earnings per share of $1.57, or 327.1%.

Previous 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.

Current wording

The $3.6 million increase in net income for the third quarter 2024 compared to the third quarter 2023 was due primarily to a $4.6 million, or 62.4%, increase in noninterest income and a $4.4 million, or 25.2%, increase in net interest income, partially offset by increases of $3.0 million, or 15.4%, in noninterest expense, $1.4 million, or 74.2%, in the provision for credit losses and $0.9 million in income tax expense.

Previous wording

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 wording

The $13.7 million increase in net income for the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023 was due primarily to a $12.7 million, or 67.7%, increase in noninterest income, an $8.7 million, or 15.8%, increase in net interest income and a $3.2 million, or 24.4%, decrease in provision for credit losses, partially offset by increases of $6.8 million, or 11.4%, in noninterest expense and $4.2 million in income tax expense.

Previous 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.

Current wording

During the third quarter 2024, return on average assets (“ROAA”), return on average shareholders’ equity (“ROAE”), and return on average tangible common equity (“ROATCE”) were 0.50%, 7.32%, and 7.41%, respectively, compared to 0.26%, 3.79%, and 3.84%, respectively, for the third quarter 2023. During the nine months ended September 30, 2024, ROAA, ROAE and ROATCE were 0.45%, 6.42%, and 6.51%, respectively, compared to 0.12%, 1.59%, and 1.61%, respectively, for the nine months ended September 30, 2023.

Previous wording

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 wording

During the nine months ended September 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 nine months ended September 30, 2024 was $18.4 million and adjusted diluted earnings per share was $2.10. Additionally, for the nine months ended September 30, 2024, adjusted ROAA, adjusted ROAE and adjusted ROATCE were 0.46%, 6.58% and 6.67%, respectively.

Previous wording

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 wording

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 nine months ended September 30, 2023. The Company also recognized $0.1 million of mortgage banking revenue during the nine months ended September 30, 2023.

Previous wording

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 wording

Additionally, during the nine months ended September 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.

Previous wording

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 wording

Excluding the impact of exiting consumer mortgage and the partial charge-off, adjusted net income for the nine months ended September 30, 2023 was $12.1 million and adjusted diluted earnings per share was $1.35. Additionally, for the nine months ended September 30, 2023, adjusted ROAA, adjusted ROAE and adjusted ROATCE were 0.34%, 4.50% and 4.56%, respectively

Previous 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.

Current wording

Net interest income for the third quarter 2024 was $21.8 million, an increase of $4.4 million, or 25.2%, compared to $17.4 million for the third quarter 2023. The increase in net interest income was the result of a $12.0 million, or 19.0%, increase in total interest income to $75.0 million for the third quarter 2024 from $63.0 million for the third quarter 2023, partially offset by a $7.6 million, or 16.6%, increase in total interest expense to $53.2 million for the third quarter 2024 from $45.6 million for the third quarter 2023.

Previous wording

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 wording

Net interest income for the nine months ended September 30, 2024 was $63.8 million, an increase of $8.7 million, or 15.8%, compared to $55.1 million for the nine months ended September 30, 2023. The increase in net interest income was the result of a $40.9 million, or 23.6%, increase in total interest income to $214.1 million for the nine months ended September 30, 2024 from $173.2 million for the nine months ended September 30, 2023. The increase in total interest income was partially offset by a $32.2 million, or 27.3%, increase in total interest expense to $150.3 million for the nine months ended September 30, 2024 from $118.1 million for the nine months ended September 30, 2023.

Previous 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.

Current wording

The increase in total interest income for the third quarter 2024 compared to third quarter 2023 was due primarily to an increase in interest earned on loans, resulting from an increase of 66 bps in the yield earned on loans, including loans held-for-sale, as well as an increase of $328.3 million, or 8.9%, in the average balance of loans, including loans held-for-sale. Additionally, the average balance of securities increased $170.2 million, or 27.4%, and the yield earned on the securities portfolio increased 69 bps for the third quarter 2024 compared to the third 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 existing interest-earning assets. The yield on funded portfolio loan originations was 8.85% for the third quarter 2024, a decrease of 7 bps compared to the third quarter 2023.

Previous wording

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 wording

The increase in total interest income for the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023 was due primarily to an increase in interest earned on loans resulting from an increase of 70 bps in the yield earned on loans, including loans held-for-sale, as well as an increase of $305.9 million, or 8.4%, in the average balance of loans, including loans held-for-sale. Additionally, the average balance of securities increased $143.0 million, or 23.7%, and the yield earned on the securities portfolio increased 78 bps for the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023. Furthermore, the yield on other earning assets increased 38 bps, partially offset by a $23.1 million, or 4.6%, decrease in the average balance of other earning assets. 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 8.85% for the nine months ended September 30, 2024, an increase of 56 bps compared to the nine months ended September 30, 2023.

Previous 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.

Current wording

The increase in total interest expense for the third quarter 2024 compared to the third quarter 2023 was due primarily to increases of $4.6 million, or 18.0%, in interest expense associated with certificates and brokered deposits, $1.3 million, or 383.3%, in interest expense associated with fintech - brokered deposits and $0.7 million, or 35.1%, 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 32 bps in the cost of these deposits, as well as an increase of $236.8 million, or 10.6%, 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 fintech - brokered deposits was driven by an increase of 4 bps in the cost of these deposits, as well as an increase of $121.1 million, or 379.8%, in the average balance of these deposits. The increase in interest expense related to interest-bearing demand deposits was driven by an increase of 6 bps in the cost of these deposits, as well as an increase of $123.9 million, or 32.0%, 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

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 wording

The increase in total interest expense for the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023 was due primarily to increases of $24.0 million, or 40.3%, in interest expense associated with certificates and brokered deposits, $3.2 million, or 446.4%, in interest expense associated with fintech - brokered deposits, $3.0 million, or 66.0%, in interest expense associated with interest-bearing demand deposits, and $1.6 million, or 4.2%, 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 72 bps in the cost of these deposits, as well as an increase of $372.6 million, or 18.9%, 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, 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 interest-bearing demand deposits was due primarily to a 48 bp increase in the cost of these deposits, as well as an increase of $106.5 million, or 29.5%, in the average balance of these deposits. The increase in interest expense related to fintech - brokered deposits was driven primarily by an increase of 25 bps in the cost of these deposits, as well as an increase of $96.2 million, or 413.9%, in the average balance of these deposits. The increase in interest expense related to money market accounts was driven primarily by an increase of 37 bps in the cost of these deposits, partially offset by a decrease of $65.2 million, or 5.0%, 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

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 wording

Overall, the cost of total interest-bearing liabilities for the third quarter 2024 increased 32 bps to 4.23% from 3.91% for the third quarter 2023. The cost of total interest-bearing liabilities for the nine months ended September 30, 2024 increased 55 bps to 4.14% from 3.59% for the nine months ended September 30, 2023. The increase in the cost of funds for the three and nine months ended September 30, 2024 reflects the impact of the continued elevated interest rate environment throughout 2023 and 2024.

Previous 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

Current wording

Net interest margin (“NIM”) was 1.62% for the third quarter 2024 compared to 1.39% for the third quarter 2023, an increase of 23 bps. On a fully-taxable equivalent (“FTE”) basis, NIM was 1.70% for the third quarter 2024 compared to 1.49% for the third quarter 2023, an increase of 21 bps. NIM was 1.65% for the nine months ended September 30, 2024 compared to 1.55% for the nine months ended September 30, 2023, an increase of 10 bps. FTE NIM was 1.74% for the nine months ended September 30, 2024 compared to 1.66% for the nine months ended September 30, 2023, an increase of 8 bps.

Previous wording

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 wording

The increase in the third quarter 2024 NIM and FTE NIM compared to the third 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 FTE NIM for the nine months ended September 30, 2024 compared to the nine months ended September 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.

Previous wording

The following table presents noninterest income for the last five completed fiscal quarters and the six months ended June 30, 2024 and 2023.

Current wording

The following table presents noninterest income for the last five completed fiscal quarters and the nine months ended September 30, 2024 and 2023.

Previous wording

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.

Current wording

During the third quarter 2024, noninterest income was $12.0 million, representing an increase of $4.6 million, or 62.4%, compared to $7.4 million for the third quarter 2023. The increase in noninterest income was due primarily to increases in gain on sale of loans and other income, partially offset by a decrease in net loan servicing revenue. The increase of $4.4 million, or 78.4%, 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 $0.3 million, or 36.9%, in other income was due primarily to distributions from fund investments. The decrease in net loan servicing was due to the fair value adjustment to the loan servicing asset.

Previous 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.

Current wording

During the nine months ended September 30, 2024, noninterest income was $31.4 million, an increase of $12.7 million, or 67.7%, compared to $18.7 million for the nine month ended September 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 $10.3 million, or 70.8%, in gain on sale of loans was due primarily to an increase in SBA 7(a) guaranteed loan sales. The increase of $2.2 million, or 147.8%, in other income was due primarily to distributions from fund investments. The increase in net loan servicing revenue was due to growth in the balance of the Company’s SBA 7 (a) servicing portfolio, partially offset by the fair value adjustment to the loan servicing asset.

Previous wording

The following table presents noninterest expense for the last five completed fiscal quarters and the six months ended June 30, 2024 and 2023.

Current wording

The following table presents noninterest expense for the last five completed fiscal quarters and the nine months ended September 30, 2024 and 2023.

Previous wording

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 wording

Noninterest expense for the third quarter 2024 was $22.8 million, compared to $19.8 million for the third quarter 2023. The increase of $3.0 million, or 15.4%, was due primarily to increases of $1.7 million in salaries and employee benefits, $0.6 million in premises and equipment, $0.4 million in consulting and professional fees, $0.2 million in loan expenses, and $0.2 million in deposit insurance premium. The increase in salaries and employee benefits was due primarily to higher small business lending incentive compensation, as well as staff additions in small business lending and risk management. The increase in premises and equipment was due primarily to property taxes, as well as software maintenance expense. The increase in consulting and professional fees was due primarily to increased consulting and audit fees. The increase in loan expenses was due primarily to higher third-party loan servicing fees and other miscellaneous lending costs. The increase in deposit insurance premium was due to asset growth and changes in the composition of the loan and deposit portfolios.

Previous 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.

Current wording

Noninterest expense for the nine months ended September 30, 2024 was $66.2 million, compared to $59.4 million for the nine months ended September 30, 2023. The increase of $6.8 million, or 11.4%, was due primarily to increases of $3.4 million in salaries and employee benefits, $1.1 million in premises and equipment, $1.0 million in deposit insurance premium, $0.6 million in other expenses and $0.6 million in consulting and professional fees. 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 $6.4 million, or 20.4%. The increase in salaries and employee benefits was due primarily to higher small business lending incentive compensation and staff additions in small business lending and risk management, as well as higher incentive compensation accruals based on the increase in net income for the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023. The increase in premises and equipment was due primarily to non-recurring IT termination fees, property taxes and software maintenance expense. 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 was due primarily 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.

Previous 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.

Current wording

The Company recorded an income tax provision of $0.6 million and an effective tax rate of 8.1% for the third quarter 2024, compared to an income tax benefit of $0.3 million for the third quarter 2023. The Company recorded an income tax provision of $1.3 million and an effective tax rate of 6.6% for the nine months ended September 30, 2024, compared to an income tax benefit of $2.9 million for the nine months ended September 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 nine months ended September 30, 2023.

Previous 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%.

Current wording

Total assets increased $655.7 million, or 12.7%, to $5.8 billion at September 30, 2024 compared to $5.2 billion at December 31, 2023. The increase was due primarily to increases in cash balances, securities and loans.

Previous 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.

Current wording

As of September 30, 2024, total shareholders’ equity was $385.1 million, an increase of $22.3 million, or 6.2%, compared to December 31, 2023. The increase in shareholders’ equity was due primarily to the net income earned during the nine months ended September 30, 2024 and a decrease in accumulated other comprehensive loss, as unrealized losses on securities decreased during 2024. Tangible common equity totaled $380.4 million as of September 30, 2024, representing an increase of $22.3 million, or 6.2%, compared to December 31, 2023. The ratio of total shareholders’ equity to total assets decreased to 6.61% as of September 30, 2024 from 7.02% as of December 31, 2023, and the ratio of tangible common equity to tangible assets decreased to 6.54% as of September 30, 2024 from 6.94% as of December 31, 2023.

Previous 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.

Current wording

Book value per common share increased 5.9% to $44.43 as of September 30, 2024 from $41.97 as of December 31, 2023. Tangible book value per share increased 5.9% to $43.89 as of September 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 $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.

Current wording

1 Includes carrying value adjustments of $24.1 million, $25.6 million, $26.9 million, $27.8 million and $29.0 million related to terminated interest rate swaps associated with public finance loans as of September 30, 2024, June 30, 2024, March 31, 2024, December 31, 2023 and September 30, 2023, respectively.

Previous 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.

Current wording

Total loans were $4.0 billion as of September 30, 2024, an increase of $195.7 million, or 5.1%, compared to December 31, 2023. Total commercial loan balances were $3.2 billion as of September 30, 2024, up $197.6 million, or 6.6%, from December 31, 2023. Total consumer loan balances were $803.4 million as of September 30, 2024, an increase of $6.4 million, or 0.8%, 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 investor commercial real estate, small business lending, construction, 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

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.

Current wording

September 30, 2024, compared to $10.4 million as of December 31, 2023, due primarily to the increase in nonperforming loans in franchise finance and small business lending mentioned above. As of September 30, 2024, the Company had one residential mortgage property in OREO with a carrying value of $0.3 million. 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 and the six months ended June 30, 2024 and 2023.

Current wording

The following table provides a rollforward of the allowance for credit losses for the last five completed fiscal quarters and the nine months ended September 30, 2024 and 2023.

Previous 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.

Current wording

The allowance for credit losses - loans (“ACL”) was $45.7 million as of September 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 and franchise finance loans, partially offset by the impact of economic data on forecasted loss rates and qualitative factors for other portfolios. The ACL as a percentage of total loans was 1.13% at September 30, 2024, compared to 1.01% at December 31, 2023. The ACL as a percentage of nonperforming loans decreased to 203.4% as of September 30, 2024, compared to 389.2% as of December 31, 2023, due primarily to the increase in nonperforming loans in small business lending and franchise finance.

Previous 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.

Current wording

Net charge-offs of $1.5 million were recognized during the third quarter 2024, resulting in net charge-offs to average loans of 0.15%, compared to net charge-offs of $1.5 million, or 0.16% of average loans, for the third quarter 2023.

Previous wording

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.

Current wording

During the nine months ended September 30, 2024, the Company recorded net charge-offs of $3.4 million, compared to net charge-offs of $10.2 million during the nine months ended September 30, 2023. The decrease in net charge-offs for the nine months ended September 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 charged off during the first quarter 2023.

Previous 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.

Current wording

The provision for credit losses - loans in the third quarter 2024 was $3.9 million, compared to $1.9 million for the third quarter 2023. The increase in the provision for credit losses - loans for the third 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 and franchise finance loans, partially offset by the 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 $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.

Current wording

The approximate fair value of available-for-sale investment securities increased $100.4 million, or 21.1%, to $575.3 million as of September 30, 2024, compared to $474.9 million as of December 31, 2023. The increase was due primarily to increases of $59.2 million in agency mortgage-backed securities - residential, $26.0 million in agency mortgage-backed securities - commercial, $13.8 million in private label mortgage-backed securities - residential and $10.3 million in asset-backed securities, partially offset by a decrease of $6.9 million in U.S. Government-sponsored agencies. This increase was caused primarily by new purchase activity within certain available-for-sale portfolios, partially offset by net paydown activity. As of September 30, 2024, the Company had securities with a net carrying value of $263.3 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 $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.

Current wording

Accrued income and other assets increased $9.0 million, or 17.6%, to $60.1 million at September 30, 2024, compared to $51.1 million at December 31, 2023. The increase was due primarily to increases of $11.1 million in equity investments and $4.1 million in income tax receivable, partially offset by a decrease of $5.8 million in deferred tax assets.

Previous 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.

Current wording

Accrued expenses and other liabilities increased $3.4 million, or 23.7%, to $17.5 million at September 30, 2024, compared to $14.2 million at December 31, 2023. The increase was due primarily to increases of $1.9 million in accrued salary and benefits, and $1.5 million in other various expenses and liabilities.