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 $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.

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 $113.8 million in SBA 7(a) loans during the three months ended March 31, 2025, and currently rank as the 8th largest SBA 7(a) lender for the SBA’s year-to-date 2025 fiscal year. We also offer a top-ranked small business checking account product to our country’s entrepreneurs.

Previous 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.

Current wording

As of March 31, 2025, the Company had consolidated assets of $5.9 billion, consolidated deposits of $4.9 billion and stockholders’ equity of $387.7 million.

Previous 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.

Current wording

During the first quarter 2025, return on average assets (“ROAA”), return on average shareholders’ equity (“ROAE”), and return on average tangible common equity (“ROATCE”) were 0.07%, 0.98%, and 0.99%, respectively, compared to 0.40%, 5.64%, and 5.71%, respectively, for the first quarter 2024.

Previous 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.

Current wording

Net interest income for the first quarter 2025 was $25.1 million, an increase of $4.4 million, or 21.0%, compared to $20.7 million for the first quarter 2024. The increase in net interest income was the result of an $8.7 million, or 12.7%, increase in total interest income to $76.8 million for the first quarter 2025 from $68.2 million for the first quarter 2024, partially offset by a $4.3 million, or 9.1%, increase in total interest expense to $51.7 million for the first quarter 2025 from $47.4 million for the first quarter 2024.

Previous 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.

Current wording

The increase in total interest income for the first quarter 2025 compared to first quarter 2024 was due primarily to an increase in interest earned on loans, resulting from an increase of 26 bps in the yield earned on loans, including loans held-for-sale, as well as an increase of $350.3 million, or 9.0%, in the average balance of loans, including loans held-for-sale. Additionally, the average balance of securities increased $198.4 million, or 28.2%, and the yield earned on the securities portfolio increased 29 bps for the first quarter 2025 compared to the first quarter 2024. The yield on funded portfolio loan originations was 7.78% for the first quarter 2025, a decrease of 107 bps compared to the first quarter 2024, reflective of 100 bps of Fed rate cuts in the second half of 2024. However, new origination yields remained well above the overall loan portfolio yield, helping to drive both total interest income and the loan portfolio yield higher.

Previous 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.

Current wording

The increase in total interest expense for the first quarter 2025 compared to the first quarter 2024 was due primarily to increases of $4.9 million, or 233.5%, in interest expense associated with interest-bearing demand deposits and $2.9 million, or 10.8%, in interest expense associated with certificates and brokered deposits, partially offset by decreases of $1.3 million, or 10.3%, in interest expense associated with money market accounts and $1.2 million, or 22.5%, in interest expense associated with other borrowed funds. When combined with deposits formerly classified as fintech – brokered deposits, the increase in interest expense related to interest-bearing demand deposits was driven by an increase in the average balance of $173.2 million, or 22.1%, compared to the the fourth quarter of 2024 due to continued growth in fintech deposits, while the cost of fund increased 41 bps due to the change in deposit mix. The increase in interest expense related to certificates and brokered deposits was driven by an increase in the average deposit balance of $371.2 million, or 16.5%, partially offset by a decrease of 20 bps in the cost 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 brokered deposits, which is expected to positively impact deposit costs in future periods. The decrease in interest expense related to money market accounts was driven by a 41 bp decrease in cost of these deposits. The decrease in interest expense related to other borrowed funds was driven by a decrease in the average balance of $127.5 million, or 24.1%, partially offset by an increase of 31bps in the cost of funds.

Previous 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.

Current wording

Net interest margin (“NIM”) was 1.82% for the first quarter 2025 compared to 1.66% for the first quarter 2024, an increase of 16 bps. On a fully-taxable equivalent (“FTE”) basis, NIM was 1.91% for the first quarter 2025 compared to 1.75% for the first quarter 2024, an increase of 16 bps. The increase in the first quarter 2025 NIM and FTE NIM compared to the first quarter 2024 reflects the combination of deploying cash balances into higher yielding loans and securities and continued improvement in the cost of funds related to deposits.

Previous 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.

Current wording

During the first quarter 2025, noninterest income was $10.4 million, representing an increase of $2.1 million, or 24.9%, compared to $8.3 million for the first quarter 2024. The increase in noninterest income was due primarily to increases in gain on sale of loans, partially offset by a decrease in net loan servicing revenue. The increase of $2.1 million, or 32.3%, in gain on sale of loans was due primarily to an increase of 36.2% in the volume of U.S. Small Business Administration (“SBA”) 7(a) guaranteed loan sales, partially offset by a decrease of 36 bps in the net premium earned on loan sales. The decrease in net loan servicing was due to the fair value adjustment to the loan servicing asset, partially offset by growth in the balance of the Company’s SBA 7(a) servicing portfolio.

Previous 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.

Current wording

Noninterest expense for the first quarter 2025 was $23.6 million, compared to $21.0 million for the first quarter 2024. The increase of $2.5 million, or 12.0%, was due primarily to increases of $1.3 million in salaries and employee benefits, $0.4 million in consulting and professional fees, $0.3 million in premises and equipment, $0.3 million in deposit insurance premium, $0.2 million in other expenses. 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 consulting and professional fees is due primarily to increased legal and audit fees. The increase in premises and equipment was due primarily to property taxes, as well as software maintenance expense. The increase in deposit insurance premium was due to year-over-year asset growth and changes in the composition of the loan and deposit portfolios. The increase in other expenses is due primarily to increases in service fees.

Previous 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.

Current wording

The Company recorded an income tax benefit of $0.9 million for the first quarter 2025, compared to an income tax provision of $0.4 million and an effective tax rate of 7.6% for the first quarter 2024.

Previous wording

The following table presents summary balance sheet data for the last five completed fiscal quarters.

Current wording

The following table shows summary balance sheet data for each of the periods presented.

Previous 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.

Current wording

As of March 31, 2025, total shareholders’ equity was $387.7 million, an increase of $3.7 million, or 1.0%, compared to December 31, 2024. The increase in shareholders’ equity was due primarily to the net income earned during the quarter and a decrease in accumulated other comprehensive loss as unrealized losses on securities decreased during the quarter. Tangible common equity totaled $383.1 million as of March 31, 2025, representing an increase of $3.7 million, or 1.0%, compared to December 31, 2024. The ratio of total shareholders’ equity to total assets decreased to 6.63% as of March 31, 2025 from 6.69% as of December 31, 2024, and the ratio of tangible common equity to tangible assets decreased to 6.55% as of March 31, 2025 from 6.62% as of December 31, 2024.

Previous 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.

Current wording

Book value per common share increased 0.6% to $44.58 as of March 31, 2025 from $44.31 as of December 31, 2024. Tangible book value per share increased 0.6% to $44.04 as of March 31, 2025 from $43.77 as of December 31, 2024. 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

The following table presents a summary of the Company’s loan portfolio for the last five completed fiscal quarters.

Current wording

The following table shows a summary of the Company’s loan portfolio for each of the periods presented.

Previous 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.

Current wording

1 Includes carrying value adjustments of $22.1 million, $22.9 million and $26.9 million related to terminated interest rate swaps associated with public finance loans as of March 31, 2025, December 31, 2024 and March 31, 2024, respectively.

Previous 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.

Current wording

Total loans were $4.3 billion as of March 31, 2025, an increase of $83.8 million, or 2.0%, compared to December 31, 2024. Total commercial loan balances were $3.4 billion as of March 31, 2025, up $89.5 million, or 2.7%, from December 31, 2024. Total consumer loan balances were $797.7 million as of March 31, 2025, a decrease of $3.7 million, or 0.5%, compared to December 31, 2024. Compared to December 31, 2024, 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 commercial and industrial portfolios. These increases were partially offset by a decrease in the franchise finance portfolio and continued runoff in the healthcare finance portfolio, as well as decreases in the owner-occupied commercial real estate and public finance portfolios. The slight decrease in consumer loan balances was due primarily to a decrease in the residential mortgage portfolio, partially offset by origination activity in the other consumer loans portfolio.

Previous wording

Nonperforming loans are comprised of nonaccrual loans and loans 90 days past due and accruing. Nonperforming assets include nonperforming loans, other real estate owned and other nonperforming assets, which consist of repossessed assets. The following table provides a summary of the Company’s nonperforming assets for the last five completed fiscal quarters.

Current wording

Nonperforming loans are comprised of nonaccrual loans and loans 90 days past due and accruing. Nonperforming assets include nonperforming loans, other real estate owned and other nonperforming assets, which consist of repossessed assets. The following table provides a summary of the Company’s nonperforming assets for each of the periods presented.

Previous 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

Current wording

Total nonperforming loans increased $5.8 million, or 20.5%, to $34.2 million as of March 31, 2025 compared to $28.4 million as of December 31, 2024 due primarily to an increase in nonperforming loans in franchise finance and small business lending during the year. Total nonperforming assets increased $7.0 million, or 24.3%, to $35.9 million as of March 31, 2025, compared to $28.9 million as of December 31, 2024, due primarily to the increase in nonperforming loans in franchise finance and small business lending mentioned above, and an increase in OREO related to small business lending. As of March 31, 2025, the Company had two small business lending properties in OREO with a carrying value of $1.5 million. As of December 31, 2024, the Company had one residential mortgage property in OREO with a carrying value of $0.3 million.

Previous 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.

Current wording

The following table provides a rollforward of the allowance for credit losses for each of the periods presented; however, allocation of a portion of the allowance to one segment does not preclude its availability to absorb losses in other segments.

Previous 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.

Current wording

The allowance for credit losses - loans (“ACL”) was $47.2 million as of March 31, 2025, compared to $44.8 million as of December 31, 2024. The increase in the ACL reflects the addition of specific reserves related to franchise finance and small business lending loans that were placed on nonaccrual during the quarter and growth in the overall loan portfolio, partially offset by the impact of economic metrics on qualitative factors in certain portfolios. The net increase to specific reserves totaled $3.3 million, of which, $2.5 million related to franchise finance and $0.8 million related to small business lending. The ACL as a percentage of total loans was 1.11% at March 31, 2025, compared to 1.07% at December 31, 2024. The ACL as a percentage of nonperforming loans decreased to 138.0% as of March 31, 2025, compared to 157.5% as of December 31, 2024 as the percentage increase in nonperforming loans outpaced the increase in the overall loan portfolio.

Previous 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.

Current wording

Net charge-offs of $9.7 million were recognized during the first quarter 2025, resulting in net charge-offs to average loans of 0.92%, compared to net charge-offs of $0.5 million, or 0.05% of average loans, for the first quarter 2024. Net charge-offs in the first quarter of 2025 were elevated as the Company continued to take action to resolve problem loans in the small business lending and franchise finance portfolios. The increase in net charge-offs included $3.5 million in small business lending and $0.3 million in consumer loan portfolios. Approximately $5.8 million of net charge-offs recognized during the quarter were related to franchise finance loans with $2.6 million of existing specific reserves.

Previous 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.

Current wording

The provision for credit losses - loans in the first quarter 2025 was $12.1 million, compared to $2.6 million for the first quarter 2024. The increase in the provision for credit losses - loans for the first quarter 2025 was driven primarily by the elevated net charge-offs, the additional specific reserves discussed above and overall growth in the loan portfolio, partially offset by the impact of economic metrics on qualitative factors in certain portfolios.

Previous wording

The following tables present the amortized cost and approximate fair value of our investment securities portfolio by security type for the last five completed fiscal quarters.

Current wording

The following tables show the amortized cost and approximate fair value of our investment securities portfolio by security type for each of the periods presented.

Previous 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.

Current wording

The approximate fair value of available-for-sale investment securities increased $94.4 million, or 16.1%, to $681.8 million as of March 31, 2025, compared to $587.4 million as of December 31, 2024. The increase was due primarily to increases of $101.4 million in agency mortgage-backed securities - residential and $4.3 million in corporate securities, partially offset by decreases of $4.5 million in U.S. Government-sponsored agencies, $2.7 million in municipal securities and $2.5 million in private label mortgage-backed securities - residential. The Company deployed liquidity during the first quarter of 2025 into new purchases of variable-rate agency mortgage-backed security-residential, which was within certain available-for-sale portfolios, partially offset by net pay down activity. As of March 31, 2025, the Company had securities with a net carrying value of $276.5 million designated as held-to-maturity, compared to $249.8 million as of December 31, 2024. The increase was due primarily to purchases of CRA-eligible agency mortgage-backed securities - residential.

Previous 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.

Current wording

Accrued income and other assets increased $3.8 million, or 6.0%, to $66.8 million at March 31, 2025, compared to $63.0 million at December 31, 2024. The increase was due primarily to increases of $4.1 million in equity fund investments, $0.8 million in prepaid assets and $0.1 million in both deferred tax assets and derivative assets, partially offset by a decrease in receivables related to a bond that was called in the fourth quarter 2024.

Previous 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.

Current wording

Accrued expenses and other liabilities decreased $1.6 million, or 8.8%, to $16.4 million at March 31, 2025, compared to $17.9 million at December 31, 2024. The decrease was due primarily to decreases of $3.1 million in accrued salary and benefits, partially offset by $1.4 million in other various expenses and liabilities, none of which were individually significant.

Previous wording

The following table presents the composition of the Company’s deposit base for the last five completed fiscal quarters.

Current wording

The following table shows the composition of the Company’s deposit base for each of the periods presented.

Previous wording

Total deposits increased $730.7 million, or 18.0%, to $4.8 billion as of September 30, 2024, compared to $4.1 billion as of December 31, 2023. The increase was due primarily to increases of $505.5 million, or 31.5%, in certificates of deposits, $137.4 million, or 184.7%, in fintech - brokered deposits and $135.5 million, or 33.6% in interest-bearing demand deposits, partially offset by decreases of $18.5 million, or 3.1%, in brokered deposits, $17.6 million, or 1.4%, in money market accounts and $11.9 million, or 9.6%, in noninterest-bearing deposits. The increase in certificates of deposits was due primarily to strong consumer and small business demand throughout 2024. The increase in fintech - brokered deposits was driven by higher payments volumes from our fintech partners. The increase in interest-bearing demand deposits was due primarily to growth in fintech partnership deposits. Using liquidity created by the growth in these deposit channels, the Company was able to pay down higher-cost brokered deposits during 2024.

Current wording

Total deposits increased $12.4 million, or 0.3%, to $4.9 billion as of March 31, 2025, compared to $4.9 billion as of December 31, 2024. The increase was due primarily to increases of $206.9 million, or 23.1%, in interest-bearing demand deposits, $108.4 million, or 9.2%, in money market accounts and $15.4 million, or 11.3%, in noninterest-bearing deposits, partially offset by decreases of $216.4 million, or 38.4%, in brokered deposits and $103.7 million, or 4.9%, in certificates of deposits. The increase in interest-bearing demand deposits was due primarily to growth in fintech partnership deposits. When combined with the liquidity provided by growth in money market accounts, the Company paid down a significant amount of higher-cost brokered deposits and maturing certificates of deposits.

Previous wording

Uninsured deposit balances represented 24% of total deposits at September 30, 2024, down 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 19% at both September 30, 2024 and December 31, 2023.

Current wording

Uninsured deposit balances represented 27% of total deposits at March 31, 2025, up from 25% at December 31, 2024. 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 22% as of March 31, 2025, compared to 20% as of December 31, 2024.

Previous wording

On December 19, 2022, the Company's Board of Directors approved a new stock repurchase program to replace the prior program. The new program authorized the repurchase of up to $25.0 million of our outstanding common stock from time to time on the open market or in privately negotiated transactions. The stock repurchase authorization is scheduled to expire on December 31, 2024. Under this program, the Company repurchased 559,522 shares of common stock through September 30, 2024, at an average price of $19.06, for a total investment of $10.7 million.

Current wording

On December 19, 2022, the Company's Board of Directors approved a new stock repurchase program to replace the prior program. The new program authorized the repurchase of up to $25.0 million of our outstanding common stock from time to time on the open market or in privately negotiated transactions. The stock repurchase authorization expired on December 31, 2024. Under this program, the Company repurchased 559,522 shares of common stock at an average price of $19.06, for a total investment of $10.7 million.

Previous wording

Liquidity management is the process used by the Company to manage the continuing flow of funds necessary to meet its financial commitments on a timely basis and at a reasonable cost while also maintaining safe and sound operations. Liquidity, represented by cash and investment securities, is a product of the Company’s operating, investing and financing activities. The primary sources of funds are deposits, principal and interest payments on loans and investment securities, maturing loans and investment securities, access to wholesale funding sources and collateralized borrowings. While scheduled payments and maturities of loans and investment securities are relatively predictable sources of funds, deposit flows are greatly influenced by interest rates, general economic conditions and competition. Therefore, the Company supplements deposit growth and enhances interest rate risk management through borrowings and wholesale funding, which are generally advances from the Federal Home Loan Bank and brokered deposits.

Current wording

Liquidity management is the process used by the Company to manage the continuing flow of funds necessary to meet its financial commitments on a timely basis and at a reasonable cost while also maintaining safe and sound operations. Liquidity, represented by cash and investment securities, is a product of the Company’s operating, investing and financing activities. The primary sources of funds are deposits, principal and interest payments on loans and investment securities, maturing loans and investment securities, access to wholesale funding sources and collateralized borrowings. While scheduled payments and maturities of loans and investment securities are relatively predictable sources of funds, deposit flows are greatly influenced by interest rates, general economic conditions and competition. Therefore, the Company supplements deposit growth and enhances interest rate risk management through borrowings and wholesale funding, which are generally advances from the Federal Home Loan Bank (“FHLB”) and brokered deposits.

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 September 30, 2024, on a consolidated basis, the Company had $1.3 billion in cash and cash equivalents and investment securities available-for-sale and $33.0 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 September 30, 2024, the Bank had the ability to borrow an additional $1.4 billion from the FHLB, the Federal Reserve and correspondent bank Fed Funds lines of credit, which when combined with cash balances, totaled $2.1 billion and represented 230% 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 March 31, 2025, on a consolidated basis, the Company had $1.1 billion in cash and cash equivalents and investment securities available-for-sale and $31.7 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, 2025, the Bank had the ability to borrow an additional $1.7 billion from the FHLB, the Federal Reserve and correspondent bank Fed Funds lines of credit, which when combined with cash balances, totaled $2.1 billion and represented 194% 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 September 30, 2024, the Company, on an unconsolidated basis, had $9.7 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 March 31, 2025, the Company, on an unconsolidated basis, had $12.7 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 September 30, 2024, approved outstanding loan commitments, including unused lines of credit and standby letters of credit, amounted to $708.3 million. Certificates of deposits and brokered deposits scheduled to mature in one year or less at September 30, 2024 totaled $1.4 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 March 31, 2025, approved outstanding loan commitments, including unused lines of credit and standby letters of credit, amounted to $626.2 million. Certificates of deposits and brokered deposits scheduled to mature in one year or less at March 31, 2025 totaled $1.4 billion.

Previous wording

This Management’s Discussion and Analysis contains financial information determined by methods other than in accordance with GAAP. Non-GAAP financial measures, specifically tangible common equity, tangible assets, tangible book value per common share, tangible common equity to tangible assets, average tangible common equity, return on average tangible common equity, total interest income - FTE, net interest income - FTE, net interest margin - FTE, adjusted total revenue, adjusted noninterest income, adjusted noninterest expense, adjusted income before income taxes, adjusted income tax provision (benefit), adjusted net income, adjusted diluted earnings per share, adjusted return on average assets, adjusted return on average shareholders’ equity and adjusted return on average tangible common equity are used by the Company’s management to measure the strength of its capital and analyze profitability, including its ability to generate earnings on tangible capital invested by its shareholders. The Company also believes that it is a standard practice in the banking industry to present total interest income, net interest income and net interest margin on a fully-taxable equivalent basis, as those measures provide useful information for peer comparisons. Although the Company believes these non-GAAP financial measures provide a greater understanding of its business, they should not be considered a substitute for financial measures determined in accordance with GAAP, nor are they necessarily comparable to non-GAAP financial measures that may be presented by other companies. Reconciliations of these non-GAAP financial measures to the most directly comparable GAAP financial measures are included in the following table for the last five completed fiscal quarters.

Current wording

This Management’s Discussion and Analysis contains financial information determined by methods other than in accordance with GAAP. Non-GAAP financial measures, specifically tangible common equity, tangible assets, tangible book value per common share, tangible common equity to tangible assets, average tangible common equity, return on average tangible common equity, total interest income - FTE, net interest income - FTE, net interest margin - FTE, adjusted total revenue, pre-tax, pre-provision income, adjusted pre-tax, pre-provision income, adjusted noninterest income, adjusted income before income taxes, adjusted income tax (benefit) provision, adjusted net income, adjusted diluted earnings per share, adjusted return on average assets, adjusted return on average shareholders’ equity and adjusted return on average tangible common equity are used by the Company’s management to measure the strength of its capital and analyze profitability, including its ability to generate earnings on tangible capital invested by its shareholders. The Company also believes that it is a standard practice in the banking industry to present total interest income, net interest income and net interest margin on a fully-taxable equivalent basis, as those measures provide useful information for peer comparisons. Although the Company believes these non-GAAP financial measures provide a greater understanding of its business, they should not be considered a substitute for financial measures determined in accordance with GAAP, nor are they necessarily comparable to non-GAAP financial measures that may be presented by other companies. Reconciliations of these non-GAAP financial measures to the most directly comparable GAAP financial measures are included in the following table for each of the periods presented.

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. The Company had interest rate swaps with notional amounts of $160.0 million at September 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.

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. In November 2024, the Company’s interest rate swap derivative designated as fair value hedges matured. In December 2024, the Company terminated interest rate swaps utilized as cash flow hedges against Federal Home Loan Bank advances. As a result, the Company had no interest rate swaps that were classified as either fair value or cash flow hedges either at March 31, 2025 or at December 31, 2024. Refer to Note 12 to the condensed consolidated financial statements for additional information about derivative financial instruments.