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What changed in First Internet Bancorp's 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of First Internet Bancorp's 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+327 added−338 removedSource: 10-K (2025-03-12) vs 10-K (2024-03-13)

Top changes in First Internet Bancorp's 2024 10-K

327 paragraphs added · 338 removed · 220 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

54 edited+41 added−51 removed96 unchanged
Biggest changeThe Basel III Rule requires minimum capital ratios for bank holding companies as follows: 4 • A ratio of minimum Common Equity Tier 1 Capital equal to 4.50% of risk-weighted assets; • A ratio of minimum Tier 1 Capital equal to 6.00% of risk-weighted assets; • A continuation of the minimum required amount of Total Capital (Tier 1 plus Tier 2) at 8.00% of risk-weighted assets; and • A minimum leverage ratio of Tier 1 Capital to total quarterly average assets equal to 4.00% in all circumstances.
Biggest changeThe leverage capital ratio, which serves as a minimum capital standard, is the ratio of Tier 1 capital to quarterly average total assets net of goodwill, certain other intangible assets, and certain required deduction items. The required minimum leverage ratio for all banks and bank holding companies is 4%.
Under this guidance, banking organizations must review their compensation programs to ensure that they: (i) provide employees with incentives that appropriately balance 6 risk and reward and that do not encourage imprudent risk, (ii) are compatible with effective controls and risk management, and (iii) are supported by strong corporate governance, including active and effective oversight by the banking organization's board of directors.
Under this guidance, banking organizations must review their compensation programs to ensure that they: (i) provide employees with incentives that appropriately balance risk and reward and that do not encourage imprudent risk, (ii) are compatible with effective controls and risk management, and (iii) are supported by strong corporate governance, including active and effective oversight by the banking organization's board of directors.
Many of the statutory provisions in the AMLA require additional rulemaking, reports and other measures, and the impact of the AMLA will depend on, among other things, rulemaking and implementation guidance. The United States has imposed economic sanctions that affect transactions with designated foreign countries, nationals and others. These sanctions, which are administered by the U.S.
Many of the statutory provisions in the AMLA require additional 8 rulemaking, reports and other measures, and the impact of the AMLA will depend on, among other things, rulemaking and implementation guidance. The United States has imposed economic sanctions that affect transactions with designated foreign countries, nationals and others. These sanctions, which are administered by the U.S.
In addition, financial 8 institutions are required to file suspicious activity reports for transactions that involve more than $5,000 and which the financial institution knows, suspects or has reason to suspect involves illegal funds, is designed to evade the requirements of the BSA or has no lawful purpose.
In addition, financial institutions are required to file suspicious activity reports for transactions that involve more than $5,000 and which the financial institution knows, suspects or has reason to suspect involves illegal funds, is designed to evade the requirements of the BSA or has no lawful purpose.
These regulatory agencies have broad enforcement power over regulated entities, including the ability to impose substantial fines and other adverse consequences for violations of law and regulations. 3 Following is a summary of the material elements of the supervisory and regulatory framework applicable to the Company and Bank.
These regulatory agencies have broad enforcement power over regulated entities, including the ability to impose substantial fines and other adverse consequences for violations of law and regulations. Following is a summary of the material elements of the supervisory and regulatory framework applicable to the Company and Bank.
References to “First Internet Bank” or the “Bank” refer to First Internet Bank of Indiana, an Indiana chartered bank and wholly-owned subsidiary of the Company. Overview First Internet Bancorp is a financial holding company headquartered in Fishers, Indiana that conducts its primary business activities through its wholly-owned subsidiary, First Internet Bank of Indiana, an Indiana chartered bank.
References to “First Internet Bank” or the “Bank” refer to First Internet Bank of Indiana, an Indiana chartered bank and wholly-owned subsidiary of the Company. Overview First Internet Bancorp is a bank holding company headquartered in Fishers, Indiana that conducts its primary business activities through its wholly-owned subsidiary, First Internet Bank of Indiana, an Indiana chartered bank.
We expect this trend of increased activity and changes at the state level to continue. Recently, the SEC has enacted laws requiring public companies to disclose material cybersecurity risks and incidents along with cybersecurity protections and governance processes.
We expect this trend of increased activity and changes at the state level to continue. The SEC has enacted laws requiring public companies to disclose material cybersecurity risks and incidents along with cybersecurity protections and governance processes.
If the loans or extensions of credit are fully secured by readily marketable collateral, the Bank may lend up to an additional 10% of its unimpaired capital and surplus. Community Reinvestment Act .
If the loans or extensions of credit are fully secured by readily marketable collateral, the Bank may lend up to an additional 10% of its unimpaired capital and surplus. 6 Community Reinvestment Act .
We believe the Bank is in compliance with these provisions. 7 Enforcement . The DFI and the FDIC share primary regulatory enforcement responsibility over the Bank and its institution-affiliated parties, including directors, officers and employees.
We believe the Bank is in compliance with these provisions. Enforcement . The DFI and the FDIC share primary regulatory enforcement responsibility over the Bank and its institution-affiliated parties, including directors, officers and employees.
Notwithstanding the availability of funds for dividends, the FDIC and the DFI may prohibit the payment of dividends by the Bank if either or both determine such payment would constitute an unsafe or unsound practice.
Notwithstanding the availability of funds for 7 dividends, the FDIC and the DFI may prohibit the payment of dividends by the Bank if either or both determine such payment would constitute an unsafe or unsound practice.
This regulatory framework is intended for the protection of depositors, borrowers and other customers, as well as the FDIC deposit insurance funds and the U.S. banking system, rather than the Company’s shareholders or creditors. Banking statutes and regulations are subject to ongoing review and revision by federal and state legislatures and regulatory agencies.
This regulatory framework is intended for the protection of depositors, borrowers and other customers, as well as the FDIC deposit insurance fund and the U.S. banking system, rather than the Company’s shareholders or creditors. Banking statutes and regulations are subject to ongoing review and revision by federal and state legislatures and regulatory agencies.
The Federal Reserve is also empowered to assess civil money penalties against companies or individuals who violate Federal Reserve orders or regulations, to order termination of nonbanking activities of bank holding companies and to order termination of ownership and control of a nonbanking subsidiary by a bank holding company. Regulatory Capital .
The Federal Reserve is also empowered to assess civil money penalties against companies or individuals who violate Federal Reserve orders or regulations, to order termination of nonbanking activities of bank holding companies and to order termination of ownership and control of a nonbanking subsidiary by a bank holding company. Capital Requirements.
In November 2021, the federal banking agencies published a final rule establishing computer-security incident notification requirements that require a banking organization to notify its primary federal regulator of any “computer security incident” that rises to the level of a “notification incident” as soon as possible and no later than 36 hours after determining that such an incident has occurred.
The federal banking agencies published a final rule establishing computer-security incident notification requirements that require a banking organization to notify its primary federal regulator of any “computer security incident” that rises to the level of a “notification incident” as soon as possible and no later than 36 hours after determining that such an incident has occurred.
While the required percentage of stock ownership is subject to change by the FHLB, the Bank is following this requirement with an investment in FHLB stock at December 31, 2023 of $28.4 million.
While the required percentage of stock ownership is subject to change by the FHLB, the Bank is following this requirement with an investment in FHLB stock at December 31, 2024 of $28.4 million.
For our construction, investor CRE, and C&I lending activities, we compete with super-regional, regional and community banks operating in the Midwest and Southwest regions of the United States. For our single tenant lease financing activities, we compete nationally with regional banks, community banks and credit unions, as well as life insurance companies and commercial mortgage-backed securities lenders.
For our C&I lending activities, we compete with super-regional, regional and community banks operating in the Midwest and Southwest regions of the United States. For our single tenant lease financing activities, we compete nationally with regional banks, community banks and credit unions, as well as life insurance companies and commercial mortgage-backed securities lenders.
Climate-Related Risk Management and Regulation. In recent years, the federal banking agencies and the SEC have increased their focus on climate-related risks impacting the operation of banks, the communities they serve and the financial system as a whole. Proposals related to climate-related financial and other risks impacting banks are being considered at both the federal and state level.
In recent years, the federal banking agencies and the SEC have increased their focus on climate-related risks impacting the operation of banks, the communities they serve and the financial system as a whole. Proposals related to climate-related financial and other risks impacting banks are being considered at both the federal and state level.
In addition, under the Basel III Rule, institutions that seek the freedom to pay dividends have to maintain 2.50% in Common Equity Tier 1 Capital attributable to the capital conservation buffer. See “Regulatory” section above. Source of Strength .
In addition, under the Basel III Rule, institutions that seek the freedom to pay dividends have to maintain 2.50% in Common Equity Tier 1 Capital attributable to the capital conservation buffer. See “Capital Requirements” section above. Source of Strength .
The Bank believes it has sufficient liquidity to meet its funding obligations for at least the next twelve months. Additionally, as of December 31, 2023, the Bank had access to $1.2 billion in unused borrowing capacity at the Federal Reserve and FHLB. Federal Home Loan Bank System .
The Bank believes it has sufficient liquidity to meet its funding obligations for at least the next twelve months. Additionally, as of December 31, 2024, the Bank had access to $1.7 billion in unused borrowing capacity at the Federal Reserve and FHLB. Federal Home Loan Bank System .
Although to date we have not experienced any material losses relating to cyber-attacks or other information security breaches, our systems and those of our customers and third-party service providers are under constant threat, and it is possible that we could experience a significant event in the future due to the rapidly evolving nature and sophistication of these threats.
Although to date we have not experienced any material losses relating to cyber-attacks or other information security breaches, our systems and those of our customers and third-party service providers are under constant threat, and it is possible that we could experience a significant event in the future due to the rapidly evolving nature and sophistication of these threats. 10 Climate-Related Risk Management and Regulation.
For our small business lending activities, we compete on a national footprint with other participating SBA-approved lenders, including a large number of regional and community banks. These competitors have resources and/or lending limits that differ greatly from one another.
For our small business lending activities, we compete on a national footprint with other participating SBA-approved lenders, including a large number of superregional, regional and community banks, as well as non-bank lenders. These competitors have resources and/or lending limits that differ greatly from one another.
The Bank’s authority to extend credit to its directors, executive officers and principal shareholders, as well as to entities controlled by such persons (“Related Interests”), is governed by Sections 22(g) and 22(h) of the Federal Reserve Act and Regulation O of the Federal Reserve.
Loans to and Other Transactions with Insiders . The Bank’s authority to extend credit to its directors, executive officers and principal shareholders, as well as to entities controlled by such persons (“Related Interests”), is governed by Sections 22(g) and 22(h) of the Federal Reserve Act and Regulation O of the Federal Reserve.
For our public finance, healthcare finance and franchise finance activities, we compete nationally with superregional and regional banks. These competitors may have significantly greater financial resources and higher lending limits than we do and may also offer specialized products and services that we do not.
For our construction, investor commercial real estate, public finance, healthcare finance and franchise finance activities, we compete nationally with superregional, regional and community banks. These competitors may have significantly greater financial resources and higher lending limits than we do and may also offer specialized products and services that we do not.
Meaningful training, an equitable hiring process, expanded hiring pools, and a long-term commitment to fostering a diverse workforce have all resulted in largely exceptional results over the past five years. In particular, when reviewing the Bank’s employee population, representation of diverse individuals by race and ethnicity increased from 9% in 2019 to 17% in 2023.
Meaningful training and education, an equitable hiring process, expanded hiring pools and a long-term commitment to fostering a qualified and diverse workforce have all resulted in largely exceptional results over the last several years. In particular, when reviewing the Bank’s employee population, representation of diverse individuals by race and ethnicity increased from 9% in 2019 to 17% in 2024.
One statement indicates that financial institutions should design multiple layers of security controls to establish lines of defense and ensure that their risk management processes also address the risk posed by compromised customer credentials, including security measures to reliably authenticate customers accessing digital-based services of the financial institution.
Federal regulators have indicated that financial institutions should design multiple layers of security controls to establish lines of defense and ensure that their risk management processes also address the risk posed by compromised customer credentials, including security measures to reliably authenticate customers accessing digital-based services of the financial institution.
We strive to maintain an inclusive and diverse work culture in which individual differences and experiences are valued and all employees have the opportunity to contribute and thrive. We believe that leveraging our employees’ diverse perspectives and capabilities will enhance innovation, foster a collaborative work culture and enable us to better serve our customers and communities.
We strive to maintain a talented work culture in which varied perspectives and experiences are valued and all employees have the opportunity to contribute and thrive. We believe leveraging our employees’ varied experiences, talents and capabilities will enhance innovation, foster a collaborative work culture and enable us to better serve our customers and communities.
We will continue to monitor and assess the impact of these state laws, which may impose substantial penalties for violations, impose significant costs for investigation and compliance, allow private class-action litigation and carry significant potential liability for our business. Cybersecurity . In 2015, federal regulators issued two related statements regarding cybersecurity.
We will continue to monitor and assess the impact of these state laws, which may impose substantial penalties for violations, impose significant costs for investigation and compliance, allow private class-action litigation and carry significant potential liability for our business. Cybersecurity .
All deposit accounts at the Bank are insured by the FDIC up to a maximum of $250,000 per depositor.
All deposit accounts at the Bank are insured by the FDIC up to a maximum of $250,000 per depositor, per insured bank, for each account ownership category.
A number of U.S. states have also enacted data privacy and security laws and regulations that govern the collection, use, disclosure, transfer, storage, disposal and protection of personal information, such as social security numbers, financial information and other information. These laws and regulations may be more restrictive and not preempted by U.S. federal laws.
A number of U.S. states have also enacted data privacy and security laws and regulations that govern the collection, use, disclosure, transfer, storage, disposal and protection of personal information, such as social security numbers, financial information and other information.
The other statement indicates that a financial institution’s management is expected to maintain sufficient business continuity planning processes to ensure the rapid recovery, resumption, and maintenance of the institution’s operations after a cyber-attack involving destructive malware.
Federal regulators have also indicated that a financial institution’s management is expected to maintain sufficient business continuity planning processes to ensure the rapid recovery, resumption, and maintenance of the institution’s operations after a cyber-attack involving destructive malware.
Under the BHCA, the Company is required to file with the Federal Reserve periodic reports of its operations and such additional information regarding the Company and Bank as the Federal Reserve may require.
It is subject to regulation, supervision, examination and enforcement by the Federal Reserve. Under the BHCA, the Company is required to file with the Federal Reserve periodic reports of its operations and such additional information regarding the Company and Bank as the Federal Reserve may require.
It does not describe all of the statutes, regulations, and regulatory policies that apply, and the descriptions in this summary are qualified in their entirety by reference to the particular statutory and regulatory provisions involved. Holding Company Regulation General.
It does not describe all of the statutes, regulations, and regulatory policies that apply, and the descriptions in this summary are qualified in their entirety by reference to the particular statutory and regulatory provisions involved. 3 Holding Company Regulation General. The Company is registered as a bank holding company under the Bank Holding Company Act of 1956 (the “BHCA”).
It cannot be predicted with certainty whether such legislation or administrative action will be enacted or the extent to which the banking industry, the Company or the Bank would be affected. 11 Available Information The Company makes available its Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and all amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), free of charge on its website at www.firstinternetbancorp.com as soon as reasonably practicable after it electronically files such material with, or furnishes it to, the SEC.
Available Information The Company makes available its Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and all amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), free of charge on its website at www.firstinternetbancorp.com as soon as reasonably practicable after it electronically files such material with, or furnishes it to, the SEC.
A financial institution is also expected to develop appropriate processes to enable recovery of data and business operations and 10 address rebuilding network capabilities and restoring data if the institution or its critical service providers fall victim to this type of cyber-attack.
A financial institution is also expected to develop appropriate processes to enable recovery of data and business operations and address rebuilding network capabilities and restoring data if the institution or its critical service providers fall victim to this type of cyber-attack. If we fail to observe the regulatory guidance, we could be subject to various regulatory sanctions, including financial penalties.
With the rapid evolution of technology that enables consumers and small businesses to manage their finances digitally, fintechs are addressing a significantly growing marketplace. Fintechs have created robust digital offerings, unburdened by legacy technology architecture, to address growing customer expectations.
With the rapid evolution of technology that enables small businesses to manage their finances digitally, fintechs are addressing a significantly growing marketplace. Fintechs have created robust digital offerings, unburdened by legacy technology architecture, to address growing customer expectations. Through partnerships with selected fintechs, we believe our ability to win and retain small business relationships will be significantly enhanced.
Team members serve on non-profit and other Boards/committees, with organizations such as Indianapolis Neighborhood Housing Partnership (INHP), Indy Chamber, and the Indiana Department of Workforce Development, to assist in meeting the community’s most pressing needs.
Team members serve on non-profit and other Boards/committees, with organizations such as Indianapolis Neighborhood Housing Partnership (INHP), Indy Chamber, and the Indiana Department of Workforce Development, to assist in meeting the community’s most pressing needs. The result is a sense of pride and increased engagement within the Bank that serves as a catalyst for the greater good.
Due to its online-driven model and nationwide banking platform, the Bank has opted to operate under a CRA Strategic Plan, which sets forth certain guidelines the Bank must meet. The Bank is awaiting FDIC approval for its proposed CRA Strategic Plan to cover the time period of January 1, 2024 through December 31, 2027.
Due to its online-driven model and nationwide banking platform, the Bank has opted to operate under a CRA Strategic Plan, which sets forth certain guidelines the Bank must meet. The Bank’s current CRA Strategic Plan covers the time period of January 1, 2024 through December 31, 2026. The Bank received a “Satisfactory” CRA rating in its most recent CRA examination.
During that same 5 year time period, we increased our percentage of racially and ethnically diverse new hires by more than 22%.
During that same time period, we increased our percentage of racially and ethnically diverse new employees by more than 18% and increased the percentage of promotions among racially and ethnically diverse employees by 12%.
We may be a digital bank, but we strongly believe in the power of personal connection and collaboration, resulting in a relationship rich culture that enables us to live to our very best potential. Our focus on employees is evident in the number of “best work place” awards we have been honored with over the years.
We focus on the employee experience and culture. We are a digital bank, but we strongly believe in the power of personal connection and collaboration, resulting in a relationship-rich culture that enables us to live and work to our very best potential.
To further foster inclusion as a norm, our organization promotes and supports the development of employee-led business resource groups, which currently include First Ladies, LIFT (a professional development group), and BELONG (a group engaged in celebrating and learning about our unique experiences, heritages, etc.). These groups magnify traditionally underrepresented voices.
To that end, we promote and support the development of employee-led business resource groups, which currently include First Ladies, LIFT (a professional development group), and BELONG (a group engaged in celebrating and learning about our unique experiences, heritages, etc.).
For example, several U.S. territories and all 50 states now have data breach laws that require timely notification to individuals, and at times regulators, the media or credit reporting agencies, if a company has experienced the unauthorized access or acquisition of personal information. Other state laws include the California Consumer Privacy Act (“CCPA”), which took effect on January 1, 2020.
These laws and regulations may be more restrictive and not preempted by U.S. federal laws. 9 For example, several U.S. territories and all 50 states now have data breach laws that require timely notification to individuals, and at times regulators, the media or credit reporting agencies, if a company has experienced the unauthorized access or acquisition of personal information.
Additional legislation and administrative actions affecting the banking industry may be considered by the United States Congress, state legislatures and various regulatory agencies, including those referred to above.
Additional legislation and administrative actions affecting the banking industry may be considered by the United States Congress, state legislatures and various regulatory agencies, including those referred to above. It cannot be predicted with certainty whether such legislation or administrative action will be enacted or the extent to which the banking industry, the Company or the Bank would be affected.
Our team members have been, and continue to be, our most valuable assets, helping to create a strong workplace culture that recognizes the unique contributions and perspectives each individual brings to the organization.
Human Capital As of December 31, 2024, we employed 326 people consisting of 323 full-time employees and 3 part-time employees. Our team members have been, and continue to be, our most valuable assets, helping to create a strong workplace culture that recognizes the unique contributions and perspectives of each individual.
We encourage our employees to “Imagine More.” We seek the game-changers, innovators and dreamers – those who are driven to find a better way of doing things for customers and each other. We encourage community involvement and opportunities that support team members, both inside and outside the office.
We empower our employees to “Imagine More.” We seek the game-changers, innovators and dreamers – those who are driven to find a better way of doing things for customers and each other. Our employees are encouraged to think outside the box and look for innovative ways to improve efficiency, drive revenue and decrease cost.
Congress, as part of the 2018 Economic Growth, Regulatory Relief, and Consumer Protection Act, authorized an optional, simplified measure of capital adequacy, the 5 “Community Bank Leverage Ratio” (“CBLR”) framework, for qualifying community banking organizations like the Company with less than $10 billion in total consolidated assets.
Under the “Community Bank Leverage Ratio” (“CBLR”) framework, for qualifying community banking organizations like the Company with less than $10 billion in total consolidated assets.
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 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 ranked as the 8 th largest Small Business Administration (“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 also offer tuition reimbursement, a robust internal training program, and leadership training and coaching through a third party consultant to help employees advance their careers and perform competently and confidently. The tuition reimbursement program reimburses approved tuition costs, registration fees for classes, and costs of books and computer-based resources as required by class.
We also offer tuition reimbursement for professional development, a robust internal training program, and leadership training and coaching through certified coaches within HR as well as a third-party consultant to help employees develop their skills, leverage their strengths, lead effectively, advance their careers and perform competently and confidently.
Banks that opt in to the rule are not required to calculate or report risk-based capital and are deemed to have met the well-capitalized ratio requirement.
Qualifying institutions that opt in and have a leverage ratio greater than 9%, off-balance sheet exposures of 25% or less of total consolidated assets, and trading assets and liabilities of 5% or less of total consolidated assets are not required to calculate or report risk-based capital and are deemed to have met the well-capitalized ratio requirement.
These laws and regulations mandate certain disclosure requirements and regulate the manner in which financial institutions must interact with customers when taking deposits, making loans, collecting loans and providing other services. Further, the Dodd-Frank Act established the CFPB as an independent agency within the Federal Reserve System.
These laws and regulations mandate certain disclosure requirements and regulate the manner in which financial institutions must interact with customers when taking deposits, making loans, collecting loans and providing other services. Failure to comply with consumer protection laws and regulations can subject financial institutions to enforcement actions, fines and other penalties. Customer Information Security .
It is too early to predict to what extent legislative and regulatory proposals will impact the Company and the Bank, but we will continue to monitor these developments and the steps that will need to be taken to address any new requirements. Additional Matters .
While our branchless business model and diversified customer base mitigates our exposure to climate-related risks, we will continue to monitor these developments and the steps that will need to be taken to address any new requirements. Additional Matters .
Through 1 partnerships with selected fintechs, we believe our ability to win and retain consumer and small business relationships will be significantly enhanced. Furthermore, we believe partnering with select fintechs will allow us to further diversify our revenue sources, acquire lower-cost deposits and pursue additional asset generation capabilities.
Furthermore, we 1 believe partnering with select fintechs will allow us to further diversify our revenue sources, acquire deposits and pursue additional asset generation capabilities. As of December 31, 2024, the Company had consolidated assets of $5.7 billion, consolidated deposits of $4.9 billion and shareholders’ equity of $384.1 million.
Under the capital regulations of the FDIC and Federal Reserve, in order to be well capitalized, a banking organization must maintain: • A Common Equity Tier 1 Capital ratio to risk-weighted assets of 6.50% or more; • A ratio of Tier 1 Capital to total risk-weighted assets of 8.00% or more; • A ratio of Total Capital to total risk-weighted assets of 10.00% or more; and • A leverage ratio of Tier 1 Capital to total adjusted average quarterly assets of 5.00% or greater.
To be well-capitalized, the Bank must maintain at least the following capital ratios: i. 5.0% leverage ratio. ii. 6.5% CET1 to risk-weighted assets; iii. 8.0% Tier 1 capital to risk-weighted assets; and iv. 10.0% Total capital to risk-weighted assets; The Federal Reserve has different requirements than those imposed under the current capital rules applicable to banks.
The result is a sense of pride and increased engagement within the Bank that serves as a catalyst for the greater good. 2 Competition The markets in which we compete to make loans, attract deposits and provide fee based financial services are highly competitive.
And we remain committed to an entrepreneurial culture, employee growth and empowerment, robust training and support, and competitive compensation and benefits that will enable us to attract the top talent and continue to “Imagine More.” 2 Competition The markets in which we compete to make loans, attract deposits and provide fee based financial services are highly competitive.
The purpose of the conservation buffer is to ensure that banking institutions maintain a buffer of capital that can be used to absorb losses during periods of financial and economic stress. Factoring in the conservation buffer increases the minimum ratios depicted above to 7.00% for Common Equity Tier 1 Capital, 8.50% for Tier 1 Capital and 10.50% for Total Capital.
In addition, the capital rules also require a capital conservation buffer of CET1 capital of 2.5% above each of the minimum capital ratio requirements (CET1, Tier 1, and total risk-based capital), which is designed to absorb losses during periods of economic stress.
Similarly, we have created positive trends in gender diversity, increasing our percentage of women new hires by 6% to 57% of our total new hires and increasing our percentage of women promotions by 20% to 58% of all promotions.
Similarly, we have created positive trends in gender diversity, increasing women’s representation among our employee population from 46% in 2019 to 49% in 2024 and by increasing our percentage of women receiving promotions from 16% to 47% during the same time range. All hiring and promotion decisions are made on the basis of merit.
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We are one of the fastest-growing lenders in the Small Business Administration (“SBA”) 7(a) program, closing more than $416.1 million in SBA 7(a) loans during the 2023 calendar year, and ranked as the 9 th largest SBA 7(a) lender for the SBA’s 2023 fiscal year. We also offer a top-ranked small business checking account product to our country’s entrepreneurs.
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One example is our Eureka! program, which promotes the submission of unique ideas to a senior leadership panel for review and possible selection.
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As of December 31, 2023, the Company had consolidated assets of $5.2 billion, consolidated deposits of $4.1 billion and shareholders’ equity of $362.8 million. Human Capital As of December 31, 2023, we employed 290 people, 287 of which were full-time.
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This program enables our employees to serve as team leads and members of cross-functional teams that develop and implement ideas that drive our business while upskilling in the areas of influential leadership, collaboration, communication, critical thinking and change management. We encourage community involvement and opportunities that support team members, both inside and outside the office.
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With this vision in mind, the Company’s diversity and inclusion strategy focuses on five organizational pillars: People, Partners, Philanthropy, Products and Processes. In 2021, we published our first Environmental, Social and Governance (“ESG”) Report to highlight, among other things, our focus on and efforts to advance Diversity and Inclusion goals.
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The professional development program reimburses approved tuition costs, certification costs, registration fees for classes or relevant seminars, and costs of books and computer-based resources as required by class. The internal training program focuses on topics such as privacy, fair banking, skills-training and many industry specific topics and regulations.
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In 2022, we provided a status update to our ESG Report, highlighting key initiatives and efforts. Our initiatives and efforts continued throughout 2023, as we continue to mandate Diversity, Equity & Inclusion (“DEI”) training for executive leadership and all employees.
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Our focus on employees is evidenced by the number of “best work place” awards we have been honored with over the years.
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The phased training program — including topics such as unconscious bias, sexual harassment, regulatory issues and the benefits of a more diverse workplace — is delivered both in-person and online. Ongoing quarterly sessions and annual refresher courses help reinforce the program’s methods and maintain active awareness.
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The Company and the Bank are required under federal law to maintain certain minimum capital levels based on ratios of capital to total assets and capital to risk-weighted assets.
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The internal training program focuses on topics such as privacy, fair banking, skills-training and many industry specific topics and regulations. The leadership training program features curriculum designed to help leaders understand management duties essential to their role. Community service is a foundational tenet.
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The required capital ratios are minimums, and the federal banking agencies may determine that a banking organization, based on its size, complexity or risk profile, must maintain a higher level of capital in order to operate in a safe and sound manner.
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Notably, the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”), enacted in 2010 in response to the global financial crisis, imposed a number of new and expanded regulatory requirements on the banking industry, which in some cases have been subsequently modified.
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Risks such as concentration of credit risks and the risk arising from non-traditional activities, as well as the institution’s exposure to a decline in the economic value of its capital due to changes in interest rates, and an institution’s ability to manage those risks are important factors that are to be taken into account by the federal banking agencies in assessing an institution’s overall capital adequacy.
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The Dodd-Frank Act, for example, gives rise to a number of additional requirements as financial institutions pass $10 billion in assets.
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The following is a brief description of the relevant provisions of these capital rules and their potential impact on our capital levels.
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The Company is registered as a bank holding company under the Bank Holding Company Act of 1956 (the “BHCA”) and has elected to be a financial holding company. It is subject to regulation, supervision, examination and enforcement by the Federal Reserve.
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The Company and the Bank are subject to the following risk-based capital ratios: a common equity Tier 1 (“CET1”) risk-based capital ratio, a Tier 1 risk-based capital ratio, which includes CET1 and additional Tier 1 capital, and a total risk-based capital ratio, which includes Tier 1 and Tier 2 capital.
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Regulatory capital represents the net assets of a banking organization available to absorb losses. Banks and bank holding companies are generally required to hold more capital than other businesses that are not subject to regulation and supervision by the banking agencies, and this directly affects the Company’s earnings capabilities.
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CET1 is primarily comprised of the sum of common stock instruments and related surplus net of treasury stock, retained earnings, and certain qualifying minority interests, less certain adjustments and deductions, including with respect to goodwill, intangible assets, mortgage servicing assets and deferred tax assets subject to temporary timing differences.
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While capital has historically been one of the key measures of the financial health of both bank holding companies and banks, its role became fundamentally more important in the wake of the global financial crisis, as banking regulators recognized that the amount and quality of capital held by banks prior to the crisis was insufficient to absorb losses during periods of severe stress.
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Additional Tier 1 capital is primarily comprised of noncumulative perpetual preferred stock, tier 1 minority interests and grandfathered trust preferred securities.
Removed
Certain provisions of the Dodd-Frank Act and Basel III, discussed below, establish capital standards for banks and bank holding companies that are meaningfully more stringent than those in place previously. Banks have been required to hold minimum levels of capital based on guidelines established by bank regulatory agencies since 1983.
Added
Tier 2 capital consists of instruments disqualified from Tier 1 capital, including qualifying subordinated debt, other preferred stock and certain hybrid capital instruments, and a limited amount of allowance for credit loss up to a maximum of 1.25% of risk-weighted assets, subject to certain eligibility criteria.
Removed
The minimums have been expressed in terms of ratios of “capital” divided by “total assets.” The capital guidelines for U.S. banks beginning in 1989 have been based upon international capital accords, known as “Basel” rules, adopted by the Basel Committee on Banking Supervision (the “BCBS”), a committee of central banks and bank supervisors that acts as the primary global standard-setter for prudential regulation, as implemented by the U.S. bank regulatory agencies on an interagency basis.
Added
The capital rules also define the risk-weights assigned to assets and off-balance sheet items to determine the risk-weighted asset components of the risk-based capital rules, including, for example, certain “high volatility” commercial real estate, past due assets, structured securities and equity holdings.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

43 edited+29 added−10 removed88 unchanged
Biggest changeChanges in the economic health of certain industries can have a significant impact on other sectors or industries which are directly or indirectly associated with those industries, and may impact the value of real estate in areas where such industries are concentrated. If our allowance for credit losses is not sufficient to cover actual credit losses, our earnings could decrease.
Biggest changeThe inability of purchasers of real estate, including residential real estate, to obtain financing may weaken the financial condition of our borrowers who are dependent on the sale or refinancing of property to repay their loans. 14 Changes in the economic health of certain industries can have a significant impact on other sectors or industries which are directly or indirectly associated with those industries, and may impact the value of real estate in areas where such industries are concentrated.
Disruptions or failures in the physical infrastructure or operating systems that support our business and clients, or cyber-attacks or security breaches of the networks, systems or devices that our clients use to access our products and services, could result in client attrition, regulatory fines, penalties or intervention, breach investigation and notification expenses, 17 reputational damage, claims or litigation, reimbursement or other compensation costs and/or additional compliance costs, any of which could materially and adversely affect our business, financial condition and results of operations.
Disruptions or failures in the physical infrastructure or operating systems that support our business and clients, or cyber-attacks or security breaches of the networks, systems or devices that our clients use to access our products and services, could result in client attrition, regulatory fines, penalties or intervention, breach investigation and notification expenses, reputational damage, claims or litigation, reimbursement or other compensation costs and/or additional compliance costs, any of which could materially and adversely affect our business, financial condition and results of operations.
The application of more stringent capital requirements for both the Company and the Bank could, among other things, result in lower returns on equity, require the raising of additional capital, and result in regulatory actions constraining us from 18 paying dividends or repurchasing shares if we were to be unable to comply with such requirements, any of which could have a material adverse effect on our business and profitability.
The application of more stringent capital requirements for both the Company and the Bank could, among other things, result in lower returns on equity, require the raising of additional capital, and/or result in regulatory actions constraining us from paying dividends or repurchasing shares if we were to be unable to comply with such requirements, any of which could have a material adverse effect on our business and profitability.
We could also be adversely affected if key personnel 13 or a significant number of employees were to become unavailable due to external events affecting the places they live. Although we have business continuity plans and other safeguards in place, there is no assurance that such plans and safeguards will completely mitigate the adverse impacts of any significant external event.
We could also be adversely affected if key personnel or a significant number of employees were to become unavailable due to external events affecting the places they live. Although we have business continuity plans and other safeguards in place, there is no assurance that such plans and safeguards will completely mitigate the adverse impacts of any significant external event.
In addition, larger competitors may be able to price loans and deposits more aggressively than we do, which could affect our ability to increase our market share and remain profitable on a long-term basis. 12 Negative developments in the banking industry could adversely affect our current and future business operations and financial condition.
In addition, larger competitors may be able to price loans and deposits more aggressively than we do, which could affect our ability to increase our market share and remain profitable on a long-term basis. Negative developments in the banking industry could adversely affect our current and future business operations and financial condition.
Any regulatory action against us could have a material adverse effect on our business, financial condition and results of operations. Our FDIC deposit insurance premiums and assessments may increase, which would reduce our profitability. The deposits of the Bank are insured by the FDIC up to legal limits and, accordingly, subject to the payment of FDIC deposit insurance assessments.
Regulatory action against us could have a material adverse effect on our business, financial condition and results of operations. Our FDIC deposit insurance premiums and assessments may increase, which would reduce our profitability. The deposits of the Bank are insured by the FDIC up to legal limits and, accordingly, subject to the payment of FDIC deposit insurance assessments.
In order to maintain a strong funding position and restore the reserve ratios of the DIF, the FDIC may increase deposit insurance assessment rates and may charge a special assessment to all FDIC-insured financial institutions. Further increases in assessment rates or special assessments may occur in the future, especially if there are significant additional financial institution failures.
In order to maintain a strong funding position and restore the reserve ratios of the DIF, the FDIC may increase deposit insurance assessment rates and may charge a special assessment to FDIC-insured financial institutions. Further increases in assessment rates or special assessments may occur in the future, especially if there are significant additional financial institution failures.
Failure to manage these risks, or failure of any product or service offerings to be successful and profitable, could have a material adverse effect on our financial condition and results of operations. Significant external events, including continued the spread or outbreak of a highly contagious disease, could adversely affect our business and results of operations.
Failure to manage these risks, or failure of any product or service offerings to be successful and profitable, could have a material adverse effect on our financial condition and results of operations. Significant external events, including continued spread or outbreak of a highly contagious disease, could adversely affect our business and results of operations.
Not maintaining a compliance management system which is deemed adequate could result in sanctions or other action against the Bank. Our ongoing review and analysis of our compliance management system and implementation of any changes resulting from that review and analysis will likely result in increased non-interest expense.
Not maintaining a risk and compliance management system which is deemed adequate could result in sanctions or other action against the Bank. Our ongoing review and analysis of our compliance management system and implementation of any changes resulting from that review and analysis will likely result in increased non-interest expense.
The financial services industry is undergoing rapid technological change, and we face constant evolution of customer demand for 16 technology-driven financial and banking products and services. Many of our competitors have substantially greater resources to invest in technological improvement and product development, marketing and implementation.
The financial services industry is undergoing rapid technological change, and we face constant evolution of customer demand for technology-driven financial and banking products and services. Many of our competitors have substantially greater resources to invest in technological improvement and product development, marketing and implementation.
However, we serve CRE and C&I borrowers primarily in Central Indiana and adjacent markets. Accordingly, the performance of our CRE and C&I lending depends upon demographic and economic conditions in those regions. The profitability of our CRE and C&I loan portfolio may be impacted by changes in those conditions.
However, we serve C&I and certain CRE borrowers primarily in Central Indiana and adjacent markets. Accordingly, the performance of our CRE and C&I lending depends upon demographic and economic conditions in those regions. The profitability of our CRE and C&I loan portfolio may be impacted by changes in those conditions.
Further, in the past, we have raised additional capital in the public debt and equity markets to support balance sheet growth, refinance existing debt obligations, or explore strategic alternatives which may include additional asset, deposit or revenue generation channels.
Further, in 15 the past, we have raised additional capital in the public debt and equity markets to support balance sheet growth, refinance existing debt obligations, or explore strategic alternatives which may include additional asset, deposit or revenue generation channels.
Our regulators or auditors have required us to increase the level and manner of our oversight of the third parties which provide marketing and other services through which we offer products and services, whether in connection with our introduction of new programs and products, or otherwise.
Our regulators and auditors have required us to increase the level and manner of our oversight of third parties that provide marketing and other services through which we offer products and services, whether in connection with our introduction of new programs and products, or otherwise.
If market interest rates continue to rise, especially at the pace they did in 2022 and 2023, the Company will continue to face competitive pressure to increase the rates the Bank pays on deposits, which could negatively affect net interest margin.
If market interest rates rise, especially at the pace they did in 2022 and 2023, the Company will face competitive pressure to increase the rates the Bank pays on deposits, which could negatively affect net interest margin.
As noted above, our operations rely on the secure processing, transmission and storage of confidential information in our computer systems and networks. Our business relies on our digital technologies, computer and email systems, software and networks to conduct its operations.
As noted 16 above, our operations rely on the secure processing, transmission and storage of confidential information in our computer systems and networks. Our business relies on digital technologies, computer and email systems, software and networks to conduct its operations.
Specifically, under regulations adopted by the Federal Reserve, (1) any other bank holding company may be required to obtain the approval of the Federal Reserve before acquiring 5% or more of our common stock and (2) any person may be required to file a notice with and not be disapproved by the Federal Reserve to acquire 10% or more of our common stock and will be required to file a notice with and not be disapproved by the Federal Reserve to acquire 25% or more of our common stock.
Specifically, under regulations adopted by the Federal Reserve, (1) any other bank holding company may be required to obtain the approval of the Federal Reserve before acquiring 5% or more of our common stock and (2) any person may be required to file a notice with and not be disapproved by the Federal Reserve to acquire 10% or more of our common stock.
Although we have reviewed, and will continue to review, our disclosure controls and procedures in order to determine whether they are effective, our controls and procedures may not be able to prevent errors or frauds in the future.
Although we have reviewed, and will continue to review, our disclosure controls and procedures in order to determine whether they are effective, our controls and procedures may not be able to prevent errors or fraud in the future.
Portions of our commercial lending activities are geographically concentrated in Central Indiana and adjacent markets, and changes in local economic conditions may impact their performance. We offer our consumer lending as well as public finance, healthcare finance, franchise finance, small business lending and single tenant financing products and services throughout the United States.
Portions of our commercial lending activities are geographically concentrated in Central Indiana and adjacent markets, and changes in local economic conditions may impact their performance. We offer our consumer lending as well as construction, investor CRE, public finance, healthcare finance, franchise finance, small business lending and single tenant financing products and services throughout the United States.
Any failure to successfully keep pace with and fund technological innovation in the markets in which we compete could have a material adverse effect on our business, financial condition and results of operations. We rely on our management team and could be adversely affected by the unexpected loss of key officers.
Any failure to successfully keep pace with and fund technological innovation could have a material adverse effect on our business, financial condition and results of operations. We rely on our management team and could be adversely affected by the unexpected loss of key officers.
We also anticipate increased regulatory scrutiny – in the course of routine examinations and otherwise – and new regulations directed towards banks of similar size to the Bank designed to respond to recent negative developments in the banking industry and/or changing regulatory focus, all of which may increase our costs of doing business and reduce our profitability.
From time to time, we may experience increased regulatory scrutiny – in the course of routine examinations and otherwise – and new regulations directed towards banks of similar size to the Bank designed to respond to negative developments in the banking industry and/or changing regulatory focus, all of which may increase our costs of doing business and reduce our profitability.
Credit Risks Our commercial loan portfolio exposes us to higher credit risks than residential real estate loans, including risks relating to the success of the underlying business and conditions in the market or the economy and concentrations in our commercial loan portfolio. Our commercial loans totaled $3.0 billion, or 78.3% of our total loan portfolio as of December 31, 2023.
Credit Risks Our commercial loan portfolio exposes us to higher credit risks than residential real estate loans, including risks relating to the success of the underlying business and conditions in the market or the economy and concentrations in our commercial loan portfolio. Our commercial loans totaled $3.3 billion, or 80.2% of our total loan portfolio as of December 31, 2024.
We are subject to risks arising from conditions in the real estate market, as a significant portion of our loans are secured by real estate . 14 At December 31, 2023, approximately 45.6% of our loans held for investment portfolio was comprised of commercial, residential mortgage and home equity loans with real estate as the primary component of collateral.
We are subject to risks arising from conditions in the real estate market, as a significant portion of our loans are secured by real estate . At December 31, 2024, approximately 49.8% of our loans held for investment portfolio was comprised of commercial, residential mortgage and home equity loans with real estate as the primary component of collateral.
We could experience other external events such as severe weather, natural disasters, acts of war, terrorism or widespread public health issues, such as the COVID-19 pandemic or another highly contagious or infectious disease, that could impair the ability of our customers to repay outstanding loans; impair the value of collateral, if any, securing outstanding loans; negatively impact our deposit base, loan originations or general demand for our services; cause significant property damage; result in loss of revenue or cause us to incur additional expenses or losses.
We could experience other external events such as severe weather, natural disasters, acts of war, terrorism, civil unrest or widespread public health issues, including pandemics or epidemics caused by highly contagious or infectious disease, that could impair the ability of our customers to repay outstanding loans; impair the value of collateral, if any, securing outstanding loans; negatively impact our deposit base, loan originations or general demand for our services; cause significant property damage; result in loss of revenue or cause us to incur additional expenses or losses.
The Bank may not be able to pay us dividends. The ability of the Bank to pay dividends to us is limited by state and federal law and depends generally on the Bank’s ability to generate net income.
The ability of the Bank to pay dividends to us is limited by state and federal law and depends generally on the Bank’s ability to generate net income.
Changes in key personnel and their responsibilities may be disruptive to our business and could have a material adverse effect on our business, financial condition and results of operations. In particular, the loss of our chief executive officer could have a material adverse effect on our business, financial condition and results of operations.
Changes in key personnel and their responsibilities may be disruptive to our business and could have a material adverse effect on our business, financial condition and results of operations.
The BSA, the USA PATRIOT Act and other laws and regulations require financial institutions, among other duties, to institute and maintain an effective anti-money laundering program and file suspicious activity and currency transaction reports as appropriate.
We face risk under the BSA and other anti-money laundering statutes and regulations, as well as general fund transfer and payments-related risk. 18 The BSA, the USA PATRIOT Act and other laws and regulations require financial institutions, among other duties, to institute and maintain an effective anti-money laundering program and file suspicious activity and currency transaction reports as appropriate.
These changes could result in a decrease of net interest income. If market interest rates decline, the Bank could 15 experience fixed-rate loan prepayments and higher investment portfolio cash flows, resulting in a lower yield on earning assets. Earnings can also be impacted by the spread between short-term and long-term market interest rates.
If market interest rates decline, the Bank could experience fixed-rate loan prepayments and higher investment portfolio cash flows, resulting in a lower reinvestment yield on earning assets. Earnings can also be impacted by the spread between short-term and long-term market interest rates. The Bank may not be able to pay us dividends.
Our introduction of new products and programs in partnership with fintechs has increased account and transaction volume at the Bank and thereby increased the foregoing risks, the results of which could have a material adverse effect on our business, financial condition and results of operations. 19 We may be subject to potential liability and business risk from actions by our regulators related to supervision of third parties.
Our introduction of new products and programs in partnership with fintechs has increased account and transaction volume at the Bank and thereby increased the foregoing risks, the results of which could have a material adverse effect on our business, financial condition and results of operations.
If these risks were to materialize, they could negatively affect our business, financial condition and results of operations. New lines of business, and new products and services, may result in exposure to new risks; and the value and earnings related to existing lines of business are subject to market conditions.
New lines of business, and new products and services, may result in exposure to new risks; and the value and earnings related to existing lines of business are subject to market conditions.
Our success depends, to a certain extent, upon favorable economic and political conditions, local and national, as well as governmental monetary policies. Conditions such as recession, unemployment, changes in interest rates, inflation, money supply, and other factors beyond the Company’s control may adversely affect deposit levels, costs, loan demand and/or asset quality and, therefore, our earnings.
Conditions such as recession, unemployment, trade wars and tariffs, changes in interest 11 rates, inflation, money supply, and other factors beyond the Company’s control may adversely affect deposit levels, costs, loan demand and/or asset quality and, therefore, our earnings.
Although these provisions do not preclude a takeover, they may have the effect of discouraging, delaying or deferring a tender offer or takeover attempt that a shareholder might consider in his or her best interest, including those attempts that might result in a premium over the market price of our common stock.
Additionally, our articles of incorporation authorize our Board of Directors to issue one or more classes or series of preferred stock without shareholder approval and such preferred stock could be issued as a defensive measure in response to a takeover proposal. 13 Although these provisions do not preclude a takeover, they may have the effect of discouraging, delaying or deferring a tender offer or takeover attempt that a shareholder might consider in his or her best interest, including those attempts that might result in a premium over the market price of our common stock.
Federal and state regulators periodically examine our business and we may be required to remediate adverse examination findings. The Federal Reserve, the FDIC and the DFI periodically examine our business, including our compliance with laws and regulations.
The Federal Reserve, the FDIC and the DFI periodically examine our business, including our compliance with laws and regulations.
These laws and regulations, and the supervisory framework that oversees the administration of these laws and regulations, are primarily intended to protect depositors, the DIF, the government and the banking system as a whole, and not shareholders. These laws and regulations, among other matters, affect our lending practices, capital structure, investment practices, dividend policy, operations and growth.
We are subject to extensive laws and regulations that govern almost all aspects of our operations. These laws and regulations, and the supervisory framework that oversees the administration of these laws and regulations, are primarily intended to protect depositors, the DIF, and the banking system as a whole, and not shareholders.
We maintain an allowance for credit losses (“ACL”) on loans and held-to-maturity debt securities. The ACL represents the Bank’s best estimate of probable losses within the existing portfolio of loans and held-to-maturity debt securities. Additionally, related to off-balance-sheet credit exposures, we maintain a liability reserve account reported as an other liability in our balance sheet.
If our allowance for credit losses is not sufficient to cover actual credit losses, our earnings could decrease. We maintain an allowance for credit losses (“ACL”) on loans and held-to-maturity debt securities. The ACL represents the Bank’s best estimate of probable losses within the existing portfolio of loans and held-to-maturity debt securities.
A failure of our controls and procedures to detect other than inconsequential errors or fraud could seriously harm our business and results of operations. We face risk under the BSA and other anti-money laundering statutes and regulations, as well as general fund transfer and payments-related risk.
A failure of our controls and procedures to detect other than inconsequential errors or fraud could seriously harm our business and results of operations.
The Bank’s regular assessments are determined by its risk classification, which is based on a number of factors, including regulatory capital levels, asset growth and asset quality. High levels of bank failures during and following the financial crisis and increases in the statutory deposit insurance limits have increased resolution costs to the FDIC and put significant pressure on the DIF.
The Bank’s regular assessments are determined by its risk classification, which is based on a number of factors, including regulatory capital levels, asset growth and asset quality.
Some of our competitors have greater name financial resources, recognition and market presence than we do and offer certain services that we do not or cannot provide.
We compete with commercial banks, savings institutions, credit unions, finance companies, fintechs, mutual funds, insurance companies and securities brokerage and investment banking firms operating locally and nationwide. Some of our competitors have greater financial resources, name recognition and market presence than we do and offer certain services that we do not or cannot provide.
Further, any new laws, rules and regulations could make compliance more difficult or expensive. All of these laws and regulations, and the supervisory framework applicable to our industry, could have a material adverse effect on our business, financial condition and results of operations.
All of these laws and regulations, and the supervisory framework applicable to our industry, could have a material adverse effect on our business, financial condition and results of operations. 17 Federal and state regulators periodically examine our business and we may be required to remediate adverse examination findings.
Compliance with the myriad laws and regulations applicable to our organization can be difficult and costly.
These laws and regulations, among other matters, affect our lending practices, capital structure, investment practices, dividend policy, operations and growth. Compliance with the myriad laws and regulations applicable to our organization can be difficult and costly.
In addition, the interest rate on the Company’s 6.0% Fixed-to-Floating Rate Subordinated Notes due 2029 (the “2029 Notes”) will change from 6.0% to three-month term SOFR plus 4.376% on June 30, 2024 (a total interest rate of 9.74% based on three-month term SOFR as of January 31, 2024), and the interest rates on the Company’s other subordinated notes are scheduled to change in 2025 and 2026, respectively.
In addition, the interest rate on the Company’s other subordinated debt have, and are scheduled to change in 2025 and 2026, from fixed to floating rates. These changes could result in a decrease of net interest income.
Further, competition for and costs of deposits has similarly increased, putting pressure on net interest margin. While we have taken actions to minimize the increase in our costs of funds, there is no guarantee that such actions will be successful or sufficient in the current or future market.
Further, competition for and costs of deposits has similarly increased, putting pressure on net interest margin.
Further, recently enacted laws impose an excise tax on a public company’s repurchase of its own stock. There are discussions and proposed legislation to increase that excise tax. Increases in the excise tax on stock repurchases could negatively affect our current stock repurchase program and our ability to repurchase common stock in the future. Item 1B. Unresolved Staff Comments None.
Further, recently enacted laws impose an excise tax on a public company’s repurchase of its own stock. Changes in accounting policies or in accounting standards could materially affect how we report our financial condition and results of operations.
Legal and Regulatory Risks We operate in a highly regulated environment, which could restrain our growth and profitability. We are subject to extensive laws and regulations that govern almost all aspects of our operations.
Further, as a result of the increased sophistication of fraud activity, we continue to invest in systems, resources, and controls to detect and prevent fraud. This will result in continued ongoing investments in the future. Legal and Regulatory Risks We operate in a highly regulated environment, which could restrain our growth and profitability.
Removed
We compete with commercial banks, savings institutions, credit unions, finance companies, fintechs, mutual funds, insurance companies and securities brokerage and investment banking firms operating locally and nationwide, and may soon compete with entities granted “special purpose national bank” (“SPNB”) charters by the Office of the Comptroller of the Currency.
Added
Our success depends, to a certain extent, upon favorable economic and political conditions, local and national, as well as governmental monetary policies.
Removed
Additionally, our articles of incorporation authorize our Board of Directors to issue one or more classes or series of preferred stock without shareholder approval and such preferred stock could be issued as a defensive measure in response to a takeover proposal.
Added
Further, our credit union competitors benefit from competitive advantages, including the credit union exemption from paying federal income tax and can, therefore, more aggressively price many products and services.
Removed
The inability of purchasers of real estate, including residential real estate, to obtain financing may weaken the financial condition of our borrowers who are dependent on the sale or refinancing of property to repay their loans.
Added
If these risks were to materialize, they could negatively affect our business, financial condition and results of operations.
Removed
The replacement of the London Inter-bank Offered Rate (“LIBOR”) may increase our cost of borrowing and could adversely impact our business, financial condition and results of operations.
Added
Societal, legislative and regulatory responses to environmental, social and governance (ESG) concerns, and anti ESG concerns, as well as diversity, equity, and inclusion (DEI) and anti-DEI concerns, could adversely affect our business and performance, including indirectly through impacts on our customers. 12 Our business faces increasing public, investor, activist, legislative and regulatory scrutiny related to ESG and anti-ESG, DEI and anti-DEI developments.
Removed
The replacement for LIBOR, and floating rate benchmarks generally, could have adverse impacts on floating-rate obligations, loans, deposits, derivatives and other financial instruments that used LIBOR as a benchmark rate and adversely affect the Company's business, financial condition or results of operations.
Added
We risk damage to our brand and reputation in certain sectors if we fail to act in response to ESG concerns, such as diversity, equity and inclusion, environmental stewardship, human capital management, support for our local communities, corporate governance and transparency, or fail to consider ESG factors in our business operations.
Removed
The floating rate features of our outstanding 2029 Notes due were based on LIBOR, while the floating rate features of our other subordinated notes are based on SOFR.
Added
Concerns over the long-term impacts of climate change have led and will likely continue to lead to global governmental efforts to mitigate those impacts. Consumers and businesses also may change their behavior and operations as a result of these concerns.
Removed
In anticipation of LIBOR’s phase out, and the uncertainty of SOFR as a LIBOR replacement, the terms of our 2029 Notes and 2031 Notes provide for a benchmark replacement rate for LIBOR or SOFR, as applicable, with such benchmark replacement rate to be determined by the Company or an independent financial advisor appointed by the Company, as applicable, in each case in accordance with terms of the 2029 Notes and 2031 Notes, respectively.
Added
The Company and its customers may need to respond to new laws and regulations as well as consumer and business preferences resulting from climate change concerns. We and our customers may face cost increases, asset value reductions and operating process changes.
Removed
Accordingly, the phase-out of LIBOR and the use of an alternative base rate or a benchmark replacement rate as a basis for calculating interest with respect to any outstanding variable rate indebtedness could lead to an increase in the interest we pay and a corresponding increase in our costs of capital or otherwise have a material adverse impact on our business, financial condition or results of operations.
Added
The impact on our customers will likely vary depending on their specific circumstances, including a significant presence in areas that are vulnerable to natural and man-made disasters that may be exacerbated by climate change, or reliance upon or a role in carbon intensive activities.
Removed
The long-term impact of regulatory capital rules is uncertain and a significant increase in our capital requirements could have an adverse effect on our business and profitability.
Added
Among the impacts to the Company could be a drop in demand for our products and services, particularly in certain sectors. In addition, we could face reductions in creditworthiness on the part of some customers or in the value of assets securing loans.
Removed
In order to remain “well-capitalized”, the Basel III Capital Rules require the Company and the Bank to maintain: (i) a minimum ratio of Common Equity Tier 1 capital to risk-weighted assets of 4.5%, plus a 2.5% “capital conservation buffer” (resulting in a minimum ratio of Common Equity Tier 1 capital to risk-weighted assets of 7.0%); (ii) a minimum ratio of Tier 1 capital to risk-weighted assets of 6.0%, plus the capital conservation buffer (resulting in a minimum Tier 1 capital ratio of 8.5%); (iii) a minimum ratio of Total capital to risk-weighted assets of 8.0%, plus the capital conservation buffer (resulting in a minimum Total capital ratio of 10.5%); and (iv) a minimum Leverage Ratio of 4.0%.
Added
Our efforts to take these risks into account may not be effective in protecting us from the negative impact of new laws and regulations or changes in consumer or business behavior.
Added
In response to ESG developments (including, in particular DEI initiatives), there are increasing instances of anti-ESG legislation and anti-DEI executive orders, adverse media coverage, regulation, and litigation that could have unintended impacts on ordinary banking operations and increase litigation or reputational risk related to actions we choose to take and impact the results of our operations.
Added
If legislatures in the states in which we operate adopt legislation intended to protect certain industries by limiting or prohibiting consideration of business and industry factors in lending activities, certain portions of our lending operations may be impacted.
Added
Additionally, related to off-balance-sheet credit exposures, we maintain a liability reserve account reported as an other liability in our balance sheet.
Added
Our business may be adversely affected by fraud. As a financial institution, we are inherently exposed to risk in the form of theft and other fraudulent activities by customers, employees, or other third parties targeting us or our customers or data.
Added
Such activity may take many forms, including check fraud, electronic fraud, wire fraud, phishing, social engineering, spoofing, and other dishonest acts. Although we devote substantial resources to maintaining effective policies and internal controls to identify and prevent such incidents, given the increasing sophistication of possible perpetrators, we may experience financial losses or reputational harm as a result of fraud.
Added
Further, any new laws, rules and regulations could make compliance more difficult or expensive.
Added
We may be subject to potential liability and business risk from actions by our regulators related to supervision of third parties.
Added
The preparation of consolidated financial statements in conformity with U.S generally accepted accounting principles (“GAAP”), including the accounting rules and regulations of the SEC and the FASB, requires management to make significant estimates and assumptions that impact our financial statements by affecting the value of our assets or liabilities and results of operations.
Added
Some of our accounting policies are critical because they require management to make difficult, subjective and complex judgments about matters that are inherently uncertain and because materially different amounts may be reported if different estimates or assumptions are used.
Added
If such estimates or assumptions underlying our financial statements are incorrect, our financial condition and results of operations could be adversely affected. 19 From time to time, the FASB and the SEC change the financial accounting and reporting standards or the interpretation of such standards that govern the preparation of our external financial statements.
Added
These changes are beyond our control, can be difficult to predict, may require extraordinary efforts or additional costs to implement and could materially impact how we report our financial condition and results of operations. Additionally, we may be required to apply a new or revised standard retrospectively, resulting in the restatement of prior period financial statements in material amounts.
Added
Shares of our common stock are not insured deposits and may lose value.
Added
Shares of our common stock are not savings accounts, deposits or other obligations of any depository institution and are not insured or guaranteed by the FDIC or any other governmental agency or instrumentality, any other deposit insurance fund or by any other public or private entity, and are subject to investment risk, including the possible loss of principal.
Added
The costs and effects of litigation, investigations or similar matters involving us or other financial institutions or counterparties, or related adverse facts and developments, could materially affect our business, operating results and financial condition. We may be involved from time to time in a variety of litigation, investigations, inquiries, or similar matters arising out of our business.
Added
Furthermore, litigation against banks tend to increase during economic downturns and periods of credit deterioration, which may occur or worsen as a result of current economic uncertainty. Most recently there has been an increase in class action lawsuits filed claiming deceptive practices or violations of account terms in connection with non-sufficient fees or overdraft charges.
Added
We manage these risks through internal controls, personnel training, insurance, litigation management, our compliance and ethics processes, and other means. However, the commencement, outcome, and magnitude of litigation cannot be predicted or controlled with any certainty. We establish reserves for legal claims when payments associated with the claims become probable and the losses can be reasonably estimated.
Added
However, our insurance may not cover all claims that may be asserted against us and indemnification rights to which we are entitled may not be honored, and any claims asserted against us, regardless of merit or eventual outcome, may harm our reputation.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

8 edited+3 added−2 removed3 unchanged
Biggest changeKey elements of our Information Security Program include: • risk assessments designed to help identify material cybersecurity risks to our critical systems, information, products, services, and our broader enterprise information technology environment; • internal testing of our security controls and our response to cybersecurity incidents; • the use of external service providers, to assess, test or otherwise assist with aspects of our security controls; • training and awareness programs for all employees that include periodic and ongoing assessments to drive adoption and awareness of cybersecurity processes and controls; • a cybersecurity incident response plan that includes procedures for responding to cybersecurity incidents; • maintenance and regular testing of a Business Continuity Plan that includes redundant back-up systems for all critical functions; • a physical security program that is tested regularly; • obtaining and maintaining appropriate insurance and indemnification for cybersecurity incidents; including insurance to cover cybersecurity incidents affecting third party vendors and service providers: and • a third-party risk management program for service providers, suppliers, and vendors, that provides for the assessment, monitoring and management of cybersecurity risk presented by the Company’s use of such third parties. 20 In the last three fiscal years, the Company has not experienced any material cybersecurity incidents, and expenses incurred from cybersecurity incidents were immaterial.
Biggest changeKey elements of our Information Security Program include: • risk assessments designed to help identify material cybersecurity risks to our critical systems, information, products, services, and our broader enterprise information technology environment are conducted on at least an annual basis; 20 • internal testing of our security controls and our response to cybersecurity incidents; • the use of external service providers, to assess, test or otherwise assist with aspects of our security controls; • training and awareness programs for all employees that include periodic and ongoing assessments to drive adoption and awareness of cybersecurity processes and controls; • a cybersecurity incident response plan that includes procedures for responding to cybersecurity incidents; • maintenance and regular testing of a Business Continuity Plan that includes redundant back-up systems for critical functions; • a physical security program that is tested regularly; • obtaining and maintaining cyber insurance; and • a third-party risk management program for service providers, suppliers, and vendors, that provides for the assessment, monitoring and management of cybersecurity risk presented by the Company’s use of such third parties, as well as contractual protections related to cybersecurity incidents affecting third party vendors and service providers.
Our ISO, who has over twenty-five years of experience in the system, network, and cybersecurity space, is responsible for implementing the Information Security Program alongside our Chief Information Officer. The ISO and Chief Information Officer both serve on the Enterprise Risk Management Committee, which is chaired by our Chief Risk Officer.
Our ISO, who has over twenty-five years of experience in the system, network, and cybersecurity space, is responsible for overseeing and managing the Information Security Program alongside our Chief Information Officer. The Chief Information Officer serves on the Enterprise Risk Management Committee, which is chaired by our Chief Risk Officer.
This does not imply that we meet any particular technical standards, specifications, or requirements, but rather that we use the guidance to help us identify, assess, and manage cybersecurity risks relevant to our business. Cybersecurity Risk Management and Strategy Our Information Security Program is aligned to the Company’s business strategy.
This does not imply that we meet any particular technical standards, specifications, or requirements, but rather that we use the guidance to help us identify, assess, and manage cybersecurity risks relevant to our business.
Item 1C. Cybersecurity We believe that cybersecurity and the protection of data and customer information in our possession, custody or control is of paramount importance to our business.
Item 1C. Cybersecurity We believe that cybersecurity and the protection of data and customer information in our possession, custody or control is of paramount importance to our business. The Company’s information security program is designed to protect the confidentiality, integrity, and availability of our critical systems and information, including customer information.
It shares common methodologies, reporting channels and governance processes that apply to other areas of enterprise risk, including legal, compliance, strategic, operational, and financial risk.
Cybersecurity Risk Management and Strategy Our Information Security Program is integrated into our risk management program and is aligned to the Company’s business strategy and Enterprise Risk Management program. It shares common methodologies, reporting channels and governance processes that apply to other areas of enterprise risk, including legal, compliance, strategic, operational, and financial risk.
Cybersecurity Governance Our Board of Directors keeps apprised of and oversees technology risk and cybersecurity of the Company, and receives updates from the Company’s Information Security Officer (“ISO”) on a quarterly basis. However, the Board has delegated certain specific responsibility for overseeing cybersecurity threats, among other things, to its Audit and Risk Committee.
The Board receives updates from the Company’s Information Security Officer (“ISO”) on a quarterly basis and receives cybersecurity training on at least an annual basis. While the entire Board receives reporting and receives training, the Board has delegated certain specific responsibility for overseeing cybersecurity threats, among other things, to its Risk Committee.
We have therefore designed and implemented a framework of policies, programs and procedures (the “Information Security Program”) intended to protect the confidentiality, integrity, and availability of our critical systems and information, including customer information. The Information Security Program is informed by interagency guidance issued by banking regulators as well as the FFIEC Information Security Booklet and Cybersecurity Assessment Tool.
The program is comprised of policies, procedures, and programs, and is informed by and intended to align with the interagency guidance issued by banking regulators as well as the FFIEC Information Security Booklet and Cybersecurity Assessment Tool (the “Information Security Program”).
Our ISO and Chief Risk Officer provide the Audit and Risk Committee and the Company’s internal Enterprise Risk Management Committee periodic reports on our cybersecurity risks and cybersecurity incidents, if any. The Board, and the Audit and Risk Committee, have appropriate expertise in planning for and dealing with cybersecurity threats.
Our ISO and Chief Risk Officer provide the Risk Committee and the Company’s internal Enterprise Risk Management Committee periodic and as needed reports on our cybersecurity risks and cybersecurity incidents, if any. The Risk Committee and the entire Board review and approve the Company’s information security policies and certain other relevant policies on at least an annual basis.
Removed
For a discussion of whether and how any risks from cybersecurity threats, including as a result of any previous cybersecurity incidents, have materially affected or are reasonably likely to materially affect us, including our business strategy, results of operations or financial condition, refer to Item 1A.
Added
The risk and evolving nature of cybersecurity threats, and not a previous cybersecurity incident, has led to the Company to devote significant time and resources to the development and implementation of the Information Security Program described above.
Removed
Specifically, and without limitation, David Becker, Ann Dee and Justin Christian all possess specific expertise in this area. The Audit and Risk Committee and the entire Board review and approve the Company’s Information Security Policy, Incident Response Policy, Third Party Risk Management Policy, Risk Appetite Statement and other relevant policies on at least an annual basis.
Added
Despite our efforts, there can be no assurance that our cybersecurity risk management processes and measures will be fully implemented, complied with, or effective in protecting our systems and information. We face risks from certain cybersecurity threats that, if realized, are reasonably likely to materially affect our business strategy, result of operations or financial condition.
Added
Please see Part I, Item 1A Risk Factors for further discussion of the risks associated with an interruption or breach in our information systems or infrastructure. Cybersecurity Governance Our Board of Directors keeps apprised of and oversees technology risk and cybersecurity of the Company.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeBMI Banks Index. The following assumes $100 invested on December 31, 2018 in First Internet Bancorp, the Nasdaq Composite Index and the S&P U.S. BMI Bank Index, and assumes that dividends are reinvested.
Biggest changeStock Performance Graph The following graph and table compares the five-year cumulative total return to shareholders of First Internet Bancorp common stock with that of the Nasdaq Composite Index and the S&P U.S. BMI Banks Index. The following assumes $100 invested on December 31, 2019 in First Internet Bancorp, the Nasdaq Composite Index and the S&P U.S.
In December 2022, the Company’s Board of Directors approved a new stock repurchase program authorizing the repurchase of up to $25.0 million of the Company’s outstanding stock from time to time on the open market or in privately negotiated transactions. The stock repurchase program is scheduled to expire on December 31, 2024, and replaced the stock repurchase program mentioned above.
In December 2022, the Company’s Board of Directors approved a new stock repurchase program authorizing the repurchase of up to $25.0 million of the Company’s outstanding stock from time to time on the open market or in privately negotiated transactions. The stock repurchase program replaced the stock repurchase program mentioned above and expired on December 31, 2024.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Market Information The Company’s common stock trades on the Nasdaq Global Select Market under the symbol “INBK.” As of March 8, 2024, the Company had 8,655,854 shares of common stock issued and outstanding, and there were 97 holders of record of common stock.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Market Information The Company’s common stock trades on the Nasdaq Global Select Market under the symbol “INBK.” As of March 7, 2025, the Company had 8,697,085 shares of common stock issued and outstanding, and there were 99 holders of record of common stock.
Dividends 21 Total cash dividends declared by the Company in 2023 were $0.24 per share.
Dividends Total cash dividends declared by the Company in 2024 were $0.24 per share.
Under this program, the Company repurchased 559,522 shares of common stock through March 8, 2024, at an average price of $19.06, for a total investment of $10.7 million.
Under this program, the Company repurchased 559,522 shares of common stock through March 8, 2024, at an average price of $19.06, for a total investment of $10.7 million. No common stock was repurchased during the fourth quarter of 2024 under the repurchase program that expired on December 31, 2024.
The historical stock price performance for our common stock is not necessarily indicative of future stock performance. 22 December 31, Index 2018 2019 2020 2021 2022 2023 First Internet Bancorp $ 100.00 $ 117.34 $ 144.17 $ 237.61 $ 123.53 $ 124.77 Nasdaq Composite Index 100.00 136.69 198.10 242.03 163.28 236.17 S&P U.S.
The historical stock price performance for our common stock is not necessarily indicative of future stock performance. 22 December 31, Index 2019 2020 2021 2022 2023 2024 First Internet Bancorp $ 100.00 $ 122.87 $ 202.50 $ 105.28 $ 106.34 $ 159.41 Nasdaq Composite Index 100.00 144.92 177.06 119.45 172.77 223.87 S&P U.S.
Removed
The following table presents information with respect to purchases of the Company’s common stock made during the fourth quarter of 2023 by or on behalf of the Company or any “affiliated purchaser,” as defined in Rule 10b-18(a)(3).
Added
BMI Bank Index, and assumes that dividends are reinvested.
Removed
(dollars in thousands, except per share data) Total Number of Shares Purchased Average Price Paid Per Share Total Number of Shares Purchased As Part of Publicly Announced Programs Approximate Dollar Value Of Shares That May Yet Be Purchased Under The Programs October 1, 2023 - October 31, 2023 23,000 $ 16.51 23,000 $ 14,988 November 1, 2023 - November 30, 2023 7,000 18.90 7,000 14,856 December 1, 2023 - December 31, 2023 10,000 23.92 10,000 14,617 Total 40,000 40,000 Stock Performance Graph The following graph and table compares the five-year cumulative total return to shareholders of First Internet Bancorp common stock with that of the Nasdaq Composite Index and the S&P U.S.
Added
BMI Banks Index 100.00 87.24 118.61 98.38 107.32 143.68
Removed
BMI Banks Index 100.00 137.36 119.83 162.92 135.13 147.41

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeReconciliations of these non-GAAP financial measures to the most directly comparable GAAP financial measures are included in the following tables for the last three completed fiscal years ended on December 31. 42 (dollars in thousands, except share and per share data) At or For The Twelve Months Ended December 31, 2023 2022 2021 Total equity - GAAP $ 362,795 $ 364,974 $ 380,338 Adjustments: Goodwill (4,687) (4,687) (4,687) Tangible common equity $ 358,108 $ 360,287 $ 375,651 Total assets - GAAP $ 5,167,572 $ 4,543,104 $ 4,210,994 Adjustments: Goodwill (4,687) (4,687) (4,687) Tangible assets $ 5,162,885 $ 4,538,417 $ 4,206,307 Total common shares outstanding 8,644,451 9,065,883 9,754,455 Book value per common share $ 41.97 $ 40.26 $ 38.99 Effect of goodwill (0.54) (0.52) (0.48) Tangible book value per common share $ 41.43 $ 39.74 $ 38.51 Total shareholders’ equity to assets 7.02 % 8.03 % 9.03 % Effect of goodwill (0.08 %) (0.09 %) (0.10 %) Tangible common equity to tangible assets 6.94 % 7.94 % 8.93 % Total average equity - GAAP $ 357,800 $ 372,844 $ 358,105 Adjustments: Average goodwill (4,687) (4,687) (4,687) Average tangible common equity $ 353,113 $ 368,157 $ 353,418 Return on average shareholders' equity 2.35 % 9.53 % 13.44 % Effect of goodwill 0.03 % 0.12 % 0.17 % Return on average tangible common equity 2.38 % 9.65 % 13.61 % Total interest income $ 239,442 $ 156,908 $ 133,883 Adjustments: Fully-taxable equivalent adjustments 1 5,233 5,355 5,453 Total interest income - FTE $ 244,675 $ 162,263 $ 139,336 Net interest income $ 74,904 $ 97,093 $ 86,556 Adjustments: Fully-taxable equivalent adjustments 1 5,233 5,355 5,453 Net interest income - FTE $ 80,137 $ 102,448 $ 92,009 Net interest margin 1.56 % 2.41 % 2.11 % Effect of fully-taxable equivalent adjustments 1 0.11 % 0.13 % 0.14 % Net interest margin - FTE 1.67 % 2.54 % 2.25 % 1 Assuming a 21% tax rate 43 (dollars in thousands, except share and per share data) At or For The Twelve Months Ended December 31, 2023 2022 2021 Total Revenue- GAAP $ 101,029 $ 118,350 $ 119,400 Adjustments: Mortgage-related revenue (65) — — Gain on sale of premises and equipment — — (2,523) Subordinated debt redemption cost — — 810 Adjusted total revenue $ 100,964 $ 118,350 $ 117,687 Noninterest income - GAAP $ 26,125 $ 21,257 $ 32,844 Adjustments: Mortgage-related revenue (65) — — Gain on sale of premises and equipment — — (2,523) Adjusted noninterest income $ 26,060 $ 21,257 $ 30,321 Noninterest expense - GAAP $ 79,436 $ 73,273 $ 61,798 Adjustments: Mortgage-related costs (3,052) — — Acquisition-related expenses — (273) (163) IT Termination fee — (475) Nonrecurring consulting fee — (875) — Write-down of Software — (125) — Discretionary inflation bonus — (531) — Accelerated equity compensation — (289) — Adjusted noninterest expense $ 76,384 $ 71,180 $ 61,160 Income before income taxes - GAAP $ 4,940 $ 40,100 $ 56,572 Adjustments: 1 Mortgage-related revenue (65) — — Mortgage-related costs 3,052 — — Gain on sale of premises and equipment — — (2,523) Partial charge-off of C&I participation loan 6,914 — — Acquisition-related expenses — 273 163 IT Termination fee — 475 Nonrecurring consulting fee — 875 — Write-down of Software — 125 — Subordinated debt redemption cost — — 810 Discretionary inflation bonus — 531 — Accelerated equity compensation — 289 — Adjusted income before income taxes $ 14,841 $ 42,193 $ 55,497 Income tax provision - GAAP $ (3,477) $ 4,559 $ 8,458 Adjustments: 1 Mortgage-related revenue (14) — — Mortgage-related costs 641 — — Gain on sale of premises and equipment — — (530) Partial charge-off of C&I participation loan 1,452 — — Acquisition-related expenses — 57 34 IT Termination fee — 100 Nonrecurring consulting fee — 184 — Write-down of Software — 26 — Subordinated debt redemption cost — — 170 Discretionary inflation bonus — 112 — Accelerated equity compensation — 61 — Adjusted income tax provision $ (1,398) $ 4,999 $ 8,232 1 Assuming a 21% tax rate 44 (dollars in thousands, except share and per share data) At or For The Twelve Months Ended December 31, 2023 2022 2021 Net income - GAAP $ 8,417 $ 35,541 $ 48,114 Adjustments: Mortgage-related revenue (51) — — Mortgage-related costs 2,411 — — Partial charge-off of C&I participation loan 5,462 — — Gain on sale of premises and equipment — — (1,993) IT Termination fee — — 375 Acquisition-related expenses — 216 129 Nonrecurring consulting fee — 691 — Write-down of Software — 99 — Subordinated debt redemption cost — — 640 Discretionary inflation bonus — 419 — Accelerated equity compensation — 228 — Adjusted net income $ 16,239 $ 37,194 $ 47,265 Diluted average common shares outstanding 8,858,890 9,595,115 9,976,261 Diluted earnings per share - GAAP $ 0.95 $ 3.70 $ 4.82 Adjustments: Mortgage-related revenue (0.01) — — Mortgage-related costs 0.27 — — Effect of gain on sale of premises and equipment — — (0.19) Effect of partial charge-off of C&I participation loan 0.62 — — Effect of acquisition-related expenses — 0.02 0.01 Effect of IT termination fee — — 0.04 Effect of nonrecurring consulting fee — 0.07 — Effect of write-down of software — 0.01 — Effect of subordinated debt redemption cost — — 0.06 Effect of discretionary inflation bonus — 0.04 — Effect of accelerated equity compensation — 0.02 — Adjusted diluted earnings per share $ 1.83 $ 3.86 $ 4.74 Return on average assets 0.17 % 0.85 % 1.14 % Effect of mortgage-related revenue 0.00 % 0.00 % 0.00 % Effect of mortgage-related costs 0.05 % 0.00 % 0.00 % Effect of gain on sale of premises and equipment 0.00 % 0.00 % (0.05 %) Effect of partial charge-off of C&I participation loan 0.11 % 0.00 % 0.00 % Effect of acquisition-related expenses 0.00 % 0.01 % 0.00 % Effect of IT termination fee 0.00 % 0.00 % 0.01 % Effect of nonrecurring consulting fee 0.00 % 0.02 % 0.00 % Effect of write-down of software 0.00 % 0.00 % 0.00 % Effect of subordinated debt redemption cost 0.00 % 0.00 % 0.02 % Effect of discretionary inflation bonus 0.00 % 0.01 % 0.00 % Effect of accelerated equity compensation 0.00 % 0.01 % 0.00 % Adjusted return on average assets 0.33 % 0.90 % 1.12 % 45 (dollars in thousands, except share and per share data) At or For The Twelve Months Ended December 31, 2023 2022 2021 Return on average shareholders' equity 2.35 % 9.53 % 13.44 % Effect of mortgage-related revenue (0.01) % 0.00 % 0.00 % Effect of mortgage-related costs 0.67 % 0.00 % 0.00 % Effect of gain on sale of premises and equipment 0.00 % 0.00 % (0.56 %) Effect of partial charge-off of C&I participation loan 1.53 % 0.00 % 0.00 % Effect of acquisition-related expenses 0.00 % 0.06 % 0.04 % Effect of IT termination fee 0.00 % 0.00 % 0.10 % Effect of nonrecurring consulting fee 0.00 % 0.19 % 0.00 % Effect of write-down of software 0.00 % 0.03 % 0.00 % Effect of subordinated debt redemption cost 0.00 % 0.00 % 0.18 % Effect of discretionary inflation bonus 0.00 % 0.11 % 0.00 % Effect of accelerated equity compensation 0.00 % 0.06 % 0.00 % Adjusted return on average shareholders' equity 4.54 % 9.98 % 13.20 % Return on average tangible common equity 2.38 % 9.65 % 13.61 % Effect of mortgage-related revenue (0.01) % 0.00 % 0.00 % Effect of mortgage-related costs 0.68 % 0.00 % 0.00 % Effect of partial charge-off of C&I participation loan 1.55 % 0.00 % 0.00 % Effect of gain on sale of premises and equipment 0.00 % 0.00 % (0.56 %) Effect of acquisition-related expenses 0.00 % 0.06 % 0.04 % Effect of IT termination fee 0.00 % 0.00 % 0.10 % Effect of nonrecurring consulting fee 0.00 % 0.19 % 0.00 % Effect of write-down of software 0.00 % 0.03 % 0.00 % Effect of subordinated debt redemption cost 0.00 % 0.00 % 0.18 % Effect of discretionary inflation bonus 0.00 % 0.11 % 0.00 % Effect of accelerated equity compensation 0.00 % 0.06 % 0.00 % Adjusted return on average tangible common equity 4.60 % 10.10 % 13.37 % 46 Critical Accounting Policies and Estimates Adoption of new accounting standards ASU 2016 - 13 On January 1, 2023, the Company adopted ASU 2016-03 Financial Instruments - Credit losses (“ASC 326”): Measurement of Credit Losses on Financial Instruments, as amended, which replaces the incurred loss methodology with an expected credit loss (“CECL”) methodology.
Biggest changeReconciliations of these non-GAAP financial measures to the most directly comparable GAAP financial measures are included in the following tables for the last three completed fiscal years ended on December 31. 41 (dollars in thousands, except share and per share data) At or For The Twelve Months Ended December 31, 2024 2023 2022 Total equity - GAAP $ 384,063 $ 362,795 $ 364,974 Adjustments: Goodwill (4,687) (4,687) (4,687) Tangible common equity $ 379,376 $ 358,108 $ 360,287 Total assets - GAAP $ 5,737,859 $ 5,167,572 $ 4,543,104 Adjustments: Goodwill (4,687) (4,687) (4,687) Tangible assets $ 5,733,172 $ 5,162,885 $ 4,538,417 Total common shares outstanding 8,667,894 8,644,451 9,065,883 Book value per common share $ 44.31 $ 41.97 $ 40.26 Effect of goodwill (0.54) (0.54) (0.52) Tangible book value per common share $ 43.77 $ 41.43 $ 39.74 Total shareholders’ equity to assets 6.69 % 7.02 % 8.03 % Effect of goodwill (0.07 %) (0.08 %) (0.09 %) Tangible common equity to tangible assets 6.62 % 6.94 % 7.94 % Total average equity - GAAP $ 377,215 $ 357,800 $ 372,844 Adjustments: Average goodwill (4,687) (4,687) (4,687) Average tangible common equity $ 372,528 $ 353,113 $ 368,157 Return on average shareholders' equity 6.70 % 2.35 % 9.53 % Effect of goodwill 0.08 % 0.03 % 0.12 % Return on average tangible common equity 6.78 % 2.38 % 9.65 % Total interest income $ 291,887 $ 239,442 $ 156,908 Adjustments: Fully-taxable equivalent adjustments 1 4,650 5,233 5,355 Total interest income - FTE $ 296,537 $ 244,675 $ 162,263 Net interest income $ 87,377 $ 74,904 $ 97,093 Adjustments: Fully-taxable equivalent adjustments 1 4,650 5,233 5,355 Net interest income - FTE $ 92,027 $ 80,137 $ 102,448 Net interest margin 1.65 % 1.56 % 2.41 % Effect of fully-taxable equivalent adjustments 1 0.09 % 0.11 % 0.13 % Net interest margin - FTE 1.74 % 1.67 % 2.54 % 1 Assuming a 21% tax rate 42 (dollars in thousands, except share and per share data) At or For The Twelve Months Ended December 31, 2024 2023 2022 Total Revenue - GAAP $ 134,722 $ 101,029 $ 118,350 Adjustments: Mortgage-related revenue — (65) — Gain on prepayment of FHLB advances (1,829) — — Gain on termination of interest rate swaps (2,904) — — Adjusted total revenue $ 129,989 $ 100,964 $ 118,350 Noninterest income - GAAP $ 47,345 $ 26,125 $ 21,257 Adjustments: Mortgage-related revenue — (65) — Gain on prepayment of FHLB advances (1,829) — — Gain on termination of interest rate swaps (2,904) — — Adjusted noninterest income $ 42,612 $ 26,060 $ 21,257 Noninterest expense - GAAP $ 90,110 $ 79,436 $ 73,273 Adjustments: Mortgage-related costs — (3,052) — Acquisition-related expenses — — (273) IT termination fees (452) — — Nonrecurring consulting fee — — (875) Write-down of Software — — (125) Discretionary inflation bonus — — (531) Accelerated equity compensation — — (289) Anniversary expenses (120) — — Adjusted noninterest expense $ 89,538 $ 76,384 $ 71,180 Income before income taxes - GAAP $ 27,542 $ 4,940 $ 40,100 Adjustments: 1 Mortgage-related revenue — (65) — Mortgage-related costs — 3,052 — Partial charge-off of C&I participation loan — 6,914 — Acquisition-related expenses — — 273 IT termination fees 452 — — Nonrecurring consulting fee — — 875 Write-down of software — — 125 Discretionary inflation bonus — — 531 Accelerated equity compensation — — 289 Anniversary expenses 120 — — Gain on prepayment of FHLB advances (1,829) — — Gain on termination of interest rate swaps (2,904) — — Adjusted income before income taxes $ 23,381 $ 14,841 $ 42,193 1 Assuming a 21% tax rate 43 (dollars in thousands, except share and per share data) At or For The Twelve Months Ended December 31, 2024 2023 2022 Income tax provision (benefit) - GAAP $ 2,266 $ (3,477) $ 4,559 Adjustments: 1 Mortgage-related revenue — (14) — Mortgage-related costs — 641 — Partial charge-off of C&I participation loan — 1,452 — Acquisition-related expenses — — 57 IT termination fees 95 — Nonrecurring consulting fee — — 184 Write-down of software — — 26 Discretionary inflation bonus — — 112 Accelerated equity compensation — — 61 Anniversary expenses 25 — — Gain on prepayment of FHLB advances (384) — — Gain on termination of interest rate swaps (610) — — Adjusted income tax provision (benefit) $ 1,392 $ (1,398) $ 4,999 Net income - GAAP $ 25,276 $ 8,417 $ 35,541 Adjustments: Mortgage-related revenue — (51) — Mortgage-related costs — 2,411 — Partial charge-off of C&I participation loan — 5,462 — IT termination fees 357 — — Acquisition-related expenses — — 216 Nonrecurring consulting fee — — 691 Write-down of software — — 99 Discretionary inflation bonus — — 419 Accelerated equity compensation — — 228 Anniversary expenses 95 — — Gain on prepayment of FHLB advances (1,445) — — Gain on termination of interest rate swaps (2,294) — — Adjusted net income $ 21,989 $ 16,239 $ 37,194 Diluted average common shares outstanding 8,765,725 8,858,890 9,595,115 Diluted earnings per share - GAAP $ 2.88 $ 0.95 $ 3.70 Adjustments: Mortgage-related revenue — (0.01) — Mortgage-related costs — 0.27 — Effect of partial charge-off of C&I participation loan — 0.62 — Effect of acquisition-related expenses — — 0.02 Effect of IT termination fees 0.04 — — Effect of nonrecurring consulting fee — — 0.07 Effect of write-down of software — — 0.01 Effect of discretionary inflation bonus — — 0.04 Effect of accelerated equity compensation — — 0.02 Effect of anniversary expenses 0.01 — — Effect of gain on prepayment of FHLB advances (0.16) — — Effect of gain on termination of interest rate swaps (0.26) — — Adjusted diluted earnings per share $ 2.51 $ 1.83 $ 3.86 1 Assuming a 21% tax rate 44 (dollars in thousands, except share and per share data) At or For The Twelve Months Ended December 31, 2024 2023 2022 Return on average assets 0.46 % 0.17 % 0.85 % Effect of mortgage-related revenue 0.00 % 0.00 % 0.00 % Effect of mortgage-related costs 0.00 % 0.05 % 0.00 % Effect of partial charge-off of C&I participation loan 0.00 % 0.11 % 0.00 % Effect of acquisition-related expenses 0.00 % 0.00 % 0.01 % Effect of IT termination fees 0.01 % 0.00 % 0.00 % Effect of nonrecurring consulting fee 0.00 % 0.00 % 0.02 % Effect of discretionary inflation bonus 0.00 % 0.00 % 0.01 % Effect of accelerated equity compensation 0.00 % 0.00 % 0.01 % Effect of anniversary expenses 0.00 % 0.00 % 0.00 % Effect of gain on prepayment of FHLB advances (0.03 %) 0.00 % 0.00 % Effect of gain on termination of interest rate swaps (0.04 %) 0.00 % 0.00 % Adjusted return on average assets 0.40 % 0.33 % 0.90 % Return on average shareholders' equity 6.70 % 2.35 % 9.53 % Effect of mortgage-related revenue 0.00 % (0.01 %) 0.00 % Effect of mortgage-related costs 0.00 % 0.67 % 0.00 % Effect of partial charge-off of C&I participation loan 0.00 % 1.53 % 0.00 % Effect of acquisition-related expenses 0.00 % 0.00 % 0.06 % Effect of IT termination fees 0.09 % 0.00 % 0.00 % Effect of nonrecurring consulting fee 0.00 % 0.00 % 0.19 % Effect of write-down of software 0.00 % 0.00 % 0.03 % Effect of discretionary inflation bonus 0.00 % 0.00 % 0.11 % Effect of accelerated equity compensation 0.00 % 0.00 % 0.06 % Effect of anniversary expenses 0.03 % 0.00 % 0.00 % Effect of gain on prepayment of FHLB advances (0.38 %) 0.00 % 0.00 % Effect of gain on termination of interest rate swaps (0.61 %) 0.00 % 0.00 % Adjusted return on average shareholders' equity 5.83 % 4.54 % 9.98 % Return on average tangible common equity 6.78 % 2.38 % 9.65 % Effect of mortgage-related revenue 0.00 % (0.01 %) 0.00 % Effect of mortgage-related costs 0.00 % 0.68 % 0.00 % Effect of partial charge-off of C&I participation loan 0.00 % 1.55 % 0.00 % Effect of acquisition-related expenses 0.00 % 0.00 % 0.06 % Effect of IT termination fees 0.10 % 0.00 % 0.00 % Effect of nonrecurring consulting fee 0.00 % 0.00 % 0.19 % Effect of write-down of software 0.00 % 0.00 % 0.03 % Effect of subordinated debt redemption cost 0.00 % 0.00 % 0.00 % Effect of discretionary inflation bonus 0.00 % 0.00 % 0.11 % Effect of accelerated equity compensation 0.00 % 0.00 % 0.06 % Effect of anniversary expenses 0.03 % 0.00 % 0.00 % Effect of gain on prepayment of FHLB advances (0.39 %) 0.00 % 0.00 % Effect of gain on termination of interest rate swaps (0.62 %) 0.00 % 0.00 % Adjusted return on average tangible common equity 5.90 % 4.60 % 10.10 % 45 Critical Accounting Policies and Estimates ACL - Loans Management considers the policies related to the ACL- loans to be critical to the financial statement presentation.
Qualitative factors for the DCF and weighted-average remaining maturity methodologies include the following: • Changes in lending policies and procedures, including changes in underwriting standards and collections, charge-offs and recovery practices • Changes in international, national, regional and local conditions • Changes in the nature and volume of the portfolio and terms of loans • Changes in the experience, depth and ability of lending management • Changes in the volume and severity of past due loans and other similar conditions • Changes in the quality of the organization’s loan review system • Changes in the value of underlying collateral for collateral dependent loans • The existence and effect of any concentrations of credit and changes in the levels of such concentrations • The effect of other external factors (i.e. competition, legal and regulatory requirements) on the level of estimated credit losses ACL - Loans - Individually Evaluated Loans that do not share risk characteristics are evaluated on an individual basis and are excluded from the collective evaluation.
Qualitative factors for the DCF and weighted-average remaining maturity methodologies include the following: • Changes in lending policies and procedures, including changes in underwriting standards and collections, charge-offs and recovery practices • Changes in international, national, regional and local conditions • Changes in the nature and volume of the portfolio and terms of loans • Changes in the experience, depth and ability of lending management • Changes in the volume and severity of past due loans and other similar conditions • Changes in the quality of the organization’s loan review system • Changes in the value of underlying collateral for collateral dependent loans • The existence and effect of any concentrations of credit and changes in the levels of such concentrations 46 • The effect of other external factors (i.e. competition, legal and regulatory requirements) on the level of estimated credit losses ACL - Loans - Individually Evaluated Loans that do not share risk characteristics are evaluated on an individual basis and are excluded from the collective evaluation.
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, 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.
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.
Investment Securities Portfolio In managing our investment securities portfolio, management focuses on providing an adequate level of liquidity and managing long-term interest rate risk, while earning an adequate level of investment income without taking undue risk.
Investment Securities Portfolio In managing our investment securities portfolio, management focuses on providing an adequate level of liquidity and managing long-term interest rate risk, while earning an adequate level of investment income without taking undue credit risk.
The $27.1 million decrease in net income for the twelve months ended December 31, 2023 compared to the twelve months ended December 31, 2022 was due primarily to a decrease of $22.2 million, or 22.9%, in net interest income, an increase of $11.7 million, or 234.6%, in provision for credit losses and an increase of $6.2 million, or 8.4%, in noninterest expense, partially offset by a decrease of $8.0 million, or 176.3%, in income tax expense and an increase of $4.9 million, or 22.9%, in noninterest income.
The decrease in net income of $27.1 million for the twelve months ended December 31, 2023 compared to the twelve months ended December 31, 2022 was due primarily to a decrease of $22.2 million, or 22.9%, in net interest income, an increase of $11.7 million, or 234.6%, in provision for loan losses and an increase of $6.2 million, or 8.4%, in noninterest expense, partially offset by a decrease of $8.0 million, or 176.3%, in income tax expense and an increase of $4.9 million, or 22.9%, in noninterest income.
Refer to the “Reconciliation of Non-GAAP Financial Measures” section of Item 7 of Part II of this report, Management's Discussion and Analysis of Financial Condition and Results of Operations 26 Rate/Volume Analysis The following table illustrates the impact of changes in the volume of interest-earning assets and interest-bearing liabilities and interest rates on net interest income for the periods indicated.
Refer to the “Reconciliation of Non-GAAP Financial Measures” section of Item 7 of Part II of this report, Management's Discussion and Analysis of Financial Condition and Results of Operations 25 Rate/Volume Analysis The following table illustrates the impact of changes in the volume of interest-earning assets and interest-bearing liabilities and interest rates on net interest income for the periods indicated.
We have the ability and intent to hold all investment securities in an unrealized loss position resulting from interest rate changes to the earlier of the forecasted recovery or the maturity of the underlying investment security. As of December 31, 2023, we did not have any investment securities of a single issuer that exceeded 10% of shareholders’ equity.
We have the ability and intent to hold all investment securities in an unrealized loss position resulting from interest rate changes to the earlier of the forecasted recovery or the maturity of the underlying investment security. As of December 31, 2024, we did not have any investment securities of a single issuer that exceeded 10% of shareholders’ equity.
Investment securities that are acquired and held principally for the purpose of selling them in the near term with the objective of generating economic profits on short-term differences in market characteristics are classified as “trading securities.” We did not classify any securities as trading securities as of December 31, 2023 and 2022.
Investment securities that are acquired and held principally for the purpose of selling them in the near term with the objective of generating economic profits on short-term differences in market characteristics are classified as “trading securities.” We did not classify any securities as trading securities as of December 31, 2024 and 2023.
Discussion, analysis and comparisons of the years ended December 31, 2022 and 2021 that are not included in this Annual Report on Form 10-K can be found in “Management's Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2022.
Discussion, analysis and comparisons of the years ended December 31, 2023 and 2022 that are not included in this Annual Report on Form 10-K can be found in “Management's Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2023.
Refer to the “Reconciliation of Non-GAAP Financial Measures” section of Item 7 of Part II of this report, Management's Discussion and Analysis of Financial Condition and Results of Operations for additional information. 30 Loan Portfolio Analysis The following table provides information regarding our loan portfolio as of the end of the last two years.
Refer to the “Reconciliation of Non-GAAP Financial Measures” section of Item 7 of Part II of this report, Management's Discussion and Analysis of Financial Condition and Results of Operations for additional information. 29 Loan Portfolio Analysis The following table provides information regarding our loan portfolio as of the end of the last two years.
Management is not aware of any other events or regulatory requirements that, if implemented, are likely to have a material effect on either the Company’s or the Bank’s liquidity. The following table presents the Company’s significant contractual obligations as of December 31, 2023.
Management is not aware of any other events or regulatory requirements that, if implemented, are likely to have a material effect on either the Company’s or the Bank’s liquidity. The following table presents the Company’s significant contractual obligations as of December 31, 2024.
We periodically evaluate each security in an unrealized loss position to determine if there is an impairment. As of December 31, 2023, the unrealized losses in our investment securities portfolio were due primarily to interest rate changes.
We periodically evaluate each security in an unrealized loss position to determine if there is an impairment. As of December 31, 2024, the unrealized losses in our investment securities portfolio were due primarily to interest rate changes.
The change in interest not due solely to volume or rate has been allocated in proportion to the absolute dollar amounts of the change in each. Rate/Volume Analysis of Net Interest Income Twelve Months Ended December 31, 2023 vs. December 31, 2022 Due to Changes in Twelve Months Ended December 31, 2022 vs.
The change in interest not due solely to volume or rate has been allocated in proportion to the absolute dollar amounts of the change in each. Rate/Volume Analysis of Net Interest Income Twelve Months Ended December 31, 2024 vs. December 31, 2023 Due to Changes in Twelve Months Ended December 31, 2023 vs.
The increase was due primarily to CRA-eligible purchases of agency mortgage-backed securities - residential. 37 Investment Maturities The following table summarizes the contractual maturity schedule (without regard to repricing schedules) of our investment securities at their amortized cost and their weighted average yields at December 31, 2023. 1 year or less More than 1 year to 5 years More than 5 years to 10 years More than 10 years Total (dollars in thousands) Amortized Cost Wtd.
The increase was due primarily to purchases of CRA-eligible agency mortgage-backed securities - residential. 36 Investment Maturities The following table summarizes the contractual maturity schedule (without regard to repricing schedules) of our investment securities at their amortized cost and their weighted average yields at December 31, 2024. 1 year or less More than 1 year to 5 years More than 5 years to 10 years More than 10 years Total (dollars in thousands) Amortized Cost Wtd.
The term “issuer” excludes the U.S. Government and its sponsored agencies and corporations. 36 The following tables present the amortized cost and approximate fair value of our investment securities portfolio by security type as of the end of the last two years. (amounts in thousands) December 31, Amortized Cost 2023 2022 Securities available-for-sale U.S.
The term “issuer” excludes the U.S. Government and its sponsored agencies and corporations. 35 The following tables present the amortized cost and approximate fair value of our investment securities portfolio by security type as of the end of the last two years. (amounts in thousands) December 31, Amortized Cost 2024 2023 Securities available-for-sale U.S.
At December 31, 2023, the Bank had the ability to borrow an additional $1.2 billion from the FHLB, the Federal Reserve and correspondent bank Fed Funds lines of credit. The Company is a separate legal entity from the Bank and must provide for its own liquidity.
At December 31, 2024, 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. The Company is a separate legal entity from the Bank and must provide for its own liquidity.
The following discussion, analysis and comparisons generally focus on the operating results for the years ended December 31, 2023 and 2022.
The following discussion, analysis and comparisons generally focus on the operating results for the years ended December 31, 2024 and 2023.
Avg. Yield Amortized Cost Wtd. Avg. Yield Amortized Cost Wtd. Avg. Yield Amortized Cost Wtd. Avg. Yield Amortized Cost Wtd. Avg. Yield Securities: U.S.
Avg. Yield 1 Amortized Cost Wtd. Avg. Yield 1 Amortized Cost Wtd. Avg. Yield 1 Amortized Cost Wtd. Avg. Yield 1 Amortized Cost Wtd. Avg. Yield 1 Securities: U.S.
Loan officers have underwriting and approval authorization of varying amounts based on their lending experience and product type. Additionally, based on the amount of the loan, multiple approvals may be required. Based on the Bank’s legal lending limit, the maximum it could lend to any one borrower at December 31, 2023 was $75.6 million.
Loan officers have underwriting and approval authorization of varying amounts based on their lending experience and product type. Additionally, based on the amount of the loan, multiple approvals may be required. Based on the Bank’s legal lending limit, the maximum it could lend to any one borrower at December 31, 2024 was $78.1 million.
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.
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 as of December 31, 2024.
At December 31, 2023, on a consolidated basis, the Company had $0.9 billion in cash and cash equivalents and investment securities available-for-sale, and $22.1 million in loans held-for-sale that were generally available for our cash needs. The Company can also generate funds from wholesale funding sources and collateralized borrowings.
At December 31, 2024, on a consolidated basis, the Company had $1.1 billion in cash and cash equivalents and investment securities available-for-sale, and $54.7 million in loans held-for-sale that were generally available for our cash needs. The Company can also generate funds from wholesale funding sources and collateralized borrowings.
Although management believes it uses the best information available to make determinations with respect to the 35 allowance for credit losses, future adjustments may be necessary if economic conditions differ substantially from those in the assumptions used to determine the size of the allowance for credit losses.
Although management believes it uses the best information available to make determinations with respect to the ACL, future adjustments may be necessary if economic conditions differ substantially from those in the assumptions used to determine the size of the ACL.
The Company repurchased a total of 855,956 shares at an average price of $36.31 per share under the program through December 19, 2022. On December 19, 2022, the Company's Board of Directors approved a new stock repurchase program to replace the prior program.
In October 2022, the Company’s Board of Directors increased the authorization to $35.0 million. The Company repurchased a total of 855,956 shares at an average price of $36.31 per share under the program through December 19, 2022. On December 19, 2022, the Company's Board of Directors approved a new stock repurchase program to replace the prior program.
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 decreased to 19% as of December 31 2023, down from 24% as of December 31, 2022.
These balances include Indiana-based municipal deposits, which are insured by the Indiana Board for Depositories, as well as larger balance accounts under contractual agreements that only allow withdrawal under certain conditions. After subtracting these types of deposits, the adjusted uninsured deposit balance drops to 20% as of December 31, 2024, compared to 19% as of December 31, 2023.
Results of Operations During the twelve months ended December 31, 2023, net income was $8.4 million, or $0.95 per diluted share, compared to net income of $35.5 million, or $3.70 per diluted share, for the twelve months ended December 31, 2022 and net income of $48.1 million, or $4.82 per diluted share, for the twelve months ended December 31, 2021.
Results of Operations During the twelve months ended December 31, 2024, net income was $25.3 million, or $2.88 per diluted share, compared to net income of $8.4 million, or $0.95 per diluted share, for the twelve months ended December 31, 2023 and net income of $35.5 million, or $3.70 per diluted share, for the twelve months ended December 31, 2022.
Excluding the impact of exiting consumer mortgage and the partial charge-off, adjusted net income for the twelve months ended December 31, 2023, 24 was $16.2 million, and adjusted diluted earnings per share was $1.83. Additionally, for the twelve months ended December 31, 2023, adjusted ROAA, adjusted ROAE and adjusted ROATCE were 0.33%, 4.54% and 4.60%, respectively.
During the twelve months ended December 31, 2023, ROAA, ROAE and ROATCE were 0.17%, 2.35% and 2.38%, respectively. Excluding the impact of exiting consumer mortgage and the partial charge-off, adjusted net income for the twelve months ended December 31, 2023 was $16.2 million and adjusted diluted earnings per share was $1.83.
The provision for credit losses - loans was $15.5 million for the twelve months ended December 31, 2023 compared to $5.0 million for the twelve months ended December 31, 2022.
The provision for credit losses - loans was $18.8 million for the twelve months ended December 31, 2024 compared to $15.5 million for the twelve months ended December 31, 2023.
The ratio of total shareholders’ equity to total assets decreased to 7.02% as of December 31, 2023 from 8.03% as of December 31, 2022 and the ratio of tangible common equity to tangible assets decreased to 6.94% as of December 31, 2023 from 7.94% as of December 31, 2022.
The ratio of total shareholders’ equity to total assets decreased to 6.69% as of December 31, 2024 from 7.02% as of December 31, 2023 and the ratio of tangible common equity to tangible assets decreased to 6.62% as of December 31, 2024 from 6.94% as of December 31, 2023.
Twelve Months Ended December 31, (amounts in thousands) 2023 2022 2021 Statutory rate times pre-tax income $ 1,037 $ 8,421 $ 11,880 (Subtract) add the tax effect of: Income from tax-exempt securities and loans (3,951) (4,190) (4,217) State income taxes, net of federal tax effect (30) 592 865 Bank-owned life insurance (215) (201) (199) Tax credits (168) (143) (175) Other differences (150) 80 304 Income tax (benefit) provision $ (3,477) $ 4,559 $ 8,458 We recognized an income tax benefit of $3.5 million in 2023, compared to an income tax provision of $4.6 million and an effective tax rate of 11.4% in 2022.
Twelve Months Ended December 31, (amounts in thousands) 2024 2023 2022 Statutory rate times pre-tax income $ 5,784 $ 1,037 $ 8,421 (Subtract) add the tax effect of: Income from tax-exempt securities and loans (3,500) (3,951) (4,190) State income taxes, net of federal tax effect 47 (30) 592 Bank-owned life insurance (262) (215) (201) Tax credits (110) (168) (143) Other differences 307 (150) 80 Income tax provision (benefit) $ 2,266 $ (3,477) $ 4,559 We recognized an income tax provision of $2.3 million and an effective tax rate of 8.2% in 2024, compared to an income tax benefit of $3.5 million in 2023.
This evaluation uses a discounted cash flow analysis based on historical loss data, reasonable and supportable forecasts and prepayment rates, as well as qualitative factors such as economic and business conditions, portfolio growth, concentrations of credit in the portfolio, trends in risk grades, delinquencies within the portfolio and changes in our lending policies and practices.
This evaluation uses a discounted cash flow analysis based on historical loss data, reasonable and supportable forecasts and prepayment rates, as well as qualitative factors such as economic and business conditions, portfolio growth, concentrations of credit in the portfolio, trends in risk grades, delinquencies within the portfolio and changes in our lending policies and practices. 34 Management actively monitors asset quality and, when appropriate, charges off loans against the ACL.
The ACL as a percentage of total loans was 1.01% as of December 31, 2023, compared to 0.91% at December 31, 2022. The ACL as a percentage of nonperforming loans decreased to 389.2% as of December 31, 2023, compared to 421.5% as of December 31, 2022.
The ACL as a percentage of total loans was 1.07% as of December 31, 2024, compared to 1.01% at December 31, 2023. The ACL as a percentage of nonperforming loans decreased to 157.5% as of December 31, 2024, compared to 389.2% as of December 31, 2023.
The growth in total interest income was due primarily to an increase in interest earned on loans resulting from an increase of 75 bps in the yield earned on loans, as well as an increase of $543.6 million, or 17.3%, in the average balance of loans, including loans held-for-sale.
The growth in total interest income was due primarily to an increase in interest earned on loans resulting from an increase of 63 bps in the yield earned on loans, as well as an increase of $311.7 million, or 8.5%, in the average balance of loans, including loans held-for-sale.
Refer to Note 18 to our consolidated financial statements for additional information about derivative financial instruments. Accrued Expenses and Other Liabilities Accrued expenses and other liabilities decreased $0.3 million, or 2.3%, to $14.2 million at December 31, 2023, compared to $14.5 million at December 31, 2022.
Refer to Note 18 to our consolidated financial statements for additional information about derivative financial instruments. 38 Accrued Expenses and Other Liabilities Accrued expenses and other liabilities increased $3.8 million, or 26.5%, to $17.9 million at December 31, 2024, compared to $14.2 million at December 31, 2023.
The ACL was $38.8 million as of December 31, 2023, compared to an ALLL of $31.7 million as of December 31, 2022.
The ACL was $44.8 million as of December 31, 2024, compared to an ACL of $38.8 million as of December 31, 2023.
The increase in interest expense related to interest-bearing demand deposits was due primarily to a 107 bp increase in the cost of these deposits, as well as an increase of $32.3 million, or 9.7%, in the average balance of these deposits.
The increase in interest expense related to interest-bearing demand deposits was due primarily to a 42 bp increase in the cost of these deposits, as well as an increase of $128.0 million, or 35.0%, in the average balance of these deposits.
At or For The Twelve Months Ended December 31, (dollars in thousands) 2023 2022 Balance outstanding at end of period $ 614,934 $ 614,928 Average amount outstanding during period 614,931 534,144 Maximum outstanding at any month end during period 614,934 615,928 Weighted average interest rate at end of period 1 3.04 % 2.82 % Weighted average interest rate during period 1 3.00 % 2.15 % 1 Excludes the impact of interest rate swaps.
At or For The Twelve Months Ended December 31, (dollars in thousands) 2024 2023 Balance outstanding at end of period $ 295,000 $ 614,934 Average amount outstanding during period 524,143 614,931 Maximum outstanding at any month end during period 614,935 614,934 Weighted average interest rate at end of period 1 3.39 % 3.04 % Weighted average interest rate during period 1 2.93 % 3.00 % 1 Excludes the impact of interest rate swaps.
The increase in interest expense related to certificates and brokered deposits was driven by an increase of 247 bps in the cost of these deposits, as well as an increase of $893.0 million, or 77.9%, in the average balance of these deposits.
The increase in interest expense related to certificates and brokered deposits was driven by an increase of 55 bps in the cost of these deposits, as well as an increase of $390.2 million, or 19.1%, in the average balance of these deposits.
Twelve Months Ended December 31, (amounts in thousands) 2023 2022 2021 Service charges and fees $ 851 $ 1,071 $ 1,114 Loan servicing revenue 3,833 2,573 1,934 Loan servicing asset revaluation (1,463) (1,639) (1,069) Mortgage banking activities 76 5,464 15,050 Gain on sale of loans 20,526 11,372 11,598 Gain on sale of premises and equipment — — 2,523 Other 2,302 2,416 1,694 Total noninterest income $ 26,125 $ 21,257 $ 32,844 During the twelve months ended December 31, 2023, noninterest income totaled $26.1 million, representing an increase of $4.9 million, or 22.9%, compared to $21.3 million for the twelve months ended December 31, 2022.
Twelve Months Ended December 31, (amounts in thousands) 2024 2023 2022 Service charges and fees $ 959 $ 851 $ 1,071 Loan servicing revenue 6,188 3,833 2,573 Loan servicing asset revaluation (2,537) (1,463) (1,639) Mortgage banking activities — 76 5,464 Gain on sale of loans 33,329 20,526 11,372 Other 9,406 2,302 2,416 Total noninterest income $ 47,345 $ 26,125 $ 21,257 During the twelve months ended December 31, 2024, noninterest income totaled $47.3 million, representing an increase of $21.2 million, or 81.2%, compared to $26.1 million for the twelve months ended December 31, 2023.
To supplement our internal loan review resources, we have engaged independent third-party loan review groups, which are a key component of our overall risk management process related to credit administration. 32 Asset Quality December 31, (dollars in thousands) 2023 2022 Nonaccrual loans Commercial loans: Commercial and industrial $ — $ 51 Owner-occupied commercial real estate — 1,570 Small business lending 6,824 4,764 Franchise finance 303 — Total commercial loans 7,127 6,385 Consumer loans: Residential mortgage 1,911 1,048 Other consumer 86 17 Total consumer loans 1,997 1,065 Total nonaccrual loans 9,124 7,450 Past Due 90 days and accruing loans Consumer loans: Residential mortgage 838 79 Total consumer loans 838 79 Total past due 90 days and accruing loans 838 79 Total nonperforming loans 9,962 7,529 Other real estate owned Residential mortgage 375 — Total other real estate owned 375 — Other nonperforming assets 17 42 Total nonperforming assets $ 10,354 $ 7,571 Total nonperforming loans to total loans 0.26 % 0.22 % Total nonperforming assets to total assets 0.20 % 0.17 % Allowance for credit losses - loans to total loans 1.01 % 0.91 % Nonaccrual loans to total loans 0.24 % 0.21 % Allowance for credit losses - loans to nonaccrual loans 425.0 % 426.0 % A loan is individually evaluated, when, based on current information or events, it is probable that we will be unable to collect all amounts due (principal and interest) according to the contractual terms of the loan agreement.
To supplement our internal loan review resources, we have engaged independent third-party loan review groups, which are a key component of our overall risk management process related to credit administration. 31 Asset Quality December 31, (dollars in thousands) 2024 2023 Nonaccrual loans Commercial loans: Small business lending $ 11,429 $ 6,824 Franchise finance 10,382 303 Total commercial loans 21,811 7,127 Consumer loans: Residential mortgage 4,083 1,911 Other consumer 61 86 Total consumer loans 4,144 1,997 Total nonaccrual loans 25,955 9,124 Past Due 90 days and accruing loans Commercial loans: Small business lending 1,320 — Total commercial loans 1,320 — Consumer loans: Residential mortgage 1,142 838 Other consumer 4 — Total consumer loans 1,146 838 Total past due 90 days and accruing loans 2,466 838 Total nonperforming loans 28,421 9,962 Other real estate owned Residential mortgage 272 375 Total other real estate owned 272 375 Other nonperforming assets 212 17 Total nonperforming assets $ 28,905 $ 10,354 Total nonperforming loans to total loans 0.68 % 0.26 % Total nonperforming assets to total assets 0.50 % 0.20 % Allowance for credit losses - loans to total loans 1.07 % 1.01 % Nonaccrual loans to total loans 0.68 % 0.24 % Allowance for credit losses - loans to nonaccrual loans 172.5 % 425.0 % Allowance for credit losses - loans to nonperforming loans 157.5 % 389.2 % A loan is individually evaluated, when, based on current information or events, it is probable that we will be unable to collect all amounts due (principal and interest) according to the contractual terms of the loan agreement.
December 31, (amounts in thousands) 2023 2022 Balance, beginning of period $ 31,737 $ 27,841 Adoption of ASU 2016-13 (CECL) 2,962 — Balance, beginning of period 34,699 27,841 Provision charged to expense 15,454 4,977 Losses charged off Commercial and industrial (7,049) — Investor commercial real estate (591) — Healthcare finance (605) — Small business lending (2,586) (402) Franchise finance (331) Residential mortgage (140) — Other consumer (582) (2,358) Total losses charged off (11,884) (2,760) Recoveries Commercial and industrial 243 5 Single tenant lease financing — 1,231 Small business lending 77 29 Residential mortgage 5 4 Home equity 6 139 Other consumer 174 271 Total recoveries 505 1,679 Balance, end of period $ 38,774 $ 31,737 Net charge-offs $ 11,379 $ 1,081 Net charge-offs (recoveries) to average loans (annualized) Commercial and industrial 6.87 % (0.01 %) Investor commercial real estate 0.47 % — % Single tenant lease financing — % (0.14 %) Healthcare finance 0.25 % — % Small business lending 1.34 % 0.32 % Franchise Finance 0.08 % — % Total commercial net charge-offs (recoveries) 0.38 % (0.03 %) Residential mortgage 0.03 % — % Home equity (0.02 %) (0.68 %) Other consumer 0.21 % 0.43 % Total consumer net charge-offs (recoveries) 0.07 % 0.32 % Net charge-offs to average loans 0.31 % 0.03 % The determination of the allowance for credit losses (“ACL”) and the related provision for credit losses are components of our significant accounting policies as discussed within Note 1 to our consolidated financial statements.
December 31, (dollars in thousands) 2024 2023 Balance, beginning of period $ 38,774 $ 31,737 Adoption of ASU 2016-13 (CECL) — 2,962 Balance, beginning of period 38,774 34,699 Provision charged to expense 18,815 15,454 Losses charged off Commercial and industrial — (7,049) Investor commercial real estate — (591) Single tenant lease financing (195) — Healthcare finance — (605) Small business lending (10,441) (2,586) Franchise finance (1,466) (331) Residential mortgage (159) (140) Other consumer (1,009) (582) Total losses charged off (13,270) (11,884) Recoveries Commercial and industrial 8 243 Small business lending 325 77 Residential mortgage 1 5 Home equity 7 6 Other consumer 109 174 Total recoveries 450 505 Balance, end of period $ 44,769 $ 38,774 Net charge-offs $ 12,820 $ 11,379 Net (recoveries) charge-offs to average loans (annualized) Commercial and industrial (0.01 %) 6.87 % Investor commercial real estate — % 0.47 % Single tenant lease financing 0.02 % — % Healthcare finance — % 0.25 % Small business lending 3.39 % 1.34 % Franchise Finance 0.27 % 0.08 % Total commercial net charge-offs 0.37 % 0.38 % Residential mortgage 0.04 % 0.03 % Home equity (0.03 %) (0.02 %) Other consumer 0.28 % 0.21 % Total consumer net charge-offs 0.13 % 0.07 % Net charge-offs to average loans 0.32 % 0.31 % The determination of the ACL and the related provision for credit losses are components of our significant accounting policies as discussed within Note 1 to our consolidated financial statements.
However, as deposit growth outpaced loan growth, balance sheet liquidity increased as the combined balance of cash and securities increased $271.8 million, or 32.5%, and the percentage of loans to deposits declined to 94.4% as of December 31, 2023, compared to 101.7% as of December 31, 2022.
As deposit growth outpaced loan growth, balance sheet liquidity increased as the combined balance of cash and securities increased $195.7 million, or 17.7%, and the percentage of loans to deposits declined to 84.5% as of December 31, 2024 from 94.4% as of December 31, 2023.
Twelve Months Ended December 31, (amounts in thousands) 2023 2022 2021 Salaries and employee benefits $ 45,322 $ 41,553 $ 38,223 Marketing, advertising and promotion 2,567 3,554 3,261 Consulting and professional services 3,082 4,826 4,054 Data processing 2,373 1,989 1,649 Loan expenses 5,756 4,435 2,112 Premises and equipment 10,599 10,688 7,063 Deposit insurance premium 3,880 1,152 1,213 Other 5,857 5,076 4,223 Total noninterest expense $ 79,436 $ 73,273 $ 61,798 28 Noninterest expense for the twelve months ended December 31, 2023 was $79.4 million, compared to $73.3 million for the twelve months ended December 31, 2022.
Twelve Months Ended December 31, (amounts in thousands) 2024 2023 2022 Salaries and employee benefits $ 51,756 $ 45,322 $ 41,553 Marketing, advertising and promotion 2,589 2,567 3,554 Consulting and professional services 3,744 3,082 4,826 Data processing 2,448 2,373 1,989 Loan expenses 5,947 5,756 4,435 Premises and equipment 11,902 10,599 10,688 Deposit insurance premium 5,000 3,880 1,152 Other 6,724 5,857 5,076 Total noninterest expense $ 90,110 $ 79,436 $ 73,273 27 Noninterest expense for the twelve months ended December 31, 2024 was $90.1 million, representing an increase of $10.7, or 13.4%, compared to $79.4 million for the twelve months ended December 31, 2023.
Twelve Months Ended December 31, 2023 December 31, 2022 December 31, 2021 (dollars in thousands) Average Balance Interest/Dividends Yield/Cost Average Balance Interest/Dividends Yield/Cost Average Balance Interest/Dividends Yield/Cost Assets Interest-earning assets Loans, including loans held-for-sale $ 3,685,729 $ 192,337 5.22 % $ 3,142,166 $ 140,600 4.47 % $ 2,999,232 $ 123,467 4.12 % Securities - taxable 551,479 17,189 3.12 % 537,921 10,711 1.99 % 544,613 7,970 1.46 % Securities - non-taxable 72,571 3,532 4.87 % 75,382 1,767 2.34 % 84,482 1,017 1.20 % Other earning assets 500,061 26,384 5.28 % 278,073 3,830 1.38 % 466,608 1,429 0.31 % Total interest-earning assets 4,809,840 239,442 4.98 % 4,033,542 156,908 3.89 % 4,094,935 133,883 3.27 % Allowance for credit losses (36,038) (29,143) (29,068) Noninterest earning-assets 194,712 166,127 140,059 Total assets $ 4,968,514 $ 4,170,526 $ 4,205,926 Liabilities Interest-bearing liabilities Interest-bearing demand deposits $ 366,082 $ 6,186 1.69 % $ 333,737 $ 2,056 0.62 % $ 195,699 $ 583 0.30 % Savings accounts 29,200 249 0.85 % 58,156 336 0.58 % 56,967 203 0.36 % Money market accounts 1,276,602 49,890 3.91 % 1,423,185 18,513 1.30 % 1,434,829 5,892 0.41 % BaaS - brokered deposits 33,039 1,402 4.24 % 60,699 1,033 1.70 % — — 0.00 % Certificates and brokered deposits 2,040,041 85,636 4.20 % 1,147,017 19,894 1.73 % 1,411,211 23,144 1.64 % Total interest-bearing deposits 3,744,964 143,363 3.83 % 3,022,794 41,832 1.38 % 3,098,706 29,822 0.96 % Other borrowed funds 719,617 21,175 2.94 % 638,526 17,983 2.82 % 600,035 17,505 2.92 % Total interest-bearing liabilities 4,464,581 164,538 3.69 % 3,661,320 59,815 1.63 % 3,698,741 47,327 1.28 % Noninterest-bearing deposits 125,816 120,325 101,825 Other noninterest-bearing liabilities 20,317 16,037 47,255 Total liabilities 4,610,714 3,797,682 3,847,821 Shareholders' equity 357,800 372,844 358,105 Total liabilities and shareholders' equity $ 4,968,514 $ 4,170,526 $ 4,205,926 Net interest income $ 74,904 $ 97,093 $ 86,556 Interest rate spread 1 1.29 % 2.26 % 1.99 % Net interest margin 2 1.56 % 2.41 % 2.11 % Net interest margin - FTE 3 1.67 % 2.54 % 2.25 % 1 Yield on total interest-earning assets minus cost of total interest-bearing liabilities 2 Net interest income divided by average interest-earning assets 3 On a fully-taxable equivalent (“FTE”) basis assuming a 21% tax rate.
Twelve Months Ended December 31, 2024 December 31, 2023 December 31, 2022 (dollars in thousands) Average Balance Interest/Dividends Yield/Cost Average Balance Interest/Dividends Yield/Cost Average Balance Interest/Dividends Yield/Cost Assets Interest-earning assets Loans, including loans held-for-sale $ 3,997,397 $ 233,844 5.85 % $ 3,685,729 $ 192,337 5.22 % $ 3,142,166 $ 140,600 4.47 % Securities - taxable 692,806 26,742 3.86 % 551,479 17,189 3.12 % 537,921 10,711 1.99 % Securities - non-taxable 77,987 3,775 4.84 % 72,571 3,532 4.87 % 75,382 1,767 2.34 % Other earning assets 516,836 27,526 5.33 % 500,061 26,384 5.28 % 278,073 3,830 1.38 % Total interest-earning assets 5,285,026 291,887 5.52 % 4,809,840 239,442 4.98 % 4,033,542 156,908 3.89 % Allowance for credit losses (42,758) (36,038) (29,143) Noninterest-earning assets 220,462 194,712 166,127 Total assets $ 5,462,730 $ 4,968,514 $ 4,170,526 Liabilities Interest-bearing liabilities Interest-bearing demand deposits $ 494,082 $ 10,448 2.11 % $ 366,082 $ 6,186 1.69 % $ 333,737 $ 2,056 0.62 % Savings accounts 22,336 189 0.85 % 29,200 249 0.85 % 58,156 336 0.58 % Money market accounts 1,230,443 51,036 4.15 % 1,276,602 49,890 3.91 % 1,423,185 18,513 1.30 % Fintech - brokered deposits 141,860 6,023 4.25 % 33,039 1,402 4.24 % 60,699 1,033 1.70 % Certificates and brokered deposits 2,430,205 115,454 4.75 % 2,040,041 85,636 4.20 % 1,147,017 19,894 1.73 % Total interest-bearing deposits 4,318,926 183,150 4.24 % 3,744,964 143,363 3.83 % 3,022,794 41,832 1.38 % Other borrowed funds 629,137 21,360 3.40 % 719,617 21,175 2.94 % 638,526 17,983 2.82 % Total interest-bearing liabilities 4,948,063 204,510 4.13 % 4,464,581 164,538 3.69 % 3,661,320 59,815 1.63 % Noninterest-bearing deposits 114,396 125,816 120,325 Other noninterest-bearing liabilities 23,056 20,317 16,037 Total liabilities 5,085,515 4,610,714 3,797,682 Shareholders' equity 377,215 357,800 372,844 Total liabilities and shareholders' equity $ 5,462,730 $ 4,968,514 $ 4,170,526 Net interest income $ 87,377 $ 74,904 $ 97,093 Interest rate spread 1 1.39 % 1.29 % 2.26 % Net interest margin 2 1.65 % 1.56 % 2.41 % Net interest margin - FTE 3 1.74 % 1.67 % 2.54 % 1 Yield on total interest-earning assets minus cost of total interest-bearing liabilities 2 Net interest income divided by average interest-earning assets 3 On a fully-taxable equivalent (“FTE”) basis assuming a 21% tax rate.
The increase was due primarily to increases of $61.4 million in U.S. Government-sponsored agencies securities, $23.0 million in agency mortgage-backed securities - commercial and $10.3 million in private label mortgage-backed securities - residential, partially offset by decreases of $8.4 million in agency mortgage-backed securities - residential and $6.1 million in corporate securities.
The increase was due primarily to increases of $63.0 million in agency mortgage-backed securities - residential, $25.0 million in private label mortgage-backed securities - residential, $24.4 million in agency mortgage-backed securities - commercial, and $15.7 million in asset-backed securities, partially offset by decreases of $12.4 million in U.S. Government-sponsored agencies securities and $4.8 million in municipal securities.
During the twelve months ended December 31, 2023, return on average assets (“ROAA”), return on average equity (“ROAE”) and return on average tangible common equity (“ROATCE”) were 0.17%, 2.35% and 2.38%.
During the twelve months ended December 31, 2024, return on average assets (“ROAA”), return on average equity (“ROAE”) and return on average tangible common equity (“ROATCE”) were 0.46%, 6.70% and 6.78%, respectively.
The decrease in net income of $12.6 million for the twelve months ended December 31, 2022 compared to the twelve months ended December 31, 2021 was due primarily to an $11.6 million decrease in noninterest income, an $11.5 million increase in noninterest expense and a $3.9 million increase in provision for loan losses, partially offset by a $10.5 million increase in net interest income and $3.9 million decrease in income tax expense.
The $16.9 million increase in net income for the twelve months ended December 31, 2024 compared to the twelve months ended December 31, 2023 was due primarily to an increase of $21.2 million, or 81.2%, in noninterest income, an increase of $12.5 million, or 16.7%, in net interest income, partially offset by an increase of $10.7 million, or 13.4%, in noninterest expense, an increase of $5.7 million, in income tax expense and an increase of $0.4 million, or 2.5%, in provision for credit losses.
Total loans were $3.8 billion as of December 31, 2023, an increase of $340.8 million, or 9.7%, compared to December 31, 2022. Total commercial loan balances were $3.0 billion, as of December 31, 2023, up $286.6 million, or 10.5%, from December 31, 2022.
Total loans were $4.2 billion as of December 31, 2024, an increase of $330.4 million, or 8.6%, compared to December 31, 2023. Total commercial loan balances were $3.3 billion, as of December 31, 2024, an increase of $336.7 million, or 11.2%, from December 31, 2023.
This increase was due primarily to increases of $730.7 million, or 83.6%, in certificates of deposits, $67.4 million, or 20.1%, in interest-bearing demand deposits, $60.8 million, or 446.8%, in BaaS - brokered deposits and $12.5 million, 2.2%, in brokered deposits, partially offset by decreases of $170.3 million, or 12.0%, in money market accounts, $51.9 million, or 29.6%, in noninterest-bearing deposits, and $23.5 million, or 52.3%, in savings accounts.
This increase was due primarily to increases of $528.3 million, or 32.9%, in certificates of deposits, $493.7 million, or 122.5%, in interest-bearing demand deposits and $13.0 million, or 10.5%, in noninterest-bearing deposits, partially offset by decreases of $64.5 million, or 5.2%, in money market accounts, $28.3 million, or 4.8%, in brokered deposits and $1.5 million, or 7.2%, in savings accounts.
Excluding these items, adjusted net income for the twelve months ended December 31, 2022 was $37.2 million and adjusted diluted earnings per share was $3.86. Additionally, for the twelve months ended December 31, 2022, adjusted ROAA, adjusted ROAE and adjusted ROATCE were 0.90%, 9.98% and 10.10%, respectively.
Adjusted net income for the twelve months ended December 31, 2024, was $22.0 million, and adjusted diluted earnings per share was $2.51. Additionally, for the twelve months ended December 31, 2024, adjusted ROAA, adjusted ROAE and adjusted ROATCE were 0.40%, 5.83% and 5.90%, respectively.
As a result of the higher interest rate environment, the yield on funded portfolio originations was 8.41% for the twelve months ended December 31, 2023, an increase of 302 bps compared to the twelve months ended December 31, 2022.
The yield on funded portfolio originations was 8.29% for the twelve months ended December 31, 2024, an increase of 5 bps compared to the twelve months ended December 31, 2023.
Balance sheet growth was driven primarily by an increase in deposits of $625.7 million, or 18.2%. A portion of the increase in deposits was used to fund loan growth as loan balances increased $340.8 million, or 9.7%.
Balance sheet growth was driven primarily by an increase in total deposits of $866.2 million, or 21.3%. The increase in deposits was used, in part, to fund loan growth, as loan balances increased $330.4 million. or 8.6%.
Accrued interest receivable on loans totaled $20.9 million as of December 31, 2023 and is excluded from the estimate of credit losses. The Company made the accounting policy election to not measure an ACL for accrued interest receivable. Accrued interest deemed uncollectible will be written off through interest income.
Accrued interest receivable on loans is excluded from the estimate of credit losses. The Company made the accounting policy election to not measure an ACL for accrued interest receivable. Accrued interest deemed uncollectible will be written off through interest income. ACL - Loans - Collectively Evaluated The ACL is measured on a collective pool basis when similar risk characteristics exist.
Additionally, during the twelve months ended December 31, 2023, the Company recognized a $6.9 million partial charge-off related to a commercial and industrial participation loan with a balance of $9.8 million. This action contributed to the increase in the provision for credit losses as compared to the twelve months ended December 31, 2022.
Additionally, during the twelve months ended December 31, 2023, the Company recognized a $6.9 million partial charge-off 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.
Net interest margin (“NIM”) was 1.56% for the twelve months ended December 31, 2023 compared to 2.41% for the twelve months ended December 31, 2022. On a fully-taxable equivalent (“FTE”) basis, NIM was 1.67% for the twelve months ended December 31, 2023 compared to 2.54% for the twelve months ended December 31, 2022, a decrease of 87 bps.
On a fully-taxable equivalent (“FTE”) basis, NIM was 1.74% for the twelve months ended December 31, 2024 compared to 1.67% for the twelve months ended December 31, 2023, an increase of 7 bps.
The increase in noninterest income was driven primarily by increases in gain on sale of loans and net loan servicing revenue, partially offset by a decrease in mortgage banking activities.
The increase in noninterest income was driven primarily by increases of $12.8 million in gain on sale of loans, $7.1 million in other income and $1.3 million in net loan servicing revenue.
Book value per common share increased 4.2% to $41.97 as of December 31, 2023 from $40.26 as of December 31, 2022. Tangible book value per share increased 4.2% to $41.43 as of December 31, 2023 from $39.74 as of December 31, 2022.
Book value per common share increased 5.6% to $44.31 as of December 31, 2024 from $41.97 as of December 31, 2023. Tangible book value per share increased 5.6% to $43.77 as of December 31, 2024 from $41.43 as of December 31, 2023.
(amounts in thousands) December 31, Balance Sheet Data: 2023 2022 Total assets $ 5,167,572 $ 4,543,104 Loans 3,840,220 3,499,401 Total securities 702,008 579,552 Loans held-for-sale 22,052 21,511 Noninterest-bearing deposits 123,464 175,315 Interest-bearing deposits 3,943,509 3,265,930 Total deposits 4,066,973 3,441,245 Advances from Federal Home Loan Bank 614,934 614,928 Total shareholders' equity 362,795 364,974 Total assets increased $624.5 million, or 13.7%, to $5.2 billion as of December 31, 2023 compared to $4.5 billion as of December 31, 2022.
(amounts in thousands) December 31, Balance Sheet Data: 2024 2023 Total assets $ 5,737,859 $ 5,167,572 Loans 4,170,646 3,840,220 Total securities 837,151 702,008 Loans held-for-sale 54,695 22,052 Noninterest-bearing deposits 136,451 123,464 Interest-bearing deposits 4,796,755 3,943,509 Total deposits 4,933,206 4,066,973 Advances from Federal Home Loan Bank 295,000 614,934 Total shareholders' equity 384,063 362,795 Total assets increased $570.3 million, or 11.0%, to $5.7 billion as of December 31, 2024 compared to $5.2 billion as of December 31, 2023.
December 31, (dollars in thousands) 2023 2022 Commercial loans Commercial and industrial $ 129,349 3.4 % $ 126,108 3.6 % Owner-occupied commercial real estate 57,286 1.5 % 61,836 1.8 % Investor commercial real estate 132,077 3.4 % 93,121 2.7 % Construction 261,750 6.8 % 181,966 5.2 % Single tenant lease financing 936,616 24.4 % 939,240 26.8 % Public finance 521,764 13.6 % 621,032 17.7 % Healthcare finance 222,793 5.8 % 272,461 7.8 % Small business lending 218,506 5.7 % 123,750 3.5 % Franchise finance 525,783 13.7 % 299,835 8.6 % Total commercial loans 3,005,924 78.3 % 2,719,349 77.7 % Consumer loans Residential mortgage 395,648 10.3 % 383,948 11.0 % Home equity 23,669 0.6 % 24,712 0.7 % Other consumer 377,614 9.8 % 324,598 9.3 % Total consumer loans 796,931 20.7 % 733,258 21.0 % Total commercial and consumer loans 3,802,855 99.0 % 3,452,607 98.7 % Net deferred loan origination costs, premiums and discounts on purchased loans and other 1 37,365 1.0 % 46,794 1.3 % Total loans 3,840,220 100.0 % 3,499,401 100.0 % Allowance for credit losses - loans (38,774) (31,737) Net loans $ 3,801,446 $ 3,467,664 1 Includes carrying value adjustments of $27.8 million and $32.5 million related to terminated interest rate swaps associated with public finance loans as of December 31, 2023 and December 31, 2022, respectively.
December 31, (dollars in thousands) 2024 2023 Commercial loans Commercial and industrial $ 120,175 2.9 % $ 129,349 3.4 % Owner-occupied commercial real estate 53,591 1.3 % 57,286 1.5 % Investor commercial real estate 269,431 6.5 % 132,077 3.4 % Construction 413,523 9.9 % 261,750 6.8 % Single tenant lease financing 949,748 22.7 % 936,616 24.4 % Public finance 485,867 11.6 % 521,764 13.6 % Healthcare finance 181,427 4.4 % 222,793 5.8 % Small business lending 1 331,914 8.0 % 218,506 5.7 % Franchise finance 536,909 12.9 % 525,783 13.7 % Total commercial loans 3,342,585 80.2 % 3,005,924 78.3 % Consumer loans Residential mortgage 375,160 9.0 % 395,648 10.3 % Home equity 18,274 0.4 % 23,669 0.6 % Other consumer 407,947 9.8 % 377,614 9.8 % Total consumer loans 801,381 19.2 % 796,931 20.7 % Total commercial and consumer loans 4,143,966 99.4 % 3,802,855 99.0 % Net deferred loan origination costs, premiums and discounts on purchased loans and other 2 26,680 0.6 % 37,365 1.0 % Total loans 4,170,646 100.0 % 3,840,220 100.0 % Allowance for credit losses - loans (44,769) (38,774) Net loans $ 4,125,877 $ 3,801,446 1 Balances include $34.0 million and $33.5 million that are guaranteed by the U.S. government as of December 31, 2024 and December 31, 2023, respectively. 2 Includes carrying value adjustments of $22.9 million and $27.8 million related to terminated interest rate swaps associated with public finance loans as of December 31, 2024 and December 31, 2023, respectively.
The increase in total interest expense was partially offset by an $82.5 million, or 52.6%, increase in total interest income to $239.4 million for the twelve months ended December 31, 2023 compared to $156.9 million for the twelve months ended December 31, 2022.
The increase in total interest income was partially offset by a $40.0 million, or 24.3%, increase in total interest expense to $204.5 million for the twelve months ended December 31, 2024 compared to $164.5 million for the twelve months ended December 31, 2023.
Individually evaluated loans include nonperforming loans and also include loans where concessions have been granted to borrowers experiencing financial difficulties. These concessions could include a reduction in the interest rate on the loan, payment extensions, forgiveness of principal, forbearance, or other actions intended to maximize collection.
These concessions could include a reduction in the interest rate on the loan, payment extensions, forgiveness of principal, forbearance, or other actions intended to maximize collection. 32 Nonperforming loans are comprised of total nonaccrual loans and loans 90 days past due and accruing.
The increase of $6.2 million, or 8.4%, compared to the twelve months ended December 31, 2022 was due primarily to increases of $3.8 million in salaries and employee benefits, $2.8 million in deposit insurance premium and $1.3 million in loan expenses, partially offset by decreases of $1.7 million in consulting and professional fees and $1.0 million in marketing, advertising and promotion.
The increase was due primarily to increases of $6.4 million, or 14.2%, in salaries and employee benefits, $1.3 million, or 12.3%, in premises and equipment, $1.1 million, or 28.9%, in deposit insurance premium, $0.9 million, or 14.8%, in other expenses and $0.7 million, or 21.5%, in consulting and professional fees.
At December 31, 2023, the Company, on an unconsolidated basis, had $11.6 million in cash generally available for its cash needs, which is in excess of its current annual regular shareholder dividend and operating expenses. 40 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 December 31, 2024, the Company, on an unconsolidated basis, had $13.0 million in cash generally available for its cash needs, which is in excess of its current annual regular shareholder dividend and operating expenses.
Fair value hedges were purchased to convert certain fixed rate assets to floating rate. Cash flow hedges were used to convert certain variable rate liabilities into fixed rate liabilities. At December 31, 2023 and December 31, 2022, we had interest rate swaps with a notional amount of $200.0 million and $260.0 million, respectively.
Fair value hedges were purchased to convert certain fixed rate assets to floating rate. Cash flow hedges were used to convert certain variable rate liabilities into fixed rate liabilities. At December 31, 2024, we had no interest rate swaps that were classified as either fair value or cash flow hedges.
The decrease in net interest income was the result of a $104.7 million, or 175.1%, increase in total interest expense to $164.5 million for the twelve months ended December 31, 2023 compared to $59.8 million for the twelve months ended December 31, 2022.
The increase in net interest income was the result of a $52.4 million, or 21.9%, increase in total interest income to $291.9 million for the twelve months ended December 31, 2024 compared to $239.4 million for the twelve months ended December 31, 2023.
The increase in total interest expense was due primarily to increases of $65.7 million, or 330.5%, in interest expense associated with certificates and brokered deposits, $31.4 million, or 169.5%, in interest expense associated with money market accounts, $4.1 million, or 200.9%, in interest expense associated with interest-bearing demand deposits and $3.2 million, or 17.8%, in interest expense associated with other borrowed funds.
The increase in total interest expense was due primarily to increases of $29.8 million, or 34.8%, in interest expense associated with certificates and brokered deposits, $4.6 million, or 329.6%, in interest expense associated with fintech - brokered deposits and $4.3 million, or 68.9%, in interest expense associated with interest-bearing demand deposits.
Government-sponsored agencies $ 95,177 $ 33,809 Municipal securities 68,446 67,276 Agency mortgage-backed securities - residential 206,649 215,092 Agency mortgage-backed securities - commercial 38,885 15,840 Private label mortgage-backed securities - residential 20,779 10,455 Asset-backed securities 8,081 4,960 Corporate securities 36,838 42,952 Total securities available-for-sale 474,855 390,384 Securities held-to-maturity Municipal securities 13,040 12,832 Agency mortgage-backed securities - residential 152,642 106,741 Agency mortgage-backed securities - commercial 4,521 4,552 Corporate securities 37,369 44,358 Total held-to-maturity 207,572 168,483 Total securities $ 682,427 $ 558,867 The approximate fair value of investment securities available-for-sale increased $84.5 million, or 21.6%, to $474.9 million as of December 31, 2023 compared to $390.4 million as of December 31, 2022.
Government-sponsored agencies $ 82,816 $ 95,177 Municipal securities 63,654 68,446 Agency mortgage-backed securities - residential 269,641 206,649 Agency mortgage-backed securities - commercial 63,331 38,885 Private label mortgage-backed securities - residential 45,821 20,779 Asset-backed securities 23,821 8,081 Corporate securities 38,271 36,838 Total securities available-for-sale 587,355 474,855 Securities held-to-maturity Municipal securities 11,925 13,040 Agency mortgage-backed securities - residential 184,412 152,642 Agency mortgage-backed securities - commercial 4,548 4,521 Corporate securities 27,966 37,369 Total securities held-to-maturity 228,851 207,572 Total securities $ 816,206 $ 682,427 The approximate fair value of investment securities available-for-sale increased $112.5 million, or 23.7%, to $587.4 million as of December 31, 2024 compared to $474.9 million as of December 31, 2023.
The increase in the average balance of these deposits was driven by strong consumer and small business demand for certificates of deposits in 2023, as well as the funding of brokered deposits during the fourth quarter 2022 and earlier in 2023 to supplement on-balance sheet liquidity.
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 2024.
Total nonperforming assets increased $2.8 million, or 36.8%, to $10.4 million as of December 31, 2023, compared to $7.6 million as of December 31, 2022, due primarily to the increases of nonperforming loans related to small business lending and residential mortgage portfolios mentioned above, as well as increases in other real estate owned (“OREO”) and accruing loans past due 90 days or more, partially offset by the owner-occupied commercial real estate loan mentioned above.
Total nonperforming assets increased $18.6 million, or 179.2%, to $28.9 million as of December 31, 2024, compared to $10.4 million as of December 31, 2023, due primarily to the increases in nonperforming loans mentioned above, as well as an increase in loan repossessions (“REPO”), partially offset by a decrease in other real estate owned (“OREO”).
The increase in consumer loans was due to higher balances in the recreational vehicles and trailers loan portfolios, in addition to funded residential mortgages and draws on construction/perm loans that were in the pipeline prior to exiting the business. 31 Loan Maturities and Rate Sensitivity The following table shows the contractual maturity distribution intervals (without regard to repayment or repricing schedules) of the outstanding loans in our portfolio as of December 31, 2023.
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. 30 Loan Maturities and Rate Sensitivity The following table shows the contractual maturity distribution intervals (without regard to repayment or repricing schedules) of the outstanding loans in our portfolio as of December 31, 2024.
The decrease was due primarily to decreases of $2.9 million in other liabilities, $1.6 million in accrued taxes, $0.2 million in accrued salary and benefits and $0.4 million in accrued property taxes, partially offset by increases of $3.7 million in the reserve for unfunded commitments as a result of the adoption of CECL in 2023, as well as new origination activity, and an increase of $0.7 million in derivative liability due to changes in fair value.
The increase was due primarily to increases of $2.3 million in accrued salary and benefits and $3.1 million in various expenses and liabilities, partially offset by a decrease of $1.6 million in the reserve for unfunded commitments.
For each segment, a loss driver analysis was performed in order to identify loss drivers and create a regression model for use in forecasting cash flows. In creating the DCF model, the Company has established a one-year reasonable and supportable forecast period with a one-year straight line reversion to the long-term historical average.
In creating the DCF model, the Company has established a one-year reasonable and supportable forecast period with a one-year straight line reversion to the long-term historical average for most segments. Due to its limited loss history, the Company elected to use peer data for a more reasonable calculation.
The Company recognized $3.1 million of mortgage operations and exit costs during the first quarter 2023, which contributed to the increase in noninterest expense compared to the twelve months ended December 31, 2022.
In connection with this decision, the Company recognized $3.1 million of mortgage operations and exit costs during the twelve months ended December 31, 2023. The Company also recognized $0.1 million of mortgage banking revenue during the twelve months ended December 31, 2023.
Income Taxes The following table reconciles reported income tax (benefit) provision to that computed at the statutory federal tax rate for the three most recent years.
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. Income Taxes The following table reconciles reported income provision tax (benefit) to that computed at the statutory federal tax rate for the three most recent years.
The increase in the provision for credit losses - loans for the twelve months ended December 31, 2023 was driven primarily by increases in net charge-offs, which included the aforementioned partial charge-off of a commercial and industrial participation loan and increased charge-offs in small business lending.
The increase in the provision for credit losses - loans for the twelve months ended December 31, 2024 was driven primarily by increases in net charge-offs in the small business lending and franchise finance portfolios, as well as growth in ACL discussed above, partially offset by lower net charge-offs in the commercial and industrial portfolio.
The contractual term excludes extensions, renewals, and modifications unless the extension or renewal options are included in the original or modified contract at the reporting date and are not unconditionally cancellable by the Company. Additional key assumptions in the DCF model include the probability of default (“PD”), loss given default (“LGD”), and prepayment/curtailment rates.
Expected credit losses are estimated over the contractual term of the loans and adjusted for prepayments when appropriate. The contractual term excludes extensions, renewals, and modifications unless the extension or renewal options are included in the original or modified contract at the reporting date and are not unconditionally cancellable by the Company.
The Company utilizes the model-driven PD and a LGD derived from a method referred to as Frye Jacobs. The Frye Jacobs method is a mathematical formula that traces the relationship between LGD and PD over time and 47 projects the LGD based on the level of PD forecasted.
The Frye Jacobs method is a mathematical formula that traces the relationship between LGD and PD over time and projects the LGD based on the level of PD forecasted. In all cases, the Frye Jacobs method is utilized to calculate LGDs during the forecast period, reversion period and long-term historical average.
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. The Company’s commercial construction and land development business was not affected by the decision and remains an important part of the Company’s lending strategy.
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.
Interest income on certain loans or securities issued by governmental, municipal and not-for-profit entities, and earnings from bank-owned life insurance were the primary components of tax-exempt income. 29 Financial Condition The following table presents summary balance sheet data as of the end of the last two years.
Our federal statutory tax rate was 21% in 2024 and 2023. In 2024 and 2023, the variance from the federal statutory rate was due primarily to tax-exempt income. Interest income on certain loans or securities issued by governmental, municipal and not-for-profit entities, and earnings from bank-owned life insurance were the primary components of tax-exempt income.
Government-sponsored agencies $ 96,404 $ 35,606 Municipal securities 69,494 68,958 Agency mortgage-backed securities - residential 237,798 252,066 Agency mortgage-backed securities - commercial 40,215 17,142 Private label mortgage-backed securities - residential 21,742 11,777 Asset-backed securities 8,071 5,000 Corporate securities 39,591 45,634 Total securities available-for-sale 513,315 436,183 Securities held-to-maturity Municipal securities 13,889 13,946 Agency mortgage-backed securities - residential 166,750 121,853 Agency mortgage-backed securities - commercial 5,767 5,818 Corporate securities 40,747 47,551 Total held-to-maturity, net 227,153 189,168 Total securities $ 740,468 $ 625,351 December 31, Approximate Fair Value 2023 2022 Securities available-for-sale U.S.
Government-sponsored agencies $ 83,811 $ 96,404 Municipal securities 67,441 69,494 Agency mortgage-backed securities - residential 300,914 237,798 Agency mortgage-backed securities - commercial 64,214 40,215 Private label mortgage-backed securities - residential 46,623 21,742 Asset-backed securities 23,802 8,071 Corporate securities 40,049 39,591 Total securities available-for-sale 626,854 513,315 Securities held-to-maturity Municipal securities 12,843 13,889 Agency mortgage-backed securities - residential 201,840 166,750 Agency mortgage-backed securities - commercial 5,705 5,767 Corporate securities 29,408 40,747 Total securities held-to-maturity, net 249,796 227,153 Total securities $ 876,650 $ 740,468 (amounts in thousands) December 31, Approximate Fair Value 2024 2023 Securities available-for-sale U.S.
The decrease in NIM and FTE NIM compared to the twelve months ended December 31, 2022 reflects the increase in the cost of interest-bearing liabilities of 206 bps, partially offset by the increase in earning asset yields of 109 bps. Noninterest Income The following table presents noninterest income for the three most recent years.
The increase in NIM and FTE NIM compared to the twelve months ended December 31, 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. Noninterest Income The following table presents noninterest income for the three most recent years.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changePresented below is the estimated impact on our NII and EVE position as of December 31, 2023, assuming a static balance sheet and gradual parallel shifts in interest rates over a twelve-month period: % Change from Base Case for Gradual Changes in Rates Implied Forward Curve -200 Basis Points Implied Forward Curve -100 Basis Points Base Implied Forward Curve Implied Forward Curve +50 Basis Points Implied Forward Curve +100 Basis Points NII - Year 1 7.78 % 4.16 % N/A (2.43 %) (4.92 %) NII - Year 2 44.76 % 38.44 % 29.04 % 23.18 % 17.18 % EVE 24.22 % 14.85 % N/A (7.67 %) (15.39 %) 50 The NII and EVE figures presented in both tables above are reflective of a static balance sheet, and do not incorporate either balance sheet growth or strategies to increase net interest income while managing volatility arising from shifts in market interest rates.
Biggest changePresented below is the estimated impact on our NII and EVE position as of December 31, 2024, assuming a static balance sheet and gradual parallel shifts in interest rates over a twelve-month period: % Change from Base Case for Gradual Changes in Rates Implied Forward Curve -200 Basis Points Implied Forward Curve -100 Basis Points Base Implied Forward Curve Implied Forward Curve +50 Basis Points Implied Forward Curve +100 Basis Points NII - Year 1 2.92 % 1.60 % N/A (1.17 %) (2.32 %) NII - Year 2 24.19 % 20.94 % 16.11 % 12.53 % 8.91 % EVE 21.86 % 13.31 % N/A (7.59 %) (15.59 %) 48 The NII and EVE figures presented in both tables above are reflective of a static balance sheet, and do not incorporate either balance sheet growth or strategies to increase net interest income while managing volatility arising from shifts in market interest rates.
We continually model our NII and EVE positions with various interest rate scenarios and assumptions of future balance sheet composition. We utilize implied forward rates as its base case scenario which reflects market expectations for rate increases over the next 24 months.
We continually model our NII and EVE positions with various interest rate scenarios and assumptions of future balance sheet composition. We utilize implied forward rates as its base case scenario which reflects market expectations for rate changes over the next 24 months.
Presented below is the estimated impact on our NII and EVE position as of December 31, 2023, assuming a static balance sheet and instantaneous parallel shifts in interest rates: % Change from Base Case for Instantaneous Parallel Changes in Rates Implied Forward Curve -200 Basis Points Implied Forward Curve -100 Basis Points Base Implied Forward Curve Implied Forward Curve +50 Basis Points Implied Forward Curve +100 Basis Points NII - Year 1 20.32 % 10.83 % N/A (4.51 %) (8.86 %) NII - Year 2 43.94 % 38.11 % 29.04 % 24.52 % 20.17 % EVE 26.38 % 16.02 % N/A (6.93 %) (13.75 %) To supplement the instantaneous rate shocks required by regulatory guidance, we also calculate our interest rate risk position assuming a gradual change in market interest rates.
Presented below is the estimated impact on our NII and EVE position as of December 31, 2024, assuming a static balance sheet and instantaneous parallel shifts in interest rates: % Change from Base Case for Instantaneous Parallel Changes in Rates Implied Forward Curve -200 Basis Points Implied Forward Curve -100 Basis Points Base Implied Forward Curve Implied Forward Curve +50 Basis Points Implied Forward Curve +100 Basis Points NII - Year 1 8.88 % 5.04 % N/A (3.10 %) (6.30 %) NII - Year 2 23.01 % 20.69 % 16.12 % 12.65 % 8.89 % EVE 23.73 % 14.33 % N/A (8.32 %) (17.04 %) To supplement the instantaneous rate shocks required by regulatory guidance, we also calculate our interest rate risk position assuming a gradual change in market interest rates.

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