What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2020-08-06 compared with 2020-05-08 · 513 added, 330 removed, 846 unchanged (50% of the section changed)

3 unchanged sentences

(Amounts in thousands except share data)

March 31, 2020

December 31, 2019

June 30, 2020 December 31, 2019

Cash and due from banks $ 7,016 $ 5,061

3 unchanged sentences

Securities held-to-maturity, at amortized cost (fair value of $69,152 and $62,560 in 2020 and 2019, respectively) 68,295 61,878

Loans held-for-sale (includes $52,394 and $56,097 at fair value in 2020 and 2019, respectively)

Loans held-for-sale, at fair value 38,813 56,097

Loans 2,973,674 2,963,547

Allowance for loan losses ( 24,465 ) ( 21,840 )

Net loans 2,949,209 2,941,707

Accrued interest receivable 21,093 18,607

2 unchanged sentences

Premises and equipment, net 23,939 14,630

Goodwill 4,687 4,687

Servicing asset, at fair value 2,522 2,481

1 unchanged sentence

Accrued income and other assets 63,217 67,066

Total assets $ 4,324,600 $ 4,100,083

Liabilities and Shareholders’ Equity

26 unchanged sentences

(Amounts in thousands except share and per share data)

Three Months Ended

March 31, 2020

March 31, 2019

Three Months Ended Six Months Ended

June 30, 2020 June 30, 2019 June 30, 2020 June 30, 2019

Interest Income

Loans $ 29,730 $ 30,842 $ 60,138 $ 60,060

Securities – taxable 3,276 3,540 6,895 6,864

3 unchanged sentences

Interest Expense

Deposits 15,763 17,147 32,971 32,533

Other borrowed funds 4,033 3,592 8,051 6,961

9 unchanged sentences

Gain (loss) on sale of loans 762 ( 66 ) 2,563 ( 170 )

Gain on sale of securities

(Loss) gain on sale of securities — ( 458 ) 41 ( 458 )

Other 456 1,089 873 1,712

Total noninterest income 4,973 3,454 11,184 5,826

7 unchanged sentences

Deposit insurance premium 435 747 920 1,302

Other 1,337 902 2,413 1,721

Total noninterest expense 13,244 11,709 26,730 22,818

Income Before Income Taxes 3,664 6,461 9,946 12,683

Income Tax Provision

Income Tax (Benefit) Provision ( 268 ) 340 ( 5 ) 866

Net Income $ 3,932 $ 6,121 $ 9,951 $ 11,817

Income Per Share of Common Stock

Basic $ 0.40 $ 0.60 $ 1.02 $ 1.16

Diluted $ 0.40 $ 0.60 $ 1.02 $ 1.16

Weighted-Average Number of Common Shares Outstanding

Basic 9,768,227 10,148,285 9,798,528 10,182,770

Diluted 9,768,227 10,148,285 9,802,427 10,186,833

Dividends Declared Per Share $ 0.06 $ 0.06 $ 0.12 $ 0.12

3 unchanged sentences

(Amounts in thousands)

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

2020 2019 2020 2019

Net income $ 3,932 $ 6,121 $ 9,951 $ 11,817

Other comprehensive (loss) income

Net unrealized holding gains on securities available-for-sale recorded within other comprehensive (loss) income before income tax

Reclassification adjustment for gains realized

Net unrealized holding (losses) gains on securities available-for-sale recorded within other comprehensive (loss) income before income tax ( 1,498 ) 3,667 4,801 10,577

Reclassification adjustment for gains (losses) realized — 458 ( 41 ) 458

Net unrealized holding losses on cash flow hedging derivatives recorded within other comprehensive (loss) income before tax ( 509 ) ( 5,892 ) ( 13,967 ) ( 9,464 )

6 unchanged sentences

Condensed Consolidated Statements of Changes in Shareholders’ Equity - Unaudited

Three Months Ended March 31, 2020 and 2019

Six Months Ended June 30, 2020 and 2019

(Amounts in thousands except per share data)

Stock Retained

Earnings Accumulated

Comprehensive

1 unchanged sentence

Balance, January 1, 2020 $ 219,423 $ 99,681 $ ( 14,191 ) $ 304,913

Net income — 9,951 — 9,951

Other comprehensive loss — — ( 6,947 ) ( 6,947 )

3 unchanged sentences

Common stock redeemed for the net settlement of share-based awards ( 93 ) — — ( 93 )

Balance, March 31, 2020

Balance, June 30, 2020 $ 220,418 $ 108,431 $ ( 21,138 ) $ 307,711

Balance, January 1, 2019 $ 227,587 $ 77,689 $ ( 16,541 ) $ 288,735

Impact of adoption of new accounting standards (1)

— ( 821 ) — ( 821 )

Net income — 11,817 — 11,817

Other comprehensive income — — 963 963

4 unchanged sentences

Common stock redeemed for the net settlement of share-based awards ( 94 ) — — ( 94 )

Balance, March 31, 2019

Balance, June 30, 2019 $ 224,244 $ 87,454 $ ( 15,578 ) $ 296,120

(1) Represents the impact of adopting Accounting Standards Update (“ASU”) 2017-08.

1 unchanged sentence

First Internet Bancorp

Condensed Consolidated Statements of Changes in Shareholders’ Equity - Unaudited

Three Months Ended June 30, 2020 and 2019

(Amounts in thousands except per share data)

Stock Retained

Earnings Accumulated

Comprehensive

Shareholders’

Balance, April 1, 2020 $ 219,893 $ 105,100 $ ( 19,866 ) $ 305,127

Net income — 3,932 — 3,932

Other comprehensive loss — — ( 1,272 ) ( 1,272 )

Dividends declared ($0.06 per share) — ( 601 ) — ( 601 )

Recognition of the fair value of share-based compensation 517 — — 517

Deferred stock rights and restricted stock units issued in lieu of cash dividends payable on outstanding deferred stock rights and restricted stock units 8 — — 8

Balance, June 30, 2020 $ 220,418 $ 108,431 $ ( 21,138 ) $ 307,711

Balance, April 1, 2019 $ 226,235 $ 81,946 $ ( 14,168 ) $ 294,013

Net income — 6,121 — 6,121

Other comprehensive loss — — ( 1,410 ) ( 1,410 )

Dividends declared ($0.06 per share) — ( 613 ) — ( 613 )

Recognition of the fair value of share-based compensation 383 — — 383

Repurchase of common stock ( 2,387 ) ( 2,387 )

Deferred stock rights and restricted stock units issued in lieu of cash dividends payable on outstanding deferred stock rights and restricted stock units 13 — — 13

Balance, June 30, 2019 $ 224,244 $ 87,454 $ ( 15,578 ) $ 296,120

See Notes to Condensed Consolidated Financial Statements

First Internet Bancorp

Condensed Consolidated Statements of Cash Flows – Unaudited

(Amounts in thousands)

Three Months Ended March 31,

Six Months Ended June 30,

Operating Activities

Net income $ 9,951 $ 11,817

Adjustments to reconcile net income to net cash used in operating activities:

3 unchanged sentences

Share-based compensation expense 1,073 862

Gain on sale of available-for-sale securities

Loss on other-than-temporary impairment of securities — —

(Loss) gain on sale of available-for-sale securities ( 41 ) 458

Loans originated for sale ( 427,323 ) ( 220,266 )

1 unchanged sentence

Gain on loans sold ( 11,069 ) ( 3,128 )

(Increase) decrease in fair value of loans held-for-sale

Gain on sale of other real estate owned — —

Decrease (increase) in fair value of loans held-for-sale 939 ( 352 )

Loss (gain) on derivatives 377 ( 553 )

Settlement of derivatives ( 46,109 ) —

Net change in servicing asset ( 41 ) —

9 unchanged sentences

Purchase of securities held-to-maturity ( 2,000 ) ( 13,116 )

Purchase of Federal Home Loan Bank of Indianapolis stock — ( 2,025 )

Purchase of premises and equipment ( 10,580 ) ( 2,852 )

1 unchanged sentence

Net proceeds from sale of portfolio loans 205,023 184,095

Net cash provided by (used in) investing activities

Net cash used in investing activities ( 40,084 ) ( 161,972 )

Financing Activities

Net increase in deposits 226,826 334,912

Short-term borrowings — —

Cash dividends paid ( 1,179 ) ( 1,214 )

Net proceeds from issuance of subordinated debt — 35,418

Repurchase of common stock — ( 4,133 )

1 unchanged sentence

Repayment of advances from Federal Home Loan Bank ( 220,000 ) ( 385,000 )

Other, net ( 93 ) ( 94 )

Net cash provided by financing activities 225,554 354,889

Net Increase (Decrease) in Cash and Cash Equivalents

Net Increase in Cash and Cash Equivalents 171,258 159,586

Cash and Cash Equivalents, Beginning of Period 327,361 188,712

4 unchanged sentences

Cash paid during the period for interest 43,716 37,672

Cash paid during the period for taxes 91 1,793

Loans transferred to other real estate owned — —

Loans transferred to held-for-sale from portfolio 204,258 184,021

Cash dividends declared, paid in subsequent period 588 601

Securities purchased during the period, settled in subsequent period — 14,247

Transfer of available-for-sale municipal securities to held-to-maturity municipal securities 4,479 —

9 unchanged sentences

In our opinion, all adjustments (consisting only of normal recurring adjustments) necessary for a fair presentation have been included.

The results of operations for the three months ended March 31, 2020 are not necessarily indicative of the results expected for the year ending December 31, 2020 or any other period.

The March 31, 2020 condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes included in the First Internet Bancorp Annual Report on Form 10-K for the year ended December 31, 2019 .

The results of operations for the three and six months ended June 30, 2020 are not necessarily indicative of the results expected for the year ending December 31, 2020 or any other period.

The June 30, 2020 condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes included in the First Internet Bancorp Annual Report on Form 10-K for the year ended December 31, 2019.

The preparation of the condensed consolidated financial statements in conformity with GAAP requires management to make estimates, judgments, or assumptions that could have a material effect on the carrying value of certain assets and liabilities.

These estimates, judgments, and assumptions affect the amounts reported in the condensed consolidated financial statements and the disclosures provided.

The determination of the allowance for loan losses, valuations and impairments of investment securities, and the accounting for income tax expense are highly dependent upon management’s estimates, judgments, and assumptions, and changes in any of these could have a significant impact on the condensed consolidated financial statements.

The determination of the allowance for loan losses, valuations and impairments of investment securities, valuation of the servicing asset and the accounting for income tax expense are highly dependent upon management’s estimates, judgments, and assumptions, and changes in any of these could have a significant impact on the condensed consolidated financial statements.

The condensed consolidated financial statements include the accounts of First Internet Bancorp (the “Company”), its wholly owned subsidiary, First Internet Bank of Indiana (the “Bank”), and the Bank’s three wholly owned subsidiaries, First Internet Public Finance Corp., JKH Realty Services, LLC and SPF15, Inc.

6 unchanged sentences

Earnings per share of common stock are based on the weighted-average number of basic shares and dilutive shares outstanding during the period.

The following is a reconciliation of the weighted-average common shares for the basic and diluted earnings per share computations for the three months ended March 31, 2020 and 2019 .

(dollars in thousands, except per share data)

Three Months Ended March 31,

The following is a reconciliation of the weighted-average common shares for the basic and diluted earnings per share computations for the three and six months ended June 30, 2020 and 2019.

(dollars in thousands, except per share data) Three Months Ended June 30, Six Months Ended June 30,

2020 2019 2020 2019

Basic earnings per share

Net income $ 3,932 $ 6,121 $ 9,951 $ 11,817

Weighted-average common shares 9,768,227 10,148,285 9,798,528 10,182,770

1 unchanged sentence

Diluted earnings per share

Net income $ 3,932 $ 6,121 $ 9,951 $ 11,817

Weighted-average common shares 9,768,227 10,148,285 9,798,528 10,182,770

2 unchanged sentences

Diluted earnings per common share (1)

$ 0.40 $ 0.60 $ 1.02 $ 1.16

(1) Potential dilutive common shares are excluded from the computation of diluted EPS in the periods where the effect would be antidilutive.

Excluded from the computation of diluted EPS were weighted-average antidilutive shares totaling 8,575 and 45,565 for the three months ended March 31, 2020 and 2019, respectively.

The following tables summarize securities available-for-sale and securities held-to-maturity as of March 31, 2020 and December 31, 2019 .

March 31, 2020

Gross Unrealized

(in thousands)

Excluded from the computation of diluted EPS were weighted-average antidilutive shares totaling 79,893 and 29,606 for the three and six months ended June 30, 2020, respectively and 30,250 and 23,305 for the three and six months ended June 30, 2019, respectively .

The following tables summarize securities available-for-sale and securities held-to-maturity as of June 30, 2020 and December 31, 2019.

June 30, 2020

Amortized Gross Unrealized Fair

(in thousands) Cost Gains Losses Value

Securities available-for-sale

2 unchanged sentences

Agency mortgage-backed securities

275,433 6,632 ( 3,535 ) 278,530

Private label mortgage-backed securities

101,110 1,044 ( 229 ) 101,925

Asset-backed securities

5,000 — ( 163 ) 4,837

Corporate securities 48,394 309 ( 2,084 ) 46,619

Total available-for-sale $ 590,046 $ 11,509 $ ( 12,538 ) $ 589,017

March 31, 2020

Gross Unrealized

(in thousands)

June 30, 2020

Amortized Gross Unrealized Fair

(in thousands) Cost Gains Losses Value

Securities held-to-maturity

3 unchanged sentences

December 31, 2019

Gross Unrealized

(in thousands)

Amortized Gross Unrealized Fair

(in thousands) Cost Gains Losses Value

Securities available-for-sale

2 unchanged sentences

Agency mortgage-backed securities

264,142 1,304 ( 4,006 ) 261,440

Private label mortgage-backed securities

63,704 97 ( 188 ) 63,613

Asset-backed securities

5,000 — ( 45 ) 4,955

Corporate securities 38,632 220 ( 1,532 ) 37,320

1 unchanged sentence

December 31, 2019

Gross Unrealized

(in thousands)

Amortized Gross Unrealized Fair

(in thousands) Cost Gains Losses Value

Securities held-to-maturity

6 unchanged sentences

The fair value of the transferred AFS securities became the book value of the HTM securities as of March 1, 2020, with no unrealized gain or loss at that date.

The carrying value of securities at March 31, 2020 is shown below by their contractual maturity date.

The carrying value of securities at June 30, 2020 is shown below by their contractual maturity date.

Actual maturities will differ because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

Available-for-Sale

(in thousands)

(in thousands) Amortized

Within one year $ 15 $ 15

2 unchanged sentences

After ten years 96,173 98,355

208,503 203,725

Agency mortgage-backed securities 275,433 278,530

1 unchanged sentence

Asset-backed securities 5,000 4,837

Total $ 590,046 $ 589,017

Held-to-Maturity

(in thousands)

(in thousands) Amortized

One to five years $ 1,505 $ 1,557

1 unchanged sentence

After ten years 12,518 12,953

There were less than $0.1 million gross gains resulting from sales of available securities during the three months ended March 31, 2020 and no gross gains or losses resulting from sales of available-for-sale securities during the three months ended March 31, 2019.

Total $ 68,295 $ 69,152

There were no gross gains or losses resulting from sales of available-for-sale securities during the three months ended June 30, 2020 and gross gains of less than $0.1 million resulting from the sales of available-for-sale securities during the

six months ended June 30, 2020.

There were $ 0.5 million of gross losses resulting from sales of available-for-sale securities during the three and six months ended June 30, 2019.

Certain investments in debt securities are reported in the condensed consolidated financial statements at an amount less than their historical cost.

The total fair value of these investments at March 31, 2020 and December 31, 2019 was $205.1 million and $ 317.5 million , which was approximately 30% and 53% , respectively, of the Company’s available-for-sale and held-to-maturity securities portfolios.

The total fair value of these investments at June 30, 2020 and December 31, 2019 was $ 237.5 million and $ 317.5 million, which was approximately 36 % and 53 %, respectively, of the Company’s available-for-sale and held-to-maturity securities portfolios.

These declines resulted primarily from fluctuations in market interest rates after purchase.

5 unchanged sentences

The contractual terms of those investments do not permit the issuer to settle the securities at a price less than the amortized cost bases of the investments.

Because the Company does not intend to sell the investments and it is not likely that the Company will be required to sell the investments before recovery of their amortized cost bases, which may be upon maturity, the Company does not consider those investments to be other-than-temporarily impaired at March 31, 2020 .

Agency Mortgage-Backed, Private Label Mortgage-Backed and Asset-Backed Securities

1 unchanged sentence

The Company expects to recover the amortized cost bases over the term of the securities.

The following tables show the securities portfolio’s gross unrealized losses and fair value, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position at March 31, 2020 and December 31, 2019.

March 31, 2020

Less Than 12 Months

12 Months or Longer

(in thousands)

June 30, 2020

Less Than 12 Months 12 Months or Longer Total

(in thousands) Fair

Value Unrealized

Securities available-for-sale

2 unchanged sentences

Agency mortgage-backed securities

22,419 ( 391 ) 10,727 ( 3,144 ) 33,146 ( 3,535 )

Private label mortgage-backed securities

21,781 ( 160 ) 2,777 ( 69 ) 24,558 ( 229 )

Asset-backed securities

— — 4,837 ( 163 ) 4,837 ( 163 )

Corporate securities

March 31, 2020

Less Than 12 Months

12 Months or Longer

(in thousands)

12,512 ( 122 ) 20,038 ( 1,962 ) 32,550 ( 2,084 )

Total $ 119,074 $ ( 5,172 ) $ 94,873 $ ( 7,366 ) $ 213,947 $ ( 12,538 )

June 30, 2020

Less Than 12 Months 12 Months or Longer Total

(in thousands) Fair

Value Unrealized

Securities held-to-maturity

Corporate securities $ 23,527 $ ( 582 ) $ — $ — $ 23,527 $ ( 582 )

Total $ 23,527 $ ( 582 ) $ — $ — $ 23,527 $ ( 582 )

December 31, 2019

Less Than 12 Months

12 Months or Longer

(in thousands)

Less Than 12 Months 12 Months or Longer Total

(in thousands) Fair

Value Unrealized

Securities available-for-sale

2 unchanged sentences

Agency mortgage-backed securities

91,159 ( 829 ) 83,212 ( 3,177 ) 174,371 ( 4,006 )

Private label mortgage-backed securities

30,077 ( 180 ) 2,884 ( 8 ) 32,961 ( 188 )

Asset-backed securities

— — 4,955 ( 45 ) 4,955 ( 45 )

Corporate securities

— — 22,985 ( 1,532 ) 22,985 ( 1,532 )

Total $ 127,335 $ ( 2,571 ) $ 176,218 $ ( 6,643 ) $ 303,553 $ ( 9,214 )

December 31, 2019

Less Than 12 Months

12 Months or Longer

(in thousands)

Less Than 12 Months 12 Months or Longer Total

(in thousands) Fair

Value Unrealized

Securities held-to-maturity

Corporate securities 13,977 ( 132 ) — — 13,977 ( 132 )

There were no amounts reclassified from accumulated other comprehensive loss to the condensed consolidated statements of income during the three months ended March 31, 2019 .

Amounts reclassified from accumulated other comprehensive loss and the affected line items in the condensed consolidated statements of income during the three months ended March 31, 2020 were as follows:

Total $ 13,977 $ ( 132 ) $ — $ — $ 13,977 $ ( 132 )

Amounts reclassified from accumulated other comprehensive loss and the affected line items in the condensed consolidated statements of income during the three and six months ended June 30, 2020 and June 30, 2019 were as follows:

(in thousands)

2 unchanged sentences

Statements of Income

Three Months Ended March 31, 2020

Realized gains on securities available-for-sale

Gain realized in earnings

Gain on sale of securities

Total reclassified amount before tax

Income Before Income Taxes

Income Tax Provision

Three Months Ended June 30, 2020 Six Months Ended June 30, 2020 Three Months Ended June 30, 2019 Six Months Ended June 30, 2019

Realized gains (losses) on securities available-for-sale

Gain (loss) realized in earnings $ — $ 41 $ ( 458 ) $ ( 458 ) Gain (loss) on sale of securities

Total reclassified amount before tax — 41 ( 458 ) ( 458 ) Income Before Income Taxes

Tax expense (benefit) — 11 ( 124 ) ( 124 ) Income Tax Provision (Benefit)

Total reclassifications out of accumulated other comprehensive loss

Loan balances as of March 31, 2020 and December 31, 2019 are summarized in the table below.

$ — $ 30 $ ( 334 ) $ ( 334 ) Net Income

Loan balances as of June 30, 2020 and December 31, 2019 are summarized in the table below.

Categories of loans include:

(in thousands)

March 31, 2020

December 31, 2019

(in thousands) June 30, 2020 December 31, 2019

Commercial loans

1 unchanged sentence

Owner-occupied commercial real estate (1)

86,897 86,726

Investor commercial real estate 13,286 12,567

Construction 77,591 60,274

Single tenant lease financing 980,292 995,879

2 unchanged sentences

Small business lending (1)

118,526 46,945

Total commercial loans 2,386,342 2,286,517

1 unchanged sentence

Residential mortgage 208,728 313,849

Home equity 22,640 24,306

Other consumer 291,632 295,309

2 unchanged sentences

Net deferred loan origination costs and premiums and discounts on purchased loans and other (2)

64,332 43,566

Total loans 2,973,674 2,963,547

Allowance for loan losses ( 24,465 ) ( 21,840 )

(1) Includes carrying value adjustments of $44.6 million and $21.4 million as of March 31, 2020 and December 31, 2019, respectively, related to interest rate swaps associated with public finance loans.

Net loans $ 2,949,209 $ 2,941,707

(1) As of June 30, 2020, $ 13.3 million of commercial real estate loan balances were reclassified from small business lending to owner-occupied commercial real estate.

(2) Includes carrying value adjustments of $ 46.0 million related to terminated interest rate swaps associated with public finance loans as of June 30, 2020 and $ 21.4 million related to interest rate swaps associated with public finance loans as of December 31, 2019.

The risk characteristics of each loan portfolio segment are as follows:

43 unchanged sentences

Certain loans may also include an additional collateral pledge of mortgaged property or a security interest in financed equipment.

Public finance loans have been completed primarily in the Midwest, with plans to continue expanding nationwide.

Public finance loans have been completed primarily in the Midwest, but continues to expand nationwide.

Healthcare Finance:

4 unchanged sentences

These loans are to small businesses and generally carry a partial guaranty from the U.S.

Small Business Administration ("SBA").

Small Business Administration ("SBA") under its 7(a) loan program.

We generally sell the government guaranteed portion of SBA loans into the secondary market while retaining the non-guaranteed portion of the loan and the servicing rights.

4 unchanged sentences

Loans are made for a broad array of purposes including, but not limited to, providing operating cash flow, funding ownership changes, and facilitating equipment purchases.

These loans also include loans originated by the Bank under the SBA’s Paycheck Protection Program, which are fully guaranteed by the SBA.

This portfolio segment has an emerging geography, with a nationwide focus.

2 unchanged sentences

Repayment of these loans is primarily dependent on the financial circumstances of the borrowers, which can be impacted by economic conditions in their market areas such as unemployment levels.

Repayment can also

be impacted by changes in residential property values.

Repayment can also be impacted by changes in residential property values.

Risk is mitigated by the fact that the loans are of smaller individual amounts and spread over a large number of borrowers in geographically diverse locations throughout the country.

32 unchanged sentences

A home improvement loan generally is charged off no later than when it is 90 days past due as to principal or interest.

The following tables present changes in the balance of the ALLL during the three months ended March 31, 2020 and 2019 .

(in thousands)

Three Months Ended March 31, 2020

The following tables present changes in the balance of the ALLL during the three and six months ended June 30, 2020 and 2019.

(in thousands) Three Months Ended June 30, 2020

Allowance for loan losses:

Balance, Beginning of Period

Provision (Credit) Charged to Expense

Balance, Beginning of Period Provision (Credit) Charged to Expense Losses

Charged Off Recoveries Balance,

End of Period

2 unchanged sentences

Investor commercial real estate 128 2 — — 130

Construction 460 261 — — 721

Single tenant lease financing 10,755 563 — — 11,318

3 unchanged sentences

Residential mortgage 500 36 — 3 539

Home equity 53 ( 4 ) — 2 51

Other consumer 2,580 347 ( 216 ) 117 2,828

(in thousands)

Three Months Ended March 31, 2019

Total $ 22,857 $ 2,491 $ ( 1,016 ) $ 133 $ 24,465

Six Months Ended June 30, 2020

Allowance for loan losses:

Balance, Beginning of Period

Provision (Credit) Charged to Expense

Balance, Beginning of Period Provision (Credit) Charged to Expense Losses

Charged Off Recoveries Balance,

End of Period

2 unchanged sentences

Investor commercial real estate 109 21 — — 130

Construction 380 341 — — 721

Single tenant lease financing 11,175 143 — — 11,318

3 unchanged sentences

Residential mortgage 657 ( 107 ) ( 15 ) 4 539

Home equity 46 — — 5 51

Other consumer 2,510 661 ( 502 ) 159 2,828

The following tables present the recorded investment in loans based on portfolio segment and impairment method as of March 31, 2020 and December 31, 2019 .

(in thousands)

Total $ 21,840 $ 3,952 $ ( 1,514 ) $ 187 $ 24,465

(in thousands) Three Months Ended June 30, 2019

Allowance for loan losses:

March 31, 2020

Ending Balance:

Collectively Evaluated for Impairment

Ending Balance:

Individually Evaluated for Impairment

Ending Balance

Ending Balance:

Collectively Evaluated for Impairment

Ending Balance:

Individually Evaluated for Impairment

Ending Balance

Balance, Beginning of Period Provision (Credit) Charged to Expense Losses

Charged Off Recoveries Balance,

End of Period

Commercial and industrial $ 1,351 $ 444 $ — $ — $ 1,795

1 unchanged sentence

Investor commercial real estate 103 66 — — 169

Construction 267 35 — — 302

Single tenant lease financing 9,368 293 — — 9,661

3 unchanged sentences

Residential mortgage 1,044 ( 383 ) — 1 662

Home equity 49 ( 5 ) — 4 48

Other consumer 2,338 451 ( 337 ) 78 2,530

(in thousands)

Total $ 18,841 $ 1,389 $ ( 337 ) $ 83 $ 19,976

Six Months Ended June 30, 2019

Allowance for loan losses:

December 31, 2019

Ending Balance:

Collectively Evaluated for Impairment

Ending Balance:

Individually Evaluated for Impairment

Ending Balance

Ending Balance:

Collectively Evaluated for Impairment

Ending Balance:

Individually Evaluated for Impairment

Ending Balance

Balance, Beginning of Period Provision (Credit) Charged to Expense Losses

Charged Off Recoveries Balance,

End of Period

Commercial and industrial $ 1,384 $ 523 $ ( 112 ) $ — $ 1,795

1 unchanged sentence

Investor commercial real estate 61 108 — — 169

Construction 251 51 — — 302

Single tenant lease financing 8,827 834 — — 9,661

3 unchanged sentences

Residential mortgage 1,079 ( 419 ) — 2 662

Home equity 53 ( 11 ) — 6 48

Other consumer 2,321 699 ( 654 ) 164 2,530

Total $ 17,896 $ 2,674 $ ( 766 ) $ 172 $ 19,976

The following tables present the recorded investment in loans based on portfolio segment and impairment method as of June 30, 2020 and December 31, 2019.

(in thousands) Loans Allowance for Loan Losses

June 30, 2020 Ending Balance:

Collectively Evaluated for Impairment Ending Balance:

Individually Evaluated for Impairment Ending Balance Ending Balance:

Collectively Evaluated for Impairment Ending Balance:

Individually Evaluated for Impairment Ending Balance

Commercial and industrial $ 80,871 $ 816 $ 81,687 $ 1,368 $ 109 $ 1,477

Owner-occupied commercial real estate 82,974 3,922 86,897 846 — 846

Investor commercial real estate 13,286 — 13,286 130 — 130

Construction 77,591 — 77,591 721 — 721

Single tenant lease financing 975,612 4,680 980,292 9,658 1,660 11,318

Public finance 647,107 — 647,107 1,542 — 1,542

Healthcare finance 380,956 — 380,956 4,762 — 4,762

Small business lending 118,526 — 118,526 251 251

Residential mortgage 207,320 1,408 208,728 539 — 539

Home equity 22,640 — 22,640 51 — 51

Other consumer 291,518 115 291,632 2,828 — 2,828

Total $ 2,898,401 $ 10,941 $ 2,909,342 $ 22,696 $ 1,769 $ 24,465

(in thousands) Loans Allowance for Loan Losses

December 31, 2019 Ending Balance:

Collectively Evaluated for Impairment Ending Balance:

Individually Evaluated for Impairment Ending Balance Ending Balance:

Collectively Evaluated for Impairment Ending Balance:

Individually Evaluated for Impairment Ending Balance

Commercial and industrial $ 93,520 $ 2,900 $ 96,420 $ 1,412 $ 109 $ 1,521

Owner-occupied commercial real estate 81,063 5,663 86,726 561 — 561

Investor commercial real estate 12,567 — 12,567 109 — 109

Construction 60,274 — 60,274 380 — 380

Single tenant lease financing 991,199 4,680 995,879 9,515 1,660 11,175

Public finance 687,094 — 687,094 1,580 — 1,580

Healthcare finance 300,612 — 300,612 3,247 — 3,247

Small business lending 46,945 — 46,945 54 — 54

Residential mortgage 312,714 1,135 313,849 657 — 657

Home equity 24,306 — 24,306 46 — 46

Other consumer 295,266 43 295,309 2,510 — 2,510

Total $ 2,905,560 $ 14,421 $ 2,919,981 $ 20,071 $ 1,769 $ 21,840

The Company utilizes a risk grading matrix to assign a risk grade to each of its commercial loans.

14 unchanged sentences

A loan placed on nonaccrual status may be restored to accrual status when all delinquent principal and interest has been brought current, and the Company expects full payment of the remaining contractual principal and interest.

The following tables present the credit risk profile of the Company’s commercial and consumer loan portfolios based on rating category and payment activity as of March 31, 2020 and December 31, 2019 .

March 31, 2020

(in thousands)

Special Mention

The following tables present the credit risk profile of the Company’s commercial and consumer loan portfolios based on rating category and payment activity as of June 30, 2020 and December 31, 2019.

June 30, 2020

(in thousands) Pass Special Mention Substandard Total

Commercial and industrial $ 77,447 $ 3,465 $ 775 $ 81,687

1 unchanged sentence

Investor commercial real estate 13,286 — — 13,286

Construction 77,591 — — 77,591

Single tenant lease financing 966,782 8,830 4,680 980,292

3 unchanged sentences

Total commercial loans $ 2,361,027 $ 15,937 $ 9,378 $ 2,386,342

March 31, 2020

(in thousands)

June 30, 2020

(in thousands) Performing Nonaccrual Total

Residential mortgage $ 207,686 $ 1,042 $ 208,728

Home equity 22,640 — 22,640

Other consumer 291,524 108 291,632

1 unchanged sentence

December 31, 2019

(in thousands)

Special Mention

(in thousands) Pass Special Mention Substandard Total

Commercial and industrial $ 89,818 $ 3,973 $ 2,629 $ 96,420

1 unchanged sentence

Investor commercial real estate 12,567 — — 12,567

Construction 60,274 — — 60,274

Single tenant lease financing 983,448 7,751 4,680 995,879

4 unchanged sentences

December 31, 2019

(in thousands)

(in thousands) Performing Nonaccrual Total

Residential mortgage $ 313,088 $ 761 $ 313,849

Home equity 24,306 — 24,306

Other consumer 295,276 33 295,309

Total consumer loans $ 632,670 $ 794 $ 633,464

The following tables present the Company’s loan portfolio delinquency analysis as of March 31, 2020 and December 31, 2019 .

March 31, 2020

The following tables present the Company’s loan portfolio delinquency analysis as of June 30, 2020 and December 31, 2019.

June 30, 2020

(in thousands) 30-59

Past Due 60-89

Past Due 90 Days

Past Due Total

Past Due Current Total

Loans Total Loans

Commercial and industrial $ 80 $ — $ 212 $ 292 $ 81,395 $ 81,687 $ 299 $ —

1 unchanged sentence

Investor commercial real estate — — — — 13,286 13,286 — —

Construction — — — — 77,591 77,591 — —

Single tenant lease financing — — 4,680 4,680 975,612 980,292 4,680 —

3 unchanged sentences

Residential mortgage — — 281 281 208,447 208,728 1,042 —

Home equity — — — — 22,640 22,640 — —

Other consumer 80 56 25 161 291,471 291,632 108 —

Total $ 160 $ 56 $ 7,264 $ 7,480 $ 2,901,862 $ 2,909,342 $ 8,195 $ —

December 31, 2019

(in thousands) 30-59

Past Due 60-89

Past Due 90 Days

Past Due Total

Past Due Current Total

Loans Total Loans

Commercial and industrial $ 15 $ 96 $ 122 $ 233 $ 96,187 $ 96,420 $ 226 $ —

1 unchanged sentence

Investor commercial real estate — — — — 12,567 12,567 — —

Construction — — — — 60,274 60,274 — —

Single tenant lease financing — 4,680 — 4,680 991,199 995,879 4,680 —

3 unchanged sentences

Residential mortgage — — 1,177 1,177 312,672 313,849 761 416

Home equity — — — — 24,306 24,306 — —

Other consumer 240 107 — 347 294,962 295,309 33 —

Total $ 309 $ 4,883 $ 1,763 $ 6,955 $ 2,913,026 $ 2,919,981 $ 6,164 $ 416

Impaired Loans

7 unchanged sentences

ASC Topic 310, Receivables , requires that impaired loans be measured based on the present value of expected future cash flows discounted at the loans’ effective interest rates or the fair value of the underlying collateral, less costs to sell, and allows existing methods for recognizing interest income.

The following table presents the Company’s impaired loans as of March 31, 2020 and December 31, 2019 .

March 31, 2020

December 31, 2019

(in thousands)

The following table presents the Company’s impaired loans as of June 30, 2020 and December 31, 2019.

June 30, 2020 December 31, 2019

(in thousands) Recorded

Balance Unpaid

Balance Specific

Allowance Recorded

Balance Unpaid

Balance Specific

Loans without a specific valuation allowance

1 unchanged sentence

Owner-occupied commercial real estate 3,922 3,925 — 5,663 5,665 —

Small business lending

Residential mortgage 1,408 1,498 — 1,135 1,209 —

Other consumer 115 215 — 43 107 —

Total 6,058 6,310 — 9,534 9,675 —

Loans with a specific valuation allowance

1 unchanged sentence

Single tenant lease financing 4,680 4,680 1,660 4,680 4,680 1,660

Total 4,883 4,920 1,769 4,887 4,924 1,769

Total impaired loans $ 10,941 $ 11,230 $ 1,769 $ 14,421 $ 14,599 $ 1,769

The table below presents average balances and interest income recognized for impaired loans during the three months ended March 31, 2020 and 2019.

Three Months Ended

March 31, 2020

March 31, 2019

(in thousands)

The table below presents average balances and interest income recognized for impaired loans during the three and six months ended June 30, 2020 and 2019.

Three Months Ended Six Months Ended

June 30, 2020 June 30, 2019 June 30, 2020 June 30, 2019

(in thousands) Average

Balance Interest

Income Average

Balance Interest

Income Average

Balance Interest

Income Average

Balance Interest

Loans without a specific valuation allowance

3 unchanged sentences

Residential mortgage 1,352 — 3,538 — 1,313 — 2,796 —

Home equity — — — — — — 21 —

Other consumer 75 — 83 — 60 — 79 —

Total 5,944 47 10,397 152 7,276 67 9,736 260

Loans with a specific valuation allowance

1 unchanged sentence

Single tenant lease financing 4,680 — — — 4,680 — — —

Total 4,884 — 353 — 4,884 — 177 —

Total impaired loans $ 10,828 $ 47 $ 10,750 $ 152 $ 12,160 $ 67 $ 9,913 $ 260

The Company had no residential mortgage other real estate owned as of March 31, 2020 and December 31, 2019 .

There were no loans in the process of foreclosure at March 31, 2020 and December 31, 2019 .

The Company had no residential mortgage other real estate owned as of June 30, 2020 and December 31, 2019.

There was one loan with a balance of $ 0.1 million in the process of foreclosure at June 30, 2020 and no loans in the process of foreclosure at December 31, 2019.

Troubled Debt Restructurings

1 unchanged sentence

These concessions typically result from loss mitigation efforts and could include reductions in the interest rate, payment extensions, forgiveness of principal, forbearance, or other actions.

are classified as nonperforming at the time of restructuring and typically are returned to performing status after considering the borrower’s sustained repayment performance for a reasonable period, generally not less than six consecutive months.

Certain TDRs are classified as nonperforming at the time of restructuring and typically are returned to performing status after

considering the borrower’s sustained repayment performance for a reasonable period, generally not less than six consecutive months.

When loans are modified in a TDR, any possible impairment similar to other impaired loans is evaluated based on the present value of expected future cash flows, discounted at the contractual interest rate of the original loan agreement, or using the current fair value of the collateral, less selling costs, for collateral dependent loans.

4 unchanged sentences

Terms may be modified to fit the ability of the borrower to repay in line with its current financial status or the loan may be restructured to secure additional collateral and/or guarantees to support the debt, or a combination of the two.

There were no commercial and industrial loans classified as new TDRs during the three months ended March 31, 2020 and 2019.

There were no performing TDRs that had payment defaults within the twelve months following modification during the three months ended March 31, 2020 and 2019.

There was one portfolio residential mortgage loan classified as a new TDR during the three and six months ended June 30, 2020 with a pre-modification and post-modification outstanding recorded investment of $ 0.8 million.

The Company did not allocate a specific allowance for that loan as of June 30, 2020.

The modification consisted of an extension of the maturity date.

There were four commercial and industrial loans classified as new TDRs during the three and six months ended June 30, 2019 with a pre-modification and post-modification outstanding recorded investment of $ 2.0 million.

The Company did not allocate a specific allowance for those loans as of June 30, 2019.

The modifications consisted of interest-only payments for a period of time.

There were no performing TDRs that had payment defaults within the twelve months following modification during the three and six months ended June 30, 2020 and 2019, respectively.

Non-TDR Loan Modifications due to COVID-19

1 unchanged sentence

This guidance encourages financial institutions to work prudently with borrowers who are or may be unable to meet their contractual payment obligations due to the effects of COVID-19.

Additionally, Section 4013 of the Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”) further provides that loan modifications due to the impact of COVID-19 that would otherwise be classified as TDRs under GAAP will not be so classified.

Additionally, Section 4013 of the Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”) provides that loan modifications due to the impact of COVID-19 that would otherwise be classified as TDRs under GAAP will not be so classified.

Modifications within the scope of this relief are in effect from the period beginning March 1, 2020 until the earlier of December 31, 2020 or 60 days after the date on which the national emergency related to the COVID-19 pandemic formally terminates.

In accordance with this guidance, the Company offered modifications to borrowers who were both impacted by COVID-19 and current on all principal and interest payments.

The modifications completed in the three months ended March 31, 2020 consisted of only loans in the healthcare finance portfolio with total balances of $233.5 million .

The modifications completed in the six months ended June 30, 2020 totaled $ 392.4 million and consisted of payment deferrals.

Premises and Equipment

The following table summarizes premises and equipment at March 31, 2020 and December 31, 2019 .

(in thousands)

The following table summarizes premises and equipment at June 30, 2020 and December 31, 2019.

(in thousands) June 30,

2020 December 31,

Land $ 2,500 $ 2,500

Right of use leased asset 1,242 1,602

2 unchanged sentences

accumulated depreciation ( 10,076 ) ( 9,165 )

Total $ 23,939 $ 14,630

During 2018, the Bank's subsidiary, SPF15, Inc., (“SPF15”) acquired several parcels of land consisting of approximately 3.3 acres located in Fishers, Indiana for approximately $ 10.2 million, inclusive of acquisition costs.

Pursuant to a Land Acquisition Agreement with the City of Fishers, Indiana (the “City”), and its Redevelopment Commission, among others, the City agreed to reimburse SPF15 for the purchase price and other specified land acquisition costs.

The Land Acquisition

Agreement was replaced by a Project Agreement in December 2018, which extended the reimbursement deadline to October 31, 2019 and made additional financial incentives available to the Company for constructing an office building and associated parking garage on the property.

The Land Acquisition Agreement was replaced by a Project Agreement in December 2018, which extended the reimbursement deadline to October 31, 2019 and made additional financial incentives available to the Company for constructing an office building and associated parking garage on the property.

As contemplated under the Project Agreement, the City transferred to SPF15 two additional parcels of land consisting of approximately 0.75 acres and SPF15 transferred to the Fishers Town Hall Building Corporation and third parties a certain parcel of land consisting of approximately 1.65 acres in connection with the development of the property.

1 unchanged sentence

Site demolition has been completed and construction of a multi-use development, to include the Company's future headquarters, began on October 7, 2019.

Development of the site is estimated to be substantially completed by September 30, 2021.

Development of the site is estimated to be substantially completed by October 12, 2021.

A lease is defined as a contract, or part of a contract, that conveys the right to control the use of identified property or equipment for a period of time in exchange for consideration.

1 unchanged sentence

In addition, the Company elected not to adjust prior comparative periods.

The Company has two operating leases that are used for general office operations with remaining lease terms of two to four years.

The Company has three operating leases that are used for general office operations with remaining lease terms of two to four years .

With the adoption of ASU 2016-02, operating lease agreements are required to be recognized on the condensed consolidated balance sheets as a right-of-use asset and a corresponding lease liability.

The following table shows the components of lease expense.

(in thousands)

Three Months Ended

March 31, 2020

March 31, 2019

(in thousands) Three Months Ended Six Months Ended

June 30, 2020 June 30, 2019 June 30, 2020 June 30, 2019

Operating lease cost $ 251 $ 187 $ 466 $ 368

The following table shows supplemental cash flow information related to leases.

(in thousands)

Three Months Ended

March 31, 2020

March 31, 2019

(in thousands) Six Months Ended

June 30, 2020 June 30, 2019

Cash paid for amounts included in the measurement of lease liabilities:

6 unchanged sentences

(dollars in thousands)

March 31, 2020

December 31, 2019

June 30, 2020 December 31, 2019

Operating lease right-of-use assets $ 1,242 $ 1,602

4 unchanged sentences

Operating leases 2.0 % 2.0 %

The following table shows the future minimum payments of operating leases with initial or remaining terms of one year or more as of March 31, 2020.

The following table shows the future minimum payments of operating leases with initial or remaining terms of one year or more as of June 30, 2020.

(in thousands)

Twelve months ended March 31,

Twelve months ended June 30,

Total lease payments 1,213

imputed interest ( 30 )

As of March 31, 2020 and December 31, 2019 , the carrying amount of goodwill was $4.7 million .

There have been no changes in the carrying amount of goodwill for the three months ended March 31, 2020 .

Total $ 1,183

As of June 30, 2020 and December 31, 2019, the carrying amount of goodwill was $ 4.7 million.

There have been no changes in the carrying amount of goodwill for the three months ended June 30, 2020.

Goodwill is tested for impairment on an annual basis as of August 31, or whenever events or changes in circumstances indicate the carrying amount of goodwill exceeds its implied fair value.

2 unchanged sentences

Servicing Asset

Activity for the servicing asset and the related changes in fair value for the three months ended March 31, 2020 and 2019 are shown in the table below.

(in thousands)

Three Months Ended

March 31, 2020

March 31, 2019

Activity for the servicing asset and the related changes in fair value for the six months ended June 30, 2020 and 2019 are shown in the table below.

(in thousands) Six Months Ended

June 30, 2020 June 30, 2019

Beginning balance $ 2,481 $ —

Additions 310 —

Changes in fair value ( 269 ) —

1 unchanged sentence

Loans serviced for others are not included in the condensed consolidated balance sheets.

The unpaid principal balances of these loans serviced for others as of March 31, 2020 and December 31, 2019 are shown in the table below.

The unpaid principal balances of these loans serviced for others as of June 30, 2020 and December 31, 2019 are shown in the table below.

(in thousands)

March 31, 2020

December 31, 2019

June 30, 2020 December 31, 2019

Loan portfolios serviced for:

SBA guaranteed loans $ 113,927 $ 103,981

Loan servicing revenue totaled $0.3 million for the three months ended March 31, 2020.

There was no loan servicing revenue for the three months ended March 31, 2019.

Loan servicing asset revaluation, which represents the change in fair value of the servicing asset, resulted in a $0.2 million downward valuation for the three months ended March 31, 2020.

Total $ 113,927 $ 103,981

Loan servicing revenue totaled $ 0.3 million and $ 0.5 million during the three and six months ended June 30, 2020, respectively.

There was no loan servicing revenue during the three and six months ended June 30, 2019.

Loan servicing asset revaluation, which represents the change in fair value of the servicing asset, resulted in a $ 0.1 million and $ 0.3 million downward valuation for the three and six months ended June 30, 2020, respectively.

There was no loan servicing asset revaluation during the three and six months ended June 30, 2019.

The fair value of servicing rights is highly sensitive to changes in underlying assumptions.

20 unchanged sentences

The 2029 Notes are intended to qualify as Tier 2 capital under regulatory guidelines.

The following table presents the principal balance and unamortized debt issuance costs for the 2025 Note, the 2026 Notes and the 2029 Notes as of March 31, 2020 and December 31, 2019 .

March 31, 2020

December 31, 2019

(in thousands)

Unamortized Debt Issuance Costs

The following table presents the principal balance and unamortized debt issuance costs for the 2025 Note, the 2026 Notes and the 2029 Notes as of June 30, 2020 and December 31, 2019.

June 30, 2020 December 31, 2019

(in thousands) Principal Unamortized Debt Issuance Costs Principal Unamortized Debt Issuance Costs

2025 Note 10,000 ( 126 ) 10,000 ( 138 )

2026 Notes 25,000 ( 777 ) 25,000 ( 839 )

2029 Notes 37,000 ( 1,416 ) 37,000 ( 1,495 )

Total $ 72,000 $ ( 2,319 ) $ 72,000 $ ( 2,472 )

Benefit Plans

8 unchanged sentences

All employees, consultants, and advisors of the Company or any subsidiary, as well as all non-employee directors of the Company, are eligible to receive awards under the 2013 Plan.

The Company recorded $0.6 million of share-based compensation expense for the three months ended March 31, 2020 , related to awards made under th e 2013 Plan.

The company recorded $0.5 million of share-based compensation expense for the three months ended March 31, 2019, related to awards made under the 2013 plan.

The following table summarizes the status of the 2013 Plan awards as of March 31, 2020 , and activity for the three months ended March 31, 2020 .

Restricted Stock Units

Weighted-Average Grant Date Fair Value Per Share

Restricted Stock Awards

Weighted-Average Grant Date Fair Value Per Share

Deferred Stock Units

Weighted-Average Grant Date Fair Value Per Share

The Company recorded $ 0.5 million and $ 1.1 million of share-based compensation expense for the three and six months ended June 30, 2020, respectively, related to awards made under th e 2013 Plan.

The Company recorded $ 0.4 million and $ 0.9 million of share-based compensation expense for the three and six months ended June 30, 2019, respectively, related to awards made under the 2013 Plan.

The following table summarizes the status of the 2013 Plan awards as of June 30, 2020 , and activity for the six months ended June 30, 2020.

Restricted Stock Units Weighted-Average Grant Date Fair Value Per Share Restricted Stock Awards Weighted-Average Grant Date Fair Value Per Share Deferred Stock Units Weighted-Average Grant Date Fair Value Per Share

Nonvested at December 31, 2019 107,244 $ 29.03 — $ — — $ —

Nonvested at March 31, 2020

At March 31, 2020 , the total unrecognized compensation cost related to nonvested awards was $ 3.6 million with a weighted-average expense recognition period of 2.1 years .

Granted 66,808 27.56 16,090 25.58 6 19.41

Vested ( 48,499 ) 30.34 ( 6,808 ) 26.37 ( 6 ) 19.41

Forfeited — — ( 1,638 ) 27.56 — —

Nonvested at June 30, 2020 125,553 $ 27.74 7,644 $ 24.44 — $ —

At June 30, 2020, the total unrecognized compensation cost related to nonvested awards was $ 3.1 million with a weighted-average expense recognition period of 1.9 years.

Directors Deferred Stock Plan

3 unchanged sentences

Deferred stock rights were to be settled in common stock following the end of the deferral period payable on the basis of one share of common stock for each deferred stock right.

The following table summarizes the status of deferred stock rights related to the Directors Deferred Stock Plan for the three months ended March 31, 2020 .

The following table summarizes the status of deferred stock rights related to the Directors Deferred Stock Plan for the six months ended June 30, 2020.

Deferred Stock Rights

3 unchanged sentences

Commitments and Credit Risk

In the normal course of business, the Company makes various commitments to extend credit which are not reflected in the accompanying consolidated financial statements.

At March 31, 2020 and December 31, 2019, the Company had outstanding loan commitments totaling approximately $295.9 million and $254.4 million , respectively.

In the normal course of business, the Company makes various commitments to extend credit which are not reflected in the accompanying condensed consolidated financial statements.

At June 30, 2020 and December 31, 2019, the Company had outstanding loan commitments totaling approximately $ 267.4 million and $ 254.4 million, respectively.

In addition, the Company is a limited partner in a Small Business Investment Company fund (the “SBIC Fund”).

As of March 31, 2020, the Company has committed to contribute up to $1.7 million of capital to the SBIC Fund.

As of June 30, 2020, the Company has committed to contribute up to $ 1.7 million of capital to the SBIC Fund.

Capital Commitments

1 unchanged sentence

The Company has entered into construction-related contracts in the amount of $ 65.1 million.

As of March 31, 2020, $58.9 million of such contract commitments had not yet been incurred.

As of June 30, 2020, $ 51.6 million of such contract commitments had not yet been incurred.

These commitments are due within two years .

3 unchanged sentences

The standard describes three levels of inputs that may be used to measure fair value:

Quoted prices in active markets for identical assets or liabilities

Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities;

Level 1 Quoted prices in active markets for identical assets or liabilities

Level 2 Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities;

quoted prices in markets that are not active;

or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities

Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities

Level 3 Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities

Following is a description of the valuation methodologies and inputs used for assets measured at fair value on a recurring basis and recognized in the accompanying condensed consolidated balance sheets, as well as the general classification of such assets pursuant to the valuation hierarchy.

10 unchanged sentences

Rating agency and industry research reports as well as default and deferral activity are reviewed and incorporated into the calculation.

The Company did not own any securities classified within Level 3 of the hierarchy as of March 31, 2020 or December 31, 2019 .

The Company did not own any securities classified within Level 3 of the hierarchy as of June 30, 2020 or December 31, 2019.

Loans Held-for-Sale (mandatory pricing agreements)

10 unchanged sentences

The fair values of interest rate lock commitments (“IRLCs”) are determined using the projected sale price of individual loans based on changes in market interest rates, projected pull-through rates (the probability that an IRLC will ultimately result in an originated loan), the reduction in the value of the applicant’s option due to the passage of time, and the remaining origination costs to be incurred based on management’s estimate of market costs (Level 3).

The following tables present the fair value measurements of assets and liabilities recognized in the accompanying condensed consolidated balance sheets measured at fair value on a recurring basis and the level within the fair value hierarchy in which the fair value measurements fall at March 31, 2020 and December 31, 2019 .

March 31, 2020 Fair Value Measurements Using

(in thousands)

Quoted Prices

June 30, 2020 Fair Value Measurements Using

(in thousands) Fair

Value Quoted Prices

in Active Markets for Identical Assets

(Level 1) Significant

(Level 2) Significant

Government-sponsored agencies $ 66,544 $ — $ 66,544 $ —

1 unchanged sentence

Agency mortgage-backed securities

278,530 — 278,530 —

Private label mortgage-backed securities

101,925 101,925 —

Asset-backed securities

4,837 — 4,837 —

Corporate securities 46,619 — 46,619 —

4 unchanged sentences

Forward contracts ( 17 ) ( 17 ) — —

IRLCs 282 — — 282

December 31, 2019

Fair Value Measurements Using

(in thousands)

Quoted Prices

(in thousands) Fair

Value Quoted Prices

in Active Markets for Identical Assets

(Level 1) Significant

(Level 2) Significant

Government-sponsored agencies $ 75,872 $ — $ 75,872 $ —

1 unchanged sentence

Agency mortgage-backed securities

261,440 — 261,440 —

Private label mortgage-backed securities

63,613 — 63,613 —

Asset-backed securities

4,955 — 4,955 —

Corporate securities 37,320 — 37,320 —

4 unchanged sentences

Forward contracts ( 153 ) ( 153 ) — —

The following tables reconcile the beginning and ending balances of recurring fair value measurements recognized in the accompanying condensed consolidated balance sheets using significant unobservable (Level 3) inputs for the three months ended March 31, 2020 and 2019.

IRLCs 910 — — 910

Three Months Ended

(in thousands)

Servicing Asset

Interest Rate Lock

(in thousands) Servicing Asset Interest Rate Lock

Balance, April 1, 2020 $ 2,415 $ 2,064

Total realized gains (losses)

Additions 197 —

Change in fair value ( 90 ) ( 1,782 )

Balance, June 30, 2020 2,522 282

Balance as of April 1, 2019 $ — $ 781

Total realized gains

Change in fair value — 428

Balance, June 30, 2019 $ — $ 1,209

(in thousands) Six Months Ended

Servicing Asset Interest Rate Lock Commitments

Balance January 1, 2020 $ 2,481 $ 910

Total realized (losses) gains

Total realized gains (losses)

Additions 310 —

Change in fair value ( 269 ) ( 628 )

Balance, March 31, 2020

Balance, June 30, 2020 $ 2,522 282

Balance as of January 1, 2019 $ — $ 389

1 unchanged sentence

Change in fair value — 820

Balance, March 31, 2019

Balance, June 30, 2019 $ — $ 1,209

The following describes the valuation methodologies and inputs used for assets measured at fair value on a nonrecurring basis, as well as the general classification of such assets pursuant to the valuation hierarchy.

6 unchanged sentences

Impaired loans with a specific valuation allowance based on the value of the underlying collateral or a discounted cash flow analysis are classified as Level 3 assets.

The following table presents the fair value measurements of assets and liabilities recognized in the accompanying condensed consolidated balance sheets measured at fair value on a nonrecurring basis and the level within the fair value hierarchy in which the fair value measurement falls at March 31, 2020 and December 31, 2019.

hierarchy in which the fair value measurement falls at December 31, 2019.

The Company did not have any measurements on a nonrecurring basis at June 30, 2020.

December 31, 2019

(in thousands)

Fair Value Measurements Using

Quoted Prices

(in thousands) Fair Value Measurements Using

Value Quoted Prices

(Level 1) Significant

(Level 2) Significant

Impaired loans $ 3,019 $ — $ — $ 3,019

1 unchanged sentence

The following tables present quantitative information about unobservable inputs used in recurring and nonrecurring Level 3 fair value measurements.

(dollars in thousands)

Fair Value at

March 31, 2020

Significant Unobservable

Weighted-Average Range

Discounted cash flow

Loan closing rates

Servicing asset

Discounted cash flow

Prepayment speeds

Expected weighted-average loan life

3.3 - 5.3 years

(dollars in thousands)

Fair Value at

December 31, 2019

Significant Unobservable

Weighted-Average Range

Impaired loans

Fair value of collateral

Discount for type of property and current market conditions

Discounted cash flow

Loan closing rates

Servicing asset

Discounted cash flow

Prepayment speeds

Expected weighted-average loan life

3.2 - 5.7 years

(dollars in thousands) Fair Value at

June 30, 2020 Valuation

Technique Significant Unobservable

Inputs Range Weighted-Average Range

IRLCs $ 282 Discounted cash flow Loan closing rates 63% - 100% 73 %

Servicing asset 2,522 Discounted cash flow Prepayment speeds 0% - 25% 13.0 %

Expected weighted-average loan life 3.6 - 5.6 years 4.8 years

(dollars in thousands) Fair Value at

December 31, 2019 Valuation

Technique Significant Unobservable

Inputs Range Weighted-Average Range

Impaired loans $ 3,019 Fair value of collateral Discount for type of property and current market conditions 10 % 10 %

IRLCs 910 Discounted cash flow Loan closing rates 50% - 100% 84 %

Servicing asset 2,481 Discounted cash flow Prepayment speeds 0% - 25% 13.5 %

Expected weighted-average loan life 3.2 - 5.7 years 5.0 years

The following methods were used to estimate the fair value of all other financial instruments recognized in the accompanying condensed consolidated balance sheets at amounts other than fair value.

22 unchanged sentences

The fair value of commitments to extend credit are based on fees currently charged to enter into similar agreements with similar maturities and interest rates.

The Company determined that the fair value of commitments was zero based on the contractual value of outstanding commitments at each of March 31, 2020 and December 31, 2019 .

The following tables present the carrying value and estimated fair value of all financial assets and liabilities at March 31, 2020 and December 31, 2019 .

March 31, 2020

The Company determined that the fair value of commitments was zero based on the contractual value of outstanding commitments at each of June 30, 2020 and December 31, 2019.

The following tables present the carrying value and estimated fair value of all financial assets and liabilities at June 30, 2020 and December 31, 2019.

June 30, 2020

Fair Value Measurements Using

(in thousands)

Quoted Prices

(in thousands) Carrying

Amount Fair Value Quoted Prices

Identical Assets

(Level 1) Significant

(Level 2) Significant

Cash and cash equivalents $ 498,619 $ 498,619 $ 498,619 $ — $ —

Securities held-to-maturity 68,295 69,152 — 69,152 —

Loans held-for-sale (best efforts pricing agreements) 23,493 23,493 — 23,493 —

Net loans 2,949,209 3,006,369 — — 3,006,369

Accrued interest receivable 21,093 21,093 21,093 — —

Federal Home Loan Bank of Indianapolis stock 25,650 25,650 — 25,650 —

Deposits 3,380,789 3,428,960 1,520,495 — 1,908,465

Advances from Federal Home Loan Bank 514,913 548,015 — 548,015 —

3 unchanged sentences

Fair Value Measurements Using

(in thousands)

Quoted Prices

(in thousands) Carrying

Amount Fair Value Quoted Prices

(Level 1) Significant

(Level 2) Significant

Cash and cash equivalents $ 327,361 $ 327,361 $ 327,361 $ — $ —

Securities held-to-maturity 61,878 62,560 — 62,560 —

Net loans 2,941,707 2,876,688 — — 2,876,688

Accrued interest receivable 18,607 18,607 18,607 — —

Federal Home Loan Bank of Indianapolis stock 25,650 25,650 — 25,650 —

Deposits 3,153,963 3,232,065 1,002,141 — 2,229,924

Advances from Federal Home Loan Bank 514,910 520,950 — 520,950 —

7 unchanged sentences

Refer to Note 14 for further information on derivative financial instruments.

During the three months ended March 31, 2020 and 2019 , the Company originated mortgage loans held-for-sale of $215.4 million and $75.2 million , respectively, and sold $225.5 million and $81.0 million of mortgage loans, respectively, into the secondary market.

Additionally, the Company sold $90.8 million of portfolio residential mortgage loans during the three months ended March 31, 2020 and sold $5.2 million of portfolio residential mortgage loans during the three months ended March 31, 2019.

The following table presents the components of income from mortgage banking activities for the three months ended March 31, 2020 and 2019 .

Three Months Ended March 31,

During the three months ended June 30, 2020 and 2019, the Company originated mortgage loans held-for-sale of $ 211.9 million and $ 145.0 million, respectively, and sold $ 229.2 million and $ 130.4 million of mortgage loans, respectively, into the secondary market.

During the six months ended June 30, 2020 and 2019, the Company originated mortgage loans held-for-sale of $ 427.3 million and $ 220.3 million, respectively, and sold $ 454.7 million and $ 211.4 million of mortgage loans, respectively, into the secondary market.

The following table presents the components of income from mortgage banking activities for the three and six months ended June 30, 2020 and 2019.

Three Months Ended June 30, Six Months Ended June 30,

(in thousands) 2020 2019 2020 2019

Gain on loans sold $ 4,164 $ 1,825 $ 8,507 $ 3,298

Gain (loss) resulting from the change in fair value of loans held-for-sale

(Loss) gain resulting from the change in fair value of derivatives

(Loss) gain resulting from the change in fair value of loans held-for-sale ( 1,255 ) 534 ( 939 ) 352

Gain (loss) resulting from the change in fair value of derivatives 499 305 ( 492 ) 631

Net revenue from mortgage banking activities $ 3,408 $ 2,664 $ 7,076 $ 4,281

5 unchanged sentences

The forward contracts are entered into in order to economically hedge the effect of changes in interest rates resulting from the Company’s commitment to fund the loans.

The Company entered into various interest rate swap agreements designated and qualifying as accounting hedges during the reported periods.

The Company had various interest rate swap agreements designated and qualifying as accounting hedges during the reported periods.

Designating an interest rate swap as an accounting hedge allows the Company to recognize gains and losses, less any ineffectiveness, in the condensed consolidated statements of income within the same period that the hedged item affects earnings.

4 unchanged sentences

The fair value of derivative instruments with a positive fair value are reported in accrued income and other assets in the condensed consolidated balance sheets, while derivative instruments with a negative fair value are reported in accrued expenses and other liabilities in the condensed consolidated balance sheets.

The following table presents amounts that were recorded on the condensed consolidated balance sheets related to cumulative basis adjustments for interest rate swap derivatives designated as fair value accounting hedges as of March 31, 2020 and December 31, 2019.

(in thousands)

Carrying amount of the hedged asset

Cumulative amount of fair value hedging adjustment included in the carrying amount of the hedged assets

Line item in the condensed consolidated balance sheets in which the hedged item is included

March 31, 2020

December 31, 2019

March 31, 2020

December 31, 2019

(in thousands) Carrying amount of the hedged asset Cumulative amount of fair value hedging adjustment included in the carrying amount of the hedged assets

Line item in the condensed consolidated balance sheets in which the hedged item is included June 30, 2020 December 31, 2019 June 30, 2020 December 31, 2019

Loans $ — $ 474,957 $ — $ 21,440

Securities available-for-sale (1)

(1) These amounts include the amortized cost basis of closed portfolios used to designate hedging relationships in which the hedged item

is the last layer expected to be remaining at the end of the hedging relationship.

At both March 31, 2020 and December 31, 2019, the amounts of the designated hedged items were $88.2 million .

The following tables present a summary of interest rate swap derivatives designated as fair value accounting hedges of fixed-rate receivables used in the Company’s asset/liability management activities at March 31, 2020 and December 31, 2019, identified by the underlying interest rate-sensitive instruments.

145,872 151,538 7,095 2,802

(1) These amounts include the amortized cost basis of closed portfolios used to designate hedging relationships in which the hedged item is the last layer expected to be remaining at the end of the hedging relationship.

At both June 30, 2020 and December 31, 2019, the amounts of the designated hedged items were $ 88.2 million.

The following tables present a summary of interest rate swap derivatives designated as fair value accounting hedges of fixed-rate receivables used in the Company’s asset/liability management activities at June 30, 2020 and December 31, 2019, identified by the underlying interest rate-sensitive instruments.

(dollars in thousands)

March 31, 2020

Weighted- Average Remaining Maturity

Weighted-Average Ratio

Instruments Associated With

3-month LIBOR

Securities available-for-sale

3-month LIBOR

Total at March 31, 2020

3-month LIBOR

June 30, 2020

Notional Weighted- Average Remaining Maturity Weighted-Average Ratio

Instruments Associated With Value (years) Fair Value Receive Pay

Securities available-for-sale 88,200 3.6 ( 7,097 ) 3-month LIBOR 2.54 %

Total at June 30, 2020 $ 88,200 3.6 $ ( 7,097 ) 3-month LIBOR 2.54 %

(dollars in thousands)

December 31, 2019

Weighted- Average Remaining Maturity

Weighted-Average Ratio

Instruments Associated With

3-month LIBOR

Securities available-for-sale

3-month LIBOR

Total at December 31, 2019

3-month LIBOR

The following tables present a summary of interest rate swap derivatives designated as cash flow accounting hedges of variable-rate liabilities used in the Company’s asset/liability management activities at March 31, 2020 and December 31, 2019.

Notional Weighted- Average Remaining Maturity Weighted-Average Ratio

Instruments Associated With Value (years) Fair Value Receive Pay

Loans $ 427,446 5.5 $ ( 21,551 ) 3-month LIBOR 2.86 %

Securities available-for-sale 88,200 4.1 ( 2,806 ) 3-month LIBOR 2.54 %

Total at December 31, 2019 $ 515,646 5.3 $ ( 24,357 ) 3-month LIBOR 2.80 %

In June 2020, the Company terminated all fair value hedging relationships associated with loans, which resulted in swap termination payments to counterparties totaling $46.1 million.

The corresponding loan fair value hedging adjustment as of the date of termination is being amortized over the remaining lives of the designated loans, which have a weighted-average term to maturity of 13.6 years as of June 30, 2020.

(dollars in thousands)

March 31, 2020

Weighted- Average Remaining Maturity

Weighted-Average Ratio

Cash Flow Hedges

Interest rate swaps

3-month LIBOR

Interest rate swaps

1-month LIBOR

June 30, 2020

Notional Weighted- Average Remaining Maturity Weighted-Average Ratio

Cash Flow Hedges Value (years) Fair Value Receive Pay

Interest rate swaps $ 110,000 6.6 $ ( 17,993 ) 3-month LIBOR 2.88 %

Interest rate swaps 100,000 3.5 ( 9,404 ) 1-month LIBOR 2.88 %

(dollars in thousands)

December 31, 2019

Weighted- Average Remaining Maturity

Weighted-Average Ratio

Cash Flow Hedges

Interest rate swaps

3-month LIBOR

Interest rate swaps

1-month LIBOR

Notional Weighted- Average Remaining Maturity Weighted-Average Ratio

Cash Flow Hedges Value (years) Fair Value Receive Pay

Interest rate swaps $ 110,000 7.1 $ ( 8,390 ) 3-month LIBOR 2.88 %

Interest rate swaps 100,000 4.0 ( 5,040 ) 1-month LIBOR 2.88 %

These derivative financial instruments were entered into for the purpose of managing the interest rate risk of certain assets and liabilities.

The Company pledged $81.3 million and $42.3 million of cash collateral to counterparties as security for its obligations related to these interest rate swap transactions at March 31, 2020 and December 31, 2019, respectively.

The Company pledged $ 34.6 million and $ 42.3 million of cash collateral to counterparties as security for its obligations related to these interest rate swap transactions at June 30, 2020 and December 31, 2019, respectively.

Collateral posted and received is dependent on the market valuation of the underlying hedges.

The following table presents the notional amount and fair value of interest rate swaps, IRLCs and forward contracts utilized by the Company at March 31, 2020 and December 31, 2019.

March 31, 2020

December 31, 2019

(in thousands)

The following table presents the notional amount and fair value of interest rate swaps, IRLCs and forward contracts utilized by the Company at June 30, 2020 and December 31, 2019.

June 30, 2020 December 31, 2019

(in thousands) Notional

Value Notional

Asset Derivatives

Derivatives designated as hedging instruments

Interest rate swaps associated with loans

Interest rate swaps associated with securities available-for-sale

Derivatives not designated as hedging instruments

IRLCs 14,527 282 56,256 910

Total contracts

$ 14,527 $ 282 $ 56,256 $ 910

Liability Derivatives

6 unchanged sentences

Total contracts

$ 309,910 $ ( 34,511 ) $ 840,646 $ ( 37,939 )

The fair value of interest rate swaps was estimated using a discounted cash flow method that incorporates current market interest rates as of the balance sheet date.

Fair values of IRLCs and forward contracts were estimated using changes in mortgage interest rates from the date the Company entered into the IRLC and the balance sheet date.

The following table presents the effects of the Company’s cash flow hedge relationships on the condensed consolidated statements of comprehensive income during the three months ended March 31, 2020 and 2019.

Amount of Loss Recognized in Other Comprehensive (Loss) Income in The Three Months Ended

(in thousands)

March 31, 2020

March 31, 2019

The following table presents the effects of the Company’s cash flow hedge relationships on the condensed consolidated statements of comprehensive income during the three and six months ended June 30, 2020 and 2019.

Amount of Loss Recognized in Other Comprehensive Loss in The Three Months Ended Amount of Loss Recognized in Other Comprehensive Loss in the Six Months Ended

(in thousands) June 30, 2020 June 30, 2019 June 30, 2020 June 30, 2019

Interest rate swap agreements $ ( 509 ) $ ( 5,892 ) $ ( 13,967 ) $ ( 9,464 )

The following table summarizes the periodic changes in the fair value of derivatives not designated as hedging instruments on the condensed consolidated statements of income for the three months ended March 31, 2020 and 2019 .

Amount of Gain / (Loss) Recognized in the Three Months Ended

(in thousands)

March 31, 2020

March 31, 2019

Amount of Gain / (Loss) Recognized in the Three Months Ended Amount of Gain / (Loss) Recognized in the Six Months Ended

(in thousands) June 30, 2020 June 30, 2019 June 30, 2020 June 30, 2019

Asset Derivatives

Derivatives not designated as hedging instruments

IRLCs $ ( 1,781 ) $ 428 $ ( 628 ) $ 820

Liability Derivatives

1 unchanged sentence

Forward contracts $ 2,281 $ ( 122 ) $ 136 $ ( 189 )

The following table presents the effects of the Company’s interest rate swap agreements on the condensed consolidated statements of income during the three months ended March 31, 2020 and 2019.

The following table presents the effects of the Company’s interest rate swap agreements on the condensed consolidated statements of income during the three and six months ended June 30, 2020 and 2019.

(in thousands)

Line item in the condensed consolidated statements of income

Three Months Ended

March 31, 2020

March 31, 2019

Three Months Ended Six Months Ended

June 30, 2020 June 30, 2019 June 30, 2020 June 30, 2019

Interest income

Loans $ ( 1,221 ) $ ( 285 ) $ ( 2,445 ) $ ( 264 )

Securities - taxable ( 159 ) ( 10 ) ( 250 ) ( 17 )

1 unchanged sentence

Total interest income

( 1,544 ) ( 268 ) ( 2,925 ) ( 209 )

Interest expense

Deposits 593 104 899 194

Other borrowed funds 589 79 911 113

Total interest expense

1,182 183 1,810 307

Net interest income

$ ( 2,726 ) $ ( 451 ) $ ( 4,735 ) $ ( 516 )

Accumulated Other Comprehensive Loss

The components of accumulated other comprehensive loss, included in stockholders' equity, are presented in the table below.

(in thousands)

Available-For-Sale Securities

Cash Flow Hedges

The components of accumulated other comprehensive loss, included in stockholders' equity, for the six months ended June 30, 2020 and 2019, respectively, are presented in the table below.

(in thousands) Available-For-Sale Securities Cash Flow Hedges Total

Balance, January 1, 2020 $ ( 4,388 ) $ ( 9,803 ) $ ( 14,191 )

3 unchanged sentences

Income tax provision (benefit) 1,760 ( 4,020 ) ( 2,260 )

Balance, March 31, 2020

Balance, June 30, 2020 $ ( 1,388 ) $ ( 19,750 ) $ ( 21,138 )

Balance, January 1, 2019 $ ( 13,360 ) $ ( 3,181 ) $ ( 16,541 )

Net change in unrealized gain (loss) 10,577 ( 9,464 ) 1,113

Reclassification of net loss realized and included in earnings 458 — 458

Accumulated other comprehensive loss before income tax ( 2,325 ) ( 12,645 ) ( 14,970 )

Income tax provision (benefit) 3,163 ( 2,555 ) 608

Balance, March 31, 2019

Balance, June 30, 2019 $ ( 5,488 ) $ ( 10,090 ) $ ( 15,578 )

The components of accumulated other comprehensive loss, included in stockholders' equity, for the three months ended June 30, 2020 and 2019, respectively, are presented in the table below.

(in thousands) Available-For-Sale Securities Cash Flow Hedges Total

Balance, April 1, 2020 $ ( 239 ) $ ( 19,627 ) $ ( 19,866 )

Net change in unrealized loss ( 1,498 ) ( 509 ) ( 2,007 )

Accumulated other comprehensive loss before income tax ( 1,737 ) ( 20,136 ) ( 21,873 )

Income tax benefit ( 349 ) ( 386 ) ( 735 )

Balance, June 30, 2020 $ ( 1,388 ) $ ( 19,750 ) $ ( 21,138 )

Balance, April 1, 2019 $ ( 8,380 ) $ ( 5,788 ) $ ( 14,168 )

Net change in unrealized gain (loss) 3,667 ( 5,892 ) ( 2,225 )

Reclassification of net loss realized and included in earnings 458 — 458

Accumulated other comprehensive loss before income tax ( 4,255 ) ( 11,680 ) ( 15,935 )

Income tax provision (benefit) 1,233 ( 1,590 ) ( 357 )

Balance, June 30, 2019 $ ( 5,488 ) $ ( 10,090 ) $ ( 15,578 )

Recent Accounting Pronouncements

17 unchanged sentences

Available-for-sale accounting recognizes that value may be realized either through collection of contractual cash flows or through sale of the security.

that recognizes that the investment could be sold at fair value if cash collection would result in the realization of an amount less than fair value.

Therefore, the amendments limit the amount of the allowance for credit losses to the amount by which fair value is below amortized cost because the classification as available-for-sale is premised on an investment strategy that recognizes that the investment could be sold at fair value if cash collection would result in the realization of an amount less than fair value.

• In May 2019, the FASB issued ASU 2019-05 - Financial Instruments - Credit Losses (Topic 326) - Targeted Transition Relief .

11 unchanged sentences

The Company has formed an implementation committee and has engaged a third-party consultant to assist in developing current expected credit losses (“CECL”) models using appropriate methodologies.

ASU 2017-04 - Intangibles - Goodwill and other (Topic 350) - Simplifying the Test for Goodwill Impairment” (January 2017)

The amendments in this update simplify the goodwill impairment test by eliminating Step 2 of the goodwill impairment process, which requires an entity to determine the implied fair value of its goodwill by assigning fair value to all its assets and liabilities.

Under the new guidance, an entity will record an impairment charge if a reporting unit’s carrying amount exceeds its fair value.

Entities still have the option to perform the qualitative assessment for a reporting unit to determine if the quantitative impairment is necessary.

The amendments in this ASU are effective for smaller reporting companies for annual and interim impairment tests performed in periods beginning after December 15, 2022.

Early adoption is permitted.

The Company adopted this guidance effective July 1, 2020 and it did not have a material impact on the condensed consolidated financial statements.

ASU 2018-13 - Fair Value Measurement (Topic 820):

18 unchanged sentences

See the “Non-TDR Loan Modifications due to COVID-19” section of Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations for more information.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements