What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2020-11-05 compared with 2020-08-06 · 239 added, 201 removed, 1158 unchanged (28% of the section changed)

3 unchanged sentences

(Amounts in thousands except share data)

June 30, 2020 December 31, 2019

September 30, 2020 December 31, 2019

Cash and due from banks $ 5,804 $ 5,061

3 unchanged sentences

Securities held-to-maturity, at amortized cost (fair value of $69,176 and $62,560 in 2020 and 2019, respectively) 68,254 61,878

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

Loans held-for-sale (includes 35,321 and 56,097 at fair value in 2020 and 2019, respectively) 76,208 56,097

Loans 3,012,914 2,963,547

38 unchanged sentences

(Amounts in thousands except share and per share data)

Three Months Ended Six Months Ended

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

Three Months Ended Nine Months Ended

September 30, 2020 September 30, 2019 September 30, 2020 September 30, 2019

Interest Income

16 unchanged sentences

Mortgage banking activities 9,630 4,307 16,706 8,588

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

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

Gain on sale of loans 2,033 523 4,596 353

Gain (loss) on sale of securities 98 — 139 ( 458 )

Other 339 517 1,212 2,229

8 unchanged sentences

Deposit insurance premium 440 — 1,360 1,302

Write-down of other real estate owned 2,065 — 2,065 —

Other 970 952 3,383 2,673

1 unchanged sentence

Income Before Income Taxes 9,806 6,775 19,752 19,458

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

Income Tax Provision 1,395 449 1,390 1,315

Net Income $ 8,411 $ 6,326 $ 18,362 $ 18,143

10 unchanged sentences

(Amounts in thousands)

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

Three Months Ended September 30, Nine Months Ended September 30,

2020 2019 2020 2019

Net income $ 8,411 $ 6,326 $ 18,362 $ 18,143

Other comprehensive (loss) income

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

Other comprehensive income (loss)

Net unrealized holding gains on securities available-for-sale recorded within other comprehensive (loss) income before income tax 1,386 1,266 6,187 11,843

Reclassification adjustment for (gains) losses realized ( 98 ) — ( 139 ) 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 )

Other comprehensive (loss) income before income tax ( 2,007 ) ( 1,767 ) ( 9,207 ) 1,571

Income tax (benefit) provision ( 735 ) ( 357 ) ( 2,260 ) 608

Other comprehensive (loss) income ( 1,272 ) ( 1,410 ) ( 6,947 ) 963

Net unrealized holding gains (losses) on cash flow hedging derivatives recorded within other comprehensive income (loss) before income tax 1,514 ( 3,225 ) ( 12,453 ) ( 12,689 )

Other comprehensive income (loss) before income tax 2,802 ( 1,959 ) ( 6,405 ) ( 388 )

Income tax provision (benefit) 754 ( 482 ) ( 1,506 ) 126

Other comprehensive income (loss) 2,048 ( 1,477 ) ( 4,899 ) ( 514 )

Comprehensive income $ 10,459 $ 4,849 $ 13,463 $ 17,629

2 unchanged sentences

Condensed Consolidated Statements of Changes in Shareholders’ Equity - Unaudited

Six Months Ended June 30, 2020 and 2019

Nine Months Ended September 30, 2020 and 2019

(Amounts in thousands except per share data)

7 unchanged sentences

Dividends declared ($ 0.18 per share)

— ( 1,802 ) — ( 1,802 )

Recognition of the fair value of share-based compensation 1,600 — — 1,600

1 unchanged sentence

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

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

Balance, September 30, 2020 $ 220,951 $ 116,241 $ ( 19,090 ) $ 318,102

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

2 unchanged sentences

Net income — 18,143 — 18,143

Other comprehensive income — — 963 963

Other comprehensive loss — — ( 514 ) ( 514 )

Dividends declared ($ 0.18 per share)

— ( 1,829 ) — ( 1,829 )

Recognition of the fair value of share-based compensation 1,278 — — 1,278

2 unchanged sentences

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

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

Balance, September 30, 2019 $ 219,013 $ 93,182 $ ( 17,055 ) $ 295,140

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

2 unchanged sentences

Condensed Consolidated Statements of Changes in Shareholders’ Equity - Unaudited

Three Months Ended June 30, 2020 and 2019

Three Months Ended September 30, 2020 and 2019

(Amounts in thousands except per share data)

3 unchanged sentences

Shareholders’

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

Balance, July 1, 2020 $ 220,418 $ 108,431 $ ( 21,138 ) $ 307,711

Net income — 8,411 — 8,411

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

Other comprehensive income — — 2,048 2,048

Dividends declared ($ 0.06 per share)

— ( 601 ) — ( 601 )

Recognition of the fair value of share-based compensation 527 — — 527

Deferred stock rights and restricted stock units issued in lieu of cash dividends payable on outstanding deferred stock rights and restricted stock units 6 — — 6

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

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

Balance, September 30, 2020 $ 220,951 $ 116,241 $ ( 19,090 ) $ 318,102

Balance, July 1, 2019 $ 224,244 $ 87,454 $ ( 15,578 ) $ 296,120

Net income — 6,326 — 6,326

1 unchanged sentence

Dividends declared ($ 0.06 per share)

— ( 598 ) — ( 598 )

Recognition of the fair value of share-based compensation 416 — — 416

1 unchanged sentence

Deferred stock rights and restricted stock units issued in lieu of cash dividends payable on outstanding deferred stock rights and restricted stock units 4 — — 4

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

Balance, September 30, 2019 $ 219,013 $ 93,182 $ ( 17,055 ) $ 295,140

See Notes to Condensed Consolidated Financial Statements

2 unchanged sentences

(Amounts in thousands)

Six Months Ended June 30,

Nine Months Ended September 30,

Operating Activities

5 unchanged sentences

Share-based compensation expense 1,600 1,278

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

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

Write-down of other real estate owned 2,065 —

Gain (loss) on sale of available-for-sale securities ( 139 ) 458

Loans originated for sale ( 431,384 ) ( 430,453 )

1 unchanged sentence

Gain on loans sold ( 19,544 ) ( 7,057 )

Gain on sale of other real estate owned — —

Decrease (increase) in fair value of loans held-for-sale 116 ( 452 )

Loss (gain) on derivatives 377 ( 553 )

Gain on derivatives ( 1,974 ) ( 1,295 )

Settlement of derivatives ( 46,109 ) —

Net change in servicing asset ( 337 ) —

Amortization of operating lease right-of-use assets 360 353

Net change in accrued income and other assets 491 ( 49,036 )

14 unchanged sentences

Net increase in deposits 218,428 476,891

Short-term borrowings — —

Cash dividends paid ( 1,773 ) ( 1,808 )

13 unchanged sentences

Cash paid during the period for taxes 2,516 4,527

Loans transferred to other real estate owned — —

Loans transferred to held-for-sale from portfolio 185,797 237,942

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

The September 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.

9 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 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,

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

(dollars in thousands, except per share data) Three Months Ended September 30, Nine Months Ended September 30,

2020 2019 2020 2019

11 unchanged sentences

(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 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

Excluded from the computation of diluted EPS were weighted-average antidilutive shares totaling 55,309 and 38,212 for the three and nine months ended September 30, 2020, respectively, and 15,256 and 22,209 for the three and nine months ended September 30, 2019, respectively .

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

September 30, 2020

Amortized Gross Unrealized Fair

4 unchanged sentences

Agency mortgage-backed securities 250,755 5,773 ( 3,236 ) 253,292

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

Private label mortgage-backed securities 71,519 1,128 ( 21 ) 72,626

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

Asset-backed securities 5,000 — ( 79 ) 4,921

5,000 — ( 163 ) 4,837

Corporate securities 48,406 500 ( 1,537 ) 47,369

Total available-for-sale $ 528,052 $ 11,186 $ ( 10,927 ) $ 528,311

June 30, 2020

September 30, 2020

Amortized Gross Unrealized Fair

29 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 June 30, 2020 is shown below by their contractual maturity date.

The carrying value of securities at September 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.

16 unchanged sentences

Total $ 68,254 $ 69,176

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.

There were $ 0.1 million of gross gains resulting from sales of AFS securities during the three and nine months ended September 30, 2020.

There were zero and $ 0.5 million of gross losses resulting from sales of AFS securities during the three and nine months ended September 30, 2019, respectively.

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 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.

The total fair value of these investments at September 30, 2020 and December 31, 2019 was $ 206.4 million and $ 317.5 million, which was approximately 35 % and 53 %, respectively, of the Company’s AFS and HTM 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 June 30, 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 June 30, 2020 and December 31, 2019.

June 30, 2020

September 30, 2020

Less Than 12 Months 12 Months or Longer Total

7 unchanged sentences

Agency mortgage-backed securities 29,466 ( 361 ) 10,294 ( 2,875 ) 39,760 ( 3,236 )

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

Private label mortgage-backed securities

1 unchanged sentence

Asset-backed securities — — 4,921 ( 79 ) 4,921 ( 79 )

— — 4,837 ( 163 ) 4,837 ( 163 )

Corporate securities — — 20,463 ( 1,537 ) 20,463 ( 1,537 )

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

Total $ 93,145 $ ( 4,610 ) $ 92,086 $ ( 6,317 ) $ 185,231 $ ( 10,927 )

June 30, 2020

September 30, 2020

Less Than 12 Months 12 Months or Longer Total

22 unchanged sentences

Corporate securities — — 22,985 ( 1,532 ) 22,985 ( 1,532 )

— — 22,985 ( 1,532 ) 22,985 ( 1,532 )

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

8 unchanged sentences

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:

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

(in thousands)

2 unchanged sentences

Statements of Income

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

Three Months Ended September 30, 2020 Nine Months Ended September 30, 2020 Three Months Ended September 30, 2019 Nine Months Ended September 30, 2019

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

1 unchanged sentence

Total reclassified amount before tax 98 139 — ( 458 ) Income Before Income Taxes

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

Tax expense (benefit) 26 38 — ( 124 ) Income Tax Provision

Total reclassifications out of accumulated other comprehensive loss

$ 72 $ 101 $ — $ ( 334 ) Net Income

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

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

Categories of loans include:

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

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

Commercial loans

16 unchanged sentences

Total commercial and consumer loans 2,950,160 2,919,981

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

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

62,754 43,566

2 unchanged sentences

Net loans $ 2,985,997 $ 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.

(1) As of September 30, 2020, $ 12.0 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 $ 44.3 million related to terminated interest rate swaps associated with public finance loans as of September 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, but continues to expand nationwide.

Public finance lending has been conducted primarily in the Midwest, but continues to expand nationwide.

Healthcare Finance:

51 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 and six months ended June 30, 2020 and 2019.

(in thousands) Three Months Ended June 30, 2020

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

(in thousands) Three Months Ended September 30, 2020

Allowance for loan losses:

14 unchanged sentences

Total $ 24,465 $ 2,509 $ ( 241 ) $ 184 $ 26,917

Six Months Ended June 30, 2020

Nine Months Ended September 30, 2020

Allowance for loan losses:

14 unchanged sentences

Total $ 21,840 $ 6,461 $ ( 1,755 ) $ 371 $ 26,917

(in thousands) Three Months Ended June 30, 2019

(in thousands) Three Months Ended September 30, 2019

Allowance for loan losses:

14 unchanged sentences

Total $ 19,976 $ 2,824 $ ( 1,182 ) $ 65 $ 21,683

Six Months Ended June 30, 2019

Nine Months Ended September 30, 2019

Allowance for loan losses:

14 unchanged sentences

Total $ 17,896 $ 5,498 $ ( 1,948 ) $ 237 $ 21,683

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.

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

(in thousands) Loans Allowance for Loan Losses

June 30, 2020 Ending Balance:

September 30, 2020 Ending Balance:

Collectively Evaluated for Impairment Ending Balance:

48 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 June 30, 2020 and December 31, 2019.

June 30, 2020

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 September 30, 2020 and December 31, 2019.

September 30, 2020

(in thousands) Pass Special Mention Substandard Total

8 unchanged sentences

Total commercial loans $ 2,417,023 $ 13,196 $ 12,281 $ 2,442,500

June 30, 2020

September 30, 2020

(in thousands) Performing Nonaccrual Total

20 unchanged sentences

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

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

June 30, 2020

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

September 30, 2020

(in thousands) 30-59

44 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 June 30, 2020 and December 31, 2019.

June 30, 2020 December 31, 2019

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

September 30, 2020 December 31, 2019

(in thousands) Recorded

7 unchanged sentences

Owner-occupied commercial real estate 3,246 3,250 — 5,663 5,665 —

Single tenant lease financing 217 217 — — — —

Healthcare finance 1,034 1,034 — — — —

Residential mortgage 1,450 1,543 — 1,135 1,209 —

6 unchanged sentences

Total impaired loans $ 13,769 $ 13,972 $ 2,077 $ 14,421 $ 14,599 $ 1,769

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

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

Three Months Ended Nine Months Ended

September 30, 2020 September 30, 2019 September 30, 2020 September 30, 2019

(in thousands) Average

9 unchanged sentences

Owner-occupied commercial real estate 3,586 29 4,803 52 4,244 60 3,244 145

Small business lending — — — —

Healthcare finance 692 8 231 8 — — — —

Residential mortgage 1,233 — 2,714 — 1,286 — 2,768 —

7 unchanged sentences

Total impaired loans $ 12,710 $ 106 $ 14,221 $ 122 $ 12,343 $ 173 $ 11,349 $ 382

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.

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

There were no loans in the process of foreclosure at September 30, 2020 and 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.

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.

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 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.

There were no loans classified as new TDRs during the three months ended September 30, 2020 and one portfolio residential mortgage loan classified as a new TDR during the nine months ended September 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 September 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.

There were no loans classified as new TDRs during the three months ended September 30, 2019 and four commercial and industrial loans classified as new TDRs during the nine months ended September 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 September 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.

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

Non-TDR Loan Modifications due to COVID-19

4 unchanged sentences

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 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 June 30, 2020 and December 31, 2019.

The table below presents loan deferrals by loan category as of June 30, 2020 and September 30, 2020, respectively.

(in thousands) June 30, 2020

Deferrals Balance September 30, 2020

Number of Deferrals

Commercial loans

Commercial and industrial $ 2,312 $ 722 5

Owner-occupied commercial real estate 25,254 6,235 4

Investor commercial real estate 411 — —

Construction — — —

Single tenant lease financing 275,129 8,281 4

Public finance — — —

Healthcare finance 79,179 2,275 3

Small business lending 1,823 2,790 10

Total commercial loans 384,108 20,303 26

Consumer loans

Residential mortgage 4,719 2,329 5

Home equity 398 — —

Other consumer 3,205 632 21

Total consumer loans 8,322 2,961 26

Total commercial and consumer loans $ 392,430 $ 23,264 52

Premises and Equipment

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

(in thousands) September 30,

2020 December 31,

11 unchanged sentences

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 October 12, 2021.

Development of the site is estimated to be substantially completed by the fourth quarter 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.

4 unchanged sentences

The following table shows the components of lease expense.

(in thousands) Three Months Ended Six Months Ended

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

(in thousands) Three Months Ended Nine Months Ended

September 30, 2020 September 30, 2019 September 30, 2020 September 30, 2019

Operating lease cost $ 225 $ 182 $ 691 $ 550

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

(in thousands) Six Months Ended

June 30, 2020 June 30, 2019

(in thousands) Nine Months Ended

September 30, 2020 September 30, 2019

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

6 unchanged sentences

(dollars in thousands)

June 30, 2020 December 31, 2019

September 30, 2020 December 31, 2019

Operating lease right-of-use assets $ 1,032 $ 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 June 30, 2020.

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

(in thousands)

Twelve months ended June 30,

Twelve months ended September 30,

Total lease payments 996

imputed interest ( 22 )

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.

The annual test indicated no impairment existed as of August 31, 2019.

Due to the impact of COVID-19 on the economy and the financial markets, the Company evaluated goodwill and determined no triggering event has occurred since the last goodwill impairment test was conducted.

As of September 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 September 30, 2020.

Goodwill is assessed for impairment annually as of August 31, or more frequently if events occur or circumstances change that indicate an impairment may exist.

When assessing goodwill for impairment, first, a qualitative assessment can be made to determine whether it is more likely than not that the estimated fair value of a reporting unit is less than its estimated carrying value.

If the results of the qualitative assessment are not conclusive, a quantitative goodwill test is performed.

Alternatively, a quantitative goodwill test can be performed without performing a qualitative assessment.

Goodwill was assessed for impairment using a quantitative test performed as of August 31, 2020.

The estimated fair value of the reporting unit exceeded the net carrying value, and therefore no goodwill impairment existed as of that date.

Servicing Asset

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

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

(in thousands) Nine Months Ended

September 30, 2020 September 30, 2019

Beginning balance $ 2,481 $ —

3 unchanged sentences

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 June 30, 2020 and December 31, 2019 are shown in the table below.

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

(in thousands)

June 30, 2020 December 31, 2019

September 30, 2020 December 31, 2019

Loan portfolios serviced for:

1 unchanged sentence

Total $ 131,525 $ 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.

Loan servicing revenue totaled $ 0.3 million and $ 0.8 million during the three and nine months ended September 30, 2020, respectively.

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

Loan servicing asset revaluation, which represents the change in fair value of the servicing asset, resulted in a $ 0.1 million and $ 0.4 million downward valuation for the three and nine months ended September 30, 2020, respectively.

There was no loan servicing asset revaluation during the three and nine months ended September 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 June 30, 2020 and December 31, 2019.

June 30, 2020 December 31, 2019

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 September 30, 2020 and December 31, 2019.

September 30, 2020 December 31, 2019

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

13 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 $ 0.5 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.

The Company recorded $ 0.5 million and $ 1.6 million of share-based compensation expense for the three and nine months ended September 30, 2020, respectively, related to awards made under th e 2013 Plan.

The Company recorded $ 0.4 million and $ 1.3 million of share-based compensation expense for the three and nine months ended September 30, 2019, respectively, related to awards made under the 2013 Plan.

The following table summarizes the status of the 2013 Plan awards as of September 30, 2020 , and activity for the nine months ended September 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

3 unchanged sentences

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.

Nonvested at September 30, 2020 125,600 $ 27.74 3,822 $ 24.44 — $ —

At September 30, 2020, the total unrecognized compensation cost related to nonvested awards was $ 2.6 million with a weighted-average expense recognition period of 1.8 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 six months ended June 30, 2020.

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

Deferred Stock Rights

4 unchanged sentences

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.

At September 30, 2020 and December 31, 2019, the Company had outstanding loan commitments totaling approximately $ 278.7 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 June 30, 2020, the Company has committed to contribute up to $ 1.7 million of capital to the SBIC Fund.

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

Capital Commitments

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

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

As of September 30, 2020, $ 44.7 million of such contract commitments had not yet been incurred.

These commitments are due within two years .

14 unchanged sentences

Level 2 securities include U.S.

Government-sponsored agencies, municipal securities, mortgage and asset-backed securities and certain corporate securities.

Government-sponsored agencies, municipal securities, mortgage- and asset-backed securities and corporate securities.

Matrix pricing is a mathematical technique widely used in the banking industry to value investment securities without relying exclusively on quoted prices for specific investment securities but also on the investment securities’ relationship to other benchmark quoted investment securities.

3 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 June 30, 2020 or December 31, 2019.

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

Loans Held-for-Sale (mandatory pricing agreements)

5 unchanged sentences

Interest Rate Swap Agreements

The fair value of interest rate swap agreements is estimated using current market interest rates as of the balance sheet date and calculated using discounted cash flows that are observable or that can be corroborated by observable market data and, therefore, are classified within Level 2 of the valuation hierarchy.

Forward Contracts

2 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 June 30, 2020 and December 31, 2019.

June 30, 2020 Fair Value Measurements Using

September 30, 2020

Fair Value Measurements Using

(in thousands) Fair

13 unchanged sentences

Total available-for-sale securities 528,311 — 528,311 —

Servicing asset 2,522 — — 2,522

Interest rate swap liabilities ( 34,494 ) — ( 34,494 ) —

Loans held-for-sale (mandatory pricing agreements) 35,321 — 35,321 —

Servicing asset 2,818 — — 2,818

Interest rate swap agreements ( 32,492 ) — ( 32,492 ) —

Forward contracts ( 485 ) ( 485 ) — —

17 unchanged sentences

Total available-for-sale securities 540,852 — 540,852 —

Servicing asset 2,481 — — 2,481

Interest rate swap liabilities ( 37,786 ) — ( 37,786 ) —

Loans held-for-sale (mandatory pricing agreements) 56,097 — 56,097 —

Servicing asset 2,481 — — 2,481

Interest rate swap agreements ( 37,786 ) — ( 37,786 ) —

Forward contracts ( 153 ) ( 153 ) — —

IRLCs 910 — — 910

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 and six months ended June 30, 2020 and 2019.

Three Months Ended

(in thousands) Servicing Asset Interest Rate Lock

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

Balance, July 1, 2020 $ 2,522 $ 282

Total realized gains (losses)

1 unchanged sentence

Change in fair value ( 103 ) 2,834

Balance, June 30, 2020 2,522 282

Balance as of April 1, 2019 $ — $ 781

Balance, September 30, 2020 2,818 3,116

Balance as of July 1, 2019 $ — $ 1,209

Total realized gains

Change in fair value — 275

Balance, June 30, 2019 $ — $ 1,209

(in thousands) Six Months Ended

Balance, September 30, 2019 $ — $ 1,484

(in thousands) Nine Months Ended

Servicing Asset Interest Rate Lock Commitments

3 unchanged sentences

Change in fair value ( 372 ) 2,206

Balance, June 30, 2020 $ 2,522 282

Balance, September 30, 2020 $ 2,818 3,116

Balance as of January 1, 2019 $ — $ 389

1 unchanged sentence

Change in fair value — 1,095

Balance, June 30, 2019 $ — $ 1,209

Balance, September 30, 2019 $ — $ 1,484

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 December 31, 2019.

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

September 30, 2020

(in thousands) Fair Value Measurements Using

Value Quoted Prices

(Level 1) Significant

(Level 2) Significant

Impaired Loans $ 2,102 $ — $ — $ 2,102

Other real estate owned — — — —

December 31, 2019

7 unchanged sentences

(dollars in thousands) Fair Value at

June 30, 2020 Valuation

September 30, 2020 Valuation

Technique Significant Unobservable

Inputs Range Weighted-Average Range

Impaired loans $ 2,102 Fair value of collateral Discount for type of property and current market conditions 8% - 20% 15 %

IRLCs 3,116 Discounted cash flow Loan closing rates 45% - 100% 84 %

Servicing asset 2,818 Discounted cash flow Prepayment speeds 0% - 25% 12.8 %

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

Other real estate owned — Fair value of collateral Discount to reflect current market conditions 100 % 100 %

(dollars in thousands) Fair Value at

5 unchanged sentences

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.

2 unchanged sentences

Securities Held-to-Maturity

Fair values are determined by using models that are based on security-specific details, as well as relevant industry and economic factors.

The most significant of these inputs are quoted market prices and interest rate spreads on relevant benchmark securities.

Where quoted market prices are available in an active market, securities are classified within Level 1 of the valuation hierarchy.

Level 1 securities include highly liquid mutual funds.

If quoted market prices are not available, then fair values are estimated by using pricing models, quoted prices of securities with similar characteristics or discounted cash flows.

Level 2 securities include municipal securities and corporate securities.

Matrix pricing is a mathematical technique widely used in the banking industry to value investment securities without relying exclusively on quoted prices for

specific investment securities but also on the investment securities’ relationship to other benchmark quoted investment securities.

In certain cases where Level 1 or Level 2 inputs are not available, securities are classified within Level 3 of the hierarchy.

Fair values are calculated using discounted cash flows.

Discounted cash flows are calculated based off of the anticipated future cash flows updated to incorporate loss severities.

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 September 30, 2020 or December 31, 2019.

Loans Held-for-Sale (best efforts pricing agreements)

16 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 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

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

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

September 30, 2020

Fair Value Measurements Using

35 unchanged sentences

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

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,

During the three months ended September 30, 2020 and 2019, the Company originated mortgage loans held-for-sale of $ 216.0 million and $ 210.2 million, respectively, and sold $ 203.7 million and $ 203.7 million of mortgage loans, respectively, into the secondary market.

During the nine months ended September 30, 2020 and 2019, the Company originated mortgage loans held-for-sale of $ 431.4 million and $ 430.5 million, respectively, and sold $ 429.3 million and $ 415.2 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 nine months ended September 30, 2020 and 2019.

Three Months Ended September 30, Nine Months Ended September 30,

(in thousands) 2020 2019 2020 2019

Gain on loans sold $ 6,441 $ 3,606 $ 14,948 $ 7,608

(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

Gain (loss) resulting from the change in fair value of loans held-for-sale 823 ( 100 ) ( 116 ) ( 452 )

Gain resulting from the change in fair value of derivatives 2,366 801 1,874 1,432

Net revenue from mortgage banking activities $ 9,630 $ 4,307 $ 16,706 $ 8,588

12 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 June 30, 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 June 30, 2020 December 31, 2019 June 30, 2020 December 31, 2019

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

Loans $ — $ 474,957 $ — $ 21,440

2 unchanged sentences

(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.

At both September 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 September 30, 2020 and December 31, 2019, identified by the underlying interest rate-sensitive instruments.

(dollars in thousands)

June 30, 2020

Notional Weighted- Average Remaining Maturity Weighted-Average Ratio

Instruments Associated With Value (years) Fair Value Receive Pay

September 30, 2020

Notional Value Weighted- Average Remaining Maturity (years) Weighted-Average Ratio

Instruments Associated With Fair Value Receive Pay

Securities available-for-sale $ 88,200 3.4 $ ( 6,610 ) 3-month LIBOR 2.54 %

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

Total at September 30, 2020 $ 88,200 3.4 $ ( 6,610 ) 3-month LIBOR 2.54 %

(dollars in thousands)

December 31, 2019

Notional Weighted- Average Remaining Maturity Weighted-Average Ratio

Instruments Associated With Value (years) Fair Value Receive Pay

Notional Value Weighted- Average Remaining Maturity (years) Weighted-Average Ratio

Instruments Associated With Fair Value Receive Pay

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

2 unchanged sentences

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.

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 June 30, 2020 and December 31, 2019.

The corresponding loan fair value hedging adjustment as of the date of termination is being amortized over the remaining lives of the designated loans.

As of September 30, 2020, the remaining unamortized loan fair value hedging adjustment was $ 44.3 million and the remaining lives of the designated loans have a weighted-average term to maturity of 13.4 years.

(dollars in thousands)

June 30, 2020

September 30, 2020

Notional Weighted- Average Remaining Maturity Weighted-Average Ratio

9 unchanged sentences

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

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.

The Company pledged $ 33.7 million and $ 42.3 million of cash collateral to counterparties as security for its obligations related to these interest rate swap transactions at September 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 June 30, 2020 and December 31, 2019.

June 30, 2020 December 31, 2019

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

September 30, 2020 December 31, 2019

(in thousands) Notional

16 unchanged sentences

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 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

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 nine months ended September 30, 2020 and 2019.

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

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

Interest rate swap agreements $ 1,514 $ ( 3,225 ) $ ( 12,453 ) $ ( 12,689 )

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 and six months ended June 30, 2020 and 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

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

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

Asset Derivatives

4 unchanged sentences

Forward contracts $ ( 468 ) $ 526 $ ( 332 ) $ 337

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.

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 nine months ended September 30, 2020 and 2019.

(in thousands)

Line item in the condensed consolidated statements of income

Three Months Ended Six Months Ended

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

Three Months Ended Nine Months Ended

September 30, 2020 September 30, 2019 September 30, 2020 September 30, 2019

Interest income

12 unchanged sentences

Accumulated Other Comprehensive Loss

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.

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

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

4 unchanged sentences

Income tax provision (benefit) 2,096 ( 3,602 ) ( 1,506 )

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

Balance, September 30, 2020 $ ( 436 ) $ ( 18,654 ) $ ( 19,090 )

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

3 unchanged sentences

Income tax provision (benefit) 3,552 ( 3,426 ) 126

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.

Balance, September 30, 2019 $ ( 4,611 ) $ ( 12,444 ) $ ( 17,055 )

The components of accumulated other comprehensive loss, included in stockholders' equity, for the three months ended September 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 )

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

Net change in unrealized loss 1,386 1,514 2,900

Reclassification of gain realized and included in earnings ( 98 ) — ( 98 )

Accumulated other comprehensive loss before income tax ( 100 ) ( 18,236 ) ( 18,336 )

Income tax benefit 336 418 754

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

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

Balance, September 30, 2020 $ ( 436 ) $ ( 18,654 ) $ ( 19,090 )

Balance, July 1, 2019 $ ( 5,488 ) $ ( 10,090 ) $ ( 15,578 )

Net change in unrealized gain (loss) 1,266 ( 3,225 ) ( 1,959 )

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

Accumulated other comprehensive loss before income tax ( 4,222 ) ( 13,315 ) ( 17,537 )

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

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

Income tax (benefit) provision 389 ( 871 ) ( 482 )

Balance, September 30, 2019 $ ( 4,611 ) $ ( 12,444 ) $ ( 17,055 )

Recent Accounting Pronouncements

55 unchanged sentences

Coronavirus Aid, Relief and Economic Security Act (“CARES Act”)

In March 2020 in connection with the implementation of the CARES Act and related provisions, the Company elected the temporary relief in the CARES Act not to apply the guidance in ASC 310-40 on accounting for TDRs to loan modifications related to COVID-19.

Section 4013 of 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.

In March 2020 in connection with the implementation of the CARES Act and related provisions, the Company adopted the temporary relief issued under the CARES Act, thereby suspending the guidance in ASC 310-40 on accounting for TDRs to loan modifications related to COVID-19.

Section 4013 of the CARES Act specifies 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.

1 unchanged sentence

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

Subsequent Event

Subsequent to the end of the quarter, on October 26, 2020, the Company issued $ 10.0 million in aggregate principal amount of 6.0 % Fixed-to-Floating Rate Subordinated Notes due 2030 (the “2030 Notes”).

The Notes were offered and sold by the Company in a private placement and are scheduled to mature on November 1, 2030.

The 2030 Notes bear interest at a fixed rate of 6.0 % per annum from and including October 26, 2020, to, but excluding, November 1, 2025, and thereafter at a floating interest rate initially equal to the three-month term SOFR plus 5.795 %.

The 2030 Notes are unsecured subordinated obligations of the Company and may be repaid, without penalty, on any interest payment date on or after November 1, 2025.

The 2030 Notes are intended to qualify as Tier 2 capital under regulatory guidelines.

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