What changed in this filing

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Item 1. Financial Statements

2021-11-09 compared with 2021-08-09 · 230 added, 198 removed, 1149 unchanged (27% of the section changed)

3 unchanged sentences

(Amounts in thousands except share data)

June 30, 2021 December 31, 2020

September 30, 2021 December 31, 2020

Cash and due from banks $ 4,932 $ 7,367

44 unchanged sentences

(Amounts in thousands except share and per share data)

Three Months Ended Six Months Ended

June 30, 2021 June 30, 2020 June 30, 2021 June 30, 2020

Three Months Ended Nine Months Ended

September 30, 2021 September 30, 2020 September 30, 2021 September 30, 2020

Interest Income

9 unchanged sentences

Net Interest Income 20,919 16,232 63,051 45,676

Provision for Loan Losses 21 2,491 1,297 3,952

(Benefit) Provision for Loan Losses ( 29 ) 2,509 $ 1,268 6,461

Net Interest Income After Provision for Loan Losses 20,948 13,723 61,783 39,215

17 unchanged sentences

Deposit insurance premium 230 440 930 1,360

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

Other 914 970 3,159 3,383

1 unchanged sentence

Income Before Income Taxes 14,310 9,806 42,090 19,752

Income Tax Provision (Benefit) 2,377 ( 268 ) 4,234 ( 5 )

Income Tax Provision 2,220 1,395 $ 6,454 1,390

Net Income $ 12,090 $ 8,411 $ 35,636 $ 18,362

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,

2021 2020 2021 2020

Net income $ 12,090 $ 8,411 $ 35,636 $ 18,362

Other comprehensive income (loss)

Net unrealized holding gains (losses) on securities available-for-sale recorded within other comprehensive income (loss) before income tax 1,388 ( 1,498 ) ( 807 ) 4,801

Other comprehensive (loss) income

Net unrealized holding (losses) gains on securities available-for-sale recorded within other comprehensive (loss) income before income tax ( 1,789 ) 1,386 ( 2,596 ) 6,187

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

Net unrealized holding (losses) gains on cash flow hedging derivatives recorded within other comprehensive income (loss) before income tax ( 54 ) ( 509 ) 6,226 ( 13,967 )

Other comprehensive income (loss) before income tax 1,334 ( 2,007 ) 5,419 ( 9,207 )

Income tax provision (benefit) 325 ( 735 ) 1,134 ( 2,260 )

Other comprehensive income (loss) 1,009 ( 1,272 ) 4,285 ( 6,947 )

Net unrealized holding gains (losses) on cash flow hedging derivatives recorded within other comprehensive income (loss) before income tax 1,439 1,514 7,665 ( 12,453 )

Other comprehensive (loss) income before income tax ( 350 ) 2,802 5,069 ( 6,405 )

Income tax (benefit) provision ( 93 ) 754 1,041 ( 1,506 )

Other comprehensive (loss) income ( 257 ) 2,048 4,028 ( 4,899 )

Comprehensive income $ 11,833 $ 10,459 $ 39,664 $ 13,463

2 unchanged sentences

Condensed Consolidated Statements of Changes in Shareholders’ Equity - Unaudited

Six Months Ended June 30, 2021 and 2020

Nine Months Ended September 30, 2021 and 2020

(Amounts in thousands except per share data)

11 unchanged sentences

Common stock redeemed for the net settlement of share-based awards ( 195 ) — — ( 195 )

Balance, June 30, 2021 $ 222,486 $ 149,066 $ ( 12,911 ) $ 358,641

Balance, September 30, 2021 $ 223,059 $ 160,551 $ ( 13,168 ) $ 370,442

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

6 unchanged sentences

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

See Notes to Condensed Consolidated Financial Statements

1 unchanged sentence

Condensed Consolidated Statements of Changes in Shareholders’ Equity - Unaudited

Three Months Ended June 30, 2021 and 2020

Three Months Ended September 30, 2021 and 2020

(Amounts in thousands except per share data)

3 unchanged sentences

Shareholders’

Balance, April 1, 2021 $ 221,911 $ 136,575 $ ( 13,920 ) $ 344,566

Balance, July 1, 2021 $ 222,486 $ 149,066 $ ( 12,911 ) $ 358,641

Net income — 12,090 — 12,090

Other comprehensive income — — 1,009 1,009

Other comprehensive loss — — ( 257 ) ( 257 )

Dividends declared ($ 0.06 per share)

2 unchanged sentences

Deferred stock rights and restricted stock units issued in lieu of cash dividends payable on outstanding deferred stock rights and restricted stock units 5 — — 5

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

Balance, June 30, 2021 $ 222,486 $ 149,066 $ ( 12,911 ) $ 358,641

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

Balance, September 30, 2021 $ 223,059 $ 160,551 $ ( 13,168 ) $ 370,442

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)

2 unchanged sentences

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

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

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

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

First Internet Bancorp

1 unchanged sentence

(Amounts in thousands)

Six Months Ended June 30,

Nine Months Ended September 30,

Operating Activities

5 unchanged sentences

Share-based compensation expense 1,830 1,600

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

Loss on sale of available-for-sale securities — ( 139 )

6 unchanged sentences

Loan servicing asset revaluation 669 ( 337 )

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

Net change in accrued income and other assets 3,114 491

15 unchanged sentences

Financing Activities

Net increase (decrease) in deposits ( 64,738 ) 226,826

Net (decrease) increase in deposits ( 46,290 ) 218,428

Cash dividends paid ( 1,802 ) ( 1,773 )

Repayment of subordinated debt ( 35,000 ) —

Net proceeds from issuance of subordinated debt 58,658 —

Proceeds from advances from Federal Home Loan Bank 110,000 330,000

23 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, 2021 are not necessarily indicative of the results expected for the year ending December 31, 2021 or any other period.

The June 30, 2021 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, 2020.

The results of operations for the three and nine months ended September 30, 2021 are not necessarily indicative of the results expected for the year ending December 31, 2021 or any other period.

The September 30, 2021 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, 2020.

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.

7 unchanged sentences

These reclassifications had no effect on net income.

Revision of Previously Issued Financial Statements

The Company has revised amounts reported in previously issued notes to financial statements for the periods presented in this Quarterly Report on Form 10-Q due to immaterial clerical errors.

The clerical errors caused the fair value associated with interest rate swap liabilities to be understated in the notes to financial statements for the period ended December 31, 2020 and had no impact on the consolidated balance sheet, income statement or statement of cash flows.

The Company evaluated the impact of the clerical errors to our previously issued financial statements in accordance with SEC Staff Accounting Bulletins No.

108 and, based upon quantitative and qualitative factors, determined that the clerical errors were not material to the previously issued financial statements and disclosures included in our Annual Report on Form 10-K for the year ended December 31, 2020.

Earnings Per Share

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, 2021 and 2020.

(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, 2021 and 2020.

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

2021 2020 2021 2020

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 6 and 3 for the three and six months ended June 30, 2021, respectively, and 79,893 and 29,606 for the three and six months ended June 30, 2020, respectively.

The following tables summarize securities available-for-sale and securities held-to-maturity as of June 30, 2021 and December 31, 2020.

June 30, 2021

Excluded from the computation of diluted EPS were weighted-average antidilutive shares totaling 0 and 28 for the three and nine months ended September 30, 2021, respectively, and 55,309 and 38,212 for the three and nine months ended September 30, 2020, respectively.

The following tables summarize securities available-for-sale and securities held-to-maturity as of September 30, 2021 and December 31, 2020.

September 30, 2021

Amortized Gross Unrealized Fair

8 unchanged sentences

Total available-for-sale $ 635,978 $ 4,892 $ ( 6,863 ) $ 634,007

June 30, 2021

September 30, 2021

Amortized Gross Unrealized Fair

25 unchanged sentences

Total held-to-maturity $ 68,223 $ 1,356 $ ( 127 ) $ 69,452

The carrying value of securities at June 30, 2021 is shown below by their contractual maturity date.

The carrying value of securities at September 30, 2021 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 $ 62,129 $ 64,337

There were no gross gains or losses resulting from sale of available-for-sale securities during the three and six months ended June 30, 2021.

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

There were no gross gains or losses resulting from the sale of available-for-sale securities during the three and nine months ended September 30, 2021.

There were $ 0.1 million of gross gains resulting from the sale of available-for-sale securities during the three and nine months ended September 30, 2020.

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, 2021 and December 31, 2020 was $ 451.8 million and $ 226.5 million, which was approximately 62 % and 40 %, respectively, of the Company’s AFS and HTM securities portfolios.

As of June 30, 2021, the Company’s security portfolio consisted of 448 securities, of which 152 were in an unrealized loss position.

The total fair value of these investments at September 30, 2021 and December 31, 2020 was $ 462.4 million and $ 226.5 million, which was approximately 66 % and 40 %, respectively, of the Company’s AFS and HTM securities portfolios.

As of September 30, 2021, the Company’s security portfolio consisted of 441 securities, of which 167 were in an unrealized loss position.

The unrealized losses are related to the categories noted below.

6 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, 2021.

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 terms 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, 2021 and December 31, 2020.

June 30, 2021

September 30, 2021

Less Than 12 Months 12 Months or Longer Total

9 unchanged sentences

Total $ 390,392 $ ( 4,320 ) $ 72,404 $ ( 2,543 ) $ 462,796 $ ( 6,863 )

There were no securities held-to-maturity with gross unrealized losses at June 30, 2021.

There were no securities held-to-maturity with gross unrealized losses at September 30, 2021.

December 31, 2020

24 unchanged sentences

Total $ 17,456 $ ( 126 ) $ 2,999 $ ( 1 ) $ 20,455 $ ( 127 )

There were no amounts reclassified from accumulated other comprehensive loss to the condensed consolidated statements of income during the three and six months ended June 30, 2021.

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 were as follows:

There were no amounts reclassified from accumulated other comprehensive loss to the condensed consolidated statements of income during the three and nine months ended September 30, 2021.

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 were as follows:

(in thousands)

2 unchanged sentences

Statements of Income

Three Months Ended June 30, 2021 Six Months Ended June 30, 2021 Three Months Ended

June 30, 2020 Six Months Ended June 30, 2020

Three Months Ended September 30, 2021 Nine Months Ended September 30, 2021 Three Months Ended

September 30, 2020 Nine Months Ended September 30, 2020

Realized gains on securities available-for-sale

4 unchanged sentences

$ — $ — $ 72 $ 101 Net Income

Loan balances as of June 30, 2021 and December 31, 2020 are summarized in the table below.

Loan balances as of September 30, 2021 and December 31, 2020 are summarized in the table below.

Categories of loans include:

(in thousands) June 30, 2021 December 31, 2020

(in thousands) September 30, 2021 December 31, 2020

Commercial loans

7 unchanged sentences

Small business lending 102,889 125,589

Franchise finance 25,598 —

Total commercial loans 2,405,491 2,515,631

10 unchanged sentences

Net loans $ 2,908,148 $ 3,029,747

(1) Includes carrying value adjustments of $ 40.4 million and $ 42.7 million related to terminated interest rate swaps associated with public finance loans as of June 30, 2021 and December 31, 2020, respectively.

(1) Includes carrying value adjustments of $ 38.9 million and $ 42.7 million related to terminated interest rate swaps associated with public finance loans as of September 30, 2021 and December 31, 2020, respectively.

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

4 unchanged sentences

Most commercial and industrial loans are secured by the assets being financed and may incorporate a personal guarantee.

This portfolio segment is generally concentrated in Central Indiana and adjacent markets and the greater Phoenix, Arizona market.

This portfolio segment is generally concentrated in the Midwest and Southwest regions of the United States.

Owner-Occupied Commercial Real Estate:

The primary source of repayment is the cash flow from the ongoing operations and activities conducted by the borrower, or an affiliate of the borrower, who owns the property.

This portfolio segment is generally concentrated in Central Indiana and adjacent markets and the greater Phoenix, Arizona market and its loans are often secured by manufacturing and service facilities, as well as office buildings.

This portfolio segment is generally concentrated in the Midwest and Southwest regions of the United States and its loans are often secured by manufacturing and service facilities, as well as office buildings.

Investor Commercial Real Estate:

3 unchanged sentences

Investor commercial real estate loans may be more adversely affected by changing economic conditions in the real estate markets, industry dynamics or the overall health of the local economy where the property is located.

The properties securing the Company’s investor commercial real estate portfolio tend to be diverse in terms of property type and are generally located in the state of Indiana or markets immediately adjacent to Indiana.

The properties securing the Company’s investor commercial real estate portfolio tend to be diverse in terms of property type and are generally located in the Midwest region of the United States.

Management monitors and evaluates commercial real estate loans based on property financial performance, collateral value, guarantor strength, economic and industry conditions together with other risk grade criteria.

4 unchanged sentences

The cash flows of builders, while initially predictable, may fluctuate with market conditions, and the value of the collateral securing these loans may be subject to fluctuations based on general economic changes.

This portfolio segment is generally concentrated in Central Indiana.

This portfolio segment is generally concentrated in the Midwest region of the United States.

Single Tenant Lease Financing:

4 unchanged sentences

Public Finance:

These loans are made to governmental and not-for-profit entities to provide both tax-exempt and taxable loans for a variety of purposes including:

These loans are made on a nationwide basis to governmental and not-for-profit entities to provide both tax-exempt and taxable loans for a variety of purposes including:

short-term cash-flow needs;

13 unchanged sentences

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

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

Healthcare Finance:

These loans are made to healthcare providers, primarily dentists, for practice acquisition refinancing that occasionally includes owner-occupied commercial real estate and equipment purchases.

These loans are made on a nationwide basis to healthcare providers, primarily dentists, for practice acquisition refinancing that occasionally includes owner-occupied commercial real estate and equipment purchases.

The sources of repayment are primarily based on the identified cash flows from operations of the borrower and related entities if the real estate is held in a separate entity and secondarily on the underlying collateral provided by the borrower.

This portfolio segment was initially concentrated in the Western United States but has since expanded throughout the rest of the country.

Small Business Lending:

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

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

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

6 unchanged sentences

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.

Franchise Finance:

These loans are made on a nationwide basis through our partnership with ApplePie Capital, which through their deep relationships with franchise brands provides franchisees with asset-light financing options for new franchise units, recapitalization, expansion, equipment and working capital.

The sources of repayment are either based on identified cash flows from existing operations of the borrower or pro forma cash flow for new franchise locations.

Residential Mortgage:

With respect to residential loans that are secured by 1-to-4 family residences and are generally owner occupied, the Company typically establishes a maximum loan-to-value ratio and requires private mortgage insurance if that ratio is exceeded.

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

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

7 unchanged sentences

Some consumer loans are unsecured, such as small installment loans, home improvement loans and certain lines of credit.

Repayment of consumer loans is primarily dependent upon the personal income of the borrowers, which can be impacted by economic conditions in their market areas such as unemployment levels.

Repayment of consumer loans is primarily dependent upon the personal income of the borrowers, which can be impacted by economic conditions, such as unemployment levels, in their market areas.

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.

23 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, 2021 and 2020.

(in thousands) Three Months Ended June 30, 2021

The following tables present changes in the balance of the ALLL during the three and nine months ended September 30, 2021 and 2020.

(in thousands) Three Months Ended September 30, 2021

Allowance for loan losses:

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

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

Charged Off Recoveries Balance,

8 unchanged sentences

Small business lending 783 415 ( 10 ) 26 1,214

Franchise finance — 310 — 310

Residential mortgage 594 19 — 3 616

2 unchanged sentences

Total $ 28,066 $ ( 29 ) $ ( 120 ) $ 83 $ 28,000

Six Months Ended June 30, 2021

Nine Months Ended September 30, 2021

Allowance for loan losses:

10 unchanged sentences

Small business lending 628 776 ( 222 ) 32 1,214

Franchise finance — 310 — — 310

Residential mortgage 519 91 ( 6 ) 12 616

2 unchanged sentences

Total $ 29,484 $ 1,268 $ ( 3,121 ) $ 369 $ 28,000

Three Months Ended June 30, 2020

Three Months Ended September 30, 2020

Allowance for loan losses:

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

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

Charged Off Recoveries Balance,

12 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:

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

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

Charged Off Recoveries Balance,

12 unchanged sentences

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

The following tables present the recorded investment in loans based on portfolio segment and impairment method as of June 30, 2021 and December 31, 2020.

The following tables present the recorded investment in loans based on portfolio segment and impairment method as of September 30, 2021 and December 31, 2020.

(in thousands) Loans Allowance for Loan Losses

June 30, 2021 Ending Balance:

September 30, 2021 Ending Balance:

Collectively Evaluated for Impairment Ending Balance:

11 unchanged sentences

100,483 2,406 102,889 822 393 1,214

Franchise finance 25,598 — 25,598 310 — 310

Residential mortgage 186,654 2,096 188,750 616 — 616

37 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, 2021 and December 31, 2020.

June 30, 2021

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, 2021 and December 31, 2020.

September 30, 2021

(in thousands) Pass Special Mention Substandard Total

8 unchanged sentences

93,037 6,762 3,090 102,889

Franchise finance 25,598 — — 25,598

Total commercial loans $ 2,353,411 $ 42,842 $ 9,238 $ 2,405,491

1 Balance in “Substandard” is guaranteed by the U.S.

June 30, 2021

September 30, 2021

(in thousands) Performing Nonaccrual Total

13 unchanged sentences

Small business lending (1)

117,474 2,930 5,185 125,589

Total commercial loans $ 2,481,795 $ 17,962 $ 15,874 $ 2,515,631

1 Balance in “Substandard” is guaranteed by the U.S.

December 31, 2020

4 unchanged sentences

Total consumer loans $ 481,107 $ 1,229 $ 482,336

The following tables present the Company’s loan portfolio delinquency analysis as of June 30, 2021 and December 31, 2020.

June 30, 2021

The following tables present the Company’s loan portfolio delinquency analysis as of September 30, 2021 and December 31, 2020.

September 30, 2021

(in thousands) 30-59

13 unchanged sentences

— — 1,351 1,351 101,538 102,889 1,351 —

Franchise finance — — — — 25,598 25,598 — —

Residential mortgage — — 378 378 188,372 188,750 1,253 —

27 unchanged sentences

Generally, loans are placed on nonaccrual status at 90 days past due and accrued interest is reversed against earnings, unless the loan is well-secured and in the process of collection.

The accrual of interest on impaired and nonaccrual loans is discontinued when, in management’s opinion, the borrower may be unable to meet payments as they become due.

of interest on impaired and nonaccrual loans is discontinued when, in management’s opinion, the borrower may be unable to meet payments as they become due.

Impaired loans include nonperforming loans as well as loans modified in TDRs where concessions have been granted to borrowers experiencing financial difficulties.

1 unchanged sentence

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, 2021 and December 31, 2020.

June 30, 2021 December 31, 2020

The following table presents the Company’s impaired loans as of September 30, 2021 and December 31, 2020.

September 30, 2021 December 31, 2020

(in thousands) Recorded

19 unchanged sentences

Healthcare Finance 941 941 523 — — —

Small business lending 1,029 1,029 393 — — —

Total 3,748 3,794 1,461 6,009 6,036 3,090

1 unchanged sentence

1 Entire balance is guaranteed by the U.S.

The table below presents average balances and interest income recognized for impaired loans during the three and six months ended June 30, 2021 and 2020.

Three Months Ended Six Months Ended

June 30, 2021 June 30, 2020 June 30, 2021 June 30, 2020

The table below presents average balances and interest income recognized for impaired loans during the three and nine months ended September 30, 2021 and 2020.

Three Months Ended Nine Months Ended

September 30, 2021 September 30, 2020 September 30, 2021 September 30, 2020

(in thousands) Average

22 unchanged sentences

Healthcare Finance 956 37 — — 809 73 — —

Small business lending 1,203 — — — 401 — — —

Total 4,897 37 6,160 51 7,235 73 5,309 51

1 unchanged sentence

1 Entire balance is guaranteed by the U.S.

The Company had $ 1.3 million in other real estate owned (“OREO”) as of June 30, 2021, which consisted of one commercial property with a carrying value of $ 1.2 million and one residential mortgage with a carrying value of $ 0.1 million.

The Company had $ 1.2 million in other real estate owned (“OREO”) as of September 30, 2021, which consisted of one commercial property.

The Company did not have any OREO as of December 31, 2020.

There were two loans totaling $ 0.4 million and no loans in the process of foreclosure at June 30, 2021 and December 31, 2020, respectively.

There were two loans totaling $ 0.4 million and no loans in the process of foreclosure at September 30, 2021 and December 31, 2020, respectively.

Troubled Debt Restructurings

7 unchanged sentences

Any loan modification is reviewed by the Company to identify whether a TDR has occurred when the Company grants a concession to the borrower that it would not otherwise consider based on economic or legal reasons related to a borrower’s financial difficulties.

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, 2021 with a pre-modification and post-modification outstanding recorded investment of $ 0.8 million.

did not allocate a specific allowance for that loan as of June 30, 2021.

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 obtain additional collateral and/or guarantees to support the debt, or a combination of the two.

There were no new TDR’s during the three months ended September 30, 2021 and one portfolio residential mortgage loan classified as a new TDR during the nine months ended September 30, 2021 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, 2021.

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

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 a new TDR 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 no performing TDRs that had payment defaults within the twelve months following modification during the three and six months ended June 30, 2021 and 2020, 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, 2021 and 2020, respectively.

Non-TDR Loan Modifications due to COVID-19

3 unchanged sentences

Modifications within the scope of this relief are in effect from the period beginning March 1, 2020 until the earlier of January 1, 2022 or 60 days after the date on which the national emergency related to the COVID-19 pandemic formally terminates.

As of June 30, 2021, the Company had eight loans totaling $ 7.9 million in non-TDR loan modifications due to COVID-19.

As of September 30, 2021, the Company had thirteen loans totaling $ 3.0 million in non-TDR loan modifications due to COVID-19.

Premises and Equipment

The following table summarizes premises and equipment at June 30, 2021 and December 31, 2020.

(in thousands) June 30,

The following table summarizes premises and equipment at September 30, 2021 and December 31, 2020.

(in thousands) September 30,

2021 December 31,

6 unchanged sentences

Total $ 52,700 $ 37,590

In December 2018, the Bank’s subsidiary, SPF15, Inc., entered into a project agreement with the City of Fishers, Indiana (the “City”), and its Redevelopment Commission, among others, to construct an office building to include the Company’s future headquarters and associated parking garage on property the Bank had acquired in 2018.

In December 2018, the Bank’s subsidiary, SPF15, Inc., entered into a project agreement with the City of Fishers, Indiana, and its Redevelopment Commission, among others, to construct an office building to include the Company’s future headquarters and associated parking garage on property the Bank had acquired in 2018.

Construction began on the project in the fourth quarter 2019 and is expected to be substantially complete in the fourth quarter 2021.

4 unchanged sentences

The Company is expected to continue to lease substantially all of the office space for the duration of the primary leaseback period.

As of June 30, 2021 and December 31, 2020, the carrying amount of goodwill was $ 4.7 million.

There have been no changes in the carrying amount of goodwill for the three and six months ended June 30, 2021.

As of September 30, 2021 and December 31, 2020, the carrying amount of goodwill was $ 4.7 million.

There have been no changes in the carrying amount of goodwill for the three and nine months ended September 30, 2021.

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.

2 unchanged sentences

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.

Goodwill was assessed for impairment using a qualitative test performed as of August 31, 2021.

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 three and six months ended June 30, 2021 and 2020 are shown in the table below.

Activity for the servicing asset and the related changes in fair value for the three and nine months ended September 30, 2021 and 2020 are shown in the table below.

(in thousands) Three Months Ended

June 30, 2021 June 30, 2020

September 30, 2021 September 30, 2020

Balance, beginning of period $ 4,120 $ 2,522

1 unchanged sentence

Paydowns ( 176 ) ( 103 )

Changes in fair value due to changes in valuation inputs or assumptions used in the

valuation model ( 86 ) —

Changes in fair value due to changes in valuation inputs or assumptions used in

the valuation model ( 98 ) —

Loan servicing asset revaluation $ ( 274 ) $ ( 103 )

Balance, end of period $ 4,412 $ 2,818

(in thousands) Six Months Ended

June 30, 2021 June 30, 2020

(in thousands) Nine Months Ended

September 30, 2021 September 30, 2020

Balance, beginning of period $ 3,569 $ 2,481

1 unchanged sentence

Paydowns ( 500 ) ( 372 )

Changes in fair value due to changes in valuation inputs or assumptions used in the

valuation model ( 71 ) —

Changes in fair value due to changes in valuation inputs or assumptions used in

the valuation model ( 169 ) —

Loan servicing asset revaluation $ ( 669 ) $ ( 372 )

Balance, end of period $ 4,412 $ 2,818

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, 2021 and December 31, 2020 are shown in the table below.

The unpaid principal balances of these loans serviced for others as of September 30, 2021 and December 31, 2020 are shown in the table below.

(in thousands)

June 30, 2021 December 31, 2020

September 30, 2021 December 31, 2020

Loan portfolios serviced for:

1 unchanged sentence

Total $ 213,378 $ 165,961

Loan servicing revenue totaled $ 0.5 million and $ 0.9 million for the three and six months ended June 30, 2021 and $ 0.3 million and $ 0.5 million for the three and six months ended June 30, 2020, respectively.

Loan servicing asset revaluation, which represents the change in fair value of the servicing asset, resulted in a $ 0.2 million and $ 0.4 million

downward valuation for the three and six months ended June 30, 2021, respectively, and a $ 0.1 and $ 0.3 million downward valuation for the three and six months ended June 30, 2020, respectively.

Loan servicing revenue totaled $ 0.5 million and $ 1.4 million for the three and nine months ended September 30, 2021 and $ 0.3 million and $ 0.8 million for the three and nine months ended September 30, 2020, respectively.

Loan servicing asset revaluation, which represents the change in fair value of the servicing asset, resulted in a $ 0.3 million and $ 0.7 million downward valuation for the three and nine months ended September 30, 2021, respectively, and a $ 0.1 and $ 0.4 million downward valuation for the three and nine months ended September 30, 2020, respectively.

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

8 unchanged sentences

The 2025 Note was intended to qualify as Tier 2 capital under regulatory guidelines.

The Company redeemed the 2025 Note on January 4, 2021.

The Company redeemed the 2025 Note in full on January 4, 2021.

In September 2016, the Company issued $ 25.0 million aggregate principal amount of 6.0% Fixed-to-Floating Rate Subordinated Notes due 2026 (the “2026 Notes”) in a public offering.

The 2026 Notes initially bear a fixed interest rate of 6.0 % per year to, but excluding September 30, 2021, and thereafter a floating rate equal to the then-current three-month LIBOR rate plus 485 basis points.

All interest on the 2026 Notes is payable quarterly.

The 2026 Notes are scheduled to mature on September 30, 2026.

The 2026 Notes are unsecured subordinated obligations of the Company and may be repaid, without penalty, on any interest payment date on or after September 30, 2021.

The 2026 Notes are intended to qualify as Tier 2 capital under regulatory guidelines.

The 2026 Notes initially had a fixed interest rate of 6.0 % per year to, but excluding September 30, 2021, and thereafter a floating rate equal to the then-current three-month LIBOR rate plus 485 basis points.

All interest on the 2026 Notes was payable quarterly.

The 2026 Notes were scheduled to mature on September 30, 2026.

The 2026 Notes were unsecured subordinated obligations of the Company eligible to be repaid, without penalty, on any interest payment date on or after September 30, 2021.

The 2026 Notes were intended to qualify as Tier 2 capital under regulatory guidelines.

The Company redeemed the 2026 Notes in full on September 30, 2021.

In June 2019, the Company issued $ 37.0 million aggregate principal amount of 6.0 % Fixed-to-Floating Rate Subordinated Notes due 2029 (the “2029 Notes”) in a public offering.

5 unchanged sentences

In October 2020, the Company entered into a term loan in the principal amount of $ 10.0 million evidenced by term notes due 2030 (the “2030 Notes”).

The 2030 Notes initially bears a fixed interest rate of 6.0 % per year to, but excluding, November 1, 2025 and thereafter at a floating rate equal to the then-current benchmark rate (initially three-month Term SOFR plus 5.795 %).

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

The 2030 Notes initially bear a fixed interest rate of 6.0 % per year to, but excluding, November 1, 2025 and thereafter at a floating rate equal to the then-current benchmark rate (initially the then current three-month term secured overnight financing rate (“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.

The Company used the net proceeds from the issuance of the 2030 Notes to redeem the 2025 Note as discussed above.

The following table presents the principal balance and unamortized debt issuance costs for the 2025 Note, the 2026 Notes, the 2029 Notes and the 2030 Notes as of June 30, 2021 and December 31, 2020.

June 30, 2021 December 31, 2020

The Company used the net proceeds from the issuance of the 2030 Notes to redeem the 2025 Note.

In August 2021, the Company issued $ 60.0 million aggregate principal amount of 3.75 % Fixed-to-Floating Rate Subordinated Notes due 2031 (the “2031 Notes”) in a private placement.

The 2031 Notes initially bear a fixed interest rate of 3.75 % per year to, but excluding, September 1, 2026, and thereafter a floating rate equal to the then-current benchmark rate (initially three-month Term SOFR plus 3.11 %).

The 2031 Notes are scheduled to mature on September 1, 2031.

The 2031 Notes are unsecured subordinated obligations of the Company and may be repaid, without penalty, on any interest payment date on or after September 1, 2026.

The 2031 Notes are intended to qualify as Tier 2 capital under regulatory guidelines.

The Company used a portion of the net proceeds from the issuance of the 2031 Notes to redeem the 2026 Notes.

Under the terms of a Registration Rights Agreement between the Company and the initial purchasers of the 2031 Notes, the Company has agreed to take certain actions to provide for the exchange of the 2031 Notes for subordinated notes that are registered under the Securities Act of 1933, as amended, and have substantially the same terms as the 2031 Notes.

The following table presents the principal balance and unamortized debt issuance costs for the 2025 Note, the 2026 Notes, the 2029 Notes, the 2030 Notes, and the 2031 Notes as of September 30, 2021 and December 31, 2020.

September 30, 2021 December 31, 2020

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

3 unchanged sentences

2030 Notes 10,000 ( 213 ) 10,000 ( 231 )

2031 Notes $ 60,000 $ ( 1,413 ) $ — $ —

Total $ 107,000 $ ( 2,844 ) $ 82,000 $ ( 2,397 )

9 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 and $ 1.3 million of share-based compensation expense for the three and six months ended June 30, 2021, respectively, related to awards made under th e 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 the 2013 Plan.

The following table summarizes the status of the 2013 Plan awards as of June 30, 2021 , and activity for the six months ended June 30, 2021.

The Company recorded $ 0.6 million and $ 1.8 million of share-based compensation expense for the three and nine months ended September 30, 2021, respectively, related to awards made under th e 2013 Plan.

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 the 2013 Plan.

The following table summarizes the status of the 2013 Plan awards as of September 30, 2021 , and activity for the nine months ended September 30, 2021.

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

Vested ( 35,745 ) 30.12 ( 9,650 ) 30.26 ( 6 ) 32.16

Nonvested at June 30, 2021 137,351 $ 28.32 6,342 $ 30.36 — $ —

At June 30, 2021, the total unrecognized compensation cost related to nonvested awards was $ 3.1 million with a weighted-average expense recognition period of 1.8 years.

Nonvested at September 30, 2021 137,351 $ 28.32 3,171 $ 30.36 — $ —

At September 30, 2021, the total unrecognized compensation cost related to nonvested awards was $ 2.5 million with a weighted-average expense recognition period of 1.7 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, 2021.

The following table summarizes the status of deferred stock rights related to the Directors Deferred Stock Plan for the nine months ended September 30, 2021.

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, 2021 and December 31, 2020, the Company had outstanding loan commitments totaling approximately $ 293.1 million and $ 263.9 million, respectively.

In addition, the Company had unfunded commitments to provide capital contributions for on-balance-sheet investments in the amount of $ 4.8 million as of June 30, 2021.

The Company is also a limited partner in a Small Business Investment Company fund (the “SBIC Fund”).

As of June 30, 2021, the Company has committed to contribute up to $ 1.1 million of capital to the SBIC Fund.

At September 30, 2021 and December 31, 2020, the Company had outstanding loan commitments totaling approximately $ 276.9 million and $ 263.9 million, respectively.

Capital Commitments

1 unchanged sentence

The Company has entered into construction-related contracts and change orders in the amount of $ 66.7 million.

As of June 30, 2021, $ 25.4 million of such contract commitments had not yet been incurred.

As of September 30, 2021, $ 20.4 million of such contract commitments had not yet been incurred.

These commitments are due within twelve months .

20 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, 2021 or December 31, 2020.

The Company did not own any securities classified within Level 3 of the hierarchy as of September 30, 2021 or December 31, 2020.

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 June 30, 2021 and December 31, 2020.

June 30, 2021

September 30, 2021

Fair Value Measurements Using

41 unchanged sentences

IRLCs 3,361 — — 3,361

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, 2021 and 2020.

Three Months Ended

(in thousands) Servicing Asset Interest Rate Lock

Balance, April 1, 2021 $ 3,817 $ 1,110

Balance, July 1, 2021 $ 4,120 $ 818

Total realized gains

2 unchanged sentences

Change in fair value ( 98 ) 22

Balance, June 30, 2021 4,120 818

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

Balance, September 30, 2021 4,412 840

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

Total realized gains

Additions 399 —

Paydowns ( 103 ) —

Change in fair value — 2,834

Balance, June 30, 2020 $ 2,522 $ 282

Six Months Ended

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

Nine Months Ended

(in thousands) Servicing Asset Interest Rate Lock

4 unchanged sentences

Change in fair value ( 169 ) ( 2,521 )

Balance, June 30, 2021 4,120 818

Balance, September 30, 2021 4,412 840

Balance as of January 1, 2020 $ 2,481 $ 910

1 unchanged sentence

Additions 709 —

Paydowns ( 372 ) —

Change in fair value — 2,206

Balance, June 30, 2020 $ 2,522 $ 282

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

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.

3 unchanged sentences

If the impaired loan is identified as collateral dependent, the fair value of the underlying collateral, less costs to sell, is used to measure impairment.

This method requires obtaining a current independent appraisal of the collateral and applying a discount factor to the value.

This method requires obtaining a current independent appraisal of the collateral and

applying a discount factor to the value.

If the impaired loan is not collateral dependent, the Company utilizes a discounted cash flow analysis to measure impairment.

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 June 30, 2021 and December 31, 2020.

June 30, 2021

September 30, 2021

(in thousands) Fair Value Measurements Using

12 unchanged sentences

(dollars in thousands) Fair Value at

June 30, 2021 Valuation

September 30, 2021 Valuation

Technique Significant Unobservable

26 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, 2021 or December 31, 2020.

The Company did not own any securities classified within Level 3 of the hierarchy as of September 30, 2021 or December 31, 2020.

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, 2021 and December 31, 2020.

The following tables present the carrying value and estimated fair value of all financial assets and liabilities at June 30, 2021 and December 31, 2020.

June 30, 2021

The Company determined that the fair value of commitments was zero based on the contractual value of outstanding commitments at each of September 30, 2021 and December 31, 2020.

The following tables present the carrying value and estimated fair value of all financial assets and liabilities at September 30, 2021 and December 31, 2020.

September 30, 2021

Fair Value Measurements Using

32 unchanged sentences

The Company’s residential real estate lending business originates mortgage loans for customers and typically sells a majority of the originated loans into the secondary market.

For most of the mortgages it sells in the secondary market, the Company hedges its mortgage banking pipeline by entering into forward contracts for the future delivery of mortgage

loans to third party investors and entering into IRLCs with potential borrowers to fund specific mortgage loans that will be sold into the secondary market.

For most of the mortgages it sells in the secondary market, the Company hedges its mortgage banking pipeline by entering into forward contracts for the future delivery of mortgage loans to third party investors and entering into IRLCs with potential borrowers to fund specific mortgage loans that will be sold into the secondary market.

To facilitate the hedging of the loans, the Company has elected the fair value option for loans originated and intended for sale in the secondary market under mandatory pricing agreements.

1 unchanged sentence

Refer to Note 13 for further information on derivative financial instruments.

During the three months ended June 30, 2021 and 2020, the Company originated mortgage loans held-for-sale of $ 163.3 million and $ 211.9 million, respectively, and sold $ 151.5 million and $ 229.2 million of mortgage loans, respectively, into the secondary market.

During the six months ended June 30, 2021 and 2020, the Company originated mortgage loans held-for-sale of $ 387.2 million and $ 427.3 million, respectively, and sold $ 393.1 million and $ 454.7 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, 2021 and 2020.

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

During the three months ended September 30, 2021 and 2020, the Company originated mortgage loans held-for-sale of $ 198.3 million and $ 216.0 million, respectively, and sold $ 186.1 million and $ 203.7 million of mortgage loans, respectively, into the secondary market.

During the nine months ended September 30, 2021 and 2020, the Company originated mortgage loans held-for-sale of $ 585.5 million and $ 431.4 million, respectively, and sold $ 579.2 million and $ 429.3 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, 2021 and 2020.

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

(in thousands) 2021 2020 2021 2020

Gain on loans sold $ 3,244 $ 6,441 $ 14,550 $ 14,948

(Loss) gain resulting from the change in fair value of loans held-for-sale 118 ( 1,255 ) ( 744 ) ( 939 )

(Loss) gain resulting from the change in fair value of derivatives ( 1,031 ) 499 ( 1,918 ) ( 492 )

Gain (loss) resulting from the change in fair value of loans held-for-sale 110 823 ( 854 ) ( 116 )

Gain (loss) resulting from the change in fair value of derivatives 496 2,366 ( 1,422 ) 1,874

Net revenue from mortgage banking activities $ 3,850 $ 9,630 $ 12,274 $ 16,706

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, 2021 and December 31, 2020.

(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, 2021 December 31, 2020 June 30, 2021 December 31, 2020

Line item in the condensed consolidated balance sheets in which the hedged item is included September 30, 2021 December 31, 2020 September 30, 2021 December 31, 2020

Securities available-for-sale (1)

1 unchanged sentence

(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.

The designated hedged items were $ 50.0 million and $ 88.2 million, at June 30, 2021 and December 31, 2020.

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, 2021 and December 31, 2020, identified by the underlying interest rate-sensitive instruments.

The designated hedged items were $ 50.0 million and $ 88.2 million, at September 30, 2021 and December 31, 2020.

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, 2021 and December 31, 2020, identified by the underlying interest rate-sensitive instruments.

(dollars in thousands)

June 30, 2021

September 30, 2021

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

1 unchanged sentence

Securities available-for-sale $ 50,000 3.1 $ ( 2,608 ) 3-month LIBOR 2.33 %

Total at June 30, 2021 $ 50,000 3.3 $ ( 2,835 ) 3-month LIBOR 2.33 %

Total at September 30, 2021 $ 50,000 3.1 $ ( 2,608 ) 3-month LIBOR 2.33 %

In March 2021, the Company terminated fair value hedging relationships with a notional value of $ 38.2 million associated with agency mortgage-backed securities available-for-sale, which resulted in swap termination payments to counterparties totaling $ 1.9 million.

7 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 12.61 years as of June 30, 2021.

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, 2021 and December 31, 2020.

(dollars in thousands)

June 30, 2021

September 30, 2021

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 $ 21.0 million and $ 30.6 million of cash collateral to counterparties as security for its obligations related to these interest rate swap transactions at June 30, 2021 and December 31, 2020, respectively.

The Company pledged $ 19.3 million and $ 30.6 million of cash collateral to counterparties as security for its obligations related to these interest rate swap transactions at September 30, 2021 and December 31, 2020, 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, 2021 and December 31, 2020.

June 30, 2021 December 31, 2020

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, 2021 and December 31, 2020.

September 30, 2021 December 31, 2020

(in thousands) Notional

3 unchanged sentences

IRLCs $ 78,602 $ 840 $ 108,095 $ 3,361

Forward contracts 80,000 458 — —

Total contracts

2 unchanged sentences

Derivatives designated as hedging instruments

Interest rate swaps associated with loans $ — $ — $ — $ —

Interest rate swaps associated with securities available-for-sale 50,000 ( 2,608 ) 88,200 ( 6,072 )

6 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, 2021 and 2020.

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

(in thousands) June 30, 2021 June 30, 2020 June 30, 2021 June 30, 2020

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, 2021 and 2020.

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

(in thousands) September 30, 2021 September 30, 2020 September 30, 2021 September 30, 2020

Interest rate swap agreements $ 1,439 $ 1,514 $ 7,665 $ ( 12,453 )

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, 2021 and 2020.

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

(in thousands) June 30, 2021 June 30, 2020 June 30, 2021 June 30, 2020

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

(in thousands) September 30, 2021 September 30, 2020 September 30, 2021 September 30, 2020

Asset Derivatives

5 unchanged sentences

Forward contracts $ 474 $ ( 468 ) $ 1,097 $ ( 332 )

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, 2021 and 2020.

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, 2021 and 2020.

(in thousands)

Line item in the condensed consolidated statements of income

Three Months Ended Six Months Ended

June 30, 2021 June 30, 2020 June 30, 2021 June 30, 2020

Three Months Ended Nine Months Ended

September 30, 2021 September 30, 2020 September 30, 2021 September 30, 2020

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, 2021 and 2020, respectively, are presented in the table below.

The components of accumulated other comprehensive loss, included in shareholders' equity, for the nine months ended September 30, 2021 and 2020, respectively, are presented in the table below.

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

4 unchanged sentences

Other comprehensive (loss) income - net of tax ( 1,980 ) 6,008 4,028

Balance, June 30, 2021 $ ( 164 ) $ ( 12,747 ) $ ( 12,911 )

Balance, September 30, 2021 $ ( 1,512 ) $ ( 11,656 ) $ ( 13,168 )

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

3 unchanged sentences

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

Other comprehensive income (loss) - net of tax 3,000 ( 9,947 ) ( 6,947 )

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

The components of accumulated other comprehensive loss, included in stockholders' equity, for the three months ended June 30, 2021 and 2020, respectively, are presented in the table below.

Other comprehensive loss - net of tax 3,952 ( 8,851 ) ( 4,899 )

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

The components of accumulated other comprehensive loss, included in shareholders' equity, for the three months ended September 30, 2021 and 2020, respectively, are presented in the table below.

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

Balance, April 1, 2021 $ ( 1,219 ) $ ( 12,701 ) $ ( 13,920 )

Net unrealized holding gains (losses) recorded within other comprehensive income before income tax 1,388 ( 54 ) 1,334

Other comprehensive gain (loss) before tax 1,388 ( 54 ) 1,334

Balance, July 1, 2021 $ ( 164 ) $ ( 12,747 ) $ ( 12,911 )

Net unrealized holding (losses) gains recorded within other comprehensive income before income tax ( 1,789 ) 1,439 ( 350 )

Other comprehensive (loss) income before tax ( 1,789 ) 1,439 ( 350 )

Income tax (benefit) provision ( 441 ) 348 ( 93 )

Other comprehensive (loss) income - net of tax ( 1,348 ) 1,091 ( 257 )

Balance, June 30, 2021 $ ( 164 ) $ ( 12,747 ) $ ( 12,911 )

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

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

Balance, September 30, 2021 $ ( 1,512 ) $ ( 11,656 ) $ ( 13,168 )

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

Net unrealized holding gains recorded within other comprehensive income before income tax 1,386 1,514 2,900

Reclassification of net loss realized and included in earnings ( 98 ) — ( 98 )

Other comprehensive loss before tax 1,288 1,514 2,802

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

Other comprehensive income (loss) - net of tax ( 1,149 ) ( 123 ) ( 1,272 )

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

Income tax provision 336 418 754

Other comprehensive loss - net of tax 952 1,096 2,048

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

Recent Accounting Pronouncements

43 unchanged sentences

The Company believes the adoption of this guidance will not have a material impact on the condensed consolidated financial statements.

Subsequent Event

On November 2, 2021, the Company announced it has entered into a definitive agreement to acquire First Century Bancorp.

(“First Century”), the parent company of First Century Bank, N.A., headquartered in Roswell, GA.

According to the terms of the definitive agreement, First Internet will acquire all of the outstanding shares of First Century common stock for $ 80 million in cash, which First Internet will fund with available on-balance sheet cash.

As of September 30, 2021, First Century had total assets of $ 408 million, total deposits of $ 330 million, and total loans of $ 32 million.

The transaction, which remains subject to regulatory approvals, is expected to close in the first quarter 2022.

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