What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2022-05-09 compared with 2021-11-09 · 286 added, 379 removed, 1000 unchanged (40% of the section changed)

3 unchanged sentences

(Amounts in thousands except share data)

September 30, 2021 December 31, 2020

March 31, 2022 December 31, 2021

Cash and due from banks $ 20,976 $ 7,492

44 unchanged sentences

(Amounts in thousands except share and per share data)

Three Months Ended Nine Months Ended

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

Three Months Ended

March 31, 2022 March 31, 2021

Interest Income

9 unchanged sentences

Net Interest Income 25,750 20,525

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

Provision for Loan Losses 791 1,276

Net Interest Income After Provision for Loan Losses 24,959 19,249

5 unchanged sentences

Gain on sale of loans 3,845 1,723

Gain on sale of securities — 98 — 139

Gain on sale of premises and equipment — — 2,523 —

Other 498 369

8 unchanged sentences

Deposit insurance premium 281 425

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

Other 1,369 1,137

13 unchanged sentences

Condensed Consolidated Statements of Comprehensive Income – Unaudited

(Amounts in thousands)

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

2021 2020 2021 2020

(Amounts in thousands except per share data)

Three Months Ended March 31,

Net income $ 11,209 $ 10,450

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 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

Securities available-for-sale

Net unrealized holding losses recorded within other comprehensive income before income tax ( 17,881 ) ( 2,195 )

Income tax benefit ( 4,077 ) ( 508 )

Net effect on other comprehensive (loss) income ( 13,804 ) ( 1,687 )

Securities held-to-maturity

Reclassification of securities from available-for-sale to held-to-maturity ( 5,402 ) —

Amortization of net unrealized holding losses on securities transferred from available-for-sale to held-to-maturity 119 —

Income tax benefit ( 1,249 ) —

Net effect on other comprehensive (loss) income ( 4,034 ) —

Cash flow hedges

Net unrealized holding gains on cash flow hedging derivatives recorded within other comprehensive income before income tax 9,334 6,280

Income tax provision 3,318 1,317

Net effect on other comprehensive (loss) income 6,016 4,963

Total other comprehensive (loss) income ( 11,822 ) 3,276

Comprehensive (loss) income $ ( 613 ) $ 13,726

See Notes to Condensed Consolidated Financial Statements

1 unchanged sentence

Condensed Consolidated Statements of Changes in Shareholders’ Equity - Unaudited

Nine Months Ended September 30, 2021 and 2020

Three Months Ended March 31, 2022 and 2021

(Amounts in thousands except per share data)

5 unchanged sentences

Net income — 11,209 — 11,209

Other comprehensive income — — 4,028 4,028

Other comprehensive loss — — ( 11,822 ) ( 11,822 )

Dividends declared ($ 0.06 per share)

1 unchanged sentence

Recognition of the fair value of share-based compensation 640 — — 640

Repurchase of common stock ( 5,118 ) — — ( 5,118 )

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 ( 195 ) — — ( 195 )

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

Balance, March 31, 2022 $ 214,473 $ 183,043 $ ( 22,861 ) $ 374,655

Balance, January 1, 2021 $ 221,408 $ 126,732 $ ( 17,196 ) $ 330,944

Net income — 10,450 — 10,450

Other comprehensive loss — — ( 4,899 ) ( 4,899 )

Other comprehensive income — — 3,276 3,276

Dividends declared ($ 0.06 per share)

3 unchanged sentences

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

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

Balance, March 31, 2021 $ 221,911 $ 136,575 $ ( 13,920 ) $ 344,566

See Notes to Condensed Consolidated Financial Statements

First Internet Bancorp

Condensed Consolidated Statements of Changes in Shareholders’ Equity - Unaudited

Three Months Ended September 30, 2021 and 2020

(Amounts in thousands except per share data)

Stock Retained

Earnings Accumulated

Comprehensive

Shareholders’

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

Net income — 12,090 — 12,090

Other comprehensive loss — — ( 257 ) ( 257 )

Dividends declared ($ 0.06 per share)

— ( 605 ) — ( 605 )

Recognition of the fair value of share-based compensation 568 — — 568

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

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

First Internet Bancorp

Condensed Consolidated Statements of Cash Flows – Unaudited

(Amounts in thousands)

Nine Months Ended September 30,

(Amounts in thousands except per share data)

Three Months Ended March 31,

Operating Activities

5 unchanged sentences

Share-based compensation expense 640 692

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

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

Loans originated for sale ( 184,067 ) ( 223,880 )

2 unchanged sentences

Decrease in fair value of loans held-for-sale 489 862

Loss on derivatives 1,870 ( 1,974 )

Settlement of derivatives ( 1,859 ) ( 46,109 )

(Gain) loss on derivatives ( 2,565 ) 881

Loan servicing asset revaluation 297 ( 248 )

1 unchanged sentence

Net change in accrued expenses and other liabilities ( 7,999 ) ( 2,012 )

Net cash provided by (used in) operating activities 42,943 ( 35,023 )

Net cash provided by operating activities 32,786 31,133

Investing Activities

Net loan activity, excluding purchases 32,510 47,653

Proceeds from sale of other real estate owned 1,188 —

Maturities and calls of securities available-for-sale 27,848 55,901

Proceeds from sale of securities available-for-sale — 893

Purchase of securities available-for-sale ( 16,453 ) ( 21,279 )

Maturities and calls of securities held-to-maturity 6,000 —

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

Net proceeds from sale of premises and equipment 8,116 —

Redemption of Federal Home Loan Bank of Indianapolis stock 431 —

Purchase of premises and equipment ( 9,808 ) ( 5,697 )

2 unchanged sentences

Other investing activities 374 —

Net cash used in investing activities ( 30,606 ) ( 20,447 )

Net cash provided by investing activities 8,497 29,344

Financing Activities

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

Net increase (decrease) in deposits 39,020 ( 53,282 )

Cash dividends paid ( 596 ) ( 601 )

Repayment of subordinated debt — ( 10,000 )

Net proceeds from issuance of subordinated debt 58,658 —

Repurchase of common stock ( 5,118 ) —

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

1 unchanged sentence

Other, net — ( 195 )

Net cash (used in) provided by financing activities ( 24,628 ) 216,562

Net (Decrease) Increase in Cash and Cash Equivalents ( 12,291 ) 161,092

Net cash provided by (used in) financing activities 33,306 ( 64,078 )

Net Increase (Decrease) in Cash and Cash Equivalents 74,589 ( 3,601 )

Cash and Cash Equivalents, Beginning of Period 442,960 419,806

3 unchanged sentences

Cash paid during the period for taxes 50 10

Loans transferred to other real estate owned 1,188 —

Loans transferred to held-for-sale from portfolio 14,049 —

1 unchanged sentence

Securities purchased during the period, settled in subsequent period — 2,035

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

Transfer of available-for-sale mortgage-backed securities to held-to-maturity mortgage-backed securities 107,168 —

See Notes to Condensed Consolidated Financial Statements

8 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 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 results of operations for the three months ended March 31, 2022 are not necessarily indicative of the results expected for the year ending December 31, 2022 or any other period.

The March 31, 2022 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, 2021.

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.

5 unchanged sentences

It is the opinion of management that the disposition or ultimate resolution of such claims and lawsuits will not have a material adverse effect on the consolidated financial position, results of operations, and cash flows of the Company.

Certain reclassifications have been made to the 2020 financial statements to conform to the presentation of the 2021 financial statements.

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 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

The following is a reconciliation of the weighted-average common shares for the basic and diluted earnings per share computations for the three months ended March 31, 2022 and 2021.

(dollars in thousands, except per share data) Three Months Ended March 31,

Basic earnings per share

10 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 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

Excluded from the computation of diluted EPS were weighted-average antidilutive shares totaling 661 for the three months ended March 31, 2022.

There were no weighted-average antidilutive shares for the three months ended March 31, 2021.

The following tables summarize securities available-for-sale and securities held-to-maturity as of March 31, 2022 and December 31, 2021.

March 31, 2022

Amortized Gross Unrealized Fair

3 unchanged sentences

Municipal securities 72,420 557 ( 173 ) 72,804

Agency mortgage-backed securities 432,613 2,364 ( 5,092 ) 429,885

Private label mortgage-backed securities 19,997 238 — 20,235

Agency mortgage-backed securities - residential 276,392 88 ( 18,798 ) 257,682

Agency mortgage-backed securities - commercial 24,815 6 ( 665 ) 24,156

Private label mortgage-backed securities - residential 15,090 6 ( 278 ) 14,818

Asset-backed securities 5,000 — ( 14 ) 4,986

1 unchanged sentence

Total available-for-sale $ 486,632 $ 956 $ ( 22,300 ) $ 465,288

September 30, 2021

March 31, 2022

Amortized Gross Unrealized Fair

2 unchanged sentences

Municipal securities $ 13,981 $ 157 $ ( 45 ) $ 14,093

Mortgage-backed securities - residential 95,982 — ( 3,043 ) 92,939

Mortgage-backed securities - commercial 5,847 — ( 427 ) 5,420

Corporate securities 47,560 338 ( 379 ) 47,519

6 unchanged sentences

Municipal securities 75,158 1,940 ( 65 ) 77,033

Agency mortgage-backed securities

241,795 4,591 ( 2,465 ) 243,921

Private label mortgage-backed securities

57,268 850 ( 2 ) 58,116

Agency mortgage-backed securities - residential 377,928 960 ( 5,652 ) 373,236

Agency mortgage-backed securities - commercial 36,024 441 ( 139 ) 36,326

Private label mortgage-backed securities - residential 15,902 122 ( 3 ) 16,021

Asset-backed securities

9 unchanged sentences

Total held-to-maturity $ 59,565 $ 1,903 $ — $ 61,468

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

The carrying value of securities at March 31, 2022 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.

1 unchanged sentence

(in thousands) Amortized

Within one year $ — $ —

One to five years $ 34,545 $ 34,808

2 unchanged sentences

165,335 163,646

Agency mortgage-backed securities 432,613 429,885

Private label mortgage-backed securities 19,997 20,235

Agency mortgage-backed securities - residential 276,392 257,682

Agency mortgage-backed securities - commercial 24,815 24,156

Private label mortgage-backed securities - residential 15,090 14,818

Asset-backed securities 5,000 4,986

5 unchanged sentences

After ten years 11,136 10,910

61,541 61,612

Agency mortgage-backed securities - residential 95,982 92,939

Agency mortgage-backed securities - commercial 5,847 5,420

Total $ 163,370 $ 159,971

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.

There were no gross gains or losses resulting from the sale of available-for-sale securities during the three months ended March 31, 2022 and March 31, 2021, 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 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 total fair value of these investments at March 31, 2022 and December 31, 2021 was $ 493.4 million and $ 403.2 million, which was approximately 79 % and 61 %, respectively, of the Company’s AFS and HTM securities portfolios.

As of March 31, 2022, the Company’s security portfolio consisted of 437 securities, of which 326 were in an unrealized loss position.

The unrealized losses are related to the categories noted below.

2 unchanged sentences

Should the impairment of any of these securities become other than temporary, the cost basis of the investment will be reduced, with the resulting loss recognized in net income in the period the other-than-temporary impairment (“OTTI”) is identified.

In the first quarter 2022, the Company transferred certain available-for-sale mortgage backed securities with a fair value of $ 96.2 million to held-to-maturity.

The transfer occurred at fair value and involved residential mortgage-backed securities that qualify for credit under the Community Reinvestment Act that the Company intends to hold until maturity.

The related after-tax unrealized loss of $ 4.1 million remained in accumulated other comprehensive loss and will be amortized to interest income over the remaining life of the securities using the interest method.

There were no gains or losses recognized as a result of this transfer.

Government-Sponsored Agencies, Municipal Securities and Corporate Securities

2 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 September 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 September 30, 2021 and December 31, 2020.

September 30, 2021

March 31, 2022

Less Than 12 Months 12 Months or Longer Total

6 unchanged sentences

Municipal securities 25,045 ( 173 ) — — 25,045 ( 173 )

Agency mortgage-backed securities 320,805 ( 4,085 ) 18,818 ( 1,007 ) 339,623 ( 5,092 )

Agency mortgage-backed securities- residential 210,766 ( 15,256 ) 36,680 ( 3,542 ) 247,446 ( 18,798 )

Agency mortgage-backed securities- commercial 19,916 ( 414 ) 2,653 ( 251 ) 22,569 ( 665 )

Private label mortgage-backed securities - residential 13,885 ( 278 ) — — 13,885 ( 278 )

Asset-backed securities 4,986 ( 14 ) — — 4,986 ( 14 )

Corporate securities 11,770 ( 230 ) 9,346 ( 654 ) 21,116 ( 884 )

Total $ 290,988 $ ( 16,429 ) $ 88,311 $ ( 5,871 ) $ 379,299 $ ( 22,300 )

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

December 31, 2020

March 31, 2022

Less Than 12 Months 12 Months or Longer Total

3 unchanged sentences

Value Unrealized

Securities available-for-sale

Government-sponsored agencies $ — $ — $ 52,351 $ ( 1,652 ) $ 52,351 $ ( 1,652 )

Securities held-to-maturity

Municipal securities $ 4,599 $ ( 45 ) $ — $ — $ 4,599 $ ( 45 )

Agency mortgage-backed securities

38,987 ( 276 ) 45,297 ( 2,189 ) 84,284 ( 2,465 )

Private label mortgage-backed securities

1,277 ( 1 ) 558 ( 1 ) 1,835 ( 2 )

Asset-backed securities

— — 4,961 ( 39 ) 4,961 ( 39 )

Agency mortgage-backed securities - residential 64,135 ( 2,115 ) 28,778 ( 928 ) 92,913 ( 3,043 )

Agency mortgage-backed securities - commercial 5,420 ( 427 ) — — 5,420 ( 427 )

Corporate securities 11,129 ( 379 ) — — 11,129 ( 379 )

6 unchanged sentences

Value Unrealized

Securities held-to-maturity

Securities available-for-sale

Government-sponsored agencies $ 2,921 $ ( 79 ) $ 40,305 $ ( 1,058 ) $ 43,226 $ ( 1,137 )

Municipal securities 5,721 ( 65 ) — — 5,721 ( 65 )

Agency mortgage-backed securities - residential 287,820 ( 3,694 ) 40,840 ( 1,958 ) 328,660 ( 5,652 )

Agency mortgage-backed securities - commercial 3,944 ( 139 ) — — 3,944 ( 139 )

Private label mortgage-backed securities

374 ( 3 ) — — 374 ( 3 )

Asset-backed securities

Corporate securities 11,813 ( 187 ) 9,491 ( 508 ) 21,304 ( 695 )

Total $ 312,593 $ ( 4,167 ) $ 90,636 $ ( 3,524 ) $ 403,229 $ ( 7,691 )

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)

Details About Accumulated Other Comprehensive Loss Components

Affected Line Item in the

Statements of Income

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

Gain realized in earnings $ — $ — $ 98 $ 139 Gain on sale of securities

Total reclassified amount before tax — — 98 139 Income Before Income Taxes

Tax expense — — 26 38 Income Tax Provision

Total reclassifications out of accumulated other comprehensive loss

$ — $ — $ 72 $ 101 Net Income

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

There were no amounts reclassified from accumulated other comprehensive loss to the condensed consolidated statements of income during the three months ended March 31, 2022 and March 31, 2021, respectively.

Loan balances as of March 31, 2022 and December 31, 2021 are summarized in the table below.

Categories of loans include:

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

(in thousands) March 31, 2022 December 31, 2021

Commercial loans

12 unchanged sentences

Home equity 18,100 17,665

Other consumer 268,396 275,692

Other consumer loans 270,330 265,478

Tax refund advance loans 9,177 —

Total consumer loans 488,760 469,913

5 unchanged sentences

Net loans $ 2,852,529 $ 2,859,821

(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:

(1) Includes carrying value adjustments of $ 36.4 million and $ 37.5 million related to terminated interest rate swaps associated with public finance loans as of March 31, 2022 and December 31, 2021, respectively.

Risk characteristics of each loan portfolio segment are as follows:

Commercial and Industrial:

12 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 Midwest region of the United States.

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 and Southwest regions 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.

As a general rule, the Company avoids financing special use projects or properties outside of its designated market areas unless other underwriting factors are present to mitigate these additional risks.

As a general rule, the Company avoids financing special use projects unless other underwriting factors are present to mitigate these additional risks.

Construction:

2 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 the Midwest region of the United States.

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

Single Tenant Lease Financing:

10 unchanged sentences

infrastructure improvements;

renewable energy projects;

and equipment financing.

9 unchanged sentences

Healthcare Finance:

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.

These loans are made on a nationwide basis to healthcare providers, primarily dentists, for practice acquisition financing or 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 and secondarily on the underlying collateral provided by the borrower.

Small Business Lending:

9 unchanged sentences

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.

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 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.

1 unchanged sentence

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, such as unemployment levels, in their market areas.

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

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

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, such as unemployment levels, in their market areas.

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.

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.

Tax Refund Advance Loans:

These loans provide short-term tax refund advance loans to eligible individual taxpayers.

Due to the nature of tax refund advance loans, it typically takes no more than three weeks from when the return is accepted by the IRS to collect from the borrower.

In the event of default, the Bank has no recourse against the tax consumer.

The Bank will charge off the balance of a tax refund advance loan if there is a balance at the end of the program year, or when collection of principal becomes doubtful.

Allowance for Loan Losses Methodology

22 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 nine months ended September 30, 2021 and 2020.

(in thousands) Three Months Ended September 30, 2021

The following tables present changes in the balance of the ALLL during the three months ended March 31, 2022 and 2021.

(in thousands) Three Months Ended March 31, 2022

Allowance for loan losses:

13 unchanged sentences

Home equity 64 ( 1 ) — 2 65

Other consumer 2,174 ( 129 ) ( 110 ) 50 1,985

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

Nine Months Ended September 30, 2021

Allowance for loan losses:

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

Charged Off Recoveries Balance,

End of Period

Commercial and industrial $ 1,146 $ 823 $ ( 28 ) $ 85 $ 2,026

Owner-occupied commercial real estate 1,082 ( 89 ) — — 993

Investor commercial real estate 155 170 — — 325

Construction 1,192 135 — — 1,327

Single tenant lease financing 12,990 454 ( 2,391 ) — 11,053

Public finance 1,732 — — — 1,732

Healthcare finance 7,485 ( 1,131 ) — — 6,354

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

Franchise finance — 310 — — 310

Residential mortgage 519 91 ( 6 ) 12 616

Home equity 48 63 ( 51 ) 5 65

Other consumer 2,507 ( 334 ) ( 423 ) 235 1,985

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

Three Months Ended September 30, 2020

Allowance for loan losses:

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

Charged Off Recoveries Balance,

End of Period

Commercial and industrial $ 1,477 $ ( 227 ) $ ( 99 ) $ — $ 1,151

Owner-occupied commercial real estate 846 167 — — 1,013

Investor commercial real estate 130 — — — 130

Construction 721 155 — — 876

Single tenant lease financing 11,318 717 — — 12,035

Public finance 1,542 191 — — 1,733

Healthcare finance 4,762 1,232 — 87 6,081

Small business lending 251 230 — 3 484

Residential mortgage 539 26 — — 565

Home equity 51 ( 1 ) — 3 53

Other consumer 2,828 19 ( 142 ) 91 2,796

Other consumer loans 1,990 263 ( 163 ) 99 2,189

Tax refund advance loans — 1842 ( 1488 ) — 354

Total $ 27,841 $ 791 $ ( 1,731 ) $ 1,350 $ 28,251

Nine Months Ended September 30, 2020

(in thousands) Three Months Ended March 31, 2021

Allowance for loan losses:

12 unchanged sentences

Home equity 48 58 ( 51 ) 2 57

Other consumer 2,510 680 ( 644 ) 250 2,796

Other consumer loans 2,507 ( 103 ) ( 181 ) 100 2,323

Total $ 29,484 $ 1,276 $ ( 311 ) $ 193 $ 30,642

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.

The following tables present the recorded investment in loans based on portfolio segment and impairment method as of March 31, 2022 and December 31, 2021.

(in thousands) Loans Allowance for Loan Losses

September 30, 2021 Ending Balance:

March 31, 2022 Ending Balance:

Collectively Evaluated for Impairment Ending Balance:

15 unchanged sentences

Other consumer 270,317 13 270,330 2,189 — 2,189

Tax refund advance loans 9,177 — 9,177 354 — 354

Total $ 2,816,761 $ 12,044 $ 2,828,805 $ 26,790 $ 1,461 $ 28,251

14 unchanged sentences

Small business lending (1)

106,682 1,984 108,666 994 393 1,387

Franchise finance 81,448 — 81,448 1,083 — 1,083

Residential mortgage 183,852 2,918 186,770 643 — 643

2 unchanged sentences

Total $ 2,822,836 $ 10,940 $ 2,833,776 $ 26,380 $ 1,461 $ 27,841

1 Balance of loans individually evaluated for impairment are guaranteed by the U.S.

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

14 unchanged sentences

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

The following tables present the credit risk profile of the Company’s commercial and consumer loan portfolios based on rating category and payment activity as of September 30, 2021 and December 31, 2020.

September 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 March 31, 2022 and December 31, 2021.

March 31, 2022

(in thousands) Pass Special Mention Substandard Total

11 unchanged sentences

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

September 30, 2021

March 31, 2022

(in thousands) Performing Nonaccrual Total

2 unchanged sentences

Other consumer 270,317 13 270,330

Tax refund advance loans 9,177 — 9,177

Total consumer loans $ 487,526 $ 1,234 $ 488,760

10 unchanged sentences

99,250 7,432 1,983 108,666

Franchise finance 81,448 — — 81,448

Total commercial loans $ 2,312,655 $ 43,209 $ 7,998 $ 2,363,863

6 unchanged sentences

Total consumer loans $ 468,664 $ 1,249 $ 469,913

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

September 30, 2021

The following tables present the Company’s loan portfolio delinquency analysis as of March 31, 2022 and December 31, 2021.

March 31, 2022

(in thousands) 30-59

17 unchanged sentences

Other consumer 69 64 — 133 270,197 270,330 13 —

Tax refund advance loans — — — — 9,177 9,177 — —

Total $ 584 $ 141 $ 235 $ 960 $ 2,827,845 $ 2,828,805 $ 7,084 $ —

1 Balance in “90 Days or More Past Due” is guaranteed by the U.S.

1 Balance in “Total Past Due” is guaranteed by the U.S.

December 31, 2021

13 unchanged sentences

Small business lending (1)

— — 657 657 108,009 108,666 959 —

Franchising Finance — — — — 81,448 81,448 — —

Residential mortgage 51 226 106 383 186,387 186,770 1,226 —

2 unchanged sentences

Total $ 119 $ 244 $ 763 $ 1,126 $ 2,832,650 $ 2,833,776 $ 7,401 $ —

1 Balance in “Total Past Due” is guaranteed by the U.S.

Impaired Loans

A loan is designated as impaired, in accordance with the impairment accounting guidance, when, based on current information or events, it is probable that the Company will be unable to collect all amounts due (principal and interest) according to the contractual terms of the loan agreement.

Payments with delays generally not exceeding 90 days outstanding are not considered impaired.

Payments with delays generally not exceeding 90 days

outstanding are not considered impaired.

Certain nonaccrual and substantially all delinquent loans more than 90 days past due may be considered to be impaired.

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.

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.

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.

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 September 30, 2021 and December 31, 2020.

September 30, 2021 December 31, 2020

The following table presents the Company’s impaired loans as of March 31, 2022 and December 31, 2021.

March 31, 2022 December 31, 2021

(in thousands) Recorded

5 unchanged sentences

Loans without a specific valuation allowance

Commercial and industrial $ 3,429 $ 3,486 $ — $ 517 $ 517 $ —

Owner-occupied commercial real estate $ 3,267 $ 3,453 $ — $ 3,345 $ 3,466 $ —

Single tenant lease financing — — — 1,315 1,334 —

Healthcare finance — — — 1,010 1,010 —

Small business lending (1)

2 unchanged sentences

Home equity 14 15 — 14 15 —

Other consumer 27 82 — 50 120 —

Other consumer loans 13 55 — 9 44 —

Total 7,800 8,382 — 7,245 7,781 —

4 unchanged sentences

Small business lending (1)

1,634 1,634 393 1,025 1,025 393

Total 4,244 4,310 1,461 3,695 3,751 1,461

Total impaired loans $ 12,044 $ 12,692 $ 1,461 $ 10,940 $ 11,532 $ 1,461

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 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

1 Balance of loans individually evaluated for impairment are guaranteed by the U.S.

The table below presents average balances and interest income recognized for impaired loans during the three months ended March 31, 2022 and 2021.

Three Months Ended

March 31, 2022 March 31, 2021

(in thousands) Average

2 unchanged sentences

Balance Interest

Income Average

Balance Interest

Income Average

Balance Interest

Loans without a specific valuation allowance

4 unchanged sentences

Small business lending (1)

1,315 — — — 1,005 — — —

Residential mortgage 3,273 8 1,736 4

4 unchanged sentences

Commercial and industrial 627 — 501 —

Owner-occupied commercial real estate — — — 29 473 — — 29

Single tenant lease financing 1,094 — 7,148 —

3 unchanged sentences

Total impaired loans $ 11,406 $ 25 $ 14,620 $ 30

1 Entire balance is guaranteed by the U.S.

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 September 30, 2021 and December 31, 2020, respectively.

1 Balance is guaranteed by the U.S.

The Company did not have any other real estate owned (“OREO”) as of March 31, 2022.

The Company had $ 1.2 million in OREO as of December 31, 2021, which consisted of one commercial property.

There were two loans totaling $ 0.2 million and one loan totaling $0.1 million in the process of foreclosure at March 31, 2022 and December 31, 2021, respectively.

Troubled Debt Restructurings

8 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 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.

There was one portfolio residential mortgage loan classified as a new TDR during the three months ended March 31, 2022 with a pre-modification and post-modification outstanding recorded investment of $ 0.7 million.

The Company did

not allocate a specific allowance for that loan as of March 31, 2022.

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

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 nine months ended September 30, 2021 and 2020, respectively.

There was one residential mortgage loan classified as a new TDR during the three months ended March 31, 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 March 31, 2021.

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 months ended March 31, 2022 and 2021, respectively.

Non-TDR Loan Modifications due to COVID-19

The “Interagency Statement on Loan Modifications and Reporting for Financial Institutions Working with Customers Affected by the Coronavirus” was issued by our banking regulators on March 22, 2020.

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

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

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

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

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

Modifications within the scope of this relief were 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 March 31, 2022, the Company had seven loans totaling $ 9.8 million in non-TDR loan modifications due to COVID-19.

Premises and Equipment

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

(in thousands) September 30,

The following table summarizes premises and equipment at March 31, 2022 and December 31, 2021.

(in thousands) March 31,

2022 December 31,

Land $ 5,598 $ —

Right of use leased asset 256 819

Construction in process — 57,469

Right of use leased asset 160 208

Building and improvements 51,902 1,090

2 unchanged sentences

Total $ 68,632 $ 59,842

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.

The Company anticipates fully occupying the new headquarters building by the end of 2021.

On February 16, 2021, the Company entered into an agreement to sell its current headquarters and certain equipment currently located in the building to a third party.

The sale was completed on April 16, 2021 and as a part of the sale agreement, the buyer agreed to lease the office building back to the Company through December 31, 2021, with an option to extend up to 90 days beyond that date.

The sale price was $ 8.9 million in cash paid in full at closing.

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

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.

On February 16, 2021, the Company entered into an agreement to sell its then headquarters (the “Prior Headquarters”) and certain equipment located in the Prior Headquarters to a third party.

The sale was completed on April 16, 2021, and the Company recorded a gain on sale of $ 2.5 million.

As a part of the sale agreement, the buyer agreed to lease the Prior Headquarters back to the Company through December 31, 2021.

The Company vacated the Prior Headquarters at the end of the lease, on or prior to December 31, 2021.

As of March 31, 2022 and December 31, 2021, the carrying amount of goodwill was $ 4.7 million.

There have been no changes in the carrying amount of goodwill for the three months ended March 31, 2022.

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.

5 unchanged sentences

Servicing Asset

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

September 30, 2021 September 30, 2020

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

Originated and purchased servicing 566 399

Paydowns ( 176 ) ( 103 )

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) Nine Months Ended

September 30, 2021 September 30, 2020

Activity for the servicing asset and the related changes in fair value for the three months ended March 31, 2022 and 2021 are shown in the table below.

Three Months Ended

(in thousands) March 31, 2022 March 31, 2021

Balance, beginning of period $ 4,702 $ 3,569

Originated and purchased servicing 844 403

Paydowns ( 500 ) ( 372 )

( 256 ) ( 170 )

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

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 September 30, 2021 and December 31, 2020 are shown in the table below.

(in thousands)

September 30, 2021 December 31, 2020

The unpaid principal balances of these loans serviced for others as of March 31, 2022 and December 31, 2021 are shown in the table below.

(in thousands) March 31, 2022 December 31, 2021

Loan portfolios serviced for:

1 unchanged sentence

Total $ 254,545 $ 230,514

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.

Loan servicing revenue totaled $ 0.6 million and $ 0.4 million for the three months ended March 31, 2022 and March 31, 2021, respectively.

Loan servicing asset revaluation, which represents the change in fair value of the servicing asset, resulted in a $ 0.3 million and $ 0.2 million downward valuation for the three months ended March 31, 2022 and 2021, respectively.

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

4 unchanged sentences

Subordinated Debt

In October 2015, the Company entered into a term loan in the principal amount of $ 10.0 million, evidenced by a term note due 2025 (the “2025 Note”).

The 2025 Note had a fixed interest rate of 6.4375 % per year, payable quarterly, and was scheduled to mature on October 1, 2025.

The 2025 Note was an unsecured subordinated obligation of the Company and was eligible to be repaid, without penalty, on any interest payment date on or after October 15, 2020.

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

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.

6 unchanged sentences

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.

The 2029 Notes initially bear a fixed interest rate of 6.0% per year to, but excluding, June 30, 2024, and thereafter a floating rate equal to the then-current benchmark rate (initially three-month LIBOR rate) plus 411 basis points.

All interest on the 2029 Notes is payable quarterly.

2 unchanged sentences

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

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 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.

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

The 2030 Note 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 the then current three-month term secured overnight financing rate (“Term SOFR”) plus 5.795 %).

The 2030 Note is 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 Note is intended to qualify as Tier 2 capital under regulatory guidelines.

The Company used the net proceeds from the issuance of the 2030 Note to redeem a subordinated term note that had been entered into in October 2015.

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.

4 unchanged sentences

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

Pursuant to the terms of a Registration Rights Agreement between the Company and the initial purchasers of the 2031 Notes, the Company offered to exchange 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.

On December 30, 2021, we completed an exchange of $ 59.3 million principal amount of the unregistered 2031 Notes for registered 2031 Notes in satisfaction of our obligations under the registration rights agreement.

Holders of $ 0.7 million of unregistered 2031 Notes did not participate in the exchange.

The following table presents the principal balance and unamortized debt issuance costs for the 2029 Notes, the 2030 Notes, and the 2031 Notes as of March 31, 2022 and December 31, 2021.

March 31, 2022 December 31, 2021

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

2025 Note — — 10,000 ( 114 )

2029 Notes $ 37,000 $ ( 1,139 ) $ 37,000 $ ( 1,178 )

1 unchanged sentence

2031 Notes 60,000 ( 1,354 ) 60,000 ( 1,383 )

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

Total $ 107,000 $ ( 2,694 ) $ 107,000 $ ( 2,769 )

4 unchanged sentences

The agreement also provides that the Chief Executive Officer may be awarded additional compensation, benefits, or consideration as the Compensation Committee may determine.

The agreement provides for the continuation of salary and certain other benefits for a specified period of time upon termination of his employment under certain circumstances, including his resignation for “good reason” or termination by the Company without “cause” at any time or any termination of his employment for any reason within twelve months following a “change in control,” along with other specific conditions.

by the Company without “cause” at any time or any termination of his employment for any reason within twelve months following a “change in control,” along with other specific conditions.

2013 Equity Incentive Plan

2 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 $ 1.8 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.

The Company recorded $ 0.6 million of share-based compensation expense for the three months ended March 31, 2022, related to awards made under th e 2013 Plan.

The Company recorded $ 0.7 million of share-based compensation expense for the three months ended March 31, 2021, related to awards made under the 2013 Plan.

The following table summarizes the status of the 2013 Plan awards as of March 31, 2022 , and activity for the three months ended March 31, 2022.

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

Nonvested at December 31, 2020 112,985 $ 27.76 — $ — — $ —

Unvested at December 31, 2021 112,822 $ 28.18 — $ — — $ —

Granted 41,381 46.71 9,954 52.64 1 52.64

Cancelled/Forfeited — — ( 1,057 ) 30.13 — —

Vested ( 23,256 ) 24.62 ( 2,502 ) 52.64 ( 1 ) 52.64

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.

Unvested at March 31, 2022 130,947 $ 34.67 7,452 $ 52.64 — $ —

At March 31, 2022, the total unrecognized compensation cost related to unvested awards was $ 3.8 million with a weighted-average expense recognition period of 2.0 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 nine months ended September 30, 2021.

The following table summarizes the status of deferred stock rights related to the Directors Deferred Stock Plan for the three months ended March 31, 2022.

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

At March 31, 2022 and December 31, 2021, the Company had outstanding loan commitments totaling approximately $ 325.7 million and $ 324.3 million, respectively.

Capital Commitments

Capital expenditures contracted to at the balance sheet date but not yet recognized in the financial statements are associated with the construction of premises intended to house our future corporate headquarters.

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

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

These commitments are due within twelve months .

Capital expenditures contracted for at the balance sheet date but not yet recognized in the financial statements are associated with the construction of the building where our corporate headquarters is located, along with an attached parking garage.

The Company has entered into construction-related contracts in the amount of $ 68.7 million.

As of March 31, 2022, $ 8.3 million of such contract commitments had not yet been incurred.

These commitments are due within one year .

Fair Value of Financial Instruments

19 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 September 30, 2021 or December 31, 2020.

The Company did not own any securities classified within Level 3 of the hierarchy as of March 31, 2022 or December 31, 2021.

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 September 30, 2021 and December 31, 2020.

September 30, 2021

March 31, 2022

Fair Value Measurements Using

6 unchanged sentences

Municipal securities 72,804 — 72,804 —

Agency mortgage-backed securities

429,885 — 429,885 —

Private label mortgage-backed securities

20,235 20,235 —

Agency mortgage-backed securities - residential 257,682 — 257,682 —

Agency mortgage-backed securities - commercial 24,156 — 24,156 —

Private label mortgage-backed securities - residential 14,818 — 14,818 —

Asset-backed securities

16 unchanged sentences

Municipal securities 77,033 — 77,033 —

Agency mortgage-backed securities

243,921 — 243,921 —

Private label mortgage-backed securities

58,116 — 58,116 —

Agency mortgage-backed securities - residential 373,236 — 373,236 —

Agency mortgage-backed securities - commercial 36,326 36,326

Private label mortgage-backed securities - residential 16,021 — 16,021 —

Asset-backed securities

7 unchanged sentences

IRLCs 718 — — 718

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 nine months ended September 30, 2021 and 2020.

Three Months Ended

(in thousands) Servicing Asset Interest Rate Lock

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

Total realized gains

Additions 566 —

Paydowns ( 176 ) —

Change in fair value ( 98 ) 22

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

Nine Months Ended

(in thousands) Servicing Asset Interest Rate Lock

Balance, January 1, 2022 $ 4,702 $ 718

3 unchanged sentences

Change in fair value ( 41 ) ( 806 )

Balance, September 30, 2021 4,412 840

Balance, March 31, 2022 $ 5,249 $ ( 88 )

Balance as of January 1, 2021 $ 3,569 $ 3,361

3 unchanged sentences

Change in fair value 15 ( 2,251 )

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

Balance, March 31, 2021 $ 3,817 $ 1,110

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 September 30, 2021 and December 31, 2020.

September 30, 2021

(in thousands) Fair Value Measurements Using

Value Quoted Prices

(Level 1) Significant

(Level 2) Significant

Impaired loans $ 3,747 $ — $ — $ 3,747

December 31, 2021

7 unchanged sentences

(dollars in thousands) Fair Value at

September 30, 2021 Valuation

March 31, 2022 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 September 30, 2021 or December 31, 2020.

The Company did not own any securities classified within Level 3 of the hierarchy as of March 31, 2022 or December 31, 2021.

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 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

The Company determined that the fair value of commitments was zero based on the contractual value of outstanding commitments at each of March 31, 2022 and December 31, 2021.

The following tables present the carrying value and estimated fair value of all financial assets and liabilities that are not measured at fair value on a recurring basis at March 31, 2022 and December 31, 2021.

March 31, 2022

Fair Value Measurements Using

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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 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,

During the three months ended March 31, 2022 and 2021, the Company originated mortgage loans held-for-sale of $ 152.4 million and $ 223.9 million, respectively, and sold $ 162.4 million and $ 241.6 million of mortgage loans, respectively, into the secondary market.

The following table presents the components of income from mortgage banking activities for the three months ended March 31, 2022 and 2021.

Three Months Ended March 31,

(in thousands) 2022 2021

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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 September 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 September 30, 2021 December 31, 2020 September 30, 2021 December 31, 2020

Line item in the condensed consolidated balance sheets in which the hedged item is included March 31, 2022 December 31, 2021 March 31, 2022 December 31, 2021

Securities available-for-sale (1)

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(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 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.

The designated hedged items were $ 50.0 million at both March 31, 2022 and December 31, 2021.

The following tables present a summary of interest rate swap derivatives designated as fair value accounting hedges of fixed-rate receivables used in the Company’s asset/liability management activities at March 31 , 2022 and December 31, 2021, identified by the underlying interest rate-sensitive instruments.

(dollars in thousands)

September 30, 2021

March 31, 2022

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

1 unchanged sentence

Securities available-for-sale $ 50,000 2.6 $ 288 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.

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

Total at March 31, 2022 $ 50,000 2.6 $ 288 3-month LIBOR 2.33 %

(dollars in thousands)

4 unchanged sentences

Total at December 31, 2021 $ 50,000 2.8 $ ( 1,731 ) 3-month LIBOR 2.33 %

In March 2021, the Company terminated the last layer of interest rate swaps associated with available-for-sale agency mortgage-backed securities - residential, which resulted in swap termination payments to counterparties totaling $ 1.9 million.

The corresponding fair value hedging adjustment was allocated pro-rata to the underlying hedged securities and is being amortized over the remaining lives of the designated securities.

During the three months ended March 31, 2022, amortization expense totaling $ 0.1 million was recognized as a reduction to interest income on securities.

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 12.36 years as of September 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 September 30, 2021 and December 31, 2020.

During the three months ended March 31, 2022 and 2021, amortization expense totaling $ 1.0 million and $ 1.1 million, respectively, related to these previously terminated fair value hedges was recognized as a reduction to interest income on loans.

(dollars in thousands)

September 30, 2021

March 31, 2022

Notional Weighted- Average Remaining Maturity Weighted-Average Ratio

2 unchanged sentences

Interest rate swaps 60,000 1.4 ( 648 ) 1-month LIBOR 2.88 %

Interest rate swaps 40,000 2.2 ( 425 ) Fed Funds Effective 2.78 %

(dollars in thousands)

5 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 $ 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.

The Company pledged $ 2.7 million and $ 15.7 million of cash collateral to counterparties as security for its obligations related to these interest rate swap transactions at March 31, 2022 and December 31, 2021, 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 September 30, 2021 and December 31, 2020.

September 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 March 31, 2022 and December 31, 2021.

March 31, 2022 December 31, 2021

(in thousands) Notional

12 unchanged sentences

Forward contracts — — 72,750 ( 30 )

IRLCs 63,378 ( 88 ) — —

Total contracts

2 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 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

The following table presents the effects of the Company’s cash flow hedge relationships on the condensed consolidated statements of comprehensive income during the three months ended March 31, 2022 and 2021.

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

(in thousands) March 31, 2022 March 31, 2021

Interest rate swap agreements $ 9,334 $ 6,280

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 nine months ended September 30, 2021 and 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

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

(in thousands) March 31, 2022 March 31, 2021

Asset Derivatives

Derivatives not designated as hedging instruments

IRLCs $ — $ 2,834 $ ( 2,519 ) $ 2,206

Forward contracts 1,102 1,361

Liability Derivatives

1 unchanged sentence

IRLCs $ ( 802 ) $ ( 2,251 )

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 nine months ended September 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 months ended March 31, 2022 and 2021.

(in thousands)

Line item in the condensed consolidated statements of income

Three Months Ended Nine Months Ended

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

Three Months Ended

March 31, 2022 March 31, 2021

Interest income

Loans $ — $ — $ — $ ( 2,445 )

Securities - taxable — ( 253 )

6 unchanged sentences

Total interest expense

1,476 1,406 4,330 3,217

Net interest income

1 unchanged sentence

Accumulated Other Comprehensive Loss

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

The components of accumulated other comprehensive loss, included in shareholders' equity, for the three months ended March 31, 2022 and 2021, respectively, are presented in the table below.

(in thousands) Unrealized Losses On Debt Securities Unrealized Losses On Debt Securities Transferred From Available-For-Sale To Held-To-Maturity Cash Flow Hedges Total

Balance, January 1, 2022 $ ( 2,555 ) $ — $ ( 8,484 ) $ ( 11,039 )

Net unrealized holding (losses) gains recorded within other comprehensive income before income tax ( 2,596 ) 7,665 5,069

Other comprehensive (loss) income before reclassifications from accumulated other comprehensive loss before tax ( 17,881 ) ( 5,402 ) 9,334 ( 13,949 )

Reclassifications from accumulated other comprehensive (loss) income to earnings before tax — 119 — 119

Other comprehensive (loss) gain before tax ( 17,881 ) ( 5,283 ) 9,334 ( 13,830 )

1 unchanged sentence

Other comprehensive (loss) income - net of tax ( 13,804 ) ( 4,034 ) 6,016 ( 11,822 )

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

Balance, March 31, 2022 $ ( 16,359 ) $ ( 4,034 ) $ ( 2,468 ) $ ( 22,861 )

Balance, January 1, 2021 $ 468 $ — $ ( 17,664 ) $ ( 17,196 )

Net unrealized holding gains (losses) recorded within other comprehensive income before income tax 6,187 ( 12,453 ) ( 6,266 )

Reclassification of net loss realized and included in earnings ( 139 ) — ( 139 )

Other comprehensive income (loss) before tax 6,048 ( 12,453 ) ( 6,405 )

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

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, 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 )

Other comprehensive (loss) income before reclassifications from accumulated other comprehensive loss before tax ( 2,195 ) — 6,280 4,085

Other comprehensive (loss) gain before tax ( 2,195 ) — 6,280 4,085

Income tax (benefit) provision ( 508 ) — 1,317 809

Other comprehensive (loss) income - net of tax ( 1,687 ) — 4,963 3,276

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 provision 336 418 754

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

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

Balance, March 31, 2021 $ ( 1,219 ) $ — $ ( 12,701 ) $ ( 13,920 )

Details About Accumulated Other Comprehensive Income (Loss) Components Amounts Reclassified from

Accumulated Other Comprehensive Income (Loss) for the Affected Line Item in the

Statements of Income

Three Months Ended March 31, 2022 Three Months Ended March 31, 2021

Reclassifications from accumulated other comprehensive loss to earnings before tax $ ( 119 ) — Interest income

Total amount reclassified before tax ( 119 ) — Income before income taxes

Tax benefit ( 27 ) — Income tax provision

Total reclassifications from accumulated other comprehensive loss $ ( 92 ) $ — Net income

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.

ASU 2022-02 - Financial Instruments - Credit Losses (Topic 326):

Troubled Debt Restructurings and Vintage Disclosures (March 2022)

In March 2022, the FASB issued ASU No.

2022-02, Financial Instruments - Credit Losses (Topic 326):

Troubled Debt Restructurings and Vintage Disclosures.

This ASU eliminates the separate recognition and measurement guidance for Troubled Debt Restructurings ("TDRs") by creditors.

The elimination of the TDR guidance may be adopted prospectively for loan modifications after adoption or on a modified retrospective basis, which would also apply to loans previously modified, resulting in a cumulative effect adjustment to retained earnings in the period of adoption for changes in the allowance for credit losses.

This guidance is effective on January 1, 2023, with early adoption permitted.

The Company is currently assessing the impact of the adoption of this guidance.

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.

On May 1, 2022, First Century Bancorp.

(“First Century”) terminated the previously announced Agreement and Plan of Merger dated November 1, 2021 (the “Merger Agreement”), by and among the Company, FC Subsidiary, Inc.

and First Century.

Under the Merger Agreement, the consummation of the merger was to have occurred on or before April 30, 2022.

The Board of Governors of the Federal Reserve approved the merger on April 29, 2022, but the parties were

precluded from closing immediately thereafter due to statutory waiting periods.

The parties were unable to agree on extension terms, and First Century exercised its option to terminate the Merger Agreement.

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