What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2022-08-09 compared with 2022-05-09 · 311 added, 183 removed, 1103 unchanged (31% of the section changed)

3 unchanged sentences

(Amounts in thousands except share data)

March 31, 2022 December 31, 2021

June 30, 2022 December 31, 2021

Cash and due from banks $ 6,155 $ 7,492

44 unchanged sentences

(Amounts in thousands except share and per share data)

Three Months Ended

March 31, 2022 March 31, 2021

Three Months Ended Six Months Ended

June 30, 2022 June 30, 2021 June 30, 2022 June 30, 2021

Interest Income

17 unchanged sentences

Gain on sale of loans 1,952 3,019 5,797 4,742

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

Other 221 249 719 618

24 unchanged sentences

(Amounts in thousands except per share data)

Three Months Ended March 31,

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

2022 2021 2022 2021

Net income $ 9,545 $ 13,096 $ 20,754 $ 23,546

1 unchanged sentence

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 unrealized holding (losses) gains recorded within other comprehensive income before income tax ( 15,395 ) 1,388 ( 33,276 ) ( 807 )

Income tax (benefit) provision ( 4,186 ) 333 ( 8,263 ) ( 175 )

Net effect on other comprehensive (loss) income ( 11,209 ) 1,055 ( 25,013 ) ( 632 )

3 unchanged sentences

Income tax benefit ( 23 ) — ( 1,272 ) —

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

Net effect on other comprehensive income (loss) 216 — ( 3,818 ) —

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

Net unrealized holding gains (losses) on cash flow hedging derivatives recorded within other comprehensive income before income tax 4,944 ( 54 ) 14,278 6,226

Income tax provision (benefit) 1,840 ( 8 ) 5,158 1,309

Net effect on other comprehensive income (loss) 3,104 ( 46 ) 9,120 4,917

Total other comprehensive (loss) income ( 7,889 ) 1,009 ( 19,711 ) 4,285

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

Comprehensive income $ 1,656 $ 14,105 $ 1,043 $ 27,831

See Notes to Condensed Consolidated Financial Statements

1 unchanged sentence

Condensed Consolidated Statements of Changes in Shareholders’ Equity - Unaudited

Three Months Ended March 31, 2022 and 2021

Six Months Ended June 30, 2022 and 2021

(Amounts in thousands except per share data)

9 unchanged sentences

Recognition of the fair value of share-based compensation 1,534 — — 1,534

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

Repurchased shares of common stock ( 398,167 )

( 16,240 ) — — ( 16,240 )

Deferred stock rights and restricted stock units issued in lieu of cash dividends payable on outstanding deferred stock rights and restricted stock units 10 — — 10

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

Common stock redeemed for the net settlement of share-based awards ( 179 ) — — ( 179 )

Balance, June 30, 2022 $ 204,071 $ 192,011 $ ( 30,750 ) $ 365,332

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

6 unchanged sentences

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

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

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

See Notes to Condensed Consolidated Financial Statements

First Internet Bancorp

Condensed Consolidated Statements of Changes in Shareholders’ Equity - Unaudited

Three Months Ended June 30, 2022 and 2021

(Amounts in thousands except per share data)

Stock Retained

Earnings Accumulated

Comprehensive

Shareholders’

Balance, April 1, 2022 $ 214,473 $ 183,043 $ ( 22,861 ) $ 374,655

Net income — 9,545 — 9,545

Other comprehensive loss — — ( 7,889 ) ( 7,889 )

Dividends declared ($ 0.06 per share)

— ( 577 ) — ( 577 )

Recognition of the fair value of share-based compensation 895 — — 895

Repurchased shares of common stock ( 294,464 )

( 11,123 ) — — ( 11,123 )

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 ( 179 ) — — ( 179 )

Balance, June 30, 2022 $ 204,071 $ 192,011 $ ( 30,750 ) $ 365,332

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

Net income — 13,096 — 13,096

Other comprehensive income — — 1,009 1,009

Dividends declared ($ 0.06 per share)

— ( 605 ) — ( 605 )

Recognition of the fair value of share-based compensation 570 — — 570

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

See Notes to Condensed Consolidated Financial Statements

First Internet Bancorp

Condensed Consolidated Statements of Cash Flows – Unaudited

(Amounts in thousands except per share data)

Three Months Ended March 31,

Six Months Ended June 30,

Operating Activities

9 unchanged sentences

Decrease in fair value of loans held-for-sale 149 744

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

Gain on derivatives ( 2,546 ) ( 1,384 )

Loan servicing asset revaluation 767 395

7 unchanged sentences

Purchase of securities available-for-sale ( 10,133 ) ( 247,791 )

Maturities and calls of securities held-to-maturity 2,309 2,500

Purchase of securities held-to-maturity ( 31,782 ) —

Redemption of Federal Home Loan Bank of Indianapolis stock 431 —

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

Purchase of premises and equipment ( 12,634 ) ( 13,707 )

2 unchanged sentences

Other investing activities 374 2,264

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

Net cash used in investing activities ( 192,563 ) ( 56,367 )

Financing Activities

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

Net decrease in deposits ( 26,858 ) ( 64,738 )

Cash dividends paid ( 1,168 ) ( 1,201 )

4 unchanged sentences

Other, net ( 179 ) ( 195 )

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

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

Net cash used in financing activities ( 94,445 ) ( 76,134 )

Net Decrease in Cash and Cash Equivalents ( 235,007 ) ( 91,009 )

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

3 unchanged sentences

Cash paid during the period for taxes 1,892 2,905

Loans transferred to other real estate owned — 1,300

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

1 unchanged sentence

Securities purchased during the period, settled in subsequent period — 13,590

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

Transfer of available-for-sale mortgage-backed securities to held-to-maturity mortgage-backed securities at fair value 96,220 —

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 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 results of operations for the three and six months ended June 30, 2022 are not necessarily indicative of the results expected for the year ending December 31, 2022 or any other period.

The June 30, 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 2021 financial statements to conform to the presentation of the 2022 financial statements.

These reclassifications had no effect on net income.

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 months ended March 31, 2022 and 2021.

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

The following is a reconciliation of the weighted-average common shares for the basic and diluted earnings per share computations for the three and six months ended June 30, 2022 and 2021.

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

2022 2021 2022 2021

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 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

Excluded from the computation of diluted EPS were weighted-average antidilutive shares totaling 5,560 and 1,198 for the three and six months ended June 30, 2022, respectively.

There were 6 and 3 weighted-average antidilutive shares for the three and six months ended June 30, 2021, respectively.

The following tables summarize securities available-for-sale and securities held-to-maturity as of June 30, 2022 and December 31, 2021.

June 30, 2022

Amortized Gross Unrealized Fair

9 unchanged sentences

Total available-for-sale $ 462,228 $ 302 $ ( 37,041 ) $ 425,489

March 31, 2022

June 30, 2022

Amortized Gross Unrealized Fair

26 unchanged sentences

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

The carrying value of securities at March 31, 2022 is shown below by their contractual maturity date.

The carrying value of securities at June 30, 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.

19 unchanged sentences

Total $ 185,113 $ 174,019

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.

There were no gross gains or losses resulting from the sale of available-for-sale securities during the three and six months ended June 30, 2022 and June 30, 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 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 total fair value of these investments at June 30, 2022 and December 31, 2021 was $ 553.8 million and $ 403.2 million, which was approximately 92 % and 61 %, respectively, of the Company’s AFS and HTM securities portfolios.

As of June 30, 2022, the Company’s security portfolio consisted of 444 securities, of which 407 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 March 31, 2022.

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 March 31, 2022 and December 31, 2021.

March 31, 2022

June 30, 2022

Less Than 12 Months 12 Months or Longer Total

12 unchanged sentences

Total $ 315,079 $ ( 28,666 ) $ 85,672 $ ( 8,375 ) $ 400,751 $ ( 37,041 )

March 31, 2022

June 30, 2022

Less Than 12 Months 12 Months or Longer Total

25 unchanged sentences

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 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.

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, 2022 and June 30, 2021, respectively.

Loan balances as of June 30, 2022 and December 31, 2021 are summarized in the table below.

Categories of loans include:

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

(in thousands) June 30, 2022 December 31, 2021

Commercial loans

21 unchanged sentences

Net loans $ 3,052,974 $ 2,859,821

(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.

(1) Includes carrying value adjustments of $ 35.4 million and $ 37.5 million related to terminated interest rate swaps associated with public finance loans as of June 30, 2022 and December 31, 2021, respectively.

Risk characteristics of each loan portfolio segment are as follows:

103 unchanged sentences

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

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

(in thousands) Three Months Ended March 31, 2022

The following tables present changes in the balance of the ALLL during the three and six months ended June 30, 2022 and 2021.

(in thousands) Three Months Ended June 30, 2022

Allowance for loan losses:

16 unchanged sentences

Total $ 28,251 $ 1,185 $ ( 500 ) $ 217 $ 29,153

(in thousands) Three Months Ended March 31, 2021

Six Months Ended June 30, 2022

Allowance for loan losses:

10 unchanged sentences

Small business lending 1,387 630 ( 80 ) 19 1,956

Franchise finance 1,083 1,198 — — 2,281

Residential mortgage 643 493 — 2 1,138

1 unchanged sentence

Other consumer loans 1,990 465 ( 291 ) 179 2,343

Tax refund advance loans — 1,860 ( 1,860 ) — —

Total $ 27,841 $ 1,976 $ ( 2,231 ) $ 1,567 $ 29,153

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) Three Months Ended June 30, 2021

Allowance for loan losses:

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

Charged Off Recoveries Balance,

End of Period

Commercial and industrial $ 1,662 $ 267 $ ( 28 ) $ 2 $ 1,903

Owner-occupied commercial real estate 1,029 ( 8 ) — — 1,021

Investor commercial real estate 169 160 — — 329

Construction 1,420 ( 63 ) — — 1,357

Single tenant lease financing 13,178 418 ( 2,391 ) — 11,205

Public finance 1,748 ( 48 ) — — 1,700

Healthcare finance 7,755 ( 817 ) — — 6,938

Small business lending 700 214 ( 133 ) 2 783

Residential mortgage 601 ( 5 ) ( 6 ) 4 594

Home equity 57 4 — 2 63

Other consumer loans 2,323 ( 101 ) ( 131 ) 82 2,173

Total $ 30,642 $ 21 $ ( 2,689 ) $ 92 $ 28,066

Six Months Ended June 30, 2021

Allowance for loan losses:

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

Charged Off Recoveries Balance,

End of Period

Commercial and industrial $ 1,146 $ 701 $ ( 28 ) $ 84 $ 1,903

Owner-occupied commercial real estate 1,082 ( 61 ) — — 1,021

Investor commercial real estate 155 174 — — 329

Construction 1,192 165 — — 1,357

Single tenant lease financing 12,990 606 ( 2,391 ) — 11,205

Public finance 1,732 ( 32 ) — — 1,700

Healthcare finance 7,485 ( 547 ) — — 6,938

Small business lending 628 361 ( 212 ) 6 783

Residential mortgage 519 72 ( 6 ) 9 594

Home equity 48 63 ( 51 ) 3 63

Other consumer loans 2,507 ( 205 ) ( 313 ) 184 2,173

Total $ 29,484 $ 1,297 $ ( 3,001 ) $ 286 $ 28,066

The following tables present the recorded investment in loans based on portfolio segment and impairment method as of June 30, 2022 and December 31, 2021.

(in thousands) Loans Allowance for Loan Losses

March 31, 2022 Ending Balance:

June 30, 2022 Ending Balance:

Collectively Evaluated for Impairment Ending Balance:

15 unchanged sentences

Other consumer 292,951 4 292,955 2,343 — 2,343

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

Total $ 3,022,491 $ 9,242 $ 3,031,733 $ 27,602 $ 1,551 $ 29,153

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

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

(in thousands) Loans Allowance for Loan Losses

18 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.

1 Balance of loans individually evaluated for impairment are partially 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 March 31, 2022 and December 31, 2021.

March 31, 2022

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, 2022 and December 31, 2021.

June 30, 2022

(in thousands) Pass Special Mention Substandard Total

10 unchanged sentences

Total commercial loans $ 2,395,882 $ 36,261 $ 5,583 $ 2,437,726

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

March 31, 2022

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

June 30, 2022

(in thousands) Performing Nonaccrual Total

2 unchanged sentences

Other consumer 292,951 4 292,955

Tax refund advance loans 9,177 — 9,177

Total consumer loans $ 592,788 $ 1,219 $ 594,007

12 unchanged sentences

Total commercial loans $ 2,312,655 $ 43,210 $ 7,998 $ 2,363,863

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

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

December 31, 2021

4 unchanged sentences

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

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

March 31, 2022

The following tables present the Company’s loan portfolio delinquency analysis as of June 30, 2022 and December 31, 2021.

June 30, 2022

(in thousands) 30-59

17 unchanged sentences

Other consumer 63 37 — 100 292,855 292,955 4 —

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

Total $ 336 $ 744 $ 596 $ 1,676 $ 3,030,057 $ 3,031,733 $ 4,527 $ —

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

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

December 31, 2021

19 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.

1 Balance in “Total Past Due” is partially 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.

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 March 31, 2022 and December 31, 2021.

March 31, 2022 December 31, 2021

The following table presents the Company’s impaired loans as of June 30, 2022 and December 31, 2021.

June 30, 2022 December 31, 2021

(in thousands) Recorded

20 unchanged sentences

Total impaired loans $ 9,242 $ 9,765 $ 1,551 $ 10,940 $ 11,532 $ 1,461

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

1 Balance of loans individually evaluated for impairment are partially 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, 2022 and 2021.

Three Months Ended Six Months Ended

June 30, 2022 June 30, 2021 June 30, 2022 June 30, 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)

867 — 1,123 — 848 — 970 —

Residential mortgage 3,667 25 2,410 9 3,470 33 2,192 13

4 unchanged sentences

Commercial and industrial 390 — 839 — 508 — 677 —

Owner-occupied commercial real estate — — 1,420 — — — 473 —

Single tenant lease financing 546 — 5,430 — 820 — 4,984 —

1 unchanged sentence

Small business lending (1)

1,674 — — — 1,504 — — —

Total 3,511 28 8,668 24 3,741 45 6,949 36

Total impaired loans $ 10,530 $ 53 $ 16,638 $ 33 $ 10,966 $ 78 $ 14,149 $ 63

1 Balance is guaranteed by the U.S.

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

1 Balance is partially guaranteed by the U.S.

The Company did not have any other real estate owned (“OREO”) as of June 30, 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.

There were two loans totaling $ 0.2 million and one loan totaling $0.1 million in the process of foreclosure at June 30, 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 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.

There were no loans classified as new TDRs during the three months ended June 30, 2022.

There was one portfolio residential mortgage loan classified as a new TDR during the six months ended June 30, 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 June 30, 2022.

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

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.

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.

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

There were no performing TDRs that had payment defaults within the twelve months following modification during the three and six months ended June 30, 2022 and 2021, respectively.

Non-TDR Loan Modifications due to COVID-19

3 unchanged sentences

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.

As of June 30, 2022, the Company had one loan totaling $ 8.0 million in non-TDR loan modifications due to COVID-19.

Premises and Equipment

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

(in thousands) March 31,

The following table summarizes premises and equipment at June 30, 2022 and December 31, 2021.

(in thousands) June 30,

2022 December 31,

10 unchanged sentences

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.

As of June 30, 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 and six months ended June 30, 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 months ended March 31, 2022 and 2021 are shown in the table below.

Activity for the servicing asset and the related changes in fair value for the three and six months ended June 30, 2022 and 2021 are shown in the table below.

Three Months Ended

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

(in thousands) June 30, 2022 June 30, 2021

Balance, beginning of period $ 5,249 $ 3,817

5 unchanged sentences

Balance, end of period $ 5,345 $ 4,120

Six Months Ended

(in thousands) June 30, 2022 June 30, 2021

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

Originated and purchased servicing 1,410 946

( 609 ) ( 324 )

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

the valuation model ( 158 ) ( 71 )

Loan servicing asset revaluation $ ( 767 ) $ ( 395 )

Balance, end of period $ 5,345 $ 4,120

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

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

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

The unpaid principal balances of these loans serviced for others as of June 30, 2022 and December 31, 2021 are shown in the table below.

(in thousands) June 30, 2022 December 31, 2021

Loan portfolios serviced for:

1 unchanged sentence

Total $ 262,745 $ 230,514

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.

Loan servicing revenue totaled $ 0.6 million and $ 1.2 million for the three and six months ended June 30, 2022 and $ 0.5 million and $ 0.9 million for the three and six months ended June 30, 2021, respectively.

Loan servicing asset revaluation, which represents the change in fair value of the servicing asset, resulted in a $ 0.5 million and $ 0.8 million downward valuation for the three and six months ended June 30, 2022, respectively, and a $ 0.2 million and $ 0.4 million downward valuation for the three and six months ended June 30, 2021, respectively.

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

Though fluctuations in prepayment speeds and changes in secondary market premiums generally have the most substantial impact on the fair value of servicing rights, other influencing factors include changing economic conditions, changes to the discount rate assumption and the weighted average life of the servicing portfolio.

Though fluctuations in prepayment speeds and changes in secondary market premiums generally have the most substantial impact on the fair

value of servicing rights, other influencing factors include changing economic conditions, changes to the discount rate assumption and the weighted average life of the servicing portfolio.

Measurement of fair value is limited to the conditions existing and the assumptions used as of a particular point in time;

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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

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 June 30, 2022 and December 31, 2021.

June 30, 2022 December 31, 2021

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

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Benefit Plans

Employment Agreement

The Company is party to an employment agreement with its Chief Executive Officer that provides for an annual base salary and an annual bonus, if any, as determined from time to time by the Compensation Committee of our Board of Directors.

The annual bonus is to be determined with reference to the achievement of annual performance objectives established by the Compensation Committee for the Chief Executive Officer and other senior officers.

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.

Employment Agreements

The Company is party to certain employment agreements with each of its Chief Executive Officer, President and Chief Operating Officer and Executive Vice President and Chief Financial Officer.

The employment agreements each provide for annual base salaries and annual bonuses, if any, as determined from time to time by the Compensation Committee of our Board of Directors.

The annual bonuses are to be determined with reference to the achievement of annual performance objectives established by the Compensation Committee.

The agreements also provide that each of the Chief Executive Officer, President and Chief Operating Officer and Executive Vice President and Chief Financial Officer, may be awarded additional compensation, benefits, or consideration as the Compensation Committee may determine.

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

2022 Equity Incentive Plan

The 2013 Equity Incentive Plan (the “2013 Plan”) authorizes the issuance of 750,000 shares of the Company’s common stock in the form of equity-based awards to employees, directors, and other eligible persons.

Under the terms of the 2013 Plan, the pool of shares available for issuance may be used for available types of equity awards under the 2013 Plan, which includes stock options, stock appreciation rights, restricted stock awards, stock unit awards, and other share-based awards.

The First Internet Bancorp 2022 Equity Incentive Plan (the “2022 Plan”) was approved by our Board of Directors and ratified by our shareholders on May 16, 2022.

The plan permits awards of incentive and non-statutory stock options, stock appreciation rights, restricted stock awards, stock unit awards, performance awards and other stock-based awards.

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 2022 Plan.

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.

The 2022 Plan initially authorized the issuance of 400,000 new shares of the Company’s common stock plus all shares of common stock that remained available for future grants under the First Internet Bancorp 2013 Equity Incentive Plan (the “2013 Plan”).

2013 Equity Incentive Plan

The 2013 Plan authorized the issuance of 750,000 shares of the Company’s common stock in the form of stock-based awards to employees, directors, and other eligible persons.

Although outstanding stock-based awards under the 2013 Plan remain in place on their terms, our authority to grant new awards under the 2013 Plan terminated upon shareholder approval of the 2022 Plan.

No awards had been made under the 2022 Plan as of June 30, 2022.

Stock-Based Award Activity

The Company recorded $ 0.9 million and $ 1.5 million of share-based compensation expense for the three and six months ended June 30, 2022, related to stock-based awards .

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, related to stock-based awards.

All awards granted during the periods presented were under the 2013 Plan.

The following table summarizes the stock-based award activity for the six months ended June 30, 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

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Granted 41,662 46.67 9,954 52.64 2 47.11

Cancelled/Forfeited ( 5,441 ) 36.62 ( 644 ) 52.64 — —

Vested ( 23,256 ) 24.62 ( 5,446 ) 52.64 ( 2 ) 47.11

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.

Unvested at June 30, 2022 125,787 $ 34.67 3,864 $ 52.64 — $ —

At June 30, 2022, the total unrecognized compensation cost related to unvested stock-based awards was $ 2.7 million with a weighted-average expense recognition period of 1.9 years.

Directors Deferred Stock Plan

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

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

The following table summarizes the status of deferred stock rights related to the Directors Deferred Stock Plan for the six months ended June 30, 2022.

Deferred Stock Rights

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

At June 30, 2022 and December 31, 2021, the Company had outstanding loan commitments totaling approximately $ 349.5 million and $ 324.3 million, respectively.

Capital Commitments

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The Company has entered into construction-related contracts in the amount of $ 69.1 million.

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

As of June 30, 2022, $ 6.8 million of such contract commitments had not yet been incurred.

These commitments are due within one year .

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

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

The Company did not own any securities classified within Level 3 of the hierarchy as of June 30, 2022 or December 31, 2021.

Loans Held-for-Sale (mandatory pricing agreements)

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

The following tables present the fair value measurements of assets and liabilities recognized in the accompanying condensed consolidated balance sheets measured at fair value on a recurring basis and the level within the fair value hierarchy in which the fair value measurements fall at March 31, 2022 and December 31, 2021.

March 31, 2022

June 30, 2022

Fair Value Measurements Using

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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 months ended March 31, 2022 and 2021.

Three Months Ended

(in thousands) Servicing Asset Interest Rate Lock

Balance, April 1, 2022 $ 5,249 $ ( 88 )

Total realized gains

Originated and purchased servicing 566 —

Subtractions:

Paydowns ( 353 ) —

Change in fair value ( 117 ) 550

Balance, June 30, 2022 $ 5,345 $ 462

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

Total realized gains

Originated and purchased servicing 543 —

Subtractions:

Paydowns ( 154 ) —

Change in fair value ( 86 ) ( 292 )

Balance, June 30, 2021 $ 4,120 $ 818

Six Months Ended

(in thousands) Servicing Asset Interest Rate Lock

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

Total realized gains

Additions 844 —

Originated and purchased servicing 1,410

Subtractions:

Paydowns ( 609 ) —

Change in fair value ( 158 ) ( 256 )

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

Balance, June 30, 2022 $ 5,345 $ 462

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

Total realized gains

Additions 403 —

Originated and purchased servicing 946 —

Subtractions:

Paydowns ( 324 ) —

Change in fair value 15 ( 2,251 )

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

Change in fair ( 71 ) ( 2,543 )

Balance, June 30, 2021 $ 4,120 $ 818

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.

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

The following table presents the fair value measurements of assets and liabilities recognized in the accompanying condensed consolidated balance sheets measured at fair value on a nonrecurring basis and the level within the fair value hierarchy in which the fair value measurement falls at March 31, 2022 and December 31, 2021.

June 30, 2022

(in thousands) Fair Value Measurements Using

Value Quoted Prices

(Level 1) Significant

(Level 2) Significant

Impaired loans $ 1,532 $ — $ — $ 1,532

December 31, 2021

7 unchanged sentences

(dollars in thousands) Fair Value at

March 31, 2022 Valuation

June 30, 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 March 31, 2022 or December 31, 2021.

The Company did not own any securities classified within Level 3 of the hierarchy as of June 30, 2022 or December 31, 2021.

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

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

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

The Company determined that the fair value of commitments was zero based on the contractual value of outstanding commitments at each of June 30, 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 June 30, 2022 and December 31, 2021.

June 30, 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.

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

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,

During the three months ended June 30, 2022 and 2021, the Company originated mortgage loans held-for-sale of $ 105.9 million and $ 163.3 million, respectively, and sold $ 107.9 million and $ 151.5 million of mortgage loans, respectively, into the secondary market.

During the six months ended June 30, 2022 and 2021, the Company originated mortgage loans held-for-sale of $ 258.2 million and $ 387.2 million, respectively, and sold $ 270.3 million and $ 393.1 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, 2022 and 2021.

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

(in thousands) 2022 2021 2022 2021

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Gain (loss) resulting from the change in fair value of loans held-for-sale 340 118 ( 149 ) ( 744 )

Gain (loss) resulting from the change in fair value of derivatives 300 ( 887 )

Loss resulting from the change in fair value of derivatives ( 508 ) ( 1,031 ) ( 208 ) ( 1,918 )

Net revenue from mortgage banking activities $ 1,710 $ 2,674 $ 3,583 $ 8,424

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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 March 31, 2022 and December 31, 2021.

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

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

Line item in the condensed consolidated balance sheets in which the hedged item is included June 30, 2022 December 31, 2021 June 30, 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 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.

The designated hedged items were $ 50.0 million at both June 30, 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 June 30 , 2022 and December 31, 2021, identified by the underlying interest rate-sensitive instruments.

(dollars in thousands)

March 31, 2022

June 30, 2022

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

1 unchanged sentence

Securities available-for-sale $ 50,000 2.3 $ 912 3-month LIBOR 2.33 %

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

Total at June 30, 2022 $ 50,000 2.3 $ 912 3-month LIBOR 2.33 %

(dollars in thousands)

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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.

During the three and six months ended June 30, 2022, amortization expense totaling $ 0.07 million and $ 0.2 million, respectively, 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 12.0 years as of March 31, 2022.

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.

The following tables present a summary of interest rate swap derivatives designated as cash flow accounting hedges of variable-rate liabilities used in the Company’s asset/liability management activities at March 31, 2022 and December 31, 2021.

Amortization expense totaling $ 1.1 million and $ 2.1 million, for the three and six months ended June 30 2022, respectively, and $ 1.2 million and $ 2.3 million, for the three and six months ended June 30, 2021 respectively, related to these previously terminated fair value hedges was recognized as a reduction to interest income on loans.

(dollars in thousands)

March 31, 2022

June 30, 2022

Notional Weighted- Average Remaining Maturity Weighted-Average Ratio

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

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.

As of June 30, 2022 the Company had no pledged cash collateral compared to $ 15.7 million, as of December 31, 2021.

Cash collateral is pledged to counterparties on interest rate swap agreements as security for its obligations related to these agreements.

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

The following table presents the notional amount and fair value of interest rate swaps, IRLCs and forward contracts utilized by the Company at March 31, 2022 and December 31, 2021.

March 31, 2022 December 31, 2021

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, 2022 and December 31, 2021.

June 30, 2022 December 31, 2021

(in thousands) Notional

1 unchanged sentence

Asset Derivatives

Derivatives designated as hedging instruments

Interest rate swaps associated with securities available-for-sale $ 50,000 $ 912 $ — $ —

Interest rate swaps associated with variable-rate liabilities 210,000 826 — —

Derivatives not designated as hedging instruments

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Interest rate swaps associated with securities available-for-sale $ — $ — $ 50,000 $ ( 1,731 )

Interest rate swaps associated with liabilities 210,000 ( 3,205 ) 210,000 ( 12,540 )

Interest rate swaps associated with variable-rate liabilities — — 210,000 ( 12,540 )

Derivatives not designated as hedging instruments

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 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

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, 2022 and 2021.

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

(in thousands) June 30, 2022 June 30, 2021 June 30, 2022 June 30, 2021

Interest rate swap agreements $ 4,944 $ ( 54 ) $ 14,278 $ 6,226

The following table summarizes the periodic changes in the fair value of derivatives not designated as hedging instruments on the condensed consolidated statements of income for the three months ended March 31, 2022 and 2021.

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

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

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

(in thousands) June 30, 2022 June 30, 2021 June 30, 2022 June 30, 2021

Asset Derivatives

Derivatives not designated as hedging instruments

IRLCs $ 550 $ — $ — $ —

Forward contracts — — 43 623

2 unchanged sentences

IRLCs $ — $ ( 292 ) $ ( 252 ) $ ( 2,541 )

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.

Forward contracts ( 1,059 ) ( 738 ) — —

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, 2022 and 2021.

(in thousands)

Line item in the condensed consolidated statements of income

Three Months Ended

March 31, 2022 March 31, 2021

Three Months Ended Six Months Ended

June 30, 2022 June 30, 2021 June 30, 2022 June 30, 2021

Interest income

7 unchanged sentences

Total interest expense

1,000 1,445 2,366 2,853

Net interest income

1 unchanged sentence

Accumulated Other Comprehensive Loss

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.

The components of accumulated other comprehensive loss, included in shareholders' equity, for the six months ended June 30, 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

5 unchanged sentences

Other comprehensive (loss) income - net of tax ( 25,013 ) ( 3,818 ) 9,120 ( 19,711 )

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

Balance, June 30, 2022 $ ( 27,568 ) $ ( 3,818 ) $ 636 $ ( 30,750 )

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

3 unchanged sentences

Other comprehensive (loss) income - net of tax ( 632 ) — 4,917 4,285

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

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

The components of accumulated other comprehensive loss, included in stockholders' equity, for the three months ended June 30, 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, April 1, 2022 $ ( 16,359 ) $ ( 4,034 ) $ ( 2,468 ) $ ( 22,861 )

Other comprehensive (loss) income before reclassifications from accumulated other comprehensive loss before tax ( 15,395 ) — 4,944 ( 10,451 )

Reclassifications from accumulated other comprehensive (loss) income to earnings before tax — 193 — 193

Other comprehensive (loss) gain before tax ( 15,395 ) 193 4,944 ( 10,258 )

Income tax (benefit) provision ( 4,186 ) ( 23 ) 1,840 ( 2,369 )

Other comprehensive (loss) income - net of tax ( 11,209 ) 216 3,104 ( 7,889 )

Balance, June 30, 2022 $ ( 27,568 ) $ ( 3,818 ) $ 636 $ ( 30,750 )

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

Other comprehensive (loss) income before reclassifications from accumulated other comprehensive loss before tax 1,388 — ( 54 ) 1,334

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

Income tax (benefit) provision ( 333 ) — 8 ( 325 )

Other comprehensive income (loss) - net of tax 1,055 — ( 46 ) 1,009

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

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

Accumulated Other Comprehensive Income (Loss) for the 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

Three Months Ended June 30, 2022 Three Months Ended June 30, 2021 Six Months Ended June 30, 2022 Six Months Ended June 30, 2021

Reclassifications from accumulated other comprehensive loss to earnings before tax $ ( 193 ) — $ ( 312 ) $ — Interest income

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This increases the comparability of financial statement information provided by institutions that otherwise would have reported similar financial instruments using different measurement methodologies, potentially decreasing costs for financial statement preparers while providing more useful information to investors and other users.

For public business entities that are SEC filers, the amendments in this update are effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years.

All entities may early adopt the amendments in this update as of the fiscal years beginning after December 15, 2018, including interim periods within those fiscal years.

In October 2019, the FASB voted to delay the effective date for smaller reporting companies to fiscal years beginning after December 15, 2022.

An entity will apply the amendments in this update through a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is effective (that is, a modified-retrospective approach).

A prospective transition approach is required for debt securities for which an OTTI had been recognized before the effective date.

The effect of a prospective transition approach is to maintain the same amortized cost basis before and after the effective date of this update.

The Company expects to adopt this guidance on January 1, 2023 and is currently evaluating the impact of the amendments on the Company’s condensed consolidated financial statements.

The Company currently cannot determine or reasonably quantify the impact of the adoption of the amendments due to the complexity and extensive changes.

The Company intends to develop processes and procedures prior to the effective date to ensure it is fully compliant with the amendments at the adoption date.

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

The Company expects to adopt this guidance on January 1, 2023 and is currently evaluating the impact of the amendments on the Company’s consolidated financial statements.

The Company has a current expected credit losses (“CECL”) working group that has been meeting to discuss implementation matters related to the completeness and accuracy of historical data, model development and corporate governance documentation.

Specific to the model, the CECL working group has discussed results from parallel model runs for each portfolio segment, assumptions related to unfunded commitments and economic forecast factors.

Model validation is expected to be completed in the third quarter 2022.

The Company expects to record a one-time cumulative effect adjustment to the ALLL in retained earnings on the consolidated balance sheet as of the beginning of the first reporting period in which the new standard is effective, as is required in the guidance.

The Company believes there will be an increase in the ALLL as a result of the adoption of this new standard;

however, it is waiting to provide an estimate until the completion of the model validation and analysis by the CECL working group.

The Company will continue to evaluate and refine the ALLL throughout the remainder of 2022, considering changes in portfolio composition, economic conditions and the results from the model validation.

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

17 unchanged sentences

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.

The ASU requires an entity to disclose current-period gross write-offs by year of origination for financing receivables within the scope of Subtopic 326-20.

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 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