Companies: 10,785     total market cap: $133.513 T
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First Internet Bancorp
INBK
#8680
Rank
$0.17 B
Marketcap
๐Ÿ‡บ๐Ÿ‡ธ United States
Country
$20.38
Share price
1.09%
Change (1 day)
-23.73%
Change (1 year)
๐Ÿ’ณ Financial services
Categories
  1. First Internet Bancorp
  2. Quarterly Reports (10-Q)
  3. Financial Year FY2025 Q1

First Internet Bancorp - 10-Q quarterly report FY2025 Q1


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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 10-Q
 
(Mark One)
☑QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period ended March 31, 2025
OR
☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Transition Period From ________ to ________.
 
Commission File Number 001-35750 
First Internet Bancorp
(Exact Name of Registrant as Specified in Its Charter)
Indiana 20-3489991
(State or Other Jurisdiction of
Incorporation or Organization)		 (I.R.S. Employer
Identification No.)
   
8701 East 116th Street
Fishers, IN
 46038
(Address of Principal Executive Offices) (Zip Code)
(317) 532-7900
(Registrant’s Telephone Number, Including Area Code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading SymbolsName of each exchange on which registered
Common Stock, without par valueINBKThe Nasdaq Stock Market LLC
6.0% Fixed to Floating Subordinated Notes due 2029INBKZThe Nasdaq Stock Market LLC
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes þ No ¨
 
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes þ No ¨
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large Accelerated Filer ¨
Accelerated Filer þ
Non-accelerated Filer ¨
Smaller Reporting Company ☐
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No þ
 
As of May 2, 2025, the registrant had 8,697,085 shares of common stock issued and outstanding.


Cautionary Note Regarding Forward-Looking Statements
  
This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of the federal securities laws. These statements are not historical facts, but rather statements based on the current expectations of First Internet Bancorp and its consolidated subsidiaries (the “Company,” “we,” “our,” or “us”) regarding our business strategies, intended results and future performance, including without limitation statements concerning the financial condition, results of operations, trends in lending policies and loan programs, plans and prospective business partnerships, objectives, future performance and business of the Company. Forward-looking statements are generally preceded by terms such as “anticipate,” “attempt,” “believe,” “can,” “continue,” “could,” “effort,” “estimate,” “expect,” “goal,” “intend,” “likely,” “may,” “objective,” “optimistic,” “pending,” “plan,” “position,” “potential,” “preliminary,” “remain,” “scale,” “should,” “will,” “would” or other similar expressions. Such statements are subject to certain risks and uncertainties including: our business and operations and the business and operations of our vendors and customers; general economic conditions, whether national or regional, and conditions in the lending markets in which we participate that may have an adverse effect on the demand for our loans and other products (including the effects of inflationary pressures, changes in interest rates, slowdowns in economic growth, the impact of tariffs and trade policies, and the potential for high unemployment rates, as well as the financial stress on borrowers and changes to customer and client behavior and credit risk as a result of the foregoing); our credit quality and related levels of nonperforming assets and loan losses, and the value and salability of the real estate that is collateral for our loans; failures or breaches of or interruptions in the communication and information systems on which we rely to conduct our business that could reduce our revenues, increase our costs or lead to disruptions in our business; our dependence on capital distributions from First Internet Bank of Indiana (the “Bank”); results of examinations of us by our regulators, including the possibility that our regulators may, among other things, require us to increase our allowance for credit losses or to write-down assets; changing bank regulatory conditions, policies or programs, whether arising as new legislation or regulatory initiatives, that could lead to restrictions on activities of banks generally, or the Bank in particular; more restrictive regulatory capital requirements; increased costs, including deposit insurance premiums; regulation or prohibition of certain income producing activities or changes in the secondary market for loans and other products; changes in market rates and prices that may adversely impact the value of securities, loans, deposits and other financial instruments and the interest rate sensitivity of our balance sheet; our liquidity requirements being adversely affected by changes in our assets and liabilities; the effect of legislative or regulatory developments, including changes in laws concerning taxes, banking, securities, insurance and other aspects of the financial services industry; potential impacts of adverse developments in the banking industry, including impacts on customer confidence, deposit outflows, liquidity and the regulatory response thereto; inaccuracies or other failures from the use of models, including the failure of assumptions and estimates, as well as differences in, and changes to, economic, market and credit conditions; potential claims, damages, penalties, fines, costs and reputational damage resulting from pending or future litigation, regulatory proceedings and enforcement actions; competitive factors among financial services organizations, including product and pricing pressures and our ability to attract, develop and retain qualified banking professionals; the growth and profitability of noninterest or fee income being less than expected; the loss of any key members of senior management; the effect of changes in accounting policies and practices, as may be adopted by the Financial Accounting Standards Board, the Securities and Exchange Commission (the “SEC”), the Public Company Accounting Oversight Board and other regulatory agencies; and the effect of fiscal and governmental policies of the United States federal government. Additional factors that may affect our results include those discussed in this Quarterly Report on Form 10-Q and our most recent Annual Report on Form 10-K under the heading “Risk Factors” and in other reports filed with the SEC. We caution readers not to place undue reliance on any such forward-looking statements, which speak only as of the date made. The factors listed above could affect our financial performance and could cause our actual results for future periods to differ materially from any opinions or statements expressed with respect to future periods in any current statements.

Except as required by law, we do not undertake, and specifically disclaim any obligation, to publicly release the result of any revisions that may be made to any forward-looking statements to reflect events or circumstances after the date of such statements or to reflect the occurrence of anticipated or unanticipated events.
i

PART I

ITEM 1.    FINANCIAL STATEMENTS 

First Internet Bancorp
Condensed Consolidated Balance Sheets
(Amounts in thousands except share data)
 March 31, 2025December 31, 2024
 (Unaudited) 
Assets  
Cash and due from banks$6,344 $9,249 
Interest-bearing deposits388,110 457,161 
Total cash and cash equivalents394,454 466,410 
Securities available-for-sale, at fair value (amortized cost of $716,860 and $626,854 in 2025 and 2024, respectively)
681,785 587,355 
Securities held-to-maturity, at amortized cost, net of allowance for credit losses of $0.1 million and $0.2 million in 2025 and 2024, respectively, (fair value of $259,116 and $228,851 in 2025 and 2024, respectively)
276,542 249,796 
Loans held-for-sale31,738 54,695 
Loans4,254,412 4,170,646 
Allowance for credit losses - loans(47,238)(44,769)
Net loans4,207,174 4,125,877 
Accrued interest receivable29,022 28,180 
Federal Home Loan Bank of Indianapolis stock28,350 28,350 
Cash surrender value of bank-owned life insurance41,675 41,394 
Premises and equipment, net70,461 71,453 
Goodwill4,687 4,687 
Servicing asset, at fair value17,445 16,389 
Other real estate owned1,518 272 
Accrued income and other assets66,757 63,001 
Total assets$5,851,608 $5,737,859 
Liabilities and Shareholders’ Equity  
Liabilities  
Noninterest-bearing deposits$151,815 $136,451 
Interest-bearing deposits4,793,810 4,796,755 
Total deposits4,945,625 4,933,206 
Advances from Federal Home Loan Bank395,000 295,000 
Subordinated debt, net of unamortized debt issuance costs of $1,772 and $1,850 in 2025 and 2024, respectively
105,228 105,150 
Accrued interest payable1,645 2,495 
Accrued expenses and other liabilities16,363 17,945 
Total liabilities5,463,861 5,353,796 
Commitments and Contingencies
Shareholders’ Equity  
Preferred stock, no par value; 4,913,779 shares authorized; issued and outstanding - none
— — 
Voting common stock, no par value; 45,000,000 shares authorized; 8,697,085 and 8,667,894 shares issued and outstanding in 2025 and 2024, respectively
185,873 186,094 
Nonvoting common stock, no par value; 86,221 shares authorized; issued and outstanding - none
— — 
Retained earnings231,031 230,622 
Accumulated other comprehensive loss(29,157)(32,653)
Total shareholders’ equity387,747 384,063 
Total liabilities and shareholders’ equity$5,851,608 $5,737,859 

See Notes to Condensed Consolidated Financial Statements
1

First Internet Bancorp
Condensed Consolidated Statements of Income – Unaudited
(Amounts in thousands except share and per share data)
 Three Months Ended March 31,
 20252024
Interest Income  
Loans$62,662 $55,435 
Securities – taxable8,463 5,694 
Securities – non-taxable661 969 
Other earning assets5,043 6,067 
Total interest income76,829 68,165 
Interest Expense  
Deposits47,626 42,129 
Other borrowed funds4,107 5,302 
Total interest expense51,733 47,431 
Net Interest Income25,096 20,734 
Provision for credit losses - loans12,121 2,582 
Benefit for credit losses - debt securities held to maturity(20)(62)
Benefit for credit losses - off-balance sheet commitments(168)(72)
Net Interest Income After Provision for Credit Losses13,163 18,286 
Noninterest Income  
Service charges and fees265 220 
Loan servicing revenue1,983 1,323 
Loan servicing asset revaluation(1,181)(434)
Gain on sale of loans8,647 6,536 
Other713 702 
Total noninterest income10,427 8,347 
Noninterest Expense  
Salaries and employee benefits13,107 11,796 
Marketing, advertising and promotion647 736 
Consulting and professional services1,228 853 
Data processing635 564 
Loan expenses1,531 1,445 
Premises and equipment3,115 2,826 
Deposit insurance premium1,398 1,145 
Other1,895 1,658 
Total noninterest expense23,556 21,023 
Income Before Income Taxes34 5,610 
Income Tax (Benefit) Provision (909)429 
Net Income $943 $5,181 
Income Per Share of Common Stock  
Basic$0.11 $0.60 
Diluted$0.11 $0.59 
Weighted-Average Number of Common Shares Outstanding  
Basic8,715,655 8,679,429 
Diluted8,784,970 8,750,297 
Dividends Declared Per Share$0.06 $0.06 

See Notes to Condensed Consolidated Financial Statements
2

First Internet Bancorp
Condensed Consolidated Statements of Comprehensive Income – Unaudited
(Amounts in thousands)
 Three Months Ended March 31,
 20252024
Net income $943 $5,181 
Other comprehensive income
Securities available-for-sale
Net unrealized holding gains (losses) recorded within other comprehensive income (loss) before income tax4,424 (2,074)
Income tax provision (benefit) 1,017 (475)
Net effect on other comprehensive income (loss)3,407 (1,599)
Securities held-to-maturity
Amortization of net unrealized holding losses on securities transferred from available-for-sale to held-to-maturity120 234 
Income tax provision 31 57 
Net effect on other comprehensive income89 177 
Cash flow hedges
Net unrealized holding gains on cash flow hedging derivatives recorded within other comprehensive income before income tax— 902 
Income tax provision — 207 
Net effect on other comprehensive income — 695 
Total other comprehensive income (loss) 3,496 (727)
Comprehensive income $4,439 $4,454 
 
 See Notes to Condensed Consolidated Financial Statements
3

First Internet Bancorp
Condensed Consolidated Statements of Changes in Shareholders’ Equity - Unaudited
Three Months Ended March 31, 2025 and 2024
(Amounts in thousands except share and per share data)
Voting and
Nonvoting
Common
Stock		Retained
Earnings		Accumulated
Other
Comprehensive
Loss		Total
Shareholders’
Equity
Balance, January 1, 2025$186,094 $230,622 $(32,653)$384,063 
Net income— 943 — 943 
     Other comprehensive income — — 3,496 3,496 
Dividends declared ($0.06 per share)
— (534)— (534)
Recognition of the fair value of share-based compensation1 — — 1 
Deferred stock rights and restricted stock units issued in lieu of cash dividends payable on outstanding deferred stock rights and restricted stock units2— — 2 
Common stock redeemed for the net settlement of share-based awards(224)— — (224)
Balance, March 31, 2025$185,873 $231,031 $(29,157)$387,747 
Balance, January 1, 2024$184,700 $207,470 $(29,375)$362,795 
Net income— 5,181 — 5,181 
Other comprehensive loss— — (727)(727)
Dividends declared ($0.06 per share)
— (530)— (530)
Recognition of the fair value of share-based compensation443 — — 443 
Repurchased shares of common stock (10,500)
(283)— — (283)
Deferred stock rights and restricted stock units issued in lieu of cash dividends payable on outstanding deferred stock rights and restricted stock units2 — — 2 
Common stock redeemed for the net settlement of share-based awards(142)— — (142)
Balance, March 31, 2024$184,720 $212,121 $(30,102)$366,739 

See Notes to Condensed Consolidated Financial Statements




4

First Internet Bancorp
Condensed Consolidated Statements of Cash Flows – Unaudited
(Amounts in thousands)
 Three Months Ended March 31,
 20252024
Operating Activities  
Net income $943 $5,181 
Adjustments to reconcile net income to net cash provided by operating activities:  
Depreciation and amortization1,070 1,866 
Increase in cash surrender value of bank-owned life insurance(281)(272)
Provision for credit losses 11,933 2,448 
Share-based compensation expense1 443 
Loans originated for sale(112,404)(80,454)
Proceeds from sale of loans141,771 84,826 
Gain on loans sold(8,647)(6,536)
Gain on sale of other real estate owned(19)— 
(Gain) loss on derivatives(216)1,224 
Loan servicing asset revaluation1,181 434 
Net change in accrued income and other assets(366)(4,872)
Net change in accrued expenses and other liabilities(2,141)(1,497)
Net cash provided by operating activities32,825 2,791 
Investing Activities
Net loan activity, excluding purchases(58,029)(39,598)
Proceeds from sale of other real estate owned291 — 
Maturities and calls of securities available-for-sale25,528 15,891 
Purchase of securities available-for-sale(115,680)(22,689)
Maturities and calls of securities held-to-maturity7,324 6,981 
Purchase of securities held-to-maturity(33,629)(15,221)
Purchase of premises and equipment(184)(940)
Loans purchased(36,907)(30,451)
Other investing activities(5,160)(7,240)
Net cash used in investing activities(216,446)(93,267)
Financing Activities
Net increase in deposits12,419 206,795 
Cash dividends paid(520)(519)
Repurchase of common stock— (283)
Proceeds from advances from Federal Home Loan Bank100,000 110,000 
Repayment of advances from Federal Home Loan Bank— (150,000)
Other, net(234)(151)
Net cash provided by financing activities111,665 165,842 
Net (Decrease) Increase in Cash and Cash Equivalents(71,956)75,366 
Cash and Cash Equivalents, Beginning of Period466,410 405,898 
Cash and Cash Equivalents, End of Period$394,454 $481,264 
Supplemental Disclosures
Cash paid during the period for interest52,583 47,897 
Cash paid during the period for taxes146 86 
Loans transferred to other real estate owned1,518 — 
Cash dividends declared, paid in subsequent period522 519 
Securities purchased during the period, settled in subsequent period— 3,327 


See Notes to Condensed Consolidated Financial Statements
5

First Internet Bancorp
Notes to Condensed Consolidated Financial Statements – Unaudited
(Table amounts in thousands except share and per share data)
  
Note 1:        Basis of Presentation
 
The accompanying unaudited condensed consolidated financial statements have been prepared in conformity with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”). Accordingly, they do not include all of the information or footnotes necessary for a complete presentation of financial condition, results of operations, changes in shareholders’ equity, or cash flows in accordance with GAAP. 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, 2025 are not necessarily indicative of the results expected for the year ending December 31, 2025 or any other period. The March 31, 2025 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, 2024.
 
The preparation of the condensed consolidated financial statements in conformity with GAAP requires management to make estimates, judgments, or assumptions that could have a material effect on the carrying value of certain assets and liabilities. These estimates, judgments, and assumptions affect the amounts reported in the condensed consolidated financial statements and the disclosures provided. The Company utilizes processes that involve the use of significant estimates and the judgment of management in determining the amount of the Company’s allowance for credit losses (“ACL”) and changes in any of these could have a significant impact on the condensed consolidated financial statements.

The condensed consolidated financial statements include the accounts of First Internet Bancorp (the “Company”), its wholly owned subsidiary, First Internet Bank of Indiana (the “Bank”), and the Bank’s three wholly owned subsidiaries, First Internet Public Finance Corp., JKH Realty Services, LLC and SPF15, Inc. All significant intercompany accounts and transactions have been eliminated in consolidation.
 
The Company is subject to claims and lawsuits that arise primarily in the ordinary course of business. 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.


6

Note 2:        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, 2025 and 2024. 
(dollars in thousands, except share and per share data)Three Months Ended March 31,
 20252024
Basic earnings per share  
Net income $943 $5,181 
Weighted-average common shares8,715,655 8,679,429 
Basic earnings per common share$0.11 $0.60 
Diluted earnings per share  
Net income $943 $5,181 
Weighted-average common shares8,715,655 8,679,429 
Dilutive effect of equity compensation69,315 70,868 
     Weighted-average common and incremental shares8,784,970 8,750,297 
Diluted earnings per common share 1
$0.11 $0.59 
1 Potential dilutive common shares are excluded from the computation of diluted EPS in the periods where the effect would be antidilutive. There were 3,916 weighted-average antidilutive shares excluded from the computation of diluted EPS for the three months ended March 31, 2025 and no antidilutive shares for the three months ended March 31, 2024.
  
7

Note 3:         Securities
 
The following tables summarize securities available-for-sale and securities held-to-maturity as of March 31, 2025 and December 31, 2024.

March 31, 2025
 Amortized CostGross UnrealizedFair Value
(amounts in thousands)GainsLosses
Securities available-for-sale    
U.S. Government-sponsored agencies$79,021 $545 $(1,288)$78,278 
Municipal securities65,344 — (4,347)60,997 
Agency mortgage-backed securities - residential 1
398,021 599 (27,577)371,043 
Agency mortgage-backed securities - commercial64,827 177 (1,070)63,934 
Private label mortgage-backed securities - residential43,947 207 (835)43,319 
Asset-backed securities21,662 30 (15)21,677 
Corporate securities44,038 167 (1,668)42,537 
Total available-for-sale$716,860 $1,725 $(36,800)$681,785 


 March 31, 2025
 Amortized CostGross UnrealizedFair ValueAllowance for Credit LossesNet Carrying Value
(amounts in thousands)GainsLosses
Securities held-to-maturity    
Municipal securities$12,218 $— $(817)$11,401 $(3)$12,215 
Agency mortgage-backed securities - residential232,235 449 (14,970)217,714 — 232,235 
Agency mortgage-backed securities - commercial5,687 — (979)4,708 — 5,687 
Corporate securities26,536 — (1,243)25,293 (131)26,405 
Total held-to-maturity$276,676 $449 $(18,009)$259,116 $(134)$276,542 

1 Includes $0.2 million of additional premium related to terminated interest rate swaps associated with agency mortgage-backed securities - residential as of March 31, 2025.

 December 31, 2024
 Amortized CostGross UnrealizedFair Value
(amounts in thousands)GainsLosses
Securities available-for-sale    
U.S. Government-sponsored agencies$83,811 $487 $(1,482)$82,816 
Municipal securities67,441 — (3,787)63,654 
Agency mortgage-backed securities - residential 1
300,914 460 (31,733)269,641 
Agency mortgage-backed securities - commercial64,214 276 (1,159)63,331 
Private label mortgage-backed securities - residential46,623 186 (988)45,821 
Asset-backed securities
23,802 62 (43)23,821 
Corporate securities40,049 71 (1,849)38,271 
Total available-for-sale$626,854 $1,542 $(41,041)$587,355 


8

 December 31, 2024
 Amortized CostGross UnrealizedFair ValueAllowance for Credit LossesNet Carrying Value
(amounts in thousands)GainsLosses
Securities held-to-maturity    
Municipal securities$12,846 $— $(921)$11,925 $(3)$12,843 
Agency mortgage-backed securities - residential201,840 102 (17,530)184,412 — 201,840 
Agency mortgage-backed securities - commercial5,705 — (1,157)4,548 — 5,705 
Corporate securities29,559 — (1,593)27,966 (151)29,408 
Total held-to-maturity$249,950 $102 $(21,201)$228,851 $(154)$249,796 
1 Includes $0.3 million of additional premium related to terminated interest rate swaps associated with agency mortgage-backed securities - residential as of December 31, 2024.

Accrued interest receivable on AFS and HTM securities at March 31, 2025 was $2.7 million and $1.1 million, respectively, compared to $2.8 million and $1.1 million, respectively, at December 31, 2024, and is included in accrued interest receivable on the condensed consolidated balance sheet. The Company elected to exclude all accrued interest receivable from securities when estimating credit losses.

At March 31, 2025 and December 31, 2024, approximately 94% and 92%, respectively, of mortgage-backed securities (including both AFS and HTM) held by the Company are issued by U.S. government-sponsored entities and agencies. These securities are either explicitly or implicitly guaranteed by the U.S. government and have a long history of no credit losses; therefore, the Company did not record an ACL on these securities.

Additionally, the Company evaluated credit impairment for individual AFS securities that are in an unrealized loss position and determined that the unrealized losses are unrelated to credit quality and are primarily attributable to changes in interest rates and volatility in the financial markets. As the Company does not intend to sell the AFS securities that are in an unrealized loss position, and it is unlikely that it will be required to sell these securities before recovery of their amortized cost basis, the Company did not record an ACL on these securities.

The Company also evaluated its HTM securities that are in an unrealized loss position and considered issuer bond ratings, historical loss rates for bond ratings and economic forecasts. The ACL on HTM securities at March 31, 2025 was $0.1 million, compared to $0.2 million at December 31, 2024.

The carrying value of securities at March 31, 2025 is shown below by their contractual maturity date. Actual maturities will differ because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

 Available-for-Sale
(amounts in thousands)Amortized
Cost		Fair
Value
Within one year$10,370 $10,353 
One to five years23,878 23,838 
Five to ten years77,154 74,094 
After ten years77,001 73,527 
 188,403 181,812 
Agency mortgage-backed securities - residential398,021 371,043 
Agency mortgage-backed securities - commercial64,827 63,934 
Private label mortgage-backed securities - residential43,947 43,319 
Asset-backed securities21,662 21,677 
Total$716,860 $681,785 


9

 Held-to-Maturity
(amounts in thousands)Amortized
Cost		Fair
Value
Within one year$1,705 $1,691 
One to five years21,180 20,805 
Five to ten years12,380 11,157 
After ten years3,489 3,041 
38,754 36,694 
Agency mortgage-backed securities - residential232,235 217,714 
Agency mortgage-backed securities - commercial5,687 4,708 
Total$276,676 $259,116 

No available-for-sale securities were sold during the three months ended March 31, 2025 and March 31, 2024. As such, the Company did not realize any gains or losses related to the sale of available-for-sale securities during either time period.

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, 2025 and December 31, 2024 was $677.0 million and $603.9 million, which was approximately 71% and 72%, respectively, of the Company’s AFS and HTM securities portfolios. As of March 31, 2025, the Company’s security portfolio consisted of 606 positions, of which 487 were in an unrealized loss position. As of December 31, 2024, the Company’s security portfolio consisted of 579 positions, of which 482 were in an unrealized loss position. The unrealized losses are related to the categories noted below.

U. S. Government-Sponsored Agencies, Municipal Securities and Corporate Securities

The unrealized losses on the Company’s investments in securities issued by U.S. Government-sponsored agencies, municipal organizations and corporate entities were caused primarily by interest rate changes. The contractual terms of those investments do not permit the issuer to settle the securities at a price less than the amortized cost basis of the investments. The Company does not intend to sell the investments, and it is not more likely than not that the Company will be required to sell the investments, before recovery of their amortized cost basis, which may be upon maturity.
 
Agency Mortgage-Backed, Private Label Mortgage-Backed Securities and Asset-Backed Securities
 
The unrealized losses on the Company’s investments in agency mortgage-backed, private label mortgage-backed securities and asset-backed securities were caused primarily by interest rate changes. The Company expects to recover the amortized cost basis over the terms of the securities. The Company does not intend to sell the investments, and it is not more likely than not that the Company will be required to sell the investments, before recovery of their amortized cost basis, which may be upon maturity.

10

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, 2025 and December 31, 2024.

 March 31, 2025
 Less Than 12 Months12 Months or LongerTotal
(amounts in thousands)Fair
Value		Unrealized
Losses		Fair
Value		Unrealized
Losses		Fair
Value		Unrealized
Losses
Securities available-for-sale      
U.S. Government-sponsored agencies$15,149 $(100)$27,600 $(1,188)$42,749 $(1,288)
Municipal securities7,092 (68)52,685 (4,279)59,777 (4,347)
Agency mortgage-backed securities- residential99,306 (255)168,456 (27,322)267,762 (27,577)
Agency mortgage-backed securities- commercial29,111 (105)10,610 (965)39,721 (1,070)
Private label mortgage-backed securities - residential10,434 (9)7,312 (826)17,746 (835)
     Asset-backed securities12,309 (15)— — 12,309 (15)
Corporate securities— — 27,347 (1,668)27,347 (1,668)
Total$173,401 $(552)$294,010 $(36,248)$467,411 $(36,800)


 December 31, 2024
 Less Than 12 Months12 Months or LongerTotal
(amounts in thousands)Fair
Value		Unrealized
Losses		Fair
Value		Unrealized
Losses		Fair
Value		Unrealized
Losses
Securities available-for-sale      
U.S. Government-sponsored agencies$16,856 $(111)$29,748 $(1,371)$46,604 $(1,482)
Municipal securities8,504 (54)52,649 (3,733)61,153 (3,787)
Agency mortgage-backed securities - residential
41,005 (179)169,483 (31,554)210,488 (31,733)
Agency mortgage-backed securities - commercial18,141 (37)12,027 (1,122)30,168 (1,159)
Private label mortgage-backed securities - residential3,003 (14)7,450 (974)10,453 (988)
Asset-backed securities
10,299 (43)— — 10,299 (43)
Corporate securities2,994 (6)27,179 (1,843)30,173 (1,849)
Total$100,802 $(444)$298,536 $(40,597)$399,338 $(41,041)



11

The following tables summarize ratings for the Company’s HTM portfolio as of March 31, 2025 and December 31, 2024.

March 31, 2025
Held-to-Maturity
(amounts in thousands)Municipal SecuritiesMortgage-Backed Securities - ResidentialMortgage-Backed Securities - CommercialCorporate SecuritiesTotal
AAA equivalent - agency$— $232,235 $5,687 $— $237,922 
Aa1/AA+8,252 — — — 8,252 
Aa2/AA2,173 — — — 2,173 
Aa3/AA-1,793 — — — 1,793 
A2/A— — — 5,000 5,000 
Baa1/BBB+— — — 8,500 8,500 
Baa2/BBB— — — 5,500 5,500 
Baa3/BBB-— — — 5,536 5,536 
Ba1/BB+— — — 2,000 2,000 
   Total$12,218 $232,235 $5,687 $26,536 $276,676 

December 31, 2024
Held-to-Maturity
(amounts in thousands)Municipal SecuritiesMortgage-Backed Securities - ResidentialMortgage-Backed Securities - CommercialCorporate SecuritiesTotal
AAA equivalent - agency$— $201,840 $5,705 $— $207,545 
Aa1/AA+8,878 — — — 8,878 
Aa2/AA2,175 — — — 2,175 
Aa3/AA-1,793 — — — 1,793 
A2/A— — — 5,000 5,000 
Baa1/BBB+— — — 8,500 8,500 
Baa2/BBB— — — 5,500 5,500 
Baa3/BBB-— — — 8,559 8,559 
Ba1/BB+— — — 2,000 2,000 
   Total$12,846 $201,840 $5,705 $29,559 $249,950 

There were no amounts reclassified from accumulated other comprehensive loss to the consolidated statements of income during the three months ended March 31, 2025 and December 31, 2024.


12

Note 4:        Loans

Loan balances as of March 31, 2025 and December 31, 2024 are summarized in the table below. Categories of loans include:

(amounts in thousands)March 31, 2025December 31, 2024
Commercial loans  
Commercial and industrial$140,239 $120,175 
Owner-occupied commercial real estate49,954 53,591 
Investor commercial real estate297,874 269,431 
Construction471,082 413,523 
Single tenant lease financing950,814 949,748 
Public finance482,558 485,867 
Healthcare finance171,430 181,427 
Small business lending1
353,408 331,914 
Franchise finance514,700 536,909 
Total commercial loans3,432,059 3,342,585 
Consumer loans
Residential mortgage367,722 375,160 
Home equity17,421 18,274 
Other consumer loans412,553 407,947 
Total consumer loans797,696 801,381 
Total commercial and consumer loans4,229,755 4,143,966 
Net deferred loan origination costs, premiums and discounts on purchased loans, and other2
24,657 26,680 
Total loans4,254,412 4,170,646 
Allowance for credit losses(47,238)(44,769)
Net loans$4,207,174 $4,125,877 

1 Balances include $37.6 million and $34.0 million that is guaranteed by the U.S. government as of March 31, 2025 and December 31, 2024, respectively.

2 Includes carrying value adjustment of $22.1 million and $22.9 million related to terminated interest rate swaps associated with public finance loans as of March 31, 2025 and December 31, 2024, respectively. 

The general risk characteristics specific to each loan portfolio segment are as follows:

Commercial and Industrial: Commercial and industrial loans’ sources of repayment are primarily based on the identified cash flows of the borrower and secondarily on the underlying collateral provided by the borrower. The cash flows of borrowers, however, may not be as expected, and the collateral securing these loans may fluctuate in value. Loans are made for working capital, equipment purchases, or other purposes. Most commercial and industrial loans are secured by the assets being financed and may incorporate a personal guarantee. This portfolio segment is generally concentrated in the Midwest and Southwest regions of the United States.

Owner-Occupied Commercial Real Estate: The primary source of repayment is the cash flow from the ongoing operations and activities conducted by the borrower, or an affiliate of the borrower, who owns the property. This portfolio segment is generally concentrated in the Midwest and Southwest regions of the United States and its loans are often secured by manufacturing and service facilities.

13

Investor Commercial Real Estate: These loans are made on a nationwide basis and are underwritten primarily based on the cash flow expected to be generated from the property and are secondarily supported by the value of the real estate. These loans typically incorporate a personal guarantee from the primary sponsor or sponsors. This portfolio segment generally involves larger loan amounts with repayment primarily dependent on the successful leasing and operation of the property securing the loan or the business conducted on the property securing the loan. 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. 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 unless other underwriting factors are present to mitigate these additional risks.

Construction: Construction loans are made on a nationwide basis and are secured by land and related improvements and are made to assist in the construction of new structures, which may include commercial (retail, industrial, office, and multi-family) properties, land development for residential properties or single family residential properties offered for sale by the builder. These loans generally finance a variety of project costs, including land, site preparation, architectural services, construction, closing and soft costs and interim financing needs. 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.

Single Tenant Lease Financing: These loans are made on a nationwide basis to owners of real estate subject to long-term lease arrangements with single tenant operators. The real estate is typically operated by regionally, nationally or globally branded businesses. The loans are underwritten based on the financial strength of the borrower, characteristics of the real estate, cash flows generated from the lease arrangements and the financial strength of the tenant. Similar to the other loan portfolio segments, management monitors and evaluates these loans based on borrower and tenant financial performance, collateral value, industry trends and other risk grade criteria.

Public Finance: These loans are made on a nationwide basis to governmental and not-for-profit entities to provide both tax-exempt and taxable loans for a variety of purposes including: short-term cash-flow needs; debt refinancing; economic development; quality of life projects; infrastructure improvements; renewable energy projects; and equipment financing. The primary sources of repayment for public finance loans include pledged revenue sources including but not limited to: general obligations; property taxes; income taxes; tax increment revenue; utility revenue; gaming revenues; sales tax; and pledged general revenue. Certain loans may also include an additional collateral pledge of mortgaged property or a security interest in financed equipment.

Healthcare Finance: 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: These loans are made on a nationwide basis to small businesses and generally carry a partial guaranty from the U.S. Small Business Administration (“SBA”) under its 7(a) loan program. We generally sell the government guaranteed portion of SBA loans into the secondary market while retaining the non-guaranteed portion of the loan and the servicing rights. Loans in the small business lending portfolio have sources of repayment that are primarily based on the identified cash flows of the borrower and secondarily on any underlying collateral provided by the borrower. Loans may, but do not always, have a collateral shortfall. For SBA loans where the guaranteed portion is retained, the SBA guaranty provides a tertiary source of repayment to the Bank in event of borrower default. Cash flows of borrowers, however, may not be as expected and collateral securing these loans may fluctuate in value. Loans are made for a broad array of purposes including, but not limited to, providing operating cash flow, funding ownership changes, and facilitating equipment and commercial real estate purchases.

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 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.

14

Residential Mortgage: With respect to residential loans that are secured by 1-to-4 family residences and are generally owner occupied, the Company typically establishes a maximum loan-to-value ratio and requires private mortgage insurance if that ratio is exceeded. Repayment of these loans is primarily dependent on the financial circumstances of the borrowers, which can be impacted by economic conditions in their market areas such as unemployment levels. Repayment can also be impacted by changes in residential property values. Risk is mitigated by the fact that the loans are of smaller individual amounts and spread over a large number of borrowers in geographically diverse locations throughout the country.

Home Equity: Home equity loans and lines of credit are typically secured by a subordinate interest in 1-to-4 family residences. The properties securing the home equity portfolio segment are generally geographically diverse as the Company offers these products on a nationwide basis. Repayment of these loans and lines of credit is primarily dependent on the financial circumstances of the borrowers and may be impacted by changes in unemployment levels and property values on residential properties, among other economic conditions in the market.

Other Consumer: These loans primarily consist of consumer loans and credit cards. Consumer loans may be secured by consumer assets such as horse trailers or recreational vehicles. Some consumer loans are unsecured, such as small installment loans, home improvement loans and certain lines of credit. Repayment of consumer loans is primarily dependent upon the personal income of the borrowers, which can be impacted by economic conditions in their market areas such as unemployment levels. 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.

Allowance for Credit Losses (“ACL”) Methodology

The ACL for loans represents management's estimate of all expected credit losses over the expected life of the Company’s existing loan portfolio. Management estimates the ACL balance using relevant available information about the collectability of cash flows, from internal and external sources, including historical information relating to past events, current conditions, and reasonable and supportable forecasts of future economic conditions. When the Company is unable to forecast future economic events, management may revert to historical information.

The Company's methodologies incorporate a one-year reasonable and supportable forecast period with a one-year straight line reversion to the long-term historical average.

The ACL methodology may also consider other adjustments to address changes in conditions, trends, and circumstances such as local industry changes that could have a significant impact on the risk profile of the loan portfolio and provide for adjustments that may not be reflected and/or captured in the historical loss data. These factors include: lending policies, imprecision in forecasting future economic conditions, loan profile, lending staff, problem loan trends, loan review, collateral, credit concentration, or other internal and external factors.

The Company also includes qualitative adjustments to the allowance based on factors and considerations that have not otherwise been fully accounted for. Qualitative adjustments include, but are not limited to:

•Changes in lending policies and procedures, including changes in underwriting standards and collections, charge-offs and recovery practices
•Changes in international, national, regional and local conditions
•Changes in the nature and volume of the portfolio and terms of loans
•Changes in the experience, depth and ability of lending management
•Changes in the volume and severity of past due loans and other similar conditions
•Changes in the quality of the organization’s loan review system
•Changes in the value of underlying collateral for collateral dependent loans
•The existence and effect of any concentrations of credit and changes in the levels of such concentrations
•The effect of other external factors (i.e. competition, legal and regulatory requirements) on the level of estimated credit losses

The ACL is measured on a collective or pool basis when similar risk characteristics exist. The Company segments its portfolio generally by Federal Financial Institutions Examination Council ("FFIEC") Call Report codes that align with its lines of business. Additional sub-segmentation may be utilized to identify groups of loans with unique risk characteristics relative to the rest of the portfolio.

15

Loans that do not share similar risk characteristics are evaluated on an individual basis. These evaluations are typically performed on loans with a deteriorated internal risk rating. The allowance for credit loss is determined based on several methods, including estimating the fair value of the underlying collateral or the present value of expected cash flows.

The Company relies on a third-party platform that offers multiple methodologies to measure historical life-of-loan losses.

Modified Loans to Borrowers Experiencing Financial Difficulty

The Company may make modifications to certain loans in order to alleviate temporary difficulties in the borrower’s financial condition and/or constraints on the borrower’s ability to repay the loan, and to minimize potential losses to the Company. Modifications may include changes in the amortization terms of the loan, other-than-insignificant payment delays, reductions in interest rates, acceptance of interest only payments, and/or reductions to the outstanding loan balance. Such loans may be placed on nonaccrual status when there is doubt concerning the full repayment of principal and interest or the loan has been delinquent for a period of 90 days or more. These loans may be returned to accrual status when all contractual amounts past due have been brought current, and the borrower’s performance under the modified terms of the loan agreement and the ultimate collectability of all contractual amounts due under the modified terms is no longer in doubt. The Company typically measures the ACL on modified loans to borrowers experiencing financial difficulty on an individual basis when the loans are deemed to no longer share risk characteristics that are similar with other loans in the portfolio. The determination of the ACL for these loans is based on a discounted cash flow approach for both those measured collectively and individually, unless the loan is deemed collateral dependent, which requires measurement of the ACL based on the estimated expected fair value of the underlying collateral, less costs to sell. GAAP requires the Company to make certain disclosures related to these loans, including certain types of modifications, as well as how such loans have performed since their modifications.

Provision for Credit Losses
 
A provision for estimated losses on loans is charged to income based upon management’s evaluation of the potential losses. Such an evaluation, which includes a review of all loans for which full repayment may not be reasonably assured, considers, among other matters, the estimated net realizable value of the underlying collateral, as applicable, economic conditions, loan loss experience, and other factors that are particularly susceptible to changes that could result in a material adjustment in the near term. While management attempts to use the best information available in making its evaluations, future allowance adjustments may be necessary if economic conditions change substantially from the assumptions used in making the evaluations.
 
Policy for Charging Off Loans
 
The Company’s policy is to charge off a loan at any point in time when it no longer can be considered a bankable asset, meaning collectible within the parameters of policy. A secured loan is generally charged down to the estimated fair value of the collateral, less costs to sell, no later than when it is 120 days past due as to principal or interest. An unsecured loan generally is charged off no later than when it is 180 days past due as to principal or interest. A home improvement loan generally is charged off no later than when it is 90 days past due as to principal or interest.

16

The following tables present changes in the balance of the ACL during the three months ended March 31, 2025 and 2024. 

(amounts in thousands)Three Months Ended March 31, 2025
Allowance for credit losses:Balance, Beginning of PeriodProvision (Credit) Charged to ExpenseLosses
Charged Off		RecoveriesBalance,
End of Period
Commercial and industrial$1,265 $93 $— $2 $1,360 
Owner-occupied commercial real estate528 (58)— — 470 
Investor commercial real estate1,149 (290)— — 859 
Construction1,984 183 — — 2,167 
Single tenant lease financing4,782 (469)— — 4,313 
Public finance703 (174)— — 529 
Healthcare finance1,412 (102)— — 1,310 
Small business lending16,161 4,929 (3,668)133 17,555 
Franchise finance8,976 8,072 (5,848)— 11,200 
Residential mortgage2,136 (241)(11)6 1,890 
Home equity106 (12)— 2 96 
Other consumer loans5,567 190 (314)46 5,489 
Total$44,769 $12,121 $(9,841)$189 $47,238 

(amounts in thousands)Three Months Ended March 31, 2024
Allowance for credit losses:Balance, Beginning of PeriodProvision (Credit) Charged to ExpenseLosses
Charged Off		RecoveriesBalance,
End of Period
Commercial and industrial$2,185 $(387)$— $2 $1,800 
Owner-occupied commercial real estate825 (56)— — 769 
Investor commercial real estate1,311 (513)— — 798 
Construction2,167 775 — — 2,942 
Single tenant lease financing8,129 342 — — 8,471 
Public finance1,372 (36)— — 1,336 
Healthcare finance1,976 (59)— — 1,917 
Small business lending6,532 2,585 (289)40 8,868 
Franchise finance6,363 (197)— — 6,166 
Residential mortgage2,054 (41)(69)1 1,945 
Home equity171 (48)— 2 125 
Other consumer loans5,689 217 (175)23 5,754 
Total$38,774 $2,582 $(533)$68 $40,891 

Accrued interest receivable on loans totaled $24.0 million and $23.8 million at March 31, 2025 and December 31, 2024, respectively, and is excluded from the estimate of credit losses. The Company made the accounting policy election to not measure an ACL for accrued interest receivable. Accrued interest deemed uncollectible will be written off through interest income.

In addition to the ACL, the Company established a reserve for off-balance sheet commitments, classified in other liabilities, as required by the adoption of the CECL methodology for measuring credit losses. This reserve is maintained at a level management believes to be sufficient to absorb losses arising from unfunded loan commitments. The adequacy of the reserve for unfunded commitments is determined quarterly based on methodology similar to the methodology for determining the ACL. The following tables detail activity in the (benefit) provision for credit losses on off-balance sheet commitments for the three ended March 31, 2025 and 2024.
17


(amounts in thousands)Balance
December 31, 2024		(Benefit) Provision for Credit LossesBalance
March 31, 2025
Off-balance sheet commitments
Commercial loans
Commercial and industrial$233 $(63)$170 
Owner-occupied commercial real estate11 (11)— 
Investor commercial real estate1 — 1 
Construction1,568 (94)1,474 
Single tenant lease financing19 (7)12 
Small business lending263 11 274 
Total commercial loans2,095 (164)1,931 
Consumer loans
Residential mortgage1 — 1 
Home equity35 (3)32 
Other consumer9 (1) 8 
Total consumer loans45 (4)41 
Total allowance for off-balance sheet commitments$2,140 $(168)$1,972 

(amounts in thousands)Balance
December 31, 2023		(Benefit) Provision for Credit LossesBalance
March 31, 2024
Off-balance sheet commitments
Commercial loans
Commercial and industrial$233 $(40)$193 
Owner-occupied commercial real estate9 (9)— 
Investor commercial real estate6 (6)— 
Construction2,889 381 3,270 
Small business lending541 (382)159 
Total commercial loans3,678 (56)3,622 
Consumer loans
Residential mortgage11 (6)5 
Home equity45 (10)35 
Other consumer11 —  11 
Total consumer loans67 (16)51 
Total allowance for off-balance sheet commitments$3,745 $(72)$3,673 






18

The Company utilizes a risk grading matrix to assign a risk grade to each of its commercial loans, which are evaluated annually. A description of the general characteristics of the risk grades is as follows:
 
•“Pass” - Higher quality loans that do not fit any of the other categories described below.

•“Special Mention” - Loans that possess some credit deficiency or potential weakness, which deserve close attention.

•“Substandard” - Loans that possess a defined weakness or weaknesses that jeopardize the liquidation of the debt. Loans characterized by the distinct possibility that the institution will sustain some loss if the deficiencies are not corrected. Loans that are inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any.

•“Doubtful” - Such loans have been placed on nonaccrual status and may be heavily dependent upon collateral possessing a value that is difficult to determine or based upon some near-term event that lacks clear certainty. These loans have all of the weaknesses of those classified as Substandard; however, based on existing conditions, these weaknesses make full collection of the principal balance highly improbable.

•“Loss” - Loans that are considered uncollectible and of such little value that continuing to carry them as assets is not warranted.

The Company does not risk grade its consumer loans. It classifies them as either performing or nonperforming. Below is a description of those classifications:

•“Performing” - Loans that are accruing and full collection of principal and interest is expected.

•“Nonperforming” - Loans that are 90 days delinquent or for which the full collection of principal and interest may be in doubt.


19


The following tables present the credit risk profile of the Company’s commercial and consumer loan portfolios by loan class and by year of origination for the years indicated based on rating category and payment activity as of March 31, 2025 and December 31, 2024.
March 31, 2025
Term Loans (amortized cost basis by origination year)Revolving loans amortized cost basisRevolving loans converted to term
(amounts in thousands)20252024202320222021PriorTotal
Commercial and industrial
  Pass$15,965 $21,234 $8,120 $12,772 $1,037 $19,638 $51,987 $— $130,753 
  Special Mention — 45 158 5,017 4,266 — — — 9,486 
  Substandard— — — — — — — — — 
  Doubtful— — — — — — — — — 
     Total commercial and
     industrial		15,965 21,279 8,278 17,789 5,303 19,638 51,987 — 140,239 
Year-to-date gross charge-offs— — — — — — — — — 
Owner-occupied commercial real estate
  Pass— 6,636 1,448 5,319 4,422 19,809 — — 37,634 
  Special Mention — — — 566 879 9,220 — — 10,665 
  Substandard— — — — — 1,655 — — 1,655 
  Doubtful— — — — — — — — — 
     Total owner-occupied
     commercial real estate		— 6,636 1,448 5,885 5,301 30,684 — — 49,954 
Year-to-date gross charge-offs— — — — — — — — — 
Investor commercial real estate
  Pass— 69,372 3,925 92,083 92,050 36,713 — — 294,143 
  Special Mention — — — — — 3,731 — — 3,731 
  Substandard— — — — — — — — — 
  Doubtful— — — — — — — — — 
     Total investor commercial real
     estate		— 69,372 3,925 92,083 92,050 40,444 — — 297,874 
Year-to-date gross charge-offs— — — — — — — — — 
Construction
  Pass6,986 60,689 229,510 151,321 19,957 687 1,932 — 471,082 
  Special Mention — — — — — — — — — 
  Substandard— — — — — — — — — 
  Doubtful— — — — — — — — — 
     Total construction6,986 60,689 229,510 151,321 19,957 687 1,932 — 471,082 
Year-to-date gross charge-offs— — — — — — — — — 
Single tenant lease financing
  Pass14,079 81,509 46,518 205,540 86,290 486,855 — — 920,791 
  Special Mention — 642 — 14,002 4,276 11,103 — — 30,023 
  Substandard— — — — — — — — — 
  Doubtful— — — — — — — — — 
     Total single tenant lease
     financing		14,079 82,151 46,518 219,542 90,566 497,958 — — 950,814 
Year-to-date gross charge-offs— — — — — — — — — 
Public finance
  Pass10,933 54,326 1,290 5,600 11,015 397,434 — — 480,598 
  Special Mention — — — — — 1,960 — — 1,960 
  Substandard— — — — — — — — — 
  Doubtful— — — — — — — — — 
     Total public finance10,933 54,326 1,290 5,600 11,015 399,394 — — 482,558 
Year-to-date gross charge-offs— — — — — — — — — 
20

March 31, 2025
Term Loans (amortized cost basis by origination year)Revolving loans amortized cost basisRevolving loans converted to term
(amounts in thousands)
20252024202320222021PriorTotal
Healthcare finance
  Pass— — — — 8,713 160,318 — — 169,031 
  Special Mention — — — — — 2,399 — — 2,399 
  Substandard— — — — — — — — — 
  Doubtful— — — — — — — — — 
     Total healthcare finance— — — — 8,713 162,717 — — 171,430 
Year-to-date gross charge-offs— — — — — — — — — 
Small business lending
  Pass28,733 137,985 88,792 28,777 10,030 16,810 18,954 — 330,081 
  Special Mention — 1,028 4,459 1,103 — 1,548 959 — 9,097 
  Substandard— 2,951 6,103 1,213 279 1,945 1,739 — 14,230 
  Doubtful— — — — — — — — — 
     Total small business lending28,733 141,964 99,354 31,093 10,309 20,303 21,652 — 353,408 
Year-to-date gross charge-offs— 1,117 2,280 149 73 49 — — 3,668 
Franchise finance
  Pass793 64,339 218,471 164,109 40,722 — — — 488,434 
  Special Mention — — 1,618 4,944 4,020 — — — 10,582 
  Substandard— 370 7,254 5,089 2,646 — — — 15,359 
  Doubtful— — 325 — — — — — 325 
     Total franchise finance793 64,709 227,668 174,142 47,388 — — — 514,700 
Year-to-date gross charge-offs— — 2,118 3,257 473 — — — 5,848 
Consumer loans
Residential mortgage
    Performing— 6,433 13,056 177,999 84,579 80,954 — — 363,021 
    Nonperforming— — — 2,308 607 1,786 — — 4,701 
      Total residential mortgage— 6,433 13,056 180,307 85,186 82,740 — — 367,722 
Year-to-date gross charge-offs— — — 11 — — — — 11 
Home equity
    Performing— — 898 1,393 349 864 13,018 899 17,421 
    Nonperforming— — — — — — — — — 
      Total home equity— — 898 1,393 349 864 13,018 899 17,421 
Year-to-date gross charge-offs— — — — — — — — — 
Other consumer
    Performing25,106 98,611 92,206 85,278 31,341 79,036 811 — 412,389 
    Nonperforming— — 25 83 10 46 — — 164 
      Total other consumer25,106 98,611 92,231 85,361 31,351 79,082 811 — 412,553 
Year-to-date gross charge-offs— 14 95 63 — 142 — — 314 
Total Loans$102,595 $606,170 $724,176 $964,516 $407,488 $1,334,511 $89,400 $899 $4,229,755 
Total year-to-date gross charge-offs$— $1,131 $4,493 $3,480 $546 $191 $— $— $9,841 













21




December 31, 2024
Term Loans (amortized cost basis by origination year)Revolving loans amortized cost basisRevolving loans converted to term
(amounts in thousands)20242023202220212020PriorTotal
Commercial and industrial
  Pass$23,539 $8,501 $13,853 $5,418 $2,362 $17,829 $44,000 $— $115,502 
  Special Mention 47 164 4,462 — — — — — 4,673 
  Substandard— — — — — — — — — 
  Doubtful— — — — — — — — — 
     Total commercial and
     industrial		23,586 8,665 18,315 5,418 2,362 17,829 44,000 — 120,175 
Year-to-date gross charge-offs— — — — — — — — — 
Owner-occupied commercial real estate
  Pass7,410 1,458 5,366 6,438 5,716 14,793 — — 41,181 
  Special Mention — — 570 888 8,144 1,153 — — 10,755 
  Substandard— — — — — 1,655 — — 1,655 
  Doubtful— — — — — — — — — 
     Total owner-occupied
     commercial real estate		7,410 1,458 5,936 7,326 13,860 17,601 — — 53,591 
Year-to-date gross charge-offs— — — — — — — — — 
Investor commercial real estate
  Pass71,430 3,849 88,290 65,050 9,607 27,474 — — 265,700 
  Special Mention — — — — — 3,731 — — 3,731 
  Substandard— — — — — — — — — 
  Doubtful— — — — — — — — — 
     Total investor commercial real
     estate		71,430 3,849 88,290 65,050 9,607 31,205 — — 269,431 
Year-to-date gross charge-offs— — — — — — — — — 
Construction
  Pass35,177 186,979 140,299 47,598 1,622 — 1,848 — 413,523 
  Special Mention — — — — — — — — — 
  Substandard— — — — — — — — — 
  Doubtful— — — — — — — — — 
     Total construction35,177 186,979 140,299 47,598 1,622 — 1,848 — 413,523 
Year-to-date gross charge-offs— — — — — — — — — 
Single tenant lease financing
  Pass79,872 46,674 211,005 88,192 63,506 437,564 — — 926,813 
  Special Mention 644 — 9,696 3,460 — 9,135 — — 22,935 
  Substandard— — — — — — — — — 
  Doubtful— — — — — — — — — 
     Total single tenant lease
     financing		80,516 46,674 220,701 91,652 63,506 446,699 — — 949,748 
Year-to-date gross charge-offs— — — — — 195 — — 195 
Public finance
  Pass55,306 1,290 7,790 12,050 463 407,008 — — 483,907 
  Special Mention — — — — — 1,960 — — 1,960 
  Substandard— — — — — — — — — 
  Doubtful— — — — — — — — — 
     Total public finance55,306 1,290 7,790 12,050 463 408,968 — — 485,867 
Year-to-date gross charge-offs— — — — — — — — — 
22

December 31, 2024
Term Loans (amortized cost basis by origination year)Revolving loans amortized cost basisRevolving loans converted to term
(amounts in thousands)20242023202220212020PriorTotal
Healthcare finance
  Pass— — — 8,969 104,427 67,413 — — 180,809 
  Special Mention — — — — — 618 — — 618 
  Substandard— — — — — — — — — 
  Doubtful— — — — — — — — — 
     Total healthcare finance— — — 8,969 104,427 68,031 — — 181,427 
Year-to-date gross charge-offs— — — — — — — — — 
Small business lending
  Pass138,044 94,556 30,486 11,715 9,687 9,896 17,197 — 311,581 
  Special Mention 1,022 4,691 927 — 354 1,213 697 — 8,904 
  Substandard2,940 3,909 1,457 258 970 1,001 894 — 11,429 
  Doubtful— — — — — — — — — 
     Total small business lending142,006 103,156 32,870 11,973 11,011 12,110 18,788 — 331,914 
Year-to-date gross charge-offs1,093 4,600 3,038 567 619 524 — — 10,441 
Franchise finance
  Pass67,065 230,425 172,830 42,869 — — — — 513,189 
  Special Mention — 1,978 5,084 6,275 — — — — 13,337 
  Substandard— 3,543 6,367 473 — — — — 10,383 
  Doubtful— — — — — — — — — 
     Total franchise finance67,065 235,946 184,281 49,617 — — — — 536,909 
Year-to-date gross charge-offs— 1,171 — 295 — — — — 1,466 
Consumer loans
Residential mortgage
    Performing3,577 13,533 183,484 86,213 28,655 55,615 — — 371,077 
    Nonperforming— — 1,671 609 69 1,734 — — 4,083 
      Total residential mortgage3,577 13,533 185,155 86,822 28,724 57,349 — — 375,160 
Year-to-date gross charge-offs— — 101 58 — — — — 159 
Home equity
    Performing— 992 1,450 356 414 530 13,621 911 18,274 
    Nonperforming— — — — — — — — — 
      Total home equity— 992 1,450 356 414 530 13,621 911 18,274 
Year-to-date gross charge-offs— — — — — — — — — 
Other consumer
    Performing101,965 97,832 88,872 33,177 20,918 64,251 870 — 407,885 
    Nonperforming— — 38 11 1 12 — — 62 
      Total other consumer101,965 97,832 88,910 33,188 20,919 64,263 870 — 407,947 
Year-to-date gross charge-offs157 242 300 127 1 182 — — 1,009 
Total Loans$588,038 $700,374 $973,997 $420,019 $256,915 $1,124,585 $79,127 $911 $4,143,966 
Total year-to-date gross charge-offs$1,250 $6,013 $3,439 $1,047 $620 $901 $— $— $13,270 
23


The following tables present the Company’s loan portfolio delinquency, including nonperforming loans, as of March 31, 2025 and December 31, 2024. 

March 31, 2025
(amounts in thousands)30-59
Days
Past Due		60-89
Days
Past Due		90 Days 
or More
Past Due		Total 
Past Due		CurrentTotal
Loans
Commercial and industrial$158 $— $— $158 $140,081 $140,239 
Owner-occupied commercial real estate— — — — 49,954 49,954 
Investor commercial real estate235 — — 235 297,639 297,874 
Construction— — — — 471,082 471,082 
Single tenant lease financing— — — — 950,814 950,814 
Public finance— — — — 482,558 482,558 
Healthcare finance— — — — 171,430 171,430 
Small business lending9,878 5,032 7,019 21,929 331,479 353,408 
Franchise finance8,818 7,078 13,466 29,362 485,338 514,700 
Residential mortgage617 1,679 3,478 5,774 361,948 367,722 
Home equity183 — — 183 17,238 17,421 
Other consumer210 202 145 557 411,996 412,553 
Total$20,099 $13,991 $24,108 $58,198 $4,171,557 $4,229,755 





December 31, 2024
(amounts in thousands)30-59
Days
Past Due		60-89
Days
Past Due		90 Days 
or More
Past Due		Total 
Past Due		CurrentTotal
Loans
Commercial and industrial$— $— $— $— $120,175 $120,175 
Owner-occupied commercial real estate— — — — 53,591 53,591 
Investor commercial real estate— — — — 269,431 269,431 
Construction— — — — 413,523 413,523 
Single tenant lease financing— — — — 949,748 949,748 
Public finance— — — — 485,867 485,867 
Healthcare finance— — — — 181,427 181,427 
Small business lending11,817 1,310 5,587 18,714 313,200 331,914 
Franchise finance9,431 3,279 9,849 22,559 514,350 536,909 
Residential mortgage648 1,711 3,815 6,174 368,986 375,160 
Home equity— — — — 18,274 18,274 
Other consumer194 196 27 417 407,530 407,947 
Total$22,090 $6,496 $19,278 $47,864 $4,096,102 $4,143,966 


Loans are reclassified to a non-accruing status when, in management’s judgment, the collateral value and financial condition of the borrower do not justify accruing interest. At the time the accrual is discontinued, all unpaid accrued interest is reversed against earnings. Interest income accrued in prior years, if any, is charged to the allowance for credit losses. Payments subsequently received on nonaccrual loans are applied to principal. A loan is returned to accrual status when principal and interest are no longer past due and collectability is probable, typically after a minimum of nine consecutive months of performance.
24

The following table summarizes the Company’s nonaccrual loans and loans past due 90 days or more and still accruing by loan class for the periods indicated:

March 31, 2025December 31, 2024
(amounts in thousands)Nonaccrual LoansNonaccrual Loans with No Allowance for Credit LossesTotal Loans
90 Days or
More Past
Due and
Accruing		Nonaccrual LoansNonaccrual Loans with No Allowance for Credit LossesTotal Loans
90 Days or
More Past
Due and
Accruing
Small business lending$12,658 $4,923 $845 $11,429 $4,778 $1,320 
Franchise finance15,684 325 — 10,382 — — 
Residential mortgage4,702 4,702 156 4,083 4,083 1,142 
Other consumer164 164 34 61 61 4 
Total loans$33,208 $10,114 $1,035 $25,955 $8,922 $2,466 
There was $0.1 million and $0.7 million in interest income recognized on nonaccrual loans for the three months ended March 31, 2025 and 2024, respectively.

Determining fair value for collateral dependent loans requires obtaining a current independent appraisal of the collateral and applying a discount factor, which includes selling costs if applicable, to the value. The fair value of real estate is generally based on appraisals by qualified licensed appraisers. The appraisers typically determine the value of the real estate by utilizing an income or market valuation approach. If an appraisal is not available, the fair value may be determined by using a cash flow analysis. Fair value on other collateral such as business assets is typically ascertained by assessing, either singularly or some combination of, asset appraisals, accounts receivable aging reports, inventory listings and/or customer financial statements. Both appraised values and values based on borrower’s financial information are discounted as considered appropriate based on age and quality of the information and current market conditions.

The following tables present the amortized cost basis of collateral dependent loans, which are individually evaluated to determine expected credit losses as of March 31, 2025 and December 31, 2024.

 March 31, 2025
(amounts in thousands)Commercial Real EstateResidential Real EstateOther (Includes Equipment, Machinery and Other Assets)TotalAllowance on Collateral Dependent Loans
Owner-occupied commercial real estate$1,654 $— $— $1,654 $— 
Small business lending1
1,041 — 10,322 11,363 4,934 
Franchise finance— — 312 312 252 
Residential mortgage— 4,702 — 4,702 — 
Other consumer loans— 69 61 130 — 
Total loans$2,695 $4,771 $10,695 $18,161 $5,186 
1 Balance includes $3.8 million of loans guaranteed by the U.S. government.

25

 December 31, 2024
(amounts in thousands)Commercial Real EstateResidential Real EstateOther (Includes Equipment, Machinery and Other Assets)TotalAllowance on Collateral Dependent Loans
Owner-occupied commercial real estate$1,654 $— $— $1,654 $— 
Small business lending1
723 — 8,571 9,294 4,167 
Franchise finance— — 3,468 3,468 679 
Residential mortgage— 4,083 — 4,083 — 
Other consumer loans— — 22 22 — 
Total loans$2,377 $4,083 $12,061 $18,521 $4,846 
1 Balance includes $3.5 million of loans guaranteed by the U.S. government.

Loan Modifications to Borrowers Experiencing Financial Difficulty
The Company may agree to modify the contractual terms of a loan to a borrower experiencing financial difficulty as a part of ongoing loss mitigation strategies. These modifications may include interest rate reductions, principal or interest forgiveness, other-than-insignificant payment delays, term extensions and other actions intended to minimize loss and to avoid foreclosure or repossession of collateral.

The Company had two loan modifications made to borrowers experiencing financial difficulty during the three months ended March 31, 2025. The Company did not have any loan modifications made to borrowers experiencing financial difficulty during the three months ended March 31, 2024.

The following table presents loans that were both experiencing financial difficulty and modified during the three months ended March 31, 2025.

Three Months Ended March 31, 2025
(dollars in thousands)Payment DelayTotal Modification by Loan Class% of Class of Loans
Healthcare finance2,658 2,658 1.6 %
Total$2,658 $2,658 


The Company closely monitors the performance of loans that are modified to borrowers experiencing financial difficulty to understand the effectiveness of its modification efforts. The following table presents the performance of loans that were modified within the twelve months ended March 31, 2025.

(amounts in thousands)Current30 - 89 Days
 Past Due		90+ Days
Past Due
Investor commercial real estate$3,731 $— $— 
Healthcare finance2,658 — — 
Franchise finance1,163 4,020 — 
Total$7,552 $4,020 $— 

No modified loans had a default during the three months ended March 31, 2025.


Other Real Estate Owned

The Company had $1.5 million in other real estate owned (“OREO”) as of March 31, 2025, which consisted of two Small Business Administration loan properties. The Company had $0.3 million in OREO as of December 31, 2024, which consisted of one residential mortgage property. There were eleven loans totaling $3.2 million and nine loans totaling $2.1 million, in the process of foreclosure at March 31, 2025 and December 31, 2024, respectively.

26


Note 5:        Premises and Equipment
 
The following table summarizes premises and equipment at March 31, 2025 and December 31, 2024.

(amounts in thousands)March 31, 2025December 31, 2024
Land$5,598 $5,598 
Construction in process89 20 
Right of use leased asset163 188 
Building and improvements63,082 63,069 
Furniture and equipment22,150 22,047 
Less: accumulated depreciation(20,621)(19,469)
Total$70,461 $71,453 
   

Note 6:        Goodwill        
 
As of March 31, 2025 and December 31, 2024, 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, 2025 or March 31, 2024. Goodwill is assessed for impairment annually as of August 31, or more frequently if events occur or circumstances change that indicate an impairment may exist. When assessing goodwill for impairment, first, a qualitative assessment can be made to determine whether it is more likely than not that the estimated fair value of a reporting unit is less than its estimated carrying value. If the results of the qualitative assessment are not conclusive, a quantitative goodwill test is performed. Alternatively, a quantitative goodwill test can be performed without performing a qualitative assessment.

Goodwill was assessed for impairment using a qualitative test performed as of August 31, 2024. The estimated fair value of the reporting unit exceeded the net carrying value, and therefore no goodwill impairment existed as of that date.


Note 7:        Servicing Asset

Activity for the servicing asset and the related changes in fair value for the three months ended March 31, 2025 and 2024 are shown in the table below.

Three Months Ended
(amounts in thousands)March 31, 2025March 31, 2024
Balance, beginning of period$16,389 $10,567 
  Additions:
     Originated 2,237 1,627 
  Subtractions:
     Paydowns(964)(612)
     Changes in fair value due to changes in valuation inputs or assumptions used in
     the valuation model 		(217)178 
      Loan servicing asset revaluation$(1,181)$(434)
Balance, end of period$17,445 $11,760 

27

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, 2025 and December 31, 2024 are shown in the table below.
(amounts in thousands)March 31, 2025December 31, 2024
Loan portfolios serviced for:
   SBA guaranteed loans$939,362 $862,089 
     Total$939,362 $862,089 

Loan servicing revenue totaled $2.0 million and $1.3 million for the three months ended March 31, 2025 and March 31, 2024, respectively. Loan servicing asset revaluation, which represents the change in fair value of the servicing asset, resulted in a $1.2 million and $0.4 million downward valuation for the three months ended March 31, 2025 and March 31, 2024, 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. Measurement of fair value is limited to the conditions existing and the assumptions used as of a particular point in time; however, those assumptions may change over time. Refer to Note 11 - Fair Value of Financial Instruments for further details.

Note 8:        Subordinated Debt
 
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 bear interest at a floating rate equal to three-month Term SOFR plus 4.376%. All interest on the 2029 Notes is payable quarterly. The 2029 Notes are scheduled to mature on June 30, 2029. The 2029 Notes are unsecured subordinated obligations of the Company and may be repaid at any time, without penalty. 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 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 three-month Term SOFR plus 5.795%). The 2030 Note is scheduled to mature on November 1, 2030. 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. The 2031 Notes initially bear a fixed interest rate of 3.75% per year to, but excluding, September 1, 2026, and thereafter at a floating rate equal to the then-current benchmark rate (initially three-month Term SOFR plus 3.11%). The 2031 Notes are scheduled to mature on September 1, 2031. The 2031 Notes are unsecured subordinated obligations of the Company and may be repaid, without penalty, on any interest payment date on or after September 1, 2026. The 2031 Notes are intended to qualify as Tier 2 capital under regulatory guidelines. The Company used a portion of the net proceeds from the issuance of the 2031 Notes to redeem subordinated notes issued by the Company in 2016. 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.

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The following table presents the principal balance and unamortized discount and debt issuance costs for the 2029 Notes, the 2030 Note, and the 2031 Notes as of March 31, 2025 and December 31, 2024.

March 31, 2025December 31, 2024
(amounts in thousands)PrincipalUnamortized Discount and Debt Issuance CostsPrincipalUnamortized Discount and Debt Issuance Costs
2029 Notes$37,000 $(664)$37,000 $(703)
2030 Note10,000 (131)10,000 (137)
2031 Notes60,000 (977)60,000 (1,010)
Total$107,000 $(1,772)$107,000 $(1,850)



Note 9:        Benefit Plans
 
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,” 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 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 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”).

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Award Activity Under 2022 Plan

The Company recorded less than $0.1 million and $0.1 million of share-based compensation expense for the three months ended March 31, 2025, and March 31, 2024, respectively, related to stock-based awards under the 2022 Plan.

The following table summarizes the stock-based award activity under the 2022 Plan for the three months ended March 31, 2025.
(dollars in thousands, except per share data)Restricted Stock UnitsWeighted-Average Grant Date Fair Value Per ShareRestricted Stock AwardsWeighted-Average Grant Date Fair Value Per ShareDeferred Stock UnitsWeighted-Average Grant Date Fair Value Per Share
Unvested at December 31, 2024130,748 $24.35 12,040 $31.46 — $— 
   Granted54,948 34.76 — — — — 
   Vested(28,192)24.32 — — — — 
Unvested at March 31, 2025157,504 $27.97 12,040 $31.46 — $— 

At March 31, 2025, the total unrecognized compensation cost related to unvested stock-based awards under the 2022 Plan was $3.3 million with a weighted-average expense recognition period of 2.2 years.


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 according to their terms, our authority to grant new awards under the 2013 Plan terminated upon shareholder approval of the 2022 Plan.

Award Activity Under 2013 Plan

The Company recorded less than $0.1 million and $0.4 million of share-based compensation expense for the three months ended March 31, 2025 and 2024, respectively, related to stock-based awards under the 2013 Plan.

The following table summarizes the stock-based award activity under the 2013 Plan for the three months ended March 31, 2025.
(dollars in thousands, except per share data)Restricted Stock UnitsWeighted-Average Grant Date Fair Value Per ShareRestricted Stock AwardsWeighted-Average Grant Date Fair Value Per ShareDeferred Stock UnitsWeighted-Average Grant Date Fair Value Per Share
Unvested at December 31, 202422,997 $46.71 — $— — $— 
   Vested(7,871)46.71 — — — — 
Unvested at March 31, 202515,126 $46.71 — $— — $— 

At March 31, 2025, there were no unrecognized compensation costs related to unvested stock-based awards under the 2013 Plan.

30

Directors Deferred Stock Plan
 
Until January 2014, the Company had a practice of granting awards under a stock compensation plan for members of the Board of Directors (“Directors Deferred Stock Plan”). The Company reserved 180,000 shares of common stock that could have been issued pursuant to the Directors Deferred Stock Plan. The plan provided directors the option to elect to receive up to 100% of their annual retainer in either common stock or deferred stock rights. 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, 2025.
 Deferred Stock Rights
Outstanding, beginning of period28,821 
Granted48 
Outstanding, end of period28,869 

All deferred stock rights granted during the 2025 period were additional rights issued in lieu of cash dividends payable on outstanding deferred stock rights.

Note 10:        Commitments and Credit Risk
 
In the normal course of business, the Company makes various commitments to extend credit which are not reflected in the accompanying condensed consolidated financial statements. At March 31, 2025 and December 31, 2024, the Company had outstanding loan commitments totaling approximately $626.2 million and $667.7 million, respectively.


Note 11:        Fair Value of Financial Instruments
 
ASC Topic 820, Fair Value Measurement, defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. ASC Topic 820 also specifies a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The standard describes three levels of inputs that may be used to measure fair value:

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

Level 2    Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities

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

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

Available-for-Sale Securities
 
Where quoted market prices are available in an active market, securities are classified within Level 1 of the valuation hierarchy. If quoted market prices are not available, then fair values are estimated by using pricing models, quoted prices of securities with similar characteristics or discounted cash flows. The Company did not own any securities classified within Level 1 of the hierarchy as of March 31, 2025 and December 31, 2024.

Level 2 securities include U.S. Government-sponsored agencies, municipal securities, mortgage and asset-backed securities and corporate securities. Matrix pricing is a mathematical technique widely used in the banking industry to value investment securities.
31


In certain cases where Level 1 or Level 2 inputs are not available, securities are classified within Level 3 of the hierarchy. Fair values are calculated using discounted cash flows. Discounted cash flows are calculated based off of the anticipated future cash flows updated to incorporate loss severities. Rating agency and industry research reports as well as default and deferral activity are reviewed and incorporated into the calculation. The Company did not own any securities classified within Level 3 of the hierarchy as of March 31, 2025 or December 31, 2024.

Servicing Asset

Fair value is based on a loan-by-loan basis taking into consideration the origination to maturity dates of the loans, the current age of the loans and the remaining term to maturity. The valuation methodology utilized for the servicing asset begins with generating estimated future cash flows for each servicing asset based on their unique characteristics and market-based assumptions for prepayment speeds and costs to service. The present value of the future cash flows is then calculated utilizing market-based discount rate assumptions (Level 3).

Interest Rate Swap Agreements Back-to-Back

The Company offers interest rate swaps to certain loan customers to allow them to hedge the risk of rising interest rates on their variable rate loans. The Company originates a variable rate loan and enters into a variable-to-fixed interest rate contract with the customer. The Company also enters into an offsetting interest rate swap with a correspondent bank. These back-to-back swap agreements are intended to offset each other and allow the Company to originate a variable rate loan, while providing a contract for fixed interest payments for the customer. The net cash flow for the Company is equal to the interest income received from a variable rate loan originated with the customer. The fair value of these derivatives is based on a discounted cash flow approach. The fair value assets and liabilities of centrally cleared interest rate swaps are net of variation margin settled-to-market (Level 2).

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, 2025 and December 31, 2024.

March 31, 2025
 Fair Value Measurements Using
(amounts in thousands)Fair
Value		Quoted Prices
in Active Markets for Identical Assets
(Level 1)		Significant
Other
Observable
Inputs
(Level 2)		Significant
Unobservable
Inputs
(Level 3)
U.S. Government-sponsored agencies$78,278 $— $78,278 $— 
Municipal securities60,997 — 60,997 — 
Agency mortgage-backed securities - residential371,043 — 371,043 — 
Agency mortgage-backed securities - commercial63,934 — 63,934 — 
Private label mortgage-backed securities - residential43,319 — 43,319 — 
Asset-backed securities
21,677 — 21,677 — 
Corporate securities42,537 — 42,537 — 
Total available-for-sale securities$681,785 $— $681,785 $— 
Servicing asset17,445 — — 17,445 
Interest rate swap agreements - assets (back-to-back)308 — 308 — 
Interest rate swap agreements - liabilities (back-to-back)(308)— (308)— 


32

December 31, 2024
Fair Value Measurements Using
(amounts in thousands)Fair
Value		Quoted Prices
in Active Markets for Identical Assets
(Level 1)		Significant
Other
Observable
Inputs
(Level 2)		Significant
Unobservable
Inputs
(Level 3)
U.S. Government-sponsored agencies$82,816 $— $82,816 $— 
Municipal securities63,654 — 63,654 — 
Agency mortgage-backed securities - residential269,641 — 269,641 — 
Agency mortgage-backed securities - commercial63,331 — 63,331 — 
Private label mortgage-backed securities - residential45,821 — 45,821 — 
Asset-backed securities
23,821 — 23,821 — 
Corporate securities38,271 — 38,271 — 
Total available-for-sale securities$587,355 $— $587,355 $— 
Servicing asset16,389 — — 16,389 
Interest rate swap agreements - assets (back-to-back)200 — 200 — 
Interest rate swap agreements - liabilities (back-to-back)(200)— (200)— 

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, 2025 and 2024.

Three Months Ended
(amounts in thousands)Servicing Asset
Balance as of January 1, 2025$16,389 
Total realized gains
Additions:
  Originated 2,237 
Subtractions:
  Paydowns(964)
  Change in fair value(217)
Balance, March 31, 2025$17,445 
Balance as of January 1, 2024$10,567 
Total realized gains
Additions:
  Originated 1,627 
Subtractions:
  Paydowns(612)
  Change in fair value178 
Balance, March 31, 2024$11,760 

33

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.

Individually Analyzed Collateral Dependent Loans

Loans for which it is probable that the Company will not collect all principal and interest due according to contractual terms are measured for impairment. The amount of impairment may be determined based on the fair value of the underlying collateral, less costs to sell, the estimated present value of future cash flows or the loan’s observable market price.

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

Individually analyzed 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, 2025 and December 31, 2024.

March 31, 2025
(amounts in thousands)Fair Value Measurements Using
 Fair
Value		Quoted Prices
in Active
Markets for
Identical
Assets
(Level 1)		Significant
Other
Observable
Inputs
(Level 2)		Significant
Unobservable
Inputs
(Level 3)
Collateral dependent loans$1,844 $— $— $1,844 


December 31, 2024
(amounts in thousands)Fair Value Measurements Using
 Fair
Value		Quoted Prices
in Active
Markets for
Identical
Assets
(Level 1)		Significant
Other
Observable
Inputs
(Level 2)		Significant
Unobservable
Inputs
(Level 3)
Collateral dependent loans$4,296 $— $— $4,296 
 Significant Unobservable (Level 3) Inputs
 
The following tables present quantitative information about unobservable inputs used in recurring and nonrecurring Level 3 fair value measurements.

(dollars in thousands)Fair Value at
March 31, 2025		Valuation
Technique		Significant Unobservable
Inputs		RangeWeighted-Average Range
Collateral dependent loans$1,844 Fair value of collateralDiscount for type of property and current market conditions
0%- 81%
24.5%
Servicing asset17,445 Discounted cash flowPrepayment speeds

Discount rate
0% - 25%

14%
11.8%

14%


34


(dollars in thousands)Fair Value at
December 31, 2024		Valuation
Technique		Significant Unobservable
Inputs		RangeWeighted-Average Range
Collateral dependent loans$4,296 Fair value of collateralDiscount for type of property and current market conditions
0% - 75%
24.2%
Servicing asset16,389 Discounted cash flowPrepayment speeds

Discount rate
0% - 25%

14%
11.7%

14%

The following methods were used to estimate the fair value of all other financial instruments recognized in the accompanying condensed consolidated balance sheets at amounts other than fair value.
 
Cash and Cash Equivalents
 
For these instruments, the carrying amount is a reasonable estimate of fair value.
 
Securities Held-to-Maturity
 
Where quoted market prices are available in an active market, securities are classified within Level 1 of the valuation hierarchy. Level 1 securities include highly liquid mutual funds. If quoted market prices are not available, then fair values are estimated by using pricing models, quoted prices of securities with similar characteristics or discounted cash flows.
 
Level 2 securities include agency mortgage-backed securities - residential, municipal securities and corporate securities. Matrix pricing is a mathematical technique widely used in the banking industry to value investment securities.
 
In certain cases where Level 1 or Level 2 inputs are not available, securities are classified within Level 3 of the hierarchy. Fair values are calculated using discounted cash flows. Discounted cash flows are calculated based off of the anticipated future cash flows updated to incorporate loss severities. Rating agency and industry research reports as well as default and deferral activity are reviewed and incorporated into the calculation. The Company did not own any securities classified within Level 3 of the hierarchy as of March 31, 2025 or December 31, 2024.

Loans Held-for-Sale
 
For loans that are sold in an active secondary market, the fair value of these loans is estimated based on secondary market price indications for loans with similar interest rate and maturity characteristics. The fair value of other loans held-for-sale approximates carrying value.

Net Loans
 
The fair value of loans is estimated on an exit price basis incorporating discounts for credit, liquidity and marketability factors.
 
Accrued Interest Receivable
 
The fair value of these financial instruments approximates carrying value.
 
Federal Home Loan Bank of Indianapolis Stock
 
The fair value of this financial instrument approximates carrying value.
 
Deposits 
The fair value of noninterest-bearing and interest-bearing demand deposits, savings and money market accounts approximates carrying value. The fair value of fixed maturity certificates of deposit and brokered deposits are estimated using rates currently offered for deposits of similar remaining maturities.
35


Advances from Federal Home Loan Bank
 
The fair value of fixed rate advances is estimated using rates currently available for advances with similar remaining maturities. The carrying value of variable rate advances approximates fair value.
 
Subordinated Debt
 
The fair value of the Company’s publicly traded subordinated debt is obtained from quoted market prices. The fair value of the Company’s remaining subordinated debt is estimated using discounted cash flow analysis, based on current borrowing rates for similar types of debt instruments.

 Accrued Interest Payable
 
The fair value of these financial instruments approximates carrying value.

Commitments
 
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, 2025 and December 31, 2024.
  
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, 2025 and December 31, 2024.

March 31, 2025
Fair Value Measurements Using
(amounts in thousands)Carrying
Amount		Fair ValueQuoted Prices
In Active
Market for
Identical Assets
(Level 1)		Significant
Other
Observable
Inputs
(Level 2)		Significant
Unobservable
Inputs
(Level 3)
Cash and cash equivalents$394,454 $394,454 $394,454 $— $— 
Securities held-to-maturity, net 276,542 259,116 — 259,116 — 
Loans held-for-sale 31,738 33,930 — 33,930 — 
Net loans4,207,174 4,045,036 — — 4,045,036 
Accrued interest receivable29,022 29,022 29,022 — — 
Federal Home Loan Bank of Indianapolis stock28,350 28,350 — 28,350 — 
Deposits4,945,625 4,955,263 2,569,222 — 2,386,041 
Advances from Federal Home Loan Bank395,000 394,883 — 394,883 — 
Subordinated debt105,228 103,644 37,059 66,585 — 
Accrued interest payable1,645 1,645 1,645 — — 

36

December 31, 2024
Fair Value Measurements Using
(amounts in thousands)Carrying
Amount		Fair ValueQuoted Prices
In Active
Market for
Identical
Assets
(Level 1)		Significant
Other
Observable
Inputs
(Level 2)		Significant
Unobservable
Inputs
(Level 3)
Cash and cash equivalents$466,410 $466,410 $466,410 $— $— 
Securities held-to-maturity 249,796 228,851 — 228,851 — 
Loans held-for-sale 54,695 58,510 — 58,510 — 
Net loans4,125,877 3,935,009 — — 3,935,009 
Accrued interest receivable28,180 28,180 28,180 — — 
Federal Home Loan Bank of Indianapolis stock28,350 28,350 — 28,350 — 
Deposits4,933,206 4,943,961 2,236,724 — 2,707,237 
Advances from Federal Home Loan Bank295,000 291,208 — 291,208 — 
Subordinated debt105,150 103,062 37,059 66,003 — 
Accrued interest payable2,495 2,495 2,495 — — 

 
Note 12:        Derivative Financial Instruments
 
The Company uses derivative financial instruments from time to time to help manage exposure to interest rate risk and the effects that changes in interest rates may have on net income and the fair value of assets and liabilities. The Company enters into interest rate swap agreements as part of its asset/liability management strategy to help manage its interest rate risk position.

The Company entered into an offsetting interest rate swap with a correspondent bank. These back-to-back swap agreements are intended to offset each other and allow the Company to originate a variable rate loan, while providing a contract for fixed interest payments for the customer. The net cash flow for the Company is equal to the interest income received from a variable rate loan originated with the customer. The fair value of these derivatives is based on a discounted cash flow approach. The fair value assets and liabilities of centrally cleared interest rate swaps are net of variation margin settled-to-market.

In December 2024, the Company terminated interest rate swaps utilized as cash flow hedges against Federal Home Loan Bank advances, which resulted in swap termination receipts from counterparties of $2.9 million. As the Company had no further liability exposure to the underlying index hedged, the Company reclassified this amount from accumulated other comprehensive loss to the consolidated statements of income and recognized a gain on termination of interest rate swaps for the year ended December 31, 2024.

In November 2024, the Company’s interest rate swap derivative designated as fair value hedges matured. As a result, the Company has no remaining fair value hedge exposure at December 31, 2024.

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. The Company had amortization expense totaling less than $0.1 million for both the three months ended March 31, 2025 and 2024, which 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 9.4 years as of March 31, 2025. The Company had amortization expense totaling $0.9 million for both the three months ended March 31, 2025 and 2024, related to these previously terminated fair value hedges which was recognized as a reduction to interest income on loans.

37

The following table presents the notional amount and fair value of interest rate swaps utilized by the Company at March 31, 2025 and December 31, 2024.

 March 31, 2025December 31, 2024
(amounts in thousands)Notional
Amount		Fair
Value		Notional
Amount		Fair
Value
Asset Derivatives    
Derivatives not designated as hedging instruments    
Back-to-back swaps$34,106 $308 $27,214 $200 
Total contracts
$34,106 $308 $27,214 $200 
Liability Derivatives
Derivatives not designated as hedging instruments
Back-to-back swaps$34,106 $(308)$27,214 $(200)
Total contracts
$34,106 $(308)$27,214 $(200)

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

Back-to-back swaps consist of two interest-rate swaps (a customer swap and an offsetting counterparty swap). As a result of this offsetting relationship, no net gains or losses are recognized in income. The Company received no cash collateral from counterparties as security for their obligations related to these swap transactions at March 31, 2025 and December 31, 2024. As of March 31, 2025, the Company pledged cash collateral of $0.3 million to counterparties as security for its obligations related to these agreements. The Company had no pledged cash collateral as of December 31, 2024 to counterparties 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 effects of the Company’s cash flow hedge relationships on the condensed consolidated statements of comprehensive income during the three months ended March 31, 2025 and 2024.

 Amount of Gain Recognized in Other Comprehensive Income for the Three Months Ended
(amounts in thousands)March 31, 2025March 31, 2024
Interest rate swap agreements$— $902 

The Company had no 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, 2025 and 2024.

The following table presents the effects of the Company’s interest rate swap agreements on the condensed consolidated statements of operations during the three months ended March 31, 2025 and 2024.

(amounts in thousands)Three Months Ended
Line Item in the Condensed Consolidated Statements of IncomeMarch 31, 2025March 31, 2024
Interest income
Securities - non-taxable$— $414 
Total interest income
— 414 
Interest expense  
Deposits— (255)
Other borrowed funds— (762)
Total interest expense
— (1,017)
Net interest income
$— $1,431 


38

Note 13:     Accumulated Other Comprehensive Loss

The components of accumulated other comprehensive loss, included in shareholders' equity, for the three months ended March 31, 2025 and 2024, respectively, are presented in the table below.

(amounts in thousands)Unrealized Losses On Debt SecuritiesUnrealized Losses On Debt Securities Transferred From Available-For-Sale To Held-To-MaturityCash Flow HedgesTotal
Balance, January 1, 2025$(30,413)$(2,240)$— $(32,653)
Other comprehensive income before reclassifications from accumulated other comprehensive loss before tax4,424 — — 4,424 
Reclassifications from accumulated other comprehensive income to earnings before tax— 120 — 120 
Other comprehensive gain before tax4,424 120 — 4,544 
Income tax provision1,017 31 — 1,048 
Other comprehensive income - net of tax3,407 89 — 3,496 
Balance, March 31, 2025$(27,006)$(2,151)$— $(29,157)
Balance, January 1, 2024$(30,174)$(2,939)$3,738 $(29,375)
Other comprehensive (loss) income before reclassifications from accumulated other comprehensive loss before tax(2,074)— 902 (1,172)
Reclassifications from accumulated other comprehensive loss to earnings before tax— 234— 234 
Other comprehensive (loss) gain before tax(2,074)234 902 (938)
Income tax (benefit) provision(475)57 207 (211)
Other comprehensive (loss) income - net of tax(1,599)177 695 (727)
Balance, March 31, 2024$(31,773)$(2,762)$4,433 $(30,102)


Amounts Reclassified from
Accumulated Other Comprehensive Income for the Three Months Ended 		Affected Line Item in the
Statements of Operations
(amounts in thousands) March 31, 2025 March 31, 2024
Details About Accumulated Other Comprehensive Loss Components
Reclassifications from accumulated other comprehensive income to earnings before tax$(120)(234)Interest income
Total amount reclassified before tax(120)(234)Income before income taxes
Tax benefit(31)(57)Income tax (benefit) provision
Total reclassifications from accumulated other comprehensive income$(89)$(177)Net income
39



Note 14:        Segment Information

The Company operates as a single reportable segment, managing the business and assessing financial performance on a consolidated basis. While there are several lines of business within the operating segment, they are closely interrelated and cannot operate independently. Accordingly, the Chief Operating Decision Maker (“CODM”) evaluates operations and financial performance on a Company-wide basis and all of the Company’s operations are aggregated into one reportable operating segment.

The CODM regularly receives and reviews the Company’s net income on a consolidated basis and uses key metrics to evaluate the overall performance of the Company and make decisions regarding the allocation of resources. Additionally, the CODM reviews budget-to-actual variances to analyze these profit measures as a single operating segment.

The function of the CODM is performed by the Finance Committee. This Committee consists of the highest level of management that is responsible for the Company’s overall resource allocation and performance. The Finance Committee includes the Chairman and Chief Executive Officer, President and Chief Operating Officer and Executive Vice President and Chief Financial Officer.

Note 15:     Recent Accounting Pronouncements

ASU 2023-09 - Income Taxes (Topic 740): Improvements to Income Tax Disclosures (December 2023)

In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740) - Improvements to Income Tax Disclosures. This ASU enhances the transparency and usefulness of income tax disclosures, which addresses investor requests for more transparency about income tax disclosures related primarily to the rate reconciliation and income taxes paid information. The guidance is effective for annual periods beginning after December 15, 2024 with early adoption permitted. The Company is currently evaluating the impact of this ASU on its condensed consolidated financial statements.

ASU 2024-03 - Income Statement-Reporting Comprehensive Income - Expense Disaggregations Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses (November 2024)

In November 2024, the FASB issued ASU No. 2024-03, Income Statement-Reporting Comprehensive Income-Expense Disaggregations Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses. This ASU requires additional disclosures of the nature of expenses included in the Company’s income statement. The new standard requires disclosures about specific types of expenses included the income statement. The guidance is effective for annual reporting periods beginning after December 15, 2026 and interim reporting periods beginning after December 15, 2027. The Company is currently evaluating the impact of this ASU on its consolidated financial statements. 2024 with early adoption permitted. The Company is currently evaluating the impact of this ASU on its condensed consolidated financial statements.


ITEM 2.    MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our condensed consolidated financial statements and related notes appearing elsewhere in this report. This discussion and analysis includes certain forward-looking statements that involve risks, uncertainties, and assumptions. You should review the “Risk Factors” sections of this report and our Annual Report on Form 10-K for the year ended December 31, 2024 for a discussion of important factors that could cause actual results to differ materially from the results described in or implied by such forward-looking statements. See also “Cautionary Note Regarding Forward-Looking Statements” at the beginning of this report.
 
40

Overview
 
First Internet Bancorp is a bank holding company headquartered in Fishers, Indiana that conducts its primary business activities through its wholly-owned subsidiary, First Internet Bank of Indiana (the “Bank”), an Indiana chartered bank. The Bank was the first state-chartered, Federal Deposit Insurance Corporation (“FDIC”) insured Internet bank and commenced banking operations in 1999. First Internet Bancorp was incorporated under the laws of the State of Indiana on September 15, 2005. On March 21, 2006, we consummated a plan of exchange by which we acquired all of the outstanding shares of the Bank.

The Bank has three wholly-owned subsidiaries: First Internet Public Finance Corp., an Indiana corporation that provides a range of public and municipal finance lending and leasing products to governmental entities throughout the United States and acquires securities issued by state and local governments and other municipalities; JKH Realty Services, LLC, a Delaware limited liability company that manages other real estate owned properties as needed; and SPF15, Inc., an Indiana corporation that owns real estate used primarily for the Bank’s principal office.

We offer a wide range of commercial, small business, consumer and municipal banking products and services. We conduct our consumer and small business deposit operations primarily through digital channels on a nationwide basis and have no traditional branch offices. Our consumer lending products are primarily originated on a nationwide basis through relationships with dealerships and financing partners.

Our commercial banking products and services are delivered through a relationship banking model or through strategic partnerships and include commercial and industrial (“C&I”), construction and investor commercial real estate, single tenant lease financing, public finance, healthcare finance, small business lending, franchise finance and commercial deposits and treasury management. Our C&I team provides credit solutions such as lines of credit, term loans, owner-occupied commercial real estate loans and corporate credit cards on a regional basis to commercial borrowers primarily in the Midwest and Southwest regions of the United States. We offer construction and investor commercial real estate loans, as well as single tenant lease financing, on a nationwide basis. Our public finance team provides a range of public and municipal lending and leasing products to government entities on a nationwide basis. Our healthcare finance team was established in conjunction with our strategic partnership with Provide, Inc. (formerly known as Lendeavor, Inc.), a San Francisco-based technology-enabled lender to healthcare practices, which provided lending on a nationwide basis for healthcare practice finance or acquisition, acquisition or refinancing of owner-occupied commercial real estate and equipment purchases. In the third quarter 2021, Provide was acquired by a super-regional financial institution. Subsequent to Provide being acquired, the acquiring institution has retained most, if not all, of Provide’s loan origination activity and our healthcare finance loan balances have declined. Our franchise finance business was established in July 2021 in conjunction with our business relationship with ApplePie Capital, a company that specializes in providing financing to franchisees in various industry segments across the United States. Our commercial deposits and treasury management team works with the other commercial teams to provide deposit products and treasury management services to our commercial and municipal lending customers as well as pursues commercial deposit opportunities in business segments where we have no credit relationships.

We believe that we differentiate ourselves from larger financial institutions by providing a full suite of services to emerging small businesses and entrepreneurs on a nationwide basis. We are one of the fastest-growing lenders in the Small Business Administration (“SBA”) 7(a) program, closing $113.8 million in SBA 7(a) loans during the three months ended March 31, 2025, and currently rank as the 8th largest SBA 7(a) lender for the SBA’s year-to-date 2025 fiscal year. We also offer a top-ranked small business checking account product to our country’s entrepreneurs.

We also offer payment, deposit, card and lending products and services through partnerships with financial technology companies and platforms (“fintechs”). With the rapid evolution of technology that enables small businesses to manage their finances digitally, fintechs are addressing a significantly growing marketplace. Fintechs have created robust digital offerings, unburdened by legacy technology architecture, to address growing customer expectations. Through partnerships with selected fintechs, we believe our ability to win and retain small business relationships will be significantly enhanced. Furthermore, we believe partnering with select fintechs will allow us to further diversify our revenue sources, acquire deposits and pursue additional asset generation capabilities.

As of March 31, 2025, the Company had consolidated assets of $5.9 billion, consolidated deposits of $4.9 billion and stockholders’ equity of $387.7 million.
41

Results of Operations

During the first quarter 2025, net income was $0.9 million, or $0.11 diluted earnings per share, compared to net income of $5.2 million, or $0.59 diluted earnings per share, during the first quarter 2024, representing a decrease in net income of $4.2 million, or 81.8%, and a decrease in diluted earnings per share of $0.48, or 81.4%.

The $4.2 million decrease in net income for the first quarter 2025 compared to the first quarter 2024 was due primarily to increases of $9.5 million, or 387.5%, in the provision for credit losses and $2.5 million, or 12.0%, in noninterest expense, partially offset by increases of $4.4 million, or 21.0%, in net interest income and $2.1 million, or 24.9%, in noninterest income as well as a $1.3 million income tax benefit.

During the first quarter 2025, return on average assets (“ROAA”), return on average shareholders’ equity (“ROAE”), and return on average tangible common equity (“ROATCE”) were 0.07%, 0.98%, and 0.99%, respectively, compared to 0.40%, 5.64%, and 5.71%, respectively, for the first quarter 2024.

Pre-tax, pre-provision income (“PTPP”) was $12.0 million, an increase of 48.5%, from PTPP of $8.1 million for the first quarter 2024. The $3.9 million increase was due to increases of $8.7 million, or 12.7%, in interest income and $2.1 million, or 24.9%, in noninterest income, partially offset by increases of $4.3 million, or 9.1%, in interest expense and $2.5 million, or 12.0%, in noninterest expense.

Refer to the “Reconciliation of Non-GAAP Financial Measures” section of Part I, Item 2 of this report, Management’s Discussion and Analysis of Financial Condition and Results of Operations for additional information.
42

Consolidated Average Balance Sheets and Net Interest Income Analyses
 
For the periods presented, the following tables provide the average balances of interest-earning assets and interest-bearing liabilities and the related yields and cost of funds. The tables do not reflect any effect of income taxes except for net interest margin - FTE, as discussed below. Balances are based on the average of daily balances. Nonaccrual loans are included in average loan balances.

Three Months Ended
March 31, 2025December 31, 2024March 31, 2024
(dollars in thousands)Average BalanceInterest /DividendsYield /CostAverage BalanceInterest /DividendsYield /CostAverage BalanceInterest /DividendsYield /Cost
Assets
Interest-earning assets
Loans, including
loans held-for-sale 		$4,242,933 $62,662 5.99 %$4,129,118 $61,523 5.93 %$3,892,589 $55,435 5.73 %
Securities - taxable820,175 8,463 4.18 %758,560 7,619 4.00 %627,216 5,694 3.65 %
Securities - non-taxable81,743 661 3.28 %83,140 794 3.80 %76,293 969 5.11 %
Other earning assets445,280 5,043 4.59 %636,377 7,835 4.90 %434,118 6,067 5.62 %
Total interest-earning assets5,590,131 76,829 5.57 %5,607,195 77,771 5.52 %5,030,216 68,165 5.45 %
Allowance for credit losses - loans(45,664)(46,427)(38,611)
Noninterest-earning assets225,913 221,348 216,331 
Total assets$5,770,380 $5,782,116 $5,207,936 
Liabilities
Interest-bearing liabilities
Interest-bearing demand deposits$956,322 $6,974 2.96 %$574,577 $2,910 2.01 %$415,106 $2,091 2.03 %
Savings accounts20,568 43 0.85 %21,072 45 0.85 %22,521 48 0.86 %
Money market accounts1,221,795 11,361 3.77 %1,236,116 12,309 3.96 %1,217,966 12,671 4.18 %
Fintech - brokered deposits— — — %208,545 2,111 4.03 %85,366 931 4.39 %
Certificates and brokered deposits2,617,293 29,248 4.53 %2,686,139 31,736 4.70 %2,246,050 26,388 4.73 %
Total interest-bearing deposits4,815,978 47,626 4.01 %4,726,449 49,111 4.13 %3,987,009 42,129 4.25 %
Other borrowed funds401,300 4,107 4.15 %528,806 5,109 3.84 %716,735 5,302 2.98 %
Total interest-bearing liabilities5,217,278 51,733 4.02 %5,255,255 54,220 4.10 %4,703,744 47,431 4.06 %
Noninterest-bearing deposits135,878 114,311 113,341 
Other noninterest-bearing liabilities25,189 23,115 21,480 
Total liabilities5,378,345 5,392,681 4,838,565 
Shareholders’ equity392,035 389,435 369,371 
Total liabilities and shareholders’ equity$5,770,380 $5,782,116 $5,207,936 
Net interest income$25,096 $23,551 $20,734 
Interest rate spread 1
1.55%1.42%1.39 %
Net interest margin 2
1.82%1.67%1.66 %
Net interest margin - FTE 3
1.91%1.75%1.75 %

1 Yield on total interest-earning assets minus cost of total interest-bearing liabilities.
2 Net interest income divided by total average interest-earning assets (annualized).
3 On an FTE basis assuming a 21% tax rate. Net interest income is adjusted to reflect income from assets such as municipal loans and securities that are exempt from Federal income taxes. This is to recognize the income tax savings that facilitates a comparison between taxable and tax-exempt assets. The Company believes that it is a standard practice in the banking industry to present net interest margin and net interest income on a fully-taxable equivalent basis, as these measures provide useful information to make peer comparisons. Net interest margin - FTE represents a non-GAAP financial measure. See “Reconciliation of Non-GAAP Financial Measures” for a reconciliation of this measure to its most directly comparable GAAP measure.

43

Rate/Volume Analysis 

The following table illustrates the impact of changes in the volume of interest-earning assets and interest-bearing liabilities and interest rates on net interest income for the periods indicated. The change in interest not due solely to volume or rate has been allocated in proportion to the absolute dollar amounts of the change in each. 

Three Months Ended March 31, 2025 vs. December 31, 2024 Due to Changes inThree Months Ended March 31, 2025 vs. March 31, 2024 Due to Changes in
(amounts in thousands)VolumeRateNetVolumeRateNet
Interest income   
Loans, including loans held-for-sale$833 $306 $1,139 $4,805 $2,422 $7,227 
Securities – taxable543 301 844 1,881 888 2,769 
Securities – non-taxable(15)(118)(133)413 (721)(308)
Other earning assets(2,306)(486)(2,792)974 (1,998)(1,024)
Total(945)3 (942)8,073 591 8,664 
Interest expense      
Interest-bearing deposits3,891 (5,376)(1,485)19,373 (13,876)5,497 
Other borrowed funds(3,207)2,205 (1,002)(9,496)8,301 (1,195)
Total684 (3,171)(2,487)9,877 (5,575)4,302 
(Decrease) increase in net interest income$(1,629)$3,174 $1,545 $(1,804)$6,166 $4,362 

Net interest income for the first quarter 2025 was $25.1 million, an increase of $4.4 million, or 21.0%, compared to $20.7 million for the first quarter 2024. The increase in net interest income was the result of an $8.7 million, or 12.7%, increase in total interest income to $76.8 million for the first quarter 2025 from $68.2 million for the first quarter 2024, partially offset by a $4.3 million, or 9.1%, increase in total interest expense to $51.7 million for the first quarter 2025 from $47.4 million for the first quarter 2024.

The increase in total interest income for the first quarter 2025 compared to first quarter 2024 was due primarily to an increase in interest earned on loans, resulting from an increase of 26 bps in the yield earned on loans, including loans held-for-sale, as well as an increase of $350.3 million, or 9.0%, in the average balance of loans, including loans held-for-sale. Additionally, the average balance of securities increased $198.4 million, or 28.2%, and the yield earned on the securities portfolio increased 29 bps for the first quarter 2025 compared to the first quarter 2024. The yield on funded portfolio loan originations was 7.78% for the first quarter 2025, a decrease of 107 bps compared to the first quarter 2024, reflective of 100 bps of Fed rate cuts in the second half of 2024. However, new origination yields remained well above the overall loan portfolio yield, helping to drive both total interest income and the loan portfolio yield higher.

The increase in total interest expense for the first quarter 2025 compared to the first quarter 2024 was due primarily to increases of $4.9 million, or 233.5%, in interest expense associated with interest-bearing demand deposits and $2.9 million, or 10.8%, in interest expense associated with certificates and brokered deposits, partially offset by decreases of $1.3 million, or 10.3%, in interest expense associated with money market accounts and $1.2 million, or 22.5%, in interest expense associated with other borrowed funds. When combined with deposits formerly classified as fintech – brokered deposits, the increase in interest expense related to interest-bearing demand deposits was driven by an increase in the average balance of $173.2 million, or 22.1%, compared to the the fourth quarter of 2024 due to continued growth in fintech deposits, while the cost of fund increased 41 bps due to the change in deposit mix. The increase in interest expense related to certificates and brokered deposits was driven by an increase in the average deposit balance of $371.2 million, or 16.5%, partially offset by a decrease of 20 bps in the cost of these deposits. The increase in the average balance of these deposits was driven by strong consumer and small business demand for certificates of deposits, partially offset by lower brokered deposit balances as the Company used on-balance sheet liquidity to pay down higher-cost brokered deposits, which is expected to positively impact deposit costs in future periods. The decrease in interest expense related to money market accounts was driven by a 41 bp decrease in cost of these deposits. The decrease in interest expense related to other borrowed funds was driven by a decrease in the average balance of $127.5 million, or 24.1%, partially offset by an increase of 31bps in the cost of funds.

Overall, the cost of total interest-bearing liabilities for the first quarter 2025 decreased 4 bps to 4.02% from 4.06% for the first quarter 2024.
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Net interest margin (“NIM”) was 1.82% for the first quarter 2025 compared to 1.66% for the first quarter 2024, an increase of 16 bps. On a fully-taxable equivalent (“FTE”) basis, NIM was 1.91% for the first quarter 2025 compared to 1.75% for the first quarter 2024, an increase of 16 bps. The increase in the first quarter 2025 NIM and FTE NIM compared to the first quarter 2024 reflects the combination of deploying cash balances into higher yielding loans and securities and continued improvement in the cost of funds related to deposits.

Noninterest Income

The following table shows noninterest income for each of the periods presented.
Three Months Ended
(amounts in thousands)March 31,
2025		December 31,
2024		March 31,
2024
Service charges and fees$265 $248 $220 
Loan servicing revenue1,983 1,825 1,323 
Loan servicing asset revaluation(1,181)(428)(434)
Mortgage banking activities— — — 
Gain on sale of loans8,647 8,568 6,536 
Other713 5,723 702 
Total noninterest income$10,427 $15,936 $8,347 

During the first quarter 2025, noninterest income was $10.4 million, representing an increase of $2.1 million, or 24.9%, compared to $8.3 million for the first quarter 2024. The increase in noninterest income was due primarily to increases in gain on sale of loans, partially offset by a decrease in net loan servicing revenue. The increase of $2.1 million, or 32.3%, in gain on sale of loans was due primarily to an increase of 36.2% in the volume of U.S. Small Business Administration (“SBA”) 7(a) guaranteed loan sales, partially offset by a decrease of 36 bps in the net premium earned on loan sales. The decrease in net loan servicing was due to the fair value adjustment to the loan servicing asset, partially offset by growth in the balance of the Company’s SBA 7(a) servicing portfolio.

Noninterest Expense

The following table shows noninterest expense for each of the periods presented.

Three Months Ended
(amounts in thousands)March 31,
2025		December 31,
2024		March 31,
2024
Salaries and employee benefits$13,107 $14,042 $11,796 
Marketing, advertising and promotion647 696 736 
Consulting and professional services1,228 967 853 
Data processing635 603 564 
Loan expenses1,531 1,381 1,445 
Premises and equipment3,115 3,004 2,826 
Deposit insurance premium1,398 1,464 1,145 
Other1,895 1,800 1,658 
Total noninterest expense$23,556 $23,957 $21,023 

Noninterest expense for the first quarter 2025 was $23.6 million, compared to $21.0 million for the first quarter 2024. The increase of $2.5 million, or 12.0%, was due primarily to increases of $1.3 million in salaries and employee benefits, $0.4 million in consulting and professional fees, $0.3 million in premises and equipment, $0.3 million in deposit insurance premium, $0.2 million in other expenses. The increase in salaries and employee benefits was due primarily to higher small business lending incentive compensation, as well as staff additions in small business lending and risk management. The increase in consulting and professional fees is due primarily to increased legal and audit fees. The increase in premises and equipment was due primarily to property taxes, as well as software maintenance expense. The increase in deposit insurance premium was due to year-over-year asset growth and changes in the composition of the loan and deposit portfolios. The increase in other expenses is due primarily to increases in service fees.

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The Company recorded an income tax benefit of $0.9 million for the first quarter 2025, compared to an income tax provision of $0.4 million and an effective tax rate of 7.6% for the first quarter 2024.

Financial Condition

The following table shows summary balance sheet data for each of the periods presented.

(amounts in thousands)
Balance Sheet Data:March 31,
2025		December 31,
2024		March 31,
2024
Total assets$5,851,608 $5,737,859 $5,340,667 
Loans4,254,412 4,170,646 3,909,804 
Total securities958,327 837,151 718,169 
Loans held-for-sale31,738 54,695 22,589 
Noninterest-bearing deposits151,815 136,451 130,760 
Interest-bearing deposits4,793,810 4,796,755 4,143,008 
Total deposits4,945,625 4,933,206 4,273,768 
Advances from Federal Home Loan Bank395,000 295,000 574,936 
Total shareholders’ equity387,747 384,063 366,739 

Total assets increased $113.7 million, or 2.0%, to $5.9 billion at March 31, 2025 compared to $5.7 billion at December 31, 2024. The increase was due primarily to an increase in deposits driven by growth in fintech partnerships which was used in conjunction with on-balance sheet liquidity to fund loan growth, purchase securities and pay down higher cost CD maturities and brokered deposits.

As of March 31, 2025, total shareholders’ equity was $387.7 million, an increase of $3.7 million, or 1.0%, compared to December 31, 2024. The increase in shareholders’ equity was due primarily to the net income earned during the quarter and a decrease in accumulated other comprehensive loss as unrealized losses on securities decreased during the quarter. Tangible common equity totaled $383.1 million as of March 31, 2025, representing an increase of $3.7 million, or 1.0%, compared to December 31, 2024. The ratio of total shareholders’ equity to total assets decreased to 6.63% as of March 31, 2025 from 6.69% as of December 31, 2024, and the ratio of tangible common equity to tangible assets decreased to 6.55% as of March 31, 2025 from 6.62% as of December 31, 2024.

Book value per common share increased 0.6% to $44.58 as of March 31, 2025 from $44.31 as of December 31, 2024. Tangible book value per share increased 0.6% to $44.04 as of March 31, 2025 from $43.77 as of December 31, 2024. The increase in both book value per common share and tangible book value per share was driven primarily by the increases in total shareholders’ equity and tangible common equity. Refer to the “Reconciliation of Non-GAAP Financial Measures” section of Part I, Item 2 of this report, Management’s Discussion and Analysis of Financial Condition and Results of Operations for additional information.
    
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Loan Portfolio Analysis

The following table shows a summary of the Company’s loan portfolio for each of the periods presented.

(dollars in thousands)March 31,
2025		December 31,
2024		March 31,
2024
Commercial loans
Commercial and industrial$140,239 3.3 %$120,175 2.9 %$133,897 3.4 %
Owner-occupied commercial real estate49,954 1.2 %53,591 1.3 %57,787 1.5 %
Investor commercial real estate297,874 7.0 %269,431 6.5 %128,276 3.3 %
Construction471,082 11.1 %413,523 9.9 %325,597 8.3 %
Single tenant lease financing950,814 22.4 %949,748 22.7 %941,597 24.1 %
Public finance482,558 11.3 %485,867 11.6 %498,262 12.7 %
Healthcare finance171,430 4.0 %181,427 4.4 %213,332 5.5 %
Small business lending353,408 8.3 %331,914 8.0 %239,263 6.1 %
Franchise finance514,700 12.1 %536,909 12.9 %543,122 13.9 %
Total commercial loans3,432,059 80.7 %3,342,585 80.2 %3,081,133 78.8 %
Consumer loans
Residential mortgage367,722 8.6 %375,160 9.0 %390,009 10.0 %
Home equity17,421 0.4 %18,274 0.4 %22,753 0.6 %
Other consumer412,553 9.7 %407,947 9.8 %380,675 9.7 %
Total consumer loans797,696 18.7 %801,381 19.2 %793,437 20.3 %
Net deferred loan origination costs, premiums and discounts
on purchased loans and other 1
24,657 0.6 %26,680 0.6 %35,234 0.9 %
Total loans4,254,412 100.0 %4,170,646 100.0 %3,909,804 100.0 %
Allowance for credit losses - loans(47,238)(44,769)(40,891)
Net loans $4,207,174 $4,125,877 $3,868,913 

1 Includes carrying value adjustments of $22.1 million, $22.9 million and $26.9 million related to terminated interest rate swaps associated with public finance loans as of March 31, 2025, December 31, 2024 and March 31, 2024, respectively. 

Total loans were $4.3 billion as of March 31, 2025, an increase of $83.8 million, or 2.0%, compared to December 31, 2024. Total commercial loan balances were $3.4 billion as of March 31, 2025, up $89.5 million, or 2.7%, from December 31, 2024. Total consumer loan balances were $797.7 million as of March 31, 2025, a decrease of $3.7 million, or 0.5%, compared to December 31, 2024. Compared to December 31, 2024, in connection with the Company’s focus on variable rate and higher-yielding products, the increase in commercial loan balances was driven by growth in the construction, investor commercial real estate, small business lending, and commercial and industrial portfolios. These increases were partially offset by a decrease in the franchise finance portfolio and continued runoff in the healthcare finance portfolio, as well as decreases in the owner-occupied commercial real estate and public finance portfolios. The slight decrease in consumer loan balances was due primarily to a decrease in the residential mortgage portfolio, partially offset by origination activity in the other consumer loans portfolio.
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Asset Quality

Nonperforming loans are comprised of nonaccrual loans and loans 90 days past due and accruing. Nonperforming assets include nonperforming loans, other real estate owned and other nonperforming assets, which consist of repossessed assets. The following table provides a summary of the Company’s nonperforming assets for each of the periods presented.

(dollars in thousands)March 31,
2025		December 31,
2024		March 31,
2024
Nonaccrual loans
Commercial loans:
Small business lending$12,658 $11,429 $9,532 
Franchise finance15,684 10,382 295 
Total commercial loans28,342 21,811 9,827 
Consumer loans:
Residential mortgage4,702 4,083 2,309 
Other consumer164 61 129 
Total consumer loans4,866 4,144 2,438 
Total nonaccrual loans 33,208 25,955 12,265 
Past Due 90 days and accruing loans
Commercial loans:
     Small business lending845 1,320 — 
     Franchise finance— — 230 
Total commercial loans845 1,320 230 
Consumer loans:
Residential mortgage156 1,142 555 
Other consumer34 4 — 
Total consumer loans190 1,146 555 
Total past due 90 days and accruing loans1,035 2,466 785 
Total nonperforming loans
34,243 28,421 13,050 
Other real estate owned
     Small business lending1,518 — — 
Residential mortgage— 272 375 
Total other real estate owned1,518 272 375 
Other nonperforming assets160 212 — 
Total nonperforming assets $35,921 $28,905 $13,425 
Total nonperforming loans to total loans0.80 %0.68 %0.33 %
Total nonperforming assets to total assets0.61 %0.50 %0.25 %
Allowance for credit losses - loans to total loans1.11 %1.07 %1.05 %
Nonaccrual loans to total loans0.78 %0.62 %0.31 %
Allowance for credit losses - loans to nonaccrual loans142.2 %172.5 %333.4 %
Allowance for credit losses - loans to nonperforming loans138.0 %157.5 %313.3 %

Total nonperforming loans increased $5.8 million, or 20.5%, to $34.2 million as of March 31, 2025 compared to $28.4 million as of December 31, 2024 due primarily to an increase in nonperforming loans in franchise finance and small business lending during the year. Total nonperforming assets increased $7.0 million, or 24.3%, to $35.9 million as of March 31, 2025, compared to $28.9 million as of December 31, 2024, due primarily to the increase in nonperforming loans in franchise finance and small business lending mentioned above, and an increase in OREO related to small business lending. As of March 31, 2025, the Company had two small business lending properties in OREO with a carrying value of $1.5 million. As of December 31, 2024, the Company had one residential mortgage property in OREO with a carrying value of $0.3 million.
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Allowance for Credit Losses - Loans

The following table provides a rollforward of the allowance for credit losses for each of the periods presented; however, allocation of a portion of the allowance to one segment does not preclude its availability to absorb losses in other segments.

Three Months Ended
(dollars in thousands)March 31,
2025		December 31,
2024		March 31,
2024
Balance, beginning of period$44,769 $45,721 $38,774 
Provision charged to expense12,121 8,455 2,582 
Losses charged off
Small business lending3,668 8,270 289 
Franchise finance5,848 889 — 
Residential mortgage11 73 69 
Other consumer314 249 175 
Total losses charged off9,841 9,481 533 
Recoveries
Commercial and industrial2 1 2 
Small business lending133 51 40 
Residential mortgage6 — 1 
Home equity2 1 2 
Other consumer46 21 23 
Total recoveries189 74 68 
Balance, end of period$47,238 $44,769 $40,891 
Net charge-offs$9,652 $9,407 $465 
Net charge-offs (recoveries) to average loans (annualized)
Commercial and industrial(0.01 %)0.00 %(0.01 %)
Small business lending3.79 %2.38 %0.40 %
Franchise finance4.49 %0.16 %0.00 %
Total commercial net charge-offs1.12 %0.28 %0.03 %
Residential mortgage0.01 %0.08 %0.07 %
Home equity(0.05 %)(0.01 %)(0.03 %)
Other consumer0.36 %0.26 %0.21 %
Total consumer net charge-offs0.14 %0.04 %0.11 %
Total net charge-offs to average loans0.92 %0.91 %0.05 %
    
The allowance for credit losses - loans (“ACL”) was $47.2 million as of March 31, 2025, compared to $44.8 million as of December 31, 2024. The increase in the ACL reflects the addition of specific reserves related to franchise finance and small business lending loans that were placed on nonaccrual during the quarter and growth in the overall loan portfolio, partially offset by the impact of economic metrics on qualitative factors in certain portfolios. The net increase to specific reserves totaled $3.3 million, of which, $2.5 million related to franchise finance and $0.8 million related to small business lending. The ACL as a percentage of total loans was 1.11% at March 31, 2025, compared to 1.07% at December 31, 2024. The ACL as a percentage of nonperforming loans decreased to 138.0% as of March 31, 2025, compared to 157.5% as of December 31, 2024 as the percentage increase in nonperforming loans outpaced the increase in the overall loan portfolio.

Net charge-offs of $9.7 million were recognized during the first quarter 2025, resulting in net charge-offs to average loans of 0.92%, compared to net charge-offs of $0.5 million, or 0.05% of average loans, for the first quarter 2024. Net charge-offs in the first quarter of 2025 were elevated as the Company continued to take action to resolve problem loans in the small business lending and franchise finance portfolios. The increase in net charge-offs included $3.5 million in small business lending and $0.3 million in consumer loan portfolios. Approximately $5.8 million of net charge-offs recognized during the quarter were related to franchise finance loans with $2.6 million of existing specific reserves.

The provision for credit losses - loans in the first quarter 2025 was $12.1 million, compared to $2.6 million for the first quarter 2024. The increase in the provision for credit losses - loans for the first quarter 2025 was driven primarily by the
49

elevated net charge-offs, the additional specific reserves discussed above and overall growth in the loan portfolio, partially offset by the impact of economic metrics on qualitative factors in certain portfolios.

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Investment Securities Portfolio

The following tables show the amortized cost and approximate fair value of our investment securities portfolio by security type for each of the periods presented. 

(amounts in thousands)
Amortized CostMarch 31,
2025		December 31,
2024		March 31,
2024
Securities available-for-sale
U.S. Government-sponsored agencies$79,021 $83,811 $93,323 
Municipal securities65,344 67,441 69,289 
Agency mortgage-backed securities - residential398,021 300,914 253,181 
Agency mortgage-backed securities - commercial64,827 64,214 39,367 
Private label mortgage-backed securities - residential43,947 46,623 23,307 
Asset-backed securities21,662 23,802 7,417 
Corporate securities44,038 40,049 37,081 
Total available-for-sale716,860 626,854 522,965 
Securities held-to-maturity, net carrying value
Municipal securities12,215 12,843 13,381 
Agency mortgage-backed securities - residential232,235 201,840 178,800 
Agency mortgage-backed securities - commercial5,687 5,705 5,752 
Corporate securities26,405 29,408 37,805 
Total held-to-maturity, net carrying value276,542 249,796 235,738 
Total securities$993,402 $876,650 $758,703 

(amounts in thousands)
Approximate Fair ValueMarch 31,
2025		December 31,
2024		March 31,
2024
Securities available-for-sale
U.S. Government-sponsored agencies$78,278 $82,816 $92,101 
Municipal securities60,997 63,654 67,415 
Agency mortgage-backed securities - residential371,043 269,641 220,484 
Agency mortgage-backed securities - commercial63,934 63,331 38,081 
Private label mortgage-backed securities - residential43,319 45,821 22,266 
Asset-backed securities21,677 23,821 7,459 
Corporate securities42,537 38,271 34,625 
Total available-for-sale681,785 587,355 482,431 
Securities held-to-maturity
Municipal securities11,401 11,925 12,450 
Agency mortgage-backed securities - residential217,714 184,412 161,915 
Agency mortgage-backed securities - commercial4,708 4,548 4,560 
Corporate securities25,293 27,966 35,295 
Total held-to-maturity259,116 228,851 214,220 
Total securities$940,901 $816,206 $696,651 

The approximate fair value of available-for-sale investment securities increased $94.4 million, or 16.1%, to $681.8 million as of March 31, 2025, compared to $587.4 million as of December 31, 2024. The increase was due primarily to increases of $101.4 million in agency mortgage-backed securities - residential and $4.3 million in corporate securities, partially offset by decreases of $4.5 million in U.S. Government-sponsored agencies, $2.7 million in municipal securities and $2.5 million in private label mortgage-backed securities - residential. The Company deployed liquidity during the first quarter of 2025 into new purchases of variable-rate agency mortgage-backed security-residential, which was within certain available-for-sale portfolios, partially offset by net pay down activity. As of March 31, 2025, the Company had securities with a net carrying value of $276.5 million designated as held-to-maturity, compared to $249.8 million as of December 31, 2024. The increase was due primarily to purchases of CRA-eligible agency mortgage-backed securities - residential.

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Accrued Income and Other Assets

Accrued income and other assets increased $3.8 million, or 6.0%, to $66.8 million at March 31, 2025, compared to $63.0 million at December 31, 2024. The increase was due primarily to increases of $4.1 million in equity fund investments, $0.8 million in prepaid assets and $0.1 million in both deferred tax assets and derivative assets, partially offset by a decrease in receivables related to a bond that was called in the fourth quarter 2024.

Accrued Expenses and Other Liabilities

Accrued expenses and other liabilities decreased $1.6 million, or 8.8%, to $16.4 million at March 31, 2025, compared to $17.9 million at December 31, 2024. The decrease was due primarily to decreases of $3.1 million in accrued salary and benefits, partially offset by $1.4 million in other various expenses and liabilities, none of which were individually significant.

Deposits  

The following table shows the composition of the Company’s deposit base for each of the periods presented.
(dollars in thousands)March 31,
2025		December 31,
2024		March 31,
2024
Noninterest-bearing deposits$151,815 3.1 %$136,451 2.8 %$130,760 3.1 %
Interest-bearing demand deposits1
1,103,540 22.3 %896,661 18.2 %423,529 9.9 %
Savings accounts21,632 0.4 %19,823 0.4 %23,554 0.6 %
Money market accounts1,292,235 26.2 %1,183,789 24.0 %1,251,230 29.2 %
Fintech - brokered deposits1
— — %— — %107,911 2.5 %
Certificates of deposits2,029,801 41.0 %2,133,455 43.2 %1,738,996 40.7 %
Brokered deposits346,602 7.0 %563,027 11.4 %597,788 14.0 %
Total deposits$4,945,625 100.0 %$4,933,206 100.0 %$4,273,768 100.0 %

1 Fintech - brokered deposits that had been previously classified as brokered deposits were reclassified to interest-bearing demand deposits as of December 31, 2024.
   
Total deposits increased $12.4 million, or 0.3%, to $4.9 billion as of March 31, 2025, compared to $4.9 billion as of December 31, 2024. The increase was due primarily to increases of $206.9 million, or 23.1%, in interest-bearing demand deposits, $108.4 million, or 9.2%, in money market accounts and $15.4 million, or 11.3%, in noninterest-bearing deposits, partially offset by decreases of $216.4 million, or 38.4%, in brokered deposits and $103.7 million, or 4.9%, in certificates of deposits. The increase in interest-bearing demand deposits was due primarily to growth in fintech partnership deposits. When combined with the liquidity provided by growth in money market accounts, the Company paid down a significant amount of higher-cost brokered deposits and maturing certificates of deposits.

Uninsured deposit balances represented 27% of total deposits at March 31, 2025, up from 25% at December 31, 2024. These balances include Indiana-based municipal deposits, which are insured by the Indiana Board for Depositories, as well as larger balance accounts under contractual agreements that only allow withdrawal under certain conditions. After subtracting these types of deposits, the adjusted uninsured deposit balance drops to 22% as of March 31, 2025, compared to 20% as of December 31, 2024.

Regulatory Capital Requirements

The Company and the Bank are subject to various regulatory capital requirements administered by state and federal banking agencies. Capital adequacy guidelines and, additionally for banks, prompt corrective action regulations, involve quantitative measures of assets, liabilities, and certain off-balance-sheet items calculated under regulatory accounting practices. Capital amounts and classifications are also subject to qualitative judgments by regulators about components, risk weighting and other factors.

The Basel III Capital Rules became effective for the Company and the Bank on January 1, 2015, subject to a phase-in period for certain provisions. Quantitative measures established by the Basel III Capital Rules to ensure capital adequacy require the maintenance of minimum amounts and ratios of Common Equity Tier 1 capital, Tier 1 capital and Total capital, as defined in the regulations, to risk-weighted assets, and of Tier 1 capital to adjusted quarterly average assets (“Leverage Ratio”).

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The Basel III Capital Rules were fully phased in on January 1, 2019 and require the Company and the Bank to maintain: 1) a minimum ratio of Common Equity Tier 1 capital to risk-weighted assets of 4.5%, plus a 2.5% “capital conservation buffer” (resulting in a minimum ratio of Common Equity Tier 1 capital to risk-weighted assets of 7.0%); 2) a minimum ratio of Tier 1 capital to risk-weighted assets of 6.0%, plus the capital conservation buffer (resulting in a minimum Tier 1 capital ratio of 8.5%); 3) a minimum ratio of Total capital to risk-weighted assets of 8.0%, plus the capital conservation buffer (resulting in a minimum Total capital ratio of 10.5%); and 4) a minimum Leverage Ratio of 4.0%.

The capital conservation buffer is designed to absorb losses during periods of economic stress. Failure to maintain the minimum Common Equity Tier 1 capital ratio plus the capital conservation buffer will result in potential restrictions on a banking institution’s ability to pay dividends, repurchase stock and/or pay discretionary compensation to its employees.

The following tables present actual and required capital ratios as of March 31, 2025 and December 31, 2024 for the Company and the Bank under the Basel III Capital Rules. The minimum required capital amounts presented include the minimum required capital levels as of March 31, 2025 and December 31, 2024, which are based on the Basel III Capital Rules. Capital levels required to be considered well capitalized are based upon prompt corrective action regulations, as amended to reflect the changes under the Basel III Capital Rules.
As permitted by the federal banking regulatory agencies, the Company elected the option to delay the impact of the day one adoption of ASC 326. The transition adjustments of $4.5 million will be phased into the regulatory capital calculations over a three-year period, with 25% of the adjustment recognized in 2023, 50% of the adjustment recognized in 2024, 75% of the adjustment recognized in 2025 and 100% of the adjustment recognized in 2026.

ActualMinimum Capital Required - Basel III Minimum Required to be Considered Well Capitalized
(dollars in thousands)Capital AmountRatioCapital AmountRatioCapital AmountRatio
As of March 31, 2025:
Common equity tier 1 capital to risk-weighted assets
Consolidated $397,687 9.15 %$304,165 7.00 %N/AN/A
Bank471,982 10.91 %302,794 7.00 %$281,166 6.50 %
Tier 1 capital to risk-weighted assets
Consolidated 397,687 9.15 %369,343 8.50 %N/AN/A
Bank471,982 10.91 %367,679 8.50 %346,051 8.00 %
Total capital to risk-weighted assets
Consolidated 543,869 12.52 %456,247 10.50 %N/AN/A
Bank520,203 12.03 %454,191 10.50 %432,563 10.00 %
Leverage ratio
Consolidated 397,687 6.87 %231,512 4.00 %N/AN/A
Bank471,982 8.18 %230,713 4.00 %288,391 5.00 %


53

ActualMinimum Capital Required - Basel III Minimum Required to be Considered Well Capitalized
(dollars in thousands)Capital AmountRatioCapital AmountRatioCapital AmountRatio
As of December 31, 2024:
Common equity tier 1 capital to risk-weighted assets
Consolidated $400,100 9.30 %$301,052 7.00 %N/AN/A
Bank475,793 11.11 %299,774 7.00 %$278,362 6.50 %
Tier 1 capital to risk-weighted assets
Consolidated 400,100 9.30 %365,563 8.50 %N/AN/A
Bank475,793 11.11 %364,012 8.50 %342,599 8.00 %
Total capital to risk-weighted assets
Consolidated 542,808 12.62 %451,578 10.50 %N/AN/A
Bank520,610 12.16 %449,662 10.50 %428,249 10.00 %
Leverage ratio
Consolidated 400,100 6.90 %232,011 4.00 %N/AN/A
Bank475,793 8.23 %231,331 4.00 %289,164 5.00 %

Shareholders’ Dividends

The Company’s Board of Directors declared a cash dividend of $0.06 per share of common stock payable April 15, 2025 to shareholders of record as of March 31, 2025. The Company expects to continue to pay cash dividends on a quarterly basis; however, the declaration and amount of any future cash dividends will be subject to the sole discretion of the Board of Directors and will depend upon many factors, including the Company’s results of operations, financial condition, capital requirements, regulatory and contractual restrictions (including with respect to the Company’s outstanding subordinated debt), business strategy and other factors deemed relevant by the Board of Directors.

As of March 31, 2025, the Company had $107.0 million principal amount of subordinated debt outstanding evidenced by the 2029 Notes, 2030 Note and 2031 Notes. The agreements that govern our outstanding subordinated debt prohibit the Company from paying any dividends on its common stock or making any other distributions to shareholders at any time when there shall have occurred, and be continuing to occur, an event of default under the applicable agreement. If an event of default were to occur and the Company did not cure it, the Company would be prohibited from paying any dividends or making any other distributions to shareholders or from redeeming or repurchasing any common stock.

Capital Resources

The Company believes it has sufficient liquidity and capital resources to meet its cash and capital expenditure requirements for the next twelve months and longer. The Company may explore strategic alternatives, including additional asset, deposit or revenue generation channels that complement our small business, commercial and consumer banking platforms, which may require additional capital. If the Company is unable to secure such capital at favorable terms, its ability to take advantage of such opportunities could be adversely affected.

On December 19, 2022, the Company's Board of Directors approved a new stock repurchase program to replace the prior program. The new program authorized the repurchase of up to $25.0 million of our outstanding common stock from time to time on the open market or in privately negotiated transactions. The stock repurchase authorization expired on December 31, 2024. Under this program, the Company repurchased 559,522 shares of common stock at an average price of $19.06, for a total investment of $10.7 million.

Various factors determine the amount and timing of our share repurchases, including our capital requirements, organic growth and other strategic opportunities, economic and market conditions (including the trading price of our stock), and regulatory and legal considerations. See Part II, Item 2, of this report for information regarding recent repurchase activity and our remaining authority under the program.

54

Liquidity

Liquidity management is the process used by the Company to manage the continuing flow of funds necessary to meet its financial commitments on a timely basis and at a reasonable cost while also maintaining safe and sound operations. Liquidity, represented by cash and investment securities, is a product of the Company’s operating, investing and financing activities. The primary sources of funds are deposits, principal and interest payments on loans and investment securities, maturing loans and investment securities, access to wholesale funding sources and collateralized borrowings. While scheduled payments and maturities of loans and investment securities are relatively predictable sources of funds, deposit flows are greatly influenced by interest rates, general economic conditions and competition. Therefore, the Company supplements deposit growth and enhances interest rate risk management through borrowings and wholesale funding, which are generally advances from the Federal Home Loan Bank (“FHLB”) and brokered deposits.

The Company holds cash and investment securities that qualify as liquid assets to maintain adequate liquidity to ensure safe and sound operations and meet its financial commitments. At March 31, 2025, on a consolidated basis, the Company had $1.1 billion in cash and cash equivalents and investment securities available-for-sale and $31.7 million in loans held-for-sale that were generally available for its cash needs. The Company can also generate funds from wholesale funding sources and collateralized borrowings. At March 31, 2025, the Bank had the ability to borrow an additional $1.7 billion from the FHLB, the Federal Reserve and correspondent bank Fed Funds lines of credit, which when combined with cash balances, totaled $2.1 billion and represented 194% of adjusted uninsured deposit balances.

The Company is a separate legal entity from the Bank and must provide for its own liquidity. In addition to its operating expenses, the Company is responsible for paying any dividends declared to its common shareholders and interest and principal on outstanding debt. The Company’s primary sources of funds are cash maintained at the holding company level and dividends from the Bank, the payment of which is subject to regulatory limits. At March 31, 2025, the Company, on an unconsolidated basis, had $12.7 million in cash for debt servicing and operating expenses.
 
The Company uses its sources of funds primarily to meet ongoing financial commitments, including withdrawals by depositors, credit commitments to borrowers, operating expenses and capital expenditures. At March 31, 2025, approved outstanding loan commitments, including unused lines of credit and standby letters of credit, amounted to $626.2 million. Certificates of deposits and brokered deposits scheduled to mature in one year or less at March 31, 2025 totaled $1.4 billion.

Management is not aware of any other events or regulatory requirements that, if implemented, are likely to have a material effect on either the Company’s or the Bank’s liquidity.

55

Reconciliation of Non-GAAP Financial Measures

This Management’s Discussion and Analysis contains financial information determined by methods other than in accordance with GAAP. Non-GAAP financial measures, specifically tangible common equity, tangible assets, tangible book value per common share, tangible common equity to tangible assets, average tangible common equity, return on average tangible common equity, total interest income - FTE, net interest income - FTE, net interest margin - FTE, adjusted total revenue, pre-tax, pre-provision income, adjusted pre-tax, pre-provision income, adjusted noninterest income, adjusted income before income taxes, adjusted income tax (benefit) provision, adjusted net income, adjusted diluted earnings per share, adjusted return on average assets, adjusted return on average shareholders’ equity and adjusted return on average tangible common equity are used by the Company’s management to measure the strength of its capital and analyze profitability, including its ability to generate earnings on tangible capital invested by its shareholders. The Company also believes that it is a standard practice in the banking industry to present total interest income, net interest income and net interest margin on a fully-taxable equivalent basis, as those measures provide useful information for peer comparisons. Although the Company believes these non-GAAP financial measures provide a greater understanding of its business, they should not be considered a substitute for financial measures determined in accordance with GAAP, nor are they necessarily comparable to non-GAAP financial measures that may be presented by other companies. Reconciliations of these non-GAAP financial measures to the most directly comparable GAAP financial measures are included in the following table for each of the periods presented.

(dollars in thousands, except share and per share data)Three Months Ended
March 31,
2025		December 31,
2024		March 31,
2024
Total equity - GAAP$387,747 $384,063 $366,739 
Adjustments:
   Goodwill(4,687)(4,687)(4,687)
Tangible common equity$383,060 $379,376 $362,052 
Total assets - GAAP$5,851,608 $5,737,859 $5,340,667 
Adjustments:
   Goodwill(4,687)(4,687)(4,687)
Tangible assets$5,846,921 $5,733,172 $5,335,980 
Common shares outstanding8,697,085 8,667,894 8,655,854 
Book value per common share$44.58 $44.31 $42.37 
   Effect of goodwill(0.54)(0.54)(0.54)
Tangible book value per common share$44.04 $43.77 $41.83 
Total shareholders’ equity to assets6.63 %6.69 %6.87 %
   Effect of goodwill(0.08 %)(0.07 %)(0.08 %)
Tangible common equity to tangible assets6.55 %6.62 %6.79 %
Total average equity - GAAP$392,035 $389,435 $369,371 
Adjustments:
   Average goodwill(4,687)(4,687)(4,687)
Average tangible common equity$387,348 $384,748 $364,684 
Return on average shareholders’ equity0.98 %7.49 %5.64 %
   Effect of goodwill0.01 %0.09 %0.07 %
Return on average tangible common equity0.99 %7.58 %5.71 %


56

(dollars in thousands, except share and per share data)Three Months Ended
March 31,
2025		December 31,
2024		March 31,
2024
Total interest income$76,829 $77,771 $68,165 
Adjustments:
   Fully-taxable equivalent adjustments 1
1,169 1,152 1,190 
Total interest income - FTE$77,998 $78,923 $69,355 
Net interest income$25,096 $23,551 $20,734 
Adjustments:
   Fully-taxable equivalent adjustments 1
1,169 1,152 1,190 
Net interest income - FTE$26,265 $24,703 $21,924 
Net interest margin1.82 %1.67 %1.66 %
   Effect of fully-taxable equivalent adjustments 1
0.09 %0.08 %0.09 %
Net interest margin - FTE1.91 %1.75 %1.75 %
1 Assuming a 21% tax rate

57

(dollars in thousands, except share and per share data)Three Months Ended
March 31,
2025		December 31,
2024		March 31,
2024
Total revenue- GAAP$35,523 $39,487 $29,081 
Adjustments:
   Gain on prepayment of FHLB advances— (1,829)— 
   Gain on termination of swaps— (2,904)— 
Adjusted total revenue$35,523 $34,754 $29,081 
Net income-GAAP$943 $7,330 $5,181 
Adjustments:1
   Provision for credit losses11,933 7,201 2,448 
   Income tax (benefit) provision(909)999 429 
Pre-tax, pre-provision income$11,967 $15,530 $8,058 
Pre-tax, pre-provision income$11,967 $15,530 $8,058 
Adjustments:
   Gain on prepayment of FHLB advances— (1,829)— 
   Gain on termination of swaps— (2,904)— 
Adjusted pre-tax, pre-provision income$11,967 $10,797 $8,058 
Noninterest income - GAAP$10,427 $15,936 $8,347 
Adjustments:
   Gain on prepayment of FHLB advances— (1,829)— 
   Gain on termination of swaps— (2,904)— 
Adjusted noninterest income$10,427 $11,203 $8,347 
Income before income taxes - GAAP$34 $8,329 $5,610 
Adjustments:1
   Gain on prepayment of FHLB advances— (1,829)— 
   Gain on termination of swaps— (2,904)— 
Adjusted income before income taxes$34 $3,596 $5,610 
Income tax (benefit) provision - GAAP$(909)$999 $429 
Adjustments:1
   Gain on prepayment of FHLB advances— (384)— 
   Gain on termination of swaps— (610)— 
Adjusted income tax (benefit) provision $(909)$5 $429 
Net income - GAAP$943 $7,330 $5,181 
Adjustments:
   Gain on prepayment of FHLB advances— (1,445)— 
   Gain on termination of swaps— (2,294)— 
Adjusted net income$943 $3,591 $5,181 
1 Assuming a 21% tax rate
58

(dollars in thousands, except share and per share data)Three Months Ended
March 31,
2025		December 31,
2024		March 31,
2024
Diluted average common shares outstanding8,784,970 8,788,793 8,750,297 
Diluted earnings per share - GAAP$0.11 $0.83 $0.59 
   Effect of gain on prepayment of FHLB advances— (0.16)— 
   Effect of gain on termination of swaps— (0.26)— 
Adjusted diluted earnings per share$0.11 $0.41 $0.59 
Return on average assets0.07 %0.50 %0.40 %
   Effect of gain on prepayment of FHLB advances— (0.10 %)— 
   Effect of gain on termination of swaps— (0.16 %)— 
Adjusted return on average assets0.07 %0.24 %0.40 %
Return on average shareholders' equity0.98 %7.49 %5.64 %
   Effect of gain on prepayment of FHLB advances— (1.48 %)— 
   Effect of gain on termination of swaps— (2.34 %)— 
Adjusted return on average shareholders' equity0.98 %3.67 %5.64 %
Return on average tangible common equity0.99 %7.58 %5.71 %
   Effect of gain on prepayment of FHLB advances— (1.49 %)— 
   Effect of gain on termination of swaps— (2.37 %)— 
Adjusted return on average tangible common equity0.99 %3.72 %5.71 %

Critical Accounting Policies and Estimates
 
There have been no material changes in the Company’s critical accounting policies or estimates from those disclosed in its Annual Report on Form 10-K for the year ended December 31, 2024.
 
Recent Accounting Pronouncements
 
Refer to Note 15 to the condensed consolidated financial statements.

Off-Balance Sheet Arrangements
 
In the ordinary course of business, the Company enters into financial transactions to extend credit, interest rate swap agreements and forms of commitments that may be considered off-balance sheet arrangements. Interest rate swaps are arranged to receive hedge accounting treatment and are classified as either fair value or cash flow hedges. Fair value hedges are purchased to convert certain fixed rate assets to floating rate. Cash flow hedges are used to convert certain variable rate liabilities into fixed rate liabilities. In November 2024, the Company’s interest rate swap derivative designated as fair value hedges matured. In December 2024, the Company terminated interest rate swaps utilized as cash flow hedges against Federal Home Loan Bank advances. As a result, the Company had no interest rate swaps that were classified as either fair value or cash flow hedges either at March 31, 2025 or at December 31, 2024. Refer to Note 12 to the condensed consolidated financial statements for additional information about derivative financial instruments.
59

ITEM 3.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     Market risk is the risk of loss arising from adverse changes in the fair value of financial instruments due to changes in interest rates, foreign exchange rates and equity prices. The primary source of market risk for the Company is interest rate risk, which can be defined as the risk to earnings and the value of our equity resulting from changes in market interest rates. Interest rate risk arises in the normal course of business to the extent that there are timing and volume differences between the amount of interest-earning assets and the amount of interest-bearing liabilities that are prepaid, withdrawn, re-priced or mature in specified periods. We seek to achieve consistent growth in net interest income and equity while managing volatility arising from shifts in market interest rates.

We monitor the Company’s interest rate risk position using income simulation models and economic value of equity (“EVE”) sensitivity analysis that capture both short-term and long-term interest rate risk exposure. Income simulation involves forecasting net interest income (“NII”) under a variety of interest rate scenarios. We use EVE sensitivity analysis to understand the impact of changes in interest rates on long-term cash flows, income and capital. EVE is calculated by discounting the cash flows for all balance sheet instruments under different interest-rate scenarios. Modeling the sensitivity of NII and EVE to changes in market interest rates is highly dependent on the assumptions incorporated into the modeling process, especially those pertaining to non-maturity deposit accounts. These assumptions are reviewed and refined on an ongoing basis by the Company. We continually model our NII and EVE positions with various interest rate scenarios and assumptions of future balance sheet composition. We utilize implied forward rates in the base case scenario which reflects market expectations for rate changes over the next 24 months. Presented below is the estimated impact on our NII and EVE position as of March 31, 2025, assuming a static balance sheet and instantaneous parallel shifts in interest rates:

% Change from Base Case for Instantaneous Parallel Changes in Rates
Implied Forward Curve -200 Basis PointsImplied Forward Curve -100 Basis Points Base Implied Forward CurveImplied Forward Curve +50 Basis PointsImplied Forward Curve +100 Basis Points
NII - Year 113.76 %7.60 %N/A(4.76 %)(9.88 %)
NII - Year 219.85 %18.64 %13.72 %9.66 %5.22 %
EVE20.39 %12.49 %N/A(7.52 %)(15.52 %)

To supplement the instantaneous rate shocks required by regulatory guidance, we also calculate our interest rate risk position assuming a gradual change in market interest rates. This gradual change is commonly referred to as a “rate ramp” and evenly allocates a change in interest rates over a specified time period.

Presented below is the estimated impact on the Company’s NII and EVE position as of March 31, 2025, assuming a static balance sheet and gradual parallel shifts in interest rates:

% Change from Base Case for Gradual Changes in Rates
Implied Forward Curve -200 Basis PointsImplied Forward Curve -100 Basis PointsBase Implied Forward CurveImplied Forward Curve +50 Basis PointsImplied Forward Curve +100 Basis Points
NII - Year 13.18 %0.73 %N/A(3.37 %)(5.37 %)
NII - Year 220.80 %17.99 %13.72 %9.71 %5.74 %
EVE18.99 %11.67 %N/A(6.85 %)(14.18 %)

60

The NII and EVE figures presented in the tables above are reflective of a static balance sheet, and do not incorporate either balance sheet growth or contraction, or strategies to increase net interest income while managing volatility arising from shifts in market interest rates. As such, it is likely that actual results will differ from what is presented in the tables above. Balance sheet strategies to achieve such objectives may include:

•Increasing the proportion of low-duration or variable-rate loans to total loans, including organic growth in small business, construction or C&I lending, and declines in longer-term loan portfolios
•Selling longer-term fixed rate loans
•Increasing the proportion of lower cost non-maturity deposits to total deposits
•Extending the duration of wholesale funding
•Executing derivative strategies to synthetically extend liabilities or shorten asset duration
•Repositioning the investment portfolio to manage its duration

ITEM 4.    CONTROLS AND PROCEDURES
 
Evaluation of Disclosure Controls and Procedures
 
The Company maintains disclosure controls and procedures that are designed to provide reasonable assurance that information required to be disclosed in reports that it files or submits under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), is recorded, processed, summarized, and reported within the time period specified in the SEC’s rules and forms. These controls and procedures are also designed to provide reasonable assurance that such information is accumulated and communicated to management, including the principal executive and principal financial officers, as appropriate, to allow timely decisions regarding required disclosures. In designing and evaluating disclosure controls and procedures, the Company has recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. Management is required to apply judgment in evaluating its controls and procedures.
 
The Company performed an evaluation under the supervision and with the participation of management, including the principal executive and principal financial officers, to assess the effectiveness of the design and operation of its disclosure controls and procedures under the Exchange Act. Based on that evaluation, our management, including our principal executive officer and principal financial officer, concluded that our disclosure controls and procedures were effective at a reasonable assurance level as of March 31, 2025.

Changes in Internal Control over Financial Reporting
 
There has been no change in the Company’s internal control over financial reporting during the quarter ended March 31, 2025 that has materially affected, or is reasonably likely to materially affect, its internal control over financial reporting.
61

PART II
 
ITEM 1.    LEGAL PROCEEDINGS
 
Neither we nor any of our subsidiaries are party to any material legal proceedings. From time to time, the Bank is a party to legal actions arising from its normal business activities.
 
ITEM 1A.    RISK FACTORS
 
There have been no material changes to the risk factors previously disclosed in Part I, Item 1A, of our Annual Report on Form 10-K for the year ended December 31, 2024.


ITEM 2.    UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS 

None.


ITEM 3.    DEFAULTS UPON SENIOR SECURITIES
 
None.
 
ITEM 4.    MINE SAFETY DISCLOSURES
 
Not Applicable.
 
ITEM 5.    OTHER INFORMATION

None.
 
ITEM 6.    EXHIBITS 
Exhibit No.DescriptionMethod of Filing
3.1
Amended and Restated Articles of Incorporation of First Internet Bancorp (incorporated by reference to Exhibit 3.1 to current report on Form 8-K filed May 21, 2020)
Incorporated by Reference
3.2
Amended and Restated Bylaws of First Internet Bancorp (incorporated by reference to Exhibit 3.2 to current report on Form 8-K filed May 21, 2020)
Incorporated by Reference
31.1
Filed Electronically
31.2
Filed Electronically
32.1
Filed Electronically
101Inline XBRL Instance Document (does not appear in the Interactive Data File because XBRL tags are embedded within the Inline XBRL document)Filed Electronically
101.SCHInline XBRL Taxonomy Extension SchemaFiled Electronically
101.CALInline XBRL Taxonomy Extension Calculation LinkbaseFiled Electronically
101.DEFInline XBRL Taxonomy Extension Definition LinkbaseFiled Electronically
101.LABInline XBRL Taxonomy Extension Label LinkbaseFiled Electronically
101.PREInline XBRL Taxonomy Extension Presentation LinkbaseFiled Electronically
104Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)Filed Electronically



62

SIGNATURES
 
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 
  FIRST INTERNET BANCORP
   
5/7/2025By/s/ David B. Becker
  
David B. Becker,
Chairman and Chief Executive Officer
(on behalf of Registrant)
   
5/7/2025By/s/ Kenneth J. Lovik
  
Kenneth J. Lovik,
Executive Vice President and Chief Financial Officer (principal financial officer)
 
63

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