10-Q

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 June 30, 2021

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.)
11201 USA Parkway Fishers, IN	46037
(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 class	Trading Symbols	Name of each exchange on which registered
Common Stock, without par value	INBK	The Nasdaq Stock Market LLC
6.0% Fixed to Floating Subordinated Notes due 2026	INBKL	The Nasdaq Stock Market LLC
6.0% Fixed to Floating Subordinated Notes due 2029	INBKZ	The 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 August 6, 2021, the registrant had 9,854,153 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 (“we,” “our,” “us” or the “Company”) regarding its business strategies, intended results and future performance. Forward-looking statements are generally preceded by terms such as “anticipate,” “attempt,” “believe,” “can,” “continue,” “could,” “effort,” “estimate,” “expect,” “intend,” “likely,” “may,” “objective,” “optimistic,” “pending,” “plan,” “position,” “potential,” “preliminary,” “remain,” “should,” “will,” “would” or other similar expressions. Such statements are not a guarantee of future performance or results, are based on information available at the time the statements are made and are subject to certain risks and uncertainties including: the effects of the COVID-19 global pandemic and other adverse public health developments on the economy, 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; our credit quality and related levels of nonperforming assets and loan losses, and the value and salability of the real estate that we own or that is the 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 plans to continue originating our commercial real estate, commercial and industrial, public finance, U.S. Small Business Administration (“SBA”) and healthcare finance loans, and to start originating franchise finance loans, which may carry greater risks of non-payment or other unfavorable consequences; 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 loan 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; competitive factors among financial services organizations, including product and pricing pressures and our ability to attract, develop and retain qualified banking professionals; execution of future acquisition, reorganization or disposition transactions, including without limitation, the related time and costs of implementing such transactions, integrating operations as part of these transactions and possible failures to achieve expected gains, revenue growth and/or expense savings and other anticipated benefits from such transactions; changes in applicable tax laws; 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.

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PART I

ITEM 1.    FINANCIAL STATEMENTS 

First Internet Bancorp

Condensed Consolidated Balance Sheets

(Amounts in thousands except share data)

	June 30, 2021		December 31, 2020
	(Unaudited)
Assets
Cash and due from banks	$	4,347	$	7,367
Interest-bearing deposits	324,450		412,439
Total cash and cash equivalents	328,797		419,806
Securities available-for-sale, at fair value (amortized cost of $663,693 and $497,004 in 2021 and 2020, respectively)	663,519		497,628
Securities held-to-maturity, at amortized cost (fair value of $68,058 and $69,452 in 2021 and 2020, respectively)	65,659		68,223
Loans held-for-sale (includes $16,870 and $26,341 at fair value in 2021 and 2020, respectively)	27,587		39,584
Loans	2,957,608		3,059,231
Allowance for loan losses	(28,066)		(29,484)
Net loans	2,929,542		3,029,747
Accrued interest receivable	16,345		17,416
Federal Home Loan Bank of Indianapolis stock	25,650		25,650
Cash surrender value of bank-owned life insurance	38,421		37,952
Premises and equipment, net	44,249		37,590
Goodwill	4,687		4,687
Servicing asset, at fair value	4,120		3,569
Other real estate owned	1,300		—
Accrued income and other assets	54,766		64,304
Total assets	$	4,204,642	$	4,246,156
Liabilities and Shareholders’ Equity
Liabilities
Noninterest-bearing deposits	$	113,996	$	96,753
Interest-bearing deposits	3,092,151		3,174,132
Total deposits	3,206,147		3,270,885
Advances from Federal Home Loan Bank	514,919		514,916
Subordinated debt, net of unamortized debt issuance costs of $2,129 and $2,397 in 2021 and 2020, respectively	69,871		79,603
Accrued interest payable	1,132		1,439
Accrued expenses and other liabilities	53,932		48,369
Total liabilities	3,846,001		3,915,212
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; 9,854,153 and 9,800,569 shares issued and outstanding in 2021 and 2020, respectively	222,486		221,408
Nonvoting common stock, no par value; 86,221 shares authorized; issued and outstanding - none	—		—
Retained earnings	149,066		126,732
Accumulated other comprehensive loss	(12,911)		(17,196)
Total shareholders’ equity	358,641		330,944
Total liabilities and shareholders’ equity	$	4,204,642	$	4,246,156

See Notes to Condensed Consolidated Financial Statements

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First Internet Bancorp

Condensed Consolidated Statements of Income – Unaudited

(Amounts in thousands except share and per share data)

	Three Months Ended				Six Months Ended
	June 30, 2021		June 30, 2020		June 30, 2021		June 30, 2020
Interest Income
Loans	$	30,835	$	29,730	$	61,720	$	60,138
Securities – taxable	1,921		3,276		3,700		6,895
Securities – non-taxable	259		457		540		1,029
Other earning assets	362		759		697		2,404
Total interest income	33,377		34,222		66,657		70,466
Interest Expense
Deposits	7,705		15,763		16,333		32,971
Other borrowed funds	4,065		4,033		8,192		8,051
Total interest expense	11,770		19,796		24,525		41,022
Net Interest Income	21,607		14,426		42,132		29,444
Provision for Loan Losses	21		2,491		1,297		3,952
Net Interest Income After Provision for Loan Losses	21,586		11,935		40,835		25,492
Noninterest Income
Service charges and fees	280		182		546		394
Loan servicing revenue	457		255		879		506
Loan servicing asset revaluation	(240)		(90)		(395)		(269)
Mortgage banking activities	2,674		3,408		8,424		7,076
Gain on sale of loans	3,019		762		4,742		2,563
Gain on sale of securities	—		—		—		41
Gain on sale of premises and equipment	2,523		—		2,523		—
Other	249		456		618		873
Total noninterest income	8,962		4,973		17,337		11,184
Noninterest Expense
Salaries and employee benefits	9,232		7,789		18,724		15,563
Marketing, advertising and promotion	872		411		1,552		786
Consulting and professional services	1,078		932		2,064		2,109
Data processing	382		339		844		714
Loan expenses	541		399		1,075		998
Premises and equipment	1,587		1,602		3,188		3,227
Deposit insurance premium	275		435		700		920
Other	1,108		1,337		2,245		2,413
Total noninterest expense	15,075		13,244		30,392		26,730
Income Before Income Taxes	15,473		3,664		27,780		9,946
Income Tax Provision (Benefit)	2,377		(268)		4,234		(5)
Net Income	$	13,096	$	3,932	$	23,546	$	9,951
Income Per Share of Common Stock
Basic	$	1.32	$	0.40	$	2.37	$	1.02
Diluted	$	1.31	$	0.40	$	2.36	$	1.02
Weighted-Average Number of Common Shares Outstanding
Basic	9,932,761		9,768,227		9,916,087		9,798,528
Diluted	9,981,422		9,768,227		9,970,147		9,802,427
Dividends Declared Per Share	$	0.06	$	0.06	$	0.12	$	0.12

See Notes to Condensed Consolidated Financial Statements

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First Internet Bancorp

Condensed Consolidated Statements of Comprehensive Income – Unaudited

(Amounts in thousands)

	Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020
Net income	$	13,096	$	3,932	$	23,546	$	9,951
Other comprehensive income (loss)
Net unrealized holding gains (losses) on securities available-for-sale recorded within other comprehensive income (loss) before income tax	1,388		(1,498)		(807)		4,801
Reclassification adjustment for gains realized	—		—		—		(41)
Net unrealized holding (losses) gains on cash flow hedging derivatives recorded within other comprehensive income (loss) before income tax	(54)		(509)		6,226		(13,967)
Other comprehensive income (loss) before income tax	1,334		(2,007)		5,419		(9,207)
Income tax provision (benefit)	325		(735)		1,134		(2,260)
Other comprehensive income (loss)	1,009		(1,272)		4,285		(6,947)
Comprehensive income	$	14,105	$	2,660	$	27,831	$	3,004

 See Notes to Condensed Consolidated Financial Statements

First Internet Bancorp

Condensed Consolidated Statements of Changes in Shareholders’ Equity - Unaudited

Six Months Ended June 30, 2021 and 2020

(Amounts in thousands except per share data)

	Voting and Nonvoting Common Stock		Retained Earnings		Accumulated Other Comprehensive Loss		Total Shareholders’ Equity
Balance, January 1, 2021	$	221,408	$	126,732	$	(17,196)	$	330,944
Net income	—		23,546		—		23,546
Other comprehensive income	—		—		4,285		4,285
Dividends declared ($0.12 per share)	—		(1,212)		—		(1,212)
Recognition of the fair value of share-based compensation	1,262		—		—		1,262
Deferred stock rights and restricted stock units issued in lieu of cash dividends payable on outstanding deferred stock rights and restricted stock units	11		—		—		11
Common stock redeemed for the net settlement of share-based awards	(195)		—		—		(195)
Balance, June 30, 2021	$	222,486	$	149,066	$	(12,911)	$	358,641
Balance, January 1, 2020	$	219,423	$	99,681	$	(14,191)	$	304,913
Net income	—		9,951		—		9,951
Other comprehensive loss	—		—		(6,947)		(6,947)
Dividends declared ($0.12 per share)	—		(1,201)		—		(1,201)
Recognition of the fair value of share-based compensation	1,073		—		—		1,073
Deferred stock rights and restricted stock units issued in lieu of cash dividends payable on outstanding deferred stock rights and restricted stock units	15		—		—		15
Common stock redeemed for the net settlement of share-based awards	(93)		—		—		(93)
Balance, June 30, 2020	$	220,418	$	108,431	$	(21,138)	$	307,711

See Notes to Condensed Consolidated Financial Statements

3

First Internet Bancorp

Condensed Consolidated Statements of Changes in Shareholders’ Equity - Unaudited

Three Months Ended June 30, 2021 and 2020

(Amounts in thousands except per share data)

	Voting and Nonvoting Common Stock		Retained Earnings		Accumulated Other Comprehensive Loss		Total Shareholders’ Equity
Balance, April 1, 2021	$	221,911	$	136,575	$	(13,920)	$	344,566
Net income	—		13,096		—		13,096
Other comprehensive income	—		—		1,009		1,009
Dividends declared ($0.06 per share)	—		(605)		—		(605)
Recognition of the fair value of share-based compensation	570		—		—		570
Deferred stock rights and restricted stock units issued in lieu of cash dividends payable on outstanding deferred stock rights and restricted stock units	5		—		—		5
Common stock redeemed for the net settlement of share-based awards	—		—		—		—
Balance, June 30, 2021	$	222,486	$	149,066	$	(12,911)	$	358,641
Balance, April 1, 2020	$	219,893	$	105,100	$	(19,866)	$	305,127
Net income	—		3,932		—		3,932
Other comprehensive loss	—		—		(1,272)		(1,272)
Dividends declared ($0.06 per share)	—		(601)		—		(601)
Recognition of the fair value of share-based compensation	517		—		—		517
Deferred stock rights and restricted stock units issued in lieu of cash dividends payable on outstanding deferred stock rights and restricted stock units	8		—		—		8
Common stock redeemed for the net settlement of share-based awards	—		—		—		—
Balance, June 30, 2020	$	220,418	$	108,431	$	(21,138)	$	307,711

4

First Internet Bancorp

Condensed Consolidated Statements of Cash Flows – Unaudited

(Amounts in thousands)

	Six Months Ended June 30,
	2021		2020
Operating Activities
Net income	$	23,546	$	9,951
Adjustments to reconcile net income to net cash used in operating activities:
Depreciation and amortization	4,038		3,515
Increase in cash surrender value of bank-owned life insurance	(469)		(472)
Provision for loan losses	1,297		3,952
Share-based compensation expense	1,262		1,073
Loss on sale of available-for-sale securities	—		(41)
Loans originated for sale	(421,012)		(427,323)
Proceeds from sale of loans	448,093		454,737
Gain on loans sold	(16,774)		(11,069)
Decrease in fair value of loans held-for-sale	744		939
Loss on derivatives	(1,384)		377
Settlement of derivatives	(1,859)		(46,109)
Loan servicing asset revaluation	395		(41)
Amortization of operating lease right-of-use assets	—		360
Net change in accrued income and other assets	1,631		(2,221)
Net change in accrued expenses and other liabilities	1,984		(1,840)
Net cash provided by (used in) operating activities	41,492		(14,212)
Investing Activities
Net loan activity, excluding purchases	120,219		(18,907)
Maturities and calls of securities available-for-sale	94,643		74,828
Proceeds from sale of securities available-for-sale	—		795
Purchase of securities available-for-sale	(247,791)		(116,993)
Maturities and calls of securities held-to-maturity	2,500		—
Purchase of securities held-to-maturity	—		(2,000)
Net proceeds from sale of premises and equipment	8,116		—
Purchase of premises and equipment	(13,707)		(10,580)
Loans purchased	(22,611)		(172,250)
Net proceeds from sale of portfolio loans	—		205,023
Other investing activities	2,264		—
Net cash used in investing activities	(56,367)		(40,084)
Financing Activities
Net increase (decrease) in deposits	(64,738)		226,826
Cash dividends paid	(1,201)		(1,179)
Repayment of subordinated debt	(10,000)		—
Proceeds from advances from Federal Home Loan Bank	110,000		220,000
Repayment of advances from Federal Home Loan Bank	(110,000)		(220,000)
Other, net	(195)		(93)
Net cash (used in) provided by financing activities	(76,134)		225,554
Net (Decrease) Increase in Cash and Cash Equivalents	(91,009)		171,258
Cash and Cash Equivalents, Beginning of Period	419,806		327,361
Cash and Cash Equivalents, End of Period	$	328,797	$	498,619
Supplemental Disclosures
Cash paid during the period for interest	24,832		43,716
Cash paid during the period for taxes	2,905		91
Loans transferred to other real estate owned	1,300		—
Loans transferred to held-for-sale from portfolio	—		204,258
Cash dividends declared, paid in subsequent period	592		588
Securities purchased during the period, settled in subsequent period	13,590		—
Transfer of available-for-sale municipal securities to held-to-maturity municipal securities	—		4,479

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 and six months ended June 30, 2021 are not necessarily indicative of the results expected for the year ending December 31, 2021 or any other period. The June 30, 2021 condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes included in the First Internet Bancorp Annual Report on Form 10-K for the year ended December 31, 2020.

The 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 determination of the allowance for loan losses, valuations and impairments of investment securities, valuation of the servicing asset and the accounting for income tax expense are highly dependent upon management’s estimates, judgments, and assumptions, 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.

Certain reclassifications have been made to the 2020 financial statements to conform to the presentation of the 2021 financial statements. These reclassifications had no effect on net income.

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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 and six months ended June 30, 2021 and 2020. 

(dollars in thousands, except per share data)	Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020
Basic earnings per share
Net income	$	13,096	$	3,932	$	23,546	$	9,951
Weighted-average common shares	9,932,761		9,768,227		9,916,087		9,798,528
Basic earnings per common share	$	1.32	$	0.40	$	2.37	$	1.02
Diluted earnings per share
Net income	$	13,096	$	3,932	$	23,546	$	9,951
Weighted-average common shares	9,932,761		9,768,227		9,916,087		9,798,528
Dilutive effect of equity compensation	48,661		—		54,060		3,899
Weighted-average common and incremental shares	9,981,422		9,768,227		9,970,147		9,802,427
Diluted earnings per common share (1)	$	1.31	$	0.40	$	2.36	$	1.02

(1) Potential dilutive common shares are excluded from the computation of diluted EPS in the periods where the effect would be antidilutive. Excluded from the computation of diluted EPS were weighted-average antidilutive shares totaling 6 and 3 for the three and six months ended June 30, 2021, respectively, and 79,893 and 29,606 for the three and six months ended June 30, 2020, respectively.

Note 3:         Securities

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

	June 30, 2021
	Amortized		Gross Unrealized				Fair
(in thousands)	Cost		Gains		Losses		Value
Securities available-for-sale
U.S. Government-sponsored agencies	$	57,984	$	337	$	(1,186)	$	57,135
Municipal securities	77,364		1,229		(155)		78,438
Agency mortgage-backed securities	445,895		2,734		(4,135)		444,494
Private label mortgage-backed securities	29,003		360		—		29,363
Asset-backed securities	5,000		5		—		5,005
Corporate securities	48,447		855		(218)		49,084
Total available-for-sale	$	663,693	$	5,520	$	(5,694)	$	663,519

	June 30, 2021
	Amortized		Gross Unrealized				Fair
(in thousands)	Cost		Gains		Losses		Value
Securities held-to-maturity
Municipal securities	$	14,549	$	824	$	—	$	15,373
Corporate securities	51,110		1,575		—		52,685
Total held-to-maturity	$	65,659	$	2,399	$	—	$	68,058

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	December 31, 2020
	Amortized		Gross Unrealized				Fair
(in thousands)	Cost		Gains		Losses		Value
Securities available-for-sale
U.S. Government-sponsored agencies	$	61,765	$	432	$	(1,652)	$	60,545
Municipal securities	82,757		463		(731)		82,489
Agency mortgage-backed securities	241,795		4,591		(2,465)		243,921
Private label mortgage-backed securities	57,268		850		(2)		58,116
Asset-backed securities	5,000		—		(39)		4,961
Corporate securities	48,419		771		(1,594)		47,596
Total available-for-sale	$	497,004	$	7,107	$	(6,483)	$	497,628

	December 31, 2020
	Amortized		Gross Unrealized				Fair
(in thousands)	Cost		Gains		Losses		Value
Securities held-to-maturity
Municipal securities	$	14,571	$	746	$	—	$	15,317
Corporate securities	53,652		610		(127)		54,135
Total held-to-maturity	$	68,223	$	1,356	$	(127)	$	69,452

The carrying value of securities at June 30, 2021 is shown below by their contractual maturity date. 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
(in thousands)	Amortized Cost		Fair Value
Within one year	$	—	$	—
One to five years	29,686		27,234
Five to ten years	72,226		72,380
After ten years	81,883		85,043
	183,795		184,657
Agency mortgage-backed securities	445,895		444,494
Private label mortgage-backed securities	29,003		29,363
Asset-backed securities	5,000		5,005
Total	$	663,693	$	663,519

	Held-to-Maturity
(in thousands)	Amortized Cost		Fair Value
One to five years	$	3,375	$	3,556
Five to ten years	50,096		51,908
After ten years	12,188		12,594
Total	$	65,659	$	68,058

There were no gross gains or losses resulting from sale of available-for-sale securities during the three and six months ended June 30, 2021. There were no gross gains or losses resulting from sale of available-for-sale securities during the three months ended June 30, 2020 and gross gains of less than $0.1 million resulting from sales of available-for-sale securities during the six months ended June 30, 2020.

8

Certain investments in debt securities are reported in the condensed consolidated financial statements at an amount less than their historical cost. The total fair value of these investments at June 30, 2021 and December 31, 2020 was $451.8 million and $226.5 million, which was approximately 62% and 40%, respectively, of the Company’s AFS and HTM securities portfolios. As of June 30, 2021, the Company’s security portfolio consisted of 448 securities, of which 152 were in an unrealized loss position. The unrealized losses are related to the categories noted below. These declines resulted primarily from fluctuations in market interest rates after purchase. Management believes the declines in fair value for these securities are temporary. Should the impairment of any of these securities become other than temporary, the cost basis of the investment will be reduced, with the resulting loss recognized in net income in the period the other-than-temporary impairment (“OTTI”) is identified.

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 bases of the investments. Because the Company does not intend to sell the investments and it is not likely that the Company will be required to sell the investments before recovery of their amortized cost bases, which may be upon maturity, the Company does not consider those investments to be other-than-temporarily impaired at June 30, 2021.

Agency Mortgage-Backed, Private Label Mortgage-Backed and Asset-Backed Securities

The unrealized losses on the Company’s investments in agency mortgage-backed, private label mortgage-backed and asset-backed securities were caused primarily by interest rate changes. The Company expects to recover the amortized cost bases over the terms of the securities. Because the Company does not intend to sell the investments and it is not likely that the Company will be required to sell the investments before recovery of their amortized cost bases, which may be upon maturity, the Company does not consider those investments to be other-than-temporarily impaired at June 30, 2021.

The following tables show the securities portfolio’s gross unrealized losses and fair value, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position at June 30, 2021 and December 31, 2020.

	June 30, 2021
	Less Than 12 Months				12 Months or Longer				Total
(in thousands)	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
Securities available-for-sale
U.S. Government-sponsored agencies	$	2,969	$	(31)	$	47,281	$	(1,155)	$	50,250	$	(1,186)
Municipal securities	61,658		(155)		—		—		61,658		(155)
Agency mortgage-backed securities	316,123		(3,543)		8,956		(592)		325,079		(4,135)
Corporate securities	4,984		(16)		9,799		(202)		14,783		(218)
Total	$	385,734	$	(3,745)	$	66,036	$	(1,949)	$	451,770	$	(5,694)

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

9

	December 31, 2020
	Less Than 12 Months				12 Months or Longer				Total
(in thousands)	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
Securities available-for-sale
U.S. Government-sponsored agencies	$	—	$	—	$	52,351	$	(1,652)	$	52,351	$	(1,652)
Municipal securities	18,731		(114)		23,519		(617)		42,250		(731)
Agency mortgage-backed securities	38,987		(276)		45,297		(2,189)		84,284		(2,465)
Private label mortgage-backed securities	1,277		(1)		558		(1)		1,835		(2)
Asset-backed securities	—		—		4,961		(39)		4,961		(39)
Corporate securities	—		—		20,406		(1,594)		20,406		(1,594)
Total	$	58,995	$	(391)	$	147,092	$	(6,092)	$	206,087	$	(6,483)

	December 31, 2020
	Less Than 12 Months				12 Months or Longer				Total
(in thousands)	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
Securities held-to-maturity
Corporate securities	17,456		(126)		2,999		(1)		20,455		(127)
Total	$	17,456	$	(126)	$	2,999	$	(1)	$	20,455	$	(127)

There were no amounts reclassified from accumulated other comprehensive loss to the condensed consolidated statements of income during the three and six months ended June 30, 2021. Amounts reclassified from accumulated other comprehensive loss and the affected line items in the condensed consolidated statements of income during the three and six months ended June 30, 2020 were as follows:

(in thousands) Details About Accumulated Other Comprehensive Loss Components									Affected Line Item in the Statements of Income
	Three Months Ended June 30, 2021		Six Months Ended June 30, 2021		Three Months Ended June 30, 2020		Six Months Ended June 30, 2020
Realized gains on securities available-for-sale
Gain realized in earnings	$	—	$	—	$	—	$	41	Gain on sale of securities
Total reclassified amount before tax	—		—		—		41		Income Before Income Taxes
Tax expense	—		—				11		Income Tax Provision
Total reclassifications out of accumulated other comprehensive loss	$	—	$	—	$	—	$	30	Net Income

10

Note 4:        Loans

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

(in thousands)	June 30, 2021		December 31, 2020
Commercial loans
Commercial and industrial	$	96,203	$	75,387
Owner-occupied commercial real estate	87,136		89,785
Investor commercial real estate	28,871		13,902
Construction	117,970		110,385
Single tenant lease financing	913,115		950,172
Public finance	612,138		622,257
Healthcare finance	455,890		528,154
Small business lending	123,293		125,589
Total commercial loans	2,434,616		2,515,631
Consumer loans
Residential mortgage	177,148		186,787
Home equity	17,510		19,857
Other consumer	271,796		275,692
Total consumer loans	466,454		482,336
Total commercial and consumer loans	2,901,070		2,997,967
Net deferred loan origination fees/costs and premiums/discounts on purchased loans and other(1)	56,538		61,264
Total loans	2,957,608		3,059,231
Allowance for loan losses	(28,066)		(29,484)
Net loans	$	2,929,542	$	3,029,747

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

The risk characteristics of 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 Central Indiana and adjacent markets and the greater Phoenix, Arizona market.

Owner-Occupied Commercial Real Estate: The primary source of repayment is the cash flow from the ongoing operations and activities conducted by the borrower, or an affiliate of the borrower, who owns the property. This portfolio segment is generally concentrated in Central Indiana and adjacent markets and the greater Phoenix, Arizona market and its loans are often secured by manufacturing and service facilities, as well as office buildings.

11

Investor Commercial Real Estate: These loans 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 and are generally located in the state of Indiana or markets immediately adjacent to Indiana. Management monitors and evaluates commercial real estate loans based on property financial performance, collateral value, guarantor strength, economic and industry conditions together with other risk grade criteria. As a general rule, the Company avoids financing special use projects or properties outside of its designated market areas unless other underwriting factors are present to mitigate these additional risks.

Construction: Construction loans 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 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. This portfolio segment is generally concentrated in Central Indiana.

Single Tenant Lease Financing: These loans are made on a nationwide basis to property 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 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; 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. Public finance lending has been conducted primarily in the Midwest, but continues to expand nationwide.

Healthcare Finance: These loans are made to healthcare providers, primarily dentists, for practice acquisition refinancing that occasionally includes owner-occupied commercial real estate and equipment purchases. The sources of repayment are primarily based on the identified cash flows from operations of the borrower and related entities if the real estate is held in a separate entity and secondarily on the underlying collateral provided by the borrower. This portfolio segment was initially concentrated in the Western United States but has since expanded throughout the rest of the country.

Small Business Lending: These loans are to small businesses and generally carry a partial guaranty from the U.S. 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 purchases. These loans also include loans originated by the Bank under the SBA’s Paycheck Protection Program, which are fully guaranteed by the SBA. This portfolio segment has an emerging geography, with a nationwide focus.

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.

12

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 Loan Losses Methodology

Company policy is designed to maintain an adequate allowance for loan losses (“ALLL”). The portfolio is segmented by loan type, and the required ALLL for types of performing homogeneous loans which do not have a specific reserve is determined by applying a factor based on average historical losses, adjusted for current economic factors and portfolio trends. Management adds qualitative factors for observable trends, changes in internal practices, changes in delinquencies and impairments, and external factors. Observable factors include changes in the composition and size of portfolios, as well as loan terms or concentration levels. The Company evaluates the impact of internal changes such as management and staff experience levels or modification to loan underwriting processes. Delinquency trends are scrutinized for both volume and severity of past due, nonaccrual, or classified loans, as well as any changes in the value of underlying collateral. Finally, the Company considers the effect of other external factors such as national, regional, and local economic and business conditions, as well as competitive, legal, and regulatory requirements. Loans that are considered to be impaired are evaluated to determine the need for a specific allowance by applying at least one of three methodologies: present value of future cash flows; fair value of collateral less costs to sell; or the loan’s observable market price. All troubled debt restructurings (“TDR”) are considered impaired loans. Loans evaluated for impairment are removed from other pools to prevent double-counting. Accounting Standards Codification (“ASC”) Topic 310, Receivables, requires that impaired loans be measured based on the present value of expected future cash flows discounted at the loans’ effective interest rates or the fair value of the underlying collateral less costs to sell and allows existing methods for recognizing interest income.

Provision for Loan 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.

13

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

(in thousands)	Three Months Ended June 30, 2021
Allowance for loan losses:	Balance, Beginning of Period		Provision (Credit) Charged to Expense		Losses Charged Off		Recoveries		Balance, End of Period
Commercial and industrial	$	1,662	$	267	$	(28)	$	2	$	1,903
Owner-occupied commercial real estate	1,029		(8)		—		—		1,021
Investor commercial real estate	169		160		—		—		329
Construction	1,420		(63)		—		—		1,357
Single tenant lease financing	13,178		418		(2,391)		—		11,205
Public finance	1,748		(48)		—		—		1,700
Healthcare finance	7,755		(817)		—		—		6,938
Small business lending	700		214		(133)		2		783
Residential mortgage	601		(5)		(6)		4		594
Home equity	57		4		—		2		63
Other consumer	2,323		(101)		(131)		82		2,173
Total	$	30,642	$	21	$	(2,689)	$	92	$	28,066

	Six Months Ended June 30, 2021
Allowance for loan losses:	Balance, Beginning of Period		Provision (Credit) Charged to Expense		Losses Charged Off		Recoveries		Balance, End of Period
Commercial and industrial	$	1,146	$	701	$	(28)	$	84	$	1,903
Owner-occupied commercial real estate	1,082		(61)		—		—		1,021
Investor commercial real estate	155		174		—		—		329
Construction	1,192		165		—		—		1,357
Single tenant lease financing	12,990		606		(2,391)		—		11,205
Public finance	1,732		(32)		—		—		1,700
Healthcare finance	7,485		(547)		—		—		6,938
Small business lending	628		361		(212)		6		783
Residential mortgage	519		72		(6)		9		594
Home equity	48		63		(51)		3		63
Other consumer	2,507		(205)		(313)		184		2,173
Total	$	29,484	$	1,297	$	(3,001)	$	286	$	28,066

14

	Three Months Ended June 30, 2020
Allowance for loan losses:	Balance, Beginning of Period		Provision (Credit) Charged to Expense		Losses Charged Off		Recoveries		Balance, End of Period
Commercial and industrial	$	1,670	$	(141)	$	(57)	$	5	$	1,477
Owner-occupied commercial real estate	645		201		—		—		846
Investor commercial real estate	128		2		—		—		130
Construction	460		261		—		—		721
Single tenant lease financing	10,755		563		—		—		11,318
Public finance	1,483		59		—		—		1,542
Healthcare finance	4,318		1,187		(743)		—		4,762
Small business lending	265		(20)		—		6		251
Residential mortgage	500		36		—		3		539
Home equity	53		(4)		—		2		51
Other consumer	2,580		347		(216)		117		2,828
Total	$	22,857	$	2,491	$	(1,016)	$	133	$	24,465

	Six Months Ended June 30, 2020
Allowance for loan losses:	Balance, Beginning of Period		Provision (Credit) Charged to Expense		Losses Charged Off		Recoveries		Balance, End of Period
Commercial and industrial	$	1,521	$	205	$	(254)	$	5	$	1,477
Owner-occupied commercial real estate	561		285		—		—		846
Investor commercial real estate	109		21		—		—		130
Construction	380		341		—		—		721
Single tenant lease financing	11,175		143		—		—		11,318
Public finance	1,580		(38)		—		—		1,542
Healthcare finance	3,247		2,258		(743)		—		4,762
Small business lending	54		183		—		14		251
Residential mortgage	657		(107)		(15)		4		539
Home equity	46		—		—		5		51
Other consumer	2,510		661		(502)		159		2,828
Total	$	21,840	$	3,952	$	(1,514)	$	187	$	24,465

15

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

(in thousands)	Loans						Allowance for Loan Losses
June 30, 2021	Ending Balance:   Collectively Evaluated for Impairment		Ending Balance:   Individually Evaluated for Impairment		Ending Balance		Ending Balance:   Collectively Evaluated for Impairment		Ending Balance:   Individually Evaluated for Impairment		Ending Balance
Commercial and industrial	$	95,511	$	692	$	96,203	$	1,453	$	450	$	1,903
Owner-occupied commercial real estate	83,649		3,487		87,136		1,021		—		1,021
Investor commercial real estate	28,871		—		28,871		329		—		329
Construction	117,970		—		117,970		1,357		—		1,357
Single tenant lease financing	910,742		2,373		913,115		10,838		367		11,205
Public finance	612,138		—		612,138		1,700		—		1,700
Healthcare finance	454,919		971		455,890		6,415		523		6,938
Small business lending(1)	122,084		1,209		123,293		783		—		783
Residential mortgage	174,717		2,431		177,148		594		—		594
Home equity	17,496		14		17,510		63		—		63
Other consumer	271,786		10		271,796		2,173		—		2,173
Total	$	2,889,883	$	11,187	$	2,901,070	$	26,726	$	1,340	$	28,066

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

(in thousands)	Loans						Allowance for Loan Losses
December 31, 2020	Ending Balance:   Collectively Evaluated for Impairment		Ending Balance:   Individually Evaluated for Impairment		Ending Balance		Ending Balance:   Collectively Evaluated for Impairment		Ending Balance:   Individually Evaluated for Impairment		Ending Balance
Commercial and industrial	$	74,870	$	517	$	75,387	$	1,146	$	—	$	1,146
Owner-occupied commercial real estate	87,947		1,838		89,785		1,082		—		1,082
Investor commercial real estate	13,902		—		13,902		155		—		155
Construction	110,385		—		110,385		1,192		—		1,192
Single tenant lease financing	942,848		7,324		950,172		9,900		3,090		12,990
Public finance	622,257		—		622,257		1,732		—		1,732
Healthcare finance	527,144		1,010		528,154		7,485		—		7,485
Small business lending	125,589		—		125,589		628		—		628
Residential mortgage	185,241		1,546		186,787		519		—		519
Home equity	19,857		—		19,857		48		—		48
Other consumer	275,642		50		275,692		2,507		—		2,507
Total	$	2,985,682	$	12,285	$	2,997,967	$	26,394	$	3,090	$	29,484

16

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

Nonaccrual Loans

Any loan which becomes 90 days delinquent or for which the full collection of principal and interest may be in doubt will be considered for nonaccrual status. At the time a loan is placed on nonaccrual status, all accrued but unpaid interest will be reversed from interest income. Placing the loan on nonaccrual status does not relieve the borrower of the obligation to repay interest. A loan placed on nonaccrual status may be restored to accrual status when all delinquent principal and interest has been brought current, and the Company expects full payment of the remaining contractual principal and interest.

17

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

	June 30, 2021
(in thousands)	Pass		Special Mention		Substandard		Total
Commercial and industrial	$	79,928	$	15,563	$	712	$	96,203
Owner-occupied commercial real estate	79,730		3,919		3,487		87,136
Investor commercial real estate	28,871		—		—		28,871
Construction	117,970		—		—		117,970
Single tenant lease financing	901,505		9,237		2,373		913,115
Public finance	612,138		—		—		612,138
Healthcare finance	454,312		615		963		455,890
Small business lending(1)	112,864		8,718		1,711		123,293
Total commercial loans	$	2,387,318	$	38,052	$	9,246	$	2,434,616

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

	June 30, 2021
(in thousands)	Performing		Nonaccrual		Total
Residential mortgage	$	175,895	$	1,253	$	177,148
Home equity	17,496		14		17,510
Other consumer	271,786		10		271,796
Total consumer loans	$	465,177	$	1,277	$	466,454

	December 31, 2020
(in thousands)	Pass		Special Mention		Substandard		Total
Commercial and industrial	$	74,138	$	732	$	517	$	75,387
Owner-occupied commercial real estate	84,292		3,655		1,838		89,785
Investor commercial real estate	13,902		—		—		13,902
Construction	110,385		—		—		110,385
Single tenant lease financing	932,830		10,018		7,324		950,172
Public finance	622,257		—		—		622,257
Healthcare finance	526,517		627		1,010		528,154
Small business lending	117,474		2,930		5,185		125,589
Total commercial loans	$	2,481,795	$	17,962	$	15,874	$	2,515,631

	December 31, 2020
(in thousands)	Performing		Nonaccrual		Total
Residential mortgage	$	185,604	$	1,183	$	186,787
Home equity	19,857		—		19,857
Other consumer	275,646		46		275,692
Total consumer loans	$	481,107	$	1,229	$	482,336

18

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

	June 30, 2021
(in thousands)	30-59 Days Past Due		60-89 Days Past Due		90 Days  or More Past Due		Total  Past Due		Current		Total Loans		Non- accrual Loans		Total Loans 90 Days or More Past Due and Accruing
Commercial and industrial	$	2	$	—	$	—	$	2	$	96,201	$	96,203	$	692	$	—
Owner-occupied commercial real estate	—		—		—		—		87,136		87,136		—		—
Investor commercial real estate	—		—		—		—		28,871		28,871		3,487		—
Construction	—		—		—		—		117,970		117,970		—		—
Single tenant lease financing	—		—		—		—		913,115		913,115		2,373		—
Public finance	—		—		—		—		612,138		612,138		—		—
Healthcare finance	—		—		—		—		455,890		455,890		—		—
Small business lending(1)	—		—		1,209		1,209		122,084		123,293		1,209		—
Residential mortgage	—		—		364		364		176,784		177,148		1,253		—
Home equity	—		—		—		—		17,510		17,510		14		—
Other consumer	89		9		—		98		271,698		271,796		10		—
Total	$	91	$	9	$	1,573	$	1,673	$	2,899,397	$	2,901,070	$	9,038	$	—

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

	December 31, 2020
(in thousands)	30-59 Days Past Due		60-89 Days Past Due		90 Days  or More Past Due		Total  Past Due		Current		Total Loans		Non- accrual Loans		Total Loans 90 Days or More Past Due and Accruing
Commercial and industrial	$	—	$	—	$	—	$	—	$	75,387	$	75,387	$	—	$	—
Owner-occupied commercial real estate	—		—		—		—		89,785		89,785		1,838		—
Investor commercial real estate	—		—		—		—		13,902		13,902		—		—
Construction	—		—		—		—		110,385		110,385		—		—
Single tenant lease financing	—		—		4,680		4,680		945,492		950,172		7,116		—
Public finance	—		—		—		—		622,257		622,257		—		—
Healthcare finance	—		—		—		—		528,154		528,154		—		—
Small business lending	—		—		—		—		125,589		125,589		—		—
Residential mortgage	49		—		269		318		186,469		186,787		1,183		—
Home equity	—		15		—		15		19,842		19,857		—		—
Other consumer	176		51		5		232		275,460		275,692		46		—
Total	$	225	$	66	$	4,954	$	5,245	$	2,992,722	$	2,997,967	$	10,183	$	—

Impaired Loans

A loan is designated as impaired, in accordance with the impairment accounting guidance, when, based on current information or events, it is probable that the Company will be unable to collect all amounts due (principal and interest) according to the contractual terms of the loan agreement. Payments with delays generally not exceeding 90 days outstanding are not considered impaired. Certain nonaccrual and substantially all delinquent loans more than 90 days past due may be considered to be impaired. Generally, loans are placed on nonaccrual status at 90 days past due and accrued interest is reversed against earnings, unless the loan is well-secured and in the process of collection. The accrual of interest on impaired and nonaccrual loans is discontinued when, in management’s opinion, the borrower may be unable to meet payments as they become due.

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Impaired loans include nonperforming loans as well as loans modified in TDRs where concessions have been granted to borrowers experiencing financial difficulties. These concessions could include a reduction in the interest rate on the loan, payment extensions, forgiveness of principal, forbearance, or other actions intended to maximize collection.

ASC Topic 310, Receivables, requires that impaired loans be measured based on the present value of expected future cash flows discounted at the loans’ effective interest rates or the fair value of the underlying collateral, less costs to sell, and allows existing methods for recognizing interest income.

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

	June 30, 2021						December 31, 2020
(in thousands)	Recorded Balance		Unpaid Principal Balance		Specific Allowance		Recorded Balance		Unpaid Principal Balance		Specific Allowance
Loans without a specific valuation allowance
Commercial and industrial	$	3,487	$	3,513	$	—	$	517	$	517	$	—
Owner-occupied commercial real estate	—		—		—		1,838		1,850		—
Single tenant lease financing	—		—		—		1,315		1,334		—
Healthcare finance	—		—		—		1,010		1,010		—
Small business lending(1)	1,209		1,209		—		—		—		—
Residential mortgage	2,431		2,566		—		1,546		1,652		—
Home equity	14		15		—		—		—		—
Other consumer	10		47		—		50		120		—
Total	7,151		7,350		—		6,276		6,483		—
Loans with a specific valuation allowance
Commercial and industrial	692		723		450		—		—		—
Single tenant lease financing	2,373		2,463		367		6,009		6,036		3,090
Healthcare Finance	971		971		523		—		—		—
Total	4,036		4,157		1,340		6,009		6,036		3,090
Total impaired loans	$	11,187	$	11,507	$	1,340	$	12,285	$	12,519	$	3,090

1 Entire balance is guaranteed by the U.S. government.

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

	Three Months Ended								Six Months Ended
	June 30, 2021				June 30, 2020				June 30, 2021				June 30, 2020
(in thousands)	Average Balance		Interest Income		Average Balance		Interest Income		Average Balance		Interest Income		Average Balance			Interest Income
Loans without a specific valuation allowance
Commercial and industrial	$	259	$	—	$	594	$	18	$	259	$	9	$	1,330	237	$	36
Owner-occupied commercial real estate	3,994		—		3,923		29		3,307		—		4,573		145	31
Single tenant lease financing	148		—		—		—		100		5		—			—
Healthcare finance	—		—		—		—		336		—		—			—
Small business lending(1)	1,123		—		—		—		970		—		—			—
Residential mortgage	2,410		9		1,352		—		2,192		13		1,313			—
Home equity	15		—		—		—		13		—		—			—
Other consumer	21		—		75		—		23		—		60			—
Total	7,970		9		5,944		47		7,200		27		7,276			67
Loans with a specific valuation allowance
Commercial and industrial	839		—		204		—		677		—		204			—
Owner-occupied commercial real estate	1,420		—		—		—		473		—		—			—
Single tenant lease financing	5,430		—		4,680		—		4,984		—		4,680			—
Healthcare Finance	979		24		—		—		815		36		—			—
Total	8,668		24		4,884		—		6,949		36		4,884			—
Total impaired loans	$	16,638	$	33	$	10,828	$	47	$	14,149	$	63	$	12,160		$	67

1 Entire balance is guaranteed by the U.S. government.

The Company had $1.3 million in other real estate owned (“OREO”) as of June 30, 2021, which consisted of one commercial property with a carrying value of $1.2 million and one residential mortgage with a carrying value of $0.1 million. The Company did not have any OREO as of December 31, 2020. There were two loans totaling $0.4 million and no loans in the process of foreclosure at June 30, 2021 and December 31, 2020, respectively.

Troubled Debt Restructurings

The loan portfolio includes TDRs, which are loans that have been modified to grant economic concessions to borrowers who have experienced financial difficulties. These concessions typically result from loss mitigation efforts and could include reductions in the interest rate, payment extensions, forgiveness of principal, forbearance, or other actions. Certain TDRs are classified as nonperforming at the time of restructuring and typically are returned to performing status after considering the borrower’s sustained repayment performance for a reasonable period, generally not less than six consecutive months.

When loans are modified in a TDR, any possible impairment similar to other impaired loans is evaluated based on the present value of expected future cash flows, discounted at the contractual interest rate of the original loan agreement, or using the current fair value of the collateral, less selling costs, for collateral dependent loans. If it is determined that the value of the modified loan is less than the recorded balance of the loan, impairment is recognized through a specific allowance or charge-off to the allowance. In periods subsequent to modification, all TDRs, including those that have payment defaults, are evaluated for possible impairment, and impairment is recognized through the allowance.

In the course of working with troubled borrowers, the Company may choose to restructure the contractual terms of certain loans in an effort to work out an alternative payment schedule with the borrower in order to optimize the collectability of the loan. Any loan modification is reviewed by the Company to identify whether a TDR has occurred when the Company grants a concession to the borrower that it would not otherwise consider based on economic or legal reasons related to a borrower’s financial difficulties. Terms may be modified to fit the ability of the borrower to repay in line with its current financial status or the loan may be restructured to secure additional collateral and/or guarantees to support the debt, or a combination of the two.

There was one portfolio residential mortgage loan classified as a new TDR during the three and six months ended June 30, 2021 with a pre-modification and post-modification outstanding recorded investment of $0.8 million. The Company

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did not allocate a specific allowance for that loan as of June 30, 2021. The modifications consisted of interest-only payments for a period of time. There was one portfolio residential mortgage loan classified as a new TDR during the three and six months ended June 30, 2020, with a pre-modification and post-modification outstanding recorded investment of $0.8 million. The Company did not allocate a specific allowance for that loan as of June 30, 2020. The modification consisted of an extension of the maturity date. There were no performing TDRs that had payment defaults within the twelve months following modification during the three and six months ended June 30, 2021 and 2020, respectively.

Non-TDR Loan Modifications due to COVID-19

The “Interagency Statement on Loan Modifications and Reporting for Financial Institutions Working with Customers Affected by the Coronavirus” was issued by our banking regulators on March 22, 2020. This guidance encourages financial institutions to work prudently with borrowers who are or may be unable to meet their contractual payment obligations due to the effects of COVID-19.

Additionally, Section 4013 of the Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”) provides that loan modifications due to the impact of COVID-19 that would otherwise be classified as TDRs under GAAP will not be so classified. Modifications within the scope of this relief are in effect from the period beginning March 1, 2020 until the earlier of January 1, 2022 or 60 days after the date on which the national emergency related to the COVID-19 pandemic formally terminates. As of June 30, 2021, the Company had eight loans totaling $7.9 million in non-TDR loan modifications due to COVID-19.

Note 5:        Premises and Equipment

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

(in thousands)	June 30, 2021		December 31, 2020
Land	$	—	$	2,500
Right of use leased asset	304		819
Construction in process	42,106		28,754
Building and improvements	439		5,819
Furniture and equipment	7,636		10,671
Less: accumulated depreciation	(6,236)		(10,973)
Total	$	44,249	$	37,590

In December 2018, the Bank’s subsidiary, SPF15, Inc., entered into a project agreement with the City of Fishers, Indiana (the “City”), and its Redevelopment Commission, among others, to construct an office building to include the Company’s future headquarters and associated parking garage on property the Bank had acquired in 2018. Construction began on the project in the fourth quarter 2019 and is expected to be substantially complete in the fourth quarter 2021. The Company anticipates fully occupying the new headquarters building by the end of 2021.

On February 16, 2021, the Company entered into an agreement to sell its current headquarters and certain equipment currently located in the building to a third party. The sale was completed on April 16, 2021 and as a part of the sale agreement, the buyer agreed to lease the office building back to the Company through December 31, 2021, with an option to extend up to 90 days beyond that date. The sale price was $8.9 million in cash paid in full at closing. The Company is expected to continue to lease substantially all of the office space for the duration of the primary leaseback period.

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Note 6:        Goodwill        

As of June 30, 2021 and December 31, 2020, the carrying amount of goodwill was $4.7 million. There have been no changes in the carrying amount of goodwill for the three and six months ended June 30, 2021.  Goodwill is assessed for impairment annually as of August 31, or more frequently if events occur or circumstances change that indicate an impairment may exist. When assessing goodwill for impairment, first, a qualitative assessment can be made to determine whether it is more likely than not that the estimated fair value of a reporting unit is less than its estimated carrying value. If the results of the qualitative assessment are not conclusive, a quantitative goodwill test is performed. Alternatively, a quantitative goodwill test can be performed without performing a qualitative assessment.

Goodwill was assessed for impairment using a quantitative test performed as of August 31, 2020. The estimated fair value of the reporting unit exceeded the net carrying value, and therefore no goodwill impairment existed as of that date.

Note 7:        Servicing Asset

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

(in thousands)	Three Months Ended
	June 30, 2021		June 30, 2020
Balance, beginning of period	$	3,817	$	2,415
Additions
Originated and purchased servicing	543		197
Subtractions
Paydowns	(154)		(90)
Changes in fair value due to changes in valuation inputs or assumptions used in the   valuation model	(86)		—
Balance, end of period	$	4,120	$	2,522

(in thousands)	Six Months Ended
	June 30, 2021		June 30, 2020
Balance, beginning of period	$	3,569	$	2,481
Additions
Originated and purchased servicing	946		310
Subtractions
Paydowns	(324)		(269)
Changes in fair value due to changes in valuation inputs or assumptions used in the   valuation model	(71)		—
Balance, end of period	$	4,120	$	2,522

Loans serviced for others are not included in the condensed consolidated balance sheets. The unpaid principal balances of these loans serviced for others as of June 30, 2021 and December 31, 2020 are shown in the table below.

(in thousands)
	June 30, 2021		December 31, 2020
Loan portfolios serviced for:
SBA guaranteed loans	$	196,869	$	165,961
Total	$	196,869	$	165,961

Loan servicing revenue totaled $0.5 million and $0.9 million for the three and six months ended June 30, 2021 and $0.3 million and $0.5 million for the three and six months ended June 30, 2020, respectively. Loan servicing asset revaluation, which represents the change in fair value of the servicing asset, resulted in a $0.2 million and $0.4 million

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

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 October 2015, the Company entered into a term loan in the principal amount of $10.0 million, evidenced by a term note due 2025 (the “2025 Note”). The 2025 Note had a fixed interest rate of 6.4375% per year, payable quarterly, and was scheduled to mature on October 1, 2025. The 2025 Note was an unsecured subordinated obligation of the Company and was eligible to be repaid, without penalty, on any interest payment date on or after October 15, 2020. The 2025 Note was intended to qualify as Tier 2 capital under regulatory guidelines. The Company redeemed the 2025 Note on January 4, 2021.

In September 2016, the Company issued $25.0 million aggregate principal amount of 6.0% Fixed-to-Floating Rate Subordinated Notes due 2026 (the “2026 Notes”) in a public offering. The 2026 Notes initially bear a fixed interest rate of 6.0% per year to, but excluding September 30, 2021, and thereafter a floating rate equal to the then-current three-month LIBOR rate plus 485 basis points. All interest on the 2026 Notes is payable quarterly. The 2026 Notes are scheduled to mature on September 30, 2026. The 2026 Notes are unsecured subordinated obligations of the Company and may be repaid, without penalty, on any interest payment date on or after September 30, 2021. The 2026 Notes are intended to qualify as Tier 2 capital under regulatory guidelines.

In June 2019, the Company issued $37.0 million aggregate principal amount of 6.0% Fixed-to-Floating Rate Subordinated Notes due 2029 (the “2029 Notes”) in a public offering. The 2029 Notes initially bear a fixed interest rate of 6.0% per year to, but excluding, June 30, 2024, and thereafter a floating rate equal to the then-current benchmark rate (initially three-month LIBOR rate) plus 411 basis points. All interest on the 2029 Notes is payable quarterly. 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, without penalty, on any interest payment date on or after June 30, 2024. The 2029 Notes are intended to qualify as Tier 2 capital under regulatory guidelines.

In October 2020, the Company, entered into a term loan in the principal amount of $10.0 million, evidenced by term notes due 2030 (the “2030 Notes”). The 2030 Notes initially bears a fixed interest rate of 6.0% per year to, but excluding, November 1, 2025 and thereafter at a floating rate equal to the then-current benchmark rate (initially three-month Term SOFR plus 5.795%). The 2030 Notes are an unsecured subordinated obligation of the Company and may be repaid, without penalty, on any interest payment date on or after November 1, 2025. The 2030 Notes are intended to qualify as Tier 2 capital under regulatory guidelines. The Company used the net proceeds from the issuance of the 2030 Notes to redeem the 2025 Note as discussed above.

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

	June 30, 2021				December 31, 2020
(in thousands)	Principal		Unamortized Debt Issuance Costs		Principal		Unamortized Debt Issuance Costs
2025 Note	—		—		10,000		(114)
2026 Notes	25,000		(652)		25,000		(715)
2029 Notes	37,000		(1,258)		37,000		(1,337)
2030 Notes	$	10,000	$	(219)	$	10,000	$	(231)
Total	$	72,000	$	(2,129)	$	82,000	$	(2,397)

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Note 9:        Benefit Plans

Employment Agreement

The Company is party to an employment agreement with its Chief Executive Officer that provides for an annual base salary and an annual bonus, if any, as determined from time to time by the Compensation Committee of our Board of Directors. The annual bonus is to be determined with reference to the achievement of annual performance objectives established by the Compensation Committee for the Chief Executive Officer and other senior officers. The agreement also provides that the Chief Executive Officer may be awarded additional compensation, benefits, or consideration as the Compensation Committee may determine.

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

2013 Equity Incentive Plan

The 2013 Equity Incentive Plan (the “2013 Plan”) authorizes the issuance of 750,000 shares of the Company’s common stock in the form of equity-based awards to employees, directors, and other eligible persons.  Under the terms of the 2013 Plan, the pool of shares available for issuance may be used for available types of equity awards under the 2013 Plan, which includes stock options, stock appreciation rights, restricted stock awards, stock unit awards, and other share-based awards.  All employees, consultants, and advisors of the Company or any subsidiary, as well as all non-employee directors of the Company, are eligible to receive awards under the 2013 Plan.

The Company recorded $0.6 million and $1.3 million of share-based compensation expense for the three and six months ended June 30, 2021, respectively, related to awards made under the 2013 Plan. The Company recorded $0.5 million and $1.1 million of share-based compensation expense for the three and six months ended June 30, 2020, respectively, related to awards made under the 2013 Plan.

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

	Restricted Stock Units	Weighted-Average Grant Date Fair Value Per Share		Restricted Stock Awards	Weighted-Average Grant Date Fair Value Per Share		Deferred Stock Units	Weighted-Average Grant Date Fair Value Per Share
Nonvested at December 31, 2020	112,985	$	27.76	—	$	—	—	$	—
Granted	60,111	30.42		13,878	30.27		4	32.53
Cancelled/Forfeited	—	—		(1,057)	30.13		—	—
Vested	(35,745)	30.12		(6,479)	30.20		(4)	32.53
Nonvested at June 30, 2021	137,351	$	28.32	6,342	$	30.36	—	$	—

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

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Directors Deferred Stock Plan

Until January 1, 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 Directors Deferred Stock 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 six months ended June 30, 2021.

	Deferred Stock Rights
Outstanding, beginning of period	83,835
Granted	350
Exercised	—
Outstanding, end of period	84,185

All deferred stock rights granted during the 2021 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 June 30, 2021 and December 31, 2020, the Company had outstanding loan commitments totaling approximately $293.1 million and $263.9 million, respectively.

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

The Company is also a limited partner in a Small Business Investment Company fund (the “SBIC Fund”). As of June 30, 2021, the Company has committed to contribute up to $1.1 million of capital to the SBIC Fund.

Capital Commitments

Capital expenditures contracted to at the balance sheet date but not yet recognized in the financial statements are associated with the construction of premises intended to house our future corporate headquarters. The Company has entered into construction-related contracts and change orders in the amount of $66.4 million. As of June 30, 2021, $25.4 million of such contract commitments had not yet been incurred. These commitments are due within twelve months.

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

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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. 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 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 without relying exclusively on quoted prices for specific investment securities but also on the investment securities’ relationship to other benchmark quoted investment securities.

In certain cases where Level 1 or Level 2 inputs are not available, securities are classified within Level 3 of the hierarchy. Fair values are calculated using discounted cash flows. Discounted cash flows are calculated based off of the anticipated future cash flows updated to incorporate loss severities. Rating agency and industry research reports as well as default and deferral activity are reviewed and incorporated into the calculation. The Company did not own any securities classified within Level 3 of the hierarchy as of June 30, 2021 or December 31, 2020.

Loans Held-for-Sale (mandatory pricing agreements)

The fair value of loans held-for-sale is determined using quoted prices for similar assets, adjusted for specific attributes of that loan (Level 2).

Servicing Asset

Fair value is based on a loan-by-loan basis taking into consideration the original maturity of the loans, the current age of the loans and the remaining term to maturity. The valuation methodology utilized for the servicing assets 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

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

Forward Contracts

The fair values of forward contracts on to-be-announced securities are determined using quoted prices in active markets or benchmarked thereto (Level 1).

Interest Rate Lock Commitments

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

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The following tables present the fair value measurements of assets and liabilities recognized in the accompanying condensed consolidated balance sheets measured at fair value on a recurring basis and the level within the fair value hierarchy in which the fair value measurements fall at June 30, 2021 and December 31, 2020.

			June 30, 2021  Fair Value Measurements Using
(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	$	57,135	$	—	$	57,135	$	—
Municipal securities	78,438		—		78,438		—
Agency mortgage-backed securities	444,494		—		444,494		—
Private label mortgage-backed securities	29,363				29,363		—
Asset-backed securities	5,005		—		5,005		—
Corporate securities	49,084		—		49,084		—
Total available-for-sale securities	663,519		—		663,519		—
Loans held-for-sale (mandatory pricing agreements)	16,870		—		16,870		—
Servicing asset	4,120		—		—		4,120
Interest rate swap agreements	(20,286)		—		(20,286)		—
Forward contracts	(17)		(17)		—		—
IRLCs	818		—		—		818

			December 31, 2020 Fair Value Measurements Using
(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	$	60,545	$	—	$	60,545	$	—
Municipal securities	82,489		—		82,489		—
Agency mortgage-backed securities	243,921		—		243,921		—
Private label mortgage-backed securities	58,116		—		58,116		—
Asset-backed securities	4,961		—		4,961		—
Corporate securities	47,596		—		47,596		—
Total available-for-sale securities	497,628		—		497,628		—
Loans held-for-sale (mandatory pricing agreements)	26,341		—		26,341		—
Servicing asset	3,569		—		—		3,569
Interest rate swap agreements	(17,606)		—		(17,606)		—
Forward contracts	(640)		(640)		—		—
IRLCs	3,361		—		—		3,361

The following tables reconcile the beginning and ending balances of recurring fair value measurements recognized in the accompanying condensed consolidated balance sheets using significant unobservable (Level 3) inputs for the three and six months ended June 30, 2021 and 2020.

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	Three Months Ended
(in thousands)	Servicing Asset		Interest Rate Lock Commitments
Balance, April 1, 2021	$	3,817	$	1,110
Total realized gains
Additions	543		—
Paydowns	(154)		—
Change in fair value	(86)		(292)
Balance, June 30, 2021	4,120		818
Balance as of April 1, 2020	$	2,415	$	2,064
Total realized gains
Additions	197		—
Paydowns	—		—
Change in fair value	(90)		(1,782)
Balance, June 30, 2020	$	2,522	$	282

	Six Months Ended
(in thousands)	Servicing Asset		Interest Rate Lock Commitments
Balance, January 1, 2021	$	3,569	$	3,361
Total realized gains
Additions	946		—
Paydowns	(324)		—
Change in fair value	(71)		(2,543)
Balance, June 30, 2021	4,120		818
Balance as of January 1, 2020	$	2,481	$	910
Total realized gains
Additions	310		—
Paydowns	—		—
Change in fair value	(269)		(628)
Balance, June 30, 2020	$	2,522	$	282

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.

Impaired Loans (Collateral Dependent)

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 impaired loan is identified as collateral dependent, the fair value of the underlying collateral, less costs to sell, is used to measure impairment. This method requires obtaining a current independent appraisal of the collateral and applying a discount factor to the value. If the impaired loan is not collateral dependent, the Company utilizes a discounted cash flow analysis to measure impairment.

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

The following table presents the fair value measurements of assets and liabilities recognized in the accompanying condensed consolidated balance sheets measured at fair value on a nonrecurring basis and the level within the fair value hierarchy in which the fair value measurement falls at June 30, 2021 and December 31, 2020.

		June 30, 2021
(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)
Impaired loans	4,035	—	—	4,035

			December 31, 2020
(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)
Impaired loans	$	4,026	$	—	$	—	$	4,026

 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 June 30, 2021		Valuation Technique	Significant Unobservable Inputs	Range	Weighted-Average Range
Impaired loans	$	4,035	Fair value of collateral	Discount for type of property and current market conditions	10%	10%
IRLCs	818		Discounted cash flow	Loan closing rates	63% - 100%	92%
Servicing asset	3,817		Discounted cash flow	Prepayment speeds Discount rate	0% - 25% 10%	12.6% 10%

(dollars in thousands)	Fair Value at December 31, 2020		Valuation Technique	Significant Unobservable Inputs	Range	Weighted-Average Range
Impaired loans	$	4,026	Fair value of collateral	Discount for type of property and current market conditions	10%	10%
IRLCs	3,361		Discounted cash flow	Loan closing rates	44% - 100%	87%
Servicing asset	3,569		Discounted cash flow	Prepayment speeds Discount rate	0% - 25% 10%	12.1% 10%

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

In certain cases where Level 1 or Level 2 inputs are not available, securities are classified within Level 3 of the hierarchy. Fair values are calculated using discounted cash flows. Discounted cash flows are calculated based off of the anticipated future cash flows updated to incorporate loss severities. Rating agency and industry research reports as well as default and deferral activity are reviewed and incorporated into the calculation. The Company did not own any securities classified within Level 3 of the hierarchy as of June 30, 2021 or December 31, 2020.

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

The fair value of these loans approximates carrying value.

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 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.

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.

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 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 June 30, 2021 and December 31, 2020.

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

	June 30, 2021 Fair Value Measurements Using
(in thousands)	Carrying Amount		Fair Value		Quoted Prices In Active Market for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Cash and cash equivalents	$	328,797	$	328,797	$	328,797	$	—	$	—
Securities held-to-maturity	65,659		68,058		—		68,058		—
Loans held-for-sale (best efforts pricing agreements)	10,717		10,717		—		10,717		—
Net loans	2,929,542		2,975,406		—		—		2,975,406
Accrued interest receivable	16,345		16,345		16,345		—		—
Federal Home Loan Bank of Indianapolis stock	25,650		25,650		—		25,650		—
Deposits	3,206,147		3,229,241		1,799,490		—		1,429,751
Advances from Federal Home Loan Bank	514,919		533,237		—		533,237		—
Subordinated debt	69,871		75,456		65,294		10,162		—
Accrued interest payable	1,132		1,132		1,132		—		—

	December 31, 2020 Fair Value Measurements Using
(in thousands)	Carrying Amount		Fair Value		Quoted Prices In Active Market for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Cash and cash equivalents	$	419,806	$	419,806	$	419,806	$	—	$	—
Securities held-to-maturity	68,223		69,452		—		69,452		—
Loans held-for-sale (best efforts pricing agreements)	13,243		13,243		—		13,243		—
Net loans	3,029,747		3,084,375		—		—		3,084,375
Accrued interest receivable	17,416		17,416		17,416		—		—
Federal Home Loan Bank of Indianapolis stock	25,650		25,650		—		25,650		—
Deposits	3,270,885		3,307,038		1,679,164		—		1,627,874
Advances from Federal Home Loan Bank	514,916		541,945		—		541,945		—
Subordinated debt	79,603		83,682		63,325		20,357		—
Accrued interest payable	1,439		1,439		1,439		—		—

Note 12:        Mortgage Banking Activities

The Company’s residential real estate lending business originates mortgage loans for customers and typically sells a majority of the originated loans into the secondary market. For most of the mortgages it sells in the secondary market, the Company hedges its mortgage banking pipeline by entering into forward contracts for the future delivery of mortgage

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loans to third party investors and entering into IRLCs with potential borrowers to fund specific mortgage loans that will be sold into the secondary market. To facilitate the hedging of the loans, the Company has elected the fair value option for loans originated and intended for sale in the secondary market under mandatory pricing agreements. Changes in the fair value of loans held-for-sale, IRLCs and forward contracts are recorded in the mortgage banking activities line item within noninterest income.  Refer to Note 13 for further information on derivative financial instruments. 

During the three months ended June 30, 2021 and 2020, the Company originated mortgage loans held-for-sale of $163.3 million and $211.9 million, respectively, and sold $151.5 million and $229.2 million of mortgage loans, respectively, into the secondary market. During the six months ended June 30, 2021 and 2020, the Company originated mortgage loans held-for-sale of $387.2 million and $427.3 million, respectively, and sold $393.1 million and $454.7 million of mortgage loans, respectively, into the secondary market.

The following table presents the components of income from mortgage banking activities for the three and six months ended June 30, 2021 and 2020.

	Three Months Ended June 30,				Six Months Ended June 30,
(in thousands)	2021		2020		2021		2020
Gain on loans sold	$	3,587	$	4,164	$	11,086	$	8,507
(Loss) gain resulting from the change in fair value of loans held-for-sale	118		(1,255)		(744)		(939)
(Loss) gain resulting from the change in fair value of derivatives	(1,031)		499		(1,918)		(492)
Net revenue from mortgage banking activities	$	2,674	$	3,408	$	8,424	$	7,076

Fluctuations in interest rates and changes in IRLC and loan volume within the mortgage banking pipeline may cause volatility in the fair value of loans held-for-sale and the fair value of derivatives used to hedge the mortgage banking pipeline.

Note 13:        Derivative Financial Instruments

The Company uses derivative financial instruments 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. Additionally, the Company enters into forward contracts for the future delivery of mortgage loans to third-party investors and enters into IRLCs with potential borrowers to fund specific mortgage loans that will be sold into the secondary market. The forward contracts are entered into in order to economically hedge the effect of changes in interest rates resulting from the Company’s commitment to fund the loans.

The Company had various interest rate swap agreements designated and qualifying as accounting hedges during the reported periods. Designating an interest rate swap as an accounting hedge allows the Company to recognize gains and losses, in the condensed consolidated statements of income within the same period that the hedged item affects earnings. The Company includes the gain or loss on the hedged items in the same line item as the offsetting loss or gain on the related interest rate swaps. For derivative instruments that are designated and qualify as cash flow hedges, any gains or losses related to changes in fair value are recorded in accumulated other comprehensive loss, net of tax. The fair value of interest rate swaps with a positive fair value are reported in accrued income and other assets in the condensed consolidated balance sheets, while interest rate swaps with a negative fair value are reported in accrued expenses and other liabilities in the condensed consolidated balance sheets.

The IRLCs and forward contracts are not designated as accounting hedges and are recorded at fair value with changes in fair value reflected in noninterest income on the condensed consolidated statements of income. The fair value of derivative instruments with a positive fair value are reported in accrued income and other assets in the condensed consolidated balance sheets, while derivative instruments with a negative fair value are reported in accrued expenses and other liabilities in the condensed consolidated balance sheets.

The following table presents amounts that were recorded on the condensed consolidated balance sheets related to cumulative basis adjustments for interest rate swap derivatives designated as fair value accounting hedges as of June 30, 2021 and December 31, 2020.  

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(in thousands)	Carrying amount of the hedged asset		Cumulative amount of fair value hedging adjustment included in the carrying amount of the hedged assets
Line item in the condensed consolidated balance sheets in which the hedged item is included	June 30, 2021	December 31, 2020	June 30, 2021	December 31, 2020
Securities available-for-sale (1)	77,363	124,210	2,834	6,064

(1) These amounts include the amortized cost basis of closed portfolios used to designate hedging relationships in which the hedged item is the last layer expected to be remaining at the end of the hedging relationship. The designated hedged items were $50.0 million and $88.2 million, at June 30, 2021 and December 31, 2020.

The following tables present a summary of interest rate swap derivatives designated as fair value accounting hedges of fixed-rate receivables used in the Company’s asset/liability management activities at June 30, 2021 and December 31, 2020, identified by the underlying interest rate-sensitive instruments.

(dollars in thousands) June 30, 2021	Notional Value		Weighted- Average Remaining Maturity (years)			Weighted-Average Ratio
Instruments Associated With				Fair Value		Receive	Pay
Securities available-for-sale	$	50,000	3.3	$	(2,835)	3-month LIBOR	2.33	%
Total at June 30, 2021	$	50,000	3.3	$	(2,835)	3-month LIBOR	2.33	%

In March 2021, the Company terminated fair value hedging relationships with a notional value of $38.2 million associated with agency mortgage-backed securities available-for-sale, which resulted in swap termination payments to counterparties totaling $1.9 million. The corresponding securities fair value hedging adjustment as of the date of termination is being amortized over the remaining lives of the designated securities.

(dollars in thousands) December 31, 2020	Notional Value		Weighted- Average Remaining Maturity (years)			Weighted-Average Ratio
Instruments Associated With				Fair Value		Receive	Pay
Securities available-for-sale	88,200		3.1	(6,072)		3-month LIBOR	2.54	%
Total at December 31, 2020	$	88,200	3.1	$	(6,072)	3-month LIBOR	2.54	%

In June 2020, the Company terminated all fair value hedging relationships associated with loans, which resulted in swap termination payments to counterparties totaling $46.1 million. The corresponding loan fair value hedging adjustment as of the date of termination is being amortized over the remaining lives of the designated loans, which have a weighted average term to maturity of 12.61 years as of June 30, 2021.

The following tables present a summary of interest rate swap derivatives designated as cash flow accounting hedges of variable-rate liabilities used in the Company’s asset/liability management activities at June 30, 2021 and December 31, 2020.

(dollars in thousands) June 30, 2021	Notional		Weighted- Average Remaining Maturity			Weighted-Average Ratio
Cash Flow Hedges	Value		(years)	Fair Value		Receive	Pay
Interest rate swaps	$	110,000	5.6	$	(11,349)	3-month LIBOR	2.88	%
Interest rate swaps	100,000		2.5	(6,103)		1-month LIBOR	2.88	%

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(dollars in thousands) December 31, 2020	Notional		Weighted- Average Remaining Maturity			Weighted-Average Ratio
Cash Flow Hedges	Value		(years)	Fair Value		Receive	Pay
Interest rate swaps	$	110,000	6.1	$	(15,727)	3-month LIBOR	2.88	%
Interest rate swaps	100,000		3.0	(7,951)		1-month LIBOR	2.88	%

These derivative financial instruments were entered into for the purpose of managing the interest rate risk of certain assets and liabilities. The Company pledged $21.0 million and $30.6 million of cash collateral to counterparties as security for its obligations related to these interest rate swap transactions at June 30, 2021 and December 31, 2020, respectively. Collateral posted and received is dependent on the market valuation of the underlying hedges.

The following table presents the notional amount and fair value of interest rate swaps, IRLCs and forward contracts utilized by the Company at June 30, 2021 and December 31, 2020.

	June 30, 2021				December 31, 2020
(in thousands)	Notional Amount		Fair Value		Notional Amount		Fair Value
Asset Derivatives
Derivatives not designated as hedging instruments
IRLCs	$	47,493	$	818	$	108,095	$	3,361
Total contracts	$	47,493	$	818	$	108,095	$	3,361
Liability Derivatives
Derivatives designated as hedging instruments
Interest rate swaps associated with loans	$	—	$	—	$	—	$	—
Interest rate swaps associated with securities available-for-sale	50,000		(2,835)		88,200		(6,072)
Interest rate swaps associated with liabilities	210,000		(17,451)		210,000		(23,678)
Derivatives not designated as hedging instruments
Forward contracts	46,750		(17)		107,500		(640)
Total contracts	$	306,750	$	(20,303)	$	405,700	$	(30,390)

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. Fair values of IRLCs and forward contracts were estimated using changes in mortgage interest rates from the date the Company entered into the IRLC and the balance sheet date.

The following table presents the effects of the Company’s cash flow hedge relationships on the condensed consolidated statements of comprehensive income during the three and six months ended June 30, 2021 and 2020.

	Amount of Gain (Loss )Recognized in Other Comprehensive Income Loss in The Three Months Ended				Amount of Loss Recognized in Other Comprehensive Income Gain (Loss) in The Six Months Ended
(in thousands)	June 30, 2021		June 30, 2020		June 30, 2021		June 30, 2020
Interest rate swap agreements	$	(54)	$	(509)	$	6,226	$	(13,967)

The following table summarizes the periodic changes in the fair value of derivatives not designated as hedging instruments on the condensed consolidated statements of income for the three and six months ended June 30, 2021 and 2020.

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	Amount of Gain / (Loss) Recognized in the Three Months Ended				Amount of Gain / (Loss) Recognized in the Six Months Ended
(in thousands)	June 30, 2021		June 30, 2020		June 30, 2021		June 30, 2020
Asset Derivatives
Derivatives not designated as hedging instruments
IRLCs	$	(292)	$	(1,781)	$	(2,541)	$	(628)
Liability Derivatives
Derivatives not designated as hedging instruments
IRLCs	—		—		—		—
Forward contracts	$	(738)	$	2,281	$	623	$	136

The following table presents the effects of the Company’s interest rate swap agreements on the condensed consolidated statements of income during the three and six months ended June 30, 2021 and 2020.

(in thousands) Line item in the condensed consolidated statements of income	Three Months Ended				Six Months Ended
	June 30, 2021		June 30, 2020		June 30, 2021		June 30, 2020
Interest income
Loans	$	—	$	(1,221)	$	—	$	(2,445)
Securities - taxable	—		(159)		(253)		(250)
Securities - non-taxable	(271)		(164)		(537)		(230)
Total interest income	(271)		(1,544)		(790)		(2,925)
Interest expense
Deposits	692		593		1,370		899
Other borrowed funds	753		589		1,483		911
Total interest expense	1,445		1,182		2,853		1,810
Net interest income	$	(1,716)	$	(2,726)	$	(3,643)	$	(4,735)

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Note 14:     Accumulated Other Comprehensive Loss

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

(in thousands)	Available-For-Sale Securities		Cash Flow Hedges		Total
Balance, January 1, 2021	$	468	$	(17,664)	$	(17,196)
Net unrealized holding (losses) gains recorded within other comprehensive income before income tax	(807)		6,226		5,419
Other comprehensive (loss) gain before tax	(807)		6,226		5,419
Income tax (benefit) provision	(175)		1,309		1,134
Other comprehensive (loss) income - net of tax	$	(632)	$	4,917	$	4,285
Balance, June 30, 2021	$	(164)	$	(12,747)	$	(12,911)
Balance, January 1, 2020	$	(4,388)	$	(9,803)	$	(14,191)
Net unrealized holding gains (losses) recorded within other comprehensive income before income tax	4,801		(13,967)		(9,166)
Reclassification of net loss realized and included in earnings	(41)		—		(41)
Other comprehensive income (loss) before tax	4,760		(13,967)		(9,207)
Income tax provision (benefit)	1,760		(4,020)		(2,260)
Other comprehensive income (loss) - net of tax	3,000		(9,947)		(6,947)
Balance, June 30, 2020	$	(1,388)	$	(19,750)	$	(21,138)

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

(in thousands)	Available-For-Sale Securities		Cash Flow Hedges		Total
Balance, April 1, 2021	$	(1,219)	$	(12,701)	$	(13,920)
Net unrealized holding gains (losses) recorded within other comprehensive income before income tax	1,388		(54)		1,334
Other comprehensive gain (loss) before tax	1,388		(54)		1,334
Income tax (benefit) provision	(333)		8		(325)
Other comprehensive (loss) income - net of tax	$	1,055	$	(46)	$	1,009
Balance, June 30, 2021	$	(164)	$	(12,747)	$	(12,911)
Balance, April 1, 2020	$	(239)	$	(19,627)	$	(19,866)
Net change in unrealized loss	(1,498)		(509)		(2,007)
Other comprehensive loss before tax	(1,498)		(509)		(2,007)
Income tax benefit	(349)		(386)		(735)
Other comprehensive income (loss) - net of tax	(1,149)		(123)		(1,272)
Balance, June 30, 2020	$	(1,388)	$	(19,750)	$	(21,138)

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Note 15:     Recent Accounting Pronouncements

ASU 2016-13 - Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (June 2016)

The main objective of this update is to provide financial statement users with more decision-useful information about the expected credit losses on financial instruments and other commitments to extend credit held by a reporting entity at each reporting date. To achieve this objective, the amendments in this update replace the incurred loss impairment methodology in current GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates.

The amendments affect entities holding financial assets that are not accounted for at fair value through net income. The amendments affect loans, debt securities, off-balance-sheet credit exposures, and any other financial assets not excluded from the scope that have the contractual right to receive cash. The amendments in this update affect an entity to varying degrees depending on the credit quality of the assets held by the entity, their duration, and how the entity applies current GAAP. There is diversity in practice in applying the incurred loss methodology, which means that before transition some entities may be more aligned under current GAAP than others to the new measure of expected credit losses. The following describes the main provisions of this update.

•Assets Measured at Amortized Cost: The amendments in this update require a financial asset (or a group of financial assets) measured at amortized cost basis to be presented at the net amount expected to be collected. The allowance for credit losses is a valuation account that is deducted from the amortized cost basis of the financial asset(s) to present the net carrying value at the amount expected to be collected on the financial asset. The statements of income reflect the measurement of credit losses for newly recognized financial assets, as well as the expected increase or decrease of credit losses that have taken place during the period. The measurement of expected credit losses is based on relevant information about past events, including historical experience, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amount. An entity must use judgment in determining the relevant information and estimation methods that are appropriate in its circumstances.

•Available-for-Sale Debt Securities: Credit losses relating to available-for-sale debt securities should be recorded through an allowance for credit losses. Available-for-sale accounting recognizes that value may be realized either through collection of contractual cash flows or through sale of the security. Therefore, the amendments limit the amount of the allowance for credit losses to the amount by which fair value is below amortized cost because the classification as available-for-sale is premised on an investment strategy that recognizes that the investment could be sold at fair value if cash collection would result in the realization of an amount less than fair value.

•In May 2019, the FASB issued ASU 2019-05 - Financial Instruments - Credit Losses (Topic 326) - Targeted Transition Relief. This ASU allows an option for preparers to irrevocably elect the fair value option, on an instrument-by-instrument basis, for eligible financial assets measured at amortized cost basis upon adoption of the credit losses standard. This increases the comparability of financial statement information provided by institutions that otherwise would have reported similar financial instruments using different measurement methodologies, potentially decreasing costs for financial statement preparers while providing more useful information to investors and other users.

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For public business entities that are SEC filers, the amendments in this update are effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. All entities may early adopt the amendments in this update as of the fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. In October 2019, the FASB voted to delay the effective date for smaller reporting companies to fiscal years beginning after December 15, 2022. An entity will apply the amendments in this update through a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is effective (that is, a modified-retrospective approach). A prospective transition approach is required for debt securities for which an OTTI had been recognized before the effective date. The effect of a prospective transition approach is to maintain the same amortized cost basis before and after the effective date of this update.

The Company expects to adopt this guidance on January 1, 2023 and is currently evaluating the impact of the amendments on the Company’s condensed consolidated financial statements. The Company currently cannot determine or reasonably quantify the impact of the adoption of the amendments due to the complexity and extensive changes. The Company intends to develop processes and procedures prior to the effective date to ensure it is fully compliant with the amendments at the adoption date. The Company has formed an implementation committee and has engaged a third-party consultant to assist in developing current expected credit losses (“CECL”) models using appropriate methodologies.

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

In March 2020 in connection with the implementation of the CARES Act and related provisions, the Company adopted the temporary relief issued under the CARES Act, thereby suspending the guidance in ASC 310-40 on accounting for TDRs to loan modifications related to COVID-19. Section 4013 of the CARES Act specifies that loan modifications due to the impact of COVID-19 that would otherwise be classified as TDRs under GAAP will not be so classified. Modifications within the scope of this relief are in effect from the period beginning March 1, 2020 until the earlier of January 1, 2022 or 60 days after the date on which the national emergency related to the COVID-19 pandemic formally terminates. See the “Non-TDR Loan Modifications due to COVID-19” section of Part I, Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations for more information.

ASU 2020-04 - Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on     Financial Reporting (March 2020)

In March 2020, FASB issued ASU 2020-04 to ease the potential burden in accounting for the transition away from the LIBORon financial reporting. The ASU provides optional expedients and exceptions for applying GAAP to contract modification and hedge accounting relationships. The guidance is effective March 12, 2020 through December 31, 2022. The Company believes the adoption of this guidance will not have a material impact on the 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, 2020 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.

Overview

    First Internet Bancorp (“we,” “our,” “us,” or the “Company”) is a bank holding company that conducts its primary business activities through its wholly owned subsidiary, First Internet Bank of Indiana, an Indiana chartered bank (the “Bank”). The Bank was the first state-chartered, Federal Deposit Insurance Corporation (“FDIC”) insured Internet bank and commenced banking operations in 1999. The Company 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.

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    The Bank has three wholly owned subsidiaries. First Internet Public Finance Corp. 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, which manages other real estate owned (“OREO”) properties as needed; and SPF15, Inc., which was established to acquire and hold real estate.

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 residential mortgage products are offered nationwide primarily through a digital direct-to-consumer platform and are supplemented with Central Indiana-based mortgage and construction lending. 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 and include commercial real estate (“CRE”) banking, commercial and industrial (“C&I”) banking, public finance, healthcare finance, small business lending and commercial deposits and treasury management. Through our CRE team, we offer single tenant lease financing on a nationwide basis in addition to traditional investor CRE and construction loans primarily within Central Indiana and adjacent markets. Our C&I banking team provides credit solutions such as lines of credit, term loans, owner-occupied CRE loans and corporate credit cards to commercial borrowers located primarily in Central Indiana, Phoenix, Arizona and adjacent markets. 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 originally 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 CRE and equipment purchases. During the second quarter 2021, Provide announced that it had entered into an agreement to be acquired by a super-regional financial institution, which is expected to close in the third quarter 2021. Subsequent to closing, we expect that the acquiring institution will retain most, if not all, of Provide’s loan origination activity and that our healthcare finance loan balances may to decline. 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.

In 2018, we identified small business as an area for potential growth in revenue, loans and deposits. We believe that we can differentiate ourselves from larger financial institutions by providing a full suite of services to emerging small businesses and entrepreneurs on a nationwide basis. We have hired and continue to recruit experienced small business sales, credit and operations personnel to expand our capabilities in small business lending and U.S. government guaranteed lending programs. As this business scales up, we expect it will drive increased earnings and profitability in future periods.

In connection with our commitment to small businesses, during the second quarter 2021 we entered into a relationship with a fintech-oriented specialty lender that provides financing to franchisees in various industry segments. Through this relationship, we expect to begin funding portfolio loans in the third quarter 2021 and expect to fund up to $100.0 million of loans over the next twelve months. We also expect this relationship to provide SBA 7(a) loan opportunities to supplement our own origination efforts.

COVID-19 Pandemic

    Throughout the coronavirus pandemic (“COVID-19”), our top priority has been the health of our team and clients. As a digitally-focused institution without branch locations, we were able to continue serving clients when they needed us most, while minimizing operational disruptions caused by COVID-19. Most of our employees who worked remotely during the earlier stages of the pandemic have returned to the office. Management continues to assess the evolving health and safety situations at local and regional levels. Our plans remain flexible to adapt as these situations evolve.

COVID-19 impacted our business during 2020 as the low interest rate environment following Federal Reserve rate cuts in the first quarter 2020 reduced the yield on interest-earning assets but also allowed us to reprice our interest-bearing deposits significantly lower, which provided an increase to net interest income. Additionally, the low interest rate environment has driven residential mortgage rates to historically low levels, which continued to benefit our mortgage business.

    During 2021, federal, state and local governments have continued to take additional steps to reopen and stimulate economies. We are optimistic that the combination of vaccinations and government stimulus programs will help mitigate any significant negative effects from the pandemic on our business and credit quality; however, there is still significant uncertainty concerning the ongoing trajectory of the pandemic and the speed at which the national and local economies will recover. The

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extent to which COVID-19 will continue to impact our business will depend on numerous evolving factors and future developments that we are not able to predict, including the new Delta variant of COVID-19 (which appears to be the most transmissible variant to date), the effectiveness of continuing containment measures, including the speed of the ongoing vaccine distribution effort, the efficacy of the various vaccines, and how quickly and to what extent normal economic and operating conditions can resume. Should economic conditions worsen to levels experienced in 2020, our business and credit quality could be adversely affected.

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Results of Operations

During the second quarter 2021, net income was $13.1 million, or $1.31 per diluted share, compared to the second quarter 2020 net income of $3.9 million, or $0.40 per diluted share, representing an increase in net income of $9.2 million, or 233.1%. During the six months ended June 30, 2021, net income was $23.5 million, or $2.36 per diluted share, compared to the six months ended June 30, 2020 net income of $10.0 million, or $1.02 per diluted share, representing an increase in net income of $13.6 million, or 136.6%.

The $9.2 million increase in net income for the second quarter 2021 compared to the second quarter 2020 was due primarily to an increase of $7.2 million, or 49.8%, in net interest income, an increase of $4.0 million, or 80.2%, in noninterest income and a decrease of $2.5 million, or 99.2%, in provision for loan losses, partially offset by increases of $2.6 million in income tax expense and $1.8 million, or 13.8%, in noninterest expense.

The $13.6 million increase in net income for the six months ended June 30, 2021 compared to the six months ended June 30, 2020 was due primarily to an increase of $12.7 million, or 43.1%, in net interest income, an increase of $6.2 million, or 55.0%, in noninterest income and a decrease of $2.7 million, or 67.2%, in provision for loan losses, partially offset by a $4.2 million increase in income tax expense and a $3.7 million, or 13.7%, increase in noninterest expense.

During the second quarter 2021, return on average assets (“ROAA”), return on average shareholders’ equity (“ROAE”), and return on average tangible common equity (“ROATCE”) were 1.25%, 14.88%, and 15.09%, respectively, compared to 0.37%, 5.15%, and 5.23%, respectively, for the second quarter 2020. During the six months ended June 30, 2021, ROAA, ROAE, and ROATCE were 1.13%, 13.78%, and 13.97%, respectively, compared to 0.47%, 6.48%, and 6.58%, respectively, for the six months ended June 30, 2020.

During the second quarter of 2021, the Company recognized a $2.5 million pre-tax gain of sale of its corporate headquarters. Excluding this item, adjusted net income for the second quarter of 2021 was $11.1 million, or $1.11 per diluted share, and adjusted net income for the six months ended June 30, 2021 was $21.6 million, or $2.16 per diluted share. Additionally, for the second quarter of 2021, adjusted ROAA, adjusted ROAE and adjusted ROATCE were 1.06%, 12.62% and 12.79, respectively, while for the six months ended June 30, 2021 adjusted ROAA, adjusted ROAE and adjusted ROATCE were 1.04%, 12.62% and 12.79, respectively.

These profitability ratios improved in the 2021 periods compared to the 2020 periods, as increases in net income and adjusted net income outpaced asset growth, which was relatively flat.

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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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.

(dollars in thousands)	Three Months Ended
	June 30, 2021						March 31, 2021						June 30, 2020
	Average Balance		Interest /Dividends		Yield /Cost		Average Balance		Interest /Dividends		Yield /Cost		Average Balance		Interest /Dividends		Yield /Cost
Assets
Interest-earning assets
Loans, including loans held-for-sale	$	3,016,330	$	30,835	4.10	%	$	3,079,130	$	30,885	4.07	%	$	2,989,772	$	29,730	4.00	%
Securities - taxable	490,634		1,921		1.57	%	461,300		1,779		1.56	%	560,947		3,276		2.35	%
Securities - non-taxable	84,050		259		1.24	%	87,129		281		1.31	%	96,675		457		1.90	%
Other earning assets	509,735		362		0.28	%	446,045		335		0.30	%	594,296		759		0.51	%
Total interest-earning assets	4,100,749		33,377		3.26	%	4,073,604		33,280		3.31	%	4,241,690		34,222		3.24	%
Allowance for loan losses	(30,348)						(29,884)						(23,388)
Noninterest-earning assets	136,565						129,553						111,872
Total assets	$	4,206,966					$	4,173,273					$	4,330,174
Liabilities
Interest-bearing liabilities
Interest-bearing demand deposits	$	192,777	$	143	0.30	%	$	180,746	$	133	0.30	%	$	137,487	$	237	0.69	%
Regular savings accounts	55,811		49		0.35	%	46,035		40		0.35	%	37,204		92		0.99	%
Money market accounts	1,416,406		1,462		0.41	%	1,369,626		1,391		0.41	%	1,089,063		3,541		1.31	%
Certificates and brokered deposits	1,444,171		6,051		1.68	%	1,519,580		7,064		1.89	%	2,006,966		11,893		2.38	%
Total interest-bearing deposits	3,109,165		7,705		0.99	%	3,115,987		8,628		1.12	%	3,270,720		15,763		1.94	%
Other borrowed funds	584,751		4,065		2.79	%	583,780		4,127		2.87	%	584,543		4,033		2.77	%
Total interest-bearing liabilities	3,693,916		11,770		1.28	%	3,699,767		12,755		1.40	%	3,855,263		19,796		2.07	%
Noninterest-bearing deposits	98,207						90,764						73,758
Other noninterest-bearing liabilities	61,949						46,774						94,285
Total liabilities	3,854,072						3,837,305						4,023,306
Shareholders’ equity	352,894						335,968						306,868
Total liabilities and shareholders’ equity	$	4,206,966					$	4,173,273					$	4,330,174
Net interest income			$	21,607					$	20,525					$	14,426
Interest rate spread 1					1.98%						1.91%						1.17	%
Net interest margin 2					2.11%						2.04%						1.37	%
Net interest margin - FTE 3					2.25%						2.18%						1.50	%

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.

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(dollars in thousands)	Six Months Ended
	June 30, 2021						June 30, 2020
	Average Balance		Interest /Dividends		Yield /Cost		Average Balance		Interest /Dividends		Yield /Cost
Assets
Interest-earning assets
Loans, including loans held-for-sale	$	3,047,560	$	61,720	4.08	%	$	2,983,883	$	60,138	4.05	%
Securities - taxable	476,049		3,700		1.57	%	545,997		6,895		2.54	%
Securities - non-taxable	85,581		540		1.27	%	98,254		1,029		2.11	%
Other earning assets	478,065		697		0.29	%	505,111		2,404		0.96	%
Total interest-earning assets	4,087,255		66,657		3.29	%	4,133,245		70,466		3.43	%
Allowance for loan losses	(30,117)						(22,724)
Noninterest-earning assets	133,074						104,532
Total assets	$	4,190,212					$	4,215,053
Liabilities
Interest-bearing liabilities
Interest-bearing demand deposits	$	186,795	$	276	0.30	%	$	130,206	$	456	0.70	%
Regular savings accounts	50,950		89		0.35	%	33,774		170		1.01	%
Money market accounts	1,393,145		2,853		0.41	%	977,834		7,284		1.50	%
Certificates and brokered deposits	1,481,667		13,115		1.78	%	2,038,068		25,061		2.47	%
Total interest-bearing deposits	3,112,557		16,333		1.06	%	3,179,882		32,971		2.09	%
Other borrowed funds	584,268		8,192		2.83	%	584,504		8,051		2.77	%
Total interest-bearing liabilities	3,696,825		24,525		1.34	%	3,764,386		41,022		2.19	%
Noninterest-bearing deposits	94,506						67,107
Other noninterest-bearing liabilities	54,403						74,623
Total liabilities	3,845,734						3,906,116
Shareholders’ equity	344,478						308,937
Total liabilities and shareholders’ equity	$	4,190,212					$	4,215,053
Net interest income			$	42,132					$	29,444
Interest rate spread 1					1.95	%					1.24	%
Net interest margin 2					2.08	%					1.43	%
Net interest margin - FTE 3					2.21	%					1.58	%

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.

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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. 

(dollars in thousands)	Three Months Ended June 30, 2021 vs. March 31, 2021 Due to Changes in						Three Months Ended June 30, 2021 vs. June 30, 2020 Due to Changes in						Six Months Ended June 30, 2021 vs. June 30, 2020 Due to Changes in
	Volume		Rate		Net		Volume		Rate		Net		Volume		Rate		Net
Interest income
Loans, including loans held-for-sale	$	(1,394)	$	1,344	$	(50)	$	290	$	815	$	1,105	$	1,174	$	408	$	1,582
Securities – taxable	129		13		142		(371)		(984)		(1,355)		(803)		(2,392)		(3,195)
Securities – non-taxable	(9)		(13)		(22)		(54)		(144)		(198)		(120)		(369)		(489)
Other earning assets	140		(113)		27		(95)		(302)		(397)		(122)		(1,585)		(1,707)
Total	(1,134)		1,231		97		(230)		(615)		(845)		129		(3,938)		(3,809)
Interest expense
Interest-bearing deposits	(17)		(906)		(923)		(738)		(7,320)		(8,058)		(685)		(15,953)		(16,638)
Other borrowed funds	49		(111)		(62)		2		30		32		(11)		152		141
Total	32		(1,017)		(985)		(736)		(7,290)		(8,026)		(696)		(15,801)		(16,497)
(Decrease) increase in net interest income	$	(1,166)	$	2,248	$	1,082	$	506	$	6,675	$	7,181	$	825	$	11,863	$	12,688

Net interest income for the second quarter 2021 was $21.6 million, an increase of $7.2 million, or 49.8%, compared to $14.4 million for the second quarter 2020. The increase in net interest income was the result of an $8.0 million, or 40.5%, decrease in total interest expense to $11.8 million for the second quarter 2021 from $19.8 million for the second quarter 2020. The decrease in total interest expense was partially offset by a $0.8 million, or 2.5%, decrease in total interest income to $33.4 million for the second quarter 2021 from $34.2 million for the second quarter 2020.

Net interest income for the six months ended June 30, 2021 was $42.1 million, an increase of $12.7 million, or 43.1%, compared to $29.4 million for the six months ended June 30, 2020. The increase in net interest income was the result of a $16.5 million, or 40.2%, decrease in total interest expense to $24.5 million for the six months ended June 30, 2021 from $41.0 million for the six months ended June 30, 2020, partially offset by a $3.8 million, or 5.4%, decrease in total interest income to $66.7 million for the six months ended June 30, 2021 from $70.5 million for the six months ended June 30, 2020.

The decrease in total interest income for the second quarter 2021 compared to the second quarter 2020 was due to decreases in interest earned on securities and other earning assets, partially offset by an increase in interest earned on loans. Interest income earned on securities decreased $1.6 million, or 41.6%, due to a decline of 76 basis points (“bps”) in the yield earned on securities, as well as a decrease of $82.9 million, or 12.6%, in the average balance of securities. The decrease in the average balance of securities was driven primarily by prepayments and maturities in private label mortgage-backed securities and agency mortgage-backed securities and early redemptions and maturities in municipal securities. Interest income earned on other earning assets declined $0.4 million, or 52.3%, due mainly to a 23 bp decline in the yield earned on these assets, as well as a decrease of $84.6 million, or 14.2%, in the average balance of other earning assets. The decrease in the average balance of other earning assets was due primarily to lower cash balances. Interest income earned on loans increased $1.1 million, or 3.7%, due primarily to an increase of 10 bps in the yield earned on average loan balances, as well as an increase of $26.6 million, or 0.9%, in average loan balances. The increase in average loan balances was due primarily to growth in the healthcare finance, construction and small business lending portfolios, which included loans originated through the Paycheck Protection Program (“PPP”), partially offset by a decrease in the average balance of residential mortgage, single tenant lease financing, public finance and commercial, and industrial loan balances.

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The decrease in total interest income for the six months ended June 30, 2021 compared to the six months ended June 30, 2020 was due primarily to a decrease of $82.6 million, or 12.8%, in the average balance of securities and the yield earned on the securities portfolio decreased 95 bps for the six months ended June 30, 2021 compared to the six months ended June 30, 2020. The decrease in the average balance of securities was driven primarily by prepayments and maturities in private label mortgage-backed securities and agency mortgage-backed securities and early redemptions and maturities in municipal securities, as well as a decrease in purchases of securities. The average balance in other earning assets also decreased $27.0 million, or 5.4%, due primarily to lower cash balances. These decreases were partially offset by an increase of $63.7 million, or 2.1%, in the average balance of loans, as well as an increase of 3 bps in the yield on loans. The increase in average loan balances was due primarily to growth in the healthcare finance, construction and small business lending portfolios, which included loans originated through the Paycheck Protection Program (“PPP”), partially offset by a decrease in the average balance of residential mortgage, single tenant lease financing, public finance and commercial, and industrial loan balances.

Overall, the yield on interest-earning assets for the second quarter 2021 increased 2 bps to 3.26% from 3.24% for the second quarter 2020. The yield on interest-earning assets for the six months ended June 30, 2021 declined 14 bps to 3.29% from 3.43% for the six months ended June 30, 2020. The increase in the yield earned on interest-earning assets for the second quarter 2021 compared to the second quarter 2020 was due to a 10 bp increase in the yield earned on loans, partially offset by decreases of 76 bps in the yield earned on securities and 23 bps in other earning assets. The decrease in the yield earned on interest-earning assets for the six months ended June 30, 2021 compared to the six months ended June 30, 2020 was due to decreases of 95 bps in the yield earned on securities and 67 bps in other earning assets, partially offset by a 3 bp increase in the yield earned on loans. Interest rates began declining in 2020 following Federal Reserve interest rate cuts in March 2020 in response to the economic effects of COVID-19. The decline in market interest rates negatively impacted the yields earned on securities and cash balances during both the quarter and the six months ended June 30, 2021, in comparison to the same time periods in 2020.

The decrease in total interest expense for the second quarter 2021 compared to the second quarter 2020 was due to a decrease in interest expense related to interest-bearing deposits. Interest expense on certificates and brokered deposits decreased $5.8 million, or 49.1%, due to a decline of 70 bps in the cost of these deposits, as well as a $562.8 million, or 28.0%, decrease in the average balance of these deposits. The decrease in certificates and brokered deposit balances was driven by the Company’s pricing strategy to reduce the level of these higher cost deposits. The decrease in interest expense related to money market accounts of $2.1 million, or 58.7%, was driven by a decline of 90 bps in the cost of these deposits, partially offset by an increase of $327.3 million, or 30.1%, in the average balance of these deposits. Average money market balances increased from the prior year period due primarily to targeted digital marketing efforts to grow small business accounts, as well as consumers, small businesses and commercial clients increasing their cash balances due in part to the economic uncertainty resulting from COVID-19. The decrease in interest expense related to interest-bearing demand deposits and savings accounts was due primarily to decreases of 39 bps and 64 bps, respectively, partially offset by increases of $55.3 million, or 40.2%, and $18.6 million, or 50.0%, respectively, in the average balance of these deposits.

The decrease in total interest expense for the six months ended June 30, 2021 compared to the six months ended June 30, 2020, was driven primarily by a 103 bp decline in the cost of funds related to interest-bearing deposits and a decrease of $67.3 million, or 2.1%, in the average balance of interest-bearing deposits. The decrease in the cost of interest-bearing deposits was due primarily to a $556.4 million, or 27.3%, decrease in average certificates and brokered deposits balances and a 69 bp decrease in the related cost of these deposits. The decrease in interest expense related to money market accounts of $4.4 million, or 60.8%, was driven by a decline of 109 bps in the cost of these deposits, partially offset by an increase of $415.3 million, or 42.5%, in the average balance of these deposits.

Overall, the cost of total interest-bearing liabilities for the second quarter 2021 declined 79 bps to 1.28% from 2.07% for the second quarter 2020. Additionally, the cost of total interest-bearing liabilities for the six months ended June 30, 2021 declined 85 bps to 1.34% from 2.19% for the six months ended June 30, 2020. Similar to asset yields, declines in the cost of funds were due to the continued decrease in market interest rates from the prior year periods. The sharp declines in both short- and long-term interest rates due to COVID-19 have allowed the Company to reprice all of its deposit products at lower rates. Furthermore, a shift in the deposit composition from higher cost certificates and brokered deposits to lower cost non-maturity deposit accounts also contributed to the decline in the cost of deposit funding.

Net interest margin (“NIM”) was 2.11% for the second quarter 2021 compared to 1.37% for the second quarter 2020; an increase of 74 bps. On a fully-taxable equivalent (“FTE”) basis, NIM was 2.25% for the second quarter 2021 compared to 1.50% for the second quarter 2020; an increase of 75 bps.

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NIM was 2.08% for the six months ended June 30, 2021 compared to 1.43% for the six months ended June 30, 2020; an increase of 65 bps. FTE NIM was 2.21% for the six months ended June 30, 2021 compared to 1.58% for the six months ended June 30, 2020; an increase of 63 bps.

The increase in second quarter 2021 NIM and FTE NIM compared to the second quarter 2020 reflects a decrease in the cost of funds while asset yields were up modestly. The reductions in the cost of interest-bearing liabilities was due primarily to the continued decrease in market interest rates from the prior year period. Interest rates declined significantly in 2020 following Federal Reserve interest rate cuts in March 2020 in response to the economic effects of COVID-19.

The increase in year-to-date June 2021 NIM and FTE NIM compared to year-to-date June 2020 reflects a decrease in the cost of funds, partially offset by a moderate decrease in interest-earning asset yields. The decline in the cost of interest-bearing liabilities and the yield on interest-earning assets was due primarily to the continued decrease in market interest rates from the prior year period.

As the pace of the decline in short-term market interest rates has slowed, the Company believes that yields on interest-earning assets have largely stabilized. Furthermore, the Company has approximately $779.0 million of certificates and brokered deposits with a weighted average cost of 1.35% that mature over the next twelve months. As the weighted average of cost of these deposits is significantly higher than current new production costs, the Company expects the cost of deposit funding to continue to decline during the second half of 2021.

Noninterest Income

The following table presents noninterest income for the last five completed fiscal quarters and the six months ended June 30, 2021 and 2020.

(in thousands)	Three Months Ended										Six Months Ended
	June 30, 2021		March 31, 2021		December 31, 2020		September 30, 2020		June 30, 2020		June 30, 2021		June 30, 2020
Service charges and fees	$	280	$	266	$	206	$	224	$	182	$	546	$	394
Loan servicing revenue	457		422		379		274		255		879		506
Loan servicing asset revaluation	(240)		(155)		(60)		(103)		(90)		(395)		(269)
Mortgage banking activities	2,674		5,750		7,987		9,630		3,408		8,424		7,076
Gain on sale of loans	3,019		1,723		3,702		2,033		762		4,742		2,563
Gain on sale of securities	—		—		—		98		—		—		41
Gain on sale of premises and equipment	2,523		—		—		—		—		2,523		—
Other	249		369		443		339		456		618		873
Total noninterest income	$	8,962	$	8,375	$	12,657	$	12,495	$	4,973	$	17,337	$	11,184

During the second quarter 2021, noninterest income was $9.0 million, representing an increase of $4.0 million, or 80.2%, compared to $5.0 million for the second quarter 2020. The increase in noninterest income was due primarily to increases in revenue from gain on sale of premises and equipment and gain on sale of loans, partially offset by decreases in mortgage banking activities and other noninterest income. The increase in gain on sale of premises and equipment was due to the Company completing the sale of its current headquarters. The increase in gain on sale of loans was due an increase in the volume of U.S. Small Business Administration 7(a) guaranteed loan sales and an increase in secondary market premiums during the second quarter 2021. The decline in mortgage banking revenue in the second quarter of 2021 versus the second quarter of 2020 was due primarily to decreases in interest rate locks, sold loan volume and gain-on-sale margins. The decrease in other noninterest income was due to various items, none of which were individually deemed significant.

During the six months ended June 30, 2021, noninterest income was $17.3 million, an increase of $6.2 million, or 55.0%, compared to $11.2 million for the six months ended June 30, 2020. The increase in noninterest income was due primarily to increases in revenue from gain on sale of premises and equipment, gain on sale of loans, mortgage banking activities, and loan servicing revenue, which was partially offset by a decrease in other income. The increase in gain on sale of premises and equipment was due to the Company completing the sale of its current headquarters. The increase in gain on sale of loans was due to an increase in the volume of SBA 7(a) guaranteed loan sales and an increase in secondary market premiums during the six months ended June 30, 2021. The increase in mortgage banking revenue was due mainly to higher gain-on-sale margins. The increase in loan servicing revenue was due to growth in the balance of the Company’s SBA 7(a) servicing

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portfolio due to origination activity over the last twelve months. The decrease in other noninterest income was due to various items, none of which were individually deemed significant.

Noninterest Expense

The following table presents noninterest expense for the last five completed fiscal quarters and the six months ended June 30, 2021 and 2020.

(in thousands)	Three Months Ended										Six Months Ended
	June 30, 2021		March 31, 2021		December 31, 2020		September 30, 2020		June 30, 2020		June 30, 2021		June 30, 2020
Salaries and employee benefits	$	9,232	$	9,492	$	9,135	$	9,533	$	7,789	$	18,724	$	15,563
Marketing, advertising and promotion	872		680		443		426		411		1,552		786
Consulting and professional services	1,078		986		788		614		932		2,064		2,109
Data processing	382		462		426		388		339		844		714
Loan expenses	541		534		630		408		399		1,075		998
Premises and equipment	1,587		1,601		1,601		1,568		1,602		3,188		3,227
Deposit insurance premium	275		425		450		440		435		700		920
Write-down of other real estate owned	—		—		—		2,065		—		—		—
Other	1,108		1,137		1,040		970		1,337		2,245		2,413
Total noninterest expense	$	15,075	$	15,317	$	14,513	$	16,412	$	13,244	$	30,392	$	26,730

Noninterest expense for the second quarter 2021 was $15.1 million, compared to $13.2 million for the second quarter 2020. The increase of $1.8 million, or 13.8%, compared to the second quarter 2020 was due primarily to increases of $1.4 million in salaries and employee benefits and $0.5 million in marketing, advertising and promotion, partially offset by decreases of $0.2 million and $0.2 million in deposit insurance premium and other noninterest expense, respectively. The increase in salaries and employee benefits was due mainly to an increase in headcount, which includes the impact of personnel growth associated with the Company’s small business lending platform, as well as increased small business lending incentive compensation for the second quarter 2021. The increase in marketing, advertising and promotion was due primarily to higher mortgage lead generation costs and sponsorship initiatives. The decrease in other expenses was due primarily to a $0.3 million charitable contribution the Company made in the second quarter 2020 to assist small businesses and nonprofits in addressing the economic challenges of the COVID-19 pandemic. The decrease in deposit insurance premium is due primarily to a decrease in the balance of brokered deposits and a decrease in the overall size of the balance sheet, both of which positively impact the formula used to calculate deposit insurance expense.

Noninterest expense for the six months ended June 30, 2021 was $30.4 million, compared to $26.7 million for the six months ended June 30, 2020. The increase of $3.7 million, or 13.7%, compared to the six months ended June 30, 2020 was due primarily to increases of $3.2 million in salaries and employee benefits and $0.8 million in marketing, advertising and promotion, partially offset by decreases of $0.2 million and $0.2 million in deposit insurance premium and other noninterest expense, respectively. The increase in salaries and employee benefits was due mainly to an increase in headcount, which includes the impact of personnel growth associated with the Company’s small business lending platform, as well as increased small business lending incentive compensation. The increase in marketing, advertising and promotion was due primarily to higher mortgage lead generation costs and digital marketing initiatives. The decrease in deposit insurance premium was due primarily to a decrease in the balance of brokered deposits and a decrease in the overall size of the balance sheet, both of which positively impact the formula used to calculate deposit insurance expense. The decrease in other expenses was due primarily to a $0.3 million charitable contribution the Company made in the second quarter 2020 to assist small businesses and nonprofits in addressing the economic challenges of the COVID-19 pandemic.

Income tax provision was $2.4 million for the second quarter 2021, resulting in an effective tax rate of 15.4%, compared to a tax benefit of $0.3 million for the second quarter 2020. Income tax provision was $4.2 million for the six months ended June 30, 2021, resulting in an effective tax rate of 15.2%, compared to an income tax benefit of less than $0.1 million for the six months ended June 30, 2020. The increase in income tax provision for both the three and six months ended June 30, 2021 compared to the three and six months ended June 30, 2020, was due primarily to the increase in pre-tax earnings driven by increased net interest income and noninterest income, partially offset by higher noninterest expenses. Additionally, the lower income tax provision and effective tax rate during the six months ended June 30, 2020, was impacted by the passage of the

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CARES Act, which was signed into law on March 27, 2020, and provided the Company the ability to carryback certain federal net operating losses.

Financial Condition

The following table presents summary balance sheet data for the last five completed fiscal quarters.

(in thousands)
Balance Sheet Data:	June 30, 2021		March 31, 2021		December 31, 2020		September 30, 2020		June 30, 2020
Total assets	$	4,204,642	$	4,188,570	$	4,246,156	$	4,333,624	$	4,324,600
Loans	2,957,608		3,058,694		3,059,231		3,012,914		2,973,674
Total securities	729,178		530,566		565,851		596,565		657,312
Loans held-for-sale	27,587		30,235		39,584		76,208		38,813
Noninterest-bearing deposits	113,996		100,700		96,753		86,088		82,864
Interest-bearing deposits	3,092,151		3,116,903		3,174,132		3,286,303		3,297,925
Total deposits	3,206,147		3,217,603		3,270,885		3,372,391		3,380,789
Advances from Federal Home Loan Bank	514,919		514,917		514,916		514,914		514,913
Total shareholders’ equity	358,641		344,566		330,944		318,102		307,711

Total assets decreased $41.5 million, or 1.0%, to $4.2 billion at June 30, 2021 compared to $4.2 billion at December 31, 2020. This decrease was driven by a $64.7 million, or 2.0%, decrease in deposit balances, which includes a $202.0 million, or 15.7%, decrease in certificates of deposits and an $81.8 million, or 6.1%, increase in money market account balances.

As of June 30, 2021, total shareholders’ equity was $358.6 million, an increase of $27.7 million, or 8.4%, compared to December 31, 2020, due primarily to the net income earned during the period, as well as a decrease in accumulated other comprehensive loss. Tangible common equity totaled $354.0 million as of June 30, 2021, representing an increase of $27.7 million, or 8.5%, compared to December 31, 2020. As both total shareholders’ equity and tangible common equity increased, while both total assets and tangible assets decreased 1.0%, respectively, the ratio of total shareholders’ equity to total assets increased to 8.53% as of June 30, 2021 from 7.79% as of December 31, 2020, and the ratio of tangible common equity to tangible assets increased to 8.43% as of June 30, 2021 from 7.69% as of December 31, 2020.

Book value per common share increased 7.8% to $36.39 as of June 30, 2021 from $33.77 as of December 31, 2020. Tangible book value per share increased 7.9% to $35.92 as of June 31, 2021 from $33.29 as of December 31, 2020. The growth in both book value per common share and tangible book value per share reflects the growth in total shareholders’ equity and tangible common equity while total common shares outstanding increased slightly from December 31, 2020. 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 presents a summary of the Company’s loan portfolio for the last five completed fiscal quarters.

(dollars in thousands)	June 30, 2021				March 31, 2021				December 31, 2020				September 30, 2020				June 30, 2020
Commercial loans
Commercial and industrial	$	96,203	3.3	%	$	71,835	2.3	%	$	75,387	2.5	%	$	77,116	2.6	%	$	81,687	2.7	%
Owner-occupied commercial real estate	87,136		2.9	%	87,930		2.9	%	89,785		2.9	%	89,095		3.0	%	86,897		2.9	%
Investor commercial real estate	28,871		1.0	%	14,832		0.5	%	13,902		0.5	%	13,084		0.4	%	13,286		0.4	%
Construction	117,970		4.0	%	123,483		4.0	%	110,385		3.6	%	92,154		3.1	%	77,591		2.6	%
Single tenant lease financing	913,115		30.9	%	941,322		30.8	%	950,172		31.1	%	960,505		31.9	%	980,292		33.0	%
Public finance	612,138		20.7	%	637,600		20.8	%	622,257		20.3	%	625,638		20.8	%	647,107		21.8	%
Healthcare finance	455,890		15.3	%	510,237		16.8	%	528,154		17.3	%	461,740		15.3	%	380,956		12.8	%
Small business lending	123,293		4.2	%	132,490		4.3	%	125,589		4.1	%	123,168		4.1	%	118,526		4.0	%
Total commercial loans	2,434,616		82.3	%	2,519,729		82.4	%	2,515,631		82.3	%	2,442,500		81.2	%	2,386,342		80.2	%
Consumer loans
Residential mortgage	177,148		6.0	%	190,148		6.2	%	186,787		6.1	%	203,041		6.7	%	208,728		7.0	%
Home equity	17,510		0.6	%	17,949		0.6	%	19,857		0.6	%	22,169		0.7	%	22,640		0.8	%
Other consumer	271,796		9.2	%	270,209		8.8	%	275,692		9.0	%	282,450		9.3	%	291,632		9.8	%
Total consumer loans	466,454		15.8	%	478,306		15.6	%	482,336		15.7	%	507,660		16.7	%	523,000		17.6	%
Net deferred loan origination costs, premiums and discounts on purchased loans and other (1)	56,538		1.9	%	60,659		2.0	%	61,264		2.0	%	62,754		2.1	%	64,332		2.2	%
Total loans	2,957,608		100.0	%	3,058,694		100.0	%	3,059,231		100.0	%	3,012,914		100.0	%	2,973,674		100.0	%
Allowance for loan losses	(28,066)				(30,642)				(29,484)				(26,917)				(24,465)
Net loans	$	2,929,542			$	3,028,052			$	3,029,747			$	2,985,997			$	2,949,209

(1) Includes carrying value adjustments of $40.4 million, $41.6 million, $42.7 million, $44.3 million and $46.0 million related to terminated interest rate swaps associated with public finance loans as of June 30, 2021, March 31, 2021, December 31, 2020, September 30, 2020 and June 30, 2020, respectively. 

Total loans were $3.0 billion as of June 30, 2021, a decrease of $101.6 million, or 3.3%, compared to December 31, 2020. Total commercial loan balances were $2.4 billion as of June 30, 2021, down $81.0 million, or 3.2%, from December 31, 2020. Compared to December 31, 2020, the decline in commercial loan balances was driven largely by net payoffs in healthcare finance, single tenant lease financing and public finance loans, which were partially offset by increases in commercial and industrial, construction and investor commercial real estate loan balances.

The net payoffs in the healthcare finance portfolio were driven primarily by elevated prepayment activity combined with a lower level of new originations, as heightened competition and the low interest rate environment has driven loan pricing to unattractively low levels. Going forward, we expect the balance of healthcare finance loans may decline as a result of Provide’s acquisition by a super-regional financial institution, as well as potential prepayment activity.

Total consumer loan balances were $466.5 million as of June 30, 2021, a decrease of $15.9 million, or 3.3%, compared to December 31, 2020. The decline in consumer loan balances from December 31, 2020 was due primarily to increased prepayment activity across the consumer 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, OREO and other nonperforming assets, which consist of repossessed assets. The following table provides a summary of the Company’s nonperforming assets for the last five completed fiscal quarters.

(dollars in thousands)	June 30, 2021			March 31, 2021			December 31, 2020			September 30, 2020			June 30, 2020
Nonaccrual loans
Commercial loans:
Commercial and industrial	$	692		$	1,002		$	—		$	117		$	299
Owner-occupied commercial real estate	3,487			4,266			1,838			1,390			2,066
Single tenant lease financing	2,373			7,080			7,116			7,148			4,680
Small business lending (1)	1,209			865			—			—			—
Total commercial loans	7,761			13,213			8,954			8,655			7,045
Consumer loans:
Residential mortgage	1,253			1,120			1,183			1,085			1,042
Home equity	14			15			—			—			—
Other consumer	10			23			46			34			108
Total consumer loans	1,277			1,158			1,229			1,119			1,150
Total nonaccrual loans	9,038			14,371			10,183			9,774			8,195
Past Due 90 days and accruing loans
Commercial loans:
Commercial and industrial	—			278			—			—			—
Total commercial loans	—			278			—			—			—
Total past due 90 days and accruing loans	—			278			—			—			—
Total nonperforming loans	9,038			14,649			10,183			9,774			8,195
Other real estate owned
Investor commercial real estate	1,188			—			—			—			2,065
Residential mortgage	112			—			—			—			—
Total other real estate owned	1,300			—			—			—			2,065
Other nonperforming assets	—			29			35			8			44
Total nonperforming assets	$	10,338		$	14,678		$	10,218		$	9,782		$	10,304
Total nonperforming loans to total loans(2)	0.31		%	0.48		%	0.33		%	0.32		%	0.28		%
Total nonperforming assets to total assets(2)	0.25		%	0.35		%	0.24		%	0.23		%	0.24		%
Allowance for loan losses to total loans	0.95		%	1.00		%	0.96		%	0.89		%	0.82		%
Allowance for loan losses to total loans, excluding PPP loans(3)	0.96		%	1.02		%	0.98		%	0.91		%	0.84		%
Allowance for loan losses to nonperforming loans(2)	310.5		%	209.2		%	289.5		%	275.4		%	298.5		%

1 Balance represents U.S. government guaranteed loans.

2 Includes the impact of nonperforming small business lending loans, which are guaranteed by the U.S. government.

3 This information 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.

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Troubled Debt Restructurings

The following table provides a summary of troubled debt restructurings for the last five completed fiscal quarters.

(in thousands)	June 30, 2021		March 31, 2021		December 31, 2020		September 30, 2020		June 30, 2020
Troubled debt restructurings – nonaccrual	$	2,581	$	2,606	$	2,637	$	811	$	854
Troubled debt restructurings – performing	1,179		1,187		367		365		372
Total troubled debt restructurings	$	3,760	$	3,793	$	3,004	$	1,176	$	1,226

The decline in nonperforming loans of $1.2 million, or 9.0%, to $9.0 million as of June 30, 2021 compared to $10.2 million as of December 31, 2020 was due primarily to a decrease in nonaccrual single tenant lease financing balances, which was partially offset by an increase in nonperforming small business lending, owner-occupied commercial real estate and commercial and industrial loans. The decrease in nonaccrual single tenant lease financing balances was due to positive developments related to a relationship which included two loans, one of which was paid off at net book value (unpaid principal balance less specific reserves) and the other was transferred to OREO.

Total nonperforming assets increased $0.1 million, or 1.2%, as of June 30, 2021 compared to December 31, 2020, due primarily to a $1.3 million increase in OREO, partially offset by the $1.2 million decrease in nonperforming loans discussed above. The ratio of nonperforming loans to total loans decreased to 0.31% as of June 30, 2021 compared to 0.33% as of December 31, 2020 and the ratio of nonperforming assets to total assets increased to 0.25% as of June 30, 2021 compared to 0.24% as of December 31, 2020, also due primarily to the loans and OREO mentioned above.

Total TDRs as of June 30, 2021 were $3.8 million, up $0.8 million from December 31, 2020. The increase was driven by one residential mortgage loan that became a TDR during the first quarter 2021.

    As of June 30, 2021, the Company had two properties in OREO, one commercial property with a carrying value of $1.2 million and one residential mortgage with a carrying value of $0.1 million. The Company did not have any OREO as of December 31, 2020.

    As of June 30, 2021, our financial results have reflected little impact on asset quality as a result of COVID-19. We are optimistic that the combination of vaccinations, government stimulus programs and relief programs we have provided to our clients will continue to mitigate the impact of the pandemic on the Company’s business. However, if economic conditions return to levels experienced during 2020, our credit quality and overall financial performance could be adversely affected.     

Non-TDR Loan Modifications due to COVID-19

    The “Interagency Statement on Loan Modifications and Reporting for Financial Institutions Working with Customers Affected by the Coronavirus” was issued by our banking regulators on March 22, 2020. This guidance encourages financial institutions to work prudently with borrowers who are or may be unable to meet their contractual payment obligations due to the effects of COVID-19.

    Additionally, Section 4013 of the CARES Act further provides that loan modifications due to the impact of COVID-19 that would otherwise be classified as TDRs under GAAP will not be so classified. Modifications within the scope of this relief are in effect from the period beginning March 1, 2020 until the earlier of January 1, 2022, or 60 days after the date on which the national emergency related to the COVID-19 pandemic formally terminates.

    In accordance with this guidance, the Company has offered modifications to borrowers who were both impacted by COVID-19 and current on all principal and interest payments.     As of June 30, 2021, the Company had eight loans totaling $7.9 million in non-TDR loan modifications due to COVID-19.

U.S. Small Business Administration Paycheck Protection Program

Section 1102 of the CARES Act created the PPP, which is jointly administered by the U.S. Small Business Administration (“SBA”) and the Department of the Treasury. The PPP is designed to provide a direct incentive to small businesses to retain employees on their payroll during COVID-19 as well as to help cover certain utility costs and rent payments. These loans may be forgiven if certain conditions are satisfied and are fully guaranteed by the SBA. In 2020, as a preferred SBA lender, we assisted our clients in participating in the PPP to help them maintain their workforces in an uncertain

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and challenging environment. The loans originated in 2020 bear an interest rate of 1.00%, and we received gross origination fees of approximately $2.3 million. The Company received this fee revenue from the SBA in late June 2020, and it was deferred over the life of the PPP loans and recognized as interest income.

On December 27, 2020, $285 billion in additional funding was allocated to the PPP through the passage of the Economic Aid to Hard-Hit Small Businesses, Nonprofits, and Venues Act. The additional funding was used to fund PPP loans for small businesses, as well as certain small businesses who were eligible to receive a second PPP loan. The Company began offering PPP loans again in 2021 and continued until the program’s funds were depleted. These loans may be forgiven if certain conditions are satisfied and are fully guaranteed by the SBA. The loans originated during 2021 bear an interest rate of 1.00% and the Company received gross origination fees of approximately $1.3 million. The Company received this fee revenue from the SBA during the six month period ended June 30, 2021, and it is being deferred over the life of the PPP loans and recognized as interest income. The Company began processing applications for forgiveness from this round beginning in May 2021.

The Company anticipates that the majority of the PPP loans will ultimately be forgiven, in whole or in part, by the SBA in accordance with the terms of the program. Management anticipates that loan forgiveness applications will continue throughout 2021.

The following table provides a rollforward of the activity of PPP loans through June 30, 2021.

(dollars in thousands)
	Number of Loans	Principal Balance		Net Deferred Fees
Originated	447	$	58,336	$	1,851
Principal repaid	(71)	(7,184)
Net deferred fees recognized				(1,253)
Balance, December 31, 2020	376	51,152		598
Originated	278	27,201		1,118
Principal repaid	(348)	(38,671)
Net deferred fees recognized				(768)
Balance, June 30, 2021	306	39,682		948

Allowance for Loan Losses 

The following table provides a rollforward of the allowance for loan losses for the last five completed fiscal quarters and the six months ended June 30, 2021 and 2020.

(dollars in thousands)	Three Months Ended															Six Months Ended
	June 30, 2021			March 31, 2021			December 31, 2020			September 30, 2020			June 30, 2020			June 30, 2021			June 30, 2020
Balance, beginning of period	$	30,642		$	29,484		$	26,917		$	24,465		$	22,857		$	29,484		$	21,840
Provision charged to expense	21			1,276			2,865			2,509			2,491			1,297			3,952
Losses charged off	(2,689)			(311)			(408)			(241)			(1,016)			(3,001)			(1,514)
Recoveries	92			193			110			184			133			286			187
Balance, end of period	$	28,066		$	30,642		$	29,484		$	26,917		$	24,465		$	28,066		$	24,465
Net charge-offs to average loans	0.35		%	0.02		%	0.04		%	0.01		%	0.12		%	0.06		%	0.06		%

    The allowance for loan losses was $28.1 million as of June 30, 2021, compared to $29.5 million as of December 31, 2020. The decrease in the allowance for loan losses compared to December 31, 2020 was due primarily to the elimination of $2.9 million of specific reserves related to a single tenant lease financing relationship and a commercial and industrial relationship, both of which had been classified as nonaccrual. The single tenant lease financing relationship included two loans, one of which was paid off at net book value (unpaid principal balance less specific reserves) and the other was transferred to OREO. The commercial and industrial relationship included four loans, two of which were paid off during the quarter. The decrease in the allowance for loan losses was partially offset by additional adjustments to the qualitative factors in the Company’s allowance model.

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     The allowance for loan losses as a percentage of total loans was 0.95% at June 30, 2021, or 0.96%, when excluding PPP loans, compared to 0.96%, or 0.98%, when excluding PPP loans, at December 31, 2020. The allowance for loan losses as a percentage of nonperforming loans increased to 310.5% as of June 30, 2021, compared to 289.5% as of December 31, 2020, due to a decrease in nonperforming loans related to the single tenant lease financing relationship and commercial and industrial relationship discussed above. The provision for loan losses in the second quarter 2021 was $21 thousand, compared to $2.5 million for the second quarter 2020. The decrease in the provision for loan losses was due primarily to the decline in loan balances. During the second quarter 2021, the Company recorded net charge-offs of $2.6 million, compared to net charge-offs of $0.9 million for the second quarter 2020. The increase in net charge-offs was due primarily to a charge-off of $2.4 million related to the single tenant lease financing relationship discussed above, as the loan payoff and the transfer to the OREO were recorded at net book value.

Investment Securities Portfolio

The following tables present the amortized cost and approximate fair value of our investment portfolio by security type for the last five completed fiscal quarters.   

(in thousands)
Amortized Cost	June 30, 2021		March 31, 2021		December 31, 2020		September 30, 2020		June 30, 2020
Securities available-for-sale
U.S. Government-sponsored agencies	$	57,984	$	60,815	$	61,765	$	65,007	$	68,203
Municipal securities	77,364		79,168		82,757		87,365		91,906
Agency mortgage-backed securities	445,895		229,981		241,795		250,755		275,433
Private label mortgage-backed securities	29,003		40,550		57,268		71,519		101,110
Asset-backed securities	5,000		5,000		5,000		5,000		5,000
Corporate securities	48,447		48,433		48,419		48,406		48,394
Total available-for-sale	663,693		463,947		497,004		528,052		590,046
Securities held-to-maturity
Municipal securities	14,549		14,560		14,571		14,582		14,603
Corporate securities	51,110		53,630		53,652		53,672		53,692
Total held-to-maturity	65,659		68,190		68,223		68,254		68,295
Total securities	$	729,352	$	532,137	$	565,227	$	596,306	$	658,341

(in thousands)
Approximate Fair Value	June 30, 2021		March 31, 2021		December 31, 2020		September 30, 2020		June 30, 2020
Securities available-for-sale
U.S. Government-sponsored agencies	$	57,135	$	59,478	$	60,545	$	63,682	$	66,544
Municipal securities	78,438		79,208		82,489		86,421		90,562
Agency mortgage-backed securities	444,494		228,818		243,921		253,292		278,530
Private label mortgage-backed securities	29,363		41,106		58,116		72,626		101,925
Asset-backed securities	5,005		5,006		4,961		4,921		4,837
Corporate securities	49,084		48,760		47,596		47,369		46,619
Total available-for-sale	663,519		462,376		497,628		528,311		589,017
Securities held-to-maturity
Municipal securities	15,373		15,109		15,317		15,328		15,274
Corporate securities	52,685		54,274		54,135		53,848		53,878
Total held-to-maturity	68,058		69,383		69,452		69,176		69,152
Total securities	$	731,577	$	531,759	$	567,080	$	597,487	$	658,169

The approximate fair value of available-for-sale investment securities increased $165.9 million, or 33.3%, to $663.5 million as of June 30, 2021, compared to $497.6 million as of December 31, 2020. The increase was due primarily to an increase of $200.6 million in agency mortgage-backed securities, partially offset by a $28.8 million decrease in private label mortgage-backed securities and a $4.1 million decrease in municipal securities. The increase in agency mortgage-backed securities was driven primarily by increased purchases during the six months ended June 30, 2021, partially offset by

54

prepayments and maturities in agency and private label mortgage-backed securities, as well as early redemptions and maturities in municipal securities.

Accrued Income and Other Assets

    Accrued income and other assets decreased $9.5 million, or 14.8%, to $54.8 million at June 30, 2021 compared to $64.3 million at December 31, 2020. The decrease primarily related to decreases of $9.5 million in cash pledged as collateral, $3.5 million in deferred tax assets and $2.5 million in derivative assets. As of these dates, the Company pledged $21.0 million and $30.6 million, respectively, of cash collateral to counterparties on interest rate swap agreements as security for its obligations related to these agreements. Collateral posted and received is dependent on the fair value of the underlying agreements as of the respective date.

Accrued Expenses and Other Liabilities

    Accrued expenses and other liabilities were $53.9 million at June 30, 2021 compared to $48.4 million at December 31, 2020.

Deposits  

The following table presents the composition of the Company’s deposit base for the last five completed fiscal quarters.

(dollars in thousands)	June 30, 2021				March 31, 2021				December 31, 2020				September 30, 2020				June 30, 2020
Noninterest-bearing deposits	$	113,996	3.6	%	$	100,700	3.1	%	$	96,753	3.0	%	$	86,088	2.6	%	$	82,864	2.5	%
Interest-bearing demand deposits	196,841		6.1	%	186,015		5.8	%	188,645		5.8	%	155,054		4.6	%	152,391		4.5	%
Savings accounts	56,298		1.8	%	51,251		1.6	%	43,200		1.3	%	49,890		1.5	%	43,366		1.3	%
Money market accounts	1,432,355		44.6	%	1,397,449		43.4	%	1,350,566		41.3	%	1,359,178		40.3	%	1,241,874		36.7	%
Certificates of deposits	1,087,350		33.9	%	1,174,764		36.5	%	1,289,319		39.4	%	1,360,575		40.3	%	1,470,905		43.5	%
Brokered deposits	319,307		10.0	%	307,424		9.6	%	302,402		9.2	%	361,606		10.7	%	389,389		11.5	%
Total deposits	$	3,206,147	100.0	%	$	3,217,603	100.0	%	$	3,270,885	100.0	%	$	3,372,391	100.0	%	$	3,380,789	100.0	%

Total deposits decreased $64.7 million, or 2.0%, to $3.2 billion as of June 30, 2021, compared to $3.3 billion as of December 31, 2020. This decrease was due primarily to a decline of $202.0 million, or 15.7%, in certificates of deposits, partially offset by increases of $81.8 million, or 6.1%, in money market accounts, $17.2 million, or 17.8%, in noninterest-bearing deposits, $16.9 million, or 5.6%, in brokered deposits, $13.1 million, or 30.3%, in savings accounts, and $8.2 million, or 4.3%, in interest-bearing demand deposits. The Company experienced strong growth in money market deposit accounts due to targeted digital marketing efforts to grow small business accounts as well as consumers, small business and commercial clients increasing their cash balances in part due to the economic uncertainty resulting from the COVID-19 pandemic. The decrease in certificates of deposits were due to the maturity of higher cost balances and reduced pricing strategies designed to limit the volume of new production.

Recent Debt Offerings

    On October 26, 2020, the Company issued $10.0 million in aggregate principal amount of 6.0% Fixed-to-Floating Rate Subordinated Notes due 2030 (the “2030 Notes”). The Notes were offered and sold by the Company in a private placement and are scheduled to mature on November 1, 2030. The 2030 Notes bear interest at a fixed rate of 6.0% per annum from and including October 26, 2020, to, but excluding, November 1, 2025, and thereafter at a floating interest rate initially equal to the three-month term SOFR plus 5.795%. The 2030 Notes are unsecured subordinated obligations of the Company and may be repaid, without penalty, on any interest payment date on or after November 1, 2025. The 2030 Notes are intended to qualify as Tier 2 capital under regulatory guidelines. The net proceeds were used to redeem the 2025 Note in January 2021.

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.

55

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”).

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 June 30, 2021 and December 31, 2020 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 June 30, 2021 and December 31, 2020 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.

	Actual				Minimum Capital Required - Basel III				Minimum Required to be Considered Well Capitalized
(dollars in thousands)	Capital Amount		Ratio		Capital Amount		Ratio		Capital Amount		Ratio
As of June 30, 2021:
Common equity tier 1 capital to risk-weighted assets
Consolidated	$	364,991	12.23	%	$	208,989	7.00	%	N/A		N/A
Bank	402,948		13.53	%	208,451		7.00	%	$	193,562	6.50	%
Tier 1 capital to risk-weighted assets
Consolidated	364,991		12.23	%	253,773		8.50	%	N/A		N/A
Bank	402,948		13.53	%	253,120		8.50	%	238,230		8.00	%
Total capital to risk-weighted assets
Consolidated	462,928		15.51	%	313,484		10.50	%	N/A		N/A
Bank	431,014		14.47	%	312,677		10.50	%	297,788		10.00	%
Leverage ratio
Consolidated	364,991		8.70	%	167,907		4.00	%	N/A		N/A
Bank	402,948		9.61	%	167,663		4.00	%	209,579		5.00	%

56

	Actual				Minimum Capital Required - Basel III				Minimum Required to be Considered Well Capitalized
(dollars in thousands)	Capital Amount		Ratio		Capital Amount		Ratio		Capital Amount		Ratio
As of December 31, 2020:
Common equity tier 1 capital to risk-weighted assets
Consolidated	$	342,159	11.31	%	$	211,828	7.00	%	N/A		N/A
Bank	377,678		12.49	%	211,612		7.00	%	$	196,497	6.50	%
Tier 1 capital to risk-weighted assets
Consolidated	342,159		11.31	%	257,220		8.50	%	N/A		N/A
Bank	377,678		12.49	%	256,957		8.50	%	241,842		8.00	%
Total capital to risk-weighted assets
Consolidated	451,246		14.91	%	317,742		10.50	%	N/A		N/A
Bank	407,162		13.47	%	317,418		10.50	%	302,303		10.00	%
Leverage ratio
Consolidated	342,159		7.95	%	172,154		4.00	%	N/A		N/A
Bank	377,678		8.78	%	172,036		4.00	%	215,045		5.00	%

Shareholders’ Dividends

The Company’s Board of Directors declared a cash dividend of $0.06 per share of common stock payable July 15, 2021 to shareholders of record as of July 1, 2021. 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 its 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, including any potential impact resulting from COVID-19.

As of June 30, 2021, the Company had $72.0 million principal amount of subordinated debt outstanding evidenced by its 6.0% Fixed-to-Floating Rate Subordinated Notes due 2026, the 2029 Notes and the 2030 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 at least the next twelve months. The Company may explore strategic alternatives, including additional asset, deposit or revenue generation channels that complement our 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.

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 FHLB and brokered deposits.

57

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. Given the uncertainty regarding the duration and ultimate economic effect of COVID-19, we believe it will be prudent to maintain higher levels of cash on the balance sheet than we have historically maintained until the crisis passes. We believe we have sufficient on-balance sheet liquidity, supplemented by access to additional funding sources, to manage the potential economic impact of COVID-19. At June 30, 2021, on a consolidated basis, the Company had $992.3 million in cash and cash equivalents and investment securities available-for-sale and $27.6 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 June 30, 2021, the Bank had the ability to borrow an additional $636.9 million from the FHLB, the Federal Reserve and correspondent bank Fed Funds lines of credit.

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 June 30, 2021, the Company, on an unconsolidated basis, had $27.7 million in cash generally available for its cash needs, which is in excess of its current annual regular shareholder dividend 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 June 30, 2021, approved outstanding loan commitments, including unused lines of credit and standby letters of credit, amounted to $293.1 million. Certificates of deposits and brokered deposits scheduled to mature in one year or less at June 30, 2021 totaled $779.0 million.

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.

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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 ratio, average tangible common equity, return on average tangible common equity, total interest income - FTE, net interest income - FTE, net interest margin - FTE, allowance for loan losses to loans, excluding PPP loans, adjusted revenue, adjusted income before income taxes, adjusted income tax, adjusted net income, adjusted diluted earnings per share, adjusted return on average assets, adjusted return on average shareholders’ equity, adjusted return on average tangible common equity and adjusted effective income tax rate 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 the last five completed fiscal quarters and the six months ended June 30, 2021 and 2020.

(dollars in thousands, except share and per share data)	Three Months Ended															Six Months Ended
	June 30, 2021			March 31, 2021			December 31, 2020			September 30, 2020			June 30, 2020			June 30, 2021			June 30, 2020
Total equity - GAAP	$	358,641		$	344,566		$	330,944		$	318,102		$	307,711		$	358,641		$	307,711
Adjustments:
Goodwill	(4,687)			(4,687)			(4,687)			(4,687)			(4,687)			(4,687)			(4,687)
Tangible common equity	$	353,954		$	339,879		$	326,257		$	313,415		$	303,024		$	353,954		$	303,024
Total assets - GAAP	$	4,204,642		$	4,188,570		$	4,246,156		$	4,333,624		$	4,324,600		$	4,204,642		$	4,324,600
Adjustments:
Goodwill	(4,687)			(4,687)			(4,687)			(4,687)			(4,687)			(4,687)			(4,687)
Tangible assets	$	4,199,955		$	4,183,883		$	4,241,469		$	4,328,937		$	4,319,913		$	4,199,955		$	4,319,913
Total common shares outstanding	9,854,153			9,823,831			9,800,569			9,800,569			9,799,047			9,854,153			9,799,047
Book value per common share	$	36.39		$	35.07		$	33.77		$	32.46		$	31.40		$	36.39		$	31.40
Effect of goodwill	(0.47)			(0.47)			(0.48)			(0.48)			(0.48)			(0.47)			(0.48)
Tangible book value per common share	$	35.92		$	34.60		$	33.29		$	31.98		$	30.92		$	35.92		$	30.92
Total shareholders’ equity to assets	8.53		%	8.23		%	7.79		%	7.34		%	7.12		%	8.53		%	7.12		%
Effect of goodwill	(0.10)		%	(0.11)		%	(0.10)		%	(0.10)		%	(0.11)		%	(0.10)		%	(0.11)		%
Tangible common equity to tangible assets ratio	8.43		%	8.12		%	7.69		%	7.24		%	7.01		%	8.43		%	7.01		%
Total average equity - GAAP	$	352,894		$	335,968		$	323,464		$	313,611		$	306,868		$	344,478		$	308,937
Adjustments:
Average goodwill	(4,687)			(4,687)			(4,687)			(4,687)			(4,687)			(4,687)			(4,687)
Average tangible common equity	$	348,207		$	331,281		$	318,777		$	308,924		$	302,181		$	339,791		$	304,250
Return on average shareholders’ equity	14.88		%	12.61		%	13.64		%	10.67		%	5.15		%	13.78		%	6.48		%
Effect of goodwill	0.21		%	0.18		%	0.20		%	0.16		%	0.08		%	0.19		%	0.10		%
Return on average tangible common equity	15.09		%	12.79		%	13.84		%	10.83		%	5.23		%	13.97		%	6.58		%

59

(dollars in thousands, except share and per share data)	Three Months Ended															Six Months Ended
	June 30, 2021			March 31, 2021			December 31, 2020			September 30, 2020			June 30, 2020			June 30, 2021			June 30, 2020
Total interest income	$	33,377		$	33,280		$	33,643		$	32,750		$	34,222		$	66,657		$	70,466
Adjustments:
Fully-taxable equivalent adjustments 1	1,394			1,356			1,400			1,424			1,437			2,750			2,972
Total interest income - FTE	$	34,771		$	34,636		$	35,043		$	34,174		$	35,659		$	69,407		$	73,438
Net interest income	$	21,607		$	20,525		$	18,865		$	16,232		$	14,426		$	42,132		$	29,444
Adjustments:
Fully-taxable equivalent adjustments 1	1,394			1,356			1,400			1,424			1,437			2,750			2,972
Net interest income - FTE	$	23,001		$	21,881		$	20,265		$	17,656		$	15,863		$	44,882		$	32,416
Net interest margin	2.11		%	2.04		%	1.78		%	1.53		%	1.37		%	2.08		%	1.43		%
Effect of fully-taxable equivalent adjustments 1	0.14		%	0.14		%	0.13		%	0.14		%	0.13		%	0.13		%	0.15		%
Net interest margin - FTE	2.25		%	2.18		%	1.91		%	1.67		%	1.50		%	2.21		%	1.58		%
Allowance for loan losses	$	28,066		$	30,642		$	29,484		$	26,917		$	24,465		$	28,066		$	24,465
Loans	$	2,957,608		$	3,058,694		$	3,059,231		$	3,012,914		$	2,973,674		$	2,957,608		$	2,973,674
Adjustments:
PPP loans	(39,682)			(53,365)			(50,554)			(58,337)			(58,948)			(39,682)			(58,948)
Loans, excluding PPP loans	$	2,917,926		$	3,005,329		$	3,008,677		$	2,954,577		$	2,914,726		$	2,917,926		$	2,914,726
Allowance for loan losses to loans	0.95		%	1.00		%	0.96		%	0.89		%	0.82		%	0.95		%	0.82		%
Effect of PPP loans	0.01		%	0.02		%	0.02		%	0.02		%	0.02		%	0.01		%	0.02		%
Allowance for loan losses to loans, excluding PPP loans	0.96		%	1.02		%	0.98		%	0.91		%	0.84		%	0.96		%	0.84		%

1 Assuming a 21% tax rate

(dollars in thousands, except share and per share data)	Three Months Ended										Six Months Ended
	June 30, 2021		March 31, 2021		December 31, 2020		September 30, 2020		June 30, 2020		June 30, 2021		June 30, 2020
Total Revenue- GAAP	$	30,569	$	28,900	$	31,522	$	28,727	$	19,399	$	59,469	$	40,628
Adjustments:
Gain on sale of premises and equipment	(2,523)		—		—		—		—		(2,523)		—
Adjusted revenue	$	28,046	$	28,900	$	31,522	$	28,727	$	19,399	$	56,946	$	40,628
Income before income taxes - GAAP	$	15,473	$	12,307	$	14,145	$	9,806	$	3,664	$	27,780	$	9,946
Adjustments:
Gain on sale of premises and equipment	(2,523)		—		—		—		—		(2,523)		—
Adjusted income before income taxes	$	12,950	$	12,307	$	14,145	$	9,806	$	3,664	$	25,257	$	9,946
Income tax provision (benefit) - GAAP	$	2,377	$	1,857	$	3,055	$	1,395	$	(268)	$	4,234	$	(5)
Adjustments:
Gain on sale of premises and equipment	(530)		—		—		—		—		(530)		—
Adjusted income tax provision (benefit)	$	1,847	$	1,857	$	3,055	$	1,395	$	(268)	$	3,704	$	(5)

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Net income - GAAP	$	13,096		$	10,450		$	11,090		$	8,411		$	3,932		$	23,546		$	9,951
Adjustments:
Gain on sale of premises and equipment	$	(1,993)		—			—			—			—			$	(1,993)		—
Adjusted net income	$	11,103		$	10,450		$	11,090		$	8,411		$	3,932		$	21,553		$	9,951
Diluted average common shares outstanding	9,981,422			9,963,036			9,914,022			9,773,224			9,768,227			9,970,147			9,802,427
Diluted earnings per share - GAAP	$	1.31		$	1.05		$	1.12		$	0.86		$	0.40		$	2.36		$	1.02
Adjustments:
Effect of gain on sale of premises and equipment	(0.20)			—			—			—			—			(0.20)			—
Adjusted diluted earnings per share	$	1.11		$	1.05		$	1.12		$	0.86		$	0.40		$	2.16		$	1.02
Return on average assets	1.25		%	1.02		%	1.02		%	0.78		%	0.37		%	1.13		%	0.47		%
Effect of gain on sale of premises and equipment	(0.19)		%	0.00		%	0.00		%	0.00		%	0.00		%	(0.09)		%	0.00		%
Adjusted return on average assets	1.06		%	1.02		%	1.02		%	0.78		%	0.37		%	1.04		%	0.47		%
Return on average shareholders' equity	14.88		%	12.61		%	13.64		%	10.67		%	5.15		%	13.78		%	6.48		%
Effect of gain on sale of premises and equipment	(2.26)		%	0.00		%	0.00		%	0.00		%	0.00		%	(1.16)		%	0.00		%
Adjusted return on average shareholders' equity	12.62		%	12.61		%	13.64		%	10.67		%	5.15		%	12.62		%	6.48		%
Return on average tangible common equity	15.09		%	12.79		%	13.84		%	10.83		%	5.23		%	13.97		%	6.58		%
Effect of gain on sale of premises and equipment	(2.30)		%	0.00		%	0.00		%	0.00		%	0.00		%	(1.18)		%	0.00		%
Adjusted return on average tangible common equity	12.79		%	12.79		%	13.84		%	10.83		%	5.23		%	12.79		%	6.58		%
Effective income tax rate	15.4		%	15.1		%	21.6		%	14.2		%	(7.3)		%	15.2		%	(0.1)		%
Effect of gain on sale of premises and equipment	(1.1)		%	0.0		%	0.0		%	0.0		%	0.0		%	(0.5)		%	0.0		%
Adjusted effective income tax rate	14.3		%	15.1		%	21.6		%	14.2		%	(7.3)		%	14.7		%	(0.1)		%

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, 2020.

Recent Accounting Pronouncements

Refer to Note 15 to the condensed consolidated financial statements.

61

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 June 2020, the Company terminated all fair value hedging instruments associated with loans. At June 30, 2021 and December 31, 2020, the Company had interest rate swaps with notional amounts of $260.0 million and $298.2 million, respectively. Additionally, we enter into forward contracts related to our mortgage banking business to hedge the exposures we have from commitments to extend new residential mortgage loans to our customers and from our mortgage loans held-for-sale. At June 30, 2021 and December 31, 2020, the Company had commitments to sell residential real estate loans of $46.8 million and $107.5 million, respectively. These contracts mature in less than one year. Refer to Note 13 to the condensed consolidated financial statements for additional information about derivative financial instruments.

62

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 the Company’s 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. The Company seeks to achieve consistent growth in net interest income and equity while managing volatility arising from shifts in market interest rates.

The Company monitors its 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. The Company uses 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. The Company continually models its NII and EVE positions with various interest rate scenarios and assumptions of future balance sheet composition. The Company utilizes implied forward rates as its base case scenario which reflects market expectations for rate increases over the next 24 months. Presented below is the estimated impact on the Company’s NII and EVE position as of June 30, 2021, 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 -25 Basis Points		Base Implied Forward Curve		Implied Forward Curve +100 Basis Points		Implied Forward Curve +200 Basis Points
NII - Year 1	0.52	%	N/A		(2.77)	%	(7.00)	%
NII - Year 2	4.92	%	2.69	%	(0.01)	%	(5.53)	%
EVE	1.72	%	N/A		(7.10)	%	(16.58)	%

To supplement the instantaneous rate shocks required by regulatory guidance, the Company also calculates its 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 June 30, 2021, assuming a static balance sheet and gradual parallel shifts in interest rates over a twelve month period:

	% Change from Base Case for Gradual Parallel Changes in Rates
	Implied Forward Curve -25 Basis Points		Base Implied Forward Curve		Implied Forward Curve +100 Basis Points		Implied Forward Curve +200 Basis Points
NII - Year 1	(0.10)	%	N/A		(0.54)	%	(2.07)	%
NII - Year 2	4.45	%	2.69	%	0.27	%	(4.76)	%
EVE	1.48	%	N/A		(7.00)	%	(16.10)	%

63

The NII and EVE figures presented in both tables above are reflective of a static balance sheet, and do not incorporate either balance sheet growth 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 SBA, construction or C&I lending

•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 liability 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, the principal executive and principal financial officers concluded that the disclosure controls and procedures were effective at a reasonable assurance level as of June 30, 2021.

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 June 30, 2021 that has materially affected, or is reasonably likely to materially affect, its internal control over financial reporting.

64

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, 2020.

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.	Description	Method 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	Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer	Filed Electronically
31.2	Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer	Filed Electronically
32.1	Section 1350 Certifications	Filed Electronically
101	Inline XBRL Instance Document (does not appear in the Interactive Data File because XBRL tags are embedded within the Inline XBRL document)	Filed Electronically
101.SCH	Inline XBRL Taxonomy Extension Schema	Filed Electronically
101.CAL	Inline XBRL Taxonomy Extension Calculation Linkbase	Filed Electronically
101.DEF	Inline XBRL Taxonomy Extension Definition Linkbase	Filed Electronically
101.LAB	Inline XBRL Taxonomy Extension Label Linkbase	Filed Electronically
101.PRE	Inline XBRL Taxonomy Extension Presentation Linkbase	Filed Electronically
104	Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)	Filed Electronically

65

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
8/9/2021	By	/s/ David B. Becker
		David B. Becker, Chairman and Chief Executive Officer (on behalf of Registrant)
8/9/2021	By	/s/ Kenneth J. Lovik
		Kenneth J. Lovik, Executive Vice President and Chief Financial Officer (principal financial officer)

66

EX-31.1

Exhibit 31.1

Certification by the Chief Executive Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, David B. Becker, certify that:

1.I have reviewed this Quarterly Report on Form 10-Q of First Internet Bancorp;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a.Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b.Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external reporting purposes in accordance with generally accepted accounting principles;

c.Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d.Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5.The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent function):

a.All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

b.Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date:	August 9, 2021
		/s/ David B. Becker
		David B. Becker, Chief Executive Officer

EX-31.2

Exhibit 31.2

Certification by the Chief Financial Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, Kenneth J. Lovik, certify that:

1.I have reviewed this Quarterly Report on Form 10-Q of First Internet Bancorp;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a.Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b.Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external reporting purposes in accordance with generally accepted accounting principles;

c.Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d.Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5.The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent function):

a.All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

b.Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date:	August 9, 2021
		/s/ Kenneth J. Lovik
		Kenneth J. Lovik, Chief Financial Officer

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of First Internet Bancorp (the “Company") on Form 10-Q for the period ended June 30, 2021 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), each of the undersigned certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:

(1)The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ David B. Becker

David B. Becker

Chief Executive Officer

August 9, 2021

/s/ Kenneth J. Lovik

Kenneth J. Lovik

Chief Financial Officer

August 9, 2021

XML

Cover - shares	6 Months Ended
	Jun. 30, 2021	Aug. 06, 2021
Class of Stock [Line Items]
Document Type	10-Q
Document Quarterly Report	true
Document Period End Date	Jun. 30, 2021
Document Transition Report	false
Entity File Number	001-35750
Entity Registrant Name	First Internet Bancorp
Entity Incorporation, State or Country Code	IN
Entity Tax Identification Number	20-3489991
Entity Address, Address Line One	11201 USA Parkway
Entity Address, City or Town	Fishers
Entity Address, State or Province	IN
Entity Address, Postal Zip Code	46037
City Area Code	317
Local Phone Number	532-7900
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Accelerated Filer
Entity Small Business	true
Entity Emerging Growth Company	false
Entity Shell Company	false
Entity Common Stock, Shares Outstanding		9,854,153
Document Fiscal Period Focus	Q2
Document Fiscal Year Focus	2021
Amendment Flag	false
Entity Central Index Key	0001562463
Current Fiscal Year End Date	--12-31
Common Stock
Class of Stock [Line Items]
Title of 12(b) Security	Common Stock, without par value
Trading Symbol	INBK
Security Exchange Name	NASDAQ
6.0% Fixed to Floating Subordinated Notes due 2026
Class of Stock [Line Items]
Title of 12(b) Security	6.0% Fixed to Floating Subordinated Notes due 2026
Trading Symbol	INBKL
Security Exchange Name	NASDAQ
6.0% Fixed to Floating Subordinated Notes due 2029
Class of Stock [Line Items]
Title of 12(b) Security	6.0% Fixed to Floating Subordinated Notes due 2029
Trading Symbol	INBKZ
Security Exchange Name	NASDAQ

XML

Premises and Equipment

6 Months Ended

Jun. 30, 2021

Property, Plant and Equipment [Abstract]

Premises and Equipment

Premises and Equipment

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

(in thousands)	June 30, 2021		December 31, 2020
Land	$	—	$	2,500
Right of use leased asset	304		819
Construction in process	42,106		28,754
Building and improvements	439		5,819
Furniture and equipment	7,636		10,671
Less: accumulated depreciation	(6,236)		(10,973)
Total	$	44,249	$	37,590

In December 2018, the Bank’s subsidiary, SPF15, Inc., entered into a project agreement with the City of Fishers, Indiana (the “City”), and its Redevelopment Commission, among others, to construct an office building to include the Company’s future headquarters and associated parking garage on property the Bank had acquired in 2018. Construction began on the project in the fourth quarter 2019 and is expected to be substantially complete in the fourth quarter 2021. The Company anticipates fully occupying the new headquarters building by the end of 2021.

On February 16, 2021, the Company entered into an agreement to sell its current headquarters and certain equipment currently located in the building to a third party. The sale was completed on April 16, 2021 and as a part of the sale agreement, the buyer agreed to lease the office building back to the Company through December 31, 2021, with an option to extend up to 90 days beyond that date. The sale price was $8.9 million in cash paid in full at closing. The Company is expected to continue to lease substantially all of the office space for the duration of the primary leaseback period.

XML

Goodwill

6 Months Ended

Jun. 30, 2021

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill

Goodwill        

As of June 30, 2021 and December 31, 2020, the carrying amount of goodwill was $4.7 million. There have been no changes in the carrying amount of goodwill for the three and six months ended June 30, 2021.  Goodwill is assessed for impairment annually as of August 31, or more frequently if events occur or circumstances change that indicate an impairment may exist. When assessing goodwill for impairment, first, a qualitative assessment can be made to determine whether it is more likely than not that the estimated fair value of a reporting unit is less than its estimated carrying value. If the results of the qualitative assessment are not conclusive, a quantitative goodwill test is performed. Alternatively, a quantitative goodwill test can be performed without performing a qualitative assessment.

Goodwill was assessed for impairment using a quantitative test performed as of August 31, 2020. The estimated fair value of the reporting unit exceeded the net carrying value, and therefore no goodwill impairment existed as of that date.

XML

Subordinated Debt

6 Months Ended

Jun. 30, 2021

Debt Disclosure [Abstract]

Subordinated Debt

Subordinated Debt

In October 2015, the Company entered into a term loan in the principal amount of $10.0 million, evidenced by a term note due 2025 (the “2025 Note”). The 2025 Note had a fixed interest rate of 6.4375% per year, payable quarterly, and was scheduled to mature on October 1, 2025. The 2025 Note was an unsecured subordinated obligation of the Company and was eligible to be repaid, without penalty, on any interest payment date on or after October 15, 2020. The 2025 Note was intended to qualify as Tier 2 capital under regulatory guidelines. The Company redeemed the 2025 Note on January 4, 2021.

In September 2016, the Company issued $25.0 million aggregate principal amount of 6.0% Fixed-to-Floating Rate Subordinated Notes due 2026 (the “2026 Notes”) in a public offering. The 2026 Notes initially bear a fixed interest rate of 6.0% per year to, but excluding September 30, 2021, and thereafter a floating rate equal to the then-current three-month LIBOR rate plus 485 basis points. All interest on the 2026 Notes is payable quarterly. The 2026 Notes are scheduled to mature on September 30, 2026. The 2026 Notes are unsecured subordinated obligations of the Company and may be repaid, without penalty, on any interest payment date on or after September 30, 2021. The 2026 Notes are intended to qualify as Tier 2 capital under regulatory guidelines.

In June 2019, the Company issued $37.0 million aggregate principal amount of 6.0% Fixed-to-Floating Rate Subordinated Notes due 2029 (the “2029 Notes”) in a public offering. The 2029 Notes initially bear a fixed interest rate of 6.0% per year to, but excluding, June 30, 2024, and thereafter a floating rate equal to the then-current benchmark rate (initially three-month LIBOR rate) plus 411 basis points. All interest on the 2029 Notes is payable quarterly. 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, without penalty, on any interest payment date on or after June 30, 2024. The 2029 Notes are intended to qualify as Tier 2 capital under regulatory guidelines.

In October 2020, the Company, entered into a term loan in the principal amount of $10.0 million, evidenced by term notes due 2030 (the “2030 Notes”). The 2030 Notes initially bears a fixed interest rate of 6.0% per year to, but excluding, November 1, 2025 and thereafter at a floating rate equal to the then-current benchmark rate (initially three-month Term SOFR plus 5.795%). The 2030 Notes are an unsecured subordinated obligation of the Company and may be repaid, without penalty, on any interest payment date on or after November 1, 2025. The 2030 Notes are intended to qualify as Tier 2 capital under regulatory guidelines. The Company used the net proceeds from the issuance of the 2030 Notes to redeem the 2025 Note as discussed above.

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

	June 30, 2021				December 31, 2020
(in thousands)	Principal		Unamortized Debt Issuance Costs		Principal		Unamortized Debt Issuance Costs
2025 Note	—		—		10,000		(114)
2026 Notes	25,000		(652)		25,000		(715)
2029 Notes	37,000		(1,258)		37,000		(1,337)
2030 Notes	$	10,000	$	(219)	$	10,000	$	(231)
Total	$	72,000	$	(2,129)	$	82,000	$	(2,397)

XML

Benefit Plans

6 Months Ended

Jun. 30, 2021

Retirement Benefits [Abstract]

Benefit Plans

Benefit Plans

Employment Agreement

The Company is party to an employment agreement with its Chief Executive Officer that provides for an annual base salary and an annual bonus, if any, as determined from time to time by the Compensation Committee of our Board of Directors. The annual bonus is to be determined with reference to the achievement of annual performance objectives established by the Compensation Committee for the Chief Executive Officer and other senior officers. The agreement also provides that the Chief Executive Officer may be awarded additional compensation, benefits, or consideration as the Compensation Committee may determine.

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

2013 Equity Incentive Plan

The 2013 Equity Incentive Plan (the “2013 Plan”) authorizes the issuance of 750,000 shares of the Company’s common stock in the form of equity-based awards to employees, directors, and other eligible persons.  Under the terms of the 2013 Plan, the pool of shares available for issuance may be used for available types of equity awards under the 2013 Plan, which includes stock options, stock appreciation rights, restricted stock awards, stock unit awards, and other share-based awards.  All employees, consultants, and advisors of the Company or any subsidiary, as well as all non-employee directors of the Company, are eligible to receive awards under the 2013 Plan.

The Company recorded $0.6 million and $1.3 million of share-based compensation expense for the three and six months ended June 30, 2021, respectively, related to awards made under the 2013 Plan. The Company recorded $0.5 million and $1.1 million of share-based compensation expense for the three and six months ended June 30, 2020, respectively, related to awards made under the 2013 Plan.

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

	Restricted Stock Units	Weighted-Average Grant Date Fair Value Per Share		Restricted Stock Awards	Weighted-Average Grant Date Fair Value Per Share		Deferred Stock Units	Weighted-Average Grant Date Fair Value Per Share
Nonvested at December 31, 2020	112,985	$	27.76	—	$	—	—	$	—
Granted	60,111	30.42		13,878	30.27		4	32.53
Cancelled/Forfeited	—	—		(1,057)	30.13		—	—
Vested	(35,745)	30.12		(6,479)	30.20		(4)	32.53
Nonvested at June 30, 2021	137,351	$	28.32	6,342	$	30.36	—	$	—

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

Directors Deferred Stock Plan

Until January 1, 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 Directors Deferred Stock 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 six months ended June 30, 2021.

	Deferred Stock Rights
Outstanding, beginning of period	83,835
Granted	350
Exercised	—
Outstanding, end of period	84,185

All deferred stock rights granted during the 2021 period were additional rights issued in lieu of cash dividends payable on outstanding deferred stock rights.

XML

Derivative Financial Instruments

6 Months Ended

Jun. 30, 2021

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivative Financial Instruments

Derivative Financial Instruments

The Company uses derivative financial instruments 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. Additionally, the Company enters into forward contracts for the future delivery of mortgage loans to third-party investors and enters into IRLCs with potential borrowers to fund specific mortgage loans that will be sold into the secondary market. The forward contracts are entered into in order to economically hedge the effect of changes in interest rates resulting from the Company’s commitment to fund the loans.

The Company had various interest rate swap agreements designated and qualifying as accounting hedges during the reported periods. Designating an interest rate swap as an accounting hedge allows the Company to recognize gains and losses, in the condensed consolidated statements of income within the same period that the hedged item affects earnings. The Company includes the gain or loss on the hedged items in the same line item as the offsetting loss or gain on the related interest rate swaps. For derivative instruments that are designated and qualify as cash flow hedges, any gains or losses related to changes in fair value are recorded in accumulated other comprehensive loss, net of tax. The fair value of interest rate swaps with a positive fair value are reported in accrued income and other assets in the condensed consolidated balance sheets, while interest rate swaps with a negative fair value are reported in accrued expenses and other liabilities in the condensed consolidated balance sheets.

The IRLCs and forward contracts are not designated as accounting hedges and are recorded at fair value with changes in fair value reflected in noninterest income on the condensed consolidated statements of income. The fair value of derivative instruments with a positive fair value are reported in accrued income and other assets in the condensed consolidated balance sheets, while derivative instruments with a negative fair value are reported in accrued expenses and other liabilities in the condensed consolidated balance sheets.

The following table presents amounts that were recorded on the condensed consolidated balance sheets related to cumulative basis adjustments for interest rate swap derivatives designated as fair value accounting hedges as of June 30, 2021 and December 31, 2020.  

(in thousands)	Carrying amount of the hedged asset		Cumulative amount of fair value hedging adjustment included in the carrying amount of the hedged assets
Line item in the condensed consolidated balance sheets in which the hedged item is included	June 30, 2021	December 31, 2020	June 30, 2021	December 31, 2020
Securities available-for-sale (1)	77,363	124,210	2,834	6,064

(1) These amounts include the amortized cost basis of closed portfolios used to designate hedging relationships in which the hedged item is the last layer expected to be remaining at the end of the hedging relationship. The designated hedged items were $50.0 million and $88.2 million, at June 30, 2021 and December 31, 2020.

The following tables present a summary of interest rate swap derivatives designated as fair value accounting hedges of fixed-rate receivables used in the Company’s asset/liability management activities at June 30, 2021 and December 31, 2020, identified by the underlying interest rate-sensitive instruments.

(dollars in thousands) June 30, 2021	Notional Value		Weighted- Average Remaining Maturity (years)			Weighted-Average Ratio
Instruments Associated With				Fair Value		Receive	Pay
Securities available-for-sale	$	50,000	3.3	$	(2,835)	3-month LIBOR	2.33	%
Total at June 30, 2021	$	50,000	3.3	$	(2,835)	3-month LIBOR	2.33	%

In March 2021, the Company terminated fair value hedging relationships with a notional value of $38.2 million associated with agency mortgage-backed securities available-for-sale, which resulted in swap termination payments to counterparties totaling $1.9 million. The corresponding securities fair value hedging adjustment as of the date of termination is being amortized over the remaining lives of the designated securities.

(dollars in thousands) December 31, 2020	Notional Value		Weighted- Average Remaining Maturity (years)			Weighted-Average Ratio
Instruments Associated With				Fair Value		Receive	Pay
Securities available-for-sale	88,200		3.1	(6,072)		3-month LIBOR	2.54	%
Total at December 31, 2020	$	88,200	3.1	$	(6,072)	3-month LIBOR	2.54	%

In June 2020, the Company terminated all fair value hedging relationships associated with loans, which resulted in swap termination payments to counterparties totaling $46.1 million. The corresponding loan fair value hedging adjustment as of the date of termination is being amortized over the remaining lives of the designated loans, which have a weighted average term to maturity of 12.61 years as of June 30, 2021.

The following tables present a summary of interest rate swap derivatives designated as cash flow accounting hedges of variable-rate liabilities used in the Company’s asset/liability management activities at June 30, 2021 and December 31, 2020.

(dollars in thousands) June 30, 2021	Notional		Weighted- Average Remaining Maturity			Weighted-Average Ratio
Cash Flow Hedges	Value		(years)	Fair Value		Receive	Pay
Interest rate swaps	$	110,000	5.6	$	(11,349)	3-month LIBOR	2.88	%
Interest rate swaps	100,000		2.5	(6,103)		1-month LIBOR	2.88	%

(dollars in thousands) December 31, 2020	Notional		Weighted- Average Remaining Maturity			Weighted-Average Ratio
Cash Flow Hedges	Value		(years)	Fair Value		Receive	Pay
Interest rate swaps	$	110,000	6.1	$	(15,727)	3-month LIBOR	2.88	%
Interest rate swaps	100,000		3.0	(7,951)		1-month LIBOR	2.88	%

These derivative financial instruments were entered into for the purpose of managing the interest rate risk of certain assets and liabilities. The Company pledged $21.0 million and $30.6 million of cash collateral to counterparties as security for its obligations related to these interest rate swap transactions at June 30, 2021 and December 31, 2020, respectively. Collateral posted and received is dependent on the market valuation of the underlying hedges.

The following table presents the notional amount and fair value of interest rate swaps, IRLCs and forward contracts utilized by the Company at June 30, 2021 and December 31, 2020.

	June 30, 2021				December 31, 2020
(in thousands)	Notional Amount		Fair Value		Notional Amount		Fair Value
Asset Derivatives
Derivatives not designated as hedging instruments
IRLCs	$	47,493	$	818	$	108,095	$	3,361
Total contracts	$	47,493	$	818	$	108,095	$	3,361
Liability Derivatives
Derivatives designated as hedging instruments
Interest rate swaps associated with loans	$	—	$	—	$	—	$	—
Interest rate swaps associated with securities available-for-sale	50,000		(2,835)		88,200		(6,072)
Interest rate swaps associated with liabilities	210,000		(17,451)		210,000		(23,678)
Derivatives not designated as hedging instruments
Forward contracts	46,750		(17)		107,500		(640)
Total contracts	$	306,750	$	(20,303)	$	405,700	$	(30,390)

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. Fair values of IRLCs and forward contracts were estimated using changes in mortgage interest rates from the date the Company entered into the IRLC and the balance sheet date.

The following table presents the effects of the Company’s cash flow hedge relationships on the condensed consolidated statements of comprehensive income during the three and six months ended June 30, 2021 and 2020.

	Amount of Gain (Loss )Recognized in Other Comprehensive Income Loss in The Three Months Ended				Amount of Loss Recognized in Other Comprehensive Income Gain (Loss) in The Six Months Ended
(in thousands)	June 30, 2021		June 30, 2020		June 30, 2021		June 30, 2020
Interest rate swap agreements	$	(54)	$	(509)	$	6,226	$	(13,967)

The following table summarizes the periodic changes in the fair value of derivatives not designated as hedging instruments on the condensed consolidated statements of income for the three and six months ended June 30, 2021 and 2020.

	Amount of Gain / (Loss) Recognized in the Three Months Ended				Amount of Gain / (Loss) Recognized in the Six Months Ended
(in thousands)	June 30, 2021		June 30, 2020		June 30, 2021		June 30, 2020
Asset Derivatives
Derivatives not designated as hedging instruments
IRLCs	$	(292)	$	(1,781)	$	(2,541)	$	(628)
Liability Derivatives
Derivatives not designated as hedging instruments
IRLCs	—		—		—		—
Forward contracts	$	(738)	$	2,281	$	623	$	136

The following table presents the effects of the Company’s interest rate swap agreements on the condensed consolidated statements of income during the three and six months ended June 30, 2021 and 2020.

(in thousands) Line item in the condensed consolidated statements of income	Three Months Ended				Six Months Ended
	June 30, 2021		June 30, 2020		June 30, 2021		June 30, 2020
Interest income
Loans	$	—	$	(1,221)	$	—	$	(2,445)
Securities - taxable	—		(159)		(253)		(250)
Securities - non-taxable	(271)		(164)		(537)		(230)
Total interest income	(271)		(1,544)		(790)		(2,925)
Interest expense
Deposits	692		593		1,370		899
Other borrowed funds	753		589		1,483		911
Total interest expense	1,445		1,182		2,853		1,810
Net interest income	$	(1,716)	$	(2,726)	$	(3,643)	$	(4,735)

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Condensed Consolidated Balance Sheets - USD ($)	Jun. 30, 2021	Dec. 31, 2020
Assets
Cash and due from banks	$ 4,347,000	$ 7,367,000
Interest-bearing deposits	324,450,000	412,439,000
Total cash and cash equivalents	328,797,000	419,806,000
Securities available-for-sale, at fair value (amortized cost of $663,693 and $497,004 in 2021 and 2020, respectively)	663,519,000	497,628,000
Securities held-to-maturity, at amortized cost (fair value of $68,058 and $69,452 in 2021 and 2020, respectively)	65,659,000	68,223,000
Loans held-for-sale (includes $16,870 and $26,341 at fair value in 2021 and 2020, respectively)	27,587,000	39,584,000
Loans	2,957,608,000	3,059,231,000
Allowance for loan losses	(28,066,000)	(29,484,000)
Net loans	2,929,542,000	3,029,747,000
Accrued interest receivable	16,345,000	17,416,000
Federal Home Loan Bank of Indianapolis stock	25,650,000	25,650,000
Cash surrender value of bank-owned life insurance	38,421,000	37,952,000
Premises and equipment, net	44,249,000	37,590,000
Goodwill	4,687,000	4,687,000
Servicing asset, at fair value	4,120,000	3,569,000
Other real estate owned	1,300,000	0
Accrued income and other assets	54,766,000	64,304,000
Total assets	4,204,642,000	4,246,156,000
Liabilities and Shareholders’ Equity
Noninterest-bearing deposits	113,996,000	96,753,000
Interest-bearing deposits	3,092,151,000	3,174,132,000
Total deposits	3,206,147,000	3,270,885,000
Advances from Federal Home Loan Bank	514,919,000	514,916,000
Subordinated debt, net of unamortized debt issuance costs of $2,129 and $2,397 in 2021 and 2020, respectively	69,871,000	79,603,000
Accrued interest payable	1,132,000	1,439,000
Accrued expenses and other liabilities	53,932,000	48,369,000
Total liabilities	3,846,001,000	3,915,212,000
Commitments and Contingencies
Shareholders’ Equity
Preferred stock, no par value; 4,913,779 shares authorized; issued and outstanding - none	0	0
Retained earnings	149,066,000	126,732,000
Accumulated other comprehensive loss	(12,911,000)	(17,196,000)
Total shareholders’ equity	358,641,000	330,944,000
Total liabilities and shareholders’ equity	4,204,642,000	4,246,156,000
Voting Common Stock
Shareholders’ Equity
Common stock	222,486,000	221,408,000
Nonvoting Common Stock
Shareholders’ Equity
Common stock	$ 0	$ 0

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Condensed Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Thousands	Jun. 30, 2021	Dec. 31, 2020
Amortized cost, at fair value	$ 663,693	$ 497,004
Held-to-maturity, at fair value	68,058	69,452
Loans held-for-sale, at fair value	16,870	26,341
Unamortized discounts and debt issuance costs	$ 2,129	$ 2,397
Preferred stock, par value (in dollars per share)	$ 0	$ 0
Preferred stock, shares authorized (in shares)	4,913,779	4,913,779
Preferred stock, shares issued (in shares)	0	0
Preferred stock, share outstanding (in shares)	0	0
Voting Common Stock
Common stock, par value (in dollars per share)	$ 0	$ 0
Common stock, shares authorized (in shares)	45,000,000	45,000,000
Common stock, shares issued (in shares)	9,854,153	9,800,569
Common stock, shares outstanding (in shares)	9,854,153	9,800,569
Nonvoting Common Stock
Common stock, par value (in dollars per share)	$ 0	$ 0
Common stock, shares authorized (in shares)	86,221	86,221
Common stock, shares issued (in shares)	0	0
Common stock, shares outstanding (in shares)	0	0

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Condensed Consolidated Statements of Income (Unaudited) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2021	Jun. 30, 2020	Jun. 30, 2021	Jun. 30, 2020
Interest Income
Loans	$ 30,835,000	$ 29,730,000	$ 61,720,000	$ 60,138,000
Securities – taxable	1,921,000	3,276,000	3,700,000	6,895,000
Securities – non-taxable	259,000	457,000	540,000	1,029,000
Other earning assets	362,000	759,000	697,000	2,404,000
Total interest income	33,377,000	34,222,000	66,657,000	70,466,000
Interest Expense
Deposits	7,705,000	15,763,000	16,333,000	32,971,000
Other borrowed funds	4,065,000	4,033,000	8,192,000	8,051,000
Total interest expense	11,770,000	19,796,000	24,525,000	41,022,000
Net Interest Income	21,607,000	14,426,000	42,132,000	29,444,000
Provision for Loan Losses	21,000	2,491,000	1,297,000	3,952,000
Net Interest Income After Provision for Loan Losses	21,586,000	11,935,000	40,835,000	25,492,000
Noninterest Income
Gain on sale of loans	3,019,000	762,000	4,742,000	2,563,000
Gain on sale of securities	0	0	0	41,000
Gain on sale of premises and equipment	2,523,000	0	2,523,000	0
Other	249,000	456,000	618,000	873,000
Total noninterest income	8,962,000	4,973,000	17,337,000	11,184,000
Noninterest Expense
Salaries and employee benefits	9,232,000	7,789,000	18,724,000	15,563,000
Marketing, advertising and promotion	872,000	411,000	1,552,000	786,000
Consulting and professional services	1,078,000	932,000	2,064,000	2,109,000
Data processing	382,000	339,000	844,000	714,000
Loan expenses	541,000	399,000	1,075,000	998,000
Premises and equipment	1,587,000	1,602,000	3,188,000	3,227,000
Deposit insurance premium	275,000	435,000	700,000	920,000
Other	1,108,000	1,337,000	2,245,000	2,413,000
Total noninterest expense	15,075,000	13,244,000	30,392,000	26,730,000
Income Before Income Taxes	15,473,000	3,664,000	27,780,000	9,946,000
Income Tax Provision (Benefit)	2,377,000	(268,000)	4,234,000	(5,000)
Net Income	$ 13,096,000	$ 3,932,000	$ 23,546,000	$ 9,951,000
Income Per Share of Common Stock
Basic (in dollars per share)	$ 1.32	$ 0.40	$ 2.37	$ 1.02
Diluted (in dollars per share)	$ 1.31	$ 0.40	$ 2.36	$ 1.02
Weighted-Average Number of Common Shares Outstanding
Basic (in shares)	9,932,761,000	9,768,227	9,916,087,000	9,798,528
Diluted (in shares)	9,981,422,000	9,768,227	9,970,147,000	9,802,427
Dividends Declared Per Share (in dollars per share)	$ 0.06	$ 0.06	$ 0.12	$ 0.12
Service charges and fees
Noninterest Income
Noninterest income	$ 280,000	$ 182,000	$ 546,000	$ 394,000
Loan servicing revenue
Noninterest Income
Noninterest income	457,000	255,000	879,000	506,000
Loan servicing asset revaluation
Noninterest Income
Noninterest income	(240,000)	(90,000)	(395,000)	(269,000)
Mortgage banking activities
Noninterest Income
Noninterest income	$ 2,674,000	$ 3,408,000	$ 8,424,000	$ 7,076,000

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Condensed Consolidated Statements of Comprehensive Income (Unaudited) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2021	Jun. 30, 2020	Jun. 30, 2021	Jun. 30, 2020
Statement of Comprehensive Income [Abstract]
Net income	$ 13,096	$ 3,932	$ 23,546	$ 9,951
Net unrealized holding gains (losses) on securities available-for-sale recorded within other comprehensive income (loss) before income tax	1,388	(1,498)	(807)	4,801
Reclassification adjustment for gains realized	0	0	0	(41)
Net unrealized holding (losses) gains on cash flow hedging derivatives recorded within other comprehensive income (loss) before income tax	(54)	(509)	6,226	(13,967)
Other comprehensive income (loss) before income tax	1,334	(2,007)	5,419	(9,207)
Income tax provision (benefit)	325	(735)	1,134	(2,260)
Other comprehensive income (loss)	1,009	(1,272)	4,285	(6,947)
Comprehensive income	$ 14,105	$ 2,660	$ 27,831	$ 3,004

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Condensed Consolidated Statements of Changes in Shareholders' Equity (Unaudited) - USD ($) $ in Thousands	Total	Common Stock Voting and Nonvoting Common Stock	Retained Earnings	Accumulated Other Comprehensive Loss
Balance, beginning of period at Dec. 31, 2019	$ 304,913	$ 219,423	$ 99,681	$ (14,191)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income	9,951		9,951
Other comprehensive income (loss)	(6,947)			(6,947)
Dividends declared	(1,201)		(1,201)
Recognition of the fair value of share-based compensation	1,073	1,073
Deferred stock rights and restricted stock units issued in lieu of cash dividends payable on outstanding deferred stock rights and restricted stock units	15	15
Common stock redeemed for the net settlement of share-based awards	(93)	(93)
Balance, end of period at Jun. 30, 2020	307,711	220,418	108,431	(21,138)
Balance, beginning of period at Mar. 31, 2020	305,127	219,893	105,100	(19,866)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income	3,932		3,932
Other comprehensive income (loss)	(1,272)			(1,272)
Dividends declared	(601)		(601)
Recognition of the fair value of share-based compensation	517	517
Deferred stock rights and restricted stock units issued in lieu of cash dividends payable on outstanding deferred stock rights and restricted stock units	8	8
Common stock redeemed for the net settlement of share-based awards	0	0
Balance, end of period at Jun. 30, 2020	307,711	220,418	108,431	(21,138)
Balance, beginning of period at Dec. 31, 2020	330,944	221,408	126,732	(17,196)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income	23,546		23,546
Other comprehensive income (loss)	4,285			4,285
Dividends declared	(1,212)		(1,212)
Recognition of the fair value of share-based compensation	1,262	1,262
Deferred stock rights and restricted stock units issued in lieu of cash dividends payable on outstanding deferred stock rights and restricted stock units	11	11
Common stock redeemed for the net settlement of share-based awards	(195)	(195)
Balance, end of period at Jun. 30, 2021	358,641	222,486	149,066	(12,911)
Balance, beginning of period at Mar. 31, 2021	344,566	221,911	136,575	(13,920)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income	13,096		13,096
Other comprehensive income (loss)	1,009			1,009
Dividends declared	(605)		(605)
Recognition of the fair value of share-based compensation	570	570
Deferred stock rights and restricted stock units issued in lieu of cash dividends payable on outstanding deferred stock rights and restricted stock units	5	5
Common stock redeemed for the net settlement of share-based awards	0	0
Balance, end of period at Jun. 30, 2021	$ 358,641	$ 222,486	$ 149,066	$ (12,911)

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Consolidated Statements of Shareholders' Equity (Unaudited) (Parenthetical) - $ / shares	3 Months Ended		6 Months Ended
	Jun. 30, 2021	Jun. 30, 2020	Jun. 30, 2021	Jun. 30, 2020
Statement of Stockholders' Equity [Abstract]
Dividends declared (in dollars per share)	$ 0.06	$ 0.06	$ 0.12	$ 0.12

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Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($)	6 Months Ended
	Jun. 30, 2021	Jun. 30, 2020
Operating Activities
Net income	$ 23,546,000	$ 9,951,000
Adjustments to reconcile net income to net cash used in operating activities:
Depreciation and amortization	4,038,000	3,515,000
Increase in cash surrender value of bank-owned life insurance	(469,000)	(472,000)
Provision for loan losses	1,297,000	3,952,000
Share-based compensation expense	1,262,000	1,073,000
Loss on sale of available-for-sale securities	0	(41,000)
Loans originated for sale	(421,012,000)	(427,323,000)
Proceeds from sale of loans	448,093,000	454,737,000
Gain on loans sold	(16,774,000)	(11,069,000)
Decrease in fair value of loans held-for-sale	744,000	939,000
Loss on derivatives	(1,384,000)	377,000
Settlement of derivatives	(1,859,000)	(46,109,000)
Loan servicing asset revaluation	395,000	(41,000)
Amortization of operating lease right-of-use assets	0	360,000
Net change in accrued income and other assets	1,631,000	(2,221,000)
Net change in accrued expenses and other liabilities	1,984,000	(1,840,000)
Net cash provided by (used in) operating activities	41,492,000	(14,212,000)
Investing Activities
Net loan activity, excluding purchases	120,219,000	(18,907,000)
Maturities and calls of securities available-for-sale	94,643,000	74,828,000
Proceeds from sale of securities available-for-sale	0	795,000
Purchase of securities available-for-sale	(247,791,000)	(116,993,000)
Maturities and calls of securities held-to-maturity	2,500,000	0
Purchase of securities held-to-maturity	0	(2,000,000)
Net proceeds from sale of premises and equipment	8,116,000	0
Purchase of premises and equipment	(13,707,000)	(10,580,000)
Loans purchased	(22,611,000)	(172,250,000)
Net proceeds from sale of portfolio loans	0	205,023,000
Other investing activities	2,264,000	0
Net cash used in investing activities	(56,367,000)	(40,084,000)
Financing Activities
Net increase (decrease) in deposits	(64,738,000)	226,826,000
Cash dividends paid	(1,201,000)	(1,179,000)
Repayment of subordinated debt	(10,000,000)	0
Proceeds from advances from Federal Home Loan Bank	110,000,000	220,000,000
Repayment of advances from Federal Home Loan Bank	(110,000,000)	(220,000,000)
Other, net	(195,000)	(93,000)
Net cash (used in) provided by financing activities	(76,134,000)	225,554,000
Net (Decrease) Increase in Cash and Cash Equivalents	(91,009,000)	171,258,000
Cash and Cash Equivalents, Beginning of Period	419,806,000	327,361,000
Cash and Cash Equivalents, End of Period	328,797,000	498,619,000
Supplemental Disclosures
Cash paid during the period for interest	24,832,000	43,716,000
Income Taxes Paid, Net	2,905,000	91,000
Loans transferred to other real estate owned	1,300,000	0
Loans transferred to held-for-sale from portfolio	0	204,258,000
Cash dividends declared, paid in subsequent period	592,000	588,000
Securities purchased during the period, settled in subsequent period	13,590,000	0
Transfer of available-for-sale municipal securities to held-to-maturity municipal securities	$ 0	$ 4,479,000

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Basis of Presentation

6 Months Ended

Jun. 30, 2021

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Basis of Presentation

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 and six months ended June 30, 2021 are not necessarily indicative of the results expected for the year ending December 31, 2021 or any other period. The June 30, 2021 condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes included in the First Internet Bancorp Annual Report on Form 10-K for the year ended December 31, 2020.

The 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 determination of the allowance for loan losses, valuations and impairments of investment securities, valuation of the servicing asset and the accounting for income tax expense are highly dependent upon management’s estimates, judgments, and assumptions, 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.

Certain reclassifications have been made to the 2020 financial statements to conform to the presentation of the 2021 financial statements. These reclassifications had no effect on net income.

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Earnings Per Share

6 Months Ended

Jun. 30, 2021

Earnings Per Share [Abstract]

Earnings Per Share

Earnings Per Share

Earnings per share of common stock are based on the weighted-average number of basic shares and dilutive shares outstanding during the period.

The following is a reconciliation of the weighted-average common shares for the basic and diluted earnings per share computations for the three and six months ended June 30, 2021 and 2020. 

(dollars in thousands, except per share data)	Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020
Basic earnings per share
Net income	$	13,096	$	3,932	$	23,546	$	9,951
Weighted-average common shares	9,932,761		9,768,227		9,916,087		9,798,528
Basic earnings per common share	$	1.32	$	0.40	$	2.37	$	1.02
Diluted earnings per share
Net income	$	13,096	$	3,932	$	23,546	$	9,951
Weighted-average common shares	9,932,761		9,768,227		9,916,087		9,798,528
Dilutive effect of equity compensation	48,661		—		54,060		3,899
Weighted-average common and incremental shares	9,981,422		9,768,227		9,970,147		9,802,427
Diluted earnings per common share (1)	$	1.31	$	0.40	$	2.36	$	1.02

(1) Potential dilutive common shares are excluded from the computation of diluted EPS in the periods where the effect would be antidilutive. Excluded from the computation of diluted EPS were weighted-average antidilutive shares totaling 6 and 3 for the three and six months ended June 30, 2021, respectively, and 79,893 and 29,606 for the three and six months ended June 30, 2020, respectively.

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Securities

6 Months Ended

Jun. 30, 2021

Investments, Debt and Equity Securities [Abstract]

Securities

Securities

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

	June 30, 2021
	Amortized		Gross Unrealized				Fair
(in thousands)	Cost		Gains		Losses		Value
Securities available-for-sale
U.S. Government-sponsored agencies	$	57,984	$	337	$	(1,186)	$	57,135
Municipal securities	77,364		1,229		(155)		78,438
Agency mortgage-backed securities	445,895		2,734		(4,135)		444,494
Private label mortgage-backed securities	29,003		360		—		29,363
Asset-backed securities	5,000		5		—		5,005
Corporate securities	48,447		855		(218)		49,084
Total available-for-sale	$	663,693	$	5,520	$	(5,694)	$	663,519

	June 30, 2021
	Amortized		Gross Unrealized				Fair
(in thousands)	Cost		Gains		Losses		Value
Securities held-to-maturity
Municipal securities	$	14,549	$	824	$	—	$	15,373
Corporate securities	51,110		1,575		—		52,685
Total held-to-maturity	$	65,659	$	2,399	$	—	$	68,058

	December 31, 2020
	Amortized		Gross Unrealized				Fair
(in thousands)	Cost		Gains		Losses		Value
Securities available-for-sale
U.S. Government-sponsored agencies	$	61,765	$	432	$	(1,652)	$	60,545
Municipal securities	82,757		463		(731)		82,489
Agency mortgage-backed securities	241,795		4,591		(2,465)		243,921
Private label mortgage-backed securities	57,268		850		(2)		58,116
Asset-backed securities	5,000		—		(39)		4,961
Corporate securities	48,419		771		(1,594)		47,596
Total available-for-sale	$	497,004	$	7,107	$	(6,483)	$	497,628

	December 31, 2020
	Amortized		Gross Unrealized				Fair
(in thousands)	Cost		Gains		Losses		Value
Securities held-to-maturity
Municipal securities	$	14,571	$	746	$	—	$	15,317
Corporate securities	53,652		610		(127)		54,135
Total held-to-maturity	$	68,223	$	1,356	$	(127)	$	69,452

The carrying value of securities at June 30, 2021 is shown below by their contractual maturity date. 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
(in thousands)	Amortized Cost		Fair Value
Within one year	$	—	$	—
One to five years	29,686		27,234
Five to ten years	72,226		72,380
After ten years	81,883		85,043
	183,795		184,657
Agency mortgage-backed securities	445,895		444,494
Private label mortgage-backed securities	29,003		29,363
Asset-backed securities	5,000		5,005
Total	$	663,693	$	663,519

	Held-to-Maturity
(in thousands)	Amortized Cost		Fair Value
One to five years	$	3,375	$	3,556
Five to ten years	50,096		51,908
After ten years	12,188		12,594
Total	$	65,659	$	68,058

There were no gross gains or losses resulting from sale of available-for-sale securities during the three and six months ended June 30, 2021. There were no gross gains or losses resulting from sale of available-for-sale securities during the three months ended June 30, 2020 and gross gains of less than $0.1 million resulting from sales of available-for-sale securities during the six months ended June 30, 2020.

Certain investments in debt securities are reported in the condensed consolidated financial statements at an amount less than their historical cost. The total fair value of these investments at June 30, 2021 and December 31, 2020 was $451.8 million and $226.5 million, which was approximately 62% and 40%, respectively, of the Company’s AFS and HTM securities portfolios. As of June 30, 2021, the Company’s security portfolio consisted of 448 securities, of which 152 were in an unrealized loss position. The unrealized losses are related to the categories noted below. These declines resulted primarily from fluctuations in market interest rates after purchase. Management believes the declines in fair value for these securities are temporary. Should the impairment of any of these securities become other than temporary, the cost basis of the investment will be reduced, with the resulting loss recognized in net income in the period the other-than-temporary impairment (“OTTI”) is identified.

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 bases of the investments. Because the Company does not intend to sell the investments and it is not likely that the Company will be required to sell the investments before recovery of their amortized cost bases, which may be upon maturity, the Company does not consider those investments to be other-than-temporarily impaired at June 30, 2021.

Agency Mortgage-Backed, Private Label Mortgage-Backed and Asset-Backed Securities

The unrealized losses on the Company’s investments in agency mortgage-backed, private label mortgage-backed and asset-backed securities were caused primarily by interest rate changes. The Company expects to recover the amortized cost bases over the terms of the securities. Because the Company does not intend to sell the investments and it is not likely that the Company will be required to sell the investments before recovery of their amortized cost bases, which may be upon maturity, the Company does not consider those investments to be other-than-temporarily impaired at June 30, 2021.

The following tables show the securities portfolio’s gross unrealized losses and fair value, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position at June 30, 2021 and December 31, 2020.

	June 30, 2021
	Less Than 12 Months				12 Months or Longer				Total
(in thousands)	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
Securities available-for-sale
U.S. Government-sponsored agencies	$	2,969	$	(31)	$	47,281	$	(1,155)	$	50,250	$	(1,186)
Municipal securities	61,658		(155)		—		—		61,658		(155)
Agency mortgage-backed securities	316,123		(3,543)		8,956		(592)		325,079		(4,135)
Corporate securities	4,984		(16)		9,799		(202)		14,783		(218)
Total	$	385,734	$	(3,745)	$	66,036	$	(1,949)	$	451,770	$	(5,694)

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

	December 31, 2020
	Less Than 12 Months				12 Months or Longer				Total
(in thousands)	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
Securities available-for-sale
U.S. Government-sponsored agencies	$	—	$	—	$	52,351	$	(1,652)	$	52,351	$	(1,652)
Municipal securities	18,731		(114)		23,519		(617)		42,250		(731)
Agency mortgage-backed securities	38,987		(276)		45,297		(2,189)		84,284		(2,465)
Private label mortgage-backed securities	1,277		(1)		558		(1)		1,835		(2)
Asset-backed securities	—		—		4,961		(39)		4,961		(39)
Corporate securities	—		—		20,406		(1,594)		20,406		(1,594)
Total	$	58,995	$	(391)	$	147,092	$	(6,092)	$	206,087	$	(6,483)

	December 31, 2020
	Less Than 12 Months				12 Months or Longer				Total
(in thousands)	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
Securities held-to-maturity
Corporate securities	17,456		(126)		2,999		(1)		20,455		(127)
Total	$	17,456	$	(126)	$	2,999	$	(1)	$	20,455	$	(127)

There were no amounts reclassified from accumulated other comprehensive loss to the condensed consolidated statements of income during the three and six months ended June 30, 2021. Amounts reclassified from accumulated other comprehensive loss and the affected line items in the condensed consolidated statements of income during the three and six months ended June 30, 2020 were as follows:

(in thousands) Details About Accumulated Other Comprehensive Loss Components									Affected Line Item in the Statements of Income
	Three Months Ended June 30, 2021		Six Months Ended June 30, 2021		Three Months Ended June 30, 2020		Six Months Ended June 30, 2020
Realized gains on securities available-for-sale
Gain realized in earnings	$	—	$	—	$	—	$	41	Gain on sale of securities
Total reclassified amount before tax	—		—		—		41		Income Before Income Taxes
Tax expense	—		—				11		Income Tax Provision
Total reclassifications out of accumulated other comprehensive loss	$	—	$	—	$	—	$	30	Net Income

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Loans

6 Months Ended

Jun. 30, 2021

Receivables [Abstract]

Loans

Loans

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

(in thousands)	June 30, 2021		December 31, 2020
Commercial loans
Commercial and industrial	$	96,203	$	75,387
Owner-occupied commercial real estate	87,136		89,785
Investor commercial real estate	28,871		13,902
Construction	117,970		110,385
Single tenant lease financing	913,115		950,172
Public finance	612,138		622,257
Healthcare finance	455,890		528,154
Small business lending	123,293		125,589
Total commercial loans	2,434,616		2,515,631
Consumer loans
Residential mortgage	177,148		186,787
Home equity	17,510		19,857
Other consumer	271,796		275,692
Total consumer loans	466,454		482,336
Total commercial and consumer loans	2,901,070		2,997,967
Net deferred loan origination fees/costs and premiums/discounts on purchased loans and other(1)	56,538		61,264
Total loans	2,957,608		3,059,231
Allowance for loan losses	(28,066)		(29,484)
Net loans	$	2,929,542	$	3,029,747

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

The risk characteristics of 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 Central Indiana and adjacent markets and the greater Phoenix, Arizona market.

Owner-Occupied Commercial Real Estate: The primary source of repayment is the cash flow from the ongoing operations and activities conducted by the borrower, or an affiliate of the borrower, who owns the property. This portfolio segment is generally concentrated in Central Indiana and adjacent markets and the greater Phoenix, Arizona market and its loans are often secured by manufacturing and service facilities, as well as office buildings.

Investor Commercial Real Estate: These loans 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 and are generally located in the state of Indiana or markets immediately adjacent to Indiana. Management monitors and evaluates commercial real estate loans based on property financial performance, collateral value, guarantor strength, economic and industry conditions together with other risk grade criteria. As a general rule, the Company avoids financing special use projects or properties outside of its designated market areas unless other underwriting factors are present to mitigate these additional risks.

Construction: Construction loans 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 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. This portfolio segment is generally concentrated in Central Indiana.

Single Tenant Lease Financing: These loans are made on a nationwide basis to property 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 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; 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. Public finance lending has been conducted primarily in the Midwest, but continues to expand nationwide.

Healthcare Finance: These loans are made to healthcare providers, primarily dentists, for practice acquisition refinancing that occasionally includes owner-occupied commercial real estate and equipment purchases. The sources of repayment are primarily based on the identified cash flows from operations of the borrower and related entities if the real estate is held in a separate entity and secondarily on the underlying collateral provided by the borrower. This portfolio segment was initially concentrated in the Western United States but has since expanded throughout the rest of the country.

Small Business Lending: These loans are to small businesses and generally carry a partial guaranty from the U.S. 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 purchases. These loans also include loans originated by the Bank under the SBA’s Paycheck Protection Program, which are fully guaranteed by the SBA. This portfolio segment has an emerging geography, with a nationwide focus.

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 Loan Losses Methodology

Company policy is designed to maintain an adequate allowance for loan losses (“ALLL”). The portfolio is segmented by loan type, and the required ALLL for types of performing homogeneous loans which do not have a specific reserve is determined by applying a factor based on average historical losses, adjusted for current economic factors and portfolio trends. Management adds qualitative factors for observable trends, changes in internal practices, changes in delinquencies and impairments, and external factors. Observable factors include changes in the composition and size of portfolios, as well as loan terms or concentration levels. The Company evaluates the impact of internal changes such as management and staff experience levels or modification to loan underwriting processes. Delinquency trends are scrutinized for both volume and severity of past due, nonaccrual, or classified loans, as well as any changes in the value of underlying collateral. Finally, the Company considers the effect of other external factors such as national, regional, and local economic and business conditions, as well as competitive, legal, and regulatory requirements. Loans that are considered to be impaired are evaluated to determine the need for a specific allowance by applying at least one of three methodologies: present value of future cash flows; fair value of collateral less costs to sell; or the loan’s observable market price. All troubled debt restructurings (“TDR”) are considered impaired loans. Loans evaluated for impairment are removed from other pools to prevent double-counting. Accounting Standards Codification (“ASC”) Topic 310, Receivables, requires that impaired loans be measured based on the present value of expected future cash flows discounted at the loans’ effective interest rates or the fair value of the underlying collateral less costs to sell and allows existing methods for recognizing interest income.

Provision for Loan 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.

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

(in thousands)	Three Months Ended June 30, 2021
Allowance for loan losses:	Balance, Beginning of Period		Provision (Credit) Charged to Expense		Losses Charged Off		Recoveries		Balance, End of Period
Commercial and industrial	$	1,662	$	267	$	(28)	$	2	$	1,903
Owner-occupied commercial real estate	1,029		(8)		—		—		1,021
Investor commercial real estate	169		160		—		—		329
Construction	1,420		(63)		—		—		1,357
Single tenant lease financing	13,178		418		(2,391)		—		11,205
Public finance	1,748		(48)		—		—		1,700
Healthcare finance	7,755		(817)		—		—		6,938
Small business lending	700		214		(133)		2		783
Residential mortgage	601		(5)		(6)		4		594
Home equity	57		4		—		2		63
Other consumer	2,323		(101)		(131)		82		2,173
Total	$	30,642	$	21	$	(2,689)	$	92	$	28,066

	Six Months Ended June 30, 2021
Allowance for loan losses:	Balance, Beginning of Period		Provision (Credit) Charged to Expense		Losses Charged Off		Recoveries		Balance, End of Period
Commercial and industrial	$	1,146	$	701	$	(28)	$	84	$	1,903
Owner-occupied commercial real estate	1,082		(61)		—		—		1,021
Investor commercial real estate	155		174		—		—		329
Construction	1,192		165		—		—		1,357
Single tenant lease financing	12,990		606		(2,391)		—		11,205
Public finance	1,732		(32)		—		—		1,700
Healthcare finance	7,485		(547)		—		—		6,938
Small business lending	628		361		(212)		6		783
Residential mortgage	519		72		(6)		9		594
Home equity	48		63		(51)		3		63
Other consumer	2,507		(205)		(313)		184		2,173
Total	$	29,484	$	1,297	$	(3,001)	$	286	$	28,066

	Three Months Ended June 30, 2020
Allowance for loan losses:	Balance, Beginning of Period		Provision (Credit) Charged to Expense		Losses Charged Off		Recoveries		Balance, End of Period
Commercial and industrial	$	1,670	$	(141)	$	(57)	$	5	$	1,477
Owner-occupied commercial real estate	645		201		—		—		846
Investor commercial real estate	128		2		—		—		130
Construction	460		261		—		—		721
Single tenant lease financing	10,755		563		—		—		11,318
Public finance	1,483		59		—		—		1,542
Healthcare finance	4,318		1,187		(743)		—		4,762
Small business lending	265		(20)		—		6		251
Residential mortgage	500		36		—		3		539
Home equity	53		(4)		—		2		51
Other consumer	2,580		347		(216)		117		2,828
Total	$	22,857	$	2,491	$	(1,016)	$	133	$	24,465

	Six Months Ended June 30, 2020
Allowance for loan losses:	Balance, Beginning of Period		Provision (Credit) Charged to Expense		Losses Charged Off		Recoveries		Balance, End of Period
Commercial and industrial	$	1,521	$	205	$	(254)	$	5	$	1,477
Owner-occupied commercial real estate	561		285		—		—		846
Investor commercial real estate	109		21		—		—		130
Construction	380		341		—		—		721
Single tenant lease financing	11,175		143		—		—		11,318
Public finance	1,580		(38)		—		—		1,542
Healthcare finance	3,247		2,258		(743)		—		4,762
Small business lending	54		183		—		14		251
Residential mortgage	657		(107)		(15)		4		539
Home equity	46		—		—		5		51
Other consumer	2,510		661		(502)		159		2,828
Total	$	21,840	$	3,952	$	(1,514)	$	187	$	24,465

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

(in thousands)	Loans						Allowance for Loan Losses
June 30, 2021	Ending Balance:   Collectively Evaluated for Impairment		Ending Balance:   Individually Evaluated for Impairment		Ending Balance		Ending Balance:   Collectively Evaluated for Impairment		Ending Balance:   Individually Evaluated for Impairment		Ending Balance
Commercial and industrial	$	95,511	$	692	$	96,203	$	1,453	$	450	$	1,903
Owner-occupied commercial real estate	83,649		3,487		87,136		1,021		—		1,021
Investor commercial real estate	28,871		—		28,871		329		—		329
Construction	117,970		—		117,970		1,357		—		1,357
Single tenant lease financing	910,742		2,373		913,115		10,838		367		11,205
Public finance	612,138		—		612,138		1,700		—		1,700
Healthcare finance	454,919		971		455,890		6,415		523		6,938
Small business lending(1)	122,084		1,209		123,293		783		—		783
Residential mortgage	174,717		2,431		177,148		594		—		594
Home equity	17,496		14		17,510		63		—		63
Other consumer	271,786		10		271,796		2,173		—		2,173
Total	$	2,889,883	$	11,187	$	2,901,070	$	26,726	$	1,340	$	28,066

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

(in thousands)	Loans						Allowance for Loan Losses
December 31, 2020	Ending Balance:   Collectively Evaluated for Impairment		Ending Balance:   Individually Evaluated for Impairment		Ending Balance		Ending Balance:   Collectively Evaluated for Impairment		Ending Balance:   Individually Evaluated for Impairment		Ending Balance
Commercial and industrial	$	74,870	$	517	$	75,387	$	1,146	$	—	$	1,146
Owner-occupied commercial real estate	87,947		1,838		89,785		1,082		—		1,082
Investor commercial real estate	13,902		—		13,902		155		—		155
Construction	110,385		—		110,385		1,192		—		1,192
Single tenant lease financing	942,848		7,324		950,172		9,900		3,090		12,990
Public finance	622,257		—		622,257		1,732		—		1,732
Healthcare finance	527,144		1,010		528,154		7,485		—		7,485
Small business lending	125,589		—		125,589		628		—		628
Residential mortgage	185,241		1,546		186,787		519		—		519
Home equity	19,857		—		19,857		48		—		48
Other consumer	275,642		50		275,692		2,507		—		2,507
Total	$	2,985,682	$	12,285	$	2,997,967	$	26,394	$	3,090	$	29,484

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

Nonaccrual Loans

Any loan which becomes 90 days delinquent or for which the full collection of principal and interest may be in doubt will be considered for nonaccrual status. At the time a loan is placed on nonaccrual status, all accrued but unpaid interest will be reversed from interest income. Placing the loan on nonaccrual status does not relieve the borrower of the obligation to repay interest. A loan placed on nonaccrual status may be restored to accrual status when all delinquent principal and interest has been brought current, and the Company expects full payment of the remaining contractual principal and interest.

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

	June 30, 2021
(in thousands)	Pass		Special Mention		Substandard		Total
Commercial and industrial	$	79,928	$	15,563	$	712	$	96,203
Owner-occupied commercial real estate	79,730		3,919		3,487		87,136
Investor commercial real estate	28,871		—		—		28,871
Construction	117,970		—		—		117,970
Single tenant lease financing	901,505		9,237		2,373		913,115
Public finance	612,138		—		—		612,138
Healthcare finance	454,312		615		963		455,890
Small business lending(1)	112,864		8,718		1,711		123,293
Total commercial loans	$	2,387,318	$	38,052	$	9,246	$	2,434,616

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

	June 30, 2021
(in thousands)	Performing		Nonaccrual		Total
Residential mortgage	$	175,895	$	1,253	$	177,148
Home equity	17,496		14		17,510
Other consumer	271,786		10		271,796
Total consumer loans	$	465,177	$	1,277	$	466,454

	December 31, 2020
(in thousands)	Pass		Special Mention		Substandard		Total
Commercial and industrial	$	74,138	$	732	$	517	$	75,387
Owner-occupied commercial real estate	84,292		3,655		1,838		89,785
Investor commercial real estate	13,902		—		—		13,902
Construction	110,385		—		—		110,385
Single tenant lease financing	932,830		10,018		7,324		950,172
Public finance	622,257		—		—		622,257
Healthcare finance	526,517		627		1,010		528,154
Small business lending	117,474		2,930		5,185		125,589
Total commercial loans	$	2,481,795	$	17,962	$	15,874	$	2,515,631

	December 31, 2020
(in thousands)	Performing		Nonaccrual		Total
Residential mortgage	$	185,604	$	1,183	$	186,787
Home equity	19,857		—		19,857
Other consumer	275,646		46		275,692
Total consumer loans	$	481,107	$	1,229	$	482,336

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

	June 30, 2021
(in thousands)	30-59 Days Past Due		60-89 Days Past Due		90 Days  or More Past Due		Total  Past Due		Current		Total Loans		Non- accrual Loans		Total Loans 90 Days or More Past Due and Accruing
Commercial and industrial	$	2	$	—	$	—	$	2	$	96,201	$	96,203	$	692	$	—
Owner-occupied commercial real estate	—		—		—		—		87,136		87,136		—		—
Investor commercial real estate	—		—		—		—		28,871		28,871		3,487		—
Construction	—		—		—		—		117,970		117,970		—		—
Single tenant lease financing	—		—		—		—		913,115		913,115		2,373		—
Public finance	—		—		—		—		612,138		612,138		—		—
Healthcare finance	—		—		—		—		455,890		455,890		—		—
Small business lending(1)	—		—		1,209		1,209		122,084		123,293		1,209		—
Residential mortgage	—		—		364		364		176,784		177,148		1,253		—
Home equity	—		—		—		—		17,510		17,510		14		—
Other consumer	89		9		—		98		271,698		271,796		10		—
Total	$	91	$	9	$	1,573	$	1,673	$	2,899,397	$	2,901,070	$	9,038	$	—

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

	December 31, 2020
(in thousands)	30-59 Days Past Due		60-89 Days Past Due		90 Days  or More Past Due		Total  Past Due		Current		Total Loans		Non- accrual Loans		Total Loans 90 Days or More Past Due and Accruing
Commercial and industrial	$	—	$	—	$	—	$	—	$	75,387	$	75,387	$	—	$	—
Owner-occupied commercial real estate	—		—		—		—		89,785		89,785		1,838		—
Investor commercial real estate	—		—		—		—		13,902		13,902		—		—
Construction	—		—		—		—		110,385		110,385		—		—
Single tenant lease financing	—		—		4,680		4,680		945,492		950,172		7,116		—
Public finance	—		—		—		—		622,257		622,257		—		—
Healthcare finance	—		—		—		—		528,154		528,154		—		—
Small business lending	—		—		—		—		125,589		125,589		—		—
Residential mortgage	49		—		269		318		186,469		186,787		1,183		—
Home equity	—		15		—		15		19,842		19,857		—		—
Other consumer	176		51		5		232		275,460		275,692		46		—
Total	$	225	$	66	$	4,954	$	5,245	$	2,992,722	$	2,997,967	$	10,183	$	—

Impaired Loans

A loan is designated as impaired, in accordance with the impairment accounting guidance, when, based on current information or events, it is probable that the Company will be unable to collect all amounts due (principal and interest) according to the contractual terms of the loan agreement. Payments with delays generally not exceeding 90 days outstanding are not considered impaired. Certain nonaccrual and substantially all delinquent loans more than 90 days past due may be considered to be impaired. Generally, loans are placed on nonaccrual status at 90 days past due and accrued interest is reversed against earnings, unless the loan is well-secured and in the process of collection. The accrual of interest on impaired and nonaccrual loans is discontinued when, in management’s opinion, the borrower may be unable to meet payments as they become due.

Impaired loans include nonperforming loans as well as loans modified in TDRs where concessions have been granted to borrowers experiencing financial difficulties. These concessions could include a reduction in the interest rate on the loan, payment extensions, forgiveness of principal, forbearance, or other actions intended to maximize collection.

ASC Topic 310, Receivables, requires that impaired loans be measured based on the present value of expected future cash flows discounted at the loans’ effective interest rates or the fair value of the underlying collateral, less costs to sell, and allows existing methods for recognizing interest income.

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

	June 30, 2021						December 31, 2020
(in thousands)	Recorded Balance		Unpaid Principal Balance		Specific Allowance		Recorded Balance		Unpaid Principal Balance		Specific Allowance
Loans without a specific valuation allowance
Commercial and industrial	$	3,487	$	3,513	$	—	$	517	$	517	$	—
Owner-occupied commercial real estate	—		—		—		1,838		1,850		—
Single tenant lease financing	—		—		—		1,315		1,334		—
Healthcare finance	—		—		—		1,010		1,010		—
Small business lending(1)	1,209		1,209		—		—		—		—
Residential mortgage	2,431		2,566		—		1,546		1,652		—
Home equity	14		15		—		—		—		—
Other consumer	10		47		—		50		120		—
Total	7,151		7,350		—		6,276		6,483		—
Loans with a specific valuation allowance
Commercial and industrial	692		723		450		—		—		—
Single tenant lease financing	2,373		2,463		367		6,009		6,036		3,090
Healthcare Finance	971		971		523		—		—		—
Total	4,036		4,157		1,340		6,009		6,036		3,090
Total impaired loans	$	11,187	$	11,507	$	1,340	$	12,285	$	12,519	$	3,090

1 Entire balance is guaranteed by the U.S. government.

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

	Three Months Ended								Six Months Ended
	June 30, 2021				June 30, 2020				June 30, 2021				June 30, 2020
(in thousands)	Average Balance		Interest Income		Average Balance		Interest Income		Average Balance		Interest Income		Average Balance			Interest Income
Loans without a specific valuation allowance
Commercial and industrial	$	259	$	—	$	594	$	18	$	259	$	9	$	1,330	237	$	36
Owner-occupied commercial real estate	3,994		—		3,923		29		3,307		—		4,573		145	31
Single tenant lease financing	148		—		—		—		100		5		—			—
Healthcare finance	—		—		—		—		336		—		—			—
Small business lending(1)	1,123		—		—		—		970		—		—			—
Residential mortgage	2,410		9		1,352		—		2,192		13		1,313			—
Home equity	15		—		—		—		13		—		—			—
Other consumer	21		—		75		—		23		—		60			—
Total	7,970		9		5,944		47		7,200		27		7,276			67
Loans with a specific valuation allowance
Commercial and industrial	839		—		204		—		677		—		204			—
Owner-occupied commercial real estate	1,420		—		—		—		473		—		—			—
Single tenant lease financing	5,430		—		4,680		—		4,984		—		4,680			—
Healthcare Finance	979		24		—		—		815		36		—			—
Total	8,668		24		4,884		—		6,949		36		4,884			—
Total impaired loans	$	16,638	$	33	$	10,828	$	47	$	14,149	$	63	$	12,160		$	67

1 Entire balance is guaranteed by the U.S. government.

The Company had $1.3 million in other real estate owned (“OREO”) as of June 30, 2021, which consisted of one commercial property with a carrying value of $1.2 million and one residential mortgage with a carrying value of $0.1 million. The Company did not have any OREO as of December 31, 2020. There were two loans totaling $0.4 million and no loans in the process of foreclosure at June 30, 2021 and December 31, 2020, respectively.

Troubled Debt Restructurings

The loan portfolio includes TDRs, which are loans that have been modified to grant economic concessions to borrowers who have experienced financial difficulties. These concessions typically result from loss mitigation efforts and could include reductions in the interest rate, payment extensions, forgiveness of principal, forbearance, or other actions. Certain TDRs are classified as nonperforming at the time of restructuring and typically are returned to performing status after considering the borrower’s sustained repayment performance for a reasonable period, generally not less than six consecutive months.

When loans are modified in a TDR, any possible impairment similar to other impaired loans is evaluated based on the present value of expected future cash flows, discounted at the contractual interest rate of the original loan agreement, or using the current fair value of the collateral, less selling costs, for collateral dependent loans. If it is determined that the value of the modified loan is less than the recorded balance of the loan, impairment is recognized through a specific allowance or charge-off to the allowance. In periods subsequent to modification, all TDRs, including those that have payment defaults, are evaluated for possible impairment, and impairment is recognized through the allowance.

In the course of working with troubled borrowers, the Company may choose to restructure the contractual terms of certain loans in an effort to work out an alternative payment schedule with the borrower in order to optimize the collectability of the loan. Any loan modification is reviewed by the Company to identify whether a TDR has occurred when the Company grants a concession to the borrower that it would not otherwise consider based on economic or legal reasons related to a borrower’s financial difficulties. Terms may be modified to fit the ability of the borrower to repay in line with its current financial status or the loan may be restructured to secure additional collateral and/or guarantees to support the debt, or a combination of the two.

There was one portfolio residential mortgage loan classified as a new TDR during the three and six months ended June 30, 2021 with a pre-modification and post-modification outstanding recorded investment of $0.8 million. The Company

did not allocate a specific allowance for that loan as of June 30, 2021. The modifications consisted of interest-only payments for a period of time. There was one portfolio residential mortgage loan classified as a new TDR during the three and six months ended June 30, 2020, with a pre-modification and post-modification outstanding recorded investment of $0.8 million. The Company did not allocate a specific allowance for that loan as of June 30, 2020. The modification consisted of an extension of the maturity date. There were no performing TDRs that had payment defaults within the twelve months following modification during the three and six months ended June 30, 2021 and 2020, respectively.

Non-TDR Loan Modifications due to COVID-19

The “Interagency Statement on Loan Modifications and Reporting for Financial Institutions Working with Customers Affected by the Coronavirus” was issued by our banking regulators on March 22, 2020. This guidance encourages financial institutions to work prudently with borrowers who are or may be unable to meet their contractual payment obligations due to the effects of COVID-19.

Additionally, Section 4013 of the Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”) provides that loan modifications due to the impact of COVID-19 that would otherwise be classified as TDRs under GAAP will not be so classified. Modifications within the scope of this relief are in effect from the period beginning March 1, 2020 until the earlier of January 1, 2022 or 60 days after the date on which the national emergency related to the COVID-19 pandemic formally terminates. As of June 30, 2021, the Company had eight loans totaling $7.9 million in non-TDR loan modifications due to COVID-19.

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Servicing Asset

6 Months Ended

Jun. 30, 2021

Transfers and Servicing [Abstract]

Servicing Asset

Servicing Asset

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

(in thousands)	Three Months Ended
	June 30, 2021		June 30, 2020
Balance, beginning of period	$	3,817	$	2,415
Additions
Originated and purchased servicing	543		197
Subtractions
Paydowns	(154)		(90)
Changes in fair value due to changes in valuation inputs or assumptions used in the   valuation model	(86)		—
Balance, end of period	$	4,120	$	2,522

(in thousands)	Six Months Ended
	June 30, 2021		June 30, 2020
Balance, beginning of period	$	3,569	$	2,481
Additions
Originated and purchased servicing	946		310
Subtractions
Paydowns	(324)		(269)
Changes in fair value due to changes in valuation inputs or assumptions used in the   valuation model	(71)		—
Balance, end of period	$	4,120	$	2,522

Loans serviced for others are not included in the condensed consolidated balance sheets. The unpaid principal balances of these loans serviced for others as of June 30, 2021 and December 31, 2020 are shown in the table below.

(in thousands)
	June 30, 2021		December 31, 2020
Loan portfolios serviced for:
SBA guaranteed loans	$	196,869	$	165,961
Total	$	196,869	$	165,961

Loan servicing revenue totaled $0.5 million and $0.9 million for the three and six months ended June 30, 2021 and $0.3 million and $0.5 million for the three and six months ended June 30, 2020, respectively. Loan servicing asset revaluation, which represents the change in fair value of the servicing asset, resulted in a $0.2 million and $0.4 million

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

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.

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Commitments and Credit Risk

6 Months Ended

Jun. 30, 2021

Commitments and Contingencies Disclosure [Abstract]

Commitments and Credit Risk

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 June 30, 2021 and December 31, 2020, the Company had outstanding loan commitments totaling approximately $293.1 million and $263.9 million, respectively.

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

The Company is also a limited partner in a Small Business Investment Company fund (the “SBIC Fund”). As of June 30, 2021, the Company has committed to contribute up to $1.1 million of capital to the SBIC Fund.

Capital Commitments

Capital expenditures contracted to at the balance sheet date but not yet recognized in the financial statements are associated with the construction of premises intended to house our future corporate headquarters. The Company has entered into construction-related contracts and change orders in the amount of $66.4 million. As of June 30, 2021, $25.4 million of such contract commitments had not yet been incurred. These commitments are due within twelve months.

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Fair Value of Financial Instruments

6 Months Ended

Jun. 30, 2021

Fair Value Disclosures [Abstract]

Fair Value of Financial Instruments

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. 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 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 without relying exclusively on quoted prices for specific investment securities but also on the investment securities’ relationship to other benchmark quoted investment securities.

In certain cases where Level 1 or Level 2 inputs are not available, securities are classified within Level 3 of the hierarchy. Fair values are calculated using discounted cash flows. Discounted cash flows are calculated based off of the anticipated future cash flows updated to incorporate loss severities. Rating agency and industry research reports as well as default and deferral activity are reviewed and incorporated into the calculation. The Company did not own any securities classified within Level 3 of the hierarchy as of June 30, 2021 or December 31, 2020.

Loans Held-for-Sale (mandatory pricing agreements)

The fair value of loans held-for-sale is determined using quoted prices for similar assets, adjusted for specific attributes of that loan (Level 2).

Servicing Asset

Fair value is based on a loan-by-loan basis taking into consideration the original maturity of the loans, the current age of the loans and the remaining term to maturity. The valuation methodology utilized for the servicing assets 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

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

Forward Contracts

The fair values of forward contracts on to-be-announced securities are determined using quoted prices in active markets or benchmarked thereto (Level 1).

Interest Rate Lock Commitments

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

The following tables present the fair value measurements of assets and liabilities recognized in the accompanying condensed consolidated balance sheets measured at fair value on a recurring basis and the level within the fair value hierarchy in which the fair value measurements fall at June 30, 2021 and December 31, 2020.

			June 30, 2021  Fair Value Measurements Using
(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	$	57,135	$	—	$	57,135	$	—
Municipal securities	78,438		—		78,438		—
Agency mortgage-backed securities	444,494		—		444,494		—
Private label mortgage-backed securities	29,363				29,363		—
Asset-backed securities	5,005		—		5,005		—
Corporate securities	49,084		—		49,084		—
Total available-for-sale securities	663,519		—		663,519		—
Loans held-for-sale (mandatory pricing agreements)	16,870		—		16,870		—
Servicing asset	4,120		—		—		4,120
Interest rate swap agreements	(20,286)		—		(20,286)		—
Forward contracts	(17)		(17)		—		—
IRLCs	818		—		—		818

			December 31, 2020 Fair Value Measurements Using
(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	$	60,545	$	—	$	60,545	$	—
Municipal securities	82,489		—		82,489		—
Agency mortgage-backed securities	243,921		—		243,921		—
Private label mortgage-backed securities	58,116		—		58,116		—
Asset-backed securities	4,961		—		4,961		—
Corporate securities	47,596		—		47,596		—
Total available-for-sale securities	497,628		—		497,628		—
Loans held-for-sale (mandatory pricing agreements)	26,341		—		26,341		—
Servicing asset	3,569		—		—		3,569
Interest rate swap agreements	(17,606)		—		(17,606)		—
Forward contracts	(640)		(640)		—		—
IRLCs	3,361		—		—		3,361

The following tables reconcile the beginning and ending balances of recurring fair value measurements recognized in the accompanying condensed consolidated balance sheets using significant unobservable (Level 3) inputs for the three and six months ended June 30, 2021 and 2020.

	Three Months Ended
(in thousands)	Servicing Asset		Interest Rate Lock Commitments
Balance, April 1, 2021	$	3,817	$	1,110
Total realized gains
Additions	543		—
Paydowns	(154)		—
Change in fair value	(86)		(292)
Balance, June 30, 2021	4,120		818
Balance as of April 1, 2020	$	2,415	$	2,064
Total realized gains
Additions	197		—
Paydowns	—		—
Change in fair value	(90)		(1,782)
Balance, June 30, 2020	$	2,522	$	282

	Six Months Ended
(in thousands)	Servicing Asset		Interest Rate Lock Commitments
Balance, January 1, 2021	$	3,569	$	3,361
Total realized gains
Additions	946		—
Paydowns	(324)		—
Change in fair value	(71)		(2,543)
Balance, June 30, 2021	4,120		818
Balance as of January 1, 2020	$	2,481	$	910
Total realized gains
Additions	310		—
Paydowns	—		—
Change in fair value	(269)		(628)
Balance, June 30, 2020	$	2,522	$	282

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.

Impaired Loans (Collateral Dependent)

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 impaired loan is identified as collateral dependent, the fair value of the underlying collateral, less costs to sell, is used to measure impairment. This method requires obtaining a current independent appraisal of the collateral and applying a discount factor to the value. If the impaired loan is not collateral dependent, the Company utilizes a discounted cash flow analysis to measure impairment.

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

The following table presents the fair value measurements of assets and liabilities recognized in the accompanying condensed consolidated balance sheets measured at fair value on a nonrecurring basis and the level within the fair value hierarchy in which the fair value measurement falls at June 30, 2021 and December 31, 2020.

		June 30, 2021
(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)
Impaired loans	4,035	—	—	4,035

			December 31, 2020
(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)
Impaired loans	$	4,026	$	—	$	—	$	4,026

 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 June 30, 2021		Valuation Technique	Significant Unobservable Inputs	Range	Weighted-Average Range
Impaired loans	$	4,035	Fair value of collateral	Discount for type of property and current market conditions	10%	10%
IRLCs	818		Discounted cash flow	Loan closing rates	63% - 100%	92%
Servicing asset	3,817		Discounted cash flow	Prepayment speeds Discount rate	0% - 25% 10%	12.6% 10%

(dollars in thousands)	Fair Value at December 31, 2020		Valuation Technique	Significant Unobservable Inputs	Range	Weighted-Average Range
Impaired loans	$	4,026	Fair value of collateral	Discount for type of property and current market conditions	10%	10%
IRLCs	3,361		Discounted cash flow	Loan closing rates	44% - 100%	87%
Servicing asset	3,569		Discounted cash flow	Prepayment speeds Discount rate	0% - 25% 10%	12.1% 10%

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

In certain cases where Level 1 or Level 2 inputs are not available, securities are classified within Level 3 of the hierarchy. Fair values are calculated using discounted cash flows. Discounted cash flows are calculated based off of the anticipated future cash flows updated to incorporate loss severities. Rating agency and industry research reports as well as default and deferral activity are reviewed and incorporated into the calculation. The Company did not own any securities classified within Level 3 of the hierarchy as of June 30, 2021 or December 31, 2020.

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

The fair value of these loans approximates carrying value.

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 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.

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 June 30, 2021 and December 31, 2020.

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

	June 30, 2021 Fair Value Measurements Using
(in thousands)	Carrying Amount		Fair Value		Quoted Prices In Active Market for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Cash and cash equivalents	$	328,797	$	328,797	$	328,797	$	—	$	—
Securities held-to-maturity	65,659		68,058		—		68,058		—
Loans held-for-sale (best efforts pricing agreements)	10,717		10,717		—		10,717		—
Net loans	2,929,542		2,975,406		—		—		2,975,406
Accrued interest receivable	16,345		16,345		16,345		—		—
Federal Home Loan Bank of Indianapolis stock	25,650		25,650		—		25,650		—
Deposits	3,206,147		3,229,241		1,799,490		—		1,429,751
Advances from Federal Home Loan Bank	514,919		533,237		—		533,237		—
Subordinated debt	69,871		75,456		65,294		10,162		—
Accrued interest payable	1,132		1,132		1,132		—		—

	December 31, 2020 Fair Value Measurements Using
(in thousands)	Carrying Amount		Fair Value		Quoted Prices In Active Market for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Cash and cash equivalents	$	419,806	$	419,806	$	419,806	$	—	$	—
Securities held-to-maturity	68,223		69,452		—		69,452		—
Loans held-for-sale (best efforts pricing agreements)	13,243		13,243		—		13,243		—
Net loans	3,029,747		3,084,375		—		—		3,084,375
Accrued interest receivable	17,416		17,416		17,416		—		—
Federal Home Loan Bank of Indianapolis stock	25,650		25,650		—		25,650		—
Deposits	3,270,885		3,307,038		1,679,164		—		1,627,874
Advances from Federal Home Loan Bank	514,916		541,945		—		541,945		—
Subordinated debt	79,603		83,682		63,325		20,357		—
Accrued interest payable	1,439		1,439		1,439		—		—

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Mortgage Banking Activities

6 Months Ended

Jun. 30, 2021

Mortgage Banking [Abstract]

Mortgage Banking Activities

Mortgage Banking ActivitiesThe Company’s residential real estate lending business originates mortgage loans for customers and typically sells a majority of the originated loans into the secondary market. For most of the mortgages it sells in the secondary market, the Company hedges its mortgage banking pipeline by entering into forward contracts for the future delivery of mortgage

loans to third party investors and entering into IRLCs with potential borrowers to fund specific mortgage loans that will be sold into the secondary market. To facilitate the hedging of the loans, the Company has elected the fair value option for loans originated and intended for sale in the secondary market under mandatory pricing agreements. Changes in the fair value of loans held-for-sale, IRLCs and forward contracts are recorded in the mortgage banking activities line item within noninterest income.  Refer to Note 13 for further information on derivative financial instruments. 

During the three months ended June 30, 2021 and 2020, the Company originated mortgage loans held-for-sale of $163.3 million and $211.9 million, respectively, and sold $151.5 million and $229.2 million of mortgage loans, respectively, into the secondary market. During the six months ended June 30, 2021 and 2020, the Company originated mortgage loans held-for-sale of $387.2 million and $427.3 million, respectively, and sold $393.1 million and $454.7 million of mortgage loans, respectively, into the secondary market.

The following table presents the components of income from mortgage banking activities for the three and six months ended June 30, 2021 and 2020.

	Three Months Ended June 30,				Six Months Ended June 30,
(in thousands)	2021		2020		2021		2020
Gain on loans sold	$	3,587	$	4,164	$	11,086	$	8,507
(Loss) gain resulting from the change in fair value of loans held-for-sale	118		(1,255)		(744)		(939)
(Loss) gain resulting from the change in fair value of derivatives	(1,031)		499		(1,918)		(492)
Net revenue from mortgage banking activities	$	2,674	$	3,408	$	8,424	$	7,076

Fluctuations in interest rates and changes in IRLC and loan volume within the mortgage banking pipeline may cause volatility in the fair value of loans held-for-sale and the fair value of derivatives used to hedge the mortgage banking pipeline.

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Accumulated Other Comprehensive Loss

6 Months Ended

Jun. 30, 2021

Stockholders' Equity Note [Abstract]

Accumulated Other Comprehensive Loss

Accumulated Other Comprehensive Loss

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

(in thousands)	Available-For-Sale Securities		Cash Flow Hedges		Total
Balance, January 1, 2021	$	468	$	(17,664)	$	(17,196)
Net unrealized holding (losses) gains recorded within other comprehensive income before income tax	(807)		6,226		5,419
Other comprehensive (loss) gain before tax	(807)		6,226		5,419
Income tax (benefit) provision	(175)		1,309		1,134
Other comprehensive (loss) income - net of tax	$	(632)	$	4,917	$	4,285
Balance, June 30, 2021	$	(164)	$	(12,747)	$	(12,911)
Balance, January 1, 2020	$	(4,388)	$	(9,803)	$	(14,191)
Net unrealized holding gains (losses) recorded within other comprehensive income before income tax	4,801		(13,967)		(9,166)
Reclassification of net loss realized and included in earnings	(41)		—		(41)
Other comprehensive income (loss) before tax	4,760		(13,967)		(9,207)
Income tax provision (benefit)	1,760		(4,020)		(2,260)
Other comprehensive income (loss) - net of tax	3,000		(9,947)		(6,947)
Balance, June 30, 2020	$	(1,388)	$	(19,750)	$	(21,138)

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

(in thousands)	Available-For-Sale Securities		Cash Flow Hedges		Total
Balance, April 1, 2021	$	(1,219)	$	(12,701)	$	(13,920)
Net unrealized holding gains (losses) recorded within other comprehensive income before income tax	1,388		(54)		1,334
Other comprehensive gain (loss) before tax	1,388		(54)		1,334
Income tax (benefit) provision	(333)		8		(325)
Other comprehensive (loss) income - net of tax	$	1,055	$	(46)	$	1,009
Balance, June 30, 2021	$	(164)	$	(12,747)	$	(12,911)
Balance, April 1, 2020	$	(239)	$	(19,627)	$	(19,866)
Net change in unrealized loss	(1,498)		(509)		(2,007)
Other comprehensive loss before tax	(1,498)		(509)		(2,007)
Income tax benefit	(349)		(386)		(735)
Other comprehensive income (loss) - net of tax	(1,149)		(123)		(1,272)
Balance, June 30, 2020	$	(1,388)	$	(19,750)	$	(21,138)

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Recent Accounting Pronouncements

6 Months Ended

Jun. 30, 2021

Accounting Standards Update and Change in Accounting Principle [Abstract]

Recent Accounting Pronouncements

Recent Accounting Pronouncements

ASU 2016-13 - Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (June 2016)

The main objective of this update is to provide financial statement users with more decision-useful information about the expected credit losses on financial instruments and other commitments to extend credit held by a reporting entity at each reporting date. To achieve this objective, the amendments in this update replace the incurred loss impairment methodology in current GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates.

The amendments affect entities holding financial assets that are not accounted for at fair value through net income. The amendments affect loans, debt securities, off-balance-sheet credit exposures, and any other financial assets not excluded from the scope that have the contractual right to receive cash. The amendments in this update affect an entity to varying degrees depending on the credit quality of the assets held by the entity, their duration, and how the entity applies current GAAP. There is diversity in practice in applying the incurred loss methodology, which means that before transition some entities may be more aligned under current GAAP than others to the new measure of expected credit losses. The following describes the main provisions of this update.

•Assets Measured at Amortized Cost: The amendments in this update require a financial asset (or a group of financial assets) measured at amortized cost basis to be presented at the net amount expected to be collected. The allowance for credit losses is a valuation account that is deducted from the amortized cost basis of the financial asset(s) to present the net carrying value at the amount expected to be collected on the financial asset. The statements of income reflect the measurement of credit losses for newly recognized financial assets, as well as the expected increase or decrease of credit losses that have taken place during the period. The measurement of expected credit losses is based on relevant information about past events, including historical experience, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amount. An entity must use judgment in determining the relevant information and estimation methods that are appropriate in its circumstances.

•Available-for-Sale Debt Securities: Credit losses relating to available-for-sale debt securities should be recorded through an allowance for credit losses. Available-for-sale accounting recognizes that value may be realized either through collection of contractual cash flows or through sale of the security. Therefore, the amendments limit the amount of the allowance for credit losses to the amount by which fair value is below amortized cost because the classification as available-for-sale is premised on an investment strategy that recognizes that the investment could be sold at fair value if cash collection would result in the realization of an amount less than fair value.

•In May 2019, the FASB issued ASU 2019-05 - Financial Instruments - Credit Losses (Topic 326) - Targeted Transition Relief. This ASU allows an option for preparers to irrevocably elect the fair value option, on an instrument-by-instrument basis, for eligible financial assets measured at amortized cost basis upon adoption of the credit losses standard. This increases the comparability of financial statement information provided by institutions that otherwise would have reported similar financial instruments using different measurement methodologies, potentially decreasing costs for financial statement preparers while providing more useful information to investors and other users.

For public business entities that are SEC filers, the amendments in this update are effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. All entities may early adopt the amendments in this update as of the fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. In October 2019, the FASB voted to delay the effective date for smaller reporting companies to fiscal years beginning after December 15, 2022. An entity will apply the amendments in this update through a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is effective (that is, a modified-retrospective approach). A prospective transition approach is required for debt securities for which an OTTI had been recognized before the effective date. The effect of a prospective transition approach is to maintain the same amortized cost basis before and after the effective date of this update.

The Company expects to adopt this guidance on January 1, 2023 and is currently evaluating the impact of the amendments on the Company’s condensed consolidated financial statements. The Company currently cannot determine or reasonably quantify the impact of the adoption of the amendments due to the complexity and extensive changes. The Company intends to develop processes and procedures prior to the effective date to ensure it is fully compliant with the amendments at the adoption date. The Company has formed an implementation committee and has engaged a third-party consultant to assist in developing current expected credit losses (“CECL”) models using appropriate methodologies.

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

In March 2020 in connection with the implementation of the CARES Act and related provisions, the Company adopted the temporary relief issued under the CARES Act, thereby suspending the guidance in ASC 310-40 on accounting for TDRs to loan modifications related to COVID-19. Section 4013 of the CARES Act specifies that loan modifications due to the impact of COVID-19 that would otherwise be classified as TDRs under GAAP will not be so classified. Modifications within the scope of this relief are in effect from the period beginning March 1, 2020 until the earlier of January 1, 2022 or 60 days after the date on which the national emergency related to the COVID-19 pandemic formally terminates. See the “Non-TDR Loan Modifications due to COVID-19” section of Part I, Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations for more information.

ASU 2020-04 - Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on     Financial Reporting (March 2020)

In March 2020, FASB issued ASU 2020-04 to ease the potential burden in accounting for the transition away from the LIBORon financial reporting. The ASU provides optional expedients and exceptions for applying GAAP to contract modification and hedge accounting relationships. The guidance is effective March 12, 2020 through December 31, 2022. The Company believes the adoption of this guidance will not have a material impact on the condensed consolidated financial statements.

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Basis of Presentation (Policies)

6 Months Ended

Jun. 30, 2021

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Recent Accounting Pronouncements

Recent Accounting Pronouncements

ASU 2016-13 - Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (June 2016)

The main objective of this update is to provide financial statement users with more decision-useful information about the expected credit losses on financial instruments and other commitments to extend credit held by a reporting entity at each reporting date. To achieve this objective, the amendments in this update replace the incurred loss impairment methodology in current GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates.

The amendments affect entities holding financial assets that are not accounted for at fair value through net income. The amendments affect loans, debt securities, off-balance-sheet credit exposures, and any other financial assets not excluded from the scope that have the contractual right to receive cash. The amendments in this update affect an entity to varying degrees depending on the credit quality of the assets held by the entity, their duration, and how the entity applies current GAAP. There is diversity in practice in applying the incurred loss methodology, which means that before transition some entities may be more aligned under current GAAP than others to the new measure of expected credit losses. The following describes the main provisions of this update.

•Assets Measured at Amortized Cost: The amendments in this update require a financial asset (or a group of financial assets) measured at amortized cost basis to be presented at the net amount expected to be collected. The allowance for credit losses is a valuation account that is deducted from the amortized cost basis of the financial asset(s) to present the net carrying value at the amount expected to be collected on the financial asset. The statements of income reflect the measurement of credit losses for newly recognized financial assets, as well as the expected increase or decrease of credit losses that have taken place during the period. The measurement of expected credit losses is based on relevant information about past events, including historical experience, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amount. An entity must use judgment in determining the relevant information and estimation methods that are appropriate in its circumstances.

•Available-for-Sale Debt Securities: Credit losses relating to available-for-sale debt securities should be recorded through an allowance for credit losses. Available-for-sale accounting recognizes that value may be realized either through collection of contractual cash flows or through sale of the security. Therefore, the amendments limit the amount of the allowance for credit losses to the amount by which fair value is below amortized cost because the classification as available-for-sale is premised on an investment strategy that recognizes that the investment could be sold at fair value if cash collection would result in the realization of an amount less than fair value.

•In May 2019, the FASB issued ASU 2019-05 - Financial Instruments - Credit Losses (Topic 326) - Targeted Transition Relief. This ASU allows an option for preparers to irrevocably elect the fair value option, on an instrument-by-instrument basis, for eligible financial assets measured at amortized cost basis upon adoption of the credit losses standard. This increases the comparability of financial statement information provided by institutions that otherwise would have reported similar financial instruments using different measurement methodologies, potentially decreasing costs for financial statement preparers while providing more useful information to investors and other users.

For public business entities that are SEC filers, the amendments in this update are effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. All entities may early adopt the amendments in this update as of the fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. In October 2019, the FASB voted to delay the effective date for smaller reporting companies to fiscal years beginning after December 15, 2022. An entity will apply the amendments in this update through a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is effective (that is, a modified-retrospective approach). A prospective transition approach is required for debt securities for which an OTTI had been recognized before the effective date. The effect of a prospective transition approach is to maintain the same amortized cost basis before and after the effective date of this update.

The Company expects to adopt this guidance on January 1, 2023 and is currently evaluating the impact of the amendments on the Company’s condensed consolidated financial statements. The Company currently cannot determine or reasonably quantify the impact of the adoption of the amendments due to the complexity and extensive changes. The Company intends to develop processes and procedures prior to the effective date to ensure it is fully compliant with the amendments at the adoption date. The Company has formed an implementation committee and has engaged a third-party consultant to assist in developing current expected credit losses (“CECL”) models using appropriate methodologies.

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

In March 2020 in connection with the implementation of the CARES Act and related provisions, the Company adopted the temporary relief issued under the CARES Act, thereby suspending the guidance in ASC 310-40 on accounting for TDRs to loan modifications related to COVID-19. Section 4013 of the CARES Act specifies that loan modifications due to the impact of COVID-19 that would otherwise be classified as TDRs under GAAP will not be so classified. Modifications within the scope of this relief are in effect from the period beginning March 1, 2020 until the earlier of January 1, 2022 or 60 days after the date on which the national emergency related to the COVID-19 pandemic formally terminates. See the “Non-TDR Loan Modifications due to COVID-19” section of Part I, Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations for more information.

ASU 2020-04 - Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on     Financial Reporting (March 2020)

In March 2020, FASB issued ASU 2020-04 to ease the potential burden in accounting for the transition away from the LIBORon financial reporting. The ASU provides optional expedients and exceptions for applying GAAP to contract modification and hedge accounting relationships. The guidance is effective March 12, 2020 through December 31, 2022. The Company believes the adoption of this guidance will not have a material impact on the condensed consolidated financial statements.

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Earnings Per Share (Tables)

6 Months Ended

Jun. 30, 2021

Earnings Per Share [Abstract]

Schedule of Weighted Average Number of Shares

The following is a reconciliation of the weighted-average common shares for the basic and diluted earnings per share computations for the three and six months ended June 30, 2021 and 2020. 

(dollars in thousands, except per share data)	Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020
Basic earnings per share
Net income	$	13,096	$	3,932	$	23,546	$	9,951
Weighted-average common shares	9,932,761		9,768,227		9,916,087		9,798,528
Basic earnings per common share	$	1.32	$	0.40	$	2.37	$	1.02
Diluted earnings per share
Net income	$	13,096	$	3,932	$	23,546	$	9,951
Weighted-average common shares	9,932,761		9,768,227		9,916,087		9,798,528
Dilutive effect of equity compensation	48,661		—		54,060		3,899
Weighted-average common and incremental shares	9,981,422		9,768,227		9,970,147		9,802,427
Diluted earnings per common share (1)	$	1.31	$	0.40	$	2.36	$	1.02

(1) Potential dilutive common shares are excluded from the computation of diluted EPS in the periods where the effect would be antidilutive. Excluded from the computation of diluted EPS were weighted-average antidilutive shares totaling 6 and 3 for the three and six months ended June 30, 2021, respectively, and 79,893 and 29,606 for the three and six months ended June 30, 2020, respectively.

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Securities (Tables)

6 Months Ended

Jun. 30, 2021

Investments, Debt and Equity Securities [Abstract]

Schedule of Available-for-sale Securities Reconciliation

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

	June 30, 2021
	Amortized		Gross Unrealized				Fair
(in thousands)	Cost		Gains		Losses		Value
Securities available-for-sale
U.S. Government-sponsored agencies	$	57,984	$	337	$	(1,186)	$	57,135
Municipal securities	77,364		1,229		(155)		78,438
Agency mortgage-backed securities	445,895		2,734		(4,135)		444,494
Private label mortgage-backed securities	29,003		360		—		29,363
Asset-backed securities	5,000		5		—		5,005
Corporate securities	48,447		855		(218)		49,084
Total available-for-sale	$	663,693	$	5,520	$	(5,694)	$	663,519

	December 31, 2020
	Amortized		Gross Unrealized				Fair
(in thousands)	Cost		Gains		Losses		Value
Securities available-for-sale
U.S. Government-sponsored agencies	$	61,765	$	432	$	(1,652)	$	60,545
Municipal securities	82,757		463		(731)		82,489
Agency mortgage-backed securities	241,795		4,591		(2,465)		243,921
Private label mortgage-backed securities	57,268		850		(2)		58,116
Asset-backed securities	5,000		—		(39)		4,961
Corporate securities	48,419		771		(1,594)		47,596
Total available-for-sale	$	497,004	$	7,107	$	(6,483)	$	497,628

Schedule Of Held-To-Maturity Securities Reconciliation

	June 30, 2021
	Amortized		Gross Unrealized				Fair
(in thousands)	Cost		Gains		Losses		Value
Securities held-to-maturity
Municipal securities	$	14,549	$	824	$	—	$	15,373
Corporate securities	51,110		1,575		—		52,685
Total held-to-maturity	$	65,659	$	2,399	$	—	$	68,058

	December 31, 2020
	Amortized		Gross Unrealized				Fair
(in thousands)	Cost		Gains		Losses		Value
Securities held-to-maturity
Municipal securities	$	14,571	$	746	$	—	$	15,317
Corporate securities	53,652		610		(127)		54,135
Total held-to-maturity	$	68,223	$	1,356	$	(127)	$	69,452

Available-for-sale Securities

The carrying value of securities at June 30, 2021 is shown below by their contractual maturity date. Actual maturities will differ because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

	Available-for-Sale
(in thousands)	Amortized Cost		Fair Value
Within one year	$	—	$	—
One to five years	29,686		27,234
Five to ten years	72,226		72,380
After ten years	81,883		85,043
	183,795		184,657
Agency mortgage-backed securities	445,895		444,494
Private label mortgage-backed securities	29,003		29,363
Asset-backed securities	5,000		5,005
Total	$	663,693	$	663,519

Held-to-maturity Securities

	Held-to-Maturity
(in thousands)	Amortized Cost		Fair Value
One to five years	$	3,375	$	3,556
Five to ten years	50,096		51,908
After ten years	12,188		12,594
Total	$	65,659	$	68,058

Available-for-sale Securities, Continuous Unrealized Loss Position, Fair Value

The unrealized losses on the Company’s investments in agency mortgage-backed, private label mortgage-backed and asset-backed securities were caused primarily by interest rate changes. The Company expects to recover the amortized cost bases over the terms of the securities. Because the Company does not intend to sell the investments and it is not likely that the Company will be required to sell the investments before recovery of their amortized cost bases, which may be upon maturity, the Company does not consider those investments to be other-than-temporarily impaired at June 30, 2021.

The following tables show the securities portfolio’s gross unrealized losses and fair value, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position at June 30, 2021 and December 31, 2020.

	June 30, 2021
	Less Than 12 Months				12 Months or Longer				Total
(in thousands)	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
Securities available-for-sale
U.S. Government-sponsored agencies	$	2,969	$	(31)	$	47,281	$	(1,155)	$	50,250	$	(1,186)
Municipal securities	61,658		(155)		—		—		61,658		(155)
Agency mortgage-backed securities	316,123		(3,543)		8,956		(592)		325,079		(4,135)
Corporate securities	4,984		(16)		9,799		(202)		14,783		(218)
Total	$	385,734	$	(3,745)	$	66,036	$	(1,949)	$	451,770	$	(5,694)

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

	December 31, 2020
	Less Than 12 Months				12 Months or Longer				Total
(in thousands)	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
Securities available-for-sale
U.S. Government-sponsored agencies	$	—	$	—	$	52,351	$	(1,652)	$	52,351	$	(1,652)
Municipal securities	18,731		(114)		23,519		(617)		42,250		(731)
Agency mortgage-backed securities	38,987		(276)		45,297		(2,189)		84,284		(2,465)
Private label mortgage-backed securities	1,277		(1)		558		(1)		1,835		(2)
Asset-backed securities	—		—		4,961		(39)		4,961		(39)
Corporate securities	—		—		20,406		(1,594)		20,406		(1,594)
Total	$	58,995	$	(391)	$	147,092	$	(6,092)	$	206,087	$	(6,483)

Held to Maturity, Continuous Unrealized Loss Position, Fair Value

	December 31, 2020
	Less Than 12 Months				12 Months or Longer				Total
(in thousands)	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
Securities held-to-maturity
Corporate securities	17,456		(126)		2,999		(1)		20,455		(127)
Total	$	17,456	$	(126)	$	2,999	$	(1)	$	20,455	$	(127)

Schedule of Accumulated Other Comprehensive Income (Loss)

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

(in thousands) Details About Accumulated Other Comprehensive Loss Components									Affected Line Item in the Statements of Income
	Three Months Ended June 30, 2021		Six Months Ended June 30, 2021		Three Months Ended June 30, 2020		Six Months Ended June 30, 2020
Realized gains on securities available-for-sale
Gain realized in earnings	$	—	$	—	$	—	$	41	Gain on sale of securities
Total reclassified amount before tax	—		—		—		41		Income Before Income Taxes
Tax expense	—		—				11		Income Tax Provision
Total reclassifications out of accumulated other comprehensive loss	$	—	$	—	$	—	$	30	Net Income

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

(in thousands)	Available-For-Sale Securities		Cash Flow Hedges		Total
Balance, January 1, 2021	$	468	$	(17,664)	$	(17,196)
Net unrealized holding (losses) gains recorded within other comprehensive income before income tax	(807)		6,226		5,419
Other comprehensive (loss) gain before tax	(807)		6,226		5,419
Income tax (benefit) provision	(175)		1,309		1,134
Other comprehensive (loss) income - net of tax	$	(632)	$	4,917	$	4,285
Balance, June 30, 2021	$	(164)	$	(12,747)	$	(12,911)
Balance, January 1, 2020	$	(4,388)	$	(9,803)	$	(14,191)
Net unrealized holding gains (losses) recorded within other comprehensive income before income tax	4,801		(13,967)		(9,166)
Reclassification of net loss realized and included in earnings	(41)		—		(41)
Other comprehensive income (loss) before tax	4,760		(13,967)		(9,207)
Income tax provision (benefit)	1,760		(4,020)		(2,260)
Other comprehensive income (loss) - net of tax	3,000		(9,947)		(6,947)
Balance, June 30, 2020	$	(1,388)	$	(19,750)	$	(21,138)

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

(in thousands)	Available-For-Sale Securities		Cash Flow Hedges		Total
Balance, April 1, 2021	$	(1,219)	$	(12,701)	$	(13,920)
Net unrealized holding gains (losses) recorded within other comprehensive income before income tax	1,388		(54)		1,334
Other comprehensive gain (loss) before tax	1,388		(54)		1,334
Income tax (benefit) provision	(333)		8		(325)
Other comprehensive (loss) income - net of tax	$	1,055	$	(46)	$	1,009
Balance, June 30, 2021	$	(164)	$	(12,747)	$	(12,911)
Balance, April 1, 2020	$	(239)	$	(19,627)	$	(19,866)
Net change in unrealized loss	(1,498)		(509)		(2,007)
Other comprehensive loss before tax	(1,498)		(509)		(2,007)
Income tax benefit	(349)		(386)		(735)
Other comprehensive income (loss) - net of tax	(1,149)		(123)		(1,272)
Balance, June 30, 2020	$	(1,388)	$	(19,750)	$	(21,138)

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Loans (Tables)

6 Months Ended

Jun. 30, 2021

Receivables [Abstract]

Schedule of Accounts, Notes, Loans and Financing Receivable

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

(in thousands)	June 30, 2021		December 31, 2020
Commercial loans
Commercial and industrial	$	96,203	$	75,387
Owner-occupied commercial real estate	87,136		89,785
Investor commercial real estate	28,871		13,902
Construction	117,970		110,385
Single tenant lease financing	913,115		950,172
Public finance	612,138		622,257
Healthcare finance	455,890		528,154
Small business lending	123,293		125,589
Total commercial loans	2,434,616		2,515,631
Consumer loans
Residential mortgage	177,148		186,787
Home equity	17,510		19,857
Other consumer	271,796		275,692
Total consumer loans	466,454		482,336
Total commercial and consumer loans	2,901,070		2,997,967
Net deferred loan origination fees/costs and premiums/discounts on purchased loans and other(1)	56,538		61,264
Total loans	2,957,608		3,059,231
Allowance for loan losses	(28,066)		(29,484)
Net loans	$	2,929,542	$	3,029,747

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

Allowance for Credit Losses on Financing Receivables

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

(in thousands)	Three Months Ended June 30, 2021
Allowance for loan losses:	Balance, Beginning of Period		Provision (Credit) Charged to Expense		Losses Charged Off		Recoveries		Balance, End of Period
Commercial and industrial	$	1,662	$	267	$	(28)	$	2	$	1,903
Owner-occupied commercial real estate	1,029		(8)		—		—		1,021
Investor commercial real estate	169		160		—		—		329
Construction	1,420		(63)		—		—		1,357
Single tenant lease financing	13,178		418		(2,391)		—		11,205
Public finance	1,748		(48)		—		—		1,700
Healthcare finance	7,755		(817)		—		—		6,938
Small business lending	700		214		(133)		2		783
Residential mortgage	601		(5)		(6)		4		594
Home equity	57		4		—		2		63
Other consumer	2,323		(101)		(131)		82		2,173
Total	$	30,642	$	21	$	(2,689)	$	92	$	28,066

	Six Months Ended June 30, 2021
Allowance for loan losses:	Balance, Beginning of Period		Provision (Credit) Charged to Expense		Losses Charged Off		Recoveries		Balance, End of Period
Commercial and industrial	$	1,146	$	701	$	(28)	$	84	$	1,903
Owner-occupied commercial real estate	1,082		(61)		—		—		1,021
Investor commercial real estate	155		174		—		—		329
Construction	1,192		165		—		—		1,357
Single tenant lease financing	12,990		606		(2,391)		—		11,205
Public finance	1,732		(32)		—		—		1,700
Healthcare finance	7,485		(547)		—		—		6,938
Small business lending	628		361		(212)		6		783
Residential mortgage	519		72		(6)		9		594
Home equity	48		63		(51)		3		63
Other consumer	2,507		(205)		(313)		184		2,173
Total	$	29,484	$	1,297	$	(3,001)	$	286	$	28,066

	Three Months Ended June 30, 2020
Allowance for loan losses:	Balance, Beginning of Period		Provision (Credit) Charged to Expense		Losses Charged Off		Recoveries		Balance, End of Period
Commercial and industrial	$	1,670	$	(141)	$	(57)	$	5	$	1,477
Owner-occupied commercial real estate	645		201		—		—		846
Investor commercial real estate	128		2		—		—		130
Construction	460		261		—		—		721
Single tenant lease financing	10,755		563		—		—		11,318
Public finance	1,483		59		—		—		1,542
Healthcare finance	4,318		1,187		(743)		—		4,762
Small business lending	265		(20)		—		6		251
Residential mortgage	500		36		—		3		539
Home equity	53		(4)		—		2		51
Other consumer	2,580		347		(216)		117		2,828
Total	$	22,857	$	2,491	$	(1,016)	$	133	$	24,465

	Six Months Ended June 30, 2020
Allowance for loan losses:	Balance, Beginning of Period		Provision (Credit) Charged to Expense		Losses Charged Off		Recoveries		Balance, End of Period
Commercial and industrial	$	1,521	$	205	$	(254)	$	5	$	1,477
Owner-occupied commercial real estate	561		285		—		—		846
Investor commercial real estate	109		21		—		—		130
Construction	380		341		—		—		721
Single tenant lease financing	11,175		143		—		—		11,318
Public finance	1,580		(38)		—		—		1,542
Healthcare finance	3,247		2,258		(743)		—		4,762
Small business lending	54		183		—		14		251
Residential mortgage	657		(107)		(15)		4		539
Home equity	46		—		—		5		51
Other consumer	2,510		661		(502)		159		2,828
Total	$	21,840	$	3,952	$	(1,514)	$	187	$	24,465

Allowance For Credit Losses On Financing Receivables Portfolio Segment

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

(in thousands)	Loans						Allowance for Loan Losses
June 30, 2021	Ending Balance:   Collectively Evaluated for Impairment		Ending Balance:   Individually Evaluated for Impairment		Ending Balance		Ending Balance:   Collectively Evaluated for Impairment		Ending Balance:   Individually Evaluated for Impairment		Ending Balance
Commercial and industrial	$	95,511	$	692	$	96,203	$	1,453	$	450	$	1,903
Owner-occupied commercial real estate	83,649		3,487		87,136		1,021		—		1,021
Investor commercial real estate	28,871		—		28,871		329		—		329
Construction	117,970		—		117,970		1,357		—		1,357
Single tenant lease financing	910,742		2,373		913,115		10,838		367		11,205
Public finance	612,138		—		612,138		1,700		—		1,700
Healthcare finance	454,919		971		455,890		6,415		523		6,938
Small business lending(1)	122,084		1,209		123,293		783		—		783
Residential mortgage	174,717		2,431		177,148		594		—		594
Home equity	17,496		14		17,510		63		—		63
Other consumer	271,786		10		271,796		2,173		—		2,173
Total	$	2,889,883	$	11,187	$	2,901,070	$	26,726	$	1,340	$	28,066

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

(in thousands)	Loans						Allowance for Loan Losses
December 31, 2020	Ending Balance:   Collectively Evaluated for Impairment		Ending Balance:   Individually Evaluated for Impairment		Ending Balance		Ending Balance:   Collectively Evaluated for Impairment		Ending Balance:   Individually Evaluated for Impairment		Ending Balance
Commercial and industrial	$	74,870	$	517	$	75,387	$	1,146	$	—	$	1,146
Owner-occupied commercial real estate	87,947		1,838		89,785		1,082		—		1,082
Investor commercial real estate	13,902		—		13,902		155		—		155
Construction	110,385		—		110,385		1,192		—		1,192
Single tenant lease financing	942,848		7,324		950,172		9,900		3,090		12,990
Public finance	622,257		—		622,257		1,732		—		1,732
Healthcare finance	527,144		1,010		528,154		7,485		—		7,485
Small business lending	125,589		—		125,589		628		—		628
Residential mortgage	185,241		1,546		186,787		519		—		519
Home equity	19,857		—		19,857		48		—		48
Other consumer	275,642		50		275,692		2,507		—		2,507
Total	$	2,985,682	$	12,285	$	2,997,967	$	26,394	$	3,090	$	29,484

Financing Receivable Credit Quality Indicators

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

	June 30, 2021
(in thousands)	Pass		Special Mention		Substandard		Total
Commercial and industrial	$	79,928	$	15,563	$	712	$	96,203
Owner-occupied commercial real estate	79,730		3,919		3,487		87,136
Investor commercial real estate	28,871		—		—		28,871
Construction	117,970		—		—		117,970
Single tenant lease financing	901,505		9,237		2,373		913,115
Public finance	612,138		—		—		612,138
Healthcare finance	454,312		615		963		455,890
Small business lending(1)	112,864		8,718		1,711		123,293
Total commercial loans	$	2,387,318	$	38,052	$	9,246	$	2,434,616

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

	June 30, 2021
(in thousands)	Performing		Nonaccrual		Total
Residential mortgage	$	175,895	$	1,253	$	177,148
Home equity	17,496		14		17,510
Other consumer	271,786		10		271,796
Total consumer loans	$	465,177	$	1,277	$	466,454

	December 31, 2020
(in thousands)	Pass		Special Mention		Substandard		Total
Commercial and industrial	$	74,138	$	732	$	517	$	75,387
Owner-occupied commercial real estate	84,292		3,655		1,838		89,785
Investor commercial real estate	13,902		—		—		13,902
Construction	110,385		—		—		110,385
Single tenant lease financing	932,830		10,018		7,324		950,172
Public finance	622,257		—		—		622,257
Healthcare finance	526,517		627		1,010		528,154
Small business lending	117,474		2,930		5,185		125,589
Total commercial loans	$	2,481,795	$	17,962	$	15,874	$	2,515,631

	December 31, 2020
(in thousands)	Performing		Nonaccrual		Total
Residential mortgage	$	185,604	$	1,183	$	186,787
Home equity	19,857		—		19,857
Other consumer	275,646		46		275,692
Total consumer loans	$	481,107	$	1,229	$	482,336

Past Due Financing Receivables

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

	June 30, 2021
(in thousands)	30-59 Days Past Due		60-89 Days Past Due		90 Days  or More Past Due		Total  Past Due		Current		Total Loans		Non- accrual Loans		Total Loans 90 Days or More Past Due and Accruing
Commercial and industrial	$	2	$	—	$	—	$	2	$	96,201	$	96,203	$	692	$	—
Owner-occupied commercial real estate	—		—		—		—		87,136		87,136		—		—
Investor commercial real estate	—		—		—		—		28,871		28,871		3,487		—
Construction	—		—		—		—		117,970		117,970		—		—
Single tenant lease financing	—		—		—		—		913,115		913,115		2,373		—
Public finance	—		—		—		—		612,138		612,138		—		—
Healthcare finance	—		—		—		—		455,890		455,890		—		—
Small business lending(1)	—		—		1,209		1,209		122,084		123,293		1,209		—
Residential mortgage	—		—		364		364		176,784		177,148		1,253		—
Home equity	—		—		—		—		17,510		17,510		14		—
Other consumer	89		9		—		98		271,698		271,796		10		—
Total	$	91	$	9	$	1,573	$	1,673	$	2,899,397	$	2,901,070	$	9,038	$	—

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

	December 31, 2020
(in thousands)	30-59 Days Past Due		60-89 Days Past Due		90 Days  or More Past Due		Total  Past Due		Current		Total Loans		Non- accrual Loans		Total Loans 90 Days or More Past Due and Accruing
Commercial and industrial	$	—	$	—	$	—	$	—	$	75,387	$	75,387	$	—	$	—
Owner-occupied commercial real estate	—		—		—		—		89,785		89,785		1,838		—
Investor commercial real estate	—		—		—		—		13,902		13,902		—		—
Construction	—		—		—		—		110,385		110,385		—		—
Single tenant lease financing	—		—		4,680		4,680		945,492		950,172		7,116		—
Public finance	—		—		—		—		622,257		622,257		—		—
Healthcare finance	—		—		—		—		528,154		528,154		—		—
Small business lending	—		—		—		—		125,589		125,589		—		—
Residential mortgage	49		—		269		318		186,469		186,787		1,183		—
Home equity	—		15		—		15		19,842		19,857		—		—
Other consumer	176		51		5		232		275,460		275,692		46		—
Total	$	225	$	66	$	4,954	$	5,245	$	2,992,722	$	2,997,967	$	10,183	$	—

Impaired Financing Receivables

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

	June 30, 2021						December 31, 2020
(in thousands)	Recorded Balance		Unpaid Principal Balance		Specific Allowance		Recorded Balance		Unpaid Principal Balance		Specific Allowance
Loans without a specific valuation allowance
Commercial and industrial	$	3,487	$	3,513	$	—	$	517	$	517	$	—
Owner-occupied commercial real estate	—		—		—		1,838		1,850		—
Single tenant lease financing	—		—		—		1,315		1,334		—
Healthcare finance	—		—		—		1,010		1,010		—
Small business lending(1)	1,209		1,209		—		—		—		—
Residential mortgage	2,431		2,566		—		1,546		1,652		—
Home equity	14		15		—		—		—		—
Other consumer	10		47		—		50		120		—
Total	7,151		7,350		—		6,276		6,483		—
Loans with a specific valuation allowance
Commercial and industrial	692		723		450		—		—		—
Single tenant lease financing	2,373		2,463		367		6,009		6,036		3,090
Healthcare Finance	971		971		523		—		—		—
Total	4,036		4,157		1,340		6,009		6,036		3,090
Total impaired loans	$	11,187	$	11,507	$	1,340	$	12,285	$	12,519	$	3,090

1 Entire balance is guaranteed by the U.S. government.

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

	Three Months Ended								Six Months Ended
	June 30, 2021				June 30, 2020				June 30, 2021				June 30, 2020
(in thousands)	Average Balance		Interest Income		Average Balance		Interest Income		Average Balance		Interest Income		Average Balance			Interest Income
Loans without a specific valuation allowance
Commercial and industrial	$	259	$	—	$	594	$	18	$	259	$	9	$	1,330	237	$	36
Owner-occupied commercial real estate	3,994		—		3,923		29		3,307		—		4,573		145	31
Single tenant lease financing	148		—		—		—		100		5		—			—
Healthcare finance	—		—		—		—		336		—		—			—
Small business lending(1)	1,123		—		—		—		970		—		—			—
Residential mortgage	2,410		9		1,352		—		2,192		13		1,313			—
Home equity	15		—		—		—		13		—		—			—
Other consumer	21		—		75		—		23		—		60			—
Total	7,970		9		5,944		47		7,200		27		7,276			67
Loans with a specific valuation allowance
Commercial and industrial	839		—		204		—		677		—		204			—
Owner-occupied commercial real estate	1,420		—		—		—		473		—		—			—
Single tenant lease financing	5,430		—		4,680		—		4,984		—		4,680			—
Healthcare Finance	979		24		—		—		815		36		—			—
Total	8,668		24		4,884		—		6,949		36		4,884			—
Total impaired loans	$	16,638	$	33	$	10,828	$	47	$	14,149	$	63	$	12,160		$	67

1 Entire balance is guaranteed by the U.S. government.

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Premises and Equipment (Tables)

6 Months Ended

Jun. 30, 2021

Property, Plant and Equipment [Abstract]

Property, Plant and Equipment

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

(in thousands)	June 30, 2021		December 31, 2020
Land	$	—	$	2,500
Right of use leased asset	304		819
Construction in process	42,106		28,754
Building and improvements	439		5,819
Furniture and equipment	7,636		10,671
Less: accumulated depreciation	(6,236)		(10,973)
Total	$	44,249	$	37,590

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Servicing Asset (Tables)

6 Months Ended

Jun. 30, 2021

Transfers and Servicing [Abstract]

Schedule of Servicing Assets at Fair Value

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

(in thousands)	Three Months Ended
	June 30, 2021		June 30, 2020
Balance, beginning of period	$	3,817	$	2,415
Additions
Originated and purchased servicing	543		197
Subtractions
Paydowns	(154)		(90)
Changes in fair value due to changes in valuation inputs or assumptions used in the   valuation model	(86)		—
Balance, end of period	$	4,120	$	2,522

(in thousands)	Six Months Ended
	June 30, 2021		June 30, 2020
Balance, beginning of period	$	3,569	$	2,481
Additions
Originated and purchased servicing	946		310
Subtractions
Paydowns	(324)		(269)
Changes in fair value due to changes in valuation inputs or assumptions used in the   valuation model	(71)		—
Balance, end of period	$	4,120	$	2,522

Schedule Of Unpaid Principal Balances Of Loans Serviced For Others

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

(in thousands)
	June 30, 2021		December 31, 2020
Loan portfolios serviced for:
SBA guaranteed loans	$	196,869	$	165,961
Total	$	196,869	$	165,961

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Subordinated Debt (Tables)

6 Months Ended

Jun. 30, 2021

Debt Disclosure [Abstract]

Schedule of Subordinated Borrowing

	June 30, 2021				December 31, 2020
(in thousands)	Principal		Unamortized Debt Issuance Costs		Principal		Unamortized Debt Issuance Costs
2025 Note	—		—		10,000		(114)
2026 Notes	25,000		(652)		25,000		(715)
2029 Notes	37,000		(1,258)		37,000		(1,337)
2030 Notes	$	10,000	$	(219)	$	10,000	$	(231)
Total	$	72,000	$	(2,129)	$	82,000	$	(2,397)

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Benefit Plans (Tables)

6 Months Ended

Jun. 30, 2021

Retirement Benefits [Abstract]

Nonvested Restricted Stock Shares Activity

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

	Restricted Stock Units	Weighted-Average Grant Date Fair Value Per Share		Restricted Stock Awards	Weighted-Average Grant Date Fair Value Per Share		Deferred Stock Units	Weighted-Average Grant Date Fair Value Per Share
Nonvested at December 31, 2020	112,985	$	27.76	—	$	—	—	$	—
Granted	60,111	30.42		13,878	30.27		4	32.53
Cancelled/Forfeited	—	—		(1,057)	30.13		—	—
Vested	(35,745)	30.12		(6,479)	30.20		(4)	32.53
Nonvested at June 30, 2021	137,351	$	28.32	6,342	$	30.36	—	$	—

Schedule Of Deferred Stock Option Plan

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

	Deferred Stock Rights
Outstanding, beginning of period	83,835
Granted	350
Exercised	—
Outstanding, end of period	84,185

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Fair Value of Financial Instruments (Tables)

6 Months Ended

Jun. 30, 2021

Fair Value Disclosures [Abstract]

Fair Value, Assets Measured on Recurring Basis

The following tables present the fair value measurements of assets and liabilities recognized in the accompanying condensed consolidated balance sheets measured at fair value on a recurring basis and the level within the fair value hierarchy in which the fair value measurements fall at June 30, 2021 and December 31, 2020.

			June 30, 2021  Fair Value Measurements Using
(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	$	57,135	$	—	$	57,135	$	—
Municipal securities	78,438		—		78,438		—
Agency mortgage-backed securities	444,494		—		444,494		—
Private label mortgage-backed securities	29,363				29,363		—
Asset-backed securities	5,005		—		5,005		—
Corporate securities	49,084		—		49,084		—
Total available-for-sale securities	663,519		—		663,519		—
Loans held-for-sale (mandatory pricing agreements)	16,870		—		16,870		—
Servicing asset	4,120		—		—		4,120
Interest rate swap agreements	(20,286)		—		(20,286)		—
Forward contracts	(17)		(17)		—		—
IRLCs	818		—		—		818

			December 31, 2020 Fair Value Measurements Using
(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	$	60,545	$	—	$	60,545	$	—
Municipal securities	82,489		—		82,489		—
Agency mortgage-backed securities	243,921		—		243,921		—
Private label mortgage-backed securities	58,116		—		58,116		—
Asset-backed securities	4,961		—		4,961		—
Corporate securities	47,596		—		47,596		—
Total available-for-sale securities	497,628		—		497,628		—
Loans held-for-sale (mandatory pricing agreements)	26,341		—		26,341		—
Servicing asset	3,569		—		—		3,569
Interest rate swap agreements	(17,606)		—		(17,606)		—
Forward contracts	(640)		(640)		—		—
IRLCs	3,361		—		—		3,361

Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation

The following tables reconcile the beginning and ending balances of recurring fair value measurements recognized in the accompanying condensed consolidated balance sheets using significant unobservable (Level 3) inputs for the three and six months ended June 30, 2021 and 2020.

	Three Months Ended
(in thousands)	Servicing Asset		Interest Rate Lock Commitments
Balance, April 1, 2021	$	3,817	$	1,110
Total realized gains
Additions	543		—
Paydowns	(154)		—
Change in fair value	(86)		(292)
Balance, June 30, 2021	4,120		818
Balance as of April 1, 2020	$	2,415	$	2,064
Total realized gains
Additions	197		—
Paydowns	—		—
Change in fair value	(90)		(1,782)
Balance, June 30, 2020	$	2,522	$	282

	Six Months Ended
(in thousands)	Servicing Asset		Interest Rate Lock Commitments
Balance, January 1, 2021	$	3,569	$	3,361
Total realized gains
Additions	946		—
Paydowns	(324)		—
Change in fair value	(71)		(2,543)
Balance, June 30, 2021	4,120		818
Balance as of January 1, 2020	$	2,481	$	910
Total realized gains
Additions	310		—
Paydowns	—		—
Change in fair value	(269)		(628)
Balance, June 30, 2020	$	2,522	$	282

Schedule Of Impaired Loans, Including Valuation Allowance, Fair Value, Unobservable Inputs Reconciliation

The following table presents the fair value measurements of assets and liabilities recognized in the accompanying condensed consolidated balance sheets measured at fair value on a nonrecurring basis and the level within the fair value hierarchy in which the fair value measurement falls at June 30, 2021 and December 31, 2020.

		June 30, 2021
(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)
Impaired loans	4,035	—	—	4,035

			December 31, 2020
(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)
Impaired loans	$	4,026	$	—	$	—	$	4,026

Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques

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 June 30, 2021		Valuation Technique	Significant Unobservable Inputs	Range	Weighted-Average Range
Impaired loans	$	4,035	Fair value of collateral	Discount for type of property and current market conditions	10%	10%
IRLCs	818		Discounted cash flow	Loan closing rates	63% - 100%	92%
Servicing asset	3,817		Discounted cash flow	Prepayment speeds Discount rate	0% - 25% 10%	12.6% 10%

(dollars in thousands)	Fair Value at December 31, 2020		Valuation Technique	Significant Unobservable Inputs	Range	Weighted-Average Range
Impaired loans	$	4,026	Fair value of collateral	Discount for type of property and current market conditions	10%	10%
IRLCs	3,361		Discounted cash flow	Loan closing rates	44% - 100%	87%
Servicing asset	3,569		Discounted cash flow	Prepayment speeds Discount rate	0% - 25% 10%	12.1% 10%

Fair Value, by Balance Sheet Grouping

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

	June 30, 2021 Fair Value Measurements Using
(in thousands)	Carrying Amount		Fair Value		Quoted Prices In Active Market for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Cash and cash equivalents	$	328,797	$	328,797	$	328,797	$	—	$	—
Securities held-to-maturity	65,659		68,058		—		68,058		—
Loans held-for-sale (best efforts pricing agreements)	10,717		10,717		—		10,717		—
Net loans	2,929,542		2,975,406		—		—		2,975,406
Accrued interest receivable	16,345		16,345		16,345		—		—
Federal Home Loan Bank of Indianapolis stock	25,650		25,650		—		25,650		—
Deposits	3,206,147		3,229,241		1,799,490		—		1,429,751
Advances from Federal Home Loan Bank	514,919		533,237		—		533,237		—
Subordinated debt	69,871		75,456		65,294		10,162		—
Accrued interest payable	1,132		1,132		1,132		—		—

	December 31, 2020 Fair Value Measurements Using
(in thousands)	Carrying Amount		Fair Value		Quoted Prices In Active Market for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Cash and cash equivalents	$	419,806	$	419,806	$	419,806	$	—	$	—
Securities held-to-maturity	68,223		69,452		—		69,452		—
Loans held-for-sale (best efforts pricing agreements)	13,243		13,243		—		13,243		—
Net loans	3,029,747		3,084,375		—		—		3,084,375
Accrued interest receivable	17,416		17,416		17,416		—		—
Federal Home Loan Bank of Indianapolis stock	25,650		25,650		—		25,650		—
Deposits	3,270,885		3,307,038		1,679,164		—		1,627,874
Advances from Federal Home Loan Bank	514,916		541,945		—		541,945		—
Subordinated debt	79,603		83,682		63,325		20,357		—
Accrued interest payable	1,439		1,439		1,439		—		—

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Mortgage Banking Activities (Tables)

6 Months Ended

Jun. 30, 2021

Mortgage Banking [Abstract]

Schedule of Participating Mortgage Loans

The following table presents the components of income from mortgage banking activities for the three and six months ended June 30, 2021 and 2020.

	Three Months Ended June 30,				Six Months Ended June 30,
(in thousands)	2021		2020		2021		2020
Gain on loans sold	$	3,587	$	4,164	$	11,086	$	8,507
(Loss) gain resulting from the change in fair value of loans held-for-sale	118		(1,255)		(744)		(939)
(Loss) gain resulting from the change in fair value of derivatives	(1,031)		499		(1,918)		(492)
Net revenue from mortgage banking activities	$	2,674	$	3,408	$	8,424	$	7,076

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Derivative Financial Instruments (Tables)

6 Months Ended

Jun. 30, 2021

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Schedule Of Derivative Instruments, Cumulative Basis Adjustments

The following table presents amounts that were recorded on the condensed consolidated balance sheets related to cumulative basis adjustments for interest rate swap derivatives designated as fair value accounting hedges as of June 30, 2021 and December 31, 2020.  

(in thousands)	Carrying amount of the hedged asset		Cumulative amount of fair value hedging adjustment included in the carrying amount of the hedged assets
Line item in the condensed consolidated balance sheets in which the hedged item is included	June 30, 2021	December 31, 2020	June 30, 2021	December 31, 2020
Securities available-for-sale (1)	77,363	124,210	2,834	6,064

(1) These amounts include the amortized cost basis of closed portfolios used to designate hedging relationships in which the hedged item is the last layer expected to be remaining at the end of the hedging relationship. The designated hedged items were $50.0 million and $88.2 million, at June 30, 2021 and December 31, 2020.

Schedule Of Derivative Instruments Of Fixed Rate Receivables

The following tables present a summary of interest rate swap derivatives designated as fair value accounting hedges of fixed-rate receivables used in the Company’s asset/liability management activities at June 30, 2021 and December 31, 2020, identified by the underlying interest rate-sensitive instruments.

(dollars in thousands) June 30, 2021	Notional Value		Weighted- Average Remaining Maturity (years)			Weighted-Average Ratio
Instruments Associated With				Fair Value		Receive	Pay
Securities available-for-sale	$	50,000	3.3	$	(2,835)	3-month LIBOR	2.33	%
Total at June 30, 2021	$	50,000	3.3	$	(2,835)	3-month LIBOR	2.33	%

In March 2021, the Company terminated fair value hedging relationships with a notional value of $38.2 million associated with agency mortgage-backed securities available-for-sale, which resulted in swap termination payments to counterparties totaling $1.9 million. The corresponding securities fair value hedging adjustment as of the date of termination is being amortized over the remaining lives of the designated securities.

(dollars in thousands) December 31, 2020	Notional Value		Weighted- Average Remaining Maturity (years)			Weighted-Average Ratio
Instruments Associated With				Fair Value		Receive	Pay
Securities available-for-sale	88,200		3.1	(6,072)		3-month LIBOR	2.54	%
Total at December 31, 2020	$	88,200	3.1	$	(6,072)	3-month LIBOR	2.54	%

Schedule Of Derivative Instruments Of Variable Rate Liabilities

The following tables present a summary of interest rate swap derivatives designated as cash flow accounting hedges of variable-rate liabilities used in the Company’s asset/liability management activities at June 30, 2021 and December 31, 2020.

(dollars in thousands) June 30, 2021	Notional		Weighted- Average Remaining Maturity			Weighted-Average Ratio
Cash Flow Hedges	Value		(years)	Fair Value		Receive	Pay
Interest rate swaps	$	110,000	5.6	$	(11,349)	3-month LIBOR	2.88	%
Interest rate swaps	100,000		2.5	(6,103)		1-month LIBOR	2.88	%

(dollars in thousands) December 31, 2020	Notional		Weighted- Average Remaining Maturity			Weighted-Average Ratio
Cash Flow Hedges	Value		(years)	Fair Value		Receive	Pay
Interest rate swaps	$	110,000	6.1	$	(15,727)	3-month LIBOR	2.88	%
Interest rate swaps	100,000		3.0	(7,951)		1-month LIBOR	2.88	%

Schedule of Derivative Instruments in Statement of Financial Position, Fair Value

The following table presents the notional amount and fair value of interest rate swaps, IRLCs and forward contracts utilized by the Company at June 30, 2021 and December 31, 2020.

	June 30, 2021				December 31, 2020
(in thousands)	Notional Amount		Fair Value		Notional Amount		Fair Value
Asset Derivatives
Derivatives not designated as hedging instruments
IRLCs	$	47,493	$	818	$	108,095	$	3,361
Total contracts	$	47,493	$	818	$	108,095	$	3,361
Liability Derivatives
Derivatives designated as hedging instruments
Interest rate swaps associated with loans	$	—	$	—	$	—	$	—
Interest rate swaps associated with securities available-for-sale	50,000		(2,835)		88,200		(6,072)
Interest rate swaps associated with liabilities	210,000		(17,451)		210,000		(23,678)
Derivatives not designated as hedging instruments
Forward contracts	46,750		(17)		107,500		(640)
Total contracts	$	306,750	$	(20,303)	$	405,700	$	(30,390)

Schedule of Cash Flow Hedges Included in Accumulated Other Comprehensive Income (Loss)

The following table presents the effects of the Company’s cash flow hedge relationships on the condensed consolidated statements of comprehensive income during the three and six months ended June 30, 2021 and 2020.

	Amount of Gain (Loss )Recognized in Other Comprehensive Income Loss in The Three Months Ended				Amount of Loss Recognized in Other Comprehensive Income Gain (Loss) in The Six Months Ended
(in thousands)	June 30, 2021		June 30, 2020		June 30, 2021		June 30, 2020
Interest rate swap agreements	$	(54)	$	(509)	$	6,226	$	(13,967)

Schedule of Derivative Instruments in Statements of Income Fair Value

The following table summarizes the periodic changes in the fair value of derivatives not designated as hedging instruments on the condensed consolidated statements of income for the three and six months ended June 30, 2021 and 2020.

	Amount of Gain / (Loss) Recognized in the Three Months Ended				Amount of Gain / (Loss) Recognized in the Six Months Ended
(in thousands)	June 30, 2021		June 30, 2020		June 30, 2021		June 30, 2020
Asset Derivatives
Derivatives not designated as hedging instruments
IRLCs	$	(292)	$	(1,781)	$	(2,541)	$	(628)
Liability Derivatives
Derivatives not designated as hedging instruments
IRLCs	—		—		—		—
Forward contracts	$	(738)	$	2,281	$	623	$	136

Schedule Of Effects Of Interest Rate Swap Agreements On Statements Of Income

The following table presents the effects of the Company’s interest rate swap agreements on the condensed consolidated statements of income during the three and six months ended June 30, 2021 and 2020.

(in thousands) Line item in the condensed consolidated statements of income	Three Months Ended				Six Months Ended
	June 30, 2021		June 30, 2020		June 30, 2021		June 30, 2020
Interest income
Loans	$	—	$	(1,221)	$	—	$	(2,445)
Securities - taxable	—		(159)		(253)		(250)
Securities - non-taxable	(271)		(164)		(537)		(230)
Total interest income	(271)		(1,544)		(790)		(2,925)
Interest expense
Deposits	692		593		1,370		899
Other borrowed funds	753		589		1,483		911
Total interest expense	1,445		1,182		2,853		1,810
Net interest income	$	(1,716)	$	(2,726)	$	(3,643)	$	(4,735)

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Accumulated Other Comprehensive Loss (Tables)

6 Months Ended

Jun. 30, 2021

Stockholders' Equity Note [Abstract]

Schedule of Accumulated Other Comprehensive Income (Loss)

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

(in thousands) Details About Accumulated Other Comprehensive Loss Components									Affected Line Item in the Statements of Income
	Three Months Ended June 30, 2021		Six Months Ended June 30, 2021		Three Months Ended June 30, 2020		Six Months Ended June 30, 2020
Realized gains on securities available-for-sale
Gain realized in earnings	$	—	$	—	$	—	$	41	Gain on sale of securities
Total reclassified amount before tax	—		—		—		41		Income Before Income Taxes
Tax expense	—		—				11		Income Tax Provision
Total reclassifications out of accumulated other comprehensive loss	$	—	$	—	$	—	$	30	Net Income

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

(in thousands)	Available-For-Sale Securities		Cash Flow Hedges		Total
Balance, January 1, 2021	$	468	$	(17,664)	$	(17,196)
Net unrealized holding (losses) gains recorded within other comprehensive income before income tax	(807)		6,226		5,419
Other comprehensive (loss) gain before tax	(807)		6,226		5,419
Income tax (benefit) provision	(175)		1,309		1,134
Other comprehensive (loss) income - net of tax	$	(632)	$	4,917	$	4,285
Balance, June 30, 2021	$	(164)	$	(12,747)	$	(12,911)
Balance, January 1, 2020	$	(4,388)	$	(9,803)	$	(14,191)
Net unrealized holding gains (losses) recorded within other comprehensive income before income tax	4,801		(13,967)		(9,166)
Reclassification of net loss realized and included in earnings	(41)		—		(41)
Other comprehensive income (loss) before tax	4,760		(13,967)		(9,207)
Income tax provision (benefit)	1,760		(4,020)		(2,260)
Other comprehensive income (loss) - net of tax	3,000		(9,947)		(6,947)
Balance, June 30, 2020	$	(1,388)	$	(19,750)	$	(21,138)

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

(in thousands)	Available-For-Sale Securities		Cash Flow Hedges		Total
Balance, April 1, 2021	$	(1,219)	$	(12,701)	$	(13,920)
Net unrealized holding gains (losses) recorded within other comprehensive income before income tax	1,388		(54)		1,334
Other comprehensive gain (loss) before tax	1,388		(54)		1,334
Income tax (benefit) provision	(333)		8		(325)
Other comprehensive (loss) income - net of tax	$	1,055	$	(46)	$	1,009
Balance, June 30, 2021	$	(164)	$	(12,747)	$	(12,911)
Balance, April 1, 2020	$	(239)	$	(19,627)	$	(19,866)
Net change in unrealized loss	(1,498)		(509)		(2,007)
Other comprehensive loss before tax	(1,498)		(509)		(2,007)
Income tax benefit	(349)		(386)		(735)
Other comprehensive income (loss) - net of tax	(1,149)		(123)		(1,272)
Balance, June 30, 2020	$	(1,388)	$	(19,750)	$	(21,138)

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Basis of Presentation (Details)	Jun. 30, 2021 subsidiary
Organization, Consolidation and Presentation of Financial Statements [Abstract]
Number of wholly-owned subsidiaries	3

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Earnings Per Share (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2021	Jun. 30, 2020	Jun. 30, 2021	Jun. 30, 2020
Basic earnings per share
Net income	$ 13,096	$ 3,932	$ 23,546	$ 9,951
Weighted-average common shares (in shares)	9,932,761,000	9,768,227	9,916,087,000	9,798,528
Basic earnings per common share ( in dollars per share)	$ 1.32	$ 0.40	$ 2.37	$ 1.02
Diluted earnings per share
Net income	$ 13,096	$ 3,932	$ 23,546	$ 9,951
Weighted-average common shares (in shares)	9,932,761,000	9,768,227	9,916,087,000	9,798,528
Dilutive effect of equity compensation (in shares)	48,661,000	0	54,060,000	3,899
Weighted-average common and incremental shares (in shares)	9,981,422,000	9,768,227	9,970,147,000	9,802,427
Diluted earnings per common share (in dollars per share)	$ 1.31	$ 0.40	$ 2.36	$ 1.02
Antidilutive securities excluded from computation of earnings per share, amount (in shares)	6	79,893	3	29,606

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Securities (Details) - USD ($) $ in Thousands	Jun. 30, 2021	Dec. 31, 2020
Available-for-sale Securities [Abstract]
Amortized cost	$ 663,693	$ 497,004
Gross Unrealized Gains	5,520	7,107
Gross Unrealized Losses	(5,694)	(6,483)
Fair Value	663,519	497,628
Debt Securities, Held-to-maturity, Fair Value to Amortized Cost [Abstract]
Held-to-maturity securities, amortized cost	65,659	68,223
Held-to-maturity securities, Gross Unrealized Gains	2,399	1,356
Held-to-maturity securities, Gross Unrealized Losses	0	(127)
Held-to-maturity, at fair value	68,058	69,452
U.S. Government-sponsored agencies
Available-for-sale Securities [Abstract]
Amortized cost	57,984	61,765
Gross Unrealized Gains	337	432
Gross Unrealized Losses	(1,186)	(1,652)
Fair Value	57,135	60,545
Municipal securities
Available-for-sale Securities [Abstract]
Amortized cost	77,364	82,757
Gross Unrealized Gains	1,229	463
Gross Unrealized Losses	(155)	(731)
Fair Value	78,438	82,489
Debt Securities, Held-to-maturity, Fair Value to Amortized Cost [Abstract]
Held-to-maturity securities, amortized cost	14,549	14,571
Held-to-maturity securities, Gross Unrealized Gains	824	746
Held-to-maturity securities, Gross Unrealized Losses	0	0
Held-to-maturity, at fair value	15,373	15,317
Agency mortgage-backed securities
Available-for-sale Securities [Abstract]
Amortized cost	445,895	241,795
Gross Unrealized Gains	2,734	4,591
Gross Unrealized Losses	(4,135)	(2,465)
Fair Value	444,494	243,921
Private label mortgage-backed securities
Available-for-sale Securities [Abstract]
Amortized cost	29,003	57,268
Gross Unrealized Gains	360	850
Gross Unrealized Losses	0	(2)
Fair Value	29,363	58,116
Asset-backed securities
Available-for-sale Securities [Abstract]
Amortized cost	5,000	5,000
Gross Unrealized Gains	5	0
Gross Unrealized Losses	0	(39)
Fair Value	5,005	4,961
Corporate securities
Available-for-sale Securities [Abstract]
Amortized cost	48,447	48,419
Gross Unrealized Gains	855	771
Gross Unrealized Losses	(218)	(1,594)
Fair Value	49,084	47,596
Debt Securities, Held-to-maturity, Fair Value to Amortized Cost [Abstract]
Held-to-maturity securities, amortized cost	51,110	53,652
Held-to-maturity securities, Gross Unrealized Gains	1,575	610
Held-to-maturity securities, Gross Unrealized Losses	0	(127)
Held-to-maturity, at fair value	$ 52,685	$ 54,135

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Securities (Details Textual)	3 Months Ended			6 Months Ended
	Jun. 30, 2021 USD ($) security	Jun. 30, 2020 USD ($)	Mar. 31, 2020	Jun. 30, 2021 USD ($) security	Jun. 30, 2020 USD ($)	Dec. 31, 2020 USD ($)
Investments, Debt and Equity Securities [Abstract]
Available-for-sale securities, gross realized gain (loss) | $	$ 0	$ 0		$ 0	$ 41,000
Continuous unrealized loss position, fair value | $	$ 451,800,000			$ 451,800,000		$ 226,500,000
Continuous unrealized loss position, fair value (as a percent)			40.00%	62.00%
Number of securities in portfolio | security	448			448
Securities in unrealized loss position | security	152			152

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Securities - Carrying Value (Details) - USD ($) $ in Thousands	Jun. 30, 2021	Dec. 31, 2020
Amortized Cost
Within one year	$ 0
One to five years	29,686
Five to ten years	72,226
After ten years	81,883
Amortized Cost	183,795
Amortized cost	663,693	$ 497,004
Held-to-maturity securities, One to five years	3,375
Held-to-maturity securities, Five to ten years	50,096
Held-to-maturity securities, After ten years	12,188
Held-to-maturity securities, Amortized Cost	65,659
Fair Value
Within one year	0
One to five years	27,234
Five to ten years	72,380
After ten years	85,043
Fair Value	184,657
Fair Value	663,519	497,628
Held-to-maturity securities, One to five years	3,556
Held-to-maturity securities, Five to ten years	51,908
Held-to-maturity securities, After ten years	12,594
Held-to-maturity securities, Fair Value	68,058
Agency mortgage-backed securities
Amortized Cost
Amortized cost	445,895	241,795
Fair Value
Fair Value	444,494	243,921
Private label mortgage-backed securities
Amortized Cost
Amortized cost	29,003	57,268
Fair Value
Fair Value	29,363	58,116
Asset-backed securities
Amortized Cost
Amortized cost	5,000	5,000
Fair Value
Fair Value	$ 5,005	$ 4,961

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Securities - Gross Unrealized Losses and Fair Value (Details) - USD ($) $ in Thousands	Jun. 30, 2021	Dec. 31, 2020
Less Than 12 Months, Fair Value	$ 385,734	$ 58,995
Less Than 12 Months, Unrealized Losses	(3,745)	(391)
12 Months or Longer, Fair Value	66,036	147,092
12 Months or Longer, Unrealized Losses	(1,949)	(6,092)
Total, Fair Value	451,770	206,087
Total, Unrealized Losses	(5,694)	(6,483)
Held-to-maturity securities, Less Than 12 Months, Fair Value		17,456
Held-to-maturity securities, Less Than 12 Months, Unrealized Losses		(126)
Held-to-maturity securities, 12 Months or Longer, Fair Value		2,999
Held-to-maturity securities, 12 Months or Longer, Unrealized Losses		(1)
Held-to-maturity securities, Total, Fair Value		20,455
Held-to-maturity securities, Total, Unrealized Losses		(127)
U.S. Government-sponsored agencies
Less Than 12 Months, Fair Value	2,969	0
Less Than 12 Months, Unrealized Losses	(31)	0
12 Months or Longer, Fair Value	47,281	52,351
12 Months or Longer, Unrealized Losses	(1,155)	(1,652)
Total, Fair Value	50,250	52,351
Total, Unrealized Losses	(1,186)	(1,652)
Municipal securities
Less Than 12 Months, Fair Value	61,658	18,731
Less Than 12 Months, Unrealized Losses	(155)	(114)
12 Months or Longer, Fair Value	0	23,519
12 Months or Longer, Unrealized Losses	0	(617)
Total, Fair Value	61,658	42,250
Total, Unrealized Losses	(155)	(731)
Agency mortgage-backed securities
Less Than 12 Months, Fair Value	316,123	38,987
Less Than 12 Months, Unrealized Losses	(3,543)	(276)
12 Months or Longer, Fair Value	8,956	45,297
12 Months or Longer, Unrealized Losses	(592)	(2,189)
Total, Fair Value	325,079	84,284
Total, Unrealized Losses	(4,135)	(2,465)
Private label mortgage-backed securities
Less Than 12 Months, Fair Value		1,277
Less Than 12 Months, Unrealized Losses		(1)
12 Months or Longer, Fair Value		558
12 Months or Longer, Unrealized Losses		(1)
Total, Fair Value		1,835
Total, Unrealized Losses		(2)
Asset-backed securities
Less Than 12 Months, Fair Value		0
Less Than 12 Months, Unrealized Losses		0
12 Months or Longer, Fair Value		4,961
12 Months or Longer, Unrealized Losses		(39)
Total, Fair Value		4,961
Total, Unrealized Losses		(39)
Corporate securities
Less Than 12 Months, Fair Value	4,984	0
Less Than 12 Months, Unrealized Losses	(16)	0
12 Months or Longer, Fair Value	9,799	20,406
12 Months or Longer, Unrealized Losses	(202)	(1,594)
Total, Fair Value	14,783	20,406
Total, Unrealized Losses	$ (218)	(1,594)
Held-to-maturity securities, Less Than 12 Months, Fair Value		17,456
Held-to-maturity securities, Less Than 12 Months, Unrealized Losses		(126)
Held-to-maturity securities, 12 Months or Longer, Fair Value		2,999
Held-to-maturity securities, 12 Months or Longer, Unrealized Losses		(1)
Held-to-maturity securities, Total, Fair Value		20,455
Held-to-maturity securities, Total, Unrealized Losses		$ (127)

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Securities Securities - Amounts Reclassified from Accumulated Other Comprehensive Income (Loss) (Details) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2021	Jun. 30, 2020	Jun. 30, 2021	Jun. 30, 2020
Investments, Debt and Equity Securities [Abstract]
Gain realized in earnings	$ 0	$ 0	$ 0	$ 41,000
Total reclassified amount before tax	0	0	0	41,000
Tax expense	0		0	11,000
Total reclassifications out of accumulated other comprehensive loss	$ 0	$ 0	$ 0	$ 30,000

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Loans - Categories (Details) - USD ($) $ in Thousands	Jun. 30, 2021	Mar. 31, 2021	Dec. 31, 2020	Jun. 30, 2020	Mar. 31, 2020	Dec. 31, 2019
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total commercial loans	$ 2,901,070		$ 2,997,967
Net deferred loan origination costs and premiums and discounts on purchased loans and other	56,538		61,264
Total loans	2,957,608		3,059,231
Allowance for loan losses	(28,066)	$ (30,642)	(29,484)	$ (24,465)	$ (22,857)	$ (21,840)
Net loans	2,929,542		3,029,747
Commercial and industrial
Accounts, Notes, Loans and Financing Receivable [Line Items]
Allowance for loan losses	(1,903)	(1,662)	(1,146)	(1,477)	(1,670)	(1,521)
Owner-occupied commercial real estate
Accounts, Notes, Loans and Financing Receivable [Line Items]
Allowance for loan losses	(1,021)	(1,029)	(1,082)	(846)	(645)	(561)
Investor commercial real estate
Accounts, Notes, Loans and Financing Receivable [Line Items]
Allowance for loan losses	(329)	(169)	(155)	(130)	(128)	(109)
Construction
Accounts, Notes, Loans and Financing Receivable [Line Items]
Allowance for loan losses	(1,357)	(1,420)	(1,192)	(721)	(460)	(380)
Single tenant lease financing
Accounts, Notes, Loans and Financing Receivable [Line Items]
Allowance for loan losses	(11,205)	(13,178)	(12,990)	(11,318)	(10,755)	(11,175)
Public finance
Accounts, Notes, Loans and Financing Receivable [Line Items]
Allowance for loan losses	(1,700)	(1,748)	(1,732)	(1,542)	(1,483)	(1,580)
Healthcare finance
Accounts, Notes, Loans and Financing Receivable [Line Items]
Allowance for loan losses	(6,938)	(7,755)	(7,485)	(4,762)	(4,318)	(3,247)
Small business lending
Accounts, Notes, Loans and Financing Receivable [Line Items]
Allowance for loan losses	(783)	(700)	(628)	(251)	(265)	(54)
Residential mortgage
Accounts, Notes, Loans and Financing Receivable [Line Items]
Allowance for loan losses	(594)	(601)	(519)	(539)	(500)	(657)
Home equity
Accounts, Notes, Loans and Financing Receivable [Line Items]
Allowance for loan losses	(63)	(57)	(48)	(51)	(53)	(46)
Other consumer
Accounts, Notes, Loans and Financing Receivable [Line Items]
Allowance for loan losses	(2,173)	$ (2,323)	(2,507)	$ (2,828)	$ (2,580)	$ (2,510)
Commercial Portfolio Segment
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total commercial loans	2,434,616		2,515,631
Commercial Portfolio Segment | Commercial and industrial
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total commercial loans	96,203		75,387
Commercial Portfolio Segment | Owner-occupied commercial real estate
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total commercial loans	87,136		89,785
Commercial Portfolio Segment | Investor commercial real estate
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total commercial loans	28,871		13,902
Commercial Portfolio Segment | Construction
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total commercial loans	117,970		110,385
Commercial Portfolio Segment | Single tenant lease financing
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total commercial loans	913,115		950,172
Commercial Portfolio Segment | Public finance
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total commercial loans	612,138		622,257
Commercial Portfolio Segment | Healthcare finance
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total commercial loans	455,890		528,154
Commercial Portfolio Segment | Small business lending
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total commercial loans	123,293		125,589
Consumer Portfolio
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total commercial loans	466,454		482,336
Consumer Portfolio | Residential mortgage
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total commercial loans	177,148		186,787
Consumer Portfolio | Home equity
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total commercial loans	17,510		19,857
Consumer Portfolio | Other consumer
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total commercial loans	271,796		275,692
Interest rate swaps | Commercial Portfolio Segment | Public finance
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total commercial loans	$ 40,400		$ 42,700

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Loans - Change in the Balances of the ALLL (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2021	Jun. 30, 2020	Jun. 30, 2021	Jun. 30, 2020
Allowance for loan losses:
Balance, beginning of period	$ 30,642	$ 22,857	$ 29,484	$ 21,840
Provision (credit) charged to expense	21	2,491	1,297	3,952
Losses charged off	(2,689)	(1,016)	(3,001)	(1,514)
Recoveries	92	133	286	187
Balance, end of period	28,066	24,465	28,066	24,465
Commercial and industrial
Allowance for loan losses:
Balance, beginning of period	1,662	1,670	1,146	1,521
Provision (credit) charged to expense	267	(141)	701	205
Losses charged off	(28)	(57)	(28)	(254)
Recoveries	2	5	84	5
Balance, end of period	1,903	1,477	1,903	1,477
Owner-occupied commercial real estate
Allowance for loan losses:
Balance, beginning of period	1,029	645	1,082	561
Provision (credit) charged to expense	(8)	201	(61)	285
Losses charged off	0	0	0	0
Recoveries	0	0	0	0
Balance, end of period	1,021	846	1,021	846
Investor commercial real estate
Allowance for loan losses:
Balance, beginning of period	169	128	155	109
Provision (credit) charged to expense	160	2	174	21
Losses charged off	0	0	0	0
Recoveries	0	0	0	0
Balance, end of period	329	130	329	130
Construction
Allowance for loan losses:
Balance, beginning of period	1,420	460	1,192	380
Provision (credit) charged to expense	(63)	261	165	341
Losses charged off	0	0	0	0
Recoveries	0	0	0	0
Balance, end of period	1,357	721	1,357	721
Single tenant lease financing
Allowance for loan losses:
Balance, beginning of period	13,178	10,755	12,990	11,175
Provision (credit) charged to expense	418	563	606	143
Losses charged off	(2,391)	0	(2,391)	0
Recoveries	0	0	0	0
Balance, end of period	11,205	11,318	11,205	11,318
Public finance
Allowance for loan losses:
Balance, beginning of period	1,748	1,483	1,732	1,580
Provision (credit) charged to expense	(48)	59	(32)	(38)
Losses charged off	0	0	0	0
Recoveries	0	0	0	0
Balance, end of period	1,700	1,542	1,700	1,542
Healthcare finance
Allowance for loan losses:
Balance, beginning of period	7,755	4,318	7,485	3,247
Provision (credit) charged to expense	(817)	1,187	(547)	2,258
Losses charged off	0	(743)	0	(743)
Recoveries	0	0	0	0
Balance, end of period	6,938	4,762	6,938	4,762
Small business lending
Allowance for loan losses:
Balance, beginning of period	700	265	628	54
Provision (credit) charged to expense	214	(20)	361	183
Losses charged off	(133)	0	(212)	0
Recoveries	2	6	6	14
Balance, end of period	783	251	783	251
Residential mortgage
Allowance for loan losses:
Balance, beginning of period	601	500	519	657
Provision (credit) charged to expense	(5)	36	72	(107)
Losses charged off	(6)	0	(6)	(15)
Recoveries	4	3	9	4
Balance, end of period	594	539	594	539
Home equity
Allowance for loan losses:
Balance, beginning of period	57	53	48	46
Provision (credit) charged to expense	4	(4)	63	0
Losses charged off	0	0	(51)	0
Recoveries	2	2	3	5
Balance, end of period	63	51	63	51
Other consumer
Allowance for loan losses:
Balance, beginning of period	2,323	2,580	2,507	2,510
Provision (credit) charged to expense	(101)	347	(205)	661
Losses charged off	(131)	(216)	(313)	(502)
Recoveries	82	117	184	159
Balance, end of period	$ 2,173	$ 2,828	$ 2,173	$ 2,828

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Loans - Recorded Investments in Loans (Details) - USD ($) $ in Thousands	Jun. 30, 2021	Mar. 31, 2021	Dec. 31, 2020	Jun. 30, 2020	Mar. 31, 2020	Dec. 31, 2019
Loans:
Ending balance: collectively evaluated for impairment	$ 2,889,883		$ 2,985,682
Ending balance: individually evaluated for impairment	11,187		12,285
Total Loans Receivable	2,901,070		2,997,967
Allowance for loan losses:
Ending balance: collectively evaluated for impairment	26,726		26,394
Ending balance: individually evaluated for impairment	1,340		3,090
Ending balance	28,066	$ 30,642	29,484	$ 24,465	$ 22,857	$ 21,840
Commercial and industrial
Loans:
Ending balance: collectively evaluated for impairment	95,511		74,870
Ending balance: individually evaluated for impairment	692		517
Allowance for loan losses:
Ending balance: collectively evaluated for impairment	1,453		1,146
Ending balance: individually evaluated for impairment	450		0
Ending balance	1,903	1,662	1,146	1,477	1,670	1,521
Owner-occupied commercial real estate
Loans:
Ending balance: collectively evaluated for impairment	83,649		87,947
Ending balance: individually evaluated for impairment	3,487		1,838
Allowance for loan losses:
Ending balance: collectively evaluated for impairment	1,021		1,082
Ending balance: individually evaluated for impairment	0		0
Ending balance	1,021	1,029	1,082	846	645	561
Investor commercial real estate
Loans:
Ending balance: collectively evaluated for impairment	28,871		13,902
Ending balance: individually evaluated for impairment	0		0
Allowance for loan losses:
Ending balance: collectively evaluated for impairment	329		155
Ending balance: individually evaluated for impairment	0		0
Ending balance	329	169	155	130	128	109
Construction
Loans:
Ending balance: collectively evaluated for impairment	117,970		110,385
Ending balance: individually evaluated for impairment	0		0
Allowance for loan losses:
Ending balance: collectively evaluated for impairment	1,357		1,192
Ending balance: individually evaluated for impairment	0		0
Ending balance	1,357	1,420	1,192	721	460	380
Single tenant lease financing
Loans:
Ending balance: collectively evaluated for impairment	910,742		942,848
Ending balance: individually evaluated for impairment	2,373		7,324
Allowance for loan losses:
Ending balance: collectively evaluated for impairment	10,838		9,900
Ending balance: individually evaluated for impairment	367		3,090
Ending balance	11,205	13,178	12,990	11,318	10,755	11,175
Public finance
Loans:
Ending balance: collectively evaluated for impairment	612,138		622,257
Ending balance: individually evaluated for impairment	0		0
Allowance for loan losses:
Ending balance: collectively evaluated for impairment	1,700		1,732
Ending balance: individually evaluated for impairment	0		0
Ending balance	1,700	1,748	1,732	1,542	1,483	1,580
Healthcare finance
Loans:
Ending balance: collectively evaluated for impairment	454,919		527,144
Ending balance: individually evaluated for impairment	971		1,010
Allowance for loan losses:
Ending balance: collectively evaluated for impairment	6,415		7,485
Ending balance: individually evaluated for impairment	523		0
Ending balance	6,938	7,755	7,485	4,762	4,318	3,247
Small business lending
Loans:
Ending balance: collectively evaluated for impairment	122,084		125,589
Ending balance: individually evaluated for impairment	1,209		0
Allowance for loan losses:
Ending balance: collectively evaluated for impairment	783		628
Ending balance: individually evaluated for impairment	0		0
Ending balance	783	700	628	251	265	54
Residential mortgage
Loans:
Ending balance: collectively evaluated for impairment	174,717		185,241
Ending balance: individually evaluated for impairment	2,431		1,546
Allowance for loan losses:
Ending balance: collectively evaluated for impairment	594		519
Ending balance: individually evaluated for impairment	0		0
Ending balance	594	601	519	539	500	657
Home equity
Loans:
Ending balance: collectively evaluated for impairment	17,496		19,857
Ending balance: individually evaluated for impairment	14		0
Allowance for loan losses:
Ending balance: collectively evaluated for impairment	63		48
Ending balance: individually evaluated for impairment	0		0
Ending balance	63	57	48	51	53	46
Other consumer
Loans:
Ending balance: collectively evaluated for impairment	271,786		275,642
Ending balance: individually evaluated for impairment	10		50
Allowance for loan losses:
Ending balance: collectively evaluated for impairment	2,173		2,507
Ending balance: individually evaluated for impairment	0		0
Ending balance	2,173	$ 2,323	2,507	$ 2,828	$ 2,580	$ 2,510
Commercial Portfolio Segment
Loans:
Total Loans Receivable	2,434,616		2,515,631
Commercial Portfolio Segment | Commercial and industrial
Loans:
Total Loans Receivable	96,203		75,387
Commercial Portfolio Segment | Owner-occupied commercial real estate
Loans:
Total Loans Receivable	87,136		89,785
Commercial Portfolio Segment | Investor commercial real estate
Loans:
Total Loans Receivable	28,871		13,902
Commercial Portfolio Segment | Construction
Loans:
Total Loans Receivable	117,970		110,385
Commercial Portfolio Segment | Single tenant lease financing
Loans:
Total Loans Receivable	913,115		950,172
Commercial Portfolio Segment | Public finance
Loans:
Total Loans Receivable	612,138		622,257
Commercial Portfolio Segment | Healthcare finance
Loans:
Total Loans Receivable	455,890		528,154
Commercial Portfolio Segment | Small business lending
Loans:
Total Loans Receivable	$ 123,293		$ 125,589

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Loans - Nonaccrual Loans (Details) - USD ($) $ in Thousands	Jun. 30, 2021	Dec. 31, 2020
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Loans Receivable	$ 2,901,070	$ 2,997,967
Commercial Portfolio Segment
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Loans Receivable	2,434,616	2,515,631
Commercial Portfolio Segment | Pass
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Loans Receivable	2,387,318	2,481,795
Commercial Portfolio Segment | Special Mention
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Loans Receivable	38,052	17,962
Commercial Portfolio Segment | Substandard
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Loans Receivable	9,246	15,874
Commercial Portfolio Segment | Commercial and industrial
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Loans Receivable	96,203	75,387
Commercial Portfolio Segment | Commercial and industrial | Pass
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Loans Receivable	79,928	74,138
Commercial Portfolio Segment | Commercial and industrial | Special Mention
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Loans Receivable	15,563	732
Commercial Portfolio Segment | Commercial and industrial | Substandard
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Loans Receivable	712	517
Commercial Portfolio Segment | Owner-occupied commercial real estate
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Loans Receivable	87,136	89,785
Commercial Portfolio Segment | Owner-occupied commercial real estate | Pass
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Loans Receivable	79,730	84,292
Commercial Portfolio Segment | Owner-occupied commercial real estate | Special Mention
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Loans Receivable	3,919	3,655
Commercial Portfolio Segment | Owner-occupied commercial real estate | Substandard
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Loans Receivable	3,487	1,838
Commercial Portfolio Segment | Investor commercial real estate
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Loans Receivable	28,871	13,902
Commercial Portfolio Segment | Investor commercial real estate | Pass
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Loans Receivable	28,871	13,902
Commercial Portfolio Segment | Investor commercial real estate | Special Mention
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Loans Receivable	0	0
Commercial Portfolio Segment | Investor commercial real estate | Substandard
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Loans Receivable	0	0
Commercial Portfolio Segment | Construction
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Loans Receivable	117,970	110,385
Commercial Portfolio Segment | Construction | Pass
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Loans Receivable	117,970	110,385
Commercial Portfolio Segment | Construction | Special Mention
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Loans Receivable	0	0
Commercial Portfolio Segment | Construction | Substandard
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Loans Receivable	0	0
Commercial Portfolio Segment | Single tenant lease financing
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Loans Receivable	913,115	950,172
Commercial Portfolio Segment | Single tenant lease financing | Pass
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Loans Receivable	901,505	932,830
Commercial Portfolio Segment | Single tenant lease financing | Special Mention
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Loans Receivable	9,237	10,018
Commercial Portfolio Segment | Single tenant lease financing | Substandard
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Loans Receivable	2,373	7,324
Commercial Portfolio Segment | Public finance
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Loans Receivable	612,138	622,257
Commercial Portfolio Segment | Public finance | Pass
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Loans Receivable	612,138	622,257
Commercial Portfolio Segment | Public finance | Special Mention
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Loans Receivable	0	0
Commercial Portfolio Segment | Public finance | Substandard
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Loans Receivable	0	0
Commercial Portfolio Segment | Healthcare finance
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Loans Receivable	455,890	528,154
Commercial Portfolio Segment | Healthcare finance | Pass
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Loans Receivable	454,312	526,517
Commercial Portfolio Segment | Healthcare finance | Special Mention
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Loans Receivable	615	627
Commercial Portfolio Segment | Healthcare finance | Substandard
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Loans Receivable	963	1,010
Commercial Portfolio Segment | Small business lending
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Loans Receivable	123,293	125,589
Commercial Portfolio Segment | Small business lending | Pass
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Loans Receivable	112,864	117,474
Commercial Portfolio Segment | Small business lending | Special Mention
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Loans Receivable	8,718	2,930
Commercial Portfolio Segment | Small business lending | Substandard
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Loans Receivable	$ 1,711	$ 5,185

XML

Loans Loans - Internal Credit Assessment (Details) - USD ($) $ in Thousands	Jun. 30, 2021	Dec. 31, 2020
Financing Receivable, Credit Quality Indicator [Line Items]
Total Loans Receivable	$ 2,901,070	$ 2,997,967
Nonaccrual
Financing Receivable, Credit Quality Indicator [Line Items]
Total Loans Receivable	9,038	10,183
Consumer Portfolio
Financing Receivable, Credit Quality Indicator [Line Items]
Total Loans Receivable	466,454	482,336
Consumer Portfolio | Performing
Financing Receivable, Credit Quality Indicator [Line Items]
Total Loans Receivable	465,177	481,107
Consumer Portfolio | Nonaccrual
Financing Receivable, Credit Quality Indicator [Line Items]
Total Loans Receivable	1,277	1,229
Consumer Portfolio | Residential mortgage
Financing Receivable, Credit Quality Indicator [Line Items]
Total Loans Receivable	177,148	186,787
Consumer Portfolio | Residential mortgage | Performing
Financing Receivable, Credit Quality Indicator [Line Items]
Total Loans Receivable	175,895	185,604
Consumer Portfolio | Residential mortgage | Nonaccrual
Financing Receivable, Credit Quality Indicator [Line Items]
Total Loans Receivable	1,253	1,183
Consumer Portfolio | Home equity
Financing Receivable, Credit Quality Indicator [Line Items]
Total Loans Receivable	17,510	19,857
Consumer Portfolio | Home equity | Performing
Financing Receivable, Credit Quality Indicator [Line Items]
Total Loans Receivable	17,496	19,857
Consumer Portfolio | Home equity | Nonaccrual
Financing Receivable, Credit Quality Indicator [Line Items]
Total Loans Receivable	14	0
Consumer Portfolio | Other consumer
Financing Receivable, Credit Quality Indicator [Line Items]
Total Loans Receivable	271,796	275,692
Consumer Portfolio | Other consumer | Performing
Financing Receivable, Credit Quality Indicator [Line Items]
Total Loans Receivable	271,786	275,646
Consumer Portfolio | Other consumer | Nonaccrual
Financing Receivable, Credit Quality Indicator [Line Items]
Total Loans Receivable	$ 10	$ 46

XML

Loans - Loan Portfolio Aging (Details) - USD ($) $ in Thousands	Jun. 30, 2021	Dec. 31, 2020
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Past Due	$ 1,673	$ 5,245
Current	2,899,397	2,992,722
Total Loans Receivable	2,901,070	2,997,967
Total Loans 90 Days or More Past Due and Accruing	0	0
Commercial and industrial
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Loans 90 Days or More Past Due and Accruing	0	0
Owner-occupied commercial real estate
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Loans 90 Days or More Past Due and Accruing	0	0
Investor commercial real estate
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Loans 90 Days or More Past Due and Accruing	0	0
Construction
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Loans 90 Days or More Past Due and Accruing	0	0
Single tenant lease financing
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Loans 90 Days or More Past Due and Accruing	0	0
Public finance
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Loans 90 Days or More Past Due and Accruing	0	0
Healthcare finance
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Loans 90 Days or More Past Due and Accruing	0	0
Small business lending
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Loans 90 Days or More Past Due and Accruing	0	0
Residential mortgage
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Loans 90 Days or More Past Due and Accruing	0	0
Home equity
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Loans 90 Days or More Past Due and Accruing	0	0
Other consumer
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Loans 90 Days or More Past Due and Accruing	0	0
30-59 Days Past Due
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Past Due	91	225
60-89 Days Past Due
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Past Due	9	66
90 Days or More Past Due
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Past Due	1,573	4,954
Commercial Portfolio Segment
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Loans Receivable	2,434,616	2,515,631
Commercial Portfolio Segment | Commercial and industrial
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Past Due	2	0
Current	96,201	75,387
Total Loans Receivable	96,203	75,387
Commercial Portfolio Segment | Owner-occupied commercial real estate
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Past Due	0	0
Current	87,136	89,785
Total Loans Receivable	87,136	89,785
Commercial Portfolio Segment | Investor commercial real estate
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Past Due	0	0
Current	28,871	13,902
Total Loans Receivable	28,871	13,902
Commercial Portfolio Segment | Construction
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Past Due	0	0
Current	117,970	110,385
Total Loans Receivable	117,970	110,385
Commercial Portfolio Segment | Single tenant lease financing
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Past Due	0	4,680
Current	913,115	945,492
Total Loans Receivable	913,115	950,172
Commercial Portfolio Segment | Public finance
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Past Due	0	0
Current	612,138	622,257
Total Loans Receivable	612,138	622,257
Commercial Portfolio Segment | Healthcare finance
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Past Due	0	0
Current	455,890	528,154
Total Loans Receivable	455,890	528,154
Commercial Portfolio Segment | Small business lending
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Past Due	1,209	0
Current	122,084	125,589
Total Loans Receivable	123,293	125,589
Commercial Portfolio Segment | 30-59 Days Past Due | Commercial and industrial
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Past Due	2	0
Commercial Portfolio Segment | 30-59 Days Past Due | Owner-occupied commercial real estate
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Past Due	0	0
Commercial Portfolio Segment | 30-59 Days Past Due | Investor commercial real estate
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Past Due	0	0
Commercial Portfolio Segment | 30-59 Days Past Due | Construction
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Past Due	0	0
Commercial Portfolio Segment | 30-59 Days Past Due | Single tenant lease financing
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Past Due	0	0
Commercial Portfolio Segment | 30-59 Days Past Due | Public finance
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Past Due	0	0
Commercial Portfolio Segment | 30-59 Days Past Due | Healthcare finance
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Past Due	0	0
Commercial Portfolio Segment | 30-59 Days Past Due | Small business lending
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Past Due	0	0
Commercial Portfolio Segment | 60-89 Days Past Due | Commercial and industrial
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Past Due	0	0
Commercial Portfolio Segment | 60-89 Days Past Due | Owner-occupied commercial real estate
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Past Due	0	0
Commercial Portfolio Segment | 60-89 Days Past Due | Investor commercial real estate
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Past Due	0	0
Commercial Portfolio Segment | 60-89 Days Past Due | Construction
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Past Due	0	0
Commercial Portfolio Segment | 60-89 Days Past Due | Single tenant lease financing
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Past Due	0	0
Commercial Portfolio Segment | 60-89 Days Past Due | Public finance
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Past Due	0	0
Commercial Portfolio Segment | 60-89 Days Past Due | Healthcare finance
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Past Due	0	0
Commercial Portfolio Segment | 60-89 Days Past Due | Small business lending
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Past Due	0	0
Commercial Portfolio Segment | 90 Days or More Past Due | Commercial and industrial
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Past Due	0	0
Commercial Portfolio Segment | 90 Days or More Past Due | Owner-occupied commercial real estate
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Past Due	0	0
Commercial Portfolio Segment | 90 Days or More Past Due | Investor commercial real estate
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Past Due	0	0
Commercial Portfolio Segment | 90 Days or More Past Due | Construction
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Past Due	0	0
Commercial Portfolio Segment | 90 Days or More Past Due | Single tenant lease financing
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Past Due	0	4,680
Commercial Portfolio Segment | 90 Days or More Past Due | Public finance
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Past Due	0	0
Commercial Portfolio Segment | 90 Days or More Past Due | Healthcare finance
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Past Due	0	0
Commercial Portfolio Segment | 90 Days or More Past Due | Small business lending
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Past Due	1,209	0
Consumer Portfolio
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Loans Receivable	466,454	482,336
Consumer Portfolio | Residential mortgage
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Past Due	364	318
Current	176,784	186,469
Total Loans Receivable	177,148	186,787
Consumer Portfolio | Home equity
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Past Due	0	15
Current	17,510	19,842
Total Loans Receivable	17,510	19,857
Consumer Portfolio | Other consumer
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Past Due	98	232
Current	271,698	275,460
Total Loans Receivable	271,796	275,692
Consumer Portfolio | 30-59 Days Past Due | Residential mortgage
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Past Due	0	49
Consumer Portfolio | 30-59 Days Past Due | Home equity
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Past Due	0	0
Consumer Portfolio | 30-59 Days Past Due | Other consumer
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Past Due	89	176
Consumer Portfolio | 60-89 Days Past Due | Residential mortgage
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Past Due	0	0
Consumer Portfolio | 60-89 Days Past Due | Home equity
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Past Due	0	15
Consumer Portfolio | 60-89 Days Past Due | Other consumer
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Past Due	9	51
Consumer Portfolio | 90 Days or More Past Due | Residential mortgage
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Past Due	364	269
Consumer Portfolio | 90 Days or More Past Due | Home equity
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Past Due	0	0
Consumer Portfolio | 90 Days or More Past Due | Other consumer
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Past Due	0	5
Nonaccrual
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Loans Receivable	9,038	10,183
Nonaccrual | Commercial Portfolio Segment | Commercial and industrial
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Loans Receivable	692	0
Nonaccrual | Commercial Portfolio Segment | Owner-occupied commercial real estate
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Loans Receivable	0	1,838
Nonaccrual | Commercial Portfolio Segment | Investor commercial real estate
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Loans Receivable	3,487	0
Nonaccrual | Commercial Portfolio Segment | Construction
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Loans Receivable	0	0
Nonaccrual | Commercial Portfolio Segment | Single tenant lease financing
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Loans Receivable	2,373	7,116
Nonaccrual | Commercial Portfolio Segment | Public finance
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Loans Receivable	0	0
Nonaccrual | Commercial Portfolio Segment | Healthcare finance
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Loans Receivable	0	0
Nonaccrual | Commercial Portfolio Segment | Small business lending
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Loans Receivable	1,209	0
Nonaccrual | Consumer Portfolio
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Loans Receivable	1,277	1,229
Nonaccrual | Consumer Portfolio | Residential mortgage
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Loans Receivable	1,253	1,183
Nonaccrual | Consumer Portfolio | Home equity
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Loans Receivable	14	0
Nonaccrual | Consumer Portfolio | Other consumer
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total Loans Receivable	$ 10	$ 46

XML

Loans - Impaired Loans (Details)	3 Months Ended		6 Months Ended
	Jun. 30, 2021 USD ($) loan	Jun. 30, 2020 USD ($) security	Jun. 30, 2021 USD ($) loan	Jun. 30, 2020 USD ($)	Dec. 31, 2020 USD ($)
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans without a specific valuation allowance - Recorded Balance	$ 7,151,000		$ 7,151,000		$ 6,276,000
Loans without a specific valuation allowance - Unpaid Principal Balance	7,350,000		7,350,000		6,483,000
Loans without a specific valuation allowance	0		0		0
Impaired loans	4,036,000		4,036,000		6,009,000
Loans with a specific valuation allowance - Unpaid Principal Balance	4,157,000		4,157,000		6,036,000
Loans with a specific valuation allowance	1,340,000		1,340,000		3,090,000
Impaired Financing Receivable, Recorded Investment	11,187,000		11,187,000		12,285,000
Impaired Financing Receivable, Unpaid Principal Balance	11,507,000		11,507,000		12,519,000
Impaired Financing Receivable, Related Allowance	1,340,000		1,340,000		3,090,000
Loans without a specific valuation allowance - Average Balance	7,970,000	$ 5,944,000	7,200,000	$ 7,276,000
Loans without a specific valuation allowance - Interest Income	9,000	47,000	27,000	67,000
Loans with a specific valuation allowance - Average Balance	8,668,000	4,884,000	6,949,000	4,884,000
Loans with a specific valuation allowance - Interest Income	24,000	0	36,000	0
Impaired Financing Receivable, Average Recorded Investment	16,638,000	10,828,000		12,160,000
Impaired Financing Receivable, Interest Income, Accrual Method	33,000	$ 47,000	63,000	67,000
Other real estate owned	$ 1,300,000		$ 1,300,000		0
Mortgage loans in process of foreclosure, number of loans | loan	2		2
Mortgage loans in process of foreclosure, amount	$ 400,000		$ 400,000		0
Number of contracts classified as TDRs | security		1
Commercial and industrial
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans without a specific valuation allowance - Recorded Balance	3,487,000		3,487,000		517,000
Loans without a specific valuation allowance - Unpaid Principal Balance	3,513,000		3,513,000		517,000
Loans without a specific valuation allowance	0		0		0
Impaired loans	692,000		692,000		0
Loans with a specific valuation allowance - Unpaid Principal Balance	723,000		723,000		0
Loans with a specific valuation allowance	450,000		450,000		0
Loans without a specific valuation allowance - Average Balance	259,000	$ 594,000	259,000	1,330,000
Loans without a specific valuation allowance - Interest Income	0	18,000	9,000	36,000
Loans with a specific valuation allowance - Average Balance	839,000	204,000	677,000	204,000
Loans with a specific valuation allowance - Interest Income	0	0	0	0
Other real estate owned	$ 1,200,000		$ 1,200,000
Other real estate, number of loans | loan	1		1
Owner-occupied commercial real estate
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans without a specific valuation allowance - Recorded Balance	$ 0		$ 0		1,838,000
Loans without a specific valuation allowance - Unpaid Principal Balance	0		0		1,850,000
Loans without a specific valuation allowance	0		0		0
Loans without a specific valuation allowance - Average Balance	3,994,000	3,923,000	3,307,000	4,573,000
Loans without a specific valuation allowance - Interest Income	0	29,000	0	31,000
Single tenant lease financing
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans without a specific valuation allowance - Recorded Balance	0		0		1,315,000
Loans without a specific valuation allowance - Unpaid Principal Balance	0		0		1,334,000
Loans without a specific valuation allowance	0		0		0
Impaired loans	2,373,000		2,373,000		6,009,000
Loans with a specific valuation allowance - Unpaid Principal Balance	2,463,000		2,463,000		6,036,000
Loans with a specific valuation allowance	367,000		367,000		3,090,000
Loans without a specific valuation allowance - Average Balance	148,000	0	100,000	0
Loans without a specific valuation allowance - Interest Income	0	0	5,000	0
Loans with a specific valuation allowance - Average Balance	5,430,000	4,680,000	4,984,000	4,680,000
Loans with a specific valuation allowance - Interest Income	0	0	0	0
Healthcare finance
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans without a specific valuation allowance - Recorded Balance	0		0		1,010,000
Loans without a specific valuation allowance - Unpaid Principal Balance	0		0		1,010,000
Loans without a specific valuation allowance	0		0		0
Impaired loans	971,000		971,000		0
Loans with a specific valuation allowance - Unpaid Principal Balance	971,000		971,000		0
Loans with a specific valuation allowance	523,000		523,000		0
Loans without a specific valuation allowance - Average Balance	0	0	336,000	0
Loans without a specific valuation allowance - Interest Income	0		0	0
Loans with a specific valuation allowance - Average Balance	979,000		815,000
Loans with a specific valuation allowance - Interest Income	24,000		36,000
Small business lending
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans without a specific valuation allowance - Recorded Balance	1,209,000		1,209,000		0
Loans without a specific valuation allowance - Unpaid Principal Balance	1,209,000		1,209,000		0
Loans without a specific valuation allowance	0		0		0
Loans without a specific valuation allowance - Average Balance	1,123,000	0	970,000	0
Loans without a specific valuation allowance - Interest Income	0		0	0
Residential mortgage
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans without a specific valuation allowance - Recorded Balance	2,431,000		2,431,000		1,546,000
Loans without a specific valuation allowance - Unpaid Principal Balance	2,566,000		2,566,000		1,652,000
Loans without a specific valuation allowance	0		0		0
Loans without a specific valuation allowance - Average Balance	2,410,000	1,352,000	2,192,000	1,313,000
Loans without a specific valuation allowance - Interest Income	9,000	0	13,000	0
Other real estate owned	$ 100,000		$ 100,000
Other real estate, number of loans | loan	1		1
Number of contracts classified as TDRs | loan			1
Financing receivable, troubled debt restructuring	$ 800,000		$ 800,000
Home equity
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans without a specific valuation allowance - Recorded Balance	14,000		14,000		0
Loans without a specific valuation allowance - Unpaid Principal Balance	15,000		15,000		0
Loans without a specific valuation allowance	0		0		0
Loans without a specific valuation allowance - Average Balance	15,000	0	13,000	0
Loans without a specific valuation allowance - Interest Income	0	0	0	0
Other consumer
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans without a specific valuation allowance - Recorded Balance	10,000		10,000		50,000
Loans without a specific valuation allowance - Unpaid Principal Balance	47,000		47,000		120,000
Loans without a specific valuation allowance	0		0		$ 0
Loans without a specific valuation allowance - Average Balance	21,000	75,000	23,000	60,000
Loans without a specific valuation allowance - Interest Income	$ 0	$ 0	$ 0	$ 0

XML

Loans - Deferrals (Details) $ in Millions	3 Months Ended
	Jun. 30, 2020 security	Jun. 30, 2021 USD ($)
Accounts, Notes, Loans and Financing Receivable [Line Items]
Number of deferrals | security	1
Payment Deferral | COVID-19 Modification
Accounts, Notes, Loans and Financing Receivable [Line Items]
Non-TDR loan modifications due to COVID-19 | $		$ 7.9

XML

Premises and Equipment - Summary (Details) - USD ($) $ in Thousands	Jun. 30, 2021	Dec. 31, 2020
Property, Plant and Equipment [Line Items]
Less: accumulated depreciation	$ (6,236)	$ (10,973)
Premises and equipment, net	44,249	37,590
Land
Property, Plant and Equipment [Line Items]
Premises and equipment, gross	0	2,500
Right of use leased asset
Property, Plant and Equipment [Line Items]
Premises and equipment, gross	304	819
Construction in process
Property, Plant and Equipment [Line Items]
Premises and equipment, gross	42,106	28,754
Building and improvements
Property, Plant and Equipment [Line Items]
Premises and equipment, gross	439	5,819
Furniture and equipment
Property, Plant and Equipment [Line Items]
Premises and equipment, gross	$ 7,636	$ 10,671

XML

Premises and Equipment - Narrative (Details) - Agreement To Sell Headquarters And Certain Equipment $ in Millions	Apr. 16, 2021 USD ($)
Property, Plant and Equipment [Line Items]
Option to extend lease, period	90 days
Sale price paid in cash	$ 8.9

XML

Goodwill (Details) - USD ($) $ in Thousands	Jun. 30, 2021	Dec. 31, 2020
Goodwill and Intangible Assets Disclosure [Abstract]
Goodwill	$ 4,687	$ 4,687

XML

Servicing Asset (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2021	Jun. 30, 2020	Jun. 30, 2021	Jun. 30, 2020
Servicing Asset at Fair Value, Amount [Roll Forward]
Balance, beginning of period	$ 3,817	$ 2,415	$ 3,569	$ 2,481
Additions	543	197	946	310
Paydowns	(154)	(90)	(324)	(269)
Changes in fair value due to changes in valuation inputs or assumptions used in the valuation model	(86)	0	(71)	0
Balance, end of period	$ 4,120	$ 2,522	$ 4,120	$ 2,522

XML

Servicing Asset - Unpaid principal balance (Details) - Loan servicing - USD ($) $ in Thousands	Jun. 30, 2021	Dec. 31, 2020
Servicing Assets at Fair Value [Line Items]
Loans serviced for others	$ 196,869	$ 165,961
SBA guaranteed loans
Servicing Assets at Fair Value [Line Items]
Loans serviced for others	$ 196,869	$ 165,961

XML

Servicing Asset - Narrative (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2021	Jun. 30, 2020	Jun. 30, 2021	Jun. 30, 2020
Servicing Assets at Fair Value [Line Items]
Changes in fair value due to changes in valuation inputs or assumptions used in the valuation model	$ (86)	$ 0	$ (71)	$ 0
Loan servicing
Servicing Assets at Fair Value [Line Items]
Loan servicing revenue	457	255	879	506
Changes in fair value due to changes in valuation inputs or assumptions used in the valuation model	$ (200)	$ (100)	$ (400)	$ (300)

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Subordinated Debt (Details Textual) - Subordinated Debt - USD ($)	1 Months Ended		6 Months Ended
	Oct. 31, 2020	Jun. 30, 2019	Jun. 30, 2021	Oct. 20, 2015
2025 Note
Debt Instrument [Line Items]
Subordinated debenture, principal amount				$ 10,000,000.0
Fixed annual interest rate (as a percent)				6.4375%
2026 Notes
Debt Instrument [Line Items]
Subordinated debenture, principal amount			$ 25,000,000.0
Fixed annual interest rate (as a percent)			6.00%
2029 Notes
Debt Instrument [Line Items]
Subordinated debenture, principal amount			$ 37,000,000.0
Fixed annual interest rate (as a percent)			6.00%
2030 Notes
Debt Instrument [Line Items]
Subordinated debenture, principal amount	$ 10,000,000.0
Fixed annual interest rate (as a percent)	6.00%
LIBOR | 2026 Notes
Debt Instrument [Line Items]
Basis spread on variable rate			485.00%
LIBOR | 2029 Notes
Debt Instrument [Line Items]
Basis spread on variable rate		411.00%
Secured Overnight Financing Rate (SOFR) Overnight Index Swap Rate | 2030 Notes
Debt Instrument [Line Items]
Basis spread on variable rate	5.795%

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Subordinated Debt - Schedule of Subordinated Debt (Details) - USD ($) $ in Thousands	Jun. 30, 2021	Dec. 31, 2020
Debt Instrument [Line Items]
Principal	$ 514,919	$ 514,916
Unamortized Debt Issuance Costs	(2,129)	(2,397)
Subordinated Debt
Debt Instrument [Line Items]
Principal	72,000	82,000
Unamortized Debt Issuance Costs	(2,129)	(2,397)
Subordinated Debt | 2025 Note
Debt Instrument [Line Items]
Principal	0	10,000
Unamortized Debt Issuance Costs	0	(114)
Subordinated Debt | 2026 Notes
Debt Instrument [Line Items]
Principal	25,000	25,000
Unamortized Debt Issuance Costs	(652)	(715)
Subordinated Debt | 2029 Notes
Debt Instrument [Line Items]
Principal	37,000	37,000
Unamortized Debt Issuance Costs	(1,258)	(1,337)
Subordinated Debt | 2030 Notes
Debt Instrument [Line Items]
Principal	10,000	10,000
Unamortized Debt Issuance Costs	$ (219)	$ (231)

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Benefit Plans - Activity (Details)	6 Months Ended
	Jun. 30, 2021 $ / shares shares
Restricted Stock Awards
Awards/Units Outstanding (in shares)
Balance at beginning of period | shares	0
Granted | shares	13,878
Vested | shares	(6,479)
Balance at end of period | shares	6,342
Weighted-Average Grant Date Fair Value Per Share (in dollars per share)
Balance at beginning of period | $ / shares	$ 0
Granted | $ / shares	30.27
Vested | $ / shares	30.20
Balance at end of period | $ / shares	$ 30.36
Deferred Stock Units
Awards/Units Outstanding (in shares)
Balance at beginning of period | shares	0
Granted | shares	4
Vested | shares	(4)
Balance at end of period | shares	0
Weighted-Average Grant Date Fair Value Per Share (in dollars per share)
Balance at beginning of period | $ / shares	$ 0
Granted | $ / shares	32.53
Vested | $ / shares	32.53
Balance at end of period | $ / shares	$ 0
Restricted Stock Units
Awards/Units Outstanding (in shares)
Balance at beginning of period | shares	112,985
Granted | shares	60,111
Vested | shares	(35,745)
Balance at end of period | shares	137,351
Weighted-Average Grant Date Fair Value Per Share (in dollars per share)
Balance at beginning of period | $ / shares	$ 27.76
Granted | $ / shares	30.42
Vested | $ / shares	30.12
Balance at end of period | $ / shares	$ 28.32

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Benefit Plans - Deferred Stock Rights (Details)	6 Months Ended
	Jun. 30, 2021 shares
Deferred Stock Rights
Outstanding, beginning of period	83,835
Granted	350
Exercised	0
Outstanding, end of period	84,185

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Benefit Plans (Details Textual) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2021	Jun. 30, 2020	Jun. 30, 2021	Jun. 30, 2020	Dec. 31, 2020
Allocated share-based compensation expense	$ 570	$ 517	$ 1,262	$ 1,073
Compensation cost not yet recognized	3,100		$ 3,100
Period for recognition			1 year 9 months 18 days
Percentage of annual retainer received in either common stock or deferred stock rights			100.00%
Plan 2013
Number of shares authorized (in shares)					750,000
Director
Common stock shares reserved for future grants (in shares)			180,000
Voting and Nonvoting Common Stock | Voting and Nonvoting Common Stock
Allocated share-based compensation expense	$ 570	$ 517	$ 1,262	$ 1,073

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Commitments and Credit Risk (Details) - USD ($) $ in Millions	6 Months Ended
	Jun. 30, 2021	Dec. 31, 2020
Other Commitments [Line Items]
Loan commitments	$ 293.1	$ 263.9
Capital committed to Small Business Investment Company fund, not contributed	1.1
Capital Contributions For On Balance Sheet Investments
Other Commitments [Line Items]
Other contract commitment	4.8
Capital Addition Purchase Commitments
Other Commitments [Line Items]
Other contract commitment	66.4
Construction related contract commitment, not yet incurred	$ 25.4
Construction related contract commitment, term	12 months

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Fair Value of Financial Instruments - Fair Value Hierarchy (Details) - USD ($) $ in Thousands	Jun. 30, 2021	Dec. 31, 2020
Total available-for-sale securities	$ 663,519	$ 497,628
Loans held-for-sale (mandatory pricing agreements)	16,870	26,341
Servicing asset	4,120	3,569
Derivative, fair value	(20,303)	(30,390)
Loans Held For Sale
Loans held-for-sale (mandatory pricing agreements)	16,870	26,341
Quoted Prices in Active Markets for Identical Assets (Level 1)
Total available-for-sale securities	0	0
Servicing asset	0	0
Quoted Prices in Active Markets for Identical Assets (Level 1) | Loans Held For Sale
Loans held-for-sale (mandatory pricing agreements)	0	0
Significant Other Observable Inputs (Level 2)
Total available-for-sale securities	663,519	497,628
Servicing asset	0	0
Significant Other Observable Inputs (Level 2) | Loans Held For Sale
Loans held-for-sale (mandatory pricing agreements)	16,870	26,341
Significant Unobservable Inputs (Level 3)
Total available-for-sale securities	0	0
Servicing asset	4,120	3,569
Significant Unobservable Inputs (Level 3) | Loans Held For Sale
Loans held-for-sale (mandatory pricing agreements)	0	0
U.S. Government-sponsored agencies
Total available-for-sale securities	57,135	60,545
U.S. Government-sponsored agencies | Quoted Prices in Active Markets for Identical Assets (Level 1)
Total available-for-sale securities	0	0
U.S. Government-sponsored agencies | Significant Other Observable Inputs (Level 2)
Total available-for-sale securities	57,135	60,545
U.S. Government-sponsored agencies | Significant Unobservable Inputs (Level 3)
Total available-for-sale securities	0	0
Municipal securities
Total available-for-sale securities	78,438	82,489
Municipal securities | Quoted Prices in Active Markets for Identical Assets (Level 1)
Total available-for-sale securities	0	0
Municipal securities | Significant Other Observable Inputs (Level 2)
Total available-for-sale securities	78,438	82,489
Municipal securities | Significant Unobservable Inputs (Level 3)
Total available-for-sale securities	0	0
Agency mortgage-backed securities
Total available-for-sale securities	444,494	243,921
Agency mortgage-backed securities | Quoted Prices in Active Markets for Identical Assets (Level 1)
Total available-for-sale securities	0	0
Agency mortgage-backed securities | Significant Other Observable Inputs (Level 2)
Total available-for-sale securities		243,921
Agency mortgage-backed securities | Significant Unobservable Inputs (Level 3)
Total available-for-sale securities	0	0
Private label mortgage-backed securities
Total available-for-sale securities	29,363	58,116
Private label mortgage-backed securities | Quoted Prices in Active Markets for Identical Assets (Level 1)
Total available-for-sale securities		0
Private label mortgage-backed securities | Significant Unobservable Inputs (Level 3)
Total available-for-sale securities	0	0
Asset-backed securities
Total available-for-sale securities	5,005	4,961
Asset-backed securities | Quoted Prices in Active Markets for Identical Assets (Level 1)
Total available-for-sale securities	0	0
Asset-backed securities | Significant Other Observable Inputs (Level 2)
Total available-for-sale securities	5,005	4,961
Asset-backed securities | Significant Unobservable Inputs (Level 3)
Total available-for-sale securities	0	0
Corporate securities
Total available-for-sale securities	49,084	47,596
Corporate securities | Quoted Prices in Active Markets for Identical Assets (Level 1)
Total available-for-sale securities	0	0
Corporate securities | Significant Other Observable Inputs (Level 2)
Total available-for-sale securities	49,084	47,596
Corporate securities | Significant Unobservable Inputs (Level 3)
Total available-for-sale securities	0	0
IRLCs
Derivative, fair value	818	3,361
IRLCs | Quoted Prices in Active Markets for Identical Assets (Level 1)
Derivative, fair value	0	0
IRLCs | Significant Other Observable Inputs (Level 2)
Derivative, fair value	0	0
IRLCs | Significant Unobservable Inputs (Level 3)
Derivative, fair value	818	3,361
Interest rate swaps | Interest rate swaps
Derivative liability, fair value	(20,286)	(17,606)
Interest rate swaps | Quoted Prices in Active Markets for Identical Assets (Level 1) | Interest rate swaps
Derivative liability, fair value	0	0
Interest rate swaps | Significant Other Observable Inputs (Level 2) | Interest rate swaps
Derivative liability, fair value	(20,286)	(17,606)
Interest rate swaps | Significant Unobservable Inputs (Level 3) | Interest rate swaps
Derivative liability, fair value	0	0
Forward contracts | Forward contracts
Derivative, fair value	(17)	(640)
Forward contracts | Quoted Prices in Active Markets for Identical Assets (Level 1) | Forward contracts
Derivative, fair value	(17)	(640)
Forward contracts | Significant Other Observable Inputs (Level 2) | Forward contracts
Derivative, fair value	0	0
Forward contracts | Significant Unobservable Inputs (Level 3) | Forward contracts
Derivative, fair value	0	0
Derivatives designated as hedging instruments | Interest rate swaps
Derivative, fair value	$ (2,835)	$ (6,072)

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Fair Value of Financial Instruments - Fair Value Roll Forward (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2021	Jun. 30, 2020	Jun. 30, 2021	Jun. 30, 2020
Interest Rate Lock Commitments
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward]
Beginning balance	$ 1,110	$ 2,064	$ 3,361	$ 910
Additions	0	0	0	0
Paydowns	0	0	0	0
Included in net income	(292)	(1,782)	(2,543)	(628)
Ending balance	818	282	818	282
Servicing asset
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward]
Beginning balance	3,817	2,415	3,569	2,481
Additions	543	197	946	310
Paydowns	(154)	0	(324)	0
Included in net income	(86)	(90)	(71)	(269)
Ending balance	$ 4,120	$ 2,522	$ 4,120	$ 2,522

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Fair Value of Financial Instruments - Quantative Information About Unobservable Inputs (Details) - USD ($) $ in Thousands	3 Months Ended	6 Months Ended
	Mar. 31, 2021	Jun. 30, 2021	Dec. 31, 2020
Impaired loans		$ 4,036	$ 6,009
Servicing asset		4,120	3,569
Quoted Prices in Active Markets for Identical Assets (Level 1)
Servicing asset		0	0
Significant Other Observable Inputs (Level 2)
Servicing asset		0	0
Significant Unobservable Inputs (Level 3)
Servicing asset		4,120	3,569
IRLCs | Significant Unobservable Inputs (Level 3)
IRLCs Fair Value		818	3,361
Servicing asset | Significant Unobservable Inputs (Level 3)
Servicing asset		3,817	3,569
Impaired Loans | Significant Unobservable Inputs (Level 3)
Impaired loans		$ 4,035	$ 4,026
Loan closing rates | Discounted cash flow | IRLCs | Significant Unobservable Inputs (Level 3) | Minimum
IRLC - Loan closing rates	44.00%	63.00%
Loan closing rates | Discounted cash flow | IRLCs | Significant Unobservable Inputs (Level 3) | Maximum
IRLC - Loan closing rates	100.00%	100.00%
Loan closing rates | Discounted cash flow | IRLCs | Significant Unobservable Inputs (Level 3) | Weighted-Average Range
IRLC - Loan closing rates	87.00%	92.00%
Measurement Input, Prepayment Rate [Member] | Discounted cash flow | Servicing asset | Significant Unobservable Inputs (Level 3) | Minimum
Servicing asset, discount rate	0.00%	0.00%
Measurement Input, Prepayment Rate [Member] | Discounted cash flow | Servicing asset | Significant Unobservable Inputs (Level 3) | Maximum
Servicing asset, discount rate	25.00%	25.00%
Measurement Input, Prepayment Rate [Member] | Discounted cash flow | Servicing asset | Significant Unobservable Inputs (Level 3) | Weighted-Average Range
Servicing asset, discount rate	12.10%	12.60%
Measurement Input, Discount Rate | Discounted cash flow | Servicing asset | Significant Unobservable Inputs (Level 3)
Servicing asset, discount rate	10.00%	10.00%
Measurement Input, Discount Rate | Discounted cash flow | Servicing asset | Significant Unobservable Inputs (Level 3) | Weighted-Average Range
Servicing asset, discount rate	10.00%	10.00%
Discount for type of property and current market conditions | Fair value of collateral | Impaired Loans | Significant Unobservable Inputs (Level 3)
Impaired Financing Receivable, Measurement Input		10.00%	10.00%
Discount for type of property and current market conditions | Fair value of collateral | Impaired Loans | Significant Unobservable Inputs (Level 3) | Weighted-Average Range
Impaired Financing Receivable, Measurement Input		10.00%	10.00%

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Fair Value of Financial Instruments - Carrying Value and Estimated Fair Value (Details) - USD ($) $ in Thousands	Jun. 30, 2021	Dec. 31, 2020
Cash and cash equivalents, Carrying Amount	$ 328,797	$ 419,806
Debt Securities, Held-to-maturity	65,659	68,223
Held-to-maturity, at fair value	68,058	69,452
Loans Held-For-Sale	10,717	13,243
Loans held for sale, Fair Value	16,870	26,341
Loans receivable	2,929,542	3,029,747
Accrued interest receivable, Carrying Amount	16,345	17,416
FHLB stock, Carrying Amount	25,650	25,650
Deposits, Carrying Amount	3,206,147	3,270,885
FHLB Advances, Carrying Amount	514,919	514,916
Accrued interest payable	1,132	1,439
Subordinated debt, Carrying Value	69,871	79,603
Reported Value Measurement
Cash and cash equivalents, Carrying Amount	328,797	419,806
Debt Securities, Held-to-maturity	65,659	68,223
Loans receivable	2,929,542	3,029,747
Accrued interest receivable, Carrying Amount	16,345	17,416
FHLB stock, Carrying Amount	25,650	25,650
Deposits, Carrying Amount	3,206,147	3,270,885
Fair Value
Cash and cash equivalents, Fair Value	328,797	419,806
Held-to-maturity, at fair value	68,058	69,452
Loans held for sale, Fair Value	10,717	13,243
Loans receivable, fair value	2,975,406	3,084,375
Accrued interest receivable, Fair Value	16,345	17,416
FHLB stock, Fair Value	25,650	25,650
Deposits, Fair Value	3,229,241	3,307,038
FHLB Advances, Fair Value	533,237	541,945
Subordinated debt, Fair Value	75,456	83,682
Accrued interest payable, Fair Value	1,132	1,439
Fair Value | Quoted Prices in Active Markets for Identical Assets (Level 1)
Cash and cash equivalents, Fair Value	328,797	419,806
Held-to-maturity, at fair value	0	0
Loans held for sale, Fair Value	0	0
Loans receivable, fair value	0	0
Accrued interest receivable, Fair Value	16,345	17,416
FHLB stock, Fair Value	0	0
Deposits, Fair Value	1,799,490	1,679,164
FHLB Advances, Fair Value	0	0
Subordinated debt, Fair Value	65,294	63,325
Accrued interest payable, Fair Value	1,132	1,439
Fair Value | Significant Other Observable Inputs (Level 2)
Cash and cash equivalents, Fair Value	0	0
Held-to-maturity, at fair value	68,058	69,452
Loans held for sale, Fair Value	10,717	13,243
Loans receivable, fair value	0	0
Accrued interest receivable, Fair Value	0	0
FHLB stock, Fair Value	25,650	25,650
Deposits, Fair Value	0	0
FHLB Advances, Fair Value	533,237	541,945
Subordinated debt, Fair Value	10,162	20,357
Accrued interest payable, Fair Value	0	0
Fair Value | Significant Unobservable Inputs (Level 3)
Cash and cash equivalents, Fair Value	0	0
Held-to-maturity, at fair value	0	0
Loans held for sale, Fair Value	0	0
Loans receivable, fair value	2,975,406	3,084,375
Accrued interest receivable, Fair Value	0	0
FHLB stock, Fair Value	0	0
Deposits, Fair Value	1,429,751	1,627,874
FHLB Advances, Fair Value	0	0
Subordinated debt, Fair Value	0	0
Accrued interest payable, Fair Value	$ 0	$ 0

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Mortgage Banking Activities (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2021	Jun. 30, 2020	Jun. 30, 2021	Jun. 30, 2020
Principal Transaction Revenue [Line Items]
Loans originated for sale	$ 163,300	$ 211,900	$ 387,200	$ 427,300
Proceeds from sale of loans	151,500	229,200	393,100	454,700
Mortgage banking activities
Principal Transaction Revenue [Line Items]
Gain on loans sold	3,587	4,164	11,086	8,507
(Loss) gain resulting from the change in fair value of loans held-for-sale	118	(1,255)	(744)	(939)
(Loss) gain resulting from the change in fair value of derivatives	(1,031)	499	(1,918)	(492)
Net revenue from mortgage banking activities	$ 2,674	$ 3,408	$ 8,424	$ 7,076

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Derivative Financial Instruments - Carrying Amount and Adjustment (Details) - USD ($) $ in Thousands	3 Months Ended	6 Months Ended
	Mar. 31, 2021	Jun. 30, 2021	Dec. 31, 2020
Derivative Instruments and Hedging Activities Disclosures [Line Items]
Amortized cost, at fair value		$ 663,693	$ 497,004
Derivatives designated as hedging instruments
Derivative Instruments and Hedging Activities Disclosures [Line Items]
Amortized cost, at fair value		50,000	88,200
Securities available-for-sale | Derivatives designated as hedging instruments
Derivative Instruments and Hedging Activities Disclosures [Line Items]
Carrying amount of the hedged assets		77,363	$ 124,210
Cumulative amount of fair value hedging adjustment included in the carrying amount of the hedged assets	$ 6,064	$ 2,834

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Derivative Financial Instruments - Interest Swap Derivatives (Details) - USD ($) $ in Thousands	1 Months Ended		3 Months Ended			6 Months Ended		9 Months Ended
	Mar. 31, 2021	Jun. 30, 2020	Jun. 30, 2021	Mar. 31, 2021	Jun. 30, 2020	Jun. 30, 2021	Jun. 30, 2020	Sep. 30, 2020	Dec. 31, 2020
Derivative Instruments and Hedging Activities Disclosures [Line Items]
Notional Value			$ 306,750			$ 306,750			$ 405,700
Fair Value			(20,303)			(20,303)			(30,390)
Interest expense			11,770		$ 19,796	24,525	$ 41,022
Payments for swap termination payments		$ 46,100
Interest rate swaps | Derivatives designated as hedging instruments
Derivative Instruments and Hedging Activities Disclosures [Line Items]
Notional Value			50,000			$ 50,000			88,200
Weighted Average Remaining Maturity (years)						3 years 3 months 18 days		3 years 1 month 6 days
Fair Value			$ (2,835)			$ (2,835)			$ (6,072)
Weighted-Average Rate			2.33%			2.33%			2.54%
Cash collateral received									$ 21,000
Cash collateral pledged									30,600
Loans | Interest rate swaps | Derivatives designated as hedging instruments
Derivative Instruments and Hedging Activities Disclosures [Line Items]
Weighted Average Remaining Maturity (years)						12 years 7 months 9 days
Securities available-for-sale | Derivatives designated as hedging instruments
Derivative Instruments and Hedging Activities Disclosures [Line Items]
Fair value hedging adjustment				$ 6,064		$ 2,834
Securities available-for-sale | Interest rate swaps | Derivatives designated as hedging instruments
Derivative Instruments and Hedging Activities Disclosures [Line Items]
Notional Value			$ 50,000			$ 50,000			88,200
Weighted Average Remaining Maturity (years)						3 years 3 months 18 days		3 years 1 month 6 days
Fair Value			$ (2,835)			$ (2,835)			$ (6,072)
Weighted-Average Rate			2.33%			2.33%			2.54%
Payments for swap termination payments	$ 1,900
Derivative Instrument, Notional Amount, Terminated			$ 38,200			$ 38,200
3-month LIBOR | Interest rate swaps | Derivatives designated as hedging instruments
Derivative Instruments and Hedging Activities Disclosures [Line Items]
Notional Value			110,000			$ 110,000			$ 110,000
Weighted Average Remaining Maturity (years)						5 years 7 months 6 days		6 years 1 month 6 days
Fair Value			$ (11,349)			$ (11,349)			$ (15,727)
Derivative, variable interest rate			2.88%			2.88%			2.88%
1-month LIBOR | Interest rate swaps | Derivatives designated as hedging instruments
Derivative Instruments and Hedging Activities Disclosures [Line Items]
Notional Value			$ 100,000			$ 100,000			$ 100,000
Weighted Average Remaining Maturity (years)						2 years 6 months		3 years
Fair Value			$ (6,103)			$ (6,103)			$ (7,951)
Derivative, variable interest rate			2.88%			2.88%			2.88%

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Derivative Financial Instruments - Notional Amounts and Fair Value (Details) - USD ($) $ in Thousands	Jun. 30, 2021	Dec. 31, 2020
Asset Derivatives
Notional Amount	$ 47,493	$ 108,095
Fair Value	818	3,361
Derivative Liability [Abstract]
Notional Amount	306,750	405,700
Derivative, fair value	(20,303)	(30,390)
Interest Rate Lock Commitments
Derivative Liability [Abstract]
Derivative, fair value	818	3,361
Derivatives designated as hedging instruments | Interest rate swaps
Derivative Liability [Abstract]
Notional Amount	50,000	88,200
Derivative, fair value	(2,835)	(6,072)
Derivatives not designated as hedging instruments | Interest Rate Lock Commitments
Asset Derivatives
Notional Amount	47,493	108,095
Fair Value	818	3,361
Derivatives not designated as hedging instruments | Forward contracts
Derivative Liability [Abstract]
Notional Amount	46,750	107,500
Fair Value	(17)	(640)
Loans | Derivatives designated as hedging instruments | Forward contracts
Derivative Liability [Abstract]
Notional Amount	0	0
Fair Value	0	0
Securities available-for-sale | Derivatives designated as hedging instruments | Interest rate swaps
Derivative Liability [Abstract]
Notional Amount	50,000	88,200
Derivative, fair value	(2,835)	(6,072)
Securities available-for-sale | Derivatives designated as hedging instruments | Forward contracts
Derivative Liability [Abstract]
Notional Amount	50,000	88,200
Fair Value	(2,835)	(6,072)
Liability | Derivatives designated as hedging instruments | Forward contracts
Derivative Liability [Abstract]
Notional Amount	210,000	210,000
Fair Value	$ (17,451)	$ (23,678)

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Derivative Financial Instruments - Gain (Loss) Recognized (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2021	Jun. 30, 2020	Jun. 30, 2021	Jun. 30, 2020
Asset Derivatives | Interest Rate Lock Commitments
Derivative Instruments and Hedging Activities Disclosures [Line Items]
Derivatives not designated as hedging instruments	$ (292)	$ (1,781)	$ (2,541)	$ (628)
Forward contracts | Liability Derivatives
Derivative Instruments and Hedging Activities Disclosures [Line Items]
Derivatives not designated as hedging instruments	(738)	2,281	623	136
Interest Rate Lock Commitments | Liability Derivatives
Derivative Instruments and Hedging Activities Disclosures [Line Items]
Derivatives not designated as hedging instruments	$ 0	$ 0	$ 0	$ 0

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Derivative Financial Instruments - Effect Of Derivatives on Income (Details) - Interest rate swaps - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2021	Jun. 30, 2020	Jun. 30, 2021	Jun. 30, 2020
Derivative Instruments, Gain (Loss) [Line Items]
Amount of Loss Recognized in Other Comprehensive Income	$ (54)	$ (509)	$ 6,226	$ (13,967)
Loans
Derivative Instruments, Gain (Loss) [Line Items]
Gain (loss) recognized on the condensed consolidated statements of income	0		0
Gain (loss) recognized on the condensed consolidated statements of income		(1,221)		(2,445)
Securities - taxable
Derivative Instruments, Gain (Loss) [Line Items]
Gain (loss) recognized on the condensed consolidated statements of income	0		(253)
Gain (loss) recognized on the condensed consolidated statements of income		(159)		(250)
Securities - non-taxable
Derivative Instruments, Gain (Loss) [Line Items]
Gain (loss) recognized on the condensed consolidated statements of income	(271)		(537)
Gain (loss) recognized on the condensed consolidated statements of income		(164)		(230)
Total interest income
Derivative Instruments, Gain (Loss) [Line Items]
Gain (loss) recognized on the condensed consolidated statements of income	(271)		(790)
Gain (loss) recognized on the condensed consolidated statements of income		(1,544)		(2,925)
Deposits
Derivative Instruments, Gain (Loss) [Line Items]
Gain (loss) recognized on the condensed consolidated statements of income	692		1,370
Gain (loss) recognized on the condensed consolidated statements of income		593		899
Other borrowed funds
Derivative Instruments, Gain (Loss) [Line Items]
Gain (loss) recognized on the condensed consolidated statements of income	753		1,483
Gain (loss) recognized on the condensed consolidated statements of income		589		911
Total interest expense
Derivative Instruments, Gain (Loss) [Line Items]
Gain (loss) recognized on the condensed consolidated statements of income	1,445		2,853
Gain (loss) recognized on the condensed consolidated statements of income		1,182		1,810
Net interest income
Derivative Instruments, Gain (Loss) [Line Items]
Gain (loss) recognized on the condensed consolidated statements of income	$ (1,716)		$ (3,643)
Gain (loss) recognized on the condensed consolidated statements of income		$ (2,726)		$ (4,735)

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Accumulated Other Comprehensive Loss (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2021	Jun. 30, 2020	Jun. 30, 2021	Jun. 30, 2020
AOCI Attributable to Parent, Net of Tax [Roll Forward]
Balance, beginning of period	$ 344,566	$ 305,127	$ 330,944	$ 304,913
Net change in unrealized gain	1,334	(2,007)	5,419	(9,166)
Reclassification of net loss realized and included in earnings				(41)
Other comprehensive (loss) gain before tax	1,334	(2,007)	5,419	(9,207)
Income tax provision (benefit)	(325)	(735)	1,134	(2,260)
Other comprehensive (loss) income - net of tax	1,009	(1,272)	4,285	(6,947)
Balance, end of period	358,641	307,711	358,641	307,711
Available-For-Sale Securities
AOCI Attributable to Parent, Net of Tax [Roll Forward]
Balance, beginning of period	(1,219)	(239)	468	(4,388)
Net change in unrealized gain	1,388	(1,498)	(807)	4,801
Reclassification of net loss realized and included in earnings				(41)
Other comprehensive (loss) gain before tax	1,388	(1,498)	(807)	4,760
Income tax provision (benefit)	(333)	(349)	(175)	1,760
Other comprehensive (loss) income - net of tax	1,055	(1,149)	(632)	3,000
Balance, end of period	(164)	(1,388)	(164)	(1,388)
Cash Flow Hedges
AOCI Attributable to Parent, Net of Tax [Roll Forward]
Balance, beginning of period	(12,701)	(19,627)	(17,664)	(9,803)
Net change in unrealized gain	(54)	(509)	6,226	(13,967)
Reclassification of net loss realized and included in earnings				0
Other comprehensive (loss) gain before tax	(54)	(509)	6,226	(13,967)
Income tax provision (benefit)	8	(386)	1,309	(4,020)
Other comprehensive (loss) income - net of tax	(46)	(123)	4,917	(9,947)
Balance, end of period	(12,747)	(19,750)	(12,747)	(19,750)
Accumulated Other Comprehensive Loss
AOCI Attributable to Parent, Net of Tax [Roll Forward]
Balance, beginning of period	(13,920)	(19,866)	(17,196)	(14,191)
Other comprehensive (loss) income - net of tax	1,009	(1,272)	4,285	(6,947)
Balance, end of period	$ (12,911)	$ (21,138)	$ (12,911)	$ (21,138)