inbk-20250630

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, 2025


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Transition Period From ________ to ________.

Commission File Number 001-35750


First Internet Bancorp
(Exact Name of Registrant as Specified in Its Charter)


Indiana						20-3489991
(State or Other Jurisdiction of Incorporation or Organization)						(I.R.S. Employer Identification No.)

8701 East 116th Street Fishers, IN						46038
(Address of Principal Executive Offices)						(Zip Code)


			(317) 532-7900
			(Registrant’s Telephone Number, Including Area Code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each 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 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 1, 2025, the registrant had 8,713,094 shares of common stock issued and outstanding.

Cautionary Note Regarding Forward-Looking Statements

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

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

PART I

ITEM 1. FINANCIAL STATEMENTS

First Internet Bancorp

Condensed Consolidated Balance Sheets

(Amounts in thousands except share data)


	June 30, 2025		December 31, 2024
	(Unaudited)
Assets
Cash and due from banks	$	9,261	$	9,249
Interest-bearing deposits	437,100		457,161
Total cash and cash equivalents	446,361		466,410

Securities available-for-sale, at fair value (amortized cost of $676,496 and $626,854 in 2025 and 2024, respectively)	644,657		587,355
Securities held-to-maturity, at amortized cost, net of allowance for credit losses of $0.1 million and $0.2 million in 2025 and 2024, respectively, (fair value of $254,667 and $228,851 in 2025 and 2024, respectively)	271,737		249,796
Loans held-for-sale	126,533		54,695
Loans	4,362,562		4,170,646
Allowance for credit losses - loans	(46,517)		(44,769)
Net loans	4,316,045		4,125,877
Accrued interest receivable	31,227		28,180
Federal Home Loan Bank of Indianapolis stock	28,350		28,350
Cash surrender value of bank-owned life insurance	41,961		41,394
Premises and equipment, net	69,930		71,453
Goodwill	4,687		4,687
Servicing asset, at fair value	16,736		16,389
Other real estate owned	1,730		272
Accrued income and other assets	72,619		63,001
Total assets	$	6,072,573	$	5,737,859
Liabilities and Shareholders’ Equity
Liabilities
Noninterest-bearing deposits	$	145,166	$	136,451
Interest-bearing deposits	5,153,623		4,796,755
Total deposits	5,298,789		4,933,206
Advances from Federal Home Loan Bank	264,500		295,000
Subordinated debt, net of unamortized debt issuance costs of $1,693 and $1,850 in 2025 and 2024, respectively	105,307		105,150
Accrued interest payable	1,614		2,495
Accrued expenses and other liabilities	12,124		17,945
Total liabilities	5,682,334		5,353,796
Commitments and Contingencies
Shareholders’ Equity
Preferred stock, no par value; 4,913,779 shares authorized; issued and outstanding - none	—		—
Voting common stock, no par value; 45,000,000 shares authorized; 8,713,094 and 8,667,894 shares issued and outstanding in 2025 and 2024, respectively	186,116		186,094
Nonvoting common stock, no par value; 86,221 shares authorized; issued and outstanding - none	—		—
Retained earnings	230,690		230,622
Accumulated other comprehensive loss	(26,567)		(32,653)
Total shareholders’ equity	390,239		384,063
Total liabilities and shareholders’ equity	$	6,072,573	$	5,737,859

See Notes to Condensed Consolidated Financial Statements

First Internet Bancorp

Condensed Consolidated Statements of Income – Unaudited

(Amounts in thousands except share and per share data)


	Three Months Ended June 30,				Six Months Ended June 30,
	2025		2024		2025		2024
Interest Income
Loans	$	66,685	$	57,094	$	129,347	$	112,529
Securities – taxable	9,062		6,476		17,525		12,170
Securities – non-taxable	654		970		1,315		1,939
Other earning assets	4,485		6,421		9,528		12,488
Total interest income	80,886		70,961		157,715		139,126
Interest Expense
Deposits	46,794		44,495		94,420		86,624
Other borrowed funds	6,102		5,139		10,209		10,441
Total interest expense	52,896		49,634		104,629		97,065
Net Interest Income	27,990		21,327		53,086		42,061
Provision for credit losses - loans	13,596		3,920		25,717		6,502
Benefit for credit losses - debt securities held to maturity	(12)		(2)		(32)		(64)
Provision (benefit) for credit losses - off-balance sheet commitments	24		113		(144)		41
Net Interest Income After Provision for Credit Losses	14,382		17,296		27,545		35,582
Noninterest Income
Service charges and fees	278		246		543		466
Loan servicing revenue	1,979		1,470		3,962		2,793
Loan servicing asset revaluation	(1,153)		(829)		(2,334)		(1,263)




Gain on sale of loans	1,673		8,292		10,320		14,828


Other	2,780		1,854		3,493		2,556
Total noninterest income	5,557		11,033		15,984		19,380
Noninterest Expense
Salaries and employee benefits	10,867		12,462		23,974		24,258
Marketing, advertising and promotion	702		609		1,349		1,345
Consulting and professional services	936		1,022		2,164		1,875
Data processing	656		606		1,291		1,170
Loan expenses	1,520		1,597		3,051		3,042
Premises and equipment	3,281		3,154		6,396		5,980
Deposit insurance premium	1,564		1,172		2,962		2,317

Other	2,274		1,714		4,170		3,372
Total noninterest expense	21,800		22,336		45,357		43,359
(Loss) Income Before Income Taxes	(1,861)		5,993		(1,828)		11,603
Income Tax (Benefit) Provision	(2,054)		218		(2,964)		647
Net Income	$	193	$	5,775	$	1,136	$	10,956
Income Per Share of Common Stock
Basic	$	0.02	$	0.67	$	0.13	$	1.26
Diluted	$	0.02	$	0.67	$	0.13	$	1.25
Weighted-Average Number of Common Shares Outstanding
Basic	8,733,559		8,594,315		8,724,657		8,684,093
Diluted	8,760,374		8,656,215		8,784,005		8,750,017
Dividends Declared Per Share	$	0.06	$	0.06	$	0.12	$	0.12

See Notes to Condensed Consolidated Financial Statements

First Internet Bancorp

Condensed Consolidated Statements of Comprehensive Income – Unaudited

(Amounts in thousands)


	Three Months Ended June 30,				Six Months Ended June 30,
	2025		2024		2025		2024
Net income	$	193	$	5,775	$	1,136	$	10,956
Other comprehensive income
Securities available-for-sale
Net unrealized holding gains (losses) recorded within other comprehensive income (loss) before income tax	3,236		(551)		7,660		(2,625)

Income tax provision (benefit)	744		(126)		1,761		(601)
Net effect on other comprehensive income (loss)	2,492		(425)		5,899		(2,024)

Securities held-to-maturity

Amortization of net unrealized holding losses on securities transferred from available-for-sale to held-to-maturity	132		188		252		422
Income tax provision	34		46		65		103
Net effect on other comprehensive income	98		142		187		319

Cash flow hedges
Net unrealized holding gains (losses) on cash flow hedging derivatives recorded within other comprehensive income (loss) before income tax	—		(262)		—		640
Income tax (benefit) provision	—		(60)		—		147
Net effect on other comprehensive (loss) income	—		(202)		—		493

Total other comprehensive income (loss)	2,590		(485)		6,086		(1,212)
Comprehensive income	$	2,783	$	5,290	$	7,222	$	9,744

See Notes to Condensed Consolidated Financial Statements

First Internet Bancorp

Condensed Consolidated Statements of Changes in Shareholders’ Equity - Unaudited

Six Months Ended June 30, 2025 and 2024

(Amounts in thousands except share and per share data)


	Voting and Nonvoting Common Stock		Retained Earnings		Accumulated Other Comprehensive Loss		Total Shareholders’ Equity
Balance, January 1, 2025	$	186,094	$	230,622	$	(32,653)	$	384,063

Net income	—		1,136		—		1,136

Other comprehensive income	—		—		6,086		6,086
Dividends declared ($0.12 per share)	—		(1,068)		—		(1,068)

Recognition of the fair value of share-based compensation	243		—		—		243


Deferred stock rights and restricted stock units issued in lieu of cash dividends payable on outstanding deferred stock rights and restricted stock units	3		—		—		3
Common stock redeemed for the net settlement of share-based awards	(224)		—		—		(224)

Balance, June 30, 2025	$	186,116	$	230,690	$	(26,567)	$	390,239

Balance, January 1, 2024	$	184,700	$	207,470	$	(29,375)	$	362,795

Net income	—		10,956		—		10,956

Other comprehensive loss	—		—		(1,212)		(1,212)
Dividends declared ($0.12 per share)	—		(1,061)		—		(1,061)

Recognition of the fair value of share-based compensation	901		—		—		901
Repurchased shares of common stock (10,500)	(283)		—		—		(283)
Excise tax on repurchase of common stock	(3)		—		—		(3)
Deferred stock rights and restricted stock units issued in lieu of cash dividends payable on outstanding deferred stock rights and restricted stock units	2		—		—		2
Common stock redeemed for the net settlement of share-based awards	(142)		—		—		(142)

Balance, June 30, 2024	$	185,175	$	217,365	$	(30,587)	$	371,953

See Notes to Condensed Consolidated Financial Statements

First Internet Bancorp

Condensed Consolidated Statements of Changes in Shareholders’ Equity - Unaudited

Three Months Ended June 30, 2025 and 2024

(Amounts in thousands except share and per share data)



	Voting and Nonvoting Common Stock		Retained Earnings		Accumulated Other Comprehensive Loss		Total Shareholders’ Equity
Balance, April 1, 2025	185,873		$	231,031	$	(29,157)	$	387,747

Net income	—		193		—		193

Other comprehensive income	—		—		2,590		2,590
Dividends declared ($0.06 per share)	—		(534)		—		(534)

Recognition of the fair value of share-based compensation	241		—		—		241


Deferred stock rights and restricted stock units issued in lieu of cash dividends payable on outstanding deferred stock rights and restricted stock units	2		—		—		2


Balance, June 30, 2025	$	186,116	$	230,690	$	(26,567)	$	390,239

Balance, April 1, 2024	$	184,720	$	212,121	$	(30,102)	$	366,739

Net income	—		5,775		—		5,775

Other comprehensive loss	—		—		(485)		(485)
Dividends declared ($0.06 per share)	—		(531)		—		(531)

Recognition of the fair value of share-based compensation	458		—		—		458

Excise tax on repurchase of common stock	(3)		—		—		(3)


Balance, June 30, 2024	$	185,175	$	217,365	$	(30,587)	$	371,953

See Notes to Condensed Consolidated Financial Statements

First Internet Bancorp

Condensed Consolidated Statements of Cash Flows – Unaudited

(Amounts in thousands)


	Six Months Ended June 30,
	2025		2024
Operating Activities
Net income	$	1,136	$	10,956
Adjustments to reconcile net income to net cash (used in) provided by operating activities:
Depreciation and amortization	2,982		3,846
Increase in cash surrender value of bank-owned life insurance	(567)		(540)
Provision for credit losses	25,541		6,479
Share-based compensation expense	243		901


Loans originated for sale	(261,753)		(200,500)
Proceeds from sale of loans	197,554		214,291
Gain on loans sold	(10,320)		(14,828)
Gain on sale of other real estate owned	(19)		(31)

(Loss) gain on derivatives	(146)		1,803
Gain on bank-owned life insurance	—		(149)

Loan servicing asset revaluation	2,334		1,263

Net change in accrued income and other assets	(7,898)		(3,370)
Net change in accrued expenses and other liabilities	(6,434)		(1,305)
Net cash (used in) provided by operating activities	(57,347)		18,816
Investing Activities
Net loan activity, excluding purchases	(199,820)		(57,851)
Proceeds from sale of other real estate owned	291		406

Maturities and calls of securities available-for-sale	65,376		33,701

Purchase of securities available-for-sale	(115,680)		(50,947)
Maturities and calls of securities held-to-maturity	12,109		11,418
Purchase of securities held-to-maturity	(33,629)		(53,977)



Purchase of premises and equipment	(834)		(1,496)
Proceeds from bank-owned life insurance	—		737

Loans purchased	(17,795)		(64,944)

Other investing activities	(6,516)		(10,438)
Net cash used in investing activities	(296,498)		(193,391)
Financing Activities
Net increase in deposits	365,583		206,949

Cash dividends paid	(1,054)		(1,049)


Repurchase of common stock	—		(283)
Proceeds from advances from Federal Home Loan Bank	104,500		320,000
Repayment of advances from Federal Home Loan Bank	(135,000)		(360,000)

Other, net	(233)		(154)
Net cash provided by financing activities	333,796		165,463
Net Decrease in Cash and Cash Equivalents	(20,049)		(9,112)
Cash and Cash Equivalents, Beginning of Period	466,410		405,898
Cash and Cash Equivalents, End of Period	$	446,361	$	396,786
Supplemental Disclosures


Cash paid during the period for interest	105,510		97,494
Cash paid during the period for taxes	238		378
Loans transferred to other real estate owned	1,730		—

Cash dividends declared, paid in subsequent period	523		520

See Notes to Condensed Consolidated Financial Statements

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, 2025 are not necessarily indicative of the results expected for the year ending December 31, 2025 or any other period. The June 30, 2025 condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes included in the First Internet Bancorp Annual Report on Form 10-K for the year ended December 31, 2024.

The preparation of the condensed consolidated financial statements in conformity with GAAP requires management to make estimates, judgments, or assumptions that could have a material effect on the carrying value of certain assets and liabilities. These estimates, judgments, and assumptions affect the amounts reported in the condensed consolidated financial statements and the disclosures provided. The Company utilizes processes that involve the use of significant estimates and the judgment of management in determining the amount of the Company’s allowance for credit losses (“ACL”) and changes in any of these could have a significant impact on the condensed consolidated financial statements.

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

The Company is subject to claims and lawsuits that arise primarily in the ordinary course of business. It is the opinion of management that the disposition or ultimate resolution of such claims and lawsuits will not have a material adverse effect on the consolidated financial position, results of operations, and cash flows of the Company.

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, 2025 and 2024.


(dollars in thousands, except share and per share data)	Three Months Ended June 30,				Six Months Ended June 30,
	2025		2024		2025		2024
Basic earnings per share
Net income	$	193	$	5,775	$	1,136	$	10,956
Weighted-average common shares	8,733,559		8,594,315		8,724,657		8,684,093
Basic earnings per common share	$	0.02	$	0.67	$	0.13	$	1.26
Diluted earnings per share
Net income	$	193	$	5,775	$	1,136	$	10,956
Weighted-average common shares	8,733,559		8,594,315		8,724,657		8,684,093

Dilutive effect of equity compensation	26,815		61,900		59,348		65,924
Weighted-average common and incremental shares	8,760,374		8,656,215		8,784,005		8,750,017
Diluted earnings per common share 1	$	0.02	$	0.67	$	0.13	$	1.25

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 15,940 and 9,006 for the three and six months ended June 30, 2025, respectively. There were no antidilutive shares for both the three and six months ended June 30, 2024.

Note 3: Securities

The following tables summarize securities available-for-sale and securities held-to-maturity as of June 30, 2025 and December 31, 2024.


	June 30, 2025
	Amortized Cost		Gross Unrealized				Fair Value
(amounts in thousands)			Gains		Losses
Securities available-for-sale
U.S. Government-sponsored agencies	$	73,297	$	533	$	(1,130)	$	72,700
Municipal securities	65,274		1		(3,852)		61,423
Agency mortgage-backed securities - residential 1	383,145		606		(25,680)		358,071
Agency mortgage-backed securities - commercial	62,340		142		(1,008)		61,474
Private label mortgage-backed securities - residential	39,971		229		(777)		39,423
Asset-backed securities	19,442		69		(23)		19,488
Corporate securities	33,027		108		(1,057)		32,078

Total available-for-sale	$	676,496	$	1,688	$	(33,527)	$	644,657


	June 30, 2025
	Amortized Cost		Gross Unrealized				Fair Value		Allowance for Credit Losses		Net Carrying Value
(amounts in thousands)			Gains		Losses
Securities held-to-maturity
Municipal securities	$	12,207	$	—	$	(730)	$	11,477	$	(3)	$	12,204
Agency mortgage-backed securities - residential	228,446		500		(14,872)		214,074		—		228,446
Agency mortgage-backed securities - commercial	5,670		—		(969)		4,701		—		5,670
Corporate securities	25,536		—		(1,121)		24,415		(119)		25,417
Total held-to-maturity	$	271,859	$	500	$	(17,692)	$	254,667	$	(122)	$	271,737

1 Includes $0.2 million of additional premium related to terminated interest rate swaps associated with agency mortgage-backed securities - residential as of June 30, 2025.


	December 31, 2024
	Amortized Cost		Gross Unrealized				Fair Value
(amounts in thousands)			Gains		Losses
Securities available-for-sale
U.S. Government-sponsored agencies	$	83,811	$	487	$	(1,482)	$	82,816
Municipal securities	67,441		—		(3,787)		63,654
Agency mortgage-backed securities - residential 1	300,914		460		(31,733)		269,641
Agency mortgage-backed securities - commercial	64,214		276		(1,159)		63,331
Private label mortgage-backed securities - residential	46,623		186		(988)		45,821
Asset-backed securities	23,802		62		(43)		23,821
Corporate securities	40,049		71		(1,849)		38,271

Total available-for-sale	$	626,854	$	1,542	$	(41,041)	$	587,355


	December 31, 2024
	Amortized Cost		Gross Unrealized				Fair Value		Allowance for Credit Losses		Net Carrying Value
(amounts in thousands)			Gains		Losses
Securities held-to-maturity
Municipal securities	$	12,846	$	—	$	(921)	$	11,925	$	(3)	$	12,843
Agency mortgage-backed securities - residential	201,840		102		(17,530)		184,412		—		201,840
Agency mortgage-backed securities - commercial	5,705		—		(1,157)		4,548		—		5,705
Corporate securities	29,559		—		(1,593)		27,966		(151)		29,408
Total held-to-maturity	$	249,950	$	102	$	(21,201)	$	228,851	$	(154)	$	249,796

1 Includes $0.3 million of additional premium related to terminated interest rate swaps associated with agency mortgage-backed securities - residential as of December 31, 2024.

Accrued interest receivable on AFS and HTM securities at June 30, 2025 was $2.7 million and $1.2 million, respectively, compared to $2.8 million and $1.1 million, respectively, at December 31, 2024, and is included in accrued interest receivable on the condensed consolidated balance sheet. The Company elected to exclude all accrued interest receivable from securities when estimating credit losses.

At June 30, 2025 and December 31, 2024, approximately 94% and 92%, respectively, of mortgage-backed securities (including both AFS and HTM) held by the Company are issued by U.S. government-sponsored entities and agencies. These securities are either explicitly or implicitly guaranteed by the U.S. government and have a long history of no credit losses; therefore, the Company did not record an ACL on these securities.

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

The Company also evaluated its HTM securities that are in an unrealized loss position and considered issuer bond ratings, historical loss rates for bond ratings and economic forecasts. The ACL on HTM securities at June 30, 2025 was $0.1 million, compared to $0.2 million at December 31, 2024.

The carrying value of securities at June 30, 2025 is shown below by their contractual maturity date. Actual maturities will differ because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.


	Available-for-Sale
(amounts in thousands)	Amortized Cost		Fair Value
Within one year	$	380	$	380
One to five years	35,230		34,417
Five to ten years	64,347		62,759
After ten years	71,641		68,645
	171,598		166,201
Agency mortgage-backed securities - residential	383,145		358,071
Agency mortgage-backed securities - commercial	62,340		61,474
Private label mortgage-backed securities - residential	39,971		39,423
Asset-backed securities	19,442		19,488

Total	$	676,496	$	644,657


	Held-to-Maturity
(amounts in thousands)	Amortized Cost		Fair Value
Within one year	$	1,701	$	1,694
One to five years	22,178		21,834
Five to ten years	10,820		9,694
After ten years	3,044		2,670
	37,743		35,892
Agency mortgage-backed securities - residential	228,446		214,074
Agency mortgage-backed securities - commercial	5,670		4,701
Total	$	271,859	$	254,667

No available-for-sale securities were sold during the three and six months ended June 30, 2025 and June 30, 2024. As such, the Company did not realize any gains or losses related to the sale of available-for-sale securities during either time period.

Certain investments in debt securities are reported in the condensed consolidated financial statements at an amount less than their historical cost. The total fair value of these investments at June 30, 2025 and December 31, 2024 was $645.8 million and $603.9 million, which was approximately 70% and 72%, respectively, of the Company’s AFS and HTM securities portfolios. As of June 30, 2025, the Company’s security portfolio consisted of 599 positions, of which 466 were in an unrealized loss position. As of December 31, 2024, the Company’s security portfolio consisted of 579 positions, of which 482 were in an unrealized loss position. The unrealized losses are related to the categories noted below.

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

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

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

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

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, 2025 and December 31, 2024.


	June 30, 2025
	Less Than 12 Months				12 Months or Longer				Total
(amounts in thousands)	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
Securities available-for-sale
U.S. Government-sponsored agencies	$	14,307	$	(55)	$	24,676	$	(1,075)	$	38,983	$	(1,130)
Municipal securities	4,732		(31)		53,075		(3,821)		57,807		(3,852)
Agency mortgage-backed securities- residential	110,469		(431)		173,052		(25,249)		283,521		(25,680)
Agency mortgage-backed securities- commercial	23,873		(113)		15,268		(895)		39,141		(1,008)
Private label mortgage-backed securities - residential	439		—		7,023		(777)		7,462		(777)
Asset-backed securities	10,766		(23)		—		—		10,766		(23)
Corporate securities	1,980		(20)		14,972		(1,037)		16,952		(1,057)

Total	$	166,566	$	(673)	$	288,066	$	(32,854)	$	454,632	$	(33,527)


	December 31, 2024
	Less Than 12 Months				12 Months or Longer				Total
(amounts in thousands)	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
Securities available-for-sale
U.S. Government-sponsored agencies	$	16,856	$	(111)	$	29,748	$	(1,371)	$	46,604	$	(1,482)
Municipal securities	8,504		(54)		52,649		(3,733)		61,153		(3,787)
Agency mortgage-backed securities - residential	41,005		(179)		169,483		(31,554)		210,488		(31,733)
Agency mortgage-backed securities - commercial	18,141		(37)		12,027		(1,122)		30,168		(1,159)
Private label mortgage-backed securities - residential	3,003		(14)		7,450		(974)		10,453		(988)
Asset-backed securities	10,299		(43)		—		—		10,299		(43)
Corporate securities	2,994		(6)		27,179		(1,843)		30,173		(1,849)

Total	$	100,802	$	(444)	$	298,536	$	(40,597)	$	399,338	$	(41,041)

The following tables summarize ratings for the Company’s HTM portfolio as of June 30, 2025 and December 31, 2024.


	June 30, 2025
	Held-to-Maturity
(amounts in thousands)	Municipal Securities		Mortgage-Backed Securities - Residential		Mortgage-Backed Securities - Commercial		Corporate Securities		Total
AAA equivalent - agency	$	—	$	228,446	$	5,670	$	—	$	234,116
Aa1/AA+	8,242		—		—		—		8,242
Aa2/AA	2,172		—		—		—		2,172
Aa3/AA-	1,793		—		—		—		1,793
A2/A	—		—		—		5,000		5,000

Baa1/BBB+	—		—		—		7,500		7,500
Baa2/BBB	—		—		—		5,500		5,500
Baa3/BBB-	—		—		—		5,536		5,536
Ba1/BB+	—		—		—		2,000		2,000

Total	$	12,207	$	228,446	$	5,670	$	25,536	$	271,859


	December 31, 2024
	Held-to-Maturity
(amounts in thousands)	Municipal Securities		Mortgage-Backed Securities - Residential		Mortgage-Backed Securities - Commercial		Corporate Securities		Total
AAA equivalent - agency	$	—	$	201,840	$	5,705	$	—	$	207,545
Aa1/AA+	8,878		—		—		—		8,878
Aa2/AA	2,175		—		—		—		2,175
Aa3/AA-	1,793		—		—		—		1,793
A2/A	—		—		—		5,000		5,000

Baa1/BBB+	—		—		—		8,500		8,500
Baa2/BBB	—		—		—		5,500		5,500
Baa3/BBB-	—		—		—		8,559		8,559
Ba1/BB+	—		—		—		2,000		2,000

Total	$	12,846	$	201,840	$	5,705	$	29,559	$	249,950

There were no amounts reclassified from accumulated other comprehensive loss to the consolidated statements of income during the three and six months ended June 30, 2025 and 2024.

Note 4: Loans

Loan balances as of June 30, 2025 and December 31, 2024 are summarized in the table below. Categories of loans include:


(amounts in thousands)	June 30, 2025		December 31, 2024
Commercial loans
Commercial and industrial	$	174,475	$	120,175
Owner-occupied commercial real estate	50,096		53,591
Investor commercial real estate	513,411		269,431
Construction	332,658		413,523
Single tenant lease financing	970,042		949,748
Public finance	476,339		485,867
Healthcare finance	160,073		181,427
Small business lending1	383,455		331,914
Franchise finance	479,757		536,909

Total commercial loans	3,540,306		3,342,585
Consumer loans
Residential mortgage	358,922		375,160
Home equity	16,668		18,274
Other consumer loans	421,581		407,947

Total consumer loans	797,171		801,381
Total commercial and consumer loans	4,337,477		4,143,966
Net deferred loan origination costs, premiums and discounts on purchased loans, and other2	25,085		26,680
Total loans	4,362,562		4,170,646
Allowance for credit losses	(46,517)		(44,769)
Net loans	$	4,316,045	$	4,125,877

1 Balances include $45.1 million and $34.0 million that is guaranteed by the U.S. government as of June 30, 2025 and December 31, 2024, respectively.

2 Includes carrying value adjustment of $21.2 million and $22.9 million related to terminated interest rate swaps associated with public finance loans as of June 30, 2025 and December 31, 2024, respectively.

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

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

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

Investor Commercial Real Estate: These loans are made on a nationwide basis and are underwritten primarily based on the cash flow expected to be generated from the property and are secondarily supported by the value of the real estate. These loans typically incorporate a personal guarantee from the primary sponsor or sponsors. This portfolio segment generally involves larger loan amounts with repayment primarily dependent on the successful leasing and operation of the property securing the loan or the business conducted on the property securing the loan. Investor commercial real estate loans may be more adversely affected by changing economic conditions in the real estate markets, industry dynamics or the overall health of the local economy where the property is located. The properties securing the Company’s investor commercial real estate portfolio tend to be diverse in terms of property type. Management monitors and evaluates commercial real estate loans based on property financial performance, collateral value, guarantor strength, economic and industry conditions together with other risk grade criteria. As a general rule, the Company avoids financing special use projects unless other underwriting factors are present to mitigate these additional risks.

Construction: Construction loans are made on a nationwide basis and are secured by land and related improvements and are made to assist in the construction of new structures, which may include commercial (retail, industrial, office, and multi-family) properties, land development for residential properties or single family residential properties offered for sale by the builder. These loans generally finance a variety of project costs, including land, site preparation, architectural services, construction, closing and soft costs and interim financing needs. The cash flows of builders, while initially predictable, may fluctuate with market conditions, and the value of the collateral securing these loans may be subject to fluctuations based on general economic changes.

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

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

Healthcare Finance: These loans are made on a nationwide basis to healthcare providers, primarily dentists, for practice acquisition financing or refinancing that occasionally includes owner-occupied commercial real estate and equipment purchases. The sources of repayment are primarily based on the identified cash flows from operations of the borrower and related entities and secondarily on the underlying collateral provided by the borrower.

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

Franchise Finance: These loans are made on a nationwide basis through our partnership with ApplePie Capital, which through their deep relationships with franchise brands provides franchisees with financing options for new franchise units, recapitalization, expansion, equipment and working capital. The sources of repayment are either based on identified cash flows from existing operations of the borrower or pro forma cash flow for new franchise locations.

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

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

Other Consumer: These loans primarily consist of consumer loans and credit cards. Consumer loans may be secured by consumer assets such as horse trailers or recreational vehicles. Some consumer loans are unsecured, such as small installment loans, home improvement loans and certain lines of credit. Repayment of consumer loans is primarily dependent upon the personal income of the borrowers, which can be impacted by economic conditions in their market areas such as unemployment levels. Risk is mitigated by the fact that the loans are of smaller individual amounts and spread over a large number of borrowers in geographically diverse locations throughout the country.

Allowance for Credit Losses (“ACL”) Methodology

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

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

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

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

•Changes in lending policies and procedures, including changes in underwriting standards and collections, charge-offs and recovery practices

•Changes in international, national, regional and local conditions

•Changes in the nature and volume of the portfolio and terms of loans

•Changes in the experience, depth and ability of lending management

•Changes in the volume and severity of past due loans and other similar conditions

•Changes in the quality of the organization’s loan review system

•Changes in the value of underlying collateral for collateral dependent loans

•The existence and effect of any concentrations of credit and changes in the levels of such concentrations

•The effect of other external factors (i.e. competition, legal and regulatory requirements) on the level of estimated credit losses

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

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

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

Modified Loans to Borrowers Experiencing Financial Difficulty

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

Provision for Credit Losses

A provision for estimated losses on loans is charged to income based upon management’s evaluation of the potential losses. Such an evaluation, which includes a review of all loans for which full repayment may not be reasonably assured, considers, among other matters, the estimated net realizable value of the underlying collateral, as applicable, economic conditions, loan loss experience, and other factors that are particularly susceptible to changes that could result in a material adjustment in the near term. While management attempts to use the best information available in making its evaluations, future allowance adjustments may be necessary if economic conditions change substantially from the assumptions used in making the evaluations.

Policy for Charging Off Loans

The Company’s policy is to charge off a loan at any point in time when it no longer can be considered a bankable asset, meaning collectible within the parameters of policy. A secured loan is generally charged down to the estimated fair value of the collateral, less costs to sell, no later than when it is 120 days past due as to principal or interest. An unsecured loan generally is charged off no later than when it is 180 days past due as to principal or interest. A home improvement loan generally is charged off no later than when it is 90 days past due as to principal or interest.

The following tables present changes in the balance of the ACL during the three and six months ended June 30, 2025 and 2024.


(amounts in thousands)	Three Months Ended June 30, 2025
Allowance for credit losses:	Balance, Beginning of Period		Provision (Credit) Charged to Expense		Losses Charged Off		Recoveries		Balance, End of Period
Commercial and industrial	$	1,360	$	545	$	—	$	2	$	1,907
Owner-occupied commercial real estate	470		2		—		—		472
Investor commercial real estate	859		750		—		—		1,609
Construction	2,167		(396)		—		—		1,771
Single tenant lease financing	4,313		133		—		—		4,446
Public finance	529		(7)		—		—		522
Healthcare finance	1,310		(111)		—		—		1,199
Small business lending	17,555		7,978		(11,851)		40		13,722
Franchise finance	11,200		4,102		(2,238)		18		13,082

Residential mortgage	1,890		32		—		1		1,923
Home equity	96		(5)		—		1		92
Other consumer loans	5,489		573		(359)		69		5,772

Total	$	47,238	$	13,596	$	(14,448)	$	131	$	46,517



(amounts in thousands)	Six Months Ended June 30, 2025
Allowance for credit losses:	Balance, Beginning of Period		Provision (Credit) Charged to Expense		Losses Charged Off		Recoveries		Balance, End of Period
Commercial and industrial	$	1,265	$	638	$	—	$	4	$	1,907
Owner-occupied commercial real estate	528		(56)		—		—		472
Investor commercial real estate	1,149		460		—		—		1,609
Construction	1,984		(213)		—		—		1,771
Single tenant lease financing	4,782		(336)		—		—		4,446
Public finance	703		(181)		—		—		522
Healthcare finance	1,412		(213)		—		—		1,199
Small business lending	16,161		12,908		(15,520)		173		13,722
Franchise finance	8,976		12,174		(8,086)		18		13,082

Residential mortgage	2,136		(209)		(11)		7		1,923
Home equity	106		(17)		—		3		92
Other consumer loans	5,567		762		(672)		115		5,772

Total	$	44,769	$	25,717	$	(24,289)	$	320	$	46,517


(amounts in thousands)	Three Months Ended June 30, 2024
Allowance for credit losses:	Balance, Beginning of Period		(Credit) Provision Charged to Expense		Losses Charged Off		Recoveries		Balance, End of Period
Commercial and industrial	$	1,800	$	(413)	$	—	$	2	$	1,389
Owner-occupied commercial real estate	769		(208)		—		—		561
Investor commercial real estate	798		374		—		—		1,172
Construction	2,942		198		—		—		3,140
Single tenant lease financing	8,471		(20)		(195)		—		8,256
Public finance	1,336		(594)		—		—		742
Healthcare finance	1,917		(108)		—		—		1,809
Small business lending	8,868		3,633		(573)		65		11,993
Franchise finance	6,166		402		(577)		—		5,991

Residential mortgage	1,945		167		—		—		2,112
Home equity	125		(8)		—		1		118
Other consumer loans	5,754		497		(160)		31		6,122

Total	$	40,891	$	3,920	$	(1,505)	$	99	$	43,405



(amounts in thousands)	Six Months Ended June 30, 2024
Allowance for credit losses:	Balance, Beginning of Period		(Credit) Provision Charged to Expense		Losses Charged Off		Recoveries		Balance, End of Period
Commercial and industrial	$	2,185	$	(800)	$	—	$	4	$	1,389
Owner-occupied commercial real estate	825		(264)		—		—		561
Investor commercial real estate	1,311		(139)		—		—		1,172
Construction	2,167		973		—		—		3,140
Single tenant lease financing	8,129		322		(195)		—		8,256
Public finance	1,372		(630)		—		—		742
Healthcare finance	1,976		(167)		—		—		1,809
Small business lending	6,532		6,218		(862)		105		11,993
Franchise finance	6,363		205		(577)		—		5,991

Residential mortgage	2,054		126		(69)		1		2,112
Home equity	171		(56)		—		3		118
Other consumer loans	5,689		714		(335)		54		6,122

Total	$	38,774	$	6,502	$	(2,038)	$	167	$	43,405

Accrued interest receivable on loans totaled $26.4 million and $28.2 million at June 30, 2025 and December 31, 2024, respectively, and is excluded from the estimate of credit losses. The Company made the accounting policy election to not measure an ACL for accrued interest receivable. Accrued interest deemed uncollectible will be written off through interest income.

In addition to the ACL, the Company established a reserve for off-balance sheet commitments, classified in other liabilities, as required by the adoption of the CECL methodology for measuring credit losses. This reserve is maintained at a level management believes to be sufficient to absorb losses arising from unfunded loan commitments. The adequacy of the reserve for unfunded commitments is determined quarterly based on methodology similar to the methodology for determining the ACL. The following tables detail activity in the provision (benefit) for credit losses on off-balance sheet commitments for the three and six months ended June 30, 2025.



(amounts in thousands)	Balance March 31, 2025		Provision (Benefit) for Credit Losses		Balance June 30, 2025
Off-balance sheet commitments
Commercial loans
Commercial and industrial	$	170	$	29	$	199

Investor commercial real estate	1		32		33
Construction	1,474		283		1,757
Single tenant lease financing	12		(7)		5


Small business lending	274		(273)		1


Total commercial loans	1,931		64		1,995
Consumer loans
Residential mortgage	1		—		1
Home equity	32		(32)		—
Other consumer loans	8		(8)		—
Total consumer loans	41		(40)		1
Total allowance for off-balance sheet commitments	$	1,972	$	24	$	1,996



(amounts in thousands)	Balance December 31, 2024		(Benefit) Provision for Credit Losses		Balance June 30, 2025
Off-balance sheet commitments
Commercial loans
Commercial and industrial	$	233	$	(34)	$	199
Owner-occupied commercial real estate	11		(11)		—
Investor commercial real estate	1		32		33
Construction	1,568		189		1,757
Single tenant lease financing	19		(14)		5


Small business lending	263		(262)		1


Total commercial loans	2,095		(100)		1,995
Consumer loans
Residential mortgage	1		—		1
Home equity	35		(35)		—
Other consumer loans	9		(9)		—
Total consumer loans	45		(44)		1
Total allowance for off-balance sheet commitments	$	2,140	$	(144)	$	1,996

The following table details activity in the (benefit) provision for credit losses on off-balance sheet commitments for the three and six months ended June 30, 2024.




(amounts in thousands)	Balance March 31, 2024		(Benefit) Provision for Credit Losses		Balance June 30, 2024
Off-balance sheet commitments
Commercial loans
Commercial and industrial	$	193	$	(5)	$	188


Construction	3,270		150		3,420



Small business lending	159		(28)		131


Total commercial loans	3,622		117		3,739
Consumer loans
Residential mortgage	5		(2)		3
Home equity	35		(2)		33
Other consumer loans	11		—		11
Total consumer loans	51		(4)		47
Total allowance for off-balance sheet commitments	$	3,673	$	113	$	3,786




(amounts in thousands)	Balance December 31, 2023		(Benefit) Provision for Credit Losses		Balance June 30, 2024
Off-balance sheet commitments
Commercial loans
Commercial and industrial	$	233	$	(45)	$	188
Owner-occupied commercial real estate	9		(9)		—
Investor commercial real estate	6		(6)		—
Construction	2,889		531		3,420



Small business lending	541		(410)		131


Total commercial loans	3,678		61		3,739
Consumer loans
Residential mortgage	11		(8)		3
Home equity	45		(12)		33
Other consumer loans	11		—		11
Total consumer loans	67		(20)		47
Total allowance for off-balance sheet commitments	$	3,745	$	41	$	3,786

The Company utilizes a risk grading matrix to assign a risk grade to each of its commercial loans, which are evaluated annually. A description of the general characteristics of the risk grades is as follows:

•“Pass” - Higher quality loans that do not fit any of the other categories described below.

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

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

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

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

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

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

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

The following tables present the credit risk profile of the Company’s commercial and consumer loan portfolios by loan class and by year of origination for the years indicated based on rating category and payment activity as of June 30, 2025 and December 31, 2024.


	June 30, 2025
	Term Loans (amortized cost basis by origination year)												Revolving loans amortized cost basis		Revolving loans converted to term
(amounts in thousands)	2025		2024		2023		2022		2021		Prior						Total
Commercial and industrial
Pass	$	51,040	$	20,509	$	7,614	$	12,452	$	612	$	18,009	$	54,526	$	—	$	164,762
Special Mention	—		190		—		5,016		4,255		—		—		—		9,461
Substandard	—		45		158		—		—		—		49		—		252
Doubtful	—		—		—		—		—		—		—		—		—
Total commercial and industrial	51,040		20,744		7,772		17,468		4,867		18,009		54,575		—		174,475
Year-to-date gross charge-offs	—		—		—		—		—		—		—		—		—

Owner-occupied commercial real estate
Pass	1,412		6,243		1,440		5,269		4,334		19,164		—		—		37,862
Special Mention	—		—		—		563		870		9,146		—		—		10,579
Substandard	—		—		—		—		—		1,655		—		—		1,655
Doubtful	—		—		—		—		—		—		—		—		—
Total owner-occupied commercial real estate	1,412		6,243		1,440		5,832		5,204		29,965		—		—		50,096
Year-to-date gross charge-offs	—		—		—		—		—		—		—		—		—
Investor commercial real estate
Pass	22,875		68,823		75,858		214,152		92,050		35,922		—		—		509,680
Special Mention	—		—		—		—		—		3,731		—		—		3,731
Substandard	—		—		—		—		—		—		—		—		—
Doubtful	—		—		—		—		—		—		—		—		—
Total investor commercial real estate	22,875		68,823		75,858		214,152		92,050		39,653		—		—		513,411
Year-to-date gross charge-offs	—		—		—		—		—		—		—		—		—
Construction
Pass	19,754		83,152		198,884		25,639		2,371		1,300		1,558		—		332,658
Special Mention	—		—		—		—		—		—		—		—		—
Substandard	—		—		—		—		—		—		—		—		—
Doubtful	—		—		—		—		—		—		—		—		—
Total construction	19,754		83,152		198,884		25,639		2,371		1,300		1,558		—		332,658
Year-to-date gross charge-offs	—		—		—		—		—		—		—		—		—
Single tenant lease financing
Pass	61,799		83,816		46,374		195,810		85,542		460,857		—		—		934,198
Special Mention	—		640		—		20,372		4,240		8,927		—		—		34,179
Substandard	—		—		—		—		—		1,665		—		—		1,665
Doubtful	—		—		—		—		—		—		—		—		—
Total single tenant lease financing	61,799		84,456		46,374		216,182		89,782		471,449		—		—		970,042
Year-to-date gross charge-offs	—		—		—		—		—		—		—		—		—
Public finance
Pass	15,674		52,333		—		5,600		11,015		390,647		—		—		475,269
Special Mention	—		—		—		—		—		1,070		—		—		1,070
Substandard	—		—		—		—		—		—		—		—		—
Doubtful	—		—		—		—		—		—		—		—		—
Total public finance	15,674		52,333		—		5,600		11,015		391,717		—		—		476,339
Year-to-date gross charge-offs	—		—		—		—		—		—		—		—		—


	June 30, 2025
	Term Loans (amortized cost basis by origination year)												Revolving loans amortized cost basis		Revolving loans converted to term
(amounts in thousands)	2025		2024		2023		2022		2021		Prior						Total
Healthcare finance
Pass	—		—		—		—		7,807		149,912		—		—		157,719
Special Mention	—		—		—		—		—		2,354		—		—		2,354
Substandard	—		—		—		—		—		—		—		—		—
Doubtful	—		—		—		—		—		—		—		—		—
Total healthcare finance	—		—		—		—		7,807		152,266		—		—		160,073
Year-to-date gross charge-offs	—		—		—		—		—		—		—		—		—
Small business lending
Pass	67,898		132,673		84,394		28,023		9,713		15,438		22,434		—		360,573
Special Mention	—		2,670		4,365		473		86		1,514		793		—		9,901
Substandard	—		4,254		4,647		405		91		1,403		2,181		—		12,981
Doubtful	—		—		—		—		—		—		—		—		—
Total small business lending	67,898		139,597		93,406		28,901		9,890		18,355		25,408		—		383,455
Year-to-date gross charge-offs	—		4,747		8,550		1,385		246		592		—		—		15,520
Franchise finance
Pass	764		62,604		199,437		144,161		32,300		—		—		—		439,266
Special Mention	—		655		1,818		9,163		4,998		—		—		—		16,634
Substandard	—		—		6,376		9,729		7,427		—		—		—		23,532
Doubtful	—		—		325		—		—		—		—		—		325
Total franchise finance	764		63,259		207,956		163,053		44,725		—		—		—		479,757
Year-to-date gross charge-offs	—		370		3,656		3,564		496		—		—		—		8,086
Consumer loans
Residential mortgage
Performing	326		6,379		12,451		174,985		83,115		77,739		—		—		354,995
Nonperforming	—		—		—		1,638		600		1,689		—		—		3,927
Total residential mortgage	326		6,379		12,451		176,623		83,715		79,428		—		—		358,922
Year-to-date gross charge-offs	—		—		—		11		—		—		—		—		11
Home equity
Performing	—		—		826		1,292		300		832		12,539		879		16,668
Nonperforming	—		—		—		—		—		—		—		—		—
Total home equity	—		—		826		1,292		300		832		12,539		879		16,668
Year-to-date gross charge-offs	—		—		—		—		—		—		—		—		—
Other consumer loans
Performing	56,111		94,740		86,508		80,587		29,542		73,168		802		—		421,458
Nonperforming	—		—		65		12		27		19		—		—		123
Total other consumer loans	56,111		94,740		86,573		80,599		29,569		73,187		802		—		421,581
Year-to-date gross charge-offs	4		76		244		85		18		245		—		—		672
Total Loans	$	297,653	$	619,726	$	731,540	$	935,341	$	381,295	$	1,276,161	$	94,882	$	879	$	4,337,477
Total year-to-date gross charge-offs	$	4	$	5,193	$	12,450	$	5,045	$	760	$	837	$	—	$	—	$	24,289


	December 31, 2024
	Term Loans (amortized cost basis by origination year)												Revolving loans amortized cost basis		Revolving loans converted to term
(amounts in thousands)	2024		2023		2022		2021		2020		Prior						Total
Commercial and industrial
Pass	$	23,539	$	8,501	$	13,853	$	5,418	$	2,362	$	17,829	$	44,000	$	—	$	115,502
Special Mention	47		164		4,462		—		—		—		—		—		4,673
Substandard	—		—		—		—		—		—		—		—		—
Doubtful	—		—		—		—		—		—		—		—		—
Total commercial and industrial	23,586		8,665		18,315		5,418		2,362		17,829		44,000		—		120,175
Year-to-date gross charge-offs	—		—		—		—		—		—		—		—		—

Owner-occupied commercial real estate
Pass	7,410		1,458		5,366		6,438		5,716		14,793		—		—		41,181
Special Mention	—		—		570		888		8,144		1,153		—		—		10,755
Substandard	—		—		—		—		—		1,655		—		—		1,655
Doubtful	—		—		—		—		—		—		—		—		—
Total owner-occupied commercial real estate	7,410		1,458		5,936		7,326		13,860		17,601		—		—		53,591
Year-to-date gross charge-offs	—		—		—		—		—		—		—		—		—
Investor commercial real estate
Pass	71,430		3,849		88,290		65,050		9,607		27,474		—		—		265,700
Special Mention	—		—		—		—		—		3,731		—		—		3,731
Substandard	—		—		—		—		—		—		—		—		—
Doubtful	—		—		—		—		—		—		—		—		—
Total investor commercial real estate	71,430		3,849		88,290		65,050		9,607		31,205		—		—		269,431
Year-to-date gross charge-offs	—		—		—		—		—		—		—		—		—
Construction
Pass	35,177		186,979		140,299		47,598		1,622		—		1,848		—		413,523
Special Mention	—		—		—		—		—		—		—		—		—
Substandard	—		—		—		—		—		—		—		—		—
Doubtful	—		—		—		—		—		—		—		—		—
Total construction	35,177		186,979		140,299		47,598		1,622		—		1,848		—		413,523
Year-to-date gross charge-offs	—		—		—		—		—		—		—		—		—
Single tenant lease financing
Pass	79,872		46,674		211,005		88,192		63,506		437,564		—		—		926,813
Special Mention	644		—		9,696		3,460		—		9,135		—		—		22,935
Substandard	—		—		—		—		—		—		—		—		—
Doubtful	—		—		—		—		—		—		—		—		—
Total single tenant lease financing	80,516		46,674		220,701		91,652		63,506		446,699		—		—		949,748
Year-to-date gross charge-offs	—		—		—		—		—		195		—		—		195
Public finance
Pass	55,306		1,290		7,790		12,050		463		407,008		—		—		483,907
Special Mention	—		—		—		—		—		1,960		—		—		1,960
Substandard	—		—		—		—		—		—		—		—		—
Doubtful	—		—		—		—		—		—		—		—		—
Total public finance	55,306		1,290		7,790		12,050		463		408,968		—		—		485,867
Year-to-date gross charge-offs	—		—		—		—		—		—		—		—		—


	December 31, 2024
	Term Loans (amortized cost basis by origination year)												Revolving loans amortized cost basis		Revolving loans converted to term
(amounts in thousands)	2024		2023		2022		2021		2020		Prior						Total
Healthcare finance
Pass	—		—		—		8,969		104,427		67,413		—		—		180,809
Special Mention	—		—		—		—		—		618		—		—		618
Substandard	—		—		—		—		—		—		—		—		—
Doubtful	—		—		—		—		—		—		—		—		—
Total healthcare finance	—		—		—		8,969		104,427		68,031		—		—		181,427
Year-to-date gross charge-offs	—		—		—		—		—		—		—		—		—
Small business lending
Pass	138,044		94,556		30,486		11,715		9,687		9,896		17,197		—		311,581
Special Mention	1,022		4,691		927		—		354		1,213		697		—		8,904
Substandard	2,940		3,909		1,457		258		970		1,001		894		—		11,429
Doubtful	—		—		—		—		—		—		—		—		—
Total small business lending	142,006		103,156		32,870		11,973		11,011		12,110		18,788		—		331,914
Year-to-date gross charge-offs	1,093		4,600		3,038		567		619		524		—		—		10,441
Franchise finance
Pass	67,065		230,425		172,830		42,869		—		—		—		—		513,189
Special Mention	—		1,978		5,084		6,275		—		—		—		—		13,337
Substandard	—		3,543		6,367		473		—		—		—		—		10,383
Doubtful	—		—		—		—		—		—		—		—		—
Total franchise finance	67,065		235,946		184,281		49,617		—		—		—		—		536,909
Year-to-date gross charge-offs	—		1,171		—		295		—		—		—		—		1,466
Consumer loans
Residential mortgage
Performing	3,577		13,533		183,484		86,213		28,655		55,615		—		—		371,077
Nonperforming	—		—		1,671		609		69		1,734		—		—		4,083
Total residential mortgage	3,577		13,533		185,155		86,822		28,724		57,349		—		—		375,160
Year-to-date gross charge-offs	—		—		101		58		—		—		—		—		159
Home equity
Performing	—		992		1,450		356		414		530		13,621		911		18,274
Nonperforming	—		—		—		—		—		—		—		—		—
Total home equity	—		992		1,450		356		414		530		13,621		911		18,274
Year-to-date gross charge-offs	—		—		—		—		—		—		—		—		—
Other consumer loans
Performing	101,965		97,832		88,872		33,177		20,918		64,251		870		—		407,885
Nonperforming	—		—		38		11		1		12		—		—		62
Total other consumer loans	101,965		97,832		88,910		33,188		20,919		64,263		870		—		407,947
Year-to-date gross charge-offs	157		242		300		127		1		182		—		—		1,009
Total Loans	$	588,038	$	700,374	$	973,997	$	420,019	$	256,915	$	1,124,585	$	79,127	$	911	$	4,143,966
Total year-to-date gross charge-offs	$	1,250	$	6,013	$	3,439	$	1,047	$	620	$	901	$	—	$	—	$	13,270

The following tables present the Company’s loan portfolio delinquency, including nonperforming loans, as of June 30, 2025 and December 31, 2024.


	June 30, 2025
(amounts in thousands)	30-59 Days Past Due		60-89 Days Past Due		90 Days or More Past Due		Total Past Due		Current		Total Loans
Commercial and industrial	$	49	$	—	$	16	$	65	$	174,410	$	174,475
Owner-occupied commercial real estate	1,460		—		—		1,460		48,636		50,096
Investor commercial real estate	—		—		—		—		513,411		513,411
Construction	—		—		—		—		332,658		332,658
Single tenant lease financing	—		—		—		—		970,042		970,042
Public finance	—		—		—		—		476,339		476,339
Healthcare finance	—		—		—		—		160,073		160,073
Small business lending	5,309		789		9,335		15,433		368,022		383,455
Franchise finance	3,867		11,865		22,468		38,200		441,557		479,757

Residential mortgage	2,178		619		2,290		5,087		353,835		358,922
Home equity	37		—		—		37		16,631		16,668
Other consumer loans	153		57		99		309		421,272		421,581

Total	$	13,053	$	13,330	$	34,208	$	60,591	$	4,276,886	$	4,337,477


	December 31, 2024
(amounts in thousands)	30-59 Days Past Due		60-89 Days Past Due		90 Days or More Past Due		Total Past Due		Current		Total Loans
Commercial and industrial	$	—	$	—	$	—	$	—	$	120,175	$	120,175
Owner-occupied commercial real estate	—		—		—		—		53,591		53,591
Investor commercial real estate	—		—		—		—		269,431		269,431
Construction	—		—		—		—		413,523		413,523
Single tenant lease financing	—		—		—		—		949,748		949,748
Public finance	—		—		—		—		485,867		485,867
Healthcare finance	—		—		—		—		181,427		181,427
Small business lending	11,817		1,310		5,587		18,714		313,200		331,914
Franchise finance	9,431		3,279		9,849		22,559		514,350		536,909

Residential mortgage	648		1,711		3,815		6,174		368,986		375,160
Home equity	—		—		—		—		18,274		18,274
Other consumer loans	194		196		27		417		407,530		407,947
Total	$	22,090	$	6,496	$	19,278	$	47,864	$	4,096,102	$	4,143,966

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

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


	June 30, 2025						December 31, 2024
(amounts in thousands)	Nonaccrual Loans		Nonaccrual Loans with No Allowance for Credit Losses		Total Loans 90 Days or More Past Due and Accruing		Nonaccrual Loans		Nonaccrual Loans with No Allowance for Credit Losses		Total Loans 90 Days or More Past Due and Accruing
Commercial and industrial	$	—	$	—	$	16	$	—	$	—	$	—




Public finance	1,665		—		—		—		—		—

Small business lending	11,582		10,658		2,370		11,429		4,778		1,320
Franchise finance	23,857		1,781		—		10,382		—		—

Residential mortgage	3,927		3,927		—		4,083		4,083		1,142

Other consumer loans	124		124		—		61		61		4
Total loans	$	41,155	$	16,490	$	2,386	$	25,955	$	8,922	$	2,466

Interest income recognized on nonaccrual loans was $0.1 million and $0.2 million for the three and six months ended June 30, 2025, respectively, and less than $0.1 million for the three and six months ended June 30, 2024, respectively.

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

The following tables present the amortized cost basis of collateral dependent loans, which are individually evaluated to determine expected credit losses as of June 30, 2025 and December 31, 2024.


	June 30, 2025
(amounts in thousands)	Commercial Real Estate		Residential Real Estate		Other (Includes Equipment, Machinery and Other Assets)		Total		Allowance on Collateral Dependent Loans

Owner-occupied commercial real estate	$	1,654	$	—	$	—	$	1,654	$	—





Small business lending1	247		—		7,575		7,822		489


Residential mortgage	—		3,927		—		3,927		—

Other consumer loans	—		65		27		92		—
Total loans	$	1,901	$	3,992	$	7,602	$	13,495	$	489

1 Balance includes $5.4 million of loans guaranteed by the U.S. government.


	December 31, 2024
(amounts in thousands)	Commercial Real Estate		Residential Real Estate		Other (Includes Equipment, Machinery and Other Assets)		Total		Allowance on Collateral Dependent Loans

Owner-occupied commercial real estate	$	1,654	$	—	$	—	$	1,654	$	—





Small business lending1	723		—		8,571		9,294		4,167
Franchise finance	—		—		3,468		3,468		679

Residential mortgage	—		4,083		—		4,083		—

Other consumer loans	—		—		22		22		—
Total loans	$	2,377	$	4,083	$	12,061	$	18,521	$	4,846

1 Balance includes $3.5 million of loans guaranteed by the U.S. government.

Loan Modifications to Borrowers Experiencing Financial Difficulty

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

The Company had six loan modifications made to borrowers experiencing financial difficulty during the three months ended June 30, 2025. The Company had eight loan modifications made to borrowers experiencing financial difficulty during the six months ended June 30, 2025. The Company did not have any loan modifications made to borrowers experiencing financial difficulty during the three and six months ended June 30, 2024.

The following table presents loans that were both experiencing financial difficulty and modified during the three months ended June 30, 2025.


	Three Months Ended June 30, 2025
(dollars in thousands)	Payment Delay		Total Modification by Loan Class		% of Class of Loans
Commercial and industrial	$	393	$	393	0.3	%



Single tenant lease financing	3,007		3,007		0.3	%


Small business lending	3,084		3,084		0.6	%





Total	$	6,484	$	6,484

The following table presents loans that were both experiencing financial difficulty and modified during the six months ended June 30, 2025.


	Six Months Ended June 30, 2025
(dollars in thousands)	Payment Delay		Total Modification by Loan Class		% of Class of Loans
Commercial and industrial	$	393	$	393	0.3	%



Single tenant lease financing	3,007		3,007		0.3	%

Healthcare finance	2,634		2,634		1.7	%
Small business lending	3,084		3,084		0.6	%





Total	$	9,118	$	9,118

The Company closely monitors the performance of loans that are modified to borrowers experiencing financial difficulty to understand the effectiveness of its modification efforts. The following table presents the performance of loans that were modified within the twelve months ended June 30, 2025.


	Twelve Months Ended June 30, 2025
(amounts in thousands)	Current		30 - 89 Days Past Due		90+ Days Past Due
Commercial and industrial	$	393	$	—	$	—

Investor commercial real estate	3,731		—		—

Single tenant lease financing	3,007		—		—

Healthcare finance	1,174		1,460		—
Small business lending	3,084		—		—
Franchise finance	—		1,156		4,020




Total	$	11,389	$	2,616	$	4,020

There were two modified loans totaling $4.0 million with payment defaults during three and six months ended June 30, 2025. The payment defaults did not have a material impact on the allowance for credit losses on loans. There were no modified loans with payment defaults during the three and six months ended June 30, 2024.

Other Real Estate Owned

The Company had $1.7 million in other real estate owned (“OREO”) as of June 30, 2025, which consisted of two small business lending properties and one residential mortgage property. The Company had $0.3 million in OREO as of December 31, 2024, which consisted of one residential mortgage property. There were seven loans totaling $2.3 million and nine loans totaling $2.1 million, in the process of foreclosure at June 30, 2025 and December 31, 2024, respectively.

Note 5: Premises and Equipment

The following table summarizes premises and equipment at June 30, 2025 and December 31, 2024.


(amounts in thousands)	June 30, 2025		December 31, 2024
Land	$	5,598	$	5,598
Construction in process	127		20
Right of use leased asset	138		188
Building and improvements	63,367		63,069
Furniture and equipment	22,477		22,047

Less: accumulated depreciation	(21,777)		(19,469)
Total	$	69,930	$	71,453

Note 6: Goodwill

As of June 30, 2025 and December 31, 2024, the carrying amount of goodwill was $4.7 million. There have been no changes in the carrying amount of goodwill for the three months ended June 30, 2025 or June 30, 2024. Goodwill is assessed for impairment annually as of August 31, or more frequently if events occur or circumstances change that indicate an impairment may exist. When assessing goodwill for impairment, first, a qualitative assessment can be made to determine whether it is more likely than not that the estimated fair value of a reporting unit is less than its estimated carrying value. If the results of the qualitative assessment are not conclusive, a quantitative goodwill test is performed. Alternatively, a quantitative goodwill test can be performed without performing a qualitative assessment.

Goodwill was assessed for impairment using a qualitative test performed as of August 31, 2024. The estimated fair value of the reporting unit exceeded the net carrying value, and therefore no goodwill impairment existed as of that date. However, there is a risk for impairment in the event of declines in general economic, market or business conditions and the resultant effect on forecasted growth rates, or any significant unfavorable change in the Company’s forecasted operations resulting from elevated levels of net charge-offs in the franchise finance and small business lending portfolios. If current and long-term projections decrease materially, the Company may be required to recognize impairment charges, which could be material to the results of operations.

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, 2025 and 2024 are shown in the table below.


	Three Months Ended
(amounts in thousands)	June 30, 2025		June 30, 2024
Balance, beginning of period	$	17,445	$	11,760
Additions:
Originated	444		2,078
Subtractions:
Paydowns	(847)		(797)
Changes in fair value due to changes in valuation inputs or assumptions used in the valuation model	(306)		(32)
Loan servicing asset revaluation	$	(1,153)	$	(829)
Balance, end of period	$	16,736	$	13,009



	Six Months Ended
(amounts in thousands)	June 30, 2025		June 30, 2024
Balance, beginning of period	$	16,389	$	10,567
Additions:
Originated	2,681		3,705
Subtractions:
Paydowns	(1,811)		(1,408)
Changes in fair value due to changes in valuation inputs or assumptions used in the valuation model	(523)		145
Loan servicing asset revaluation	$	(2,334)	$	(1,263)
Balance, end of period	$	16,736	$	13,009

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, 2025 and December 31, 2024 are shown in the table below.



(amounts in thousands)	June 30, 2025		December 31, 2024
Loan portfolios serviced for:
SBA guaranteed loans	$	932,168	$	862,089

Total	$	932,168	$	862,089

Loan servicing revenue totaled $2.0 million and $4.0 million for the three and six months ended June 30, 2025, respectively, and $1.5 million and $2.8 million for the three and six months ended June 30, 2024, respectively. Loan servicing asset revaluation, which represents the change in fair value of the servicing asset, resulted in a $1.2 million and $2.3 million downward valuation for the three and six months ended June 30, 2025 and a $0.8 million and $1.3 million downward valuation for both the three and six months ended June 30, 2024, respectively.

The fair value of servicing rights is highly sensitive to changes in underlying assumptions. Though fluctuations in prepayment speeds and changes in secondary market premiums generally have the most substantial impact on the fair value of servicing rights, other influencing factors include changing economic conditions, changes to the discount rate assumption and the weighted average life of the servicing portfolio. Measurement of fair value is limited to the conditions existing and the assumptions used as of a particular point in time; however, those assumptions may change over time. Refer to Note 11 - Fair Value of Financial Instruments for further details.

Note 8: Subordinated Debt

In June 2019, the Company issued $37.0 million aggregate principal amount of 6.0% Fixed-to-Floating Rate Subordinated Notes due 2029 (the “2029 Notes”) in a public offering. The 2029 Notes bear interest at a floating rate equal to three-month Term SOFR plus 4.376%. All interest on the 2029 Notes is payable quarterly. The 2029 Notes are scheduled to mature on June 30, 2029. The 2029 Notes are unsecured subordinated obligations of the Company and may be repaid at any time, without penalty. The 2029 Notes are intended to qualify as Tier 2 capital under regulatory guidelines.

In October 2020, the Company entered into a term loan in the principal amount of $10.0 million, evidenced by a term note due 2030 (the “2030 Note”). The 2030 Note initially bears a fixed interest rate of 6.0% per year to, but excluding, November 1, 2025 and thereafter at a floating rate equal to the then-current benchmark rate (initially three-month Term SOFR plus 5.795%). The 2030 Note is scheduled to mature on November 1, 2030. The 2030 Note is an unsecured subordinated obligation of the Company and may be repaid, without penalty, on any interest payment date on or after November 1, 2025. The 2030 Note is intended to qualify as Tier 2 capital under regulatory guidelines. The Company used the net proceeds from the issuance of the 2030 Note to redeem a subordinated term note that had been entered into in October 2015.

In August 2021, the Company issued $60.0 million aggregate principal amount of 3.75% Fixed-to-Floating Rate Subordinated Notes due 2031 (the “2031 Notes”) in a private placement. The 2031 Notes initially bear a fixed interest rate of 3.75% per year to, but excluding, September 1, 2026, and thereafter at a floating rate equal to the then-current benchmark rate (initially three-month Term SOFR plus 3.11%). The 2031 Notes are scheduled to mature on September 1, 2031. The 2031 Notes are unsecured subordinated obligations of the Company and may be repaid, without penalty, on any interest payment date on or after September 1, 2026. The 2031 Notes are intended to qualify as Tier 2 capital under regulatory guidelines. The Company used a portion of the net proceeds from the issuance of the 2031 Notes to redeem subordinated notes issued by the Company in 2016. Pursuant to the terms of a Registration Rights Agreement between the Company and the initial purchasers of the 2031 Notes, the Company offered to exchange the 2031 Notes for subordinated notes that are registered under the Securities Act of 1933, as amended, and have substantially the same terms as the 2031 Notes. On December 30, 2021, we completed an exchange of $59.3 million principal amount of the unregistered 2031 Notes for registered 2031 Notes in satisfaction of our obligations under the registration rights agreement. Holders of $0.7 million of unregistered 2031 Notes did not participate in the exchange.

The following table presents the principal balance and unamortized discount and debt issuance costs for the 2029 Notes, the 2030 Note, and the 2031 Notes as of June 30, 2025 and December 31, 2024.


	June 30, 2025				December 31, 2024
(amounts in thousands)	Principal		Unamortized Discount and Debt Issuance Costs		Principal		Unamortized Discount and Debt Issuance Costs

2029 Notes	$	37,000	$	(625)	$	37,000	$	(703)
2030 Note	10,000		(125)		10,000		(137)
2031 Notes	60,000		(943)		60,000		(1,010)


Total	$	107,000	$	(1,693)	$	107,000	$	(1,850)

Note 9: Benefit Plans

Employment Agreements

The Company is party to certain employment agreements with each of its Chief Executive Officer, President and Chief Operating Officer and Executive Vice President and Chief Financial Officer. The employment agreements each provide for annual base salaries and annual bonuses, if any, as determined from time to time by the Compensation Committee of our Board of Directors. The annual bonuses are to be determined with reference to the achievement of annual performance objectives established by the Compensation Committee. The agreements also provide that each of the Chief Executive Officer, President and Chief Operating Officer and Executive Vice President and Chief Financial Officer, may be awarded additional compensation, benefits, or consideration as the Compensation Committee may determine.

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

2022 Equity Incentive Plan

The First Internet Bancorp 2022 Equity Incentive Plan (the “2022 Plan”) was approved by our Board of Directors and ratified by our shareholders on May 16, 2022. The plan permits awards of incentive and non-statutory stock options, stock appreciation rights, restricted stock awards, stock unit awards, performance awards and other stock-based awards. All employees, consultants and advisors of the Company or any subsidiary, as well as all non-employee directors of the Company, are eligible to receive awards under the 2022 Plan. The 2022 Plan initially authorized the issuance of 400,000 new shares of the Company’s common stock plus all shares of common stock that remained available for future grants under the First Internet Bancorp 2013 Equity Incentive Plan (the “2013 Plan”).

Award Activity Under 2022 Plan

The Company recorded $0.5 million of share-based compensation expense for both the three and six months ended June 30, 2025, related to stock-based awards under the 2022 Plan. The Company recorded $0.4 million and $0.7 million of share-based compensation expense for the three and six months ended June 30, 2024, respectively, related to stock-based awards under the 2022 Plan.

The following table summarizes the stock-based award activity under the 2022 Plan for the six months ended June 30, 2025.


(dollars in thousands, except per share data)	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
Unvested at December 31, 2024	130,748	$	24.35	12,040	$	31.46	—	$	—
Granted	54,948	34.72		16,009	24.72		—	—

Vested	(28,192)	24.32		(12,040)	31.46		—	—

Unvested at June 30, 2025	157,504	$	27.97	16,009	$	24.72	—	$	—

At June 30, 2025, the total unrecognized compensation cost related to unvested stock-based awards under the 2022 Plan was $3.2 million with a weighted-average expense recognition period of 1.9 years.

2013 Equity Incentive Plan

The 2013 Plan authorized the issuance of 750,000 shares of the Company’s common stock in the form of stock-based awards to employees, directors, and other eligible persons. No awards under the 2013 Plan remain outstanding and our authority to grant new awards under the 2013 Plan terminated upon shareholder approval of the 2022 Plan.

Award Activity Under 2013 Plan

The Company recorded no share-based compensation expense for the three months ended June 30, 2025, and less than $0.1 million of share-based compensation expense for the six months ended June 30, 2025, related to stock-based awards under the 2013 Plan. The Company recorded $0.1 million and $0.2 million of share-based compensation expense for the three and six months ended June 30, 2024, respectively, related to stock-based awards under the 2013 Plan.

The following table summarizes the stock-based award activity under the 2013 Plan for the six months ended June 30, 2025.


(dollars in thousands, except per share data)	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
Unvested at December 31, 2024	22,997	$	46.71	—	$	—	—	$	—

Cancelled/Forfeited	(15,126)	46.71		—	—		—	—
Vested	(7,871)	46.71		—	—		—	—

Unvested at June 30, 2025	—	$	—	—	$	—	—	$	—

At June 30, 2025, there were no unrecognized compensation costs related to unvested stock-based awards under the 2013 Plan.

Directors Deferred Stock Plan

Until January 2014, the Company had a practice of granting awards under a stock compensation plan for members of the Board of Directors (“Directors Deferred Stock Plan”). The Company reserved 180,000 shares of common stock that could have been issued pursuant to the Directors Deferred Stock Plan. The plan provided directors the option to elect to receive up to 100% of their annual retainer in either common stock or deferred stock rights. Deferred stock rights were to be settled in common stock following the end of the deferral period payable on the basis of one share of common stock for each deferred stock right.

The following table summarizes the status of deferred stock rights related to the Directors Deferred Stock Plan for the six months ended June 30, 2025.


						Deferred Stock Rights
Outstanding, beginning of period						28,821
Granted						96

Outstanding, end of period						28,917

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

Note 10: Commitments and Credit Risk

In the normal course of business, the Company makes various commitments to extend credit which are not reflected in the accompanying condensed consolidated financial statements. At June 30, 2025 and December 31, 2024, the Company had outstanding loan commitments totaling approximately $584.5 million and $667.7 million, respectively.

Note 11: Fair Value of Financial Instruments

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

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

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

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

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

Available-for-Sale Securities

Where quoted market prices are available in an active market, securities are classified within Level 1 of the valuation hierarchy. If quoted market prices are not available, then fair values are estimated by using pricing models, quoted prices of securities with similar characteristics or discounted cash flows. The Company did not own any securities classified within Level 1 of the hierarchy as of June 30, 2025 and December 31, 2024.

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

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, 2025 or December 31, 2024.

Servicing Asset

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

Interest Rate Swap Agreements Back-to-Back

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

The following tables present the fair value measurements of assets and liabilities recognized in the accompanying condensed consolidated balance sheets measured at fair value on a recurring basis and the level within the fair value hierarchy in which the fair value measurements fall at June 30, 2025 and December 31, 2024.


			June 30, 2025 Fair Value Measurements Using
(amounts in thousands)	Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
U.S. Government-sponsored agencies	$	72,700	$	—	$	72,700	$	—
Municipal securities	61,423		—		61,423		—
Agency mortgage-backed securities - residential	358,071		—		358,071		—
Agency mortgage-backed securities - commercial	61,474		—		61,474		—
Private label mortgage-backed securities - residential	39,423		—		39,423		—
Asset-backed securities	19,488		—		19,488		—
Corporate securities	32,078		—		32,078		—

Total available-for-sale securities	$	644,657	$	—	$	644,657	$	—

Servicing asset	16,736		—		—		16,736


Interest rate swap agreements - assets (back-to-back)	273		—		273		—
Interest rate swap agreements - liabilities (back-to-back)	(273)		—		(273)		—


			December 31, 2024 Fair Value Measurements Using
(amounts in thousands)	Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
U.S. Government-sponsored agencies	$	82,816	$	—	$	82,816	$	—
Municipal securities	63,654		—		63,654		—
Agency mortgage-backed securities - residential	269,641		—		269,641		—
Agency mortgage-backed securities - commercial	63,331		—		63,331		—
Private label mortgage-backed securities - residential	45,821		—		45,821		—
Asset-backed securities	23,821		—		23,821		—
Corporate securities	38,271		—		38,271		—

Total available-for-sale securities	$	587,355	$	—	$	587,355	$	—

Servicing asset	16,389		—		—		16,389


Interest rate swap agreements - assets (back-to-back)	200		—		200		—
Interest rate swap agreements - liabilities (back-to-back)	(200)		—		(200)		—

The following tables reconcile the beginning and ending balances of recurring fair value measurements recognized in the accompanying condensed consolidated balance sheets using significant unobservable (Level 3) inputs for the three and six months ended June 30, 2025 and 2024.


	Three Months Ended
(amounts in thousands)	Servicing Asset
Balance as of April 1, 2025	$	17,445
Total realized gains
Additions:
Originated	444
Subtractions:
Paydowns	(847)
Change in fair value	(306)

Balance, June 30, 2025	$	16,736

Balance as of April 1, 2024	$	11,760
Total realized gains
Additions:
Originated	2,078
Subtractions:
Paydowns	(797)
Change in fair value	(32)
Balance, June 30, 2024	$	13,009



	Six Months Ended
(amounts in thousands)	Servicing Asset
Balance, January 1, 2025	$	16,389
Total realized gains
Additions:
Originated	2,681
Subtractions:
Paydowns	(1,811)
Change in fair value	(523)

Balance, June 30, 2025	$	16,736

Balance, January 1, 2024	$	10,567
Total realized gains
Additions:
Originated	3,705
Subtractions:
Paydowns	(1,408)
Change in fair value	145
Balance, June 30, 2024	$	13,009

The following describes the valuation methodologies and inputs used for assets measured at fair value on a nonrecurring basis, as well as the general classification of such assets pursuant to the valuation hierarchy.

Individually Analyzed Collateral Dependent Loans

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

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

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

The following table presents the fair value measurements of assets and liabilities recognized in the accompanying condensed consolidated balance sheets measured at fair value on a nonrecurring basis and the level within the fair value hierarchy in which the fair value measurement falls at June 30, 2025 and December 31, 2024.


			June 30, 2025
(amounts in thousands)			Fair Value Measurements Using
	Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Collateral dependent loans	$	318	$	—	$	—	$	318


			December 31, 2024
(amounts in thousands)			Fair Value Measurements Using
	Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Collateral dependent loans	$	4,296	$	—	$	—	$	4,296

Significant Unobservable (Level 3) Inputs

The following tables present quantitative information about unobservable inputs used in recurring and nonrecurring Level 3 fair value measurements.

(dollars in thousands)

Fair Value at
June 30, 2025

Valuation
Technique

Significant Unobservable
Inputs

Range

Weighted-Average Range

Collateral dependent loans

318

Fair value of collateral

Discount for type of property and current market conditions

0%- 40%

31.6%

Servicing asset

16,736

Discounted cash flow

Prepayment speeds

Discount rate

0% - 25%

14%

12.1%

14%

(dollars in thousands)

Fair Value at
December 31, 2024

Valuation
Technique

Significant Unobservable
Inputs

Range

Weighted-Average Range

Collateral dependent loans

4,296

Fair value of collateral

Discount for type of property and current market conditions

0% - 75%

24.2%

Servicing asset

16,389

Discounted cash flow

Prepayment speeds

Discount rate

0% - 25%

14%

11.7%

14%

The following methods were used to estimate the fair value of all other financial instruments recognized in the accompanying condensed consolidated balance sheets at amounts other than fair value.

Cash and Cash Equivalents

For these instruments, the carrying amount is a reasonable estimate of fair value.

Securities Held-to-Maturity

Where quoted market prices are available in an active market, securities are classified within Level 1 of the valuation hierarchy. Level 1 securities include highly liquid mutual funds. If quoted market prices are not available, then fair values are estimated by using pricing models, quoted prices of securities with similar characteristics or discounted cash flows.

Level 2 securities include agency mortgage-backed securities - residential, municipal securities and corporate securities. Matrix pricing is a mathematical technique widely used in the banking industry to value investment securities.

Loans Held-for-Sale

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

Net Loans

The fair value of loans is estimated on an exit price basis incorporating discounts for credit, liquidity and marketability factors.

Accrued Interest Receivable

The fair value of these financial instruments approximates carrying value.

Federal Home Loan Bank of Indianapolis Stock

The fair value of this financial instrument approximates carrying value.

Deposits

The fair value of noninterest-bearing and interest-bearing demand deposits, savings and money market accounts approximates carrying value. The fair value of fixed maturity certificates of deposit and brokered deposits are estimated using rates currently offered for deposits of similar remaining maturities.

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, 2025 and December 31, 2024.

The following tables present the carrying value and estimated fair value of all financial assets and liabilities that are not measured at fair value on a recurring basis at June 30, 2025 and December 31, 2024.


	June 30, 2025 Fair Value Measurements Using
(amounts in thousands)	Carrying Amount		Fair Value		Quoted Prices In Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Cash and cash equivalents	$	446,361	$	446,361	$	446,361	$	—	$	—

Securities held-to-maturity, net	271,737		254,667		—		254,667		—
Loans held-for-sale	126,533		136,645		—		136,645		—
Net loans	4,316,045		4,172,679		—		—		4,172,679
Accrued interest receivable	31,227		31,227		31,227		—		—
Federal Home Loan Bank of Indianapolis stock	28,350		28,350		—		28,350		—
Deposits	5,298,789		5,310,415		2,835,151		—		2,475,264
Advances from Federal Home Loan Bank	264,500		266,302		—		266,302		—
Subordinated debt	105,307		104,244		37,059		67,185		—
Accrued interest payable	1,614		1,614		1,614		—		—


	December 31, 2024 Fair Value Measurements Using
(amounts in thousands)	Carrying Amount		Fair Value		Quoted Prices In Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Cash and cash equivalents	$	466,410	$	466,410	$	466,410	$	—	$	—

Securities held-to-maturity, net	249,796		228,851		—		228,851		—
Loans held-for-sale	54,695		58,510		—		58,510		—
Net loans	4,125,877		3,935,009		—		—		3,935,009
Accrued interest receivable	28,180		28,180		28,180		—		—
Federal Home Loan Bank of Indianapolis stock	28,350		28,350		—		28,350		—
Deposits	4,933,206		4,943,961		2,236,724		—		2,707,237
Advances from Federal Home Loan Bank	295,000		291,208		—		291,208		—
Subordinated debt	105,150		103,062		37,059		66,003		—
Accrued interest payable	2,495		2,495		2,495		—		—

Note 12: Derivative Financial Instruments

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

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

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

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

In March 2021, the Company terminated the last layer of interest rate swaps associated with available-for-sale agency mortgage-backed securities - residential, which resulted in swap termination payments to counterparties totaling $1.9 million. The corresponding fair value hedging adjustment was allocated pro-rata to the underlying hedged securities and is being amortized over the remaining lives of the designated securities. The Company had amortization expense totaling less than $0.1 million for both the three and six months ended June 30, 2025 and 2024, which was recognized as a reduction to interest income on securities.

In June 2020, the Company terminated all fair value hedging relationships associated with loans, which resulted in swap termination payments to counterparties totaling $46.1 million. The corresponding loan fair value hedging adjustment as of the date of termination is being amortized over the remaining lives of the designated loans, which have a weighted average term to maturity of 9.2 years as of June 30, 2025. The Company had amortization expense totaling $0.9 million and $1.7 million for the three and six months ended June 30, 2025, respectively, and $1.2 million and $2.2 million for the three and six months ended June 30, 2024, respectively, related to these previously terminated fair value hedges which was recognized as a reduction to interest income on loans.

The following table presents the notional amount and fair value of interest rate swaps utilized by the Company at June 30, 2025 and December 31, 2024.


	June 30, 2025				December 31, 2024
(amounts in thousands)	Notional Amount		Fair Value		Notional Amount		Fair Value
Asset Derivatives




Derivatives not designated as hedging instruments
Back-to-back swaps	$	39,648	$	273	$	27,214	$	200


Total contracts	$	39,648	$	273	$	27,214	$	200
Liability Derivatives




Derivatives not designated as hedging instruments
Back-to-back swaps	$	39,648	$	(273)	$	27,214	$	(200)


Total contracts	$	39,648	$	(273)	$	27,214	$	(200)

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

Back-to-back swaps consist of two interest-rate swaps (a customer swap and an offsetting counterparty swap). As a result of this offsetting relationship, no net gains or losses are recognized in income. The Company received no cash collateral from counterparties as security for their obligations related to these swap transactions at June 30, 2025 and December 31, 2024. As of June 30, 2025, the Company pledged cash collateral of $0.3 million to counterparties as security for its obligations related to these agreements. The Company had no pledged cash collateral as of December 31, 2024 to counterparties as security for its obligations related to these agreements. Collateral posted and received is dependent on the market valuation of the underlying hedges.

The following table presents the effects of the Company’s cash flow hedge relationships on the condensed consolidated statements of comprehensive income during the three and six months ended June 30, 2025 and 2024.


	Amount of Loss Recognized in Other Comprehensive Income for the Three Months Ended				Amount of Gain Recognized in Other Comprehensive Income for the Six Months Ended
(amounts in thousands)	June 30, 2025		June 30, 2024		June 30, 2025		June 30, 2024

Interest rate swap agreements	$	—	$	(262)	$	—	$	640

The Company had no changes in the fair value of derivatives not designated as hedging instruments on the condensed consolidated statements of income for the three and six months ended June 30, 2025 and 2024.

The following table presents the effects of the Company’s interest rate swap agreements on the condensed consolidated statements of operations during the three and six months ended June 30, 2025 and 2024.


(amounts in thousands)	Three Months Ended				Six Months Ended
Line Item in the Condensed Consolidated Statements of Income	June 30, 2025		June 30, 2024		June 30, 2025		June 30, 2024
Interest income


Securities - non-taxable	$	—	$	415	$	—	$	829
Total interest income	—		415		—		829
Interest expense
Deposits	—		(169)		—		(424)
Other borrowed funds	—		(760)		—		(1,522)
Total interest expense	—		(929)		—		(1,946)
Net interest income	$	—	$	1,344	$	—	$	2,775

Note 13: Accumulated Other Comprehensive Loss

The components of accumulated other comprehensive loss, included in shareholders' equity, for the six months ended June 30, 2025 and 2024, respectively, are presented in the table below.


(amounts in thousands)	Unrealized Losses On Debt Securities		Unrealized Losses On Debt Securities Transferred From Available-For-Sale To Held-To-Maturity		Cash Flow Hedges		Total
Balance, January 1, 2025	$	(30,413)	$	(2,240)	$	—	$	(32,653)
Other comprehensive income before reclassifications from accumulated other comprehensive loss before tax	7,660		—		—		7,660
Reclassifications from accumulated other comprehensive income to earnings before tax	—		252		—		252

Other comprehensive gain before tax	7,660		252		—		7,912
Income tax provision	1,761		65		—		1,826
Other comprehensive income - net of tax	5,899		187		—		6,086
Balance, June 30, 2025	$	(24,514)	$	(2,053)	$	—	$	(26,567)

Balance, January 1, 2024	$	(30,174)	$	(2,939)	$	3,738	$	(29,375)
Other comprehensive (loss) income before reclassifications from accumulated other comprehensive loss before tax	(2,625)		—		640		(1,985)
Reclassifications from accumulated other comprehensive loss to earnings before tax	—		422		—		422
Other comprehensive (loss) gain before tax	(2,625)		422		640		(1,563)
Income tax (benefit) provision	(601)		103		147		(351)
Other comprehensive (loss) income - net of tax	(2,024)		319		493		(1,212)
Balance, June 30, 2024	$	(32,198)	$	(2,620)	$	4,231	$	(30,587)

The components of accumulated other comprehensive loss, included in stockholders' equity, for the three months ended June 30, 2025 and 2024, respectively, are presented in the table below.



(amounts in thousands)	Unrealized Losses On Debt Securities		Unrealized Losses On Debt Securities Transferred From Available-For-Sale To Held-To-Maturity		Cash Flow Hedges		Total
Balance, April 1, 2025	$	(27,006)	$	(2,151)	$	—	$	(29,157)
Other comprehensive income before reclassifications from accumulated other comprehensive loss before tax	3,236		—		—		3,236
Reclassifications from accumulated other comprehensive loss to earnings before tax	—		132				132

Other comprehensive gain before tax	3,236		132		—		3,368
Income tax provision	744		34		—		778
Other comprehensive income - net of tax	2,492		98		—		2,590
Balance, June 30, 2025	$	(24,514)	$	(2,053)	$	—	$	(26,567)

Balance, April 1, 2024	$	(31,773)	$	(2,762)	$	4,433	(30,102)
Other comprehensive (loss) before reclassifications from accumulated other comprehensive loss before tax	(551)		—		(262)		(813)
Reclassifications from accumulated other comprehensive loss to earnings before tax	—		188		—		188
Other comprehensive (loss) gain before tax	(551)		188		(262)		(625)
Income tax (benefit) provision	(126)		46		(60)		(140)
Other comprehensive (loss) income - net of tax	(425)		142		(202)		(485)
Balance, June 30, 2024	$	(32,198)	$	(2,620)	$	4,231	$	(30,587)


	Amounts Reclassified from Accumulated Other Comprehensive Loss for the Three Months Ended				Amounts Reclassified from Accumulated Other Comprehensive Loss for the Six Months Ended				Affected Line Item in the Statements of Operations
(amounts in thousands)	June 30, 2025		June 30, 2024		June 30, 2025		June 30, 2024
Details About Accumulated Other Comprehensive Loss Components
Reclassifications from accumulated other comprehensive income to earnings before tax	$	(132)	(188)		$	(252)	$	(422)	Interest income
Total amount reclassified before tax	(132)		(188)		(252)		(422)		(Loss) income before income taxes
Tax benefit	(34)		(46)		(65)		(103)		Income tax (benefit) provision
Total reclassifications from accumulated other comprehensive loss	$	(98)	$	(142)	$	(187)	$	(319)	Net income

Note 14: Segment Information

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

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

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

Note 15: Recent Accounting Pronouncements

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

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

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

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

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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

Overview

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

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

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

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

We believe that we differentiate ourselves from larger financial institutions by providing a full suite of services to emerging small businesses and entrepreneurs on a nationwide basis. We are one of the fastest-growing lenders in the Small Business Administration (“SBA”) 7(a) program, closing $282.8 million in SBA 7(a) loans during the six months ended June 30, 2025, and currently rank as the 7th largest SBA 7(a) lender for the SBA’s year-to-date 2025 fiscal year. We also offer a top-ranked small business checking account product to our country’s entrepreneurs.

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

As of June 30, 2025, the Company had consolidated assets of $6.1 billion, consolidated deposits of $5.3 billion and stockholders’ equity of $390.2 million.

Results of Operations

During the second quarter 2025, net income was $0.2 million, or $0.02 diluted earnings per share, compared to net income of $5.8 million, or $0.67 diluted earnings per share, during the second quarter 2024, representing a decrease in net income of $5.6 million, or 96.7%, and a decrease in diluted earnings per share of $0.65, or 97.0%. During the six months ended June 30, 2025, net income was $1.1 million, or $0.13 diluted earnings per share, compared to the six months ended June 30, 2024 net income of $11.0 million, or $1.25 per diluted share, resulting in a decrease in net income of $9.8 million, or 89.6%, and a decrease in diluted earnings per share of $1.12, or 89.6%.

The $5.6 million decrease in net income for the second quarter 2025 compared to the second quarter 2024 was due primarily to an increase of $9.6 million, or 237.6%, in the provision for credit losses and a decrease of $5.5 million, or 49.6%, in noninterest income, partially offset by increases of $6.7 million, or 31.2%, in net interest income as well as a $2.3 million income tax benefit and a decrease of $0.5 million, or 2.4%, in noninterest expense.

The $9.8 million decrease in net income for the six months ended June 30, 2025 compared to the six months ended June 30, 2024 was due primarily to increases of $19.1 million, or 294.2%, in the provision for credit loss and $2.0 million, or 4.6%, in noninterest expense and a decrease of $3.4 million, or 17.5%, in noninterest income, partially offset by an increase of $11.0 million, or 26.2%, in net interest income and a $3.6 million in income tax benefit.

During the second quarter 2025, return on average assets (“ROAA”), return on average shareholders’ equity (“ROAE”), and return on average tangible common equity (“ROATCE”) were 0.01%, 0.20%, and 0.20%, respectively, compared to 0.44%, 6.28%, and 6.36%, respectively, for the second quarter 2024. During the six months ended June 30, 2025, ROAA, ROAE and ROATCE were 0.04%, 0.58%, and 0.59%, respectively, compared to 0.42%, 5.96%, and 6.04%, respectively, for the six months ended June 30, 2024.

During the second quarter 2025, pre-tax, pre-provision income (“PTPP”) was $11.7 million, an increase of 17.2% from PTPP of $10.0 million for the second quarter 2024. The $1.7 million increase was due to an increase of $6.7 million, or 31.2%, in net interest income and a decrease of $0.5 million, or 2.4%, in noninterest expense, partially offset by a decrease of $5.5 million, or 49.6%, in noninterest income.

During the six months ended June 30, 2025, PTPP income was $23.7 million, an increase of 31.1% from PTPP of $18.1 million for the six months ended June 30, 2024. The $5.6 million increase was due to an increase of $11.0 million, or 26.2%, in net interest income, partially offset by a decrease of $3.4 million, or 17.5%, in noninterest income and an increase of $2.0 million, or 4.6%, in noninterest expense.

During the second quarter 2024, the Company recognized $0.5 million in IT termination fees and $0.1 million in anniversary expenses. Excluding these items, adjusted net income for the second quarter 2024 was $6.2 million and adjusted diluted earnings per share was $0.72. Additionally, for the second quarter 2024, adjusted ROAA, adjusted ROAE and adjusted ROATCE were 0.48%, 6.77% and 6.85%, respectively.

During the six months ended June 30, 2024, the Company recognized $0.5 million in IT termination fees and $0.1 million in anniversary expenses. Excluding these items, adjusted net income for the six months ended June 30, 2024 was $11.4 million and adjusted diluted earnings per share was $1.30. Additionally, for the six months ended June 30, 2024, adjusted ROAA, adjusted ROAE and adjusted ROATCE were 0.43%, 6.20% and 6.29%, respectively.

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.

Consolidated Average Balance Sheets and Net Interest Income Analyses

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


	Three Months Ended
	June 30, 2025						June 30, 2024
(dollars in thousands)	Average Balance		Interest /Dividends		Yield /Cost		Average Balance		Interest /Dividends		Yield /Cost
Assets
Interest-earning assets
Loans, including loans held-for-sale	$	4,407,196	$	66,685	6.07	%	$	3,936,723	$	57,094	5.83	%
Securities - taxable	856,070		9,062		4.25	%	670,502		6,476		3.88	%
Securities - non-taxable	78,924		654		3.32	%	74,035		970		5.27	%
Other earning assets	396,829		4,485		4.53	%	469,045		6,421		5.51	%
Total interest-earning assets	5,739,019		80,886		5.65	%	5,150,305		70,961		5.54	%

Allowance for credit losses - loans	(49,073)						(41,362)
Noninterest-earning assets	234,198						223,833
Total assets	$	5,924,144					$	5,332,776

Liabilities
Interest-bearing liabilities
Interest-bearing demand deposits	$	1,226,439	$	9,767	3.19	%	$	474,124	$	2,567	2.18	%
Savings accounts	21,760		46		0.85	%	22,987		48		0.84	%
Money market accounts	1,187,782		11,087		3.74	%	1,243,011		13,075		4.23	%
Fintech - brokered deposits	—		—		—	%	119,662		1,299		4.37	%
Certificates and brokered deposits	2,356,958		25,894		4.41	%	2,313,192		27,506		4.78	%
Total interest-bearing deposits	4,792,939		46,794		3.92	%	4,172,976		44,495		4.29	%
Other borrowed funds	567,575		6,102		4.31	%	652,176		5,139		3.17	%
Total interest-bearing liabilities	5,360,514		52,896		3.96	%	4,825,152		49,634		4.14	%
Noninterest-bearing deposits	153,016						116,939
Other noninterest-bearing liabilities	18,744						20,860
Total liabilities	5,532,274						4,962,951

Shareholders’ equity	391,870						369,825
Total liabilities and shareholders’ equity	$	5,924,144					$	5,332,776

Net interest income			$	27,990					$	21,327

Interest rate spread 1					1.69%						1.40	%
Net interest margin 2					1.96%						1.67	%
Net interest margin - FTE 3					2.04%						1.76	%

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.



	Six Months Ended
	June 30, 2025						June 30, 2024
(dollars in thousands)	Average Balance		Interest /Dividends		Yield /Cost		Average Balance		Interest /Dividends		Yield /Cost
Assets
Interest-earning assets
Loans, including loans held-for-sale	$	4,325,518	$	129,347	6.03	%	$	3,914,656	$	112,529	5.78	%
Securities - taxable	838,222		17,525		4.22	%	648,860		12,170		3.77	%
Securities - non-taxable	80,325		1,315		3.30	%	75,163		1,939		5.19	%
Other earning assets	420,921		9,528		4.56	%	451,582		12,488		5.56	%
Total interest-earning assets	5,664,986		157,715		5.61	%	5,090,261		139,126		5.50	%

Allowance for credit losses - loans	(47,378)						(39,986)
Noninterest-earning assets	230,079						220,081
Total assets	$	5,847,687					$	5,270,356

Liabilities
Interest-bearing liabilities
Interest-bearing demand deposits	$	1,092,127	$	16,742	3.09	%	$	444,615	$	4,658	2.11	%
Savings accounts	21,167		88		0.84	%	22,754		96		0.85	%
Money market accounts	1,204,695		22,449		3.76	%	1,230,488		25,746		4.21	%
Fintech - brokered deposits	—		—		—	%	102,514		2,230		4.37	%
Certificates and brokered deposits	2,486,407		55,141		4.47	%	2,279,621		53,894		4.75	%
Total interest-bearing deposits	4,804,396		94,420		3.96	%	4,079,992		86,624		4.27	%
Other borrowed funds	484,897		10,209		4.25	%	684,456		10,441		3.07	%
Total interest-bearing liabilities	5,289,293		104,629		3.99	%	4,764,448		97,065		4.10	%
Noninterest-bearing deposits	144,494						115,140
Other noninterest-bearing liabilities	21,948						21,170
Total liabilities	5,455,735						4,900,758

Shareholders’ equity	391,952						369,598
Total liabilities and shareholders’ equity	$	5,847,687					$	5,270,356

Net interest income			$	53,086					$	42,061

Interest rate spread 1					1.62%						1.40%
Net interest margin 2					1.89%						1.67%
Net interest margin - FTE 3					1.97%						1.76%

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).

Rate/Volume Analysis

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


	Three Months Ended June 30, 2025 vs. June 30, 2024 Due to Changes in						Six Months Ended June 30, 2025 vs. June 30, 2024 Due to Changes in
(amounts in thousands)	Volume		Rate		Net		Volume		Rate		Net
Interest income
Loans, including loans held-for-sale	$	7,134	$	2,457	$	9,591	$	11,910	$	4,908	$	16,818
Securities – taxable	1,923		663		2,586		3,801		1,554		5,355
Securities – non-taxable	390		(706)		(316)		352		(976)		(624)
Other earning assets	(898)		(1,038)		(1,936)		(811)		(2,149)		(2,960)
Total	8,549		1,376		9,925		15,252		3,337		18,589

Interest expense
Interest-bearing deposits	20,992		(18,693)		2,299		23,488		(15,692)		7,796
Other borrowed funds	(3,687)		4,650		963		(7,068)		6,836		(232)
Total	17,305		(14,043)		3,262		16,420		(8,856)		7,564

(Decrease) increase in net interest income	$	(8,756)	$	15,419	$	6,663	$	(1,168)	$	12,193	$	11,025

Net interest income for the second quarter 2025 was $28.0 million, an increase of $6.7 million, or 31.2%, compared to $21.3 million for the second quarter 2024. The increase in net interest income was the result of a $9.9 million, or 14.0%, increase in total interest income to $80.9 million for the second quarter 2025 from $71.0 million for the second quarter 2024, partially offset by a $3.3 million, or 6.6%, increase in total interest expense to $52.9 million for the second quarter 2025 from $49.6 million for the second quarter 2024.

Net interest income for the six months ended June 30, 2025 was $53.1 million, an increase of $11.0 million, or 26.2%, compared to $42.1 million for the six months ended June 30, 2024. The increase in net interest income was the result of an $18.6 million, or 13.4%, increase in total interest income to $157.7 million for the six months ended June 30, 2025 from $139.1 million for the six months ended June 30, 2024. The increase in total interest income was partially offset by a $7.6 million, or 7.8%, increase in total interest expense to $104.6 million for the six months ended June 30, 2025 from $97.1 million for the six months ended June 30, 2024.

The increase in total interest income for the second quarter 2025 compared to second quarter 2024 was due primarily to an increase in interest earned on loans, resulting from an increase of 24 bps in the yield earned on loans, including loans held-for-sale, as well as an increase of $470.5 million, or 12.0%, in the average balance of loans, including loans held-for-sale. Additionally, the average balance of securities increased $190.5 million, or 25.6%, and the yield earned on the securities portfolio increased 15 bps for the second quarter 2025 compared to the second quarter 2024. The yield on funded portfolio loan originations was 7.55% for the second quarter 2025, a decrease of 133 bps compared to the second quarter 2024, reflective of 100 bps of Fed rate cuts in the second half of 2024. However, new origination yields remained well above the overall loan portfolio yield, helping to drive both total interest income and the loan portfolio yield higher.

The increase in total interest income for the six months ended June 30, 2025 compared to the six months ended June 30, 2024 was due primarily to an increase in interest earned on loans, resulting from an increase of 25 bps in the yield on loans, including loans held-for-sale, as well as an increase of $410.9 million, or 10.5%, in the average balance of loans, including loans held-for-sale. Additionally, the average balance of securities increased $194.5 million, or 26.9%, and the yield earned on the securities portfolio increased 22 bps for the six months ended June 30, 2025 compared to the six months ended June 30, 2024. The increase in total interest income was partially offset as the yield on other earning assets decreased 100 bps and the average balance of other earning assets decreased $30.7 million, or 6.8%. The increase in the yield earned on loans and securities was due to the impact of the continued elevated interest rate environment on both existing and newly-originated interest-earning assets. The yield on funded portfolio loan originations was 7.57% for the six months ended June 30, 2025, a decrease of 119 bps compared to the six months ended June 30, 2024.

The increase in total interest expense for the second quarter 2025 compared to the second quarter 2024 was due primarily to increases of $7.2 million, or 280.5%, in interest expense associated with interest-bearing demand deposits and $1.0 million, or 18.7%, in interest expense associated with other borrowed funds, partially offset by decreases of $2.0 million, or 15.2%, in interest expense associated with money market accounts and $1.6 million, or 5.9%, in interest expense associated with certificates and brokered deposits. When combined with deposits formerly classified as fintech – brokered deposits, the increase in interest expense related to interest-bearing demand deposits was driven by an increase in the average balance of $632.7 million, or 106.5%, compared to the second quarter of 2024 due to continued growth in fintech deposits, while the cost of funds increased 57 bps due to the change in deposit mix. The decrease in interest expense related to money market accounts was driven by a decrease in the average deposit balance of $55.2 million, or 4.4%, as well as a 49 bp decrease in the cost of these deposits. The decrease in interest expense related to certificates and brokered deposits was driven by a decrease of 37 bps in the cost of these deposits, partially offset by an increase in the average deposit balance of $43.8 million. The increase in the average balance of these deposits was driven by strong consumer and small business demand for certificates of deposits, partially offset by lower brokered deposit balances as the Company used on-balance sheet liquidity to pay down higher-cost brokered deposits, which is expected to positively impact deposit costs in future periods. The increase in interest expense related to other borrowed funds was driven by an increase of 114 bps in the cost of funds, partially offset by a decrease in the average balance of $84.6 million, or 13.0%.

The increase in total interest expense for the six months ended June 30, 2025 compared to the six months ended June 30, 2024 was due primarily to increases of $12.1 million, or 259.4%, in interest expense associated with interest-bearing demand deposits and $1.2 million, or 2.3%, in interest expense associated with certificates and brokered deposits, partially offset by decreases of $3.3 million, or 12.8%, in interest expense associated with money market deposits and $0.2 million, or 2.2%, in interest expense associated with other borrowed funds. When combined with deposits formerly classified as fintech - brokered deposits, the increase in interest expense related to interest-bearing demand deposits was due primarily to a 56 bp increase in the cost of these deposits, as well as an increase of $545.0 million, or 99.6%, in the average balance of these deposits. The increase in interest expense related to certificates and brokered deposits was driven by an increase of $206.8 million, or 9.1%, in the average balance of these deposits, partially offset by a decrease of 28 bps in the cost of these deposits. The increase in the average balance of these deposits was driven by strong consumer and small business demand for certificates of deposits, partially offset by lower brokered deposit balances as the Company used on-balance sheet liquidity to pay down higher-cost brokered deposits. The decrease in interest expense related to money market accounts was driven primarily by a decrease of $25.8 million, or 2.1%, in the average balance of these deposits as well as a decrease of 45 bps in the cost of these deposits. The decrease in interest expense related to other borrowed funds was driven by a decrease in the average balance of $199.6 million, or 29.2%, partially offset by a 118 bp increase in the cost of these funds.

Overall, the cost of total interest-bearing liabilities for the second quarter 2025 decreased 18 bps to 3.96% from 4.14% for the second quarter 2024. The cost of total interest-bearing liabilities for the six months ended June 30, 2025 decreased 11 bps to 3.99% from 4.10% for the six months ended June 30, 2024.

Net interest margin (“NIM”) was 1.96% for the second quarter 2025 compared to 1.67% for the second quarter 2024, an increase of 29 bps. On a fully-taxable equivalent (“FTE”) basis, NIM was 2.04% for the second quarter 2025 compared to 1.76% for the second quarter 2024, an increase of 28 bps. NIM was 1.89% for the six months ended June 30, 2025 compared to

1.67% for the six months ended June 30, 2024, an increase of 22 bps. FTE NIM was 1.97% for the six months ended June 30, 2025 compared to 1.76% for the six months ended June 30, 2024, an increase of 21 bps.

The increase in the second quarter and six months ended June 30, 2025 NIM and FTE NIM compared to the second quarter and six months ended June 30, 2024 reflects the combination of deploying cash balances into higher yielding loans and securities and continued improvement in the cost of funds related to deposits.

Noninterest Income

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


	Three Months Ended		Six Months Ended
(amounts in thousands)	June 30, 2025			June 30, 2024		June 30, 2025		June 30, 2024
Service charges and fees	$	278		$	246	$	543	$	466
Loan servicing revenue	1,979			1,470		3,962		2,793
Loan servicing asset revaluation	(1,153)			(829)		(2,334)		(1,263)

Gain on sale of loans	1,673			8,292		10,320		14,828


Other	2,780			1,854		3,493		2,556
Total noninterest income	$	5,557		$	11,033	$	15,984	$	19,380

During the second quarter 2025, noninterest income was $5.6 million, representing a decrease of $5.4 million, or 49.6%, compared to $11.0 million for the second quarter 2024. The decrease in noninterest income was due primarily to a decrease in gain on sale of loans, partially offset by increases in other revenue and net loan servicing revenue. The decrease of $6.6 million, or 79.8%, in gain on sale of loans was due to a decrease in the volume of U.S. Small Business Administration (“SBA”) 7(a) guaranteed loans sales, as the Company implemented a process change to hold SBA loans for a longer period of time before selling them in the secondary market. The increase of $0.9 million, or 49.9%, in other noninterest income was due primarily to a planned distribution from a fund investment. The increase of $0.2 million, or 28.9%, in net loan servicing was due to growth in the balance of the Company’s SBA 7(a) servicing portfolio, partially offset by the fair value adjustment to the loan servicing asset.

During the six months ended June 30, 2025, noninterest income was $16.0 million, a decrease of $3.4 million, or 17.5%, compared to $19.4 million for the six months ended June 30, 2024. The decrease in noninterest income was due primarily to a decrease in gain on sale of loans, partially offset by increases in other income and net loan servicing revenue. The decrease of $4.5 million, or 30.4%, in gain on sale of loans was due to a decrease in the volume of SBA 7(a) guaranteed loans sales, as the Company implemented a process change to hold SBA for a longer period of time before selling them in the secondary market. The increase of $0.9 million, or 36.7%, in other noninterest income was due primarily to a planned distribution from a fund investment. The increase of $0.1 million, or 6.4%, in net loan servicing was due to growth in the balance of the Company’s SBA 7(a) servicing portfolio, partially offset by the fair value adjustment to the loan servicing asset.

Noninterest Expense

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


	Three Months Ended		Six Months Ended
(amounts in thousands)	June 30, 2025			June 30, 2024			June 30, 2025		June 30, 2024
Salaries and employee benefits	$	10,867		$	12,462		$	23,974	$	24,258
Marketing, advertising and promotion	702			609			1,349		1,345
Consulting and professional services	936			1,022			2,164		1,875
Data processing	656			606			1,291		1,170
Loan expenses	1,520			1,597			3,051		3,042
Premises and equipment	3,281			3,154			6,396		5,980
Deposit insurance premium	1,564			1,172			2,962		2,317

Other	2,274			1,714			4,170		3,372
Total noninterest expense	$	21,800		$	22,336	22336000	$	45,357	$	43,359

Noninterest expense for the second quarter 2025 was $21.8 million, representing a decrease of $0.5 million, or 2.4%, compared to $22.3 million for the second quarter 2024. The decrease in noninterest expense was due primarily to decreases in salaries and employee benefits, partially offset by increases in other expenses, deposit insurance premium and premises and equipment. The decrease of $1.6 million, or 12.8%, in salaries and employee benefits was driven primarily by a reduction in incentive compensation. The increase of $0.6 million, or 32.7%, in other expense was due primarily to higher fintech volume activity. The increase of $0.4 million, or 33.4%, in deposit insurance premium was due to year-over-year asset growth and changes in the composition of the loan portfolio. The increase of $0.1 million, or 4.0%, in premises and equipment was due primarily to software maintenance expense.

Noninterest expense for the six months ended June 30, 2025 was $45.4 million, an increase of $2.0 million, or 4.6%, compared to $43.4 million for the six months ended June 30, 2024. The increase was due primarily to increases in other expense, deposit insurance premium, premises and equipment, and consulting and professional fees, partially offset by a decrease in salaries and employee benefits. The increase of $0.8 million, or 23.7%, in other expense was due primarily to higher fintech volume activity. The increase of $0.6 million, or 27.8%, in deposit insurance premium was due to year-over-year asset growth and changes in the composition of the loan portfolio. The increase of $0.4 million, or 7.0%, in premises and equipment was due primarily to software maintenance expense. The increase of $0.3 million, or 15.4%, in consulting and professional fees was due mainly to increased legal and audit fees. The decrease of $0.3 million, or 1.2%, in salaries and employee benefits was driven primarily by a reduction in incentive compensation.

The Company recorded an income tax benefit of $2.1 million for the second quarter 2025, compared to an income tax provision of $0.2 million and an effective tax rate of 3.6% for the second quarter 2024. The Company recorded an income tax benefit of $3.0 million for the six months ended June 30, 2025, compared to an income tax provision of $0.6 million and an effective tax rate of 5.6% for the six months ended June 30, 2024. The income tax benefits recognized during the second quarter 2025 and the six months ended June 30, 2025 reflect lower pre-tax earnings, as well as the benefit of tax exempt income. The variance from the federal statutory rate for the second quarter 2024 and the six months ended June 30, 2024 was due primarily to tax-exempt income. Interest income on certain loans or securities issued by governmental, municipal and not-for-profit entities, and earnings from bank-owned life insurance were the primary components of tax-exempt income.

Financial Condition

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


(amounts in thousands)
Balance Sheet Data:	June 30, 2025		December 31, 2024
Total assets	$	6,072,573	$	5,737,859
Loans	4,362,562		4,170,646
Total securities	916,394		837,151


Loans held-for-sale	126,533		54,695
Noninterest-bearing deposits	145,166		136,451
Interest-bearing deposits	5,153,623		4,796,755
Total deposits	5,298,789		4,933,206
Advances from Federal Home Loan Bank	264,500		295,000
Total shareholders’ equity	390,239		384,063

Total assets increased $334.7 million, or 5.8%, to $6.1 billion at June 30, 2025 compared to $5.7 billion at December 31, 2024. The increase was due primarily to an increase in deposits driven by growth in fintech partnerships, which was used in conjunction with on-balance sheet liquidity to fund loan growth, purchase securities and pay down higher cost brokered deposits and FHLB advances.

As of June 30, 2025, total shareholders’ equity was $390.2 million, an increase of $6.2 million, or 1.6%, compared to December 31, 2024. The increase in shareholders’ equity was due primarily to a decrease in accumulated other comprehensive loss as unrealized losses on securities decreased during the six months ended June 30, 2025. Tangible common equity totaled $385.6 million as of June 30, 2025, representing an increase of $6.2 million, or 1.6%, compared to December 31, 2024. The ratio of total shareholders’ equity to total assets decreased to 6.43% as of June 30, 2025 from 6.69% as of December 31, 2024, and the ratio of tangible common equity to tangible assets decreased to 6.35% as of June 30, 2025 from 6.62% as of December 31, 2024.

Book value per common share increased 1.1% to $44.79 as of June 30, 2025 from $44.31 as of December 31, 2024. Tangible book value per share increased 1.1% to $44.25 as of June 30, 2025 from $43.77 as of December 31, 2024. The increase in both book value per common share and tangible book value per share was driven primarily by the increases in total shareholders’ equity and tangible common equity. Refer to the “Reconciliation of Non-GAAP Financial Measures” section of Part I, Item 2 of this report, Management’s Discussion and Analysis of Financial Condition and Results of Operations for additional information.

Loan Portfolio Analysis

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


(dollars in thousands)	June 30, 2025				December 31, 2024
Commercial loans
Commercial and industrial	$	174,475	4.0	%	$	120,175		2.9	%
Owner-occupied commercial real estate	50,096		1.1	%	53,591			1.3	%
Investor commercial real estate	513,411		11.8	%	269,431			6.5	%
Construction	332,658		7.6	%	413,523			9.9	%
Single tenant lease financing	970,042		22.3	%	949,748			22.7	%
Public finance	476,339		10.9	%	485,867			11.6	%
Healthcare finance	160,073		3.7	%	181,427			4.4	%
Small business lending	383,455		8.8	%	331,914			8.0	%
Franchise finance	479,757		11.0	%	536,909			12.9	%

Total commercial loans	3,540,306		81.2	%	3,342,585			80.2	%
Consumer loans
Residential mortgage	358,922		8.2	%	375,160			9.0	%
Home equity	16,668		0.4	%	18,274			0.4	%
Other consumer loans	421,581		9.6	%	407,947			9.8	%

Total consumer loans	797,171		18.2	%	801,381		801381000	19.2	%
Net deferred loan origination costs, premiums and discounts on purchased loans and other 1	25,085		0.6	%	26,680			0.6	%
Total loans	4,362,562		100.0	%	4,170,646			100.0	%
Allowance for credit losses - loans	(46,517)				(44,769)
Net loans	$	4,316,045			$	4,125,877

1 Includes carrying value adjustments of $21.2 million and $22.9 million related to terminated interest rate swaps associated with public finance loans as of June 30, 2025 and December 31, 2024, respectively.

Total loans were $4.4 billion as of June 30, 2025, an increase of $191.9 million, or 4.6%, compared to December 31, 2024. Total commercial loan balances were $3.5 billion as of June 30, 2025, up $197.7 million, or 5.9%, from December 31, 2024. Total consumer loan balances were $797.2 million as of June 30, 2025, a decrease of $4.2 million, or 0.5%, compared to December 31, 2024. Compared to December 31, 2024, in connection with the Company’s focus on variable rate products, as well as capitalizing on the overall higher interest rate environment, the increase in commercial loan balances was driven by growth in the investor commercial real estate, commercial and industrial, small business lending and single tenant lease financing portfolios. These increases were partially offset by decreases in the construction, franchise finance and public finance portfolios, as well as continued runoff in the healthcare finance portfolio. The decrease in construction balances was partially due to completed projects that were moved to investor commercial real estate upon entering their stabilization period. The slight decrease in consumer loan balances was due primarily to a decrease in the residential mortgage portfolio, partially offset by origination activity in the other consumer loans portfolio.

Asset Quality

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


(dollars in thousands)	June 30, 2025			December 31, 2024
Nonaccrual loans
Commercial loans:




Single tenant lease financing	$	1,665		$	—
Small business lending	11,582			11,429
Franchise finance	23,857			10,382

Total commercial loans	37,104			21,811
Consumer loans:
Residential mortgage	3,927			4,083

Other consumer loans	124			61
Total consumer loans	4,051			4,144
Total nonaccrual loans	41,155			25,955

Past due 90 days and accruing loans
Commercial loans:
Commercial and industrial	16			—




Small business lending	2,370			1,320

Total commercial loans	2,386			1,320
Consumer loans:
Residential mortgage	—			1,142

Other consumer loans	—			4
Total consumer loans	—			1,146
Total past due 90 days and accruing loans	2,386			2,466

Total nonperforming loans	43,541			28,421

Other real estate owned
Small business lending	1,509			—
Residential mortgage	221			272
Total other real estate owned	1,730			272

Other nonperforming assets	268			212

Total nonperforming assets	$	45,539		$	28,905

Total nonperforming loans to total loans	1.00		%	0.68		%
Total nonperforming assets to total assets	0.75		%	0.50		%
Allowance for credit losses - loans to total loans	1.07		%	1.07		%
Nonaccrual loans to total loans	0.94		%	0.62		%
Allowance for credit losses - loans to nonaccrual loans	113.0		%	172.5		%
Allowance for credit losses - loans to nonperforming loans	106.8		%	157.5		%

Total nonperforming loans increased $15.1 million, or 53.2%, to $43.5 million as of June 30, 2025 compared to $28.4 million as of December 31, 2024 due primarily to an increase in nonperforming loans in the franchise finance, single tenant lease financing and small business lending portfolios during the year. Total nonperforming assets increased $16.6 million, or 57.6%, to $45.5 million as of June 30, 2025, compared to $28.9 million as of December 31, 2024, due primarily to the increase in nonperforming loans mentioned above and an increase in OREO related to small business lending. As of June 30, 2025, the Company had two small business lending properties and one residential mortgage property in OREO with carrying values of

$1.5 million and $0.2 million, respectively. As of December 31, 2024, the Company had one residential mortgage property in OREO with a carrying value of $0.3 million.

Allowance for Credit Losses - Loans

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


	Three Months Ended			Six Months Ended	Year Ended
(dollars in thousands)	June 30, 2025				June 30, 2024			June 30, 2025			June 30, 2024			December 31, 2024
Balance, beginning of period	$	47,238			$	40,891		$	44,769		$	38,774		$	38,774


Provision charged to expense	13,596				3,920			25,717			6,502			18,815
Losses charged off




Single tenant lease financing	—				195			—			195			195


Small business lending	11,851				573			15,520			862			10,441
Franchise finance	2,238				577			8,086			577			1,466

Residential mortgage	—				—			11			69			159



Other consumer loans	359				160			672			335			1,009

Total losses charged off	14,448				1,505			24,289			2,038			13,270
Recoveries
Commercial and industrial	2				2			4			4			8






Small business lending	40				65			173			105			325
Franchise finance	18				—			18			—			—
Residential mortgage	1				—			7			1			1
Home equity	1				1			3			3			7
Other consumer loans	69				31			115			54			109
Total recoveries	131				99			320			167			450
Balance, end of period	$	46,517			$	43,405		$	46,517		$	43,405		$	44,769

Net charge-offs	$	14,317			$	1,406		$	23,969		$	1,871		$	12,820

Net charge-offs (recoveries) to average loans (annualized)
Commercial and industrial	0.00		%		0.00		%	(0.01		%)	(0.01		%)	(0.01		%)



Single tenant lease financing	0.00		%		0.04		%	0.00		%	0.04		%	0.02		%


Small business lending	5.43		%		0.37		%	7.57		%	0.57		%	3.39		%
Franchise finance	0.90		%		0.21		%	3.17		%	0.21		%	0.27		%

Total commercial net charge-offs	0.79		%		0.08		%	1.35		%	0.10		%	0.37		%
Residential mortgage	0.00		%		0.00		%	0.00		%	0.04		%	0.04		%
Home equity	(0.01		%)		(0.01		%)	(0.03		%)	(0.03		%)	(0.03		%)
Other consumer loans	0.41		%		0.20		%	0.38		%	0.20		%	0.28		%

Total consumer net charge-offs	0.07		%		0.03		%	0.14		%	0.09		%	0.13		%
Total net charge-offs to average loans	1.31		%		0.14		%	1.12		%	0.10		%	0.32		%

The allowance for credit losses - loans (“ACL”) was $46.5 million as of June 30, 2025, compared to $44.8 million as of December 31, 2024. The increase in the ACL reflects the addition of specific reserves related to franchise finance loans that were placed on nonaccrual during the six month period ended June 30, 2025 and growth in the overall loan portfolio, partially offset by the removal of specific reserves for small business lending and franchise finance loans that were charged off. The ACL as a percentage of total loans was 1.07% at both June 30, 2025 and December 31, 2024. The ACL as a percentage of nonperforming loans decreased to 106.8% as of June 30, 2025, compared to 157.5% as of December 31, 2024 as the percentage increase in nonperforming loans outpaced the increase in the overall loan portfolio.

Net charge-offs of $14.3 million were recognized during the second quarter 2025, resulting in net charge-offs to average loans of 1.31%, compared to net charge-offs of $1.4 million, or 0.14% of average loans, for the second quarter 2024. Net charge-offs in the second quarter 2025 were elevated as the Company continued to take action to resolve problem loans in the small business lending and franchise finance portfolios. Approximately $11.9 million of net charge-offs recognized during

the quarter were related to small business lending and $2.2 million were related to franchise finance loans, with $7.3 million of existing specific reserves previously applied to these loans.

During the six months ended June 30, 2025, the Company recorded net charge-offs of $24.0 million, compared to net charge-offs of $1.9 million during the six months ended June 30, 2024. The increase in net charge-offs for the six months ended June 30, 2025 was driven primarily by $15.5 million in net charge-offs related to small business lending and $8.1 million in net charge-offs related to franchise finance loans, as the Company continued to take action to resolve problem loans in these portfolios.

The provision for credit losses - loans in the second quarter 2025 was $13.6 million, compared to $3.9 million for the second quarter 2024. The increase in the provision for credit losses - loans for the second quarter 2025 was driven primarily by the net charge-offs and additional specific reserves discussed above, as well as overall growth in the loan portfolio, partially offset by the decrease in specific reserves related to small business lending and franchise finance loans that were charged off.

The provision for credit losses - loans during the six months ended June 30, 2025 was $25.7 million, compared to $6.5 million for the six months ended June 30, 2024. The increase in the provision for credit losses - loans for the six months ended June 30, 2025 was driven primarily by the net charge-offs and additional specific reserves discussed above, as well as overall growth in the loan portfolio, partially offset by the decrease in specific reserves related to small business lending and franchise finance loans that were charged off.

Investment Securities Portfolio

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


(amounts in thousands)
Amortized Cost	June 30, 2025		December 31, 2024
Securities available-for-sale
U.S. Government-sponsored agencies	$	73,297	$	83,811
Municipal securities	65,274		67,441
Agency mortgage-backed securities - residential	383,145		300,914
Agency mortgage-backed securities - commercial	62,340		64,214
Private label mortgage-backed securities - residential	39,971		46,623
Asset-backed securities	19,442		23,802
Corporate securities	33,027		40,049

Total available-for-sale	676,496		626,854
Securities held-to-maturity, net carrying value
Municipal securities	12,204		12,843
Agency mortgage-backed securities - residential	228,446		201,840
Agency mortgage-backed securities - commercial	5,670		5,705
Corporate securities	25,417		29,408
Total held-to-maturity, net carrying value	271,737		249,796
Total securities	$	948,233	$	876,650


(amounts in thousands)
Approximate Fair Value	June 30, 2025		December 31, 2024
Securities available-for-sale
U.S. Government-sponsored agencies	$	72,700	$	82,816
Municipal securities	61,423		63,654
Agency mortgage-backed securities - residential	358,071		269,641
Agency mortgage-backed securities - commercial	61,474		63,331
Private label mortgage-backed securities - residential	39,423		45,821
Asset-backed securities	19,488		23,821
Corporate securities	32,078		38,271

Total available-for-sale	644,657		587,355
Securities held-to-maturity
Municipal securities	11,477		11,925
Agency mortgage-backed securities - residential	214,074		184,412
Agency mortgage-backed securities - commercial	4,701		4,548
Corporate securities	24,415		27,966
Total held-to-maturity	254,667		228,851
Total securities	$	899,324	$	816,206

The approximate fair value of available-for-sale investment securities increased $57.3 million, or 9.8%, to $644.7 million as of June 30, 2025, compared to $587.4 million as of December 31, 2024. The increase was due primarily to an increase of $88.4 million in agency mortgage-backed securities - residential, partially offset by decreases of $10.1 million in U.S. Government-sponsored agencies, $6.4 million in private label mortgage-backed securities - residential, $6.2 million in corporate securities, $4.3 million in asset-backed securities, $2.2 million in municipal securities and $1.9 million in agency mortgage-backed securities - commercial. The Company deployed liquidity during the first half of 2025 into new purchases of available-for-sale variable-rate agency mortgage-backed securities - residential, partially offset by net pay down activity in other security types. As of June 30, 2025, the Company had securities with a net carrying value of $271.7 million designated as held-to-maturity, compared to $249.8 million as of December 31, 2024. The increase was due primarily to purchases of CRA-eligible agency mortgage-backed securities - residential.

Accrued Income and Other Assets

Accrued income and other assets increased $9.6 million, or 15.3%, to $72.6 million at June 30, 2025, compared to $63.0 million at December 31, 2024. The increase was due primarily to increases of $5.3 million in equity fund investments, $3.3 million in prepaid assets and $0.8 million in deferred tax assets.

Accrued Expenses and Other Liabilities

Accrued expenses and other liabilities decreased $5.8 million, or 32.4%, to $12.1 million at June 30, 2025, compared to $17.9 million at December 31, 2024. The decrease was due primarily to decreases of $5.1 million in accrued salary and benefits and $0.8 million in other liabilities.

Deposits

The following table shows the composition of the Company’s deposit base for each of the periods presented.


(dollars in thousands)	June 30, 2025				December 31, 2024
Noninterest-bearing deposits	$	145,166	2.7	%	$	136,451	2.8	%
Interest-bearing demand deposits	1,458,123		27.5	%	896,661		18.2	%
Savings accounts	20,902		0.4	%	19,823		0.4	%
Money market accounts	1,210,960		22.9	%	1,183,789		24.0	%

Certificates of deposits	2,146,356		40.5	%	2,133,455		43.2	%
Brokered deposits	317,282		6.0	%	563,027		11.4	%
Total deposits	$	5,298,789	100.0	%	$	4,933,206	100.0	%

Total deposits increased $365.6 million, or 7.4%, to $5.3 billion as of June 30, 2025, compared to $4.9 billion as of December 31, 2024. The increase was due primarily to increases of $561.5 million, or 62.6%, in interest-bearing demand deposits, $27.2 million, or 2.3%, in money market accounts, $12.9 million, or 0.6%, in certificates of deposit and $8.7 million or 6.4%, in noninterest-bearing deposits, partially offset by a decrease of $245.7 million, or 43.7%, in brokered deposits. The increase in interest-bearing demand deposits was due primarily to growth in fintech partnership deposits. When combined with the liquidity provided by growth in money market accounts, the Company paid down a significant amount of higher-cost brokered deposits.

Uninsured deposit balances represented 27% of total deposits at June 30, 2025, up from 25% at December 31, 2024. These balances include Indiana-based municipal deposits, which are insured by the Indiana Board for Depositories, as well as larger balance accounts under contractual agreements that only allow withdrawal under certain conditions. After subtracting these types of deposits, the adjusted uninsured deposit balance drops to 22% as of June 30, 2025, compared to 20% as of December 31, 2024.

Regulatory Capital Requirements

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

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

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, 2025 and December 31, 2024 for the Company and the Bank under the Basel III Capital Rules. The minimum required capital amounts presented include the minimum required capital levels as of June 30, 2025 and December 31, 2024, which are based on the Basel III Capital Rules. Capital levels required to be considered well capitalized are based upon prompt corrective action regulations, as amended to reflect the changes under the Basel III Capital Rules.

As permitted by the federal banking regulatory agencies, the Company elected the option to delay the impact of the day one adoption of ASC 326. The transition adjustments of $4.5 million will be phased into the regulatory capital calculations over a three-year period, with 25% of the adjustment recognized in 2023, 50% of the adjustment recognized in 2024, 75% of the adjustment recognized in 2025 and 100% of the adjustment recognized in 2026.


	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, 2025:
Common equity tier 1 capital to risk-weighted assets
Consolidated	$	397,215	8.90	%		$	312,571	7.00	%	N/A		N/A
Bank	469,414		10.56	%		311,084		7.00	%	$	288,864	6.50	%
Tier 1 capital to risk-weighted assets
Consolidated	397,215		8.90	%		379,550		8.50	%	N/A		N/A
Bank	469,414		10.56	%		377,745		8.50	%	355,525		8.00	%
Total capital to risk-weighted assets
Consolidated	542,760		12.16	%		468,856		10.50	%	N/A		N/A
Bank	516,927		11.63	%		466,626		10.50	%	444,406		10.00	%
Leverage ratio
Consolidated	397,215		6.69	%		237,602		4.00	%	N/A		N/A
Bank	469,414		7.93	%		236,795		4.00	%	295,994		5.00	%


	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, 2024:
Common equity tier 1 capital to risk-weighted assets
Consolidated	$	400,100	9.30	%		$	301,052	7.00	%	N/A		N/A
Bank	475,793		11.11	%		299,774		7.00	%	$	278,362	6.50	%
Tier 1 capital to risk-weighted assets
Consolidated	400,100		9.30	%		365,563		8.50	%	N/A		N/A
Bank	475,793		11.11	%		364,012		8.50	%	342,599		8.00	%
Total capital to risk-weighted assets
Consolidated	542,808		12.62	%		451,578		10.50	%	N/A		N/A
Bank	520,610		12.16	%		449,662		10.50	%	428,249		10.00	%
Leverage ratio
Consolidated	400,100		6.90	%		232,011		4.00	%	N/A		N/A
Bank	475,793		8.23	%		231,331		4.00	%	289,164		5.00	%

Shareholders’ Dividends

The Company’s Board of Directors declared a cash dividend of $0.06 per share of common stock payable July 15, 2025 to shareholders of record as of June 30, 2025. The Company expects to continue to pay cash dividends on a quarterly basis; however, the declaration and amount of any future cash dividends will be subject to the sole discretion of the Board of Directors and will depend upon many factors, including the Company’s results of operations, financial condition, capital requirements, regulatory and contractual restrictions (including with respect to the Company’s outstanding subordinated debt), business strategy and other factors deemed relevant by the Board of Directors.

As of June 30, 2025, the Company had $107.0 million principal amount of subordinated debt outstanding evidenced by the 2029 Notes, 2030 Note and 2031 Notes. The agreements that govern our outstanding subordinated debt prohibit the Company from paying any dividends on its common stock or making any other distributions to shareholders at any time when there shall have occurred, and be continuing to occur, an event of default under the applicable agreement. If an event of default were to occur and the Company did not cure it, the Company would be prohibited from paying any dividends or making any other distributions to shareholders or from redeeming or repurchasing any common stock.

Capital Resources

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

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

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

Liquidity

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

The Company holds cash and investment securities that qualify as liquid assets to maintain adequate liquidity to ensure safe and sound operations and meet its financial commitments. At June 30, 2025, on a consolidated basis, the Company had $1.1 billion in cash and cash equivalents and investment securities available-for-sale and $126.5 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, 2025, the Bank had the ability to borrow an additional $1.9 billion from the FHLB, the Federal Reserve and correspondent bank Fed Funds lines of credit, which when combined with cash balances, totaled $2.3 billion and represented 200% of adjusted uninsured deposit balances.

The Company is a separate legal entity from the Bank and must provide for its own liquidity. In addition to its operating expenses, the Company is responsible for paying any dividends declared to its common shareholders and interest and principal on outstanding debt. The Company’s primary sources of funds are cash maintained at the holding company level and dividends from the Bank, the payment of which is subject to regulatory limits. At June 30, 2025, the Company, on an unconsolidated basis, had $13.6 million in cash for debt servicing and operating expenses.

The Company uses its sources of funds primarily to meet ongoing financial commitments, including withdrawals by depositors, credit commitments to borrowers, operating expenses and capital expenditures. At June 30, 2025, approved outstanding loan commitments, including unused lines of credit and standby letters of credit, amounted to $584.5 million. Certificates of deposits and brokered deposits scheduled to mature in one year or less at June 30, 2025 totaled $1.5 billion.

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

Reconciliation of Non-GAAP Financial Measures

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


(dollars in thousands, except share and per share data)	Three Months Ended						Six Months Ended
	June 30, 2025			June 30, 2024			June 30, 2025			June 30, 2024
Total equity - GAAP	$	390,239		$	371,953		$	390,239		$	371,953
Adjustments:
Goodwill	(4,687)			(4,687)			(4,687)			(4,687)
Tangible common equity	$	385,552		$	367,266		$	385,552		$	367,266

Total assets - GAAP	$	6,072,573		$	5,343,302		$	6,072,573		$	5,343,302
Adjustments:
Goodwill	(4,687)			(4,687)			(4,687)			(4,687)
Tangible assets	$	6,067,886		$	5,338,615		$	6,067,886		$	5,338,615

Common shares outstanding	8,713,094			8,667,894			8,713,094			8,667,894

Book value per common share	$	44.79		$	42.91		$	44.79		$	42.91
Effect of goodwill	(0.54)			(0.54)			(0.54)			(0.54)
Tangible book value per common share	$	44.25		$	42.37		$	44.25		$	42.37

Total shareholders’ equity to assets	6.43		%	6.96		%	6.43		%	6.96		%
Effect of goodwill	(0.08		%)	(0.08		%)	(0.08		%)	(0.08		%)
Tangible common equity to tangible assets	6.35		%	6.88		%	6.35		%	6.88		%

Total average equity - GAAP	$	391,870		$	369,825		$	391,952		$	369,598
Adjustments:
Average goodwill	(4,687)			(4,687)			(4,687)			(4,687)
Average tangible common equity	$	387,183		$	365,138		$	387,265		$	364,911

Return on average shareholders’ equity	0.20		%	6.28		%	0.58		%	5.96		%
Effect of goodwill	0.00		%	0.08		%	0.01		%	0.08		%
Return on average tangible common equity	0.20		%	6.36		%	0.59		%	6.04		%


(dollars in thousands, except share and per share data)	Three Months Ended						Six Months Ended
	June 30, 2025			June 30, 2024			June 30, 2025			June 30, 2024
Total interest income	$	80,886		$	70,961		$	157,715		$	139,126
Adjustments:
Fully-taxable equivalent adjustments 1	1,157			1,175			2,326			2,365
Total interest income - FTE	$	82,043		$	72,136		$	160,041		$	141,491






Net interest income	$	27,990		$	21,327		$	53,086		$	42,061
Adjustments:
Fully-taxable equivalent adjustments 1	1,157			1,175			2,326			2,365
Net interest income - FTE	$	29,147		$	22,502		$	55,412		$	44,426














Net interest margin	1.96		%	1.67		%	1.89		%	1.67		%
Effect of fully-taxable equivalent adjustments 1	0.08		%	0.09		%	0.08		%	0.09		%
Net interest margin - FTE	2.04		%	1.76		%	1.97		%	1.76		%
1 Assuming a 21% tax rate


(dollars in thousands, except share and per share data)	Three Months Ended						Six Months Ended
	June 30, 2025			June 30, 2024			June 30, 2025			June 30, 2024








Net income-GAAP	$	193		$	5,775		$	1,136		$	10,956
Adjustments:1
Provision for credit losses	13,608			4,031			25,541			6,479
Income tax (benefit) provision	(2,054)			218			(2,964)			647
Pre-tax, pre-provision income	$	11,747		$	10,024		$	23,713		$	18,082














Noninterest expense - GAAP	$	21,800		$	22,336		$	45,357		$	43,359
Adjustments:



IT termination fees	—			(452)			—			(452)
Anniversary expenses	—			(120)			—			(120)

Adjusted noninterest expense	$	21,800		$	21,764		$	45,357		$	42,787

(Loss) Income before income taxes - GAAP	$	(1,861)		$	5,993		$	(1,828)		$	11,603
Adjustments:



IT termination fees	—			452			—			452
Anniversary expenses	—			120			—			120



Adjusted (loss) income before income taxes	$	(1,861)		$	6,565		$	(1,828)		$	12,175

Income tax (benefit) provision - GAAP	$	(2,054)		$	218		$	(2,964)		$	647
Adjustments:1



IT termination fees	—			95			—			95
Anniversary expenses	—			25			—			25



Adjusted income tax (benefit) provision	$	(2,054)		$	338		$	(2,964)		$	767


Net income - GAAP	$	193		$	5,775		$	1,136		$	10,956
Adjustments:




IT termination fees	—			357			—			357
Anniversary expenses	—			95			—			95




Adjusted net income	$	193		$	6,227		$	1,136		$	11,408






Diluted average common shares outstanding	8,760,374			8,656,215			8,784,005			8,750,017

Diluted earnings per share - GAAP	$	0.02		$	0.67		$	0.13		$	1.25
Adjustments:




Effect of IT termination fees	—			0.04			—			0.04
Effect of anniversary expenses	—			0.01			—			0.01




Adjusted diluted earnings per share	$	0.02		$	0.72		$	0.13		$	1.30

Return on average assets	0.01		%	0.44		%	0.04		%	0.42		%




Effect of IT termination fees	0.00		%	0.03		%	0.00		%	0.01		%
Effect of anniversary expenses	0.00		%	0.01		%	0.00		%	0.00		%




Adjusted return on average assets	0.01		%	0.48		%	0.04		%	0.43		%

Return on average shareholders' equity	0.20		%	6.28		%	0.58		%	5.96		%



Effect of IT termination fees	0.00		%	0.39		%	0.00		%	0.19		%


Effect of anniversary expenses	0.00		%	0.10		%	0.00		%	0.05		%



Adjusted return on average shareholders' equity	0.20		%	6.77		%	0.58		%	6.20		%
1 Assuming a 21% tax rate


(dollars in thousands, except share and per share data)	Three Months Ended				Six Months Ended
	June 30, 2025		June 30, 2024		June 30, 2025		June 30, 2024
Return on average tangible common equity	0.20	%	6.36	%	0.59	%	6.04	%


Effect of IT termination fees	0.00	%	0.39	%	0.00	%	0.20	%

Effect of anniversary expenses	0.00	%	0.10	%	0.00	%	0.05	%



Adjusted return on average tangible common equity	0.20	%	6.85	%	0.59	%	6.29	%

Critical Accounting Policies and Estimates

There have been no material changes in the Company’s critical accounting policies or estimates from those disclosed in its Annual Report on Form 10-K for the year ended December 31, 2024.

Recent Accounting Pronouncements

Refer to Note 15 to the condensed consolidated financial statements.

Off-Balance Sheet Arrangements

In the ordinary course of business, the Company enters into financial transactions to extend credit, interest rate swap agreements and forms of commitments that may be considered off-balance sheet arrangements. Interest rate swaps are arranged to receive hedge accounting treatment and are classified as either fair value or cash flow hedges. Fair value hedges are purchased to convert certain fixed rate assets to floating rate. Cash flow hedges are used to convert certain variable rate liabilities into fixed rate liabilities. In November 2024, the Company’s interest rate swap derivative designated as fair value hedges matured. In December 2024, the Company terminated interest rate swaps utilized as cash flow hedges against Federal Home Loan Bank advances. As a result, the Company had no interest rate swaps that were classified as either fair value or cash flow hedges either at June 30, 2025 or at December 31, 2024. Refer to Note 12 to the condensed consolidated financial statements for additional information about derivative financial instruments.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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

We monitor the Company’s interest rate risk position using income simulation models and economic value of equity (“EVE”) sensitivity analysis that capture both short-term and long-term interest rate risk exposure. Income simulation involves forecasting net interest income (“NII”) under a variety of interest rate scenarios. We use EVE sensitivity analysis to understand the impact of changes in interest rates on long-term cash flows, income and capital. EVE is calculated by discounting the cash flows for all balance sheet instruments under different interest-rate scenarios. Modeling the sensitivity of NII and EVE to changes in market interest rates is highly dependent on the assumptions incorporated into the modeling process, especially those pertaining to non-maturity deposit accounts. These assumptions are reviewed and refined on an ongoing basis by the Company. We continually model our NII and EVE positions with various interest rate scenarios and assumptions of future balance sheet composition. We utilize implied forward rates in the base case scenario which reflects market expectations for rate changes over the next 24 months. Presented below is the estimated impact on our NII and EVE position as of June 30, 2025, assuming a static balance sheet and instantaneous parallel shifts in interest rates:


	% Change from Base Case for Instantaneous Parallel Changes in Rates
	Implied Forward Curve -200 Basis Points		Implied Forward Curve -100 Basis Points		Base Implied Forward Curve		Implied Forward Curve +50 Basis Points		Implied Forward Curve +100 Basis Points
NII - Year 1	11.04	%	5.85	%	N/A		(3.77	%)	(7.99	%)
NII - Year 2	16.86	%	15.75	%	11.94	%	8.67	%	5.34	%
EVE	18.46	%	11.10	%	N/A		(6.66	%)	(13.69	%)

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

Presented below is the estimated impact on the Company’s NII and EVE position as of June 30, 2025, assuming a static balance sheet and gradual parallel shifts in interest rates:


	% Change from Base Case for Gradual Changes in Rates
	Implied Forward Curve -200 Basis Points		Implied Forward Curve -100 Basis Points		Base Implied Forward Curve		Implied Forward Curve +50 Basis Points		Implied Forward Curve +100 Basis Points
NII - Year 1	2.27	%	0.12	%	N/A		(3.23	%)	(4.90	%)
NII - Year 2	19.94	%	16.28	%	11.94	%	8.11	%	4.67	%
EVE	16.73	%	10.17	%	N/A		(5.90	%)	(12.20	%)

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

•Increasing the proportion of low-duration or variable-rate loans to total loans, including organic growth in small business, construction or C&I lending, and declines in longer-term loan portfolios

•Selling longer-term fixed rate loans

•Increasing the proportion of lower cost non-maturity deposits to total deposits

•Extending the duration of wholesale funding

•Executing derivative strategies to synthetically extend liabilities or shorten asset duration

•Repositioning the investment portfolio to manage its duration

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

The Company maintains disclosure controls and procedures that are designed to provide reasonable assurance that information required to be disclosed in reports that it files or submits under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), is recorded, processed, summarized, and reported within the time period specified in the SEC’s rules and forms. These controls and procedures are also designed to provide reasonable assurance that such information is accumulated and communicated to management, including the principal executive and principal financial officers, as appropriate, to allow timely decisions regarding required disclosures. In designing and evaluating disclosure controls and procedures, the Company has recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. Management is required to apply judgment in evaluating its controls and procedures.

The Company performed an evaluation under the supervision and with the participation of management, including the principal executive and principal financial officers, to assess the effectiveness of the design and operation of its disclosure controls and procedures under the Exchange Act. Based on that evaluation, our management, including our principal executive officer and principal financial officer, concluded that our disclosure controls and procedures were effective at a reasonable assurance level as of June 30, 2025.

Changes in Internal Control over Financial Reporting

There has been no change in the Company’s internal control over financial reporting during the quarter ended June 30, 2025 that has materially affected, or is reasonably likely to materially affect, its internal control over financial reporting.

PART II

ITEM 1. LEGAL PROCEEDINGS

Neither we nor any of our subsidiaries are party to any material legal proceedings. From time to time, the Bank is a party to legal actions arising from its normal business activities.

ITEM 1A. RISK FACTORS

There have been no material changes to the risk factors previously disclosed in Part I, Item 1A, of our Annual Report on Form 10-K for the year ended December 31, 2024.

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

None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

Not Applicable.

ITEM 5. OTHER INFORMATION

None.

ITEM 6. EXHIBITS

Exhibit No.

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

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

8/6/2025	By	/s/ David B. Becker
		David B. Becker, Chairman and Chief Executive Officer (on behalf of Registrant)

8/6/2025	By	/s/ Kenneth J. Lovik
		Kenneth J. Lovik, Executive Vice President and Chief Financial Officer (principal financial officer)