First Internet Bancorp (NASDAQ: INBK) posts Q1 2026 $2.5M profit
Filing Impact
Filing Sentiment
Form Type
10-Q
First Internet Bancorp reported Q1 2026 net income of $2.5 million, up from $0.9 million a year earlier, with basic and diluted earnings per share of $0.29 versus $0.11. Net interest income rose to $31.6 million from $25.1 million as deposit interest expense declined, though the provision for credit losses on loans increased to $16.6 million, reflecting ongoing credit costs, particularly in small business and franchise finance.
Total assets reached $5.71 billion, up from $5.57 billion at year-end, with loans at $3.78 billion and deposits at $4.98 billion. The allowance for credit losses on loans grew to $56.5 million. Noninterest income was $11.5 million, driven by $7.4 million of gains on loan sales and $2.9 million of servicing revenue, while noninterest expense totaled $25.0 million. Comprehensive income was $1.3 million after recognizing unrealized losses in the securities portfolio.
Positive
- None.
Negative
- None.
Insights
Profit rebounded on stronger margin and fee income, but credit costs remain elevated.
First Internet Bancorp generated Q1 2026 net income of $2.5M, nearly triple the prior year’s $0.9M, as net interest income improved to $31.6M and deposit funding costs eased. Noninterest income of $11.5M was helped by $7.4M of gains on loan sales and higher servicing revenue.
This performance came alongside a larger provision for credit losses on loans of $16.6M, up from $12.1M, and year-to-date net charge-offs of $16.3M, reflecting stress in segments such as small business and franchise finance. The allowance for credit losses on loans increased to $56.5M as of March 31, 2026.
Total assets grew to $5.71B with loans at $3.76B and deposits at $4.98B, indicating continued balance sheet expansion. Comprehensive income of $1.3M was dampened by other comprehensive losses tied to securities valuations, illustrating the sensitivity of capital to interest rate movements disclosed in the securities portfolio detail.
Key Figures
Total assets: $5,711.7M
Total loans: $3,775.9M
Total deposits: $4,981.7M
+5 more
8 metrics
Total assets
$5,711.7M
March 31, 2026 balance sheet
Total loans
$3,775.9M
Gross loans as of March 31, 2026
Total deposits
$4,981.7M
Deposits as of March 31, 2026
Net income
$2.509M
Three months ended March 31, 2026 (vs. $0.943M 2025)
Net interest income
$31.598M
Q1 2026 income statement
Provision for credit losses - loans
$16.606M
Q1 2026 provision expense
Allowance for credit losses on loans
$56.496M
March 31, 2026 allowance balance
Nonaccrual loans
$52.941M
Nonaccrual plus 90+ day metrics at March 31, 2026
Key Terms
allowance for credit losses, nonaccrual loans, variable interest entities, Tier 2 capital, +2 more
6 terms
allowance for credit losses financial
"The ACL for loans represents management's estimate of all expected credit losses over the expected life of the Company’s existing loan portfolio."
Allowance for credit losses is a reserve set aside by a financial institution to cover potential losses from borrowers who may not repay their loans. It acts like a safety net, helping the institution prepare for loans that might turn sour. For investors, it signals how cautious the institution is about the quality of its loans and potential risks to its financial health.
nonaccrual loans financial
"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."
Nonaccrual loans are loans a lender has stopped counting toward interest income because the borrower is overdue or unlikely to pay; the lender only records cash payments received and may set aside extra funds to cover potential losses. For investors, a rising number or amount of nonaccrual loans signals weaker credit quality, lower future interest revenue and larger potential write-downs — similar to pausing expected subscription income when many customers stop paying.
variable interest entities financial
"The above investments meet the criteria of a VIE. However, the Company is not the primary beneficiary of the entities as it does not have the power to direct the activities that most significantly impact the economic performance of the entities."
A variable interest entity (VIE) is a business that a company controls through contracts or special arrangements instead of owning a majority of its shares, like steering a puppet without holding its ticket. Investors care because these arrangements can hide who really bears the financial risks and rewards, affect how assets and liabilities appear on financial statements, and create extra legal or enforcement uncertainty that can change the value and risk of an investment.
Tier 2 capital regulatory
"The 2029 Notes are intended to qualify as Tier 2 capital under regulatory guidelines."
Tier 2 capital is the secondary cushion a bank holds to absorb losses after its core capital is used, made up of items like long-term subordinated debt and certain reserves. Think of it as a backup battery that kicks in only after the main battery fails; it matters to investors because its size and quality affect a bank’s regulatory strength, creditworthiness, and the safety of dividends and bond payments under stress.
servicing asset financial
"Activity for the servicing asset and the related changes in fair value for the three months ended March 31, 2026 and 2025 are shown in the table below."
fair value hierarchy financial
"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."
Earnings Snapshot
Net interest income: $31.6M
Q1 2026
Net interest income
$31.6M
Net income
$2.5M
Diluted EPS
$0.29
Total assets
$5.71B
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |||||
For the Quarterly Period ended March 31, 2026
OR
| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |||||
For the Transition Period From ________ to ________.
Commission File Number 001-35750
| (Exact Name of Registrant as Specified in Its Charter) | ||
| (State or Other Jurisdiction of Incorporation or Organization) | (I.R.S. Employer Identification No.) | |||||||
| (Address of Principal Executive Offices) | (Zip Code) | |||||||
( | ||||||||
| (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 | ||||||||||||
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 ¨ | |||||
Non-accelerated Filer ¨ | Smaller Reporting Company | ||||
Emerging growth company | |||||
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No þ
As of May 1, 2026, the registrant had 8,716,662 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 subsequent reports filed with the SEC. We caution readers not to place undue reliance on any such forward-looking statements, which speak only as of the date made. The factors listed above could affect our financial performance and could cause our actual results for future periods to differ materially from any opinions or statements expressed with respect to future periods in any current statements.
Except as required by law, we do not undertake, and specifically disclaim any obligation, to publicly release the result of any revisions that may be made to any forward-looking statements to reflect events or circumstances after the date of such statements or to reflect the occurrence of anticipated or unanticipated events.
i
PART I
ITEM 1. FINANCIAL STATEMENTS
First Internet Bancorp
Condensed Consolidated Balance Sheets
(Amounts in thousands except share data)
| March 31, 2026 | December 31, 2025 | |||||||||||||||||||
| (Unaudited) | ||||||||||||||||||||
| Assets | ||||||||||||||||||||
| Cash and due from banks | $ | $ | ||||||||||||||||||
| Interest-bearing deposits | ||||||||||||||||||||
| Total cash and cash equivalents | ||||||||||||||||||||
Securities available-for-sale, at fair value (amortized cost of $ | ||||||||||||||||||||
Securities held-to-maturity, at amortized cost, net of allowance for credit losses of $ | ||||||||||||||||||||
| Loans held-for-sale | ||||||||||||||||||||
| Loans | ||||||||||||||||||||
| Allowance for credit losses - loans | ( | ( | ||||||||||||||||||
| Net loans | ||||||||||||||||||||
| Accrued interest receivable | ||||||||||||||||||||
| Federal Home Loan Bank of Indianapolis stock | ||||||||||||||||||||
| Cash surrender value of bank-owned life insurance | ||||||||||||||||||||
| Premises and equipment, net | ||||||||||||||||||||
| Goodwill | ||||||||||||||||||||
| Servicing asset, at fair value | ||||||||||||||||||||
| Other real estate owned | ||||||||||||||||||||
| Accrued income and other assets | ||||||||||||||||||||
| Total assets | $ | $ | ||||||||||||||||||
| Liabilities and shareholders’ equity | ||||||||||||||||||||
| Liabilities | ||||||||||||||||||||
| Noninterest-bearing deposits | $ | $ | ||||||||||||||||||
| Interest-bearing deposits | ||||||||||||||||||||
| Total deposits | ||||||||||||||||||||
| Advances from Federal Home Loan Bank | ||||||||||||||||||||
Subordinated debt, net of unamortized debt issuance costs of $ | ||||||||||||||||||||
| Accrued interest payable | ||||||||||||||||||||
| Accrued expenses and other liabilities | ||||||||||||||||||||
| Total liabilities | ||||||||||||||||||||
| Commitments and contingencies | ||||||||||||||||||||
| Shareholders’ equity | ||||||||||||||||||||
Preferred stock, no par value; | ||||||||||||||||||||
Voting common stock, no par value; | ||||||||||||||||||||
Nonvoting common stock, no par value; | ||||||||||||||||||||
| Retained earnings | ||||||||||||||||||||
| Accumulated other comprehensive loss | ( | ( | ||||||||||||||||||
| Total shareholders’ equity | ||||||||||||||||||||
| Total liabilities and shareholders’ equity | $ | $ | ||||||||||||||||||
See Notes to Condensed Consolidated Financial Statements
1
First Internet Bancorp
Condensed Consolidated Statements of Income – Unaudited
(Amounts in thousands except share and per share data)
| Three Months Ended March 31, | ||||||||||||||||||||||||||
| 2026 | 2025 | |||||||||||||||||||||||||
| Interest income | ||||||||||||||||||||||||||
| Loans | $ | $ | ||||||||||||||||||||||||
| Securities – taxable | ||||||||||||||||||||||||||
| Securities – non-taxable | ||||||||||||||||||||||||||
| Other earning assets | ||||||||||||||||||||||||||
| Total interest income | ||||||||||||||||||||||||||
| Interest expense | ||||||||||||||||||||||||||
| Deposits | ||||||||||||||||||||||||||
| Other borrowed funds | ||||||||||||||||||||||||||
| Total interest expense | ||||||||||||||||||||||||||
| Net interest income | ||||||||||||||||||||||||||
| Provision for credit losses - loans | ||||||||||||||||||||||||||
| Benefit for credit losses - debt securities held to maturity | ( | ( | ||||||||||||||||||||||||
| Benefit for credit losses - off-balance sheet commitments | ( | ( | ||||||||||||||||||||||||
| Net interest income after provision for credit losses | ||||||||||||||||||||||||||
| Noninterest income | ||||||||||||||||||||||||||
| Service charges and fees | ||||||||||||||||||||||||||
| Loan servicing revenue | ||||||||||||||||||||||||||
| Loan servicing asset revaluation | ( | ( | ||||||||||||||||||||||||
| Gain on sale of loans | ||||||||||||||||||||||||||
| Other | ||||||||||||||||||||||||||
| Total noninterest income | ||||||||||||||||||||||||||
| Noninterest expense | ||||||||||||||||||||||||||
| Salaries and employee benefits | ||||||||||||||||||||||||||
| Marketing, advertising and promotion | ||||||||||||||||||||||||||
| Consulting and professional services | ||||||||||||||||||||||||||
| Data processing | ||||||||||||||||||||||||||
| Loan expenses | ||||||||||||||||||||||||||
| Premises and equipment | ||||||||||||||||||||||||||
| Deposit insurance premium | ||||||||||||||||||||||||||
| Other | ||||||||||||||||||||||||||
| Total noninterest expense | ||||||||||||||||||||||||||
| Income before income taxes | ||||||||||||||||||||||||||
| Income tax (benefit) provision | ( | ( | ||||||||||||||||||||||||
| Net income | $ | $ | ||||||||||||||||||||||||
| Income per share of common stock | ||||||||||||||||||||||||||
| Basic | $ | $ | ||||||||||||||||||||||||
| Diluted | $ | $ | ||||||||||||||||||||||||
| Weighted-average number of common shares outstanding | ||||||||||||||||||||||||||
| Basic | ||||||||||||||||||||||||||
| Diluted | ||||||||||||||||||||||||||
| Dividends declared per share | $ | $ | ||||||||||||||||||||||||
See Notes to Condensed Consolidated Financial Statements
2
First Internet Bancorp
Condensed Consolidated Statements of Comprehensive Income – Unaudited
(Amounts in thousands)
| Three Months Ended March 31, | ||||||||||||||||||||||||||
| 2026 | 2025 | |||||||||||||||||||||||||
| Net income | $ | $ | ||||||||||||||||||||||||
| Other comprehensive income | ||||||||||||||||||||||||||
| Securities available-for-sale | ||||||||||||||||||||||||||
| Net unrealized holding (losses) gains recorded within other comprehensive income before (loss) income tax | ( | |||||||||||||||||||||||||
| Income tax (benefit) provision | ( | |||||||||||||||||||||||||
| Net effect on other comprehensive (loss) income | ( | |||||||||||||||||||||||||
| Securities held-to-maturity | ||||||||||||||||||||||||||
| Amortization of net unrealized holding losses on securities transferred from available-for-sale to held-to-maturity | ||||||||||||||||||||||||||
| Income tax provision | ||||||||||||||||||||||||||
| Net effect on other comprehensive income | ||||||||||||||||||||||||||
| Total other comprehensive (loss) income | ( | |||||||||||||||||||||||||
| Comprehensive income | $ | $ | ||||||||||||||||||||||||
See Notes to Condensed Consolidated Financial Statements
3
First Internet Bancorp
Condensed Consolidated Statements of Changes in Shareholders’ Equity - Unaudited
Three Months Ended March 31, 2026 and 2025
(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, 2026 | $ | $ | $ | ( | $ | |||||||||||||||||||||
| Net Income | — | — | ||||||||||||||||||||||||
| Other comprehensive income | — | — | ( | ( | ||||||||||||||||||||||
Dividends declared ($ | — | ( | — | ( | ||||||||||||||||||||||
| Recognition of the fair value of share-based compensation | — | — | ||||||||||||||||||||||||
| Common stock redeemed for the net settlement of share-based awards | ( | — | — | ( | ||||||||||||||||||||||
| Balance, March 31, 2026 | $ | $ | $ | ( | $ | |||||||||||||||||||||
| Balance, January 1, 2025 | $ | $ | $ | ( | $ | |||||||||||||||||||||
| Net income | — | — | ||||||||||||||||||||||||
| Other comprehensive income | — | — | ||||||||||||||||||||||||
Dividends declared ($ | — | ( | — | ( | ||||||||||||||||||||||
| Recognition of the fair value of share-based compensation | — | — | ||||||||||||||||||||||||
| Deferred stock rights and restricted stock units issued in lieu of cash dividends payable on outstanding deferred stock rights and restricted stock units | — | — | ||||||||||||||||||||||||
| Common stock redeemed for the net settlement of share-based awards | ( | — | — | ( | ||||||||||||||||||||||
| Balance, March 31, 2025 | $ | $ | $ | ( | $ | |||||||||||||||||||||
See Notes to Condensed Consolidated Financial Statements
4
First Internet Bancorp
Condensed Consolidated Statements of Cash Flows – Unaudited
(Amounts in thousands)
| Three Months Ended March 31, | ||||||||||||||
| 2026 | 2025 | |||||||||||||
| Operating activities | ||||||||||||||
| Net income | $ | $ | ||||||||||||
| Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||||||||
| Depreciation and amortization | ||||||||||||||
| Increase in cash surrender value of bank-owned life insurance | ( | ( | ||||||||||||
| Provision for credit losses | ||||||||||||||
| Share-based compensation expense | ||||||||||||||
| Loans originated for sale | ( | ( | ||||||||||||
| Proceeds from sale of loans | ||||||||||||||
| Gain on loans sold | ( | ( | ||||||||||||
| Loss (gain) on sale of other real estate owned | ( | |||||||||||||
| Gain on derivatives | ( | |||||||||||||
| Loan servicing asset revaluation | ||||||||||||||
| Net change in accrued income and other assets | ( | ( | ||||||||||||
| Net change in accrued expenses and other liabilities | ( | |||||||||||||
| Net cash provided by operating activities | ||||||||||||||
| Investing activities | ||||||||||||||
| Net loan activity, excluding purchases | ( | ( | ||||||||||||
| Proceeds from sale of other real estate owned | ||||||||||||||
| Maturities and calls of securities available-for-sale | ||||||||||||||
| Purchase of securities available-for-sale | ( | ( | ||||||||||||
| Maturities and calls of securities held-to-maturity | ||||||||||||||
| Purchase of securities held-to-maturity | ( | ( | ||||||||||||
| Purchase of premises and equipment | ( | ( | ||||||||||||
| Loans purchased | ( | |||||||||||||
| Other investing activities | ( | ( | ||||||||||||
| Net cash used in investing activities | ( | ( | ||||||||||||
| Financing activities | ||||||||||||||
| Net increase in deposits | ||||||||||||||
| Cash dividends paid | ( | ( | ||||||||||||
| Proceeds from advances from Federal Home Loan Bank | ||||||||||||||
| Repayment of advances from Federal Home Loan Bank | ( | |||||||||||||
| Other, net | ( | ( | ||||||||||||
| Net cash provided by financing activities | ||||||||||||||
| Net increase (decrease) in cash and cash equivalents | ( | |||||||||||||
| Cash and cash equivalents, beginning of period | ||||||||||||||
| Cash and cash equivalents, end of period | $ | $ | ||||||||||||
| Supplemental disclosures | ||||||||||||||
| Cash paid during the period for interest | ||||||||||||||
| Cash (received) paid during the period for taxes | ( | |||||||||||||
| Loans transferred to other real estate owned | ||||||||||||||
| Cash dividends declared, paid in subsequent period | ||||||||||||||
| Securities purchased during the period, settled in subsequent period | ||||||||||||||
See Notes to Condensed Consolidated Financial Statements
5
First Internet Bancorp
Notes to Condensed Consolidated Financial Statements – Unaudited
(Table amounts in thousands except share and per share data)
Note 1: Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have been prepared in conformity with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”). Accordingly, they do not include all of the information or footnotes necessary for a complete presentation of financial condition, results of operations, changes in shareholders’ equity, or cash flows in accordance with GAAP. In our opinion, all adjustments (consisting only of normal recurring adjustments) necessary for a fair presentation have been included. The results of operations for the three months ended March 31, 2026 are not necessarily indicative of the results expected for the year ending December 31, 2026 or any other period. The March 31, 2026 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, 2025.
The preparation of the condensed consolidated financial statements in conformity with GAAP requires management to make estimates, judgments, or assumptions that could have a material effect on the carrying value of certain assets and liabilities. These estimates, judgments, and assumptions affect the amounts reported in the condensed consolidated financial statements and the disclosures provided. The Company utilizes processes that involve the use of significant estimates and the judgment of management in determining the amount of the Company’s allowance for credit losses (“ACL”) and changes in any of these could have a significant impact on the condensed consolidated financial statements.
The condensed consolidated financial statements include the accounts of First Internet Bancorp (the “Company”), its wholly owned subsidiary, First Internet Bank of Indiana (the “Bank”), and the Bank’s three wholly owned subsidiaries, First Internet Public Finance Corp., JKH Realty Services, LLC and SPF15, Inc. All significant intercompany accounts and transactions have been eliminated in consolidation.
The Company is subject to claims and lawsuits that arise primarily in the ordinary course of business. It is the opinion of management that the disposition or ultimate resolution of such claims and lawsuits will not have a material adverse effect on the consolidated financial position, results of operations, and cash flows of the Company.
6
Note 2: Earnings Per Share
Earnings per share of common stock are based on the weighted-average number of basic shares and dilutive shares outstanding during the period.
The following is a reconciliation of the weighted-average common shares for the basic and diluted earnings per share computations for the three months ended March 31, 2026 and 2025.
| (dollars in thousands, except share and per share data) | Three Months Ended March 31, | |||||||||||||||||||||||||
| 2026 | 2025 | |||||||||||||||||||||||||
| Basic earnings per share | ||||||||||||||||||||||||||
| Net income | $ | $ | ||||||||||||||||||||||||
| Weighted-average common shares | ||||||||||||||||||||||||||
| Basic earnings per common share | $ | $ | ||||||||||||||||||||||||
| Diluted earnings per share | ||||||||||||||||||||||||||
| Net income | $ | $ | ||||||||||||||||||||||||
| Weighted-average common shares | ||||||||||||||||||||||||||
| Dilutive effect of equity compensation | ||||||||||||||||||||||||||
| Weighted-average common and incremental shares | ||||||||||||||||||||||||||
Diluted earnings per common share 1 | $ | $ | ||||||||||||||||||||||||
1 Potential dilutive common shares are excluded from the computation of diluted EPS in the periods where the effect would be antidilutive. There were 11,186 and 3,916 weighted-average antidilutive shares excluded from the computation of diluted EPS for the three months ended March 31, 2026 and 2025, respectively.
7
Note 3: Securities
The following tables summarize securities available-for-sale (“AFS”) and securities held-to-maturity (“HTM”) as of March 31, 2026 and December 31, 2025.
| March 31, 2026 | ||||||||||||||||||||||||||
| Amortized Cost | Gross Unrealized | Fair Value | ||||||||||||||||||||||||
| (amounts in thousands) | Gains | Losses | ||||||||||||||||||||||||
| Securities available-for-sale | ||||||||||||||||||||||||||
| U.S. Government-sponsored agencies | $ | $ | $ | ( | $ | |||||||||||||||||||||
| Municipal securities | ( | |||||||||||||||||||||||||
Agency mortgage-backed securities - residential 1 | ( | |||||||||||||||||||||||||
| Agency mortgage-backed securities - commercial | ( | |||||||||||||||||||||||||
| Private label mortgage-backed securities - residential | ( | |||||||||||||||||||||||||
| Asset-backed securities | ( | |||||||||||||||||||||||||
| Corporate securities | ( | |||||||||||||||||||||||||
| Total available-for-sale | $ | $ | $ | ( | $ | |||||||||||||||||||||
| March 31, 2026 | ||||||||||||||||||||||||||||||||||||||
| Amortized Cost | Gross Unrealized | Fair Value | Allowance for Credit Losses | Net Carrying Value | ||||||||||||||||||||||||||||||||||
| (amounts in thousands) | Gains | Losses | ||||||||||||||||||||||||||||||||||||
| Securities held-to-maturity | ||||||||||||||||||||||||||||||||||||||
| Municipal securities | $ | $ | $ | ( | $ | $ | ( | $ | ||||||||||||||||||||||||||||||
| Agency mortgage-backed securities - residential | ( | |||||||||||||||||||||||||||||||||||||
| Agency mortgage-backed securities - commercial | ( | |||||||||||||||||||||||||||||||||||||
| Corporate securities | ( | ( | ||||||||||||||||||||||||||||||||||||
| Total held-to-maturity | $ | $ | $ | ( | $ | $ | ( | $ | ||||||||||||||||||||||||||||||
1 Includes $0.2 million of additional premium related to terminated interest rate swaps associated with agency mortgage-backed securities - residential as of March 31, 2026.
| December 31, 2025 | ||||||||||||||||||||||||||
| Amortized Cost | Gross Unrealized | Fair Value | ||||||||||||||||||||||||
| (amounts in thousands) | Gains | Losses | ||||||||||||||||||||||||
| Securities available-for-sale | ||||||||||||||||||||||||||
| U.S. Government-sponsored agencies | $ | $ | $ | ( | $ | |||||||||||||||||||||
| Municipal securities | ( | |||||||||||||||||||||||||
Agency mortgage-backed securities - residential 1 | ( | |||||||||||||||||||||||||
| Agency mortgage-backed securities - commercial | ( | |||||||||||||||||||||||||
| Private label mortgage-backed securities - residential | ( | |||||||||||||||||||||||||
Asset-backed securities | ( | |||||||||||||||||||||||||
| Corporate securities | ( | |||||||||||||||||||||||||
| Total available-for-sale | $ | $ | $ | ( | $ | |||||||||||||||||||||
8
| December 31, 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 | $ | $ | $ | ( | $ | $ | ( | $ | ||||||||||||||||||||||||||||||
| Agency mortgage-backed securities - residential | ( | |||||||||||||||||||||||||||||||||||||
| Agency mortgage-backed securities - commercial | ( | |||||||||||||||||||||||||||||||||||||
| Corporate securities | ( | ( | ||||||||||||||||||||||||||||||||||||
| Total held-to-maturity | $ | $ | $ | ( | $ | $ | ( | $ | ||||||||||||||||||||||||||||||
1 Includes $0.2 million of additional premium related to terminated interest rate swaps associated with agency mortgage-backed securities - residential as of December 31, 2025.
Accrued interest receivable on AFS and HTM securities at March 31, 2026 was $2.9 million and $1.0 million, respectively, compared to $3.0 million and $1.1 million, respectively, at December 31, 2025, and is included in accrued interest receivable on the condensed consolidated balance sheet. The Company elected to exclude all accrued interest receivable from securities when estimating credit losses.
At March 31, 2026 and December 31, 2025, approximately 86 % and 84 %, 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 was $0.1
The carrying value of securities at March 31, 2026 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 | $ | $ | ||||||||||||
| One to five years | ||||||||||||||
| Five to ten years | ||||||||||||||
| After ten years | ||||||||||||||
| Agency mortgage-backed securities - residential | ||||||||||||||
| Agency mortgage-backed securities - commercial | ||||||||||||||
| Private label mortgage-backed securities - residential | ||||||||||||||
| Asset-backed securities | ||||||||||||||
| Total | $ | $ | ||||||||||||
9
| Held-to-Maturity | ||||||||||||||
| (amounts in thousands) | Amortized Cost | Fair Value | ||||||||||||
| Within one year | $ | $ | ||||||||||||
| One to five years | ||||||||||||||
| Five to ten years | ||||||||||||||
| After ten years | ||||||||||||||
| Agency mortgage-backed securities - residential | ||||||||||||||
| Agency mortgage-backed securities - commercial | ||||||||||||||
| Total | $ | $ | ||||||||||||
No AFS securities were sold during the three months ended March 31, 2026 and March 31, 2025. As such, the Company did not realize any gains or losses related to the sale of AFS securities during either time period.
Certain investments in debt securities are reported in the condensed consolidated financial statements at an amount less than their historical cost. The total fair value of these investments at March 31, 2026 and December 31, 2025 was $633.1 million and $611.2 million, which was approximately 60 % and 59 %, respectively, of the Company’s AFS and HTM securities portfolios. As of March 31, 2026, the Company’s security portfolio consisted of 623 positions, of which 412 were in an unrealized loss position. As of December 31, 2025, the Company’s security portfolio consisted of 618 positions, of which 395 were in an unrealized loss position. The unrealized losses are related to the categories noted below.
U. S. Government-Sponsored Agencies, Municipal Securities and Corporate Securities
The unrealized losses on the Company’s investments in securities issued by U.S. Government-sponsored agencies, municipal organizations and corporate entities were caused primarily by interest rate changes. The contractual terms of those investments do not permit the issuer to settle the securities at a price less than the amortized cost basis of the investments. The Company does not intend to sell the investments, and it is not more likely than not that the Company will be required to sell the investments, before recovery of their amortized cost basis, which may be upon maturity.
Agency Mortgage-Backed, Private Label Mortgage-Backed Securities and Asset-Backed Securities
The unrealized losses on the Company’s investments in agency mortgage-backed, private label mortgage-backed securities and asset-backed securities were caused primarily by interest rate changes. The Company expects to recover the amortized cost basis over the terms of the securities. The Company does not intend to sell the investments, and it is not more likely than not that the Company will be required to sell the investments, before recovery of their amortized cost basis, which may be upon maturity.
10
The following tables show the securities portfolio’s gross unrealized losses and fair value, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position at March 31, 2026 and December 31, 2025.
| March 31, 2026 | ||||||||||||||||||||||||||||||||||||||
| 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 | $ | $ | ( | $ | $ | ( | $ | $ | ( | |||||||||||||||||||||||||||||
| Municipal securities | ( | ( | ( | |||||||||||||||||||||||||||||||||||
| Agency mortgage-backed securities- residential | ( | ( | ( | |||||||||||||||||||||||||||||||||||
| Agency mortgage-backed securities- commercial | ( | ( | ( | |||||||||||||||||||||||||||||||||||
| Private label mortgage-backed securities - residential | ( | ( | ( | |||||||||||||||||||||||||||||||||||
| Asset-backed securities | ( | ( | ||||||||||||||||||||||||||||||||||||
| Corporate securities | ( | ( | ( | |||||||||||||||||||||||||||||||||||
| Total | $ | $ | ( | $ | $ | ( | $ | $ | ( | |||||||||||||||||||||||||||||
| December 31, 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 | $ | $ | ( | $ | $ | ( | $ | $ | ( | |||||||||||||||||||||||||||||
| Municipal securities | ( | ( | ||||||||||||||||||||||||||||||||||||
Agency mortgage-backed securities - residential | ( | ( | ( | |||||||||||||||||||||||||||||||||||
| Agency mortgage-backed securities - commercial | ( | ( | ( | |||||||||||||||||||||||||||||||||||
| Private label mortgage-backed securities - residential | ( | ( | ( | |||||||||||||||||||||||||||||||||||
Asset-backed securities | ( | ( | ||||||||||||||||||||||||||||||||||||
| Corporate securities | ( | ( | ( | |||||||||||||||||||||||||||||||||||
| Total | $ | $ | ( | $ | $ | ( | $ | $ | ( | |||||||||||||||||||||||||||||
11
The following tables summarize ratings for the Company’s HTM portfolio as of March 31, 2026 and December 31, 2025.
| March 31, 2026 | ||||||||||||||||||||||||||||||||
| Held-to-Maturity | ||||||||||||||||||||||||||||||||
| (amounts in thousands) | Municipal Securities | Mortgage-Backed Securities - Residential | Mortgage-Backed Securities - Commercial | Corporate Securities | Total | |||||||||||||||||||||||||||
| AAA equivalent - agency | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
| Aa1/AA+ | ||||||||||||||||||||||||||||||||
| Aa2/AA | ||||||||||||||||||||||||||||||||
| Aa3/AA- | ||||||||||||||||||||||||||||||||
| A3/A- | ||||||||||||||||||||||||||||||||
| Baa1/BBB+ | ||||||||||||||||||||||||||||||||
| Baa3/BBB- | ||||||||||||||||||||||||||||||||
Not Rated1 | ||||||||||||||||||||||||||||||||
| Total | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
1 This security previously had a BBB rating, but the issuer was acquired during the first quarter 2026. The acquiring company did not have any outstanding subordinated debt issuances prior to the acquisition and, therefore, did not have a rating at the time of acquisition.
| December 31, 2025 | ||||||||||||||||||||||||||||||||
| Held-to-Maturity | ||||||||||||||||||||||||||||||||
| (amounts in thousands) | Municipal Securities | Mortgage-Backed Securities - Residential | Mortgage-Backed Securities - Commercial | Corporate Securities | Total | |||||||||||||||||||||||||||
| AAA equivalent - agency | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
| Aa1/AA+ | ||||||||||||||||||||||||||||||||
| Aa2/AA | ||||||||||||||||||||||||||||||||
| Aa3/AA- | ||||||||||||||||||||||||||||||||
| A3/A- | ||||||||||||||||||||||||||||||||
| Baa1/BBB+ | ||||||||||||||||||||||||||||||||
| Baa2/BBB | ||||||||||||||||||||||||||||||||
| Baa3/BBB- | ||||||||||||||||||||||||||||||||
| Ba1/BB+ | ||||||||||||||||||||||||||||||||
| Total | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
Equity Investments
Equity investments, largely comprised of non-marketable equity investments, are generally accounted for under equity security accounting and are included within accrued income and other assets on the consolidated balance sheet. The Company’s non-marketable equity investments consist of limited partner interests in venture capital and Small Business Investment Company (“SBIC”) funds. After the initial commitment and over the course of the investment period, the Company will make capital contributions and receive a proportional share of profit and return of capital distributions as a result of fund performance until the funds wind down. While the partnership agreements allow the Company to remove the general partner, this right is not considered to be substantive as the general partner can only be removed for cause. All of these investments are generally non-redeemable and distributions are generally expected to be received through the liquidation of the underlying investments throughout the life of the investment fund. Investments may only be sold or transferred subject to the notice and approval provisions of the underlying investment agreements.
12
The following tables provide additional information related to equity investments accounted for under equity security accounting.
The carrying amount of each equity investment with a readily determinable fair value or net asset value at March 31, 2026 and December 31, 2025 is reflected in the following table:
| (amounts in thousands) | March 31, 2026 | December 31, 2025 | ||||||||||||
| GenOpp Financial Fund LP | $ | $ | ||||||||||||
| Total | $ | $ | ||||||||||||
The carrying amount of the Company’s investments in non-marketable equity securities with no readily determinable fair value and amounts recognized in earnings on a cumulative basis at March 31, 2026 and December 31, 2025 is reflected in the following table:
| (amounts in thousands) | March 31, 2026 | December 31, 2025 | ||||||||||||
Carrying value1 | $ | $ | ||||||||||||
| Carrying value adjustments | ||||||||||||||
| Impairment | ||||||||||||||
| Upward changes for observable prices | ||||||||||||||
| Downward changes for observable prices | ||||||||||||||
| Net change | $ | $ | ||||||||||||
1 Excludes $14.3 million and $14.6 million in unfunded commitments as of March 31, 2026 and December 31, 2025, respectively.
Variable Interest Entities
The above investments meet the criteria of a VIE. However, the Company is not the primary beneficiary of the entities as it does not have the power to direct the activities that most significantly impact the economic performance of the entities. The Company’s maximum exposure to loss from unconsolidated VIEs includes the value of the investment recorded on the Company’s consolidated balance sheets and unfunded commitment. The Company believes the potential for loss from these investments is remote, the maximum exposure for the affordable housing investment was determined by assuming a scenario where related tax credits were recaptured.
The following table provides a summary of VIEs that the Company has not consolidated as March 31, 2026 and December 31, 2025:
| March 31, 2026 | ||||||||||||||||||||||||||
| (amounts in thousands) | Carrying Amount | Maximum Exposure to Loss | Liability Recognized | Classification | ||||||||||||||||||||||
| Private equity and venture capital funds | $ | $ | $ | Other assets (1) | ||||||||||||||||||||||
| Hedge funds | Other assets (2) | |||||||||||||||||||||||||
| SBIC | Other assets (3) | |||||||||||||||||||||||||
| Affordable housing | Other assets (4) | |||||||||||||||||||||||||
| Non-marketable and other equity investments | Other assets (5) | |||||||||||||||||||||||||
13
| December 31, 2025 | ||||||||||||||||||||||||||
| (amounts in thousands) | Carrying Amount | Maximum Exposure to Loss | Liability Recognized | Classification | ||||||||||||||||||||||
| Private equity and venture capital funds | $ | $ | $ | Other assets (6) | ||||||||||||||||||||||
| Hedge funds | Other assets (7) | |||||||||||||||||||||||||
| SBIC | Other assets (8) | |||||||||||||||||||||||||
| Affordable housing | Other assets (9) | |||||||||||||||||||||||||
| Non-marketable and other equity investments | Other assets (10) | |||||||||||||||||||||||||
(1) Maximum exposure to loss includes $13.4 million of current investments and $6.0 million in unfunded commitments.
(2) Maximum exposure to loss includes $2.9 million of current investments.
(3) Maximum exposure to loss includes $7.3 million of current investments and $5.7 million in unfunded commitments.
(4) Maximum exposure to loss includes $7.4 million of current investments, $2.6 million in unfunded commitments and a scenario in which related tax credits of $2.5 million are recaptured, totaling $12.5 million.
(5) Maximum exposure to loss includes $10.0 million of current investments.
(6) Maximum exposure to loss includes $13.7 million of current investments and $6.0 million in unfunded commitments.
(7) Maximum exposure to loss includes $2.9 million of current investments.
(8) Maximum exposure to loss includes $7.3 million of current investments and $5.7 million in unfunded commitments.
(9) Maximum exposure to loss includes $7.6 million of current investments, $2.6 million in unfunded commitments and a scenario in which related tax credits of $2.5 million are recaptured, totaling $12.5 million.
(10) Maximum exposure to loss includes $10.0 million of current investments.
14
Note 4: Loans
Loan balances as of March 31, 2026 and December 31, 2025 are summarized in the table below. Categories of loans include:
| (amounts in thousands) | March 31, 2026 | December 31, 2025 | ||||||||||||
| Commercial loans | ||||||||||||||
| Commercial and industrial | $ | $ | ||||||||||||
| Owner-occupied commercial real estate | ||||||||||||||
| Investor commercial real estate | ||||||||||||||
| Construction | ||||||||||||||
| Single tenant lease financing | ||||||||||||||
| Public finance | ||||||||||||||
| Healthcare finance | ||||||||||||||
Small business lending1 | ||||||||||||||
| Franchise finance | ||||||||||||||
| Total commercial loans | ||||||||||||||
| Consumer loans | ||||||||||||||
| Residential mortgage | ||||||||||||||
| Home equity | ||||||||||||||
| Other consumer loans | ||||||||||||||
| Total consumer loans | ||||||||||||||
| Total commercial and consumer loans | ||||||||||||||
Net deferred loan origination costs, premiums and discounts on purchased loans, and other2 | ||||||||||||||
| Total loans | ||||||||||||||
| Allowance for credit losses | ( | ( | ||||||||||||
| Net loans | $ | $ | ||||||||||||
1 Balances include $59.5 million and $52.2 million that are guaranteed by the U.S. government as of March 31, 2026 and December 31, 2025, 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.
15
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 the 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 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
16
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. 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. 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.
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.
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 for most segments.
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 includes these as qualitative adjustments to the ACL which 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 economic 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 Company’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 (e.g. 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 has not been 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 ACL is determined based on several methods, including estimating the fair value of the underlying collateral or the present value of expected cash flows.
Modified Loans to Borrowers Experiencing Financial Difficulty
17
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 calculation 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 ACL adjustments may be necessary if 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. Commercial loans are generally charged off when management determines they are uncollectible. Consumer loans are generally charged off when they reach a specified level of delinquency, unless they are well secured and in the process of collection.
18
The following tables present changes in the balance of the ACL during the three months ended March 31, 2026 and 2025.
| (amounts in thousands) | Three Months Ended March 31, 2026 | ||||||||||||||||||||||||||||||||||
| Allowance for credit losses: | Balance, Beginning of Period | Provision (Credit) Charged to Expense | Charge-Offs | Recoveries | Balance, End of Period | ||||||||||||||||||||||||||||||
| Commercial and industrial | $ | $ | $ | ( | $ | $ | |||||||||||||||||||||||||||||
| Owner-occupied commercial real estate | ( | ||||||||||||||||||||||||||||||||||
| Investor commercial real estate | |||||||||||||||||||||||||||||||||||
| Construction | |||||||||||||||||||||||||||||||||||
| Single tenant lease financing | |||||||||||||||||||||||||||||||||||
| Public finance | ( | ||||||||||||||||||||||||||||||||||
| Healthcare finance | ( | ( | |||||||||||||||||||||||||||||||||
| Small business lending | ( | ||||||||||||||||||||||||||||||||||
| Franchise finance | ( | ||||||||||||||||||||||||||||||||||
| Residential mortgage | ( | ||||||||||||||||||||||||||||||||||
| Home equity | ( | ||||||||||||||||||||||||||||||||||
| Other consumer loans | ( | ||||||||||||||||||||||||||||||||||
| Total | $ | $ | $ | ( | $ | $ | |||||||||||||||||||||||||||||
| (amounts in thousands) | Three Months Ended March 31, 2025 | ||||||||||||||||||||||||||||
| Allowance for credit losses: | Balance, Beginning of Period | Provision (Credit) Charged to Expense | Charge-Offs | Recoveries | Balance, End of Period | ||||||||||||||||||||||||
| Commercial and industrial | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| Owner-occupied commercial real estate | ( | ||||||||||||||||||||||||||||
| Investor commercial real estate | ( | ||||||||||||||||||||||||||||
| Construction | |||||||||||||||||||||||||||||
| Single tenant lease financing | ( | ||||||||||||||||||||||||||||
| Public finance | ( | ||||||||||||||||||||||||||||
| Healthcare finance | ( | ||||||||||||||||||||||||||||
| Small business lending | ( | ||||||||||||||||||||||||||||
| Franchise finance | ( | ||||||||||||||||||||||||||||
| Residential mortgage | ( | ( | |||||||||||||||||||||||||||
| Home equity | ( | ||||||||||||||||||||||||||||
| Other consumer loans | ( | ||||||||||||||||||||||||||||
| Total | $ | $ | $ | ( | $ | $ | |||||||||||||||||||||||
Accrued interest receivable on loans totaled $23.1 million at both March 31, 2026 and December 31, 2025 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 maintains a reserve for off-balance sheet commitments, classified in other liabilities. This reserve is at a level management believes to be sufficient to absorb losses arising from unfunded loan commitments. The adequacy of the reserve for unfunded commitments is determined quarterly based on methodology similar to the methodology for determining the ACL. The following tables detail activity in the (benefit) provision for credit losses on off-balance sheet commitments for the three months ended March 31, 2026 and 2025.
19
| (amounts in thousands) | Balance December 31, 2025 | (Benefit) Provision for Credit Losses | Balance March 31, 2026 | |||||||||||||||||||||||
| Off-balance sheet commitments | ||||||||||||||||||||||||||
| Commercial loans | ||||||||||||||||||||||||||
| Commercial and industrial | $ | $ | $ | |||||||||||||||||||||||
| Investor commercial real estate | ||||||||||||||||||||||||||
| Construction | ( | |||||||||||||||||||||||||
| Single tenant lease financing | ||||||||||||||||||||||||||
| Small business lending | ( | |||||||||||||||||||||||||
| Total commercial loans | ( | |||||||||||||||||||||||||
| Total allowance for off-balance sheet commitments | $ | $ | ( | $ | ||||||||||||||||||||||
| (amounts in thousands) | Balance December 31, 2024 | (Benefit) Provision for Credit Losses | Balance March 31, 2025 | |||||||||||||||||||||||
| Off-balance sheet commitments | ||||||||||||||||||||||||||
| Commercial loans | ||||||||||||||||||||||||||
| Commercial and industrial | $ | $ | ( | $ | ||||||||||||||||||||||
| Owner-occupied commercial real estate | ( | |||||||||||||||||||||||||
| Investor commercial real estate | ||||||||||||||||||||||||||
| Construction | ( | |||||||||||||||||||||||||
| Single tenant lease financing | ( | |||||||||||||||||||||||||
| Small business lending | ||||||||||||||||||||||||||
| Total commercial loans | ( | |||||||||||||||||||||||||
| Consumer loans | ||||||||||||||||||||||||||
| Residential mortgage | ||||||||||||||||||||||||||
| Home equity | ( | |||||||||||||||||||||||||
| Other consumer loans | ( | |||||||||||||||||||||||||
| Total consumer loans | ( | |||||||||||||||||||||||||
| Total allowance for off-balance sheet commitments | $ | $ | ( | $ | ||||||||||||||||||||||
20
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 potential credit deficiency or 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.
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.
21
The following tables present the credit risk profile of the Company’s commercial and consumer loan portfolios by loan class and by year of origination for the years indicated based on rating category and payment activity as of March 31, 2026 and December 31, 2025.
| March 31, 2026 | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Term Loans (amortized cost basis by origination year) | Revolving loans amortized cost basis | Revolving loans converted to term | ||||||||||||||||||||||||||||||||||||||||||||||||
| (amounts in thousands) | 2026 | 2025 | 2024 | 2023 | 2022 | Prior | Total | |||||||||||||||||||||||||||||||||||||||||||
| Commercial and industrial | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Pass | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||
| Special Mention | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Substandard | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Doubtful | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Total commercial and industrial | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Year-to-date gross charge-offs | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Owner-occupied commercial real estate | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Pass | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Special Mention | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Substandard | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Doubtful | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Total owner-occupied commercial real estate | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Year-to-date gross charge-offs | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Investor commercial real estate | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Pass | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Special Mention | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Substandard | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Doubtful | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Total investor commercial real estate | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Year-to-date gross charge-offs | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Construction | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Pass | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Special Mention | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Substandard | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Doubtful | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Total construction | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Year-to-date gross charge-offs | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Single tenant lease financing | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Pass | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Special Mention | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Substandard | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Doubtful | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Total single tenant lease financing | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Year-to-date gross charge-offs | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Public finance | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Pass | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Special Mention | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Substandard | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Doubtful | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Total public finance | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Year-to-date gross charge-offs | ||||||||||||||||||||||||||||||||||||||||||||||||||
22
| March 31, 2026 | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Term Loans (amortized cost basis by origination year) | Revolving loans amortized cost basis | Revolving loans converted to term | ||||||||||||||||||||||||||||||||||||||||||||||||
(amounts in thousands) | 2026 | 2025 | 2024 | 2023 | 2022 | Prior | Total | |||||||||||||||||||||||||||||||||||||||||||
| Healthcare finance | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Pass | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Special Mention | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Substandard | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Doubtful | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Total healthcare finance | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Year-to-date gross charge-offs | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Small business lending | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Pass | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Special Mention | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Substandard | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Doubtful | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Total small business lending | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Year-to-date gross charge-offs | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Franchise finance | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Pass | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Special Mention | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Substandard | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Doubtful | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Total franchise finance | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Year-to-date gross charge-offs | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Consumer loans | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Residential mortgage | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Performing | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Nonperforming | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Total residential mortgage | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Year-to-date gross charge-offs | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Home equity | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Performing | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Nonperforming | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Total home equity | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Year-to-date gross charge-offs | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Other consumer loans | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Performing | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Nonperforming | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Total other consumer loans | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Year-to-date gross charge-offs | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Total Loans | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||
| Total year-to-date gross charge-offs | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||
23
| December 31, 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 | $ | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||||||||
| Special Mention | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Substandard | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Doubtful | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total commercial and industrial | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Year-to-date gross charge-offs | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Owner-occupied commercial real estate | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Pass | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Special Mention | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Substandard | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Doubtful | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total owner-occupied commercial real estate | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Year-to-date gross charge-offs | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Investor commercial real estate | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Pass | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Special Mention | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Substandard | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Doubtful | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total investor commercial real estate | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Year-to-date gross charge-offs | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Construction | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Pass | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Special Mention | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Substandard | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Doubtful | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total construction | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Year-to-date gross charge-offs | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Single tenant lease financing | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Pass | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Special Mention | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Substandard | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Doubtful | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total single tenant lease financing | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Year-to-date gross charge-offs | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Public finance | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Pass | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Special Mention | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Substandard | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Doubtful | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total public finance | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Year-to-date gross charge-offs | |||||||||||||||||||||||||||||||||||||||||||||||||||||
24
| December 31, 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 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Special Mention | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Substandard | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Doubtful | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total healthcare finance | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Year-to-date gross charge-offs | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Small business lending | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Pass | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Special Mention | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Substandard | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Doubtful | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total small business lending | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Year-to-date gross charge-offs | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Franchise finance | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Pass | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Special Mention | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Substandard | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Doubtful | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total franchise finance | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Year-to-date gross charge-offs | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Consumer loans | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Residential mortgage | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Performing | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Nonperforming | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total residential mortgage | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Year-to-date gross charge-offs | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Home equity | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Performing | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Nonperforming | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total home equity | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Year-to-date gross charge-offs | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Other consumer loans | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Performing | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Nonperforming | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total other consumer loans | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Year-to-date gross charge-offs | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total Loans | $ | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||||||||
| Total year-to-date gross charge-offs | $ | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||||||||
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The following tables present the Company’s loan portfolio delinquency, including nonperforming loans, as of March 31, 2026 and December 31, 2025.
| March 31, 2026 | ||||||||||||||||||||||||||||||||||||||
| (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 | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||
| Owner-occupied commercial real estate | ||||||||||||||||||||||||||||||||||||||
| Investor commercial real estate | ||||||||||||||||||||||||||||||||||||||
| Construction | ||||||||||||||||||||||||||||||||||||||
| Single tenant lease financing | ||||||||||||||||||||||||||||||||||||||
| Public finance | ||||||||||||||||||||||||||||||||||||||
| Healthcare finance | ||||||||||||||||||||||||||||||||||||||
| Small business lending | ||||||||||||||||||||||||||||||||||||||
| Franchise finance | ||||||||||||||||||||||||||||||||||||||
| Residential mortgage | ||||||||||||||||||||||||||||||||||||||
| Home equity | ||||||||||||||||||||||||||||||||||||||
| Other consumer loans | ||||||||||||||||||||||||||||||||||||||
| Total | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||
| December 31, 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 | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||
| Owner-occupied commercial real estate | ||||||||||||||||||||||||||||||||||||||
| Investor commercial real estate | ||||||||||||||||||||||||||||||||||||||
| Construction | ||||||||||||||||||||||||||||||||||||||
| Single tenant lease financing | ||||||||||||||||||||||||||||||||||||||
| Public finance | ||||||||||||||||||||||||||||||||||||||
| Healthcare finance | ||||||||||||||||||||||||||||||||||||||
| Small business lending | ||||||||||||||||||||||||||||||||||||||
| Franchise finance | ||||||||||||||||||||||||||||||||||||||
| Residential mortgage | ||||||||||||||||||||||||||||||||||||||
| Home equity | ||||||||||||||||||||||||||||||||||||||
| Other consumer loans | ||||||||||||||||||||||||||||||||||||||
| Total | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||
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.
26
The following table summarizes the Company’s nonaccrual loans and loans past due 90 days or more and still accruing by loan class for the periods indicated:
| March 31, 2026 | December 31, 2025 | |||||||||||||||||||||||||||||||||||||
| (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 | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||
| Single tenant lease financing | ||||||||||||||||||||||||||||||||||||||
| Healthcare finance | ||||||||||||||||||||||||||||||||||||||
Small business lending1 | ||||||||||||||||||||||||||||||||||||||
| Franchise finance | ||||||||||||||||||||||||||||||||||||||
| Residential mortgage | ||||||||||||||||||||||||||||||||||||||
| Other consumer loans | ||||||||||||||||||||||||||||||||||||||
| Total loans | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||
1 Balance includes $15.5 million and $13.6 million at March 31, 2026 and December 31, 2025, respectively, of loans guaranteed by the U.S. government.
Interest income recognized on nonaccrual loans was $0.1
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.
The following tables present the amortized cost basis of collateral dependent loans, which are individually evaluated to determine expected credit losses as of March 31, 2026 and December 31, 2025.
| March 31, 2026 | ||||||||||||||||||||||||||||||||
| (amounts in thousands) | Commercial Real Estate | Residential Real Estate | Other (Includes Equipment, Machinery and Other Assets) | Total | Allowance on Collateral Dependent Loans | |||||||||||||||||||||||||||
Small business lending1 | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
| Residential mortgage | ||||||||||||||||||||||||||||||||
| Other consumer loans | ||||||||||||||||||||||||||||||||
| Total loans | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
1 Balance includes $8.3 million of loans guaranteed by the U.S. government.
27
| December 31, 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 | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
Small business lending1 | ||||||||||||||||||||||||||||||||
| Residential mortgage | ||||||||||||||||||||||||||||||||
| Other consumer loans | ||||||||||||||||||||||||||||||||
| Total loans | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
1 Balance includes $8.5 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 one loan modification made to borrowers experiencing financial difficulty during the three months ended March 31, 2026. The Company had two loan modifications made to borrowers experiencing financial difficulty during the three months ended March 31, 2025.
The following tables present loans that were both experiencing financial difficulty and modified during the three months ended March 31, 2026 and 2025.
| Three Months Ended March 31, 2026 | ||||||||||||||||||||||||||
| (dollars in thousands) | Payment Delay | Total Modification by Loan Class | % of Class of Loans | |||||||||||||||||||||||
| Commercial and industrial | $ | $ | % | |||||||||||||||||||||||
| Total | $ | $ | ||||||||||||||||||||||||
| Three Months Ended March 31, 2025 | ||||||||||||||||||||||||||
| (dollars in thousands) | Payment Delay | Total Modification by Loan Class | % of Class of Loans | |||||||||||||||||||||||
| Healthcare finance | % | |||||||||||||||||||||||||
| Total | $ | $ | ||||||||||||||||||||||||
The Company closely monitors the performance of loans that are modified to borrowers experiencing financial difficulty to understand the effectiveness of its modification efforts. The following table presents the performance of loans that were modified within the twelve months ended March 31, 2026.
| Twelve Months Ended March 31, 2026 | ||||||||||||||||||||||||||
| (amounts in thousands) | Current | 30 - 89 Days Past Due | 90+ Days Past Due | |||||||||||||||||||||||
| Commercial and industrial | $ | $ | $ | |||||||||||||||||||||||
| Single tenant lease financing | ||||||||||||||||||||||||||
| Healthcare finance | ||||||||||||||||||||||||||
| Small business lending | ||||||||||||||||||||||||||
| Franchise finance | ||||||||||||||||||||||||||
| Total | $ | $ | $ | |||||||||||||||||||||||
There were no loans that were modified within the twelve months ended March 31, 2026 that subsequently defaulted during the period presented.
28
Other Real Estate Owned
29
Note 5: Premises and Equipment
The following table summarizes premises and equipment at March 31, 2026 and December 31, 2025.
| (amounts in thousands) | March 31, 2026 | December 31, 2025 | ||||||||||||
| Land | $ | $ | ||||||||||||
| Construction in process | ||||||||||||||
| Right of use leased asset | ||||||||||||||
| Building and improvements | ||||||||||||||
| Furniture and equipment | ||||||||||||||
| Less: accumulated depreciation | ( | ( | ||||||||||||
| Total | $ | $ | ||||||||||||
Note 6: Goodwill
As of March 31, 2026 and December 31, 2025, the carrying amount of goodwill was $4.7
Goodwill was assessed for impairment using a quantitative test performed as of August 31, 2025. 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 months ended March 31, 2026 and 2025 are shown in the table below.
| Three Months Ended | ||||||||||||||
| (amounts in thousands) | March 31, 2026 | March 31, 2025 | ||||||||||||
| Balance, beginning of period | $ | $ | ||||||||||||
| Additions: | ||||||||||||||
| Originated | ||||||||||||||
| Subtractions: | ||||||||||||||
| Paydowns | ( | ( | ||||||||||||
| Changes in fair value due to changes in valuation inputs or assumptions used in the valuation model | ( | |||||||||||||
| Loan servicing asset revaluation | $ | ( | $ | ( | ||||||||||
| Balance, end of period | $ | $ | ||||||||||||
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Loans serviced for others are not included in the condensed consolidated balance sheets. The unpaid principal balances of these loans serviced for others as of March 31, 2026 and December 31, 2025 are shown in the table below.
| | ||||||||||||||||||||||||||||||||
| (amounts in thousands) | March 31, 2026 | December 31, 2025 | ||||||||||||||||||||||||||||||
| Loan portfolios serviced for: | ||||||||||||||||||||||||||||||||
| SBA guaranteed loans | $ | $ | ||||||||||||||||||||||||||||||
| Single tenant lease financing | ||||||||||||||||||||||||||||||||
| Total | $ | $ | ||||||||||||||||||||||||||||||
Loan servicing revenue totaled $2.9 million and $2.0 million for the three months ended March 31, 2026 and March 31, 2025, respectively. Loan servicing asset revaluation, which represents the change in fair value of the servicing asset, resulted in a $1.1 million and $1.2 million downward valuation for the three months ended March 31, 2026 and March 31, 2025, 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 accrued interest at a fixed rate of 6.0 % per year to, but excluding, November 1, 2025 and thereafter at a floating rate equal to three-month Term SOFR plus 5.795 %. The 2030 Note is an unsecured subordinated obligation of the Company and may be repaid, without penalty, on any interest payment date on or after November 1, 2025. The 2030 Note is intended to qualify as Tier 2 capital under regulatory guidelines. The Company used the net proceeds from the issuance of the 2030 Note to redeem a subordinated term note that had been entered into in October 2015.
In August 2021, the Company issued $60.0 million aggregate principal amount of 3.75 % Fixed-to-Floating Rate Subordinated Notes due 2031 (the “2031 Notes”) in a private placement. 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.
31
The following table presents the principal balance and unamortized discount and debt issuance costs for the 2029 Notes, the 2030 Note, and the 2031 Notes as of March 31, 2026 and December 31, 2025.
| March 31, 2026 | December 31, 2025 | ||||||||||||||||||||||
| (amounts in thousands) | Principal | Unamortized Discount and Debt Issuance Costs | Principal | Unamortized Discount and Debt Issuance Costs | |||||||||||||||||||
| 2029 Notes | $ | $ | ( | $ | $ | ( | |||||||||||||||||
| 2030 Note | ( | ( | |||||||||||||||||||||
| 2031 Notes | ( | ( | |||||||||||||||||||||
| Total | $ | $ | ( | $ | $ | ( | |||||||||||||||||
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”).
32
Award Activity Under 2022 Plan
The Company recorded $0.6 million and less than $0.1 million of share-based compensation expense for the three months ended March 31, 2026, and March 31, 2025, respectively, related to stock-based awards under the 2022 Plan.
The following table summarizes the stock-based award activity under the 2022 Plan for the three months ended March 31, 2026.
| (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, 2025 | $ | $ | $ | ||||||||||||||||||||||||||||||||
| Granted | |||||||||||||||||||||||||||||||||||
| Vested | ( | ||||||||||||||||||||||||||||||||||
| Unvested at March 31, 2026 | $ | $ | $ | ||||||||||||||||||||||||||||||||
At March 31, 2026, the total unrecognized compensation cost related to unvested stock-based awards under the 2022 Plan was $3.6 million with a weighted-average expense recognition period of 2.2 years.
2013 Equity Incentive Plan
The 2013 Plan authorized the issuance of 750,000 shares of the Company’s common stock in the form of stock-based awards to employees, directors, and other eligible persons. 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 March 31, 2026 , and less than $0.1 million of share-based compensation expense for the three months ended March 31, 2025, related to stock-based awards under the 2013 Plan.
At March 31, 2026, 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 three months ended March 31, 2026.
| Deferred Stock Rights | |||||||||||
| Outstanding, beginning of period | |||||||||||
| Granted | |||||||||||
| Outstanding, end of period | |||||||||||
33
Note 10: Commitments and Credit Risk
Note 11: Fair Value of Financial Instruments
ASC Topic 820, Fair Value Measurement, defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. ASC Topic 820 also specifies a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The standard describes three levels of inputs that may be used to measure fair value:
Level 1 Quoted prices in active markets for identical assets or liabilities
Level 2 Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities
Level 3 Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities
Following is a description of the valuation methodologies and inputs used for assets measured at fair value on a recurring basis and recognized in the accompanying condensed consolidated balance sheets, as well as the general classification of such assets pursuant to the valuation hierarchy.
Available-for-Sale Securities
Where quoted market prices are available in an active market, securities are classified within Level 1 of the valuation hierarchy. If quoted market prices are not available, then fair values are estimated by using pricing models, quoted prices of securities with similar characteristics or discounted cash flows. The Company did not own any securities classified within Level 1 of the hierarchy as of March 31, 2026 and December 31, 2025.
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 March 31, 2026 or December 31, 2025.
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
34
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 clear interest rate swaps are net of variation margin settled-to-market (Level 2).
The following tables present the fair value measurements of assets and liabilities recognized in the accompanying condensed consolidated balance sheets measured at fair value on a recurring basis and the level within the fair value hierarchy in which the fair value measurements fall at March 31, 2026 and December 31, 2025.
| March 31, 2026 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 | $ | $ | $ | $ | ||||||||||||||||||||||
| Municipal securities | ||||||||||||||||||||||||||
| Agency mortgage-backed securities - residential | ||||||||||||||||||||||||||
| Agency mortgage-backed securities - commercial | ||||||||||||||||||||||||||
| Private label mortgage-backed securities - residential | ||||||||||||||||||||||||||
Asset-backed securities | ||||||||||||||||||||||||||
| Corporate securities | ||||||||||||||||||||||||||
| Total available-for-sale securities | $ | $ | $ | $ | ||||||||||||||||||||||
| Servicing asset | ||||||||||||||||||||||||||
| Interest rate swap agreements - assets (back-to-back) | ||||||||||||||||||||||||||
| Interest rate swap agreements - liabilities (back-to-back) | ( | ( | ||||||||||||||||||||||||
| December 31, 2025 Fair Value Measurements Using | ||||||||||||||||||||||||||
| (amounts in thousands) | Fair Value | Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | ||||||||||||||||||||||
| U.S. Government-sponsored agencies | $ | $ | $ | $ | ||||||||||||||||||||||
| Municipal securities | ||||||||||||||||||||||||||
| Agency mortgage-backed securities - residential | ||||||||||||||||||||||||||
| Agency mortgage-backed securities - commercial | ||||||||||||||||||||||||||
| Private label mortgage-backed securities - residential | ||||||||||||||||||||||||||
Asset-backed securities | ||||||||||||||||||||||||||
| Corporate securities | ||||||||||||||||||||||||||
| Total available-for-sale securities | $ | $ | $ | $ | ||||||||||||||||||||||
| Servicing asset | ||||||||||||||||||||||||||
| Interest rate swap agreements - assets (back-to-back) | ||||||||||||||||||||||||||
| Interest rate swap agreements - liabilities (back-to-back) | ( | ( | ||||||||||||||||||||||||
35
The following tables reconcile the beginning and ending balances of recurring fair value measurements recognized in the accompanying condensed consolidated balance sheets using significant unobservable (Level 3) inputs for the three months ended March 31, 2026 and 2025.
| (amounts in thousands) | Servicing Asset | |||||||||||||
| Balance as of January 1, 2026 | $ | |||||||||||||
| Total realized gains | ||||||||||||||
| Additions | ||||||||||||||
| Paydowns | ( | |||||||||||||
| Change in fair value | ||||||||||||||
| Balance as of March 31, 2026 | $ | |||||||||||||
| Balance as of January 1, 2025 | $ | |||||||||||||
| Total realized gains | ||||||||||||||
| Additions | ||||||||||||||
| Paydowns | ( | |||||||||||||
| Change in fair value | ( | |||||||||||||
| Balance as of March 31, 2025 | $ | |||||||||||||
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 evaluated 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 evaluated loan is not collateral dependent, the Company utilizes a discounted cash flow analysis to measure impairment.
Individually evaluated loans with a specific valuation allowance based on the value of the underlying collateral or a discounted cash flow analysis are classified as Level 3 assets.
The following table presents the fair value measurements of assets and liabilities recognized in the accompanying condensed consolidated balance sheets measured at fair value on a nonrecurring basis and the level within the fair value hierarchy in which the fair value measurement falls at March 31, 2026 and December 31, 2025.
| March 31, 2026 | ||||||||||||||||||||||||||
| (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 | $ | $ | $ | $ | ||||||||||||||||||||||
| Other real estate owned | ||||||||||||||||||||||||||
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| December 31, 2025 | ||||||||||||||||||||||||||
| (amounts in thousands) | Fair Value Measurements Using | |||||||||||||||||||||||||
| Fair Value | Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | |||||||||||||||||||||||
| Collateral dependent loans | $ | $ | $ | $ | ||||||||||||||||||||||
| Other real estate owned | ||||||||||||||||||||||||||
Significant Unobservable (Level 3) Inputs
The following tables present quantitative information about unobservable inputs used in recurring and nonrecurring Level 3 fair value measurements.
| (dollars in thousands) | Fair Value at March 31, 2026 | Valuation Technique | Significant Unobservable Inputs | Range | Weighted-Average Range | |||||||||||||||||||||||||||
| Collateral dependent loans | $ | Fair value of collateral | Discount for type of property and current market conditions | |||||||||||||||||||||||||||||
| Servicing asset | Discounted cash flow | Prepayment speeds Discount rate | ||||||||||||||||||||||||||||||
| Other real estate owned | Fair value of collateral | Discount to reflect current market conditions | ||||||||||||||||||||||||||||||
| (dollars in thousands) | Fair Value at December 31, 2025 | Valuation Technique | Significant Unobservable Inputs | Range | Weighted-Average Range | |||||||||||||||||||||||||||
| Collateral dependent loans | $ | Fair value of collateral | Discount for type of property and current market conditions | |||||||||||||||||||||||||||||
| Servicing asset | Discounted cash flow | Prepayment speeds Discount rate | ||||||||||||||||||||||||||||||
| Other real estate owned | Fair value of collateral | Discount to reflect current market conditions | ||||||||||||||||||||||||||||||
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. 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.
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In certain cases where Level 1 or Level 2 inputs are not available, securities are classified within Level 3 of the hierarchy. Fair values are calculated using discounted cash flows. Discounted cash flows are calculated based off of the anticipated future cash flows updated to incorporate loss severities. Rating agency and industry research reports as well as default and deferral activity are reviewed and incorporated into the calculation. The Company did not own any securities classified within Level 3 of the hierarchy as of March 31, 2026 or December 31, 2025.
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 March 31, 2026 and December 31, 2025.
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The following tables present the carrying value and estimated fair value of all financial assets and liabilities that are not measured at fair value on a recurring basis at March 31, 2026 and December 31, 2025.
| March 31, 2026 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 | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
| Securities held-to-maturity, net | ||||||||||||||||||||||||||||||||
| Loans held-for-sale | ||||||||||||||||||||||||||||||||
| Net loans | ||||||||||||||||||||||||||||||||
| Accrued interest receivable | ||||||||||||||||||||||||||||||||
| Federal Home Loan Bank of Indianapolis stock | ||||||||||||||||||||||||||||||||
| Deposits | ||||||||||||||||||||||||||||||||
| Advances from Federal Home Loan Bank | ||||||||||||||||||||||||||||||||
| Subordinated debt | ||||||||||||||||||||||||||||||||
| Accrued interest payable | ||||||||||||||||||||||||||||||||
| December 31, 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 | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
| Securities held-to-maturity, net | ||||||||||||||||||||||||||||||||
| Loans held-for-sale | ||||||||||||||||||||||||||||||||
| Net loans | ||||||||||||||||||||||||||||||||
| Accrued interest receivable | ||||||||||||||||||||||||||||||||
| Federal Home Loan Bank of Indianapolis stock | ||||||||||||||||||||||||||||||||
| Deposits | ||||||||||||||||||||||||||||||||
| Advances from Federal Home Loan Bank | ||||||||||||||||||||||||||||||||
| Subordinated debt | ||||||||||||||||||||||||||||||||
| Accrued interest payable | ||||||||||||||||||||||||||||||||
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.
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The Company entered into offsetting interest rate swaps 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 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
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 8.6 years as of March 31, 2026. The Company had amortization expense totaling $1.0 million and $0.9 million for the three months ended March 31, 2026, and 2025, 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 March 31, 2026 and December 31, 2025.
| March 31, 2026 | December 31, 2025 | |||||||||||||||||||||||||
| (amounts in thousands) | Notional Amount | Fair Value | Notional Amount | Fair Value | ||||||||||||||||||||||
| Asset Derivatives | ||||||||||||||||||||||||||
| Derivatives not designated as hedging instruments | ||||||||||||||||||||||||||
| Back-to-back swaps | $ | $ | $ | $ | ||||||||||||||||||||||
Total contracts | $ | $ | $ | $ | ||||||||||||||||||||||
| Liability Derivatives | ||||||||||||||||||||||||||
| Derivatives not designated as hedging instruments | ||||||||||||||||||||||||||
| Back-to-back swaps | $ | $ | ( | $ | $ | ( | ||||||||||||||||||||
Total contracts | $ | $ | ( | $ | $ | ( | ||||||||||||||||||||
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 both March 31, 2026 and December 31, 2025. The Company pledged cash collateral of $0.3 million to counterparties as security for its obligations related to these agreements at both March 31, 2026 and December 31, 2025.
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Note 13: Accumulated Other Comprehensive Loss
The components of accumulated other comprehensive loss, included in stockholders' equity, for the three months ended March 31, 2026 and 2025, 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 | Total | |||||||||||||||||||||||
| Balance, January 1, 2026 | $ | ( | $ | ( | ( | |||||||||||||||||||||
| Other comprehensive loss before reclassifications from accumulated other comprehensive loss before tax | ( | ( | ||||||||||||||||||||||||
| Reclassifications from accumulated other comprehensive income to earnings before tax | ||||||||||||||||||||||||||
| Other comprehensive (loss) income before tax | ( | ( | ||||||||||||||||||||||||
| Income tax (benefit) provision | ( | ( | ||||||||||||||||||||||||
| Other comprehensive (loss) income - net of tax | ( | ( | ||||||||||||||||||||||||
| Balance, March 31, 2026 | $ | ( | $ | ( | $ | ( | ||||||||||||||||||||
| Balance, January 1, 2025 | $ | ( | $ | ( | ( | |||||||||||||||||||||
| Other comprehensive income before reclassifications from accumulated other comprehensive loss before tax | ||||||||||||||||||||||||||
| Reclassifications from accumulated other comprehensive income to earnings before tax | ||||||||||||||||||||||||||
| Other comprehensive income before tax | ||||||||||||||||||||||||||
| Income tax provision | ||||||||||||||||||||||||||
| Other comprehensive income - net of tax | ||||||||||||||||||||||||||
| Balance, March 31, 2025 | $ | ( | $ | ( | $ | ( | ||||||||||||||||||||
| (amounts in thousands) | Amounts Reclassified from Accumulated Other Comprehensive Income for the Three Months Ended | |||||||||||||||||||||||||||||||||||||
| Details About Accumulated Other Comprehensive Loss Components | March 31, 2026 | March 31, 2025 | Affected Line Item in the Statements of Income | |||||||||||||||||||||||||||||||||||
| Reclassifications from accumulated other comprehensive income to earnings before tax | $ | ( | ( | Interest Income | ||||||||||||||||||||||||||||||||||
| Total amount reclassified before tax | ( | ( | Income before income taxes | |||||||||||||||||||||||||||||||||||
| Tax benefit | ( | ( | Income tax (benefit) provision | |||||||||||||||||||||||||||||||||||
| Total reclassifications from accumulated other comprehensive (loss) income | $ | ( | $ | ( | Net income | |||||||||||||||||||||||||||||||||
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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
Recently Adopted Accounting Standards
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 Company adopted this guidance on January 1, 2025 and it did not have a material impact on its consolidated financial statements.
Newly Issued But Not Yet Effective Accounting Standards
ASU 2024-03 - Income Statement-Reporting Comprehensive Income - Expense Disaggregations Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses (November 2024)
In November 2024, the FASB issued ASU No. 2024-03, Income Statement-Reporting Comprehensive Income-Expense Disaggregations Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses. This ASU requires additional disclosures of the nature of expenses included in the Company’s income statement. The new standard requires disclosures about specific types of expenses included the income statement. The guidance is effective for annual reporting periods beginning after December 15, 2026 and interim reporting periods beginning after December 15, 2027. The Company is currently evaluating the impact of this ASU on its consolidated financial statements.
ASU 2025-08 - Financial Instruments - Credit Losses (Topic 326) - Purchased Loans (November 2025)
In November 2025, the FASB issued ASU No. 2025-08, Financial Instruments - Credit Losses (Topic 326) - Purchased Loans. This ASU changes the accounting for certain acquired purchased seasoned loans ("PSL") by applying the gross‑up method, which records an allowance for expected credit losses at acquisition as an adjustment to amortized cost basis rather than a day one provision through earnings. The guidance is intended to simplify post‑acquisition accounting, reduce inconsistency between PCD and non-PCD loans, and eliminate day one credit loss expense for in‑scope PSLs. The amendments are effective for public business entities for annual periods beginning after December 15, 2026, with early adoption permitted. The Company is currently evaluating the impact of this ASU on its consolidated financial statements.
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ASU 2025-09 - Derivatives and Hedging (Topic 815) - Hedge Accounting Improvements (November 2025)
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, 2025 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”) lending, construction and investor commercial real estate lending, single tenant lease financing, public finance, specialty finance, small business lending, 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, investor commercial real estate loans and 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 specialty finance team manages our healthcare, franchise finance and equipment finance portfolios and 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 an active lender in the Small Business
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Administration (“SBA”) 7(a) program, closing $72.5 million in SBA 7(a) loans during the three months ended March 31,2026. We also offer a top-ranked small business checking account product to our country’s entrepreneurs.
We offer payment, deposit, card and lending products and services through partnerships with financial technology companies and platforms (“fintechs”). With the rapid evolution of technology that enables small businesses to manage their finances digitally, fintechs are addressing a significantly growing marketplace. Fintechs have created robust digital offerings, unburdened by legacy technology architecture, to address growing customer expectations. Through partnerships with selected fintechs, we believe our ability to win and retain small business relationships will be significantly enhanced. Furthermore, we believe partnering with select fintechs will allow us to further diversify our revenue sources, acquire deposits and pursue additional asset generation capabilities.
As of March 31, 2026, the Company had consolidated assets of $5.7 billion, consolidated deposits of $5.0 billion and stockholders’ equity of $361.0 million.
Results of Operations
During the first quarter 2026, net income was $2.5 million, or $0.29 diluted earnings per share, compared to net income of $0.9 million, or $0.11 diluted earnings per share, during the first quarter 2025, representing an increase in net income of $1.6 million, or 166.1%, and an increase in diluted earnings per share of $0.18, or 163.6%.
The $1.6 million increase in net income for the first quarter 2026 compared to the first quarter 2025 was due primarily to increases of $6.5 million, or 25.9%, in net interest income and $1.1 million, or 10.5%, in noninterest income, partially offset by increases of $4.4 million, or 36.6%, in the provision for credit losses and $1.5 million, or 6.2%, in noninterest expense, as well as a decrease of $0.2 million in income tax benefit.
During the first quarter 2026, return on average assets (“ROAA”), return on average shareholders’ equity (“ROAE”), and return on average tangible common equity (“ROATCE”) were 0.18%, 2.72% and 2.75%, respectively, compared to 0.07%, 0.98% and 0.99%, respectively, for the first quarter 2025.
During the first quarter 2026, pre-provision net revenue (“PPNR”) was $18.1 million, an increase of 51.2% from PPNR of $12.0 million for the first quarter 2025. The $6.1 million increase was due to an increase of $6.5 million, or 25.9%, in net interest income and an increase of $1.1 million, or 10.5%, in noninterest income, partially offset by an increase of $1.5 million, or 6.2%, in noninterest expense.
Refer to the “Reconciliation of Non-GAAP Financial Measures” section of Part I, Item 2 of this report, Management’s Discussion and Analysis of Financial Condition and Results of Operations for additional information.
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Consolidated Average Balance Sheets and Net Interest Income Analyses
For the periods presented, the following tables provide the average balances of interest-earning assets and interest-bearing liabilities and the related yields and cost of funds. The tables do not reflect any effect of income taxes except for net interest margin - FTE, as discussed below. Balances are based on the average of daily balances. Nonaccrual loans are included in average loan balances.
| Three Months Ended | ||||||||||||||||||||||||||||||||||||||
| March 31, 2026 | March 31, 2025 | |||||||||||||||||||||||||||||||||||||
| (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 | $ | 3,880,131 | $ | 60,839 | 6.36 | % | $ | 4,242,933 | $ | 62,662 | 5.99 | % | ||||||||||||||||||||||||||
| Securities - taxable | 943,079 | 9,496 | 4.08 | % | 820,175 | 8,463 | 4.18 | % | ||||||||||||||||||||||||||||||
| Securities - non-taxable | 79,793 | 654 | 3.32 | % | 81,743 | 661 | 3.28 | % | ||||||||||||||||||||||||||||||
| Other earning assets | 521,697 | 4,821 | 3.75 | % | 445,280 | 5,043 | 4.59 | % | ||||||||||||||||||||||||||||||
| Total interest-earning assets | 5,424,700 | 75,810 | 5.67 | % | 5,590,131 | 76,829 | 5.57 | % | ||||||||||||||||||||||||||||||
| Allowance for credit losses - loans | (56,106) | (45,664) | ||||||||||||||||||||||||||||||||||||
| Noninterest-earning assets | 267,052 | 225,913 | ||||||||||||||||||||||||||||||||||||
| Total assets | $ | 5,635,646 | $ | 5,770,380 | ||||||||||||||||||||||||||||||||||
| Liabilities | ||||||||||||||||||||||||||||||||||||||
| Interest-bearing liabilities | ||||||||||||||||||||||||||||||||||||||
| Interest-bearing demand deposits | $ | 1,243,549 | $ | 8,168 | 2.66 | % | $ | 956,322 | $ | 6,974 | 2.96 | % | ||||||||||||||||||||||||||
| Savings accounts | 19,542 | 41 | 0.85 | % | 20,568 | 43 | 0.85 | % | ||||||||||||||||||||||||||||||
| Money market accounts | 1,292,126 | 10,103 | 3.17 | % | 1,221,795 | 11,361 | 3.77 | % | ||||||||||||||||||||||||||||||
| Certificates and brokered deposits | 2,188,972 | 22,047 | 4.08 | % | 2,617,293 | 29,248 | 4.53 | % | ||||||||||||||||||||||||||||||
| Total interest-bearing deposits | 4,744,189 | 40,359 | 3.45 | % | 4,815,978 | 47,626 | 4.01 | % | ||||||||||||||||||||||||||||||
| Other borrowed funds | 352,117 | 3,853 | 4.44 | % | 401,300 | 4,107 | 4.15 | % | ||||||||||||||||||||||||||||||
| Total interest-bearing liabilities | 5,096,306 | 44,212 | 3.52 | % | 5,217,278 | 51,733 | 4.02 | % | ||||||||||||||||||||||||||||||
| Noninterest-bearing deposits | 143,305 | 135,878 | ||||||||||||||||||||||||||||||||||||
| Other noninterest-bearing liabilities | 21,759 | 25,189 | ||||||||||||||||||||||||||||||||||||
| Total liabilities | 5,261,370 | 5,378,345 | ||||||||||||||||||||||||||||||||||||
| Shareholders’ equity | 374,276 | 392,035 | ||||||||||||||||||||||||||||||||||||
| Total liabilities and shareholders’ equity | $ | 5,635,646 | $ | 5,770,380 | ||||||||||||||||||||||||||||||||||
| Net interest income | $ | 31,598 | $ | 25,096 | ||||||||||||||||||||||||||||||||||
Interest rate spread 1 | 2.15% | 1.55% | ||||||||||||||||||||||||||||||||||||
Net interest margin 2 | 2.36% | 1.82% | ||||||||||||||||||||||||||||||||||||
Net interest margin - FTE 3 | 2.45% | 1.91% | ||||||||||||||||||||||||||||||||||||
1 Yield on total interest-earning assets minus cost of total interest-bearing liabilities.
2 Net interest income divided by total average interest-earning assets (annualized).
3 On an FTE basis assuming a 21% tax rate. Net interest income is adjusted to reflect income from assets such as municipal loans and securities that are exempt from Federal income taxes. This is to recognize the income tax savings that facilitates a comparison between taxable and tax-exempt assets. The Company believes that it is a standard practice in the banking industry to present net interest margin and net interest income on a fully-taxable equivalent basis, as these measures provide useful information to make peer comparisons. Net interest margin - FTE represents a non-GAAP financial measure. See “Reconciliation of Non-GAAP Financial Measures” for a reconciliation of this measure to its most directly comparable GAAP measure.
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Rate/Volume Analysis
The following table illustrates the impact of changes in the volume of interest-earning assets and interest-bearing liabilities and interest rates on net interest income for the periods indicated. The change in interest not due solely to volume or rate has been allocated in proportion to the absolute dollar amounts of the change in each.
| Three Months Ended March 31, 2026 vs. March 31, 2025 Due to Changes in | ||||||||||||||||||||||||||||||||||||||
| (amounts in thousands) | Volume | Rate | Net | |||||||||||||||||||||||||||||||||||
| Interest income | ||||||||||||||||||||||||||||||||||||||
| Loans, including loans held-for-sale | $ | (19,288) | $ | 17,465 | $ | (1,823) | ||||||||||||||||||||||||||||||||
| Securities – taxable | 2,305 | (1,272) | 1,033 | |||||||||||||||||||||||||||||||||||
| Securities – non-taxable | (48) | 41 | (7) | |||||||||||||||||||||||||||||||||||
| Other earning assets | 3,513 | (3,735) | (222) | |||||||||||||||||||||||||||||||||||
| Total | (13,518) | 12,499 | (1,019) | |||||||||||||||||||||||||||||||||||
| Interest expense | ||||||||||||||||||||||||||||||||||||||
| Interest-bearing deposits | (701) | (6,566) | (7,267) | |||||||||||||||||||||||||||||||||||
| Other borrowed funds | (1,644) | 1,390 | (254) | |||||||||||||||||||||||||||||||||||
| Total | (2,345) | (5,176) | (7,521) | |||||||||||||||||||||||||||||||||||
| (Decrease) increase in net interest income | $ | (11,173) | $ | 17,675 | $ | 6,502 | ||||||||||||||||||||||||||||||||
Net interest income for the first quarter 2026 was $31.6 million, an increase of $6.5 million, or 25.9%, compared to $25.1 million for the first quarter 2025. The increase in net interest income was the result of a decrease of $7.5 million, or 14.5%, in total interest expense to $44.2 million for the first quarter 2026 from $51.7 million for the first quarter 2025, which was partially offset by a $1.0 million, or 1.3%, decrease in total interest income to $75.8 million for the first quarter 2026 from $76.8 million for the first quarter 2025.
The decrease in total interest income for the first quarter 2026 compared to first quarter 2025 was due primarily to a decrease in interest earned on loans, resulting from a decrease of $362.8 million, or 8.6%, in the average balance of loans including loans held-for-sale, partially offset by an increase of 37 bps in the yield earned on loans, including loans held-for-sale. Additionally, the average balance of other earning assets increased $76.4 million, or 17.2%, while the yield on other earning assets decreased 84 bps. The decrease in the yield earned on other earning assets was due mainly to the impact of decreases in the Fed Funds rates on cash balances held at the Federal Reserve. The decrease in total interest income was partially offset by increases in interest income related to securities. The average balance of securities increased $121.0 million, or 13.4%, but was partially offset by a decrease of 8 bps in the yield earned on securities for the first quarter 2026 compared to the first quarter 2025. The yield on funded portfolio loan originations was 6.58% for the first quarter 2026, a decrease of 120 bps compared to the first quarter 2025, but still higher than the overall yield on the loan portfolio.
The decrease in total interest expense for the first quarter 2026 compared to the first quarter 2025 was due primarily to decreases of $7.2 million, or 24.6%, in interest expense associated with certificates and brokered deposits, $1.2 million, or 11.1%, in interest expense associated with money market accounts and $0.3 million, or 6.2%, in other borrowed funds, partially offset by an increase of $1.2 million, or 17.1%, in interest expense associated with interest-bearing demand deposits. The decrease in interest expense related to certificates and brokered deposits was driven by a decrease of 45 bps in the cost of these deposits, as well as a decrease in the average balance of these deposits of $428.3 million, or 16.4%. The decrease in interest expense related to money market accounts was driven by a 60 bp decrease in the cost of these deposits, partially offset by an increase in the average balance of these deposits of $70.3 million, or 5.8%. The decrease in interest expense related to other borrowed funds was driven by a decrease in the average balance of $49.2 million, or 12.3%, partially offset by a 29 bp increase in the cost of these funds. The increase in interest expense related to interest-bearing demand deposits was driven by an increase in the average balance of $287.2 million, or 30%, partially offset by 30 bp decrease in the cost of these deposits.
Overall, the cost of total interest-bearing liabilities for the first quarter 2026 decreased 50 bps to 3.52% from 4.02% for the first quarter 2025.
Net interest margin (“NIM”) was 2.36% for the first quarter 2026 compared to 1.82% for the first quarter 2025, an increase of 54 bps. On a fully-taxable equivalent (“FTE”) basis, NIM was 2.45% for the first quarter 2026 compared to 1.91% for the first quarter 2025, an increase of 54 bps. The increase in the first quarter 2026 NIM and FTE NIM compared to the first
46
quarter 2025 reflects the combination of higher yields on loans and continued improvement in the cost of funds related to deposits.
Noninterest Income
The following table shows noninterest income for each of the periods presented.
| Three Months Ended | |||||||||||||||||||||||||||||||||||
| (amounts in thousands) | March 31, 2026 | March 31, 2025 | |||||||||||||||||||||||||||||||||
| Service charges and fees | $ | 844 | $ | 265 | |||||||||||||||||||||||||||||||
| Loan servicing revenue | 2,856 | 1,983 | |||||||||||||||||||||||||||||||||
| Loan servicing asset revaluation | (1,060) | (1,181) | |||||||||||||||||||||||||||||||||
| Gain on sale of loans | 7,377 | 8,647 | |||||||||||||||||||||||||||||||||
| Other | 1,501 | 713 | |||||||||||||||||||||||||||||||||
| Total noninterest income | $ | 11,518 | $ | 10,427 | |||||||||||||||||||||||||||||||
During the first quarter 2026, noninterest income was $11.5 million, representing an increase of $1.1 million, or 10.5%, compared to $10.4 million of noninterest income for the first quarter 2025. The increase in noninterest income was driven primarily by increases in net loan servicing, other noninterest income and service charges and fees, partially offset by a decrease in gain on sale of loans. The increase of $1.0 million, or 123.9%, in net loan servicing was due to growth in the balance of the Company’s SBA 7(a) and single tenant lease financing servicing portfolios. The increase of $0.8 million, or 110.5%, in other noninterest income was due primarily to an increase in fintech partnership revenue. The increase of $0.6 million, or 218.5%, in service charges and fees reflects higher fees earned on fintech deposits moved off-balance sheet into deposit networks, which increased substantially from the prior year. The decrease in gain on sale of loans of $1.3 million, or 14.7%, was due primarily to a lower volume of SBA loans sold in the first quarter 2026 compared to the first quarter 2025, partially offset by a 27 bp increase in net premiums.
Noninterest Expense
The following table shows noninterest expense for each of the periods presented.
| Three Months Ended | |||||||||||||||||||||||||||||||||||
| (amounts in thousands) | March 31, 2026 | March 31, 2025 | |||||||||||||||||||||||||||||||||
| Salaries and employee benefits | $ | 13,236 | $ | 13,107 | |||||||||||||||||||||||||||||||
| Marketing, advertising and promotion | 615 | 647 | |||||||||||||||||||||||||||||||||
| Consulting and professional services | 1,080 | 1,228 | |||||||||||||||||||||||||||||||||
| Data processing | 775 | 635 | |||||||||||||||||||||||||||||||||
| Loan expenses | 2,179 | 1,531 | |||||||||||||||||||||||||||||||||
| Premises and equipment | 3,676 | 3,115 | |||||||||||||||||||||||||||||||||
| Deposit insurance premium | 1,487 | 1,398 | |||||||||||||||||||||||||||||||||
| Other | 1,979 | 1,895 | |||||||||||||||||||||||||||||||||
| Total noninterest expense | $ | 25,027 | $ | 23,556 | |||||||||||||||||||||||||||||||
Noninterest expense for the first quarter 2026 was $25.0 million, representing an increase of $1.5 million, or 6.2%, compared to $23.6 million for the first quarter 2025. The increase in noninterest expense was due primarily to increases in loan expenses and premises and equipment. The increase of $0.6 million, or 42.3%, in loan expenses was due primarily to collection expense, as well as third party servicing associated with SBA and fintech lending. The increase of $0.6 million, or 18.0%, in premises and equipment was due primarily to continued investment in technology to enhance the user experience in consumer and small business banking.
The Company recorded an income tax benefit of $0.7 million for the first quarter 2026, compared to an income tax benefit of $0.9 million for the first quarter 2025.
47
Financial Condition
The following table shows summary balance sheet data for each of the periods presented.
| (amounts in thousands) | ||||||||||||||||||||||||||
| Balance Sheet Data: | March 31, 2026 | December 31, 2025 | ||||||||||||||||||||||||
| Total assets | $ | 5,711,688 | $ | 5,571,647 | ||||||||||||||||||||||
| Loans | 3,775,870 | 3,746,728 | ||||||||||||||||||||||||
| Total securities | 1,048,077 | 1,029,296 | ||||||||||||||||||||||||
| Loans held-for-sale | 55,240 | 108,608 | ||||||||||||||||||||||||
| Noninterest-bearing deposits | 149,505 | 146,879 | ||||||||||||||||||||||||
| Interest-bearing deposits | 4,832,145 | 4,692,934 | ||||||||||||||||||||||||
| Total deposits | 4,981,650 | 4,839,813 | ||||||||||||||||||||||||
| Advances from Federal Home Loan Bank | 239,500 | 249,500 | ||||||||||||||||||||||||
| Total liabilities | 5,350,734 | 5,211,880 | ||||||||||||||||||||||||
| Total shareholders’ equity | 360,954 | 359,767 | ||||||||||||||||||||||||
Total assets increased $140.0 million, or 2.5%, to $5.7 billion at March 31, 2026 compared to $5.6 billion at December 31, 2025. 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 certificates of deposits and FHLB advances. Total liabilities increased $138.9 million, or 2.7%, to $5.4 billion at March 31, 2026 compared to $5.2 billion at December 31, 2025. The increase was due mainly to an increase in total deposits.
As of March 31, 2026, total shareholders’ equity was $361.0 million, an increase of $1.2 million, or 0.3%, compared to December 31, 2025. The increase in shareholders’ equity was due primarily to current period net income and was partially offset by an increase in accumulated other comprehensive loss as unrealized losses on debt securities increased during the quarter due to changes in market interest rates. Tangible common equity totaled $356.3 million as of March 31, 2026, representing an increase of $1.2 million, or 0.3%, compared to December 31, 2025. The ratio of total shareholders’ equity to total assets decreased to 6.32% as of March 31, 2026 from 6.46% as of December 31, 2025, and the ratio of tangible common equity to tangible assets decreased to 6.24% as of March 31, 2026 from 6.38% as of December 31, 2025.
Book value per common share was $41.41 for both March 31, 2026 and December 31, 2025 and tangible book value per common share was $40.87 for both March 31, 2026 and December 31, 2025. The slight increase in total shareholders’ equity and tangible common equity was offset by a higher number of shares outstanding. Refer to the “Reconciliation of Non-GAAP Financial Measures” section of Part I, Item 2 of this report, Management’s Discussion and Analysis of Financial Condition and Results of Operations for additional information.
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Loan Portfolio Analysis
The following table shows a summary of the Company’s loan portfolio for each of the periods presented.
| (dollars in thousands) | March 31, 2026 | December 31, 2025 | |||||||||||||||||||||||||||
| Commercial loans | |||||||||||||||||||||||||||||
| Commercial and industrial | $ | 225,425 | 6.0 | % | $ | 221,714 | 5.9 | % | |||||||||||||||||||||
| Owner-occupied commercial real estate | 48,136 | 1.3 | % | 48,575 | 1.3 | % | |||||||||||||||||||||||
| Investor commercial real estate | 598,933 | 15.9 | % | 647,394 | 17.3 | % | |||||||||||||||||||||||
| Construction | 449,888 | 11.9 | % | 372,668 | 9.9 | % | |||||||||||||||||||||||
| Single tenant lease financing | 254,044 | 6.7 | % | 222,925 | 5.9 | % | |||||||||||||||||||||||
| Public finance | 441,734 | 11.7 | % | 442,234 | 11.8 | % | |||||||||||||||||||||||
| Healthcare finance | 131,161 | 3.5 | % | 139,469 | 3.7 | % | |||||||||||||||||||||||
Small business lending 1 | 433,964 | 11.5 | % | 430,024 | 11.5 | % | |||||||||||||||||||||||
| Franchise finance | 389,249 | 10.3 | % | 417,045 | 11.1 | % | |||||||||||||||||||||||
| Total commercial loans | 2,972,534 | 78.8 | % | 2,942,048 | 78.4 | % | |||||||||||||||||||||||
| Consumer loans | |||||||||||||||||||||||||||||
| Residential mortgage | 338,058 | 9.0 | % | 343,110 | 9.2 | % | |||||||||||||||||||||||
| Home equity | 14,219 | 0.4 | % | 14,725 | 0.4 | % | |||||||||||||||||||||||
| Other consumer loans | 431,338 | 11.4 | % | 425,458 | 11.4 | % | |||||||||||||||||||||||
| Total consumer loans | 783,615 | 20.8 | % | 783,293 | 21.0 | % | |||||||||||||||||||||||
| Total commercial and consumer loans | 3,756,149 | 99.6 | % | 3,725,341 | 99.4 | % | |||||||||||||||||||||||
Net deferred loan origination costs, premiums and discounts on purchased loans and other 2 | 19,721 | 0.4 | % | 21,387 | 0.6 | % | |||||||||||||||||||||||
| Total loans | 3,775,870 | 100.0 | % | 3,746,728 | 100.0 | % | |||||||||||||||||||||||
| Allowance for credit losses - loans | (56,496) | (55,686) | |||||||||||||||||||||||||||
| Net loans | $ | 3,719,374 | $ | 3,691,042 | |||||||||||||||||||||||||
1 Balances include $59.5 million and $52.2 million that are guaranteed by the U.S. government as of March 31, 2026 and December 31, 2025, respectively.
2 Includes carrying value adjustments of $18.1 million and $19.1 million related to terminated interest rate swaps associated with public finance loans as of March 31, 2026 and December 31, 2025, respectively.
Total loans were $3.8 billion as of March 31, 2026, an increase of $29.1 million, or 0.8%, compared to December 31, 2025. Total commercial loan balances were $3.0 billion as of March 31, 2026, an increase of $30.5 million, or 1.0%, from December 31, 2025. Total consumer loan balances were $783.6 million as of March 31, 2026, an increase of $0.3 million, or less than 0.1%, compared to December 31, 2025. Compared to December 31, 2025, the increase in commercial loan balances was driven by construction and single tenant lease financing loans, partially offset by early payoffs in investor commercial real estate and planned run-off in the franchise finance and healthcare finance portfolios. The slight increase in consumer loan balances was due primarily to origination activity in the other consumer loans portfolio.
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Asset Quality
Nonperforming loans are comprised of nonaccrual loans and loans 90 days past due and accruing. Nonperforming assets include nonperforming loans, other real estate owned (“OREO”) and other nonperforming assets, which consist of repossessed assets. The following table provides a summary of the Company’s nonperforming assets for each of the periods presented.
| (dollars in thousands) | March 31, 2026 | December 31, 2025 | |||||||||||||||
| Nonaccrual loans | |||||||||||||||||
| Commercial loans: | |||||||||||||||||
| Commercial and industrial | $ | 261 | $ | 240 | |||||||||||||
| Single tenant lease financing | 1,665 | 1,665 | |||||||||||||||
| Healthcare finance | 1,437 | 2,596 | |||||||||||||||
Small business lending 1 | 21,292 | 19,781 | |||||||||||||||
| Franchise finance | 23,350 | 26,978 | |||||||||||||||
| Total commercial loans | 48,005 | 51,260 | |||||||||||||||
| Consumer loans: | |||||||||||||||||
| Residential mortgage | 4,781 | 4,893 | |||||||||||||||
| Other consumer loans | 155 | 234 | |||||||||||||||
| Total consumer loans | 4,936 | 5,127 | |||||||||||||||
| Total nonaccrual loans | 52,941 | 56,387 | |||||||||||||||
| Past due 90 days and accruing loans | |||||||||||||||||
| Commercial loans: | |||||||||||||||||
| Small business lending | 268 | — | |||||||||||||||
| Franchise finance | 6,779 | 1,144 | |||||||||||||||
| Total commercial loans | 7,047 | 1,144 | |||||||||||||||
| Consumer loans: | |||||||||||||||||
| Residential mortgage | 1,608 | 1,007 | |||||||||||||||
| Total consumer loans | 1,608 | 1,007 | |||||||||||||||
| Total past due 90 days and accruing loans | 8,655 | 2,151 | |||||||||||||||
Total nonperforming loans | 61,596 | 58,538 | |||||||||||||||
| Other real estate owned | |||||||||||||||||
| Small business lending | 1,945 | 2,631 | |||||||||||||||
| Total other real estate owned | 1,945 | 2,631 | |||||||||||||||
| Other nonperforming assets | 150 | 186 | |||||||||||||||
| Total nonperforming assets | $ | 63,691 | $ | 61,355 | |||||||||||||
| Total nonperforming loans to total loans | 1.63 | % | 1.56 | % | |||||||||||||
| Total nonperforming assets to total assets | 1.12 | % | 1.10 | % | |||||||||||||
| Allowance for credit losses - loans to total loans | 1.50 | % | 1.49 | % | |||||||||||||
| Nonaccrual loans to total loans | 1.40 | % | 1.50 | % | |||||||||||||
| Allowance for credit losses - loans to nonaccrual loans | 106.7 | % | 98.8 | % | |||||||||||||
| Allowance for credit losses - loans to nonperforming loans | 91.7 | % | 95.1 | % | |||||||||||||
1 Balances include $15.5 million and $13.6 million that are guaranteed by the U.S. government as of March 31, 2026 and December 31, 2025, respectively.
Total nonperforming loans increased $3.1 million, or 5.2%, to $61.6 million as of March 31, 2026 compared to $58.5 million as of December 31, 2025 due primarily to an increase in accruing loans past due 90 days or more and nonperforming
50
loans in the small business lending portfolio, partially offset by decreases in nonperforming loans in the franchise finance and healthcare finance portfolios. Total nonperforming assets increased $2.3 million, or 3.8%, to $63.7 million as of March 31, 2026, compared to $61.4 million as of December 31, 2025, due primarily to the accruing loans past due 90 days or more mentioned above. As of March 31, 2026, the Company had two small business lending properties in OREO with carrying values of $1.9 million. As of December 31, 2025, the Company had three small business lending properties in OREO with a carrying value of $2.6 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 | Year Ended | ||||||||||||||||||||||||||||||||||||||||||||||
| (dollars in thousands) | March 31, 2026 | March 31, 2025 | December 31, 2025 | ||||||||||||||||||||||||||||||||||||||||||||
| Balance, beginning of period | $ | 55,686 | $ | 44,769 | $ | 44,769 | |||||||||||||||||||||||||||||||||||||||||
| Provision charged to expense | 16,606 | 12,121 | 71,921 | ||||||||||||||||||||||||||||||||||||||||||||
| Losses charged off | |||||||||||||||||||||||||||||||||||||||||||||||
| Commercial and industrial | (202) | — | (153) | ||||||||||||||||||||||||||||||||||||||||||||
| Healthcare finance | (38) | — | — | ||||||||||||||||||||||||||||||||||||||||||||
| Small business lending | (9,400) | (3,668) | (39,650) | ||||||||||||||||||||||||||||||||||||||||||||
| Franchise finance | (6,047) | (5,848) | (21,754) | ||||||||||||||||||||||||||||||||||||||||||||
| Residential mortgage | (80) | (11) | (75) | ||||||||||||||||||||||||||||||||||||||||||||
| Other consumer loans | (573) | (314) | (1,457) | ||||||||||||||||||||||||||||||||||||||||||||
| Total losses charged off | (16,340) | (9,841) | (63,089) | ||||||||||||||||||||||||||||||||||||||||||||
| Recoveries | |||||||||||||||||||||||||||||||||||||||||||||||
| Commercial and industrial | 11 | 2 | 21 | ||||||||||||||||||||||||||||||||||||||||||||
| Small business lending | 360 | 133 | 1,681 | ||||||||||||||||||||||||||||||||||||||||||||
| Franchise finance | 64 | — | 94 | ||||||||||||||||||||||||||||||||||||||||||||
| Residential mortgage | — | 6 | 19 | ||||||||||||||||||||||||||||||||||||||||||||
| Home equity | 1 | 2 | 7 | ||||||||||||||||||||||||||||||||||||||||||||
| Other consumer loans | 108 | 46 | 263 | ||||||||||||||||||||||||||||||||||||||||||||
| Total recoveries | 544 | 189 | 2,085 | ||||||||||||||||||||||||||||||||||||||||||||
| Balance, end of period | $ | 56,496 | $ | 47,238 | $ | 55,686 | |||||||||||||||||||||||||||||||||||||||||
| Net charge-offs | $ | 15,796 | $ | 9,652 | $ | 61,004 | |||||||||||||||||||||||||||||||||||||||||
| Net charge-offs (recoveries) to average loans (annualized) | |||||||||||||||||||||||||||||||||||||||||||||||
| Commercial and industrial | 0.55 | % | (0.01 | %) | 0.11 | % | |||||||||||||||||||||||||||||||||||||||||
| Healthcare finance | 0.11 | % | 0.00 | % | 0.00 | % | |||||||||||||||||||||||||||||||||||||||||
| Small business lending | 7.12 | % | 3.79 | % | 8.16 | % | |||||||||||||||||||||||||||||||||||||||||
| Franchise finance | 5.96 | % | 4.49 | % | 4.48 | % | |||||||||||||||||||||||||||||||||||||||||
| Total commercial net charge-offs | 2.01 | % | 1.12 | % | 1.76 | % | |||||||||||||||||||||||||||||||||||||||||
| Residential mortgage | 0.10 | % | 0.01 | % | 0.02 | % | |||||||||||||||||||||||||||||||||||||||||
| Home equity | (0.03 | %) | (0.05 | %) | (0.04 | %) | |||||||||||||||||||||||||||||||||||||||||
| Other consumer loans | 0.65 | % | 0.36 | % | 0.41 | % | |||||||||||||||||||||||||||||||||||||||||
| Total consumer net charge-offs | 0.28 | % | 0.14 | % | 0.16 | % | |||||||||||||||||||||||||||||||||||||||||
| Total net charge-offs to average loans | 1.65 | % | 0.92 | % | 1.45 | % | |||||||||||||||||||||||||||||||||||||||||
51
The allowance for credit losses - loans (“ACL”) was $56.5 million as of March 31, 2026, compared to $55.7 million as of December 31, 2025. The ACL as a percentage of total loans was 1.50% at March 31, 2026, compared to 1.49% at December 31, 2025. The ACL as a percentage of nonperforming loans decreased to 91.7% as of March 31, 2026, compared to 95.1% as of December 31, 2025, as the increase in nonperforming loans outweighed the increase in the ACL.
Net charge-offs of $15.8 million were recognized during the first quarter 2026, resulting in net charge-offs to average loans of 1.65%, compared to net charge-offs of $9.7 million, or 0.92% of average loans, for the first quarter 2025. Net charge-offs in the first quarter 2026 were elevated as the Company continued to take action to resolve problem loans in the small business lending and franchise finance portfolios.
The provision for credit losses - loans in the first quarter 2026 was $16.6 million, compared to $12.1 million for the first quarter 2025. The increase in the provision for credit losses - loans for the first quarter 2026 was driven primarily by the net charge-offs mentioned above and additional specific reserves related to franchise finance loans.
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Investment Securities Portfolio
The following tables show the amortized cost and approximate fair value of our investment securities portfolio by security type for each of the periods presented.
| (amounts in thousands) | |||||||||||
| Amortized Cost | March 31, 2026 | December 31, 2025 | |||||||||
| Securities available-for-sale | |||||||||||
| U.S. Government-sponsored agencies | $ | 59,556 | $ | 64,298 | |||||||
| Municipal securities | 59,677 | 64,777 | |||||||||
| Agency mortgage-backed securities - residential | 422,344 | 409,718 | |||||||||
| Agency mortgage-backed securities - commercial | 62,063 | 59,112 | |||||||||
| Private label mortgage-backed securities - residential | 116,592 | 124,264 | |||||||||
| Asset-backed securities | 39,403 | 42,492 | |||||||||
| Corporate securities | 37,758 | 37,761 | |||||||||
| Total available-for-sale | 797,393 | 802,422 | |||||||||
| Securities held-to-maturity, net carrying value | |||||||||||
| Municipal securities | 10,371 | 11,006 | |||||||||
| Agency mortgage-backed securities - residential | 241,611 | 213,530 | |||||||||
| Agency mortgage-backed securities - commercial | 5,616 | 5,635 | |||||||||
| Corporate securities | 18,444 | 20,438 | |||||||||
| Total held-to-maturity, net carrying value | 276,042 | 250,609 | |||||||||
| Total securities | $ | 1,073,435 | $ | 1,053,031 | |||||||
| (amounts in thousands) | |||||||||||
| Approximate Fair Value | March 31, 2026 | December 31, 2025 | |||||||||
| Securities available-for-sale | |||||||||||
| U.S. Government-sponsored agencies | $ | 59,150 | $ | 63,764 | |||||||
| Municipal securities | 57,105 | 63,386 | |||||||||
| Agency mortgage-backed securities - residential | 402,078 | 389,457 | |||||||||
| Agency mortgage-backed securities - commercial | 61,167 | 58,477 | |||||||||
| Private label mortgage-backed securities - residential | 115,746 | 123,673 | |||||||||
| Asset-backed securities | 39,294 | 42,553 | |||||||||
| Corporate securities | 37,495 | 37,377 | |||||||||
| Total available-for-sale | 772,035 | 778,687 | |||||||||
| Securities held-to-maturity | |||||||||||
| Municipal securities | 9,839 | 10,551 | |||||||||
| Agency mortgage-backed securities - residential | 230,079 | 203,715 | |||||||||
| Agency mortgage-backed securities - commercial | 4,708 | 4,720 | |||||||||
| Corporate securities | 17,790 | 19,829 | |||||||||
| Total held-to-maturity | 262,416 | 238,815 | |||||||||
| Total securities | $ | 1,034,451 | $ | 1,017,502 | |||||||
The approximate fair value of available-for-sale investment securities decreased $6.7 million, or 0.9%, to $772.0 million as of March 31, 2026, compared to $778.7 million as of December 31, 2025. The decrease was due primarily to decreases of $7.9 million in private label mortgage-backed securities - residential, $6.3 million in municipal securities, $4.6 million in U.S. Government-sponsored agencies and $3.3 million in asset-backed securities, partially offset by increases of $12.6 million in agency mortgage-backed securities - residential and $2.7 million in agency mortgage-backed securities - commercial. The Company deployed available liquidity during the first quarter 2026 into new purchases of available-for-sale short-duration agency mortgage-backed securities - residential and agency mortgage-backed securities - commercial, which was partially offset by net pay down activity in other security types. As of March 31, 2026, the Company had securities with a net carrying value of $276.0 million designated as held-to-maturity, compared to $250.6 million as of December 31, 2025. The increase was due primarily to purchases of CRA-eligible agency mortgage-backed securities - residential made in the first quarter 2026.
53
Accrued Income and Other Assets
Accrued income and other assets increased $1.5 million, or 1.7%, to $90.5 million at March 31, 2026, compared to $89.1 million at December 31, 2025. The increase was due primarily to increases of $1.3 million in various receivables, $0.5 million in deferred tax assets and $0.4 million in investments in fund partnerships, partially offset by a decrease of $0.6 million in prepaid assets.
Accrued Expenses and Other Liabilities
Accrued expenses and other liabilities increased $7.4 million, or 48.5%, to $22.8 million at March 31, 2026, compared to $15.4 million at December 31, 2025. The increase was due primarily to an increase related to securities purchased at the end of March that did not settle until April and accrued interest, partially offset by decreases of $0.3 million in both unfunded commitments and the reserve for unfunded loan commitments.
Deposits
The following table shows the composition of the Company’s deposit base for each of the periods presented.
| (dollars in thousands) | March 31, 2026 | December 31, 2025 | ||||||||||||||||||||||||
| Noninterest-bearing deposits | $ | 149,505 | 3.0 | % | $ | 146,879 | 3.0 | % | ||||||||||||||||||
| Interest-bearing demand deposits | 1,358,028 | 27.3 | % | 1,120,850 | 23.2 | % | ||||||||||||||||||||
| Savings accounts | 20,344 | 0.4 | % | 18,991 | 0.4 | % | ||||||||||||||||||||
| Money market accounts | 1,325,382 | 26.6 | % | 1,272,845 | 26.3 | % | ||||||||||||||||||||
| Certificates of deposits | 1,869,181 | 37.5 | % | 2,004,909 | 41.4 | % | ||||||||||||||||||||
| Brokered deposits | 259,210 | 5.2 | % | 275,339 | 5.7 | % | ||||||||||||||||||||
| Total deposits | $ | 4,981,650 | 100.0 | % | $ | 4,839,813 | 100.0 | % | ||||||||||||||||||
Total deposits increased $141.8 million, or 2.9%, to $5.0 billion as of March 31, 2026, compared to $4.8 billion as of December 31, 2025. The increase was due primarily to increases of $237.2 million, or 21.2%, in interest-bearing demand deposits and $52.5 million, or 4.1%, in money market accounts, partially offset by decreases of $135.8 million, or 6.8%, in certificates of deposits and $16.1 million, or 5.9%, in brokered deposits. The increase in interest-bearing demand deposits was driven by growth in fintech partnership deposits, which provided the ability to pay down higher-cost brokered deposits and certificates of deposits.
Uninsured deposit balances represented 39% of total deposits at March 31, 2026, up from 33% at December 31, 2025. 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 34% as of March 31, 2026, compared to 27% as of December 31, 2025. The increase in uninsured deposit balances was impacted by increases in fintech payment volumes experienced on the last day of the quarter.
Regulatory Capital Requirements
The Company and the Bank are subject to various regulatory capital requirements administered by state and federal banking agencies. Capital adequacy guidelines and, additionally for banks, prompt corrective action regulations, involve quantitative measures of assets, liabilities, and certain off-balance-sheet items calculated under regulatory accounting practices. Capital amounts and classifications are also subject to qualitative judgments by regulators about components, risk weighting and other factors.
The Basel III Capital Rules became effective for the Company and the Bank on January 1, 2015, subject to a phase-in period for certain provisions. Quantitative measures established by the Basel III Capital Rules to ensure capital adequacy require the maintenance of minimum amounts and ratios of Common Equity Tier 1 capital, Tier 1 capital and Total capital, as defined in the regulations, to risk-weighted assets, and of Tier 1 capital to adjusted quarterly average assets (“Leverage Ratio”).
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The Basel III Capital Rules were fully phased in on January 1, 2019 and require the Company and the Bank to maintain: 1) a minimum ratio of Common Equity Tier 1 capital to risk-weighted assets of 4.5%, plus a 2.5% “capital conservation buffer” (resulting in a minimum ratio of Common Equity Tier 1 capital to risk-weighted assets of 7.0%); 2) a minimum ratio of Tier 1 capital to risk-weighted assets of 6.0%, plus the capital conservation buffer (resulting in a minimum Tier 1 capital ratio of 8.5%); 3) a minimum ratio of Total capital to risk-weighted assets of 8.0%, plus the capital conservation buffer (resulting in a minimum Total capital ratio of 10.5%); and 4) a minimum Leverage Ratio of 4.0%.
The capital conservation buffer is designed to absorb losses during periods of economic stress. Failure to maintain the minimum Common Equity Tier 1 capital ratio plus the capital conservation buffer will result in potential restrictions on a banking institution’s ability to pay dividends, repurchase stock and/or pay discretionary compensation to its employees.
The following tables present actual and required capital ratios as of March 31, 2026 and December 31, 2025 for the Company and the Bank under the Basel III Capital Rules. The minimum required capital amounts presented include the minimum required capital levels as of March 31, 2026 and December 31, 2025, 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.
| 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 March 31, 2026: | |||||||||||||||||||||||||||||||||||||||||||||||
| Common equity tier 1 capital to risk-weighted assets | |||||||||||||||||||||||||||||||||||||||||||||||
| Consolidated | $ | 350,456 | 8.97 | % | $ | 273,388 | 7.00 | % | N/A | N/A | |||||||||||||||||||||||||||||||||||||
| Bank | 421,265 | 10.86 | % | 271,490 | 7.00 | % | $ | 252,097 | 6.50 | % | |||||||||||||||||||||||||||||||||||||
| Tier 1 capital to risk-weighted assets | |||||||||||||||||||||||||||||||||||||||||||||||
| Consolidated | 350,456 | 8.97 | % | 331,971 | 8.50 | % | N/A | N/A | |||||||||||||||||||||||||||||||||||||||
| Bank | 421,265 | 10.86 | % | 329,666 | 8.50 | % | 310,274 | 8.00 | % | ||||||||||||||||||||||||||||||||||||||
| Total capital to risk-weighted assets | |||||||||||||||||||||||||||||||||||||||||||||||
| Consolidated | 488,370 | 12.50 | % | 410,082 | 10.50 | % | N/A | N/A | |||||||||||||||||||||||||||||||||||||||
| Bank | 469,873 | 12.12 | % | 407,234 | 10.50 | % | 387,842 | 10.00 | % | ||||||||||||||||||||||||||||||||||||||
| Leverage ratio | |||||||||||||||||||||||||||||||||||||||||||||||
| Consolidated | 350,456 | 6.23 | % | 224,998 | 4.00 | % | N/A | N/A | |||||||||||||||||||||||||||||||||||||||
| Bank | 421,265 | 7.53 | % | 223,849 | 4.00 | % | 279,811 | 5.00 | % | ||||||||||||||||||||||||||||||||||||||
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| 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, 2025: | |||||||||||||||||||||||||||||||||||||||||||||||
| Common equity tier 1 capital to risk-weighted assets | |||||||||||||||||||||||||||||||||||||||||||||||
| Consolidated | $ | 350,350 | 8.97 | % | $ | 273,335 | 7.00 | % | N/A | N/A | |||||||||||||||||||||||||||||||||||||
| Bank | 420,963 | 10.83 | % | 272,045 | 7.00 | % | $ | 252,613 | 6.50 | % | |||||||||||||||||||||||||||||||||||||
| Tier 1 capital to risk-weighted assets | |||||||||||||||||||||||||||||||||||||||||||||||
| Consolidated | 350,350 | 8.97 | % | 331,907 | 8.50 | % | N/A | N/A | |||||||||||||||||||||||||||||||||||||||
| Bank | 420,963 | 10.83 | % | 330,340 | 8.50 | % | 310,908 | 8.00 | % | ||||||||||||||||||||||||||||||||||||||
| Total capital to risk-weighted assets | |||||||||||||||||||||||||||||||||||||||||||||||
| Consolidated | 488,170 | 12.50 | % | 410,003 | 10.50 | % | N/A | N/A | |||||||||||||||||||||||||||||||||||||||
| Bank | 469,649 | 12.08 | % | 408,067 | 10.50 | % | 338,635 | 10.00 | % | ||||||||||||||||||||||||||||||||||||||
| Leverage ratio | |||||||||||||||||||||||||||||||||||||||||||||||
| Consolidated | 350,350 | 6.24 | % | 224,566 | 4.00 | % | N/A | N/A | |||||||||||||||||||||||||||||||||||||||
| Bank | 420,963 | 7.53 | % | 223,717 | 4.00 | % | 279,646 | 5.00 | % | ||||||||||||||||||||||||||||||||||||||
Shareholders’ Dividends
The Company’s Board of Directors declared a cash dividend of $0.06 per share of common stock payable April 15, 2026 to shareholders of record as of March 31, 2026. The Company expects to continue to pay cash dividends on a quarterly basis; however, the declaration and amount of any future cash dividends will be subject to the sole discretion of the Board of Directors and will depend upon many factors, including the Company’s results of operations, financial condition, capital requirements, regulatory and contractual restrictions (including with respect to the Company’s outstanding subordinated debt), business strategy and other factors deemed relevant by the Board of Directors.
As of March 31, 2026, 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, consumer and fintech 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 October 20, 2025, the Board of Directors of the Company authorized the repurchase of up to $25.0 million of the Company's outstanding common stock from time to time on the open market or in privately negotiated transactions. Under the program, the Company repurchased 27,998 shares of common stock, at an average price of $18.64, for a total investment of $0.5 million as of March 31, 2026. The stock repurchase authorization is scheduled to expire on September 30, 2027.
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.
56
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. In addition, the Company may elect to hold certain deposit balances off-balance sheet, with optionality to bring them back onto the balance sheet as funding needs evolve. 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 may supplement deposit growth and enhances interest rate risk management through borrowings and wholesale funding, which are generally advances from the Federal Home Loan Bank (“FHLB”) and brokered deposits.
The Company holds cash and investment securities that qualify as liquid assets to maintain adequate liquidity to ensure safe and sound operations and meet its financial commitments. At March 31, 2026, on a consolidated basis, the Company had $1.4 billion in cash and cash equivalents and investment securities available-for-sale and $55.2 million in loans held-for-sale that were generally available for its cash needs. Additionally, the Company uses a custodial deposit arrangement for certain deposit programs whereby the Company, acting as custodian of account holder funds, places a portion of such account holder funds that are not needed to support near term liquidity needs at one or more third-party banks insured by the FDIC through the IntraFi One-Way Sell network. The Company remains the issuer of, and maintains the records for, all accounts under the applicable account holder agreements and, importantly, retains transactional authority to move funds on-and-off balance sheet as liquidity needs merit. Such off-balance sheet deposits totaled $1.5 billion at March 31, 2026 and $1.1 billion at December 31, 2025 and primarily consist of fintech partnership deposits. The Company can also generate funds from wholesale funding sources and collateralized borrowings. At March 31, 2026, the Bank had the ability to borrow an additional $1.7 billion from the FHLB, the Federal Reserve and correspondent bank Fed Funds lines of credit.
The Company is a separate legal entity from the Bank and must provide for its own liquidity. In addition to its operating expenses, the Company is responsible for paying any dividends declared to its common shareholders and interest and principal on outstanding debt. The Company’s primary sources of funds are cash maintained at the holding company level and dividends from the Bank, the payment of which is subject to regulatory limits. At March 31, 2026, the Company, on an unconsolidated basis, had $9.0 million in cash for debt servicing and operating expenses.
The Company uses its sources of funds primarily to meet ongoing financial commitments, including withdrawals by depositors, credit commitments to borrowers, operating expenses and capital expenditures. At March 31, 2026, approved outstanding loan commitments, including unused lines of credit and standby letters of credit, amounted to $610.6 million. Certificates of deposits and brokered deposits scheduled to mature in one year or less at March 31, 2026 totaled $1.4 billion.
Management is not aware of any other events or regulatory requirements that, if implemented, are likely to have a material effect on either the Company’s or the Bank’s liquidity.
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Reconciliation of Non-GAAP Financial Measures
This Management’s Discussion and Analysis contains financial information determined by methods other than in accordance with GAAP. Non-GAAP financial measures, specifically tangible common equity, tangible assets, tangible book value per common share, tangible common equity to tangible assets, average tangible common equity, return on average tangible common equity, total interest income - FTE, net interest income - FTE, net interest margin - FTE and pre-provision net revenue are used by the Company’s management to measure the strength of its capital and analyze profitability, including its ability to generate earnings on tangible capital invested by its shareholders. The Company also believes that it is a standard practice in the banking industry to present total interest income, net interest income and net interest margin on a fully-taxable equivalent basis, as those measures provide useful information for peer comparisons. Although the Company believes these non-GAAP financial measures provide a greater understanding of its business, they should not be considered a substitute for financial measures determined in accordance with GAAP, nor are they necessarily comparable to non-GAAP financial measures that may be presented by other companies. Reconciliations of these non-GAAP financial measures to the most directly comparable GAAP financial measures are included in the following table for each of the periods presented.
| (dollars in thousands, except share and per share data) | Three Months Ended | |||||||||||||||||||||||||
| March 31, 2026 | March 31, 2025 | |||||||||||||||||||||||||
| Total equity - GAAP | $ | 360,954 | $ | 387,747 | ||||||||||||||||||||||
| Adjustments: | ||||||||||||||||||||||||||
| Goodwill | (4,687) | (4,687) | ||||||||||||||||||||||||
| Tangible common equity | $ | 356,267 | $ | 383,060 | ||||||||||||||||||||||
| Total assets - GAAP | $ | 5,711,688 | $ | 5,851,608 | ||||||||||||||||||||||
| Adjustments: | ||||||||||||||||||||||||||
| Goodwill | (4,687) | (4,687) | ||||||||||||||||||||||||
| Tangible assets | $ | 5,707,001 | $ | 5,846,921 | ||||||||||||||||||||||
| Common shares outstanding | 8,716,662 | 8,697,085 | ||||||||||||||||||||||||
| Book value per common share | $ | 41.41 | $ | 44.58 | ||||||||||||||||||||||
| Effect of goodwill | (0.54) | (0.54) | ||||||||||||||||||||||||
| Tangible book value per common share | $ | 40.87 | $ | 44.04 | ||||||||||||||||||||||
| Total shareholders’ equity to assets | 6.32 | % | 6.63 | % | ||||||||||||||||||||||
| Effect of goodwill | (0.08 | %) | (0.08 | %) | ||||||||||||||||||||||
| Tangible common equity to tangible assets | 6.24 | % | 6.55 | % | ||||||||||||||||||||||
| Total average equity - GAAP | $ | 374,276 | $ | 392,035 | ||||||||||||||||||||||
| Adjustments: | ||||||||||||||||||||||||||
| Average goodwill | (4,687) | (4,687) | ||||||||||||||||||||||||
| Average tangible common equity | $ | 369,589 | $ | 387,348 | ||||||||||||||||||||||
| Return on average shareholders’ equity | 2.72 | % | 0.98 | % | ||||||||||||||||||||||
| Effect of goodwill | 0.03 | % | 0.01 | % | ||||||||||||||||||||||
| Return on average tangible common equity | 2.75 | % | 0.99 | % | ||||||||||||||||||||||
58
| (dollars in thousands, except share and per share data) | Three Months Ended | |||||||||||||||||||||||||
| March 31, 2026 | March 31, 2025 | |||||||||||||||||||||||||
| Total interest income | $ | 75,810 | $ | 76,829 | ||||||||||||||||||||||
| Adjustments: | ||||||||||||||||||||||||||
Fully-taxable equivalent adjustments 1 | 1,160 | 1,169 | ||||||||||||||||||||||||
| Total interest income - FTE | $ | 76,970 | $ | 77,998 | ||||||||||||||||||||||
| Net interest income | $ | 31,598 | $ | 25,096 | ||||||||||||||||||||||
| Adjustments: | ||||||||||||||||||||||||||
Fully-taxable equivalent adjustments 1 | 1,160 | 1,169 | ||||||||||||||||||||||||
| Net interest income - FTE | $ | 32,758 | $ | 26,265 | ||||||||||||||||||||||
| Net interest margin | 2.36 | % | 1.82 | % | ||||||||||||||||||||||
Effect of fully-taxable equivalent adjustments 1 | 0.09 | % | 0.09 | % | ||||||||||||||||||||||
| Net interest margin - FTE | 2.45 | % | 1.91 | % | ||||||||||||||||||||||
| Net income-GAAP | $ | 2,509 | $ | 943 | ||||||||||||||||||||||
Adjustments:1 | ||||||||||||||||||||||||||
| Provision for credit losses | 16,305 | 11,933 | ||||||||||||||||||||||||
| Income tax benefit | (725) | (909) | ||||||||||||||||||||||||
| Pre-provision net revenue | $ | 18,089 | $ | 11,967 | ||||||||||||||||||||||
1 Assuming a 21% tax rate | ||||||||||||||||||||||||||
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, 2025, except as described below.
Recent Accounting Pronouncements
Refer to Note 15 to the condensed consolidated financial statements.
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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Market risk is the risk of loss arising from adverse changes in the fair value of financial instruments due to changes in interest rates, foreign exchange rates and equity prices. The primary source of market risk for the Company is interest rate risk, which can be defined as the risk to earnings and the value of our equity resulting from changes in market interest rates. Interest rate risk arises in the normal course of business to the extent that there are timing and volume differences between the amount of interest-earning assets and the amount of interest-bearing liabilities that are prepaid, withdrawn, re-priced or mature in specified periods. We seek to achieve consistent growth in net interest income and equity while managing volatility arising from shifts in market interest rates.
We monitor the Company’s interest rate risk position using income simulation models and economic value of equity (“EVE”) sensitivity analysis that capture both short-term and long-term interest rate risk exposure. Income simulation involves forecasting net interest income (“NII”) under a variety of interest rate scenarios. We use EVE sensitivity analysis to understand the impact of changes in interest rates on long-term cash flows, income and capital. EVE is calculated by discounting the cash flows for all balance sheet instruments under different interest-rate scenarios. Modeling the sensitivity of NII and EVE to changes in market interest rates is highly dependent on the assumptions incorporated into the modeling process, especially those pertaining to non-maturity deposit accounts. These assumptions are reviewed and refined on an ongoing basis by the Company. We continually model our NII and EVE positions with various interest rate scenarios and assumptions of future balance sheet composition. We utilize implied forward rates in the base case scenario which reflects market expectations for rate changes over the next 24 months. Presented below is the estimated impact on our NII and EVE position as of March 31, 2026, 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 | 7.54 | % | 4.08 | % | N/A | (2.65 | %) | (4.71 | %) | ||||||||||||||||||||
| NII - Year 2 | 3.97 | % | 4.07 | % | 1.71 | % | (1.07 | %) | (3.48 | %) | |||||||||||||||||||
| EVE | 11.27 | % | 7.47 | % | N/A | (4.94 | %) | (10.18 | %) | ||||||||||||||||||||
To supplement the instantaneous rate shocks required by regulatory guidance, we also calculate our interest rate risk position assuming a gradual change in market interest rates. This gradual change is commonly referred to as a “rate ramp” and evenly allocates a change in interest rates over a specified time period.
Presented below is the estimated impact on the Company’s NII and EVE position as of March 31, 2026, 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 | 3.70 | % | 2.01 | % | N/A | (1.14 | %) | (1.98 | %) | ||||||||||||||||||||
| NII - Year 2 | 6.44 | % | 4.50 | % | 1.71 | % | (1.04 | %) | (3.31 | %) | |||||||||||||||||||
| EVE | 10.34 | % | 7.09 | % | N/A | (4.59 | %) | (9.48 | %) | ||||||||||||||||||||
60
The NII and EVE figures presented in the tables above are reflective of a static balance sheet, and do not incorporate either balance sheet growth or contraction, or strategies to increase net interest income while managing volatility arising from shifts in market interest rates. As such, it is likely that actual results will differ from what is presented in the tables above. Balance sheet strategies to achieve such objectives may include:
•Increasing the proportion of low-duration or variable-rate loans to total loans, including organic growth in small business, construction or C&I lending, and declines in longer-term loan portfolios
•Selling longer-term fixed rate loans
•Increasing the proportion of lower cost non-maturity deposits to total deposits
•Extending the duration of wholesale funding
•Executing derivative strategies to synthetically extend liabilities or shorten asset duration
•Repositioning the investment portfolio to manage its duration
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
The Company maintains disclosure controls and procedures that are designed to provide reasonable assurance that information required to be disclosed in reports that it files or submits under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), is recorded, processed, summarized, and reported within the time period specified in the SEC’s rules and forms. These controls and procedures are also designed to provide reasonable assurance that such information is accumulated and communicated to management, including the principal executive and principal financial officers, as appropriate, to allow timely decisions regarding required disclosures. In designing and evaluating disclosure controls and procedures, the Company has recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. Management is required to apply judgment in evaluating its controls and procedures.
The Company performed an evaluation under the supervision and with the participation of management, including the principal executive and principal financial officers, to assess the effectiveness of the design and operation of its disclosure controls and procedures under the Exchange Act. Based on that evaluation, our management, including our principal executive officer and principal financial officer, concluded that our disclosure controls and procedures were effective at a reasonable assurance level as of March 31, 2026.
Changes in Internal Control over Financial Reporting
There has been no change in the Company’s internal control over financial reporting during the quarter ended March 31, 2026 that has materially affected, or is reasonably likely to materially affect, its internal control over financial reporting.
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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, 2025.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
Repurchases of Common Stock
On October 20, 2025, the Board of Directors of the Company authorized the repurchase of up to $25.0 million of the Company's outstanding common stock from time to time on the open market or in privately negotiated transactions. Under the program, the Company repurchased 27,998 shares of common stock, at an average price of $18.64, for a total investment of $0.5 million as of March 31, 2026. The stock repurchase authorization is scheduled to expire on September 30, 2027.
The following table presents information with respect to purchases of the Company’s common stock made by or on behalf of the Company or any “affiliated purchaser,” as defined in Rule 10b-18(a)(3), during the first quarter 2026.
(dollars in thousands, except per share data) | Total Number of Shares Purchased | Average Price Paid Per Share | Total Number of Shares Purchased As Part of Publicly Announced Programs | Approximate Dollar Value Of Shares That May Yet Be Purchased Under The Program | |||||||||||||||||||
January 1, 2026 - January 31, 2026 | — | $ | — | — | $ | 24,478 | |||||||||||||||||
February 1, 2026 - February 28, 2026 | — | $ | — | — | $ | 24,478 | |||||||||||||||||
March 1, 2026 - March 31, 2026 | — | $ | — | — | $ | 24,478 | |||||||||||||||||
Total | — | — | |||||||||||||||||||||
Limitations on the Payment of Dividends
The ability of the Company to make capital distributions, including paying dividends and repurchasing shares, depends upon our receipt of dividends from the Bank. The ability of the Bank to pay dividends is limited by state and federal laws and regulations, including the requirement for the Bank to obtain the prior approval of the Indiana Department of Financial Institutions (“DFI”) before paying a dividend that, together with other dividends it has paid during a calendar year, would exceed the sum of its net income for the year to date combined with its retained net income for the previous two years. The ability of the Bank to pay dividends is further affected by the requirement to maintain adequate capital pursuant to applicable capital adequacy guidelines and regulations, and it is generally prohibited from paying any dividends if, following payment thereof, it would be undercapitalized. Notwithstanding the availability of funds for dividends, the FDIC and the DFI may prohibit the payment of dividends by the Bank if either or both determine such payment would constitute an unsafe or unsound practice. In addition, under the Basel III Capital Rules, institutions that seek the freedom to pay dividends have to maintain 2.5% in Common Equity Tier 1 Capital attributable to the capital conservation buffer.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. MINE SAFETY DISCLOSURES
Not Applicable.
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ITEM 5. OTHER INFORMATION
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 | Furnished 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 | ||||||||||||
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| FIRST INTERNET BANCORP | ||||||||
| 5/6/2026 | By | /s/ David B. Becker | ||||||
David B. Becker, Chairman and Chief Executive Officer (on behalf of Registrant) | ||||||||
| 5/6/2026 | By | /s/ Kenneth J. Lovik | ||||||
Kenneth J. Lovik, Executive Vice President and Chief Financial Officer (principal financial officer) | ||||||||
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FAQ
How did First Internet Bancorp (INBK) perform financially in Q1 2026?
First Internet Bancorp earned $2.5 million in net income for Q1 2026, up from $0.9 million a year earlier. Basic and diluted EPS were $0.29. Higher net interest income and stronger noninterest income supported the improvement despite higher credit loss provisions.
What were First Internet Bancorp’s key revenue and expense drivers in Q1 2026?
Net interest income reached $31.6 million, helped by lower deposit interest expense. Noninterest income totaled $11.5 million, including $7.4 million of gains on loan sales and $2.9 million of servicing revenue. Noninterest expenses were $25.0 million, led by salaries and occupancy costs.
How large is First Internet Bancorp’s loan and deposit base as of March 31, 2026?
At March 31, 2026, total loans were $3.78 billion and total deposits were $4.98 billion. Assets stood at $5.71 billion. Commercial loans made up the majority of the portfolio, with notable exposure to small business and franchise finance segments.
What is the status of credit quality and reserves at First Internet Bancorp?
The allowance for credit losses on loans was $56.5 million at March 31, 2026, up from $55.7 million at year-end. Nonaccrual loans totaled $52.9 million. The bank recorded a $16.6 million provision for credit losses and $16.3 million in year-to-date net charge-offs.
How did First Internet Bancorp’s securities and comprehensive income change in Q1 2026?
The available-for-sale securities portfolio had a fair value of $772.0 million, with unrealized losses driven mainly by interest rate movements. Other comprehensive loss from AFS and HTM securities was $1.2 million, reducing comprehensive income to $1.3 million despite higher net income.
What earnings per share and dividends did First Internet Bancorp report for Q1 2026?
First Internet Bancorp reported basic and diluted earnings per share of $0.29 for Q1 2026, compared with $0.11 in Q1 2025. Dividends declared were $0.06 per share, consistent with the prior-year quarter, with total declared dividends of about $0.5 million.