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Section 1: 10-Q (10-Q)

Document


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 10-Q
 
(Mark One)
þ
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period ended March 31, 2020
OR
¨
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Transition Period From ________ to ________.
 
Commission File Number 001-35750 
First Internet Bancorp
(Exact Name of Registrant as Specified in Its Charter)
Indiana
 
20-3489991
(State or Other Jurisdiction of
Incorporation or Organization)
 
(I.R.S. Employer
Identification No.)
 
 
 
11201 USA Parkway
Fishers, IN
 
46037
(Address of Principal Executive Offices)
 
(Zip Code)
 
(317) 532-7900
 
 
(Registrant’s Telephone Number, Including Area Code)
 

Securities registered pursuant to Section 12(b) of the Act:
Title of each class
 
Trading Symbols
 
Name of each exchange on which registered
Common Stock, without par value
 
INBK
 
The Nasdaq Stock Market LLC
6.0% Fixed to Floating Subordinated Notes due 2026
 
INBKL
 
The Nasdaq Stock Market LLC
6.0% Fixed to Floating Subordinated Notes due 2029
 
INBKZ
 
The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes þ No ¨
 
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes þ No ¨
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large Accelerated Filer ¨
Accelerated Filer þ
Non-accelerated Filer ¨ 
Smaller Reporting Company þ
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, 2020, the registrant had 9,801,825 shares of common stock issued and outstanding.




Cautionary Note Regarding Forward-Looking Statements
  
This Quarterly Report on Form 10-Q contains “forward-looking statements” within the meaning of the federal securities laws. These statements are not historical facts, but rather statements based on the current expectations of First Internet Bancorp and its consolidated subsidiaries (“we,” “our,” “us” or the “Company”) regarding its business strategies, intended results and future performance. Forward-looking statements are generally preceded by terms such as “anticipate,” “attempt,” “believe,” “can,” “continue,” “could,” “estimate,” “expect,” “intend,” “likely,” “may,” “pending,” “plan,” “position,” “preliminary,” “remain,” “should,” “will,” “would” and other similar expressions. Forward-looking statements are not a guarantee of future performance or results, are based on information available at the time the statements are made and involve known and unknown risks, uncertainties and other factors that could cause actual results to differ materially from the information in the forward-looking statements. The COVID-19 pandemic crisis is adversely affecting us, our customers, counterparties, employees, and third-party service providers, and the ultimate extent of the impacts on our business, financial position, results of operations, liquidity, and prospects remains uncertain. Continued deterioration in general business and economic conditions, including further increases in unemployment rates, or turbulence in domestic or global financial markets could adversely affect our revenues and the values of our assets and liabilities, reduce the availability of funding, lead to a tightening of credit, and further increase stock price volatility. In addition, changes to statutes, regulations, or regulatory policies or practices as a result of, or in response to COVID-19, could affect us in substantial and unpredictable ways. Other factors that may cause such differences include: general economic conditions, whether national or regional, and conditions in the lending markets in which we participate that may have an adverse effect on the demand for our loans and other products; our credit quality and related levels of nonperforming assets and loan losses, and the value and salability of the real estate that we own or that is the collateral for our loans; failures or breaches of or interruptions in the communication and information systems on which we rely to conduct our business that could reduce our revenues, increase our costs or lead to disruptions in our business; our plans to grow our commercial real estate, commercial and industrial, public finance, U.S. Small Business Administration and healthcare finance loan portfolios, which may carry greater risks of non-payment or other unfavorable consequences; our dependence on capital distributions from First Internet Bank of Indiana (the “Bank”); results of examinations of us by our regulators, including the possibility that our regulators may, among other things, require us to increase our allowance for loan losses or to write-down assets; changing bank regulatory conditions, policies or programs, whether arising as new legislation or regulatory initiatives, that could lead to restrictions on activities of banks generally, or the Bank in particular; more restrictive regulatory capital requirements; increased costs, including deposit insurance premiums; regulation or prohibition of certain income producing activities or changes in the secondary market for loans and other products; changes in market rates and prices that may adversely impact the value of securities, loans, deposits and other financial instruments and the interest rate sensitivity of our balance sheet; our liquidity requirements being adversely affected by changes in our assets and liabilities; the effect of legislative or regulatory developments, including changes in laws concerning taxes, banking, securities, insurance and other aspects of the financial services industry; competitive factors among financial services organizations, including product and pricing pressures and our ability to attract, develop and retain qualified banking professionals; execution of future acquisition, reorganization or disposition transactions, including without limitation, the related time and costs of implementing such transactions, integrating operations as part of these transactions and possible failures to achieve expected gains, revenue growth and/or expense savings and other anticipated benefits from such transactions; changes in applicable tax laws; the growth and profitability of noninterest or fee income being less than expected; the loss of any key members of senior management; the effect of changes in accounting policies and practices, as may be adopted by the Financial Accounting Standards Board, the Securities and Exchange Commission (the “SEC”), the Public Company Accounting Oversight Board and other regulatory agencies; and the effect of fiscal and governmental policies of the United States federal government. Additional factors that may affect our results include those discussed in this Quarterly Report on Form 10-Q, our most recent Annual Report on Form 10-K under the heading “Risk Factors” and in other reports filed with the SEC. We caution readers not to place undue reliance on any such forward-looking statements, which speak only as of the date made. The factors listed above could affect our financial performance and could cause our actual results for future periods to differ materially from any opinions or statements expressed with respect to future periods in any current statements.
Except as required by law, we do not undertake, and specifically disclaim any obligation, to publicly release the result of any revisions that may be made to any forward-looking statements to reflect events or circumstances after the date of such statements or to reflect the occurrence of anticipated or unanticipated events.


i



PART I

ITEM 1.
FINANCIAL STATEMENTS 

First Internet Bancorp
Condensed Consolidated Balance Sheets
(Amounts in thousands except share data)
 
 
March 31, 2020
 
December 31, 2019
 
 
(Unaudited)
 
 
Assets
 
 

 
 

Cash and due from banks
 
$
5,726

 
$
5,061

Interest-bearing deposits
 
345,542

 
322,300

Total cash and cash equivalents
 
351,268

 
327,361

Securities available-for-sale, at fair value (amortized cost of $608,567 and $546,640 in 2020 and 2019, respectively)
 
608,682

 
540,852

Securities held-to-maturity, at amortized cost (fair value of $69,468 and $62,560 in 2020 and 2019, respectively)
 
66,331

 
61,878

Loans held-for-sale (includes $52,394 and $56,097 at fair value in 2020 and 2019, respectively)
 
52,394

 
56,097

Loans
 
2,892,093

 
2,963,547

Allowance for loan losses
 
(22,857
)
 
(21,840
)
Net loans
 
2,869,236

 
2,941,707

Accrued interest receivable
 
16,960

 
18,607

Federal Home Loan Bank of Indianapolis stock
 
25,650

 
25,650

Cash surrender value of bank-owned life insurance
 
37,238

 
37,002

Premises and equipment, net
 
18,883

 
14,630

Goodwill
 
4,687

 
4,687

Servicing asset, at fair value
 
2,415

 
2,481

Other real estate owned
 
2,065

 
2,065

Accrued income and other assets
 
112,337

 
67,066

Total assets
 
$
4,168,146

 
$
4,100,083

Liabilities and Shareholders’ Equity
 
 

 
 

Liabilities
 
 

 
 

Noninterest-bearing deposits
 
$
70,562

 
$
57,115

Interest-bearing deposits
 
3,107,944

 
3,096,848

Total deposits
 
3,178,506

 
3,153,963

Advances from Federal Home Loan Bank
 
514,911

 
514,910

Subordinated debt, net of unamortized debt issuance costs of $2,395 and $2,472 in 2020 and 2019, respectively
 
69,605

 
69,528

Accrued interest payable
 
3,293

 
3,767

Accrued expenses and other liabilities
 
96,704

 
53,002

Total liabilities
 
3,863,019

 
3,795,170

Commitments and Contingencies
 


 


Shareholders’ Equity
 
 

 
 

Preferred stock, no par value; 4,913,779 shares authorized; issued and outstanding - none
 

 

Voting common stock, no par value; 45,000,000 shares authorized; 9,801,825 and 9,741,800 shares issued and outstanding in 2020 and 2019, respectively
 
219,893

 
219,423

Nonvoting common stock, no par value; 86,221 shares authorized; issued and outstanding - none
 

 

Retained earnings
 
105,100

 
99,681

Accumulated other comprehensive loss
 
(19,866
)
 
(14,191
)
Total shareholders’ equity
 
305,127

 
304,913

Total liabilities and shareholders’ equity
 
$
4,168,146

 
$
4,100,083


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, 2020
 
March 31, 2019
Interest Income
 
 

 
 

Loans
 
$
30,408

 
$
29,218

Securities – taxable
 
3,619

 
3,324

Securities – non-taxable
 
572

 
684

Other earning assets
 
1,645

 
1,773

Total interest income
 
36,244

 
34,999

Interest Expense
 
 

 
 

Deposits
 
17,208

 
15,386

Other borrowed funds
 
4,018

 
3,369

Total interest expense
 
21,226

 
18,755

Net Interest Income
 
15,018

 
16,244

Provision for Loan Losses
 
1,461

 
1,285

Net Interest Income After Provision for Loan Losses
 
13,557

 
14,959

Noninterest Income
 
 

 
 

Service charges and fees
 
212

 
236

Loan servicing revenue
 
251

 

Loan servicing asset revaluation
 
(179
)
 

Mortgage banking activities
 
3,668

 
1,617

Gain (loss) on sale of loans
 
1,801

 
(104
)
Gain on sale of securities
 
41

 

Other
 
417

 
623

Total noninterest income
 
6,211

 
2,372

Noninterest Expense
 
 

 
 

Salaries and employee benefits
 
7,774

 
6,321

Marketing, advertising and promotion
 
375

 
469

Consulting and professional services
 
1,177

 
814

Data processing
 
375

 
317

Loan expenses
 
599

 
314

Premises and equipment
 
1,625

 
1,500

Deposit insurance premium
 
485

 
555

Other
 
1,076

 
819

Total noninterest expense
 
13,486

 
11,109

Income Before Income Taxes
 
6,282

 
6,222

Income Tax Provision
 
263

 
526

Net Income
 
$
6,019

 
$
5,696

Income Per Share of Common Stock
 
 

 
 

Basic
 
$
0.62

 
$
0.56

Diluted
 
$
0.62

 
$
0.56

Weighted-Average Number of Common Shares Outstanding
 
 

 
 

Basic
 
9,721,485

 
10,217,637

Diluted
 
9,750,528

 
10,230,531

Dividends Declared Per Share
 
$
0.06

 
$
0.06


See Notes to Condensed Consolidated Financial Statements

2



First Internet Bancorp
Condensed Consolidated Statements of Comprehensive Income – Unaudited
(Amounts in thousands)
 
 
Three Months Ended March 31,
 
 
2020
 
2019
Net income
 
$
6,019

 
$
5,696

Other comprehensive loss (income)
 
 
 
 
Net unrealized holding gains on securities available-for-sale recorded within other comprehensive (loss) income before income tax
 
6,299

 
6,910

Reclassification adjustment for gains realized
 
(41
)
 

Net unrealized holding losses on cash flow hedging derivatives recorded within other comprehensive (loss) income before tax
 
(13,458
)
 
(3,572
)
Other comprehensive (loss) income before income tax
 
(7,200
)
 
3,338

Income tax (benefit) provision
 
(1,525
)
 
965

Other comprehensive (loss) income
 
(5,675
)
 
2,373

Comprehensive income
 
$
344

 
$
8,069

 
 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, 2020 and 2019
(Amounts in thousands except per share data)
 
 
Voting and
Nonvoting
Common
Stock
 
Retained
Earnings
 
Accumulated
Other
Comprehensive
Loss
 
Total
Shareholders’
Equity
Balance, January 1, 2020
 
$
219,423

 
$
99,681

 
$
(14,191
)
 
$
304,913

Net income
 

 
6,019

 

 
6,019

Other comprehensive loss
 

 

 
(5,675
)
 
(5,675
)
Dividends declared ($0.06 per share)
 

 
(600
)
 

 
(600
)
Recognition of the fair value of share-based compensation
 
555

 

 

 
555

Deferred stock rights and restricted stock units issued in lieu of cash dividends payable on outstanding deferred stock rights and restricted stock units
 
8

 

 

 
8

Common stock redeemed for the net settlement of share-based awards
 
(93
)
 

 

 
(93
)
Balance, March 31, 2020
 
$
219,893

 
$
105,100

 
$
(19,866
)
 
$
305,127

 
 
 
 
 
 
 
 
 
Balance, January 1, 2019
 
$
227,587

 
$
77,689

 
$
(16,541
)
 
$
288,735

Impact of adoption of new accounting standards (1)
 

 
(821
)
 

 
(821
)
Net income
 

 
5,696

 

 
5,696

Other comprehensive income
 

 

 
2,373

 
2,373

Dividends declared ($0.06 per share)
 

 
(618
)
 

 
(618
)
Recognition of the fair value of share-based compensation
 
478

 

 

 
478

Repurchase of common stock
 
(1,746
)
 
 
 
 
 
(1,746
)
Deferred stock rights and restricted stock units issued in lieu of cash dividends payable on outstanding deferred stock rights and restricted stock units
 
10

 

 

 
10

Common stock redeemed for the net settlement of share-based awards
 
(94
)
 

 

 
(94
)
Balance, March 31, 2019
 
$
226,235

 
$
81,946

 
$
(14,168
)
 
$
294,013


(1) Represents the impact of adopting Accounting Standards Update (“ASU”) 2017-08.

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,
 
 
2020
 
2019
Operating Activities
 
 

 
 

Net income
 
$
6,019

 
$
5,696

Adjustments to reconcile net income to net cash used in operating activities:
 
 

 
 

Depreciation and amortization
 
1,644

 
2,271

Increase in cash surrender value of bank-owned life insurance
 
(236
)
 
(234
)
Provision for loan losses
 
1,461

 
1,285

Share-based compensation expense
 
555

 
478

Gain on sale of available-for-sale securities
 
(41
)
 

Loans originated for sale
 
(215,385
)
 
(75,239
)
Proceeds from sale of loans
 
225,547

 
81,048

Gain on loans sold
 
(6,144
)
 
(1,369
)
(Increase) decrease in fair value of loans held-for-sale
 
(316
)
 
182

Loss (gain) on derivatives
 
1,163

 
(314
)
Net change in servicing asset
 
66

 

Amortization of operating lease right-of-use assets
 
152

 
176

Net change in accrued income and other assets
 
(40,631
)
 
(20,833
)
Net change in accrued expenses and other liabilities
 
311

 
1,570

Net cash used in operating activities
 
(25,835
)
 
(5,283
)
Investing Activities
 
 
 
 
Net loan activity, excluding purchases
 
(1,305
)
 
(73,783
)
Maturities and calls of securities available-for-sale
 
30,851

 
13,840

Proceeds from sale of securities available-for-sale
 
795

 

Purchase of securities available-for-sale
 
(95,835
)
 
(46,562
)
Purchase of securities held-to-maturity
 

 
(8,500
)
Purchase of premises and equipment
 
(4,856
)
 
(1,564
)
Loans purchased
 
(97,306
)
 
(79,343
)
Net proceeds from sale of portfolio loans
 
193,533

 
35,673

Net cash provided by (used in) investing activities
 
25,877

 
(160,239
)
Financing Activities
 
 
 
 
Net increase in deposits
 
24,543

 
139,757

Cash dividends paid
 
(585
)
 
(613
)
Repurchase of common stock
 

 
(1,746
)
Proceeds from advances from Federal Home Loan Bank
 
110,000

 
165,000

Repayment of advances from Federal Home Loan Bank
 
(110,000
)
 
(195,000
)
Other, net
 
(93
)
 
(94
)
Net cash provided by financing activities
 
23,865

 
107,304

Net Increase (Decrease) in Cash and Cash Equivalents
 
23,907

 
(58,218
)
Cash and Cash Equivalents, Beginning of Period
 
327,361

 
188,712

Cash and Cash Equivalents, End of Period
 
$
351,268

 
$
130,494

Supplemental Disclosures
 
 
 
 
Initial recognition of right-of-use asset
 
$

 
$
2,096

Initial recognition of operating lease liabilities
 

 
2,096

Cash paid during the period for interest
 
21,699

 
18,314

Loans transferred to held-for-sale from portfolio
 
192,768

 
35,599

Cash dividends declared, paid in subsequent period
 
585

 
606

Transfer of available-for-sale municipal securities to held-to-maturity municipal securities
 
4,479

 

See Notes to Condensed Consolidated Financial Statements

5



First Internet Bancorp
Notes to Condensed Consolidated Financial Statements – Unaudited
(Table amounts in thousands except share and per share data)
  
Note 1:        Basis of Presentation
 
The accompanying unaudited condensed consolidated financial statements have been prepared in conformity with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”). Accordingly, they do not include all of the information or footnotes necessary for a complete presentation of financial condition, results of operations, changes in shareholders’ equity, or cash flows in accordance with GAAP. In our opinion, all adjustments (consisting only of normal recurring adjustments) necessary for a fair presentation have been included. The results of operations for the three months ended March 31, 2020 are not necessarily indicative of the results expected for the year ending December 31, 2020 or any other period. The March 31, 2020 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, 2019.
 
The preparation of the condensed consolidated financial statements in conformity with GAAP requires management to make estimates, judgments, or assumptions that could have a material effect on the carrying value of certain assets and liabilities. These estimates, judgments, and assumptions affect the amounts reported in the condensed consolidated financial statements and the disclosures provided. The determination of the allowance for loan losses, valuations and impairments of investment securities, and the accounting for income tax expense are highly dependent upon management’s estimates, judgments, and assumptions, and changes in any of these could have a significant impact on the condensed consolidated financial statements.

The condensed consolidated financial statements include the accounts of First Internet Bancorp (the “Company”), its wholly owned subsidiary, First Internet Bank of Indiana (the “Bank”), and the Bank’s three wholly owned subsidiaries, First Internet Public Finance Corp., JKH Realty Services, LLC and SPF15, Inc. All significant intercompany accounts and transactions have been eliminated in consolidation.
 
The Company is subject to claims and lawsuits that arise primarily in the ordinary course of business. It is the opinion of management that the disposition or ultimate resolution of such claims and lawsuits will not have a material adverse effect on the consolidated financial position, results of operations, and cash flows of the Company.
 
Certain reclassifications have been made to the 2019 financial statements to conform to the presentation of the 2020 financial statements. These reclassifications had no effect on net income.



    




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, 2020 and 2019
(dollars in thousands, except per share data)
 
Three Months Ended March 31,
 
 
2020
 
2019
Basic earnings per share
 
 

 
 

Net income
 
$
6,019

 
$
5,696

Weighted-average common shares
 
9,721,485

 
10,217,637

Basic earnings per common share
 
$
0.62

 
$
0.56

Diluted earnings per share
 
 

 
 

Net income
 
$
6,019

 
$
5,696

Weighted-average common shares
 
9,721,485

 
10,217,637

Dilutive effect of equity compensation
 
29,043

 
12,894

     Weighted-average common and incremental shares
 
9,750,528

 
10,230,531

Diluted earnings per common share (1)
 
$
0.62

 
$
0.56

(1) Potential dilutive common shares are excluded from the computation of diluted EPS in the periods where the effect would be antidilutive. Excluded from the computation of diluted EPS were weighted-average antidilutive shares totaling 8,575 and 45,565 for the three months ended March 31, 2020 and 2019, respectively.
  
Note 3:         Securities
 
The following tables summarize securities available-for-sale and securities held-to-maturity as of March 31, 2020 and December 31, 2019.
 
 
March 31, 2020
 
 
Amortized
 
Gross Unrealized
 
Fair
(in thousands)
 
Cost
 
Gains
 
Losses
 
Value
Securities available-for-sale
 
 

 
 

 
 

 
 

U.S. Government-sponsored agencies
 
$
71,387

 
$
438

 
$
(1,821
)
 
$
70,004

Municipal securities
 
94,981

 
4,049

 
(4,211
)
 
94,819

Agency mortgage-backed securities
 
279,458

 
6,901

 
(3,727
)
 
282,632

Private label mortgage-backed securities
 
114,363

 
813

 
(152
)
 
115,024

Asset-backed securities
 
5,000

 

 
(287
)
 
4,713

Corporate securities
 
43,378

 
322

 
(2,210
)
 
41,490

Total available-for-sale
 
$
608,567

 
$
12,523

 
$
(12,408
)
 
$
608,682

 
 
March 31, 2020
 
 
Amortized
 
Gross Unrealized
 
Fair
(in thousands)
 
Cost
 
Gains
 
Losses
 
Value
Securities held-to-maturity
 
 

 
 

 
 

 
 

Municipal securities
 
$
14,617

 
$
1,061

 
$

 
$
15,678

Corporate securities
 
51,714

 
2,262

 
(186
)
 
53,790

Total held-to-maturity
 
$
66,331

 
$
3,323

 
$
(186
)
 
$
69,468


7



 
 
December 31, 2019
 
 
Amortized
 
Gross Unrealized
 
Fair
(in thousands)
 
Cost
 
Gains
 
Losses
 
Value
Securities available-for-sale
 
 

 
 

 
 

 
 

U.S. Government-sponsored agencies
 
$
77,715

 
$
99

 
$
(1,942
)
 
$
75,872

Municipal securities
 
97,447

 
1,706

 
(1,501
)
 
97,652

Agency mortgage-backed securities
 
264,142

 
1,304

 
(4,006
)
 
261,440

Private label mortgage-backed securities
 
63,704

 
97

 
(188
)
 
63,613

Asset-backed securities
 
5,000

 

 
(45
)
 
4,955

Corporate securities
 
38,632

 
220

 
(1,532
)
 
37,320

Total available-for-sale
 
$
546,640

 
$
3,426

 
$
(9,214
)
 
$
540,852

 
 
December 31, 2019
 
 
Amortized
 
Gross Unrealized
 
Fair
(in thousands)
 
Cost
 
Gains
 
Losses
 
Value
Securities held-to-maturity
 
 

 
 

 
 

 
 

Municipal securities
 
$
10,142

 
$
226

 
$

 
$
10,368

Corporate securities
 
51,736

 
588

 
(132
)
 
52,192

Total held-to-maturity
 
$
61,878

 
$
814

 
$
(132
)
 
$
62,560


The Company elected to transfer ten available-for-sale (“AFS”) securities with an aggregate fair value of $4.5 million to a classification of held-to-maturity (“HTM”) on March 1, 2020. The net unrealized holding gain of $0.1 million, net of tax, as the date of the transfer was retained in accumulated other comprehensive loss, with the associated pretax amount retained in the carrying value of the HTM securities. Such amounts will be amortized to interest income over the remaining life of the securities. The fair value of the transferred AFS securities became the book value of the HTM securities as of March 1, 2020, with no unrealized gain or loss at that date.

The carrying value of securities at March 31, 2020 is shown below by their contractual maturity date. Actual maturities will differ because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.
 
 
Available-for-Sale
(in thousands)
 
Amortized
Cost
 
Fair
Value
Within one year
 
$
15

 
$
15

One to five years
 
19,032

 
15,068

Five to ten years
 
81,662

 
80,465

After ten years
 
109,037

 
110,765

 
 
209,746

 
206,313

Agency mortgage-backed securities
 
279,458

 
282,632

Private label mortgage-backed securities
 
114,363

 
115,024

Asset-backed securities
 
5,000

 
4,713

Total
 
$
608,567

 
$
608,682

 
 
Held-to-Maturity
(in thousands)
 
Amortized
Cost
 
Fair
Value
One to five years
 
$
1,505

 
$
1,584

Five to ten years
 
52,301

 
54,610

After ten years
 
12,525

 
13,274

Total
 
$
66,331

 
$
69,468



8



There were less than $0.1 million gross gains resulting from sales of available securities during the three months ended March 31, 2020 and no gross gains or losses resulting from sales of available-for-sale securities during the three months ended March 31, 2019.

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, 2020 and December 31, 2019 was $205.1 million and $317.5 million, which was approximately 30% and 53%, respectively, of the Company’s available-for-sale and held-to-maturity securities portfolios. These declines resulted primarily from fluctuations in market interest rates after purchase. Management believes the declines in fair value for these securities are temporary. Should the impairment of any of these securities become other than temporary, the cost basis of the investment will be reduced, with the resulting loss recognized in net income in the period the other-than-temporary impairment (“OTTI”) is identified.

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

The unrealized losses on the Company’s investments in securities issued by U.S. Government-sponsored agencies, municipal organizations and corporate entities were caused primarily by interest rate changes. The contractual terms of those investments do not permit the issuer to settle the securities at a price less than the amortized cost bases of the investments. Because the Company does not intend to sell the investments and it is not likely that the Company will be required to sell the investments before recovery of their amortized cost bases, which may be upon maturity, the Company does not consider those investments to be other-than-temporarily impaired at March 31, 2020.
 
Agency Mortgage-Backed, Private Label Mortgage-Backed and Asset-Backed Securities
 
The unrealized losses on the Company’s investments in agency mortgage-backed, private label mortgage-backed and asset-backed securities were caused primarily by interest rate changes. The Company expects to recover the amortized cost bases over the term of the securities. Because the Company does not intend to sell the investments and it is not likely that the Company will be required to sell the investments before recovery of their amortized cost bases, which may be upon maturity, the Company does not consider those investments to be other-than-temporarily impaired at March 31, 2020.

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, 2020 and December 31, 2019.
 
 
March 31, 2020
 
 
Less Than 12 Months
 
12 Months or Longer
 
Total
(in thousands)
 
Fair
Value
 
Unrealized
Losses
 
Fair
Value
 
Unrealized
Losses
 
Fair
Value
 
Unrealized
Losses
Securities available-for-sale
 
 

 
 

 
 

 
 

 
 

 
 

U.S. Government-sponsored agencies
 
$
3,274

 
$
(96
)
 
$
57,775

 
$
(1,725
)
 
$
61,049

 
$
(1,821
)
Municipal securities
 
61,974

 
(4,211
)
 

 

 
61,974

 
(4,211
)
Agency mortgage-backed securities
 
18,798

 
(317
)
 
13,516

 
(3,410
)
 
32,314

 
(3,727
)
Private label mortgage-backed securities
 
10,201

 
(122
)
 
2,639

 
(30
)
 
12,840

 
(152
)
Asset-backed securities
 

 

 
4,713

 
(287
)
 
4,713

 
(287
)
Corporate securities
 
9,274

 
(286
)
 
20,076

 
(1,924
)
 
29,350

 
(2,210
)
Total
 
$
103,521

 
$
(5,032
)
 
$
98,719

 
$
(7,376
)
 
$
202,240

 
$
(12,408
)
 
 
March 31, 2020
 
 
Less Than 12 Months
 
12 Months or Longer
 
Total
(in thousands)
 
Fair
Value
 
Unrealized
Losses
 
Fair
Value
 
Unrealized
Losses
 
Fair
Value
 
Unrealized
Losses
Securities held-to-maturity
 
 

 
 

 
 

 
 

 
 

 
 

Corporate securities
 
$
2,814

 
$
(186
)
 
$

 
$

 
$
2,814

 
$
(186
)
Total
 
$
2,814

 
$
(186
)
 
$

 
$

 
$
2,814

 
$
(186
)

 

9



 
 
December 31, 2019
 
 
Less Than 12 Months
 
12 Months or Longer
 
Total
(in thousands)
 
Fair
Value
 
Unrealized
Losses
 
Fair
Value
 
Unrealized
Losses
 
Fair
Value
 
Unrealized
Losses
Securities available-for-sale
 
 

 
 

 
 

 
 

 
 

 
 

U.S. Government-sponsored agencies
 
$
4,820

 
$
(61
)
 
$
62,182

 
$
(1,881
)
 
$
67,002

 
$
(1,942
)
Municipal securities
 
1,279

 
(1,501
)
 

 

 
1,279

 
(1,501
)
Agency mortgage-backed securities
 
91,159

 
(829
)
 
83,212

 
(3,177
)
 
174,371

 
(4,006
)
Private label mortgage-backed securities
 
30,077

 
(180
)
 
2,884

 
(8
)
 
32,961

 
(188
)
Asset-backed securities
 

 

 
4,955

 
(45
)
 
4,955

 
(45
)
Corporate securities
 

 

 
22,985

 
(1,532
)
 
22,985

 
(1,532
)
Total
 
$
127,335

 
$
(2,571
)
 
$
176,218

 
$
(6,643
)
 
$
303,553

 
$
(9,214
)
 
 
December 31, 2019
 
 
Less Than 12 Months
 
12 Months or Longer
 
Total
(in thousands)
 
Fair
Value
 
Unrealized
Losses
 
Fair
Value
 
Unrealized
Losses
 
Fair
Value
 
Unrealized
Losses
Securities held-to-maturity
 
 

 
 

 
 

 
 

 
 

 
 

Corporate securities
 
13,977

 
(132
)
 

 

 
13,977

 
(132
)
Total
 
$
13,977

 
$
(132
)
 
$

 
$

 
$
13,977

 
$
(132
)

There were no amounts reclassified from accumulated other comprehensive loss to the condensed consolidated statements of income during the three months ended March 31, 2019. Amounts reclassified from accumulated other comprehensive loss and the affected line items in the condensed consolidated statements of income during the three months ended March 31, 2020 were as follows:

(in thousands)



Details About Accumulated Other Comprehensive Loss Components
 
 
 
Affected Line Item in the
Statements of Income
 
Three Months Ended March 31, 2020
 
Realized gains on securities available-for-sale
 
 

 
 
Gain realized in earnings
 
$
41

 
Gain on sale of securities
Total reclassified amount before tax
 
41

 
Income Before Income Taxes
Tax expense
 
11

 
Income Tax Provision
Total reclassifications out of accumulated other comprehensive loss
 
$
30

 
Net Income


10



Note 4:        Loans
 
Loan balances as of March 31, 2020 and December 31, 2019 are summarized in the table below.
 
Categories of loans include:
(in thousands)
 
March 31, 2020
 
December 31, 2019
Commercial loans
 
 

 
 

Commercial and industrial
 
$
95,227

 
$
96,420

Owner-occupied commercial real estate
 
74,737

 
73,392

Investor commercial real estate
 
13,421

 
12,567

Construction
 
64,581

 
60,274

Single tenant lease financing
 
972,275

 
995,879

Public finance
 
627,678

 
687,094

Healthcare finance
 
372,266

 
300,612

Small business lending
 
67,275

 
60,279

Total commercial loans
 
2,287,460

 
2,286,517

Consumer loans
 
 
 
 
Residential mortgage
 
218,730

 
313,849

Home equity
 
23,855

 
24,306

Other consumer
 
296,605

 
295,309

Total consumer loans
 
539,190

 
633,464

Total commercial and consumer loans
 
2,826,650

 
2,919,981

Net deferred loan origination costs and premiums and discounts on purchased loans and other(1)
 
65,443

 
43,566

Total loans
 
2,892,093

 
2,963,547

Allowance for loan losses
 
(22,857
)
 
(21,840
)
Net loans
 
$
2,869,236

 
$
2,941,707


(1) Includes carrying value adjustments of $44.6 million and $21.4 million as of March 31, 2020 and December 31, 2019, respectively, related to interest rate swaps associated with public finance loans. 

The risk characteristics of each loan portfolio segment are as follows:

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

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


11



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

Construction: Construction loans are secured by land and related improvements and are made to assist in the construction of new structures, which may include commercial (retail, industrial, office, multi-family) properties or single family residential properties offered for sale by the builder. These loans generally finance a variety of project costs, including land, site preparation, architectural services, construction, closing and soft costs and interim financing needs. The cash flows of builders, while initially predictable, may fluctuate with market conditions, and the value of the collateral securing these loans may be subject to fluctuations based on general economic changes. This portfolio segment is generally concentrated in Central Indiana.
Single Tenant Lease Financing: These loans are made on a nationwide basis to property owners of real estate subject to long-term lease arrangements with single tenant operators. The real estate is typically operated by regionally, nationally or globally branded businesses.  The loans are underwritten based on the financial strength of the borrower, characteristics of the real estate, cash flows generated from the lease arrangements and the financial strength of the tenant.  Similar to the other loan portfolio segments, management monitors and evaluates these loans based on borrower and tenant financial performance, collateral value, industry trends and other risk grade criteria.

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

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

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

Residential Mortgage: With respect to residential loans that are secured by 1-to-4 family residences and are generally owner occupied, the Company typically establishes a maximum loan-to-value ratio and requires private mortgage insurance if that ratio is exceeded. Repayment of these loans is primarily dependent on the financial circumstances of the borrowers, which can be impacted by economic conditions in their market areas such as unemployment levels. Repayment can also

12



be impacted by changes in residential property values. Risk is mitigated by the fact that the loans are of smaller individual amounts and spread over a large number of borrowers in geographically diverse locations throughout the country.
Home Equity: Home equity loans and lines of credit are typically secured by a subordinate interest in 1-to-4 family residences. The properties securing the home equity portfolio segment are generally geographically diverse as the Company offers these products on a nationwide basis. Repayment of these loans and lines of credit is primarily dependent on the financial circumstances of the borrowers and may be impacted by changes in unemployment levels and property values on residential properties, among other economic conditions in the market.
Other Consumer: These loans primarily consist of consumer loans and credit cards. Consumer loans may be secured by consumer assets such as horse trailers or recreational vehicles. Some consumer loans are unsecured, such as small installment loans, home improvement loans and certain lines of credit. Repayment of consumer loans is primarily dependent upon the personal income of the borrowers, which can be impacted by economic conditions in their market areas such as unemployment levels. Risk is mitigated by the fact that the loans are of smaller individual amounts and spread over a large number of borrowers in geographically diverse locations throughout the country.
Allowance for Loan Losses Methodology
 
Company policy is designed to maintain an adequate allowance for loan losses (“ALLL”). The portfolio is segmented by loan type, and the required ALLL for types of performing homogeneous loans which do not have a specific reserve is determined by applying a factor based on average historical losses, adjusted for current economic factors and portfolio trends. Management adds qualitative factors for observable trends, changes in internal practices, changes in delinquencies and impairments, and external factors. Observable factors include changes in the composition and size of portfolios, as well as loan terms or concentration levels. The Company evaluates the impact of internal changes such as management and staff experience levels or modification to loan underwriting processes. Delinquency trends are scrutinized for both volume and severity of past due, nonaccrual, or classified loans, as well as any changes in the value of underlying collateral. Finally, the Company considers the effect of other external factors such as national, regional, and local economic and business conditions, as well as competitive, legal, and regulatory requirements. Loans that are considered to be impaired are evaluated to determine the need for a specific allowance by applying at least one of three methodologies: present value of future cash flows; fair value of collateral less costs to sell; or the loan’s observable market price. All troubled debt restructurings (“TDR”) are considered impaired loans. Loans evaluated for impairment are removed from other pools to prevent double-counting. Accounting Standards Codification (“ASC”) Topic 310, Receivables, requires that impaired loans be measured based on the present value of expected future cash flows discounted at the loans’ effective interest rates or the fair value of the underlying collateral less costs to sell and allows existing methods for recognizing interest income.
 
Provision for Loan Losses
 
A provision for estimated losses on loans is charged to income based upon management’s evaluation of the potential losses. Such an evaluation, which includes a review of all loans for which full repayment may not be reasonably assured, considers, among other matters, the estimated net realizable value of the underlying collateral, as applicable, economic conditions, loan loss experience, and other factors that are particularly susceptible to changes that could result in a material adjustment in the near term. While management attempts to use the best information available in making its evaluations, future allowance adjustments may be necessary if economic conditions change substantially from the assumptions used in making the evaluations.
 
Policy for Charging Off Loans
 
The Company’s policy is to charge off a loan at any point in time when it no longer can be considered a bankable asset, meaning collectible within the parameters of policy. A secured loan is generally charged down to the estimated fair value of the collateral, less costs to sell, no later than when it is 120 days past due as to principal or interest. An unsecured loan generally is charged off no later than when it is 180 days past due as to principal or interest. A home improvement loan generally is charged off no later than when it is 90 days past due as to principal or interest.


13



The following tables present changes in the balance of the ALLL during the three months ended March 31, 2020 and 2019

(in thousands)
Three Months Ended March 31, 2020
Allowance for loan losses:
Balance, Beginning of Period
 
Provision (Credit) Charged to Expense
 
Losses
Charged Off
 
Recoveries
 
Balance,
End of Period
Commercial and industrial
$
1,521

 
$
346

 
$
(197
)
 
$

 
$
1,670

Owner-occupied commercial real estate
561

 
84

 

 

 
645

Investor commercial real estate
109

 
19

 

 

 
128

Construction
380

 
80

 

 

 
460

Single tenant lease financing
11,175

 
(420
)
 

 

 
10,755

Public finance
1,580

 
(97
)
 

 

 
1,483

Healthcare finance
3,247

 
1,071

 

 

 
4,318

Small business lending
54

 
203

 

 
8

 
265

Residential mortgage
657

 
(143
)
 
(15
)
 
1

 
500

Home equity
46

 
5

 

 
2

 
53

Other consumer
2,510

 
313

 
(286
)
 
43

 
2,580

Total
$
21,840

 
$
1,461

 
$
(498
)
 
$
54

 
$
22,857


(in thousands)
Three Months Ended March 31, 2019
Allowance for loan losses:
Balance, Beginning of Period
 
Provision (Credit) Charged to Expense
 
Losses
Charged Off
 
Recoveries
 
Balance,
End of Period
Commercial and industrial
$
1,384

 
$
79

 
$
(112
)
 
$

 
$
1,351

Owner-occupied commercial real estate
783

 
(38
)
 

 

 
745

Investor commercial real estate
61

 
42

 

 

 
103

Construction
251

 
16

 

 

 
267

Single tenant lease financing
8,827

 
541

 

 

 
9,368

Public finance
1,670

 
(20
)
 

 

 
1,650

Healthcare finance
1,264

 
467

 

 

 
1,731

Small business lending
203

 
(8
)
 

 

 
195

Residential mortgage
1,079

 
(36
)
 

 
1

 
1,044

Home equity
53

 
(6
)
 

 
2

 
49

Other consumer
2,321

 
248

 
(317
)
 
86

 
2,338

Total
$
17,896

 
$
1,285

 
$
(429
)
 
$
89

 
$
18,841









14



The following tables present the recorded investment in loans based on portfolio segment and impairment method as of March 31, 2020 and December 31, 2019
(in thousands)
Loans
 
Allowance for Loan Losses
March 31, 2020
Ending Balance:  
Collectively Evaluated for Impairment
 
Ending Balance:  
Individually Evaluated for Impairment
 
Ending Balance
 
Ending Balance:  
Collectively Evaluated for Impairment
 
Ending Balance:  
Individually Evaluated for Impairment
 
Ending Balance
Commercial and industrial
$
94,329

 
$
898

 
$
95,227

 
$
1,561

 
$
109

 
$
1,670

Owner-occupied commercial real estate
74,142

 
595

 
74,737

 
645

 

 
645

Investor commercial real estate
13,421

 

 
13,421

 
128

 

 
128

Construction
64,581

 

 
64,581

 
460

 

 
460

Single tenant lease financing
967,595

 
4,680

 
972,275

 
9,095

 
1,660

 
10,755

Public finance
627,678

 

 
627,678

 
1,483

 

 
1,483

Healthcare finance
372,266

 

 
372,266

 
4,318

 

 
4,318

Small business lending
63,948

 
3,327

 
67,275

 
265

 
 
 
265

Residential mortgage
217,370

 
1,360

 
218,730

 
500

 

 
500

Home equity
23,855

 

 
23,855

 
53

 

 
53

Other consumer
296,557

 
48

 
296,605

 
2,580

 

 
2,580

Total
$
2,815,742

 
$
10,908

 
$
2,826,650

 
$
21,088

 
$
1,769

 
$
22,857

(in thousands)
Loans
 
Allowance for Loan Losses
December 31, 2019
Ending Balance:  
Collectively Evaluated for Impairment
 
Ending Balance:  
Individually Evaluated for Impairment
 
Ending Balance
 
Ending Balance:  
Collectively Evaluated for Impairment
 
Ending Balance:  
Individually Evaluated for Impairment
 
Ending Balance
Commercial and industrial
$
93,520

 
$
2,900

 
$
96,420

 
$
1,412

 
$
109

 
$
1,521

Owner-occupied commercial real estate
71,067

 
2,325

 
73,392

 
561

 

 
561

Investor commercial real estate
12,567

 

 
12,567

 
109

 

 
109

Construction
60,274

 

 
60,274

 
380

 

 
380

Single tenant lease financing
991,199

 
4,680

 
995,879

 
9,515

 
1,660

 
11,175

Public finance
687,094

 

 
687,094

 
1,580

 

 
1,580

Healthcare finance
300,612

 

 
300,612

 
3,247

 

 
3,247

Small business lending
56,941

 
3,338

 
60,279

 
54

 
 
 
54

Residential mortgage
312,714

 
1,135

 
313,849

 
657

 

 
657

Home equity
24,306

 

 
24,306

 
46

 

 
46

Other consumer
295,266

 
43

 
295,309

 
2,510

 

 
2,510

Total
$
2,905,560

 
$
14,421

 
$
2,919,981

 
$
20,071

 
$
1,769

 
$
21,840



15



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

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

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

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

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

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

16




The following tables present the credit risk profile of the Company’s commercial and consumer loan portfolios based on rating category and payment activity as of March 31, 2020 and December 31, 2019
 
March 31, 2020
(in thousands)
Pass
 
Special Mention
 
Substandard
 
Total
Commercial and industrial
$
91,028

 
$
3,301

 
$
898

 
$
95,227

Owner-occupied commercial real estate
74,142

 

 
595

 
74,737

Investor commercial real estate
13,421

 

 

 
13,421

Construction
64,581

 

 

 
64,581

Single tenant lease financing
959,161

 
8,434

 
4,680

 
972,275

Public finance
627,678

 

 

 
627,678

Healthcare finance
371,203

 
1,063

 

 
372,266

Small business lending
62,226

 
1,722

 
3,327

 
67,275

Total commercial loans
$
2,263,440

 
$
14,520

 
$
9,500

 
$
2,287,460

 
March 31, 2020
(in thousands)
Performing
 
Nonaccrual
 
Total
Residential mortgage
$
217,739

 
$
991

 
$
218,730

Home equity
23,855

 

 
23,855

Other consumer
296,566

 
39

 
296,605

Total consumer loans
$
538,160

 
$
1,030

 
$
539,190

 
December 31, 2019
(in thousands)
Pass
 
Special Mention
 
Substandard
 
Total
Commercial and industrial
$
89,818

 
$
3,973

 
$
2,629

 
$
96,420

Owner-occupied commercial real estate
71,068

 
1,727

 
597

 
73,392

Investor commercial real estate
12,567

 

 

 
12,567

Construction
60,274

 

 

 
60,274

Single tenant lease financing
983,448

 
7,751

 
4,680

 
995,879

Public finance
687,094

 

 

 
687,094

Healthcare finance
300,612

 

 

 
300,612

Small business lending
55,206

 
1,735

 
3,338

 
60,279

Total commercial loans
$
2,260,087

 
$
15,186

 
$
11,244

 
$
2,286,517

 
December 31, 2019
(in thousands)
Performing
 
Nonaccrual
 
Total
Residential mortgage
$
313,088

 
$
761

 
$
313,849

Home equity
24,306

 

 
24,306

Other consumer
295,276

 
33

 
295,309

Total consumer loans
$
632,670

 
$
794

 
$
633,464

  

17



The following tables present the Company’s loan portfolio delinquency analysis as of March 31, 2020 and December 31, 2019

 
 
March 31, 2020
(in thousands)
 
30-59
Days
Past Due
 
60-89
Days
Past Due
 
90 Days 
or More
Past Due
 
Total 
Past Due
 
Current
 
Total
Loans
 
Non-
accrual
Loans
 
Total Loans
90 Days or
More Past
Due and
Accruing
Commercial and industrial
 
$

 
$

 
$
285

 
$
285

 
$
94,942

 
$
95,227

 
$
218

 
$
73

Owner-occupied commercial real estate
 

 

 
464

 
464

 
74,273

 
74,737

 
464

 

Investor commercial real estate
 

 

 

 

 
13,421

 
13,421

 

 

Construction
 

 

 

 

 
64,581

 
64,581

 

 

Single tenant lease financing
 

 

 
4,680

 
4,680

 
967,595

 
972,275

 
4,680

 

Public finance
 

 

 

 

 
627,678

 
627,678

 

 

Healthcare finance