INBK US Equity☆

Item 1A. Risk Factors

Risk factors which could cause actual results to differ from our expectations and which could negatively impact our financial condition and results of operations are discussed below and elsewhere in this report. Additional risks and uncertainties not presently known to us or that are currently not believed to be significant to our business may also affect our actual results and could harm our business, financial condition and results of operations. If any of the risks or uncertainties

12

described below or any additional risks and uncertainties actually occur, our business, results of operations and financial condition could be materially and adversely affected.

Business, Strategic, and Reputational Risks

A failure of, or interruption in, the communications and information systems on which we rely to conduct our business could adversely affect our revenues and profitability.

We rely heavily upon communications and information systems to conduct our business. Although we have built a level of redundancy into our information technology infrastructure and update our business continuity plan annually, any failure or interruption of our information systems, or the third-party information systems on which we rely, as a result of inadequate or failed processes or systems, human errors or external events, could adversely affect our digital-based operations and slow or temporarily halt the processing of applications, loan servicing, deposit-related transactions, and our general banking operations. In addition, our communication and information systems may present security risks and could be susceptible to hacking or other unauthorized access. The occurrence of any of these events could have a material adverse effect on our business, financial condition and results of operations.

Weakness in the economy may disproportionately and materially adversely affect our business and results of operations.

Any economic downturn could result in financial stress on our borrowers that would adversely affect consumer confidence, a reduction in general business activity and increased market volatility. The resulting economic pressure on consumers and businesses and the lack of confidence in the financial markets could adversely affect our business, financial condition, results of operations and stock price. Our ability to properly assess the creditworthiness of our customers and to estimate the losses inherent in our credit exposure would be made more complex by difficult market and economic conditions. Accordingly, if market conditions worsen, we may experience increases in foreclosures, delinquencies, write-offs and customer bankruptcies, as well as more restricted access to funds.

The competitive nature of the banking and financial services industry could negatively affect our ability to increase or maintain our market share and retain long-term profitability.

Competition in the banking and financial services industry is strong. We compete with commercial banks, savings institutions, mortgage brokerage firms, credit unions, finance companies, fintechs, mutual funds, insurance companies and securities brokerage and investment banking firms operating locally and nationwide. Some of our competitors have greater name recognition and market presence than we do and offer certain services that we do not or cannot provide. In addition, larger competitors may be able to price loans and deposits more aggressively than we do, which could affect our ability to increase our market share and remain profitable on a long-term basis.

In 2018, the Office of the Comptroller of the Currency announced that it would begin to accept and evaluate charters for entities that wanted to conduct certain components of a banking business pursuant to a federal charter, known as a “special purpose national bank” (“SPNB”) charter. Intended to promote economic opportunity and spur financial innovation, SPNBs may engage in any of the following activities: paying checks, lending money, or taking deposits. If any such applications are granted, recipients of an SPNB charter may enter the U.S. payments market in which the Bank operates, which could have a material adverse effect on the Bank and certain of its business lines.

Reputational risk and social factors may negatively affect us.

Our ability to attract and retain customers is highly dependent upon other external perceptions of our business practices and financial condition. Adverse perceptions could damage our reputation to a level that could lead to difficulties in generating and maintaining lending and deposit relationships and accessing equity or credit markets, as well as increased regulatory scrutiny of our business.Adverse developments or perceptions regarding the business practices or financial condition of our competitors, or our industry as a whole, may also indirectly adversely affect our reputation.

In addition, adverse reputational developments with respect to third parties with whom we have important relationships may negatively affect our reputation. All of the above factors may result in greater regulatory and/or legislative scrutiny, which may lead to laws or regulations that may change or constrain the manner in which we engage with our customers and the products we offer and may also increase our litigation risk. If these risks were to materialize, they could negatively affect our business, financial condition and results of operations.

13

We have and expect to incur substantial costs related to the merger with First Century (the “merger”) and integration.

We have incurred and expect to incur a number of non-recurring costs associated with the merger. These costs include legal, financial advisory, accounting, consulting and other advisory fees, retention, severance and employee benefit-related costs, regulatory fees, closing, integration and other related costs. Some of these costs are payable regardless of whether or not the merger is completed.

The merger may be more difficult, costly, or time-consuming than expected, and we may not realize the anticipated benefits of the merger.

The anticipated benefits of the merger, including revenue diversification and growth, may not be realized fully or at all or may take longer to realize than expected and integration may result in additional and unforeseen expenses. An inability to realize the full extent of the anticipated benefits of the merger, as well as any delays encountered in the integration process, could have an adverse effect upon our operating results following the completion of the merger.

In addition, we and First Century have operated and, until the completion of the merger, must continue to operate, independently. It is possible that the integration process could result in the loss of key employees, including employees of First Century, the disruption of each company’s ongoing businesses or inconsistencies in standards, controls, procedures, and policies that adversely affect each company’s ability to maintain relationships with clients, customers, depositors, and employees or to achieve the anticipated benefits of the merger. Integration efforts between the companies may also divert management attention and resources. These integration matters could have an adverse effect on the Company during this transition period and for an undetermined period after completion of the merger.

Regulatory approvals may not be received, may take longer than expected, or may impose conditions that are not presently anticipated or that could have an adverse effect on the Company following the merger.

Before the merger and the merger of First Century Bank, N.A. into the Bank may be completed, various approvals, consents, and non-objections must be obtained from the FDIC, the Federal Reserve, and other regulatory authorities in the United States. In determining whether to grant these approvals, such regulatory authorities consider a variety of factors, including the regulatory standing of each party. These approvals could be delayed or not obtained at all, including due to an adverse development in either party’s regulatory standing or in any other factors considered by regulators when granting such approvals; governmental, political or community group inquiries, investigations or opposition; or changes in legislation or the political environment generally.

The approvals that are granted may impose terms and conditions, limitations, obligations, or costs, or place restrictions on the conduct of our business or require changes to the terms of the transactions contemplated by the merger agreement. There can be no assurance that regulators will not impose any such conditions, limitations, obligations, or restrictions and that such conditions, limitations, obligations, or restrictions will not have the effect of delaying the completion of any of the transactions contemplated by the merger agreement, imposing additional material costs on or materially limiting our revenues following the merger or otherwise reducing the anticipated benefits of the merger if the merger were consummated successfully within the expected timeframe. In addition, there can be no assurance that any such conditions, terms, obligations, or restrictions will not result in the delay or abandonment of the merger.

Failure to complete the merger could negatively impact the Company.

If the merger is not completed for any reason, there may be various adverse consequences and we may experience negative reactions from the financial markets and from our customers and employees. Additionally, if the merger agreement is terminated, the market price of our common stock could decline to the extent that current market prices reflect a market assumption that the merger will be beneficial and will be completed. We also could be subject to litigation related to any failure to complete the merger or to perform our obligations under the merger agreement.

We will be subject to business uncertainties and contractual restrictions while the merger is pending.

Uncertainty about the effect of the merger on employees and customers may have an adverse effect on the Company and/or First Century. These uncertainties may impair First Century and/or our ability to attract, retain and motivate key

14

personnel until the merger is completed, and could cause customers and others that deal with First Century and/or the Company to seek to change existing business relationships with First Century and/or the Company.

The merger agreement may be terminated in accordance with its terms and the merger may not be completed.

The merger agreement is subject to a number of conditions which must be fulfilled in order to complete the merger. Those conditions include: (i) approval by First Century shareholders; (ii) the receipt of required regulatory approvals, including the approval of the DFI, the FDIC and the Federal Reserve; and (iii) the absence of any statute, rule, regulation, injunction, order, or decree, which shall have been enacted, entered, promulgated, or enforced, which prohibits, prevents, or makes illegal the completion of the merger, and no material claim, litigation or proceeding shall have been initiated and pending or threatened relating to the merger agreement or the merger or seeking to prevent the completion of the merger. Each party’s obligation to complete the merger is also subject to certain additional customary conditions. These conditions to the closing may not be fulfilled in a timely manner or at all, and, accordingly, the merger may not be completed.

We may not have discovered certain liabilities or other matters related to First Century, which may adversely affect the future financial performance of the combined company.

In the course of the due diligence review that we conducted prior to the execution of the merger agreement, we may not have discovered, or may have been unable to properly quantify, certain liabilities of First Century or other factors that may have an adverse effect on the business, results of operations, financial condition, and cash flows of the combined company after the consummation of the merger.

Our estimates and judgments related to the acquisition accounting methods used to record the purchase price allocation related to the merger may be inaccurate.

Our management will make significant accounting judgments and estimates related to the application of acquisition accounting of the merger under GAAP, as well as the underlying valuation models. Our business, operating results, and financial condition could be materially adversely impacted in future periods if the accounting judgments and estimates prove to be inaccurate.

New lines of business, and new products and services may result in exposure to new risks and the value and earnings related to existing lines of business are subject to market conditions.

The Bank has introduced, and in the future, may introduce new products and services to differing markets either alone or in conjunction with third parties, including programs and products introduced as part of our fintech partnership initiatives. New lines of business, products or services could have a significant impact on the effectiveness of our system of internal controls or the controls of third parties and could reduce our revenues and potentially generate losses. There are material inherent risks and uncertainties associated with offering new products and services, especially when new markets are not fully developed or when the laws and regulations regarding a new product are not mature. New products and services, or entrance into new markets, may require substantial time, resources and capital, and profitability targets may not be achieved. Factors outside of our control, such as developing laws and regulations, regulatory orders, competitive product offerings and changes in commercial and consumer demand for products or services may also materially impact the successful launch and implementation of new products or services. Failure to manage these risks, or failure of any product or service offerings to be successful and profitable, could have a material adverse effect on our financial condition and results of operations.

Significant external events could adversely affect our business and results of operations.

We could experience other external events such as severe weather, natural disasters, acts of war, such as the current conflict in Ukraine, or terrorism or other widespread public health issues or continued circumstances that could impair the ability of our customers to repay outstanding loans; impair the value of collateral, if any, securing outstanding loans; negatively impact our deposit base, loan originations or general demand for our services; cause significant property damage; result in loss of revenue or cause us to incur additional expenses or losses. We could also be adversely affected if key personnel or a significant number of employees were to become unavailable due to external events affecting the places they live. Although we have business continuity plans and other safeguards in place, there is no assurance that such plans and safeguards will completely mitigate the adverse impacts of any significant external event. The occurrence or continuation of any such event could materially adversely impact our business, our ability to provide our services, demand for our services, asset quality, financial condition and results of operations.

15

The COVID-19 pandemic, or other such epidemic, pandemic or outbreak of a highly contagious disease, occurring in the United States or in the geographies in which we conduct operations, could adversely affect our business operations, asset valuations, financial condition and results of operations.

Our business is dependent upon the willingness and ability of our customers to conduct banking and other financial transactions. The COVID-19 pandemic, or outbreak of another highly contagious or infectious disease, could negatively impact the ability of our employees and customers to conduct such transactions and disrupt the business activities and operations of our customers in the geographic areas in which we operate. The spread of the COVID-19 virus had an impact on our operations during fiscal year 2021, and we expect that the virus will continue to have an impact on our business, financial condition and results of operations and those of our customers during 2022. The COVID-19 pandemic has caused changes in the behavior of customers, businesses and their employees, including illness, quarantines, social distancing practices, cancellation of events and travel, business and school shutdowns, reduction in commercial activity and financial transactions, supply chain interruptions, increased unemployment and overall economic and financial market instability. Future effects, including additional actions taken by federal, state, and local governments to contain COVID-19 or treat its impact, are unknown. Any sustained disruption to our operations is likely to negatively impact our financial condition and results of operations. Notwithstanding our contingency and business continuity plans and other safeguards against pandemics or another contagious disease, the spread of COVID-19 could also negatively impact the availability of our personnel who are necessary to conduct our business operations, as well as potentially impact the business and operations of our third party service providers who perform critical services for us. If the response to contain COVID-19, or another highly infectious or contagious disease, is unsuccessful, we could experience a material adverse effect on our business operations, asset valuations, financial condition and results of operations. Material adverse impacts may include all or a combination of allowance for loan losses, income taxes, valuation and impairments of investment securities and goodwill, as well as fair value measurements of derivatives, loans held-for-sale and other real estate owned.

Anti-takeover provisions could negatively impact our shareholders.

Provisions of Indiana law and provisions of our articles of incorporation could make it more difficult for a third party to acquire control of us or have the effect of discouraging a third party from attempting to acquire control of us. We are subject to certain anti-takeover provisions under the Indiana Business Corporation Law. Additionally, our articles of incorporation authorize our Board of Directors to issue one or more classes or series of preferred stock without shareholder approval and such preferred stock could be issued as a defensive measure in response to a takeover proposal.

Although these provisions do not preclude a takeover, they may have the effect of discouraging, delaying or deferring a tender offer or takeover attempt that a shareholder might consider in his or her best interest, including those attempts that might result in a premium over the market price of our common stock. Such provisions will also render the removal of the Board of Directors and of management more difficult and, therefore, may serve to perpetuate current management. These provisions could potentially adversely affect the market price of our common stock.

Credit Risks

Our commercial loan portfolio exposes us to higher credit risks than residential real estate loans, including risks relating to the success of the underlying business and conditions in the market or the economy and concentrations in our commercial loan portfolio.

Our commercial loans totaled $2.4 billion, or 81.8% of our total loan portfolio. These loans generally involve higher credit risks than residential real estate loans and are dependent upon our lenders maintaining close relationships with the borrowers. Payments on these loans are often dependent upon the successful operation and management of the underlying business or assets, and repayment of such loans may be influenced to a great extent by conditions in the market or the economy. Commercial loans typically involve larger loan balances than residential real estate loans and could lead to concentration risks within our commercial loan portfolio. In addition, our C&I, healthcare finance, franchise finance and small business loans have primarily been extended to small to medium sized businesses that generally have fewer financial resources in terms of capital or borrowing capacity than larger entities.Our failure to manage this commercial loan growth and the related risks could have a material adverse effect on our business, financial condition and results of operations.

In addition, with respect to CRE, federal and state banking regulators are examining CRE lending activity with heightened scrutiny and may require banks with higher levels of CRE loans to implement more stringent underwriting, internal controls, risk management policies and portfolio stress testing, as well as possibly higher levels of allowances for losses and

16

capital levels as a result of CRE lending growth and exposures. Because a significant portion of our loan portfolio is comprised of CRE loans, our banking regulators may require us to maintain higher levels of capital than we would otherwise be expected to maintain, which could limit our ability to leverage our capital and have a material adverse effect on our business, financial condition, results of operations and prospects.

Portions of our commercial lending activities are geographically concentrated in Central Indiana and adjacent markets, and changes in local economic conditions may impact their performance.

We offer our residential mortgage and consumer lending as well as public finance, healthcare finance, franchise finance, small business lending and single tenant financing products and services throughout the United States. However, we serve CRE and C&I borrowers primarily in Central Indiana and adjacent markets. Accordingly, the performance of our CRE and C&I lending depends upon demographic and economic conditions in those regions. The profitability of our CRE and C&I loan portfolio may be impacted by changes in those conditions. Additionally, unfavorable local economic conditions could reduce or limit the growth rate of our CRE and C&I loan portfolios for a significant period of time, or otherwise decrease the ability of those borrowers to repay their loans, which could have a material adverse effect on our business, financial condition and results of operations.

We are subject to risks arising from conditions in the real estate market, as a significant portion of our loans are secured by commercial and residential real estate.

At December 31, 2021, approximately 44.9% of our loans held for investment portfolio was comprised of loans with real estate as the primary component of collateral. Our real estate lending activities, and our exposure to fluctuations in real estate collateral values, are significant and may increase as our assets increase. The market value of real estate can fluctuate significantly in a relatively short period of time as a result of market conditions in the geographic area in which the real estate is located, in response to factors such as economic downturns, changes in the economic health of industries heavily concentrated in a particular area and in response to changes in market interest rates, which influence capitalization rates used to value revenue-generating commercial real estate. If the value of real estate serving as collateral for our loans declines materially, a significant part of our loan portfolio could become under-collateralized and losses incurred upon borrower defaults would increase. Conditions in certain segments of the real estate industry, including homebuilding, lot development and mortgage lending, may have an effect on values of real estate pledged as collateral for our loans. The inability of purchasers of real estate, including residential real estate, to obtain financing may weaken the financial condition of our borrowers who are dependent on the sale or refinancing of property to repay their loans. Changes in the economic health of certain industries can have a significant impact on other sectors or industries which are directly or indirectly associated with those industries, and may impact the value of real estate in areas where such industries are concentrated.

The implementation of CECL, including the design and maintenance of related internal controls over financial reporting, will require a significant amount of time and resources which may have a material impact on our results of operations.

A new accounting standard adopted by FASB, referred to as Current Expected Credit Loss, or (“CECL”), will require financial institutions, like the Bank, to determine periodic estimates of lifetime expected credit losses on loans, and recognize the expected credit losses as allowances for loan and lease losses beginning with our fiscal year ending December 31, 2023.Current GAAP requires an incurred loss methodology for recognizing credit losses that delays recognition until it is probable a loss has been incurred.CECL will represent a significant change in methodology and may greatly increase the types of data we will need to collect and review to determine the appropriate level of the allowance for loan and lease losses.We are in the process of evaluating the impact of the adoption of this guidance on our financial statements.However, the allowance for loan and lease losses may increase upon the adoption of CECL and any such increased allowance level would decrease shareholders' equity and the Company's and Bank's regulatory capital ratios.

A significant amount of time and resources may be needed to implement CECL effectively, including the design and implementation of adequate internal controls, which may adversely affect our results of operations.If we are unable to maintain effective internal control over financial reporting relating to CECL, or otherwise, our ability to report our financial condition and results of operations accurately and on a timely basis could also be adversely affected.

17

Our active participation in the PPP, or in other relief programs, may expose us to credit losses as well as litigation and compliance risk.

To support our customers, businesses, and communities, we have participated in the PPP as a lender. As of December 31, 2021, we had originated 728 loans with balances in excess of $85 million to new and existing customers through the PPP. As of December 31, 2021, only 23 PPP loans, with aggregate outstanding principal balances of $3.15 million, had not been repaid or forgiven. Because of the short timeframe between the passing of the CARES Act and the April 3, 2020 opening of the PPP, there was some ambiguity in the laws, rules and guidance regarding the operation of the program, which exposes the Company to risks relating to noncompliance with the PPP. In addition, since the commencement of the PPP, several other banks have been subject to litigation regarding the process and procedures that such banks followed in accepting and processing applications for the PPP. We may be exposed to the risk of similar litigation. The Bank also has credit risk on PPP loans if a determination is made by the SBA that there is a deficiency in the manner in which the loan was originated, funded, or serviced by the Bank, such as an issue with the eligibility of a borrower to receive a PPP loan, which may or may not be related to the ambiguity in the laws, rules and guidance regarding the operation of the program. In the event of a loss resulting from a default on a PPP loan and a determination by the SBA that there was a deficiency in the manner in which the PPP loan was originated, funded, or serviced by the Corporation, the SBA may deny its liability under the guaranty, reduce the amount of the guaranty, or, if it has already paid under the guaranty, seek recovery of any loss related to the deficiency from the Bank. Any financial liability, litigation costs or reputational damage caused by PPP-related litigation could have a material adverse impact on our business, financial condition and results of operations.

Market, Interest Rate, and Liquidity Risks

The market value of some of our investments could decline and adversely affect our financial position.

In assessing the impairment of investment securities, we consider the length of time and extent to which the fair value has been less than cost, the financial condition and near-term prospects of the issuers, whether the market decline was affected by macroeconomic conditions and whether we have the intent to sell the security or will be required to sell the security before its anticipated recovery. We also use economic models to assist in the valuation of some of our investment securities. If our investment securities experience a decline in value, we would need to determine whether the decline represented an other-than-temporary impairment, in which case we would be required to record a write-down of the investment and a corresponding charge to our earnings.

An increase in interest rates, or the replacement of the London Inter-bank Offered Rate (“LIBOR”) with a benchmark rate that is higher or more volatile than LIBOR, could increase our cost of borrowing and could adversely impact our business, financial condition and results of operations.

In 2017, the Chief Executive of the United Kingdom Financial Conduct Authority (the “Authority”) announced that the Authority intended to stop persuading or compelling banks to submit rates for the calculation of LIBOR to the ICE Benchmark Administration Limited (together with any successor, “IBA”), as administrator of LIBORIn response to concerns regarding the future of LIBOR, Federal Reserve and the Federal Reserve Bank of New York convened the Alternative Reference Rates Committee (“ARRC”) to identify alternatives to LIBOR. The ARRC first recommended a benchmark replacement waterfall that facilitated continued linkage to LIBOR while recognizing that the discontinuation of LIBOR would eventually occur. The initial steps in the ARRC's recommended waterfall referenced variations of the Secured Overnight Financing Rate (“SOFR”), and the ARRC has since recommended SOFR as the replacement rate for U.S. dollar denominated LIBOR. While market participants were warned that LIBOR may cease to exist after 2021, the IBA announced in early 2021 that it would continue to publish the most widely used tenors of U.S. dollar denominated LIBOR (such as one-month and three-month LIBOR) until June 30, 2023. While the IBA's announcement extended LIBOR's phase-out, there is no current expectation that LIBOR will continue beyond mid-2023, and U.S. banking regulators have issued guidance encouraging banking organizations to cease using U.S. dollar denominated LIBOR as a reference rate in new contracts.

At this time, it is not possible to predict whether SOFR will attain market acceptance as the standard replacement for LIBOR, whether alternative reference rates other than SOFR (such as Ameribor) will gain market traction or whether additional reforms to LIBOR may be enacted. Further, other central banks and regulators have convened working groups to evaluate other interest rate benchmarks (such as EURIBOR), and it is possible that a transition away from certain of these interest rate benchmarks will occur leading to the establishment of new market accepted reference rates. Uncertainty regarding the market standard replacement for LIBOR, and floating rate benchmarks generally, could have adverse impacts on floating-rate obligations, loans, deposits, derivatives and other financial instruments that currently use LIBOR as a benchmark rate and adversely affect the Company's business, financial condition or results of operations.

18

Additionally, the floating rate features of our outstanding 6.0% Fixed-to-Floating Rate Subordinated Notes due 2029 (the “2029 Notes”) are based on LIBOR, while the floating rate features of our 3.75% Fixed-to-Floating Rate Subordinated notes due 2031 (the “2031 Notes”) are based on SOFR. In anticipation of LIBOR’s phase out, and the uncertainty of SOFR as a LIBOR replacement, the terms of our 2029 Notes and 2031 Notes provide for a benchmark replacement rate for LIBOR or SOFR, as applicable, with such benchmark replacement rate to be determined by the Company or an independent financial advisor appointed by the Company, as applicable, in each case in accordance with terms of the 2029 Notes and 2031 Notes, respectively. There can be no assurance that any replacement benchmark rate for our 2029 Notes or 2031 Notes will be determined or agreed upon, as applicable, before experiencing adverse effects due to changes in interest rates, if at all. We will continue to monitor the situation and address the potential reference rate changes in future debt obligations that we may incur. Accordingly, the potential effect of the phase-out of LIBOR, or the unavailability of any other interest rate benchmarks such as SOFR or EURIBOR, on our cost of capital cannot yet be determined. Further, the use of an alternative base rate or a benchmark replacement rate as a basis for calculating interest with respect to any outstanding variable rate indebtedness could lead to an increase in the interest we pay and a corresponding increase in our costs of capital or otherwise have a material adverse impact on our business, financial condition or results of operations.

The Bank may not be able to pay us dividends.

The ability of the Bank to pay dividends to us is limited by state and federal law and depends generally on the Bank’s ability to generate net income. If we are unable to comply with applicable provisions of these statutes and regulations, the Bank may not be able to pay dividends to us, we may not be able to pay dividends on our outstanding common stock and our ability to service our debt may be materially impaired.

We may need additional capital resources in the future, and these capital resources may not be available when needed or at all, without which our financial condition, results of operations and prospects could be materially impaired.

In recent years, we have raised additional capital in the public debt and equity markets to support balance sheet growth, refinance existing debt obligations, or explore strategic alternatives which may include additional asset, deposit or revenue generation channels. Our ability to raise future capital, if needed, will depend upon our financial performance and conditions in the capital markets, as well as economic conditions generally. Accordingly, such financing may not be available to us on acceptable terms or at all. If we cannot raise additional capital when needed, it could have a material adverse effect on our business, financial condition and results of operations.

Operational Risks

Because our business is highly dependent on technology that is subject to rapid change and transformation, we are subject to risks of obsolescence.

The Bank conducts its deposit gathering activities and a significant portion of its residential mortgage lending activities through digital channels. The financial services industry is undergoing rapid technological change, and we face constant evolution of customer demand for technology-driven financial and banking products and services. Many of our competitors have substantially greater resources to invest in technological improvement and product development, marketing and implementation. Any failure to successfully keep pace with and fund technological innovation in the markets in which we compete could have a material adverse effect on our business, financial condition and results of operations.

We rely on our management team and could be adversely affected by the unexpected loss of key officers.

Our future success and profitability are substantially dependent upon our management and the abilities of our senior executives. We believe that our future results will also depend in part upon our ability to attract and retain highly skilled and qualified management. Competition for senior personnel is intense, and we may not be successful in attracting and retaining such personnel. Changes in key personnel and their responsibilities may be disruptive to our business and could have a material adverse effect on our business, financial condition and results of operations. In particular, the loss of our chief executive officer could have a material adverse effect on our business, financial condition and results of operations.

19

A failure in or breach of our operational or security systems or infrastructure, or those of our third-party vendors and other service providers, including as a result of cyber-attacks, could disrupt our business and lead to unauthorized disclosure of customers’ personal information, theft or misuse of confidential or proprietary information, damage to our reputation, and increases in our costs or financial losses.

We depend upon our ability to process, record and monitor our client transactions on a continuous basis. As customer, public and regulatory expectations regarding data privacy and information security have increased, our operational systems and infrastructure must continue to be safeguarded and monitored for potential failures, disruptions and breakdowns. Our business, financial, accounting and data processing systems, or other operating systems and facilities, may stop operating properly or become disabled or damaged as a result of a number of factors, including events that are wholly or partially beyond our control. For example, there could be electrical or telecommunications outages; natural disasters such as earthquakes, tornadoes and hurricanes; disease pandemics; events arising from local or larger-scale political or social matters, including terrorist acts; and, as described below, cyber-attacks. Although we have business continuity plans and other safeguards in place, our business operations may be adversely affected by significant and widespread disruption to our physical infrastructure or operating systems that support our business.

Information security risks for financial institutions such as ours have generally increased in recent years in part because of the proliferation of new technologies, the use of digital technologies to conduct financial transactions, and the increased sophistication and activities of organized crime, hackers, terrorists, activists and other external parties. As noted above, our operations rely on the secure processing, transmission and storage of confidential information in our computer systems and networks. Our business relies on our digital technologies, computer and email systems, software and networks to conduct its operations. In addition, to access our products and services, our customers may use smartphones, tablets, personal computers and other mobile devices that are beyond our control systems. Although we have information security procedures and controls in place, our technologies, systems, networks and our customers’ devices may become the target of cyber-attacks or information security breaches that could result in the unauthorized release, gathering, monitoring, misuse, loss or destruction of our or our customers’ confidential, proprietary and other information, or otherwise disrupt our or our customers’ or other third parties’ business operations.

Third parties with whom we do business or that facilitate our business activities, including financial intermediaries or vendors that provide services or security solutions for our operations, could also be sources of operational and information security risk to us, including from breakdowns or failures of their own systems or capacity constraints. Although to date we have not experienced any material losses relating to cyber-attacks or other information security breaches, like other companies, we and our vendors face a wide range of ongoing cyber threats that include phishing emails and social engineering schemes, ransomware threats, and criminal re-use of credentials sold on the dark web. Therefore, there can be no assurance that we will not suffer such material losses in the future. Our risk and exposure to these matters remains heightened because of the evolving nature of these threats. As a result, cybersecurity and the continued development and enhancement of our controls, processes and practices designed to protect our systems, computers, software, company data, networks, and customer information from attack, damage or unauthorized access remain a focus for us. As threats continue to evolve, we may be required to expend additional resources to continue to modify or enhance our protective measures or to investigate and remediate information security vulnerabilities.

Disruptions or failures in the physical infrastructure or operating systems that support our business and clients, or cyber-attacks or security breaches of the networks, systems or devices that our clients use to access our products and services, could result in client attrition, regulatory fines, penalties or intervention, breach investigation and notification expenses, reputational damage, claims or litigation, reimbursement or other compensation costs and/or additional compliance costs, any of which could materially and adversely affect our business, financial condition and results of operations.

Legal and Regulatory Risks

We operate in a highly regulated environment, which could restrain our growth and profitability.

We are subject to extensive laws and regulations that govern almost all aspects of our operations. These laws and regulations, and the supervisory framework that oversees the administration of these laws and regulations, are primarily intended to protect depositors, the DIF and the banking system as a whole, and not shareholders. These laws and regulations, among other matters, affect our lending practices, capital structure, investment practices, dividend policy, operations and growth. Compliance with the myriad laws and regulations applicable to our organization can be difficult and costly. In addition, these laws, regulations and policies are subject to continual review by governmental authorities, and changes to these laws, regulations and policies, including changes in interpretation or implementation of these laws, regulations and policies, could affect us in substantial and unpredictable ways and often impose additional compliance costs. Further, any new laws, rules and

20

regulations could make compliance more difficult or expensive. All of these laws and regulations, and the supervisory framework applicable to our industry, could have a material adverse effect on our business, financial condition and results of operations.

Federal and state regulators periodically examine our business and we may be required to remediate adverse examination findings.

The Federal Reserve, the FDIC and the DFI periodically examine our business, including our compliance with laws and regulations. If, as a result of an examination, a federal or state banking agency were to determine that our financial condition, capital resources, asset quality, earnings prospects, management, liquidity or other aspects of any of our operations had become unsatisfactory, or that we were in violation of any law or regulation, it may take a number of different remedial actions as it deems appropriate. These actions include the power to enjoin “unsafe or unsound” practices, to require action to correct any conditions resulting from any violation or practice, to issue an administrative order that can be judicially enforced, to direct an increase in our capital, to restrict our growth, to assess civil monetary penalties against our officers or directors, to remove officers and directors and, if it is concluded that such conditions cannot be corrected or there is an imminent risk of loss to depositors, to terminate our deposit insurance and place us into receivership or conservatorship. Any regulatory action against us could have a material adverse effect on our business, financial condition and results of operations.

Our FDIC deposit insurance premiums and assessments may increase, which would reduce our profitability.

The deposits of the Bank are insured by the FDIC up to legal limits and, accordingly, subject to the payment of FDIC deposit insurance assessments. The Bank’s regular assessments are determined by its risk classification, which is based on a number of factors, including regulatory capital levels, asset growth and asset quality. High levels of bank failures during and following the financial crisis and increases in the statutory deposit insurance limits have increased resolution costs to the FDIC and put significant pressure on the DIF. In order to maintain a strong funding position and restore the reserve ratios of the DIF, the FDIC may increase deposit insurance assessment rates and may charge a special assessment to all FDIC-insured financial institutions. Further increases in assessment rates or special assessments may occur in the future, especially if there are significant additional financial institution failures. Any future special assessments, increases in assessment rates or required prepayments in FDIC insurance premiums could reduce our profitability or limit our ability to pursue certain business opportunities, which could have a material adverse effect on our business, financial condition and results of operations.

The long-term impact of regulatory capital rules is uncertain and a significant increase in our capital requirements could have an adverse effect on our business and profitability.

In order to remain “well-capitalized”, the Basel III Capital Rules require the Company and the Bank to maintain: (i) 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%); (ii) 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%); (iii) 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 (iv) a minimum Leverage Ratio of 4.0%.

The application of more stringent capital requirements for both the Company and the Bank could, among other things, result in lower returns on equity, require the raising of additional capital, and result in regulatory actions constraining us from paying dividends or repurchasing shares if we were to be unable to comply with such requirements, any of which could have a material adverse effect on our business and profitability.

We are subject to numerous laws designed to protect consumers, including the CRA and fair lending laws, and failure to comply with these laws could lead to a wide variety of sanctions.

The CRA, the Equal Credit Opportunity Act, the Fair Housing Act and other fair lending laws and regulations impose nondiscriminatory lending requirements on financial institutions. The Department of Justice and other federal agencies are responsible for enforcing these laws and regulations. A successful regulatory challenge to an institution’s performance under the CRA or fair lending laws and regulations could result in a wide variety of sanctions, including damages and civil money penalties, injunctive relief, restrictions on mergers and acquisitions activity, restrictions on expansion and restrictions on entering new business lines. Private parties may also have the ability to challenge an institution’s performance under fair lending laws in private class action litigation. Such actions could have a material adverse effect on our business, financial condition and results of operations.

21

We are subject to evolving and expensive regulations and requirements. Our failure to adhere to these requirements or the failure or circumvention of our controls and procedures could seriously harm our business.

We are subject to extensive regulation as a financial institution and are also required to follow the corporate governance and financial reporting practices and policies required of a company whose stock is registered under the Exchange Act and listed on the Nasdaq Global Select Market. Compliance with these requirements means we incur significant legal, accounting and other expenses. Compliance also requires a significant diversion of management time and attention, particularly with regard to disclosure controls and procedures and internal control over financial reporting. Although we have reviewed, and will continue to review, our disclosure controls and procedures in order to determine whether they are effective, our controls and procedures may not be able to prevent errors or frauds in the future. Faulty judgments, simple errors or mistakes, or the failure of our personnel to adhere to established controls and procedures may make it difficult for us to ensure that the objectives of the control system will be met. A failure of our controls and procedures to detect other than inconsequential errors or fraud could seriously harm our business and results of operations.

We face risk under the BSA and other anti-money laundering statutes and regulations, as well as general fund transfer and payments-related risk.

The BSA, the USA PATRIOT Act and other laws and regulations require financial institutions, among other duties, to institute and maintain an effective anti-money laundering program and file suspicious activity and currency transaction reports as appropriate. The federal Financial Crimes Enforcement Network is authorized to impose significant civil money penalties for violations of those requirements and has engaged in coordinated enforcement efforts with the individual federal banking regulators, as well as the U.S. Department of Justice, Drug Enforcement Administration and Internal Revenue Service. We are also subject to increased scrutiny of compliance with the rules enforced by the OFAC. If our policies, procedures and systems are deemed deficient, we would be subject to liability, including fines and regulatory actions, which may include restrictions on our ability to pay dividends and the necessity to obtain regulatory approvals to proceed with certain aspects of our business plan, including our acquisition plans. Failure to maintain and implement adequate programs to combat money laundering and terrorist financing could also have serious reputational consequences for us. Any of these results could have a material adverse effect on our business, financial condition and results of operations.

In addition, financial institutions, including ourselves, bear fund transfer risks of different types which result from large transaction volumes and large dollar amounts of incoming and outgoing money transfers. Loss exposure may result if money is transferred from the Bank before it is received, or legal rights to reclaim monies transferred are asserted. Such exposure results from payments which are made to merchants for payment clearing, while customers have statutory periods to reverse their payments. It also results from funds transfers made prior to receipt of offsetting funds, as accommodations to customers. Transfers could also be made in error. Additionally, as with other financial institutions, we may incur legal liability or reputational risk, if we unknowingly process payments for companies in violation of money laundering laws or regulations or immoral activities.

The merger and our introduction of new products and programs in partnership with fintechs is expected to increase account and transaction volume at the Bank and thereby increase the foregoing risks, the results of which could have a material adverse effect on our business, financial condition and results of operations.

We may be subject to potential liability and business risk from actions by our regulators related to supervision of third parties.

Our regulators or auditors may require us to increase the level and manner of our oversight of the third parties which provide marketing and other services through which we offer products and services, whether in connection with the merger, our introduction of new programs and products, or otherwise. Although we have significant compliance staff and have used outside consultants, our internal and external compliance examiners continually evaluate our practices and must be satisfied with the results of our third-party oversight activities. We cannot assure you that we will satisfy all related requirements. Not maintaining a compliance management system which is deemed adequate could result in sanctions against the Bank. Our ongoing review and analysis of our compliance management system and implementation of any changes resulting from that review and analysis will likely result in increased non-interest expense.

Federal banking laws limit the acquisition and ownership of our common stock.

Because we are a bank holding company, any purchaser of certain specified amounts of our common stock may be required to file a notice with or obtain the approval of the Federal Reserve under the BHCA, as amended, and the Change in

22

Bank Control Act of 1978, as amended. Specifically, under regulations adopted by the Federal Reserve, (1) any other bank holding company may be required to obtain the approval of the Federal Reserve before acquiring 5% or more of our common stock and (2) any person may be required to file a notice with and not be disapproved by the Federal Reserve to acquire 10% or more of our common stock and will be required to file a notice with and not be disapproved by the Federal Reserve to acquire 25% or more of our common stock.

Item 1B. Unresolved Staff Comments

None.

Item 2. Properties

In March 2013, the Company borrowed $4.0 million from the Bank for the purchase of the Company’s principal executive offices. On February 16, 2021, the Company entered into an agreement to sell its principal executive offices to a third party. The sale was completed on April 16, 2021 and as a part of the sale agreement, the buyer leased the office building back to the Company through December 31, 2021. We vacated the office building at the end of the lease, on or prior to December 31, 2021. Additionally, the remaining principal balance of the Company’s loan from the Bank was paid-in-full.

During 2019, the Bank's subsidiary, SPF15, Inc., acquired several parcels of real estate located in Fishers, Indiana. Site demolition was completed on the properties in early 2020 and construction of a multi-use development, which included the future headquarters of the Company and the Bank began shortly thereafter. The Company and the Bank now fully occupy the new headquarters, which is located at 8701 East 116th Street, Fishers, IN 46038.

Item 3. 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 4. Mine Safety Disclosures

None.

23

PART II

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Market Information

The Company’s common stock trades on the Nasdaq Global Select Market under the symbol “INBK.”

As of March 11, 2022, the Company had 9,683,727 shares of common stock issued and outstanding, and there were 106 holders of record of common stock.

Dividends

Total cash dividends declared in 2021 were $0.24 per share. 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 our 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.

Because the Company is a holding company and does not engage directly in business activities of a material nature, its ability to pay dividends to shareholders may depend, in large part, upon the receipt of distributions from the Bank, which is also subject to numerous limitations on the payment of dividends under federal and state banking laws, regulations and policies. The present and future ability of the Bank to distribute funds to the Company are subject to the discretion of the Board of the Directors of the Bank and the Bank is not obligated to pay any distributions to the Company.

Issuer Purchases of Equity Securities

On October 18, 2021, the Company's Board of Directors approved a stock repurchase program authorizing the repurchase of up to $30.0 million of our outstanding common stock from time to time on the open market or in privately negotiated transactions. The stock repurchase authorization is scheduled to expire on December 31, 2022. Under this program, the Company has repurchased 200,000 shares of common stock through March 11, 2022, at an average price of $46.97, for a total investment of $9.4 million. As of March 11, 2022, we have $20.6 million remaining under this program.

The following table presents information with respect to purchases of the Company’s common stock made during the fourth quarter of 2021 by or on behalf of the Company or any “affiliated purchaser,” as defined in Rule 10b-18(a)(3).

Stock Performance Graph

The following graph and table compares the five-year cumulative total return to shareholders of First Internet Bancorp common stock with that of the Nasdaq Composite Index and the S&P U.S. BMI Banks Index. The following assumes $100 invested on December 31, 2016 in First Internet Bancorp, the Nasdaq Composite Index and the S&P U.S. BMI Bank Index, and assumes that dividends are reinvested. The historical stock price performance for our common stock is not necessarily indicative of future stock performance.

24

December 31,

Item 6. [RESERVED]

25

Item 7. 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 consolidated financial statements and related notes appearing elsewhere in this report.

The following discussion, analysis and comparisons generally focus on the operating results for the years ended December 31, 2021 and 2020. Discussion, analysis and comparisons of the years ended December 31, 2020 and 2019 that are not included in this Annual Report on Form 10-K can be found in “Management's Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2020. This discussion and analysis includes certain forward-looking statements that involve risks, uncertainties and assumptions. You should review the “Risk Factors” section of this report 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 the “Cautionary Note Regarding Forward-Looking Statements” at the beginning of this report.

COVID-19 Pandemic

The year 2021 was characterized by continued uncertainty as the coronavirus (“COVID-19”) pandemic persisted globally. However, federal, state and local governments have continued to take additional steps to reopen and stimulate economies, evidenced by improving economic indicators as 2021 progressed. While the effects of COVID-19 did have an impact on our operating results during 2021, we believe the impact was consistent with the effects of COVID-19 on the overall banking industry. The extent to which COVID-19 will continue to impact our business will depend on numerous evolving factors and future developments that we are not able to predict, including potential new variants of COVID-19, the effectiveness of continuing containment measures, including the speed of the ongoing vaccine distribution effort, the efficacy of the various vaccines, and how quickly and to what extent normal economic and operating conditions can resume.

COVID-19 impacted our business during 2021, as the low interest rate environment following Federal Reserve rate cuts in the first quarter 2020 had a negative impact on some variable rate assets throughout 2021. However, the low interest rate environment has also allowed us to reprice our interest-bearing deposits at lower rates, which provided a benefit to net interest income in 2021.

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

Pending Merger Transaction

On November 1, 2021, we entered into a merger agreement to acquire all of the outstanding shares of common stock of First Century Bancorp. (“First Century”), the parent company of First Century Bank, N.A. (“First Century Bank”), for $80 million in cash. First Century Bank is a technology-driven, financial solutions company with lines of business focused on payments, tax product lending, sponsored card programs and homeowners association services. We expect to fund our payment obligations upon closing with available on-balance sheet cash. The acquisition is subject to customary regulatory approvals and the completion of various closing conditions. The acquisition has received approval from the Indiana Department of Financial Institutions and First Century shareholders, but it is awaiting approval from the Federal Deposit Insurance Corporation and the Federal Reserve. As of December 31, 2021, First Century had total assets of $486.7 million, total deposits of $409.4 million, and total loans of $25.2 million.

Results of Operations

During the twelve months ended December 31, 2021, net income was $48.1 million, or $4.82 per diluted share, compared to net income of $29.5 million, or $2.99 per diluted share, for the twelve months ended December 31, 2020 and net income of $25.2 million, or $2.51 per diluted share, for the twelve months ended December 31, 2019.

The $18.7 million increase in net income for the twelve months ended December 31, 2021 compared to the twelve months ended December 31, 2020 was due primarily to a $22.0 million increase in net interest income and an $8.3 million decrease in provision for loan losses, partially offset by a $4.1 million increase in noninterest expense, a $4.0 million increase in income tax expense and a $3.5 million decrease in noninterest income.

26

The increase in net income of $4.2 million for the twelve months ended December 31, 2020 compared to the twelve months ended December 31, 2019 was due primarily to a $19.5 million increase in noninterest income and a $1.6 million increase in net interest income, partially offset by an $11.0 million increase in noninterest expense, a $3.4 million increase in provision for loan losses and a $2.5 million increase in income tax expense.

During the twelve months ended December 31, 2021, return on average assets was 1.14%, compared to 0.69% for the twelve months ended December 31, 2020. During the twelve months ended December 31, 2021, return on average shareholders’ equity was 13.44%, compared to 9.39% for the twelve months ended December 31, 2020. Additionally, for the twelve months ended December 31, 2021, return on average tangible common equity was 13.61% compared to 9.53% for the twelve months ended December 31, 2020. These profitability ratios improved during 2021 due to net income growth of 63.4%, while total average assets was down slightly from 2020. Additionally, the growth in net income outpaced growth in average shareholders' equity of 14.1% and growth in average tangible common equity of 14.4%. Refer to the “Reconciliation of Non-GAAP Financial Measures” section of Item 7 of Part II of this report, Management's Discussion and Analysis of Financial Condition and Results of Operations for additional information.

27

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. Balances are based on the average of daily balances. Nonaccrual loans are included in average loan balances.

Twelve Months Ended

Assets

Interest-earning assets

Liabilities

Interest-bearing liabilities

1 Yield on total interest-earning assets minus cost of total interest-bearing liabilities

2 Net interest income divided by average interest-earning assets

3 On a fully-taxable equivalent (“FTE”) basis assuming a 21% tax rate. Refer to the “Reconciliation of Non-GAAP Financial Measures” section of Item 7 of Part II of this report, Management's Discussion and Analysis of Financial Condition and Results of Operations

28

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.

Rate/Volume Analysis of Net Interest Income

(amounts in thousands) Volume Rate Net Volume Rate Net

Interest income

Interest expense

Net interest income for the twelve months ended December 31, 2021 was $86.6 million, an increase of $22.0 million, or 34.1%, compared to $64.5 million for the twelve months ended December 31, 2020. The increase in net interest income was the result of a $25.0 million, or 34.6%, decrease in total interest expense to $47.3 million for the twelve months ended December 31, 2021 compared to $72.3 million for the twelve months ended December 31, 2020. This decrease in total interest expense was partially offset by a $3.0 million, or 2.2%, decrease in total interest income to $133.9 million for the twelve months ended December 31, 2021 compared to $136.9 million for the twelve months ended December 31, 2020.

The decrease in total interest expense was driven primarily by decreases in interest expense related to certificates and brokered deposits and money market accounts. Interest expense on certificates and brokered deposits decreased $20.3 million, or 46.7%, due to a decline of 67 bps in the cost of these deposits as well as a $471.6 million, or 25.0%, decrease in the average balance of these deposits. The decrease in certificates and brokered deposit balances was driven by our pricing strategy to reduce the level of these higher cost deposits. The decrease in interest expense related to money market accounts of $5.5 million, or 48.2%, was driven by a decline of 57 bps in the cost of these deposits, partially offset by an increase of $278.7 million, or 24.1%, in the average balance of these deposits. Money market balances increased throughout 2021 due to targeted digital marketing efforts to grow small business accounts, as well as consumers, small businesses and commercial clients increasing their cash balances due in part to the continued economic uncertainty resulting from COVID-19. The decrease in interest expense related to interest-bearing demand deposits and savings accounts was due primarily to decreases of 28 bps and 39 bps, respectively, in the cost of these deposits, partially offset by increases of $50.5 million, or 34.8%, and $16.4 million, or 40.3%, respectively, in the average balance of these deposits. The increase in interest expense associated with other borrowed funds was due primarily to the recognition of $0.8 million of costs related to the Company redeeming the 2026 Notes on September 30, 2021.

The decrease in total interest income was due primarily to decreases in interest earned on securities and other earning assets, partially offset by an increase in interest earned on loans, including loans held-for sale. Interest income earned on securities decreased $3.9 million, or 21.6%, due to a decline of 62 bps in the yield earned on securities, partially offset by an increase of $3.1 million, or 0.4%, in the average balance of securities. The decrease in the yield earned on securities was driven primarily by lower market interest rates following Federal Reserve interest rate cuts in March 2020 in response to the economic effects of COVID-19, which contributed to increased prepayment activity and lower yields earned on private label and agency mortgage-backed securities and U.S. Government agency securities, as well as early redemptions and maturities in corporate and municipal securities. Interest income earned on other earning assets decreased $2.0 million, or 57.7%, due to a decline of 34 bps in the yield earned on these assets, as well as a decrease of $57.2 million, or 10.9%, in the average balance of other earning assets. The decrease in the yield earned on other earning assets was due primarily to lower market interest rates, as

29

described above. The decrease in the average balance of other earning assets was due to lower cash balances driven by declines in the average balance of deposits. Interest income earned on loans, including loans held-for-sale, increased by $2.8 million as the yield on the loan portfolio increased by 13 bps, but was partially offset by a decrease of $26.8 million, or 0.9%, in the average balance of loans. The decrease in average loan balances was due primarily to declines in the single tenant lease financing, public finance, owner-occupied commercial real estate, commercial and industrial and consumer portfolios, but was partially offset by increases in the healthcare finance, construction, small business lending (which included loans originated through the Paycheck Protection Program (“PPP”)), franchise finance and investor commercial real estate portfolios.

Net interest margin was 2.11% for the twelve months ended December 31, 2021 compared to 1.55% for the twelve months ended December 31, 2020. The increase in net interest margin was due primarily to a 62 bp decrease in the cost of interest-bearing liabilities, partially offset by a 1 bp decrease in the yield earned on interest-earning assets. The decline in the cost of interest-bearing liabilities was driven primarily by the lower deposit costs, as discussed above, due primarily to the continued low interest rate environment following Federal Reserve interest rate cuts in March 2020 in response to the economic effects of COVID-19. Looking ahead into 2022, we believe that yields on interest-earning assets will increase as we anticipate growing our commercial loan portfolio. We have approximately $712.8 million of certificates and brokered deposits with a weighted average cost of 1.02% that mature over the next twelve months. As the weighted average of cost of these deposits is significantly higher than current new production costs, we expect the cost of deposit funding to continue to decline in 2022, although at a much slower pace than in 2021.

Noninterest Income

The following table presents noninterest income for the three most recent years.

Twelve Months Ended December 31,

Loan servicing asset revaluation (1,069) (432) —

Gain (loss) on sale of securities — 139 (458)

Gain on sale of premises and equipment 2,523 — —

During the twelve months ended December 31, 2021, noninterest income totaled $32.8 million, representing a decrease of $3.5 million, or 9.6%, compared to $36.3 million for the twelve months ended December 31, 2020. The decrease in noninterest income was driven primarily by a decrease in revenue from mortgage banking activities, which was partially offset by increases in gain on sale of loans and gain on sale of premises and equipment. The decrease in mortgage banking revenue was due mainly to decreases in interest rate locks and sold loan volume as well as lower gain-on-sale margins. The increase in gain on sale of loans for the twelve months ended December 31, 2021 was due to a higher amount of SBA 7(a) guaranteed loan sales as well as the sale of single tenant lease financing loans. The increase in gain on sale of premises and equipment was due to the Company completing the sale of its headquarters during 2021.

30

Noninterest Expense

The following table presents noninterest expense for the three most recent years.

Twelve Months Ended December 31,

Write-down of other real estate owned — 2,065 —

Noninterest expense for the twelve months ended December 31, 2021 was $61.8 million, compared to $57.7 million for the twelve months ended December 31, 2020. The increase of $4.1 million, or 7.2%, compared to the twelve months ended December 31, 2020 was due primarily to a $4.0 million increase in salaries and employee benefits, a $1.6 million increase in marketing, advertising and promotion, a $0.7 million increase in premises and equipment, and a $0.5 million increase in consulting and professional fees, partially offset by a $2.1 million decrease in write-down of other real estate owned and a $0.6 million decrease in deposit insurance premium. The increase in salaries and employee benefits was due mainly to increased headcount, predominately in the Company’s small business lending, information technology and construction lending groups. The increase in marketing, advertising and promotion was due primarily to higher mortgage lead generation costs and digital marketing initiatives. The increase in consulting and professional fees was due primarily to acquisition-related expenses. The increase in premises and equipment was driven primarily by a $0.5 million termination fee related to an information technology contract. The decrease in write-down of other real estate owned was due to no write-down in 2021, as opposed to a $2.1 million write-down in 2020. The decrease in deposit insurance premium was due primarily to a decrease in asset growth and an increase in the Bank's regulatory capital ratios, both of which positively impact the formula used to calculate deposit insurance expense.

31

Income Taxes

The following table reconciles reported income tax expense to that computed at the statutory federal tax rate for the three most recent years.

Twelve Months Ended December 31,

(Subtract) add the tax effect of:

Income from tax-exempt securities and loans (4,217) (4,464) (4,881)

State income taxes, net of federal tax effect 865 1,765 1,285

We recognized income tax expense of $8.5 million in 2021, resulting in an effective tax rate of 15.0%, compared to $4.4 million and an effective tax rate of 13.1% in 2020. Our federal statutory tax rate was 21% in 2021 and 2020. In both 2021 and 2020, the variance from the federal statutory rate was due primarily to tax-exempt income, partially offset by state income taxes. Interest income on certain loans or securities issued by governmental, municipal and not-for-profit entities, and earnings from bank-owned life insurance were the primary components of tax-exempt income. The increase in the effective tax rate and income tax expense was due primarily to the increase in pre-tax earnings driven by a higher proportion of taxable revenue, including higher net interest income, gain on sale of loans and gain on sale of premises and equipment.

32

Financial Condition

The following table presents summary balance sheet data as of the end of the last two years.

(amounts in thousands) December 31,

Total assets decreased $35.2 million, or 0.8%, to $4.2 billion as of December 31, 2021 compared to $4.2 billion as of December 31, 2020. The decline in total assets was driven primarily by a decrease in loan balances of $171.6 million, or 5.6%. The liquidity provided by the decline in loan balances was used, in part, to fund the reduction in higher cost deposit balances. Overall, deposit balances declined $91.9 million, or 2.8%, compared to the year-end 2020. Additional liquidity from the decline in loan balances was deployed into securities as total securities balances increased $96.8 million, or 17.1%, compared to balances at December 31, 2020.

As of December 31, 2021, total shareholders’ equity was $380.3 million, an increase of $49.4 million, or 14.9%, compared to December 31, 2020, due primarily to the net income earned during the year, as well as a decrease in accumulated other comprehensive loss. Tangible common equity totaled $375.7 million as of December 31, 2021, representing an increase of $49.4 million, or 15.1%, compared to December 31, 2020. As both total shareholders’ equity and tangible common equity increased compared to a slight decline in both total assets and tangible assets, the ratio of total shareholders’ equity to total assets increased to 9.03% as of December 31, 2021 from 7.79% as of December 31, 2020 and the ratio of tangible common equity to tangible assets increased to 8.93% as of December 31, 2021 from 7.69% as of December 31, 2020.

Book value per common share increased 15.5% to $38.99 as of December 30, 2021 from $33.77 as of December 31, 2020. Tangible book value per share increased 15.7% to $38.51 as of December 31, 2021 from $33.29 as of December 31, 2020. The growth in both book value per common share and tangible book value per share reflects the growth in total shareholders’ equity and tangible common equity while total common shares outstanding decreased slightly year-over-year, or 0.5%. Refer to the “Reconciliation of Non-GAAP Financial Measures” section of Item 7 of Part II of this report, Management's Discussion and Analysis of Financial Condition and Results of Operations for additional information.

33

Loan Portfolio Analysis

The following table provides information regarding our loan portfolio as of the end of the last two years.

December 31,

Commercial loans

Consumer loans

1 Includes carrying value adjustments of $37.5 million and $42.7 million related to terminated interest rate swaps associated with public finance loans as of December 31, 2021 and December 31, 2020, respectively.

Total loans were $2.9 billion as of December 31, 2021, a decrease of $171.6 million, or 5.6%, compared to December 31, 2020. Total commercial loan balances were $2.4 billion, as of December 31, 2021, down $151.8 million, or 6.0%, from December 31, 2020. Total consumer loan balances were $469.9 million as of December 30, 2021, a decrease of $12.4 million, or 2.6%, compared to December 31, 2020. Compared to December 31, 2020, the decline in commercial loan balances was driven largely by net payoffs in healthcare finance, single tenant lease financing, small business lending and public finance loans. These items were partially offset by increases in franchise finance, construction, commercial and industrial, franchise finance and investor commercial real estate loan balances. The net payoffs in the healthcare finance portfolio were driven primarily by elevated prepayment activity and minimal origination activity. Going forward, we expect the balance of healthcare finance loans to continue to decline as a result of Provide, Inc.'s acquisition by a superregional financial institution, as well as potential prepayment activity. The decline in single tenant lease financing balances was due to elevated prepayment activity and lower origination volumes as well as a sale of $20.1 million of balances in the fourth quarter 2021. The decline in public finance balances was due to lower origination activity and scheduled maturities. Related to single tenant lease financing, public finance and other lending areas with fixed interest rates, the combination of the low interest rate environment and heightened competition for high quality borrowers drove pricing to levels that we consider unattractive, which negatively impacted origination activity in such areas during 2021. The net payoffs in small business lending were predominantly related to PPP loan forgiveness, partially offset by originations.

Franchise finance was established in July 2021 in conjunction with our business relationship with ApplePie Capital, a provider of growth financing to franchisees in various industry segments across the country. We began funding franchise finance loans during 2021 and, as of December 31, 2021, we funded a total of $81.4 million in loans. We expect to fund approximately $150.0 million of franchise finance loans during 2022. The increase in construction balances was driven by increased origination activity, offset by paydowns, as we have increased our reserves in this area due to the variable rate structure and attractive pricing levels.

34

Loan Maturities and Rate Sensitivity

The following table shows the contractual maturity distribution intervals (without regard to repayment schedules) of the outstanding loans in our portfolio as of December 31, 2021.

(amounts in thousands) Within 1 Year 1-5 Years 5-15 Years Beyond 15 Years Total

Commercial loans

Consumer loans

The following table shows the rate sensitivity of the outstanding loans in our portfolio by the contractual maturity distribution intervals as of December 31, 2021.

(amounts in thousands) Within 1 Year 1-5 Years 5-15 Years Beyond 15 Years Total

Loan Approval Procedures and Authority

Our lending activities follow written, non-discriminatory policies with loan approval limits approved by the Board of Directors of the Bank. Loan officers have underwriting and approval authorization of varying amounts based on their lending experience and product type. Additionally, based on the amount of the loan, multiple approvals may be required. Based on the Bank’s legal lending limit, the maximum it could lend to any one borrower at December 31, 2021 was $69.0 million.

Our goal is to have a well-diversified and balanced loan portfolio. In order to manage our loan portfolio risk, we establish concentration limits by borrower, product type, industry and geography. To supplement our internal loan review resources, we have engaged independent third-party loan review groups, which are a key component of our overall risk management process related to credit administration.

35

Asset Quality

December 31,

Nonaccrual loans

Commercial loans:

Commercial and industrial $ 674 $ —

Owner-occupied commercial real estate 3,419 1,838

Single tenant lease financing 1,100 7,116

Small business lending 959 —

Consumer loans:

Home equity 14 —

Other consumer 9 46

Past Due 90 days and accruing loans — —

Other real estate owned

Single tenant lease financing 1,188 —

Total other real estate owned 1,188 —

Other nonperforming assets 29 35

Total nonperforming loans to total loans 0.26 % 0.33 %

Total nonperforming assets to total assets 0.20 % 0.22 %

Allowance for loan losses to total loans 0.96 % 0.96 %

Nonaccrual loans to total loans 0.26 % 0.33 %

Allowance for loan losses to nonaccrual loans 376.2 % 289.5 %

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

Impaired loans include nonperforming loans and also include loans modified in troubled debt restructurings (“TDRs”) where concessions have been granted to borrowers experiencing financial difficulties. These concessions could include a reduction in the interest rate on the loan, payment extensions, forgiveness of principal, forbearance, or other actions intended to maximize collection.

Nonperforming loans are comprised of total nonaccrual loans and loans 90 days past due and accruing. Nonperforming assets include nonperforming loans, other real estate owned and other nonperforming assets, which consist of repossessed assets. Nonperforming assets can also include investments that were classified as other-than-temporarily impaired; however, we did not own any investments classified as such during the two-year period ended December 31, 2021.

36

Troubled Debt Restructurings

December 31,

Troubled debt restructurings – nonaccrual $ 2,492 $ 2,637

Troubled debt restructurings – performing 1,693 367

Total troubled debt restructurings $ 4,185 $ 3,004

The decrease in nonperforming loans of $2.8 million, or 27.3%, to $7.4 million as of December 31, 2021 compared to $10.2 million as of December 31, 2020 was due primarily to a decrease in nonaccrual single tenant lease financing balances, which was partially offset by an increase in nonaccrual loans in owner-occupied commercial real estate, and to a lessor extent, increases in small business lending and commercial and industrial loans. The decrease in nonaccrual single tenant lease financing balances was due to a payoff of a loan that was previously on nonaccrual, as well as positive developments related to a single tenant lease financing relationship which included two loans, one of which was paid off at net book value (unpaid principal balance less specific reserves) and the other was transferred to other real estate owned (“OREO”).

Total nonperforming assets decreased $1.6 million, or 15.7%, as of December 31, 2021 compared to December 31, 2020, due primarily to the decrease in nonperforming loans discussed above, partially offset by a $1.2 million increase in OREO related to the single tenant loan financing relationship discussed above. The ratio of nonperforming loans to total loans decreased to 0.26% as of December 31, 2021 compared to 0.33% as of December 31, 2020 and the ratio of nonperforming assets to total assets decreased to 0.20% as of December 31, 2021, compared to 0.22% as of December 31, 2020.

Total TDRs as of December 31, 2021 were $4.2 million, up $1.2 million from December 31, 2020. The increase was driven by two portfolio residential mortgage loans classified as new TDRs during the twelve months ended December 31, 2021 with a pre-modification and post-modification outstanding recorded investment of $1.6 million.

As of December 31, 2021, we had one commercial property in OREO with a carrying value of $1.2 million. We did not have any OREO as of December 31, 2020.

As of December 31, 2021, our financial results have reflected little impact on asset quality to date as a result of COVID-19. We are optimistic that the combination of vaccinations, government stimulus programs and relief programs we have provided to our clients will continue to mitigate the impact of the pandemic on our business.However, if economic conditions return to levels experienced during 2020, our credit quality and overall financial performance could be adversely affected.

Non-TDR Loan Modifications due to COVID-19

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

Additionally, Section 4013 of the CARES Act further provides that loan modifications due to the impact of COVID-19 that would otherwise be classified as TDRs under GAAP will not be so classified. Modifications within the scope of this relief were in effect from the period beginning March 1, 2020 until January 1, 2022.

In accordance with this guidance, we offered modifications to borrowers who were both impacted by COVID-19 and current on all principal and interest payments. As of December 31, 2021, we had eleven loans totaling $10.5 million in non-TDR loan modifications due to COVID-19.

U.S. Small Business Administration Paycheck Protection Program

Section 1102 of the CARES Act created the PPP, which is jointly administered by the SBA and the Department of the Treasury. The PPP is designed to provide a direct incentive to small businesses to retain employees on their payroll during COVID-19 as well as to help cover certain utility costs and rent payments. These loans may be forgiven if certain conditions are satisfied and are fully guaranteed by the SBA.In 2020, as a preferred SBA lender, we assisted our clients in participating in the PPP to help them maintain their workforces in an uncertain and challenging environment. The loans originated in 2020 bear an interest rate of 1.00%, and we received gross origination fees of approximately $2.3 million. We received this fee revenue from

37

the SBA in late June 2020, and it was deferred over the life of the PPP loans and recognized as interest income. We began processing applications for forgiveness from this round beginning in December 2020 and 100% of loan balances have been forgiven as of December 31, 2021.

On December 27, 2020, $285 billion in additional funding was allocated to the PPP through the passage of the Economic Aid to Hard-Hit Small Businesses, Nonprofits, and Venues Act. We began offering PPP loans again in 2021 and continued until the program’s funds were depleted. These loans may be forgiven if certain conditions are satisfied and are fully guaranteed by the SBA. The loans originated during 2021 bear an interest rate of 1.00% and we received gross origination fees of approximately $1.3 million. We received this fee revenue from the SBA during 2021, and it is being deferred over the life of the PPP loans and recognized as interest income. We began processing applications for forgiveness from this round beginning in May 2021 and 96.5% of loan balances have been forgiven as of December 31, 2021.

The following table provides a rollforward of the activity of PPP loans through December 31, 2021.

(dollars in thousands)

Number of Loans Principal Balance Net Deferred Fees

Net deferred fees recognized (1,253)

Net deferred fees recognized (1,624)

We anticipate that the majority of PPP loans we originated will ultimately be forgiven, in whole or in part, by the SBA in accordance with the terms of the program. Management anticipates that loan forgiveness applications will continue during 2022.

38

Allowance for Loan Losses

December 31,

Losses charged off

Commercial and industrial (28) (461)

Owner-occupied commercial real estate — (24)

Single tenant lease financing (2,391) —

Healthcare finance — (743)

Small business lending (222) (110)

Residential mortgage (6) (20)

Home equity (51) —

Recoveries

Commercial and industrial 89 6

Healthcare finance — 87

Small business lending 80 19

Residential mortgage 63 4

Home equity 7 11

Net charge-offs (recoveries) to average loans (annualized)

Commercial and industrial (0.08) % 0.58 %

Owner-occupied commercial real estate — % 0.03 %

Single tenant lease financing 0.26 % — %

Healthcare finance — % 0.16 %

Small business lending 0.11 % 0.08 %

Total commercial net charge-offs (recoveries) 0.10 % 0.05 %

Residential mortgage (0.03) % 0.01 %

Total consumer net charge-offs (recoveries) 0.04 % 0.08 %

Net charge-offs to average loans 0.09 % 0.06 %

The determination of the allowance for loan losses and the related provision for loan losses are components of our significant accounting policies as discussed within Note 1 to our consolidated financial statements. The adequacy of the allowance for loan losses and the provision are based on the review and evaluation of the loan portfolio and reflect management’s assessment of the risks and potential losses within the portfolio. This evaluation considers historical loss experience as well as qualitative factors such as economic and business conditions, portfolio growth, concentrations of credit in the portfolio, trends in risk grades, delinquencies within the portfolio and changes in our lending policies and practices.

Management actively monitors asset quality and, when appropriate, charges off loans against the allowance for loan losses. Although management believes it uses the best information available to make determinations with respect to the allowance for loan losses, future adjustments may be necessary if economic conditions differ substantially from those in the assumptions used to determine the size of the allowance for loan losses.

The allowance for loan losses was $27.8 million as of December 31, 2021, compared to $29.5 million as of December 31, 2020. The decrease in the allowance for loan losses compared to December 31, 2020 was due primarily to the elimination of $2.9 million of specific reserves related to single tenant lease financing loans and a commercial and industrial relationship, all of which had been classified as nonaccrual. The single tenant lease financing loans included a nonaccrual loan

39

that was paid off during the year and a relationship consisting of two loans, one of which was paid off at net book value (unpaid principal balance less specific reserves) and the other was transferred to OREO. The commercial and industrial relationship included four loans, two of which were paid off during the year. The decrease in the specific reserves was partially offset by additional adjustments to the qualitative factors in our allowance model that increased the allowance for loan losses to total loans.

The allowance for loan losses as a percentage of total loans was 0.96% as of December 31, 2021, or 0.97 % when excluding PPP Loans, compared to 0.96% and 0.98%, respectively, as of December 31, 2020. The allowance for loan losses as a percentage of nonperforming loans increased to 376.2% as of December 31, 2021, up from to 289.5% as of December 31, 2020. The provision for loans losses was $1.0 million for the twelve months ended December 31, 2021 compared to $9.3 million for the twelve months ended December 31, 2020. The decrease in the provision for loan losses was due primarily to the decline in loan balances during the year. During 2021, we recorded net charge-offs of $2.7 million, compared to $1.7 million during 2020. The increase in net charge-offs was due primarily to the elimination of the specific reserve related to the single tenant lease financing loans disclosed above, offset by a $0.7 million charge-off of a healthcare finance relationship in 2020.

Investment Securities Portfolio

In managing our investment securities portfolio, management focuses on providing an adequate level of liquidity and managing long-term interest rate risk, while earning an adequate level of investment income without taking undue risk. Investment securities that are acquired and held principally for the purpose of selling them in the near term with the objective of generating economic profits on short-term differences in market characteristics are classified as “trading securities.” We did not classify any securities as trading securities as of December 31, 2021 and 2020. Securities that we intend to hold until maturity are classified as “held-to-maturity” securities, and all other investment securities are classified as “available-for-sale.” The carrying values of available-for-sale investment securities are adjusted for unrealized gains or losses as a valuation allowance and any gain or loss is reported on an after-tax basis as a component of other comprehensive income (loss).

We periodically evaluate each security in an unrealized loss position to determine if the impairment is temporary or other-than-temporary. As of December 31, 2021, the unrealized losses in our investment securities portfolio were due primarily to interest rate changes. We have the ability and intent to hold all investment securities in an unrealized loss position resulting from interest rate changes to the earlier of the forecasted recovery or the maturity of the underlying investment security. As of December 31, 2021, we did not have any investment securities of a single issuer that exceeded 10% of shareholders’ equity. The term “issuer” excludes the U.S. Government and its sponsored agencies and corporations.

40

The following tables present the amortized cost and approximate fair value of our investment securities portfolio by security type as of the end of the last two years.

(amounts in thousands) December 31,

Securities available-for-sale

U.S. Government-sponsored agencies $ 50,013 $ 61,765

Agency mortgage-backed securities - residential 377,928 213,408

Agency mortgage-backed securities - commercial 36,024 28,387

Private label mortgage-backed securities - residential 15,902 57,268

Securities held-to-maturity

December 31,

Securities available-for-sale

U.S. Government-sponsored agencies $ 49,040 $ 60,545

Agency mortgage-backed securities - residential 373,236 214,330

Agency mortgage-backed securities - commercial 36,326 29,591

Private label mortgage-backed securities - residential 16,021 58,116

Securities held-to-maturity

The approximate fair value of investment securities available-for-sale increased $105.4 million, or 21.2%, to $603.0 million as of December 31, 2021 compared to $497.6 million as of December 31, 2020. The increase was due primarily to an increase of $158.9 million in agency mortgage-backed securities - residential and $6.7 million in agency mortgage-backed securities - commercial, partially offset by decreases of $42.1 million in private label mortgage-backed securities - residential, $11.5 million in U.S. Government-sponsored agencies securities, and $5.5 million in municipal securities. The increase in agency mortgage-backed securities was driven primarily by purchases during the twelve months ended December 31, 2021, partially offset by prepayments and maturities in agency and private label mortgage-backed securities and U.S. Government-sponsored agencies, as well as early redemptions and maturities in municipal securities. As of December 31, 2021, we had securities with an amortized cost basis of $59.6 million designated as held-to-maturity compared to $68.2 million as of December 31, 2020, a decrease of $8.7 million, due mainly to contractual calls within corporate securities.

41

Investment Maturities

The following table summarizes the contractual maturity schedule of our investment securities at their amortized cost and their weighted average yields at December 31, 2021.

Securities:

Accrued Income and Other Assets

Accrued income and other assets were $46.9 million at December 31, 2021 compared to $64.3 million at December 31, 2020. The decrease was primarily related to a decrease of $14.9 million in cash pledged as collateral. As of these dates, we pledged $15.7 million and $30.6 million, respectively, of cash collateral to counterparties on interest rate swap agreements as security for its obligations related to these agreements. Collateral posted and received is dependent on the fair value of the underlying agreements as of the respective date.

.

Deposits

The following table presents the composition of our deposit base as of the end of the last two years.

December 31,

Total deposits decreased $91.9 million, or 2.8%, to $3.2 billion as of December 31, 2021 compared to $3.3 billion as of December 31, 2020. This decrease was due primarily to a decline of $319.2 million, or 24.8%, in certificates of deposits, partially offset by increases of $133.4 million, or 9.9%, in money market accounts, $59.3 million, or 31.4%, in interest-bearing demand deposits, $20.8 million, or 21.5%, in noninterest-bearing deposits, and $16.8 million, or 38.9%, in savings accounts. We experienced strong growth in money market and interest-bearing demand deposits balances due to targeted digital marketing efforts to grow small business accounts, as well as consumers, small businesses and commercial clients increasing their cash balances due in part to the continued economic uncertainty resulting from the COVID-19 pandemic. The declines in certificates of deposits and brokered deposits were due to the maturity of higher cost balances and reduced pricing strategies designed to limit the volume of new production.

42

The following tables present contractual interest rates paid on time deposits, their scheduled maturities, and the scheduled maturities for time deposits greater than $250,000.

Time Deposit Maturities at December 31, 2021

Period to Maturity Percentage of Total Certificate Accounts

Interest Rate:

Time Deposit Maturities Greater than $250,000

(dollars in thousands) December 31, 2021

Maturity Period:

Federal Home Loan Bank Advances

Although deposits are the primary source of funds for our lending and investment activities and for general business purposes, we may use short-term advances from the Federal Home Loan Bank of Indianapolis (the “FHLB”) to manage liquidity needs and longer-term advances to supplement balance sheet growth and manage interest rate risk. Refer to Note 18 to our consolidated financial statements for additional information about derivative financial instruments. The following table is a summary of FHLB borrowings for the periods indicated.

At Or For The Twelve Months Ended December 31,

Weighted average interest rate at end of period 1 1.65 % 1.30 % 1.98 %

Weighted average interest rate during period 1 1.68 % 1.78 % 2.15 %

1 Excludes the impact of interest rate swaps.

Subordinated Notes due 2031

On August 16, 2021, we issued $60.0 million of subordinated notes at an initial fixed interest rate of 3.75%, which is payable semi-annually. Beginning on September 1, 2026, the interest rate converts to a variable interest rate, reset quarterly, equal to the three-month Term SOFR plus 3.11%, which is payable quarterly. The subordinated notes mature on September 1, 2031. The subordinated notes, net of issuance costs, were $58.6 million million at December 31, 2021. On December 30, 2021, we completed an exchange of $59.3 million principal amount of the subordinated notes for substantially identical subordinated notes registered under the Securities Act of 1933, in satisfaction of our obligations under a registration rights agreement entered into with the initial purchasers of the subordinated notes. The subordinated notes qualify for Tier 2 regulatory capital treatment at the Company level under applicable regulatory guidelines.

For additional information regarding these and our other outstanding subordinated notes, refer to Note 10 to our consolidated financial statements

43

Accrued Expenses and Other Liabilities

Accrued expenses and other liabilities were $30.5 million at December 31, 2021 compared to $48.4 million at December 31, 2020. The decrease in accrued expenses and other liabilities was due primarily to an $16.1 million, or 52.9%, decrease in derivative liabilities due to changes in fair value.

Liquidity and Capital Resources

Liquidity management is the process we use to manage the continuing flow of funds necessary to meet our 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 our operating, investing and financing activities. The primary sources of funds are deposits, principal and interest payments on loans and investment securities, maturing loans and investment securities, access to wholesale funding sources and collateralized borrowings. While scheduled payments and maturities of loans and investment securities are relatively predictable sources of funds, deposit flows are greatly influenced by interest rates, general economic conditions and competition. We supplement deposit growth and enhance interest rate risk management, if necessary, through borrowings and wholesale funding, which are generally advances from the FHLB and brokered deposits.

We hold cash and investment securities that qualify as liquid assets to maintain adequate liquidity to ensure safe and sound operations and to meet our financial commitments. At December 31, 2021, on a consolidated basis, we had $1.0 billion in cash and cash equivalents and investment securities available-for-sale, and $47.7 million in loans held-for-sale that were generally available for our cash needs. Additionally, at December 31, 2021, the Bank had the ability to borrow an additional $596.5 million in advances from the FHLB 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 December 31, 2021, the Company, on an unconsolidated basis, had $52.9 million in cash generally available for its cash needs, which is in excess of its current annual regular shareholder dividend and operating expenses.

We use our sources of funds primarily to meet ongoing financial commitments, including withdrawals by depositors, credit commitments to borrowers, operating expenses and capital expenditures. At December 31, 2021, approved outstanding loan commitments, including unused lines of credit, amounted to $324.3 million. Certificates of deposits and brokered certificates of deposits scheduled to mature in one year or less at December 31, 2021 totaled $747.6 million.

Thefollowing table presents the Company’s significant contractual obligations as of December 31, 2021.

Payments Due In

1 Amounts do not include associated interest payments.

2 Amounts do not include the effect of interest rate swaps used to convert short-term advances into long-term funding.

On October 18, 2021, our Board of Directors approved a stock repurchase program authorizing the repurchase of up to $30.0 million of our outstanding common stock from time to time on the open market or in privately negotiated transactions. The stock repurchase authorization is scheduled to expire on December 31, 2022.

44

Reconciliation of Non-GAAP Financial Measures

This Management's Discussion and Analysis contains financial information determined by methods other than in accordance with GAAP. Non-GAAP financial measures, specifically tangible common equity, tangible assets, tangible book value per common share, tangible common equity to tangible assets ratio, average tangible common equity, return on average tangible common equity, total interest income - FTE, net interest income - FTE, adjusted net interest income, adjusted net interest income - FTE, net interest margin - FTE, adjusted net interest margin, adjusted net interest margin - FTE, allowance for loan losses, loans, excluding PPP loans, adjusted total revenue, adjusted noninterest income, adjusted noninterest expense, adjusted income before income taxes, adjusted income tax provision, adjusted net income, adjusted diluted earnings per share, adjusted return on average assets, adjusted return on average shareholders' equity, adjusted return on average tangible common equity and adjusted effective income tax rate are used by the Company's management to measure the strength of its capital and analyze profitability, including its ability to generate earnings on tangible capital invested by its shareholders. The Company also believes that it is standard practice in the banking industry to present total interest income, net interest income and net interest margin on a fully-taxable equivalent basis, as those measures provide useful information for peer comparisons. Although the Company believes these non-GAAP financial measures provide a greater understanding of its business, they should not be considered a substitute for financial measures determined in accordance with GAAP, nor are they necessarily comparable to non-GAAP financial measures that may be presented by other companies. Reconciliations of these non-GAAP financial measures to the most directly comparable GAAP financial measures are included in the following table for the last three completed fiscal years ended on December 31.

Adjustments:

Adjustments:

Total shareholders’ equity to assets 9.03 % 7.79 % 7.44 %

Tangible common equity to tangible assets 8.93 % 7.69 % 7.33 %

Adjustments:

Return on average shareholders' equity 13.44 % 9.39 % 8.52 %

Return on average tangible common equity 13.61 % 9.53 % 8.65 %

Adjustments:

Adjustments:

45

Adjustments:

Subordinated debt redemption cost 810 — —

Adjustments:

Subordinated debt redemption cost 810 — —

Effect of fully-taxable equivalent adjustments1 0.14 % 0.13 % 0.17 %

Net interest margin - FTE 2.25 % 1.68 % 1.82 %

Effect of subordinated debt redemption cost 0.02 % — % — %

Adjusted net interest margin 2.13 % 1.55 % 1.65 %

Effect of fully-taxable equivalent adjustments1 0.14 % 0.13 % 0.17 %

Effect of subordinated debt redemption cost 0.02 % — % — %

Adjusted net interest margin - FTE 2.27 % 1.68 % 1.82 %

Adjustments:

Allowance for loan losses to loans 0.96 % 0.96 % 0.74 %

Effect of PPP loans 0.01 % 0.02 % — %

Allowance for loan losses to loans, excluding PPP loans 0.97 % 0.98 % 0.74 %

1Assuming a 21% tax rate

46

Adjustments:

Gain on sale of premises and equipment (2,523) — —

Subordinated debt redemption cost 810 — —

Adjustments:

Gain on sale of premises and equipment (2,523) — —

Adjustments:

Acquisition-related expenses (163) — —

IT termination fee (475) — —

Adjustments:

Write-down of other real estate owned — 2,065 —

Gain on sale of premises and equipment (2,523) — —

Subordinated debt redemption cost 810 — —

Acquisition-related expenses 163 — —

IT termination fee 475 — —

Adjustments:

Write-down of other real estate owned — 434 —

Gain on sale of premises and equipment (530) — —

Subordinated debt redemption cost 170 — —

Acquisition-related expenses 34 — —

IT termination fee 100 — —

Net deferred tax asset revaluation — — —

Adjustments:

Write-down of other real estate owned — 1,631 —

Gain on sale of premises and equipment (1,993) — —

Subordinated debt redemption cost 640 — —

Acquisition-related expenses 129 — —

IT termination fee 375 — —

Net deferred tax asset revaluation — — —

Diluted earnings per share - GAAP $ 4.82 $ 2.99 $ 2.51

Adjustments:

Effect of write-down of other real estate owned — 0.17 —

Effect of gain on sale of premises and equipment (0.19) — —

Effect of subordinated debt redemption cost 0.06 — —

Effect of acquisition-related expenses 0.01 — —

47

Effect of IT termination fee 0.04 — —

Effect of net deferred tax asset revaluation — — —

Adjusted diluted earnings per share $ 4.74 $ 3.16 $ 2.51

Effect of write-down of other real estate owned — % 0.04 % — %

Effect of gain on sale of premises and equipment (0.05) % — % — %

Effect of subordinated debt redemption cost 0.02 % — % — %

Effect of acquisition-related expenses — % — % — %

Effect of IT termination fee 0.01 % — % — %

Effect of net deferred tax asset revaluation — % — % — %

Adjusted return on average assets 1.12 % 0.73 % 0.65 %

Return on average shareholders' equity 13.44 % 9.39 % 8.52 %

Effect of write-down of other real estate owned — % 0.52 % — %

Effect of gain on sale of premises and equipment (0.56) % — % — %

Effect of subordinated debt redemption cost 0.18 % — % — %

Effect of acquisition-related expenses 0.04 % — % — %

Effect of IT termination fee 0.10 % — % — %

Effect of net deferred tax asset revaluation — % — % — %

Adjusted return on average shareholders' equity 13.20 % 9.91 % 8.52 %

Return on average tangible common equity 13.61 % 9.53 % 8.65 %

Effect of write-down of other real estate owned — % 0.53 % — %

Effect of gain on sale of premises and equipment (0.56) % — % — %

Effect of subordinated debt redemption cost 0.18 % — % — %

Effect of acquisition-related expenses 0.04 % — % — %

Effect of IT termination fee 0.10 % — % — %

Effect of net deferred tax asset revaluation — % — % — %

Adjusted return on average tangible common equity 13.37 % 10.06 % 8.65 %

Effective income tax rate 15.0 % 13.1 % 7.1 %

Effect of write-down of other real estate owned — % 0.5 % — %

Effect of gain on sale of premises and equipment (0.4) % — % — %

Effect of subordinated debt redemption cost 0.1 % — % — %

Effect of acquisition-related expenses — % — % — %

Effect of IT termination fee 0.1 % — % — %

Effect of net deferred tax asset revaluation — % — % — %

Adjusted effective income tax rate 14.8 % 13.6 % 7.1 %

Critical Accounting Policies and Estimates

Allowance for Loan Losses. We believe the allowance for loan losses is the critical accounting policy that requires the most significant judgments and assumptions used in the preparation of our consolidated financial statements. An estimate of potential losses inherent in the loan portfolio is determined and an allowance for those losses is established by considering factors including historical loss rates, expected cash flows, estimated collateral values, and other qualitative factors. The allowance for loan losses represents management’s best estimate of losses inherent in the existing loan portfolio. The allowance for loan losses is increased by the provision for loan losses charged to expense and reduced by loans charged off, net of recoveries. Management evaluates the allowance for loan losses quarterly. If the underlying assumptions later prove to be inaccurate based on subsequent loss evaluations, the allowance for loan losses is adjusted.

48

Management estimates the appropriate level of allowance for loan losses by separately evaluating impaired and non-impaired loans. A specific allowance is assigned to an impaired loan when expected cash flows or collateral do not justify the carrying amount of the loan. The methodology used to assign an allowance to a non-impaired loan is more subjective. Generally, the allowance assigned to non-impaired loans is determined by applying historical loss rates to existing loans with similar risk characteristics, adjusted for qualitative factors including changes in economic and business conditions, unemployment rates, concentrations of credit, changes in the nature and volume of the portfolio, terms of loans, risk grades, trends in charge-offs and recoveries, trends in delinquencies, nonaccrual loans, and impaired loans, and changes in lending policies and procedures. Because the economic and business climate in any given industry or market, and its impact on any given borrower, can change rapidly, the risk profile of the loan portfolio is periodically assessed and adjusted when appropriate. Notwithstanding these procedures, there still exists the possibility that the assessment could prove to be significantly incorrect and that an immediate adjustment to the allowance for loan losses would be required.

Investments in Debt and Equity Securities. We classify investments in debt and equity securities as available-for-sale in accordance with Accounting Standards Codification, or ASC, Topic 320, “Accounting for Certain Investments in Debt and Equity Securities.” Securities classified as held-to-maturity would be recorded at cost or amortized cost. Available-for-sale securities are carried at fair value. Fair value calculations are based on quoted market prices when such prices are available. If quoted market prices are not available, estimates of fair value are computed using a variety of pricing sources, including Reuters/EJV, Interactive Data and Standard & Poors. Due to the subjective nature of the valuation process, it is possible that the actual fair values of these investments could differ from the estimated amounts, thereby affecting our financial position, results of operations and cash flows. If the estimated value of investments is less than the cost or amortized cost, management evaluates whether an event or change in circumstances has occurred that may have a significant adverse effect on the fair value of the investment. If such an event or change has occurred and management determines that the impairment is other-than-temporary, a further determination is made as to the portion of impairment that is related to credit loss. The impairment of the investment that is related to the credit loss is expensed in the period in which the event or change occurred. The remainder of the impairment is recorded in other comprehensive income (loss).

Other Real Estate Owned. OREO acquired through loan foreclosure is initially recorded at fair value less costs to sell when acquired, establishing a new cost basis. The adjustment at the time of foreclosure is recorded through the allowance for loan losses. Due to the subjective nature of establishing the fair value when the asset is acquired, the actual fair value of the OREO or foreclosed asset could differ from the original estimate. If it is determined that fair value declines subsequent to foreclosure, a valuation adjustment is recorded through noninterest expense. Net operating costs associated with the assets after acquisition are also recorded as noninterest expense. Gains and losses on the disposition of OREO and foreclosed assets are netted and posted through noninterest income.

Impairment of Goodwill. As a result of a previous acquisition by the Company, goodwill, an intangible asset with an indefinite life, is reflected on the balance sheet. Goodwill is evaluated for impairment annually, unless there are factors present that indicate a potential impairment, in which case, the goodwill impairment test is performed more frequently.

Deferred Income Tax Assets/Liabilities. Our net deferred income tax asset arises from differences in the dates that items of income and expense enter into our reported income and taxable income. Deferred tax assets and liabilities are established for these items as they arise. From an accounting standpoint, deferred tax assets are reviewed to determine if they are realizable based on the historical level of taxable income, estimates of future taxable income and the reversals of deferred tax liabilities. In most cases, the realization of the deferred tax asset is based on future profitability. If we were to experience net operating losses for tax purposes in a future period, the realization of deferred tax assets would be evaluated for a potential valuation reserve.

Recent Accounting Pronouncements

Refer to Note 22 to our consolidated financial statements.

Off-Balance Sheet Arrangements

In the ordinary course of business, we enter into financial transactions to extend credit, interest rate swaps and forms of commitments that may be considered off-balance sheet arrangements. Interest rate swaps are arranged to receive hedge accounting treatment and are classified as either fair value or cash flow hedges. Fair value hedges are purchased to convert certain fixed rate assets to floating rate. Cash flow hedges are used to convert certain variable rate liabilities into fixed rate liabilities. In June 2020, we terminated all fair value hedging instruments associated with loans. At December 31, 2021 and December 31, 2020, we had interest rate swaps with notional amounts of $260.0 million and $298.2 million, respectively. Additionally, we enter into forward contracts relating to our mortgage banking business to hedge the exposures we have from commitments to extend new residential mortgage loans to our customers and from our mortgage loans held-for-sale. At

49

December 31, 2021 and December 31, 2020, we had commitments to sell residential real estate loans of $72.8 million and $107.5 million, respectively. These contracts mature in less than one year. Refer to Note 18 to our consolidated financial statements for additional information about derivative financial instruments.

50

Item 7A. 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 its interest rate risk position using income simulation models and economic value of equity (“EVE”) sensitivity analysis that capture both short-term and long-term interest rate risk exposure. Income simulation involves forecasting net interest income (“NII”) under a variety of interest rate scenarios. 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 as its base case scenario which reflects market expectations for rate increases over the next 24 months. Presented below is the estimated impact on our NII and EVE position as of December 31, 2021, assuming a static balance sheet and instantaneous parallel shifts in interest rates:

% Change from Base Case for Instantaneous Parallel Changes in Rates

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 our NII and EVE position as of December 31, 2021, assuming a static balance sheet and gradual parallel shifts in interest rates over a twelve-month period:

% Change from Base Case for Gradual Parallel Changes in Rates

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

•Increasing the proportion of low-duration or variable-rate loans to total loans, including organic growth in SBA,

construction or C&I lending

•Selling longer-term fixed rate loans

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

•Extending the duration of wholesale funding

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

•Repositioning the investment portfolio to manage its duration

51

Item 8. Financial Statements and Supplementary Data

The consolidated financial statements and notes thereto required pursuant to this Item begin on page F-1 of this report.

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

None.

Item 9A. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

The Company maintains disclosure controls and procedures that are designed to ensure that information the Company is required to disclose in reports that the Company files or submits under the Exchange Act is recorded, processed, summarized and reported within the time period specified in SEC rules and forms. These controls and procedures are also designed to ensure that such information is accumulated and communicated to management, including our principal executive and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure. 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 Company’s principal executive officer and principal financial officer, to assess the effectiveness of the design and operation of our 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 as of December 31, 2021.

Report of Management's Assessment of Internal Control Over Financial Reporting

Management is responsible for establishing and maintaining adequate internal control over financial reporting for the Company, including accounting and other internal control systems that, in the opinion of management, provide reasonable assurance that (1) transactions are properly authorized, (2) the assets are properly safeguarded, and (3) transactions are properly recorded and reported to permit the preparation of the consolidated financial statements in conformity with accounting principles generally accepted in the United States. The Company’s management assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2021. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control—Integrated Framework (2013). Based on that assessment, management concluded that, as of December 31, 2021, the Company’s internal control over financial reporting was effective based on those criteria. The Company’s internal control over financial reporting as of December 31, 2021 has been audited by BKD, LLP, an independent registered public accounting firm, as stated in its report appearing on page F-2.

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 December 31, 2021, that has materially affected or is reasonably likely to materially affect, the Company's internal control over financial reporting.

Item 9B. Other Information

None.

Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections

Not Applicable.

52

PART III

Certain information required by Part III is incorporated by reference from our definitive Proxy Statement for our 2022 Annual Meeting of Shareholders (the “Proxy Statement”), which we intend to file with the SEC pursuant to Regulation 14A within 120 days after December 31, 2021. Except for those portions specifically incorporated by reference from our Proxy Statement, no other portions of the Proxy Statement are deemed to be filed as part of this report.

Item 10. Directors, Executive Officers and Corporate Governance

Information about our Executive Officers

Our executive officers are as follows:

Name Age Position

David B. Becker 68 Chairman, Chief Executive Officer and Director

Nicole S. Lorch 47 President and Chief Operating Officer

Kenneth J. Lovik 52 Executive Vice President and Chief Financial Officer

C. Charles Perfetti 77 Executive Vice President and Secretary

David B. Becker has served as our Chairman of the Board since 2006, as our Chief Executive Officer since 2007, and as our President from 2007 to June 2021. Mr. Becker is the founder of the Bank and has served as an officer and director of the Bank since 1998.

Nicole S. Lorch has served as President and Chief Operating Officer since June 2021. Previously, she served as Executive Vice President and Chief Operating Officer since January 2017. Ms. Lorch joined the Company as Director of Marketing in 1999 and served as Vice President, Marketing & Technology from 2003 to 2011 and Senior Vice President, Retail Banking from 2011 to January 2017. She previously served as Director of Marketing at Virtual Financial Services, an online banking services provider, from 1996 to 1999.

Kenneth J. Lovik has served as Executive Vice President and Chief Financial Officer of the Company since January 2017. Mr. Lovik joined the Company in August 2014 as Senior Vice President and Chief Financial Officer. Previously, he served as Senior Vice President, Investor Relations and Corporate Development, at First Financial Bancorp, a publicly traded bank holding company headquartered in Cincinnati, Ohio, from February 2013 to May 2014. Prior to that, he served as its Vice President, Investor Relations and Corporate Development, from 2010 to February 2013. Before First Financial Bancorp, he was an investment banker at Milestone Advisors, LLC, Howe Barnes Hoefer & Arnett, Inc. and A.G. Edwards & Sons, Inc.

C. Charles Perfetti has served as Executive Vice President since January 2017 and Secretary since May 2014. He previously served as Senior Vice President from 2012 until January 2017. Mr. Perfetti joined First Internet Bancorp in 2007 upon our acquisition of Landmark Financial Corporation, where he had served as President from 1989 to 2007. He previously conducted independent real estate and government consulting and served as the Chief Investment Manager of the State of Indiana from 1979 to 1986.

Executive officers are elected annually by our Board of Directors and serve a one-year period or until their successors are elected. None of the above-identified executive officers are related to each other or to any of our directors.

Code of Business Conduct and Ethics

We have adopted a code of business conduct and ethics that applies to all of our directors and officers and other employees, including our principal executive officer and principal financial officer. This code is publicly available through the Corporate Governance section of our website at www.firstinternetbancorp.com. To the extent permissible under applicable law, the rules of the SEC or Nasdaq listing standards, we intend to post on our website any amendment to the code of business conduct and ethics, or any grant of a waiver from a provision of the code of business conduct and ethics, that requires disclosure under applicable law, the rules of the SEC or Nasdaq listing standards.

The disclosure in the Proxy Statement under the headings “Proposal No. 1 - Election of Directors,” “Corporate Governance,” “Shareholder proposals for 2021 Annual Meeting,” and, if applicable “Delinquent Section 16(a) Reports” is incorporated into this Item by reference.

53

Item 11. Executive Compensation

Incorporated into this Item by reference is the information in the Proxy Statement regarding the compensation of our named executive officers appearing under the heading “Executive Compensation,” the information regarding compensation committee interlocks and insider participation under the heading “Corporate Governance” and the information regarding compensation of non-employee directors under the heading “Director Compensation.”

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

Incorporated into this Item by reference is the information in the Proxy Statement appearing under the headings “Security Ownership of Certain Beneficial Owners and Management” and “Equity Compensation Plan Information.”

Item 13. Certain Relationships and Related Transactions, and Director Independence

Incorporated into this Item by reference is the information in the Proxy Statement regarding director independence and related person transactions under the heading “Corporate Governance.”

Item 14. Principal Accountant Fees and Services

Incorporated into this Item by reference is the information in the Proxy Statement under the heading “Audit-Related Matters.” The independent registered public accounting firm is BKD, LLP (Public Company Accounting Oversight Board Firm ID No. 686) located in Indianapolis, Indiana.

54

PART IV

Item 15. Exhibits and Financial Statement Schedules

(a)Documents Filed as Part of this annual report on Form 10-K:

1. See our financial statements beginning on page F-1.

(b)Exhibits:

Exhibit No. Description

55

Exhibit No. Description

21.1 List of Subsidiaries

23.1 Consent of Independent Registered Public Accounting Firm

24.1 Powers of Attorney

31.1 Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer

31.2 Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer

__________________________________

*Management contract, compensatory plan or arrangement required to be filed as an exhibit.

**Schedules and exhibits have been omitted pursuant to Item 601(a)(5) of Regulation S-K. A copy of any omitted schedule or exhibit will be furnished to the SEC upon request; provided, however, that the parties may request confidential treatment pursuant to Rule 24b-2 of the Exchange Act for any document so furnished.

Item 16. Form 10-K Summary.

None.

56

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, on March 15, 2022.

FIRST INTERNET BANCORP

By: /s/ David B. Becker

David B. Becker,Chairman and Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed below by the following persons on behalf of the Registrant and in the capacities indicated on March 15, 2022.

/s/ David B. Becker /s/ Kenneth J. Lovik

* *

Aasif M. Bade, Director David R. Lovejoy, Director

* *

Justin P. Christian, Director Ralph R. Whitney, Jr., Director

* *

Ann Colussi Dee, Director Jerry Williams, Director

* *

Ana Dutra., Director Jean L. Wojtowicz, Director

*

John K. Keach, Jr., Director

* David B. Becker, by signing his name hereto, does hereby sign this document on behalf of each of the above-named directors of the Registrant pursuant to powers of attorney duly executed by such persons.

By: /s/ David B. Becker

David B. Becker,Attorney-in-Fact

57

Reports of Independent Registered Public Accounting Firm

To the Shareholders, Board of Directors and Audit Committee

First Internet Bancorp

Fishers, Indiana

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of First Internet Bancorp (the “Company”) as of December 31, 2021 and 2020, the related consolidated statements of income, comprehensive income, shareholders’ equity and cash flows for each of the years in the three-year period ended December 31, 2021 and the related notes (collectively referred to as the “financial statements”). In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2021 in conformity with accounting principles generally accepted in the United States of America.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the Company’s internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) and our report dated March 15, 2022 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.

Basis for Opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits.

We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

F-1

Critical Audit Matters

The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.