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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, 2024 and 2023. Discussion, analysis and comparisons of the years ended December 31, 2023 and 2022 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, 2023. 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.

Results of Operations

During the twelve months ended December 31, 2024, net income was $25.3 million, or $2.88 per diluted share, compared to net income of $8.4 million, or $0.95 per diluted share, for the twelve months ended December 31, 2023 and net income of $35.5 million, or $3.70 per diluted share, for the twelve months ended December 31, 2022.

The $16.9 million increase in net income for the twelve months ended December 31, 2024 compared to the twelve months ended December 31, 2023 was due primarily to an increase of $21.2 million, or 81.2%, in noninterest income, an increase of $12.5 million, or 16.7%, in net interest income, partially offset by an increase of $10.7 million, or 13.4%, in noninterest expense, an increase of $5.7 million, in income tax expense and an increase of $0.4 million, or 2.5%, in provision for credit losses.

During the twelve months ended December 31, 2024, return on average assets (“ROAA”), return on average equity (“ROAE”) and return on average tangible common equity (“ROATCE”) were 0.46%, 6.70% and 6.78%, respectively. The Company recognized gains of $2.9 million from termination of interest rate swap agreements and $1.8 million from prepayment of FHLB advances as well as expenses of $0.5 million in IT termination fees and $0.1 million in anniversary expenses. Adjusted net income for the twelve months ended December 31, 2024, was $22.0 million, and adjusted diluted earnings per share was $2.51. Additionally, for the twelve months ended December 31, 2024, adjusted ROAA, adjusted ROAE and adjusted ROATCE were 0.40%, 5.83% and 5.90%, respectively.

Due to the steep decline in consumer mortgage volumes and the negative outlook for consumer mortgage lending, the Company decided to exit its consumer mortgage business during the first quarter 2023. This included its nationwide digital direct-to-consumer mortgage platform that originated residential loans for sale in the secondary market, as well as its local traditional consumer mortgage and construction-to-permanent business. In connection with this decision, the Company recognized $3.1 million of mortgage operations and exit costs during the twelve months ended December 31, 2023. The Company also recognized $0.1 million of mortgage banking revenue during the twelve months ended December 31, 2023.

Additionally, during the twelve months ended December 31, 2023, the Company recognized a $6.9 million partial charge-off related to a commercial and industrial participation loan with a balance of $9.8 million, prior to the partial charge-off, that was moved to nonaccrual status late in the first quarter 2023. The Company received payment for the remaining balance of the participation loan during 2023.

The decrease in net income of $27.1 million for the twelve months ended December 31, 2023 compared to the twelve months ended December 31, 2022 was due primarily to a decrease of $22.2 million, or 22.9%, in net interest income, an increase of $11.7 million, or 234.6%, in provision for loan losses and an increase of $6.2 million, or 8.4%, in noninterest expense, partially offset by a decrease of $8.0 million, or 176.3%, in income tax expense and an increase of $4.9 million, or 22.9%, in noninterest income.

During the twelve months ended December 31, 2023, ROAA, ROAE and ROATCE were 0.17%, 2.35% and 2.38%, respectively. Excluding the impact of exiting consumer mortgage and the partial charge-off, adjusted net income for the twelve months ended December 31, 2023 was $16.2 million and adjusted diluted earnings per share was $1.83. Additionally, for the twelve months ended December 31, 2023, adjusted ROAA, adjusted ROAE and adjusted ROATCE were 0.33%, 4.54% and 4.60%, respectively.

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.

Consolidated Average Balance Sheets and Net Interest Income Analyses

For the periods presented, the following table provides the average balances of interest-earning assets and interest-bearing liabilities and the related yields and cost of funds. The table does 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

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, 2024 was $87.4 million, an increase of $12.5 million, or 16.7%, compared to $74.9 million for the twelve months ended December 31, 2023. The increase in net interest income was the result of a $52.4 million, or 21.9%, increase in total interest income to $291.9 million for the twelve months ended December 31, 2024 compared to $239.4 million for the twelve months ended December 31, 2023. The increase in total interest income was partially offset by a $40.0 million, or 24.3%, increase in total interest expense to $204.5 million for the twelve months ended December 31, 2024 compared to $164.5 million for the twelve months ended December 31, 2023.

The growth in total interest income was due primarily to an increase in interest earned on loans resulting from an increase of 63 bps in the yield earned on loans, as well as an increase of $311.7 million, or 8.5%, in the average balance of loans, including loans held-for-sale. Additionally, the average balance of securities increased $146.7 million, or 23.5%, and the yield earned on the securities portfolio increased 64 bps. The increase in the yield earned on loans and securities was due to the impact of the continued elevated interest rate environment on both existing and newly-originated interest-earning assets. The yield on funded portfolio originations was 8.29% for the twelve months ended December 31, 2024, an increase of 5 bps compared to the twelve months ended December 31, 2023.

The increase in total interest expense was due primarily to increases of $29.8 million, or 34.8%, in interest expense associated with certificates and brokered deposits, $4.6 million, or 329.6%, in interest expense associated with fintech - brokered deposits and $4.3 million, or 68.9%, in interest expense associated with interest-bearing demand deposits. The increase in interest expense related to certificates and brokered deposits was driven by an increase of 55 bps in the cost of these deposits, as well as an increase of $390.2 million, or 19.1%, in the average balance of these deposits. The increase in the average balance of these deposits was driven by strong consumer and small business demand for certificates of deposits in 2024, partially offset by lower brokered deposit balances, as the Company used on-balance sheet liquidity to pay down higher-cost balances throughout 2024. The increase in interest expense related to fintech - brokered deposits was driven primarily by an increase of $108.8 million, or 329.6%, in the average balance of these deposits. The balance of these deposits is driven by payments volume associated with one of the Company’s fintech partnerships, which increased significantly year-over-year. The increase in interest expense related to interest-bearing demand deposits was due primarily to a 42 bp increase in the cost of these deposits, as well as an increase of $128.0 million, or 35.0%, in the average balance of these deposits. The increase in the average balance of these deposits was due to growth in deposit activity from certain fintech partnerships. The increase in the cost of funds across all of these deposit types reflects the impact of the elevated interest rate environment throughout 2024.

Net interest margin (“NIM”) was 1.65% for the twelve months ended December 31, 2024 compared to 1.56% for the twelve months ended December 31, 2023. On a fully-taxable equivalent (“FTE”) basis, NIM was 1.74% for the twelve months ended December 31, 2024 compared to 1.67% for the twelve months ended December 31, 2023, an increase of 7 bps. The increase in NIM and FTE NIM compared to the twelve months ended December 31, 2023 reflects the decelerating pace of increase in the cost of interest-bearing deposits and the Company’s focus on shifting the loan composition towards variable rate and higher-yielding products.

Noninterest Income

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

Twelve Months Ended December 31,

Mortgage banking activities — 76 5,464

During the twelve months ended December 31, 2024, noninterest income totaled $47.3 million, representing an increase of $21.2 million, or 81.2%, compared to $26.1 million for the twelve months ended December 31, 2023. The increase in noninterest income was driven primarily by increases of $12.8 million in gain on sale of loans, $7.1 million in other income and $1.3 million in net loan servicing revenue. The increase in gain on sale of loans was due primarily to an increase of 48.8% in the volume of SBA 7(a) guaranteed loan sales as well as an increase of 83 bps to 108.17% in net gain on sale premium for the year. The increase in other income was due primarily to distributions from fund investments, as well as a gain on termination of interest rate swaps of $2.9 million and a gain on prepayment of FHLB advances of $1.8 million. The increase in net loan servicing revenue was due to growth in the balance of the Company’s SBA 7(a) servicing portfolio, partially offset by the fair value adjustment to the loan servicing asset.

Noninterest Expense

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

Twelve Months Ended December 31,

Noninterest expense for the twelve months ended December 31, 2024 was $90.1 million, representing an increase of $10.7, or 13.4%, compared to $79.4 million for the twelve months ended December 31, 2023. The increase was due primarily to increases of $6.4 million, or 14.2%, in salaries and employee benefits, $1.3 million, or 12.3%, in premises and equipment, $1.1 million, or 28.9%, in deposit insurance premium, $0.9 million, or 14.8%, in other expenses and $0.7 million, or 21.5%, in consulting and professional fees. The increase in salaries and employee benefits was due primarily to higher small business lending incentive compensation and staff additions in small business lending and risk management, as well as higher incentive compensation accruals based on the increase in net income in 2024. The increase in premises and equipment was due primarily to non-recurring IT termination fees, property taxes and software maintenance expense. The increase in deposit insurance premium was due mainly to year-over-year asset growth and changes in the composition of the loan and deposit portfolios. The increase in other expenses was due primarily to various expenses, none of which were individually significant. The increase in consulting and professional fees was due primarily to increased consulting and audit fees.

Income Taxes

The following table reconciles reported income provision tax (benefit) 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 (3,500) (3,951) (4,190)

State income taxes, net of federal tax effect 47 (30) 592

We recognized an income tax provision of $2.3 million and an effective tax rate of 8.2% in 2024, compared to an income tax benefit of $3.5 million in 2023. Our federal statutory tax rate was 21% in 2024 and 2023. In 2024 and 2023, the variance from the federal statutory rate was due primarily to tax-exempt income. Interest income on certain loans or securities issued by governmental, municipal and not-for-profit entities, and earnings from bank-owned life insurance were the primary components of tax-exempt income. The income tax benefits recognized during 2023 also reflect the benefit of tax exempt income relative to stated pre-tax income, as well as the impact on pre-tax income from mortgage exit costs and the partial charge-off of a commercial and industrial participation loan in 2023.

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 increased $570.3 million, or 11.0%, to $5.7 billion as of December 31, 2024 compared to $5.2 billion as of December 31, 2023. Balance sheet growth was driven primarily by an increase in total deposits of $866.2 million, or 21.3%. The increase in deposits was used, in part, to fund loan growth, as loan balances increased $330.4 million. or 8.6%. Furthermore, additional liquidity from the increase in deposits was deployed to reduce advances from the FHLB, which declined as FHLB advances decreased $319.9 million, or 52.0%. As deposit growth outpaced loan growth, balance sheet liquidity increased as the combined balance of cash and securities increased $195.7 million, or 17.7%, and the percentage of loans to deposits declined to 84.5% as of December 31, 2024 from 94.4% as of December 31, 2023.

As of December 31, 2024, total shareholders’ equity was $384.1 million, an increase of $21.3 million, or 5.9%, compared to December 31, 2023. The increase in shareholders’ equity was due primarily to the net income earned during 2024, partially offset by an increase in accumulated other comprehensive loss. Tangible common equity totaled $379.4 million as of December 31, 2024, representing an increase of $21.3 million, or 5.9%, compared to December 31, 2023. The ratio of total shareholders’ equity to total assets decreased to 6.69% as of December 31, 2024 from 7.02% as of December 31, 2023 and the ratio of tangible common equity to tangible assets decreased to 6.62% as of December 31, 2024 from 6.94% as of December 31, 2023.

Book value per common share increased 5.6% to $44.31 as of December 31, 2024 from $41.97 as of December 31, 2023. Tangible book value per share increased 5.6% to $43.77 as of December 31, 2024 from $41.43 as of December 31, 2023. The increase in both book value per common share and tangible book value per share was driven primarily by the increases in total shareholders’ equity and tangible common equity. Refer to the “Reconciliation of Non-GAAP Financial Measures” section of Item 7 of Part II of this report, Management's Discussion and Analysis of Financial Condition and Results of Operations for additional information.

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

Allowance for credit losses - loans (44,769) (38,774)

1 Balances include $34.0 million and $33.5 million that are guaranteed by the U.S. government as of December 31, 2024 and December 31, 2023, respectively.

2 Includes carrying value adjustments of $22.9 million and $27.8 million related to terminated interest rate swaps associated with public finance loans as of December 31, 2024 and December 31, 2023, respectively.

Total loans were $4.2 billion as of December 31, 2024, an increase of $330.4 million, or 8.6%, compared to December 31, 2023. Total commercial loan balances were $3.3 billion, as of December 31, 2024, an increase of $336.7 million, or 11.2%, from December 31, 2023. Total consumer loan balances were $801.4 million as of December 31, 2024, an increase of $4.5 million, or 0.6%, compared to December 31, 2023. Compared to December 31, 2023, in connection with the Company’s focus on variable rate products, the increase in commercial loan balances was driven by growth in the construction, investor commercial real estate and small business lending portfolios. The increase was partially offset by continued runoff in the healthcare finance portfolio and a decrease in the fixed-rate public finance portfolio. Additionally, commercial and industrial balances declined due primarily to early payoffs. The slight increase in consumer loan balances was due primarily to new origination activity in the other consumer loans portfolios, partially offset by a decrease in the residential mortgage portfolio.

Loan Maturities and Rate Sensitivity

The following table shows the contractual maturity distribution intervals (without regard to repayment or repricing schedules) of the outstanding loans in our portfolio as of December 31, 2024.

(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, 2024.

(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, 2024 was $78.1 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.

Asset Quality

December 31,

Nonaccrual loans

Commercial loans:

Consumer loans:

Past Due 90 days and accruing loans

Commercial loans:

Small business lending 1,320 —

Total commercial loans 1,320 —

Consumer loans:

Other consumer 4 —

Total past due 90 days and accruing loans 2,466 838

Other real estate owned

Total other real estate owned 272 375

Other nonperforming assets 212 17

Total nonperforming loans to total loans 0.68 % 0.26 %

Total nonperforming assets to total assets 0.50 % 0.20 %

Allowance for credit losses - loans to total loans 1.07 % 1.01 %

Nonaccrual loans to total loans 0.68 % 0.24 %

Allowance for credit losses - loans to nonaccrual loans 172.5 % 425.0 %

Allowance for credit losses - loans to nonperforming loans 157.5 % 389.2 %

A loan is individually evaluated, 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 individually evaluated. Certain nonaccrual and substantially all delinquent loans more than 90 days past due may be individually evaluated. 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 individually evaluated loans is discontinued when, in management’s opinion, the borrower may be unable to meet payments as they become due.

Individually evaluated loans include nonperforming loans and also include loans 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 (“OREO”) and other nonperforming assets, which consist of repossessed assets. Nonperforming assets could also include individual securities for which a credit loss has been recognized; however, we did not own any securities classified as such during the two-year period ended December 31, 2024.

Total nonperforming loans increased $18.5 million, or 185.3%, to $28.4 million as of December 31, 2024 compared to $10.0 million as of December 31, 2023, due primarily to increases in nonperforming loans related to the small business lending, franchise finance and residential mortgage portfolios, as well as an increase in accruing loans past due 90 days or more. Total nonperforming assets increased $18.6 million, or 179.2%, to $28.9 million as of December 31, 2024, compared to $10.4 million as of December 31, 2023, due primarily to the increases in nonperforming loans mentioned above, as well as an increase in loan repossessions (“REPO”), partially offset by a decrease in other real estate owned (“OREO”). As of December 31, 2024, the Company had one residential mortgage property in OREO with a carrying value of $0.3 million. As of December 31, 2023, the Company had two residential mortgage properties in OREO with a carrying value of $0.4 million.

Allowance for Credit Losses - Loans

The following table provides a rollforward of the ACL on loans by loan portfolio segment for the twelve months ended December 31, 2024 and 2023; however, allocation of a portion of the allowance to one segment does not preclude its availability to absorb losses in other segments.

December 31,

Losses charged off

Commercial and industrial — (7,049)

Investor commercial real estate — (591)

Single tenant lease financing (195) —

Healthcare finance — (605)

Residential mortgage (159) (140)

Recoveries

Commercial and industrial 8 243

Small business lending 325 77

Residential mortgage 1 5

Home equity 7 6

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

Commercial and industrial (0.01 %) 6.87 %

Investor commercial real estate — % 0.47 %

Single tenant lease financing 0.02 % — %

Healthcare finance — % 0.25 %

Small business lending 3.39 % 1.34 %

Franchise Finance 0.27 % 0.08 %

Total commercial net charge-offs 0.37 % 0.38 %

Residential mortgage 0.04 % 0.03 %

Total consumer net charge-offs 0.13 % 0.07 %

Net charge-offs to average loans 0.32 % 0.31 %

The determination of the ACL and the related provision for credit losses are components of our significant accounting policies as discussed within Note 1 to our consolidated financial statements. The adequacy of the allowance for credit 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 uses a discounted cash flow analysis based on historical loss data, reasonable and supportable forecasts and prepayment rates, 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 ACL. Although management believes it uses the best information available to make determinations with respect to the ACL, future adjustments may be necessary if economic conditions differ substantially from those in the assumptions used to determine the size of the ACL.

The ACL was $44.8 million as of December 31, 2024, compared to an ACL of $38.8 million as of December 31, 2023. The increase in the ACL reflects growth and higher coverage ratios in certain portfolios, as well as additional reserves for nonperforming small business lending and franchise finance loans, partially offset by the impact of economic data on forecasted loss rates and qualitative factors for other portfolios. The ACL as a percentage of total loans was 1.07% as of December 31, 2024, compared to 1.01% at December 31, 2023. The ACL as a percentage of nonperforming loans decreased to 157.5% as of December 31, 2024, compared to 389.2% as of December 31, 2023.

The provision for credit losses - loans was $18.8 million for the twelve months ended December 31, 2024 compared to $15.5 million for the twelve months ended December 31, 2023. The increase in the provision for credit losses - loans for the twelve months ended December 31, 2024 was driven primarily by increases in net charge-offs in the small business lending and franchise finance portfolios, as well as growth in ACL discussed above, partially offset by lower net charge-offs in the commercial and industrial portfolio.

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 credit 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, 2024 and 2023. 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 there is an impairment. As of December 31, 2024, 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, 2024, 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.

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 $ 83,811 $ 96,404

Agency mortgage-backed securities - residential 300,914 237,798

Agency mortgage-backed securities - commercial 64,214 40,215

Private label mortgage-backed securities - residential 46,623 21,742

Securities held-to-maturity

Agency mortgage-backed securities - residential 201,840 166,750

Agency mortgage-backed securities - commercial 5,705 5,767

(amounts in thousands) December 31,

Securities available-for-sale

U.S. Government-sponsored agencies $ 82,816 $ 95,177

Agency mortgage-backed securities - residential 269,641 206,649

Agency mortgage-backed securities - commercial 63,331 38,885

Private label mortgage-backed securities - residential 45,821 20,779

Securities held-to-maturity

Agency mortgage-backed securities - residential 184,412 152,642

Agency mortgage-backed securities - commercial 4,548 4,521

The approximate fair value of investment securities available-for-sale increased $112.5 million, or 23.7%, to $587.4 million as of December 31, 2024 compared to $474.9 million as of December 31, 2023. The increase was due primarily to increases of $63.0 million in agency mortgage-backed securities - residential, $25.0 million in private label mortgage-backed securities - residential, $24.4 million in agency mortgage-backed securities - commercial, and $15.7 million in asset-backed securities, partially offset by decreases of $12.4 million in U.S. Government-sponsored agencies securities and $4.8 million in municipal securities. The increase was primarily attributable to new purchase activity within the available-for-sale portfolios, partially offset by net paydown activity. As of December 31, 2024, the Company had securities with a net carrying value of $249.8 million designated as held-to-maturity compared to $227.2 million as of December 31, 2023. The increase was due primarily to purchases of CRA-eligible agency mortgage-backed securities - residential.

Investment Maturities

The following table summarizes the contractual maturity schedule (without regard to repricing schedules) of our investment securities at their amortized cost and their weighted average yields at December 31, 2024.

Securities:

1 Weighted-average yields are calculated on a fully-taxable equivalent basis using the federal statutory rate of 21% for 2024.

Accrued Income and Other Assets

Accrued income and other assets increased $11.9 million, or 23.3%, to $63.0 million at December 31, 2024 compared to $51.1 million at December 31, 2023. The increase was due primarily to increases of $12.9 million in equity investments, $3.0 million related to a bond that was called on December 30, 2024 and $2.3 million in income tax receivable, partially offset by a decrease of $5.6 million in derivative assets.

Deposits

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

December 31,

Fintech - brokered deposits1 — — % 74,401 1.8 %

1 Fintech - brokered deposits that had been previously classified as brokered deposits were reclassified to interest-bearing demand deposits as of December 31, 2024.

Total deposits increased $866.2 million, or 21.3%, to $4.9 billion as of December 31, 2024 compared to $4.1 billion as of December 31, 2023. This increase was due primarily to increases of $528.3 million, or 32.9%, in certificates of deposits, $493.7 million, or 122.5%, in interest-bearing demand deposits and $13.0 million, or 10.5%, in noninterest-bearing deposits, partially offset by decreases of $64.5 million, or 5.2%, in money market accounts, $28.3 million, or 4.8%, in brokered deposits and $1.5 million, or 7.2%, in savings accounts. The increase in certificates of deposits was due primarily to strong consumer and small business demand in 2024. The increase in interest-bearing demand deposits was due primarily to growth in fintech partnership deposits. The decrease in money market accounts was driven by general customer withdraw activity which was due to larger-balance accounts that can experience volatility from time-to-time. The decrease in brokered deposits was driven by using excess liquidity to paydown higher-cost deposits throughout the year.

Uninsured deposit balances represented 25% of total deposits as of December 31, 2024 and 2023. These balances include Indiana-based municipal deposits, which are insured by the Indiana Board for Depositories, as well as larger balance accounts under contractual agreements that only allow withdrawal under certain conditions. After subtracting these types of deposits, the adjusted uninsured deposit balance drops to 20% as of December 31, 2024, compared to 19% as of December 31, 2023.

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, 2024

Period to Maturity Percentage of Total Certificate Accounts

Interest Rate:

Time Deposit Maturities Greater than $250,000

(amounts in thousands) December 31, 2024

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 deposit growth and manage interest rate risk. The following table is a summary of FHLB borrowings for the periods indicated.

At or For The Twelve Months Ended December 31,

Maximum outstanding at any month end during period 614,935 614,934

Weighted average interest rate at end of period1 3.39 % 3.04 %

Weighted average interest rate during period1 2.93 % 3.00 %

1Excludes the impact of interest rate swaps. Refer to Note 18 to our consolidated financial statements for additional information about derivative financial instruments.

Accrued Expenses and Other Liabilities

Accrued expenses and other liabilities increased $3.8 million, or 26.5%, to $17.9 million at December 31, 2024, compared to $14.2 million at December 31, 2023. The increase was due primarily to increases of $2.3 million in accrued salary and benefits and $3.1 million in various expenses and liabilities, partially offset by a decrease of $1.6 million in the reserve for unfunded commitments.

Liquidity and Capital Resources

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

The Company holds cash and investment securities that qualify as liquid assets to maintain adequate liquidity to ensure safe and sound operations and meet its financial commitments. At December 31, 2024, on a consolidated basis, the Company had $1.1 billion in cash and cash equivalents and investment securities available-for-sale, and $54.7 million in loans held-for-sale that were generally available for our cash needs. The Company can also generate funds from wholesale funding sources and collateralized borrowings. At December 31, 2024, the Bank had the ability to borrow an additional $1.7 billion from the FHLB, the Federal Reserve and correspondent bank Fed Funds lines of credit.

The Company is a separate legal entity from the Bank and must provide for its own liquidity. In addition to its operating expenses, the Company is responsible for paying any dividends declared to its common shareholders and interest and principal on outstanding debt. The Company’s primary sources of funds are cash maintained at the holding company level and dividends from the Bank, the payment of which is subject to regulatory limits. At December 31, 2024, the Company, on an unconsolidated basis, had $13.0 million in cash generally available for its cash needs, which is in excess of its current annual regular shareholder dividend and operating expenses.

The Company uses its sources of funds primarily to meet ongoing financial commitments, including withdrawals by depositors, credit commitments to borrowers, operating expenses and capital expenditures. At December 31, 2024, approved outstanding loan commitments, including unused lines of credit and standby letters of credit, amounted to $667.7 million. Certificates of deposits and brokered certificates of deposits scheduled to mature in one year or less at December 31, 2024 totaled $1.5 billion.

At December 31, 2024, capital ratios for the Company and the Bank were above regulatory requirements for well-capitalized institutions. Refer to “Note 14: Regulatory Capital Requirements” for additional information regarding regulatory capital requirements.

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

Thefollowing table presents the Company’s significant contractual obligations as of December 31, 2024.

Payments Due In

1 Amounts do not include associated interest payments.

In October 2021, the Company’s Board of Directors approved a stock repurchase program authorizing the repurchase of up to $30.0 million of the Company’s outstanding common stock from time to time on the open market or in privately negotiated transactions. In October 2022, the Company’s Board of Directors increased the authorization to $35.0 million. The Company repurchased a total of 855,956 shares at an average price of $36.31 per share under the program through December 19, 2022.

On December 19, 2022, the Company's Board of Directors approved a new stock repurchase program to replace the prior program. The new program authorized the repurchase of up to $25.0 million of our outstanding common stock from time to time on the open market or in privately negotiated transactions. The stock repurchase authorization expired as of December 31, 2024. Under this program, the Company repurchased 10,500 shares of common stock at an average price of $26.95 per share during 2024, 502,525 shares of common stock at an average price of $18.40 per share during 2023, and 46,497 shares of common stock at an average price of $24.42 per share during 2022.

Reconciliation of Non-GAAP Financial Measures

This Management's Discussion and Analysis contains financial information determined by methods other than in accordance with GAAP. Non-GAAP financial measures, specifically tangible common equity, tangible assets, tangible book value per common share, tangible common equity to tangible assets, average tangible common equity, return on average tangible common equity, total interest income - FTE, net interest income - FTE, net interest margin - FTE, adjusted total revenue, adjusted noninterest income, adjusted noninterest expense, adjusted income before income taxes, adjusted income tax provision (benefit), adjusted net income, adjusted diluted earnings per share, adjusted return on average assets, adjusted return on average shareholders’ equity and adjusted return on average tangible common equity are used by the Company's management to measure the strength of its capital and analyze profitability, including its ability to generate earnings on tangible capital invested by its shareholders. The Company also believes that it is 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 tables for the last three completed fiscal years ended on December 31.

Adjustments:

Total shareholders’ equity to assets 6.69 % 7.02 % 8.03 %

Tangible common equity to tangible assets 6.62 % 6.94 % 7.94 %

Adjustments:

Return on average shareholders' equity 6.70 % 2.35 % 9.53 %

Return on average tangible common equity 6.78 % 2.38 % 9.65 %

Adjustments:

Effect of fully-taxable equivalent adjustments1 0.09 % 0.11 % 0.13 %

Net interest margin - FTE 1.74 % 1.67 % 2.54 %

1Assuming a 21% tax rate

Adjustments:

Mortgage-related revenue — (65) —

Gain on prepayment of FHLB advances (1,829) — —

Gain on termination of interest rate swaps (2,904) — —

Adjustments:

Mortgage-related revenue — (65) —

Gain on prepayment of FHLB advances (1,829) — —

Gain on termination of interest rate swaps (2,904) — —

Adjustments:

Mortgage-related costs — (3,052) —

Acquisition-related expenses — — (273)

IT termination fees (452) — —

Nonrecurring consulting fee — — (875)

Write-down of Software — — (125)

Discretionary inflation bonus — — (531)

Accelerated equity compensation — — (289)

Anniversary expenses (120) — —

Adjustments:1

Mortgage-related revenue — (65) —

Mortgage-related costs — 3,052 —

Partial charge-off of C&I participation loan — 6,914 —

Acquisition-related expenses — — 273

IT termination fees 452 — —

Nonrecurring consulting fee — — 875

Write-down of software — — 125

Discretionary inflation bonus — — 531

Accelerated equity compensation — — 289

Anniversary expenses 120 — —

Gain on prepayment of FHLB advances (1,829) — —

Gain on termination of interest rate swaps (2,904) — —

1Assuming a 21% tax rate

Income tax provision (benefit) - GAAP $ 2,266 $ (3,477) $ 4,559

Adjustments:1

Mortgage-related revenue — (14) —

Mortgage-related costs — 641 —

Partial charge-off of C&I participation loan — 1,452 —

Acquisition-related expenses — — 57

IT termination fees 95 —

Nonrecurring consulting fee — — 184

Write-down of software — — 26

Discretionary inflation bonus — — 112

Accelerated equity compensation — — 61

Anniversary expenses 25 — —

Gain on prepayment of FHLB advances (384) — —

Gain on termination of interest rate swaps (610) — —

Adjusted income tax provision (benefit) $ 1,392 $ (1,398) $ 4,999

Adjustments:

Mortgage-related revenue — (51) —

Mortgage-related costs — 2,411 —

Partial charge-off of C&I participation loan — 5,462 —

IT termination fees 357 — —

Acquisition-related expenses — — 216

Nonrecurring consulting fee — — 691

Write-down of software — — 99

Discretionary inflation bonus — — 419

Accelerated equity compensation — — 228

Anniversary expenses 95 — —

Gain on prepayment of FHLB advances (1,445) — —

Gain on termination of interest rate swaps (2,294) — —

Diluted earnings per share - GAAP $ 2.88 $ 0.95 $ 3.70

Adjustments:

Mortgage-related revenue — (0.01) —

Mortgage-related costs — 0.27 —

Effect of partial charge-off of C&I participation loan — 0.62 —

Effect of acquisition-related expenses — — 0.02

Effect of IT termination fees 0.04 — —

Effect of nonrecurring consulting fee — — 0.07

Effect of write-down of software — — 0.01

Effect of discretionary inflation bonus — — 0.04

Effect of accelerated equity compensation — — 0.02

Effect of anniversary expenses 0.01 — —

Effect of gain on prepayment of FHLB advances (0.16) — —

Effect of gain on termination of interest rate swaps (0.26) — —

Adjusted diluted earnings per share $ 2.51 $ 1.83 $ 3.86

1 Assuming a 21% tax rate

Effect of mortgage-related revenue 0.00 % 0.00 % 0.00 %

Effect of mortgage-related costs 0.00 % 0.05 % 0.00 %

Effect of partial charge-off of C&I participation loan 0.00 % 0.11 % 0.00 %

Effect of acquisition-related expenses 0.00 % 0.00 % 0.01 %

Effect of IT termination fees 0.01 % 0.00 % 0.00 %

Effect of nonrecurring consulting fee 0.00 % 0.00 % 0.02 %

Effect of discretionary inflation bonus 0.00 % 0.00 % 0.01 %

Effect of accelerated equity compensation 0.00 % 0.00 % 0.01 %

Effect of anniversary expenses 0.00 % 0.00 % 0.00 %

Effect of gain on prepayment of FHLB advances (0.03 %) 0.00 % 0.00 %

Effect of gain on termination of interest rate swaps (0.04 %) 0.00 % 0.00 %

Adjusted return on average assets 0.40 % 0.33 % 0.90 %

Return on average shareholders' equity 6.70 % 2.35 % 9.53 %

Effect of mortgage-related revenue 0.00 % (0.01 %) 0.00 %

Effect of mortgage-related costs 0.00 % 0.67 % 0.00 %

Effect of partial charge-off of C&I participation loan 0.00 % 1.53 % 0.00 %

Effect of acquisition-related expenses 0.00 % 0.00 % 0.06 %

Effect of IT termination fees 0.09 % 0.00 % 0.00 %

Effect of nonrecurring consulting fee 0.00 % 0.00 % 0.19 %

Effect of write-down of software 0.00 % 0.00 % 0.03 %

Effect of discretionary inflation bonus 0.00 % 0.00 % 0.11 %

Effect of accelerated equity compensation 0.00 % 0.00 % 0.06 %

Effect of anniversary expenses 0.03 % 0.00 % 0.00 %

Effect of gain on prepayment of FHLB advances (0.38 %) 0.00 % 0.00 %

Effect of gain on termination of interest rate swaps (0.61 %) 0.00 % 0.00 %

Adjusted return on average shareholders' equity 5.83 % 4.54 % 9.98 %

Return on average tangible common equity 6.78 % 2.38 % 9.65 %

Effect of mortgage-related revenue 0.00 % (0.01 %) 0.00 %

Effect of mortgage-related costs 0.00 % 0.68 % 0.00 %

Effect of partial charge-off of C&I participation loan 0.00 % 1.55 % 0.00 %

Effect of acquisition-related expenses 0.00 % 0.00 % 0.06 %

Effect of IT termination fees 0.10 % 0.00 % 0.00 %

Effect of nonrecurring consulting fee 0.00 % 0.00 % 0.19 %

Effect of write-down of software 0.00 % 0.00 % 0.03 %

Effect of subordinated debt redemption cost 0.00 % 0.00 % 0.00 %

Effect of discretionary inflation bonus 0.00 % 0.00 % 0.11 %

Effect of accelerated equity compensation 0.00 % 0.00 % 0.06 %

Effect of anniversary expenses 0.03 % 0.00 % 0.00 %

Effect of gain on prepayment of FHLB advances (0.39 %) 0.00 % 0.00 %

Effect of gain on termination of interest rate swaps (0.62 %) 0.00 % 0.00 %

Adjusted return on average tangible common equity 5.90 % 4.60 % 10.10 %

Critical Accounting Policies and Estimates

ACL - Loans

Management considers the policies related to the ACL- loans to be critical to the financial statement presentation. The total allowance for credit losses on loans includes activity related to allowances calculated in accordance with Accounting Standards Codification (“ASC”) 326, Financial Instruments - Credit Losses. The ACL for loans represents management's estimate of all expected credit losses over the expected life of the Company’s existing loan portfolio. Management estimates the ACL balance using relevant available information about the collectability of cash flows, from internal and external sources, including historical information relating to past events, current conditions, and reasonable and supportable forecasts of future economic conditions. When the Company is unable to forecast future economic events, management may revert to historical information.

Accrued interest receivable on loans is excluded from the estimate of credit losses. The Company made the accounting policy election to not measure an ACL for accrued interest receivable. Accrued interest deemed uncollectible will be written off through interest income.

ACL - Loans - Collectively Evaluated

The ACL is measured on a collective pool basis when similar risk characteristics exist.

The Company utilized a discounted cash flow (“DCF”) method to estimate the quantitative portion of the allowance for credit losses for loans evaluated on a collective pooled basis. For each segment, a loss driver analysis was performed in order to identify loss drivers and create a regression model for use in forecasting cash flows.

In creating the DCF model, the Company has established a one-year reasonable and supportable forecast period with a one-year straight line reversion to the long-term historical average for most segments. Due to its limited loss history, the Company elected to use peer data for a more reasonable calculation.

Key inputs into the DCF model include loan-level detail, including the amortized cost basis of individual loans, payment structure, loss history, and forecasted loss drivers. The Company utilizes a third party to provide economic forecasts under various scenarios, which are assessed quarterly considering the scenarios in the context of the current economic environment and loss risk.

Expected credit losses are estimated over the contractual term of the loans and adjusted for prepayments when appropriate. The contractual term excludes extensions, renewals, and modifications unless the extension or renewal options are included in the original or modified contract at the reporting date and are not unconditionally cancellable by the Company.

Additional key assumptions in the DCF model include the probability of default (“PD”), loss given default (“LGD”), and prepayment/curtailment rates. The Company utilizes the model-driven PD and a LGD derived from a method referred to as Frye Jacobs. The Frye Jacobs method is a mathematical formula that traces the relationship between LGD and PD over time and projects the LGD based on the level of PD forecasted. In all cases, the Frye Jacobs method is utilized to calculate LGDs during the forecast period, reversion period and long-term historical average. Prepayment and curtailment rates were calculated through third party analysis of the Company’s own data.

Qualitative factors for the DCF and weighted-average remaining maturity methodologies include the following:

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

•Changes in international, national, regional and local conditions

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

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

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

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

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

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

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

ACL - Loans - Individually Evaluated

Loans that do not share risk characteristics are evaluated on an individual basis and are excluded from the collective evaluation. The Company has determined that any loans which have been placed on nonaccrual status will be individually evaluated. Individual analysis will establish a specific reserve for loans, if necessary. Specific reserves on nonaccrual loans are typically based on management’s best estimate of the fair value of collateral securing these loans, adjusted for selling costs as necessary.

ACL - Off-Balance Sheet Credit Exposures

The Company estimates expected credit losses over the contractual period in which the Company is exposed to credit risk via a contractual obligation to extend credit, unless that obligation is unconditionally cancellable by the Company. The allowance on off-balance sheet credit exposure is recorded as a liability and adjusted as a provision for credit loss expense. The estimate includes consideration of the likelihood that funding will occur and an estimate of expected credit losses on commitments expected to be funded over its estimated life. Funding rates are based on a historical analysis of the Company’s portfolio, while estimates of credit losses are determined using the same loss rates as funded loans.

Allowance for Loan Losses

Management believes the allowance for loan losses is a 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.

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.

Recent Accounting Pronouncements

Refer to Note 23 to our consolidated financial statements.

Off-Balance Sheet Arrangements

In the ordinary course of business, we may enter into financial transactions to extend credit, engage in interest rate swaps or other forms of commitments that may be considered off-balance sheet arrangements. Interest rate swaps were arranged to receive hedge accounting treatment and were classified as either fair value or cash flow hedges. Fair value hedges were purchased to convert certain fixed rate assets to floating rate. Cash flow hedges were used to convert certain variable rate liabilities into fixed rate liabilities. At December 31, 2024, we had no interest rate swaps that were classified as either fair value or cash flow hedges. At December 31, 2023, we had interest rate swaps with a notional amount of $200.0 million. Refer to Note 18 to our consolidated financial statements for additional information about derivative financial instruments.

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 the Company’s interest rate risk position using income simulation models and economic value of equity (“EVE”) sensitivity analysis that capture both short-term and long-term interest rate risk exposure. Income simulation involves forecasting net interest income (“NII”) under a variety of interest rate scenarios. We use EVE sensitivity analysis to understand the impact of changes in interest rates on long-term cash flows, income and capital. EVE is calculated by discounting the cash flows for all balance sheet instruments under different interest-rate scenarios. Modeling the sensitivity of NII and EVE to changes in market interest rates is highly dependent on the assumptions incorporated into the modeling process, especially those pertaining to non-maturity deposit accounts. These assumptions are reviewed and refined on an ongoing basis by the Company. We continually model our NII and EVE positions with various interest rate scenarios and assumptions of future balance sheet composition. We utilize implied forward rates as its base case scenario which reflects market expectations for rate changes over the next 24 months. Presented below is the estimated impact on our NII and EVE position as of December 31, 2024, 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, 2024, assuming a static balance sheet and gradual parallel shifts in interest rates over a twelve-month period:

% Change from Base Case for Gradual 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

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 Annual Report on Form 10-K.

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 officer 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, 2024.

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, 2024. 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, 2024, 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, 2024 has been audited by Forvis Mazars, 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, 2024, that has materially affected or is reasonably likely to materially affect, the Company's internal control over financial reporting.

Item 9B. Other Information

None of our directors or officers (as defined in Rule 16a-1(f) of the Securities Exchange Act) adopted, modified, or terminated any contract, instruction, or written plan for the purchase or sale of our securities that was intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) of the Securities Exchange Act or any non-Rule 10b5-1 trading arrangement (as defined in Item 408(c) of Regulation S-K) during the fiscal quarter ended December 31, 2024.

Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections

Not Applicable.

PART III

Certain information required by Part III is incorporated by reference from our definitive Proxy Statement for our 2025 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, 2024. 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 71 Chairman, Chief Executive Officer and Director

Nicole S. Lorch 50 President, Chief Operating Officer and Secretary

Kenneth J. Lovik 55 Executive Vice President and Chief Financial Officer

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 Secretary since June of 2022 and 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.

Executive officers are elected annually by our Board of Directors and serve a one-year term 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.

Insider Trading Policy

We have adopted insider trading policies and procedures governing the purchase, sale, and/or other dispositions of the Company's securities by directors, officers and employees that are reasonably designed to promote compliance with insider trading laws, rules and regulations, and any listing standards applicable to the Company. A copy of the Company's Trading Policy has been filed as Exhibit 19 to this Annual Report on Form 10-K.

The disclosures in the Proxy Statement under the headings “Proposal 1 - Election of Directors,” “Corporate Governance,” “Shareholder Proposals for 2025 Annual Meeting,” and, if applicable “Delinquent Section 16(a) Reports” are incorporated into this Item by reference.

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” (excluding information under the caption “Pay versus Performance”), 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 Matters.” The independent registered public accounting firm is Forvis Mazars, LLP (Public Company Accounting Oversight Board Firm ID No. 686) located in Indianapolis, Indiana.

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

19 Insider Trading Policy

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.

Item 16. Form 10-K Summary.

None.

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 12, 2025.

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 12, 2025.

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

* *

Aasif M. Bade, Director Joseph A. Fenech, Director

* *

Justin P. Christian, Director Jean L. Wojtowicz, Director

* *

Ann Colussi Dee, Director John K. Keach, Jr., Director

Michele L. Raines, 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

Reports of Independent Registered Public Accounting Firm

To the Shareholders, Board of Directors and Audit Committee

First Internet Bancorp

Fishers, Indiana

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated balance sheets of First Internet Bancorp (the “Company”) as of December 31, 2024 and 2023, 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, 2024, 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, 2024 and 2023, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2024, 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, 2024, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated March 12, 2025, expressed an unqualified opinion thereon.

Change in Accounting Principle

As discussed in Note 1 and Note 4 to the consolidated financial statements, in 2023, the Company changed its method of accounting for credit losses on financial instruments due to the adoption of Accounting Standards Codification Topic 326: Financial Instruments – Credit Losses.

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.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current-period audit of the financial statements that were 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 separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

F-1

Allowance for Credit Losses (ACL) – Loans – Qualitative Adjustments

Critical Audit Mater Description

As described in Note 4 to the consolidated financial statements, the Company’s consolidated allowance for credit losses (ACL) was $44,769,000 at December 31, 2024. The Company also describes in Note 1 of the consolidated financial statements the “Allowance for Credit Losses” accounting policy around this estimate. The ACL for loans represents management's estimate of all expected credit losses over the expected life of the Company’s existing loan portfolio. Management estimates the ACL balance using relevant available information about the collectability of cash flows, from internal and external sources, including historical information relating to past events, current conditions, and reasonable and supportable forecasts of future economic conditions. The Company utilized a discounted cash flow (“DCF”) method to estimate the quantitative portion of the allowance for credit losses for loans evaluated on a collective pooled basis. Due to its minimal loss history, the Company elected to use peer data for a more accurate calculation. The Company also includes qualitative adjustments to the ACL based on factors and considerations that have not otherwise been fully accounted for.

We have identified auditing the qualitative adjustments as a critical audit matter as management’s determination of the qualitative adjustments used in the ACL is subjective and involves significant management judgments; and our audit procedures related to the qualitative adjustments involved a high degree of auditor judgment and required significant audit effort.

The primary procedures we performed to address this critical audit matter included:

•We obtained an understanding of the Company’s process for establishing the ACL, including the key qualitative factor adjustments applied to the ACL.

•Evaluated the design and tested the operating effectiveness of key controls over significant assumptions and judgments applied in the application of the qualitative adjustments used in the ACL calculation

•Assessed management’s process for developing the qualitative adjustments and determining the reasonableness of the qualitative adjustments applied in the ACL estimate which included assessing the relevance and reliability of data used to develop the qualitative adjustments. Our evaluation considered evidence from internal and external sources.

•Evaluated the reasonableness of the overall ACL and related qualitative adjustments to determine whether the ACL appropriately reflects expected credit losses by assessing trends in relevant factors and evaluating the relationship of those trends to the overall ACL and related qualitative adjustments applied to the ACL.

•Evaluated the mathematical accuracy of the qualitative adjustments applied to the loan segments in the ACL calculation.

/s/ Forvis Mazars, LLP

We have served as the Company's auditor since 2004.

Indianapolis, Indiana

March 12, 2025

F-2

Reports of Independent Registered Public Accounting Firm

To the Shareholders, Board of Directors, and Audit Committee

First Internet Bancorp

Fishers, Indiana

Opinion on the Internal Control Over Financial Reporting

We have audited First Internet Bancorp’s (the “Company”) internal control over financial reporting as of December 31, 2024 based on criteria established in Internal Control – Integrated Framework: (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2024, based on criteria established in Internal Control – Integrated Framework: (2013) issued by COSO.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the consolidated financial statements of the Company as of December 31, 2024 and 2023, and for each of the three years in the period ended December 31, 2024, and our report dated March 12, 2025, expressed an unqualified opinion on those financial statements.

Basis for Opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Report of Management’s Assessment of Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

Definitions and Limitations of Internal Control Over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of reliable financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions or that the degree of compliance with the policies or procedures may deteriorate.

/s/ Forvis Mazars, LLP

Indianapolis, Indiana

March 12, 2025

F-3

First Internet Bancorp

Consolidated Balance Sheets

(Amounts in thousands except share data)

December 31,

Assets

Allowance for credit losses - loans (44,769) (38,774)

Federal Home Loan Bank of Indianapolis stock 28,350 28,350

Cash surrender value of bank-owned life insurance 41,394 40,882

Other real estate owned 272 375

Liabilities and shareholders’ equity

Liabilities

Accrued expenses and other liabilities 17,945 14,184

Commitments and Contingencies

Shareholders’ equity

Accumulated other comprehensive loss (32,653) (29,375)

See Notes to Consolidated Financial Statements

F-4

First Internet Bancorp

Consolidated Statements of Income

(Amounts in thousands except share and per share data)

Year Ended December 31,

Interest income

Interest expense

Benefit for credit losses - debt securities held-to-maturity (139) (42) —

Noninterest income

Mortgage banking activities — 76 5,464

Noninterest expense

Income per share of common stock

Weighted-average number of common shares outstanding

Dividends declared per share $ 0.24 $ 0.24 $ 0.24

See Notes to Consolidated Financial Statements

F-5

First Internet Bancorp

Consolidated Statements of Comprehensive Income

(Amounts in thousands)

Year Ended December 31,

Other comprehensive (loss) income

Securities available-for-sale

Net effect on other comprehensive (loss) income (239) 5,657 (33,276)

Securities held-to-maturity

Net effect on other comprehensive income (loss) 699 580 (3,519)

Cash flow hedges

Reclassification of gain on termination of interest rate swaps (2,904) — —

Net effect on other comprehensive (loss) income (3,738) (1,976) 14,198

See Notes to Consolidated Financial Statements

F-6

First Internet Bancorp

Consolidated Statements of Shareholders’ Equity

(Amounts in thousands except share and per share data)

Dividends declared ($0.24 per share) — (2,297) — (2,297)

Recognition of the fair value of share-based compensation 2,035 — — 2,035

Impact of adoption of new accounting standards (1) — (4,491) — (4,491)

Other comprehensive income — — 4,261 4,261

Dividends declared ($0.24 per share) — (2,131) — (2,131)

Excise tax on repurchase of common stock (92) — — (92)

Recognition of the fair value of share-based compensation 1,258 — — 1,258

Other comprehensive loss — — (3,278) (3,278)

Dividends declared ($0.24 per share) — (2,124) — (2,124)

Repurchased shares of common stock (10,500) (283) — — (283)

Recognition of the fair value of share-based compensation 1,814 — — 1,814

1Reflects the impact of adopting Accounting Standards Update (“ASU”) 2016-13.

See Notes to Consolidated Financial Statements

F-7

First Internet Bancorp

Consolidated Statements of Cash Flows

(Amounts in thousands)

Year Ended December 31,

Operating activities

Gain on sale of other real estate owned (27) — —

Decrease in fair value of loans held-for-sale — 143 184

Gain on prepayment of FHLB advances (1,829) — —

Gain on termination of interest rate swaps (2,904) — —

INBK US Equity

INBK · 10-K · period ended 2024-12-31

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Item 7A. Quantitative and Qualitative Disclosures about Market Risk

Item 8. Financial Statements and Supplementary Data

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

Item 9A. Controls and Procedures

Item 9B. Other Information

Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections

Item 10. Directors, Executive Officers and Corporate Governance

Item 11. Executive Compensation

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

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

Item 14. Principal Accountant Fees and Services

Item 15. Exhibits and Financial Statement Schedules

Item 16. Form 10-K Summary.

INBK US Equity☆

INBK · 10-K · period ended 2024-12-31

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Item 7A. Quantitative and Qualitative Disclosures about Market Risk

Item 8. Financial Statements and Supplementary Data

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

Item 9A. Controls and Procedures

Item 9B. Other Information

Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections

Item 10. Directors, Executive Officers and Corporate Governance

Item 11. Executive Compensation

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

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

Item 14. Principal Accountant Fees and Services

Item 15. Exhibits and Financial Statement Schedules

Item 16. Form 10-K Summary.

INBK US Equity