What changed in this filing

/stocks — the workspaceLOADING

Item 9A. Controls and Procedures

2023-03-14 compared with 2022-03-15 · 337 added, 255 removed, 1733 unchanged (25% of the section changed)

2 unchanged sentences

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.

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.

7 unchanged sentences

Based on that assessment, management concluded that, as of December 31, 2022, 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.

The Company’s internal control over financial reporting as of December 31, 2022 has been audited by FORVIS, LLP, an independent registered public accounting firm, as stated in its report appearing on page F-2.

Changes in Internal Control Over Financial Reporting

10 unchanged sentences

Becker 69 Chairman, Chief Executive Officer and Director

Lorch 47 President and Chief Operating Officer

Lorch 48 President, Chief Operating Officer and Secretary

Lovik 53 Executive Vice President and Chief Financial Officer

Charles Perfetti 77 Executive Vice President and Secretary

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.

Becker is the founder of the Bank and has served as an officer and director of the Bank since 1998.

Lorch has served as President and Chief Operating Officer since June 2021.

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.

7 unchanged sentences

Edwards & Sons, Inc.

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.

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.

4 unchanged sentences

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.

The disclosures in the Proxy Statement under the headings “Proposal 1 - Election of Directors,” “Corporate Governance,” “Shareholder Proposals for 2024 Annual Meeting,” and, if applicable “Delinquent Section 16(a) Reports” are incorporated into this Item by reference.

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.”

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.”

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

3 unchanged sentences

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.

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, LLP (Public Company Accounting Oversight Board Firm ID No.

686 ) located in Indianapolis, Indiana.

8 unchanged sentences

Bank National Association, as trustee (incorporated by reference to Exhibit 4.1 to current report on Form 8-K filed on September 30, 2016)

First Supplemental Indenture, dated as of September 30, 2016, between First Internet Bancorp and U.S.

Bank National Association, as trustee (incorporated by reference to Exhibit 4.2 to current report on Form 8-K filed on September 30, 2016)

Second Supplemental Indenture, dated as of June 12, 2019, between First Internet Bancorp and U.S.

Bank National Association, as trustee (incorporated by reference to Exhibit 4.2 to current report on Form 8-K filed June 12, 2019

Third Supplemental Indenture, dated as of October 26, 2020, between First Internet Bancorp and U.S.

3 unchanged sentences

Form of Global Note representing 6.0% Subordinated Notes due 2026 (incorporated by reference to Exhibit A included in Exhibit 4.2 to current report on Form 8-K filed on September 30, 2016)

Form of Senior Indenture (incorporated by reference to Exhibit 4.5 to registration statement on Form S-3 (Registration No.

333-219841) filed August 9, 2017)

Form of Subordinated Indenture (incorporated by reference to Exhibit 4.6 to registration statement on Form S-3 (Registration No.

333-219841) filed August 9, 2017)

Forms of 3.75% Fixed-to-Floating Rate Subordinated Note due September 1, 2031 (included as Exhibit A-1 and Exhibit A-2 to the Fourth Supplemental Indenture filed as Exhibit 4.2 hereto)

Form of Registration Rights Agreement, dated August 16, 2021, by and among First Internet Bancorp and the Purchasers (incorporated by reference to Exhibit 10.2 to current report on Form 8-K filed August 16, 2021)

Form of 3.75% Fixed-to-Floating Rate Subordinated Note due September 1, 2031 (incorporated by reference to Exhibit A-1 and Exhibit A-2 included in Exhibit 4.2 to current report on Form 8-K filed on August 16, 2021)

First Internet Bancorp 2013 Equity Incentive Plan (incorporated by reference to Appendix A to the definitive proxy statement on Schedule 14A filed April 9, 2013)*

2 unchanged sentences

Becker dated March 28, 2013 (incorporated by reference to Exhibit 10.4 to Annual Report on Form 10-K for the year ended December 31, 2012)*

Form of Non-Employee Director Restricted Stock Award Agreement under 2013 Equity Incentive Plan (incorporated by reference to Exhibit 10.2 to quarterly report on Form 10-Q filed May 4, 2016)*

Loan Agreement dated as of March 6, 2013, by and between First Internet Bancorp and First Internet Bank of Indiana (incorporated by reference to Exhibit 10.1 to current report on Form 8-K filed March 11, 2013)

Amendment to Amended and Restated Employment Agreement among First Internet Bank of Indiana, First Internet Bancorp and David B.

Becker dated April 20, 2022 (incorporated by reference to Exhibit 10.1 to current report on Form 8-K filed April 25, 2022)

Employment Agreement among First Internet Bank of Indiana, First Internet Bancorp and Nicole S.

Lorch dated April 20, 2022 (incorporated by reference to Exhibit 10.2 to current report on Form 8-K filed April 25, 2022)

Employment Agreement among First Internet Bank of Indiana, First Internet Bancorp and Kenneth J.

Lovik dated April 20, 2022 (incorporated by reference to Exhibit 10.3 to current report on Form 8-K filed April 25, 2022)

Form of Non-Employee Director Restricted Stock Award Agreement under 2013 Equity Incentive Plan (incorporated by reference to Exhibit 10.1 to quarterly report on Form 10-Q for the fiscal quarter ended March 31, 2022)*

First Internet Bancorp Annual Bonus Plan (incorporated by reference to Exhibit 10.1 to quarterly report on Form 10-Q for the fiscal quarter ended March 31, 2017)*

Form of Subordinated Note Purchase Agreement, dated as of October 26, 2020, between First Internet Bancorp and the purchaser thereunder (incorporated by reference to Exhibit 10.1 to current report on Form 8-K filed October 26, 2020)

Form of Management Incentive Award Agreement - Restricted Stock Units (time based) under 2013 Equity Incentive Plan (incorporated by reference to Exhibit 10.1 to quarterly report on Form 10-Q for the fiscal quarter ended March 31, 2021)*

Form of Management Incentive Award Agreement - Restricted Stock Units under 2013 Equity Incentive Plan (incorporated by reference to Exhibit 10.2 to quarterly report on Form 10-Q for the fiscal quarter ended March 31, 2022)*

Form of Management Incentive Award Agreement - Restricted Stock units (performance based) under 2013 Equity Incentive Plan (incorporated by reference to Exhibit 10.2 to quarterly report on Form 10-Q for the fiscal quarter ended March 31, 2021)*

Form of Subordinated Note Purchase Agreement, dated August 16,2021, by and among First Internet Bancorp and the Purchasers* (incorporated by reference to Exhibit 10.1 to current report on Form 8-K filed August 15, 2021)

Agreement and Plan of Merger dated November 1, 2021, by and among First Internet Bancorp, FC Subsidiary, Inc., and First Century Bancorp (incorporated by reference to Exhibit 2.1 to current report on Form 8-K filed November 2, 2021)**

First Internet Bancorp 2022 Equity Incentive Plan (incorporated by reference to Exhibit 10.1 to current report on Form 8-K filed May 17, 2022)*

List of Subsidiaries

9 unchanged sentences

*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.

Form 10-K Summary.

12 unchanged sentences

Christian, Director

Whitney, Jr., Director

Ann Colussi Dee, Director

Jerry Williams, Director

Ana Dutra., Director

Wojtowicz, Director

Ann Colussi Dee, Director

Keach, Jr., Director

5 unchanged sentences

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”).

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated balance sheets of First Internet Bancorp (the “Company”) as of December 31, 2022 and 2021, the related consolidated statements of income, comprehensive income, shareholders’ equity, and cash flows9F for each of the years in the three-year period ended December 31, 2022, 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, 2022 and 2021, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2022, 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.

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, 2022, 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 14, 2023 expressed an unqualified opinion thereon .

Basis for Opinion

10 unchanged sentences

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:

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 a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

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.

Allowances for Loan Losses

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The primary reason for our determination that the ALLL is a critical audit matter is that it involved significant judgment and complex review.

There is a high degree of subjectivity in evaluating management’s estimate, such as evaluating management’s assessment of economic conditions and other environmental factors, including the impact of the COVID-19 pandemic on the loan portfolio, evaluating the adequacy of specific allowances associated with impaired loans and assessing the appropriateness of loan grades.

There is a high degree of subjectivity in evaluating management’s estimate, such as evaluating management’s assessment of economic conditions and other environmental factors, evaluating the adequacy of specific allowances associated with impaired loans and assessing the appropriateness of loan grades.

How We Addressed the Matter in Our Audit

5 unchanged sentences

Evaluating the appropriateness of loan grades and assessing the reasonableness of specific impairments on loans.

/s/ FORVIS, LLP (Formerly, BKD, LLP)

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

10 unchanged sentences

(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, 2022 and 2021, and for each of the three years in the period ended December 31, 2022 and our report dated March 14, 2023, expressed an unqualified opinion on those financial statements.

Basis for Opinion

9 unchanged sentences

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 financial statements for external purposes in accordance with generally accepted accounting principles.

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;

3 unchanged sentences

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, LLP (Formerly BKD, LLP)

Indianapolis, Indiana

72 unchanged sentences

Gain on sale of loans 11,372 11,598 8,298

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

Gain on sale of securities — — 139

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

29 unchanged sentences

Net income $ 35,541 $ 48,114 $ 29,453

Other comprehensive income (loss)

Other comprehensive (loss) income

Securities available-for-sale

Net unrealized holding (losses) gains on securities available-for-sale recorded within other comprehensive income before income tax ( 42,336 ) ( 4,087 ) 6,551

Reclassification adjustment for (gains) losses realized — ( 139 ) 458

Reclassification adjustment for gains realized — — ( 139 )

Income tax (benefit) provision ( 9,060 ) ( 1,064 ) 1,556

Net effect on other comprehensive (loss) income ( 33,276 ) ( 3,023 ) 4,856

Securities held-to-maturity

Reclassification of securities from available-for-sale to held-to-maturity ( 5,402 ) — —

Amortization of net unrealized holding losses on securities transferred from available-for-sale to held-to-maturity 844 — —

Income tax benefit ( 1,039 ) — —

Net effect on other comprehensive loss ( 3,519 ) — —

Cash flow hedges

Net unrealized holding gains (losses) on cash flow hedging derivatives recorded within other comprehensive income before income tax 19,091 11,138 ( 10,248 )

Other comprehensive income (loss) before tax 7,051 ( 3,836 ) 3,459

Income tax provision (benefit) 4,893 1,958 ( 2,387 )

Other comprehensive income (loss) - net of tax 6,157 ( 3,005 ) 2,350

Net effect on other comprehensive income (loss) 14,198 9,180 ( 7,861 )

Total other comprehensive (loss) income ( 22,597 ) 6,157 ( 3,005 )

Comprehensive income $ 12,944 $ 54,271 $ 26,448

8 unchanged sentences

Balance, January 1, 2020 $ 219,423 $ 99,681 $ ( 14,191 ) $ 304,913

Impact of adoption of new accounting standards (1)

( 821 ) — ( 821 )

Net income — 29,453 — 29,453

Other comprehensive income — — 2,350 2,350

Other comprehensive loss — — ( 3,005 ) ( 3,005 )

Dividends declared ($0.24 per share) — ( 2,402 ) — ( 2,402 )

Repurchase of common stock ( 9,784 ) — — ( 9,784 )

Recognition of the fair value of share-based compensation 2,110 — — 2,110

3 unchanged sentences

Net income — 48,114 — 48,114

Other comprehensive loss — — ( 3,005 ) ( 3,005 )

Other comprehensive income — — 6,157 6,157

Dividends declared ($0.24 per share) — ( 2,415 ) — ( 2,415 )

Repurchased shares of common stock (100,000) ( 4,436 ) — — ( 4,436 )

Recognition of the fair value of share-based compensation 2,393 — — 2,393

3 unchanged sentences

Net income — 35,541 — 35,541

Other comprehensive income — — 6,157 6,157

Other comprehensive loss — — ( 22,597 ) ( 22,597 )

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

Repurchase of common stock ( 4,436 ) — — ( 4,436 )

Repurchased shares of common stock (779,956) ( 27,780 ) — — ( 27,780 )

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

2 unchanged sentences

Balance, December 31, 2022 $ 192,935 $ 205,675 $ ( 33,636 ) $ 364,974

(1) Represents the impact of adopting ASU 2017-08 .

See Notes to Consolidated Financial Statements

12 unchanged sentences

Share-based compensation expense 2,035 2,393 2,110

(Gain) loss from sale of available-for-sale securities — ( 139 ) 458

Gain from sale of available-for-sale securities — — ( 139 )

Loans originated for sale ( 518,870 ) ( 814,671 ) ( 1,009,266 )

1 unchanged sentence

Gain on sale of loans ( 17,473 ) ( 29,401 ) ( 31,124 )

Decrease (increase) in fair value of loans held-for-sale 718 94 ( 538 )

Loss (gain) on derivatives 1,513 ( 2,069 ) ( 671 )

Decrease in fair value of loans held-for-sale 184 718 94

(Gain) loss on derivatives ( 2,569 ) 1,513 ( 2,069 )

Settlement of derivatives — ( 1,859 ) ( 46,109 )

1 unchanged sentence

Net change in servicing asset 1,639 1,069 ( 1,088 )

Deferred income tax 2,434 ( 4,118 ) ( 4,402 )

Net deferred income tax 4,632 2,434 ( 4,118 )

Net change in other assets 9,815 7,028 7,163

Net change in other liabilities ( 3,775 ) ( 921 ) ( 4,983 )

Net cash provided by (used in) operating activities 54,840 13,068 ( 43,577 )

Net cash provided by operating activities 82,723 54,840 13,068

Investing activities

7 unchanged sentences

Purchase of securities held-to-maturity ( 41,246 ) — ( 2,000 )

Net proceeds from sale of premises and equipment 8,116 — —

Redemption of Federal Home Loan Bank of Indianapolis stock 431 — —

Purchase of Federal Home Loan Bank of Indianapolis stock ( 3,131 ) — —

Net proceeds from sale of premises and equipment — 8,116 —

Purchase of premises and equipment ( 17,517 ) ( 29,892 ) ( 25,559 )

1 unchanged sentence

Other investing activities ( 3,510 ) 4,434 —

Net cash provided by (used in) investing activities 43,874 ( 44,809 ) ( 313,273 )

Net cash (used in) provided by investing activities ( 601,033 ) 43,874 ( 44,809 )

Financing activities

7 unchanged sentences

Other, net ( 287 ) ( 441 ) ( 152 )

Net cash (used in) provided by financing activities (75,560) 124,186 495,499

Net increase in cash and cash equivalents 23,154 92,445 138,649

Net cash provided by (used in) financing activities 331,902 ( 75,560 ) 124,186

Net (decrease) increase in cash and cash equivalents ( 186,408 ) 23,154 92,445

Cash and cash equivalents, beginning of year 442,960 419,806 327,361

1 unchanged sentence

Supplemental disclosures of cash flows information

Initial recognition of right-of-use asset $ — $ — $ 2,096

Initial recognition of operating lease liabilities — — 2,096

Cash paid during the year for interest 58,920 46,748 74,646

4 unchanged sentences

Securities purchases settled in subsequent period 2,997 — 5,547

Transfer of available-for-sale mortgage-backed securities to held-to-maturity mortgage-backed securities at fair value 96,220 — —

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

8 unchanged sentences

The Company was incorporated on September 15, 2005 , and consummated a plan of exchange on March 21, 2006, by which the Company became a bank holding company and 100 % owner of First Internet Bank of Indiana (the “Bank”).

The Company elected to and became a financial holding company, effective as of September 1, 2022.

The Bank offers a wide range of commercial, small business, consumer and municipal banking products and services.

The Bank conducts its consumer and small business deposit operations primarily through digital channels on a nationwide basis and has no traditional branch offices.

Residential mortgage products are offered nationwide primarily through a digital direct-to-consumer platform and are supplemented with Central Indiana-based mortgage and construction lending.

Consumer lending products are primarily originated on a nationwide basis through relationships with dealerships and financing partners.

48 unchanged sentences

For loans recorded at cost, interest income is accrued based on the unpaid principal balance.

Loan origination fees, net of certain direct origination costs, as well as premiums and discounts, are deferred and amortized as a level yield adjustment over the respective term of the loan.

Loan origination fees, net of certain direct origination costs, as well as premiums and discounts, are recorded in accordance with our revenue recognition policy.

Allowance for Loan Losses Methodology

42 unchanged sentences

A loan is designated as impaired, in accordance with the impairment accounting guidance when, based on current information or events, it is probable that the Company 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.

Payments with delays not exceeding 90 days outstanding generally are not considered impaired.

Certain nonaccrual and substantially all delinquent loans more than 90 days past due may be considered to be impaired.

35 unchanged sentences

The forward contracts are entered into in order to economically hedge the effect of changes in interest rates resulting from the Company’s commitment to fund the loans.

Designating an interest rate swap as an accounting hedge allows the Company to recognize gains and losses, less any ineffectiveness, in the income statement within the same period that the hedged item affects earnings.

Designating an interest rate swap as an accounting hedge allows the Company to recognize gains and losses, in the income statement within the same period that the hedged item affects earnings.

The Company includes the gain or loss on the hedged items in the same line item as the offsetting loss or gain on the related interest rate swaps.

54 unchanged sentences

Comprehensive income consists of net income and other comprehensive income (loss).

Other comprehensive income (loss) includes unrealized gains and losses on securities available-for-sale and unrealized gains and losses on cash flow hedges.

Other comprehensive income (loss) includes unrealized gains and losses on securities available-for-sale, unrealized gains and losses on the transfer of securities available-for-sale to securities held-to-maturity, and unrealized gains and losses on cash flow hedges.

Reclassification adjustments have been determined for all components of other comprehensive income or loss reported in the consolidated statements of changes in shareholders’ equity.

20 unchanged sentences

These reclassifications had no effect on net income.

Revision of Previously Issued Financial Statements

The Company has revised amounts reported in previously issued notes to financial statements for the periods presented

in this Annual Report on Form 10-K due to immaterial clerical errors.

The clerical errors caused the fair value associated with interest rate swap liabilities to be understated in the notes to financial statements for the period ended December 31, 2020 and had no impact on the consolidated balance sheet, income statement or statement of cash flows.

The Company evaluated the impact of the clerical errors to our previously issued financial statements in accordance with SEC Staff Accounting Bulletins No.

108 and, based upon quantitative and qualitative factors, determined that the clerical errors were not material to the previously issued financial statements and disclosures included in our Annual Report on Form 10-K for the year ended December 31, 2020.

Cash and Cash Equivalents

3 unchanged sentences

On March 15, 2020, the Federal Reserve Board reduced requirement ratios to zero percent effective March 26, 2020.

As such, the Company is no longer required to maintain reserve funds in cash and/or on deposit with the Federal Reserve Bank.

As such, the Company is not currently required to maintain reserve funds in cash and/or on deposit with the Federal Reserve Bank.

The following tables summarize securities available-for-sale and securities held-to-maturity as of December 31, 2022 and 2021.

First Internet Bancorp

Notes to Consolidated Financial Statements

(Tabular dollar amounts in thousands except per share data)

December 31, 2022

12 unchanged sentences

Total available-for-sale $ 436,183 $ 493 $ ( 46,292 ) $ 390,384

First Internet Bancorp

Notes to Consolidated Financial Statements

(Tabular dollar amounts in thousands except per share data)

December 31, 2022

3 unchanged sentences

Municipal securities $ 13,946 $ — $ ( 1,114 ) $ 12,832

Agency mortgage-backed securities - residential 121,853 — ( 15,112 ) 106,741

Agency mortgage-backed securities - commercial 5,818 — ( 1,266 ) 4,552

Corporate securities 47,551 — ( 3,193 ) 44,358

8 unchanged sentences

Agency mortgage-backed securities - residential 1

377,928 960 ( 5,652 ) 373,236

Agency mortgage-backed securities - commercial 36,024 441 ( 139 ) 36,326

11 unchanged sentences

Total held-to-maturity $ 59,565 $ 1,903 $ — $ 61,468

1 Includes $ 0.8 million of additional premium related to terminated interest rate swaps associated with agency mortgage-backed securities - residential as of December 31, 2021.

First Internet Bancorp

18 unchanged sentences

After ten years 5,479 4,782

61,497 57,190

Agency mortgage-backed securities - residential 121,853 106,741

Agency mortgage-backed securities - commercial 5,818 4,552

Total $ 189,168 $ 168,483

There were no gross realized gains or losses resulting from the sale of available-for-sale securities recognized during the twelve months ended December 31, 2021.

There were gross realized gains of $ 0.1 million resulting from sales of available-for-sale securities recognized during the twelve months ended December 31, 2020 and there were gross realized losses of $ 0.5 million resulting from sales of available-for-sale securities recognized during the twelve months ended December 31, 2019.

There were no gross realized gains or losses resulting from the sale of available-for-sale securities recognized during the twelve months ended December 31, 2022 and December 31, 2021.

There were gross realized losses of $ 0.1 million resulting from sales of available-for-sale securities recognized during the twelve months ended December 31, 2020.

As of December 31, 2022, the fair value of available-for-sale investment securities pledged as collateral was $ 328.7 million.

The Company pledged the securities for various types of transactions, including FHLB advances and derivative financial instruments.

The Company pledged the securities for various types of transactions, including FHLB advances, deposits and derivative financial instruments.

Certain investments in debt securities are reported in the consolidated financial statements at an amount less than their historical cost.

8 unchanged sentences

The contractual terms of those investments do not permit the issuer to settle the securities at a price less than the amortized cost bases of the investments.

Because the Company does not intend to sell the investments and it is not likely that the Company will be required to sell the investments before recovery of their amortized cost bases, which may not be until maturity, the Company does not consider those investments to be other-than-temporarily impaired at December 31, 2021.

Because the Company does not intend to sell the investments and it is not likely that the Company will be

First Internet Bancorp

1 unchanged sentence

(Tabular dollar amounts in thousands except per share data)

required to sell the investments before recovery of their amortized cost bases, which may not be until maturity, the Company does not consider those investments to be other-than-temporarily impaired at December 31, 2022.

Agency Mortgage-Backed and Private Label Mortgage-Backed Securities

The unrealized losses on the Company’s investments in agency mortgage-backed and private label mortgage-backed were caused by interest rate changes.

The unrealized losses on the Company’s investments in agency mortgage-backed and private label mortgage-backed securities were caused by interest rate changes.

The Company expects to recover the amortized cost bases over the term of the securities.

10 unchanged sentences

Agency mortgage-backed securities - residential 170,026 ( 29,690 ) 45,066 ( 7,284 ) 215,092 ( 36,974 )

287,820 ( 3,694 ) 40,840 ( 1,958 ) 328,660 ( 5,652 )

Agency mortgage-backed securities - commercial 10,560 ( 926 ) 5,280 ( 376 ) 15,840 ( 1,302 )

Private label mortgage-backed securities - residential 2,445 ( 330 ) 8,010 ( 992 ) 10,455 ( 1,322 )

Asset-backed securities

4,960 ( 40 ) — — 4,960 ( 40 )

Corporate securities 21,568 ( 1,452 ) 13,239 ( 1,265 ) 34,807 ( 2,717 )

5 unchanged sentences

Value Unrealized

Securities available-for-sale

Government-sponsored agencies $ — $ — $ 52,351 $ ( 1,652 ) $ 52,351 $ ( 1,652 )

Securities held-to-maturity

Municipals $ 8,160 $ ( 661 ) $ 4,258 $ ( 453 ) $ 12,418 $ ( 1,114 )

Agency mortgage-backed securities - residential 38,987 ( 276 ) 45,297 ( 2,189 ) 84,284 ( 2,465 )

Private label mortgage-backed securities - residential 1,277 ( 1 ) 558 ( 1 ) 1,835 ( 2 )

Asset-backed securities

— — 4,961 ( 39 ) 4,961 ( 39 )

Mortgage-backed securities - residential 68,408 ( 8,848 ) 38,332 ( 6,264 ) 106,740 ( 15,112 )

Mortgage-backed securities - commercial 4,552 ( 1,266 ) — — 4,552 ( 1,266 )

Corporate securities 36,866 ( 2,685 ) 7,492 ( 508 ) 44,358 ( 3,193 )

Total $ 117,986 $ ( 13,460 ) $ 50,082 $ ( 7,225 ) $ 168,068 $ ( 20,685 )

First Internet Bancorp

Notes to Consolidated Financial Statements

(Tabular dollar amounts in thousands except per share data)

December 31, 2021

3 unchanged sentences

Value Unrealized

Securities held-to-maturity

Securities available-for-sale

Government-sponsored agencies $ 2,921 $ ( 79 ) $ 40,305 $ ( 1,058 ) $ 43,226 $ ( 1,137 )

Municipals 5,721 ( 65 ) — — 5,721 ( 65 )

Agency mortgage-backed securities - residential 287,820 ( 3,694 ) 40,840 ( 1,958 ) 328,660 ( 5,652 )

Agency mortgage-backed securities - commercial 3,944 ( 139 ) — — 3,944 ( 139 )

Private label mortgage-backed securities - residential 374 ( 3 ) — — 374 ( 3 )

Corporate securities 11,813 ( 187 ) 9,491 ( 508 ) 21,304 ( 695 )

Total $ 312,593 $ ( 4,167 ) $ 90,636 $ ( 3,524 ) $ 403,229 $ ( 7,691 )

First Internet Bancorp

Notes to Consolidated Financial Statements

(Tabular dollar amounts in thousands except per share data)

Amounts reclassified from accumulated other comprehensive loss and the affected line items in the consolidated statements of income during the years ended December 31, 2022, 2021 and 2020 were as follows:

4 unchanged sentences

2022 2021 2020

Unrealized gains and losses on securities available-for-sale

Gain (loss) realized in earnings $ — $ 139 $ ( 458 ) Gain (loss) on sale of securities

Unrealized gains on securities available-for-sale

Gain realized in earnings $ — $ — $ 139 Gain on sale of securities

Total reclassified amount before tax — — 139 Income before income taxes

Tax expense (benefit) — 38 ( 124 ) Income tax provision

Tax expense — — 38 Income tax provision

Total reclassifications out of accumulated other comprehensive loss

$ — $ — $ 101 Net Income

Equity Investments

Equity investments, largely comprised of non-marketable equity investments, are generally accounted for under equity security accounting.

The following tables provide additional information related to investments accounted for under this method.

The carrying amount of each equity investment with a readily determinable fair value at December 31, 2022 and 2021 is reflected in the following table:

(dollars in thousands) 2022 2021

GenOpp Financial Fund LP $ 2,134 $ 2,075

Total $ 2,134 $ 2,075

First Internet Bancorp

1 unchanged sentence

(Tabular dollar amounts in thousands except per share data)

The carrying amount of the Company’s investments in non-marketable equity securities with no readily determinable fair value and amounts recognized in earnings on a cumulative basis as of December 31, 2022 and for the years ended December 31, 2022 and 2021 is reflected in the following table:

(dollars in thousands )

Carrying value 1

$ 8,067 $ 4,636

Carrying value adjustments — —

Impairment — —

Upward changes for observable prices — —

Downward changes for observable prices — —

Net change $ 8,067 $ 4,636

1 Exclusive of $ 13.0 million and $ 12.0 million in unfunded commitments as of December 31, 2022, and 2021, respectively.

First Internet Bancorp

Notes to Consolidated Financial Statements

(Tabular dollar amounts in thousands except per share data)

Categories of loans include:

21 unchanged sentences

Net loans $ 3,467,664 $ 2,859,821

(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 2020, respectively.

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

1 Includes carrying value adjustment of $ 32.5 million and $ 37.5 million related to terminated interest rate swaps associated with public finance loans as of December 31, 2022 and December 31, 2021, respectively.

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

Commercial and Industrial:

15 unchanged sentences

Investor commercial real estate loans may be more adversely affected by changing economic conditions in the real estate markets, industry dynamics or the overall health of the local economy where the property is located.

The properties securing the Company’s investor commercial real estate portfolio tend to be diverse in terms of property type and are generally located in the Midwest and Southwest region of the United States.

Management monitors and evaluates commercial real estate loans based on property financial performance, collateral value, guarantor strength, economic and industry conditions together with other risk grade criteria.

1 unchanged sentence

Construction:

Construction loans are secured by land and related improvements and are made to assist in the construction of new structures, which may include commercial (retail, industrial, office, and multi-family) properties or single family residential properties offered for sale by the builder.

Construction loans are secured by land and related improvements and are made to assist in the construction of new structures, which may include commercial (retail, industrial, office, and multi-family) properties, land development for residential properties or single family residential properties offered for sale by the builder.

These loans generally finance a variety of project costs, including land, site preparation, architectural services, construction, closing and soft costs and interim financing needs.

The cash flows of builders, while initially predictable, may fluctuate with market conditions, and the value of the collateral securing these loans may be subject to fluctuations based on general economic changes.

This portfolio segment is generally concentrated in the Midwest and Southwest region of the United States.

This portfolio segment is generally concentrated in the Midwest and Southwest regions of the United States.

Single Tenant Lease Financing:

36 unchanged sentences

Loans are made for a broad array of purposes including, but not limited to, providing operating cash flow, funding ownership changes, and facilitating equipment purchases.

These loans also include loans originated by the Bank under the SBA’s Paycheck Protection Program, which are fully guaranteed by the SBA.

Franchise Finance:

46 unchanged sentences

Small business lending 628 901 ( 222 ) 80 1,387

Franchise finance — 1,083 — — 1,083

Residential mortgage 519 67 ( 6 ) 63 643

35 unchanged sentences

Small business lending 1

113,699 10,051 123,750 1,465 703 2,168

Franchise finance 299,835 — 299,835 3,988 — 3,988

3 unchanged sentences

Total $ 3,427,463 $ 25,144 $ 3,452,607 $ 30,983 $ 754 $ 31,737

1 Balance is partially guaranteed by the U.S.

First Internet Bancorp

15 unchanged sentences

Small business lending 1

106,682 1,984 108,666 994 393 1,387

Franchise finance 81,448 — 81,448 1,083 — 1,083

Residential mortgage 183,852 2,918 186,770 643 — 643

2 unchanged sentences

Total $ 2,822,836 $ 10,940 $ 2,833,776 $ 26,380 $ 1,461 $ 27,841

1 Balance is partially guaranteed by the U.S.

The Company utilizes a risk grading matrix to assign a risk grade to each of its commercial loans.

23 unchanged sentences

Small business lending 1

107,885 5,814 10,051 123,750

Franchise finance 299,241 594 — 299,835

Total commercial loans $ 2,672,714 $ 25,214 $ 21,421 $ 2,719,349

1 Balance is partially guaranteed by the U.S.

December 31, 2022

14 unchanged sentences

Small business lending 1

99,250 7,433 1,983 108,666

Franchise finance 81,448 — — 81,448

Total commercial loans $ 2,312,655 $ 43,210 $ 7,998 $ 2,363,863

1 Balance is partially guaranteed by the U.S.

December 31, 2021

23 unchanged sentences

Small business lending 1

57 — 3,485 3,542 120,208 123,750 4,764 —

Franchise Finance 313 — — 313 299,522 299,835 — —

3 unchanged sentences

Total $ 542 $ 1,491 $ 3,721 $ 5,754 $ 3,446,853 $ 3,452,607 $ 7,450 $ 79

1 Balance is partially guaranteed by the U.S.

December 31, 2021

12 unchanged sentences

Small business lending 1

— — 657 657 108,009 108,666 959 —

Franchise Finance — — — — 81,448 81,448 — —

Residential mortgage 51 226 106 383 186,387 186,770 1,226 —

2 unchanged sentences

Total $ 119 $ 244 $ 763 $ 1,126 $ 2,832,650 $ 2,833,776 $ 7,401 $ —

1 Balance is partially guaranteed by the U.S.

First Internet Bancorp

11 unchanged sentences

Owner-occupied commercial real estate 1,570 1,779 — 3,345 3,466 —

Single tenant lease financing — — — 1,315 1,334 —

Healthcare finance $ — $ — $ — $ 1,010 $ 1,010 $ —

Small business lending 1

8,184 8,705 — 959 1,193 —

Residential mortgage 3,676 3,835 — 2,918 3,063 —

4 unchanged sentences

Commercial and industrial $ 51 $ 51 $ 51 $ 644 $ 677 $ 450

Construction — — — — — —

Single tenant lease financing — — — 1,100 1,123 95

1 unchanged sentence

Small business lending 1

1,867 1,867 703 1,025 1,025 393

Total 1,918 1,918 754 3,695 3,751 1,461

Total impaired loans $ 25,144 $ 26,052 $ 754 $ 10,940 $ 11,532 $ 1,461

1 Balance is partially guaranteed by the U.S.

The following table presents average balances and interest income recognized for impaired loans during the twelve months ended December 31, 2022, 2021, and 2020.

12 unchanged sentences

Small business lending 1

2,678 — 1,215 — — —

Residential mortgage 3,529 25 2,264 67 1,333 —

8 unchanged sentences

Small business lending 1

1,662 — 644 — — —

Other consumer 50 — — — — —

Total 3,153 45 6,446 131 5,840 7

Total impaired loans $ 15,313 $ 942 $ 13,812 $ 212 $ 12,443 $ 140

The Company had $ 1.2 million in other real estate owned (“OREO”) as of December 31, 2021, which consisted of one commercial property.

The Company did not have any OREO as of December 31, 2020.

There was one loan for $ 0.1 million and no loans in the process of foreclosure at December 31, 2021 and December 31, 2020, respectively.

1 Balance is partially guaranteed by the U.S.

First Internet Bancorp

1 unchanged sentence

(Tabular dollar amounts in thousands except per share data)

The Company did not have any other real estate owned (“OREO”) as of December 31, 2022.

The Company had $ 1.2 million in OREO as of December 31, 2021, which consisted of one commercial property.

There was one loan for $ 0.1 million and one loan for $ 0.1 million in the process of foreclosure at December 31, 2022 and December 31, 2021, respectively.

Troubled Debt Restructurings

The loan portfolio includes TDRs, which are loans that have been modified to grant economic concessions to borrowers who have experienced financial difficulties.

These concessions typically result from loss mitigation efforts and could include reductions in the interest rate, payment extensions, forgiveness of principal, forbearance, or other actions.

Certain TDRs are classified as nonperforming at the time of restructuring and typically are returned to performing status after considering the borrower’s sustained repayment performance for a reasonable period, generally not less than six consecutive months.

When loans are modified in a TDR, any possible impairment similar to other impaired loans is evaluated based on the present value of expected future cash flows, discounted at the contractual interest rate of the original loan agreement, or using the current fair value of the collateral, less selling costs, for collateral-dependent loans.

If it is determined that the value of the modified loan is less than the recorded balance of the loan, impairment is recognized through a specific allowance or charge-off to the allowance.

In periods subsequent to modification, all TDRs, including those that have payment defaults, are evaluated for possible impairment, and impairment is recognized through the allowance.

In the course of working with troubled borrowers, the Company may choose to restructure the contractual terms of certain loans in an effort to work out an alternative payment schedule with the borrower in order to optimize the collectability of the loan.

1 unchanged sentence

Terms may be modified to fit the ability of the borrower to repay in line with its current financial status or the loan may be restructured to secure additional collateral and/or guarantees to support the debt, or a combination of the two.

There were two new portfolio residential mortgage loans classified as a new TDRs during the twelve months ended December 31, 2021 with a pre-modification and post-modification outstanding recorded investment of $ 1.6 million.

The Company did not allocate a specific allowance for these loans as of December 31, 2021.

There were two portfolio residential mortgage loans classified as new TDRs during the twelve months ended December 31, 2022 with a pre-modification and post-modification outstanding recorded investment of $ 1 million.

The Company did not allocate a specific ALLL for these loans as of December 31, 2022 and the modifications consisted of interest only payments for a period of time.

There was one SBA loan classified as a new TDR during the twelve months ended December 31, 2022 with a pre-modification and post-modification outstanding recorded investment of $ 0.6 million and the modification consisted of a forbearance agreement.

The company allocated a specific ALLL of $ 0.3 million for this loan.

There were 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.

The Company did not allocate a specific ALLL for these loans as of December 31, 2021.

The modifications consisted of interest-only payments for a period of time.

There were three commercial and industrial loans classified as new TDRs during the twelve months ended December 31, 2020 with a pre-modification and post-modification outstanding recorded investment of $ 2.6 million.

The Company did not allocate a specific allowance for these loans as of December 31, 2020 and the modifications consisted of interest only payments for a period of time and an extension of the maturity date.

There were four commercial and industrial loans classified as new TDRs during the twelve months ended December 31, 2019 with a pre-modification and post-modification outstanding recorded investment of $ 2.0 million.

The Company did not allocate a specific allowance for these loans as of December 31, 2019 and the modifications consisted of interest only payments for a period of time.

The Company did not allocate a specific ALLL for these loans as of December 31, 2020 and the modifications consisted of interest only payments for a period of time and an extension of the maturity dates.

There were no performing TDRs which had payment defaults within the twelve months following modification during the years ended December 31, 2022, 2021 and 2020.

1 unchanged sentence

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.

This guidance encouraged financial institutions to work prudently with borrowers who were or may be unable to meet their contractual payment obligations due to the effects of COVID-19.

Additionally, Section 4013 of the Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”) 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.

As of December 31, 2021, the Company had eleven loans totaling $ 10.5 million in non-TDR loan modifications due to COVID-19.

As of December 31, 2022, the Company had no loans classified as non-TDR loan modifications due to COVID-19.

Premises and Equipment

The following table summarizes premises and equipment at December 31, 2022 and 2021.

First Internet Bancorp

1 unchanged sentence

(Tabular dollar amounts in thousands except per share data)

Premises and Equipment

The following table summarizes premises and equipment at December 31, 2021 and 2020.

Land $ 5,598 $ —

5 unchanged sentences

$ 72,711 $ 59,842

In December 2018, the Bank’s subsidiary, SPF15, Inc., entered into a project agreement with the City of Fishers, Indiana, and it’s Redevelopment Commission, among others, to construct an office building to include the Company’s future headquarters and associated parking garage on property the Bank had acquired.

The City agreed to reimburse SPF15, Inc.

a total of $ 11.2 million for the cost of the land and $ 15.0 million for the construction of the parking garage.

On February 16, 2021, the Company entered into an agreement to sell its headquarters and certain equipment currently located in the building to a third party.

On February 16, 2021, the Company entered into an agreement to sell its then headquarters (the “Prior Headquarters”) and certain equipment located in the Prior Headquarters to a third party.

The sale was completed on April 16, 2021, and the Company recorded a gain on sale of $ 2.5 million.

As a part of the sale agreement, the buyer agreed to lease the office building back to the Company through December 31, 2021 .

As a part of the sale agreement, the buyer agreed to lease the Prior Headquarters back to the Company through December 31, 2021.

The Company vacated the Prior Headquarters at the end of the lease, on or prior to December 31, 2021.

As of December 31, 2022 and 2021, the carrying amount of goodwill was $ 4.7 million.

18 unchanged sentences

Loans serviced for others are not included in the consolidated balance sheets.

The unpaid principal balances of these loans serviced for others as of December 31, 2021 and December 31, 2020 are shown in the table below.

December 31, 2021 December 31, 2020

The unpaid principal balances of these loans serviced for others as of December 31, 2022, 2021, and 2020 are shown in the table below.

December 31, 2022 December 31, 2021 December 31, 2020

Loan portfolios serviced for:

1 unchanged sentence

Total $ 318,194 $ 230,514 $ 165,961

Loan servicing revenue totaled $ 1.9 million during the twelve months ended December 31, 2021 and $ 1.2 million during the twelve months ended December 31, 2020.

Loan servicing asset revaluation, which represents paydowns and the change in fair value of the servicing asset, resulted in a $ 1.1 million and $ 0.4 million downward valuation for twelve months ended December 31, 2021 and December 31, 2020, respectively.

Loan servicing revenue totaled $ 2.6 million, $ 1.9 million, and $ 1.2 million during the twelve months ended December 31, 2022, 2021, and 2020, respectively.

Loan servicing asset revaluation, which represents paydowns and the change in fair value of the servicing asset, resulted in a $ 1.6 million, $ 1.1 million, and $ 0.4 million downward valuation for twelve months ended December 31, 2022 , 2021 and 2020, respectively.

The fair value of servicing rights is highly sensitive to changes in underlying assumptions.

11 unchanged sentences

Money market accounts 1,418,599 1,483,936

Banking-as-a-Service (“BaaS”) - brokered deposits 13,607 —

Certificates of deposits 874,490 970,107

25 unchanged sentences

Subordinated Debt

In October 2015, the Company entered into a term loan in the principal amount of $ 10.0 million, evidenced by a term note due 2025 (the “2025 Note”).

The 2025 Note had a fixed interest rate of 6.4375 % per year, payable quarterly, and was scheduled to mature on October 1, 2025.

The 2025 Note was an unsecured subordinated obligation of the Company and was eligible to be repaid, without penalty, on any interest payment date on or after October 15, 2020.

The 2025 Note was intended to qualify as Tier 2 capital under regulatory guidelines.

The Company redeemed the 2025 Note in full on January 4, 2021.

In September 2016, the Company issued $ 25.0 million aggregate principal amount of 6.0 % Fixed-to-Floating Rate Subordinated Notes due 2026 (the “2026 Notes”) in a public offering.

The 2026 Notes initially bear a fixed interest rate of 6.00 % per year to, but excluding, September 30, 2021, and thereafter a floating rate equal to the then-current three-month London Interbank Offered Rate (“LIBOR”) plus 4.85 %.

The 2026 Notes initially had a fixed interest rate of 6.0 % per year to, but excluding, September 30, 2021, and thereafter a floating rate equal to the then-current three-month London Interbank Offered Rate (“LIBOR”) plus 4.85 %.

All interest on the 2026 Notes was payable quarterly.

14 unchanged sentences

The 2030 Note is intended to qualify as Tier 2 capital under regulatory guidelines.

The Company used the net proceeds from the issuance of the 2030 Note to redeem the 2025 Note as discussed above.

The Company used the net proceeds from the issuance of the 2030 Note to redeem a subordinated term note that had been entered into in October 2015.

In August 2021, the Company issued $ 60.0 million aggregate principal amount of 3.75 % Fixed-to-Floating Rate Subordinated Notes due 2031 (the “2031 Notes”) in a private placement.

5 unchanged sentences

Pursuant to the terms of a Registration Rights Agreement between the Company and the initial purchasers of the 2031 Notes, the Company offered to exchange the 2031 Notes for subordinated notes that are registered under the Securities Act of 1933, as amended, and have substantially the same terms as the 2031 Notes.

The offering period to exchange the unregistered 2031 Notes for registered 2031 Notes expired on December 30, 2021.

First Internet Bancorp

Notes to Consolidated Financial Statements

(Tabular dollar amounts in thousands except per share data)

The following table presents the principal balance and unamortized discount and debt issuance costs for the 2025 Note, the 2026 Notes, the 2029 Notes, the 2030 Note, and the 2031 Notes as of December 31, 2021 and 2020.

On December 30, 2021, we completed an exchange of $ 59.3 million principal amount of the unregistered 2031 Notes for registered 2031 Notes in satisfaction of our obligations under the registration rights agreement.

Holders of $ 0.7 million of unregistered 2031 Notes did not participate in the exchange.

The following table presents the principal balance and unamortized discount and debt issuance costs for the 2029 Notes, the 2030 Note and the 2031 Notes as of December 31, 2022 and 2021.

December 31, 2022 December 31, 2021

Principal Unamortized Discount and Debt Issuance Costs Principal Unamortized Discount and Debt Issuance Costs

2025 Note $ — $ — $ 10,000 $ ( 114 )

2029 Notes $ 37,000 $ ( 1,020 ) $ 37,000 $ ( 1,178 )

2029 Notes 37,000 ( 1,178 ) 37,000 ( 1,337 )

2030 Note 10,000 ( 184 ) 10,000 ( 208 )

1 unchanged sentence

Total $ 107,000 $ ( 2,468 ) $ 107,000 $ ( 2,769 )

First Internet Bancorp

Notes to Consolidated Financial Statements

(Tabular dollar amounts in thousands except per share data)

Benefit Plans

The Company has a 401(k) plan established for substantially all full-time employees, as defined in the plan.

The Company has a 401(k) plan established for substantially all full-time and part-time employees, as defined in the plan.

Employee contributions are limited to the maximum established by the Internal Revenue Service on an annual basis.

The Company has elected to match contributions equal to 100 % of the first 1 % of employee deferrals and then 50 % on deferrals over 1 % up to a maximum of 6 % of an individual’s total eligible salary, as defined in the plan, which vests immediately.

The Company has elected to match contributions equal to 100 % up to the first 1 % of employee deferrals and then 50 % on deferrals over 1 % up to a maximum of 6 % of an individual’s total eligible salary, as defined in the plan, which vests immediately.

Discretionary employer-matching contributions begin vesting immediately at a rate of 50 % per year of employment and are fully vested after the completion of two years of employment.

Contributions totaled approximately $ 0.9 million, $ 0.9 million and $ 0.8 million in the twelve months ended December 31, 2022, 2021 and 2020, respectively.

Employment Agreement

The Company has entered into an employment agreement with its Chief Executive Officer that provides for an annual base salary and an annual bonus, if any, as determined from time to time by the Compensation Committee.

The annual bonus is to be determined with reference to the achievement of annual performance objectives established by the Compensation Committee for the Chief Executive Officer and other senior officers.

The agreement also provides that the Chief Executive Officer may be awarded additional compensation, benefits or consideration as the Compensation Committee may determine.

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

Employment Agreements

The Company is party to certain employment agreements with each of its Chief Executive Officer, President and Chief Operating Officer and Executive Vice President and Chief Financial Officer.

The employment agreements each provide for annual base salaries and annual bonuses, if any, as determined from time to time by the Compensation Committee of our Board of Directors.

The annual bonuses are to be determined with reference to the achievement of annual performance objectives established by the Compensation Committee.

The agreements also provide that each of the Chief Executive Officer, President and Chief Operating Officer and Executive Vice President and Chief Financial Officer, may be awarded additional compensation, benefits, or consideration as the Compensation Committee may determine.

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

2022 Equity Incentive Plan

The 2013 Equity Incentive Plan (“2013 Plan”) authorizes the issuance of up to 750,000 shares of the Company’s common stock in the form of equity-based awards to employees, directors, and other eligible persons.

Under the terms of the 2013 Plan, the pool of shares available for issuance may be used for available types of equity awards under the 2013 Plan, which includes stock options, stock appreciation rights, restricted stock awards, stock unit awards, and other share-based awards.

The First Internet Bancorp 2022 Equity Incentive Plan (the “2022 Plan”) was approved by our Board of Directors and ratified by our shareholders on May 16, 2022.

The plan permits awards of incentive and non-statutory stock options, stock appreciation rights, restricted stock awards, stock unit awards, performance awards and other stock-based awards.

All employees, consultants, and advisors of the Company or any subsidiary, as well as all non-employee directors of the Company, are eligible to receive awards under the 2022 Plan.

The Company recorded $ 2.4 million, $ 2.1 million, and $ 1.7 million of share-based compensation expense for the years ended December 31, 2021, 2020, and 2019, respectively, related to awards made under the 2013 Plan.

The 2022 Plan initially authorized the issuance of 400,000 new shares of the Company’s common stock plus all shares of common stock that remained available for future grants under the First Internet Bancorp 2013 Equity Incentive Plan (the “2013 Plan”).

Award Activity Under 2022 Plan

The Company recorded less than $ 0.1 million of share-based compensation expense for the year ended December 31, 2022, related to stock-based awards under the 2022 Plan.

The following table summarizes the stock-based award activity under the 2022 Plan for the year ended December 31, 2022.

Restricted Stock Units Weighted-Average Grant Date Fair Value Per Share Restricted Stock Awards Weighted-Average Grant Date Fair Value Per Share Deferred Stock Units Weighted-Average Grant Date Fair Value Per Unit

Unvested at January 1, 2022 — $ — — $ — — $ —

Granted — — 4,151 36.84 — —

Forfeited — — ( 593 ) 36.84 —

Unvested at December 31, 2022 — $ — 3,558 $ 36.84 — $ —

First Internet Bancorp

1 unchanged sentence

(Tabular dollar amounts in thousands except per share data)

The following table summarizes the status of the 2013 Plan awards as of December 31, 2021, and activity for the year ended December 31, 2021:

At December 31, 2022, the total unrecognized compensation cost related to unvested stock-based awards was 0.1 million with a weighted-average expense recognition period of 0.4 years.

2013 Equity Incentive Plan

The 2013 Plan authorized the issuance of 750,000 shares of the Company’s common stock in the form of stock-based awards to employees, directors, and other eligible persons.

Although outstanding stock-based awards under the 2013 Plan remain in place according to their terms, our authority to grant new awards under the 2013 Plan terminated upon shareholder approval of the 2022 Plan.

Award Activity Under 2013 Plan

The Company recorded $ 2.0 million, $ 2.4 million, and $ 2.1 million of share-based compensation expense for the years ended December 31, 2022, 2021, and 2020, respectively, related to stock-based awards under the 2013 Plan.

The following table summarizes the stock-based award activity under the 2013 Plan for the year ended December 31, 2022:

13 unchanged sentences

Outstanding, beginning of year 84,536

Released ( 44,554 )

Outstanding, end of year 40,414

All deferred stock rights granted during 2022 were additional rights issued in lieu of cash dividends payable on outstanding deferred stock rights.

First Internet Bancorp

Notes to Consolidated Financial Statements

(Tabular dollar amounts in thousands except per share data)

The provision for income taxes consists of the following:

3 unchanged sentences

Total $ 4,559 $ 8,458 $ 4,445

First Internet Bancorp

Notes to Consolidated Financial Statements

(Tabular dollar amounts in thousands except per share data)

Income tax provision is reconciled to the statutory 21% rate applied to pre-tax income.

17 unchanged sentences

Prepaid assets ( 813 ) ( 641 )

Net operating loss 8,928 —

Other 312 149

Total deferred tax assets, net $ 12,092 $ 11,408

During 2022, the Company generated a federal and state net operating loss of $ 40.5 million and $ 9.1 million, respectively.

For federal income tax purposes, the NOL has no expiration period;

however, for state income tax purposes, the NOL may have varying expiration periods.

The Company expects to generate sufficient taxable income in the future to utilize the loss generated.

Related Party Transactions

2 unchanged sentences

Further, in management’s opinion, these loans did not involve more than the normal risk of collectability or present other unfavorable features.

Management evaluated related party loans and extensions of credit at December 31, 2021 and 2020, and deemed the balances immaterial.

First Internet Bancorp

Notes to Consolidated Financial Statements

(Tabular dollar amounts in thousands except per share data)

Related party loans and extensions of credit at December 31, 2022 and 2021 totaled $ 21.9 million and $ 11.4 million, respectively.

The following table presents the change in related party loans as of December 31, 2022 and 2021.

Twelve Months Ended

December 31, 2022 December 31, 2021

Balance at the beginning of period $ 11,364 $ 2,089

Effect of change in composition of directors and executive officers — —

New Term Loans 21,810 11,352

Repayment of term loans ( 11,324 ) ( 2,072 )

Changes in balances of revolving lines of credit 10 ( 5 )

Balance at end of period $ 21,860 $ 11,364

Deposits from related parties held by the Company at December 31, 2022 and 2021 totaled $ 33.7 million and $ 28.8 million, respectively.

3 unchanged sentences

Capital amounts and classifications are also subject to qualitative judgments by regulators about components, risk weighting and other factors.

First Internet Bancorp

Notes to Consolidated Financial Statements

(Tabular dollar amounts in thousands except per share data)

The Basel III Capital Rules became effective for the Company and the Bank on January 1, 2015, subject to a phase-in period for certain provisions.

50 unchanged sentences

Capital Commitments

Capital expenditures contracted for at the balance sheet date but not yet recognized in the financial statements are associated with the construction of premises intended to house our corporate headquarters.

Capital expenditures contracted for at the balance sheet date but not yet recognized in the financial statements are associated with the construction of the building where our corporate headquarters is located, along with the attached parking garage.

The Company has entered into construction-related contracts in the amount of $ 68.9 million.

16 unchanged sentences

Level 2 securities include U.S.

Government-sponsored agencies, municipal securities, mortgage and asset-backed securities and certain corporate securities.

Matrix pricing is a mathematical technique widely used in the banking industry to value investment securities without relying exclusively on quoted prices for specific investment securities but also on the investment securities’ relationship to other benchmark quoted investment securities.

Government-sponsored agencies, municipal securities, mortgage and asset-backed securities and corporate securities.

Matrix pricing is a mathematical technique widely used in the banking industry to value investment securities.

In certain cases where Level 1 or Level 2 inputs are not available, securities are classified within Level 3 of the hierarchy.

37 unchanged sentences

Servicing asset 6,255 — — 6,255

Interest rate swaps liabilities ( 14,271 ) — ( 14,271 ) —

Interest rate swaps assets 8,645 — 8,645 —

Loans held-for-sale (mandatory pricing agreements) 9,110 — 9,110 —

28 unchanged sentences

Additions 1,520 —

Paydowns ( 524 )

Change in fair value 92 2,451

3 unchanged sentences

Paydowns ( 820 ) —

Changes in fair value 92 2,451

Change in fair value ( 249 ) ( 2,643 )

Balance, December 31, 2021 4,702 718

2 unchanged sentences

Paydowns ( 1,135 ) —

Changes in fair value ( 249 ) ( 2,643 )

Change in fair value ( 504 ) ( 585 )

Balance, December 31, 2022 $ 6,255 $ 133

7 unchanged sentences

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

The following table presents the fair value measurements of assets and liabilities recognized in the accompanying condensed consolidated balance sheets measured at fair value on a nonrecurring basis and the level within the fair value hierarchy in which the fair value measurement falls at December 31, 2022 and December 31, 2021.

December 31, 2022

Fair Value Measurements Using

6 unchanged sentences

(Tabular dollar amounts in thousands except per share data)

December 31, 2021

Fair Value Measurements Using

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discounted cash flows.

Level 2 securities include municipal securities and corporate securities.

Matrix pricing is a mathematical technique

widely used in the banking industry to value investment securities without relying exclusively on quoted prices for

specific investment securities but also on the investment securities’ relationship to other benchmark quoted

investment securities.

Level 2 securities include agency mortgage-backed securities - residential, municipal securities and corporate securities.

Matrix pricing is a mathematical technique widely used in the banking industry to value investment securities.

In certain cases where Level 1 or Level 2 inputs are not available, securities are classified within Level 3 of the

Fair values are calculated using discounted cash flows.

Discounted cash flows are calculated based off of

First Internet Bancorp

1 unchanged sentence

(Tabular dollar amounts in thousands except per share data)

Fair values are calculated using discounted cash flows.

Discounted cash flows are calculated based off of

the anticipated future cash flows updated to incorporate loss severities.

7 unchanged sentences

Federal Home Loan Bank of Indianapolis Stock

The fair value approximates carrying value.

The fair value of noninterest-bearing and interest-bearing demand deposits, savings and money market accounts approximates carrying value.

The fair value of this financial instrument approximates carrying value.

The fair value of noninterest-bearing and interest-bearing demand deposits, savings accounts and money market accounts approximates carrying value.

The fair value of fixed maturity certificates of deposit and brokered deposits are estimated using rates currently offered for deposits of similar remaining maturities.

44 unchanged sentences

Mortgage Banking Activities

The Company’s residential real estate lending business originates mortgage loans for customers and sells a majority of the originated loans into the secondary market.

The Company hedges its mortgage banking pipeline by entering into forward contracts for the future delivery of mortgage loans to third-party investors and entering into IRLCs with potential borrowers to fund specific mortgage loans that will be sold into the secondary market.

The Company’s residential real estate lending business originated mortgage loans for customers and sold a majority of the originated loans into the secondary market.

The Company hedged its mortgage banking pipeline by entering into forward contracts for the future delivery of mortgage loans to third-party investors and entering into IRLCs with potential borrowers to fund specific mortgage loans that will be sold into the secondary market.

To facilitate the hedging of the loans, the Company has elected the fair value option for loans originated and intended for sale in the secondary market under mandatory pricing agreements.

9 unchanged sentences

Gain on loans sold $ 6,101 $ 17,803 $ 22,826

(Loss) gain resulting from the change in fair value of loans held-for-sale ( 718 ) ( 94 ) 538

Loss resulting from the change in fair value of loans held-for-sale ( 184 ) ( 718 ) ( 94 )

(Loss) gain resulting from the change in fair value of derivatives ( 453 ) ( 2,035 ) 1,961

6 unchanged sentences

The Company enters into interest rate swap agreements as part of its asset/liability management strategy to help manage its interest rate risk position.

Additionally, the Company enters into forward contracts for the future delivery of mortgage loans to third-party investors and enters into IRLCs with potential borrowers to fund specific mortgage loans that will be sold into the secondary market.

Additionally, the Company entered into forward contracts for the future delivery of mortgage loans to third-party investors and entered into IRLCs with potential borrowers to fund specific mortgage loans that will be sold into the secondary market.

The forward contracts are entered into in order to economically hedge the effect of changes in interest rates resulting from the Company’s commitment to fund the loans.

The Company entered into various interest rate swap agreements designated and qualifying as accounting hedges during the reported periods.

Designating an interest rate swap as an accounting hedge allows the Company to recognize gains and losses, in the income statement within the same period that the hedged item affects earnings.

The Company includes the gain or loss on the hedged items in the same line item as the offsetting loss or gain on the related interest rate swaps.

10 unchanged sentences

1 These amounts include the amortized cost basis of closed portfolios used to designate hedging relationships in which the hedged item is the last layer expected to be remaining at the end of the hedging relationship.

The amounts of the designated hedged items were $ 50.0 million and $ 88.2 million, at December 31, 2021 and 2020, respectively.

The amounts of the designated hedged items were $ 50.0 million at December 31, 2022 and 2021.

The following tables present a summary of interest rate swap derivatives designated as fair value accounting hedges of fixed-rate receivables used in the Company's asset/liability management activities at December 31, 2022 and December 31, 2021, identified by the underlying interest rate-sensitive instruments.

24 unchanged sentences

Interest rate swaps 60,000 0.6 735 1 month LIBOR 2.88 %

Interest rate swaps 40,000 1.4 1,030 Fed Funds Effective 2.78 %

December 31, 2021 Weighted Average Remaining Maturity (years) Weighted-Average Rate

4 unchanged sentences

These derivative financial instruments were entered into for the purpose of managing the interest rate risk of certain assets and liabilities.

The Company pledged $ 15.7 million and $ 30.6 million of cash collateral to counterparties as security for its obligations related to these interest rate swap transactions at December 31, 2021 and 2020, respectively.

As of December 31, 2022, the Company received $ 7.7 million of cash collateral from counterparties as security for their obligations related to these swap transactions.

As of December 31, 2021, the Company pledged cash collateral of $ 15.7 million to counterparties as security for its obligations related to these interest rate swap transactions.

Cash collateral is pledged to counterparties on interest rate swap agreements as security for its obligations related to these agreements.

Collateral posted and received is dependent on the market valuation of the underlying hedges.

6 unchanged sentences

Asset Derivatives

Derivatives designated as hedging instruments

Interest rate swaps associated with securities available-for-sale $ 50,000 $ 2,093 $ — $ —

Interest rate swaps associated with liabilities 210,000 6,552 — —

Derivatives not designated as hedging instruments

IRLCs 14,862 133 62,789 718

Forward contracts 17,000 97 — —

Total contracts $ 291,862 $ 8,875 $ 62,789 $ 718

7 unchanged sentences

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

Fair values of IRLCs and forward contracts were estimated using changes in mortgage interest rates from the date the Company entered into the IRLC and the balance sheet date.

Fair values of IRLCs and forward contracts were estimated using changes in mortgage interest rates and other factors from the date the Company entered into the IRLC and the balance sheet date.

Refer to “Note 16 - Fair Value of Financial Instruments” for additional information.

The following table presents the effects of the Company's cash flow hedge relationships on the consolidated statements of comprehensive income during the twelve months ended December 31, 2022, 2021, and 2020.

3 unchanged sentences

The following table summarizes the periodic changes in the fair value of the derivative financial instruments on the consolidated statements of income for the twelve months ended December 31, 2022, 2021, and 2020.

First Internet Bancorp

Notes to Consolidated Financial Statements

(Tabular dollar amounts in thousands except per share data)

Amount of (Loss) / Gain Recognized in the Twelve Months Ended

4 unchanged sentences

Forward contracts 127 610 —

First Internet Bancorp

Notes to Consolidated Financial Statements

(Tabular dollar amounts in thousands except per share data)

Liability Derivatives

Derivatives not designated as hedging instruments

IRLCs $ ( 585 ) $ ( 2,643 ) $ —

Forward contracts — — ( 487 )

The following table presents the effects of the Company's interest rate swap agreements on the consolidated statements of income during the twelve months ended December 31, 2022, 2021, and 2020.

Line item in the consolidated statements of income Twelve Months Ended

Line item in the consolidated statements of income

December 31, 2022 December 31, 2021 December 31, 2020

13 unchanged sentences

Shareholders’ Equity

On October 20, 2021, the Company's Board of Directors approved a stock repurchase program authorizing the repurchase of up to $ 30.0 million of its outstanding common stock from time to time on the open market or in privately negotiated transactions.

The Company repurchased 100,000 shares under this program during the fourth quarter 2021.

The stock repurchase authorization is scheduled to expire on December 31, 2022.

On October 20, 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.

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 authorizing 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 replaced the Company’s previously announced stock repurchase program and is scheduled to expire on December 31, 2023.

Under this program, the Company repurchased 46,497 shares of common stock during the fourth quarter 2022 at an average price of $ 24.42 per share.

As of December 31, 2022, the Company had $ 23.9 million of remaining authority under the program.

First Internet Bancorp

3 unchanged sentences

The components of accumulated other comprehensive loss, included in stockholders' equity, are presented in the table below.

Available-For-Sale Securities Cash Flow Hedges Total

Available-For-Sale Securities Unrealized Losses on Debt Securities Transferred from Available-for-Sale to Held-to-Maturity Cash Flow Hedges Total

Balance, January 1, 2020 $ ( 4,388 ) $ — $ ( 9,803 ) $ ( 14,191 )

Net unrealized holding gains (losses) recorded within other comprehensive income before income tax 6,551 — ( 10,248 ) ( 3,697 )

Reclassification of net loss realized and included in earnings 458 — 458

Reclassification adjustment for gains realized ( 139 ) — — ( 139 )

Other comprehensive income (loss) before tax 6,412 — ( 10,248 ) ( 3,836 )

2 unchanged sentences

Balance, December 31, 2020 $ 468 $ — $ ( 17,664 ) $ ( 17,196 )

Net unrealized holding gains (losses) recorded within other comprehensive income before income tax 6,551 ( 10,248 ) ( 3,697 )

Reclassification of net gain realized and included in earnings ( 139 ) — ( 139 )

Other comprehensive income (loss) before tax 6,412 ( 10,248 ) ( 3,836 )

Income tax provision (benefit) 1,556 ( 2,387 ) ( 831 )

Other comprehensive income (loss) - net of tax 4,856 ( 7,861 ) ( 3,005 )

Net unrealized holding (losses) gains recorded within other comprehensive income before income tax ( 4,087 ) — 11,138 7,051

Other comprehensive (loss) income before tax ( 4,087 ) — 11,138 7,051

Income tax (benefit) provision ( 1,064 ) — 1,958 894

Other comprehensive (loss) income- net of tax ( 3,023 ) — 9,180 6,157

Balance, December 31, 2021 $ ( 2,555 ) $ — $ ( 8,484 ) $ ( 11,039 )

Net unrealized holding (gains) losses recorded within other comprehensive income before income tax ( 4,087 ) 11,138 7,051

Other comprehensive (loss) income before income tax ( 4,087 ) 11,138 7,051

Net unrealized holding (losses) gains recorded within other comprehensive income before income tax ( 42,336 ) — 19,091 ( 23,245 )

Reclassification of securities available-for-sale to held-to-maturity — ( 5,402 ) — ( 5,402 )

Amortization of net unrealized losses on securities transferred from available-for-sale to held-to-maturity — 844 — 844

Other comprehensive (loss) income before tax ( 42,336 ) ( 4,558 ) 19,091 ( 27,803 )

Income tax (benefit) provision ( 9,060 ) ( 1,039 ) 4,893 ( 5,206 )

15 unchanged sentences

Subordinated debt, net of unamortized discounts and debt issuance costs of $2,468 in 2022 and $2,769 in 2021 $ 104,532 $ 104,231

Note payable to the Bank — 3,000

Accrued expenses and other liabilities 2,023 2,353

6 unchanged sentences

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

Other 285 75 —

Total income 285 2,598 —

17 unchanged sentences

Net income $ 35,541 $ 48,114 $ 29,453

Other comprehensive income (loss)

Other comprehensive (loss) income

Securities available-for-sale

Net unrealized holding (losses) gains on securities available-for-sale recorded within other comprehensive income before income tax ( 42,336 ) ( 4,087 ) 6,551

Reclassification adjustment for (gains) losses realized — ( 139 ) 458

Net unrealized holding losses on cash flow hedging derivatives recorded within other comprehensive income before income tax 11,138 ( 10,248 ) ( 9,071 )

Other comprehensive income (loss) before tax 7,051 ( 3,836 ) 3,459

Reclassification adjustment for gains realized — — ( 139 )

Income tax (benefit) provision ( 9,060 ) ( 1,064 ) 1,556

Net effect on other comprehensive loss ( 33,276 ) ( 3,023 ) 4,856

Securities held-to-maturity

Reclassification of securities from available-for-sale to held-to-maturity ( 5,402 ) — —

Amortization of net unrealized holding losses on securities transferred from available-for-sale to held-to-maturity 844 — —

Income tax benefit ( 1,039 ) — —

Net effect on other comprehensive loss ( 3,519 ) — —

Cash flow hedges

Net unrealized holding gains (losses) on cash flow hedging derivatives recorded within other comprehensive income before income tax 19,091 11,138 ( 10,248 )

Income tax provision (benefit) 4,893 1,958 ( 2,387 )

Other comprehensive income (loss) - net of tax 6,157 ( 3,005 ) 2,350

Net effect on other comprehensive income (loss) 14,198 9,180 ( 7,861 )

Total other comprehensive (loss) income ( 22,597 ) 6,157 ( 3,005 )

Comprehensive income $ 12,944 $ 54,271 $ 26,448

8 unchanged sentences

Adjustments to reconcile net income to net cash provided by operating activities:

Dividend received from Bank 8,000 — —

Equity in undistributed net income of subsidiaries ( 42,049 ) ( 53,847 ) ( 35,526 )

4 unchanged sentences

Net change in other liabilities ( 490 ) 775 311

Net cash used in operating activities ( 5,596 ) ( 5,035 ) ( 4,788 )

Net cash provided by (used in) operating activities 2,476 ( 5,596 ) ( 5,035 )

Investing activities

Capital contribution to the Bank — — ( 25,000 )

Purchase of premises and equipment — — ( 13 )

Net proceeds from sale of premises and equipment — 8,116 —

Other investing activities ( 2,727 ) ( 3,561 ) —

Net cash provided by (used in) investing activities 4,555 — ( 25,013 )

Net cash (used in) provided by investing activities ( 2,727 ) 4,555 —

Financing activities

6 unchanged sentences

Net cash provided by financing activities ( 30,347 ) 13,366 7,264

Net increase (decrease) in cash and cash equivalents 12,325 2,229 ( 6,978 )

Net (decrease) increase in cash and cash equivalents ( 30,598 ) 12,325 2,229

Cash and cash equivalents at beginning of year 52,857 40,532 38,303

29 unchanged sentences

(Tabular dollar amounts in thousands except per share data)

For public business entities that are SEC filers, the amendments in this update are effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years.

All entities may early adopt the amendments in this update as of the fiscal years beginning after December 15, 2018, including interim periods within those fiscal years.

In November 2019, the FASB issued ASU 2019-10 - Financial Instruments - Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842) - Effective Dates.

This ASU delayed the effective date for public companies to fiscal years beginning after December 15, 2022.

An entity will apply the amendments in this update through a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is effective (that is, a modified-retrospective approach).

A prospective transition approach is required for debt securities for which an OTTI had been recognized before the effective date.

The effect of a prospective transition approach is to maintain the same amortized cost basis before and after the effective date of this update.

The Company does not expect to early adopt and is currently evaluating the impact of the amendments on the Company’s consolidated financial statements.

The Company currently cannot determine or reasonably quantify the impact of the adoption of the amendments due to the complexity and extensive changes.

The Company intends to develop processes and procedures prior to the effective date to ensure it is fully compliant with the amendments at the adoption date.

The Company has formed an implementation committee and has engaged a third-party consultant to assist in developing current expected credit losses (“CECL”) models using appropriate methodologies.

ASU 2017-04 - Intangibles - Goodwill and other (Topic 350) - Simplifying the Test for Goodwill Impairment (January 2017)

The amendments in this update simplify the goodwill impairment test by eliminating Step 2 of the goodwill impairment process, which requires an entity to determine the implied fair value of its goodwill by assigning fair value to all its assets and liabilities.

Under the new guidance, an entity will record an impairment charge if a reporting unit’s carrying amount exceeds its fair value.

Entities still have the option to perform the qualitative assessment for a reporting unit to determine if the quantitative impairment is necessary.

The amendments in this ASU are effective for public companies for annual and interim impairment tests performed in periods beginning after December 15, 2022.

Early adoption is permitted.

The Company adopted this guidance effective July 1, 2020 and it did not have a material impact on the consolidated financial statements.

ASU 2018-13 - Fair Value Measurement (Topic 820):

Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement (August 2018)

The amendments in this update modify the disclosure requirements on fair value measurements in ASC Topic 820.

This ASU eliminates the requirements to disclose the amount of and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy, the policy for timing of transfers between levels and the valuation processes for Level 3 fair value measurements.

In addition, this ASU requires entities that calculate net asset value to disclose the timing of liquidation of an investee’s assets and the date when restrictions from redemption might lapse only if the investee has communicated the timing to the entity or announced the timing publicly.

This ASU also adds new requirements, which include the disclosure of the changes in unrealized gains and losses for the period included in other comprehensive income for recurring Level 3 fair value measurements held at the end of the reporting period and the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements.

The amendments in this ASU were effective for public companies for fiscal years, and interim fiscal periods within those fiscal years, beginning after December 15, 2019.

The adoption of this guidance did not have a material impact on the consolidated financial statements.

First Internet Bancorp

Notes to Consolidated Financial Statements

(Tabular dollar amounts in thousands except per share data)

The ASU was effective for SEC filers for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019.

FASB subsequently approved a delay in adoption for Smaller Reporting Companies, which postponed adoption until periods beginning after December 15, 2022.

The Company has a current expected credit losses (“CECL”) working group that has been meeting to discuss implementation matters related to the completeness and accuracy of historical data, model development and corporate governance documentation.

The new allowance model estimates credit losses over the expected life of the portfolio and includes a qualitative framework to account for drivers of losses that the quantitative model does not capture.

The CECL working group discussed results from parallel model runs for each portfolio segment, assumptions related to unfunded commitments and economic forecast factors.

Model validation was completed by an independent third party in the fourth quarter 2022.

The ASU allows for several different methods of calculating the Allowance for Credit Losses (“ACL”) and based on its analysis of observable data, the Company determined the discounted cash flow method to be the most appropriate for all its loan segments, with the exception of its home improvement loan segment.

The most appropriate method for this portfolio is the weighted-average remaining life method.

The Company expects to record a one-time cumulative effect adjustment to the ACL in retained earnings on the consolidated balance sheet as of the beginning of 2023, as is required in the guidance.

The Company believes there will be an increase to the ACL between $ 2.5 million and $ 3.0 million.

In addition, the Company expects the allowance for unfunded commitments to be in the range of $ 2.5 million and $ 3.0 million.

The qualitative impact of the new accounting standard will still be directed by many of the same factors that impacted the previous methodology for calculating the ACL, including but not limited to, quality and experience of staff, changes in the value of collateral, concentrations of credit in loan types or industries and changes to lending policies.

In addition, the Company will also use reasonable and supportable forecasts.

Examples of this are regression analyses of data from the Federal Open Market Committee quarterly economic projections for change in real GDP, housing price index and national unemployment.

The actual impact from adopting this guidance may be subject to change based upon refinement and finalization of the model and associated assumptions, the implementation and testing of certain internal controls ensuring model effectiveness and management’s judgment.

The Company does not expect a material ACL on HTM securities or AFS debt securities.

ASU 2019-04 - Codification Improvements to Topic 326, Financial Instruments - Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments (April 2019)

6 unchanged sentences

The amendments to Topic 825 were effective for interim and annual reporting periods beginning after December 15, 2019 and the adoption of this guidance did not have a material impact on the consolidated financial statements.

First Internet Bancorp

Notes to Consolidated Financial Statements

(Tabular dollar amounts in thousands except per share data)

Coronavirus Aid, Relief and Economic Security Act (“CARES Act”)

1 unchanged sentence

Section 4013 of the CARES Act specifies 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 are in effect from the period beginning March 1, 2020 until the earlier of December 31, 2020 or 60 days after the date on which the national emergency related to the COVID-19 pandemic formally terminates.

Modifications within the scope of this relief were in effect from the period beginning March 1, 2020 until the earlier of December 31, 2020 or 60 days after the date on which the national emergency related to the COVID-19 pandemic formally terminates.

See the “Non-TDR Loan Modifications due to COVID-19” section of Item 2.

4 unchanged sentences

The ASU provides optional expedients and exceptions for applying GAAP to contract modification and hedge accounting relationships.

The guidance is effective March 12, 2020 through December 31, 2022.

In December 2022, FASB extended the effective date for this ASU from December 31, 2022 to December 31, 2024.

The Company is still evaluating the impact of reference rate reform and does not believe the adoption of this guidance will have a material impact on the consolidated financial statements.

ASU 2022-02 - Financial Instruments - Credit Losses (Topic 326):

Troubled Debt Restructurings and Vintage Disclosures (March 2022)

In March 2022, the FASB issued ASU No.

2022-02, Financial Instruments - Credit Losses (Topic 326):

Troubled Debt Restructurings and Vintage Disclosures.

This ASU eliminates the separate recognition and measurement guidance for Troubled Debt Restructurings ("TDRs") by creditors.

The elimination of the TDR guidance may be adopted prospectively for loan modifications after adoption or on a modified retrospective basis, which would also apply to loans previously modified, resulting in a cumulative effect adjustment to retained earnings in the period of adoption for changes in the allowance for credit losses.

The ASU requires an entity to disclose current-period gross write-offs by year of origination for financing receivables within the scope of Subtopic 326-20.

The Company adopted this guidance on January 1, 2023 and it did not have a material impact on the condensed consolidated financial statements.

First Internet Bancorp

1 unchanged sentence

(Tabular dollar amounts in thousands except per share data)

On November 2, 2021, the Company announced it has entered into a definitive agreement to acquire First Century Bancorp.

(“First Century”), the parent company of First Century Bank, N.A., headquartered in Roswell, GA.

According to the terms of the definitive agreement, First Internet will acquire all of the outstanding shares of First Century common stock for $ 80 million in cash, which First Internet will fund with available on-balance sheet cash.

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.

The transaction, which remains subject to regulatory approvals, is expected to close in the second quarter 2022.

Subsequent Event

Due to the steep decline in consumer mortgage volumes and the negative outlook for consumer mortgage lending over the next several years, the Company decided to exit its consumer mortgage business during the first quarter of 2023.

This includes its nationwide digital direct-to-consumer mortgage platform that originates residential loans for sale in the secondary market as well as its local traditional consumer mortgage and construction-to-permanent business.

The Company’s commercial construction and land development business will not be affected by this decision and will remain an important part of the Company’s lending strategy.

This action is expected to reduce total annual noninterest expense by approximately $ 6.8 million and increase annualized pre-tax income by approximately $ 2.7 million, with 80 % of the benefit realized in 2023 and 100 % thereafter.

The Company estimates that it will incur total pre-tax expense of approximately $ 3.3 million in the first and second quarters of 2023 associated with exiting this line of business.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 9A. Controls and Procedures