First Internet Bancorp (INBK)

ITEM 2.    MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our condensed consolidated financial statements and related notes appearing elsewhere in this report. This discussion and analysis includes certain forward-looking statements that involve risks, uncertainties, and assumptions. You should review the “Risk Factors” sections of this report and our Annual Report on Form 10-K for the year ended December 31, 2025 for a discussion of important factors that could cause actual results to differ materially from the results described in or implied by such forward-looking statements. See also “Cautionary Note Regarding Forward-Looking Statements” at the beginning of this report.

Overview

First Internet Bancorp is a bank holding company headquartered in Fishers, Indiana that conducts its primary business activities through its wholly-owned subsidiary, First Internet Bank of Indiana (the “Bank”), an Indiana chartered bank. The Bank was the first state-chartered, Federal Deposit Insurance Corporation (“FDIC”) insured Internet bank and commenced banking operations in 1999. First Internet Bancorp was incorporated under the laws of the State of Indiana on September 15, 2005. On March 21, 2006, we consummated a plan of exchange by which we acquired all of the outstanding shares of the Bank.

The Bank has three wholly-owned subsidiaries: First Internet Public Finance Corp., an Indiana corporation that provides a range of public and municipal finance lending and leasing products to governmental entities throughout the United States and acquires securities issued by state and local governments and other municipalities; JKH Realty Services, LLC, a Delaware limited liability company that manages other real estate owned properties as needed; and SPF15, Inc., an Indiana corporation that owns real estate used primarily for the Bank’s principal office.

We offer a wide range of commercial, small business, consumer and municipal banking products and services. We conduct our consumer and small business deposit operations primarily through digital channels on a nationwide basis and have no traditional branch offices. Our consumer lending products are primarily originated on a nationwide basis through relationships with dealerships and financing partners.

Our commercial banking products and services are delivered through a relationship banking model or through strategic partnerships and include commercial and industrial (“C&I”) lending, construction and investor commercial real estate lending, single tenant lease financing, public finance, specialty finance, small business lending, and commercial deposits and treasury management. Our C&I team provides credit solutions such as lines of credit, term loans, owner-occupied commercial real estate loans and corporate credit cards on a regional basis to commercial borrowers primarily in the Midwest and Southwest regions of the United States. We offer construction, investor commercial real estate loans and single tenant lease financing on a nationwide basis. Our public finance team provides a range of public and municipal lending and leasing products to government entities on a nationwide basis. Our specialty finance team manages our healthcare, franchise finance and equipment finance portfolios and our commercial deposits and treasury management team works with the other commercial teams to provide deposit products and treasury management services to our commercial and municipal lending customers as well as pursues commercial deposit opportunities in business segments where we have no credit relationships.

We believe that we differentiate ourselves from larger financial institutions by providing a full suite of services to emerging small businesses and entrepreneurs on a nationwide basis. We are an active lender in the Small Business

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Administration (“SBA”) 7(a) program, closing $72.5 million in SBA 7(a) loans during the three months ended March 31,2026. We also offer a top-ranked small business checking account product to our country’s entrepreneurs.

We offer payment, deposit, card and lending products and services through partnerships with financial technology companies and platforms (“fintechs”). With the rapid evolution of technology that enables small businesses to manage their finances digitally, fintechs are addressing a significantly growing marketplace. Fintechs have created robust digital offerings, unburdened by legacy technology architecture, to address growing customer expectations. Through partnerships with selected fintechs, we believe our ability to win and retain small business relationships will be significantly enhanced. Furthermore, we believe partnering with select fintechs will allow us to further diversify our revenue sources, acquire deposits and pursue additional asset generation capabilities.

As of March 31, 2026, the Company had consolidated assets of $5.7 billion, consolidated deposits of $5.0 billion and stockholders’ equity of $361.0 million.

Results of Operations

During the first quarter 2026, net income was $2.5 million, or $0.29 diluted earnings per share, compared to net income of $0.9 million, or $0.11 diluted earnings per share, during the first quarter 2025, representing an increase in net income of $1.6 million, or 166.1%, and an increase in diluted earnings per share of $0.18, or 163.6%.

The $1.6 million increase in net income for the first quarter 2026 compared to the first quarter 2025 was due primarily to increases of $6.5 million, or 25.9%, in net interest income and $1.1 million, or 10.5%, in noninterest income, partially offset by increases of $4.4 million, or 36.6%, in the provision for credit losses and $1.5 million, or 6.2%, in noninterest expense, as well as a decrease of $0.2 million in income tax benefit.

During the first quarter 2026, return on average assets (“ROAA”), return on average shareholders’ equity (“ROAE”), and return on average tangible common equity (“ROATCE”) were 0.18%, 2.72% and 2.75%, respectively, compared to 0.07%, 0.98% and 0.99%, respectively, for the first quarter 2025.

During the first quarter 2026, pre-provision net revenue (“PPNR”) was $18.1 million, an increase of 51.2% from PPNR of $12.0 million for the first quarter 2025. The $6.1 million increase was due to an increase of $6.5 million, or 25.9%, in net interest income and an increase of $1.1 million, or 10.5%, in noninterest income, partially offset by an increase of $1.5 million, or 6.2%, in noninterest expense.

Refer to the “Reconciliation of Non-GAAP Financial Measures” section of Part I, Item 2 of this report, Management’s Discussion and Analysis of Financial Condition and Results of Operations for additional information.

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Consolidated Average Balance Sheets and Net Interest Income Analyses

For the periods presented, the following tables provide the average balances of interest-earning assets and interest-bearing liabilities and the related yields and cost of funds. The tables do not reflect any effect of income taxes except for net interest margin - FTE, as discussed below. Balances are based on the average of daily balances. Nonaccrual loans are included in average loan balances.

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

2 Net interest income divided by total average interest-earning assets (annualized).

3 On an FTE basis assuming a 21% tax rate. Net interest income is adjusted to reflect income from assets such as municipal loans and securities that are exempt from Federal income taxes. This is to recognize the income tax savings that facilitates a comparison between taxable and tax-exempt assets. The Company believes that it is a standard practice in the banking industry to present net interest margin and net interest income on a fully-taxable equivalent basis, as these measures provide useful information to make peer comparisons. Net interest margin - FTE represents a non-GAAP financial measure. See “Reconciliation of Non-GAAP Financial Measures” for a reconciliation of this measure to its most directly comparable GAAP measure.

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Rate/Volume Analysis

The following table illustrates the impact of changes in the volume of interest-earning assets and interest-bearing liabilities and interest rates on net interest income for the periods indicated. The change in interest not due solely to volume or rate has been allocated in proportion to the absolute dollar amounts of the change in each.

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[Excerpt truncated for page length; source filing is linked above.]

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

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and related notes appearing elsewhere in this report.

The following discussion, analysis and comparisons generally focus on the operating results for the years ended December 31, 2025 and 2024. Discussion, analysis and comparisons of the years ended December 31, 2024 and 2023 that are not included in this Annual Report on Form 10-K can be found in “Management's Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2024. This discussion and analysis includes certain forward-looking statements that involve risks, uncertainties and assumptions. You should review the “Risk Factors” section of this report for a discussion of important factors that could cause actual results to differ materially from the results described in or implied by such forward-looking statements. See also the “Cautionary Note Regarding Forward-Looking Statements” at the beginning of this report.

Results of Operations

During the twelve months ended December 31, 2025, net loss was $35.2 million, or $4.03 diluted loss per share, compared to net income of $25.3 million, or $2.88 per diluted share, for the twelve months ended December 31, 2024 and net income of $8.4 million, or $0.95 per diluted share, for the twelve months ended December 31, 2023.

The $60.4 million decrease in net income for the twelve months ended December 31, 2025 compared to the twelve months ended December 31, 2024 was due primarily to an increase of $55.2 million, or 323.6%, in provision for credit losses, a decrease of $44.6 million, or 94.3%, in noninterest income and an increase of $4.9 million, or 5.5%, in noninterest expense, partially offset by an increase of $26.4 million, or 30.2%, in net interest income and a decrease of $18.0 million in income tax expense.

During the twelve months ended December 31, 2025, the Company closed on the sale of $851.2 million of single tenant lease financing loans recognizing a pre-tax loss of $38.2 million on the transaction. The transaction was executed as part of an initiative to strengthen the Company’s regulatory capital ratios and improve its interest rate risk position. While the loss on the transaction negatively impacted shareholders’ equity and regulatory capital, the transaction significantly reduced risk-weighted assets, resulting in a net positive effect on regulatory capital ratios. Furthermore, the loan sale reduced the Company’s interest rate risk profile by reducing exposure to longer-duration assets. Additionally, the Company expects the transaction to have a beneficial impact on key profitability metrics, such as net interest margin and return on average assets, in future periods.

During the twelve months ended December 31, 2025, return on average assets (“ROAA”), return on average equity (“ROAE”) and return on average tangible common equity (“ROATCE”) were (0.60%), (9.15%) and (9.26%), respectively. Excluding the after tax net loss on the sale of the single tenant lease financing loans, adjusted net loss for the twelve months ended December 31, 2025, was $5.7 million, and adjusted diluted loss per share was $0.66. Additionally, for the twelve months ended December 31, 2025, adjusted ROAA, adjusted ROAE and adjusted ROATCE were (0.10%), (1.49%) and (1.51%), respectively.

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

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

Refer to the “Reconciliation of Non-GAAP Financial Measures” section of Item 7 of Part II of this report, Management's Discussion and Analysis of Financial Condition and Results of Operations for additional information.

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Consolidated Average Balance Sheets and Net Interest Income Analyses

For the periods presented, the following table provides the average balances of interest-earning assets and interest-bearing liabilities and the related yields and cost of funds. The table does not reflect any effect of income taxes. Balances are based on the average of daily balances. Nonaccrual loans are included in average loan balances.

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

2 Net interest income divided by average interest-earning assets

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

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Rate/Volume Analysis

The following table illustrates the impact of changes in the volume of interest-earning assets and interest-bearing liabilities and interest rates on net interest income for the periods indicated. The change in interest not due solely to volume or rate has been allocated in proportion to the absolute dollar amounts of the change in each.

Net interest income for the twelve months ended December 31, 2025 was $113.8 million, an increase of $26.4 million, or 30.2%, compared to $87.4 million for the twelve months ended December 31, 2024. The increase in net interest income was the result of a $28.3 million, or 9.7%, increase in total interest income to $320.2 million for the twelve months ended December 31, 2025 compared to $291.9 million for the twelve months ended December 31, 2024. The increase in total interest income was partially offset by a $1.9 million, or 0.9%, increase in total interest expense to $206.4 million for the twelve months ended December 31, 2025 compared to $204.5 million for the twelve months ended December 31, 2024.

The growth in total interest income was due primarily to an increase in interest earned on loans, resulting from an increase of 30 bps in the yield earned on loans, as well as an increase of $225.7 million, or 5.6%, in the average balance of loans, including loans held-for-sale. Additionally, the average balance of securities increased $149.0 million, or 19.3%, and the yield earned on the securities portfolio increased 13 bps. The increase in total interest income was partially offset by a 95 bp decrease in the yield on other earning assets. The increase in the yield earned on loans was driven by new originations throughout the year as the yield on funded portfolio originations was 7.31%, well above the overall loan portfolio yield. Additionally, the yield earned on the loan portfolio benefitted from the sale of the single tenant lease financing loans, which had interest rates below the overall loan portfolio yield. The increase in the yield earned on securities was primarily driven by new securities purchases during the year, partially offset by the maturity of an interest rate swap designed to enhance the yield on certain municipal securities. The decrease in the yield earned on other earning assets was due mainly to the impact of decreases in the Fed Funds rates on cash balances held at the Federal Reserve.

The increase in total interest expense was due primarily to an increase of $25.6 million, or 244.6%, in interest expense associated with interest-bearing demand deposits, partially offset by decreases of $8.7 million, or 7.5%, in interest expense associated with certificates and brokered deposits, $5.6 million, or 10.9%, in interest expense associated with money market accounts and $3.4 million, or 15.7%, in interest expense associated with other borrowed funds. When combined with deposits formerly classified as fintech - brokered deposits, the increase in interest expense related to interest-bearing demand deposits was due primarily to a 378 bp increase in the cost of these deposits, as well as an increase of $516.3 million, or 81.2%, in the average balance of these deposits. The decrease in interest expense related to certificates and brokered deposits was driven by a 39 bp decline in cost of these deposits, partially offset by a slight increase in the average balance of these deposits. The decrease in the cost of funds was due to the combination of lower rates on new certificates of deposit production and using on-balance sheet liquidity to paydown higher-cost brokered deposits as they matured. The decrease in interest expense related to money

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market accounts was driven primarily by a decrease of 49 bps in the cost of these deposits, partially offset by a slight increase in the average balance of these deposits. The decrease in the cost of funds was due to the impact of decreases in the Fed Funds rate late in 2024 and in the second half of 2025. The decrease in interest expense related to other borrowed funds was driven by a decrease in the average balance of $207.2 million, or 32.9%, partially offset by an 87 bp increase in the cost of these funds. The decrease in the average balance of other borrowed funds was driven primarily by the early paydown of Federal Home Loan Bank advances late in 2024 as the Company deployed excess on-balance liquidity to reduce the size of the balance sheet and lower interest expense in future periods. The increase in the cost of the funds was due mainly to the cost of one issuance of subordinated debt repricing higher as its fixed-rate term expired in the third quarter of 2024 and converted to variable rate.

Net interest margin (“NIM”) was 2.01% for the twelve months ended December 31, 2025 compared to 1.65% for the twelve months ended December 31, 2024, an increase of 36 bps. On a fully-taxable equivalent (“FTE”) basis, NIM was 2.09% for the twelve months ended December 31, 2025 compared to 1.74% for the twelve months ended December 31, 2024, an increase of 35 bps. The increase in NIM and FTE NIM compared to the twelve months ended December 31, 2024 reflects the combination of higher yields on loans and securities and continued improvement in the cost of funds related to deposits.

Noninterest Income

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

Noninterest income for the twelve months ended December 31, 2025 was $2.7 million, representing a decrease of $44.6 million, or 94.3%, compared to $47.3 million for the twelve months ended December 31, 2024. Excluding the pre-tax loss of $38.2 million on the sale of the single tenant lease financing loans, adjusted noninterest income for the twelve months ended December 31, 2025 was $40.9 million. Excluding the gain on termination of interest rate swaps of $2.9 million and the gain on prepayment of FHLB advances of $1.8 million, adjusted noninterest income for the twelve months ended December 31, 2024 was $42.6 million.

The decline in adjusted noninterest income of $1.7 million, or 3.9%, was due primarily to a decrease of $3.4 million, or 10.2%, in gain on sale of loans, partially offset by an increase of $1.7 million in other noninterest income. During 2025, the Company recognized $29.4 million in gain of sales of U.S. Small Business Administration (“SBA”) 7(a) guaranteed loans compared to $33.2 million in 2024. The decrease was due mainly to a decrease in sold loan volume as the Company implemented a process change in the second quarter 2025 to hold SBA loans held-for-sale longer before selling into the secondary market. This process change had a one quarter effect as gain on sale revenue reverted to normalized levels in the third quarter 2025. The increase in other noninterest income was primarily driven by higher fintech partnership revenue resulting from increased program management fees and higher payments volume.

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Noninterest Expense

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

Noninterest expense for the twelve months ended December 31, 2025 was $95.0 million, representing an increase of $4.9 million or 5.5%, compared to $90.1 million for the twelve months ended December 31, 2024. Excluding the IT termination fees of $0.5 million and anniversary expenses of $0.1 million, adjusted noninterest expense for the twelve months ended December 31, 2024 was $89.5 million.

The decline in adjusted noninterest expense of $5.5 million, or 6.1%, was due primarily to increases of $2.2 million, or 19.4%, in premises and equipment, $1.4 million, or 21.9%, in other noninterest expense and $1.1 million, or 22.2%, in deposit insurance premium. The increase in premises and equipment was driven by higher software maintenance costs. The increase in other noninterest expense was due mainly to higher fintech volume activity and the increase in deposit insurance premium was due to changes in the composition of the loan portfolio.

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Income Taxes

In December 2023, the FASB issued ASU 2023-09, which expands income tax disclosure requirements to include additional information related to the rate reconciliation of our effective tax rates to statutory rates. The Company adopted ASU 2023-09 on a prospective basis for the year ended December 31, 2025.

1 The states that contribute to the majority (greater than 50%) of the tax effect in the category include Indiana and Florida for 2025.

The following table reconciles reported income tax provision (benefit) to that computed at the statutory federal tax rate for the years ended December 31, 2024 and 2023, in accordance with the guidance prior to the adoption of ASU 2023-09.

We recognized an income tax benefit of $15.7 million in 2025, compared to an income tax provision of $2.3 million and an effective tax rate of 8.2% in 2024 and a benefit of $3.5 million in 2023. Our federal statutory tax rate was 21% in 2024. The variance from the federal statutory rate was due primarily to tax-exempt income. Interest income on certain loans or securities issued by governmental, municipal and not-for-profit entities, and earnings from bank-owned life insurance were the primary components of tax-exempt income. The income tax benefit recognized during 2025 also reflects the impact of a pre-tax loss of $38.2 million from the loss on the sale of the single tenant lease financing loans.

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Financial Condition

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

Total assets decreased $166.2 million, or 2.9%, to $5.6 billion as of December 31, 2025 compared to $5.7 billion as of December 31, 2024. The decrease was driven by a decline in loans due to the single tenant lease financing loan sale and lower franchise finance balances, partially offset by higher investor commercial real estate, commercial and industrial and small business lending balances. Total liabilities declined $141.9 million, or 2.7%, to $5.2 billion at December 31, 2025 compared to $5.4 billion at December 31, 2024. The decrease was due mainly to a decrease in total deposits, as well as a decline in advances from the Federal Home Loan Bank. Increased liquidity from growth in fintech partnership deposits allowed the Company to pay down higher cost brokered deposits and advances from the Federal Home Loan Bank throughout 2025. Additionally, following the sale of the single tenant lease financing loans, the Company moved a significant amount of fintech deposits off-balance sheet in order to manage the overall size of the balance sheet.

As of December 31, 2025, total shareholders’ equity was $359.8 million, a decrease of $24.3 million, or 6.3%, compared to December 31, 2024. The decrease in shareholders’ equity was due primarily to the net loss during 2025, partially offset by a decrease in accumulated other comprehensive loss as unrealized losses on securities declined during the year. Tangible common equity totaled $355.1 million as of December 31, 2025, representing a decrease of $24.3 million, or 6.4%, compared to December 31, 2024. The ratio of total shareholders’ equity to total assets decreased to 6.46% as of December 31, 2025 from 6.69% as of December 31, 2024 and the ratio of tangible common equity to tangible assets decreased to 6.38% as of December 31, 2025 from 6.62% as of December 31, 2024.

Book value per common share decreased 6.5% to $41.41 as of December 31, 2025 from $44.31 as of December 31, 2024. Tangible book value per share decreased 6.6% to $40.87 as of December 31, 2025 from $43.77 as of December 31, 2024. The decrease in both book value per common share and tangible book value per common share was driven primarily by the decreases in total shareholders’ equity and tangible common equity. Refer to the “Reconciliation of Non-GAAP Financial Measures” section of Item 7 of Part II of this report, Management's Discussion and Analysis of Financial Condition and Results of Operations for additional information.

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Loan Portfolio Analysis

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

1 Balances include $52.2 million and $34.0 million that are guaranteed by the U.S. government as of December 31, 2025 and December 31, 2024, respectively.

2 Includes carrying value adjustments of $19.1 million and $22.9 million related to terminated interest rate swaps associated with public finance loans as of December 31, 2025 and December 31, 2024, respectively.

Total loans were $3.7 billion as of December 31, 2025, a decrease of $423.9 million, or 10.2%, compared to December 31, 2024. Total commercial loan balances were $2.9 billion, as of December 31, 2025, a decrease of $400.5 million, or 12.0%, from December 31, 2024. Total consumer loan balances were $783.3 million as of December 31, 2025, a decrease of $18.1 million, or 2.3%, compared to December 31, 2024. Compared to December 31, 2024, the decrease in commercial loan balances was driven by the sale of the single tenant lease financing loans, planned run-off in the franchise finance and healthcare finance portfolios and a decline in the fixed rate public finance portfolio. The decreases were partially offset by increases in investor commercial real estate, which was driven by completed construction projects that were moved to investor commercial real estate upon entering their stabilization period, as well as growth in the commercial and industrial and small business lending portfolios. The slight decrease in consumer loan balances was due primarily to expected run-off in the residential mortgage portfolio, partially offset by origination activity in the other consumer loans portfolio.

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Loan Maturities and Rate Sensitivity

The following table shows the contractual maturity distribution intervals (without regard to repayment or repricing schedules) of the outstanding loans in our portfolio as of December 31, 2025.

The following table shows the rate sensitivity of the outstanding loans in our portfolio by the contractual maturity distribution intervals as of December 31, 2025.

Loan Approval Procedures and Authority

Our lending activities follow written, non-discriminatory policies with loan approval limits approved by the Board of Directors of the Bank. Loan officers have underwriting and approval authorization of varying amounts based on their lending experience and product type. Additionally, based on the amount of the loan, multiple approvals may be required. Based on the Bank’s legal lending limit, the maximum it could lend to any one borrower at December 31, 2025 was $70.4 million.

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

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Asset Quality

1 Balances include $13.6 million and $4.9 million that are guaranteed by the U.S. government as of December 31, 2025 and December 31, 2024, respectively.

A loan is individually evaluated, when, based on current information or events, it is probable that we will be unable to collect all amounts due (principal and interest) according to the contractual terms of the loan agreement. Payments with delays generally not exceeding 90 days outstanding are not individually evaluated. Certain nonaccrual and substantially all delinquent loans more than 90 days past due may be individually evaluated. Generally, loans are placed on nonaccrual status at 90 days past due and accrued interest is reversed against earnings, unless the loan is well secured and in the process of collection. The

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accrual of interest on individually evaluated loans is discontinued when, in management’s opinion, the borrower may be unable to meet payments as they become due.

Individually evaluated loans include nonperforming loans and may also include loans where concessions have been granted to borrowers experiencing financial difficulties. These concessions could include a reduction in the interest rate on the loan, payment extensions, forgiveness of principal, forbearance, or other actions intended to maximize collection.

Nonperforming loans are comprised of total nonaccrual loans and loans 90 days past due and accruing. Nonperforming assets include nonperforming loans, other real estate owned (“OREO”) and other nonperforming assets, which consist of repossessed assets. Nonperforming assets could also include individual securities for which a credit loss has been recognized; however, we did not own any securities classified as such during the two-year period ended December 31, 2025.

Total nonperforming loans increased $30.1 million, or 106.0%, to $58.5 million as of December 31, 2025 compared to $28.4 million as of December 31, 2024, due primarily to an increase in nonperforming loans in the franchise finance and small business lending portfolios during the year. Total nonperforming assets increased $32.5 million, or 112.3%, to $61.4 million as of December 31, 2025, compared to $28.9 million as of December 31, 2024, due primarily to the aforementioned increase in nonperforming loans and an increase in OREO related to small business lending. As of December 31, 2025, the Company had three small business lending properties in OREO with a carrying value of $2.6 million. As of December 31, 2024, the Company had one residential mortgage property in OREO with a carrying value of $0.3 million.

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Allowance for Credit Losses - Loans

The following table provides a rollforward of the ACL on loans by loan portfolio segment for the twelve months ended December 31, 2025 and 2024; however, allocation of a portion of the allowance to one segment does not preclude its availability to absorb losses in other segments.

The determination of the ACL and the related provision for credit losses are components of our significant accounting policies as discussed within Note 1 to our consolidated financial statements. The adequacy of the ACL and the provision are based on the review and evaluation of the loan portfolio and reflect management’s assessment of the risks and potential losses within the portfolio. This evaluation uses a discounted cash flow analysis based on historical loss data, reasonable and supportable forecasts and prepayment rates, as well as qualitative factors such as economic and business conditions, portfolio growth, concentrations of credit in the portfolio, trends in risk grades, delinquencies within the portfolio and changes in our lending policies and practices.

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

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The ACL was $55.7 million as of December 31, 2025, compared to $44.8 million as of December 31, 2024. The increase in the ACL reflects updated assumptions to the Company’s CECL model, including updates that significantly increased the ACL related to small business lending, as well as additional specific reserves related to franchise finance loans that were placed on nonaccrual during the year, partially offset by the removal of specific reserves for small business lending and franchise finance loans that were charged off. Furthermore, the ACL as a percentage of total loans was impacted by lower total loan balances following the sale of the single tenant lease financing loans. The ACL as a percentage of total loans was 1.49% as of December 31, 2025, compared to 1.07% at December 31, 2024. The ACL as a percentage of nonperforming loans decreased to 95.1% as of December 31, 2025, compared to 157.5% as of December 31, 2024, as the increase in nonperforming loans outweighed the increase in the ACL.

The provision for credit losses - loans was $71.9 million for the twelve months ended December 31, 2025 compared to $18.8 million for the twelve months ended December 31, 2024. The increase in the provision for credit losses - loans for the twelve months ended December 31, 2025 was driven primarily by the net charge-offs and the increase in the ACL related to small business lending and the additional specific reserves related to franchise finance discussed above, partially offset by the decrease in the ACL resulting from the sale of the single tenant lease financing loans mentioned above and by the decrease in specific reserves related to small business lending and franchise finance loans that were charged off.

Investment Securities Portfolio

In managing our investment securities portfolio, management focuses on providing an adequate level of liquidity and managing long-term interest rate risk, while earning an adequate level of investment income without taking undue credit risk. Investment securities that are acquired and held principally for the purpose of selling them in the near term with the objective of generating economic profits on short-term differences in market characteristics are classified as “trading securities.” We did not classify any securities as trading securities as of December 31, 2025 and 2024. Securities that we intend to hold until maturity are classified as “held-to-maturity” securities, and all other investment securities are classified as “available-for-sale.” The carrying values of available-for-sale investment securities are adjusted for unrealized gains or losses as a valuation allowance and any gain or loss is reported on an after-tax basis as a component of other comprehensive (loss) income.

We periodically evaluate each security in an unrealized loss position to determine if there is an impairment. As of December 31, 2025, the unrealized losses in our investment securities portfolio were due primarily to interest rate changes. We have the ability and intent to hold all investment securities in an unrealized loss position resulting from interest rate changes to the earlier of the forecasted recovery or the maturity of the underlying investment security. As of December 31, 2025, and 2024, we did not have any investment securities of a single issuer that exceeded 10% of shareholders’ equity. The term “issuer” excludes the U.S. Government and its sponsored agencies and corporations.

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

The approximate fair value of investment securities available-for-sale increased $191.3 million, or 32.6%, to $778.7 million as of December 31, 2025 compared to $587.4 million as of December 31, 2024. The increase was due primarily to increases of $119.8 million in agency mortgage-backed securities - residential, $77.9 million in private label mortgage-backed securities - residential and $18.7 million in asset-backed securities, partially offset by decreases of $19.1 million in U.S. Government-sponsored agencies securities and $4.9 million in agency mortgage-backed securities - commercial. The Company deployed liquidity during 2025 primarily into new purchases of available-for-sale variable-rate mortgage-backed and asset-backed securities, which was partially offset by net pay down activity in other security types. As of December 31, 2025, the Company had securities with a net carrying value of $250.6 million designated as held-to-maturity compared to $249.8 million as of December 31, 2024. The slight increase was due primarily to purchases of CRA-eligible agency mortgage-backed securities - residential made in the first quarter 2025, which was partially offset by net paydown activity of corporate and municipal securities.

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Investment Maturities

The following table summarizes the contractual maturity schedule (without regard to repricing schedules) of our investment securities at their amortized cost and their weighted average yields at December 31, 2025.

1 Weighted-average yields are calculated on a fully-taxable equivalent basis using the federal statutory rate of 21% for 2025.

Accrued Income and Other Assets

Accrued income and other assets increased $26.1 million, or 41.4%, to $89.1 million at December 31, 2025 compared to $63.0 million at December 31, 2024. The increase was due primarily to increases of $14.5 million in deferred tax assets and $10.4 million in equity investments.

Deposits

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

Total deposits decreased $93.4 million, or 1.9%, to $4.8 billion as of December 31, 2025 compared to $4.9 billion as of December 31, 2024. This decrease was due primarily to decreases of $287.7 million, or 51.1%, in brokered deposits and $128.5 million, or 6.0%, in certificates of deposits, partially offset by increases of $224.2 million, or 25.0%, in interest-bearing demand deposits, $89.1 million, or 7.5%, in money market accounts and $10.4 million, or 7.6%, in noninterest-bearing deposits. The Company experienced strong growth in fintech partnership deposits during 2025, driving the increases in interest-bearing demand and noninterest-bearing deposits. The strong growth, combined with liquidity from the sale of the single tenant lease financing loans, provided the ability to pay down maturing higher-cost brokered deposits and certificates of deposit. Additionally, following the sale of the single tenant lease financing loans, the Company moved a significant amount of fintech partnership deposits off-balance sheet in order to manage the size of the balance sheet and improve profitability and balance sheet metrics. As of December 31, 2025, the Company had $859.9 million of fintech deposits on-balance sheet and $1.1 billion of deposits off-balance sheet, providing flexibility for future funding and liquidity needs.

Uninsured deposit balances represented 33% of total deposits at December 31, 2025, up from 25% at December 31, 2024. These balances include Indiana-based municipal deposits, which are insured by the Indiana Board for Depositories, as well as larger balance accounts under contractual agreements that only allow withdrawal under certain conditions. After

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subtracting these types of deposits, the adjusted uninsured deposit balance drops to 27% as of December 31, 2025, compared to 20% as of December 31, 2024.

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

Time Deposit Maturities at December 31, 2025

Time Deposit Maturities Greater than $250,000

Federal Home Loan Bank Advances

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

Accrued Expenses and Other Liabilities

Accrued expenses and other liabilities decreased $2.6 million, or 14.4%, to $15.4 million at December 31, 2025, compared to $17.9 million at December 31, 2024. The decrease was due primarily to decreases of $3.0 million in accrued salary and benefits and $1.1 million in other accrued expenses, partially offset by increases of $1.1 million in unfunded commitments and $0.4 million in the reserve for unfunded loan commitments

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Liquidity and Capital Resources

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

The Company holds cash and investment securities that qualify as liquid assets to maintain adequate liquidity to ensure safe and sound operations and meet its financial commitments. At December 31, 2025, on a consolidated basis, the Company had $1.2 billion in cash and cash equivalents and investment securities available-for-sale, and $108.6 million in loans held-for-sale that were generally available for our cash needs. Importantly, the Company also had access to an additional $1.1 billion in the form of off-balance sheet deposits sold into the IntraFi deposit network. In addition, the Company can generate funds from wholesale funding sources and collateralized borrowings. At December 31, 2025, the Company had the ability to borrow an additional $1.7 billion from the Federal Home Loan Bank, Federal Reserve and correspondent bank Fed Funds lines of credit.

The Company is a separate legal entity from the Bank and must provide for its own liquidity. In addition to its operating expenses, the Company is responsible for paying any dividends declared to its common shareholders and interest and principal on outstanding debt. The Company’s primary sources of funds are cash maintained at the holding company level and dividends from the Bank, the payment of which is subject to regulatory limits. At December 31, 2025, the Company, on an unconsolidated basis, had $14.5 million in cash generally available for its cash needs, which is in excess of its current annual regular shareholder dividend and operating expenses.

The Company uses its sources of funds primarily to meet ongoing financial commitments, including withdrawals by depositors, credit commitments to borrowers, operating expenses and capital expenditures. At December 31, 2025, approved outstanding loan commitments, including unused lines of credit and standby letters of credit, amounted to $617.6 million. Certificates of deposits and brokered certificates of deposits scheduled to mature in one year or less at December 31, 2025 totaled $1.4 billion.

At December 31, 2025, capital ratios for the Company and the Bank were above regulatory requirements for well-capitalized institutions. Refer to “Note 14: Regulatory Capital Requirements” for additional information regarding regulatory capital requirements.

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

The following table presents the Company’s significant contractual obligations as of December 31, 2025.

1 Amounts do not include associated interest payments.

On December 19, 2022, the Company's Board of Directors approved a stock repurchase program that authorized the repurchase of up to $25.0 million of our outstanding common stock from time to time on the open market or in privately negotiated transactions. The stock repurchase authorization expired on December 31, 2024. Under the program, the Company repurchased 559,522 shares of common stock, at an average price of $19.06, for a total investment of $10.7 million.

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On October 20, 2025, the Board of Directors of the Company authorized the repurchase of up to $25.0 million of the Company's outstanding common stock from time to time on the open market or in privately negotiated transactions. Under the program, the Company repurchased 27,998 shares of common stock, at an average price of $18.64, for a total investment of $0.5 million as of December 31, 2025. The stock repurchase authorization is scheduled to expire on September 30, 2027.

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Reconciliation of Non-GAAP Financial Measures

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

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1Assuming a 21% tax rate

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