First Internet Bancorp (Form: 10-12B, Received: 11/30/2012 17:02:28)

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10

GENERAL FORM FOR REGISTRATION OF SECURITIES
PURSUANT TO SECTION 12(b) or (g) OF
THE SECURITIES EXCHANGE ACT OF 1934

FIRST INTERNET BANCORP

(Exact name of registrant as specified in its charter)

Indiana		20-348991
(State or other jurisdiction of incorporation or organization)		(I.R.S. employer identification no.)

9200 Keystone Crossing, Suite 800 Indianapolis, Indiana		46240
(Address of principal executive offices)		(Zip code)

(317) 532-7900

(Registrant’s telephone number, including area code)

Securities to be registered under Section 12(b) of the Act:

Title of each class to be so registered		Name of each exchange on which each class is to be registered
Common Stock, no par value		NASDAQ Stock Market, LLC

Securities to be registered under Section 12(g) of the Act: None

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large Accelerated Filer o

Accelerated Filer o

Non-accelerated Filer o
(Do not check if a smaller
reporting company)

Smaller Reporting
Company x

Cautionary Note Regarding Forward-Looking Statements

This registration statement contains forward-looking statements. In some cases, you can identify forward-looking statements by the following words: “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “ongoing,” “plan,” “potential,” “predict,” “project,” “should,” “will,” “would” or the negative of these terms or other comparable terminology, although not all forward-looking statements contain these words. Forward-looking statements are not a guarantee of future performance or results, and will not necessarily be accurate indications of the times at, or by, which such performance or results will be achieved. Forward-looking statements are based on information available at the time the statements are made and involve known and unknown risks, uncertainties and other factors that may cause our results, levels of activity, performance or achievements to be materially different from the information expressed or implied by the forward-looking statements in this registration statement. These factors include:

· Changing bank regulatory conditions, policies or programs, whether arising as new legislation or regulatory initiatives, that could lead to restrictions on activities of banks generally or First Internet Bank of Indiana (the “Bank”) in particular, more restrictive regulatory capital requirements, increased costs, including deposit insurance premiums, regulation or prohibition of certain income producing activities or changes in the secondary market for loans and other products;

· Failures of or interruptions in the communications and information systems on which we rely to conduct our business could reduce our revenues, increase our costs or lead to disruptions in our business;

· General economic conditions, whether national or regional, and conditions in the lending markets in which we participate that may hinder our ability to increase lending activities or have an adverse effect on the demand for our loans and other products, our credit quality and related levels of nonperforming assets and loan losses, and the value and salability of the real estate that we own or that is the collateral for our loans;

· Competitive factors, including competition with national, regional and community financial institutions, that may lead to pricing pressures that reduce the yields the Bank earns on loans and increase rates the Bank pays on deposits, the loss of our most valued customers, defection of key employees or groups of employees or other losses;

· Our plans to grow our commercial real estate and commercial and industrial loan portfolios which may carry greater risks of non-payment or other unfavorable consequences;

· The loss of any key members of senior management; or

· Other risk factors included under “Risk Factors” in this registration statement.

Furthermore, forward-looking statements are subject to risks and uncertainties related to our ability to, among other things: generate loan and deposit balances at projected spreads; sustain fee generation including gains on sales of loans; maintain asset quality and control risk; limit the amount of net loan charge-offs; adopt to changing customer deposit, investment and borrowing behaviors; control expenses; dispose of properties or other assets obtained through foreclosures at expected prices and within a reasonable period of time; attract and retain key personnel; and monitor and manage our financial reporting, operating and disclosure control environments.

You should read the matters described in “Risk Factors” and the other cautionary statements made in this registration statement as being applicable to all related forward-looking statements wherever they appear in this registration statement. We cannot assure you that the forward-looking statements in this registration statement will prove to be accurate and therefore you are encouraged not to place undue reliance on forward-looking statements. You should read this registration statement completely. Other than as required by law, we undertake no obligation to update or revise these forward-looking statements, even though our situation may change in the future.

Fiscal Year

Our fiscal year begins on the first day of January and ends on the last day of December each year.

Other Information

In this registration statement, “we,” “our,” “us” and “Company” refer to First Internet Bancorp and its consolidated subsidiaries, except where the context otherwise requires.

The information in this registration statement speaks only as of the date it is filed with the U.S. Securities and Exchange Commission (“SEC”), unless the information specifically indicates that another date applies.

ITEM 1 — BUSINESS

General

First Internet Bancorp is a bank holding company that conducts its business activities through its subsidiary, First Internet Bank of Indiana, an Indiana chartered bank (the “Bank”). The Bank was the first state-chartered, FDIC-insured Internet bank. The Bank offers a full complement of products and services on a nationwide basis. We do so primarily over the Internet and have no branch offices.

We commenced banking operations in 1999 and grew organically in our early years by adding new customers, products and capabilities. In 2007, we acquired Indianapolis-based Landmark Financial Corporation. The acquisition merged Landmark Savings Bank, FSB, into the Bank. The Landmark acquisition added a small number of deposit customers, primarily from Central Indiana, to the Bank; more importantly, it added a turnkey retail mortgage lending operation that we could expand through our Internet platform. More recently, we have added commercial real estate (“CRE”) and commercial and industrial (“C&I”) lending services to meet the needs of high-quality, underserved commercial borrowers.

Despite the downturn in banking that began in 2008, we have experienced substantial growth while maintaining a strong capital position, low non-performing assets, and a stable core deposit base. From December 31, 2010, total assets have increased by 24.6% from $503.9 million to $627.7 million at September 30, 2012. During the same period, total deposits grew from $422.7 million to $522.7 million, an increase of 23.6%.

The Company was incorporated under the laws of Indiana on September 15, 2005, and on March 21, 2006, consummated a plan of exchange by which it acquired all of the outstanding capital stock of the Bank. The principal office of the Company and the Bank is located at 9200 Keystone Crossing, Suite 800, Indianapolis, Indiana 46240, and the main telephone number is (317) 532-7900.

Business Strategies

Our main objective is to grow in size while enhancing our profitability. We expect to grow organically on a national basis in our consumer (retail) activities and on a regional basis in our commercial (wholesale) activities. To achieve this objective, we are pursuing the following strategies:

Grow Nationwide Internet Activities. We offer our retail products and services throughout the United States through our web-based operations. Our retail banking offering appeals to consumers who require online access to their accounts but do not need a branch network for making deposits or conducting transactions in person. We believe that we are well positioned to continue to take advantage of the consumer-driven shift from branch banking to direct banking. We believe Internet banking is now the preferred banking channel by consumers. According to a 2011 American Bankers Association survey, the number of bank customers who prefer to do their banking online increased from 21% to 62% between 2007 and 2011, while those who prefer branch banking has declined from 39% to 20% over the same period.

Our online banking platform is outsourced and is scalable without requiring additional fixed-cost investments to support growth.

Increase Non-Interest Income. In 2011, we closed 1,256 residential mortgage loans. This was a 38% increase over 2010. During the first nine months of 2012, we closed 1,877 residential mortgage loans, a 153% increase over the number of loans closed during the same period in 2011. Over 97% of these loans were sold into the secondary market, thereby contributing to non-interest income and not remaining on the Bank’s balance sheet.

Increase Loan Volume and Diversify Loan Portfolio . While maintaining a conservative approach to lending, we expect to continue to pursue growth in our CRE and C&I loan portfolios. We entered into these markets by hiring teams of experienced bankers with lending expertise in specific industries and giving them authority to make certain pricing and credit decisions, avoiding the bureaucratic structure of larger banks. During the nine

months ended September 30, 2012, these portfolios grew from $45.6 million to $89.1 million, or 95%, and represented 25.3% of the total loan portfolio at September 30, 2012.

Maintain Sound Asset Quality . We strive to maintain the sound asset quality that has been representative of our recent operations. As we continue to diversify and increase our lending activities, we may face higher rates of nonpayment and other increased risks. We intend to continue to employ the strict underwriting guidelines and comprehensive loan review process that have contributed to our low incidence of nonperforming assets and minimal charge-offs in relation to our size.

Continue Focus on Technology and Efficiency . We have invested significantly in the infrastructure required to operate a real-time, Internet-only business model and believe that our existing data processing infrastructure can accommodate additional growth while minimizing operational costs through economies of scale. Our core banking platform is licensed software operated and maintained by Bank employees. Expanded banking operations could require additional software license or hardware costs in order to support the growth; however, these expenses are not expected to be significant. We plan to maintain our stringent cost control practices and policies.

Expand Market Share Through Disciplined Acquisition Strategy . We may expand on an opportunistic basis, primarily as a means of securing additional asset generation, for example, by acquiring a bank with an established SBA loan program.

Lending Activities

Residential Mortgage Lending. We offer first-lien residential mortgage loans in 49 states and second-lien (home equity) loans as well as home equity lines of credit in 44 states. We offer loans for homebuyers (purchase money) as well as existing homeowners who wish to refinance their current loans. The low interest rate environment has made refinancing an attractive opportunity for homeowners in the past two years. Approximately 81%, 81% and 86% of the loans we originated in 2010, 2011 and the nine months ended September 30, 2012, respectively, were refinances. While we expect the low interest rate environment to continue indefinitely, we have begun introducing programs to increase the proportion of purchase money loans, as this will provide a reliable stream of business in a rising rate environment.

We attract creditworthy loan applicants through disciplined online lead generation efforts and through repeat business from past customers. We track our acquisition costs vigilantly and discontinue any lead sources that are not contributing to a positive margin. We use customer relationship management tools to track prospects and identify the most likely sales opportunities on which to focus our efforts. For the nine months ended September 30, 2012, the weighted average credit score of our mortgage customer was 776 at time of origination.

We currently sell the vast majority of our conforming conventional (fixed rate) loans to the secondary market and thereby avoid the potential interest rate risk of these loans. We retain variable rate non-conforming (jumbo) loans in our portfolio. As rates rise, we will have the opportunity to retain conforming conventional loans on an opportunistic basis.

We also actively promote home equity loans and lines of credit through our Internet channel, leveraging our robust yet easy-to-use customer-facing toolset. We continue to expand our efforts to complement our first lien product.

Consumer Lending. While we offer consumer loans and credit cards through our website to a nationwide consumer base, the majority of our consumer loans have been acquired through indirect dealer networks, primarily horse trailers and recreational vehicles (RVs). We expanded our recreational product dealer network in 2011 and implemented a new loan origination system in Q1 2012 to improve the customer experience and document tracking.

Commercial Real Estate (CRE) Lending. We began offering CRE loans in Indiana and other parts of the Midwest in 2010. We have a team of five full-time employees, most with large regional bank experience. We expect that the majority of our CRE loans will be in office, retail, industrial, and multifamily loans in the Midwest, with credit tenant lease financing on a nationwide basis. While many banks in Central Indiana must address legacy

problem CRE loans in their portfolios, we are in a position to meet pent-up demand from qualified borrowers. In 2011, the first full year of CRE loan operations, we attracted $49.8 million in CRE loan commitments. We believe our CRE portfolio will continue its growth pattern, thereby significantly diversifying our loan portfolio.

Commercial and Industrial (C&I) Lending. We began offering C&I loans in the Central Indiana area in 2011. We have a team of seven full-time employees, most with large regional bank experience and strong local relationships. We recently began piloting expanded online account access and treasury management service capabilities in order to begin to attract deposits from these borrowers, further diversifying our deposit mix, reducing our cost of funds, and unlocking a new avenue for non-interest income.

Loan Portfolio Analysis
(dollars in thousands)

						December 31,
	September 30, 2012					2011					2010					2009					2008					2007
Real estate loans:
Residential	$	132,297		37.65	%	$	143,452		43.24	%	$	106,729		35.30	%	$	80,781		26.02	%	$	68,408		21.48	%	$	87,451		25.28	%
Commercial	78,266			22.27	%	43,507			13.11	%	19,563			6.47	%	20,212			6.51	%	15,856			4.98	%	9,106			2.63	%
Total real estate loans	210,563			59.92	%	186,959			56.35	%	126,292			41.77	%	100,993			32.53	%	84,264			26.46	%	96,557			27.91	%
Commercial loans	10,814			3.07	%	2,063			0.62	%	4,919			1.63	%	3,779			1.22	%	2,443			0.77	%	252			0.07	%
Consumer loans	130,055			37.01	%	142,783			43.03	%	171,122			56.60	%	205,702			66.25	%	231,732			72.77	%	249,124			72.02	%
	351,432			100.00	%	331,805			100.00	%	302,333			100.00	%	310,474			100.00	%	318,439			100.00	%	345,933			100.00	%
Less:
Net deferred loan fees, premiums and discounts	3,807					3,421					4,057					5,062					6,344					7,038
Allowance for losses	(6,400		)			(5,656		)			(6,845		)			(10,097		)			(4,616		)			(3,564		)
Total loans	$	348,839				$	329,570				$	299,545				$	305,439				$	320,167				$	349,407

Loan Maturities

The following table shows the contractual maturity distribution and repricing intervals of the outstanding loans in our portfolio as of the end of our most recent completed fiscal year.

(dollars in thousands)

	Real Estate
At December 31, 2011	Residential		Commercial		Commercial		Consumer		Total
Amounts due in:
One year or less	$	7,915	$	9,796	$	718	$	2,216	$	20,645
More than one to two years	4,375		7,294		348		1,489		$	13,506
More than two to three years	1,128		7,131		—		3,398		$	11,657
More than three to five years	398		14,590		997		16,839		$	32,824
More than five to ten years	2,444		2,716		—		96,384		$	101,544
More than ten to fifteen years	3,771		1,980		—		22,457		$	28,208
More than fifteen years	123,421		—		—		—		$	123,421
Total	$	143,452	$	43,507	$	2,063	$	142,783	$	331,805

Fixed vs. Adjustable Rate Loans

The following table shows the distribution of the outstanding loans in our portfolio between those with variable or floating interest rates and those with fixed or predetermined interest rates as of December 31, 2011.

	Due after December 31, 2011
(dollars in thousands)	Fixed		Adjustable		Total
Real estate loans:
Residential	$	13,619	$	129,833	$	143,452
Commercial	5,066		38,441		$	43,507
Total real estate loans	18,685		168,274		$	186,959
Commercial loans	1,345		718		$	2,063
Consumer loans	141,372		1,411		$	142,783
Total loans	$	161,402	$	170,403	$	331,805

Loan Activity
(dollars in thousands)

	Nine Months ended			Year ended December 31,
	September 30, 2012			2011			2010
Total loans at beginning of period:	$	331,805		$	302,333		$	310 ,474

Loans originated:
Real estate loans:
Residential	2,883			1,964			3,160
Commercial	10,534			25,732			6,666
Commercial loans	19,304			470			1,259
Consumer loans	18,245			15,304			15,147
Total loans originated	50,966			43,470			26,232

Loans purchased:
Real estate loans:
Residential	—			59,477			52,317
Commercial	8,877			—			—
Commercial loans	—			—			—
Consumer loans	—			—			—
Total loans purchased	8,877			59,477			52,317

Add (Deduct):
Principal repayments	(38,033		)	(67,362		)	(78,803		)
Net other	(2,183		)	(6,113		)	(7,887		)

Net loan activity	19,627			29,472			(8,141		)
Total loans at end of period	$	351,432		$	331,805		$	302,333

Non-Performing Assets

Loans are reviewed at least quarterly and any loan whose collectability is doubtful is placed on non-accrual status. Loans are placed on non-accrual status when either principal or interest is 90 days or more past due, unless, in the judgment of management, the loan is well collateralized and in the process of collection. Interest accrued and unpaid at the time a loan is placed on non-accrual status is charged against interest income. Subsequent payments are either applied to the outstanding principal balance or recorded as interest income, depending on the assessment of the ultimate collectability of the loan. Restructured loans include troubled debt restructurings that involved forgiving a portion of interest or principal or making loans at a rate materially less than the market rate to borrowers whose financial condition had deteriorated. Foreclosed and repossessed assets include assets acquired in the settlement of loans. The following table sets forth the amounts and categories of non-performing assets in our portfolio as of the dates indicated.

	September 30,			December 31,
(dollars in thousands)	2012			2011			2010			2009			2008			2007
Non-accrual loans:(1)
Real estate loans:
Residential	$	2,025		$	876		$	2,841		$	3,388		$	2,383		$	309
Commercial	6,683			7,523			3,593			5,186			227			131
Total real estate loans	8,708			8,399			6,434			8,574			2,610			440
Commercial loans	—			—			1,539			—			—			—
Consumer loans	251			224			683			1,726			1,898			845
Total non-accrual loans	8,959			8,623			8,656			10,300			4,508			1,285

Accruing loans past due 90 days or more:
Real estate loans:
Residential	—			75			—			47			38			116
Commercial	—			—			900			—			—			—
Total real estate loans	—			75			900			47			38			116
Commercial loans	—			—			—			—			—			—
Consumer loans	6			56			30			72			29			82
Total accruing loans past due 90 days or more	6			131			930			119			67			198

Total non-accrual and 90 days or more past due loans	8,965			8,754			9,586			10,419			4,575			1,483

Real estate owned:
Residential	273			448			591			126			398			211
Commercial	280			1,064			1,616			—			—			—
Other	—			—			—			—			—			—
Total real estate owned	553			1,512			2,207			126			398			211

Other non-performing assets	2,376			3,113			5,118			2,164			453			284

Total non-performing assets	11,894			13,379			16,911			12,709			5,426			1,978

Troubled debt restructurings:
Real estate loans:
Residential	1,102			817			360			—			—			—
Commercial	—			—			—			—			—			—
Total real estate loans	1,102			817			360			—			—			—
Commercial loans	—			—			—			—			—			—
Consumer loans	313			245			—			—			—			—
Total troubled debt restructurings	1,415			1,062			360			—			—			—

Troubled debt restructurings and total non-performing assets	$	13,309		$	14,441		$	17,271		$	12,709		$	5,426		$	1,978

Total non-performing loans to total loans	2.55		%	2.64		%	3.17		%	3.36		%	1.44		%	0.43		%
Total non-performing assets to total assets	1.89		%	2.29		%	3.36		%	2.52		%	1.00		%	0.35		%
Total non-performing assets and troubled debt restructurings to total assets	2.12		%	2.47		%	3.43		%	2.52		%	1.00		%	0.35		%

(1) Includes non-performing troubled debt restructurings.

Classified Assets
(dollars in thousands)

	September 30,		December 31,
	2012		2011		2010
Special mention assets	$	2,098	$	2,222	$	3,714
Substandard assets	6,790		7,635		4,736
Doubtful assets	—		—		—
Loss assets	—		—		—
Total classified assets	$	8,888	$	9,857	$	8,450

Delinquencies
(dollars in thousands)

							December 31,
	September 30, 2012						2011						2010
	30-59 Days Past Due		60-89 Days Past Due		90+ Days Past Due		30-59 Days Past Due		60-89 Days Past Due		90+ Days Past Due		30-59 Days Past Due		60-89 Days Past Due		90+ Days Past Due
Real estate loans:
Residential	$	145	$	25	$	1,997	$	1,376	$	121	$	666	$	137	$	1,780	$	1,294
Commercial	—		—		6,683		—		—		7,523		—		—		1,410
Total real estate loans	145		25		8,680		1,376		121		8,189		137		1,780		2,704
Commercial loans	—		—		—		—		—		—		10		—		1,539
Consumer loans	1,151		153		203		1,709		213		206		2,757		455		382
Total	$	1,296	$	178	$	8,883	$	3,085	$	334	$	8,395	$	2,904	$	2,235	$	4,625

Allocation of Allowance for Loan Losses

The determination of the allowance for loan losses and the related provision is one of our critical accounting policies that is subject to significant estimates, as previously discussed. The current level of the allowance for loan losses is a result of management’s assessment of the risks within the portfolio based on the information obtained through the credit evaluation process. We utilize a risk-rating system on non-homogenous CRE and C&I loans that includes regular credit reviews to identify and quantify the risk in the commercial portfolio. Our management conducts quarterly reviews of the entire loan portfolio and evaluates the need to establish allowances on the basis of these reviews.

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

The following table reflects allowance for loan losses and its allocations for the periods indicated.

	September 30, 2012
(dollars in thousands)	Amount		% of Total Allowance		% of Total Loans
Real estate loans:
Residential	$	1,469	22.95	%	37.65	%
Commercial	3,332		52.06	%	22.27	%
Commercial loans	348		5.44	%	3.07	%
Consumer loans	1,251		19.55	%	37.01	%
Total allowance for loan losses	$	6,400	100.00	%	100.00	%


	December 31,
	2011						2010						2009						2008						2007
	Amount		% of Total Allowance		% of Total Loans		Amount		% of Total Allowance		% of Total Loans		Amount		% of Total Allowance		% of Total Loans		Amount		% of Total Allowance		% of Total Loans		Amount		% of Total Allowance		% of Total Loans
Real estate loans:
Residential	$	1,099	19.43	%	43.24	%	$	2,135	31.19	%	35.30	%	$	765	7.58	%	26.02	%	$	250	5.42	%	21.48	%	$	361	10.13	%	25.28	%
Commercial	2,485		43.93	%	13.11	%	1,292		18.88	%	6.47	%	4,232		41.91	%	6.51	%	260		5.63	%	4.98	%	77		2.16	%	2.63	%
Commercial loans	333		5.89	%	0.62	%	608		8.88	%	1.63	%	79		0.78	%	1.22	%	16		0.35	%	0.77	%	10		0.28	%	0.07	%
Consumer loans	1,739		30.75	%	43.03	%	2,810		41.05	%	56.60	%	5,021		49.73	%	66.25	%	4,090		88.60	%	72.77	%	3,116		87.43	%	72.02	%
Total allowance for loan losses	$	5,656	100.00	%	100.00	%	$	6,845	100.00	%	100.00	%	$	10,097	100.00	%	100.00	%	$	4,616	100.00	%	100.00	%	$	3,564	100.00	%	100.00	%

Loan Loss Experience

The following table reflects activity in allowance for loan losses for the periods indicated and selected related statistics.

	Nine Months ended September 30,						Fiscal Year ended December 31,
(dollars in thousands)	2012			2011			2011			2010			2009			2008			2007
Allowance at beginning of period:	$	5,656		$	6,845		$	6,845		$	10,097		$	4,616		$	3,564		$	3,376
LFC acquisition	—			—			—			—			—			—			855
Provision for loan losses	2,108			1,493			2,440			927			11,564			4,819			1,802
Charge offs:
Real estate loans:
Residential	(479		)	(959		)	(811		)	(1,158		)	(1,402		)	(125		)	(627		)
Commercial	(272		)	(364		)	(698		)	(445		)	(294		)	—			—
Commercial loans	—			(275		)	(612		)	(61		)	(10		)	(18		)	—
Consumer loans	(1,152		)	(1,728		)	(2,296		)	(3,399		)	(5,297		)	(4,330		)	(2,832		)
Total charge-offs	(1,903		)	(3,326		)	(4,417		)	(5,063		)	(7,003		)	(4,473		)	(3,459		)

Recoveries:
Real estate loans:
Residential	41			127			141			121			102			10			368
Commercial	—			—			—			17			—			—			—
Commercial loans	75			—			19			—			—			18			—
Consumer loans	423			431			628			746			818			678			622
Total recoveries	539			558			788			884			920			706			990

Net charge-offs	(1,364		)	(2,768		)	(3,629		)	(4,179		)	(6,083		)	(3,767		)	(2,469		)

Allowance at end of period	$	6,400		$	5,570		$	5,656		$	6,845		$	10,097		$	4,616		$	3,564

Allowance to non-performing loans	71.39		%	85.08		%	64.61		%	71.41		%	96.91		%	100.90		%	243.11		%
Allowance to total loans outstanding at end of period	1.82		%	1.67		%	1.70		%	2.26		%	3.25		%	1.45		%	1.03		%
Net annualized charge-offs to average loans outstanding during period	-0.47		%	-1.10		%	-1.05		%	-1.35		%	-1.85		%	-1.12		%	-0.69		%

Deposit Activities and Other Sources of Funds

We obtain deposits through the ACH network (direct deposit as well as customer-directed transfers of funds from outside financial institutions), remote and mobile deposit capture, mailed checks, wire transfers, and a deposit-taking ATM network. We do not currently solicit brokered deposits, although we have approximately $18.3 million in brokered time deposits at September 30, 2012.

The Bank does not own or operate any ATMs. Through network participation, the Bank’s customers are able to use nearly any ATM worldwide to withdraw cash. The Bank currently rebates up to $6.00 per customer per month for surcharges our customers incur when using an ATM owned by another institution. Management believes this program is more cost effective for the Bank, and more convenient for customers, than it would be to build and maintain a proprietary nationwide ATM network for our customers.

By providing a robust online toolset, quality customer service, and a tremendous value for services offered, we have been able to develop relationships with our retail customers and build brand loyalty. The average retail checking or savings account has been open with us for more than eight years. As a result, we are not dependent upon costly account acquisition campaigns to attract new customers on a continual basis.

Deposits
(dollars in thousands)

	Nine months ended					Fiscal Year ended December 31,
	September 30, 2012					2011					2010					2009
Regular savings accounts	$	11,326		2.17	%	$	7,773		1.60	%	$	7,384		1.75	%	$	6,074		1.48	%
Non-interest bearing	12,072			2.31	%	15,870			3.26	%	9,893			2.34	%	7,676			1.86	%
Interest-bearing	65,189			12.47	%	64,006			13.15	%	58,075			13.74	%	53,108			12.90	%
Money market accounts	194,124			37.14	%	165,561			34.02	%	132,031			31.23	%	114,874			27.91	%
Certificates of deposit	222,228			42.52	%	209,762			43.10	%	187,292			44.31	%	199,248			48.41	%
Brokered deposits	17,890			3.42	%	23,898			4.91	%	28,284			6.69	%	30,844			7.49	%
Premiums on brokered deposits	(170		)	-0.03	%	(205		)	-0.04	%	(256		)	-0.06	%	(197		)	-0.05	%
Total	$	522,659		100.00	%	$	486,665		100.00	%	$	422,703		100.00	%	$	411,627		100.00	%

Time Deposits at September 30, 2012
(dollars in thousands)

Interest Rate:
< 1.00%	$	33,841
1.00% – 1.99%	67,587
2.00% – 2.99%	89,254
3.00% – 3.99%	35,854
4.00% – 4.99%	7,398
5.00% – 5.99%	6,184
Total	$	240,118

Time Deposit Maturities at September 30, 2012
(dollars in thousands)

	Period to Maturity										Percentage of Total
	Less than 1 year		> 1 year to 2 years		> 2 years to 3 years		More than 3 years		Total		Certificate Accounts
Interest Rate:
< 1.00%	$	31,596	$	2,245	$	—	$	—	$	33,841	14.09	%
1.00% – 1.99%	39,050		10,897		5,833		11,807		67,587		28.15	%
2.00% – 2.99%	12,350		4,137		11,960		60,807		89,254		37.17	%
3.00% – 3.99%	1,063		5,680		18,766		10,345		35,854		14.93	%
4.00% – 4.99%	5,572		1,826		—		—		7,398		3.08	%
5.00% – 5.99%	2,043		—		—		4,141		6,184		2.58	%
Total	$	91,674	$	24,785	$	36,559	$	87,100	$	240,118	100.00	%

Time Deposit Maturities of $100,000 or Greater at September 30, 2012
(dollars in thousands)

	Certificates of Deposit
Maturity Period:
3 months or less	$	21,858
Over 3 through 6 months	16,649
Over 6 through 12 months	20,328
Over 12 months	79,723
Total	$	138,558

Federal Home Loan Advances

Although deposits are the primary source of funds for our lending and investment activities and for general business purposes, we may obtain advances from the Federal Home Loan Bank of Indianapolis (“FHLB”) as an alternative to retail deposit funds. The following table is a summary of FHLB borrowings for the periods indicated.

	Nine Months ended September 30,						Fiscal Year ended December 31,
(dollars in thousands)	2012			2011			2011			2010			2009
Balance outstanding at end of period	$	40,658		$	40,543		$	40,573		$	30,455		$	47,000
Average amount outstanding during period	40,611			37,861			38,539			36,427			49,676
Maximum outstanding at any month end during period	40,658			40,543			40,573			47,000			57,000

Weighted average interest rate at end of period	3.22		%	3.22		%	3.22		%	4.02		%	4.10		%
Weighted average interest rate during period	3.35		%	3.57		%	3.52		%	4.20		%	4.19		%

Market Areas

Our only office is located in Indianapolis, Indiana. The low cost of living in Indianapolis (a 2009 Forbes study showed Indianapolis to be the most affordable place to live among the largest 40 MSAs in the United States) gives us access to highly skilled employees and office space at a competitive cost.

The market area for our retail banking activities, primarily residential mortgage and consumer lending and deposit gathering, is nationwide. The physical location of our office is of no consequence to our retail customers.

We serve CRE borrowers in surrounding states in the Midwest, while our more recent expansion into C&I banking focuses on Central Indiana. Both CRE and C&I relationships are highly dependent on strong lender/borrower relationships.

Competition

The markets in which we compete to make loans and attract deposits are highly competitive.

For retail banking activities, we compete with other banks that use the Internet as a primary service channel, including Ally Bank, ING Direct, EverBank and Bank of Internet. However, we also compete with other banks, savings banks, credit unions, investment banks, insurance companies, securities brokerages and other financial institutions, as nearly all have some form of Internet delivery for their services. For residential mortgage lending, competitors that use the Internet as a primary service channel include Quicken Loans and Lending Tree. However, we also compete with the major banks in residential mortgage lending, including Bank of America, Chase and Wells Fargo.

For our commercial lending activities, we compete with larger financial institutions operating in the Midwest and Central Indiana regions, including Key Bank, PNC Bank, Chase, BMO Harris, First Merchants Bank and First Financial Bank. All of these competitors have significantly greater financial resources and higher lending

limits and may also offer specialized products and services we do not. For our commercial clients, we offer a highly personalized relationship and fast, local decision making.

In the United States, banking has experienced widespread consolidation over the last decade leading to the emergence of several large nationwide banking institutions. These competitors have significantly greater financial resources and offer many branch locations as well as a variety of services we do not. We have attempted to offset some of the advantages of the larger competitors by leveraging technology to deliver product solutions and better compete in targeted segments. We have positioned ourselves as an alternative to banking conglomerates for consumers who do not wish to subsidize the cost of large branch networks through high fees and unfavorable rates.

We anticipate that consolidation will continue in the financial services industry and perhaps accelerate as a result of ongoing financial stress, intensified competition for the same customer segments and significantly increased regulatory burdens and rules that are expected to increase expenses and put pressure on revenues.

Employees

At September 30, 2012, we had 95 employees, all of whom are full-time employees. None of our employees are currently represented by a union or covered by a collective bargaining agreement. Management believes that its employee relations are satisfactory.

Available Information

Our website is http://www.firstinternetbancorp.com. After our common stock is registered under the Exchange Act, we intend to make available, free of charge, through our website, any materials that we file with or furnish to the SEC pursuant to Section 13(a) of the Exchange Act, including our Annual Reports on Form 10-K, our Quarterly Reports on Form 10-Q, our Current Reports on Form 8-K and amendments to those reports. These materials will be posted on our website as soon as reasonably practicable after we electronically file them with or furnish them to the SEC.

Members of the public may read and copy any materials that we may file in the future with the SEC at its Public Reference Room at 100 F Street, NE, Washington, DC 20549. Information on the operation of the Public Reference Room is available by calling the SEC at 1-800-SEC-0330. The SEC maintains a website that contains reports, proxy and information statements and other information about us and other issuers that file electronically at http://www.sec.gov.

Regulation and Supervision

General

We and the Bank are extensively regulated under federal and state law. We are a registered bank holding company under the Bank Holding Company Act of 1956 (the “BHCA”) and, as such, are subject to regulation, supervision and examination by the Board of Governors of the Federal Reserve System (the “Federal Reserve”). We are required to file reports with the Federal Reserve on a quarterly basis.

The Bank is an Indiana-chartered bank formed pursuant to the Indiana Financial Institutions Act (the “IFIA”). As such, the Bank is regularly examined by and subject to regulations promulgated by the Indiana Department of Financial Institutions (the “DFI”) and the Federal Deposit Insurance Corporation (the “FDIC”) as its primary federal bank regulator. The Bank is not a member of the Federal Reserve System.

The regulatory environment affecting us has been and continues to be altered by the enactment of new statutes and the adoption of new regulations as well as by revisions to, and evolving interpretations of, existing regulations. State and federal banking agencies have significant discretion in the conduct of their supervisory and enforcement activities and their examination policies. Any change in such practices and policies could have a material impact on our operations and shareholders.

The following discussion is intended to be a summary of the material statutes, regulations and regulatory directives that are currently applicable to us. It does not purport to be comprehensive or complete and it is expressly subject to and modified by reference to the text of the applicable statutes, regulations and directives.

The Dodd-Frank Act

The Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”) comprehensively reformed the regulation of financial institutions, products and services. Certain provisions of the Dodd-Frank Act noted in this section are also discussed in other sections. Furthermore, many of the provisions of the Dodd-Frank Act require further study or rulemaking by federal agencies, a process which will take months and years to implement fully.

Among other things, the Dodd-Frank Act provides for new capital standards that eliminate the treatment of trust preferred securities as Tier 1 capital. The Company has never issued any trust preferred securities. The Dodd-Frank Act permanently raised deposit insurance levels to $250,000, retroactive to January 1, 2008, and provided unlimited deposit insurance coverage for non-interest bearing transaction accounts through December 31, 2012, which is now mandatory for all insured depository institutions. Pursuant to modifications under the Dodd-Frank Act, deposit insurance assessments are now being calculated based on an insured depository institution’s assets rather than its insured deposits and the minimum reserve ratio of the FDIC’s Deposit Insurance Fund (the “DIF”) has been raised to 1.35%. The payment of interest on business demand deposit accounts is permitted by the Dodd-Frank Act. The Dodd-Frank Act authorized the Federal Reserve to regulate interchange fees for debit card transactions and established new minimum mortgage underwriting standards for residential mortgages. Further, the Dodd-Frank Act barred certain banking organizations from engaging in proprietary trading and from sponsoring and investing in hedge funds and private equity funds, except as permitted under certain limited circumstances. The Dodd-Frank Act empowered the newly established Financial Stability Oversight Council to designate certain activities as posing a risk to the U.S. financial system and to recommend new or heightened standards and safeguards for financial organizations engaging in such activities.

The Dodd-Frank Act also established the Consumer Financial Protection Bureau (the “CFPB”) as an independent bureau of the Federal Reserve. The CFPB has the exclusive authority to prescribe rules governing the provision of consumer financial products and services, which in the case of the Bank will be enforced by the FDIC. Further, the Dodd-Frank Act established the Office of Financial Research, which has the power to require reports from other financial services companies.

Holding Company Regulation

We are subject to supervision and examination as a bank holding company by the Federal Reserve under the BHCA. In addition, the Federal Reserve has the authority to issue orders to bank holding companies to cease and desist from unsafe or unsound banking practices and from violations of conditions imposed by, or violations of agreements with, the Federal Reserve. The Federal Reserve is also empowered, among other things, to assess civil money penalties against companies or individuals who violate Federal Reserve orders or regulations, to order termination of nonbanking activities of bank holding companies, and to order termination of ownership and control of a nonbanking subsidiary by a bank holding company. Federal Reserve approval is also required in connection with bank holding companies’ acquisitions of more than 5% of the voting shares of any class of a depository institution or its holding company and, among other things, in connection with the bank holding company’s engaging in new activities.

Under the BHCA, our activities are limited to businesses so closely related to banking, managing or controlling banks as to be a proper incident thereto. The BHCA also requires a bank holding company to obtain approval from the Federal Reserve before (1) acquiring or holding more than a 5% voting interest in any bank or bank holding company, (2) acquiring all or substantially all of the assets of another bank or bank holding company or (3) merging or consolidating with another bank holding company.

The BHCA also restricts non-bank activities to those which have been determined by the Federal Reserve to be closely related to the business of banking or of managing or controlling banks. We have not filed an election with

the Federal Reserve to be treated as a “financial holding company,” a type of holding company that can engage in certain insurance and securities-related activities that are not permitted for a bank holding company.

Source of Strength . Under the Dodd-Frank Act, we are required to serve as a source of financial strength for the Bank in the event of the financial distress of the Bank. This provision codifies the longstanding policy of the Federal Reserve. Although the Dodd-Frank Act requires the federal banking agencies to issue regulations to implement the source of strength provisions, no regulations have been promulgated at this time. In addition, any capital loans by a bank holding company to any of its depository subsidiaries are subordinate to the payment of deposits and to certain other indebtedness. In the event of a bank holding company’s bankruptcy, any commitment by the bank holding company to a federal bank regulatory agency to maintain the capital of a depository subsidiary will be assumed by the bankruptcy trustee and entitled to a priority of payment.

Regulation of Banks, Generally

Business Activities . The Bank derives its lending and investment powers from the IFIA, the Federal Deposit Insurance Act (the “FDIA”) and related regulations.

Loans-to-One Borrower Limitations . Generally, the Bank’s total loans or extensions of credit to a single borrower outstanding at one time, and not fully secured, cannot exceed 15% of the Bank’s unimpaired capital and surplus. If the loans or extensions of credit are fully secured by readily marketable collateral, the Bank may lend up to an additional 10% of its unimpaired capital and surplus.

Capital Requirements—Generally . FDIC regulations require insured non-member banks generally to meet three minimum capital standards:

· a ratio of tangible capital to adjusted total assets (tangible capital ratio) of not less than 1.5%;

“Tangible capital” for this purpose is defined to include common stockholders’ equity (including retained earnings), noncumulative perpetual preferred stock and related earnings and minority interests in consolidated subsidiaries, less intangibles and investments in certain “non-includable” subsidiaries.

· a ratio of “core capital” to adjusted total assets (“Tier 1 Capital Ratio” or “leverage ratio”) of not less than 4%; and

“Core capital” (also called “Tier 1 Capital”) is defined similarly to tangible capital, but also includes certain qualifying supervisory goodwill and certain purchased credit card relationships.

· a ratio of total capital (core and supplementary) to total risk-weighted assets (“Total Risk-Based Capital Ratio”) of not less than 8%, provided that the amount of supplementary capital used to satisfy this requirement may not exceed the amount of core capital.

“Supplementary capital” (also called “Tier 2 Capital”) for this purpose is defined to include cumulative and certain other preferred stock, mandatory convertible debt securities, subordinated debt and the allowance for loan and lease losses (up to a maximum of 1.25% of risk-weighted assets). In addition, up to 45% of unrealized gains on available-for-sale equity securities with a readily determinable fair value may be included in Tier 2 Capital.

In determining the amount of risk-weighted assets for purposes of the risk-based capital requirements, the Bank’s balance sheet assets and the credit conversion values of certain off-balance sheet items are multiplied by specified risk-weights, generally ranging from 0% for cash and obligations issued by the U.S. Government or its agencies to 100% for consumer and commercial loans, as specified by the FDIC regulations based on the degree of risk deemed to be inherent in the particular type of asset.

The FDIC has adopted regulations to implement its capital adequacy requirements through the system of prompt corrective action established by Section 38 of the FDIA. Under the prompt corrective action regulations, a

bank is “well capitalized” if it has: (1) a Total Risk-Based Capital Ratio of 10.0% or greater; (2) a Tier 1 (Core) risk-based capital ratio of 6.0% or greater; (3) a leverage ratio of 5.0% or greater; and (4) is not subject to any written agreement, order, capital directive or prompt corrective action directive to meet and maintain a specific capital level for any capital measure. A bank is “adequately capitalized” if it has: (1) a Total Risk-Based Capital Ratio of 8.0% or greater; (2) a Tier 1 (Core) risk-based capital ratio of 4.0% or greater; and (3) a leverage ratio of 4.0% or greater (3.0% under certain circumstances) and does not meet the definition of a “well capitalized” savings association.

Regulators also must take into consideration: (1) concentrations of credit risk, (2) interest rate risk and (3) risks from non-traditional activities, as well as an institution’s ability to manage those risks, when determining the adequacy of an institution’s capital. This evaluation will be made as a part of the institution’s regular safety and soundness examination.

Generally, a bank, upon receiving notice that it is not adequately capitalized (i.e., that it is “undercapitalized”), becomes subject to the prompt corrective action provisions of Section 38 of FDIA that, for example, (1) restrict payment of capital distributions and management fees, (2) require that the FDIC monitor the condition of the bank and its efforts to restore its capital, (3) require submission of a capital restoration plan, (4) restrict the growth of the bank’s assets and (5) require prior regulatory approval of certain expansion proposals. A bank that is required to submit a capital restoration plan must concurrently submit a performance guarantee by each company that controls the bank. A bank that is “critically undercapitalized” ( i.e. , has a ratio of tangible equity to total assets that is equal to or less than 2.0%) will be subject to further restrictions, and generally will be placed in conservatorship or receivership within 90 days.

We are also subject to capital adequacy regulations of the Federal Reserve. These capital requirements are substantially similar to those applicable to the Bank. For bank holding companies, the minimum Tier 1 risk-based capital ratio is 4% and the minimum Total Risk-Based Capital Ratio is 8%. In addition to the risk-based capital requirements, the Federal Reserve requires top rated bank holding companies to maintain a minimum leverage capital ratio of Tier 1 capital (defined by reference to the risk-based capital guidelines) to its average total consolidated assets of at least 3.0%. For most other bank holding companies, the minimum leverage ratio is 4.0%. Bank holding companies with supervisory, financial, operational or managerial weaknesses, as well as bank holding companies that are anticipating or experiencing significant growth, are expected to maintain capital ratios well above the minimum levels.

In June 2012, the federal banking agencies issued notices of proposed rulemaking that would replace the current risk-based and leveraged capital requirement consistent with agreements reached by the Basel Committee on Banking Supervision (the “Basel Committee”) in response to the recent financial crisis (collectively, “Basel III”). The proposed revisions would include implementation of a new common equity tier 1 minimum capital requirement, a higher minimum tier 1 capital requirement, and, for banking organizations subject to the advanced approaches capital rules, a supplementary leverage ratio that incorporates a broader set of exposures in the denominator measure. Additionally, consistent with Basel III, the agencies proposed to limit a banking organization’s capital distributions and certain discretionary bonus payments if the banking organization does not hold a specified amount of common equity tier 1 capital as well as more conservative standards for including an instrument in regulatory capital. The revisions were also intended to implement section 171 of the Dodd-Frank Act, which requires the agencies to establish minimum risk-based and leverage capital requirements. The revised capital requirements are to become effective on January 1, 2013; however on November 9, 2012, the agencies announced that they did not expect that the proposed revisions would become effective January 1, 2013. Accordingly, the Company is not yet in a position to determine the effect of Basel III on its capital requirements.

TARP/CPP . Under the Troubled Asset Relief Program established by the Emergency Economic Stabilization Act of 2008, the U.S. Treasury Department established the Capital Purchase Program (“TARP/CPP”) by which the Treasury Department purchased senior preferred shares of participating holding companies or financial institutions. We determined that we did not need the capital infusion offered under the TARP/CPP, and so we never issued any preferred shares or other securities to the Treasury Department.

Community Reinvestment Act . Under the Community Reinvestment Act (the “CRA”), as implemented by FDIC regulations, the Bank has a continuing and affirmative obligation, consistent with safe and sound banking practices, to help meet the credit needs of its entire community, including low and moderate income neighborhoods.

The CRA does not establish specific lending requirements or programs for financial institutions nor does it limit an institution’s discretion to develop the types of products and services that it believes are best suited to its particular community, consistent with the CRA. The CRA requires the FDIC, in connection with its examinations of the Bank, to assess the Bank’s record of meeting the credit needs of its entire community and to take that record into account in evaluating certain applications for regulatory approvals that we may file with the FDIC.

The CRA regulations establish an assessment system that bases an association’s rating on its actual performance in meeting community needs. In particular, the assessment system focuses on three tests:

· a lending test , to evaluate our record of making loans in our local communities, defined as our CRA assessment areas;

· an investment test , to evaluate our record of investing in community development projects, affordable housing and programs benefiting low or moderate income individuals and businesses in our CRA assessment areas or a broader area that includes our assessment areas; and

· a service test , to evaluate our delivery of services through our retail banking channels and the extent and innovation of our community development services.

Due to its Internet focus, the Bank does not have the kind of easily defined local community market that most other banks have. As a result, the Bank operates under a CRA Strategic Plan, which was approved by the FDIC and sets forth certain guidelines the Bank must meet in order to achieve a “Satisfactory” rating. The current Strategic Plan expires December 31, 2014; the Bank may elect to submit a new plan for approval prior to that date. The Bank received a “Satisfactory” CRA rating in its most recent CRA examination. Failure of an institution to receive at least a “Satisfactory” rating could inhibit such institution or its holding company from undertaking certain activities, including engaging in certain activities and acquisitions of other financial institutions.

Transactions with Affiliates . The authority of the Bank, like other FDIC-insured banks, to engage in transactions with its “affiliates” is limited by Sections 23A and 23B of the Federal Reserve Act and the Federal Reserve’s Regulation W. An “affiliate” for this purpose is defined generally as any company that owns or controls the Bank or is under common ownership or control with the Bank, but excludes a company controlled by a bank. In general, transactions between the Bank and its affiliates must be on terms that are consistent with safe and sound banking practices and at least as favorable to the Bank as comparable transactions between the Bank and non-affiliates. In addition, covered transactions with affiliates are restricted individually to 10% and in the aggregate to 20% of the Bank’s capital. Collateral ranging from 100% to 130% of the loan amount depending on the quality of the collateral must be provided for an affiliate to secure a loan or other extension of credit from the Bank. The Company is an “affiliate” of the Bank for purposes of Regulation W and Sections 23A and 23B of the Federal Reserve Act. The Bank is in compliance with these provisions.

Loans to Insiders . The Bank’s authority to extend credit to its directors, executive officers and principal stockholders, as well as to entities controlled by such persons (“Related Interests”), is governed by Sections 22(g) and 22(h) of the Federal Reserve Act and Regulation O of the Federal Reserve. Among other things, these provisions require that extensions of credit to insiders: (1) be made on terms that are substantially the same as, and follow credit underwriting procedures that are not less stringent than, those prevailing for comparable transactions with unaffiliated persons and that do not involve more than the normal risk of repayment or present other unfavorable features; and (2) not exceed certain limitations on the amount of credit extended to such persons, individually and in the aggregate, which limits are based, in part, on the amount of the Bank’s capital. In addition, extensions of credit in excess of certain limits must be approved in advance by the Bank’s board of directors. Further, provisions of the Dodd-Frank Act require that after July 21, 2011, any sale or purchase of an asset by the Bank with an insider must be on market terms and if the transaction represents more than 10% of the Bank’s capital stock and surplus it must be approved in advance by a majority of the disinterested directors of the Bank. The Bank is in compliance with these provisions.

Enforcement . The DFI and the FDIC share primary regulatory enforcement responsibility over the Bank and its institution-affiliated parties (“IAPs”), including directors, officers and employees. This enforcement authority

includes, among other things, the ability to appoint a conservator or receiver for the Bank, to assess civil money penalties, to issue cease and desist orders, to seek judicial enforcement of administrative orders and to remove directors and officers from office and bar them from further participation in banking. In general, these enforcement actions may be initiated in response to violations of laws, regulations and administrative orders, as well as in response to unsafe or unsound banking practices or conditions.

Standards for Safety and Soundness . Pursuant to the FDIA, the federal banking agencies have adopted a set of guidelines prescribing safety and soundness standards. These guidelines establish general standards relating to internal controls and information systems, internal audit systems, loan documentation, credit underwriting, interest rate risk exposure, asset growth, asset quality, earnings standards, compensation, fees and benefits. In general, the guidelines require appropriate systems and practices to identify and manage the risks and exposures specified in the guidelines. We believe we are in compliance with the safety and soundness guidelines.

Dividends . The ability of the Bank to pay dividends is limited by state and federal laws and regulations that require the Bank to obtain the prior approval of the DFI before paying a dividend that, together with other dividends it has paid during a calendar year, would exceed the sum of its net income for the year to date combined with its retained net income for the previous two years. The amount of dividends the Bank may pay may also be limited by the principles of prudent bank management.

Capital Distributions . The FDIC may disapprove of a notice or application to make a capital distribution if:

· the Bank would be undercapitalized following the distribution;

· the proposed capital distribution raises safety and soundness concerns; or

· the capital distribution would violate a prohibition contained in any statute, regulation or agreement applicable to the Bank.

Insurance of Deposit Accounts . The Bank is a member of the DIF, which is administered by the FDIC. All deposit accounts at the Bank are insured by the FDIC up to a maximum of $250,000 per depositor. In addition, as noted above, under the Dodd-Frank Act certain noninterest-bearing transaction accounts are fully insured regardless of the dollar amount beginning December 31, 2010 and ending December 31, 2012. This additional deposit insurance coverage replaced the FDIC’s Transaction Account Guarantee Program.

The FDIA, as amended by the Federal Deposit Insurance Reform Act and the Dodd-Frank Act, requires the FDIC to set a ratio of deposit insurance reserves to estimated insured deposits—the designated reserve ratio (the “DRR”)—of at least 1.35%. The FDIC utilizes a risk-based assessment system that imposes insurance premiums based upon a risk matrix that takes into account a bank’s capital level and supervisory rating. On February 27, 2009, the FDIC introduced three possible adjustments to an institution’s initial base assessment rate: (1) a decrease of up to five basis points for long-term unsecured debt, including senior unsecured debt (other than debt guaranteed under the Temporary Liquidity Guarantee Program) and subordinated debt and, for small institutions, a portion of Tier 1 capital; (2) an increase not to exceed 50 percent of an institution’s assessment rate before the increase for secured liabilities in excess of 25 percent of domestic deposits; and (3) for non-Risk Category I institutions, an increase not to exceed 10 basis points for brokered deposits in excess of 10 percent of domestic deposits.

On November 9, 2010, the FDIC proposed to change its assessment base from total domestic deposits to average total assets minus average tangible equity, which is defined as Tier 1 capital, as required in the Dodd-Frank Act. The new assessment formula became effective on April 1, 2011, and was used to calculate the June 30, 2011 assessment. The FDIC plans to raise the same expected revenue under the new base as under the current assessment base. Since the new base is larger than the current base, the proposal would lower the assessment rate schedule to maintain revenue neutrality. Assessment rates would be reduced to a range of 2.5 to 9 basis points on the broader assessment base for banks in the lowest risk category (well capitalized and CAMELS I or II) and up to 30 to 45 basis points for banks in the highest risk category.

FDIC insurance expense, including assessments relating to FICO bonds, totaled $727,000 and $939,000 for 2011 and 2010, respectively. For the nine months ended September 30, 2012 and 2011, FDIC insurance expense, including FICO assessments, totaled $341,000 and $609,000, respectively.

Under the FDIA, the FDIC may terminate deposit insurance upon a finding that the institution has engaged in unsafe and unsound practices, is in an unsafe or unsound condition to continue operations or has violated any applicable law, regulation, rule, order or condition imposed by the FDIC.

Liquidity . The Bank is required to maintain a sufficient amount of liquid assets to ensure its safe and sound operation. To fund its operations, the Bank historically has relied upon core deposits, fed funds lines with correspondent banks, FHLB of Indianapolis borrowings and brokered deposits. The Bank does not currently solicit brokered deposits. The Bank believes it has sufficient liquidity to meet its funding obligations.

Federal Home Loan Bank System . The Bank is a member of the FHLB of Indianapolis, which is one of the regional Federal Home Loan Banks comprising the Federal Home Loan Bank System. Each Federal Home Loan Bank serves as a central credit facility primarily for its member institutions. The Bank, as a member of the FHLB of Indianapolis, is required to acquire and hold shares of capital stock in the FHLB of Indianapolis. While the required percentage of stock ownership is subject to change by the FHLB of Indianapolis, the Bank is in compliance with this requirement with an investment in FHLB of Indianapolis stock at September 30, 2012 of $2.9 million. Any advances from the FHLB of Indianapolis must be secured by specified types of collateral, and long-term advances may be used for the purpose of providing funds to make residential mortgage or commercial loans and to purchase investments. Long term advances may also be used to help alleviate interest rate risk for asset and liability management purposes. The Bank receives dividends on its FHLB of Indianapolis stock.

Federal Reserve System . Although the Bank is not a member of the Federal Reserve System, it is subject to provisions of the Federal Reserve Act and the Federal Reserve’s regulations under which depository institutions may be required to maintain reserves against their deposit accounts and certain other liabilities. In 2008, the Federal Reserve Banks began paying interest on reserve balances. Currently, reserves must be maintained against transaction accounts (primarily NOW and regular checking accounts). The Federal Reserve’s regulations currently require reserves equal to 3% on transaction account balances over $10.7 million and up to $58.8 million, plus 10% on the excess over $58.8 million. These requirements are subject to adjustment annually by the Federal Reserve. The Bank is in compliance with the foregoing reserve requirements. The balances maintained to meet the reserve requirements imposed by the Federal Reserve may be used to satisfy liquidity requirements imposed by the FDIC.

Anti-Money Laundering and the Bank Secrecy Act . Under the Bank Secrecy Act (“BSA”), a financial institution is required to have systems in place to detect and report transactions of a certain size and nature. Financial institutions are generally required to report to the U.S. Treasury any cash transactions involving more than $10,000. In addition, financial institutions are required to file suspicious activity reports for transactions that involve more than $5,000 and which the financial institution knows, suspects or has reason to suspect involves illegal funds, is designed to evade the requirements of the BSA or has no lawful purpose. The Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 (the “USA PATRIOT Act”), which amended the BSA, is designed to deny terrorists and others the ability to obtain anonymous access to the U.S. financial system. The USA PATRIOT Act has significant implications for financial institutions and businesses of other types involved in the transfer of money. The USA PATRIOT Act, together with the implementing regulations of various federal regulatory agencies, has caused financial institutions, such as the Bank, to adopt and implement additional policies or amend existing policies and procedures with respect to, among other things, anti-money laundering compliance, suspicious activity, currency transaction reporting, customer identity verification and customer risk analysis.

The United States has imposed economic sanctions that affect transactions with designated foreign countries, nationals and others. These sanctions, which are administered by the Treasury Office of Foreign Assets Control (“OFAC”), take many different forms. Generally, however, they contain one or more of the following elements: (1) restrictions on trade with or investment in a sanctioned country, including prohibitions against direct or indirect imports from and exports to a sanctioned country and prohibitions on “U.S. persons” engaging in financial transactions relating to making investments in, or providing investment-related advice or assistance to, a sanctioned

country; and (2) blocking of assets in which the government or specially designated nationals of the sanctioned country have an interest, by prohibiting transfers of property subject to U.S. jurisdiction (including property in the possession or control of U.S. persons). Blocked assets (for example, property and bank deposits) cannot be paid out, withdrawn, set off or transferred in any manner without a license from OFAC.

Consumer Protection Laws . The Bank is subject to a number of federal and state laws designed to protect consumers and prohibit unfair or deceptive business practices. These laws include the Equal Credit Opportunity Act, Fair Housing Act, Home Ownership Protection Act, Fair Credit Reporting Act, as amended by the Fair and Accurate Credit Transactions Act of 2003 (“FACT Act”), the Gramm-Leach-Bliley Act (“GLBA”), the Truth in Lending Act, the CRA, the Home Mortgage Disclosure Act, the Real Estate Settlement Procedures Act, the National Flood Insurance Act and various state law counterparts. These laws and regulations mandate certain disclosure requirements and regulate the manner in which financial institutions must interact with customers when taking deposits, making loans, collecting loans and providing other services. Further, the Dodd-Frank Act established the CFPB, which has the responsibility for making rules and regulations under the federal consumer protection laws relating to financial products and services. The CFPB also has a broad mandate to prohibit unfair or deceptive acts and practices and is specifically empowered to require certain disclosures to consumers and draft model disclosure forms. Failure to comply with consumer protection laws and regulations can subject financial institutions to enforcement actions, fines and other penalties. The FDIC will enforce CFPB rules with respect to the Bank.

Interchange Fees . Pursuant to the Dodd-Frank Act, the Federal Reserve has issued a final rule governing the interchange fees charged on debit card transactions. The rule caps the interchange income that an issuing bank can receive from a debit card holder’s transactions. The rule became effective October 1, 2011. Although the rule does not directly apply to institutions with less than $10 billion in assets, market forces may result in point-of-sale networks paying the same reduced interchange rate to banks of all sizes. If that were to occur, the Bank would receive less income on its debit card customers’ transactions.

Mortgage Reform . The Dodd-Frank Act prescribes certain standards that mortgage lenders must consider before making a residential mortgage loan, including verifying a borrower’s ability to repay such mortgage loan. The Dodd-Frank Act also allows borrowers to assert violations of certain provisions of the Truth-in-Lending Act as a defense to foreclosure proceedings. Under the Dodd-Frank Act, prepayment penalties are prohibited for certain mortgage transactions and creditors are prohibited from financing insurance policies in connection with a residential mortgage loan or home equity line of credit. The Dodd-Frank Act requires mortgage lenders to make additional disclosures prior to the extension of credit, in each billing statement and for negative amortization loans and hybrid adjustable rate mortgages. Additionally, the Dodd-Frank Act prohibits mortgage originators from receiving compensation based on the terms of residential mortgage loans and generally limits the ability of a mortgage originator to be compensated by others if compensation is received from a consumer.

Customer Information Security . The federal banking agencies have adopted final guidelines for establishing standards for safeguarding nonpublic personal information about customers. These guidelines implement provisions of GLBA. Specifically, the Information Security Guidelines established by GLBA require each financial institution, under the supervision and ongoing oversight of its board of directors or an appropriate committee thereof, to develop, implement and maintain a comprehensive written information security program designed to ensure the security and confidentiality of customer information (as defined under GLBA), to protect against anticipated threats or hazards to the security or integrity of such information and to protect against unauthorized access to or use of such information that could result in substantial harm or inconvenience to any customer. The federal banking regulators have issued guidance for banks on response programs for unauthorized access to customer information. This guidance, among other things, requires notice to be sent to customers whose “sensitive information” has been compromised if unauthorized use of this information is “reasonably possible.”

Identity Theft Red Flags . The federal banking agencies jointly issued final rules and guidelines in 2007 implementing Section 114 of the FACT Act and final rules implementing Section 315 of the FACT Act. The rules implementing Section 114 require each financial institution or creditor to develop and implement a written Identity Theft Prevention Program to detect, prevent and mitigate identity theft in connection with the opening of certain accounts or certain existing accounts. In addition, the federal banking agencies issued guidelines to assist financial institutions and creditors in the formulation and maintenance of an Identity Theft Prevention Program that satisfies

the requirements of the rules. The rules implementing Section 114 also require credit and debit card issuers to assess the validity of notifications of changes of address under certain circumstances. Additionally, the federal banking agencies issued joint rules, that became effective in 2008, under Section 315 that provide guidance regarding reasonable policies and procedures that a user of consumer reports must employ when a consumer reporting agency sends the user a notice of address discrepancy.

Privacy . GLBA requires financial institutions to implement policies and procedures regarding the disclosure of nonpublic personal information about consumers to nonaffiliated third parties. In general, the statute requires financial institutions to explain to consumers their policies and procedures regarding the disclosure of such nonpublic personal information and, except as otherwise required or permitted by law, financial institutions are prohibited from disclosing such information except as provided in their policies and procedures. The Bank is required to provide notice to its customers on an annual basis disclosing their policies and procedures on the sharing of nonpublic personal information. In December 2009, the federal banking agencies promulgated regulations that incorporate a two-page model form that financial institutions may use to satisfy their privacy disclosure obligations under GLBA. These regulations became effective in January 2011.

ITEM 1A — RISK FACTORS

Before making an investment decision, you should carefully consider all of the risks described in this registration statement. If any of the risks discussed in this registration statement actually occur, or if additional risks and uncertainties not presently known to us or that we do not currently believe to be important to you, materialize, our business, results of operations or financial condition would likely suffer. If this were to happen, the price of our shares could decline significantly and you may lose all or part of your investment. Our forward-looking statements in this registration statement are subject to the following risks and uncertainties. Our actual results could differ materially from those anticipated by our forward-looking statements as a result of the risk factors below.

RISKS RELATED TO OUR BUSINESS

We are subject to extensive governmental regulation, which may result in significant restrictions on our activities, operations, financing and ownership.

We and the Bank are subject to extensive governmental regulation that is intended primarily to protect depositors and the DFI, rather than our shareholders. As a bank holding company, we are regulated primarily by the Federal Reserve. As an Indiana-chartered bank, the Bank is subject to regulation, examination and supervision by the DFI as chartering authority, and the FDIC as the primary federal regulator and deposit insurer. These regulators have the ability, should the situation require, to place significant regulatory and operational restrictions upon us and the Bank. The Bank’s activities are also regulated under consumer protection laws applicable to our lending, deposit and other activities.

Further, we may be required to invest significant management attention and resources to evaluate and make any changes necessary to comply with new statutory and regulatory requirements, including the Dodd-Frank Act and new regulatory capital requirements intended to implement Basel III. Failure to comply with the new requirements may negatively affect our results of operations and financial condition. While we cannot predict what effect any presently contemplated or future changes in the laws or regulations or their interpretations would have on us, these changes could be materially adverse to our investors.

Federal and state laws and regulations govern numerous other matters including permissible types, amounts and terms of extensions of credit and investments; permissible nonbanking activities; the level of reserves against deposits; and restrictions on dividend payments. The DFI and FDIC possess the power to issue cease and desist orders to prevent or remedy unsafe or unsound practices or violations of law by banks subject to their regulation, and the Federal Reserve possesses similar powers with respect to bank holding companies. These and other restrictions limit the manner in which we, and the Bank, may conduct business and obtain financing.

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

We rely heavily upon communications and information systems to conduct our business. Although we have built a level of redundancy into our information technology infrastructure and update our business continuity plan annually, any failure or interruption of our information systems or the third-party information systems on which we rely as a result of inadequate or failed processes or systems, human errors or external events could cause underwriting or other delays and could result in fewer applications being received, slower processing of applications and reduced efficiency in servicing. In addition, our communication and information systems may present security risks and could be susceptible to hacking or other unauthorized access. The occurrence of any of these events could have a material adverse effect on our business.

Our plans to grow our commercial loan portfolios may not succeed.

We may not succeed in our plans to grow our CRE and C&I loan portfolios. Even if our plans can be implemented successfully, this may not result in the realization of the expected benefits. These loans generally involve higher credit risks than residential real estate and consumer loans and are dependent on our lenders maintaining close relationships with the borrowers. Payments on these loans are often dependent upon the successful operation and management of the underlying business or assets, repayment of such loans may be influenced to a great extent by conditions in the market or the economy. Our failure to achieve or manage this growth could have an adverse effect on our business, future prospects, financial condition or results of operations.

An inadequate allowance for loan losses would reduce our earnings and adversely affect our financial condition and results of operations.

Our success depends to a significant extent upon the quality of our assets, particularly loans. In originating loans, there is a substantial likelihood that credit losses will be experienced. The risk of loss will vary with, among other things, general economic conditions, the type of loan being made, the creditworthiness of the borrower over the term of the loan and, in the case of a collateralized loan, the quality of the collateral. Although we and our regulators regularly review our loan portfolio and evaluate the adequacy of our allowance and believe that the allowance is adequate to absorb such probable losses, there can be no assurance that we will not experience losses in excess of the allowance and be required to increase our provision.

As of September 30, 2012, our allowance for loan losses was $6.4 million, which represented approximately 1.8% of total loans. We had $9.0 million in non-performing loans as of September 30, 2012. The allowance may not prove sufficient to cover future loan losses. Although management uses the best information available to make determinations with respect to the allowance for loan losses, future adjustments may be necessary if economic conditions differ substantially from the assumptions used or adverse developments arise with respect to our non-performing or performing loans. Accordingly, the allowance for loan losses may not be adequate to cover loan losses or significant increases to the allowance may be required in the future if economic conditions should worsen. Any increase in our provision could have a material adverse effect on our financial condition and results of operations.

We have goodwill which, if impaired, would adversely impact our results of operations.

At September 30, 2012, our assets included goodwill of approximately $4.7 million. As required by generally accepted accounting standards, we periodically review our goodwill, intangible assets and long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amounts of these assets may not be recoverable. In the event that we determine in the future that an impairment exists for any reason, we would record an impairment charge in the quarter such determination is made, which could adversely impact our financial position and results of operations.

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

As of September 30, 2012, we held $4.5 million fair value of investments in private label mortgage-backed and pooled trust securities which had an unrealized loss of $2.5 million at September 30, 2012. Although we use economic models to determine whether an other-than-temporary impairment has occurred, such models have limitations. Although we do not anticipate any decline in the value of these investments, if they experience an other-than-temporary impairment, we would be required to record a write-down or loss and a charge to our earnings.

Our products and services are delivered on a technological platform that is subject to rapid change and transformation.

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

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

If we continue to experience significant growth, we may need to raise additional capital. Our ability to raise capital, if needed, will depend upon our financial performance and condition and on conditions in the capital markets, as well as economic conditions generally. Accordingly, such financing may not be available to us on acceptable terms or at all. If we cannot raise additional capital when needed, it would have a material adverse effect on our financial condition, results of operations and prospects.

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

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

Reputational risk and social factors may negatively affect us.

Our ability to attract and retain depositors and customers is highly dependent upon consumer and other external perceptions of our business practices and financial condition. Adverse perceptions could damage our reputation to a level that could lead to difficulties in generating and maintaining deposit accounts, accessing credit markets and increased regulatory scrutiny of our business. Borrower payment behaviors also affect us. To the extent that borrowers determine to stop paying their loans where the financed properties’ market values are less than the amount of their loans, or for other reasons, our costs and losses may increase. Adverse developments or perceptions regarding the business practices or financial condition of our competitors, or our industry as a whole, may also indirectly adversely affect our reputation.

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

We are dependent upon the services of our management team.

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

Fluctuations in interest rates could reduce our profitability and affect the value of our assets.

Like other financial institutions, we are subject to interest rate risk. Our primary source of income is net interest income, which is the difference between interest earned on loans and leases and investments and interest paid on deposits and borrowings. We expect that we will periodically experience imbalances in the interest rate sensitivities of our assets and liabilities and the relationships of various interest rates to each other. Over any defined period of time, our interest-earning assets may be more sensitive to changes in market interest rates than our interest-bearing liabilities, or vice-versa. In addition, the individual market interest rates underlying our loan and lease and deposit products may not change to the same degree over a given time period. In any event, if market interest rates should move contrary to our position, earnings may be negatively affected. In addition, loan and lease volume and quality and deposit volume and mix can be affected by market interest rates as can the businesses of our clients. Changes in levels of market interest rates could have a material adverse effect on our net interest spread, asset quality, origination volume and overall profitability.

Market interest rates are beyond our control, and they fluctuate in response to economic conditions and the policies of various governmental and regulatory agencies, in particular, the Federal Reserve. Changes in monetary policy, including changes in interest rates, may negatively affect our ability to originate loans and leases, the value of assets and our ability to realize gains from the sale of our assets, all of which ultimately could affect our earnings.

We are a holding company dependent on capital distributions from the Bank.

We are a separate and distinct legal entity from the Bank and depend on dividends, distributions and other payments from the Bank to fund all payments on our obligations. The ability of the Bank to pay dividends to us is limited by state and federal law and depends generally on the Bank’s ability to generate net income. If we are unable to comply with applicable provisions of these statutes and regulations, the Bank may not be able to pay dividends to us, and we would not be able to pay dividends on our outstanding common stock.

RISKS RELATED TO OUR COMMON STOCK

There is no established trading market for our common stock and you may not be able to resell your shares.

The shares of our common stock are currently quoted on the over-the-counter market. We have filed this registration statement in order to list our common stock on the NASDAQ Capital Market which we expect will provide a more liquid market for our common stock. However, we cannot guarantee that our application for listing on the NASDAQ Capital Market will be approved and even if it is approved, the listing will not guarantee a significantly more active trading market will develop.

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

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

Anti-takeover provisions could negatively impact our shareholders.

Provisions of Indiana law and provisions of our Articles of Incorporation could make it more difficult for a third party to acquire control of us or have the effect of discouraging a third party from attempting to acquire control of us. We will become subject to certain anti-takeover provisions under the Indiana Business Corporation Law (the “IBCL”). Additionally, our Articles of Incorporation authorize our Board of Directors to issue one or more classes or series of preferred stock without shareholder approval and such preferred stock could be issued as a defensive measure in response to a takeover proposal. These provisions could make it more difficult for a third party to acquire us even if an acquisition might be in the best interest of our shareholders.

Our shares of common stock are not an insured deposit and as such are subject to loss of entire investment.

The shares of our common stock are not a bank deposit and will not be insured or guaranteed by the FDIC or any other government agency. Your investment will be subject to investment risk, and you must be capable of affording the loss of your entire investment.

If we were to issue preferred stock, the rights of holders of our common stock and the value of such common stock could be adversely affected.

Our Board of Directors is authorized to issue classes or series of preferred stock, without any action on the part of the stockholders. The Board of Directors also has the power, without stockholder approval, to set the terms of any such classes or series of preferred stock, including voting rights, dividend rights and preferences over the common stock with respect to dividends or upon the liquidation, dissolution or winding-up of our business and other terms. If we issue preferred stock in the future that has a preference over the common stock with respect to the payment of dividends or upon liquidation, dissolution or winding-up, or if we issue preferred stock with voting rights that dilute the voting power of the common stock, the rights of holders of the common stock or the value of the common stock would be adversely affected.

Upon the effectiveness of this registration statement, we will become subject to evolving and expensive corporate governance regulations and requirements. Our failure to adhere to these requirements or the failure or circumvention of our controls and procedures could seriously harm our business.

Although we are subject to extensive regulation as a financial institution, we have not been required to follow the corporate governance and financial reporting practices and policies required of a company whose stock is registered under the Securities Exchange Act of 1934, as amended, and traded on a national securities exchange. Upon the effectiveness of this registration statement, we will be subject to certain federal, state and other rules and regulations, including applicable requirements of the Dodd-Frank Act and the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”). Compliance with these evolving regulations means we will incur significant legal, accounting and other expenses that we did not incur in the past and are not reflected in our historical financial statements. Compliance will also require a significant diversion of management time and attention, particularly with regard to disclosure controls and procedures and internal control over financial reporting, and will require changes in corporate governance practices. Although we have reviewed, and will continue to review, our disclosure controls and procedures in order to determine whether they are effective, our controls and procedures may not be able to prevent errors or frauds in the future. Faulty judgments, simple errors or mistakes, or the failure of our personnel to adhere to established controls and procedures, may make it difficult for us to ensure that the objectives of the control system will be met. A failure of our controls and procedures to detect other than inconsequential errors or fraud could seriously harm our business and results of operations.

ITEM 2 — FINANCIAL INFORMATION

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 and condensed financial statements and related notes appearing elsewhere in this registration statement. This discussion and analysis includes certain forward-looking statements that involve risks, uncertainties and assumptions. You should review the “Risk Factors” section of this registration statement 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 “Cautionary Note Regarding Forward-Looking Statements” at the beginning of this registration statement.

Financial Overview

Selected Financial and Other Data
(dollars in thousands)

	Nine Months ended September 30,						Fiscal Year ended December 31,
	2012			2011			2011			2010			2009			2008			2007
Financial Condition:
Total assets	$	627,678		$	561,293		$	585,440		$	503,915		$	504,615		$	543,044		$	557,901
Cash and cash equivalents	$	24,174		$	9,773		$	34,778		$	32,417		$	30,016		$	25,780		$	65,174
Investment securities available for sale	171,323			149,971			149,270			136,936			133,584			168,807			118,525
Loans held for sale	55,490			44,425			45,091			5,008			7,169			4,203			3,060
Loans receivable, net	348,839			331,041			329,570			299,545			305,439			320,167			349,407
Deposits	522,659			464,106			486,665			422,703			411,627			439,242			461,563
Federal Home Loan Bank advances	40,658			40,543			40,573			30,455			47,000			57,000			48,700
Total shareholders’ equity	60,695			53,986			55,423			48,897			44,764			45,411			46,087

Operating:
Interest and dividends	18,051			18,009			23,944			25,296			28,607			31,155			31,799
Interest expense	6,494			7,384			9,621			10,785			14,859			18,873			20,160
Net interest income	11,557			10,625			14,323			14,511			13,748			12,282			11,639
Provision for loan losses	2,108			1,493			2,440			927			11,564			4,819			1,802
Non-interest income	7,808			1,736			3,559			3,437			2,903			2,585			2,298
Non-interest expenses	11,784			8,301			11,483			10,370			9,341			8,481			8,359
Income (loss) before income taxes	5,473			2,567			3,959			6,651			(4,254		)	1,567			3,776
Income taxes	1,421			442			773			1,696			(2,136		)	(9		)	948
Net income (loss)	$	4,052		$	2,125		$	3,186		$	4,955		$	(2,118	)	$	1,576		$	2,828

Performance Ratios:
Return on average assets (annualized)	0.88		%	0.53		%	0.59		%	1.01		%	-0.40		%	0.29		%	0.54		%
Return on average equity (annualized)	9.36		%	5.53		%	6.13		%	10.21		%	-4.59		%	3.47		%	6.42		%
Interest rate spread (annualized) (1)	2.46		%	2.60		%	2.57		%	2.83		%	2.42		%	2.07		%	1.95		%
Net interest margin (annualized) (2)	2.62		%	2.78		%	2.75		%	3.06		%	2.67		%	2.34		%	2.27		%
Noninterest expense to average assets (annualized)	2.57		%	2.09		%	2.12		%	2.11		%	1.76		%	1.56		%	1.58		%
Efficiency ratio (3)	60.85		%	67.15		%	64.22		%	57.78		%	56.10		%	57.05		%	59.98		%
Average interest-earning assets to average interest-bearing liabilities	123.26		%	124.13		%	124.18		%	123.83		%	120.36		%	118.25		%	118.60		%
Average equity to average assets	9.45		%	9.66		%	9.61		%	9.85		%	8.68		%	8.38		%	8.34		%

Capital Ratios:
Total capital to risk weighted assets	11.2		%	12.5		%	12.4		%	12.2		%	11.0		%	13.2		%	11.6		%

	Nine Months ended September 30,				Fiscal Year ended December 31,
	2012		2011		2011		2010		2009		2008		2007
Tier 1 capital to risk weighted assets	10.0	%	11.3	%	11.2	%	10.9	%	9.8	%	12.0	%	10.7	%
Tier 1 capital to average assets	8.7	%	9.0	%	8.7	%	9.4	%	7.7	%	8.2	%	7.5	%

Asset Quality Ratios:
Allowance for loan losses as a percentage of total loans	1.82	%	1.67	%	1.70	%	2.26	%	3.25	%	1.45	%	1.03	%
Allowance for loan losses as a percentage of non-performing loans	71.39	%	85.08	%	64.61	%	71.41	%	96.91	%	100.90	%	243.11	%
Net (charge-offs) recoveries to average outstanding loans during the period	-0.47	%	-1.10	%	-1.05	%	-1.35	%	-1.85	%	-1.12	%	-0.69	%
Non-performing loans as a percentage of total loans	2.55	%	1.97	%	2.64	%	3.17	%	3.36	%	1.44	%	0.43	%
Non-performing loans as percentage of total assets	1.89	%	1.17	%	2.29	%	3.36	%	2.52	%	1.00	%	0.35	%
Total non-performing assets and troubled debt restructuring as a percentage of total assets	2.12	%	1.35	%	2.47	%	3.43	%	2.52	%	1.00	%	0.35	%

Shares and Per Share Data:
Average common shares outstanding:
Basic	1,911,846		1,905,604		1,906,289		1,898,919		1,892,082		1,878,466		1,866,793
Diluted	1,911,846		1,905,604		1,906,289		1,898,919		1,892,082		1,886,466		1,879,550
Per share:
Basic earnings available to common shareholders	2.12		1.12		1.67		2.61		(1.12	)	0.84		1.51
Diluted earnings available to common shareholders	2.12		1.12		1.67		2.61		(1.12	)	0.84		1.50
Dividends — common stock	—		—		—		—		—		—		—
Dividend payout ratio (4)	0.00	%	0.00	%	0.00	%	0.00	%	0.00	%	0.00	%	0.00	%

Other:
Number of offices	1		1		1		1		2		2		5

(1) Represents the difference between the weighted average yield on average interest-earning assets and the weighted average cost of interest-bearing liabilities.

(2) Represents net interest income as a percentage of average interest-earning assets.

(3) Represents noninterest expense divided by the sum of net interest income and noninterest income.

(4) Dividends per share divided by diluted earnings per share.

Overview

The primary drivers of our performance since January 1, 2011, have been:

· our ability to capitalize on the demand for residential mortgage refinancings due to the ongoing low-rate environment;

· our deployment of excess cash into higher-yielding assets and

· our ability to maintain high credit quality despite the ongoing difficulties affecting many other banks.

During 2011 and the nine months ended September 30, 2012, we reported net income of $7.2 million. During the same period, total assets increased by $123.8 million, or 24.6% from December 31, 2010. We increased net loans in this period by $49.3 million, or 16.5%, from December 31, 2010. Net interest income totaled $25.9 million in 2011 and the nine months ended September 30, 2012. Our net interest spread on an annualized basis

has been relatively steady at 2.57% and 2.46% for 2011 and the first nine months of 2012, respectively. Securities available for sale increased by $34.4 million, or 25.1%, from December 31, 2010. Our regulatory capital ratios have remained well above all required minimums. Non-performing loans as a percentage of total loans declined from 3.17% in 2010 to 2.64% and 2.55% in 2011 and in the nine months ended September 30, 2012, respectively.

Due to our sustained record of performance, our Board of Directors declared a special cash dividend of $0.25 per share payable December 28, 2012, to holders of our common stock on December 10, 2012.

Results of Operations

Nine Months Ended September 30, 2012 vs. Nine Months Ended September 30, 2011

Total interest income remained flat due to the existing low rate environment, increasing to $18.1 million during the nine months ended September 30, 2012, from $18.0 million in the same period in 2011. Average yield on assets decreased by 0.64%, which was offset by an increase of $79.9 million in the average outstanding balance of interest earning assets.

Interest expense from deposits for the first nine months of 2012 decreased by $896,000, or 14.1%, compared to the same period last year, primarily due to the ongoing low rate environment. Despite an increase of $68.5 million in the average balance of interest-bearing deposits, the average cost of funds decreased by 0.52% due primarily to the low-rate environment.

Provision for loan losses increased by $615,000, or 41.2%, as a result of management’s ongoing evaluation of the adequacy of the allowance for loan losses which includes an analysis of the overall size and composition of the portfolio as well as a review of all loans for which full collectability may not be reasonably assured, which considers, among other matters, the estimated net realizable value of the underlying collateral, economic conditions, loan loss experience and other factors that are particularly susceptible to changes that could result in a material change to the borrower’s ability to pay the loan upon maturity.

Gain on loans sold during the period increased by $5.6 million, or 389.9%, compared to the same period in 2011, primarily due to increased loan origination volumes within the residential mortgage department. The existing low rate environment has made refinancing existing mortgages an attractive option for consumers.

Other-than-temporary impairment (“OTTI”) losses decreased by $352,000, or 63.3%, compared to the same period in 2011. Management evaluates investment securities for OTTI on a quarterly basis. Impairment on securities is determined after analyzing the estimated cash flows to be received and the underlying collateral and determining the amount of additional losses needed in the individual pools to create a shortfall in interest or principal payments. In 2012, management’s evaluation indicated OTTI losses on two private label mortgage backed securities (“PLMBS”) and one collateralized debt obligation (“CDO”). Amortized cost remaining on securities with OTTI losses totaled $2.2 million as of September 30, 2012.

Loss on asset disposals decreased by $286,000, or 88.5%, compared to the same period in 2011, primarily as the result of an $189,000 gain on liquidation of a commercial real estate property owned by the company in the third quarter of 2012.

Salaries and employee benefits increased by $2.2 million, or 56.7%, reflecting the addition of 21 full time employees during the nine months ended September 30, 2012 compared to the same period in 2011. Additional staffing took place primarily within the residential mortgage and C&I lending departments to address increased origination volumes.

Marketing, advertising and promotion expenses increased by $474,000, or 88.4%, as the result of the increased usage of third party lead sources to attract potential borrowers to our mortgage website. We acquire mortgage leads from third party sources to drive loan applications.

Consulting and professional fees increased by $524,000, or 102.1%, to accommodate increased legal fees of approximately $452,000 during 2012 incurred through the normal course of operations such as credit collection efforts.

Loan expenses increased by $497,000, or 133.6%, due primarily to $332,000 of expenses related to a non performing commercial real estate credit which was moved to Other Real Estate Owned (“OREO”) in October 2012.

Deposit insurance premiums decreased by $268,000, or 44.0%, due to the decrease of 0.01472% in the Bank’s FDIC assessment rates.

Fiscal Year Ended December 31, 2011 vs. Fiscal Year Ended December 31, 2010

Interest income from loans for 2011 decreased by $1.1 million, or 5.6%, compared to 2010 primarily due to the ongoing low rate environment. Despite an increase of $36.9 million in average loans outstanding, the average yield decreased by 1.01%.

Interest expense from deposits for 2011 decreased by $988,000, or 10.7%, compared to 2010 primarily due to the low rate environment. Despite an increase of $39.4 million in the average balance of interest bearing deposits, the average cost of funds decreased by 0.44%.

Provision for loan losses increased by $1.5 million, or 163.2%, from 2010 to 2011 as a result of management’s ongoing evaluation of the adequacy of the allowance for loan losses which includes an analysis of the overall size and composition of the portfolio as well as a review of all loans for which full collectability may not be reasonably assured which considers, among other matters, the estimated net realizable value of the underlying collateral, economic conditions, loan loss experience and other factors that are particularly susceptible to changes that could result in a material change to the borrower’s ability to pay the loan upon maturity. 2010 provision expense contained a $2.4 million provision reversal related to a single commercial real estate credit re-collateralized in the first quarter of 2010. Provision expense improvements in 2011 occurred due to reduced delinquencies and charge-off activity.

Gain on loans sold during 2011 increased by $592,000, or 19.1%, compared to 2010, primarily due to increased loan origination for refinancings within the residential mortgage department. The ongoing low rate environment has made refinancing existing mortgages an attractive option for consumers.

OTTI losses decreased by $283,000, or 31.1%, compared to 2010. Management’s evaluation of the securities portfolio in 2011 indicated OTTI losses on three PLMBS and one CDO. The amortized cost remaining on securities with OTTI losses totaled $2.7 million as of December 31, 2011.

Loss on asset disposals increased by $710,000, or 207.6%, in 2011, primarily as the result of the write off of $368,000 representing the full value of a minority investment in an Indiana financial institution which disclosed that it may be unable to continue as a going concern. In addition, the Bank wrote down a commercial property in OREO by $288,000 in the fourth quarter of 2011.

Salaries and employee benefits increased $516,000, or 10.8%, reflecting the addition of 22 full time employees during 2011 compared to 2010. We added staff within the residential mortgage department to address increased origination volumes. In addition, the Bank established a C&I lending department in November 2011 to serve a new market.

Marketing, advertising and promotion expenses increased by $667,000, or 248.0%, as the result of the increased usage of third party lead sources to attract potential borrowers to our mortgage website. We acquire mortgage leads from third party sources to drive loan applications.

Average Balance Sheets, Net Interest Earnings

For the periods presented, the following table provides the total dollar amount of interest income from average interest-earning assets and the resulting yields, and the interest expense on average interest-bearing liabilities, expressed both in dollars and rates, and the net interest margin. The table does not reflect any effect of income taxes. Balances are based on the average of daily balances. Non-accrual loans are included in average loan balances.

Average Balance Sheets
(dollars in thousands)

	Nine Months ended September 30,
	2012						2011
	Average Balance		Interest and Dividends		Yield/Cost		Average Balance		Interest and Dividends		Yield/Cost
Assets:
Interest-earning assets:
Loans	$	382,909	$	14,268	4.98	%	$	336,274	$	13,989	5.56	%
Investment securities	175,442		3,658		2.79	%	147,904		3,913		3.54	%
FHLB stock	2,943		70		3.18	%	3,127		64		2.74	%
Other interest-earning assets	28,968		55		0.25	%	23,081		43		0.25	%
Total interest-earning assets	590,262		18,051				510,386		18,009

Noninterest-earning assets	20,790						19,892
Total assets	$	611,052					$	530,278

Liabilities and equity:
Interest-bearing liabilities
Regular savings accounts	$	9,622	$	42	0.58	%	$	7,303	$	36	0.66	%
Interest-bearing demand deposits	62,034		265		0.57	%	55,393		297		0.72	%
Money market accounts	183,626		1,073		0.78	%	147,327		1,083		0.98	%
Certificates and brokered deposits	240,543		4,095		2.27	%	217,280		4,955		3.05	%
Total interest-bearing deposits	495,825		5,475				427,303		6,371		1.99	%
											3.58	%
FHLB advances	40,611		1,019		3.35	%	37,861		1,013		0.49	%
Other borrowings	—		—		0.00	%	22		—		2.12	%
Total interest-bearing liabilities	536,436		6,494				465,186		7,384

Noninterest-bearing liabilities	9,363						7,694
Other non-interest bearing liabilities	7,298						5,833
Total liabilities	553,097						478,713

Stockholders’ equity	57,955						51,565
Total liabilities and equity	$	611,052					$	530,278

Net interest income			$	11,557					$	10,625

Interest rate spread					2.46	%					2.60	%
Net interest margin					2.62	%					2.78	%
Average interest-earning assets to average interest-bearing liabilities					110.03	%					109.72	%

	Year ended December 31,
	2011						2010						2009
	Average Balance		Interest and Dividends		Yield/Cost		Average Balance		Interest and Dividends		Yield/Cost		Average Balance		Interest and Dividends		Yield/Cost
Assets:
Interest-earning assets:
Loans	$	346,589	$	18,752	5.41	%	$	309,655	$	19,868	6.42	%	$	328,817	$	21,433	6.52	%
Investment securities	145,823		5,045		3.46	%	133,943		5,294		3.95	%	156,709		7,035		4.49	%
FHLB stock	3,080		83		2.69	%	3,592		68		1.89	%	3,637		79		2.17	%
Other interest-earning assets	25,383		64		0.25	%	27,447		66		0.24	%	25,390		60		0.24	%
Total interest-earning assets	520,875		23,944				474,637		25,296				514,553		28,607

Noninterest-earning assets	19,938						17,896						16,456
Total assets	$	540,813					$	492,533					$	531,009

Liabilities and equity:
Interest-bearing liabilities
Regular savings accounts	$	7,417	$	48	0.65	%	$	6,760	$	50	0.74	%	$	5,767	$	65	1.13	%
Interest-bearing demand deposits	55,708		386		0.69	%	50,963		403		0.79	%	46,523		464		1.00	%
Money market accounts	151,134		1,444		0.96	%	125,223		1,408		1.12	%	99,734		1,627		1.63	%
Certificates and brokered deposits	220,601		6,388		2.90	%	212,553		7,393		3.48	%	271,901		10,620		3.91	%
Total interest-bearing deposits	434,860		8,266				395,499		9,254				423,925		12,776

FHLB advances	38,539		1,355		3.52	%	36,427		1,531		4.20	%	49,677		2,083		4.19	%
Other borrowings	20		—		0.51	%	—		—		0.00	%	6		—		0.55	%
Total interest-bearing liabilities	473,419		9,621				431,926		10,785				473,608		14,859

Noninterest-bearing liabilities	8,218						7,069						6,266
Other non-interest bearing liabilities	6,863						4,502						4,671
Total liabilities	488,500						443,497						484,545

Stockholders’ equity	52,313						49,036						46,464
Total liabilities and equity	$	540,813					$	492,533					$	531,009

Net interest income			$	14,323					$	14,511					$	13,748

Interest rate spread					2.57	%					2.83	%					2.42	%
Net interest margin					2.75	%					3.06	%					2.67	%
Average interest-earning assets to average interest-bearing liabilities					110.02	%					109.89	%					108.65	%

Rate/Volume Analysis
(dollars in thousands)

The following table sets forth certain information regarding changes in our interest income and interest expense for the periods indicated. For each category of earning assets and interest bearing liabilities, information is provided on changes attributable to (i) changes in volume (change in average volume multiplied by old rate); and (ii) changes in rates (change in rate multiplied by old average volume). Changes in rate/volume (change in rate multiplied by the change in volume) have been allocated to the changes due to volume and rate in proportion to the absolute value of the changes due to volume and rate prior to the allocation.

	Rate/Volume Analysis of Net Interest Income
	Nine Months ended September 30, 2012 vs. 2011 Due to Changes in									Fiscal Year ended December 31, 2011 vs. 2010 Due to Changes in									Fiscal Year ended December 31, 2010 vs. 2009 Due to Changes in
	Volume			Rate			Net			Volume			Rate			Net			Volume			Rate			Net
Interest income
Loans receivable	$	2,395		$	(2,116	)	$	279		$	2,209		$	(3,325	)	$	(1,116	)	$	(1,234	)	$	(331	)	$	(1,565	)
Investment securities	861			(1,116		)	(255		)	416			(665		)	(249		)	(957		)	(784		)	(1,741		)
FHLB stock	(6		)	12			6			(11		)	26			15			(1		)	(10		)	(11		)
Other interest-earning assets	11			1			12			(5		)	3			(2		)	5			1			6
Total	3,261			(3,219		)	42			2,609			(3,961		)	(1,352		)	(2,187		)	(1,124		)	(3,311		)

Interest expense
Deposits	1,123			(2,019		)	(896		)	578			(1,566		)	(988		)	(1,740		)	(1,782		)	(3,522		)
FHLB advances	95			(89		)	6			85			(261		)	(176		)	(557		)	5			(552		)
Total	1,218			(2,108		)	(890		)	663			(1,827		)	(1,164		)	(2,297		)	(1,777		)	(4,074		)

Increase (decrease) in net interest income	$	2,043		$	(1,111	)	$	932		$	1,946		$	(2,134	)	$	(188	)	$	110		$	653		$	763

Liquidity and Capital Resources

The Company’s primary source of funds is dividends from the Bank, the declaration of which is subject to regulatory limits. Historically, the Company has not had significant demands for the use of its cash. However, we declared a special dividend of $0.25 per share of common stock in the fourth quarter of 2012, and our Board of Directors is evaluating whether to pay quarterly dividends. If we institute quarterly dividends, we expect the amount we pay each quarter will be less than $0.25 per share. At September 30, 2012, the Company, on an unconsolidated basis, had $1.1 million in cash generally available for its cash needs.

At September 30, 2012, we had $195.5 million in cash and investment securities available for sale and $55.5 million in loans held for sale that were generally available for our cash needs. At September 30, 2012, we had the ability to borrow an additional $20.1 million in FHLB advances and correspondent bank fed funds line of credit draws.

At September 30, 2012, approved outstanding loan commitments, including unused lines of credit, amounted to $30.4 million. Certificates of deposit scheduled to mature in one year or less at September 30, 2012, totaled $91.7 million; however, due to our competitive rates, we believe that a majority of maturing deposits will remain with the Bank.

The allowance for loan losses increased $744,000, or 13.2%, from the end of 2011 to $6.4 million as of September 30, 2012 representing 1.8% of total loans outstanding. A total of $1.8 million of the reserve balance relates specifically to $6.2 million of loan balances on three commercial real estate credits. Total past due loans decreased by $1.5 million, or 12.3%, from the end of 2011. As of September 30, 2012, total past due loans represented 2.95% of total loans, a decrease from 3.56% as of December 31, 2011. Certain loans have been modified in troubled debt restructurings, in which economic concessions have been granted to borrowers who have experienced financial difficulties. These concessions typically result from loss mitigation activities and could include reductions in the interest rate, payment extensions, forgiveness of principal, forbearance or other actions. Modifications of terms for our loans and their inclusion as troubled debt restructurings are based on individual facts

and circumstances. The impact to the allowance for loan losses due to these modifications was insignificant. In determining whether to restructure a loan, we evaluate the borrower’s financial ability to meet the modified terms of the contract. The loan will only be restructured if the ability to repay is reasonably determined. As a result of this process, we have experienced minimal defaults of loans modified as troubled debt restructurings since January 1, 2011.

Bank-owned life insurance increased 40.2% from the end of 2011 as a result of a $3.0 million purchase completed in the first quarter of 2012.

OREO which is included in other assets decreased by 63.4% during the nine months ended September 30, 2012, primarily as the result of the liquidation of a single commercial real estate asset representing $630,000 during the second quarter of 2012. The current balance of OREO is $553,000 as of September 30, 2012.

Other assets, excluding OREO, decreased by 18.3% since the end of 2011 reflecting a decrease in deferred tax assets due to continued positive earnings and increases in unrealized gains and losses on securities available for sale impacting mark-to-market adjustments within deferred taxes.

Total deposits increased 7.4% from the end of 2011. Due to recent economic conditions, consumers have maintained higher cash balances in bank deposit accounts such as money market savings and short term time deposits.

Total shareholders’ equity increased $5.3 million during the nine months ended September 30, 2012, as a result of net income of $4.1 million during the period ended September 30, 2012 and an increase of $1.2 million in accumulated other comprehensive income due to increased unrealized gains on available-for-sale securities.

At September 30, 2012, the Company and the Bank met applicable requirements to be considered “well-capitalized” under regulatory capital requirements. We believe our capital resources are sufficient to meet our current and expected needs, including any cash dividends we may pay; however, if we continue to experience significant growth, we may require additional capital resources. Although we have limited experience in raising additional capital, we believe our plan to list our common stock on the NASDAQ Capital Market will improve our ability to access capital markets when necessary by enhancing the marketability of our common stock.

Investing Activities

Investment Securities Portfolio

In managing our investment securities portfolio we focus on providing an adequate level of liquidity and establishing an interest rate-sensitive position, while earning an adequate level of investment income without taking undue risk. Investment 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. Currently, all of our investment securities are classified as available-for-sale. The carrying values of available-for-sale investment securities are adjusted for unrealized gains or losses as a valuation allowance and any gain or loss is reported on an after-tax basis as a component of other comprehensive income.

The investment securities portfolio is maintained primarily as a source of liquidity by targeting a weighted average life below five years while providing a higher yield on assets than maintaining balances within an interest bearing cash account. Purchases during 2012 have focused primarily on mortgage-backed securities issued by U.S. government sponsored enterprises.

The following table summarizes the book value and approximate fair value and distribution of our investment securities as of the dates indicated.

					December 31,
	September 30, 2012				2011				2010				2009
(dollars in thousands)	Amortized Cost		Approximate Fair Value		Amortized Cost		Approximate Fair Value		Amortized Cost		Approximate Fair Value		Amortized Cost		Approximate Fair Value
Securities available for sale:
U.S. government-sponsored enterprises	$	18,955	$	19,936	$	24,685	$	25,502	$	43,444	$	43,393	$	14,600	$	14,549
U.S. government treasuries	—		—		—		—		2,369		2,332		—		—
Municipals	40,789		43,584		40,849		42,761		42,463		40,764		42,961		42,793
Mortgage- and asset-backed securities — government-sponsored enterprises	87,150		89,511		67,354		69,790		37,850		39,981		55,878		58,109
Mortgage- and asset-backed securities — private labeled	3,999		3,643		5,850		5,445		9,720		9,000		14,200		12,600
Other securities	16,769		14,649		8,648		5,772		4,279		1,466		7,770		5,533
Total securities available for sale	$	167,662	$	171,323	$	147,386	$	149,270	$	140,125	$	136,936	$	135,409	$	133,584

Investment Maturities
(dollars in thousands)

The total amount of securities in an unrealized loss position for greater than 12 months is comprised of municipal, mortgage-backed and other securities. Our management periodically evaluates each security available-for-sale in an unrealized loss position to determine if the impairment is temporary or other than temporary. The unrealized losses are due solely to interest rate changes and we have the ability and intent to hold all investment securities with identified impairments resulting from interest rate changes to the earlier of the forecasted recovery or the maturity of the underlying investment security. As of September 30, 2012, we did not have any investment securities that constituted 10% or more of the stockholders’ equity of any third party issuer.

The following table summarizes the maturity and repricing schedule of our investment securities at their amortized cost and their weighted average yields at September 30, 2012.

	1 year or Less				More than 1 year to 5 years				More than 5 years to 10 years				More than 10 years				Total
	Amortized Cost		Weighted Average Yield		Amortized Cost		Weighted Average Yield		Amortized Cost		Weighted Average Yield		Amortized Cost		Weighted Average Yield		Amortized Cost		Weighted Average Yield
Securities available for sale:
U.S. government-sponsored enterprises	$	1	4.13	%	$	1,203	3.69	%	$	3,403	5.34	%	$	14,348	4.45	%	$	18,955	4.56	%
Municipals	1,301		2.37	%	2,913		3.27	%	9,981		3.47	%	26,594		3.75	%	40,789		3.60	%
Mortgage- and asset-backed securities - government-sponsored enterprises	—		0.00	%	235		5.50	%	6,750		4.37	%	80,165		5.13	%	87,150		5.07	%
Mortgage- and asset-backed securities - private labeled	—		0.00	%	—		0.00	%	1,081		4.89	%	2,918		2.74	%	3,999		3.33	%
Other securities	1,500		2.42	%	12,233		3.74	%	—		0.00	%	3,036		1.66	%	16,769		3.24	%
Total securities available for sale	$	2,802			$	16,584			$	21,215			$	127,061			$	167,662

Critical Accounting Policies and Estimates

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

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

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

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

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

Deferred Income Tax Assets/Liabilities. Our net deferred income tax asset arises from differences in the dates that items of income and expense enter into our reported income and taxable income. Deferred tax assets and liabilities are established for these items as they arise. From an accounting standpoint, deferred tax assets are

reviewed to determine if they are realizable based on the historical level of taxable income, estimates of future taxable income and the reversals of deferred tax liabilities. In most cases, the realization of the deferred tax asset is based on future profitability. If we were to experience net operating losses for tax purposes in a future period, the realization of deferred tax assets would be evaluated for a potential valuation reserve.

Additionally, management reviews our uncertain tax positions annually under ASC Subtopic 740-10, “ Accounting for Uncertainty in Income Taxes. ” An uncertain tax position is recognized as a benefit only if it is “more likely than not” that the tax position would be sustained in a tax examination, with a tax examination being presumed to occur. The amount actually recognized is the largest amount of tax benefit that is greater than 50% likely to be recognized on examination. For tax positions not meeting the “more likely than not” test, no tax benefit is recorded. A significant amount of judgment is applied to determine both whether the tax position meets the “more likely than not” test as well as to determine the largest amount of tax benefit that is greater than 50% likely to be recognized. Differences between the position taken by management and that of taxing authorities could result in a reduction of a tax benefit or increase to tax liability, which could adversely affect future income tax expense.

Recent Accounting Pronouncements

In May 2011, the Financial Accounting Standards Board (“FASB”), issued ASU No. 2011-04. The amendments in this ASU generally represent clarifications of Topic 820, but also include some instances where a particular principle or requirement for measuring fair value or disclosing information about fair value measurements has changed. This ASU results in common principles and requirements for measuring fair value and for disclosing information about fair value measurements in accordance with U.S. GAAP and IFRS. The amendments in this ASU are to be applied prospectively. For public entities, the amendments are effective during interim and annual periods beginning after December 15, 2011. We have included the required disclosure in the Consolidated Financial Statements in this Registration Statement on Form 10 beginning with the quarter ended September 30, 2012.

In June 2011, FASB issued ASU No. 2011-05. Under the amendments in this ASU, an entity has the option to present the total of comprehensive income, the components of net income, and the components of other comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements. In both choices, an entity is required to present each component of net income along with total net income, each component of other comprehensive income along with a total for other comprehensive income, and a total amount for comprehensive income. This ASU eliminates the option to present the components of other comprehensive income as part of the statement of changes in stockholders’ equity. The amendments in this ASU do not change the items that must be reported in other comprehensive income or when an item of other comprehensive income must be reclassified to net income. The amendments in this ASU should be applied retrospectively. For public entities, the amendments are effective for fiscal years, and interim periods within those years, beginning after December 15, 2011. We have included the required disclosure in the Consolidated Financial Statements in this Registration Statement on Form 10 beginning with the quarter ended September 30, 2012.

In September 2011, the FASB issued ASU No. 2011-08, Intangibles-Goodwill and Other (Topic 350): Testing Goodwill for Impairment. The amendments in this ASU will allow an entity to first assess qualitative factors to determine whether it is necessary to perform the two-step quantitative goodwill impairment test. Under these amendments, an entity would not be required to calculate the fair value of a reporting unit unless the entity determines, based on a qualitative assessment, that it is more likely than not that its fair value is less than its carrying amount. The amendments include a number of events and circumstances for an entity to consider in conducting the qualitative assessment. ASU 2011-08 is effective for annual and interim goodwill impairment tests performed for fiscal years beginning after December 15, 2011. Early adoption is permitted, including for annual and interim goodwill impairment tests performed as of a date before September 15, 2011, if an entity’s financial statements for the most recent annual or interim period have not yet been issued. We adopted the methodologies prescribed by this ASU effective January 1, 2012. Adoption of this ASU did not have a material effect on our financial position or results of operations.

comprehensive income either on the face of the statement that reports other comprehensive income or in the notes to the financial statements. The requirement to present comprehensive income in either a single continuous statement or two consecutive condensed statements remains for both annual and interim reporting. The deferral of the requirement for the presentation of reclassification adjustments is intended to be temporary until the FASB reconsiders the operational concerns and needs of financial statement users. We have included the required disclosure in the Consolidated Financial Statements in this Registration Statement on Form 10 beginning with the quarter ended September 30, 2012.

In December 2011, the FASB issued ASU 2011-11. The objective of this ASU is to provide enhanced disclosures that will enable users of financial statements to evaluate the effect or potential effect of netting arrangements on an entity’s financial position. This includes the effect or potential effect of rights of setoff associated with an entity’s recognized assets and recognized liabilities within the scope of this ASU. The amendments require enhanced disclosures by requiring improved information about financial instruments and derivative instruments that are either (1) offset in accordance with either Section 210-20-45 or Section 815-10-45 or (2) subject to an enforceable master netting arrangement or similar agreement, irrespective of whether they are offset in accordance with either Section 210-20-45 or Section 815-10-45. An entity is required to apply the amendments for annual reporting periods beginning on or after January 1, 2013, and interim periods within those annual periods. An entity should provide the disclosures required by those amendments retrospectively for all comparative periods presented. We will adopt the methodologies prescribed by this ASU by the date required, and does not anticipate that the ASU will have a material effect on its financial position or results of operations.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements.

ITEM 3 — PROPERTIES

The Bank currently leases approximately 14,766 square feet of office space in Indianapolis, Indiana under a lease that has a remaining term of approximately 63 months. The Bank has agreed with its landlord to relocate its offices to a new location managed by the same landlord in early 2013. The new leased space will comprise approximately 23,891 square feet of office space. The term of the lease for the new space is eight years from the date the new space is ready for occupancy. The Bank is currently in negotiations with the landlord regarding the expansion of the new leased space by approximately 6,000 square feet. We believe that the new leased space with the expansion will be adequate to meet the Bank’s current and near-term needs.

ITEM 4 — SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth, as of November 29, 2012, the ownership of common stock by each shareholder who we know beneficially owns more than 5% of our outstanding common stock, each director and each named executive officer listed in the Summary Compensation Table, and all executive officers and directors as a group. At November 29, 2012, there were 1,871,590 shares of common stock issued and outstanding, each of which is entitled to one vote.

Beneficial ownership is determined in accordance with the rules of the SEC. To our knowledge and subject to applicable community property laws, each of the holders of stock listed below has sole voting and investment power as to the stock owned unless otherwise noted. The address for each of our directors and named executive officers is c/o First Internet Bancorp, 9200 Keystone Crossing, Suite 800, Indianapolis, Indiana 46240.

Name of Beneficial Owner	Amount and Nature of Beneficial Ownership(1)		Percent of Outstanding Shares
David B. Becker	122,209	(2)	6.5	%
C. Charles Perfetti	10,000		*
Laurinda A. Swank	3,207		*
Jeffrey K. Harty	3,647	(3)	*
Nicole Lorch	2,490		*
Edward A. Roebuck	—		—
John K. Keach, Jr.	—		—
David R. Lovejoy	6,524	(4)	*
Ralph R. Whitney, Jr.	10,000		*
Jerry Williams	36,812	(5)	2.0	%
Jean L. Wojtowicz	24,583	(6)	1.3	%
All directors, director nominees, named executive officers and other executive officers as a group (11 persons)	219,272	(7)	11.7	%

*	Less than 1%.
(1)	Unless otherwise indicated in the footnotes to this table, (1) the listed beneficial owner has sole voting power and investment power with respect to the number of shares shown and (2) no director or executive officer has pledged as security any shares shown as beneficially owned. There are no options that are currently exercisable or exercisable within 60 days of November 29, 2012. Excludes fractional shares held by any listed beneficial owner.
(2)	All shares are pledged as security against a line of credit.
(3)	Includes 1,000 shares held as trustee of a living trust.
(4)	Includes 6,287 deferred stock rights under our Directors' Deferred Compensation Plan. Deferred stock rights are payable in shares on a one-for-one basis when the holder ceases to serve as a director.
(5)	Includes 6,600 shares held in an IRA; 1,135 shares held by a limited liability company of which Mr. Williams holds voting and investment power; and 9,984 deferred stock rights under our Directors’ Deferred Stock Plan.
(6)	Includes 14,583 deferred stock rights under our Directors’ Deferred Stock Plan.
(7)	Group consists of all directors and executive officers as of November 29, 2012. At November 29, 2012, none of our executive officers or directors held options to acquire any shares.

ITEM 5 — DIRECTORS AND EXECUTIVE OFFICERS

Directors and Executive Officers

Our directors and executive officers are as follows:

Name	Age	Position
David B. Becker	59	Chief Executive Officer, President, Director and Chairman
Nicole S. Lorch	38	Senior Vice President, Retail Banking
C. Charles Perfetti	68	Senior Vice President
Edward A. Roebuck	48	Senior Vice President and Chief Credit Officer
Laurinda A. Swank	41	Chief Financial Officer, Senior Vice President and Secretary
John K. Keach, Jr.	60	Director
David R. Lovejoy	64	Director, Vice Chairman of the Board
Ralph R. Whitney, Jr.	77	Director
Jerry Williams	70	Director
Jean L. Wojtowicz	55	Director

The principal occupation and business experience of each executive officer and director of the Company is as follows:

David B. Becker has served as our Chairman of the Board since 2006 and as our President since 2007. Mr. Becker is the founder of the Bank and has served as an officer and director of the Bank since 1999.

Mr. Becker’s experiences as an entrepreneur in numerous businesses and in acting as our principal executive officer for over five years qualify him for service on our Board of Directors.

Nicole S. Lorch has served as Senior Vice President, Retail Banking since May 2011. Ms. Lorch joined the Company as Director of Marketing in 1999 and served as Vice President, Marketing & Technology from May 2003 to May 2011. She previously served as Director of Marketing at Virtual Financial Services, an online banking services provider, from 1996 to 1999.

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

Edward A. Roebuck has served as Senior Vice President, Chief Credit Officer since August 2012. Mr. Roebuck previously served as Senior Asset Manager at PNC Bank from January 2009 to June 2012 and as Chief Credit Officer and Senior Underwriter at National City Bank from 1986 to December 2008.

Laurinda A. Swank has served as Senior Vice President, Chief Financial Officer and Secretary since May 2002. Ms. Swank previously served as Vice President and Controller from 1999 to 2002. She previously served as Controller at Automotive Finance Corporation, a floorplan financing source for auto dealers nationwide, from 1996 to 1999 as well as a Senior Auditor at Ernst & Young, a public accounting firm, from 1993 to 1996.

John K. Keach, Jr. joined our Board of Directors in November 2012. Mr. Keach is an employee of Old National Bank, a position he has held since September 2012. From 1994 to September 2012, he was Chairman of the Board, President and Chief Executive Officer of Indiana Community Bancorp, a bank holding company headquartered in Columbus, Indiana, that was acquired by Old National in September 2012.

Mr. Keach’s experience as the chief executive officer of a publicly-held bank holding company for more than ten years qualifies him for service on our Board of Directors.

David R. Lovejoy has served as Vice Chairman of the Board since 2006. He has been a director of the Company since 2006 and a director of the Bank since 1999. Mr. Lovejoy previously served as President at the Bank from 2000 to 2006. He is currently a managing director, chief compliance officer and chief financial officer of Greycourt & Co., which provides investment advisor services. Mr. Lovejoy has extensive experience in financial services, corporate development and strategy, corporate restructuring and startup. He has served as the Vice Chairman of Mellon Bank Corporation and Security Pacific Corporation, and as a director of the Los Angeles Branch of the 12 th District Federal Reserve Bank and Phelps Dodge Corporation.

Mr. Lovejoy is qualified to serve as a director due to his years of experience in the financial service industries, including his service as an executive of major financial companies and a director of a Federal Reserve Bank

Ralph R. Whitney, Jr. has been a director of the Company since 2006 and a director of the Bank since 1998. Mr. Whitney is a principal at Hammond, Kennedy, Whitney & Co., a New York financial intermediary and private investment banking firm, since 1971. He currently serves a director of Baldwin Technology Company, Inc. and has served as a director of Excel Industries, Inc. and served as chairman of that company’s board of directors from 1983 to 1985, as a director of Dura Automotive Systems, Inc., which merged with Excel Industries, and currently serves as chairman of the board of directors of First Wyoming Capital Corp. and as a director of S.A. Technologies, as well as an advisor to Cheyenne Capital and Access Venture Partners. Mr. Whitney is also a Trustee of the University of Rochester and a director of the University of Wyoming Foundation.

Mr. Whitney’s decades of experience in private equity and investment banking and his service on several boards of directors of public companies qualify him to serve on our Board of Directors.

Jerry Williams has been a director of the Company since 2006 and a director of the Bank since 1998. Mr. Williams has been a practicing attorney for more than 40 years and is associated with Taft Stettinius & Hollister LLP, an Indianapolis-based law firm. He previously served as executive vice president, general counsel and a director of ADESA Corporation, and was responsible for more than 20 acquisitions. He is a past director of NNC Group (and chaired its compensation and audit committees), the Indiana Secondary Market for Education Loans, Inc., a state chartered organization originating and acquiring higher education loans, and Gleaners Food Bank of Indiana, Inc.

Mr. Williams’ career, encompassing his experience in private legal practice in advising businesses and as general counsel and a director of publicly-traded and private companies, qualifies him for service on our Board of Directors.

Jean L. Wojtowicz has been a director of the Company since 2006 and a director of the Bank since 1998. Ms. Wojtowicz founded Cambridge Capital Management Corp., a consulting firm and manager of non-traditional sources of business capital, in 1983 and currently serves as its President. She serves on the boards of directors of publicly traded companies Vectren Corporation and First Merchants Corporation in addition to the National Association of Development Companies and the National Association of Business Development Corporations.

Ms. Wojtowicz is qualified to serve as one of our directors due to the entrepreneurial skills she demonstrated in the founding of her company and her experiences as an advisor to businesses obtaining financing.

ITEM 6 — EXECUTIVE COMPENSATION

Summary Compensation Table

The following table sets forth certain information regarding compensation for the years ended December 31, 2010 and 2011, provided to our principal executive officer and the two other most highly compensated executive officers who received remuneration exceeding $100,000 during the year ended December 31, 2011, whom we refer to as our named executive officers.

Name and Principal Position	Year	Salary ($)	Non-Equity Incentive Plan Compensation ($)(1)	Nonqualified Deferred Compensation Earnings ($)(2)	All Other Compensation ($)(3)	Total ($)
David B. Becker	2011	245,601	61,400	72,557	8,596	388,154
Chief Executive Officer and President	2010	233,906	116,953	46,994	9,381	407,234

Laurinda A. Swank	2011	190,724	47,681	15,741	6,693	260,839
Chief Financial Officer,	2010	179,928	89,964	9,817	6,642	286,351
Senior Vice President and Secretary

C. Charles Perfetti	2011	175,140	43,785	—	16,969	235,894
Senior Vice President	2010	166,800	83,400	—	18,211	268,411

Jeffrey K. Harty	2011	222,212	55,553	27,749	7,777	313,291
former officer	2010	211,630	105,815	17,977	7,731	343,153

(1)	Represents cash bonuses earned during each of the applicable fiscal years under the applicable year’s Senior Management Bonus Plan.
(2)	Represents payments made under applicable Supplemental Employment Retirement Agreements.
(3)	Represents matching contributions under 401k Plan and, with respect to Mr. Perfetti only, automobile allowances totaling $10,800 for 2010 and 2011.

Employment and Other Agreements

The Bank entered into an Employment Agreement with David B. Becker effective as of June 1, 2000, which was subsequently amended as of July 1, 2001 and amended again effective January 1, 2007. Mr. Becker’s Employment Agreement, as amended, provides for an annual base salary of $60,000, subject to review at least annually and adjustment from time to time, and a bonus for each calendar year in an amount up to 120% of his base salary based on performance objectives established by the Bank’s compensation committee or its board of directors. The Employment Agreement had an initial term of one year, which term is automatically extended for an additional year at the end of the term unless the Bank or Mr. Becker provide notice at least ninety days before the expiration date then in effect. In addition to other customary terms, Mr. Becker’s Employment Agreement requires him to maintain confidentiality and entitles him to indemnification by the Bank against claims against him in connection with the performance or nonperformance of his duties, which indemnification is subject to certain customary exceptions.

The Bank entered into an Employment Agreement with Laurinda A. Swank effective as of August 8, 1999. Ms. Swank’s Employment Agreement provides for an annual base salary of $90,000, subject to review at least annually and adjustment from time to time, and a bonus for each calendar year in an amount up to 20% of her base salary based on performance objectives established by the Bank’s compensation committee or its board of directors. The Employment Agreement has an indefinite term subject to termination by the Bank or Ms. Swank upon two weeks written notice. In addition to other customary terms, Ms. Swank’s Employment Agreement requires her to maintain confidentiality and entitles her to indemnification by the Bank against claims against him in connection with the performance or nonperformance of his duties, which indemnification is subject to certain customary exceptions.

The Bank entered into a Severance Agreement with Jeffrey K. Harty, a former officer of the Bank, dated March 30, 2012. Under the terms of the Severance Agreement, Mr. Harty is receiving a cash severance payment of $444,424, being paid in eight quarterly installments ending in 2013. The Bank expensed all of the quarterly

installments payable to Mr. Harty in the first quarter of 2012. The Bank also agreed to pay the monthly costs of health and dental plan coverage pursuant to the Consolidated Omnibus Budget Reconciliation Act on Mr. Harty’s behalf through December 2012. Mr. Harty agreed to provide certain consulting services to the Bank through December 31, 2012. If Mr. Harty provides more than 25 hours of consulting services, the Bank will compensate him at the rate of $25 per hour. The Bank also released Mr. Harty from the noncompetition covenant in his employment agreement, but not the non-solicitation covenant and agreement to maintain confidentiality of the Bank’s confidential and proprietary information. Both parties agreed to release the other from any claims, including any claims relating to Mr. Harty’s employment and separation.

Outstanding Equity Awards at Fiscal Year-End

	Option Awards
Name	Number of Securities Underlying Unexercised Options (#) Exercisable	Number of Securities Underlying Unexercised Options (#) Unexercisable	Option Exercise Price ($)
David B. Becker	—	—
Laurinda A. Swank	—	—
C. Charles Perfetti	—	—
Jeffrey K. Harty	30,000	—	19.38

Senior Management Bonus Plan

In January 2012, the compensation committee of the Bank’s board of directors authorized the president of the Bank to determine discretionary bonuses for officers and employees of the Bank that (a) may not be more favorable than the terms of the 2012 Senior Management Bonus Plan and (b) may not encourage or reward excessive risk taking. In addition to other employees, all of our Named Executive Officers (excluding Mr. Harty) are named participants in the 2012 Senior Management Bonus Plan.

The 2012 Senior Management Bonus Plan requires that 2012 performance must exceed the following thresholds:

· The Bank must have satisfactory capital, asset quality, management, earnings and asset liability management (CAMEL) ratings.

· The Bank must have an operating income of at least $4.8 million (after accounting for any bonuses under the plan).

· We must declare in 2012 and pay not later than January 31, 2013 a dividend to shareholders of at least $0.25 per share.

If all of the thresholds are met in 2012 and if the Bank achieves a return on average assets above 0.65%, then the participants in the 2012 Senior Management Bonus Plan may receive a bonus based on the following table.

Return on Average Assets	Maximum Bonus (% of 2012 Base Salary)
less than 0.65%	—
0.65% to less than 0.75%	10	%
0.75% to less than 0.85%	25	%
0.85% or greater	50	%

If the Bank’s return on average assets is 0.85% or greater and the Bank’s operating income exceeds $6 million (after accounting for any bonuses under the plan), then half of the bonus will be paid in cash and the other half will be paid in a combination of cash (in an amount sufficient to cover the Bank’s withholding obligations) and shares of Company common stock; however, the executive may elect to receive the bonus entirely in common stock. The number of shares issuable will be determined using the value of Company common stock on the date the award was granted for accounting purposes.

If the Bank restates its financial statements for the applicable fiscal year, then the Bank’s board of directors will determine the maximum bonus that each participant could have been paid based on the restated financial statements. If such amount exceeds the actual bonus paid to a participant, then the participant may be paid such difference. If such amount is less than the actual bonus paid to a participant, then the participant must repay the difference to the Bank.

Participants in the 2012 Senior Management Bonus Plan must be employed with the Bank during all of 2012 and at the time bonuses are paid to receive any bonus under the plan. In the event of death or termination due to disability during 2012 or before the bonuses for 2012 are paid, a pro-rata portion of the bonus amount will be paid to the employee or their beneficiary.

Potential Payments upon Termination or Change-in-Control

Each of Mr. Becker and Ms. Swank’s Employment Agreements provides that if the executive’s employment is terminated by the Bank for cause, the executive will receive all amounts then due to the executive for his or her respective service. If the executive’s employment is terminated due to a change in control, the Bank will pay all accrued compensation and a lump-sum severance payment equal to two times the executive’s then current base annual salary, all restrictions on any outstanding incentive awards (including equity awards) will lapse and become 100% vested. If the executive’s employment is terminated for any other reason, the Bank will pay all accrued compensation and a lump sum severance payment equal to one month of his or her base annual salary for each year of service to the Bank, subject to a maximum of one year of base annual salary.

The Bank has also entered into Supplemental Executive Retirement Agreements with David B. Becker and Laurinda A. Swank. Under their respective agreements, after they have completed 15 or more years of service with the Bank, the Bank will pay supplemental retirement benefits to them upon termination of their employment for reasons other than death or after their sixtieth birthday. The maximum amount payable under each of the agreements is equal to 30% of the highest annual base salary rate paid by the Bank to the executive during the five years before the date the benefit is triggered. If the benefit is triggered before the executive has completed 15 years of service with the Bank, no benefit is payable. If the benefit is triggered after the executive has completed 15 years of service with the Bank, but before the executive’s sixtieth birthday, the benefit will equal the a 15-year fixed annuity derived from the total balance sheet liability accrued on the Bank’s records with respect to the payment of benefits under the agreement, crediting interest on the unpaid balance at an annual rate of four percent, compounded annually. If the benefit is triggered on or after the executive’s sixtieth birthday, the benefit phases in after each additional year from 85% of the maximum amount payable after the executive’s sixtieth birthday to 100% of the maximum amount payable after the executive’s sixty-fifth birthday. If the executive’s employment is terminated due to disability at any time, the Bank will pay the full benefit as if the executive had served past their sixty-fifth birthday. If the executive’s employment is terminated due to death, Bank will pay to the executive an amount equal to the total balance sheet liability accrued on the Bank’s records with respect to the payment of benefits under the agreement.

Each Supplemental Executive Retirement Agreement provides for, among other things, the maintenance of confidentiality, regulatory compliance and good standing by the executive. Each Supplemental Executive Retirement Agreement includes additional covenants not to compete with or solicit employees, vendors, consultants, independent contractors of customers from the Bank, which covenants are generally enforceable against the executive by the Bank during the term of their employment with the Bank and for a period of two years thereafter.

Compensation Committee Interlocks and Insider Participation

During the year ended December 31, 2011, no person who served as a member of our Compensation Committee was, during such period, an officer or employee of our company, or has ever been one of our officers, and no such person had any transaction with us required to be disclosed in “Item 7 — Certain Relationships and Related Transactions” below. During the year ended December 31, 2011, (1) none of our executive officers served as a member of the compensation committee of another entity, one of whose executive officers served on our Compensation Committee; (2) none of our executive officers served as a director of another entity, one of whose executive officers served on our Compensation Committee; and (3) none of our executive officers served as a

member of the compensation committee of another entity, one of whose executive officers served as one of our directors.

Director Compensation

The following table sets forth certain information regarding compensation of person who served as a non-employee director during the year ended December 31, 2011.

Name	Fees Earned or Paid in Cash ($)	Stock Awards ($)	Total ($)
David R. Lovejoy	5,400	15,000	20,400
Ralph R. Whitney, Jr.	11,500	15,000	26,500
Jerry Williams	12,500	15,000	27,500
Jean L. Wojtowicz	18,600	15,000	33,600

We compensate our non-employee directors for their services in common stock or cash. As of January 1, 2012, non-employee directors are eligible to receive the following compensation

· Annual Retainer . We pay non-employee directors a $20,000 annual retainer either in shares of common stock or deferred stock rights under the Directors’ Deferred Stock Plan. Each deferred stock right is payable as a share of common stock when the holder ceases to serve as a director. The retainer fully vests as of the last day of the same year. If a director’s service is terminated during the vesting period, they receive a pro rata portion of the annual retainer based on the number of full months served using the grant date valuation to determine the number of vested whole shares to be purchased by the pro rata retainer. Any remaining balance due to the director is paid in cash. The remainder of the unvested retainer is forfeited.

· Audit Committee Meeting Fees . We pay each non-employee director a $600 meeting fee for each audit committee meeting attended. An annual fee of $9,000 is paid to the chair of the audit committee and other members receive an annual fee of $2,500, both of which are paid pro rata over the year on at least a quarterly basis.

· Compensation Committee Meeting Fees. We pay each non-employee director a $600 meeting fee for each compensation committee meeting attended. An annual fee of $3,500 is paid to the chair of the compensation committee, paid pro rata over the year on at least a quarterly basis.

· Reimbursement of Meeting Expenses . We reimburse our non-employee directors for their reasonable expenses incurred in attending regular, special and board committee meetings.

ITEM 7 — CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

Director Independence

Our Board of Directors currently consists of six directors. Our Board of Directors has determined that all five of our non-employee directors are independent, as defined under the applicable rules of the NASDAQ Stock Market. The non-employee directors are John K. Keach, Jr., David R. Lovejoy, Ralph R. Whitney, Jr., Jerry Williams and Jean L. Wojtowicz.

Related Party Transactions

Our credit card processing services are provided by OneBridge, Inc. (“OneBridge”). David B. Becker, our Chairman, President and Chief Executive Officer, is an owner and executive officer of OneBridge. During 2010, 2011 and the nine months ended September 30, 2012, we paid OneBridge approximately $150,000, $128,000 and $86,000, respectively.

The transactions with OneBridge have been approved by a majority of our disinterested directors after full disclosure of Mr. Becker’s interest. OneBridge provides similar services to other financial institutions on a nationwide basis. The Board of Directors believes the terms of the transactions with OneBridge are no less favorable to us than what would be available in an arms’-length transaction with an unrelated person.

The Bank offers loans to directors, officers and employees in the ordinary course of business on substantially the same terms, including interest rate and collateral, as those prevailing at the time for comparable loans with person not related to the lender, and which do not involve more than the normal risk of collectability or present other unfavorable features. All such loans were performing in accordance with their terms as of the date of this registration statement. Federal regulations permit executive officers and directors to participate in loan programs that are available to other employees, so long as the director or executive officer is not given preferential treatment compared to other participating employees.

Although the Sarbanes-Oxley Act generally prohibits a public company from extending credit, arranging for the extension of credit or renewing an extension of credit in the form of a personal loan to an officer or director, there are several exceptions to this general prohibition, including loans made by an FDIC-insured depository institution that is subject to the insider lending restrictions of the Federal Reserve Act. All loans to our directors and officers comply with the Federal Reserve Act and the Federal Reserve’s Regulation O and, therefore, are excepted from the prohibitions of Section 402.

ITEM 8 — LEGAL PROCEEDINGS

We are not party to any material pending legal proceedings.

ITEM 9 — MARKET PRICE OF AND DIVIDENDS ON THE COMPANY’S COMMON STOCK AND RELATED STOCKHOLDER MATTERS

Market Information

Since 2005, our shares of common stock (and prior to the formation of the Company, shares of the common stock of the Bank) have been traded in the over-the-counter market and quoted on the over-the-counter market under the symbol “FIBP.” There is a limited trading market for our common stock. The following table sets forth the range of high and low bid quotations for each quarter within the two most recent fiscal years and the subsequent interim period. These quotations as reported on the over-the-counter market reflect inter-dealer prices without retail mark-up, mark-down, or commissions and may not necessarily represent actual transactions.

	High	Low
Period	(US$)	(US$)
Year Ended December 31, 2010:
First Quarter	7.10	4.26
Second Quarter	11.50	7.10
Third Quarter	12.50	8.50
Fourth Quarter	12.50	10.50
Year Ended December 31, 2011:
First Quarter	11.40	10.25
Second Quarter	12.00	10.10
Third Quarter	11.74	9.25
Fourth Quarter	11.50	9.70
Year Ending December 31, 2012:
First Quarter	15.90	10.25
Second Quarter	16.00	13.45
Third Quarter	17.05	14.63
Fourth Quarter (through November 27, 2012)	19.75	16.00

As of November 29, 2012, we had 1,871,590 shares of common stock issued and outstanding, and there were 193 holders of record of our common stock.

We plan to submit a listing application to the Nasdaq Stock Market, LLC for listing of our common stock on the NASDAQ Capital Market. There can be no assurance that the listing application will be approved or, if it is approved, that a significantly more active trading market will develop.

After this registration statement becomes effective, we intend to file with the SEC one or more registration statements on Form S-8 covering approximately 520,000 shares of our common stock issuable under our 2006 Stock Option Plan and our Directors’ Deferred Stock Plan.

Dividends

On November 20, 2012, we announced a special cash dividend of $0.25 per share of common stock payable on December 28, 2012, to the holders of record as of December 10, 2012. This is the first cash dividend we have ever paid. Our Board of Directors is currently considering paying cash dividends in a lesser amount on a quarterly basis in 2013. However, the declaration and amount of any future cash dividends will be subject to the sole discretion of our Board of Directors and will depend upon many factors, including our financial condition, earnings, capital requirements of our operating subsidiaries, legal requirements, regulatory constraints and other factors deemed relevant by our Board of Directors. Moreover, if we determine to begin paying quarterly dividends in the future, there can be no assurance that we will continue to pay such dividends.

Equity Compensation Plan Information

The following information regarding our equity compensation plans is as of December 31, 2011.

Plan Category	Number of securities to be issued upon exercise of outstanding options, warrants and rights		Weighted-average exercise price of outstanding options, warrants and rights			Number of securities remaining available for future issuances under equity compensation plans
Equity compensation plans approved by security holders(1)	90,000	(2)	$	19.38	(2)	307,900
Equity compensation plans not approved by security holders(3)	32,629	(4)	—		(4)	67,207
Total	122,629		$	19.38		375,107

(1) Consists of our 2006 Stock Option Plan.

(2) All of the 90,000 stock options outstanding on December 31, 2011, expired unexercised on April 15, 2012.

(3) Consists of our Directors’ Deferred Stock Plan.

(4) Consists of deferred stock rights which have no exercise price and are payable in shares of common stock on a one-for one basis when the holder ceases to serve as a director.

ITEM 10 — RECENT SALES OF UNREGISTERED SECURITIES

The only securities we have issued during the three years preceding the filing of this registration statement are the following deferred stock rights we issued to our non-employee directors under our Directors’ Deferred Stock Plan:

Effective January 1, 2010, we issued 9,024 deferred stock rights, comprised of 2,256 deferred stock rights issued to each of Mr. Lovejoy, Mr. Whitney, Mr. Williams and Ms. Wojtowicz.

Effective January 1, 2011, we issued 5,456 deferred stock rights, comprised of 1,364 deferred stock rights issued to each of Mr. Lovejoy, Mr. Whitney, Mr. Williams and Ms. Wojtowicz.

Effective January 1, 2012, we issued 7,808 deferred stock rights, comprised of 1,952 deferred stock rights issued to each of Mr. Lovejoy, Mr. Whitney, Mr. Williams and Ms. Wojtowicz.

ITEM 11 — DESCRIPTION OF SECURITIES TO BE REGISTERED

General

The following description of our capital stock is a summary only and is qualified in its entirety by reference to our Articles of Incorporation, as amended, and amended and restated Bylaws, which are included as Exhibits 3.1 and 3.2 to this registration statement, respectively.

We are authorized to issue up to 50,000,000 shares of capital stock with no par value; of which 5,000,000 shares may be issued as preferred stock and 45,000,000 shares may be issued as common stock. 86,221 shares of the preferred stock available for issuance are designated as “Non-Voting Common Stock.”

As of November 29, 2012, there were 1,871,590 shares of our common stock outstanding. There were no shares of preferred stock or Non-Voting Common Stock outstanding as of the same date.

Common Stock

General. Except as described below under “Important Provisions of Indiana Laws—Control Share Acquisitions,” each holder of common stock is entitled to one vote for each share on all matters to be voted upon by the common shareholders. There are no cumulative voting rights. Subject to preferences to which holders of any

shares of preferred stock may be entitled, holders of common stock will be entitled to receive ratably any dividends that may be declared from time to time by the Board of Directors out of funds legally available for that purpose. In the event of our liquidation, dissolution or winding up, holders of common stock will be entitled to share in our assets remaining after the payment or provision for payment of our debts and other liabilities, and the satisfaction of any liquidation preferences granted to the holders of any shares of preferred stock that may be outstanding. Holders of common stock have no preemptive or conversion rights or other subscription rights. There are no redemption or sinking fund provisions that apply to the common stock. All shares of common stock currently outstanding are fully paid and nonassessable. The rights, preferences and privileges of the holders of common stock are subject to, and may be adversely affected by, the rights of the holders of shares of any series of preferred stock that we may designate in the future.

Transfer Agent and Registrar . The transfer agent and registrar for our common stock is Registrar and Transfer Company.

Preferred Stock

We are authorized to issue up to 5,000,000 shares of preferred stock in one or more series with respect to which our Board of Directors may, without shareholder approval, determine voting, conversion and other rights which could adversely affect the rights of the holders of common stock.

The rights of the holders of our common stock would generally be subject to the prior rights of the preferred stock with respect to dividends, liquidation preferences and other matters. The dividend rights, dividend rates, conversion rights, conversion prices, voting rights, redemption rights and terms (including sinking fund provisions, if any), the redemption price or prices and the liquidation preferences of any series of the authorized preferred stock and the numbers of such shares of preferred stock in each series will be established by our Board of Directors as such shares are to be issued. It is not possible to state the actual effect of the preferred stock on the rights of holders of common stock until our Board of Directors determines the rights of the holders of a series of the preferred stock. However, such effects might include (1) restrictions on dividends; (2) dilution of the voting power to the extent that the shares of preferred stock were given voting rights; (3) dilution of the equity interest and voting power if the shares of preferred stock were convertible into common stock; and (4) restrictions upon any distribution of assets to the holders of common stock upon liquidation or dissolution until the satisfaction of any liquidation preference granted to holders of the preferred stock.

Furthermore, although we have no present intention to do so, our Board of Directors could direct us to issue, in one or more transactions, shares of preferred stock, additional shares of common stock or rights to purchase such shares (subject to the limits imposed by applicable laws and the rules of the NASDAQ Stock Market) in amounts which could make more difficult and, therefore, less likely, a takeover, proxy contest, change in our management or any other extraordinary corporate transaction, which might be opposed by the incumbent Board of Directors. Any issuance of preferred stock or of common stock could have the effect of diluting the earnings per share, book value per share and voting power of common stock held by our shareholders.

Under regulations adopted by the Federal Reserve under the BHCA, if the holders of any series of the preferred stock are or become entitled to vote for the election of directors, such series may then be deemed a “class of voting securities” and a holder of 10% or more of such series that is a company may then be subject to regulation as a bank holding company. In addition, at such time as such series is deemed a class of voting securities, (1) any holder that is a bank holding company may be required to obtain the approval of the Federal Reserve to acquire or retain more than 5% of that series and (2) any person may be required to obtain the approval of the Federal Reserve to acquire or retain 10% or more of that series.

Number of Directors; Removal; Vacancies

Our Bylaws provide that we are to have not less than three or more than eleven directors, with the actual number determined from time to time by resolution of the Board of Directors. Our Articles of Incorporation provide that any director may be removed for a specific cause found and determined by the vote of a majority of the entire Board of Directors. In addition, any or all directors may be removed with our without cause at a meeting of shareholders called for such purpose by the affirmative vote of the holders of a majority of the outstanding shares entitled to be cast generally in the election of directors.

Special Meetings of Shareholders; Limitations on Shareholder Action by Written Consent

Our Bylaws provide that special meetings of our shareholders may be called only by our Chairman of the Board of Directors, Chief Executive Officer, President or a majority of the Board of Directors acting with or without a meeting, or by the holders of 25% or more of the outstanding shares entitled to be voted on the matters to be considered at such meeting. The only matters that may be considered at any special meeting of the shareholders are the matters specified in the notice of the meeting.

Although our Bylaws permit shareholders to act by written consent if the consent is signed by the shareholders holding sufficient shares to approve the action, once our common stock is registered under the Exchange Act, the IBCL provides that any actions required or permitted to be taken by our shareholders may not be effected by written consent unless the written consent describing the action taken is signed by all shareholders entitled to vote on the action.

Amendments; Vote Requirements

Our Articles of Incorporation may be amended if the amendment is recommended by the Board of Directors and approved by a majority of the votes entitled to be cast if the amendment would create dissenters’ rights or otherwise if the votes cast favoring the proposal exceed the votes cast opposing the proposal at a meeting at which a quorum is present. Our Bylaws may only be amended by action of the Board of Directors.

Advance Notice Requirements for Shareholder Proposals and Nomination of Directors

Our Bylaws provide that shareholders seeking to bring business before an annual meeting of shareholders, or to nominate candidates for election as directors at an annual meeting of shareholders, must provide timely notice in writing. To be timely, a shareholder’s notice must be delivered to or mailed and received at our principal executive offices not less than 90 days prior to the meeting. However, in the event that less than 70 days’ notice or public disclosure of such meeting date is given, such notice will be timely only if received not later than the close of business on the tenth day following the date on which notice of the date of the annual meeting was mailed to shareholders or made public, whichever first occurs. Our Bylaws also specify requirements as to the form and content of a shareholder’s notice.

Important Provisions of Indiana law

Control Share Acquisitions. Under Chapter 42 of the IBCL, an acquiring person or group who makes a “control share acquisition” in an “issuing public corporation” may not exercise voting rights on any “control shares” unless these voting rights are conferred by a majority vote of the disinterested shareholders of the issuing public corporation at a special meeting of those shareholders held upon the request and at the expense of the acquiring person. If control shares acquired in a control share acquisition are accorded full voting rights and the acquiring person has acquired control shares with a majority or more of all voting power, all shareholders of the issuing public corporation have dissenters’ rights to receive the fair value of their shares pursuant to Chapter 44 of the IBCL.

Under the IBCL, “control shares” are shares acquired by a person that, when added to all other shares of the issuing public corporation owned by that person or in respect to which that person may exercise or direct the exercise of voting power, would otherwise entitle that person to exercise voting power of the issuing public corporation in the election of directors within any of the following ranges:

· one-fifth or more but less than one-third;

· one-third or more but less than a majority; or

· a majority or more.

A “control share acquisition” means, subject to specified exceptions, the acquisition, directly or indirectly, by any person of ownership of, or the power to direct the exercise of voting power with respect to, issued and outstanding control shares. For the purposes of determining whether an acquisition constitutes a control share acquisition, shares acquired within 90 days or under a plan to make a control share acquisition are considered to have been acquired in the same acquisition.

An “issuing public corporation” means a corporation which has (1) 100 or more shareholders; (2) its principal place of business or its principal office in Indiana, or that owns or controls assets within Indiana having a fair market value of greater than $1,000,000; and (3) (a) more than 10% of its shareholders resident in Indiana, (b) more than 10% of its shares owned of record or owned beneficially by Indiana residents or (c) 1,000 shareholders resident in Indiana.

The overall effect of these provisions may be to render more difficult or to discourage a merger, a tender offer, a proxy contest or the assumption of control by a holder of a large block of our common stock or other person, or the removal of incumbent management, even if those actions may be beneficial to our shareholders generally.

The provisions described above do not apply if, before a control share acquisition is made, the corporation’s articles of incorporation or by-laws, including a by-law adopted by the corporation’s board of directors, provide that the provisions do not apply to the corporation. Our Articles of Incorporation and Bylaws do not currently exclude us from Chapter 42.

Certain Business Combinations. Chapter 43 of the IBCL restricts the ability of a “resident domestic corporation” to engage in any combinations with an “interested shareholder” for five years after the date the interested shareholder became such, unless the combination or the purchase of shares by the interested shareholder on the interested shareholder’s date of acquiring shares is approved by the board of directors of the resident domestic corporation before that date. If the combination was not previously approved, then the interested shareholder may effect a combination after the five-year period only if that shareholder receives approval from a majority of the disinterested shareholders or the offer meets specified “fair price” criteria.

For purposes of the above provisions, “resident domestic corporation” means an Indiana corporation that has 100 or more shareholders. “Interested shareholder” means any person, other than the resident domestic corporation or its subsidiaries, who is (1) the beneficial owner, directly or indirectly, of 10% or more of the voting power of the outstanding voting shares of the resident domestic corporation or (2) an affiliate or associate of the resident domestic corporation, which at any time within the five-year period immediately before the date in question, was the beneficial owner, directly or indirectly, of 10% or more of the voting power of the then-outstanding shares of the resident domestic corporation.

The definition of “beneficial owner” for purposes of Chapter 43 means a person who, directly or indirectly, owns the shares, has the right to acquire or vote the subject shares (excluding voting rights under revocable proxies made in accordance with federal law), has any agreement, arrangement or understanding for the purpose of acquiring, holding or voting or disposing of the subject shares or holds any “derivative instrument” that includes the opportunity, directly or indirectly, to profit or share in any profit derived from any increase in the value of the subject shares.

The above provisions do not apply to corporations that elect not to be subject to Chapter 43 in an amendment to their articles of incorporation approved by a majority of the disinterested shareholders. That amendment, however, cannot become effective until 18 months after its passage and would apply only to share acquisitions occurring after its effective date. Our Articles of Incorporation do not exclude us from Chapter 43.

Mandatory Classified Board of Directors . Under Section 23-1-33-6(c) of the IBCL, a corporation with a class of voting shares registered with the SEC under Section 12 of the Exchange Act must have a classified board of directors unless the corporation adopts a by-law expressly electing not to be governed by this provision by the later of July 31, 2009 or 30 days after the corporation’s voting shares are first registered under Section 12 of the Exchange Act. Within thirty days of this Registration Statement becoming effective, our Board of Directors will consider whether to adopt a bylaw provision electing not to be subject to the mandatory classified board requirement.

ITEM 12 — INDEMNIFICATION OF DIRECTORS AND OFFICERS

Chapter 37 of the IBCL authorizes every Indiana corporation to indemnify its officers and directors under certain circumstances against liability incurred in connection with proceedings to which the officers or directors are made a party by reason of their relationship to the corporation. Officers and directors may be indemnified where they have acted in good faith, which means, in the case of official action, they reasonably believed the conduct was in the corporation’s best interests, and in all other cases, they reasonably believed the action taken was not against the best interests of the corporation, and in the case of criminal proceedings they had reasonable cause to believe the action was lawful or there was no reasonable cause to believe the action was unlawful. Chapter 37 also requires every Indiana corporation to indemnify any of its officers or directors (unless limited by the articles of incorporation of the corporation) who were wholly successful, on the merits or otherwise, in the defense of any such proceeding against reasonable expenses incurred in connection with the proceeding. A corporation may also, under certain circumstances, pay for or reimburse the reasonable expenses incurred by an officer or director who is a party to a proceeding in advance of final disposition of the proceeding. Chapter 37 states that the indemnification provided for therein is not exclusive of any other rights to which a person may be entitled under the articles of incorporation, by-laws or resolutions of the board of directors or shareholders.

Our Articles of Incorporation provide for indemnification of our directors against any judgments, settlements, penalties, fines, other liabilities and reasonable expenses that they may incur, excepting only for liabilities or expenses incurred in matters as to which the indemnified person is adjudged to have committed gross misconduct or fraud.

We maintain directors’ and officers’ liability insurance policies, which insure against liabilities that directors or officers may incur in such capacities. These insurance policies, together with the indemnification agreements, may be sufficiently broad to permit indemnification of our directors and officers for liabilities, including reimbursement of expenses incurred, arising under the securities laws or otherwise.

ITEM 13 — FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

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

ITEM 14 — CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.

ITEM 15 — FINANCIAL STATEMENTS AND EXHIBITS

(a) Financial Statements

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

(b) Exhibits

Refer to the Exhibit Index immediately following the signature page of this report, which is incorporated herein by reference.

SIGNATURES

Pursuant to the requirements of Section 12 of the Securities Exchange Act of 1934, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized.

	FIRST INTERNET BANCORP

Date: November 30, 2012	By:	/s/ David B. Becker
		Name:	David B. Becker
		Title:	Chief Executive Officer

EXHIBIT INDEX

Exhibit No.		Description
3.1		Articles of Incorporation of First Internet Bancorp
3.2		Amended and Restated Bylaws of First Internet Bancorp
10.1		First Internet Bancorp 2006 Stock Option Plan
10.2		First Internet Bancorp Directors’ Deferred Stock Plan
10.3		Employment Agreement between First Internet Bank of Indiana and David B. Becker conformed to reflect all amendments through January 1, 2007
10.4		Employment Agreement between First Internet Bank of Indiana and Laurinda A. Swank dated August 8, 1999
10.5		2012 Senior Management Bonus Plan
10.6		Form of Supplemental Executive Retirement Agreement between First Internet Bank of Indiana and certain employees
10.7		Severance Agreement with Jeffrey K. Harty dated March 30, 2012
21.1		List of Subsidiaries

First Internet Bancorp

As of September 30, 2012 (Unaudited) and December 31, 2011 and 2010
and Nine Months Ended September 30, 2012 and 2011 (Unaudited) and
Years Ended December 31, 2011 and 2010

Contents

Report of Independent Registered Public Accounting Firm	F-2

Consolidated Financial Statements

Balance Sheets as of September 30, 2012 (Unaudited) and December 31, 2011 and 2010	F-3

Statements of Income for the Nine Months Ended September 30, 2012 and 2011 (Unaudited) and Years Ended December 31, 2011 and 2010	F-4

Statements of Comprehensive Income for the Nine Months Ended September 30, 2012 and 2011 (Unaudited) and Years Ended December 31, 2011 and 2010	F-5

Statements of Shareholders’ Equity for the Nine Months Ended September 30, 2012 (Unaudited) and Years Ended December 31, 2011 and 2010	F-6

Statements of Cash Flows for the Nine Months Ended September 30, 2012 and 2011 (Unaudited) and Years Ended December 31, 2011 and 2010	F-7

Notes to Financial Statements as of September 30, 2012 (Unaudited) and December 31, 2011 and 2010 and Nine Months Ended September 30, 2012 and 2011 (Unaudited) and Years Ended December 31, 2011 and 2010	F-8

F-1

Report of Independent Registered Public Accounting Firm

Audit Committee, Board of Directors and Shareholders

First Internet Bancorp

Indianapolis, Indiana

We have audited the accompanying consolidated balance sheets of First Internet Bancorp as of December 31, 2011 and 2010, and the related consolidated statements of income, comprehensive income, shareholders’ equity and cash flows for the years then ended. The Company’s management is responsible for these financial statements. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing auditing procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. Our audits also included examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of First Internet Bancorp as of December 31, 2011 and 2010, and the results of its operations and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.

/s/ BKD, LLP

Indianapolis, Indiana

November 30, 2012

F-2

First Internet Bancorp

Consolidated Balance Sheets

As of September 30, 2012 (Unaudited) and
December 31, 2011 and 2010

(Dollar Amounts in Thousands except per share data)

	September 30,		December 31,
	2012		2011		2010
	(Unaudited)
Assets

Cash and due from banks	$	1,910	$	1,582	$	2,354
Interest-bearing demand deposits	22,264		33,196		30,063
Total cash and cash equivalents	24,174		34,778		32,417
Securities available for sale - at fair value (amortized cost of $167,662 in 2012 (unaudited), $147,386 in 2011 and $140,125 in 2010)	171,323		149,270		136,936
Loans held for sale	55,490		45,091		5,008
Loans receivable - net of allowance for loan losses of $6,400 at September 30, 2012 (unaudited), $5,656 and $6,845 at December 31, 2011 and 2010	348,839		329,570		299,545
Accrued interest receivable	2,263		2,129		2,095
Federal Home Loan Bank of Indianapolis stock	2,943		2,943		3,259
Bank-owned life insurance - at cash surrender value	11,442		8,161		7,869
Goodwill	4,687		4,687		4,687
Prepaid expenses and other assets	6,517		8,811		12,099

Total assets	$	627,678	$	585,440	$	503,915

Liabilities and Shareholders’ Equity
Liabilities
Deposits	$	522,659	$	486,665	$	422,703
Advances from Federal Home Loan Bank	40,658		40,573		30,455
Accrued payroll and related expenses	1,686		1,153		563
Accrued interest payable	98		120		126
Accrued expenses and other liabilities	1,882		1,506		1,171
Total liabilities	566,983		530,017		455,018

Commitments and Contingencies

Shareholders’ Equity
Preferred stock, no par value; 4,913,779 shares authorized; issued and outstanding - none
Voting common stock, no par value; 45,000,000 shares authorized; 1,871,590 shares issued and outstanding	41,366		41,306		41,246
Nonvoting common stock, no par value; 86,221 shares authorized; issued and outstanding	—		—		—
Retained earnings	16,949		12,897		9,711
Accumulated other comprehensive income (loss) (net of income taxes of $1,281 in 2012 (unaudited), $664 in 2011 and ($1,129) in 2010)	2,380		1,220		(2,060		)
Total shareholders’ equity	60,695		55,423		48,897

Total liabilities and shareholders’ equity	$	627,678	$	585,440	$	503,915

See Notes to Consolidated Financial Statements

F-3

First Internet Bancorp

Consolidated Statements of Income

Nine Months Ended September 30, 2012 and 2011 (Unaudited) and
Years Ended December 31, 2011 and 2010

(Dollar Amounts in Thousands except per share data)

	Nine Months Ended September 30,						Years Ended December 31,
	2012			2011			2011			2010
	(Unaudited)
Interest Income
Securities - taxable	$	2,459		$	2,707		$	3,436		$	3,591
Securities — non-taxable	1,269			1,270			1,692			1,771
Loans	14,268			13,989			18,752			19,868
Federal funds sold and other short-term investments	55			43			64			66
Total interest income	18,051			18,009			23,944			25,296

Interest Expense
Deposits	5,475			6,371			8,266			9,254
Other borrowed funds	1,019			1,013			1,355			1,531
Total interest expense	6,494			7,384			9,621			10,785

Net Interest Income	11,557			10,625			14,323			14,511

Provision for Loan Losses	2,108			1,493			2,440			927

Net Interest Income After Provision for Loan Losses	9,449			9,132			11,883			13,584

Noninterest Income
Service charges and fees	719			876			1,157			1,267
Gain on loans sold	6,991			1,427			3,690			3,098
Other-than-temporary impairment
Total loss related to other than temporarily impaired securities	(1,508		)	(2,044		)	(2,036		)	(2,776		)
Portion of loss recognized in other comprehensive income (loss)	1,304			1,488			1,410			1,867
Other-than-temporary impairment loss recognized in net income	(204		)	(556		)	(626		)	(909		)
Gain on sale of securities	49			84			84			16
Loss on asset disposals	(37		)	(323		)	(1,052		)	(342		)
Other	290			228			306			307
Total noninterest income	7,808			1,736			3,559			3,437

Noninterest Expense
Salaries and employee benefits	6,066			3,871			5,311			4,795
Marketing, advertising and promotion	1,010			536			936			269
Consulting and professional fees	1,037			513			777			729
Data processing	682			695			915			964
Loan expenses	869			372			526			735
Premises and equipment	1,092			1,136			1,481			1,150
Deposit insurance premium	341			609			727			939
Other	687			569			810			789
Total noninterest expense	11,784			8,301			11,483			10,370

Income Before Income Taxes	5,473			2,567			3,959			6,651

Income Tax Provision	1,421			442			773			1,696

Net Income	$	4,052		$	2,125		$	3,186		$	4,955

Income Per Share of Common Stock
Basic	$	2.12		$	1.12		$	1.67		$	2.61
Diluted	2.12			1.12			1.67			2.61

Weighted-Average Number of Common Shares Outstanding
Basic	1,911,846			1,905,604			1,906,289			1,898,919
Diluted	1,911,846			1,905,604			1,906,289			1,898,919

See Notes to Consolidated Financial Statements

F-4

First Internet Bancorp

Consolidated Statements of Comprehensive Income

Nine Months Ended September 30, 2012 and 2011 (Unaudited) and
Years Ended December 31, 2011 and 2010

(Dollar Amounts in Thousands except per share data)

	Nine Months Ended September 30,						Years Ended December 31,
	2012			2011			2011			2010
	(Unaudited)

Net income	$	4,052		$	2,125		$	3,186		$	4,955

Other comprehensive income (loss)
Net unrealized holding gains on securities available for sale	3,130			6,087			6,567			510
Reclassification adjustment for gains realized	(49		)	(84		)	(84		)	(7		)
Net unrealized holding losses on securities available for sale for which an other-than-temporary impairment has been recognized in income	(1,508		)	(2,044		)	(2,036		)	(2,776		)
Reclassification adjustment for other-than-temporary impairment loss recognized in income	204			556			626			909
Other comprehensive income (loss) before tax	1,777			4,515			5,073			(1,364		)

Income tax provision (benefit)	617			1,597			1,793			(483		)

Other comprehensive income (loss) - net of tax	1,160			2,918			3,280			(881		)

Comprehensive income	$	5,212		$	5,043		$	6,466		$	4,074

See Notes to Consolidated Financial Statements

F-5

First Internet Bancorp

Consolidated Statements of Shareholders’ Equity

Nine Months Ended September 30, 2012 (Unaudited) and
Years Ended December 31, 2011 and 2010

(Dollar Amounts in Thousands except per share data)

			Accumulated
	Voting and		Other
	Nonvoting		Comprehensive					Total
	Common		Income			Retained		Shareholders’
	Stock		(Loss)			Earnings		Equity
Balance, January 1, 2010	$	41,186	$	(1,179	)	$	4,756	$	44,763
Comprehensive income
Net income						4,955		4,955
Unrealized loss on securities available for sale for which an other-than-temporary impairment has been recognized in income - net of income tax			(335		)			(335		)
Unrealized loss on securities available for sale - net of income tax			(546		)			(546		)
Total comprehensive income								4,074
Issuance of directors deferred stock rights	60							60

Balance, December 31, 2010	41,246		(2,060		)	9,711		48,897

Comprehensive income
Net income						3,186		3,186
Unrealized gain on securities available for sale for which an other-than-temporary impairment has been recognized in income - net of income tax			294					294
Unrealized gain on securities available for sale - net of income tax			2,986					2,986
Total comprehensive income								6,466
Issuance of directors deferred stock rights	60							60

Balance, December 31, 2011	41,306		1,220			12,897		55,423

Comprehensive income
Net income (unaudited)						4,052		4,052
Unrealized gain on securities available for sale for which an other-than-temporary impairment has been recognized in income - net of income tax (unaudited)			65					65
Unrealized gain on securities available for sale - net of income tax (unaudited)			1,095					1,095
Total comprehensive income (unaudited)								5,212
Issuance of directors deferred stock rights (unaudited)	60							60

Balance, September 30, 2012 (Unaudited)	$	41,366	$	2,380		$	16,949	$	60,695

See Notes to Consolidated Financial Statements

F-6

First Internet Bancorp

Consolidated Statements of Cash Flows

Nine Months Ended September 30, 2012 and 2011 (Unaudited) and
Years Ended December 31, 2011 and 2010

(Dollar Amounts in Thousands except per share data)

	Nine Months Ended September 30,						Years Ended December 31,
	2012			2011			2011			2010
	(Unaudited)
Operating Activities
Net income	$	4,052		$	2,125		$	3,186		$	4,955
Adjustments to reconcile net income to net cash from operating activities
Depreciation	229			187			251			361
Amortization and accretion on securities	1,743			105			341			145
Amortization on FHLB prepayment penalties	85			88			118			88
Loss from disposal of fixed assets	1			64			64			15
(Gain) loss from real estate owned	(127		)	57			346			102
Loss from impairment of other asset	—			—			368			—
Increase in cash surrender value of bank-owned life insurance	(281		)	(218		)	(292		)	(294		)
Provision for loan losses	2,108			1,493			2,440			927
Deferred income taxes	(744		)	(948		)	(938		)	1,328
Director fees and officer compensation	60			45			60			60
Loss on other-than-temporary impairment of security	204			556			626			909
Gain from sale of available-for-sale securities	(49		)	(84		)	(84		)	(7		)
Loans originated for sale	(523,761		)	(237,400		)	(373,512		)	(236,676		)
Proceeds from sale of loans	520,353			199,410			337,119			241,935
Gain on loans sold	(6,991		)	(1,427		)	(3,690		)	(3,098		)
Changes in assets and liabilities
Accrued interest receivable	(134		)	(148		)	(34		)	161
Prepaid expenses and other assets	1,523			2,857			1,287			(207		)
Accrued expenses and other liabilities	887			798			919			637
Net cash provided by (used in) operating activities	(842		)	(32,440		)	(31,425		)	11,341

Investing Activities
Net decrease in loans	(11,920		)	25,489			25,499			54,535
Loans purchased	(9,737		)	(59,660		)	(59,660		)	(52,393		)
BOLI purchased	(3,000		)	—			—			—
Proceeds from liquidation of real estate owned	1,365			1,499			2,046			640
Maturities of securities available for sale	33,351			37,455			58,383			32,968
Proceeds from sale of securities available for sale	3,477			11,350			11,350			3,056
Proceeds from redemption of FHLB stock	—			316			316			379
Purchase of securities available for sale	(59,002		)	(57,903		)	(77,877		)	(41,788		)
Capital expenditures	(290		)	(153		)	(233		)	(780		)
Net cash used in investing activities	(45,756		)	(41,607		)	(40,176		)	(3,383		)

Financing Activities
Net increase in deposits	35,994			41,403			63,962			11,075
Repayment of FHLB advances	—			(5,000		)	(5,000		)	(28,633		)
Proceeds from FHLB advances	—			15,000			15,000			12,000
Net cash provided by (used in) financing activities	35,994			51,403			73,962			(5,558		)

Net Increase (Decrease) in Cash and Cash Equivalents	(10,604		)	(22,644		)	2,361			2,400

Cash and Cash Equivalents, Beginning of Period	34,778			32,417			32,417			30,017

Cash and Cash Equivalents, End of Period	$	24,174		$	9,773		$	34,778		$	32,417

Supplemental Disclosures of Cash Flows Information
Cash paid during the year for interest	$	6,516		$	7,412		$	9,627		$	10,793
Cash paid (refund) during the year for taxes	735			(327		)	614			1,110
Loans transferred to real estate owned	280			1,182			1,696			2,824

See Notes to Consolidated Financial Statements

F-7

First Internet Bancorp

Notes to Consolidated Financial Statements

As of September 30, 2012 (Unaudited) and December 31, 2011 and 2010
and Nine Months Ended September 30, 2012 and 2011 (Unaudited) and
Years Ended December 31, 2011 and 2010

(Dollar Amounts in Thousands except per share data)

Note 1: Summary of Significant Accounting Policies

The accounting policies of First Internet Bancorp (Company) conform to accounting principles generally accepted in the United States of America. A summary of the Company’s significant accounting policies follows:

Description of Business

The Company was incorporated on September 15, 2005, and was approved to consummate a plan of exchange on March 21, 2006, whereas the Company became a single-bank holding company with 100% ownership in First Internet Bank of Indiana (Bank).

The Bank was incorporated on October 28, 1998, and was approved to accept FDIC-insured deposits on December 28, 1998. The Bank commenced operations to the public on February 22, 1999. The Bank provides commercial and retail banking, with operations conducted on the World Wide Web (Internet) at www.firstib.com and through its corporate office located in Indianapolis, Indiana. The majority of the Bank’s income is derived from retail lending activities and investments in securities. The Bank is subject to competition from other financial institutions. The Bank is regulated by certain state and federal agencies and undergoes periodic examinations by those regulatory authorities.

Principles of Consolidation

The consolidated financial statements include the accounts of the Company and its subsidiary. All significant intercompany accounts and transactions have been eliminated in consolidation.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could differ from those estimates. Estimates most susceptible to change in the near term include the allowance for loan losses and the fair value of securities available for sale.

Unaudited Interim Financial Statements

The interim consolidated financial statements at September 30, 2012 and for the nine months ended September 30, 2012 and 2011 and the related footnote information are unaudited. Such unaudited interim financial statements have been prepared in accordance with the requirements for presentation of interim financial statements of Regulation S-X and are in accordance with U.S. GAAP. In the opinion of management, the accompanying unaudited consolidated financial statements contain all adjustments (consisting only of normal recurring accruals) considered necessary for a fair presentation of the results of operations for the interim periods. The results of operations for the nine months ended September 30, 2012, are not necessarily indicative of the results that may be expected for the entire year or any other interim period.

F-8

First Internet Bancorp

Notes to Consolidated Financial Statements
As of September 30, 2012 (Unaudited) and December 31, 2011 and 2010
and Nine Months Ended September 30, 2012 and 2011 (Unaudited) and
Years Ended December 31, 2011 and 2010
(Dollar Amounts in Thousands except per share data)

Securities

The Company classifies its securities in one of three categories and accounts for the investments as follows:

· Securities that the Company has the positive intent and ability to hold to maturity are classified as “securities held to maturity” and reported at amortized cost.

· 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 “securities held for trading” and reported at fair value, with unrealized gains and losses included in earnings.

· Securities not classified as either held to maturity or trading securities are classified as “securities available for sale” and reported at fair value, with unrealized gains and losses, after applicable taxes, excluded from earnings and reported in a separate component of shareholders’ equity. Declines in the value of debt securities and marketable equity securities that are considered to be other than temporary are recorded as an other-than-temporary impairment of securities available for sale with the unrealized losses recorded in the consolidated statements of operations.

Interest and dividend income, adjusted by amortization of premium or discount, is included in earnings using the effective interest rate method. Purchases and sales of securities are recorded in the consolidated balance sheets on the trade date. Gains and losses from security sales or disposals are recognized as of the trade date in the consolidated statements of operations for the period in which securities are sold or otherwise disposed of. Gains and losses on sales of securities are determined on the specific-identification method.

Loans Held for Sale

Loans originated and intended for sale in the secondary market are carried at the lower of cost or fair value in the aggregate. Net unrealized losses, if any, are recognized through a valuation allowance by charges to noninterest income. Gains and losses on loan sales are recorded in noninterest income, and direct loan origination costs and fees are deferred at origination of the loan and are recognized in noninterest income upon sale of loan.

Revenue Recognition

Interest income on loans is based on the principal balance outstanding and is recognized as earned on the interest method, except for interest on loans on nonaccrual status, which is recorded as a reduction of loan principal when received.

Premiums and discounts are amortized using the effective interest rate method.

Loan fees, net of certain direct origination costs, primarily salaries and wages, are deferred and amortized to interest income as a yield adjustment over the life of the loan.

F-9

First Internet Bancorp

Loans

Loans that management has the intent and ability to hold for the foreseeable future or until maturity or payoff are reported at their outstanding principal balance adjusted for unearned income, charge-offs, the allowance for loan losses, any unamortized deferred fees or costs on originated loans and unamortized premiums or discounts on purchased loans.

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.

Allowance for Loan Losses Methodology

Company policy is designed to ensure that an adequate allowance for loan losses (“ALLL”) will be maintained. Primary responsibility for ensuring that the Company has processes in place to consistently assess the adequacy of the ALLL rests with the Board. The Board has charged the Chief Financial Officer (“CFO”) with responsibility for establishing the methodology to be used and to assess the adequacy of the ALLL quarterly. Quarterly, the Board will review recommendations from the CFO to adjust the allowance as appropriate.

The methodology employed by the CFO for each portfolio segment will, at a minimum, contain the following:

1. Loans will be segmented by type of loan.

2. The required ALLL for types of performing homogeneous loans which do not have a specific reserve will be determined by applying a factor based on historical losses averaged over the past 12 months adjusted for qualitative factors as outlined below. In those instances where the Company expands into a new credit offering and historical experience is not available, the CFO will develop factors based on industry experience and best practices.

3. All criticized, classified and impaired loans will be tested for impairment by applying one of three methodologies:

a. Present value of future cash flows;

b. Fair value of collateral less cost to sell; or

c. The loan’s observable market price

4. All troubled debt restructurings (“TDR”) are considered impaired loans.

5. Loans tested for impairment will be removed from other pools to prevent layering (double-counting).

6. The required ALLL for each group of loans will be added together to determine the total required ALLL for the Company. The required ALLL will be compared to the current ALLL to determine the provision required to increase the ALLL or credit to decrease the ALLL.

F-10

First Internet Bancorp

The historical loss experience is determined by portfolio segment and is based on the actual loss history experienced by the Company over the prior 12 months. Management believes the historical loss experience methodology is appropriate in the current economic environment, as it captures loss rates that are comparable to the current period being analyzed.

We also factor in the following qualitative considerations:

1. Changes in policies and procedures;

2. Changes in national, regional and local economic and business conditions;

3. Changes in the composition and size of the portfolio and in the terms of loans;

4. Changes in the experience, ability and depth of lending management and other relevant staff;

5. Changes in the volume and severity of past due loans, the volume of nonaccrual loans, and the volume and severity of adversely classified or graded loans;

6. Changes in the quality of the Company’s loan review system;

7. Changes in the value of underlying collateral for collateral-dependent loans;

8. The existence and effect of any concentration of credit and changes in the level of such concentrations; and

9. The effect of other external factors such as competition and legal and regulatory requirements on the level of estimated credit losses in the existing portfolio.

Provision for Loan Losses

A provision for estimated losses on loans is charged to operations based upon management’s evaluation of the potential losses. Such an evaluation, which includes a review of all loans for which full collectability may not be reasonably assured considers, among other matters, the estimated net realizable value of the underlying collateral, as applicable, economic conditions, loan loss experience and other factors that are particularly susceptible to changes that could result in a material adjustment in the near term. While management endeavors to use the best information available in making its evaluations, future allowance adjustments may be necessary if economic conditions change substantially from the assumptions used in making the evaluations.

ASC Topic 310, Receivables , requires that impaired loans be measured based on the present value of expected future cash flows discounted at the loans effective interest rates or the fair value of the underlying collateral and allows existing methods for recognizing interest income.

F-11

First Internet Bancorp

Nonaccrual Loans

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

Impaired Loans

A loan is designated as impaired 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 insignificant delays not exceeding 90 days outstanding are not considered impaired. Certain nonaccrual and substantially all delinquent loans may be considered to be impaired. Generally, loans are placed on nonaccrual status at 90 days past due and accrued interest is reversed against earnings, unless the loan is well-secured and in the process of collection. The accrual of interest on impaired and nonaccrual loans is discontinued when, in management’s opinion, the borrower may be unable to meet payments as they become due.

Troubled Debt Restructurings (TDR)

The loan portfolio includes certain loans that have been modified in a TDR, where economic concessions have been granted 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.

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 use 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.

F-12

First Internet Bancorp

Policy for Charging Off Loans

A loan should be charged off at any point in time when it no longer can be considered a bankable asset, meaning collectable within the parameters of policy. A secured loan generally should be charged off to the estimated fair value of the collateral no later than when it is 120 days past due as to principal or interest. An unsecured loan generally should be charged off no later than when it is 180 days past due as to principal or interest. All charge-offs are approved by the Credit Review Committee.

Federal Home Loan Bank (FHLB) Stock

Federal law requires a member institution of the FHLB system to hold common stock of its district FHLB according to a predetermined formula. This investment is stated at cost, which represents redemption value, and may be pledged as collateral for FHLB advances.

Real Estate Owned

Real estate owned represents real estate acquired through foreclosure or deed in lieu of foreclosure and is recorded at its fair value less estimated costs to sell. When property is acquired, it is recorded at its fair value at the date of acquisition, with any resulting write-down charged against the allowance for loan losses. Any subsequent deterioration of the property is charged directly to operating expense. Costs relating to the development and improvement of real estate owned are capitalized, whereas costs relating to holding and maintaining the property are charged to expense as incurred. The Company has $1,512 and $2,207 of real estate owned as of December 31, 2011 and 2010, respectively. The Company has $553 (unaudited) of real estate owned as of September 30, 2012.

Equipment

Equipment is stated at cost, less accumulated depreciation. Depreciation is computed on the straight-line method over the estimated useful lives, which range from three to five years.

Income Taxes

Deferred income tax assets and liabilities reflect the impact of temporary differences between amounts of assets and liabilities for financial reporting purposes and the basis of such assets and liabilities as measured by tax laws and regulations. Deferred income tax expense or benefit is based upon the change in deferred tax assets and liabilities from period to period, subject to an ongoing assessment of realization of deferred tax assets. Deferred tax assets are reduced by a valuation allowance if, based on the weight of evidence available, it is more likely than not that some portion or all of a deferred tax asset will not be realized.

F-13

First Internet Bancorp

The Company files income tax returns in the U.S. federal and Indiana jurisdictions. With few exceptions, the Company is no longer subject to U.S. federal, state and local examinations by tax authorities for years before 2007.

ASC Topic 740-10, Accounting for Uncertainty in Income Taxes , prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. It also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. The Company did not identify any uncertain tax positions that it believes should be recognized in the consolidated financial statements.

Earnings Per Share

Earnings per share of common stock are based on the weighted-average number of basic shares and dilutive shares outstanding during the year.

The following is a reconciliation of the weighted-average common shares for the basic and diluted earnings per share computations for the nine months ended September 30, 2012 and 2011 and the years ended December 31, 2011 and 2010:

	September 30,		December 31,
	2012	2011	2011	2010
	(Unaudited)
Basic earnings per share
Weighted-average common shares	1,911,846	1,905,604	1,906,289	1,898,919

Diluted earnings per share
Weighted-average common shares	1,911,846	1,905,604	1,906,289	1,898,919
Dilutive effect of stock compensation	—	—	—	—
Dilutive effect of stock options	—	—	—	—

Weighted-average common and incremental shares	1,911,846	1,905,604	1,906,289	1,898,919

Number of stock options excluded from the calculation of earnings per share as the options’ exercise prices were greater than the average market price of the Company’s common stock	—	90,000	90,000	203,000

Dividend Restrictions

Banking regulations require maintaining certain capital levels and may limit the dividends paid by the Bank to the Company or by the Company to shareholders. As of September 30, 2012 and December 31, 2011 approximately $12,894 (unaudited) and $6,693 was available to be paid as dividends to the Company by the Bank.

F-14

First Internet Bancorp

Stock Compensation

At December 31, 2011, the Company has a stock-based employee compensation plan using the fair value recognition provisions of ASC Topic 718, Stock Based Compensation . The plan is described more fully in Note 9.

Comprehensive Income

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, which are also recognized as separate components of equity. Accumulated other comprehensive income (loss) at September 30, 2012 and 2011, December 31, 2011 and 2010 is solely related to unrealized gains and losses on investment securities.

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

Statements of Cash Flows

Cash and cash equivalents are defined to include cash on-hand, noninterest and interest-bearing amounts due from other banks and federal funds sold. Generally, federal funds are sold for one-day periods. The Company reports net cash flows for customer loan transactions and deposit transactions.

Bank-Owned Life Insurance

Bank-owned life insurance policies are carried at their cash surrender value. The Company recognizes tax-free income from the periodic increases in the cash surrender value of these policies and from death benefits.

Goodwill

Goodwill is tested annually for impairment. If the implied fair value of goodwill is lower than its carrying amount, goodwill impairment is indicated and goodwill is written down to its implied fair value. Subsequent increases in goodwill value are not recognized in the consolidated financial statements.

F-15

First Internet Bancorp

Current Economic Conditions

The current protracted economic decline continues to present financial institutions with circumstances and challenges which in some cases have resulted in large declines in the fair values of investments and other assets, constraints on liquidity and significant credit quality problems. Due to national, state and local economic conditions, values for commercial and development real estate have declined significantly, and the market for these properties is depressed. The accompanying consolidated financial statements have been prepared using values and information currently available to the Company. Given the volatility of current economic conditions, the values of assets and liabilities recorded in the consolidated financial statements could change rapidly, resulting in material future adjustments in asset values, the allowance for loan losses and capital that could negatively impact the Company’s ability to meet regulatory capital requirements and maintain sufficient liquidity. Furthermore, the Company’s regulators could require material adjustments to asset values or the allowance for loan losses for regulatory capital purposes that could affect the Company’s measurement of regulatory capital and compliance with the capital adequacy guidelines under the regulatory framework for prompt corrective action.

Reclassifications

Certain reclassifications have been made to the 2010 financial statements to conform to the 2011 financial statement presentation. These reclassifications had no effect on net income.

Note 2: Cash and Cash Equivalents

Effective July 21, 2010, the FDIC’s insurance limits were permanently increased to $250. At September 30, 2012 and December 31, 2011, the Company’s interest-bearing cash accounts did not exceed federally insured limits. At September 30, 2012, $1 and $22,261 (unaudited) of cash is held by the FHLB of Indianapolis and the Federal Reserve Bank of Chicago, respectively. At December 31, 2011, approximately $2 and $33,192 of cash is held by the FHLB of Indianapolis and Federal Reserve Bank of Chicago, respectively, which is not federally insured.

The Company is required to maintain reserve funds in cash and/or on deposit with the Federal Reserve Bank. The reserve required at September 30, 2012 was $107 (unaudited) and December 31, 2011 was $219.

F-16

First Internet Bancorp

Note 3: Securities

The amortized cost and approximate fair values of investment securities are as follows:

	September 30, 2012
	Amortized		Gross Unrealized					Fair
	Cost		Gains		Losses			Value
	(Unaudited)
Securities available for sale
U.S. government-sponsored enterprises	$	18,955	$	981	$	—		$	19,936
Municipals	40,789		2,936		(141		)	43,584
Mortgage-backed and asset-backed securities — government-sponsored enterprises	87,150		2,411		(50		)	89,511
Mortgage-backed and asset-backed securities — private labeled	3,999		35		(391		)	3,643
Other securities	16,769		104		(2,224		)	14,649

Total available for sale	$	167,662	$	6,467	$	(2,806	)	$	171,323

	December 31, 2011
	Amortized		Gross Unrealized					Fair
	Cost		Gains		Losses			Value
Securities available for sale
U.S. government-sponsored enterprises	$	24,685	$	817	$	—		$	25,502
Municipals	40,849		2,290		(378		)	42,761
Mortgage-backed and asset-backed securities — government-sponsored enterprises	67,354		2,456		(20		)	69,790
Mortgage-backed and asset-backed securities — private labeled	5,850		56		(461		)	5,445
Other securities	8,648		41		(2,917		)	5,772

Total available for sale	$	147,386	$	5,660	$	(3,776	)	$	149,270

F-17

First Internet Bancorp

	December 31, 2010
	Amortized		Gross Unrealized					Fair
	Cost		Gains		Losses			Value
Securities available for sale
U.S. government-sponsored enterprises	$	43,444	$	263	$	(314	)	$	43,393
U.S. government treasuries	2,369		—		(37		)	2,332
Municipals	42,463		270		(1,969		)	40,764
Mortgage-backed and asset-backed securities — government-sponsored enterprises	37,850		2,141		(10		)	39,981
Mortgage-backed and asset-backed securities — private labeled	9,720		105		(825		)	9,000
Other securities	4,279		12		(2,825		)	1,466

Total available for sale	$	140,125	$	2,791	$	(5,980	)	$	136,936

The carrying value of securities at September 30, 2012 and December 31, 2011 is shown below by their contractual maturity date. Actual maturities will differ because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

	September 30, 2012				December 31, 2011
	Available for Sale				Available for Sale
	Amortized		Fair		Amortized		Fair
	Cost		Value		Cost		Value
	(Unaudited)
Within one year	$	2,802	$	2,889	$	1,500	$	1,542
One to five years	16,349		16,438		12,583		12,399
Five to ten years	13,384		13,969		13,709		14,246
After ten years	43,978		44,873		46,390		45,848
	76,513		78,169		74,182		74,035
Mortgage-backed and asset-backed securities — government-sponsored enterprises	87,150		89,511		67,354		69,790
Mortgage-backed and asset-backed securities — private labeled	3,999		3,643		5,850		5,445

Totals	$	167,662	$	171,323	$	147,386	$	149,270

Gross gains of $49 and $98 (unaudited) and gross losses of $0 and $14 (unaudited) resulting from sales of available-for-sale securities during the nine months ended September 30, 2012 and 2011, respectively.

Gross gains of $98 and $7, and gross losses of $14 and $0 resulting from sales of available-for-sale securities were realized for the years ended December 31, 2011 and 2010, respectively.

F-18

First Internet Bancorp

Certain investments in debt securities are reported in the consolidated financial statements at an amount less than their historical cost. Total fair value of these investments at December 31, 2011 and 2010 was $20,239 and $55,144, which is approximately 14% and 40%, respectively, of the Company’s available-for-sale investment portfolio. The total fair value of these investments at September 30, 2012 was $27,189 (unaudited), which is approximately 16% (unaudited) of the Company’s available-for-sale investment portfolio. These declines primarily resulted from fluctuations in market interest rates after purchase.

Except as discussed below, management believes the declines in fair value for these securities are temporary.

Should the impairment of any of these securities become other than temporary, the cost basis of the investment will be reduced and the resulting loss recognized in net income in the period the other-than-temporary impairment is identified.

The following tables show the Company’s investments’ gross unrealized losses and fair value, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position at September 30, 2012, December 31, 2011 and 2010:

	September 30, 2012
	Less Than 12 Months					12 Months or Longer					Total
	Fair		Unrealized			Fair		Unrealized			Fair		Unrealized
	Value		Losses			Value		Losses			Value		Losses
	(Unaudited)
Securities available for sale:
Municipals	$	1,329	$	(4	)	$	2,392	$	(137	)	$	3,721	$	(141	)
Mortgage-backed and asset-backed securities - government-sponsored enterprises	12,901		(50		)	—		—			12,901		(50		)
Mortgage-backed and asset-backed securities — private labeled	—		—			1,755		(391		)	1,755		(391		)
Other securities	3,978		(22		)	4,834		(2,202		)	8,812		(2,224		)

	$	18,208	$	(76	)	$	8,981	$	(2,730	)	$	27,189	$	(2,806	)

	December 31, 2011
	Less Than 12 Months					12 Months or Longer					Total
	Fair		Unrealized			Fair		Unrealized			Fair		Unrealized
	Value		Losses			Value		Losses			Value		Losses
Securities available for sale:
Municipals	$	221	$	(2	)	$	4,687	$	(376	)	$	4,908	$	(378	)
Mortgage-backed and asset-backed securities - government-sponsored enterprises	8,229		(20		)	—		—			8,229		(20		)
Mortgage-backed and asset-backed securities — private labeled	—		—			2,871		(461		)	2,871		(461		)
Other securities	3,761		(239		)	470		(2,678		)	4,231		(2,917		)

	$	12,211	$	(261	)	$	8,028	$	(3,515	)	$	20,239	$	(3,776	)

F-19

First Internet Bancorp

	December 31, 2010
	Less Than 12 Months					12 Months or Longer					Total
	Fair		Unrealized			Fair		Unrealized			Fair		Unrealized
	Value		Losses			Value		Losses			Value		Losses
Securities available for sale:
U.S. government-sponsored enterprises	$	18,330	$	(312	)	$	466	$	(2	)	$	18,796	$	(314	)
U.S. government treasuries	2,332		(37		)	—		—			2,332		(37		)
Municipals	24,785		(1,486		)	3,108		(483		)	27,893		(1,969		)
Mortgage-backed and asset-backed securities - government-sponsored enterprises	493		(10		)	—		—			493		(10		)
Mortgage-backed and asset-backed securities — private labeled	—		—			5,176		(825		)	5,176		(825		)
Other securities	—		—			454		(2,825		)	454		(2,825		)

	$	45,940	$	(1,845	)	$	9,204	$	(4,135	)	$	55,144	$	(5,980	)

Municipals

The unrealized losses on the Company’s investments in municipal securities were caused by interest rate changes. The contractual terms of those investments do not permit the issuer to settle the securities at a price less than the amortized cost bases of the investments. Because the Company does not intend to sell the investments and it is not more likely than not the Company will be required to sell the investments before recovery of their amortized cost bases, which may be maturity, the Company does not consider those investments to be other than temporarily impaired at September 30, 2012 (unaudited) or December 31, 2011.

Mortgage-Backed Securities

The unrealized losses on the Company’s investment in mortgage-backed securities were caused by interest rate changes. The Company expects to recover the amortized cost basis over the term of the securities. Because the decline in market value is attributable to changes in interest rates and not credit quality, and because the Company does not intend to sell the investments and it is not more likely than not the Company will be required to sell the investments before recovery of their amortized cost bases, which may be maturity, the Company does not consider those investments to be other than temporarily impaired at September 30, 2012 (unaudited) or December 31, 2011.

F-20

First Internet Bancorp

Other Securities

The Company’s unrealized loss on investments in other securities is primarily made up of two investments. The first investment is a $2,000 par investment in I-PreTSL I B-2 pooled trust security. The unrealized loss was primarily caused by a sector downgrade by several industry analysts. The Company currently expects to recover the entire amortized cost basis of the investment. The determination of no credit loss was calculated by comparing expected discounted cash flows based on performance indicators of the underlying assets in the security to the carrying value of the investment. Because the Company does not intend to sell the investment and it is not more likely than not the Company will be required to sell the investment before recovery of its amortized cost basis, which may be maturity, it does not consider the remainder of the investment to be other than temporarily impaired at September 30, 2012 (unaudited) or December 31, 2011. The second investment is discussed in the next section.

Other-Than-Temporary Impairment

The Company routinely conducts periodic reviews to identify and evaluate investment securities to determine whether an other-than-temporary impairment has occurred. Economic models are used to determine whether an other-than-temporary impairment has occurred on these securities.

An other-than-temporary impairment has been recognized on a $2,000 par investment in ALESCO IV Series B2 pooled trust security. The unrealized loss was primarily caused by (a) a decrease in performance and (b) a sector downgrade by several industry analysts. The Company currently expects ALESCO IV to settle the security at a price less than the amortized cost basis of the investment (that is, the Company expects to recover less than the entire amortized cost basis of the security). The Company has recognized a loss equal to the credit loss, establishing a new, lower amortized cost basis. The credit loss was calculated by comparing expected discounted cash flows based on performance indicators of the underlying assets in the security to the carrying value of the investment. Because the Company does not intend to sell the investment and it is not more likely than not the Company will be required to sell the investment before recovery of its new, lower amortized cost basis, which may be maturity, it does not consider the remainder of the investment in ALESCO IV to be other than temporarily impaired at September 30, 2012 or December 31, 2011.

For identified mortgage-backed securities in the investment portfolio, an extensive, quarterly review is conducted to determine if an other-than-temporary impairment has occurred. Various inputs to the economic models are used to determine if an unrealized loss is other than temporary. The most significant inputs are voluntary prepay rates, default rates, liquidation rates and loss severity.

F-21

First Internet Bancorp

To determine if the unrealized loss for mortgage-backed securities is other than temporary, the Company projects total estimated defaults of the underlying assets (mortgages) and multiplies that calculated amount by an estimate of realizable value upon sale in the marketplace (severity) in order to determine the projected collateral loss. The Company also evaluates the current credit enhancement underlying the bond to determine the impact on cash flows. If the Company determines that a given mortgage-backed security position will be subject to a write-down or loss, the Company records the expected credit loss as a charge to earnings.

Credit Losses Recognized on Investments

Certain debt securities have experienced fair value deterioration due to credit losses, as well as due to other market factors, but are not otherwise other than temporarily impaired.

The following table provides information about debt securities for which only a credit loss was recognized in income and other losses are recorded in other comprehensive loss.

	Accumulated Credit Losses
Credit losses on debt securities held
January 1, 2010	$	300
Additions related to other-than-temporary losses not previously recognized	489
Additions related to increases in previously recognized other-than-temporary losses	420

December 31, 2010	1,209
Additions related to increases in previously recognized other-than-temporary losses	626

December 31, 2011	1,835
Reductions related to actual losses incurred	(170		)
Additions related to other-than-temporary losses not previously recognized	43
Additions related to increases in previously recognized other-than-temporary losses	161

September 30, 2012 (Unaudited)	$	1,869

F-22

First Internet Bancorp

Note 4: Loans Receivable

Categories of loans include:

	September 30,			December 31,
	2012			2011			2010
	(Unaudited)
Real estate loans
Residential	$	132,297		$	143,452		$	106,729
Commercial	78,266			43,507			19,563
Total real estate loans	210,563			186,959			126,292
Commercial loans	10,814			2,063			4,919
Consumer loans	130,055			142,783			171,122
Total loans	351,432			331,805			302,333
Deferred loan origination costs and premiums and discounts on purchased loans	3,807			3,421			4,057
Allowance for loan losses	(6,400		)	(5,656		)	(6,845		)

Total net loans	$	348,839		$	329,570		$	299,545

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

Commercial Real Estate : These loans are viewed primarily as cash flow loans and secondarily as loans secured by real estate. Commercial real estate lending typically involves higher loan principal amounts, and the repayment of these loans is generally dependent on the successful operation of the property securing the loan or the business conducted on the property securing the loan. Commercial real estate loans may be more adversely affected by conditions in the real estate markets or in the general economy. The properties securing the Company’s commercial real estate portfolio are diverse in terms of property type and geographic location. Management monitors and evaluates Commercial real estate loans based on property financial performance, collateral value and other risk grade criteria. As a general rule, the Company avoids financing special use projects or properties outside of its designated marketing areas unless other underwriting factors are present to help mitigate risk. In addition, management tracks the level of owner-occupied commercial real estate loans versus nonowner occupied loans.

Commercial : Commercial loans are primarily based on the identified cash flows of the borrower and secondarily on the underlying collateral provided by the borrower. The cash flows of borrowers, however, may not be as expected, and the collateral securing these loans may fluctuate in value. Most commercial loans are secured by the assets being financed or other business assets such as accounts receivable or inventory and may incorporate a personal guarantee; however, some short-term loans may be made on an unsecured basis. In the case of loans secured by accounts receivable, the availability of funds for the repayment of these loans may be substantially dependent on the ability of the borrower to collect amounts due from its customers.

F-23

First Internet Bancorp

Residential and Consumer : With respect to residential loans that are secured by 1-4 family residences and are generally owner occupied, the Company generally establishes a maximum loan-to-value ratio and requires private mortgage insurance if that ratio is exceeded. Home equity loans are typically secured by a subordinate interest in 1-4 family residences, and consumer loans are secured by consumer assets such as automobiles or recreational vehicles. Some consumer loans are unsecured, such as small installment loans and certain lines of credit. Repayment of these loans is primarily dependent on the personal income of the borrowers, which can be impacted by economic conditions in their market areas such as unemployment levels. Repayment can also be impacted by changes in property values on residential properties. Risk is mitigated by the fact that the loans are of smaller individual amounts and spread over a large number of borrowers.

The following tables present the balance and activity in the allowance for loan losses and the recorded investment in loans based on portfolio segment and impairment method for the nine months ended September 30, 2012 and 2011:

	September 30, 2012
	Residential Real Estate			Commercial Real Estate			Commercial			Consumer			Total
	(Unaudited)
Allowance for loan losses:
Balance, beginning of period	$	1,099		$	2,485		$	333		$	1,739		$	5,656
Provision charged to expense	808			1,119			(60		)	241			2,108
Losses charged off	(479		)	(272		)	—			(1,152		)	(1,903		)
Recoveries	41			—			75			423			539

Balance, end of period	1,469			3,332			348			1,251			6,400
Ending balance: individually evaluated for impairment	183			1,883			—			56			2,122

Ending balance: collectively evaluated for impairment	$	1,286		$	1,449		$	348		$	1,195		$	4,278

Loans:
Ending balance	$	132,297		$	78,266		$	10,814		$	130,055		$	351,432
Ending balance: individually evaluated for impairment	3,127			6,790			—			563			10,480

Ending balance: collectively evaluated for impairment	$	129,170		$	71,476		$	10,814		$	129,492		$	340,952

F-24

First Internet Bancorp

	September 30, 2011
	Residential Real Estate			Commercial Real Estate			Commercial			Consumer			Total
	(Unaudited)
Allowance for loan losses:
Balance, beginning of period	$	2,135		$	1,292		$	608		$	2,810		$	6,845
Provision charged to expense	(258		)	881			266			604			1,493
Losses charged off	(625		)	(698		)	(275		)	(1,727		)	(3,325		)
Recoveries	127			—			—			430			557

Balance, end of period	1,379			1,475			599			2,117			5,570
Ending balance: individually evaluated for impairment	223			951			275			76			1,525

Ending balance: collectively evaluated for impairment	$	1,156		$	524		$	324		$	2,041		$	4,045

Loans:
Ending balance	$	151,329		$	29,431		$	4,056		$	148,118		$	332,934
Ending balance: individually evaluated for impairment	1,439			3,844			599			379			6,261

Ending balance: collectively evaluated for impairment	$	149,890		$	25,587		$	3,457		$	147,739		$	326,673

The following tables present the balance and activity in the allowance for loan losses and the recorded investment in loans based on portfolio segment and impairment method as of December 31, 2011 and 2010:

	December 31, 2011
	Residential Real Estate			Commercial Real Estate			Commercial			Consumer			Total
Allowance for loan losses:
Balance, beginning of year	$	2,135		$	1,292		$	608		$	2,810		$	6,845
Provision charged to expense	(366		)	1,891			318			597			2,440
Losses charged off	(811		)	(698		)	(612		)	(2,296		)	(4,417		)
Recoveries	141			—			19			628			788

Balance, end of year	1,099			2,485			333			1,739			5,656
Ending balance: individually evaluated for impairment	93			1,329			—			52			1,474

Ending balance: collectively evaluated for impairment	$	1,006		$	1,156		$	333		$	1,687		$	4,182

Loans:
Ending balance	$	143,452		$	43,507		$	2,063		$	142,783		$	331,805
Ending balance: individually evaluated for impairment	1,693			7,634			—			499			9,826

Ending balance: collectively evaluated for impairment	$	141,759		$	35,873		$	2,063		$	142,284		$	321,979

F-25

First Internet Bancorp

	December 31, 2010
	Residential Real Estate			Commercial Real Estate			Commercial			Consumer			Total
Allowance for loan losses:
Balance, beginning of year	$	1,489		$	3,491		$	79		$	5,038		$	10,097
Provision charged to expense	1,683			(1,771		)	590			425			927
Losses charged off	(1,158		)	(445		)	(61		)	(3,399		)	(5,063		)
Recoveries	121			17			—			746			884

Balance, end of year	2,135			1,292			608			2,810			6,845
Ending balance: individually evaluated for impairment	723			883			540			151			2,297

Ending balance: collectively evaluated for impairment	$	1,412		$	409		$	68		$	2,659		$	4,548

Loans:
Ending balance	$	106,729		$	19,563		$	4,919		$	171,122		$	302,333
Ending balance: individually evaluated for impairment	3,074			3,593			1,539			689			8,895

Ending balance: collectively evaluated for impairment	$	103,655		$	15,970		$	3,380		$	170,433		$	293,438

The Company utilizes a risk grading matrix to assign a risk grade to each of its commercial loans. Loans are graded on a scale of 1 to 8. A description of the general characteristics of the 8 risk grades is as follows:

· Grades 1 & 2 - These grades are assigned to loans with very high credit quality borrowers of investment or near investment grade or where the loan is primarily secured by cash or conservatively margined high quality marketable securities. These borrowers are generally publicly traded, have significant capital strength, possess investment grade public debt ratings, demonstrate low leverage, exhibit stable earnings and growth and have ready access to various financing alternatives.

· Grades 3 & 4 - Loans assigned these grades include loans to borrowers possessing solid credit quality with acceptable risk. Borrowers in these grades are differentiated from higher grades on the basis of size (capital and/or revenue), leverage, asset quality, stability of the industry or specific market area and quality/coverage of collateral. These borrowers generally have a history of consistent earnings and reasonable leverage.

· Grade 5 - This grade includes “pass grade” loans to borrowers which require special monitoring because of deteriorating financial results, declining credit ratings, decreasing cash flow, increasing leverage, marginal collateral coverage or industry stress that has resulted or may result in a changing overall risk profile.

F-26

First Internet Bancorp

· Grade 6 - This grade is for “Special Mention” loans in accordance with regulatory guidelines. This grade is intended to include loans to borrowers whose credit quality has clearly deteriorated and where risk of further decline is possible unless active measures are taken to correct the situation. Weaknesses are considered potential at this state and are not yet fully defined.

· Grade 7 - This grade includes “Substandard” loans in accordance with regulatory guidelines. Loans categorized in this grade possess a well-defined credit weakness, and the likelihood of repayment from the primary source is uncertain. Significant financial deterioration has occurred, and very close attention is warranted to ensure the full repayment without loss. Collateral coverage may be marginal, and the accrual of interest has been suspended.

· Grade 8 - This grade includes “Doubtful” loans in accordance with regulatory guidelines. Such loans have been placed on nonaccrual status and may be heavily dependent upon collateral possessing a value that is difficult to determine or based upon some near-term event which lacks clear certainty. These loans have all of the weaknesses of those classified as Substandard; however, based on existing conditions, these weaknesses make full collection of the principal balance highly improbable.

The following tables present the credit risk profile of the Company’s loan portfolio based on rating category and payment activity as of September 30, 2012, December 31, 2011 and 2010:

	September 30, 2012
	Commercial Real Estate		Commercial
	(Unaudited)
Rating:
1-5 Pass	$	69,818	$	10,374
6 Special Mention	1,658		440
7 Substandard	6,790		—
8 Doubtful	—		—

Total	$	78,266	$	10,814

	September 30, 2012
	Residential Real Estate		Consumer
	(Unaudited)
Performing	$	130,272	$	129,804
Nonperforming (nonaccrual)	2,025		251

Total	$	132,297	$	130,055

F-27

First Internet Bancorp

	December 31, 2011
	Commercial Real Estate		Commercial
Rating:
1-5 Pass	$	34,172	$	1,541
6 Special Mention	1,700		522
7 Substandard	7,635		—
8 Doubtful	—		—

Total	$	43,507	$	2,063

	December 31, 2011
	Residential Real Estate		Consumer
Performing	$	142,576	$	142,559
Nonperforming (nonaccrual)	876		224

Total	$	143,452	$	142,783

	December 31, 2010
	Commercial Real Estate		Commercial
Rating:
1-5 Pass	$	12,662	$	3,370
6 Special Mention	3,704		10
7 Substandard	3,197		1,539
8 Doubtful	—		—

Total	$	19,563	$	4,919

	December 31, 2010
	Residential Real Estate		Consumer
Performing	$	103,888	$	170,439
Nonperforming (nonaccrual)	2,841		683

Total	$	106,729	$	171,122

F-28

First Internet Bancorp

The following tables present the Company’s loan portfolio aging analysis as of September 30, 2012, December 31, 2011 and 2010:

	September 30, 2012
	30-59 Days Past Due				60-89 Days Past Due				90 Days or More Past Due				Total Past Due				Current				Total Loans Receivable				Nonaccrual Loans				Total Loans 90 Days or More Past Due and Accruing
	(Unaudited)
Real estate loans
Residential	$		145		$		25		$		1,997		$		2,167		$		130,130		$		132,297		$		2,025		$		—
Commercial	—				—				6,683				6,683				71,583				78,266				6,683				—
Commercial	—				—				—				—				10,814				10,814				—				—
Consumer	1,151				153				203				1,507				128,548				130,055				251				6

Total	$		1,296		$		178		$		8,883		$		10,357		$		341,075		$		351,432		$		8,959		$		6

	December 31, 2011
	30-59 Days Past Due				60-89 Days Past Due				90 Days or More Past Due				Total Past Due				Current				Total Loans Receivable				Nonaccrual Loans				Total Loans 90 Days or More Past Due and Accruing
Real estate loans
Residential	$	1,376			$		121		$		666		$		2,163		$		141,289		$		143,452		$		876		$		75
Commercial	—				—				7,523				7,523				35,984				43,507				7,523				—
Commercial	—				—				—				—				2,063				2,063				—				—
Consumer	1,709				213				206				2,128				140,655				142,783				224				56

Total	$		3,085		$		334		$		8,395		$		11,814		$		319,991		$		331,805		$		8,623		$		131

	December 31, 2010
	30-59 Days Past Due			60-89 Days Past Due				90 Days or More Past Due				Total Past Due				Current				Total Loans Receivable				Nonaccrual Loans				Total Loans 90 Days or More Past Due and Accruing
Real estate loans
Residential	$	137		$		1,780		$		1,294		$		3,211		$		103,518		$		106,729		$		2,841		$		—
Commercial	—			—				1,410				1,410				18,153				19,563				3,593				900
Commercial	10			—				1,539				1,549				3,370				4,919				1,539				—
Consumer	2,757			455				382				3,594				167,528				171,122				683				30

Total	$		2,904	$		2,235		$		4,625		$		9,764		$		292,569		$		302,333		$		8,656		$		930

A loan is considered impaired, in accordance with the impairment accounting guidance (ASC 310-10-35-16) when, based on current information and events, it is probable the Company will be unable to collect all amounts due from the borrower in accordance with the contractual terms of the loan. Impaired loans include nonperforming commercial loans but also include loans modified in troubled debt restructurings 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.

F-29

First Internet Bancorp

The following table present the Company’s impaired loans as of September 30, 2012:

	September 30, 2012
	Recorded Balance		Unpaid Principal Balance		Specific Allowance		Average Balance		Interest Income
	(Unaudited)
Loans without a specific valuation allowance
Residential real estate loans	$	2,870	$	3,157	$	—	$	1,594	$	26
Commercial real estate loans	530		535		—		344		—
Commercial loans	—		—		—		—		—
Consumer loans	426		642		—		387		—

Loans with a specific valuation allowance
Residential real estate loans	$	257	$	309	$	183	$	534	$	—
Commercial real estate loans	6,260		6,562		1,883		6,995		5
Commercial loans	—		—		—		—		—
Consumer loans	137		253		56		92		—

Total impaired loans
Residential real estate loans	$	3,127	$	3,466	$	183	$	2,128	$	26
Commercial real estate loans	6,790		7,097		1,883		7,339		5
Commercial loans	—		—		—		—		—
Consumer loans	563		895		56		479		—

The following table presents average impaired loans and interest income for the nine months ended September 30, 2011:

	September 30, 2011
	Average Balance		Interest Income
	(Unaudited)
Loans without a specific valuation allowance
Residential real estate loans	$	795	$	—
Commercial real estate loans	275		—
Commercial loans	260		—
Consumer loans	202		—

Loans with a specific valuation allowance
Residential real estate loans	$	1,400	$	—
Commercial real estate loans	3,992		5
Commercial loans	806		—
Consumer loans	335		1

Total impaired loans
Residential real estate loans	$	2,195	$	—
Commercial real estate loans	4,267		5
Commercial loans	1,066		—
Consumer loans	537		1

F-30

First Internet Bancorp

The following tables present the Company’s impaired loans as of December 31, 2011 and 2010:

	December 31, 2011
	Recorded Balance		Unpaid Principal Balance		Specific Allowance		Average Balance		Interest Income
Loans without a specific valuation allowance
Residential real estate loans	$	1,328	$	1,529	$	—	$	902	$	—
Commercial real estate loans	—		—		—		220		—
Commercial loans	—		—		—		208		—
Consumer loans	388		612		—		239		—

Loans with a specific valuation allowance
Residential real estate loans	$	365	$	373	$	93	$	1,193	$	—
Commercial real estate loans	7,634		8,096		1,329		4,721		6
Commercial loans	—		—		—		645		—
Consumer loans	111		131		52		290		1

Total impaired loans
Residential real estate loans	$	1,693	$	1,902	$	93	$	2,095	$	—
Commercial real estate loans	7,634		8,096		1,329		4,941		6
Commercial loans	—		—		—		853		—
Consumer loans	499		743		52		529		1

	December 31, 2010
	Recorded Balance		Unpaid Principal Balance		Specific Allowance
Loans without a specific valuation allowance
Residential real estate loans	$	1,148	$	1,148	$	—
Commercial real estate loans	—		—		—
Commercial loans	842		842		—
Consumer loans	278		278		—

Loans with a specific valuation allowance
Residential real estate loans	$	1,926	$	1,933	$	723
Commercial real estate loans	3,593		3,750		883
Commercial loans	697		697		540
Consumer loans	411		411		151

Total impaired loans
Residential real estate loans	$	3,074	$	3,080	$	723
Commercial real estate loans	3,593		3,750		883
Commercial loans	1,539		1,539		540
Consumer loans	689		689		151

F-31

First Internet Bancorp

Average impaired loans outstanding totaled $8,418 and $8,104 for the years ended December 31, 2011 and 2010.

Loans classified as a troubled debt restructuring during the nine months ended September 30, 2012 and 2011 are shown in the tables below. These modifications consisted primarily of interest rate and maturity date concessions.

	September 30, 2012
	Modifications
	Number	Recorded Balance Before		Recorded Balance After
	(Unaudited)
Real estate loans:
Commercial	—	$	—	$	—
Residential	1	29		29
Commercial loans	—	—		—
Consumer loans	7	157		133

Total	8	$	186	$	162

	September 30, 2011
	Modifications
	Number	Recorded Balance Before		Recorded Balance After
	(Unaudited)
Real estate loans:
Commercial	—	$	—	$	—
Residential	3	751		751
Commercial loans	—	—		—
Consumer loans	8	142		83

Total	11	$	893	$	834

F-32

First Internet Bancorp

Troubled debt restructured loans which had payment defaults during the nine months ended September 30, 2012 and 2011 are shown in the tables below. Default occurs when a loan is 90 days or more past due or transferred to nonaccrual within 12 months of restructuring.

	September 30, 2012
	Number of Defaults	Recorded Balance
	(Unaudited)
Real estate loans:
Commercial	—	$	—
Residential	1	29
Commercial loans and leases	—	—
Consumer loans	2	32

Total	3	$	61

	September 30, 2011
	Number of Defaults	Recorded Balance
	(Unaudited)
Real estate loans:
Commercial	—	$	—
Residential	2	285
Commercial loans and leases	—	—
Consumer loans	4	16

Total	6	$	301

F-33

First Internet Bancorp

Loans classified as a troubled debt restructuring during the year ended December 31, 2011 are shown in the table below. These modifications consisted primarily of interest rate and maturity date concessions.

	December 31, 2011
	Modifications
	Number	Recorded Balance Before		Recorded Balance After
Real estate loans:
Commercial	—	$	—	$	—
Residential	3	751		751
Commercial loans	—	—		—
Consumer loans	11	196		123

Total	14	$	947	$	874

Troubled debt restructured loans which had payment defaults during the year ended December 31, 2011 are shown in the table below. Default occurs when a loan is 90 days or more past due or transferred to nonaccrual within 12 months of restructuring.

	December 31, 2011
	Number of Defaults	Recorded Balance
Real estate loans:
Commercial	—	$	—
Residential	2	285
Commercial loans and leases	—	—
Consumer loans	6	45

Total	8	$	330

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First Internet Bancorp

Note 5: Equipment

Equipment included in other assets consists of the following:

	September 30,			December 31,
	2012			2011			2010
	(Unaudited)
Furniture and equipment	$	3,502		$	3,460		$	3,409
Less accumulated depreciation	(2,649		)	(2,667		)	(2,534		)

	$	853		$	793		$	875

Note 6: Goodwill

The change in the carrying amount of goodwill was:

Balance as of January 1, 2010	$	4,687
Changes in goodwill during the year	—

Balance as of December 31, 2010	4,687
Changes in goodwill during the year	—

Balance as of December 31, 2011	4,687
Changes in goodwill during the period (unaudited)	—

Balance as of September 30, 2012 (Unaudited)	$	4,687

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First Internet Bancorp

Note 7: Deposits

Deposits are as follows:

	September 30,			December 31,
	2012			2011			2010
	(Unaudited)

Regular savings accounts	$	11,326		$	7,773		$	7,384
Noninterest-bearing demand deposit accounts	12,072			15,870			9,893
Interest-bearing demand deposit accounts	65,189			64,006			58,075
Money market accounts	194,124			165,561			132,031
Total transaction accounts	282,711			253,210			207,383

Certificates of deposits	222,228			209,762			187,292
Brokered deposits	17,890			23,898			28,284
Premiums on brokered deposits	(170		)	(205		)	(256		)

Total deposits	$	522,659		$	486,665		$	422,703

Certificates of deposit in the amount of $100 or more totaled approximately $138,558 (unaudited), $124,929 and $98,605 at September 30, 2012, December 31, 2011 and 2010, respectively.

A summary of certificate accounts by scheduled maturities is as follows:

	September 30,		December 31,
	2012		2011
	(Unaudited)

2012	$	34,926	$	77,429
2013	64,424		28,734
2014	33,152		28,602
2015	37,468		34,535
2016	59,524		58,738
Thereafter	10,624		5,622

	$	240,118	$	233,660

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First Internet Bancorp

Note 8: FHLB Advances

The Company has outstanding FHLB advances of $40,658 (unaudited), $40,573 and $30,455 as of September 30, 2012, December 31, 2011 and 2010, respectively. Advances, at interest rates from 0.49 to 4.57 percent (unaudited) at September 30, 2012 and 0.49 to 4.57 percent at December 31, 2011, are subject to restrictions or penalties in the event of prepayment. The advances are collateralized by mortgage loans pledged and held by the Company and investment securities pledged by the Company and held in safekeeping with the FHLB. Mortgage loans pledged were approximately $0 (unaudited), $5,806 and $9,187 as of September 30, 2012, December 31, 2011 and 2010, respectively, and the fair value of investment securities pledged was approximately $46,327 (unaudited), $53,117 and $46,321 as of September 30, 2012, December 31, 2011 and 2010, respectively. The FHLB advances are scheduled to mature according to the following schedule:

	September 30,			December 31,
	2012			2011
	(Unaudited)

2013	$	19,000		$	19,000
2014	5,000			5,000
2015	11,000			11,000
2016	3,000			3,000
Thereafter	3,000			3,000
	41,000			41,000
Deferred prepayment penalties on advance restructure	(342		)	(427		)

	$	40,658		$	40,573

Amounts advanced totaling $10,000 (unaudited) at September 30, 2012 and $10,000 at December 31, 2011 are subject to an option for the FHLB to convert the entire advance to a periodic adjustable rate one year after the date of the advance. If the FHLB exercises its option to convert the advance to an adjustable rate, the advance will be pre-payable at the Company’s option, at par without a penalty fee.

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First Internet Bancorp

Note 9: Benefit Plans

401(k) Plan

The Company has a 401(k) plan established for substantially all full-time employees, as defined. 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 by the plan. Employer-matching contributions begin vesting after one year at a rate of 50% per year of employment and are fully vested after the completion of two years of service. Contributions each year during the years ended December 31, 2011 and 2010, totaled approximately $137 and $117, respectively. Contributions during the nine months ended September 30, 2012 and 2011 were $149 and 91 (unaudited), respectively.

Employment Agreements

The Company has entered into employment agreements with certain officers that provide for the continuation of salary and certain benefits for a specified period of time under certain conditions. Under the terms of the agreements, these payments could occur in the event of a change in control of the Company, as defined, along with other specific conditions.

Stock Options

The Company has a qualified stock option plan for Directors and key employees of the Company (Stock Option Plan) and has reserved 400,000 shares of common stock that may be issued pursuant to the Stock Option Plan. The option exercise price per share is the fair value of a share on the date of grant, and the stock options become exercisable in a series of three equal and successive annual installments, with the first one-third vesting at the end of one year measured from the grant date of the option. Each option grant expires within ten years of the grant date. The options are nontransferable and are forfeited upon termination of employment. The Company has a policy to satisfy option exercises from authorized but unissued shares.

The fair value of each option award is estimated on the date of grant using a Black-Scholes option valuation model that utilizes various assumptions. Expected volatility is based on the historical volatility of the Company’s stock and other factors. The Company uses historical data to estimate option exercises and employee terminations. The expected term of options granted represents the period of time the options are expected to be outstanding. The risk-free rate for periods within the contractual life of the option is based on the U.S. Treasury yield curve in effect at the time of the grant.

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First Internet Bancorp

The following is an analysis of activity in the Stock Option Plan for the period ended September 30, 2012 and the stock options outstanding at the end of the period:

	September 30, 2012
					Weighted-
			Weighted-		Average	Aggregate
			Average		Remaining Life	Intrinsic
	Shares		Exercise Price		(In Years)	Value
	(Unaudited)

Outstanding, beginning of year	90,000		$	19.38
Expired	(90,000	)	19.38

Outstanding, end of year	—				—	$	—

Exercisable, end of year	—				—	$	—

The following is an analysis of activity in the Stock Option Plan for the year ended December 31, 2011 and the stock options outstanding at the end of the year:

	December 31, 2011
					Weighted-
			Weighted-		Average	Aggregate
			Average		Remaining Life	Intrinsic
	Shares		Exercise Price		(In Years)	Value

Outstanding, beginning of year	202,500		$	21.81
Expired	(112,500	)	23.75

Outstanding, end of year	90,000		19.38		0.3	$	—

Exercisable, end of year	90,000		19.38		0.3	$	—

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First Internet Bancorp

Directors Deferred Stock Plan

The Company has adopted a stock compensation plan for members of the Board of Directors (Directors Deferred Stock Plan). The Company has reserved 120,000 shares of common stock that may be issued pursuant to the Directors Deferred Stock Plan. During 2011, this amount was increased from 60,000 shares. The plan provides directors the option to elect to receive up to 100% of their annual retainer in either common stock or deferred stock rights. Monthly meeting fees are paid in cash. The deferred stock right is payable to the director on the basis of one common share for each deferred stock right. Director compensation totaled $108 and $114 in 2011 and 2010, respectively, of which $60 and $60 in 2011 and 2010, respectively, were paid in either common stock or deferred stock rights. Director compensation totaled $104 and $82 (unaudited) during the nine months ended September 30, 2012 and 2011, of which $60 and $45 (unaudited) in the nine months ended September 30, 2012 and 2011 were paid in either common stock or deferred stock rights. The common stock and deferred stock rights are granted on January 1 at fair value and vest from January 1 st until December 31 st . The Company recognizes compensation expense ratably over the vesting period based upon the fair value of the stock on the grant date.

The following is an analysis of deferred stock rights and common stock related to the Directors Deferred Stock Plan:

	September 30, 2012		December 31, 2011
	Deferred	Common	Deferred	Common
	Rights	Shares	Rights	Shares
	(Unaudited)

Outstanding, beginning of period	37,629		32,173
Granted	7,808		5,456
Exercised	—		—

Outstanding, end of period	45,437		37,629

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First Internet Bancorp

Note 10: Income Taxes

The provision (credit) for income taxes consists of the following:

	Nine Months Ended September 30,			Years Ended December 31,
	2012			2011			2010
	(Unaudited)

Current	$	2,165		$	1,711		$	368
Deferred	(744		)	(938		)	1,328

Total	$	1,421		$	773		$	1,696

Income tax provision (credit) is reconciled to the 34% statutory rate applied to pre-tax income as follows:

	Nine Months Ended September 30,			Years Ended December 31,
	2012			2011			2010
	(Unaudited)

Statutory rate times pre-tax income	$	1,861		$	1,346		$	2,261
Add (subtract) the tax effect of:
Income from tax-exempt securities	(402		)	(525		)	(537		)
State income tax, net of federal tax effect	35			31			61
Bank-owned life insurance	(96		)	(99		)	(100		)
Other differences	23			20			11

Total income taxes	$	1,421		$	773		$	1,696

F-41

First Internet Bancorp

The net deferred tax asset consists of the following:

	September 30,			December 31,
	2012			2011			2010
	(Unaudited)

Deferred tax assets (liabilities)
Allowance for loan losses	$	2,240		$	1,995		$	2,423
Unrealized (gain) loss on available for sale securities	(1,281		)	(664		)	1,129
Other than temporarily impaired securities	441			432			428
Mark to market adjustments	627			17			(1,543		)
Depreciation	(209		)	(260		)	(249		)
Deferred compensation	439			409			337
Deferred loan origination fees	(112		)	(59		)	(50		)
AMT credit carry forward	—			—			463
Prepaid assets	(81		)	(89		)	(65		)
Other	265			421			184

Total deferred tax assets, net	$	2,329		$	2,202		$	3,057

Note 11: Related Party Transactions

At September 30, 2012, December 31, 2011 and 2010, certain directors, executive officers and/or companies in which these individuals had a 10% or more beneficial ownership were indebted to the Company as follows:

	Nine Months Ended September 30,			Years Ended December 31,
	2012			2011			2010
	(Unaudited)

Beginning balance	$	50		$	241		$	291
New loans	—			—			—
Repayments	(1		)	(191		)	(50		)

Ending balance	$	49		$	50		$	241

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First Internet Bancorp

In management’s opinion, such loans and other extensions of credit and deposits were made in the ordinary course of business and were made on substantially the same terms (including interest rates and collateral) as those prevailing at the time for comparable transactions with other persons. Further, in management’s opinion, these loans did not involve more than normal risk of collectability or present other unfavorable features.

Deposits from related parties held by the Company at September 30, 2012, December 31, 2011 and 2010 totaled $13,946 (unaudited), $10,353 and $10,738, respectively.

The Company’s card processing services are provided by OneBridge, which is controlled by a shareholder of the Company. Total expenses incurred related to card processing provided by OneBridge during the years ended December 31, 2011 and 2010, were approximately $128 and $150, respectively, and were $86 and $98 (unaudited) for the nine months ended September 30, 2012 and 2011.

Note 12: Regulatory Capital Requirements

The Company is subject to regulatory capital requirements administered by federal banking regulatory agencies. Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the Company’s consolidated financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Company must meet specific capital guidelines that involve quantitative measures of the Company’s assets, liabilities and certain off-balance sheet items as calculated under regulatory accounting practices. The Company’s capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings and other factors. Furthermore, the Company’s regulators could require adjustments to regulatory capital not reflected in these financial statements.

Quantitative measures that have been established by regulation to ensure capital adequacy require the Company to maintain minimum capital amounts and ratios (set forth in the table below) of total and Tier 1 capital (as defined in the regulations) to risk-weighted assets (as defined) and of Tier 1 capital (as defined) to average assets (as defined).

F-43

First Internet Bancorp

To be categorized as well capitalized, the Company must maintain minimum total risk-based, Tier 1 risk-based and Tier 1 leverage ratios as set forth in the table. As of September 30, 2012 (unaudited), December 31, 2011 and 2010, the most recent notification from the FDIC categorized the Company as well capitalized under the regulatory framework for prompt corrective action. There are no conditions or events since that notification that management believes have changed the Company’s categories.

									Minimum to be
					Minimum				Well Capitalized
					Capital				Under Prompt
	Actual				Requirement				Corrective Actions
	Amount		Ratio		Amount		Ratio		Amount		Ratio

As of September 30, 2012 (Unaudited):
Total capital (to risk-weighted assets)
Consolidated	$	60,060	11.2	%	$	42,952	8.0	%	N/A		N/A
Bank	58,875		11.0	%	42,926		8.0	%	$	53,658	10.0	%
Tier 1 capital (to risk-weighted assets)
Consolidated	53,628		10.0	%	21,476		4.0	%	N/A		N/A
Bank	52,443		9.8	%	21,463		4.0	%	32,195		6.0	%
Tier 1 capital (to average assets)
Consolidated	53,628		8.7	%	24,637		4.0	%	N/A		N/A
Bank	52,443		8.5	%	24,625		4.0	%	30,782		5.0	%
As of December 31, 2011:
Total capital (to risk-weighted assets)
Consolidated	$	55,088	12.4	%	$	35,530	8.0	%	N/A		N/A
Bank	53,793		12.2	%	35,425		8.0	%	$	44,281	10.0	%
Tier 1 capital (to risk-weighted assets)
Consolidated	49,516		11.2	%	17,765		4.0	%	N/A		N/A
Bank	48,237		10.9	%	17,712		4.0	%	26,569		6.0	%
Tier 1 capital (to average assets)
Consolidated	49,516		8.7	%	22,660		4.0	%	N/A		N/A
Bank	48,237		8.5	%	22,603		4.0	%	28,254		5.0	%
As of December 31, 2010:
Total capital (to risk-weighted assets)
Consolidated	$	51,361	12.2	%	$	33,779	8.0	%	N/A		N/A
Bank	49,929		11.9	%	33,654		8.0	%	$	42,067	10.0	%
Tier 1 capital (to risk-weighted assets)
Consolidated	46,059		10.9	%	16,889		4.0	%	N/A		N/A
Bank	44,646		10.6	%	16,827		4.0	%	25,240		6.0	%
Tier 1 capital (to average assets)
Consolidated	46,059		9.4	%	19,583		4.0	%	N/A		N/A
Bank	44,646		9.1	%	19,532		4.0	%	24,415		5.0	%

F-44

First Internet Bancorp

Note 13: Commitments and Contingencies

In the normal course of business, the Company makes various commitments to extend credit which are not reflected in the accompanying consolidated financial statements. At September 30, 2012, December 31, 2011 and 2010, the Company had outstanding loan commitments totaling approximately $30,388 (unaudited), $23,840 and $14,714, respectively.

As of December 31, 2011, the Company leased its office facility under an operating lease expiring July 2018. As of September 30, 2012, the Company leases its office facility under an amended operating lease expiring January 2021. The lease is subject to additional rentals based on building operating costs and property taxes in excess of specified amounts. Future minimum cash lease payments are as follows:

	September 30,		December 31,
	2012		2011
	(Unaudited)

2012	$	88	$	247
2013	473		299
2014	492		304
2015	501		310
2016	509		315
Thereafter	2,166		509
	$	4,229	$	1,984

Note 14: Fair Value of Financial Instruments

ASC Topic 820, Fair Value Measurements , defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Topic 820 also specifies a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The standard describes three levels of inputs that may be used to measure fair value:

Level 1 Quoted prices in active markets for identical assets or liabilities

Level 2 Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities

Level 3 Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities

F-45

First Internet Bancorp

Following is a description of the valuation methodologies and inputs used for assets measured at fair value on a recurring basis and recognized in the accompanying consolidated balance sheets, as well as the general classification of such assets pursuant to the valuation hierarchy.

Securities

Where quoted market prices are available in an active market, securities are classified within Level 1 of the valuation hierarchy. Level 1 securities include highly liquid mutual funds. If quoted market prices are not available, then fair values are estimated by using pricing models, quoted prices of securities with similar characteristics or discounted cash flows.

Level 2 securities include U.S. government-sponsored enterprises, mortgage and asset-backed securities and obligations of state, municipals 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 rather relying on the investment securities’ relationship to other benchmark quoted investment securities.

In certain cases where Level 1 or Level 2 inputs are not available, securities are classified within Level 3 of the hierarchy and include certain other securities. 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 and volatility. Rating agency and industry research reports as well as default and deferral activity are reviewed and incorporated into the calculation.

The following tables present the fair value measurements of securities available for sale recognized in the accompanying consolidated balance sheets measured at fair value on a recurring basis and the level within the fair value hierarchy in which the fair value measurements fall at September 30, 2012, December 31, 2011 and 2010:

			September 30, 2012
			Fair Value Measurements Using
			Quoted Prices
			in Active		Significant
			Markets for		Other		Significant
			Identical		Observable		Unobservable
	Fair		Assets		Inputs		Inputs
	Value		(Level 1)		(Level 2)		(Level 3)
	(Unaudited)

U.S. government-sponsored enterprises	$	19,936	$	—	$	19,936	$	—
Municipals	43,584		—		43,584		—
Mortgage-backed and asset-backed securities - government-sponsored enterprises	89,511		—		89,511		—
Mortgage-backed and asset-backed securities - private labeled	3,643		—		3,643		—
Other securities	14,649		1,571		12,228		850

	$	171,323	$	1,571	$	168,902	$	850

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First Internet Bancorp

			December 31, 2011
			Fair Value Measurements Using
			Quoted Prices
			in Active		Significant
			Markets for		Other		Significant
			Identical		Observable		Unobservable
	Fair		Assets		Inputs		Inputs
	Value		(Level 1)		(Level 2)		(Level 3)

U.S. government-sponsored enterprises	$	25,502	$	—	$	25,502	$	—
Municipals	42,761		—		42,761		—
Mortgage-backed and asset-backed securities - government-sponsored enterprises	69,790		—		69,790		—
Mortgage-backed and asset-backed securities - private labeled	5,445		—		5,445		—
Other securities	5,772		1,541		3,761		470

	$	149,270	$	1,541	$	147,259	$	470

			December 31, 2010
			Fair Value Measurements Using
			Quoted Prices
			in Active		Significant
			Markets for		Other		Significant
			Identical		Observable		Unobservable
	Fair		Assets		Inputs		Inputs
	Value		(Level 1)		(Level 2)		(Level 3)

U.S. government-sponsored enterprises	$	43,393	$	—	$	43,393	$	—
U.S. government treasuries	2,332		—		2,332		—
Municipals	40,764		—		40,764		—
Mortgage-backed and asset-backed securities - government-sponsored enterprises	39,981		—		39,981		—
Mortgage-backed and asset-backed securities - private labeled	9,000		—		9,000		—
Other securities	1,466		1,012		—		454

	$	136,936	$	1,012	$	135,470	$	454

F-47

First Internet Bancorp

The following is a reconciliation of the beginning and ending balances of recurring fair value measurements recognized in the accompanying consolidated balance sheets using significant unobservable (Level 3) inputs:

	Securities Available for Sale

Balance, January 1, 2010	$	1,609
Total realized and unrealized gains and losses
Included in net income	(421		)
Included in other comprehensive loss	(734		)

Balance, December 31, 2010	454
Total realized and unrealized gains and losses
Included in net income	(132		)
Included in other comprehensive loss	148

Balance, December 31, 2011	470
Total realized and unrealized gains and losses
Included in net income (unaudited)	(112		)
Included in other comprehensive loss (unaudited)	492

Balance, September 30, 2012 (Unaudited)	$	850

Following is a description of the valuation methodologies and inputs used for assets measured at fair value on a nonrecurring basis and recognized in the accompanying consolidated balance sheets, as well as the general classification of such assets pursuant to the valuation hierarchy.

Impaired Loans (collateral dependent)

Loans for which it is probable that the Company will not collect all principal and interest due according to contractual terms are measured for impairment. Allowable methods for determining the amount of impairment include estimating fair value using the fair value of the collateral for collateral dependent loans.

If the impaired loan is identified as collateral dependent, then the fair value method of measuring the amount of impairment is utilized. This method requires obtaining a current independent appraisal of the collateral and applying a discount factor to the value.

Impaired loans that are collateral dependent are classified within Level 3 of the fair value hierarchy when impairment is determined using the fair value method.

F-48

First Internet Bancorp

The following tables present the fair value measurements of impaired loans recognized in the accompanying consolidated balance sheets measured at fair value on a nonrecurring basis and the level within the fair value hierarchy in which the fair value measurements fall at September 30, 2012, December 31, 2011 and 2010:

September 30, 2012

Fair Value Measurements Using

Quoted Prices

in Active

Significant

Markets for

Other

Significant

Identical

Observable

Unobservable

Fair

Assets

Inputs

Value

(Level 1)

(Level 2)

(Level 3)

(Unaudited)

Impaired loans

5,463

—

5,463

December 31, 2011

Fair Value Measurements Using

Quoted Prices

in Active

Significant

Markets for

Other

Significant

Identical

Observable

Unobservable

Fair

Assets

Inputs

Value

(Level 1)

(Level 2)

(Level 3)

Impaired loans

7,309

—

7,309

December 31, 2010

Fair Value Measurements Using

Quoted Prices

in Active

Significant

Markets for

Other

Significant

Identical

Observable

Unobservable

Fair

Assets

Inputs

Value

(Level 1)

(Level 2)

(Level 3)

Impaired loans

4,330

—

4,330

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First Internet Bancorp

Unobservable (Level 3) Inputs

The following tables present quantitative information about unobservable inputs used in recurring and nonrecurring Level 3 fair value measurements other than goodwill.

	Fair Value at
	September 30, 2012		Valuation Technique	Unobservable Inputs	Weighted Average
	(Unaudited)

Collateral dependent impaired loans	$	5,463	Market comparable properties	Marketability discount	22%

	Fair Value at
	December 31, 2011		Valuation Technique	Unobservable Inputs	Weighted Average

Collateral dependent impaired loans	$	7,309	Market comparable properties	Marketability discount	20%

The following methods were used to estimate the fair value of all other financial instruments recognized in the accompanying consolidated balance sheets at amounts other than fair value:

Cash and Cash Equivalents

For these instruments, the carrying amount is a reasonable estimate of fair value.

Loans Held For Sale

The fair value of these financial instruments approximates carrying value.

Loans Receivable

The fair value of loans receivable is estimated by discounting future cash flows using current rates at which similar loans would be made to borrowers with similar credit ratings and remaining maturities.

Accrued Interest Receivable

The fair value of these financial instruments approximates carrying value.

Federal Home Loan Bank Stock

The carrying amount approximates fair value.

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First Internet Bancorp

Deposits

The fair value of noninterest-bearing demand deposits and savings and NOW accounts is the amount payable as of the reporting date. The fair value of fixed maturity certificates of deposit is estimated using rates currently offered for deposits of similar remaining maturities.

FHLB Advances

The fair value of fixed rate advances is estimated using rates currently offered for similar remaining maturities.

Accrued Interest Payable

The fair value of these financial instruments approximates carrying value.

Commitments

The fair value of commitments to extend credit are based on fees currently charged to enter into similar agreements with similar maturities and interest rates. The Company determined that the fair value of commitments was zero based on the contractual value of outstanding commitments at December 31, 2011 and 2010.

The following schedules includes the carrying value and estimated fair value of all financial assets and liabilities at September 30, 2012 and December 31, 2011:

	September 30, 2012
	Fair Value Measurements Using
			Quoted Prices
			In Active		Significant
			Market for		Other		Significant
			Identical		Observable		Unobservable
	Carrying		Assets		Inputs		Inputs
	Amount		(Level 1)		(Level 2)		(Level 3)
	(Unaudited)

Cash and cash equivalents	$	24,174	$	24,174	$	—	$	—
Securities available for sale	171,323		1,571		168,902		850
Loans held for sale	55,490		—		55,490		—
Loans receivable - net	348,839		—		—		348,371
Accrued interest receivable	2,263		2,263		—		—
FHLB stock	2,943		2,943		—		—

Deposits	522,659		282,711		—		247,197
FHLB advances	40,658		—		43,229		—
Accrued interest payable	98		98		—		—

F-51

First Internet Bancorp

	December 31, 2011
	Fair Value Measurements Using
			Quoted Prices
			In Active		Significant
			Market for		Other		Significant
			Identical		Observable		Unobservable
	Carrying		Assets		Inputs		Inputs
	Amount		(Level 1)		(Level 2)		(Level 3)
Cash and cash equivalents	$	34,778	$	34,778	$	—	$	—
Securities available for sale	149,270		1,541		147,259		470
Loans held for sale	45,091		—		45,091		—
Loans receivable - net	329,570		—		—		322,557
Accrued interest receivable	2,129		2,129		—		—
FHLB stock	2,943		2,943		—		—

Deposits	486,665		253,210		—		240,482
FHLB advances	40,573		—		43,526		—
Accrued interest payable	120		120		—		—

The following schedule includes the carrying value and estimated fair value of all financial assets and liabilities at December 31, 2010:

	December 31, 2010
	Carrying		Fair
	Amount		Value
Cash and cash equivalents	$	32,417	$	32,417
Securities available for sale	136,936		136,936
Loans held for sale	5,008		5,008
Loans receivable - net	299,545		286,218
Accrued interest receivable	2,095		2,095
FHLB stock	3,259		3,259

Deposits	422,703		429,440
FHLB advances	30,455		32,645
Accrued interest payable	126		126

F-52

First Internet Bancorp

Note 15: Condensed Financial Information (Parent Company Only)

Presented below is condensed financial information as to financial position, results of operations and cash flows of the Company:

Condensed Balance Sheets

	September 30,		December 31,
	2012		2011		2010
	(Unaudited)
Assets
Cash and cash equivalents	$	1,061	$	152	$	247
Investment in common stock of subsidiaries	59,510		54,144		47,274
Other assets	313		1,292		1,542

Total assets	$	60,884	$	55,588	$	49,063

Liabilities and Equity
Other liabilities	$	189	$	165	$	166

Shareholders’ equity	60,695		55,423		48,897

Total liabilities and equity	$	60,884	$	55,588	$	49,063

F-53

First Internet Bancorp

Condensed Statements of Income

	Nine Months Ended September 30,						Years Ended December 31,
	2012			2011			2011			2010
	(Unaudited)
Expenses
Loss on asset disposal	$	—		$	—		$	368		$	—
Other expenses	236			197			258			220
Total expenses	236			197			626			220

Loss Before Income Tax and Equity in Undistributed Net Income of Subsidiaries	(236		)	(197		)	(626		)	(220		)

Income Tax Benefit	(82		)	(69		)	(221		)	(78		)

Loss Before Equity in Undistributed Net Income of Subsidiaries	(154		)	(128		)	(405		)	(142		)

Equity in undistributed net income of subsidiaries	4,206			2,253			3,591			5,097

Net Income	$	4,052		$	2,125		$	3,186		$	4,955

F-54

First Internet Bancorp

Condensed Statements of Cash Flows

	Nine Months Ended September 30,						Years Ended December 31,
	2012			2011			2011			2010
	(Unaudited)
Operating Activities
Net income	$	4,052		$	2,125		$	3,186		$	4,955
Items not requiring (providing) cash	(3,143		)	(2,193		)	(3,281		)	(5,901		)
Net cash provided by (used in) by operating activities	909			(68		)	(95		)	(946		)

Cash and Cash Equivalents at Beginning of Period	152			247			247			1,193

Cash and Cash Equivalents at End of Period	$	1,061		$	179		$	152		$	247

Note 16: Recent Accounting Pronouncements

In May, 2011, FASB issued ASU No. 2011-04. The amendments in this ASU generally represent clarifications of Topic 820, but also include some instances where a particular principle or requirement for measuring fair value or disclosing information about fair value measurements has changed. This ASU results in common principles and requirements for measuring fair value and for disclosing information about fair value measurements in accordance with U.S. GAAP and IFRS. The amendments in this ASU are to be applied prospectively. For public entities, the amendments are effective during interim and annual periods beginning after December 15, 2011. The Company has included the required disclosure in the Consolidated Financial Statements in the Form 10 beginning with the quarter ended September 30, 2012.

F-55

First Internet Bancorp

In June 2011, FASB issued ASU No. 2011-05. Under the amendments in this ASU, an entity has the option to present the total of comprehensive income, the components of net income, and the components of other comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements. In both choices, an entity is required to present each component of net income along with total net income, each component of other comprehensive income along with a total for other comprehensive income, and a total amount for comprehensive income. This ASU eliminates the option to present the components of other comprehensive income as part of the statement of changes in stockholders’ equity. The amendments in this ASU do not change the items that must be reported in other comprehensive income or when an item of other comprehensive income must be reclassified to net income. The amendments in this ASU should be applied retrospectively. For public entities, the amendments are effective for fiscal years, and interim periods within those years, beginning after December 15, 2011. The Company has included the required disclosure in the Consolidated Financial Statements in the Form 10 beginning with the quarter ended September 30, 2012.

In September 2011, the FASB issued ASU No. 2011-08, Intangibles-Goodwill and Other (Topic 350): Testing Goodwill for Impairment . The amendments in this ASU will allow an entity to first assess qualitative factors to determine whether it is necessary to perform the two-step quantitative goodwill impairment test. Under these amendments, an entity would not be required to calculate the fair value of a reporting unit unless the entity determines, based on a qualitative assessment, that it is more likely than not that its fair value is less than its carrying amount. The amendments include a number of events and circumstances for an entity to consider in conducting the qualitative assessment. ASU 2011-08 is effective for annual and interim goodwill impairment tests performed for fiscal years beginning after December 15, 2011. Early adoption is permitted, including for annual and interim goodwill impairment tests performed as of a date before September 15, 2011, if an entity’s financial statements for the most recent annual or interim period have not yet been issued. The Company adopted the methodologies prescribed by this ASU effective January 1, 2012. Adoption of this ASU did not have a material effect on the Company’s financial position or results of operations.

ASU No. 2011-12 defers the effective date of the requirement to present separate line items on the income statement for reclassification adjustments of items out of accumulated other comprehensive income into net income for all periods presented. The ASU does not change the other requirements of FASB ASU No. 2011-05, Presentation of Comprehensive Income . Entities are still required to present reclassification adjustments within other comprehensive income either on the face of the statement that reports other comprehensive income or in the notes to the financial statements. The requirement to present comprehensive income in either a single continuous statement or two consecutive condensed statements remains for both annual and interim reporting. The deferral of the requirement for the presentation of reclassification adjustments is intended to be temporary until the FASB reconsiders the operational concerns and needs of financial statement users. The Company has included the required disclosure in the Consolidated Financial Statements in the Form 10 beginning with the quarter ended September 30, 2012.

F-56

First Internet Bancorp

In December 2011, FASB issued ASU 2011-11. The objective of this Update is to provide enhanced disclosures that will enable users of financial statements to evaluate the effect or potential effect of netting arrangements on an entity’s financial position. This includes the effect or potential effect of rights of setoff associated with an entity’s recognized assets and recognized liabilities within the scope of this Update. The amendments require enhanced disclosures by requiring improved information about financial instruments and derivative instruments that are either (1) offset in accordance with either Section 210-20-45 or Section 815-10-45 or (2) subject to an enforceable master netting arrangement or similar agreement, irrespective of whether they are offset in accordance with either Section 210-20-45 or Section 815-10-45. An entity is required to apply the amendments for annual reporting periods beginning on or after January 1, 2013, and interim periods within those annual periods. An entity should provide the disclosures required by those amendments retrospectively for all comparative periods presented. The Company will adopt the methodologies prescribed by this ASU by the date required, and does not anticipate that the ASU will have a material effect on its financial position or results of operations.

Note 17: Subsequent Events

The Company’s Board of Directors declared a special cash dividend of $0.25 per share payable December 28, 2012, to holders of the Company’s common stock on December 10, 2012.

F-57

Exhibit 3.1

ARTICLES OF INCORPORATION

FIRST INTERNET BANCORP

The undersigned, desiring to form a corporation (the “Corporation”) pursuant to the provisions of the Indiana Business Corporation Law, as amended (the “Law”), executes the following Articles of Incorporation.

ARTICLE I
NAME OF CORPORATION

Section 1 . Name . The name of the Corporation is First Internet Bancorp.

ARTICLE II
REGISTERED AGENT AND OFFICE; PRINCIPAL OFFICE

Section 1 . Registered Agent . The name of the Corporation’s initial registered agent for service of process is John E. Taylor, Esq.

Section 2 . Registered Office . The street address of the Corporation’s initial registered office for service of process is 2700 Market Tower, 10 West Market Street, Indianapolis, Indiana 46204.

Section 3 . Principal Office . The street address of the Corporation’s initial principal office is 7820 Innovation Boulevard, Suite 210, Indianapolis, Indiana 46278.

ARTICLE III
AUTHORIZED SHARES

Section 1 . Amount . The Corporation has the authority to issue fifty million (50 000 000) shares, without par value.

Section 2 . Preferred Stock .

A. The Corporation has the authority to issue up to 5,000,000 of the initial 50,000,000 shares as a separate and single class of shares known as Preferred Stock, which may be issued in one or more series. The Board of Directors of the Corporation is vested with the authority to determine and state the designations and the preferences, limitations, relative rights and voting rights, if any, of each of such series by the adoption and filing in accordance with the Law, before the issuance of any shares of such series, of an amendment or amendments to these Articles determining the terms of such series, which amendment need not be approved by the shareholders or the holders of any class or series of shares except as provided by the Law (“Preferred Stock Amendment”). All shares of Preferred Stock of the same series shall be identical with each other in all respects. Except as otherwise provided herein, the holders of shares of Preferred Stock have the right, voting separately by class or by series to cast one vote for each duly authorized, issued and outstanding share of Preferred Stock held by them upon each question or matter in respect of which, under the Law, such holders are entitled to vote by class or

by series. The holders of a series of Preferred Stock shall also have such other voting rights, if any, as may have been provided for such series in a Preferred Stock Amendment.

B. Non-Voting Common Shares . The Corporation has the authority to issue up to 86,221 shares of the 5,000,000 shares of Preferred Stock, to be designated “Non-Voting Common Stock” (“Non-Voting Shares”) with the preferences, limitations, and relative rights set forth below.

(1) Dividend Rights . Subject to the rights of any class or series of shares having a preference over the Common Stock with respect to dividends, if the Board of Directors of the Corporation shall elect to pay or declare and set apart for payment any dividend or other distribution on any Common Stock out of any funds legally available therefor, the holder of each Non-Voting Share shall be entitled at such time to receive a dividend out of such legally available funds equal to the dividend payable with respect to each share of Common Stock.

If the Board of Directors of the Corporation shall elect to pay or declare and set apart for payment any dividend or other distribution on any Common Stock payable in shares of Common Stock, then the shares of Common Stock so issued to the holders of Non-Voting Shares in any such dividend or distribution, shall be Non-Voting Shares, and each holder of a Non-Voting Share shall be entitled to receive in any such dividend or distribution the same number of shares of Common Stock as are received by each holder of a share of Common Stock and on the same terms, except that the shares of Common Stock so issued or issuable to holders of Non-Voting Shares shall be Non-Voting Shares.

(2) Liquidation Rights . Subject to the rights of any class or series of shares having a preference over the Common Stock with respect to the distribution of the proceeds of the liquidation of the Corporation, in the event of a voluntary or involuntary liquidation, dissolution, or winding up of the Corporation, the holders of the Common Stock and the holders of the Non-Voting Shares shall share ratably, on a per share basis, in the assets of the Corporation legally available therefor, such that the holders of Non-Voting Shares shall be entitled to receive, out of the assets of the Corporation legally available therefor, an amount per Non-Voting Share equal to the amount distributed per share of Common Stock.

(3) Conversion .

(a) Definitions . The following terms shall have the following meanings:

“ Business Day ” means any day other than a Saturday or Sunday or a day on which commercial banks are not authorized or required to close in Indianapolis.

“ Person ” means any individual, corporation, partnership, limited liability company, joint venture, association, joint stock company, trust, estate, unincorporated organization or government (or any agency or political subdivision thereof).

“ Securities Act ” means the Securities Act of 1933, as amended, or any successor statute.

(b) Optional Conversion of Non-Voting Common . Each outstanding Non-Voting Share may be converted into one fully paid and nonassessable share of Common Stock by any third party transferee of such Non-Voting Shares which acquires the shares in the following manner:

(i) in a widely distributed public offering;

(ii) pursuant to Rule 144 of the Securities Act;

(iii) in blocks representing no more than two percent (2%) of the total voting interests of the Corporation to any single Person or related Persons;

(iv) To a third party that has already acquired control of a majority of the voting interests of the Corporation without reliance upon the transfer of the Non-Voting Shares; or

(v) in any transaction approved by the Federal Reserve.

(c) Notice . The Non-Voting Shares shall be convertible into Common Shares by written notice to such effect from the transferee to the Corporation specifying:

(i) the name of the registered holder of the Non-Voting Shares to be converted;

(ii) the number of Non-Voting Shares to be converted;

(iii) The certificate number of the certificate representing such Non-Voting Shares (or, if no stock certificate has then been issued to such holder, a statement that such notice is accompanied by a written statement pursuant to Section B(3)( d) below);

(iv) The date on which conversion is to take place (the “Conversion Date”), which shall be a Business Day at least two (2) Business Days and not more than twenty (20) Business Days after the date of such notice;

(v) the name(s) and addressees) of the Person(s) in whose name(s) the shares of Common Stock to be issued upon conversion are to be registered, if other than such holder; and

(vi) the denominations in which certificates for the shares of Common Stock to be issued are required to be issued.

An election by a holder of Non-Voting Shares to convert pursuant to Section B(3)(b) may be rescinded by written notice delivered to the Corporation at any time prior to the Conversion Date.

(d) Surrendered Non-Voting Common Share Certificate . On or prior to the Conversion Date, the holder of the Non-Voting Shares to be converted

hereunder shall surrender or deliver to the Corporation at its principal office, (i) the certificate(s) representing such Non-Voting Shares (the “Surrendered Non-Voting Share Certificate”), or (ii) if no certificate(s) for such shares has at the time been issued to such holder by the Corporation, a written statement of such holder to the effect that it has not yet received such certificate and instructing the Corporation to treat such certificate, when and if issued, as a Surrendered Non-Voting Share Certificate (the delivery of such statement to be deemed, for purposes of this Section B(3)(d), to constitute a surrender of the Surrendered Non-Voting Share Certificate).

(e) Effectiveness of Conversion . Subject to a rescission of the election to convert pursuant to Section B(3)(c) above, on the Conversion Date, each Person to whom any shares of Common Stock are issuable upon conversion hereunder shall become the holder of record thereof and the holder of the Non-Voting Shares then converted shall cease to be the holder of record of such shares, regardless of whether certificates representing such shares of Common Stock have then been issued and delivered pursuant to Section B(3)(f) below or the Surrendered Non-Voting Share Certificate has been delivered to the Corporation pursuant to Section B(3)(d) above.

(f) Delivery of Stock Certificates . As promptly as practicable after the Conversion Date, the Corporation at its expense will issue and deliver to the holder of the shares of Common Stock issued upon a conversion of Non-Voting Shares hereunder, or as such holder may direct, (a) a certificate or certificates for the number of shares of Common Stock issued upon such conversion and (b) in the case of the conversion of less than all of the Non-Voting Shares represented by a Surrendered Non-Voting Share Certificate, a new certificate for a number of Non-Voting Shares equal to the unconverted shares represented by the Surrendered Non-Voting Share Certificate (such new certificate to be dated so that there will be no loss of dividends, whether then declared or undeclared, on the unconverted Non-Voting Shares represented by such Surrendered Non-Voting Share Certificate); provided, however, that the Corporation shall not be obligated to issue any certificate for shares of Common Stock and/or Non-Voting Shares pursuant to this Section B(3)(f) unless and until the holder of Non-Voting Shares to be converted shall have delivered the Surrendered Non-Voting Share Certificate to the Corporation.

(g) Other Provisions .

(i) Stock Reserved for Issuance . The Corporation will at all times reserve and keep available out of its authorized but unissued shares of Common Stock for the purpose of issuance upon the conversion of Non-Voting Shares as provided in this Section, such number of shares of Common Stock as are then issuable pursuant to this Section upon the conversion of all then outstanding Non-Voting Shares into shares of Common Stock hereunder. Notwithstanding the foregoing, if, at any time, there shall be an insufficient number of authorized but unissued shares of Common Stock available for issuance upon conversion of Non- Voting Shares hereunder, the Corporation will take all action necessary to propose and recommend to the shareholders of the Corporation that these Articles of Incorporation be amended to authorize additional shares

in an amount sufficient to provide adequate reserves of shares of Common Stock for issuance upon such conversion, including the diligent solicitation of votes and proxies to vote in favor of such an amendment. All shares of Common Stock which are issuable upon conversion hereunder will, when issued, be duly and validly issued, fully paid and nonassessable.

(ii) Issuance Expenses . The issuance of certificates for shares of Common Stock upon conversion of Non-Voting Shares pursuant to this Section will be made without charge to any original holder of any N on- Voting Shares for any issuance tax in respect thereof or any other cost incurred by the Corporation in connection with such conversion and the related issuance of shares of Common Stock, provided that the Corporation will not be required to pay any such taxes or costs which may be payable in respect of any such conversion by any Person other than the record holder or in respect of any transfer involving the issuance and delivery of any certificate in a name other than that of the registered holder of the shares so converted.

(h) Closing of Books . The Corporation will at no time close its transfer books against the transfer of any shares of Common Stock issued or issuable upon the conversion pursuant to this Section in any manner which interferes with the timely conversion of Non-Voting Shares hereunder.

(i) Voting Rights . The holders of Non-Voting Shares shall have no right to vote, except as otherwise required by the Law.

Section 3 . Common Stock . Of the 50,000,000 shares the Corporation has authority to issue, 45,000,000 constitute a separate class of shares known as Common Stock, which shall have no par value, shall not be issued in series, and shall have the same preferences, limitations, and relative rights. The class of Common Stock authorized hereby has unlimited voting rights and is entitled to receive the net assets of the Corporation upon dissolution. The holders of shares of Common Stock have the right, voting separately by class, to cast one vote for each duly authorized issued and outstanding share of Common Stock held by them upon each question or matter in respect of which, under the Law, such holders are entitled to vote by class. Such holders also have the right to cast one vote for each duly authorized, issued and outstanding share of Common Stock held by them upon each question or matter submitted generally to the holders of shares of the Corporation in respect of which, under the Law, voting by class or by series is not required (a “General Voting Matter”). If and to the extent voting rights with respect to any General Voting Matter are provided in a Preferred Stock Amendment to the holders of a series of Preferred Stock the holders of shares of Common Stock shall have the right to vote on such General Voting Matter either in common with, or separately by class from, the holders of such series of Preferred Stock depending on the provisions of such Preferred Stock Amendment.

Section 4 . Share Dividends . Shares of one (1) series may be issued as a share dividend in respect of shares of another series.

ARTICLE IV
INCORPORATOR

The name and post office address of the incorporator is David B. Becker, 7820 Innovation Boulevard, Suite 210, Indianapolis, Indiana 46278.

ARTICLE V
PURPOSE

Section 1 . Purpose . The purposes for which the Corporation is formed are to act as holding company and to engage in any business or businesses permitted by the Law, the Bank Holding Company Act of 1956, as amended, the regulations of the Board of Governors of the Federal Reserve System, and the other laws of the United States of America applicable to bank holding companies.

ARTICLE VI
DIRECTORS

Section 1 . Number of Directors . The number of Directors shall not be less than three (3) nor more than twenty-five (25). The actual number of Directors shall be fixed from time to time by resolution of the Board of Directors. The By-laws may provide for staggered terms for the Board of Directors.

Section 2 . Initial Board of Directors . The names and post office addresses of the initial Board of Directors of the Corporation are:

Name		Address

David B. Becker		7820 Innovation Boulevard, Suite 210 Indianapolis, Indiana 46278

David R. Lovejoy		7820 Innovation Boulevard, Suite 210 Indianapolis, Indiana 46278

Jerry Williams		7820 Innovation Boulevard, Suite 210 Indianapolis, Indiana 46278

Michael D. Horgan		7820 Innovation Boulevard, Suite 210 Indianapolis, Indiana 46278

Ralph R. Whitney, Jr		7820 Innovation Boulevard, Suite 210 Indianapolis, Indiana 46278

Jean L. Wojtowicz		7820 Innovation Boulevard, Suite 210 Indianapolis, Indiana 46278

Section 2 . Qualifications . Directors need not be shareholders of the Corporation.

Section 3 . Removal of Directors . Any or all of the Directors may be removed at any time for a specific cause found and determined by a vote of a majority of the entire Board of Directors. Any or all of the Directors may be removed at any time with or without cause, at a meeting of the shareholders called expressly for that proposal, only by a vote of the holders of a majority of the shares then entitled to vote.

Section 4 . Vacancies on the Board of Directors . If any vacancy or vacancies occurs on the Board of Directors, including a vacancy which occurs by reason of an increase in the number of Directors, such vacancy shall be filled by majority vote of the Directors then in office.

ARTICLE VII
INDEMNIFICATION

Section 1 . Right to Indemnity . The Corporation shall indemnify each person who is or was a Director, officer, employee or agent of the Corporation, or a director, officer, partner employee, trustee, member or agent of any other corporation, partnership, limited liability company, joint venture, trust, employee benefit plan or other enterprise (collectively, “Other Entities”) which the individual is serving or served in any capacity at the request of the Corporation, against any and all judgments, settlements, penalties, fines (including excise taxes assessed with respect to employee benefit plans), other liabilities and reasonable expenses (including reasonable attorneys’ fees) that may be incurred by the individual in connection with or resulting from any claim, actions, suit proceeding or investigation (whether actual or threatened, whether formal or informal, whether brought by or in the right of the Corporation, any such Other Entity, or otherwise, whether civil, criminal, administrative, or investigative, or whether or not in connection with an appeal relating thereto), in which the individual may become involved, as a party or otherwise, by reason of the individual’s being or having been a Director, officer, employee or agent of the Corporation or a director, officer, partner, employee, trustee, member or agent of any such Other Entity or by reason of any past or future action taken or not taken in the individual’s capacity as such director , officer, partner, employee, trustee, member or agent, whether or not the individual continues to be such at the time such liability or expense is incurred, except only for matters as to which such individual is adjudged, in an action, suit, or proceeding terminated against the individual by judgment, order, or conviction, to have committed gross misconduct or fraud upon the Corporation.

Section 2 . Right to Expense Advances . As used in this Article VII , the tern “expense” shall include, but not be limited to, attorneys’ fees and disbursements, incurred in connection with the claim, action, suit, proceeding or investigation. The Corporation shall advance expenses to, or where appropriate and with the consent of such director, officer, employee, member, partner, trustee or agent may at its expense undertake the defense of, any such person upon receipt of an undertaking by or on behalf of such person to repay such advances if it should ultimately be determined that the person is not entitled to indemnification under this Article VII or otherwise.

Section 3 . Vested Right . The provisions of this Article VI shall be applicable to claims, actions, suits, proceedings or investigations made or commenced before or after the adoption hereof, whether arising from acts or omissions to act occurring before or after the adoption hereof. If several claims, issues or matters of action are involved, any such director, officer, partner employee, trustee, member or agent may be entitled to indemnification as to some matters even though the individual is not so entitled as to others. The rights of indemnification provided hereunder shall inure to the benefit of the heirs of any such person and the personal representatives, executors and administrators of the estate any such person. Any repeal or modification of this Article VI shall not adversely affect any rights to indemnification and advancement of expenses existing pursuant to this Article VII with respect to any acts or omissions occurring prior to such repeal or modification.

Section 4 . Not Exclusive . The indemnification of a person provided for in this Article VII shall be in addition to, and not in limitation of, any indemnification rights such person may be entitled to by law (statutory, common law, or otherwise), contract or otherwise. To the extent allowable under applicable law, the Corporation may supplement (not replace or limit) the indemnification of a person set forth in this Article VII in the Corporation’s Bylaws or by resolution adopted by the directors.

Exhibit 3.2

AMENDED AND RESTATED

BYLAWS

FIRST INTERNET BANCORP
(Effective as of November 19, 2012)

ARTICLE 1

MEETINGS OF SHAREHOLDERS

SECTION 1.1. ANNUAL MEETINGS. Annual meetings of the shareholders of First Internet Bancorp (the “Corporation”) shall be held each year on such date, at such hour and at such place within or without the State of Indiana as shall be designated by the Board of Directors. In the absence of designation, the meeting shall be held at the principal office of the Corporation.

SECTION 1.2. SPECIAL MEETINGS. Special meetings of the shareholders of the Corporation may be called at any time only by the Board of Directors, the Chairman of the Board, the Chief Executive Officer or the President. A special meeting of the shareholders may not be called by any other person or persons. The Board of Directors, the Chairman of the Board, the Chief Executive Officer or the President, as the case may be, calling a special meeting of shareholders shall set the date, time and place of such meeting, which may be held within or without the State of Indiana.

SECTION 1.3. NOTICES. A written notice (as the term “written” is defined in Section 9.6 of these Bylaws), stating (a) the date, time, and place of any meeting of the shareholders, (b) the means of remote communications, if any, by which shareholders and proxy holders may be deemed to be present in person and vote at such meeting, and (c) in the case of a special meeting, the purpose or purposes for which such meeting is called, shall be delivered or mailed by the Secretary of the Corporation to each shareholder of record of the Corporation entitled to notice of or to vote at such meeting no fewer than ten (10) nor more than sixty (60) days before the date of the meeting. Notice of shareholders’ meetings, if mailed, shall be mailed, postage prepaid, to each shareholder at his or her address shown in the Corporation’s current record of shareholders; provided, that this requirement shall be satisfied with respect to shareholders of record who share an address, and notice shall be deemed to have been given to all such shareholders, if notice is given in accordance with the “householding” rules set forth in Rule 14a-3(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and the provisions of IC 23-1-20-29 of the Indiana Business Corporation Law. If mailed, notice shall be deemed to be delivered when deposited in the United States mail, addressed to the shareholder at his, her or its address as it appears in the books of the Corporation, with postage thereon prepaid. If sent by electronic transmission, notice shall be deemed to be delivered when sent.

Notice of a meeting of shareholders shall be given to shareholders not entitled to vote, but only if a purpose for the meeting is to vote on any amendment to the Corporation’s Articles of Incorporation, merger, or share exchange to which the Corporation would be a party, sale of the Corporation’s assets, dissolution of the Corporation, or consideration of voting rights to be accorded to shares acquired or to be acquired in a “control share acquisition” (as such term is defined in the Indiana Business Corporation Law). Except as required by the foregoing sentence or as otherwise required by the Indiana Business Corporation Law or the Corporation’s Articles of Incorporation, notice of a meeting of shareholders is required to be given only to shareholders entitled to vote at the meeting.

A shareholder or his proxy may at any time waive notice of a meeting if the waiver is in writing, is signed by the shareholder entitled to the notice and is delivered to the Corporation for inclusion in the minutes or filing with the Corporation’s records. A shareholder’s attendance at a meeting, whether in person or by proxy, (a) waives objection to lack of notice or defective notice of the meeting, unless the shareholder or his proxy at the beginning of the meeting objects to holding the meeting or transacting business at the meeting, and (b) waives objection to consideration of a particular matter at the meeting that is not within the purpose or purposes described in the meeting notice, unless the shareholder or his proxy objects to considering the matter when it is presented. Each shareholder who has, in the manner above provided, waived notice or objection to notice of a shareholders’ meeting shall be conclusively presumed to have been given due notice of such meeting, including the purpose or purposes thereof.

If an annual or special shareholders’ meeting is adjourned to a different date, time, or place, notice need not be given of the new date, time, or place if the new date, time, or place is announced at the meeting before adjournment, unless a new record date is or must be established for the adjourned meeting.

SECTION 1.4. ADVANCE NOTICE PROCEDURES.

(a) Advance Notice of Shareholder Business . At an annual meeting of the shareholders, only such business shall be conducted as shall have been properly brought before the meeting. To be properly brought before an annual meeting, business must be brought: (i) pursuant to the Corporation’s proxy materials with respect to such meeting, (ii) by or at the direction of the Board of Directors, or (iii) by a shareholder of the Corporation who is a shareholder of record at the time of the giving of the notice required by this Section 1.4(a) and on the record date for the determination of shareholders entitled to vote at the annual meeting and has timely complied in proper written form with the notice procedures set forth in this Section 1.4(a). In addition, for business to be properly brought before an annual meeting by a shareholder, such business must be a proper matter for shareholder action pursuant to these Bylaws and applicable law. Except for proposals properly made in accordance with Rule 14a-8 under the Exchange Act and the rules and regulations thereunder (as so amended and inclusive of such rules and regulations), and included in the notice of meeting given by or at the direction of the Board of Directors, for the avoidance of doubt, clause (iii) above shall be the exclusive means for a shareholder to bring business before an annual meeting of shareholders.

(1) To comply with clause (iii) of Section 1.4(a) above, a shareholder’s notice must set forth all information required under this Section 1.4(a) and must be timely received by the Secretary of the Corporation. To be timely, a shareholder’s notice must be received by the Secretary at the principal executive offices of the Corporation not later than the 45th day nor earlier than the 75th day before the one-year anniversary of the date on which the Corporation first mailed its proxy materials or a notice of availability of proxy materials (whichever is earlier) for the preceding year’s annual meeting; provided, however, that in the event that no annual meeting was held in the previous year or if the date of the annual meeting is advanced by more than thirty (30) days prior to or delayed by more than sixty (60) days after the one-year anniversary of the date of the previous year’s annual meeting, then, for notice by the shareholder to be timely, it must be so received by the Secretary not earlier than the close of business on the 120th day prior to such annual meeting and not later than the close of business on the later of (A) the 90th day prior to such annual meeting, or (B) the 10th day following the day on which Public Announcement (as defined below) of the date of such annual meeting is first made. In no event shall any adjournment or postponement of an annual meeting or the announcement thereof commence a new time period for the giving of a shareholder’s notice as described

in this Section 1.4(a)(1). “Public Announcement” shall mean disclosure in a press release reported by the Dow Jones News Service, Associated Press or a comparable national news service or in a document publicly filed by the Corporation with the Securities and Exchange Commission pursuant to Section 13, 14 or 15(d) of the Exchange Act, or any successor thereto.

(2) To be in proper written form, a shareholder’s notice to the Secretary must set forth as to each matter of business the shareholder intends to bring before the annual meeting: (A) a brief description of the business intended to be brought before the annual meeting and the reasons for conducting such business at the annual meeting, (B) the name and address, as they appear on the Corporation’s books, of the shareholder proposing such business and any Shareholder Associated Person (as defined below), (C) the class and number of shares of the Corporation that are held of record or are beneficially owned by the shareholder or any Shareholder Associated Person and any derivative positions held or beneficially held by the shareholder or any Shareholder Associated Person, (D) whether and the extent to which any hedging or other transaction or series of transactions has been entered into by or on behalf of such shareholder or any Shareholder Associated Person with respect to any securities of the Corporation, and a description of any other agreement, arrangement or understanding (including any short position or any borrowing or lending of shares), the effect or intent of which is to mitigate loss to, or to manage the risk or benefit from share price changes for, or to increase or decrease the voting power of, such shareholder or any Shareholder Associated Person with respect to any securities of the Corporation, (E) any material interest of the shareholder or a Shareholder Associated Person in such business, and (F) a statement whether either such shareholder or any Shareholder Associated Person will deliver a proxy statement and form of proxy to holders of at least the percentage of the Corporation’s voting shares required under applicable law to carry the proposal (such information provided and statements made as required by clauses (A) through (F), a “Business Solicitation Statement”). In addition, to be in proper written form, a shareholder’s notice to the Secretary must be supplemented not later than ten (10) days following the record date for notice of the meeting to disclose the information contained in clauses (C) and (D) above as of the record date for notice of the meeting. For purposes of this Section 1.4, a “Shareholder Associated Person” of any shareholder shall mean (I) any person controlling, directly or indirectly, or acting in concert with, such shareholder, (II) any beneficial owner of shares of stock of the Corporation owned of record or beneficially by such shareholder and on whose behalf the proposal or nomination, as the case may be, is being made, or (III) any person controlling, controlled by or under common control with such person referred to in the preceding clauses (I) and (II).

(3) Without exception, no business shall be conducted at any annual meeting except in accordance with the provisions set forth in this Section 1.4(a) and, if applicable, Section 1.4(b). In addition, business proposed to be brought by a shareholder may not be brought before the annual meeting if such shareholder or a Shareholder Associated Person, as applicable, takes action contrary to the representations made in the Business Solicitation Statement applicable to such business or if the Business Solicitation Statement applicable to such business contains an untrue statement of a material fact or omits to state a material fact necessary to make the statements therein not misleading. The chairman of the annual meeting shall, if the facts warrant, determine and declare at the annual meeting that business was not properly brought before the annual meeting and in accordance with the provisions of this Section 1.4(a), and, if the chairman should so

determine, he or she shall so declare at the annual meeting that any such business not properly brought before the annual meeting shall not be conducted.

(b) Advance Notice of Director Nominations at Annual Meetings . Notwithstanding anything in these Bylaws to the contrary, only persons who are nominated in accordance with the procedures set forth in this Section 1.4(b) shall be eligible for election or re-election as Directors at an annual meeting of shareholders. Nominations of persons for election or re-election to the Board of Directors of the Corporation shall be made at an annual meeting of shareholders only (i) by or at the direction of the Board of Directors or (ii) by a shareholder of the Corporation who was a shareholder of record at the time of the giving of the notice required by this Section 1.4(b) and on the record date for the determination of shareholders entitled to vote at the annual meeting and has complied with the notice procedures set forth in this Section 1.4(b). In addition to any other applicable requirements, for a nomination to be made by a shareholder, the shareholder must have given timely notice thereof in proper written form to the Secretary of the Corporation.

(1) To comply with clause (ii) of Section 1.4(b) above, a nomination to be made by a shareholder must set forth all information required under this Section 1.4(b) and must be received by the Secretary of the Corporation at the principal executive offices of the Corporation at the time set forth in, and in accordance with, the final three sentences of Section 1.4(a)(1) above.

(2) To be in proper written form, such shareholder’s notice to the Secretary must set forth:

(A) as to each person (a “nominee”) whom the shareholder proposes to nominate for election or re-election as a Director: (I) the name, age, business address and residence address of the nominee, (II) the principal occupation or employment of the nominee, (III) the class and number of shares of the Corporation that are held of record or are beneficially owned by the nominee and any derivative positions held or beneficially held by the nominee, (IV) whether and the extent to which any hedging or other transaction or series of transactions has been entered into by or on behalf of the nominee with respect to any securities of the Corporation, and a description of any other agreement, arrangement or understanding (including any short position or any borrowing or lending of shares), the effect or intent of which is to mitigate loss to, or to manage the risk or benefit of share price changes for, or to increase or decrease the voting power of the nominee, (V) a description of all arrangements or understandings between the shareholder and each nominee and any other person or persons (naming such person or persons) pursuant to which the nominations are to be made by the shareholder, (VI) a written statement executed by the nominee acknowledging that as a Director of the Corporation, the nominee will owe a fiduciary duty under Indiana law with respect to the Corporation and its shareholders, and (VII) any other information relating to the nominee that would be required to be disclosed about such nominee if proxies were being solicited for the election or re-election of the nominee as a Director, or that is otherwise required, in each case pursuant to Regulation 14A under the Exchange Act (including without limitation the nominee’s written consent to being named in the proxy statement, if any, as a nominee and to serving as a Director if elected or re-elected, as the case may be); and

(B) as to such shareholder giving notice, (I) the information required to be provided pursuant to clauses (B) through (E) of Section 1.4(a)(2) above, and the supplement referenced in the second sentence of Section 1.4(a)(2) above

(except that the references to “business” in such clauses shall instead refer to nominations of Directors for purposes of this paragraph), and (II) a statement whether either such shareholder or Shareholder Associated Person will deliver a proxy statement and form of proxy to holders of a number of the Corporation’s voting shares reasonably believed by such shareholder or Shareholder Associated Person to be necessary to elect or re-elect such nominee(s) (such information provided and statements made as required by clauses (I) and (II) above, a “Nominee Solicitation Statement”).

(3) At the request of the Board of Directors, any person nominated by a shareholder for election or re-election as a Director must furnish to the Secretary of the Corporation (A) that information required to be set forth in the shareholder’s notice of nomination of such person as a Director as of a date subsequent to the date on which the notice of such person’s nomination was given, (B) such other information as may reasonably be required by the Corporation to determine the eligibility of such proposed nominee to serve as a director of a regulated financial institution or subsidiary under applicable banking laws and regulations and as an independent Director or audit committee financial expert of the Corporation under applicable law, securities exchange rule or regulation, or any publicly-disclosed corporate governance guideline or committee charter of the Corporation and (C) additional information that could be material to a reasonable shareholder’s understanding of the independence, or lack thereof, of such nominee; in the absence of the furnishing of such information if requested, such shareholder’s nomination shall not be considered in proper form pursuant to this Section 1.4(b).

(4) Without exception, no person shall be eligible for election or re-election as a Director of the Corporation at an annual meeting of shareholders unless nominated in accordance with the provisions set forth in this Section 1.4(b). In addition, a nominee shall not be eligible for election or re-election if a shareholder or Shareholder Associated Person, as applicable, takes action contrary to the representations made in the Nominee Solicitation Statement applicable to such nominee or if the Nominee Solicitation Statement applicable to such nominee contains an untrue statement of a material fact or omits to state a material fact necessary to make the statements therein not misleading. The chairman of the annual meeting shall, if the facts warrant, determine and declare at the annual meeting that a nomination was not made in accordance with the provisions prescribed by these Bylaws, and if the chairman should so determine, he or she shall so declare at the annual meeting, and the defective nomination shall be disregarded.

(1) For a special meeting of shareholders at which Directors are to be elected or re-elected, nominations of persons for election or re-election to the Board of Directors shall be made only (A) by or at the direction of the Board of Directors or (B) by any shareholder of the Corporation who (I) is a shareholder of record at the time of the giving of the notice required by this Section 1.4(c) and on the record date for the determination of shareholders entitled to vote at the special meeting and (II) delivers a timely written notice of the nomination to the Secretary of the Corporation that includes the information set forth in Sections 1.4(b)(2) and (b)(3) above. To be timely, such notice must be received by the Secretary at the principal executive offices of the Corporation not later than the close of business on the later of the 90th day prior to such special meeting or the 10th day following the day on which Public Announcement is first made of the date of the special meeting and of the nominees proposed by the Board of Directors to be elected

or re-elected at such meeting. A person shall not be eligible for election or re-election as a Director at a special meeting unless the person is nominated by or at the direction of the Board of Directors or by a shareholder in accordance with the notice procedures set forth in this Section 1.4(c). In addition, a nominee shall not be eligible for election or re-election if a shareholder or Shareholder Associated Person, as applicable, takes action contrary to the representations made in the Nominee Solicitation Statement applicable to such nominee or if the Nominee Solicitation Statement applicable to such nominee contains an untrue statement of a material fact or omits to state a material fact necessary to make the statements therein not misleading.

(2) The chairman of the special meeting shall, if the facts warrant, determine and declare at the meeting that a nomination or business was not made in accordance with the procedures prescribed by these Bylaws, and if the chairman should so determine, he or she shall so declare at the meeting, and the defective nomination or business shall be disregarded.

(d) Other Requirements and Rights . In addition to the foregoing provisions of this Section 1.4, a shareholder must also comply with all applicable requirements of state law and of the Exchange Act and the rules and regulations thereunder with respect to the matters set forth in this Section 1.4. Nothing in this Section 1.4 shall be deemed to affect any rights of:

(1) a shareholder to request inclusion of proposals in the Corporation’s proxy statement pursuant to Rule 14a-8 (or any successor provision) under the Exchange Act; or

(2) the Corporation to omit a proposal from the Corporation’s proxy statement pursuant to Rule 14a-8 (or any successor provision) under the Exchange Act.

SECTION 1.5. VOTING. Except as otherwise provided by the Indiana Business Corporation Law or the Corporation’s Articles of Incorporation, each share of stock of the Corporation, regardless of class, that is outstanding at the record date established for any annual or special meeting of shareholders and is outstanding at the time of and represented in person or by proxy at the annual or special meeting, shall entitle the record holder thereof, or his proxy, to one (1) vote on each matter voted on at the meeting.

SECTION 1.6. QUORUM. Unless the Corporation’s Articles of Incorporation or the Indiana Business Corporation Law provide otherwise, at all meetings of shareholders, a majority of the votes entitled to be cast on a matter, represented in person or by proxy, constitutes a quorum for action on the matter. Action may be taken at a shareholders’ meeting only on matters with respect to which a quorum exists; provided, however, that any meeting of shareholders, including annual and special meetings and any adjournments thereof, may be adjourned to a later date although less than a quorum is present. Once a share is represented for any purpose at a meeting, it is deemed present for quorum purposes for the remainder of the meeting and for any adjournment of that meeting unless a new record date is or must be set for that adjourned meeting.

SECTION 1.7. VOTE REQUIRED TO TAKE ACTION. If a quorum exists as to a matter to be considered at a meeting of shareholders, action on such matter (other than the election of Directors) is approved if the votes properly cast favoring the action exceed the votes properly cast opposing the action, except as the Corporation’s Articles of Incorporation or the Indiana Business Corporation Law require a greater number of affirmative votes. Directors shall be elected by a plurality of the votes properly cast.

SECTION 1.8. RECORD DATE. Only such persons shall be entitled to notice of or to vote, in person or by proxy, at any shareholders’ meeting as shall appear as shareholders upon the books of the Corporation as of such record date as the Board of Directors shall determine, which date may not be

earlier than the date seventy (70) days immediately preceding the meeting. In the absence of such determination, the record date shall be the fiftieth (50th) day immediately preceding the date of such meeting. Unless otherwise provided by the Board of Directors, shareholders of record shall be determined on the record date as of the close of trading on the principal securities exchange on which the Company’s common stock is traded.

SECTION 1.9. PROXIES. A shareholder may vote his shares either in person or by proxy. A shareholder may appoint a proxy to vote or otherwise act for the shareholder (including authorizing the proxy to receive, or to waive, notice of any shareholders’ meeting within the effective period of such proxy) by signing an appointment form, either personally or by the shareholder’s attorney-in-fact. An appointment of a proxy is effective when received by the Secretary or other officer or agent authorized to tabulate votes and is effective for eleven (11) months unless a shorter or longer period is expressly provided in the appointment form. The proxy’s authority may be limited to a particular meeting or may be general and authorize the proxy to represent the shareholder at any meeting of shareholders held within the time provided in the appointment form. Subject to the Indiana Business Corporation Law and to any express limitation on the proxy’s authority appearing on the face of the appointment form, the Corporation is entitled to accept the proxy’s vote or other action as that of the shareholder making the appointment.

SECTION 1.10. PARTICIPATION OTHER THAN IN PERSON. The Chairman of the Board or the Board of Directors may permit any or all shareholders to participate in an annual or special meeting of shareholders by, or through the use of, any means of communication, such as conference telephone or webcast, by which all shareholders participating may simultaneously hear each other during the meeting. A shareholder participating in a meeting by such means shall be deemed to be present in person at the meeting.

SECTION 1.11. ORGANIZATION AND CONDUCT OF THE MEETING .

(a) At each meeting of the shareholders of the Corporation, the Chairman of the Board, or, in the absence of the Chairman of the Board, a person designated by the Chairman of the Board, or, in the absence of such designation, a person chosen by the Board of Directors, shall call the meeting to order and shall act as the chairman of such meeting. The Secretary of the Corporation shall act as secretary of such meeting or, in the Secretary’s absence, the chairman of the meeting shall appoint a secretary.

(b) At each meeting of the shareholders of the Corporation, the Chairman of the Board (or, in the absence of the Chairman of the Board, such person designated as chairman of the meeting pursuant to Section 1.11(a) of these Bylaws) shall prescribe the order of business to be conducted at the meeting and establish procedures incident thereto. The Board of Directors of the Corporation may adopt by resolution such rules or regulations for the conduct of meetings of shareholders as it shall deem appropriate. Except to the extent inconsistent with such rules and regulations as adopted by the Board of Directors, the Chairman of the Board or the designated chairman of any meeting of shareholders shall have the right and authority to prescribe such rules, regulations and procedures and to do all such acts as, in the judgment of the Chairman of the Board or such chairman, are appropriate for the proper conduct of the meeting.

SECTION 1.12. VOTING LISTS. At least five (5) business days before each meeting of shareholders, the officer or agent having charge of the stock transfer books shall make a complete list of the shareholders entitled to notice of a shareholders’ meeting, arranged in alphabetical order, with the address and number of shares so entitled to vote held by each, which list shall be on file at the principal office of the Corporation and subject to inspection by any shareholder entitled to vote at the meeting, or such shareholder’s agent or attorney authorized in writing. Such list shall be produced and kept open at the time and place of the meeting and subject to the inspection of any shareholder, or the shareholder’s

agent or attorney authorized in writing, during the holding of such meeting. Unless otherwise required by law, the Corporation need not include electronic mail addresses or other electronic contact information on such list. Unless otherwise required by law, the list prepared in accordance with this Section 1.12 shall be the only evidence as to who are the shareholders entitled to examine such list or to vote at any meeting of the shareholders. Refusal or failure to prepare or make available the shareholders’ list does not affect the validity of action taken at the meeting.

ARTICLE 2

DIRECTORS

SECTION 2.1. NUMBER AND TERMS.

(a) The business and affairs of the Corporation shall be managed under the direction of a Board of Directors consisting of at least three (3) Directors, but not more than eleven (11) Directors, with the actual number of Directors being fixed from time to time by resolution of the Board of Directors, subject to the requirements of the Articles of Incorporation. A Director need not be a resident of the State of Indiana or a shareholder of the Corporation. The number of Directors may be increased or decreased from time to time by vote or resolution of the Board of Directors, but no decrease shall have the effect of shortening the term of any incumbent Director. Directors are elected at each annual meeting of the shareholders and shall be elected to serve for a term which shall expire at the next annual meeting of the shareholders.

(b) Despite the expiration of a Director’s term, the Director shall continue to serve until his or her successor is elected and qualified, or until the earlier of his or her death, resignation, disqualification or removal, or until there is a decrease in the number of Directors. Any vacancy occurring in the Board of Directors, from whatever cause arising including a vacancy resulting from an increase in the number of Directors, shall be filled by selection of a successor by a majority vote of the remaining members of the Board of Directors (although less than a quorum); provided, however, that if such vacancy or vacancies leave the Board of Directors with no members or if the remaining members of the Board are unable to agree upon a successor or determine not to select a successor, such vacancy may be filled by a vote of the shareholders at a special meeting called for that purpose or at the next annual meeting of shareholders. The term of a Director elected or selected to fill a vacancy shall expire at the end of the term for which such Director’s predecessor was elected, or if the vacancy arises because of an increase in the size of the Board of Directors, at the end of the term specified at the time of election or selection. A vacancy that will occur at a specific later date (by reason of a resignation effective at a later date), may be filled before the vacancy occurs but the new Director may not take office until the vacancy occurs.

(d) The provisions of IC 23-1-33-6(c) regarding the requirement for corporations whose voting shares are registered under the Exchange Act to have a staggered Board of Directors shall not apply to the Corporation.

SECTION 2.2. RESIGNATION. A Director may resign at any time by delivering a written resignation to the Board of Directors, the Chairman of the Board, the President or the Secretary of the Corporation. A resignation is effective when the notice is delivered unless the notice specifies a later effective date or an effective date determined upon the happening of an event.

SECTION 2.3. QUORUM AND VOTE REQUIRED TO TAKE ACTION. A majority of the whole Board of Directors shall be necessary to constitute a quorum for the transaction of any business, except the filling of vacancies. If a quorum is present when a vote is taken, the affirmative vote of a majority of the Directors present shall be the act of the Board of Directors, unless the act of a greater number is required by the Indiana Business Corporation Law, the Corporation’s Articles of Incorporation or these Bylaws.

SECTION 2.4. ANNUAL AND REGULAR MEETINGS. The Board of Directors shall meet annually, without notice, immediately following the annual meeting of the shareholders, for the purpose of transacting such business as properly may come before the meeting. Other regular meetings of the Board of Directors, in addition to said annual meeting, shall be held on such dates, at such times and at such places as shall be fixed by resolution adopted by the Board of Directors and specified in a notice of each such regular meeting, or otherwise communicated to the Directors. The Board of Directors may at any time alter the date for the next regular meeting of the Board of Directors.

SECTION 2.5. SPECIAL MEETINGS. Special meetings of the Board of Directors may be called by any one of the Chairman of the Board, the Chief Executive Officer or a majority of the entire Board of Directors upon not less than two (2) days’ notice given to each Director of the date, time, and place of the meeting, which notice need not specify the purpose or purposes of the special meeting. Such notice may be communicated in person (either by hand delivery of such notice or orally), by telephone, telegraph, teletype or other form of wire or wireless communication, by mail, or electronically, and shall be effective at the earlier of the time of its receipt or, if mailed, five (5) days after its mailing. Notice of any meeting of the Board may be waived in writing at any time if the waiver is in writing, is signed by the Director entitled to the notice and is filed with the minutes or corporate records. A Director’s attendance at or participation in a meeting waives any required notice to the Director of the meeting, unless the Director at the beginning of the meeting (or promptly upon the Director’s arrival) objects to holding the meeting or transacting business at the meeting and does not thereafter vote for or assent to action taken at the meeting.

SECTION 2.6. WRITTEN CONSENTS. Any action required or permitted to be taken at any meeting of the Board of Directors may be taken without a meeting if the action is taken by all members of the Board. The action must be evidenced by one (1) or more written consents, in one or more counterparts, describing the action taken, signed by each Director, delivered to the Secretary of the Corporation and included in the minutes or filed with the corporate records reflecting the action taken. Action taken under this Section 2.6 is effective when the last Director signs the consent, unless (a) the consent specifies a different prior or subsequent effective date, in which case the action is effective on or as of the specified date, or (b) the action taken under this Section 2.6 is taken electronically as contemplated by IC 26-2-8, in which case the effective date is determined in accordance with IC 26-2-8. A consent signed under this Section 2.6 shall have the same effect as a unanimous meeting vote of all members of the Board and may be described as such in any document.

SECTION 2.7. PARTICIPATION OTHER THAN IN PERSON. The Board of Directors may permit any or all Directors to participate in a regular or special meeting by, or through the use of, any means of communication, such as conference telephone or webcast, by which all Directors participating may simultaneously hear each other during the meeting. A Director participating in a meeting by such means shall be deemed to be present in person at the meeting.

SECTION 2.8. COMMITTEES OF THE BOARD. The Board of Directors may create one (1) or more committees and appoint members of the Board of Directors to serve on them by resolution of the Board of Directors adopted by a majority of all the Directors in office when the resolution is adopted. Each committee may exercise the authority of the Board of Directors to the extent specified in the

resolution. Each committee may have one (1) or more members, and all the members of such committee shall serve at the pleasure of the Board of Directors.

SECTION 2.9. EXECUTIVE COMMITTEE. The Board of Directors may appoint three (3) members to an Executive Committee. The Executive Committee shall, subject to the restrictions of Section 2.13, be authorized to exercise the authority of the full Board of Directors at any times other than during regular or special meetings of the Board of Directors. All actions taken by the Executive Committee shall be reported at the first regular meeting of the Board of Directors following such actions. Members of the Executive Committee shall serve at the pleasure of the Board of Directors.

SECTION 2.10. COMPENSATION COMMITTEE. The Board of Directors shall appoint two (2) or more members to a Compensation Committee. The duties of the Compensation Committee shall be as set forth in the written charter of such committee adopted by the Board of Directors.

SECTION 2.11. AUDIT COMMITTEE. The Board of Directors shall appoint three (3) or more members to an Audit Committee. The duties of the Audit Committee shall be as set forth in the written charter of such committee adopted by the Board of Directors.

SECTION 2.12. NOMINATING AND CORPORATE GOVERNANCE COMMITTEE. The Board of Directors shall appoint two (2) or more members to a Nominating and Corporate Governance Committee. The duties of the Nominating and Corporate Governance Committee shall be as set forth in the written charter of such committee adopted by the Board of Directors.

SECTION 2.13. LIMITATIONS ON COMMITTEES; NOTICE, QUORUM AND VOTING.

(a) No committee established in these Bylaws or any other committee hereafter established may:

(1) authorize dividends or other distributions, except a committee (or an executive officer of the Corporation designated by the Board of Directors) may authorize or approve a reacquisition of shares or other distribution if done according to a formula or method, or within a range, prescribed by the Board of Directors;

(2) approve or propose to shareholders action that is required to be approved by shareholders;

(3) fill vacancies on the Board of Directors or on any of its committees;

(4) except as permitted under Section 2.13(a)(7) below, amend the Corporation’s Articles of Incorporation under IC 23-1-38-2;

(5) adopt, amend or repeal provisions of these Bylaws;

(6) approve a plan of merger not requiring shareholder approval; or

(7) authorize or approve the issuance or sale or a contract for sale of shares, or determine the designation and relative rights, preferences, and limitations of a class or series of shares, except the Board of Directors may authorize a committee (or an executive officer of the Corporation designated by the Board of Directors) to take the

action described in this Section 2.13(a)(7) within limits prescribed by the Board of Directors.

(b) Except to the extent inconsistent with the resolutions creating a committee, Sections 2.1 through 2.7 of these Bylaws, which govern meetings, action without meetings, notice and waiver of notice, quorum and voting requirements and participation in meetings of the Board of Directors other than in person, apply to each committee and its members as well.

ARTICLE 3

OFFICERS

SECTION 3.1. DESIGNATION, SELECTION AND TERMS. The officers of the Corporation shall consist of a Chairman of the Board, a Chief Executive Officer, a President and a Secretary, and may also consist of one or more Vice Presidents, a Chief Financial Officer, and any other officers or assistant officers as it may from time to time determine by resolution creating the office and defining the duties thereof. In addition, the Chief Executive Officer may, by a certificate of appointment creating the office and defining the duties and term thereof delivered to the Secretary for inclusion with the corporate records, from time to time create and appoint such Vice Presidents or assistant officers as he or she deems desirable. The officers of the Corporation shall be elected by the Board of Directors (or appointed by the Chief Executive Officer as provided above) and need not be selected from among the members of the Board of Directors, except for the Chairman of the Board, who shall be a member of the Board of Directors. Any two (2) or more offices may be held by the same person. All officers shall serve at the pleasure of the Board of Directors and, with respect to officers appointed by the Chief Executive Officer, also at the pleasure of such officer. The election or appointment of an officer does not itself create contract rights.

SECTION 3.2. RESIGNATION, REMOVAL AND VACANCIES. An officer may resign at any time by delivering written notice to the Board of Directors, the Chairman of the Board, the Chief Executive Officer, the President or the Secretary of the Corporation. A resignation is effective when the notice is delivered unless the notice specifies a later effective date. If a resignation is made effective at a later date and the Corporation accepts the future effective date, the Board of Directors may fill the pending vacancy before the effective date if the Board of Directors provides that the successor does not taken office until the effective date. The Board of Directors may remove any officer at any time with or without cause. An officer appointed by the Chief Executive Officer may also be removed at any time, with or without cause, by such officer. Vacancies in such offices, however occurring, may be filled by the Board of Directors at any meeting of the Board of Directors (or by appointment by the Chief Executive Officer, to the extent provided in Section 3.1 of these Bylaws). An officer’s resignation or removal will not affect the officer’s contract rights, if any, with the Corporation.

SECTION 3.3. CHAIRMAN OF THE BOARD. The Chairman of the Board shall be chosen from among the members of the Board of Directors, shall preside at all meetings of the Board of Directors and the shareholders and shall perform such other duties as the Board of Directors may from time to time assign.

SECTION 3.4. CHIEF EXECUTIVE OFFICER. The Chief Executive Officer, subject to the authority of the Board of Directors, shall have overall responsibility for the affairs of the Corporation, including responsibility for developing and attaining major corporate goals and implementing policies approved by the Board of Directors. In general, the Chief Executive Officer shall perform the duties and exercise the powers incident to the office of Chief Executive Officer and all such other duties and powers as, from time to time, may be assigned by the Board of Directors. In the absence of the Chairman of the

Board, the Chief Executive Officer shall preside at all meetings of the shareholders and, if he or she is a Director, at all meetings of the Board of Directors at which the Chief Executive Officer is in attendance.

The Chief Executive Officer, or in the Chief Executive Officer’s absence, the President, shall have full authority to execute proxies on behalf of the Corporation, to vote shares owned by it in any other corporation, and to execute, with the Secretary, powers of attorney appointing other corporations, partnership, or individuals the agent of the Corporation, all subject to the provisions of the Indiana Business Corporation Law.

SECTION 3.5. PRESIDENT. The President shall perform the duties and exercise the powers incident to the office of President and all such other duties and powers as, from time to time, may be prescribed by the Board of Directors, the Chief Executive Officer or these Bylaws. Subject to the authority and direction of the Board of Directors and the Chief Executive Officer, the President may enter into, execute and deliver any agreement, instrument or document in the name and on behalf of the Corporation.

SECTION 3.6. VICE PRESIDENTS. Each Vice President shall have such powers and perform such duties as the Board of Directors may, from time to time, prescribe and as the Chairman of the Board, the Chief Executive Officer or the President may, from time to time, delegate to him or her.

SECTION 3.7. SECRETARY. The Secretary shall have the custody and care of the corporate seal, if any, records, minutes and share books of the Corporation. The Secretary shall keep, or cause to be kept in a book provided for the purpose, a true and complete record of the proceedings of all meetings of the shareholders and of the Board of Directors, and shall perform a like duty for all standing committees appointed by the Board of Directors, when required. The Secretary shall authenticate records, attend to the giving and serving of all notices of the Corporation, file and take charge of all papers and documents belonging to the Corporation and perform such other duties as these Bylaws may require or the Board of Directors or the Chief Executive Officer may prescribe or as are usual to such office.

SECTION 3.8. CHIEF FINANCIAL OFFICER. The Chief Financial Officer shall be the financial officer of the Corporation and shall keep correct and complete records of account, showing accurately at all times the financial condition of the Corporation. The Chief Financial Officer shall be the legal custodian of all moneys, notes, security and other valuables which may, from time to time, come into the possession of the Corporation. The Chief Financial Officer shall immediately deposit all funds of the Corporation received by the Chief Financial Officer in a reliable bank or other depository to be designated by the Board of Directors, and shall keep such bank account in the name of the Corporation. The Chief Financial Officer shall perform such other duties as these Bylaws may require, as the Board of Directors or Chief Executive Officer may prescribe, or as are customary to the office.

ARTICLE 4

CHECKS

All checks, drafts, or other orders for payment of money shall be signed in the name of the Corporation by such officers or persons as shall be designated from time to time by resolution adopted by the Board of Directors and included in the minute book of the Corporation; and in the absence of such designation, such checks, drafts, or other orders for payment shall be signed by the Chief Executive Officer, the President, the Chief Financial Officer or the Secretary.

ARTICLE 5

LOANS

Such of the officers of the Corporation as shall be designated from time to time by resolution adopted by the Board of Directors and included in the minute book of the Corporation shall have the power, with such limitations thereon as may be fixed by the Board of Directors, to borrow money on the Corporation’s behalf, to establish credit, to discount bills and papers, to pledge collateral, and to execute such notes, bonds, debentures, or other evidences of indebtedness, and such mortgages, trust indentures, and other instruments in connection therewith, as may be authorized from time to time by the Board of Directors.

ARTICLE 6

EXECUTION OF DOCUMENTS

The Chief Executive Officer, the President, the Chief Financial Officer, the Secretary or any other officer authorized by the Board of Directors may, in the Corporation’s name, acting singly, sign all deeds, leases, contracts, or similar documents unless otherwise directed by the Board of Directors or otherwise provided herein or in the Corporation’s Articles of Incorporation, or as otherwise required by law. Only one signature is required, unless otherwise provided by a resolution of the Board of Directors.

ARTICLE 7

STOCK

SECTION 7.1. CERTIFICATES FOR SHARES. Unless the Board of Directors has authorized or directed that any shares of the Corporation of any class or series may be issued without a certificate, each shareholder of the Corporation, upon request to the transfer agent or registrar of the Corporation, shall be entitled to a certificate for shares of the Corporation, signed by the Chairman of the Board, the Chief Executive Officer or the President and by the Secretary or any Assistant Secretary and the seal of the Corporation (or a facsimile thereof), if any, affixed thereto. Where any such certificate is also signed by a transfer agent or a registrar, or both, the signatures of the officers of the Corporation may be facsimiles. The Corporation may issue and deliver any such certificate notwithstanding that any such officer who shall have signed, or whose facsimile signature shall have been imprinted on, such certificate shall have ceased to be such officer.

The Secretary shall ensure that records of issuance of all uncertificated shares and the transfer, exchange, conversion, surrender or redemption thereof, shall be maintained at all times by the duly appointed transfer agent or agents of the Corporation, through a direct registration system or other book-entry record keeping system as the Secretary may approve. Any direction of the Board of Directors that any shares of any class or series shall be issued in uncertificated form shall not affect shares already represented by certificates until they are surrendered to the Corporation.

SECTION 7.2. CONTENTS. Each certificate issued shall state on its face the name of the Corporation and that it is organized under the laws of the State of Indiana, the name of the person to whom it is issued, the number and class of shares and the designation of the series, if any, the certificate represents, and any restrictions on the transfer or registration of such shares of stock imposed by the Corporation’s Articles of Incorporation, these Bylaws, any agreement among shareholders or any agreement between shareholders and the Corporation and such other information as may be required under Indiana law. Each certificate shall state conspicuously on its front or back that the Corporation will

furnish the shareholder, upon his written request and without charge, a summary of the designations, relative rights, preferences, and limitations applicable to each class and the variations in rights, preferences, and limitations determined for each series (and the authority of the Board of Directors to determine variations for future series).

Within a reasonable time after the issuance or transfer of uncertificated stock, the Corporation shall send to the registered owner thereof a written notice that shall set forth the name of the Corporation and that it is organized under the laws of the State of Indiana, the name of the person to whom the shares have been issued, the number and class of shares and the designation of the series, if any, of the shares represented, and any restrictions on the transfer or registration of such shares of stock imposed by the Corporation’s Articles of Incorporation, these Bylaws, any agreement among shareholders or any agreement between shareholders and the Corporation and such other information as may be required under Indiana law. The written notice shall further state that the Corporation will furnish the shareholder, upon his written request and without charge, a summary of the designations, relative rights, preferences, and limitations applicable to each class and the variations in rights, preferences, and limitations determined for each series (and the authority of the Board of Directors to determine variations for future series).

SECTION 7.3. TRANSFERS. Except as otherwise provided by law or by resolution of the Board of Directors, transfers of shares of the Corporation shall be made only on the books of the Corporation by the holder thereof, in person or by duly authorized attorney, on payment of all taxes thereon and, in the case of certificated shares, on surrender for cancellation of the certificate or certificates for such shares (except as hereinafter provided in the case of loss, destruction, or mutilation of certificates) properly endorsed by the holder thereof, or if such shares are uncertificated, upon receipt of proper transfer instructions from the registered owner of such shares, in each case accompanied by the proper evidence of succession, assignment, or authority to transfer.

SECTION 7.4. STOCK TRANSFER RECORDS. There shall be entered upon the stock records of the Corporation the number of each certificate issued, if applicable, the number, kind, and class of shares issued, the name and address of the registered holder of such shares, the date of issue, whether the shares are originally issued or transferred, the registered holder from whom transferred, and such other information as is commonly required to be shown by such records. The stock records of the Corporation shall be kept at its principal office, unless the Corporation appoints a transfer agent or registrar, in which case the Corporation shall keep at its principal office a complete and accurate shareholders’ list giving the names and addresses of all shareholders and the number and class of shares held by each, which shall be updated periodically as determined by the Secretary, but not less frequently than quarterly, and which shall be updated as of each record date established with respect to a meeting of shareholders or other shareholder action. If a transfer agent is appointed by the Corporation, shareholders shall give written notice of any changes in their addresses from time to time to the transfer agent.

SECTION 7.5. TRANSFER AGENTS AND REGISTRARS. The Board of Directors may appoint one or more transfer agents and one or more registrars and may require each stock certificate to bear the signature of either or both.

SECTION 7.6. LOSS, DESTRUCTION, OR MUTILATION OF CERTIFICATES. The holder of any shares of the Corporation shall immediately notify the Corporation of any loss, destruction, or mutilation of the certificate therefor, and the Board of Directors may, in its discretion, cause to be issued to him (a) a new certificate or certificates or (b) uncertificated shares in place of any certificate of certificates previously issued by the Corporation, upon the surrender of the mutilated certificate, or, in the case of loss or destruction, upon satisfactory proof of such loss or destruction. The Board of Directors may, in its discretion, require the holder of the lost or destroyed certificate or his legal representative to

give the Corporation a bond in such sum and in such form, and with such surety or sureties as it may direct, to indemnify the Corporation, its transfer agents and registrars, if any, against any claim that may be made against them or any of them with respect to the shares represented by the certificate or certificates alleged to have been lost or destroyed, but the Board of Directors may, in its discretion, refuse to issue a new certificate or certificates or uncertificated shares, save upon the order of a court having jurisdiction in such matters.

SECTION 7.7. FORM OF CERTIFICATES. The form of certificates for shares of the Corporation, if any, shall conform to the requirements of Section 7.2 of these Bylaws and be in such printed form as shall from time to time be approved by resolution of the Board of Directors.

ARTICLE 8

CORPORATE BOOKS, RECORDS AND SEAL

SECTION 8.1. CORPORATE BOOKS AND RECORDS. The Corporation shall keep as permanent records minutes of all meetings of its shareholders and Board of Directors, a record of all actions taken by the shareholders or Board of Directors without a meeting, and a record of all actions taken by a committee of the Board of Directors in place of the Board of Directors on behalf of the Corporation. The Corporation shall also maintain appropriate accounting records and a record of its shareholders, in a form that permits preparation of a list of the names and addresses of all shareholders, in alphabetical order by class of shares showing the number and class of shares held by each shareholder. The Corporation shall maintain its records in written form or in another form capable of conversion into written form and shall keep a copy of the following records at its principal office:

(a) The Articles of Incorporation and all amendments to them currently in effect;

(b) The Bylaws and all amendments to them currently in effect;

(c) Resolutions adopted by the Board of Directors with respect to one (1) or more classes or series of shares and fixing their relative rights, preferences and limitations, if shares issued pursuant to those resolutions are outstanding;

(d) The minutes of all shareholders’ meetings, and records of all action taken by shareholders without a meeting, for the past three (3) years;

(e) All written communications to shareholders generally within the past three (3) years, including the financial statements furnished for the past three (3) years;

(f) A list of the names and business addresses of its current Directors and officers; and

(g) The most recent annual report delivered to the Indiana Secretary of State.

Except as otherwise provided by the laws of the State of Indiana, the books and records of the Corporation may be kept at such place or places within or without the State of Indiana, as the Board of Directors may from time to time by resolution determine; but that absent such resolution, the books and records of this Corporation shall be kept at the principal office of the Corporation.

SECTION 8.2. SEAL. The corporate seal of the Corporation shall, if the Corporation elects to have one, be in the form of a disc, with the name of the Corporation and “INDIANA” on the periphery thereof and the word “SEAL” in the center. The Corporation shall not be required to have a seal.

ARTICLE 9

MISCELLANEOUS

SECTION 9.1. INDIANA BUSINESS CORPORATION LAW. The provisions of the Indiana Business Corporation law, as amended, applicable to all matters relevant to, but not specifically covered by, these Bylaws are hereby, by reference, incorporated in and made a part of these Bylaws.

SECTION 9.2. FISCAL YEAR. The fiscal year of the Corporation shall begin on the first day of January and shall end on the last day of December in each year.

SECTION 9.3. ELECTION TO BE GOVERNED BY INDIANA CODE SECTION 23-1-43. Effective upon the registration of any class of the Corporation’s shares under Section 12 of the Exchange Act, the Corporation shall be governed by the provisions of IC 23-1-43 regarding business combinations.

SECTION 9.4. CONTROL SHARE ACQUISITION STATUTE. The provisions of IC 23-1-42 shall apply to the acquisition of shares of the Corporation.

SECTION 9.5. AMENDMENTS. These Bylaws may be adopted, amended or repealed, and provisions hereof may be waived, at any meeting of the Board of Directors by the affirmative vote of a majority of the entire number of Directors at the time, except as otherwise required by the Corporation’s Articles of Incorporation or by the Indiana Business Corporation Law.

SECTION 9.6. ELECTRONIC TRANSMISSION. When used in these Bylaws, the terms “written” and “in writing” shall include any “electronic transmission” as defined in IC 23-1-20-8.5, including, without limitation, any telegraph, teletype, telegram, cablegram, facsimile or other form of wire or wireless communication and communication by electronic mail.

SECTION 9.7. DEFINITION OF ARTICLES OF INCORPORATION. The term “Articles of Incorporation” as used in these Bylaws means the articles of incorporation of the Corporation as from time to time are in effect.

Exhibit 10.1

FIRST INTERNET BANCORP
2006 STOCK OPTION PLAN

1. PURPOSE

The purpose of this 2006 Stock Option Plan (the “Plan”) is to advance the interests of First Internet Bancorp (the “Corporation”) and its subsidiaries, by stimulating the efforts of directors and key employees on behalf of the Corporation, heightening the desire of those individuals to continue in the service of the Corporation or its subsidiaries and assisting the Corporation and its subsidiaries in competing effectively with other enterprises for the services of new directors and key employees necessary for the continued improvement of operations. This Plan permits the grant of incentive stock options as defined in Section 422 of the Internal Revenue Code of 1986, as amended (the “Code”), as well as options which are not incentive stock options pursuant to Code Section 422.

2. DEFINITIONS

(a) “Arm’s Length Transaction” means a transaction negotiated and bargained for in the ordinary course of business, in good faith, between unrelated parties, each acting in its own self interest.

(b) “Board” means the Board of Directors of the Corporation.

(i) The acquisition by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) (a “Person”) of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 20% or more of either (i) the then outstanding shares of common stock of the Corporation (the “Outstanding Corporation Common Shares”) or (ii) the combined voting power of the then outstanding voting securities of the Corporation entitled to vote generally in the election of directors (the “Outstanding Corporation Voting Securities”); provided, however, that the following acquisitions shall not constitute a Change of Control: (i) any acquisition directly from the Corporation (excluding an acquisition by virtue of the exercise of a conversion privilege), (ii) any acquisition by the Corporation, (iii) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Corporation or any corporation controlled by the Corporation or (iv) any acquisition by any corporation pursuant to a reorganization, merger or consolidation, if, following such reorganization, merger or

consolidation, the conditions described in clauses (A), (B) and (C) of subsection (iii) of this Section 2(c) are satisfied; or

(ii) Individuals who, as of the date hereof, constitute the Board (the “Incumbent Board”) cease for any reason to constitute at least a majority of the Board; provided, however, that any individual becoming a director subsequent to the date hereof whose election, or nomination for election by the Corporation’s shareholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of either an actual or threatened election contest (as such terms are used in Rule 14a-11 of Regulation 14A promulgated under the Exchange Act) or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board; or

(iii) Approval by the shareholders of the Corporation of a reorganization, merger or consolidation, in each case, unless, following such reorganization, merger or consolidation, (A) more than 60% of, respectively, the then outstanding shares of common stock of the corporation resulting from such reorganization, merger or consolidation and the combined voting power of the then outstanding voting securities of such corporation entitled to vote generally in the election of directors is then beneficially owned directly or indirectly, by all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the outstanding Corporation Common Shares Outstanding Corporation Voting securities immediately prior to such reorganization, merger or consolidation in substantially the same proportions as their ownership, immediately prior to such reorganization, merger or consolidation, of the Outstanding Corporation Common Shares and outstanding Corporation Voting Securities, as the case may be, (B) no Person (excluding the Corporation, any employee benefit plan (or related trust) of the Corporation or such corporation resulting from such reorganization merger or consolidation and any Person beneficially owning immediately prior to such reorganization, merger or consolidation, directly or indirectly, 20% or more of the Outstanding Corporation Common Shares or Outstanding Voting Securities, as the case may be) beneficially owns, directly or indirectly, 20% or more of, respectively, the then outstanding shares of common stock of the corporation resulting from such reorganization, merger or

consolidation or the combined voting power of the then outstanding voting securities of such corporation entitled to vote generally in the election of directors and (C) at least a majority of the members of the board of directors of the corporation resulting from such reorganization, merger or consolidation were members of the Incumbent Board at the time of the execution of the initial agreement providing for such reorganization, merger or consolidation; or

(iv) Approval by the shareholders of the Corporation of (A) a complete liquidation or dissolution of the Corporation or (B) the sale or other disposition of all or substantially all of the assets of the Corporation, other than to a corporation, with respect to which following such sale or other disposition, (1) more than 60% of, respectively, the then outstanding shares of common stock of such corporation and the combined voting power of the then outstanding voting securities of such corporation entitled to vote generally in the election of directors is then beneficially owned, directly or indirectly, by all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the Outstanding Corporation Common Shares and Outstanding Corporation Voting Securities immediately prior to such sale or other disposition in substantially the same proportion as their ownership immediately prior to such sale or other disposition, of the Outstanding Corporation Common Shares and outstanding Corporation Voting Securities, as the case may be, (2) no Person (excluding the Corporation and any employee benefit plan (or related trust) of the Corporation or such corporation and any Person beneficially owning, immediately prior to such sale or other disposition directly or indirectly, 20% or more of the Outstanding Corporation Common Shares or Outstanding Corporation Voting Securities, as the case may be) beneficially owns, directly or indirectly, 20% or more of, respectively, the then outstanding shares of common stock of such corporation and the combined voting power of the then outstanding voting securities of such corporation entitled to vote generally in the election of directors and (C) at least a majority of the members of the board of directors of such corporation were members of the Incumbent Board at the time of the execution of the initial agreement or action of the Board providing for such sale or other disposition of assets of the Corporation.

(d) “Committee” means the Compensation Committee of the Board of Directors, which shall consist of not less than two persons appointed by the Board, or the full Board if no committee is appointed.

(e) “Common Shares” means shares of the Corporation’s common stock, no par value, or the number and kind of shares of stock or other securities which shall be substituted or adjusted for such shares as provided in Section 7. Such shares may be authorized and unissued shares of the Corporation’s common stock.

(f) “Disability” means a physical condition arising from an illness or injury which renders an individual incapable of performing work pursuant to the terms of Code Section 22(3). The Committee shall make the final determination as to an individual’s Disability, and that determination shall be conclusive on all of the parties.

(g) “Fair Market Value” means, if the stock is not then Publicly Traded, $10 per Common Share until such time as Common Shares have been traded in an Arm’s Length Transaction. After an Arm’s Length Transaction, the Fair Market Value shall be the most recent price per Common Share at which Common Shares have been traded in an Arm’s Length Transaction provided that such Transaction has occurred within a six-month period. If no Arm’s Length Transaction has occurred within a six-month period, the Fair Market Value will be the price per Common Share most recently determined by the Committee or the Board within such six month period taking the following factors into consideration: the price at which one could reasonably expect such stock to be sold for cash in an Arm’s Length Transaction; the most recent transactions involving shares of such stock; the Corporation’s net worth; prospective earning power and dividend-paying capacity; the goodwill of the Corporation’s business; the Corporation’s industry position; the industry’s economic outlook; the values of securities of issuers whose stock is Publicly Traded and which are engaged in the banking business; the absence of a public market for such stock and such other matters as the Committee or Board deems appropriate. The determination by the Committee or the Board of the Fair Market Value shall, if not unreasonable, be conclusive and binding notwithstanding the possibility that other persons might make a different, and also reasonable, determination. In no event shall the Fair Market Value be less than the book value of a Common Share at the end of the most recent fiscal year quarter.

If the stock is then Publicly Traded, the Fair Market Value is the closing price of the stock as of the day in question (or, the nearest preceding trading day if the day in question is not a trading day) as reported with respect to the market in which shares of such stock are then traded, or, if no such closing prices are reported, on the basis of the mean between the high bid and low asked prices that day on the principal market or quotation system on which shares of such stock are then quoted, or, if not so quoted, as furnished by a professional

securities dealer making a market in such stock selected by the Board or the Committee.

(h) “Misconduct” means acts of embezzlement, fraud, dishonesty, nonpayment of any obligation owed to the Corporation or a subsidiary, breach of fiduciary duty or deliberate disregard of the Corporation’s or a subsidiary’s rules resulting in loss, damage or injury to the Corporation or a subsidiary, or the making of an unauthorized disclosure of any the Corporation’s or a subsidiary’s trade secret or confidential information, engaging in any conduct constituting unfair competition, inducing any of the Corporation’s or a subsidiary’s customers to breach a contract with the Corporation or a subsidiary or inducing any principal for whom the Corporation or a subsidiary acts as agent to terminate such agency relationship. In determining whether an optionee has committed an act of Misconduct, the Committee shall act fairly and shall give the optionee an opportunity to appear and present evidence on his or her behalf at a hearing before the Committee of the Board of Directors.

(i) “Plan” means the First Internet Bancorp 2006 Stock Option Plan.

(j) “Publicly Traded” means traded in the over-the-counter market with Common Shares prices reported by the National Association of Securities Dealers through its NASDAQ system or any successor system, or listed or admitted to trading on the New York Stock Exchange or any other national securities exchange.

(k) “Retirement” means retirement from active employment, or retirement from service in the case of a director, with the Corporation or a subsidiary at or after age 65. The determination of the Committee as to an individual’s Retirement shall be conclusive on all parties.

3. ELIGIBLE PARTICIPANTS

Directors and key employees of the Corporation and its subsidiaries who, in the Committee’s judgment, are largely responsible through their judgment, interest, ability and special efforts for the successful conduct of the Corporation’s or its subsidiaries’ operations are eligible to receive options granted under this Plan by the Committee from time to time.

4. EFFECTIVE DATE AND TERMINATION OF PLAN

This Plan was adopted by the Board of Directors and its shareholders and will become effective on March 17, 2006. The Plan shall terminate when all shares of stock subject to options granted under this Plan shall have been acquired through

exercise of such options or on March 16, 2016, whichever is earlier or at such earlier time as the Board of Directors may determine. Termination of the Plan will not affect the rights and obligations arising under options theretofore granted and then in effect.

5. SHARES SUBJECT TO THE PLAN AND TO OPTIONS

The maximum number of Common Shares of Corporation that may be subject to awards under the Plan is Four Hundred Thousand (400,000), subject to adjustment pursuant to Section 7. In no event shall the aggregate number of Common Shares for which any one individual participating in the Plan may be granted stock options exceed 75,000 shares per calendar year, subject to adjustment pursuant to Section 7. All or any shares of stock subject to an option which for any reason terminates unexercised may again be made subject to an option under the Plan.

6. GRANT, TERMS AND CONDITIONS OF OPTIONS

Options may be granted at any time and from time to time prior to the termination of the Plan. No optionee shall have any rights as a shareholder with respect to any Common Shares subject to option hereunder until said Shares have been issued. Each option shall be evidenced by a written stock option agreement which will expressly identify the option as an incentive stock option or as a nonqualified stock option. Options granted pursuant to the Plan need not be identical but each option is subject to the terms of the Plan and must contain and be subject to the following terms and conditions:

(a) Price . The purchase price under each option granted to optionees shall be established by the Committee. In no event will the option price of a stock option be less than 100% of the Fair Market Value of the stock on the date of grant. The option price must be paid in full at the time of the exercise. The price may be paid in cash or cash equivalents or, if the Common Shares are publicly traded, in Common Shares held by the optionee for the period of time necessary to qualify as mature shares as defined by current accounting guidance and valued at Fair Market Value having an aggregate value on the date of exercise equal to the option price, or in any combination of the foregoing.

(b) Duration and Exercise or Termination of Option . Each option granted to an optionee shall be exercisable in such manner and at such times as the Committee shall determine. Each option grant shall become exercisable in a series of three equal and successive annual installments of 33 1/3% of the number of options granted, with the first 33 1/3% vesting at the end of one year measured from the grant date of the option. Each option granted must

expire within a period of ten (10) years from the grant date. An optionee’s stock option agreement may provide for accelerated exercisability in the event of the optionee’s death, Disability or Retirement or other events in accordance with policies established by the Committee and may provide for expiration prior to the end of its terms in the event of the termination of the optionee’s service.

Except as otherwise provided in this Plan, the following provisions shall govern the exercise period applicable to any options held by the optionee at the time of cessation of service or death:

(i) Should the optionee cease to remain in service for any reason other than death or Disability, then the period during which each outstanding option held by such optionee is to remain exercisable shall be limited to the three (3)-month period following the date of such cessation of service.

(ii) Should such service terminate by reason of Disability, then the period during which each outstanding option held by the optionee is to remain exercisable shall be limited to the twelve (12)-month period following the date of such cessation of service.

(iii) Should the optionee die while holding one or more outstanding options, then the period during which each such option is to remain exercisable shall be limited to the twelve (12)-month period following the date of the optionee’s death. During such limited period, the option may be exercised by the personal representative of the optionee’s estate or by the person or persons to whom the option is transferred pursuant to the optionee’s will or in accordance with the laws of descent and distribution.

(iv) Should the optionee’s service be terminated for Misconduct, then all outstanding options held by the optionee shall terminate immediately and cease to be outstanding.

(v) Under no circumstances shall any such option be exercisable after the specified expiration date of the option term.

(vi) During the applicable post-service exercise period, the option may not be exercised in the aggregate for more than the number of vested shares for which the option is exercisable on the date of the optionee’s cessation of service. Upon the expiration of the applicable exercise period or (if earlier) upon the expiration of the option term, the option shall terminate and cease to be exercisable for any vested

shares for which the option has not been exercised. However, the option shall, immediately upon the optionee’s cessation of service for any reason, terminate and cease to be outstanding with respect to any option shares for which the option is not at that time exercisable or in which the optionee is not otherwise at that time vested.

(c) Transferability of Option. Each option shall be transferable only by will or the laws of descent and distribution following the optionee’s death.

(d) Modification or Assumption of Options . The Committee may modify, extend or assume outstanding options (whether granted by the Corporation or by another issuer) in return for the grant of new options for the same or a different number of shares and at the same or a different exercise price.

(e) Incentive Options. Options granted under the Plan that are intended to be incentive options will be subject to the following additional terms and conditions.

(i) Dollar Limitation. To the extent that the aggregate Fair Market Value of Common Shares (determined as of the respective date or dates of grant) underlying incentive options which are exercisable for the first time by any individual during any calendar year under the Plan (or any other plan of the Corporation, a parent or subsidiary corporation or predecessor thereof) exceeds the sum of $100,000 (or such greater amount as may be permitted under the Code), whether by reason of acceleration or otherwise, such options will not be treated as incentive options. In making such a determination, options will be taken into account in the order in which they were granted.

(ii) 10% Shareholder. If any optionee to whom an incentive option is to be granted pursuant to the provisions of the Plan is, on the date of grant, the owner of stock (determined with application of the ownership attribution rules of Code Section 424(d)) possessing more than ten percent (10%) of the total combined voting power of all classes of stock of his or her employer corporation or of its parent or subsidiary corporation (“10% Shareholder”), then the following special provisions will apply to the option granted to such individual:

(iii) The option price per share of the stock subject to such incentive option will not be less than one hundred ten percent (110%) of the Fair Market Value of the option shares on the date of grant; and

(iv) The option will not have a term in excess of five years from the date of grant.

(g) Other Terms and Conditions . Options may also contain such other provisions, which shall not be inconsistent with any of the foregoing terms, as the Committee shall deem appropriate. No option, however, nor anything contained in the Plan shall confer upon any optionee any right to continue in the Corporation’s or a subsidiary’s employ or service nor limit in any way the Corporation’s or a subsidiary’s right to terminate his or her employment or service at any time.

7. ADJUSTMENT OF AND CHANGES IN THE STOCK

(a) Should any change be made to the Common Shares issuable under the Plan by reason of any stock split, stock dividend, recapitalization, combination of shares, exchange of shares or other change affecting the outstanding Common Shares as a class, without the Corporation’s receipt of consideration, then appropriate adjustments shall be made to (i) the maximum number and/or class of securities issuable under the Plan, (ii) the maximum number and/or class of securities for which any one individual participating in the Plan may be granted stock options in the aggregate per calendar year, (iii) the number and/or class of securities and price per share in effect under each option outstanding under the Plan. Such adjustments to the outstanding options are to be effected in a manner which precludes the enlargement or dilution of rights and benefits under the Plan. The adjustments determined by the Committee or the Board shall be final, binding and conclusive.

(b) No right to purchase fractional shares shall result from any adjustment in options pursuant to this Section 7. In case of any such adjustment, the shares subject to the option shall be rounded down to the nearest whole share. Notice of any adjustment shall be given by the Corporation to each optionee which shall have been so adjusted and such adjustment (whether or not notice is given) shall be effective and binding for all purposes of the Plan.

8. CHANGE IN CONTROL

(a) In connection with any Change in Control, the Common Shares at the time subject to each outstanding option under this Plan but not otherwise vested shall automatically vest in full so that each such option shall, immediately prior to the specified effective date for the Change in Control, become fully exercisable for all of the Common Shares at the time subject to that option and may be exercised for all or any portion of those shares as fully vested Common Shares. Each option so accelerated shall remain exercisable for fully-vested shares until the expiration or sooner termination of the option term.

(b) The portion of any incentive option accelerated in connection with a Change in Control shall remain exercisable as an incentive option only to the extent the applicable one hundred thousand dollar limitation is not exceeded. To the extent such dollar limitation is exceeded, the accelerated portion of such option shall be exercisable as a non-statutory option under the Federal tax laws.

(c) The outstanding options shall in no way affect the right of the Corporation to adjust, reclassify, reorganize or otherwise change its capital or business structure or to merge, consolidate, dissolve, liquidate or sell or transfer all or any part of its business or assets.

9. THE CORPORATION’S RIGHT OF FIRST PURCHASE

So long as the stock of the class subject to this Plan has not been Publicly Traded for at least ninety days, any stock issued on exercise of any option granted under this Plan shall be subject to the Corporation’s right of first purchase. By virtue of that right, such stock may not be transferred during the optionee’s lifetime to any person other than members of the optionee’s immediate family, a partnership whose members are the optionee and/or members of the optionee’s immediate family, or a trust for the benefit of the optionee and/or members of the optionee’s immediate family, unless such transfer occurs within fifteen days following the expiration of thirty days after the Corporation has been given a written notice which correctly identified the prospective transferee or transferees and which offered the Corporation an opportunity to purchase such stock at its Fair Market Value in cash and such offer was not accepted within thirty days after the Corporation’s receipt of the notice.

10. LISTING OR QUALIFICATION OF STOCK

In the event that the Board of Directors determines in its discretion that the listing or qualification of the Plan shares on any securities exchange or under any applicable law or governmental regulation is necessary as a condition to the issuance of such shares under the option, the option may not be exercised in whole or in part unless such listing, qualification, consent or approval has been unconditionally obtained.

11. ADMINISTRATION AND AMENDMENT OF THE PLAN

The Plan shall be administered by the Committee. The Committee shall be appointed by the Board of Directors, and shall serve at its pleasure. The Board shall fill vacancies on the Committee and may from time to time remove or add members. The Board of Directors may amend or terminate the Plan as desired, without further action by the Corporation’s shareholders except to the extent required by applicable

law, provided such amendment does not adversely affect the rights and obligations with respect to options outstanding at the time of the amendment.

12. TIME OF GRANTING OPTIONS

The effective date of each option granted hereunder shall be the date on which the grant was made. Within a reasonable time thereafter, the Corporation will execute and deliver a written option agreement to the optionee.

13. WITHHOLDING

To the extent required by applicable federal, state, local or foreign law, an optionee shall make arrangements satisfactory to the Corporation or a subsidiary, as applicable, for the satisfaction of any withholding tax obligations that arise by reason of an option exercise or any sale of shares. The Corporation shall not be required to issue shares until such obligations are satisfied. The Committee may, in its sole discretion, permit these obligations to be satisfied by having the Corporation or a subsidiary withhold a portion of the shares of stock that otherwise would be issued to him or her upon exercise of the option, or to the extent permitted, by tendering shares previously acquired.

Exhibit 10.2

FIRST INTERNET BANCORP

2011 DIRECTORS’ DEFERRED STOCK PLAN

1. Purpose .

The purpose of this First Internet Bancorp 2011 Directors’ Deferred Stock Plan (the “Plan”) is to assist First Internet Bancorp (the “Company”) in recruiting and retaining highly qualified directors and to strengthen the commonality of interest between directors and shareholders by providing for the receipt by the directors of the Company of all or a portion of their Director Fees (as defined below) in the form of Deferred Stock Rights (as defined below). Any rights created under this Plan shall be mere unsecured contractual rights of participants and their beneficiaries against the Company. The Plan is unfunded, and any payments will be made from treasury shares or general assets of the Company. However, nothing in this Plan shall prohibit the Company from establishing a rabbi trust to fund the benefits provided under this Plan.

2. Administration .

The Plan will be administered by a committee of not less than two outside directors of the Company, or if no committee is appointed, by the Board (the “Committee”). The Committee’s construction and interpretation of the terms and provisions of the Plan shall be final and conclusive. All questions of interpretation of the Plan shall be determined by the Committee and such determination shall be final and binding upon all persons having an interest in the Plan. No Committee member shall be liable for any action or determination under the Plan made in good faith. In the event the Company’s common stock, no par value (“Common Stock”) becomes Publicly Traded, the Committee will comprise two outside directors as defined in Rule 16b-3 promulgated under Section 16 of the Exchange Act of 1934.

3. Participation in the Plan .

All directors of the Company who are not employees of the Company or under separate contract with the Company (“Eligible Directors”) shall be eligible to be granted Deferred Stock Rights under the Plan. The Company will maintain an account for each of the Eligible Directors who receives Deferred Stock Rights under the Plan, which account will be maintained even after the Eligible Director ceases to provide services as a Director, and until the Eligible Director’s Account in the Plan has been distributed in accordance with the provisions of Section 6(e) of the Plan. During the period of time the Company maintains an account for an Eligible Director, the Eligible Director will be participating in the Plan.

4. Stock Subject to the Plan .

The maximum number of shares which may be issued under the Plan and any predecessor plan is 120,000 shares of the Company’s Common Stock, no par value, subject to adjustment as provided in Section 10.

5. Election of Deferred Stock Right .

If a Director elects before January 1 of each calendar year, he or she will receive as of January 1 of each year, Deferred Stock Rights based on the dollar amount of the Directors Fees to be earned during that calendar year divided by the Fair Market Value of the shares of Common Stock on the Valuation Date.

(a) “Director Fees” means the amount that a director is entitled to receive as an annual retainer for serving as a director for a calendar year, as determined from time to time by the Board of Directors. An Eligible Director will be entitled to receive 1/12 of his or her annual retainer for each full calendar month during which the Eligible Director serves as a Director during the applicable calendar year.

(b) “Deferred Stock Rights” represent the right to receive a specified number of shares of Common Stock from the Company on a later date as elected by the Eligible Director in accordance with Section 6 of the Plan.

6. Terms, Conditions and Form of Deferred Stock Rights .

Each election to receive Deferred Stock Rights granted under the Plan shall be evidenced by a written agreement in such form as the Committee shall from time to time approve (“Election Form”), which agreement shall comply with and be subject to the following terms and conditions:

(a) Amount of Deferral. With respect to each calendar year, an Eligible Director may elect to defer a specified dollar amount or percentage of his or her Director Fees for that calendar year (“Deferral Amount”) by filing an Election Form prior to the beginning of such calendar year. An Eligible Director shall have the right to elect to defer each calendar year. If the Eligible Director does not file a new Election Form prior to the beginning of a calendar year, the Election Form on file will remain effective for that calendar year. An Eligible Director may change the dollar amount or percentage of his or her Director Fees to be deferred (or reduce such amount or percentage to zero) by filing a subsequent Election Form with the Committee. Any such change shall be effective as of the first day of the calendar year immediately succeeding the calendar year in which such Election Form is filed with the Committee. The Deferred Stock Rights shall be paid out in shares of Common Stock as set forth in Section 6(e).

(b) Deferred Stock Rights. Subject to Section 14, effective as of each Valuation Date of each calendar year (or as soon thereafter as reasonably practicable) commencing on or after January 1, 2011, each Eligible Director then in office who has elected to defer all or part of his/her Director Fees will be granted a Deferred Stock Right in respect of the Deferral Amount, valued as of the

Valuation Date. Any Eligible Director who is first elected other than at an annual meeting of shareholders shall be entitled to receive a Deferred Stock Right for the Deferral Amount (appropriately prorated) provided such election is made within thirty (30) days from the date the Eligible Director is elected. The Valuation Date will be the January 1 of the year in which the Director is elected. For the 2011 Plan Year, each Eligible Director will be entitled to receive a Deferred Stock Right, if he or she so elects within thirty (30) days from the adoption date of this Plan.

(c) Accounts. Promptly following each Valuation Date, the Company shall establish an account for each Eligible Director who elected to receive a Deferred Stock Right (“Account”). The Company shall credit to each Eligible Director’s Account a number of units equal to the number of whole shares determined by dividing the Deferral Amount for the calendar year by the Fair Market Value (defined below) on the Valuation Date. The Eligible Director’s Account shall also be credited with such dividends as would have been paid if the units credited to such account had been held in Company Common Stock on the dividend payment date. Such hypothetical dividends shall be accounted for as additional Deferred Stock Rights based on the Fair Market Value on the Valuation Date in the year for which the dividends were paid. To the extent that the application of the foregoing formula would result in the issuance of fractional shares, no fractional shares shall be issued, but instead, the Company shall maintain a separate non-interest-bearing account for each Eligible Director (“Sub-Account”), which Sub-Account shall be credited with the amount of any Deferral Amounts not convertible into whole shares of Common Stock which amounts shall be combined with Deferral Amounts that are paid for the next following calendar year. When whole shares of Common Stock are issued by the Company to the Eligible Director for any calendar year, the amounts in such Sub-Accounts shall be reduced by that amount which results in the issuance of the maximum number of whole shares of Common Stock to such Eligible Director. The Company shall pay any and all fees and commissions incurred in connection with the payment of Deferred Amounts to an Eligible Director in shares of Common Stock.

(d) Calculation of Payment. For Eligible Directors who have elected to have the Director Fees paid in the form of Deferred Stock Rights, the number of shares underlying the Deferred Stock Rights granted to any Eligible Director shall be equal to the whole number (with any fractional interests rounded up to the next highest whole number) obtained by dividing the Director Fees (including an annual retainer of $15,000 in 2010, and as adjusted from time to time by the Board of Directors) by the Fair Market Value of the Common Stock on the Valuation Date.

The Fair Market Value is the closing price of the stock as of the day in question (or, the nearest preceding trading day if the day in question is not a trading day) as reported with respect to the market in which shares of such stock are then traded, or, if no such closing prices are reported, on the basis of the mean between the high bid and low asked prices that day on the principal market or quotation system on which shares of such stock are then quoted, or, if not so quoted, as furnished by a professional securities dealer making a market in such stock selected by the Board or the Committee. In no event shall the Fair Market Value be less than the average value of the Common

Stock traded on the over-the-counter Bulletin Board (www.otcbb.com symbol FIBP) during the prior month ended December 31. The determination by the Committee or the Board of the Fair Market Value shall, if not unreasonable, be conclusive and binding notwithstanding the possibility that other persons might make a different, and also reasonable, determination.

“Publicly Traded” means traded in the over-the-counter market with Common Stock prices reported by the National Association of Securities Dealers through its NASDAQ system or any successor system, or listed or admitted to trading on the New York Stock Exchange or any other national securities exchange.

(e) Mid-Year Termination. If a Director terminates service as a Director during the calendar year, he or she shall forfeit any Deferred Stock Rights attributable to Director Fees that have not yet been earned.

(f) Time of Payment. Subject to Section 7, each Eligible Director who elects to receive Deferred Stock Rights may elect in the Election Form submitted to the Company prior to the beginning of a calendar year or, if newly eligible, within 30 days of his or her initial eligibility date to receive payment of his or her Deferred Stock Rights earned during that calendar year upon (i) the date upon which the grantee ceases to serve as a director of the Company for any reason including, but not limited to death, disability as defined within the American Jobs Creation Act of 2004 and the underlying laws and regulations, removal or resignation (“Separation from Service”); however, if the Company is Publicly Traded at the time of Separation of Service, payment of the Deferred Stock Rights will be delayed six (6) months after the date of Separation of Service, or (ii) the date the Eligible Director attains age 65.

(g) Form of Payment. Eligible Directors will be paid in shares of Common Stock in the proportion of one share of Common Stock for one Deferred Stock Right (any fractions shall be converted to and paid in cash).

(h) Special Distributions. Notwithstanding any other provision of this Section 6, an Eligible Director may elect to receive a distribution (“Special Distribution”) of part or all of his or her Account balance in one or more distributions if (and only if) the Committee determines, in its discretion, that the Eligible Director has experienced an unforeseeable emergency, as defined within the American Jobs Creation Act of 2004 and the underlying laws and regulations, that is caused by an event beyond the control of the Eligible Director and that would result in severe financial hardship to the Eligible Director if the early distribution were not permitted. Upon such Special Distribution, the amount of the Eligible Director’s Account balance subject to such distribution is reduced by ten percent (10%). Any distribution made pursuant to such an election shall be made within sixty (60) days of the date such election is submitted to the Committee. The remaining ten percent (10%) of the portion of the electing Eligible Director’s Account balance subject to such distribution shall be forfeited.

(i) Payment Upon Death. In the event of an Eligible Director’s death, the shares of Common Stock issuable to the Eligible Director under Deferred Stock Rights shall be issued to the legal representative or legatee of the Eligible Director. In the alternative, an Eligible Director may elect to designate a beneficiary to receive his or her shares issuable under Deferred Stock Rights in the event of such Eligible Director’s death. In order to designate a beneficiary or beneficiaries, such director must complete and deliver to the Company a written form (the “Beneficiary Form”) on which he or she makes such designation. Such a designation will become effective when received by the Company. If the Eligible Director dies without making a designation, the shares underlying Deferred Stock Rights shall be issued to the legal representative or legatee of the Eligible Director’s estate.

7. Change in Control .

The following provisions of this Section 7 will become effective upon a Change in Control. No portion of this Section 7 will apply to any transaction or event referred to herein to the extent it is inconsistent with applicable state or federal law. Notwithstanding any other provision of this Plan to the contrary, upon the occurrence of a Change in Control, the benefit provided by this Section 7 shall be the exclusive benefit provided under this Plan to the Eligible Directors (and to their spouses and beneficiaries), and accordingly, each such person shall not be entitled to any other benefits under this Plan. Upon receipt of his or her benefit under this Section 7, a person shall cease being an Eligible Director in the Plan.

(a) Effective on a Change in Control, each Eligible Director’s Account (including all contributions and earnings as of that date) shall be paid to the Eligible Director and/or beneficiary, as applicable, by the Committee as soon as administratively practicable following the Change in Control in the form of a lump sum cash payment.

(b) “Change in Control” shall mean (i) the direct or indirect acquisition by any person, entity or group of persons, within the meaning of Section 13(d) or 14(d) of the Securities Exchange Act of 1934 (“Act”), or any comparable successor provisions of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Act) of securities possessing more than 30 percent (30%) of the total combined voting power of the Company’s outstanding securities pursuant to a tender or exchange offer made directly to the Company’s shareholders which the Board of Directors does not recommend such shareholders to accept or (ii) the approval by the shareholders of the Company of a reorganization, merger, or consolidation, in each case, with respect to which persons who were shareholders of the Company immediately prior to such reorganization, merger or consolidation do not, immediately thereafter, own more than 50 percent (50%) of the combined voting power entitled to vote generally in the election of directors of the reorganized, merged or consolidated Company’s then outstanding securities, (iii) a liquidation or dissolution of the Company, or (iv) the sale of all or substantially all of the Company’s assets.

8. Assignments .

Each Deferred Stock Right granted under the Plan by its terms shall not be transferable by the grantee otherwise than by will or by the laws of descent and distribution, or pursuant to a qualified domestic relations order (as defined in Section 414(p) of the Internal Revenue Code of 1986, as amended or replaced from time to time).

9. Limitation of Rights .

(a) No Right to Continue as Director. Neither the Plan, nor the granting of a Deferred Stock Right nor any other action taken pursuant to the Plan, shall constitute or be evidence of any agreement or understanding, expressed or implied, that the Company will retain a director for any period of time.

(b) No Shareholder Rights. Except as specifically set forth in this Plan, a grantee shall have no rights as a shareholder with respect to the Common Stock covered by his or her Deferred Stock Right until the date of the issuance to him or her of a stock certificate covering the shares underlying such Deferred Stock Rights, and no adjustment will be made for rights for which the record date is prior to the date such certificate is issued. Any voting rights with respect to shares covered by a Deferred Stock Right shall be exercised by the Committee, or, if a rabbi trust is established, by the trustee.

10. Adjustment Provisions .

(a) Recapitalizations. If, through or as a result of any merger, consolidation, sale of all or substantially all of the assets of the Company, reorganization, recapitalization, reclassification, stock dividend, stock split, reverse stock split or other similar transaction, (i) the outstanding shares of Common Stock are increased or decreased or are exchanged for a different number or kind of shares or other securities of the Company, or (ii) additional shares or new or different shares or other securities of the Company or other non-cash assets of the Company are distributed with respect to such shares of Common Stock or other securities, an appropriate and proportionate adjustment, as determined by the Committee in its sole discretion, may be made in (x) the maximum number and kind of shares reserved for issuance under the Plan, (y) the number and kind of shares or other securities subject to any then outstanding Deferred Stock Rights under the Plan, and (z) the price for each share subject to any then outstanding Deferred Stock Rights under the Plan. In the event of any other extraordinary dividend or distribution, whether in stock, cash or other property, or a spinoff, split up or other extraordinary transaction, the number of shares issuable under this Plan shall be subject to such adjustment as the Committee or the Board may deem appropriate, and the number of shares issuable pursuant to any Deferred Stock Rights theretofore granted and the price of such Deferred Stock Rights shall be subject to such adjustment as the Committee or the Board may deem appropriate with a view toward preserving the value of such Deferred Stock Rights.

(b) Successors. The Company shall require any successor (whether direct or indirect, by purchase, merger, consolidation, reorganization or otherwise) to all or substantially all of the business and/or assets of the Company expressly to assume and to agree to perform this Plan in the same manner and to the same extent the Company would be required to perform if no such succession had taken place. This Plan shall be binding upon and inure to the benefit of the Company and any successor of or to the Company, including without limitation any persons acquiring directly or indirectly all or substantially all of the business and/or assets of the Company whether by sale, merger, consolidation, reorganization or otherwise (and such successor shall thereafter be deemed the “Company” for the purpose of this Plan), and the heirs, beneficiaries, executors and administrators of each Eligible Director.

11. Amendment of the Plan .

The Board may at any time amend or discontinue the Plan and the Committee may at any time amend or cancel any outstanding Deferred Stock Rights for any purpose, including, but not limited to satisfying changes in law or for any other lawful purpose, but no such action shall adversely affect rights under any outstanding Deferred Stock Rights without the holder’s consent.

12. Notice .

Any written notice to the Company required by any of the provisions of the Plan shall be addressed to the Secretary of the Company at 9200 Keystone Crossing, Suite 800, Indianapolis, Indiana 46240 and sent by first class mail/certified mail/overnight courier and shall become effective when it is received by the Secretary, Assistant Secretary, or his or her designees.

13. Effective Date and Duration of the Plan .

(a) Effective Date. The Plan shall become effective on the date set forth below. Amendments to the Plan shall become effective when adopted by the Board of Directors, unless otherwise provided. No shareholder approval is required to implement this Plan.

(b) Termination. The Plan shall terminate upon the date on which all shares available for issuance, and all cash payable under, the Plan shall have been issued and paid pursuant to the Deferred Stock Rights granted under the Plan.

14. Miscellaneous

(a) Investment Representations. The Company may require any person to whom a Deferred Stock Right is granted, as a condition of such Deferred Stock Right, to give written assurances in substance and form satisfactory to the Company to the effect that such person is acquiring the Common Stock subject to the Deferred Stock Right for his or her own account for investment and not with any present intention of selling or otherwise distributing the same, and to

such other effects as the Company deems necessary or appropriate in order to comply with federal and applicable state securities laws.

(b) Compliance with Securities Laws. Each Deferred Stock Right shall be subject to the requirements that if, at any time, counsel to the Company shall determine that the listing, registration or qualification of the shares subject to such Deferred Stock Rights upon any securities exchange or under any state or federal law is necessary as a condition of, or in connection with, the issuance or purchase of shares thereunder, such shares may not be issued unless such listing, registration, qualification, consent or approval, or satisfaction of such condition shall have been effected or obtained on conditions acceptable to the Board of Directors. Nothing herein shall be deemed to require the Company to apply for or to obtain listing, registration or qualification, or to satisfy such condition.

(c) Withholding Taxes. The Company shall have no withholding obligations with respect to Deferred Stock Rights or the issuance of Common Stock under this Plan and each Eligible Director will be responsible for taxes owed under the Plan. The Company will issue the required information return on Form 1099 as appropriate.

Exhibit 10.3

Employment Agreement

David B. Becker

(conformed to reflect all amendments through January 1, 2007)

EMPLOYMENT AGREEMENT

THIS EMPLOYMENT AGREEMENT (“Agreement”) entered into on the 1 st day of June, 2000 and amended each of July 1, 2001 and January 1, 2007, by and between First Internet Bank of Indiana (“First Internet Bank” or the Bank”) and David B. Becker (the “Executive”), but effective as of the Effective Date as defined herein.

WHEREAS, First Internet Bank desires to employ the Executive and the Executive wishes to be employed by First Internet Bank; and

WHEREAS, the parties intend that the Executive will become employed by First Internet Bank as Chairman and Chief Executive Officer.

NOW, THEREFORE, in consideration of the respective agreements of the parties contained herein, it is agreed as follows:

1. Employment Term . Subject to Section 22 of this Agreement, the “Employment Term” shall mean the continuous period beginning on the date set forth in the attached Exhibit A (the “Effective Date”) and ending on the Executive’s Terminate Date. The Employment Term shall expire on the first anniversary of the Effective Date (the “Anniversary Date”); provided , however , that, commencing on each Anniversary Date, the Employment Term shall automatically be extended for a period of one (1) year unless either the Bank or the Executive shall have given written notice to the other at least ninety (90) days before the Anniversary Date that the Employment Term shall not be so extended.

2. Employment .

(a) Subject to the provisions of Section 7, the Bank agrees to continue to employ the Executive and the Executive agrees to remain in the employ of the Bank during the Employment Term. During the Employment Term, the Executive shall be employed in the executive capacity and with the title and duties set forth on Exhibit A. The Executive shall perform the duties, undertake the responsibilities and exercise the authority customarily performed, undertaken and exercised by a person having the title and duties assigned to Executive pursuant to this Agreement.

(b) During the Employment Term, excluding periods of vacation and sick leave to which the Executive is entitled, the Executive shall devote reasonably necessary and sufficient attention and time during business hours to the business and affairs of the Bank to the extent necessary to

discharge the responsibilities assigned to the Executive under this Agreement. The Executive may (1) serve on corporate, civil or charitable boards or committees, subject to approval by the Board of Directors of First Internet Bank (the “Board”) which approval shall not be unreasonably withheld or delayed; (2) manage personal investments; (3) deliver lectures, so long as such activities do not interfere with the performance of the Executive’s responsibilities under this Agreement; and (4) continuing professional education at the Bank’s expense.

3. Compensation .

(a) Base Salary . During the Employment Term, the Bank agrees to pay or cause to be paid to the Executive an annual salary as may be determined or adjusted from time to time (hereinafter referred to as the “Base Salary”). Such Base Salary shall be payable in accordance with the Bank’s customary practices applicable to its executives and shall not be subject to unilateral reduction by the Bank at any time during the Employment Term. The Bank shall review the Executive’s Base Salary at least annually, with the first review upon the first anniversary of the Effective Date.

(b) Deferred Compensation . The Bank shall pay the Executive $35,000 in deferred compensation (“Deferred Compensation”) in one lump sum as soon as practicable after the Amendment Effective Date. Executive acknowledges that such payment of Deferred Compensation shall be deemed Base Salary paid as set forth in the Employment Agreement. Executive further acknowledges that upon receipt of the payment of Deferred Compensation, he shall have been paid all Base Salary owed to him as of July 1, 2001 under the Employment Agreement.

(c) Base Salary after Amendment Effective Date . As of the Amendment Effective Date, Executive’s Base Salary shall be payable at an annual rate of $60,000 and shall be earned and accrued on a per diem basis and shall be paid in accordance with the Bank’s standard and customary procedures for payment of salaries to executive officers and shall not be subject to unilateral reduction by the Bank at any time during the Employment Term. The Bank shall review the Executive’s Base Salary at least annually.

(d) Annual Bonus . During the Employment Term, in addition to Base Salary, the Executive shall be awarded, for each calendar year ending during the Employment Term, an annual bonus (the “Annual Bonus”), which shall be in an amount up to 120% of the Executive’s Base Salary and shall be based on performance objectives established by the Compensation Committee or the Board. The cash portion of any such Annual Bonus, if any, shall be paid no later than the end of the third month of the calendar year next following the calendar year for which the Annual Bonus is earned. The Executive shall have the opportunity to earn a pro rata bonus for each partial calendar year during the Employment Term. Any restricted shares that are part of the Annual Bonus shall be earned and paid in accordance with the terms and conditions of the Annual Bonus adopted by the Compensation Committee or the Board.

4. Benefits .

(a) COBRA Continuation . For so long as the Executive and/or his or her dependents are eligible to receive continuation coverage provided by a previous employer under COBRA, and the Executive and/or his or her dependents are paying the premiums for such coverage, the Bank shall reimburse the Executive and/or his or her dependents for the premiums paid to continue the coverage. Upon the date the Executive and/or his or

her dependents are no longer eligible to receive continuation coverage from a previous employer under COBRA, provided the Executive is still employed pursuant to the terms of this Agreement, the Executive and/or his dependents shall be eligible to receive benefits provided for in this Agreement.

(b) During Employment Term . Subject to subsection (a) of this Section 4, during the Employment Term, the Executive shall be entitled to participate in all employee benefit plans, practices and programs maintained by the Bank and made available to employees generally, including, without limitation, any pension, retirement, savings, medical, hospitalization, disability, dental, life or travel accident insurance benefit plans. Unless otherwise provided in this Agreement, the Executive’s participation in, such plans, practices and programs shall be on the same basis and terms as are applicable to employees of the Bank generally.

(c) Executive Benefits . Subject to subsection (a) of this Section 4, during the Employment Term, the Executive shall be entitled to participate in all executive benefit or incentive compensation plans maintained or established by the Bank for the purpose of providing compensation and/or benefits to executives of the Bank including, but not limited to, any supplemental retirement, salary continuation, stock option, deferred compensation, supplemental medical or life insurance or other bonus or incentive compensation plans (the “Executive Benefits”). Unless otherwise provided in this Agreement, the Executive’s benefits under, and the Executive’s participation in, such Executive Benefit plans shall be on the same basis and terms as are applicable to executives of the Bank generally.

5. Reimbursement of Business Expenses . The Executive shall be entitled to receive prompt reimbursement of all expenses reasonably incurred by him or her in connection with the performance of the duties of an executive of the Bank or for promoting, pursuing or otherwise furthering the business or interests of First Internet Bank.

6. Vacation and Sick Leave . During the Employment Term, at such reasonable times as the Board shall in its discretion permit, the Executive shall be entitled, without loss of pay, to absent himself or herself voluntarily from the performance of his or her employment under this Agreement, provided that:

(a) Vacation . The Executive shall be entitled to an annual vacation in accordance with the policies as periodically established by the Board for similarly situated executives of the Bank; provided, however, that in no

event shall the Executive’s annual vacation entitlement be less than the period set forth on Exhibit A. Executive will be entitled to carry over any unused vacation from one fiscal year to the next in accordance with Bank policy, but in no event shall Executive be entitled to carry over unused vacation for more than one (I) year.

(b) Sick Leave . The Executive shall be entitled to sick leave (without loss of pay) in accordance with the Bank’s policies as in effect from time to time.

7. Termination . Subject to Section 22 of this Agreement, during the Employment Term, the Executive’s employment hereunder may be terminated under the following circumstances:

(a) Cause . The Bank may terminate the Executive’s employment for “Cause.” For purposes of this Agreement, for “Cause” means:

(i) the Executive has been convicted of, or pled nolo contendere to, a felony or a crime involving moral turpitude; or

(ii) the Executive (1) either (x) intentionally and continually failed substantially to perform his or her reasonably assigned duties with the Bank (other than a failure resulting from the Executive’s incapacity due to physical or mental illness or from the assignment to the Executive of duties that would constitute Good Reason), which failure has continued for a period of at least thirty (30) days after a written notice of demand for substantial performance, signed by a duly authorized member of the Board, has been delivered to the Executive specifying the manner in which the Executive has failed substantially to perform and the steps required for the Executive to cure the nonperformance, or (y) intentionally engaged in conduct which has been demonstrably and materially injurious to the Bank and (2) the termination is evidenced by a resolution adopted in good faith by more than two-thirds (2/3) of the Board; or

(iii) the Executive has breached any of the Executive’s covenants set forth in Section 12 of this Agreement.

(b) Disability . The Bank may terminate the Executive’s employment after having established the Executive’s Disability. For purposes of this Agreement, “Disability” means a physical or mental infirmity which impairs the Executive’s ability to substantially perform his or her duties under this Agreement for three (3) consecutive months or for four (4) months in any consecutive 12-month period. The Executive shall be

entitled to the compensation and benefits provided for under this Agreement for any period during the Employment Term and prior to the establishment of the Executive’s Disability during which the Executive is unable to work due to a physical or mental infirmity. Notwithstanding anything contained in this Agreement to the contrary, until the Termination Date specified in a Notice of Termination delivered by the Bank to the Executive (as each term is hereinafter defined) relating to the Executive’s Disability, the Executive shall be entitled to return to his or her position with the Bank as set forth in this Agreement in which event no Disability of the Executive will be deemed to have occurred.

(c) Good Reason . The Executive may terminate his or her employment after “Good Reason,” which shall mean the occurrence of any of the following events or conditions:

(i) a material change in the Executive’s status, title, position or responsibilities or reporting requirements which represents a material adverse change from his or her status, title, position or responsibilities as in effect immediately prior thereto; the assignment to the Executive of any duties or responsibilities which are inconsistent with his or her status, title, position, responsibilities or reporting requirements; or any removal of the Executive from or failure to appoint or elect or reappoint or reelect him or her to any of the offices or positions Executive holds, including Executive’s position on the Board of Directors, except in connection with the termination of his or her employment for Disability, Cause, as a result of his or her death or by the Executive other than for Good Reason;

(ii) the failure by the Bank to pay to the Executive any portion of the Executive’s current compensation within thirty (30) days of the date such compensation is due; or

(iii) a material reduction in the Executive’s Base Salary, Annual Bonus opportunity, or Executive Benefits without the Executive’s prior written approval.

(d) Change in Control . If (i) within twelve (12) months following a Change in Control, either (A) the Bank terminates the Executive for reasons other than Cause, Disability or death, or (B) the Executive terminates for Good Reason, or (ii) after the passage of twelve (12) months from the date of a Change in Control, the Executive terminates or is terminated for any reason other than Cause, then such termination is due to a Change in

Control. For purposes of this Agreement, a “Change in Control” shall mean the occurrence during the term of the Agreement of:

(i) An acquisition (other than directly from the Bank) of any Common Stock or other voting securities of the Bank entitled to vote generally for the election of directors (the “Voting Securities”) by any “Person” (as the term person is used for purposes of Section 13(d) or 14(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), immediately after which such Person has “Beneficial Ownership” (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of thirty percent (30%) or more of the then outstanding shares of Common Stock or the combined voting power of the Bank’s then outstanding Voting Securities; provided, however, in determining whether a Change in Control has occurred, Voting Securities which are acquired in a Non-Control Acquisition (as hereinafter defined) shall not constitute an acquisition which would cause a Change in Control. A “Non-Control Acquisition” shall mean an acquisition by (A) any Bank employee benefit plan (or a trust forming a part of the employee benefit plan) maintained by (x) the Bank or (y) any corporation or other Person of which a majority of its voting power or its voting equity securities or equity interest is owned, directly or indirectly, by the Bank (a “Subsidiary”), (B) the Bank or its Subsidiaries, or (C) any Person in connection with a Non-Control Transaction (as hereinafter defined);

(ii) The consummation of:

(1) A merger, consolidation, reorganization or other business combination with or into the Bank or in which securities of the Bank are issued, unless such merger, consolidation, reorganization or other business combination is a “Non- Control Transaction.” A “Non-Control Transaction” shall mean a merger, consolidation or reorganization with or into the Bank or in which securities of the Bank are issued where:

(A) the shareholders of the Bank, immediately before such merger, consolidation or reorganization, own directly or indirectly immediately following such merger, consolidation or reorganization, at least fifty-five percent (55%) of the combined voting power of the outstanding voting securities of the

corporation resulting from such merger or consolidation or reorganization (the “Surviving Corporation”) in substantially the same proportion as their ownership of the Voting Securities immediately before such merger, consolidation or reorganization,

(B) the individuals who, as of the Effective Date, are members of the Board immediately prior to the execution of the agreement providing for such merger, consolidation or reorganization constitute at least fifty-five percent (55%) of the members of the board of directors or the board of trustees of the Surviving Corporation or a corporation that directly or indirectly has Beneficial Ownership of a majority of the voting securities of the Surviving Corporation, and

(C) no Person other than (i) the Bank, (ii) any Subsidiary, (iii) any employee benefit plan (or any trust forming a part of the employee benefit plan) that immediately prior to such merger_ consolidation or reorganization, was maintained by the Bank, the Surviving Corporation, or any Subsidiary, or (iv) any Person who, immediately prior to such merger, consolidation or reorganization had Beneficial Ownership of thirty percent (30%) or more of the then outstanding Voting Securities or common stock of the Bank, has Beneficial Ownership of thirty percent (30%) or more of the combined voting power of the Surviving Corporation’s then outstanding voting securities or its common stock.

(2) A complete liquidation or dissolution of the Bank; or

(3) The sale or other disposition of all or substantially all of the assets of the Bank to any Person (other than a transfer to a Subsidiary).

Notwithstanding the foregoing, a Change in Control shall not be deemed to occur solely because any Person (the “Subject Person”) acquired Beneficial Ownership of more than the permitted amount of the then outstanding common stock or

Voting Securities as a result of the acquisition of Common Stock or Voting Securities by the Bank which, by reducing the number of shares of Common Stock or Voting Securities then outstanding, increases the proportional number of shares Beneficially Owned by the Subject Person, provided that if a Change in Control would occur (but for the operation of this sentence) as a result of the acquisition of shares of Common Stock or Voting Securities by the Bank, and after such share acquisition by the Bank, the Subject Person becomes the Beneficial Owner of any additional shares of Common Stock or Voting Securities which increases the percentage of the then outstanding shares of Common Stock or Voting Securities Beneficially Owned by the Subject Person, then a Change in Control shall occur.

8. Compensation Upon Termination . Subject to Section 22 of this Agreement, upon termination of the Executive’s employment during the Employment Term, the Executive shall be entitled to the benefits set forth below. The Executive shall not be required to mitigate the amount of any payment provided for in this Section 8 by seeking other employment or otherwise and no such payment shall be offset or reduced by the amount of any compensation or benefits provided to the Executive in any subsequent employment except as provided in subsection 8(b)(iv), 8(c)(iv) and 8(d)(iv).

(a) If the Executive’s employment with the Bank shall be terminated (1) by the Bank for Cause or (2) by the Executive voluntarily other than for Good Reason, the Bank shall pay the Executive all amounts earned or accrued through the Termination Date but not paid as of the Termination Date, including (i) Base Salary, (ii) reimbursement for reasonable and necessary expenses incurred by the Executive on behalf of the Bank during the period ending on the Termination Date, (iii) vacation pay, and (iv) sick leave (collectively, “Accrued Compensation”). The Executive shall also receive any other benefits which may be due Executive in accordance with Bank policy and procedures or separate written agreement.

(b) If the Executive’s employment with the Bank shall be terminated by the Executive’s death or Disability, the Executive shall be entitled to the following:

(i) The Bank shall pay the Executive all Accrued Compensation.

(ii) In the event of death, the Bank shall pay the Executive’s dependents and/or estate, a cash payment in an amount equal to 120% of the cash portion of the any bonus awarded by the Bank to the Executive based on the Executive’s performance during the calendar year prior to termination (“Replacement Bonus”).

(iii) In the event of Disability, the Bank shall pay the Executive, within four (4) weeks of termination, as severance pay and in lieu of any further compensation for periods subsequent to the Termination Date, a single cash payment in an amount equal to the sum of (A) the Executive’s then current Base Salary plus (B) the Replacement Bonus.

(iv) (A) The restrictions on any outstanding incentive awards (including restricted stock and granted performance shares or units) granted to the Executive after the date of this Agreement under the Bank’s equity based plans or under any other incentive arrangement shall lapse and the shares underlying those incentive awards shall become 100% vested and, if permissible under applicable law, freely transferable; all stock options and stock appreciation rights granted to the Executive after the date of this Agreement shall become immediately exercisable and shall become 100% vested; and all performance units granted to the Executive shall become 100% vested and (B) subject to applicable legal limitations and, where required, regulatory approval, in addition to all rights the Executive would have to retain or transfer the Bank’s shares acquired pursuant to stock-based awards, the Executive shall have the right to require the Bank to purchase, for cash, any shares of unrestricted stock or shares purchased upon exercise of any options, at a price equal to the fair market value (as such term is defined in the applicable stock incentive plan) of such shares on the date of purchase by the Bank.

(v) For a number of months equal to the lesser of (A) twelve (12) or (B) the number of months remaining under the Employment Term in effect on the date of termination (the “Continuation Period”), the Bank shall at its expense continue on behalf of the Executive and his or her dependents and beneficiaries the life insurance, disability, medical, dental and hospitalization benefits provided (x) to the Executive prior to the Termination Date or (y) to other similarly situated executives who continue in the employ of the Bank during the Continuation Period. The coverage and benefits (including deductibles and costs) provided in this Section during the Continuation Period shall be no less favorable to the Executive and his or her dependents and beneficiaries, than the most favorable of such coverages and benefits during any of the periods referred to in clauses (x) and (y) above. The Bank’s obligation hereunder with respect to the foregoing benefits shall be limited to the extent that the Executive or his or her dependents or

beneficiaries obtain any such benefits pursuant to a subsequent employer’s benefit plans, in which case the Bank may reduce the coverage of any benefits it is required to provide the Executive hereunder so long as the aggregate coverages and benefits of the combined benefit plans are no less favorable to the Executive than the coverages and benefits required to be provided hereunder. This subsection (iv) shall not be interpreted so as to limit any benefits to which the Executive, his or her dependents or beneficiaries may be entitled under any of the Bank’s employee benefit plans, programs or practices following the Executive’s termination or employment, including without limitation, retiree medical and life insurance benefits.

(c) If the Executive’s employment with the Bank shall be terminated other than in connection with a Change in Control or a Nonrenewal of Employment Term as provided in Section 9, (1) by the Bank other than for Cause, Disability, or death or (2) by the Executive for Good Reason, the Executive shall be entitled to the following:

(i) The Bank shall pay the Executive all Accrued Compensation and a Replacement Bonus.

(ii) The Bank shall pay the Executive, within four (4) weeks of termination, as severance pay and in lieu of any further compensation for periods subsequent to the Termination Date, a single cash payment in an amount equal to two (2) times the sum of (A) the Executive’s then current Base Salary plus (B) the Replacement Bonus.

(iii) (A) The restrictions on any outstanding incentive awards (including restricted stock and granted performance shares or units) granted to the Executive after the date of this Agreement under the Bank’s equity based plans or under any other incentive arrangement shall lapse and the shares underlying such incentive awards shall become 100% vested and, if permissible under applicable law, freely transferable; all stock options and stock appreciation rights granted to the Executive after the date of this Agreement shall become immediately exercisable and shall become 100% vested; and all performance units granted to the Executive shall become 100% vested and (B) subject to applicable legal limitations and, where required, regulatory approval, in addition to all rights the Executive would have to retain or transfer the Bank’s shares acquired pursuant to stock-based awards, the

Executive shall have the right to require the Bank to purchase, for cash, any shares of unrestricted stock or shares purchased upon exercise of any options, at a price equal to the fair market value (as such term is defined in the applicable stock incentive plan) of such shares on the date of purchase by the Bank.

(iv) For the Continuation Period, the Bank shall at its expense continue on behalf of the Executive and his or her dependents and beneficiaries the life insurance, disability, medical, dental and hospitalization benefits provided (x) to the Executive prior to the Termination Date or (y) to other similarly situated executives who continue in the employ of the company during the Continuation Period. The coverage and benefits (including deductibles and costs) provided in this Section during the Continuation Period shall be no less favorable to the Executive and his or her dependents and beneficiaries, than the most favorable of such coverages and benefits during any of the periods referred to in clauses (x) and (y) above. The Bank’s obligation hereunder with respect to the foregoing benefits shall be limited to the extent that the Executive obtains any such benefits pursuant to a subsequent employer’s benefit plans, in which case the Bank may reduce the coverage of any benefits it is required to provide the Executive hereunder so long as the aggregate coverages and benefits of the combined benefit plans are no less favorable to the Executive than the coverages and benefits required to be provided hereunder. This subsection (iv) shall not be interpreted so as to limit any benefits to which the Executive, his or her dependents or beneficiaries may be entitled under any of the Bank’s employee benefit plans, programs or practices following the Executive’s termination of employment, including without limitation, retiree medical and life insurance benefits.

(d) If the Executive’s employment with the Bank shall be terminated due to a Change in Control, then the Executive shall be entitled to the following:

(i) The Bank shall pay the Executive all Accrued Compensation.

(ii) The Bank shall pay the Executive, within four (4) weeks of termination, as severance pay and in lieu of any further compensation for periods subsequent to the Termination Date, a severance payment in an amount equal to the sum of (A) three (3) times the Executive’s then current Base Salary plus (B) two (2) times the Replacement Bonus.

(iii) (A) The restrictions on any outstanding incentive awards (including restricted stock and granted performance shares or units) granted to the Executive after the date of this Agreement under the Banks equity-based plans or under any other incentive an arrangement shall lapse and the shares underlying such incentive award shall become 100% vested and, if permissible under applicable law, freely transferable; all stock options and stock appreciation rights granted to the Executive after the date of this Agreement shall become immediately exercisable and shall become 100% vested; and all performance units granted to the Executive shall become 100% vested and (B) subject to applicable legal limitations and, where required, regulatory approval, in addition to all rights the Executive would have to retain or transfer the Banks shares acquired pursuant to stock-based awards, the Executive shall have the right to require the Bank to purchase, for cash, any shares of unrestricted stock or shares purchased upon exercise of any options, at a price equal to the fair market value (as such term is defined in the applicable stock incentive plan) of such shares on the date of purchase by the Bank.

(iv) For the Continuation Period, the Bank shall at its expense continue on behalf of the Executive and his or her dependents and beneficiaries the life insurance, disability, medical, dental and hospitalization benefits provided (x) to the Executive prior to the Termination Date or (y) to other similarly situated executives who continue in the employ of the company during the Continuation Period. The coverage and benefits (including deductibles and costs) provided in this Section during the Continuation Period shall be no less favorable to the Executive and his or her dependents and beneficiaries, than the most favorable of such coverages and benefits during any of the periods referred to clauses (x) and (y) above. The Bank’s obligation hereunder with respect to the foregoing benefits shall be limited to the extent that the Executive obtains any such benefits pursuant to a subsequent employer’s benefit plans, in which case the Bank may reduce the coverage of any benefits it is required to provide the Executive hereunder so long as the aggregate coverages and benefits of the combined benefit plans are no less favorable to the Executive than the coverages and benefits required to be provided hereunder. This subsection (iv) shall not be interpreted so as to limit any benefits to which the Executive, his or her dependents or beneficiaries may be entitled under any of the Bank’s employee benefit plans, programs

or practices following the Executive’s termination of employment, including without limitation, retiree medical and life insurance benefits.

(v) The Bank shall make payment of, or reimbursement for, the costs, fees and expenses of outplacement assistance services (not to exceed twenty percent (20%) of the Executive’s then current Base Salary) provided by any outplacement agency selected by the Executive.

9. Nonrenewal of Employment Term . Subject to Section 22 of this Agreement, if the Bank gives notice to the Executive that the automatic extension of the Employment Term under Section 1 shall cease, and a Change in Control has not occurred, the Executive shall be entitled to the benefits set forth below. The Executive shall not be required to mitigate the amount of any payment provided for in this Section 9 by seeking other employment or otherwise and no such payment shall be offset or reduced by the amount of any compensation or benefits provided to the Executive in any subsequent employment except as provided in clause (c) of this Section 9.

(a) The Bank shall pay the Executive all Accrued Compensation and a Replacement Bonus.

(b) The Bank shall pay the Executive, within four (4) weeks of termination, as severance pay and in lieu of any further compensation for periods subsequent to the Termination Date, a severance payment in an amount equal to two (2) times the sum of (A) the Executive’s then current Base Salary plus (B) the Replacement Bonus.

(c) For one full year after the Termination Date (the “Continuation Period”), the Bank shall at its expense continue on behalf of the Executive and his or her dependents and beneficiaries the life insurance, disability, medical, dental and hospitalization benefits provided (x) to the Executive prior to the Termination Date or (y) to other similarly situated executives who continue in the employ of the Bank during the Continuation Period. The coverage and benefits (including deductibles and costs) provided in this Section during the Continuation Period shall be no less favorable to the Executive and his or her dependents and beneficiaries, than the most favorable of such coverages and benefits during any of the periods referred to in clauses (x) and (y) above. The Bank’s obligation hereunder with respect to the foregoing benefits shall be limited to the extent that the Executive obtains any such benefits pursuant to subsequent employer’s benefit plans, in which case the Bank may reduce the coverage of any benefits it is required to provide the Executive hereunder so long as the

aggregate coverages and benefits of the combined benefit plans is no less favorable to the Executive than the coverages and benefits required to be provided hereunder. This subsection (iii) shall’ not be interpreted so as to limit any benefits to which the Executive, his or her dependents or beneficiaries may be entitled under any of the Bank’s employee benefit plans, programs or practices following the Executive’s termination of employment, including without limitation, retiree medical and life insurance benefits.

10. Section 280G .

(a) Notwithstanding anything contained in this Agreement to the contrary, to the extent that any payment or distribution of any type to or for the benefit of the Executive by the Bank, any Affiliate of the Bank, any person who acquires ownership or effective control of the Bank or ownership of a substantial portion of the Bank’s assets (within the meaning of Section 280G of the Internal Revenue Code of 1986, as amended (the “Code”), and the regulations thereunder), or any Affiliate of such person, whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise (the “Total Payments”) is or will be subject to the excise tax imposed under Section 4999 of the Code (the “Excise Tax”), then the Total Payments shall be reduced (but not below zero) if and to the extent that a reduction in the Total Payments would result in the Executive retaining a larger amount, on an after-tax basis (taking into account federal, state and local income taxes and the Excise Tax), than if the Executive received the entire amount of such Total Payments. Unless the Executive shall have given prior written notice specifying a different order to the Bank to effectuate the foregoing, the Bank shall reduce or eliminate the Total Payments, by first reducing or eliminating the portion of the Total Payments which are not payable in cash and then by reducing or eliminating cash payments, in each case in reverse order beginning with payments or benefits which are to be paid the farthest in time from the Determination (as hereinafter defined). Any notice given by the Executive pursuant to the preceding sentence shall take precedence over the provisions of any other plan, arrangement or agreement governing the Executive’s rights and entitlements to any benefits or compensation.

(b) The determination of whether the Total Payments shall be reduced as provided in Section 10(a) and the amount of such reduction shall be made at the Bank’s expense by an accounting firm selected by the Bank (the “Accounting Firm”). The Accounting Firm shall provide its determination (the “Determination”), together with detailed supporting calculations and documentation to the Bank and the Executive within ten (10) days of the

Termination Date. If the Accounting Firm determines that no Excise Tax is payable by the Executive with respect to the Total Payments, it shall furnish the Executive with an opinion reasonably acceptable to the Executive that no Excise Tax will be imposed with respect to any such payments and, absent manifest error, such Determination shall be binding, final and conclusive upon the Bank and the Executive.

11. Exclusivity of Severance Payments Hereunder . The Severance Payments and benefits provided for in this Agreement shall be in lieu of any other severance payments, rights, options or benefits to which the Executive may be entitled under any Bank severance or benefit plan, program or arrangement

12. Covenants of the Executive .

(a) Confidential Information . In connection with his or her employment at the Bank, Executive will have access to Trade Secrets. During and after his or her employment by the Bank, regardless of the reasons that such employment ends, Executive agrees:

(i) to hold all Trade Secrets in confidence and not discuss, communicate or transmit to others, or make any unauthorized copy of or use the Trade Secrets in any capacity, position or business except as it directly relates to Executive’s employment by the Bank;

(ii) to use the Trade Secrets only in furtherance of proper employment related reasons of the Bank to further the interests of the Bank;

(iii) to take all reasonable actions that the Bank deems necessary or appropriate to prevent unauthorized use or disclosure of or to protect the interest of the Bank in the Trade Secrets; and

(iv) that any of the Trade Secrets, whether prepared by Executive or which may come into Executive’s possession during Executive’s employment hereunder, are and remain the property of the Bank, and all such Trade Secrets, including copies thereof, together with all other property belonging to any of the Bank or its Affiliates, or used in their respective businesses, shall be delivered to or left with the Bank.

Section 12(a) of this Agreement does not apply to (A) information that by means other than the deliberate or inadvertent disclosure by any employee or agent of the Bank becomes well known to the

public; or (B) disclosure compelled by judicial or administrative proceedings after Executive diligently tries to avoid each disclosure and affords the Bank the opportunity to obtain assurance that compelled disclosures will receive confidential treatment.

(b) Ownership and Return of Documents . The Executive agrees that all memoranda, notes, records, papers or other documents and all copies of such documents or records relating to the operations or business of First Internet Bank, some of which may have been prepared by the Executive, and all objects associated with the documents or records in any way obtained or controlled by the Executive shall be the property of First Internet Bank. The Executive shall not, except for First Internet Bank’s use, copy or duplicate any of the aforementioned documents or objects. The Executive shall not remove the aforementioned documents or objects from the Bank’s facilities nor use any information concerning them either during the Executive’s employment, or at any other time, except for the Bank’s benefit or upon the Bank’s request. The Executive agrees to deliver all of the aforementioned documents and objects that may be in his or her possession to the Bank upon termination of the Executive’s employment.

(c) Regulatory Matters . The Bank is regulated by federal and state law and requires the complete confidence of the regulators and its customers if it is to prosper. Accordingly, Executive shall act in good faith and use his or her best efforts to (i) maintain compliance with applicable federal and state laws, and (ii) preserve and improve the good will, growth and reputation of the Bank in the banking and e-commerce communities.

(d) Non-Competition . The Bank and the Executive agree that the services rendered by the Executive hereunder are special, unique and irreplaceable. By and in consideration of the Bank’s entering into this Agreement and the compensation and benefits to be provided by the Bank hereunder, and further in consideration of the Executive’s exposure to the proprietary information of the Bank and its Affiliates, the Executive agrees that he or she will not, during the Employment Term and for a period of one (1) year thereafter, directly own, manage, operate, join, control, be employed by or participate in the ownership, management, operation or control of, or be connected in any manner, including, but not limited to, holding the position of shareholder, director, officer, consultant, independent contractor, employee, partner, or investor, with any Competing Enterprise in the United States.

The parties agree that the Executive may, without violating the foregoing restrictions: (a) own no more than 5% of the outstanding shares of common stock of a Competing Enterprise so long as he is a passive investor and is not an Affiliate of the Competing Enterprise; and/or (b) manage, operate, join, control, be employed by or participate in the ownership, management, operation or control of, or be connected in any manner with, a full service bank which offers, not as its main business, banking products or services via the Internet, so long as he does not directly manage, operate, or control a division or subsidiary of such full service bank which has, as the main business of such division or subsidiary, the delivery of banking products or services via the Internet.

(e) Non-Solicitation . During the Employment Term and for a period of one (1) year thereafter, the Executive shall not directly or indirectly interfere with the Bank’s relationship with, or endeavor to entice away from the Bank, any person who is or was an employee, vendor, consultant, independent contractor or customer of the Bank or who otherwise had a material business relationship with the Bank.

13. Injunctive Relief . In addition to money damages and the right of the Bank to offset payments to the Executive for any breaches of this Agreement, the Executive agrees that it would be difficult to compensate the Bank fully for damages for any violation of the provisions of this Agreement, including without limitation, the provisions of subsections 12(a), 12(b), 12(c), 12(d) and 12(e). Accordingly, the Executive specifically agrees that the Bank shall be entitled to temporary and permanent injunctive relief to enforce the provisions of this Agreement and that such relief may be granted without the necessity of proving actual damages, This provision with respect to injunctive relief shall not, however, diminish the right of the Bank to offset, or to claim and recover damages in addition to injunctive relief. The Executive hereby irrevocably and unconditionally consents to submit to the exclusive jurisdiction of the state courts of Indiana located in Marion County (unless such courts assert no jurisdiction, in which case he consents to the exclusive jurisdiction of the United States District Courts in the Southern District of Indiana) for any actions, suits or proceedings arising out of or relating to this Agreement and the transactions contemplated hereby (and agrees not to commence any action, suit or proceeding relating thereto except in such courts), and further agrees that service of any process, summons, notice or document by U.S. registered mail to his address set forth in this Agreement shall be effective service of process for any action, suit or proceeding brought against him in any such court. The Executive hereby irrevocably and unconditionally waives any objection to the laying of venue of any action, suit or proceeding arising out of this Agreement, in the state courts of Indiana located in Marion County, (unless such courts assert no jurisdiction, in which case he consents

to the exclusive jurisdiction of the United States District Court of the Southern District of Indiana) and hereby further irrevocably and unconditionally waives and agrees not to plead or to claim in any such court that any such action, suit or proceeding brought in any such court has been brought in an inconvenient forum. The agreements in subsection of Section 12 shall survive the termination of this Agreement.

14. Definitions . In addition to other terms defined herein, the following terms shall be defined as follows:

“ Affiliate ” shall mean any entity directly or indirectly controlled by, controlling or under common control of the Bank or any corporation or other entity acquiring, directly or indirectly, all or substantially all the assets and business of the Bank, whether by operation of law or otherwise.

“ Competing Enterprise ” shall mean (i) any Internet bank, including any division or subsidiary of an Internet bank; (ii) any U.S. person, corporation, partnership or other entity, whose main business is to deliver banking products or services via the Internet, or (ii) any U.S. division or subsidiary of any person, corporation, partnership or other entity, whose main business is to deliver banking products or services via the Internet.

“ Immediate Family ” shall mean the Executive’s children, grandchildren or spouse, a charity or trust exclusively for the benefit of such family members and/or charity or corporations, partnerships or other entities in which such family members are the only shareholders, partners, equity holders or beneficiaries.

“ Notice of Termination ” shall mean a written notice of termination of the Executive’s employment, signed by the Executive if to the Bank or signed by a duly authorized officer of the Bank if to the Executive, which indicates the specific termination provision in this Agreement, if any, relied upon and which sets forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive’s employment under the provision so indicated. Any purported termination by the Bank or by the Executive shall be communicated by written Notice of Termination to the other. For purposes of this Agreement, no such purported termination of employment shall be effective without such Notice of Termination.

“ Successor and Assign ” shall mean, with respect to the Bank, a corporation or other entity acquiring all or substantially all the equity securities or assets and business of the Bank, as the case may be (including this Agreement), whether by operation of law or otherwise.

“ Termination Date ” shall mean (a) in the case of the Executive’s death, his or her date of death, (b) if the Executive’s employment is terminated for Disability, thirty (30) days after Notice of Termination is given to the Executive (provided that the Executive shall not have returned to the performance of his or her duties on a full- time basis during such thirty (30) day period) and (c) if the Executive’s employment is terminated for any other reason, the date specified in the Notice of Termination (which, in the case of a termination for Cause shall not be less than two (2) days, and in the case of a termination for Good Reason shall not be less than ninety (90) days, from the date such Notice of Termination is given).

“ Trade Secrets ” shall mean any of the following:

“ Business Operating Information ,” including the methodology used by the Bank from time to time to integrate technology with financial services and the delivery of those services and products to the customer and prospective customers of the Bank;

“ Financial Information ,” including, but not limited to, information relating to the Bank’s earnings, assets, liabilities, prices, pricing structure, volume of purchases or sales or other financial data;

“ Simply and Service Information ,” including, but not limited to, information relating to goods and services, suppliers’ names or addresses, terms of supply or service contracts or of particular transactions, or related information about potential suppliers, and the extent that the combination of suppliers or use of a particular supplier, though generally known or available, yields advantages to the Bank, details of which are not generally known in the banking industry;

“ Marketing Information ,” including, but not limited to, information relating to details about ongoing or proposed marketing programs or agreements by or on behalf of the Bank, sales forecasts, advertising formats and methods or results of marketing efforts or information about impending transactions;

“ Personal Information ,” including, but not limited to, information relating to employees’ personal or medical histories, compensation or other terms of employment, actual or proposed promotions, hirings, resignations, disciplinary actions, terminations or reasons therefor, training methods, performance, or other employee information; and

“ Customer Information ,” including, but not limited to, information relating to past, existing or prospective customers, their addresses or backgrounds, records of agreements and prices, proposals or agreements between

customers and the Bank, status of customers’ accounts or credit, as well as customer lists.

provided , however , that Trade Secrets shall not include any information that the Executive can show (a) by writings preceding the first date he began discussions with the Bank regarding employment, to be already rightfully in the possession of the Executive without obligation or confidence; (b) is or becomes publicly available without breach of this Agreement or any other agreement between the parties or any agreement under which the parties are beneficiaries; (c) is rightfully received by the Executive from a third party who is not under an obligation of confidence; or (d) is required to be disclosed pursuant to court order, provided that the Executive gives reasonable notice to the Bank or such Affiliated Entity of such order prior to any disclosure.

15. Successors and Assigns .

(a) This Agreement shall be binding upon and shall inure to the benefit of the Bank and its Successors and Assigns, and the Bank shall require any Successor or Assign to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Bank would be required to perform if no such succession or assignment had taken place. The term “Bank” as used herein shall include such Successors and Assigns.

(b) Neither this Agreement nor any right or interest hereunder shall be assignable or transferable by the Executive, his or her beneficiaries or legal representatives, except by will or by the laws of descent and distribution. This Agreement shall inure to the benefit of and be enforceable by the Executive’s legal personal representative.

16. Notice . For purposes of this Agreement, notices and all other communications provided for in this Agreement (including the Notice of Termination) shall be in writing and shall be deemed to have been duly given when (i) personally delivered; (ii) (A) sent by certified mail, return receipt requested, postage prepaid or (B) sent by overnight courier with proof of delivery; addressed to the respective address listed below or the respective address last given by each party to the other if different than that listed below, provided that all notices to the Bank shall be directed to the attention of the Board with a copy to the Secretary of the Bank. All notices and communication shall be deemed to have been received on the date of delivery thereof or on the third business day after the mailing thereof, except that notice of change of address shall be effective only upon receipt.

If to the Executive, to the address shown on Exhibit A.

If to First Internet Bank:

First Internet Bank

8520 Allison Pointe Blvd., Ste. 210

Indianapolis, IN 46250

Attention: Chairman of the Board

With a copy to:

James A. Strain

Sommer & Barnard, PC

4000 Bank One Tower

111 Monument Circle Indianapolis, IN 46240

17. Nonexclusivity of Rights . Nothing in this Agreement shall prevent or limit the Executive’s continuing or future participation in any benefit, bonus, incentive or other plan or program provided by the Bank or any of its subsidiaries and for which the Executive may qualify, no shall anything herein limit or reduce such rights as the Executive may have under any other agreements with the Bank or any of its subsidiaries. Amounts which are vested benefits or which the Executive is otherwise entitled to receive under any plan or program of the Bank or any of its subsidiaries shall be payable in accordance with such plan or program, except as explicitly modified by this Agreement.

18. Indemnification . To the fullest extent permitted by law, the Bank shall indemnify and hold harmless Executive from and against any and all losses, claims, expenses, damages, or liabilities to which Executive may become subject in connection with the performance or nonperformance of duties under this Agreement except to the extent that any such loss, claim, expense, damage or liability results from Executive’s willful misfeasance or bad faith. If for any reason other than Executive’s willful misfeasance or bad faith the foregoing indemnification is unavailable or insufficient to hold Executive harmless, then the Bank shall contribute to the amount paid or payable by Executive in such proportion as is appropriate to reflect not only the relative benefits received by the Bank on the one hand and Executive by the other but also the relative fault of the Bank and the Executive, as well as any relevant equitable contributions.

In the event of termination of Executive’s employment for any reason, the Executive shall continue to be entitled to indemnification by the Bank for liability arising from Executive’s acts or failure to act to the same extent and under the same circumstances as provided to the Executive by the Bank’s charter, by-laws, contracts and other arrangements until the last full day of employment.

19. Miscellaneous . No provision of this Agreement may be modified, waived or discharged unless such waiver, modification or discharge is agreed to in writing and signed by the Executive and the Bank. No waiver by either party hereto at any time of any breach by the other party hereto of, or compliance with, any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of similar provisions or conditions at the same or at any prior or subsequent time. No agreements or representations, oral or otherwise, express or implied, with respect to the subject matter hereof have been made by either party which are not expressly set forth in this Agreement.

20. Governing Law: Submission to Jurisdiction . All unresolved disputes arising under this Agreement which do not involve requests for injunctive relief shall be submitted to arbitration in the city of Indianapolis, Indiana, under the rules of the American Arbitration Association. The award of the arbitrator shall be binding and may be entered as a judgment in any court of competent jurisdiction. This Agreement and the relationship between the Bank and Executive shall be construed exclusively in accordance with the laws of the State of Indiana, without regard to conflict of laws principles.

21. Severability . The provisions of this Agreement shall be deemed severable and the invalidity or unenforceability of any provision shall not affect the validity or enforceability of the other provisions hereof.

22. Voidability . Notwithstanding anything else in this Agreement to the contrary, in the event the First Internet Bank is determined by Regulators to be “significantly undercapitalized” as that term is used in Section 38 of the Federal Deposit Insurance Act, 12 U.S.C. § 1831o, as the same may be amended from time to time, this entire Agreement shall become null and void and its provisions shall have no further force or effect.

23. Entire Agreement . This Agreement constitutes the entire agreement between the parties hereto and supersedes all prior agreements, if any, understandings and arrangements, oral or written, between the parties hereto with respect to the subject matter hereof.

24. Counterparts . This Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original but all of which together will constitute one and the same instrument.

[signature page follows]

IN WITNESS WHEREOF, First Internet Bank has caused this Agreement to be executed by its duly authorized officers and the Executive has executed this Agreement as of the day and year first above written.

	“BANK”

	First Internet Bank of Indiana

	By:	Jeffrey K. Harty
	Name: Jeffry K. Harty
	Title: EVP - CFO


	“EXECUTIVE”

	/s/ David B. Becker
	David B. Becker

Exhibit 10.4

EMPLOYMENT AGREEMENT

THIS EMPLOYMENT AGREEMENT (“Agreement”) entered into on the 8th day of August, 1999, by and between First Internet Bank of Indiana (“First Internet Bank” or the “Bank”) and Laurinda A. Swank (the “Employee”), effective as of the Effective Date as defined herein.

WHEREAS, First Internet Bank desires to employ the Employee and the Employee wishes to be employed by First Internet Bank;

WHEREAS, the parties intend that the Employee will become employed by First Internet Bank as set forth on Exhibit A; and

NOW, THEREFORE, in consideration of the respective agreements of the parties contained herein, it is agreed as follows:

1. Employment Term . Subject to Section 20 of this Agreement, the “Employment Term” shall mean the continuous period beginning on the date set forth in the attached Exhibit A (the “Effective Date”) and ending on the Employee’s Termination Date. “ Termination Date ” shall mean (a) in the case of the Employee’s death, his or her date of death, (b) if the Employee’s employment is terminated for any other reason, the date specified in the Notice of Termination (which, in the case of a termination for Cause shall not be less than two (2) days).

2. Employment .

(a) Subject to the provisions of Section 7, the Bank agrees to continue to employ the Employee and the Employee agrees to remain in the employ of the Bank during the Employment Term During the Employment Term, the Employee shall be employed in the capacity and with the title and duties set forth on Exhibit A. The Employee shall perform the duties, undertake the responsibilities and exercise the authority customarily performed, undertaken and exercised by a person having the title and duties assigned to Employee pursuant to this Agreement.

(b) During the Employment Term, excluding periods of vacation and sick leave to which the Employee is entitled, the Employee shall devote reasonably necessary and sufficient attention and time during business hours to the business and affairs of the Bank to the extent necessary to discharge the responsibilities assigned to the Employee under this Agreement. The Employee may serve on corporate, civil or charitable boards or

committees, subject to approval by the Board of Directors of First Internet Bank (the “Board”) which approval shall not be unreasonably withheld or delayed.

3. Compensation .

(a) Base Salary . During the Employment Term, the Bank agrees to pay or cause to be paid to the Employee an annual salary in the amount shown on Exhibit A or as may be adjusted from time to time (hereinafter referred to as the “Base Salary”). Such Base Salary shall be payable in accordance with the Bank’s customary practices applicable to its employees. The Bank shall review the Employee’s Base Salary at least annually, with the first review upon the first anniversary of the Effective Date.

(b) Annual Bonus . During the Employment Term, in addition to Base Salary, the Employee may be awarded, for each calendar year ending during the Employment Term, an annual bonus (the “Annual Bonus”), which may be in an amount up to 20% of the Employee’s Base Salary and shall be based on performance objectives established by the Compensation Committee or the Board. The cash portion of any such Annual Bonus, if any, shall be paid no later than the end of the third month of the calendar year next following the calendar year for which the Annual Bonus is earned. Any restricted shares that are part of the Annual Bonus shall be earned and paid in accordance with the terns and conditions of the Annual Bonus adopted by the Compensation Committee or the Board.

4. Benefits . During the Employment Term, the Employee shall be entitled to participate in all employee benefit plans, practices and programs maintained by the Bank and made available to employees generally, including, without limitation, any pension, retirement, savings, medical, hospitalization, disability, dental, life or travel accident insurance benefit plans. Unless otherwise provided in this Agreement, the Employee’s participation in, such plans, practices and programs shall be on the same basis and terms as are applicable to employees of the Bank generally.

5. Reimbursement of Business Expenses . The Employee shall be entitled to receive prompt reimbursement of all expenses reasonably incurred by him or her in coIll1ection with the performance of the duties of an employee of the Bank or for promoting, pursuing or otherwise furthering the business or interests of First Internet Bank, including, but not limited to, reimbursement for continuing professional education required for maintenance of professional licensing.

6. Vacation and Sick Leave . During the Employment Term, at such reasonable times as the Board shall in its discretion permit, the Employee shall be entitled,

without loss of pay, to absent himself or herself voluntarily from the performance of his or her employment under this Agreement, provided that:

(a) Vacation . The Employee shall be entitled to an annual vacation in accordance with the policies as periodically established by the Board for similarly situated employees of the Bank; provided, however, that in no event shall the Employee’s annual vacation entitlement be less than the period set forth on Exhibit A. Employee will be entitled to carry over a maximum of one week of unused vacation from one fiscal year to the next, but in no event shall Employee be entitled to carry over unused vacation for more than one (1) year.

(b) Sick Leave . The Employee shall be entitled to sick leave (without loss of pay) in accordance with the Bank’s policies as in effect from time to time.

7. Termination . Subject to Section 20 of this Agreement, during the Employment Term, the Employee’s employment hereunder may be terminated for any reason, upon two weeks written notice. The following definitions apply in certain circumstances:

(a) Cause . For purposes of this Agreement, for “Cause” means:

(i) the Employee has been convicted of, or pled nolo contendere to, a felony or a crime involving moral turpitude; or

(ii) the Employee (1) either (x) intentionally and continually failed substantially to perform his or her reasonably assigned duties with the Bank (other than a failure resulting from the Employee’s incapacity due to physical or mental illness or for reasons constituting Good Reason), which failure has continued for a period of at least thirty (30) days after a written notice of demand for substantial performance, signed by a duly authorized member of the Board, has been delivered to the Employee specifying the manner in which the Employee has failed substantially to perform and the steps required for the Employee to cure the nonperformance, or (y) intentionally engaged in conduct which has been demonstrably and materially injurious to the Bank and (2) the termination is evidenced by a resolution adopted in good faith by more than two-thirds (2/3) of the Board; or

(iii) the Employee has breached any of the Employee’s covenants set forth in Section 10 of this Agreement.

(b) Change in Control . If within twelve (12) months following a Change in Control, the Bank terminates the Employee· for reasons other than Cause then such termination is due to a Change in Control. For purposes of this Agreement, a “Change in Control” shall mean the occurrence during the term of the Agreement of:

(i) An acquisition (other than directly from the Bank) of any Common Stock or other voting securities of the Bank entitled to vote generally for the election of directors (the “Voting Securities”) by any “Person” (as the term person is used for purposes of Section 13(d) or 14( d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), immediately after which such Person has “Beneficial Ownership” (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of thirty percent (30%) or more of the then outstanding shares of Common Stock or the combined voting power of the Bank’s then outstanding Voting Securities; provided, however, in determining whether a Change in Control has occurred, Voting Securities which are acquired in a Non-Control Acquisition (as hereinafter defined) shall not constitute an acquisition which would cause a Change in Control. A “Non-Control Acquisition” shall mean an acquisition by (A) any Bank employee benefit plan (or a trust forming a part of the employee benefit plan) maintained by (x) the Bank or (y) any corporation or other Person of which a majority of its voting power or its voting equity securities or equity interest is owned, directly or indirectly, by the Bank (a “Subsidiary”), (B) the Bank or its Subsidiaries, or (C) any Person in connection with a Non-Control Transaction (as hereinafter defined);

(ii) The consummation of:

(1) A merger, consolidation, reorganization or other business combination with or into the Bank or in which securities of the Bank are issued, unless such merger, consolidation, reorganization or other business combination is a “NonControl Transaction.” A “Non-Control Transaction” shall mean a merger, consolidation or reorganization with or into the Bank or in which securities of the Bank are issued where:

fifty-five percent (55%) of the combined voting power of the outstanding voting securities of the corporation resulting from such merger or consolidation or reorganization (the “Surviving Corporation”) in substantially the same proportion as their ownership of the Voting Securities immediately before such merger, consolidation or reorganization,

(C) no Person other than (i) the Bank, (ii) any Subsidiary, (ill) any employee benefit plan (or any trust forming a part of the employee benefit plan) that, immediately prior to such merger, consolidation or reorganization, was maintained by the Bank, the Surviving Corporation, or any Subsidiary, or (iv) any Person who, immediately prior to such merger, consolidation or reorganization had Beneficial Ownership of thirty percent (30%) or more of the then outstanding Voting Securities or common stock of the Bank, has Beneficial Ownership of thirty percent (30%) or more of the combined voting power of the Surviving Corporation’s then outstanding voting securities or its common stock.

(2) A complete liquidation or dissolution of the Bank; or

(3) The sale or other disposition of all or substantially all of the assets of the Bank to any Person (other than a transfer to a Subsidiary).

Notwithstanding the foregoing, a Change in Control shall not be deemed to occur solely because any Person (the “Subject Person”) acquired Beneficial Ownership of

more than the permitted amount of the then outstanding common stock or Voting Securities as a result of the acquisition of Common Stock or Voting Securities by the Bank which, by reducing the number of shares of Common Stock or Voting Securities then outstanding, increases the proportional number of shares Beneficially Owned by the Subject Person, provided that if a Change in Control would occur (but for the operation of this sentence) as a result of the acquisition of shares of Common Stock or Voting Securities by the Bank, and after such share acquisition by the Bank:, the Subject Person becomes the Beneficial Owner of any additional shares of Common Stock or Voting Securities which increases the percentage of the then outstanding shares of Common Stock or Voting Securities Beneficially Owned by the Subject Person, then a Change in Control shall occur.

8. Compensation Upon Termination . Subject to Section 20 of this Agreement, upon termination of the Employee’s employment during the Employment Term for any reason, the Employee shall be entitled to the benefits set forth below.

(a) If the Employee’s employment with the Bank shall be terminated by the Bank for Cause, the Bank shall pay the Employee all amounts earned or accrued through the Termination Date but not paid as of the Termination Date, including (i) Base Salary, (ii) reimbursement for reasonable and necessary expenses incurred by the Employee on behalf of the Bank during the period ending on the Termination Date, (iii) vacation pay, and (iv) sick leave (collectively, “Accrued Compensation”). The Employee shall also receive any other benefits which may be due Employee in accordance with Bank policy and procedures or separate written agreement.

(b) If the Employee’s employment with the Bank shall be terminated due to a Change in Control, then the Employee shall be entitled to the following:

(i) The Bank shall pay the Employee all Accrued Compensation.

(ii) The Bank: shall pay the Employee, within four (4) weeks of termination, as severance pay and in lieu of any further compensation for periods subsequent to the Termination Date, a severance payment in an amount equal to two (2) times the Employee’s then current Base Salary.

(iii) (A) The restrictions on any outstanding incentive awards (including restricted stock and granted performance shares or units) granted to the Employee after the date of this Agreement under the Bank’s equity-based plans or under any other incentive arrangement shall lapse and the shares underlying such incentive award shall become 100% vested and, if permissible under applicable law, freely transferable; all stock options and stock appreciation rights granted

to the Employee after the date of this Agreement shall become immediately exercisable and shall become 100% vested; and all performance units granted to the Employee shall become 100% vested.

(c) If the Employee’s employment with the Bank shall be terminated for any reason other than due to a Change in Control or for Cause, then the Employee shall be entitled to:

(i) all Accrued Compensation;

(ii) as severance pay and in lieu of any further compensation for periods subsequent. to the Termination Date, a single cash payment in an amount equal to one month of current Base Salary for each year of service to the Bank, up to a maximum amount equal to one year of Base Salary.

9. Exclusivity of Severance Payments Hereunder . The Severance Payments and benefits provided for in this Agreement shall be in lieu of any other severance payments, rights, options or benefits to which the Employee may be entitled under any Bank severance or benefit plan, program or arrangement.

10. Covenants of the Employee .

(a) Confidential Information . In connection with his or her employment at the Bank, Employee will have access to Trade Secrets. During and after his or her employment by the Bank, regardless of the reasons that such employment ends, Employee agrees:

(ii) to use the Trade Secrets only in furtherance of proper employment related reasons of the Bank to further the interests of the Bank;

(iii) to take all reasonable actions that the Bank deems necessary or appropriate to prevent unauthorized use or disclosure of or to protect the interest of the Bank in the Trade Secrets; and

(iv) that any of the Trade Secrets, whether prepared by Employee or which may come into Employee’s possession during Employee’s employment hereunder, are and remain the property of the Bank,

and all such Trade Secrets, including copies thereof, together with all other property belonging to any of the Bank or its Affiliates, or used in their respective businesses, shall be delivered to or left with the Bank.

Section 10(a) of this Agreement does not apply to (A) information that by means other than the deliberate or inadvertent disclosure by any employee or agent of the Bank becomes well known to the public; or (B) disclosure compelled by judicial or administrative proceedings if (i) Employee notifies the Bank as soon as possible after Employee is notified that he or she will be compelled to make such disclosure and (ii) if possible, Employee does not make such disclosure until after Employee has notified the Bank that he or she will be compelled to make such disclosure.

(b) Ownership and Return of Documents . The Employee agrees that all memoranda, notes, records, papers or other documents and all copies of such documents or records relating to the operations or business of First Internet Bank, some of which may have been prepared by the Employee, and all objects associated with the documents or records in any way obtained or controlled by the Employee shall be the property of First Internet Bank. The Employee shall not, except for First Internet Bank’s use, copy or duplicate any of the aforementioned documents or objects. The Employee shall not remove the aforementioned documents or objects from the Bank’s facilities nor use any information concerning them either during the Employee’s employment, or at any other time, except for the Bank’s benefit or upon the Bank’s request. The Employee agrees to deliver all of the aforementioned documents and objects that may be in his or her possession to the Bank upon Termination of the Employee’s employment.

(c) Regulatory Matters . The Bank is regulated by federal and state law and requires the complete confidence of the regulators and its customers if it is to prosper. Accordingly, Employee shall act in good faith and use his or her best efforts to (i) maintain compliance with applicable federal and state laws, and (ii) preserve and improve the good will, growth and reputation of the Bank in the banking and e-commerce communities.

(d) Non-Competition . The Bank and the Employee agree that the services rendered by the Employee hereunder are special, unique and irreplaceable. By and in consideration of the Bank’s entering into this Agreement and the compensation and benefits to be provided by the Bank hereunder, and further in consideration of the Employee’s exposure to the proprietary information of the Bank and its Affiliates, the Employee agrees that he or

she will not, during the Employment Term and for a period of one (1) year thereafter, directly own, manage, operate, join, control, be employed by or participate in the ownership, management, operation or control of; or be connected in any manner, including, but not limited to, holding the position of shareholder, director, officer, consultant, independent contractor, employee, partner, or investor, with any Competing Enterprise in the United States; provided , however, that should the Employee terminate employment for Good Reason or following a Change in Control, the one (I)-year period of noncom petition shall not apply.

The parties agree that the Employee may, without violating the foregoing restrictions: (a) own no more than 5% of the outstanding shares of common stock of a Competing Enterprise so long as he is a passive investor and is not an Affiliate of the Competing Enterprise; and/or (b) manage, operate, join, control, be employed by or participate in the ownership, management, operation or control of, or be connected in any manner with, a full service bank which offers, not as its main business, banking products or services via the Internet, so long as he does not directly manage, operate, or control a division or subsidiary of such full service bank which has, as the main business of such division or subsidiary, the delivery of banking products or services via the Internet.

(e) Non-Solicitation . During the Employment Term and for a period of one (l) year thereafter, the Employee shall not directly or indirectly interfere with the Bank’s relationship with, or endeavor to entice away from the Bank, any person who is or was an employee, vendor, consultant, independent contractor or customer of the Bank or who otherwise had a material business relationship with the Bank.

11. Injunctive Relief . In addition to money damages and the right of the Bank to offset payments to the Employee for any breaches of this Agreement, the Employee agrees that it would be difficult to compensate the Bank fully for damages for any violation of the provisions of this Agreement, including without limitation, the provisions of subsections 10(a), 10(b), l0(c), 10(d) and 10(e). Accordingly, the Employee specifically agrees that the Bank shall be entitled to temporary and permanent injunctive relief to enforce the provisions of this Agreement and that such relief may be granted without the necessity of proving actual damages. This provision with respect to injunctive relief shall not, however, diminish the right of the Bank. to offset, or to claim and recover damages in addition to injunctive relief. The Employee hereby irrevocably and unconditionally consents to submit to the exclusive jurisdiction of the state courts of Indiana located in Marion County (unless such courts assert no jurisdiction, in which case he consents to the exclusive jurisdiction of the United States District Courts in the Southern District of Indiana) for any actions, suits or proceedings arising out of or relating to this

Agreement and the transactions contemplated hereby (and agrees not to commence any action, suit or proceeding relating thereto except in such courts), and further agrees that service of any process, summons, notice or document by U.S. registered mail to his address set forth in this Agreement shall be effective service of process for any action, suit or proceeding brought against him in any such court. The Employee hereby irrevocably and unconditionally waives any objection to the laying of venue of any action, suit or proceeding arising out of this Agreement, in the state courts of Indiana located in Marion County, (unless such courts assert no jurisdiction, in which case he consents to the exclusive jurisdiction of the United States District Court of the Southern District of Indiana) and hereby further irrevocably and unconditionally waives and agrees not to plead or to claim in any such court that any such action, suit or proceeding brought in any such court has been brought in an inconvenient forum. The agreements in Section 10 shall survive the termination of this Agreement.

12. Definitions . In addition to other terms defined herein, the following terms shall be defined as follows:

“ Competing Enterprise ” shall mean any Internet bank, including any division or subsidiary of an Internet bank.

“ Good Reason ” shall mean the occurrence of any of the following events or conditions:

(i) the failure by the Bank to pay to the Employee any portion of the Employee’s current compensation within thirty (30) days of the date such compensation is due;

(ii) a material change in the Employee’s status or duties, which represents a material adverse change from his or her status or duties as in effect immediately prior thereto without the Employee’s consent or approval; or

(iii) a material reduction in the Employee’s Base Salary or benefits without the Employee’s prior written approval.

“ Notice of Termination ” shall mean a written notice of termination of the Employee’s employment, signed by the Employee if to the Bank or signed by a duly authorized officer of the Bank if to the Employee, which indicates the specific termination provision in this Agreement, if any, relied upon and which sets forth in reasonable detail the facts and circumstances claimed to provide a basis for

termination of the Employee’s employment under the provision so indicated; provided, however, that the Bank may terminate Employee for any reason, including without Cause, upon two weeks written notice and Employee may terminate employment upon two weeks written notice to the Bank. Any purported termination by the Bank or by the Employee shall be communicated by written Notice of Termination to the other. For purposes of this Agreement, no such purported termination of employment shall be effective without such Notice of Termination.

“ Successor and Assign ” shall mean, with respect to the Bank, a corporation or other entity acquiring all or substantially all the equity securities or assets and business of the Bank., as the case may be (including this Agreement), whether by operation of law or otherwise.

“ Trade Secrets” shall mean any of the following:

“ Business Operating Information ” including the methodology used by the Bank from time to time to integrate technology with financial services and the delivery of those services and products to the customer and prospective customers of the Bank;

“ Financial Information ” including, but not limited to, information relating to the Bank’s earnings, assets, liabilities, prices, pricing structure, volume of purchases or sales or other financial data;

“ Supply and Service Information ” including, but not limited to, information relating to goods and services, suppliers’ names or addresses, terms of supply or service contracts or of particular transactions, or related information about potential suppliers, and the extent that the combination of suppliers or use of a particular supplier, though generally known or available, yields advantages to the Bank, details of which are not generally known in the banking industry;

“ Marketing Information ” including, but not limited to, information relating to details about ongoing or proposed marketing programs or agreements by or on behalf of the Bank, sales forecasts, advertising formats and methods or results of marketing efforts or information about impending transactions;

“ Personal Information ” including, but not limited to, information relating to employees’ personal or medical histories, compensation or other terms of employment, actual or proposed promotions, hirings, resignations, disciplinary actions, terminations or reasons therefor, training methods, performance, or other employee information; and

“ Customer Information ” including, but not limited to, information relating to past, existing or prospective customers, their addresses or backgrounds, records of agreements and prices, proposals or agreements between customers and the Bank, status of customers’ accounts or credit, as well as customer lists.

provided , however, that Trade Secrets shall not include any information that the Employee can show (a) by writings preceding the first date he began discussions with the Bank regarding employment, to be already rightfully in the possession of the Employee without obligation or confidence; (b) is or becomes publicly available without breach of this Agreement or any other agreement between the parties or any agreement under which the parties are beneficiaries; (c) is rightfully received by the Employee from a third party who is not under an obligation of confidence; or (d) is required to be disclosed pursuant to court order, provided that the Employee gives reasonable notice to the Bank or such Affiliated Entity of such order prior to any disclosure.

13. Successors and Assigns .

(a) This Agreement shall be binding upon and shall inure to the benefit of the Bank. and its Successors and Assigns, and the Bank shall require any Successor or Assign to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Bank. would be required to perform if no such succession or assignment had taken place. The term “Bank.” as used herein shall include such Successors and Assigns.

(b) Neither this Agreement nor any right or interest hereunder shall be assignable or transferable by the Employee, his or her beneficiaries or legal representatives, except by will or by the laws of descent and distribution. This Agreement shall inure to the benefit of and be enforceable by the Employee’s legal personal representative.

14. Notice . For purposes of this Agreement, notices and all other communications provided for in this Agreement (including the Notice of Termination) shall be in writing and shall be deemed to have been duly given when (i) personally delivered; (ii) (A) sent by certified mail, return receipt requested, postage prepaid or (B) sent by overnight courier with proof of delivery; addressed to the respective address listed below or the respective address last given by each party to the other if different than that listed below, provided that all notices to the Bank. shall be directed to the attention of the Board with a copy to the Secretary of the Bank. All notices and communication shall be deemed to have been received on the date of delivery thereof or on the third business day after the mailing thereof, except that notice of change of address shall be effective only upon receipt.

If to the Employee, to the address shown on Exhibit A.

If to First Internet Bank:

First Internet Bank

8520 Allison Pointe Blvd., Ste.

210 Indianapolis, IN 46250

Attention: Chairman of the Board

With a copy to:

James A. Strain

Sommer & Barnard, PC

4000 Bank One Tower

111 Monument Circle

Indianapolis, IN 46240

15. Nonexclusivity of Rights . Nothing in this Agreement shall prevent or limit the Employee’s continuing or future participation in any benefit, bonus, incentive or other plan or program provided by the Bank or any of its subsidiaries and for which the Employee may qualify, nor shall anything herein limit or reduce such rights as the Employee may have under any other agreements with the Bank or any of its subsidiaries. Amounts which are vested benefits or which the Employee is otherwise entitled to receive under any plan or program of the Bank or any of its subsidiaries shall be payable in accordance with such plan or program, except as explicitly modified by this Agreement.

16. Indemnification . To the fullest extent permitted by law, the Bank shall indemnify and hold harmless Employee from and against any and all losses, claims, expenses, damages, or liabilities to which Employee may become subject in connection with the performance or nonperfonnance of duties under this Agreement except to the extent that any such loss, claim, expense, damage or liability results from Employee’s willful misfeasance or bad faith. If for any reason other than Employee’s willful misfeasance or bad faith the foregoing indemnification is unavailable or insufficient to hold Employee harmless, then the Bank shall contribute to the amount paid or payable by Employee in such proportion as is appropriate to reflect not only the relative benefits received by the Bank on the one hand and Employee by the other but also the relative fault of the Bank and the Employee, as well as any relevant equitable contributions.

In the event of termination of Employee’s employment for any reason, the Employee shall continue to be entitled to indemnification by the Bank for liability arising from Employee’s acts or failure to act to the same extent and under the

same circumstances as provided to the Employee by the Bank’s charter, by-laws, contracts and other arrangements until the last full day of employment.

17. Miscellaneous . No provision of this Agreement may be modified, waived or discharged unless such waiver, modification or discharge is agreed to in writing and signed by the Employee and the Bank. No waiver by either party hereto at any time of any breach by the other party hereto of, or compliance with, any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of similar provisions or conditions at the same or at any prior or subsequent time. No agreements or representations, oral or otherwise, express or implied, with respect to the subject matter hereof have been made by either party which are not expressly set forth in this Agreement.

18. Governing Law; Submission to Jurisdiction . All unresolved disputes arising under this Agreement which do not involve requests for injunctive relief shall be submitted to arbitration in the city of Indianapolis, Indiana, under the rules of the American Arbitration Association. The award of the arbitrator shall be binding and may be entered as a judgment in any court of competent jurisdiction. This Agreement and the relationship between the Bank. and Employee shall be construed exclusively in accordance with the laws of the State of Indiana, without regard to conflict of laws principles.

19. Severability . The provisions of this Agreement shall be deemed severable and the invalidity or unenforceability of any provision shall not affect the validity or enforceability of the other provisions hereof.

20. Voidability . Notwithstanding anything else in this Agreement to the contrary, in the event the First Internet Bank is determined by Regulators to be “critically undercapitalized” as that term is used in Section 38 of the Federal Deposit Insurance Act, 12 V.S.C. § 18310, as the same maybe amended from time to time, this entire Agreement shall become null and void and its provisions shall have no further force or effect.

21. Entire Agreement . This Agreement constitutes the entire agreement between the parties hereto and supersedes all prior agreements, if any, understandings and arrangements, oral or written, between the parties hereto with respect to the subject matter hereof.

22. Counterparts . This Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original but all of which together will constitute one and the same instrument.

[signature page follows]

IN WITNESS WHEREOF, First Internet Bank has caused this Agreement to be executed. by its duly authorized officers and the Employee has executed this Agreement as of the day and year first above written.

	“BANK”

	First Internet Bank of Indiana


	By:	/s/ David B. Becker
	Name: David B. Becker
	Title: CEO


	“EMPLOYEE”


	/s/ Laurinda A. Swank
	Laurinda A. Swank

Exhibit 10.5

2012 Senior Management Bonus Plan

The following bonus plan is established for participating senior management employees effective as of January 1, 2012.

The threshold to earn a bonus based on 2012 performance is:

(l) the Bank having a satisfactory CAMEL rating;

(2) the Bank having operating income of at least $4.8 million (after accounting for any bonus under this plan); and

(3) First Internet Bancorp declaring in 2012 and paying not later than January 31, 2013 a dividend to its shareholders of at least $0.25 per share (which is equal to a 1.66% return using an average share price of $15.00); .

If the threshold is met in 2012 and if the Bank achieves a return on average assets (“ROAA”) greater than 0.65%, then each participating senior management employee shall be entitled to receive a bonus equal to a percentage of his or her 2012 base salary in accordance with the following table:

ROAA		Bonus as a % of 2012 base salary
Less than 0.65		-0-
Equal to or greater than 0.650 but less than 0.750		10%
Equal to or greater than 0.750 but less than 0.850		25%
0.850 or greater		50%

The bonus shall be computed as soon as practicable after December 31, 2012 and paid after completion of the 2012 audited financial statement of the Bank.

In the event the ROAA for 2012 is 0.850 or greater and the operating income is over $6 million (after accounting for any bonus under this plan), then (i) one-half of the bonus shall be paid in immediately available funds and (ii) the other one-half shall be paid in a combination of such funds (in an amount sufficient to cover the Bank’s withholding obligations) and the balance shall be paid in shares of the Bank’s holding company. The number of shares to be paid/issued to each person who participates in this plan shall be determined by using the value of the shares at January 1, 2012 (using the same valuation process that was used to determine the number of shares to be issued to the members of the Board of Directors). No fractional shares shall be issued; rather a payment in immediately available funds shall be made equal to the value of any fractional share. .

Any shares issued pursuant to this plan may be sold or transferred by an employee upon compliance with the holding company’s Statement of Trading Policy as in effect at the time of the proposed sale or transfer. A participant who acquires shares pursuant to this plan and who is no longer employed by the Bank or the holding company or any affiliate of either may sell or transfer such shares upon compliance with applicable securities laws.

If, after the payment of a bonus under this plan, the Bank restates its financial statements for the year ending December 31, 2012, then the Board of Directors shall determine the amount of bonus that should have been paid based on the restated financial statements (the “Restated Bonus Amount”). If the Restated Bonus Amount is greater than the bonus that was paid, then the Bank will pay such difference (the “Make-Up Amount”) within 30 days after the determination of the Make-Up Amount regardless of whether the employee is still employed with the Bank at such time. If the Restated Bonus Amount is less than the bonus that was paid, then the employee (or his or her designated beneficiary or estate) shall repay such difference (the “Overpayment Amount”) to the Bank within 30 days after the Bank provides notice of repayment which will specify the Overpayment Amount. The obligation to repay the Bank the Overpayment Amount shall apply regardless of whether the employee is then currently employed with the Bank. The employees selected to participate in the 2012 Senior Management Bonus Plan shall, as a condition of such participation, execute an “Employee Acknowledgment Concerning Participation in 2012 Senior Management Bonus Plan” in the form prepared by the Bank.

Except in the case of death or termination due to disability, in order to be eligible to receive any payment under the 2012 Senior Management Bonus Plan the employee must be employed with the Bank during all of 2012 and at the time the bonuses under the 2012 Senior Management Bonus Plan are paid. In the event of death or termination due to disability during 2012 or in 2013 but before the payment date, a pro-rata portion of the bonus amount shall be paid to the employee or his or her beneficiary designated in writing and filed with the Bank. The pro-rata amount due shall be determined by a fraction, the numerator being the number of days of full time employment by the Bank in 2012 and the denominator being 365. In the absence of a designated beneficiary, the bonus shall be paid to the estate of a deceased employee.

The Board of Directors, in its sole and absolute discretion, shall determine (a) whether the financial metrics on which the bonus is based have been achieved, (b) the amount of any applicable bonus based on the achievement of such metrics and (c) the date on which any bonus is to be paid.

The Board of Directors, in its sale and absolute discretion, has the right to amend, modify or discontinue the 2012 Senior Management Bonus Plan at any time.

Exhibit 10.6

FIRST INTERNET BANK OF INDIANA

SUPPLEMENTAL EXECUTIVE RETIREMENT AGREEMENT

THIS AGREEMENT made as of the day of , by and between First Internet Bank of Indiana, an Indiana corporation (the “Company”), and the undersigned executive (the “Executive”), Laurinda A. Swank.

INTRODUCTION

The Company has agreed to provide supplemental retirement benefits to the Executive and to enter into this agreement with the Executive to set forth the terms thereof. This agreement is intended to encourage the Executive to remain an employee of the Company or one or more of its Subsidiaries. The Company will pay the benefits from its general assets. The agreement is intended to constitute an unfunded plan maintained primarily to provide deferred compensation to a member of a select group of management or highly compensated employees within the meaning of Sections 201(2), 301(3) and 401(a)(1) of ERISA and regulations issued thereunder.

In furtherance of the foregoing, the Company and the Executive agree as follows:

AGREEMENT

ARTICLE 1

DEFINITIONS

Whenever used in this Agreement, the following words and phrases shall have the meanings specified:

1.1 “ Accrual Rate ” means an interest rate equal to 4 percent per annum.

1.2 “ Accrued Benefit ” means the total balance sheet liability accrued on the Company’s records with respect to payment of benefits to the Executive under this Agreement determined in accordance with generally accepted accounting principles (“GAAP”) consistently applied in accordance with the Company’s past accounting practices.

1.3 “ Agreement ” means this Supplemental Executive Retirement Agreement entered into between the Company and the Executive.

1.4 “ Benefit Percentage ” means thirty percent ( %).

1.5 “ Code ” means the Internal Revenue Code of 1986, as amended from time to time, or any successor legislation thereto.

1.6 “ Company ” means First Internet Bank of Indiana, an Indiana corporation, as well as any successor to such entity as provided in Section 10.9 hereof.

1.7 “ Compensation Committee ” means the Compensation Committee of the Company’s Board of Directors.

1.8 “ Competing Enterprise ” shall mean (i) any Internet bank, including any division or subsidiary of an Internet bank; (ii) any person whose main business is to deliver banking products or services within the United States of America via the Internet, or (ii) any division, subsidiary or affiliate of any person whose main business is to deliver banking products or services within the United States of America via the Internet

1.9 “ Disability ” means: (i) the Executive is limited from performing the material and substantial duties of his or her regular occupation due to sickness or injury and (ii) the Executive has a twenty percent (20%) or more loss in monthly earnings from base salary due to the same sickness or injury. The Executive shall be entitled to the benefits provided for under this Agreement for any period during the Executive’s employment and prior to the establishment of the Executive’s Disability during which the Executive is unable to work due to a sickness or injury. Notwithstanding anything contained in this Agreement to the contrary, until the Termination of Employment relating to the Executive’s Disability, the Executive shall be entitled to return to his or her position with the Company or Subsidiary in which event no Disability of the Executive will be deemed to have occurred.

1.10 “ Early Retirement Age ” means the Executive’s 60th birthday.

1.11 “ Effective Date ” means .

1.12 “ ERISA ” means the Employee Retirement Income Security Act of 1974, as amended.

1.13 “ Executive ” means the individual named on this Agreement and on whose behalf the Agreement is entered.

1.14 “ Executive Management ” means the Chief Executive Officer, President, Chief Operating Officer or Chief Financial Officer of the Company.

1.15 “ Final Salary ” means the highest annual base salary rate paid by the Company and any Subsidiary to the Executive during the five (5) years ending on the date of Termination of Employment, or if earlier, the date the Executive attains Normal Retirement Age.

1.16 “ Involuntary Termination of Employment ” means, for the purposes of the Agreement, Termination of Employment by the Company or a Subsidiary without Cause (as defined in Section 1.21 of this Agreement) or by the Executive because of Good Reason (as defined in Section 1.21 of this Agreement).

1.17 “ Normal Retirement Age ” means the Executive’s 65th birthday.

1.18 “ Normal Retirement Date ” means the later of the Normal Retirement Age or Termination of Employment.

1.19 “ Plan Year ” means a twelve-month period commencing on January 1 and ending on December 31 of each year. The initial Plan Year may be a short Plan Year which shall commence on the Effective Date.

1.20 “ Subsidiary ” means any corporation or other “Person” (as the term person is used for purposes of Section 13(d) or 14(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) of which a majority of its voting power or its voting equity securities or equity interest is owned, directly or indirectly, by the Company, its Parent or Subsidiaries.

1.21 “ Termination of Employment ”

(a) For purposes of this Agreement, the term “Termination of Employment” shall mean (i) termination by the Company and all Subsidiaries of the employment of the Executive with the Company and all Subsidiaries for any reason including death, Disability, or “Cause” (as defined below), or (ii) resignation from employment with the Company and all Subsidiaries by the Executive for any reason, including “Good Reason” (as defined below).

(b) “Cause” shall mean, with respect to termination of an Executive’s employment, the occurrence of any one or more of the following, as determined by a member of the Company’s Executive Management, in the exercise of good faith and reasonable judgment:

(i) the Executive has been convicted of, or pled nolo contendere to, a felony or a crime involving moral turpitude; or

(ii) the Executive either (x) intentionally and continually failed substantially to perform his or her reasonably assigned duties with the Company or Subsidiary (other than a failure resulting from the Executive’s incapacity due to physical or mental illness or from the assignment to the Executive of duties that would constitute Good Reason), which failure has continued for a period of at least thirty (30) days after a written notice of demand for substantial performance, signed by a duly authorized member of Executive Management, has been delivered to the Executive specifying the manner in which the Executive has failed substantially to perform and the steps required for the Executive to cure the nonperformance, or (y) intentionally engaged in conduct which has been demonstrably and materially injurious to the Company or Subsidiary; or

(iii) the Executive has breached any of the Executive’s restrictive covenants set forth in Section 6.3 of this Agreement

(c) The term “Good Reason” shall mean the Executive’s resignation from employment with the Company and all Subsidiaries upon any one of the following:

(i) a material change in the Executive’s responsibilities which represents a material adverse change from his or her responsibilities as in effect immediately prior thereto; or the assignment to the Executive of any duties or responsibilities which are inconsistent with his or her responsibilities;

(ii) the failure by the Company or Subsidiary to pay to the Executive any portion of the Executive’s current compensation within thirty (30) days of the date such compensation is due; or

(iii) a material reduction in the Executive’s base salary without the Executive’s prior written approval.

1.22 “ Trade Secrets ” shall mean any of the following provided , however , that Trade Secrets shall not include any information that the Executive can show (a) by writings preceding the first date he began discussions with the Company or Subsidiary regarding employment, to be already rightfully in the possession of the Executive without obligation or confidence; (b) is or becomes publicly available without breach of this Agreement or any other agreement between the parties or any agreement under which the parties are beneficiaries; (c) is rightfully received by the Executive from a third party who is not under an obligation of confidence; or (d) is required to be disclosed pursuant to court order, provided that the Executive gives reasonable notice to the Company or a Subsidiary of such order prior to any disclosure:

1.22.1 “ Business Operating Information ,” including the methodology used by the Company or Subsidiary from time to time to integrate technology with financial services and the delivery of those services and products to the customer and prospective customers of the Company or Subsidiary;

1.22.2 “ Financial Information ,” including, but not limited to, information relating to the Company’s or Subsidiary’s earnings, assets, liabilities, prices, pricing structure, volume of purchases or sales or other financial data;

1.22.3 “ Supply and Service Information ,” including, but not limited to, information relating to goods and services, suppliers’ names or addresses, terms of supply or service contracts or of particular transactions, or related information about potential suppliers, and the extent that the combination of suppliers or use of a particular supplier, though generally known or available, yields advantages to the Company or Subsidiary, details of which are not generally known in the banking industry;

1.22.4 “ Marketing Information ,” including, but not limited to, information relating to details about ongoing or proposed marketing programs or agreements by or on behalf of the Company or Subsidiary, sales forecasts, advertising formats and methods or results of marketing efforts or information about impending transactions;

1.22.5 “ Personal Information ,” including, but not limited to, information relating to employees’ personal or medical histories, compensation or other terms of employment, actual or proposed promotions, hirings, resignations, disciplinary actions, terminations or reasons therefor, training methods, performance, or other employee information; and

1.22.6 “ Customer Information ,” including, but not limited to, information relating to past, existing or prospective customers, their addresses or backgrounds, records of agreements and prices, proposals or agreements between customers and the Company or Subsidiary, status of customers’ accounts or credit, as well as customer lists.

1.23 “ Year of Service ” means a twelve-month period commencing on the later of October 28, 1998 or the Executive’s date of hire by the Company or a Subsidiary and on each anniversary thereof.

ARTICLE 2

INCOME BENEFITS

2.1 Normal Retirement Benefit . Subject to Article 6, upon Termination of Employment (a) on or after the Normal Retirement Age for reasons other than death and (b) after completing fifteen (15) or more Years of Service with the Company or any Subsidiary, the Company shall pay to the Executive the benefit described in this Section 2.1 in lieu of any other benefit under this Agreement.

2.1.1 Amount of Benefit . The annual benefit under this Section 2.1 is an amount equal to the Executive’s Final Salary multiplied by the Benefit Percentage.

2.1.2 Payment of Benefit . The Company shall pay the annual benefit to the Executive in fifteen (15) equal annual installments commencing with the last day of the month immediately following the Executive’s Termination of Employment and annually thereafter. The annual benefit shall be paid to the Executive for fifteen (15) years.

2.1.3 Benefit Increases . Commencing on the first anniversary of the first benefit payment, and continuing on each subsequent anniversary, the Company’s Board of Directors, in its sole discretion, may increase the annual benefit payable on that and each subsequent payment date.

2.2 Early Retirement Benefit . Subject to Article 6, upon Termination of Employment (a) on or after the Early Retirement Age but before the Normal Retirement Age for reasons other than death or Disability and (b) after completing fifteen (15) or more Years of Service with the Company or any Subsidiary, the Company shall pay to the Executive the benefit described in this Section 2.2 in lieu of any other benefit under this Agreement.

2.2.1 Amount of Benefit . The annual benefit under this Section 2.2 is an amount equal to a percentage of the annual benefit that would be payable as described in Section 2.1.1 above, computed as follows:

Age at Termination of Employment		Percentage of Section 2.1.1 Benefit
60 years		85%
61 years		88%
62 years		91%
63 years		94%
64 years		97%
65 years		100%

2.2.2 Payment of Benefit . The Company shall pay the annual benefit to the Executive in fifteen (15) equal annual installments, commencing with the last day of the month immediately following the Executive’s Termination of Employment.

2.3 Early Termination Benefit . Subject to Article 6, upon Termination of Employment before the Early Retirement Age, for reasons other than death or Disability, the Company shall pay to the Executive the benefit described in this Section 2.3 in lieu of any other benefit under this Agreement.

2.3.1 Amount of Benefit . If the Executive has completed fifteen (15) or more Years of Service with the Company or any Subsidiary, the total benefit under this Section 2.3 is the Executive’s Accrued Benefit as of the date of the Executive’s Termination of Employment. The early termination annual benefit amount is determined by calculating a 15-year fixed annuity from the Accrued Benefit, crediting interest on the unpaid balance at an annual rate equal to the Accrual Rate, compounded annually. If the Executive has completed less than fifteen (15) Years of Service, the Company shall pay no benefit under this Section 2.3.

2.3.2 Payment of Benefit . The Company shall pay the annual benefit to the Executive in fifteen (15) equal annual installments payable commencing with the last day of the month immediately following the Executive’s Normal Retirement Date.

2.4 Disability Benefit . Subject to Article 6, if the Executive terminates employment due to Disability prior to Normal Retirement Age, the Company shall pay to the Executive the benefit described in this Section 2.4 in lieu of any other benefit under this Agreement.

2.4.1 Amount of Benefit . The benefit under this Section 2.4 is an amount equal to the Executive’s Normal Retirement Benefit, calculated under Section 2.1 above, as if the Executive remained employed, with no increase in annual base salary through his Normal Retirement Age.

2.4.2 Payment of Benefit . The Company shall pay the annual benefit amount to the Executive in fifteen (15) equal annual installments commencing with the last day of the month immediately following the Executive’s Normal Retirement Date.

ARTICLE 3

DEATH BENEFITS

3.1 Death During Active Service . If the Executive dies while in the active service of the Company or a Subsidiary, the Company shall pay to the Executive’s beneficiary the benefit described in this Section 3.1. This benefit shall be paid in lieu of the benefits under Article 2.

3.1.1 Amount of Benefit . The total benefit under this Section 3.1 is the Executive’s Accrued Benefit as of the date of the Executive’s death.

3.1.2 Payment of Benefit . The Company shall pay the benefit to the Executive’s beneficiary in a lump sum within sixty (60) days following the Executive’s death.

3.2 Death During Payment of an Income Benefit . If the Executive dies after any payments have commenced under Article 2 of this Agreement but before receiving all such payments, the Company shall pay the remaining benefits to the Executive’s beneficiary at the same time and in the same amounts they would have been paid to the Executive had the Executive survived.

3.3 Death After Termination of Employment But Before Payment of an Income Benefit Commences . If the Executive is entitled to a benefit under Article 2 of this Agreement, but dies after Termination of Employment and prior to the commencement of said benefit payments, the Company shall pay the same benefit payments to the Executive’s beneficiary that the Executive was entitled to prior to death except that the benefit payments shall commence on the first day of the month following the date of the Executive’s death.

ARTICLE 4

FUNDING

This Agreement is an unfunded benefit within the meaning of ERISA and the Code. Benefits payable under the Agreement shall be paid from the general assets of the Company. The Executive and his or her beneficiaries are general unsecured creditors of the Company for the payment of benefits under this Agreement. This Agreement represents the mere promise by the Company to pay such benefits. The rights to benefits are not subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, attachment, or garnishment by creditors. Any insurance on the Executive’s life is a general asset of the Company to which the Executive and beneficiary have no preferred or secured claim.

ARTICLE 5

BENEFICIARIES

5.1 Beneficiary Designations . The Executive shall designate a beneficiary by filing a written designation with the Company. The Executive may revoke or modify the designation at any time by filing a new designation. However, designations will only be effective if signed by the Executive and accepted by the Company during the Executive’s lifetime. The Executive’s beneficiary designation shall be deemed automatically revoked if the beneficiary predeceases the Executive, or if the Executive names a spouse as beneficiary and the marriage is subsequently dissolved. If the Executive dies without a valid beneficiary designation, all payments shall be made to the Executive’s estate.

5.2 Facility of Payment . If a benefit is payable to a minor, to a person declared incapacitated, or to a person incapable of handling the disposition of his or her property, the Company may pay such benefit to the guardian, legal representative or person having the care or custody of such minor, incapacitated person or incapable person. The Company may require proof of incapacity, minority or guardianship as it may deem appropriate prior to distribution of the benefit. Such distribution shall completely discharge the Company from all liability with respect to such benefit.

ARTICLE 6

GENERAL LIMITATIONS

6.1 Termination for Cause . Notwithstanding any provision of this Agreement to the contrary, the Company shall not pay any benefit under this Agreement if the Company or any Subsidiary terminates Executive’s employment for Cause.

6.2 Suicide Misstatement . The Company shall not pay any benefit under the Agreement if Executive commits suicide within two years after the Effective Date.

6.3 Restrictive Covenants .

6.3.1 The Company has agreed to provide benefits under this Agreement in return for Executive’s acceptance of restrictive covenants set forth in this Section 6.3. Executive hereby acknowledges that the benefits provided hereunder constitute adequate consideration for Executive’s obligations under this Section 6.3.

6.3.2 The Company shall not pay any benefit under this Agreement, and the Executive shall be obligated to repay any payments received under this Agreement if, at any time prior to the second anniversary of the Termination of Employment of the Executive, without the prior written consent of the Company and the affected Subsidiary or Subsidiaries, Executive does not abide by the following agreements:

(a) Confidential Information. In connection with his or her employment at the Company or any Subsidiary, the Executive will have access to Trade Secrets. During and after his or her employment by the Company or any Subsidiary, regardless of the reasons that such employment ends, the Executive agrees: (i) to hold all Trade Secrets in confidence and not discuss, communicate or transmit to others, or make any unauthorized copy of or use the Trade Secrets in any capacity, position or business except as it directly relates to the Executive’s employment by the Company or any Subsidiary; (ii) to use the Trade Secrets only in furtherance of proper employment related reasons of the Company or Subsidiary to further the interests of the Company or any Subsidiary; (iii) to take all reasonable actions that the Company or any Subsidiary deems necessary or appropriate to prevent unauthorized use or disclosure of or to protect the interest of the Company or any Subsidiary in the Trade Secrets; and (iv) that any of the Trade Secrets, whether prepared by Executive or which may come into the Executive’s possession during the Executive’s employment hereunder, are and remain the property of the Company or applicable Subsidiary, and all such Trade Secrets, including copies thereof, together with all other property belonging to the Company or any Subsidiary, or used in their respective businesses, shall be delivered to or left with the Company or Subsidiary. Section 6.3.2(a) of this Agreement does not apply to (A) information that by means other than the deliberate or inadvertent disclosure by any employee or agent of the Company or any Subsidiary becomes well known to the public; or (B) disclosure compelled by judicial or administrative proceedings after the Executive diligently tries to avoid each disclosure and affords the Company or Subsidiary the opportunity to obtain assurance that compelled disclosures will receive confidential treatment.

(b) Ownership and Return of Documents . The Executive agrees that all memoranda, notes, records, papers or other documents and all copies of such documents or records relating to the operations or business of the Company or any Subsidiary, some of which may have been prepared by the Executive, and all objects associated with the documents or records in any way obtained or controlled by the Executive shall be the property of the Company or applicable Subsidiary. The Executive shall not, except for the Company’s or Subsidiary’s use, copy or duplicate any of the aforementioned documents or objects. The Executive shall not remove the aforementioned documents or objects from the Company’s or Subsidiary’s facilities nor use any information concerning them either during the Executive’s employment, or at any other time, except for the Company’s or Subsidiary’s benefit or upon the Company’s or Subsidiary’s request. The Executive agrees to deliver all of the aforementioned documents and objects that may be in his or her possession to the Company or Subsidiary upon termination of the Executive’s employment.

(c) Regulatory Matters . The Company and its Subsidiaries are regulated by federal and state law and require the complete confidence of the regulators and their customers if they are to prosper. Accordingly, the Executive shall act in good faith and use his or her best efforts to (i) maintain compliance with applicable federal and state laws, and (ii) preserve and improve the good will, growth and reputation of the Company and its Subsidiaries within the banking, e-commerce, and other business related communities.

(d) Non-Competition . The Company and the Executive agree that the services rendered by the Executive hereunder are special, unique and irreplaceable. By and in consideration of the Company’s entering into this Agreement and the compensation and benefits to be provided by the Company hereunder, and further in consideration of the Executive’s exposure to the proprietary information of the Company or its Subsidiaries, the Executive agrees that he or she will not, during the Employment Term and for a period of two (2) years thereafter, directly own, manage, operate, join, control, be employed by or participate in the ownership, management, operation or control of, or be connected in any manner, including, but not limited to, holding the position of shareholder, director, officer, consultant, independent contractor, employee, partner, or investor, with any Competing Enterprise in the United States; provided , however , that should the Executive terminate employment for Good Reason, the two (2)-year period of noncompetition shall not apply. The parties agree that the Executive may, without violating the foregoing restrictions: (a) own no more than 5% of the outstanding shares of common stock of a Competing Enterprise so long as he or she is a passive investor; and/or (b) manage, operate, join, control, be employed by or participate in the ownership, management, operation or control of, or be connected in any manner with, a full service bank which offers, not as its main business, banking products or services via the Internet, so long as he or she does not directly manage, operate, control or work for a division or subsidiary of such full service bank which has, as the main business of such division or subsidiary, the delivery of banking products or services via the Internet.

(e) Non-Solicitation . During the Employment Term and for a period of two (2) years thereafter, the Executive shall not directly or indirectly interfere with the

Company’s or any Subsidiary’s relationship with, or endeavor to entice away from the Company or any Subsidiary, any person who is or was an employee, vendor, consultant, independent contractor or customer of the Company or any Subsidiary or who otherwise had a material business relationship with the Company or any Subsidiary.

6.3.3 Executive represents and warrants that:

(a) Executive has read and understands this Agreement;

(b) Executive has had an opportunity to consult with legal counsel in connection herewith;

(d) enforcement of the provisions of Section 6.3 will not cause him or her undue hardship; and

(e) that the above restrictions are reasonable in scope and duration and are the least restrictive means to protect the Company’s and its Subsidiaries’ legitimate and proprietary business interests and property from irreparable harm. However, in the event that any restriction contained in this Section 6.3 is deemed too broad to permit enforcement of such restriction, then the restriction shall be judicially modified by striking the overly broad portion(s) and enforced to provide the Company with the maximum protection permitted by law.

6.3.4 The Company and the Employee hereby recognize that the restrictive non-compete provisions of Section 6.3.2 have value and that value shall be recognized in the Section 280 G calculations by an allocation of the termination benefits between the non-compete provision and the other Termination Benefits based on the value of the fair market value of the non-compete provisions. The Company shall make the determination of the fair value to be assigned.

ARTICLE 7

CLAIMS AND REVIEW PROCEDURES

7.1 Claims Procedure . The Company shall notify any person that makes a claim under this Agreement (the “Claimant”) in writing, within ninety (90) days of Claimant’s written application for benefits, of his or her eligibility or noneligibility for benefits under the Agreement. If the Company determines that the Claimant is not eligible for benefits or full benefits, the notice shall set forth (1) the specific reasons for such denial, (2) a specific reference to the provisions of the Agreement on which the denial is based, (3) a description of any additional information or material necessary for the Claimant to perfect his or her claim, and a description of why it is needed, and (4) an explanation of this Agreement’s claims review procedure and other appropriate information as to the steps to be taken if the Claimant wishes to have the claim reviewed. If the Company determines that there are special circumstances requiring additional time to make a decision, the Company shall notify the Claimant of the

special circumstances and the date by which a decision is expected to be made, and may extend the time for up to an additional ninety (90) days.

7.2 Review Procedure . If the Claimant is determined by the Company not to be eligible for benefits, or if the Claimant believes that he or she is entitled to greater or different benefits, the Claimant shall have the opportunity to have such claim reviewed by the Company by filing a petition for review with the Company within sixty (60) days after receipt of the notice issued by the Company. Said petition shall state the specific reasons which the Claimant believes entitle him or her to benefits or to greater or different benefits. Within sixty (60) days after receipt by the Company of the petition, the Company shall afford the Claimant (and counsel, if any) an opportunity to present his or her position to the Company orally or in writing, and the Claimant (or counsel) shall have the right to review the pertinent documents. The Company shall notify the Claimant of its decision in writing within the 60-day period, stating specifically the basis of its decision, written in a manner calculated to be understood by the Claimant and the specific provisions of the Agreement on which the decision is based. If, because of the need for a hearing, the 60-day period is not sufficient, the decision may be deferred for up to another sixty (60) days at the election of the Company, but notice of this deferral shall be given to the Claimant.

ARTICLE 8

AMENDMENT OR TERMINATION

8.1 Amendment . This Agreement may be amended by the Company’s Compensation Committee, in its sole discretion, at any time and from time to time; provided, however, no amendment shall adversely affect the Executive’s Accrued Benefit as of the date of such amendment or inhibit the payment of such Accrued Benefit when and if Executive fulfills the applicable requirements and conditions for payment as in effect immediately prior to such amendment.

8.2 Termination . This Agreement may be terminated by the Company’s Compensation Committee at any time, in its sole discretion, in which case, the Executive’s Accrued Benefit as of the date of the Agreement’s termination will be immediately and fully vested and shall be payable to the Executive as outlined under Section 2.3.2. The annual benefit amount is determined by calculating a 15-year fixed annuity from the Accrued Benefit, crediting interest on the unpaid balance at an annual rate equal to the Accrual Rate, compounded annually.

ARTICLE 9

ADJUSTMENT DUE TO EXCISE TAX

9.1 If it is determined by the Company, that any amount payable to Executive by Company under this Agreement would constitute an “Excess Parachute Payment” within the meaning of Code Section 280G (or any similar provision), subject to the excise tax imposed by Section 4999 of the Code, as amended from time to time (the “Excise Tax”), then the benefits payable to the Executive under any provision of this Agreement shall be reduced to the extent necessary to maximize the amounts payable to the Executive on an after-tax basis consistent with

the provisions of the Executive’s employment agreement where applicable. For the purposes of calculating an amount payable to the Executive under the guidelines of this section, the amount payable will not exceed 100% of the applicable amount outlined within Section 2.1.1, 2.2.1, 2.3.1 or 2.4.1. Executive shall be responsible for any and all Excise Tax (or similar taxes imposed upon such payments).

9.2 The determination of the amount of reduction, if any, in the amounts payable to the Executive shall be made in good faith by the Company and a written statement setting forth the calculation thereof shall be provided to the Executive.

ARTICLE 10

MISCELLANEOUS

10.1 No Guarantee of Employment . This Agreement is not an employment policy or contract. It does not give the Executive the right to remain an employee of the Company or any Subsidiary, nor does it interfere with the right of the Company or any Subsidiary to discharge the Executive. It also does not require the Executive to remain an employee nor interfere with the Executive’s right to terminate employment at any time.

10.2 Non-Transferability . Benefits under this Agreement may not be sold, transferred, assigned, pledged, attached or encumbered in any manner.

10.3 Tax Withholding . The Company shall withhold any taxes that are required to be withheld from the benefits provided under this Agreement.

10.4 Applicable Law . The Agreement and all rights hereunder shall be governed by the laws of Indiana, except to the extent preempted by the laws of the United States of America.

10.5 Administration . The Company shall have powers which are necessary to administer this Agreement, including but not limited to:

10.5.1 Construing and interpreting the provisions of the Agreement;

10.5.2 Establishing and revising the method of accounting for the Agreement;

10.5.3 Maintaining a record of benefit payments; and

10.5.4 Establishing rules and prescribing any forms necessary or desirable to administer the Agreement.

10.6 Named Fiduciary . The Company shall be the named fiduciary and plan administrator under this Agreement. It may delegate to others certain aspects of the management and operational responsibilities including the employment of advisors and the delegation of ministerial duties to qualified individuals.

10.7 Gender and Number . In the Agreement, wherever the context permits, words in the masculine gender include the feminine and neuter genders, words in the singular include the plural and words in the plural include the singular.

10.8 Entire Agreement . This Agreement constitutes the entire agreement between the Company and the Executive as to the subject matter hereof. No rights are granted to the Executive by virtue of this Agreement other than those specifically set forth herein.

10.9 Binding Effect . This Agreement shall bind the Executive and the Company, and their beneficiaries, survivors, executors, successors, administrators and transferees.

IN WITNESS WHEREOF, the Executive and a duly authorized company Officer have signed this Agreement on this day of , effective as of the date first written above.

Executive:		Company:
		First Internet Bank of Indiana


		By:

		Title:

Exhibit 10.7

SEVERANCE AGREEMENT

This Severance Agreement (hereinafter the “Agreement”) is made and entered into effective as of the 30th day of March, 2012 (the “Effective Date”) by and between FIRST INTERNET BANK OF INDIANA (“EMPLOYER”) and JEFFREY K. HARTY (“EMPLOYEE”) with reference to the following:

WHEREAS, prior to EMPLOYEE’S voluntary resignation and separation from employment effective January 31, 2012 (the “Separation Date”), EMPLOYEE was employed by EMPLOYER pursuant to an Employment Agreement dated June 1, 2000, as amended by Amendment No. 1 thereto dated July 1, 2001 and Amendment No. 2 thereto dated January 1, 2007 (such Employment Agreement, as amended, the “Employment Agreement”); and

WHEREAS, EMPLOYER and EMPLOYEE, in order to settle, compromise and fully and finally release any and all claims and potential claims against EMPLOYEE, Employee Released Parties (as defined below), EMPLOYER or Employer Released Parties (as defined below), arising out of EMPLOYEE’S employment and the cessation thereof, have agreed to resolve these matters on the terms and conditions set forth herein;

NOW, THEREFORE, in consideration of the mutual promises and covenants contained herein, the parties agree as follows:

1. Recitals. The recitals set forth above are true, accurate, and correct, and are incorporated in this Agreement by this reference and made a material part of this Agreement.

2. Employment-Related Compensation. EMPLOYEE acknowledges and agrees that upon receipt of (a) a payroll check for salary earned through and including the Separation Date, and (b) a check in the amount of $55,553.00 in payment of the EMPLOYEE’S annual bonus for the year 2011, EMPLOYEE will have received from EMPLOYER all compensation to which EMPLOYEE is entitled for services provided to EMPLOYER through the Separation Date. Such salary and bonus shall be paid to EMPLOYEE on the Effective Date and shall be subject to deduction of all required and customary federal, state and local taxes and withholdings. EMPLOYEE further acknowledges and agrees that EMPLOYEE has received reimbursement from EMPLOYER of all business expenses incurred by EMPLOYEE through the Separation Date in accordance with EMPLOYER’S expense reimbursement policy and practices.

3. Severance Benefits.

a. Severance Pay. Provided EMPLOYEE does not revoke his release pursuant to Section 13 of this Agreement, EMPLOYER shall pay EMPLOYEE severance (“Severance Pay”) in the total amount of $444,424.00, payable in eight (8) quarterly installments of $55,553.00 each, with the first installment due and payable on April 15, 2012, the second installment due and payable on June 30, 2012, and subsequent installments, due and payable on the last day of each consecutive calendar quarter thereafter until the Severance Pay has been paid in full. If the day on which any

installment of Severance Pay is payable falls on a weekend, holiday or other day on which such payment cannot be made, such installment shall be due and payable on the immediately preceding business day on which such payment can be made. Unless otherwise directed in writing by EMPLOYEE, all payments of Severance Pay shall be made by EMPLOYER to EMPLOYEE by direct deposit to such bank account of EMPLOYEE as EMPLOYEE specifies by written notice to that effect to EMPLOYER. The Severance Pay shall be payable to EMPLOYEE without deduction for any federal or state withholdings or taxes, all of which shall be the responsibility of EMPLOYEE. If EMPLOYER fails to pay any installment of Severance Pay when due, then: (i) such unpaid installment of Severance Pay shall bear interest from the date such installment was due until paid at the rate of eighteen percent (18%) per annum; and (ii) EMPLOYEE may give EMPLOYER written notice of such delinquent payment, and if EMPLOYER fails to cure such delinquency in payment by paying all delinquent installment(s) of Severance Pay, plus all accrued interest thereon, within ten (10) days following the date EMPLOYEE gives EMPLOYER such notice of delinquency, then all unpaid installments of Severance Pay and all accrued interest thereon automatically shall become immediately due and payable in full by EMPLOYER to EMPLOYEE.

b. COBRA. If elected by EMPLOYEE, EMPLOYER will provide EMPLOYEE with continued group medical, dental and vision insurance benefits under EMPLOYER’s group medical, dental and vision insurance plans, or the plans then in effect for similarly situated employees, as required by the Consolidated Omnibus Budget Reconciliation Act (“COBRA”). EMPLOYER and EMPLOYEE mutually acknowledge and agree that EMPLOYEE’S COBRA period began on February 1, 2012. EMPLOYER shall pay EMPLOYEE a monthly payment in an amount equal to the monthly cost of his COBRA continuation coverage for the eleven (11) months of February 2012 through December 2012.

4. Release by EMPLOYEE. To the fullest extent permitted by applicable laws, EMPLOYEE hereby generally, irrevocably and unconditionally releases and forever discharges and covenants not to sue EMPLOYER and all of its parents, subsidiaries and affiliates and all of its and their current and/or former employees, partners, officers, members, shareholders, directors, managers, representatives, agents, attorneys, employee benefit plans and their fiduciaries and administrators, and all persons acting by, through, or under or in concert with any of them, both individually and in their representative capacities (collectively, including without limitation EMPLOYER, the “Employer Released Parties”), from any and all complaints, claims, demands, liabilities, damages, obligations, injuries, actions or rights of action of any nature whatsoever (including without limitation claims for damages, attorneys’ fees, interest and costs), whether known or unknown, disclosed or undisclosed, administrative or judicial, suspected or unsuspected, existing in whole or in part as of the Separation Date that are based upon, arise out of or are in any manner connected with EMPLOYEE’S employment with EMPLOYER or the separation of EMPLOYEE’S employment with EMPLOYER. Without limiting the generality of the foregoing, EMPLOYEE acknowledges and agrees that the foregoing release/covenant not to sue is to be construed as broadly as possible and includes, but is not limited to, and constitutes a complete waiver of, any and all possible claims EMPLOYEE has or may have against the Employer Released Parties under or with respect to the Age Discrimination in Employment Act

of 1967, as amended (including the Older Workers Benefit Protection Act), 29 U.S.C. § 621 et seq., the Civil Rights Act of 1964 and 1991, as amended, 29 U.S.C. § 2000(e), the Americans With Disabilities Act of 1990, as amended, 42 U.S.C. § 12,101 et seg., except as otherwise provided below the Employee Retirement Income Security Act of 1974, as amended, 29 U.S.C. § 1001 et seq.(`ERISA”), all other federal, state and local employment-related laws and statutes, all wrongful discharge or other similar state law claims and all contract claims or other theories of recovery as of the Separation Date.

Provided, however that EMPLOYEE is not releasing or waiving any rights or claims. (a) that may arise after the Separation Date; (b) that EMPLOYEE may have with respect to any 401(k) plan or other employee benefit plan subject to ERISA; (c) that EMPLOYEE may have as a customer or account holder of EMPLOYER; (d) that EMPLOYEE may have to be indemnified by EMPLOYER and/or First Internet Bancorp (“FIB”) for any claim against EMPLOYEE based upon or arising out of EMPLOYEE’s position, status or service as an employee and/or an officer of EMPLOYER and/or FIB; (e) that EMPLOYEE may have for coverage and/or to be indemnified under any policy of insurance with respect to any claim against EMPLOYEE based upon or arising out of EMPLOYEE’s position, status or service as an employee and/or officer of EMPLOYER and/or FIB; and/or (f) under this Agreement.

The parties to this Agreement mutually acknowledge and agree that, as of and following the Effective Date, EMPLOYEE remains a shareholder of FIB with the same rights and privileges as other shareholders of FIB. EMPLOYEE hereby represents to EMPLOYER that EMPLOYEE has no actual knowledge of any claim, cause of action or basis for a claim or cause of action against FIB by EMPLOYEE as a shareholder of FIB.

This Agreement does not prohibit EMPLOYEE from filing an administrative charge against EMPLOYER with a governmental agency such as the United States Equal Employment Opportunity Commission (“EEOC”) relating to EMPLOYEE’S employment with EMPLOYER; provided, however, EMPLOYEE waives and releases, to the fullest extent permitted by applicable law, any and all entitlement to any form of personal relief arising from such charge or any legal action relating to such charge. If the EEOC or any other administrative agency or person brings a complaint, charge or legal action on EMPLOYEE’S behalf or for EMPLOYEE’S benefit against any of the Employer Released Parties based on any acts, omissions or events occurring on or before the Separation Date, EMPLOYEE hereby waives any rights to, and will not accept, any remedy obtained through the efforts of such agency or person.

5. Release by EMPLOYER. To the fullest extent permitted by applicable laws, EMPLOYER hereby, generally, irrevocably, and unconditionally releases and forever discharges and covenants not to sue EMPLOYEE and all of his agents, attorneys, representatives, successors, heirs, assigns, and all persons acting by, through, under, or in concert with them (collectively, including without limitation EMPLOYEE, the “Employee Released Parties”), from any and all claims, charges, complaints, demands; liabilities, damages, obligations, injuries, actions, rights of action or proceedings of any nature whatsoever (including without limitation claims for damages, attorneys’ fees, interest and costs), whether known or unknown, disclosed or undisclosed, administrative or judicial, suspected or unsuspected, existing in whole or impart as of the Separation Date that are based upon, arise out of or are in any manner connected with

EMPLOYEE’S employment with EMPLOYER, separation of EMPLOYEE’s employment with EMPLOYER or any act or omission by EMPLOYEE in his capacity or while acting as, or in connection with his service or status as, an employee and/or officer of EMPLOYER and/or FIB. This release, discharge and covenant not to sue is to be construed as broadly as possible and includes, but is not limited to, any and all claims brought or that could be brought under any agreement between EMPLOYEE and EMPLOYER (except for this Agreement), as well as any and all claims brought or that could be brought pursuant to or under any applicable federal or state law or regulation. EMPLOYER does not waive any rights or claims that may arise after the Separation Date or any right or claim under this Agreement.

6. Resignation of Employment by EMPLOYEE. Under the terms of this Agreement, EMPLOYEE has agreed to voluntarily resign EMPLOYEE’S employment with EMPLOYER, and EMPLOYER has accepted such resignation, effective upon the Separation Date. EMPLOYEE also hereby resigns as an officer of FIB effective as of the Separation Date.

7. Consultation. Through December 31, 2013, EMPLOYEE agrees to use his reasonable, good faith efforts to assist EMPLOYER, upon EMPLOYER’S request, regarding any investigation, litigation, regulatory, and/or alternative dispute resolution proceeding as to which EMPLOYEE’S assistance is helpful because EMPLOYEE has special or unique knowledge or involvement related to the subject matter at issue that is not otherwise available to EMPLOYER through any other person. Such assistance may include, without limitation, communicating and/or meeting with EMPLOYER’S representatives and/or EMPLOYER’S attorneys, attending depositions and reviewing pleadings and discovery. EMPLOYEE will appear and give truthful testimony in court or arbitration proceedings. EMPLOYEE shall not be paid for giving testimony under oath. The scheduling of such assistance shall be by mutual agreement of EMPLOYEE and EMPLOYER and shall not unreasonably interfere or conflict with other employment, business or personal commitments of EMPLOYEE. If and to the extent that EMPLOYEE expends a total of more than twenty-five (25) hours providing such assistance, EMPLOYEE shall be compensated by EMPLOYER in the form of a consulting fee at the rate of $200.00 per hour. Such consulting fee shall be payable by EMPLOYER to EMPLOYEE within ten (10) days after EMPLOYEE submits a written request therefor accompanied by an itemized statement describing the time expended and the assistance provided in reasonable detail. In addition, EMPLOYER shall pay or reimburse EMPLOYEE, for all reasonable and necessary travel and other expenses incurred by EMPLOYEE in providing such assistance within ten (10) days after EMPLOYEE submits a written request for such payment or reimbursement accompanied by an itemized statement identifying such expenses and, where appropriate, copies of receipts or other supporting documentation.

8. Return of EMPLOYER Property. The parties mutually acknowledge and agree: (a) that all documents relating in any manner to the EMPLOYER’s business, vendors, suppliers or customers, whether prepared by EMPLOYEE or anyone else, and all EMPLOYER-provided electronic door access cards, computer(s) and computer accessories, desk or office keys, credit cards, computer passwords, office supplies, and computer programs or software are the exclusive property of the EMPLOYER; and (b) that all such items have been returned to EMPLOYER by EMPLOYEE.

9. Confidentiality of Severance Agreement. EMPLOYEE and EMPLOYER mutually agree to keep confidential, and to not divulge, the terms of this Agreement, its negotiation, and/or its implementation. Provided, however, that:

a. This section shall not prohibit EMPLOYEE from (i) disclosing this Agreement to EMPLOYEE’S immediate family members and to EMPLOYEE’S attorney(s), financial or tax advisor(s), outplacement firm, creditors, or otherwise as required by law, or (ii) advising a governmental taxing authority of the consideration being paid to EMPLOYEE, or of the existence of this Agreement, in response to a question or questions posed by such taxing authority. The parties further agree that it shall not be a breach of this Agreement if EMPLOYEE’S disclosure of such information has been compelled through the issuance of compulsory legal process; provided, however, that in such case, EMPLOYEE agrees to give EMPLOYER reasonable notice of the order or subpoena in question and an opportunity to challenge the disclosure of any such information before the appropriate court or agency. It shall not be a breach of this section for EMPLOYEE to disclose the terms of this Agreement in a suit to enforce the terms of this Agreement or defend a claim that this Agreement has been breached. EMPLOYEE acknowledges, understands, and agrees that this confidentiality provision is a material term of this Agreement, and that EMPLOYEE’S agreement to this provision concerning confidentiality is a material inducement to EMPLOYER’S willingness to enter into this Agreement.

b. This section shall not prohibit EMPLOYER from (i) disclosing this Agreement to EMPLOYER’S attorney(s), financial or tax advisor(s), regulatory authorities having jurisdiction over EMPLOYER or otherwise as required by law, or (ii) advising a governmental taxing authority of the consideration being paid to EMPLOYEE, or of the existence of this Agreement, in response to a question or questions posed by such taxing authority. The parties further agree that it shall not be a breach of this Agreement if EMPLOYER’s disclosure of such information has been compelled through the issuance of compulsory legal process; provided, however, that in such case, EMPLOYER agrees to give EMPLOYEE reasonable notice of the order or subpoena in question and an opportunity to challenge the disclosure of any such information before the appropriate court or agency. It shall not be a breach of this section for EMPLOYER to disclose the terms of this Agreement in a suit to enforce the temis of this Agreement or defend a claim that this Agreement has been breached. EMPLOYER acknowledges, understands, and agrees that this confidentiality provision is a material term of this Agreement, and that EMPLOYER’s agreement to this provision concerning confidentiality is a material inducement to EMPLOYEE’S willingness to enter into this Agreement.

10. Employment Reference. EMPLOYER agrees, upon request, to provide the employment reference for EMPLOYEE set forth on Exhibit A attached hereto and incorporated herein by reference. EMPLOYER shall use good faith reasonable efforts to cause its directors and executive officers not to communicate orally or non-verbally in a manner that is inconsistent with the EMPLOYEE employment reference attached as Exhibit A.

11. Release of EMPLOYEE from Non-Competition Covenant; Continued Effect of Certain Other Provisions of Employment Agreement. EMPLOYER and EMPLOYEE mutually acknowledge and agree that:

a. From and after the Separation Date, EMPLOYEE is and shall be fully released from the non-competition covenant set forth in Section 12(d) of the Employment Agreement, and that such non-competition covenant shall have no further force or effect.

b. The confidential information covenant set forth in Section 12(a) of the Employment Agreement and the non-solicitation covenant set forth in Section 12(e) of the Employment Agreement both shall continue in full force and effect in accordance with their terms. For these purposes, the “Employment Term” (as that term is used in the Employment Agreement) ended on the Separation Date.

c. Except as otherwise expressly provided above in Section 11.b of this Agreement, the Employment Agreement and the respective rights and, obligations of the parties thereunder are and shall be terminated effective as of the Separation Date.

12. Attorneys Fees. EMPLOYER hereby agrees to pay EMPLOYEE’S attorney, Gary L. Stage, within thirty (30) days following the Effective Date, $25,000.00 to defray the attorneys’ fees incurred by EMPLOYEE in connection with the negotiation of the terms of EMPLOYEE’S separation from employment with EMPLOYER and negotiation and preparation of this Agreement. In addition, in the event of any dispute regarding this Agreement or enforcement thereof, the prevailing party in any judicial proceeding shall be entitled to recover its reasonable attorneys’ fees and other litigation costs.

13. Age Act Advisements. EMPLOYEE acknowledges that EMPLOYER has advised EMPLOYEE as follows: (a) by entering into this Agreement, EMPLOYEE is waiving and releasing all claims against the Employer Released Parties under the Age Discrimination In Employment Act of 1967, as amended (including the Older Workers Benefit Protection Act), 29 U.S.C. § 621 et seq., as of the Separation Date; (b) EMPLOYER has advised EMPLOYEE to consult with an attorney before signing this Agreement; (c) EMPLOYEE has up to twenty-one (21) days to consider and accept this Agreement by signing and returning this Agreement to EMPLOYER; (d) for a period of seven (7) days following EMPLOYEE’S signing of this Agreement, EMPLOYEE may revoke the release of all claims under the Age Discrimination In Employment Act of 1967 (including the Older Workers Benefit Protection Act) 29 U.S.C. § 621 et seq. by providing written notice of revocation to the EMPLOYER.

14. Non-Admission. Execution of this Agreement and compliance with its terms shall not be considered or deemed an admission by either party of any liability whatsoever, or as an admission by either party of any violation of rights of the other party or the rights of any other person, a violation of any order, law, statute or duty, or breach of any duty owed to the other party or any other person. EMPLOYER and EMPLOYEE each specifically disclaim any and all such liability.

15. Amendment. This Agreement shall be binding upon the parties and may not be amended, supplemented, changed, or modified in any manner, orally or otherwise, except by an instrument in writing of concurrent or subsequent date signed by EMPLOYEE and an authorized

representative of EMPLOYER. Any subsequent Agreements to be entered between the parties similarly may only be via a signed writing executed by EMPLOYEE and an authorized representative of EMPLOYER.

16. Entire Agreement. This Agreement constitutes the entire understanding and agreement between the parties hereto with respect to the subject matter hereof, and, except as otherwise provided herein, cancels all prior or contemporaneous oral or written understandings, negotiations, agreements, commitments, representations, and promises in connection herewith.

17. Construction. The parties hereto acknowledge and agree that each party has participated in the drafting of this Agreement and has had the opportunity to have this document reviewed by the respective legal counsel for the parties hereto and that the normal rule of construction to the effect that any ambiguities are to be resolved against the drafting party shall not be applied to the interpretation of this Agreement. No inference in favor of, or against, any party shall be drawn from the fact that one party has drafted any portion hereof. The section titles in this Agreement are for convenience only; they form no part of this Agreement and shall not affect its interpretation.

18. Execution in Counterparts; Facsimile Signatures. This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original as against any party whose signature appears thereon, and all of which shall together constitute one and the same instrument. This Agreement shall become binding when one or more counterparts hereof, individually or taken together, shall bear the signatures of the parties reflected hereon as the signatories. Facsimile signatures shall be sufficient and fully binding.

19. Choice of Law and Venue. This Agreement shall be governed by the laws of the State of Indiana, without regard to the conflicts of laws or principles thereof With respect to any litigation based on, arising out of, or in connection with this Agreement, the parties consent to the sole and exclusive jurisdiction and venue of the Circuit or Superior Courts of Marion County, Indiana, and the parties hereby expressly submit to the personal jurisdiction of those courts and waive, to the fullest extent permitted by law, any objection that they may now or hereafter have to the laying of venue of any such litigation brought in any such court referred to above, including without limitation any claim that any such litigation has been brought in an inconvenient forum.

20. Waiver. The failure of a party to insist upon strict adherence to any obligation of this Agreement shall not be considered a waiver or deprive that party of the right thereafter to insist upon strict adherence to that term or any other term of this Agreement. Any waiver of any provision of this Agreement must be in a written instrument signed and delivered by the party waiving the provision.

21. Notices. Any notice required or permitted to be given to EMPLOYEE pursuant to this Agreement shall be given in writing, and either personally delivered or mailed to EMPLOYEE by certified mail, return receipt requested, at the address set forth below or at such other address as EMPLOYEE shall designate by written notice to EMPLOYER given in accordance with this Section 21; and any notice required or permitted to be given to EMPLOYER shall be given in writing, and either personally delivered or mailed to the EMPLOYER by certified mail, return receipt requested, addressed to EMPLOYER at the address

set forth below or at such other address as EMPLOYER shall designate by written notice to EMPLOYEE given in accordance with this Section 21. Any notice complying with this Section 21 shall be deemed received upon delivery to the addressee, if personally delivered, or three (3) business days following deposit in the U.S. Mail, if mailed by certified mail, postage prepaid, and properly addressed, as provided above.

	If to EMPLOYER:	First Internet Bank of Indiana 9200 Keystone Crossing
		Suite 800
		Indianapolis, N 46240
		Attn: Chief Executive Officer

	If to EMPLOYEE:	Jeffrey K. Harty
		9030 Mud Creek Road
		Indianapolis, IN 46256

22. Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of, as applicable, the parties’ respective successors, assigns, heirs, estates, and representatives.

[Signatures on following page.]

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed and delivered as of the date set forth below.

	FIRST INTERNET BANK OF INDIANA


	By:	/s/ David B. Becker
	Its:	CEO
	Date:	March 31, 2012


	/s/ Jeffrey K. Harty
	JEFFREY K. HARTY
	Date:	March 30, 2012

Exhibit 21.1

LIST OF SUBSIDIARIES

Name		Jurisdiction
First Internet Bank of Indiana		Indiana