Table of Contents Embracing opportunities for new products, services and partnerships  — In 2020, we continued our focus on renewable energy sources through lending and investment partnerships with renewable energy providers. We recognize the opportunities and complexities associated with energy financing and understand the value of innovative technology that leverages the wind and sun, which are sustainable from an environmental and financial perspective. To date, we have invested $84 million and provided debt financing in 32 solar projects across 12 states with current loan and lease outstandings of $293 million. We employ a values-based, relationship-focused approach to financing solar projects and partner with strong developers who have national project pipelines. Many of our solar clients focus on projects in Midwestern and Northeastern states. This geographic focus is driven primarily by new and developing state solar programs, many of which require or include incentives for Community Solar projects, which are distributed generation solar projects but are typically smaller in size than small utility projects. These solar projects consist of one or multiple solar arrays that are interconnected with the local utility grid. A group of subscribers, including commercial businesses, small business, municipalities, and residential homes, participate in the program and receive the benefits of purchasing their electricity from the community solar array. Community Solar projects are a strategic focus for our portfolio, with existing community solar projects in Minnesota, Illinois, New York, and Massachusetts. In addition to our focus on Community Solar projects, we also finance solar projects that provide clean energy to colleges, universities, school districts, utilities, and municipalities as we seek to continue our efforts to reduce our carbon footprint through sustainable investments. The 32 solar projects in our existing portfolio have a current operating capacity of 288,852 MWh per year, which is equivalent to avoiding 204,230 metric tons of carbon greenhouse emissions or 225 million pounds of coal burned. We are committed to investing in and financing solar energy projects and are pleased with the current and ongoing environmental benefits of this portfolio that positively impact the lives of people in communities across the United States. We will continue to finance and invest in sustainable opportunities, and we will explore new opportunities to develop products and solutions that support our clients and advance sustainability. Adopting new technologies  — We encourage our clients to take advantage of our online and mobile banking tools. Our ATM devices allow clients to make deposits without the need for an envelope. This reduces the use of paper, which again reduces emissions throughout our supply chain. To help reduce emissions associated with travel, we have tools that help clients choose the banking center and ATMs closest to them. In addition, mobile deposit features are available to our clients, enabling them to deposit checks into their accounts using their mobile devices. Many of these approaches can create long-term value for our clients and shareholders through increased revenues, reduced costs and improved convenience. General — 1st Source and the Bank are extensively regulated under federal and state law. To the extent the following information describes statutory or regulatory provisions, it is qualified in its entirety by reference to the particular statutory and regulatory provisions. Any change in applicable laws or regulations may have a material effect on our existing and prospective business and operations. We are unable to predict the nature or the extent of the effects on our business, operations and earnings that fiscal or monetary policies, economic controls, or new federal or state legislation or regulation may have in the future. We are a registered bank holding company under the Bank Holding Company Act of 1956, as amended (BHCA), and, as such, we are subject to regulation, supervision, and examination by the Board of Governors of the Federal Reserve System (Federal Reserve). We are required to file annual reports with the Federal Reserve and to provide the Federal Reserve such additional information as it may require. The Bank, as an Indiana state bank and member of the Federal Reserve System, is subject to prudential supervision by the Indiana Department of Financial Institutions (DFI) and the Federal Reserve Bank of Chicago (FRB Chicago). As such, 1st Source Bank is regularly examined by and subject to regulations promulgated by the DFI and the Federal Reserve. Because the Federal Deposit Insurance Corporation (FDIC) provides deposit insurance to the Bank, we are also subject to supervision and regulation by the FDIC (even though the FDIC is not our primary Federal regulator). The Bank is also subject to regulations promulgated by the Consumer Financial Protection Bureau (CFPB) and to supervision for compliance with such regulations by the DFI and the FRB Chicago. Bank Holding Company Act  — Under the BHCA our activities are limited to (i) business so closely related to banking, managing, or controlling banks as to be a proper incident thereto and (ii) non-bank activities, determined by law or regulation, to be closely related to the business of banking or of managing or controlling banks. We are also subject to capital requirements applied on a consolidated basis in a form substantially similar to those required of the Bank. The BHCA also requires a bank holding company to obtain approval from the Federal Reserve before (i) acquiring, or holding more than 5% voting interest in any bank or bank holding company, (ii) acquiring all or substantially all of the assets of another bank or bank holding company, or (iii) merging or consolidating with another bank holding company. 6 REGULATION AND SUPERVISION