Market Overview

NorthWest Indiana Bancorp Announces Earnings for the Six and Three Months Ended June 30, 2018

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NorthWest Indiana Bancorp (the "Bancorp" or "NWIN"), the holding company
for Peoples Bank (the "Bank"), reported an earnings increase of 5.1% for
the six months ended June 30, 2018, compared to the same period in 2017.
Net income totaled $5.1 million for the six months ended June 30, 2018,
compared to $4.8 million for the six months ended June 30, 2017.

The earnings of $5.1 million for the six months ended June 30, 2018,
represent $1.77 earnings per basic and diluted share. For the first six
months of 2018, the return on average assets (ROA) was 1.08% and the
return on average equity (ROE) was 11.12%. At June 30, 2018, the
Bancorp's assets totaled $959.0 million.

For the three months ended June 30, 2018, the Bancorp's net income
totaled $2.51 million, compared to $2.53 million for the three months
ended June 30, 2017, a decrease of 0.7%. The net income of $2.51 million
for the three months ended June 30, 2018 represents $0.88 earnings per
basic and diluted share. For the three months ended June 30, 2018, the
ROA was 1.07% and the ROE was 11.04%.

On February 20, 2018, the Bancorp announced the pending merger with
First Personal Financial Corp. ("First Personal"). It is anticipated
that the merger will be completed on July 26, 2018. During the first six
months of 2018, the Bancorp has recorded one-time acquisition costs of
approximately $545 thousand related to the merger with First Personal.

Excluding the one-time acquisition costs, the Bancorp's earnings for the
six months ended June 30, 2018 increased by 14.9% resulting in an ROA of
1.18%. Without the one-time acquisition costs, the Bancorp's earnings
for the three months ended June 30, 2018 increased by 17.7% resulting in
an ROA of 1.26%. See Table 1 below for a reconciliation of these
non-GAAP figures to the Bancorp's GAAP net income.

"Financial performance was very strong during the first half of the
year, driven primarily by excellent operating results. While we do
expect continued acquisition expenses in the second half of the year
related to the integration of First Personal, the underlying results
provide a substantial foundation for the performance we expect from a
fully integrated Bank. Full integration is expected to take place in
September 2018, at which point First Personal customers will have full
access to our Banking Centers as well as an extended menu of products
and services. Additionally, our current customers will have a larger
Banking Center network with locations in South Suburban Chicagoland,"
said Benjamin Bochnowski, president & chief executive officer.

"During the first six months of 2018, the Bancorp's earnings increase
was driven by 8.4% annualized loan growth, which helped drive the
increase in the Bancorp's net interest income. In addition, for the same
period, noninterest income increased 24.2% as a result of management's
focused efforts on executing its operating strategies. Strong asset
quality continues to benefit earnings, as nonperforming loans represent
only 0.65% of the Bancorp's loan portfolio. Also, the Bancorp's low
effective tax rate continues to enhance profitability," said Robert
Lowry, chief financial officer.

Net Interest Income

Net interest income, the difference between interest income from loans
and investments and interest expense paid to fund providers, totaled
$15.7 million for the six months ended June 30, 2018, compared to $15.2
million for the six months ended June 30, 2017, an increase of $538
thousand or 3.5%. The Bancorp's net interest margin on a tax-adjusted
basis was 3.79% for the six months ended June 30, 2018, compared to
3.83% for the six months ended June 30, 2017. For the three months ended
June 30, 2018, net interest income totaled $7.9 million, compared to
$7.7 million for the three months ended June 30, 2017 for an increase of
$218 thousand or 2.8%. The Bancorp's net interest margin on a
tax-adjusted basis was 3.78% for the three months ended June 30, 2018,
compared to 3.84% for the three months ended June 30, 2017. The
increased net interest income for both periods is a result of an
increase in average daily balances for loans.

Noninterest Income

Noninterest income from banking activities totaled $4.7 million for the
six months ended June 30, 2018, compared to $3.7 million for the six
months ended June 30, 2017, an increase of $907 thousand or 24.2%. For
the three months ended June 30, 2018, noninterest income from banking
activities totaled $2.2 million, compared to $2.0 million for the three
months ended June 30, 2017, an increase of $243 thousand or 12.4%. The
increase in noninterest income is related to an increase in income from
banking services as the Bancorp continued to focus on being competitive
within its market place. Current market conditions also provided
opportunities to maintain securities cash flows, while recognizing gains
from the sales of securities. Wealth management income increased as
assets under management increased and one-time fees were recognized. The
increase in gain on sale of loans held for sale is the result of
continued efforts on loan growth and normal course of business sales.

Noninterest Expense

Noninterest expense totaled $13.9 million for the six months ended June
30, 2018, compared to $12.3 million for the six months ended June 30,
2017, an increase of $1.5 million or 12.5%. For the three months ended
June 30, 2018, noninterest expense totaled $6.9 million, compared to
$6.0 million for the three months ended June 30, 2017, an increase of
$878 thousand or 14.6%. During 2018, one-time expenses of $545 thousand
have been incurred for the planned acquisition of First Personal. In
addition, compensation and benefits increased as a result of a continued
focus on talent management and retention. Data processing expense
included acquisition costs and saw increased system utilization. Other
operating expense increased as higher costs were incurred for
foreclosure and collection expense, seminars and education, higher third
party costs, a shared loss from the operation of the wholly-owned
captive insurance subsidiary, and acquisition expenses. The Bancorp's
efficiency ratio was 68.1% for the six months ended June 30, 2018,
compared to 65.2% for the six months ended June 30, 2017. Excluding the
one-time acquisition expense, the efficiency ratio would decrease to
65.45% for the same period. See Table 1 below for a reconciliation of
the non-GAAP figure to the Bancorp's GAAP efficiency ratio. The
efficiency ratio is determined by dividing total noninterest expense by
the sum of net interest income and total noninterest income for the
period.

Lending

The Bancorp's loan portfolio totaled $646.3 million at June 30, 2018,
compared to $620.2 million at December 31, 2017, an increase of $26.1
million or 4.2%. During the first six months of 2018, the Bancorp
originated $177.2 million in new loans, an increase of 6.6% compared to
the six months ended June 30, 2017. During the six months ended June 30,
2018, the Bancorp saw its commercial real estate, commercial business,
residential real estate, multifamily, construction and land development,
and HELOC loan balances increase. During the six months ended June 30,
2018, $22.1 million in newly originated fixed rate mortgage loans were
sold into the secondary market resulting in gains of $570 thousand. The
loan portfolio represents 72.1% of earning assets and is comprised of
66.8% commercial related credits.

Investing

The Bancorp's securities portfolio totaled $238.2 million at June 30,
2018, compared to $244.5 million at December 31, 2017, a decrease of
$6.3 million or 2.6%. The securities portfolio represents 26.6% of
earning assets and provides a consistent source of liquidity and
earnings to the Bancorp. Cash and cash equivalents totaled $19.8 million
at June 30, 2018, compared to $11.0 million at December 31, 2017, an
increase of $8.8 million or 79.5%. The increase in cash and cash
equivalents will be used to fund third quarter loan originations.

Funding

At June 30, 2018, core deposits totaled $599.2 million, compared to
$609.1 million at December 31, 2017, a decrease of $9.9 million or 1.6%.
The decrease is related to prior year-end balance fluctuations. Core
deposits include checking, savings, and money market accounts and
represented 74.3% of the Bancorp's total deposits at June 30, 2018.
During the first six months of 2018, balances for interest bearing
checking and savings accounts increased. The increase in these core
deposits is a result of management's sales efforts along with customer
preferences for competitively priced short-term liquid investments. At
June 30, 2018, balances for certificates of deposit totaled $206.8
million, compared to $183.9 million at December 31, 2017, an increase of
$22.9 million or 12.4%. In addition, at June 30, 2018, borrowings and
repurchase agreements totaled $49.9 million, compared to $32.2 million
at December 31, 2017, an increase of $17.7 million or 55.1%. Additional
short-term borrowings were acquired to cover municipal deposit balance
fluctuations.

Asset Quality

At June 30, 2018, non-performing loans totaled $4.2 million, compared to
$5.2 million at December 31, 2017, a decrease of $1.0 million or 19.7%.
The Bancorp's ratio of non-performing loans to total loans was 0.65% at
June 30, 2018, compared to 0.84% at December 31, 2017. In addition, the
Bancorp's ratio of non-performing assets to total assets was 0.78% at
June 30, 2018, compared to 1.00% at December 31, 2017.

For the six months ended June 30, 2018, $638 thousand in provisions to
the ALL were required, compared to $557 thousand for the six months
ended June 30, 2017, an increase of $81 thousand or 14.5%. The ALL
provision increase is primarily a result of overall loan portfolio
growth. For the six months ended June 30, 2018, charge-offs, net of
recoveries, totaled $672 thousand. The net loan charge-offs for the
first six months of 2018 were comprised of $106 thousand in residential
real estate, $24 thousand in home equity loans, $13 thousand in consumer
loans, $412 thousand in commercial business loans, and $117 thousand in
commercial real estate. At June 30, 2018, the allowance for loan losses
totaled $7.4 million and is considered adequate by management. The
allowance for loan losses as a percentage of total loans was 1.15% at
June 30, 2018, compared to 1.21% at December 31, 2017. The allowance for
loan losses as a percentage of non-performing loans, or coverage ratio,
was 177.7% at June 30, 2018, compared to 143.3% at December 31, 2017.

Capital Adequacy

At June 30, 2018, shareholders' equity stood at $90.6 million, and
tangible capital represented 9.5% of total assets. The Bancorp's
regulatory capital ratios at June 30, 2018 were 14.1% for total capital
to risk-weighted assets, 13.0% for both common equity tier 1 capital to
risk-weighted assets and tier 1 capital to risk-weighted assets, and
9.8% for tier 1 leverage capital to adjusted average assets. Under all
regulatory capital requirements, the Bancorp is considered well
capitalized. The book value of the Bancorp's stock stood at $31.58 per
share at June 30, 2018.

About NorthWest Indiana Bancorp

NorthWest Indiana Bancorp is a locally managed and independent financial
holding company headquartered in Munster, Indiana, whose activities are
primarily limited to holding the stock of Peoples Bank. Peoples Bank
provides a wide range of personal, business, electronic and wealth
management financial services from its 16 locations in Lake and Porter
Counties in Northwest Indiana. NorthWest Indiana Bancorp's common stock
is quoted on the OTC Pink Marketplace and the OTC Bulletin Board under
the symbol NWIN. The website ibankpeoples.com provides information on
Peoples Bank's products and services, and NorthWest Indiana Bancorp's
investor relations.

Forward Looking Statements

This press release may contain forward-looking statements regarding the
financial performance, business prospects, growth and operating
strategies of NWIN and First Personal. For these statements, each of
NWIN and First Personal claims the protections of the safe harbor for
forward-looking statements contained in the Private Securities
Litigation Reform Act of 1995. Statements in this communication should
be considered in conjunction with the other information available about
NWIN and First Personal, including the information in the filings NWIN
makes with the SEC. Forward-looking statements provide current
expectations or forecasts of future events and are not guarantees of
future performance. The forward-looking statements are based on
management's expectations and are subject to a number of risks and
uncertainties. Forward-looking statements are typically identified by
using words such as "anticipate," "estimate," "project," "intend,"
"plan," "believe," "will" and similar expressions in connection with any
discussion of future operating or financial performance.

Although management believes that the expectations reflected in such
forward-looking statements are reasonable, actual results may differ
materially from those expressed or implied in such statements. Risks and
uncertainties that could cause actual results to differ materially
include: ability to meet the closing conditions to the merger; delay in
closing the merger; difficulties and delays in integrating NWIN's and
First Personal's businesses or fully realizing cost savings and other
benefits; business disruption following the merger; changes in asset
quality and credit risk; the inability to sustain revenue and earnings
growth; changes in interest rates and capital markets; inflation;
customer acceptance of NWIN's and First Personal's products and
services; customer borrowing, repayment, investment, and deposit
practices; customer disintermediation; the introduction, withdrawal,
success, and timing of business initiatives; competitive conditions; the
inability to realize cost savings or revenues or to implement
integration plans and other consequences associated with mergers,
acquisitions, and divestitures; economic conditions; and the impact,
extent, and timing of technological changes, capital management
activities, and other actions of the Federal Reserve Board and
legislative and regulatory actions and reforms.

Important Additional Information for Shareholders and Where to Find It

In connection with the proposed merger with First Personal, NWIN has
filed with the SEC a Registration Statement on Form S-4, which was
declared effective on May 4, 2018, that includes a Proxy Statement of
First Personal and a Prospectus of NWIN (the "Proxy
Statement/Prospectus"), as well as other relevant documents concerning
the proposed transaction. SHAREHOLDERS AND INVESTORS ARE URGED TO READ
THE REGISTRATION STATEMENT AND THE PROXY STATEMENT/PROSPECTUS REGARDING
THE MERGER AND ANY OTHER RELEVANT DOCUMENTS FILED WITH THE SEC, AS WELL
AS ANY AMENDMENTS OR SUPPLEMENTS TO THOSE DOCUMENTS, BECAUSE THEY
CONTAIN IMPORTANT INFORMATION.

The Proxy Statement/Prospectus and other relevant materials, and any
other documents NWIN has filed with the SEC, may be obtained free of
charge at the SEC's website at www.sec.gov.
In addition, investors and security holders may obtain copies of the
documents NWIN has filed with the SEC, free of charge, from NWIN at www.ibankpeoples.com
under the tab "Investor Relations – SEC Filings." Alternatively, these
documents can be obtained free of charge from NWIN upon written request
to NorthWest Indiana Bancorp, Attn: Shareholder Services, 9204 Columbia
Avenue, Munster, Indiana 46321, or by calling (219) 853-7080, and from
First Personal upon written request to First Personal Financial Corp.,
Attn: Randall R. Schwartz, 14701 Ravinia Avenue, Orland Park, Illinois
60462, or by calling (708) 226-2727. The information available through
NWIN's website is not and shall not be deemed part of this press release
or incorporated by reference into other filings NWIN makes with the SEC.

This communication does not constitute an offer to sell or the
solicitation of an offer to buy any securities or a solicitation of any
vote or approval.

Disclosure Regarding Non-GAAP Measures

This report refers to certain financial measures that are identified as
non-GAAP. The Bancorp believes that the non-GAAP measures are helpful to
investors because it assists in identifying one-time acquisition related
noninterest expense. This supplemental information should not be
considered in isolation or as a substitute for the related GAAP
measures. See the attached Table 1 at the end of this press release for
a reconciliation of the non-GAAP earnings measures identified herein and
their most comparable GAAP measures.

 
 
NorthWest Indiana Bancorp
Quarterly Financial Report
Key Ratios     Three Months Ended     Six Months Ended
June 30, June 30,
(Unaudited) (Unaudited)
2018   2017 2018     2017
Return on equity 11.04% 11.30% 11.12% 10.97%
Return on assets 1.07% 1.11% 1.08% 1.07%
Basic earnings per share $ 0.88 $ 0.89 $ 1.77 $ 1.69
Diluted earnings per share $ 0.88 $ 0.89 $ 1.77 $ 1.69
Yield on loans 4.56% 4.42% 4.51% 4.39%
Yield on security investments 2.79% 2.64% 2.78% 2.62%
Total yield on earning assets 4.07% 3.89% 4.02% 3.87%
Cost of deposits 0.43% 0.26% 0.39% 0.25%
Cost of repurchase agreements 1.35% 0.78% 1.26% 0.73%
Cost of borrowed funds 2.13% 1.21% 1.99% 1.17%
Total cost of funds 0.53% 0.30% 0.48% 0.29%
Net interest margin - tax equivalent 3.78% 3.84% 3.79% 3.83%
Noninterest income / average assets 0.94% 0.86% 0.99% 0.83%
Noninterest expense / average assets 2.93% 2.66% 2.96% 2.73%
Net noninterest margin / average assets -1.99% -1.80% -1.97% -1.90%
Efficiency ratio 68.52% 62.69% 68.13% 65.17%
Effective tax rate 12.69% 22.59% 13.33% 19.99%
Dividend declared per common share $ 0.30 $ 0.29 $ 0.59 $ 0.57
 
June 30,
2018 December 31,
(Unaudited) 2017
Net worth / total assets 9.45% 9.93%
Book value per share $ 31.58 $ 32.14
Non-performing assets to total assets 0.78% 1.00%
Non-performing loans to total loans 0.65% 0.84%
Allowance for loan losses to non-performing loans 177.65% 143.26%
Allowance for loan losses to loans outstanding 1.15% 1.21%
Foreclosed real estate to total assets 0.11% 0.18%
 
Consolidated Statements of Income Three Months Ended Six Months Ended
(Dollars in thousands) June 30, June 30,
(Unaudited) (Unaudited)
2018 2017 2018 2017
Interest income:
Loans $ 7,257 $ 6,664 $ 14,251

 

$ 13,103
Securities & short-term investments   1,739   1,608   3,478   3,247
Total interest income   8,996   8,272   17,729   16,350
Interest expense:
Deposits 838 498 1,513 957
Borrowings   282   116   505   220
Total interest expense   1,120   614   2,018   1,177
Net interest income 7,876 7,658 15,711 15,173
Provision for loan losses   297   323   638   557
Net interest income after provision for loan losses   7,579   7,335   15,073   14,616
Noninterest income:
Fees and service charges 947

 

821 1,839

 

1,561
Gain on sale of securities, net 246

 

252 1,004

 

545
Gain on sale of loans held-for-sale, net 359

 

271 570

 

471
Wealth management operations 424

 

398 839

 

808
Increase in cash value of bank owned life insurance 120

 

115 228

 

230
Gain on sale of foreclosed real estate, net 68

 

93 100

 

93
Other   39

 

  10   72

 

  37
Total noninterest income 2,203 1,960 4,652 3,745
Noninterest expense:
Compensation and benefits 3,516

 

3,140 7,376

 

6,753
Occupancy and equipment 842

 

815 1,695

 

1,697
Data processing 703

 

360 1,064

 

728
Federal deposit insurance premiums 75

 

81 159

 

158
Marketing 166

 

199 300

 

334
Other   1,604

 

  1,433   3,279

 

  2,658
Total noninterest expense   6,906   6,028   13,873   12,328
Income before income taxes 2,876 3,267 5,852 6,033
Income tax expenses   365

 

  738   780

 

  1,206
Net income $ 2,511 $ 2,529 $ 5,072 $ 4,827
 
 
NorthWest Indiana Bancorp
Quarterly Financial Report
               
Balance Sheet Data
(Dollars in thousands) June 30,
2018 December 31, Change Mix
(Unaudited) 2017 % %
Total assets $ 958,951 $ 927,259 3.4% n/a
Cash & cash equivalents 19,792 11,025 79.5% n/a
Certificates of deposit in other financial institutions 1,526 1,676 -8.9% n/a
Securities - available for sale 238,164 244,490 -2.6% n/a
 
Loans receivable:
Residential real estate $ 175,492 $ 172,141 1.9% 27.2%
Home equity 38,303 36,769 4.2% 5.9%
Commercial real estate 223,598 211,090 5.9% 34.6%
Construction and land development 51,947 50,746 2.4% 8.0%
Multifamily 44,781 43,368 3.3% 6.9%
Farmland 245 - 100.0% 0.0%
Consumer 487 461 5.6% 0.1%
Commercial business 83,699 76,851 8.9% 13.0%
Government   27,736   28,785 -3.6% 4.3%
Total loans $ 646,288 $ 620,211 4.2% 100.0%
 
Deposits:
Core deposits:
Noninterest bearing checking $ 120,418 $ 120,556 -0.1% 14.9%
Interest bearing checking 201,170 188,467 6.7% 25.0%
Savings 131,003 129,702 1.0% 16.3%
Money market   146,613   170,359 -13.9% 18.1%
Total core deposits 599,204 609,084 -1.6% 74.3%
Certificates of deposit   206,773   183,920 12.4% 25.7%
Total deposits $ 805,977 $ 793,004 1.6% 100.0%
 
Borrowings and repurchase agreements $ 49,915 $ 32,181 55.1%
Stockholder's equity 90,577 92,060 -1.6%
 
 
Asset Quality June 30,
(Dollars in thousands) 2018 December 31, Change
(Unaudited) 2017 %
Nonaccruing loans $ 4,122 $ 4,996 -17.5%
Accruing loans delinquent more than 90 days 71 227 -68.7%
Securities in non-accrual 2,196 2,299 -4.5%
Foreclosed real estate   1,087   1,699 -36.0%
Total nonperforming assets $ 7,476 $ 9,221 -18.9%
 
Allowance for loan losses (ALL):
ALL specific allowances for impaired loans $ 62 $ 704 -91.2%
ALL general allowances for loan portfolio   7,386   6,778 9.0%
Total ALL $ 7,448 $ 7,482 -0.5%
 
Troubled Debt Restructurings:

Nonaccruing troubled debt restructurings, non-compliant (1)
(2)

$ - $ - 0.0%

Nonaccruing troubled debt restructurings, compliant (2)

- - 0.0%
Accruing troubled debt restructurings   2,057   535 284.5%
Total troubled debt restructurings $ 2,057 $ 535 284.5%

(1) "non-compliant" refers to not being within the guidelines
of the restructuring agreement

(2) included in nonaccruing loan balances presented above

 
 
At June 30,
2018
Actual Ratio Required
(Unaudited) To Be Well Capitalized
 
Capital Adequacy Bancorp
Common equity tier 1 capital to risk-weighted assets 13.0% N/A
Tier 1 capital to risk-weighted assets 13.0% N/A
Total capital to risk-weighted assets 14.1% N/A
Tier 1 capital to adjusted average assets 9.8% N/A
 
Capital Adequacy Bank
Common equity tier 1 capital to risk-weighted assets 12.7% 6.5%
Tier 1 capital to risk-weighted assets 12.7% 8.0%
Total capital to risk-weighted assets 13.7% 10.0%
Tier 1 capital to adjusted average assets 9.5% 5.0%
 
 
Table 1 - Reconciliation of the Non-GAAP Earnings Figures
     
Thee Months Six Months
Ended Ended
6/30/2018 6/30/2018
(Unaudited) (Unaudited)
 
GAAP net Income $ 2,511 $ 5,072
GAAP income tax expense   365   780
GAAP income before income taxes 2,876 5,852
Acquisition costs   533   545
Pro forma income before income taxes 3,409 6,397
Pro forma income taxes   433   853
Pro forma net income $ 2,976 $ 5,544
 
Pro forma net income change 17.7% 14.9%
Pro forma ROA 1.26% 1.18%
Pro forma ROE 13.09% 12.15%
Pro forma EPS $ 1.04 $ 1.93
Pro forma efficiency ratio 63.23% 65.45%
Pro forma non-interest expense / average assets 2.87% 2.90%

 

 

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