Northeast Indiana Bancorp, Inc. Announces Year End 2004 and Fourth Quarter Earnings

Share Name	Share Symbol	Market	Type
Northeast Indiana Bancorp (MM)	NASDAQ:NEIB	NASDAQ	Common Stock

Northeast Indiana Bancorp (NASDAQ:NEIB)
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Northeast Indiana Bancorp, Inc. Announces Year End 2004 and Fourth Quarter Earnings HUNTINGTON, Ind., Jan. 21 /PRNewswire-FirstCall/ -- Northeast Indiana Bancorp, Inc. (NEIB), the parent company of First Federal Savings Bank, today announced earnings for the year ended December 31, 2004 of $982,000 ($0.67 per diluted common share) compared to net income of $1.9 million ($1.31 per diluted common share) for the year ended December 31, 2003. Overall, the Bank's underlying core businesses remained stable or saw improvement in 2004. The fourth quarter and year ended December 31, 2004, however, were impacted negatively by a $735,500 non-cash accounting write-down of Federal Home Loan Mortgage Corporation (FHLMC) and Federal National Mortgage Association (FNMA) preferred stocks in the investment portfolio. The Company's earnings would have been $1.7 million ($1.17 per diluted common share) for the year ended December 31, 2004 without the non-cash accounting write-down of the preferred stocks. Stephen E. Zahn, Chairman and Chief Executive Officer, commented on the results by stating "while we are pleased with improvements in the Company's net interest income and margins, declines in non-performing asset ratios, and increases in certain segments of non-interest income, we are not pleased with the volatility of our earnings for 2004. This was particularly evident when we made the decision to recognize through the income statement the impairment of $735,500 related to our holdings of FHLMC and FNMA preferred stock. Unrealized gains and losses on these securities had been recognized in the equity section of the balance sheet in prior periods. Due to a number of factors, including recent public disclosures about these companies and our cost in relation to their market value, we concluded the securities were impaired and reflected the loss in our income statement. We continue to hold these securities due to their variable rate features in the face of rising interest rates and other positive income characteristics." Net interest income increased $539,000 or 9.2% to $6.4 million for the year ended December 31, 2004 when compared to $5.8 million for the year ended December 31, 2003. This increase was primarily related to volume from additional average interest earning assets in 2004 compared to 2003 and to a lesser extent, changes in rates between the same periods. The Company's net interest margin improved to 2.97% for the twelve months ended December 31, 2004 versus 2.78% for the twelve months ended December 31, 2003. Northeast Indiana Bancorp, Inc. saw improvements in non-performing asset trends during 2004. The Company's non-performing assets were $1.9 million or 0.8% of total assets at December 31, 2004, a decline from the $2.6 million or 1.1% of total assets reported at December 31, 2003. Net charge-offs increased to $452,000 for the twelve months ended December 31, 2004 versus $364,000 during the same period of 2003. The increased net charge-offs were primarily related to loan balances charged off in 2004 where specific reserves had been allocated during the prior year periods and to a lesser extent, continued softness in the consumer portion of the loan portfolio. Because of these net charge-offs along with the increasing loan balances outstanding, the Company decided to make a $37,500 provision for loan loss during the quarter and year ended December 31, 2004 compared to no provision for loan loss during the prior year. Excluding the impairment write-down discussed above of $735,500, non- interest income would have been $1.5 million for the year ended December 31, 2004 compared to $1.7 million for the year ended December 31, 2003. A decline in refinancing activity led to a sharp decrease in net gain on the sale of loans to $89,000 in the current twelve month period from $510,000 in the year earlier twelve month period. This decline was partially offset by a significant increase in service charges on deposit accounts and increases in other income between the same periods. Brokerage fees also rose sharply during the quarter ended December 31, 2004 from an acquisition of a local brokerage firm completed late June 2004. Non-interest expenses increased to $5.5 million for the year ended December 31, 2004 compared to $5.0 million for the year ended December 31, 2003. This increase came primarily in salaries and employee benefits due to increased funding on a defined benefit pension plan, increased ESOP expense due to the Company's higher average share price in 2004 compared to 2003, less deferred loan origination fees due to lower mortgage volumes and wage increases related to more employees from a brokerage acquisition that was completed late June 2004. Excluding the impairment write-down discussed previously, net income would have increased $38,000 or 9.0% to $460,000 for the three months ended December 31, 2004 from $422,000 for the three months ended December 31, 2003. The net income that would have been posted for the quarter ended December 31, 2004 of $460,000, without impairment write-down, would have been the strongest quarterly earnings report of 2004 even with the Company taking its first provision for loan loss of the fiscal year 2004 in that quarter in the amount of $37,500. The quarterly improvements came primarily from increased net interest income of $158,000, a sharp increase of 94% or $83,000 in service charges on deposit accounts, and another sharp increase of $63,000 in brokerage fees partially offset by the provision for loan loss of $37,500 and an increase in non-interest expense of $201,000 all occurring between the quarter ended December 31, 2004 and the quarter ended December 31, 2003. Total assets at December 31, 2004 of $228.7 million compared to December 31, 2003 assets of $227.4 million. Net loans receivable increased $11.1 million or 6.8% to $174.8 million at December 31, 2004 from $163.7 million at December 31, 2003. Deposits increased to $124.0 million at December 31, 2004 from $122.0 million at December 31, 2003. The increase in net loans receivable was primarily funded by security maturities and paydowns, cash equivalents and new deposits. Increases in Savings, NOW, Time Deposits and Non-interest bearing checking accounts were partially offset by a decline in MMDA balances between year end 2004 and year end 2003. Shareholders' equity at December 31, 2004 was $26.0 million compared to the $27.2 million reported at December 31, 2003. The company repurchased 107,326 shares of treasury stock, at an average cost of $21.83, for a total cost of approximately $2.3 million during the year ended December 31, 2004. In the opinion of management, these repurchases help leverage Northeast Indiana Bancorp's remaining equity and tend to improve return on shareholders' equity. Northeast Indiana Bancorp has approximately 55,000 shares that may be repurchased under the current stock repurchase program, which was previously announced. The book value of NEIB's stock was $18.33 per common share as of December 31, 2004. The number of outstanding common shares was 1,420,779. The last reported trade of the stock on December 31, 2004 was $20.10 per common share. Northeast Indiana Bancorp, Inc. management and directors have been investigating the possibility of de-listing its stock and de-registering with the Securities and Exchange Commission ("SEC"). The Company is primarily concerned with the escalating costs and additional allocation of management's time that is becoming necessary under the Sarbanes-Oxley Act of 2002. This concern is further heightened under the pending implementation of Section 404 that will impact the Company beginning with the fiscal year ended December 31, 2005. This de-registering strategy would reduce future expenses associated with SEC reporting requirements as well as NASDAQ filing fees, but would also result in the Company's common stock no longer being quoted on the NASDAQ Stock Market. In order to de-register, the Company must first have fewer than 300 shareholders of record. The Company currently has 450 shareholders of record. The Company is currently exploring possible methods of reducing shareholders below 300 and the costs of any such possible transactions. The Company's shares trade infrequently and residents of Indiana hold many shares. Therefore, it is management's belief that any negative impact on the liquidity of the shares as a result of de-registering and de-listing would be minimal. Northeast Indiana Bancorp, Inc. is headquartered at 648 North Jefferson Street, Huntington, Indiana. The company offers a full array of banking, trust, and financial brokerage services to its customers through three full service branches located in Huntington, Indiana. The company is traded on the NASDAQ Stock Market under the symbol "NEIB". This press release may contain forward-looking statements, which are based on management's current expectations regarding economic, legislative and regulatory issues. Factors which may cause future results to vary materially include, but are not limited to, general economic conditions, changes in interest rates, loan demand, and competition. Additional factors include changes in accounting principles, policies or guidelines; changes in legislation or regulation; and other economic, competitive, regulatory and technological factors affecting each company's operations, pricing, products and services. NORTHEAST INDIANA BANCORP CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) CONSOLIDATED STATEMENT OF FINANCIAL CONDITION ASSETS December 31, December 31, 2004 2003 Interest-earning cash and cash equivalents $1,142,340 $6,849,198 Noninterest earning cash and cash equivalents 2,242,859 2,483,881 Total cash and cash equivalents 3,385,199 9,333,079 Securities available for sale 38,903,998 43,687,318 Securities held to maturity estimated market value of $60,000 and $150,000 at December 31, 2004 and December 31, 2003 60,000 150,000 Loans held for sale - - Loans receivable, net of allowance for loan loss December 31, 2004 $1,357,505 and December 31, 2003 $1,772,109 174,800,272 163,676,825 Accrued interest receivable 830,837 798,722 Premises and equipment 2,175,981 2,061,781 Investments in limited liability partnerships 1,370,919 1,602,147 Cash surrender value of life insurance 5,159,178 4,352,129 Other assets 1,985,839 1,732,531 Total Assets $228,672,223 $227,394,532 LIABILITIES AND STOCKHOLDERS' EQUITY Deposits 123,950,768 122,009,736 Borrowed Funds 77,066,576 76,545,485 Accrued interest payable and other liabilities 1,608,346 1,644,751 Total Liabilities 202,625,690 200,199,972 Retained earnings - substantially restricted 26,046,533 27,194,560 Total Liabilities and Shareholders' Equity $228,672,223 $227,394,532 CONSOLIDATED STATEMENTS OF INCOME Three Months Ended Twelve Months Ended December 31, December 31, 2004 2003 2004 2003 Total interest income $3,071,645 $2,987,812 $12,103,226 $12,368,715 Total interest expense 1,431,383 1,505,554 5,715,241 6,519,296 Net interest income $1,640,262 $1,482,258 $6,387,985 $5,849,419 Provision for loan losses 37,500 - 37,500 - Net interest income after provision for loan losses $1,602,762 $1,482,258 $6,350,485 $5,849,419 Service charges on deposit accounts 170,129 87,602 529,665 360,389 Net gain (loss) on securities (735,500) 6,030 (716,364) 18,427 Net gain on sale of loans 13,928 33,154 89,164 510,369 Net gain (loss) on sale of repossessed assets 11,588 (8,923) 884 48,110 Trust and brokerage fees 76,782 16,905 131,275 151,107 Other income 184,186 170,017 685,746 650,975 Total noninterest income $(278,887) $304,785 $720,370 $1,739,377 Salaries and employee benefits 832,154 676,541 3,106,407 2,607,819 Occupancy 122,648 105,283 456,225 463,926 Data processing 161,461 155,609 645,002 667,745 Deposit insurance premiums 4,718 4,661 18,840 19,733 Professional fees 60,461 51,025 257,495 248,978 Correspondent bank charges 53,373 54,959 216,063 210,273 Other expense 194,898 180,606 777,122 750,880 Total noninterest expenses $1,429,713 $1,228,684 $5,477,154 $4,969,354 Income before income tax expenses $(105,838) $558,359 $1,593,701 $2,619,442 Income tax expenses 169,410 136,840 611,479 689,468 Net Income $(275,248) $421,519 $982,222 $1,929,974 NORTHEAST INDIANA BANCORP CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) Three Months Ended Twelve Months Ended December 31, December 31, 2004 2003 2004 2003 Basic Earnings per common share (0.20) 0.30 0.69 1.36 Dilutive Earnings per share (0.20) 0.29 0.67 1.31 Net interest margin 2.96% 2.81% 2.97% 2.78% Return on average assets (0.47)% 0.75% 0.43% 0.87% Return on average equity (4.24)% 6.24% 3.70% 7.22% Average shares outstanding - primary 1,381,620 1,420,728 1,415,729 1,419,417 Average shares outstanding - diluted 1,381,620 1,435,438 1,463,908 1,477,455 Allowance for loan losses: Balance at beginning of period $1,461,051 $1,856,347 $1,772,109 $2,135,630 Charge-offs: One-to-four family - - 2,907 25,954 Commercial real estate 49,531 - 257,749 235,722 Commercial 73,460 59,611 73,460 160,099 Consumer 38,593 54,946 274,399 226,134 Gross charge-offs 161,584 114,557 608,515 647,909 Recoveries: One-to-four family - - - - Commercial real estate - - - - Commercial - - 10,000 96,000 Consumer 20,538 30,319 146,411 188,388 Gross recoveries 20,538 30,319 156,411 284,388 Net charge-offs (recoveries) 141,046 84,238 452,104 363,521 Additions charged to operations 37,500 - 37,500 - Balance at end of period $1,357,505 $1,772,109 $1,357,505 $1,772,109 Net loan charge-offs (recoveries) to average loans (1) 0.31% 0.20% 0.26% 0.23% Nonperforming assets (000's) At December 31, At September 30, Loans: 2004 2004 Non-accrual $1,713 $1,493 Past 90 days or more and still accruing - - Troubled debt restructured - - Total nonperforming loans 1,713 1,493 Real estate owned 204 150 Other repossessed assets 7 12 Total nonperforming assets $1,924 $1,655 Nonperforming assets to total assets 0.84% 0.72% Nonperforming loans to total loans 0.97% 0.86% Allowance for loan losses to nonperforming loans 79.30% 97.86% Allowance for loan losses to net loans receivable 0.77% 0.84% Nonperforming assets (000's) At June 30, At December 31, Loans: 2004 2003 Non-accrual $1,342 $2,413 Past 90 days or more and still accruing - - Troubled debt restructured - - Total nonperforming loans 1,342 2,413 Real estate owned 1,099 162 Other repossessed assets - 3 Total nonperforming assets $2,441 $2,578 Nonperforming assets to total assets 1.08% 1.13% Nonperforming loans to total loans 0.81% 1.46% Allowance for loan losses to nonperforming loans 110.58% 73.44% Allowance for loan losses to net loans receivable 0.89% 1.07% At December 31, 2004 2003 Stockholders' equity as a % of total assets 11.39% 11.96% Book value per share $18.33 $18.28 Common shares outstanding- EOP 1,420,779 1,487,514 (1) Ratios for the three-month periods are annualized. DATASOURCE: Northeast Indiana Bancorp, Inc. CONTACT: Randy J. Sizemore, Sr. Vice President, CFO of Northeast Indiana Bancorp, Inc., +1-260-358-4680 Web site: http://www.firstfedhuntington.com/

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NEIB Northeast Indiana Bancorp (MM)