First Internet-First Century merger unravels

Six months after agreeing to acquire First Century Bancorp in a bid to expand into payments, the $4.2 billion-asset First Internet Bancorp in Fishers, Indiana, says that the $80 million deal has been called off.

According to the merger agreement announced in early November, the deal was required to close on or before April 30. The Federal Reserve Board approved the transaction Friday, but the two banks were prevented from closing within the contractual window by statutory waiting periods and First Century terminated the agreement, First Internet said in a press release Sunday. The banks had been negotiating an increase to the deal price in exchange for an extension but failed to agree on terms.

“While the acquisition initially appeared to provide opportunities to diversify our revenue streams, we will not support excess deployment of capital without a clear and likely pathway to an acceptable payback,” First Internet Chairman and CEO David Becker said in the release.

Acquiring the $391 million-asset First Century, in Roswell, Georgia, would have given First Internet a robust payments business that has processed more than $13 billion in total ACH credit volume and $32 billion in virtual lockbox volume since 2018. First Century is also one of the 15 largest U.S. commercial prepaid card issuers.

First Century reported $3.7 million of net income for the quarter ending March 31, according to the call report it filed with the Federal Deposit Insurance Corp. Its results were buoyed by a big increase in noninterest income, which totaled $2.14 million. For the same period in 2021, First Century earned $1.65 million, with fee income of $648,000.

First Internet, which recently moved to expand its involvement in banking-as-a-service, reported a 7% year-over-year increase in first quarter net income to $11.2 million despite a steep decline in mortgage banking revenue.