First Internet Bancorp Prices Baby Bonds

First Internet Bancorp (NASDAQ:INBK) has priced a new issue of Fixed-to-Floating rate subordinated notes. This is a small issue of just 1.4 million shares (bonds) with another 80,000 for over allotments.

The issue will have a fixed 6% coupon until 6/29/2024 after which it will float at the rate of 3 month Libor plus a spread of 4.114%.

The coupon will float beginning on 6/30/2024 and final maturity will be on 6/30/2029.

The issue is unrated by the big ratings agencies, but is rated BBB- by Kroll Bond Rating Agency.

The pricing term sheet can be found here.

No ticker has yet been announced and there will be no OTC Grey market trading on this issue.

35 thoughts on “First Internet Bancorp Prices Baby Bonds”

    1. Established a 2X position in INBKZ at 24.85 with the intent of later flipping half.

    1. I just missed blow out, Nomad. On driving range darn it. It got well under par too.

      1. What do you think was the reason, Grid? But volume was very low, only about 1000 or so shares traded below $24. And volume as of now less than 5K. Someone just had an attack of Nervous Nellies and dumped indiscriminately.
        I saw the drop, and tried to buy another 200 shares at $24.50, but unsuccessful.
        Bid is back up above par. Whoever dumped should be feeling like a moron right now – and a title well deserved.

      2. Saw there was a brief momentary lapse of reason; someone must have gotten spooked by the in First Internet Bank Fixed to float and dumped theirs well under par. It’s back at $25.35/$25.48 now… someone got taken to the brokerage cleaners!
        Although gold and silver are not by nature money, money is by nature gold and silver.” – Karl Marx

        1. Inspy, I agree with you and Nomad. I suspect someone saw a good bid and hit market and there wasnt supporting bids to hold the market dump. Had to be bone head mistake, one would think.

          1. I was trying to pick up more INBKL too – bid $24.40 but the selling had stopped. Wouldn’t mind picking up some of the new on as well with the longer maturity but I’ll wait for a symbol – NOT going to call fixed income at TDAM again. They were no help with ATHDF.

    2. For those keeping score at home, I just bought another 400 shares of First Internet Bancorp Prices Baby Bonds at $25…
      Smile, Nomad

      1. I’ve owned INBKL since Jan ’17. Saw the dump happen but foolishly considered me to be full up on the name so didn’t try to take advantage even for a trade.

        1. When some of you say that you ‘saw it happen’, can you explain? Are you getting email alerts from your brokerages when your holdings or watchlists drop below a certain value or what? I have traps like this set up on my holdings. Anything that drops >2% auto generates an email to me. Just wondering how others are working with this type of alerting…

          1. A4I, I am going to tell you what I did, but its probably too sophisticated and detailed for you. But I will try and explain anyways… It started with me taking a bad push shot with my 7 iron on the range. So I decided to stop for a second and got on my CNBC app on phone that has a list of about 25 tickers on it. I saw last trade at $24, and go “Oh sh@@t I need to try and buy some quick”. By time I opened up brokerage app up bid was 24.50. By time I entered bid in those were swallowed up and bid was $25…So then it was never mind…Time to hit more golf balls. 🙂 So, are you impressed with my sophisticated strategy? 🙂

            1. I’m still processing this Grid, so I may need a few more days to noodle this over. You had me stumped as soon as you mentioned 7 iron. All we have is one for getting wrinkles out of clothes and nowhere on it can I find a number ‘7’. You must have a newer model than me. I’m going to checkout the Merrill Edge gift shop and see if I can pick up this alleged 7 iron and see if I can monitor it for price moves like how you did. 🙂 lol

          2. I tend to sit and stare mindlessly at Think Or Swim without really doing anything about what I see, but I have about 6 separate watchlists to monitor. Visually, I find it very easy to see big moves given TOS’s use of green and red and having a column that expresses the day’s movement of the individual symbols in percentage terms… Then when I see something like what happened to INBKL, I’ll then turn to the chart window I have set up along with Level II quotes to get a feel for what happened and whether it’s ongoing… sometimes I’ll also crosscheck with Fidelity’s Active Trader Pro where I can view each individual trade that’s happened during the day, trade by trade… If that’s doable on TOS, I’ve not found out how, but seeing than makes it easier to have an opinion on whether it’s a single seller/buyer activity or if it’s an onslaught…. I suppose there are probably much better ways to monitor and probably the email alerts and other forms of reminders within both programs should be used as well. I just don’t do them…. What’s also helpful occasionally is to have throwaway BTC bids or offers already on the table. That way, sometimes you can be that buyer with a similar INBKL panicked seller shows up…. Same thing happened last week on a tiny little insurance company stock, CNFR, where a single seller knocked the shares down 20% for no apparent reason… It stayed down all day, but recovered the next day… I’ve been following their baby bond, CNFRL.

              1. Whenever I sit and stare at L2 quotes, my glasses fog up and I get dizzy from all the rapid eye movement! Thanks for the input and good luck with Conifer.

            1. I used to to that with the old platform they had. The new ones I have no real interest in. Probably because I dont want to mess with it.

          3. A4I, I have Level II on my trading platform, and INBKL is one of the stocks on my real time watchlist. So I can actually see the trades going off, price and volume.

            In this particular instance, I was away from my desk when the dump started, by the time I cam back, it was beginning to recover.

            I quickly stuck in a bid, but too late.

    3. Merrill has it in the system but cannot trade it yet. uggh… They didn’t underwrite it so they’ll be slow to bring it up to bid on.

    4. Just a slight update; the permanent symbol will be INBKZ. Security is still trading by CUSIP and no Grey Sheet symbol as of yet…
      Smile, Nomad

    5. Nomad, does your position in this issue, INBKZ, have a current price? My purchase Monday at Schwab @24.98 has never had an active price show in their system and after three calls they say they are still working with their market maker to get active pricing on it.

      1. OK, looks like it starts trading Monday 6/17. From their website:

        FISHERS, Ind.–(BUSINESS WIRE)– First Internet Bancorp (the “Company”) (Nasdaq: INBK), the parent company of First Internet Bank (the “Bank”) (, today announced the completion of its previously announced public offering of $35.0 million principal amount of its 6.0% Fixed-to-Floating Rate Subordinated Notes due 2029 (the “Notes”). Keefe, Bruyette & Woods, Inc., a Stifel Company, has served as sole book-running manager for the offering, with Janney Montgomery Scott, BB&T Capital Markets, Boenning & Scattergood, Inc. and William Blair serving as co-managers.

        The Company has granted the underwriters in the offering a right to purchase up to an additional $2.0 million principal amount of Notes at the public offering price, less the underwriting discounts, on or before July 5, 2019. Assuming the Company’s application to list the Notes on the Nasdaq Global Select Market is approved, trading in the Notes on Nasdaq is expected to begin on or about June 17, 2019.

      2. Hi mikeo, I bought 2 separate 400 share lots of this INBKZ at Vanguard. These buys were done with the help of a Vanguard Fixed Income trader I have spoken to many times before about Grey Sheet issues “by” the CUSIP number and not the symbol. The 800 shares shows as $25.00 in my account for the last few days with no price movement and for the symbol #INBN. My belief is that the lead underwriter is in no great rush to get the baby bond symbol listed…
        Have a great weekend, Nomad

        1. That underwriter and the underwriter of Ford. Ford finally got a symbol yesterday F.PR.B. I know this issue not for you Nomad. Still OTC but another example of buying by CUSIP.

          1. Thanks Nomad. Yep, thanks for the Ford symbol Steve. At least I had a active price for it.

  1. Back in the early 80’s my 1st mortgage was 11.5% with a VA guarantee. Round that time the 30 year tres. bond was ’bout 14%.

    History repeats to some degree. When bond yields rise, as they will, so will LIBOR/& it’s replacement. I fear many defaults will occur with the floating rate securities.

  2. As a generalized question to the more accountant savvy types among us, is there really much difference in the corporate food chain between a subordinated note, emphasis on “subordinated,” and a preferred stock?

    1. 2WR, I am not an expert, but have studied a lot. And brass tacks, bottom line in general, not a lot. Here is basically why, when a company gets in serious trouble they pile on the senior secured and bank secured loans moving the senior unsecured to the exposed and subordinated debt is left hanging in the wind fighting over nothing.
      But devil is in the prospectus details. Take AQNB subordinated debt. It specifically states it automatically converts to preferred stock if they hit the crapper. Now, as far as price support goes, that is a different story. They tend to trade better because of the “debt payment priority”. Look at the AFSI debt and preferreds. The subordinated debt though stressed also, held up better. And so has NSS compared to its preferred sisters in times of volatility. But Fitch stated in a receivership situation NSS recovery rate would be 0-10%. Hardly any better than the 0% the preferreds would get.
      So typically they trade a bit stronger in times of stress or distrust, but ultimately if they go under, their recovery rate is about on par with preferreds. Probably nothing….If you notice on FINRA bond market many of these subordinated issues are actually listed as preferred securities.
      So one could come out better holding the subordinated debt, but its best to assume the worst due to lack of covenant protections.

      1. So to restate and oversimplify what you’re saying from the point of view of an investor expecting to hold all the way through if the s**t hits the fan, there’d really be next to no extra benefit to a subordinated note holder over a preferred shareholder and if one takes solace in being a note holder, not a preferred holder, their solace is mostly misplaced. I’m talking SUBORDINATED note holder only. Said another way, if this 1st Internet Bancorp issue was called a preferred instead of a subordinated note, from the holder’s point the market would or should treat it the same way. I get it where especially with banks, there’s probably a more significant difference between the two as to how they’re treated on the balance sheet or Tier 1 type stuff, but from John Q’s perspective, no reason to feel more protected because you own a subordinated NOTE, not a preferred…. Yes? BTW, I own INBKL and see no reason to move out for this one……

        1. 2WR, yes that is the way I see it. And keep in mind we are just speaking academically not on suitability or worries about any issue. Banks are a bit different animal. Banks have no hard assets and are essentially just leverage on top of leverage…So if a bank ever went under, assume the subordinated debt to go poof….A smarter man than me who does own these issues told me just assume a bank debt issue is worthless if they go under.
          But in reality that would be the result in most companies anyways based on what typically happens during the dying days of trying to stay afloat.

          1. Thanks Grid. It makes me wonder if the banks can sometimes offer a lower coupon if they structured it as a preferred with QDI, instead of debt. I’m sure they have great financial minds who have considered the question.

        2. I am guessing the range where a company would be able to pay its subordinated debt, but not its preferreds would be very narrow when we are talking about companies going under. It’s kind of like being in the tail of a small plane that crashes vs. being in the cockpit. There is a statistically better chance of surviving in the rear because a plane has never backed into a mountain, but anything which crashes the plane is far more likely to kill everyone on board. And you can tell the difference is not significant because no one pays extra to sit in the rear.

          I am sure someone at a business school somewhere has done a study and could give you the exact figures.

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