UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 1999
or
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from __________________ to _________________
Commission File Number 0-29814
FIRST BANCORP OF INDIANA, INC.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Indiana 35-2061832
- --------------------------------------------------------------------------------
(State or other jurisdiction of incorporation (I.R.S. Employer
or organization) Identification No.)
2200 West Franklin Street, Evansville, Indiana 47712
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(812) 423-3196
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(Registrant's telephone number, including area code)
Not Applicable
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(Former name, former address and former fiscal year,
if changes since last report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes [X] No [_]
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date: 2,272,400 shares of common
stock, par value $0.01 per share, were outstanding as of February 1, 2000.
<PAGE>
FIRST BANCORP OF INDIANA, INC. AND SUBSIDIARY
FORM 10-Q
FOR THE QUARTER ENDED DECEMBER 31, 1999
INDEX
Page
----
Part I Financial Information
Item 1. Consolidated Financial Statements 1
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations 6
Item 3. Quantitative and Qualitative Disclosures about Market Risk 11
Part II Other Information
Item 1. Legal Proceedings 12
Item 2. Changes in Securities and Use of Proceeds 12
Item 3. Defaults Upon Senior Securities 12
Item 4. Submission of Matters to a Vote of Security Holders 12
Item 5. Other Information 13
Item 6. Exhibits and Reports on Form 8-K 13
<PAGE>
<TABLE>
<CAPTION>
FIRST BANCORP OF INDIANA, INC.
AND SUBSIDIARY
Consolidated Balance Sheet
December 31, 1999 June 30, 1999
- ---------------------------------------------------------------------------------------------
(Unaudited)
<S> <C> <C>
Assets
Cash and due from banks $ 2,142,137 $ 1,105,134
Interest-bearing demand deposits 4,701,140 15,567,989
Federal funds sold 1,005,000 25,000
------------- -------------
Total cash and cash equivalents 7,848,277 16,698,123
Interest-bearing deposits 1,683,000 2,079,000
Investment securities
Available for sale 1,671,628 2,972,581
Held to maturity 40,866,003 40,003,256
------------- -------------
Total investment securities 42,537,631 42,975,837
Loans 62,645,489 56,582,900
Allowance for loan losses (333,759) (274,000)
------------- -------------
Net loans 62,311,730 56,308,900
Premises and equipment 1,521,625 1,508,570
Federal Home Loan Bank stock 727,400 727,400
Other assets 4,044,811 4,502,175
------------- -------------
Total assets $ 120,674,474 $ 124,800,005
============= =============
Liabilities
Deposits
Non-interest bearing $ 381,700 $ 419,865
Interest bearing 82,699,670 86,302,246
------------- -------------
Total deposits 83,081,370 86,722,111
Advances by borrowers for
taxes and insurance 434,187 381,226
Other liabilities 1,007,103 1,168,668
------------- -------------
Total liabilities 84,522,660 88,272,005
------------- -------------
Stockholders' Equity
Preferred stock, $.01 par value
Authorized and unissued - 1,000,000 shares
Common stock, $.01 par value
Authorized - 9,000,000 shares
Issued and outstanding - 2,272,400 shares 22,724 22,724
Additional paid-in capital 21,848,244 21,831,518
Retained earnings 15,974,363 15,473,935
Accumulated other comprehensive income 7,588 25,263
------------- -------------
37,852,919 37,353,440
Less:
Unallocated employee stock ownership plan shares-166,642 (1,701,105) (825,440)
------------- -------------
Total stockholders' equity 36,151,814 36,528,000
------------- -------------
Total liabilities and stockholders' equity $ 120,674,474 $ 124,800,005
============= =============
</TABLE>
See notes to unaudited consolidated financial statements
<PAGE>
<TABLE>
<CAPTION>
FIRST BANCORP OF INDIANA, INC.
AND SUBSIDIARY
Consolidated Statement of Income
For the For the
Three Months Ended Six Months Ended
December 31, December 31,
-------------------------- --------------------------
1999 1998 1999 1998
- --------------------------------------------------------------------------------------------------------------------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Interest Income
Loans receivable $1,231,682 $ 798,301 $2,387,633 $1,542,958
Investment securities 708,650 804,380 1,416,974 1,634,053
Deposits with financial institutions 92,934 209,640 245,415 441,449
Federal funds sold 8,587 7,636 17,664 17,938
Other interest and dividend income 14,667 14,668 29,335 29,390
---------- ---------- ---------- ----------
Total interest income 2,056,520 1,834,625 4,097,021 3,665,788
---------- ---------- ---------- ----------
Interest Expense
Deposits 962,692 1,116,894 1,964,193 2,236,746
Borrowings 0 51,055 0 103,921
Other 14,417 11,892 28,834 23,784
---------- ---------- ---------- ----------
Total interest expense 977,109 1,179,841 1,993,027 2,364,451
---------- ---------- ---------- ----------
Net Interest Income 1,079,411 654,784 2,103,994 1,301,337
---------- ---------- ---------- ----------
Provision for Loan Losses 49,342 0 94,342 0
---------- ---------- ---------- ----------
Net Interest Income after Provision 1,030,069 654,784 2,009,652 1,301,337
Noninterest Income
Increase in cash surrrender values
of life insurance 24,048 23,334 48,096 46,668
Other Income 201,573 57,920 397,286 109,317
---------- ---------- ---------- ----------
Total noninterest income 225,621 81,254 445,382 155,985
---------- ---------- ---------- ----------
Noninterest Expense
Salaries and employee benefits 525,178 360,469 936,093 641,338
Net occupancy expense 49,346 42,983 94,069 86,610
Equipment expense 52,693 28,834 97,306 57,066
Deposit insurance expense 12,807 12,938 29,060 27,636
Data processing fees 21,434 27,130 52,134 52,802
Other expense 290,355 117,765 505,483 230,608
---------- ---------- ---------- ----------
Total noninterest expense 951,813 590,119 1,714,145 1,096,060
---------- ---------- ---------- ----------
Income Before Income Tax 303,877 145,919 740,889 361,262
Income tax expense 93,173 34,435 240,461 95,211
---------- ---------- ---------- ----------
Net Income $ 210,704 $ 111,484 $ 500,428 $ 266,051
========== ========== ========== ==========
Basic earnings per share $ 0.10 N/A $ 0.24 N/A
Diluted earnings per share $ 0.10 N/A $ 0.24 N/A
Weighted avg number shares outstanding - Basic 2,103,994 0 2,117,126 0
Weighted avg number shares outstanding - Diluted 2,103,994 0 2,117,126 0
</TABLE>
See notes to unaudited consolidated financial statements
<PAGE>
<TABLE>
<CAPTION>
FIRST BANCORP OF INDIANA, INC.
AND SUBSIDIARY
Consolidated Statement of Changes in Equity Capital
Common Stock
-------------------- Additional
Shares Paid-in Comprehensive
Outstanding Amount Capital Income
----------------------------------------------------
<S> <C> <C> <C> <C>
Balances, June 30, 1999 2,272,400 $22,724 $21,831,518
Net income $289,724
Other comprehensive income,
net of tax--Unrealized losses
on securities (unaudited) (10,707)
--------
Comprehensive income (unaudited) $279,017
========
Employee Stock Ownership Plan
shares allocated (483)
Purchase ESOP Shares
Refunded Conversion Expenses 20,816
--------------------------------
Balances, Sept 30, 1999 (unaudited) 2,272,400 $22,724 $21,851,851
================================
Net income $210,704
Other comprehensive income,
net of tax--Unrealized losses
on securities (unaudited) (6,968)
--------
Comprehensive income (unaudited) $203,736
========
Employee Stock Ownership Plan
shares allocated (3,607)
--------------------------------
Balances, Dec 31, 1999 (unaudited) 2,272,400 $22,724 $21,848,244
================================
<PAGE>
<CAPTION>
FIRST BANCORP OF INDIANA, INC.
AND SUBSIDIARY
Consolidated Statement of Changes in Equity Capital
Accumulated
Other Unallocated
Retained Comprehensive ESOP
Earnings Income Shares Total
----------------------------------------------------
<S> <C> <C> <C> <C>
Balances, June 30, 1999 $15,473,935 $25,263 ($825,440) $36,528,000
Net income 289,724 289,724
Other comprehensive income,
net of tax--Unrealized losses
on securities (unaudited) (10,707) (10,707)
Comprehensive income (unaudited)
Employee Stock Ownership Plan
shares allocated 50,724 50,241
Purchase ESOP Shares (980,411) (980,411)
Refunded Conversion Expenses 20,816
----------------------------------------------------
Balances, Sept 30, 1999 (unaudited) $15,763,659 $14,556 ($1,755,127) $35,897,663
====================================================
Net income 210,704 210,704
Other comprehensive income,
net of tax--Unrealized losses
on securities (unaudited) (6,968) (6,968)
Comprehensive income (unaudited)
Employee Stock Ownership Plan
shares allocated 54,022 50,415
----------------------------------------------------
Balances, Dec 31, 1999 (unaudited) $15,974,363 $7,588 ($1,701,105) $36,151,814
====================================================
</TABLE>
See notes to unaudited consolidated financial statements
<PAGE>
<TABLE>
<CAPTION>
FIRST BANCORP OF INDIANA
AND SUBSIDIARY
Consolidated Statement of Cash Flows
Quarter Ended Six Months Ended
December 31, December 31,
---------------------------- ----------------------------
1999 1998 1999 1998
------------ ------------ ------------ ------------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Net Cash Provided (Used) by Operating Activities ($ 54,685) ($ 738,037) $ 985,490 ($ 12,174)
Investing Activities
Net change in interest-bearing deposits 396,000 397,000
Proceeds from maturities of securities available for sale 530,672 354,002 1,272,861 737,707
Purchases of securities held to maturity (3,246,613) (14,440,479) (13,520,594) (22,440,479)
Proceeds from maturities of securities held to maturity 7,420,387 12,571,307 12,618,912 21,946,393
Net change in loans (3,228,035) (851,494) (6,097,172) (3,364,817)
Net (Purchases) or Dispositions of premises and equipment 53,892 (10,419) 42,032 (30,637)
------------ ------------ ------------ ------------
Net cash used by investing activities 1,530,303 (2,377,083) (5,287,961) (2,754,833)
------------ ------------ ------------ ------------
Financing Activities
Net change in
Non-interest bearing, interest-bearing demand
and savings deposits (942,861) 707,121 (682,026) 1,902,403
Certificates of deposit (1,102,170) 641,942 (2,958,715) 1,178,522
Advances by borrows for taxes and insurance (106,270) (153,373) 52,961 51,446
Refunded conversion expenses 20,816
Purchase of ESOP Shares (980,411)
------------ ------------ ------------ ------------
Net cash provided (used) by financing activities (2,151,301) 1,195,690 (4,547,375) 3,132,371
------------ ------------ ------------ ------------
Net Change in Cash and Cash Equivalents (675,683) (1,919,430) (8,849,846) 365,364
Cash and Cash Equivalents, Beginning of Period 8,523,960 13,973,863 16,698,123 11,689,069
------------ ------------ ------------ ------------
Cash and Cash Equivalents, End of Period $ 7,848,277 $12,054,433 $ 7,848,277 $12,054,433
============ ============ ============ ============
Additional Cash Flow Information
Interest paid 1,352,193 1,585,410 1,942,313 2,290,019
Income tax paid 305,461 72,404 441,319 88,702
</TABLE>
See notes to unaudited consolidated financial statements
<PAGE>
FIRST BANCORP OF INDIANA, INC. AND SUBSIDIARY
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
The accompanying consolidated financial statements of First Bancorp of
Indiana, Inc. (the "Company") have been prepared in accordance with instructions
to Form 10-Q. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. However, such information reflects all adjustments
(consisting solely of normal recurring adjustments) which are, in the opinion of
management, necessary for a fair statement of results for the interim period.
The results of operations for the three and six months ended December 31, 1999
are not necessarily indicative of the results to be expected for the year ending
June 30, 2000. The consolidated financial statements and notes thereto should be
read in conjunction with the audited consolidated financial statements and notes
thereto for the year ended June 30, 1999, contained in the Company's annual
report to shareholders.
2. CONVERSION TO STOCK FORM OF OWNERSHIP
On September 16, 1998, the Board of Directors of First Federal Savings Bank
(the "Bank") adopted a Plan of Conversion to convert from a federally chartered
mutual savings bank to a federally chartered capital stock savings bank. The
conversion was accomplished through the formation of the Company in November
1998, the adoption of a federal stock charter, the sale of all of the Bank's
stock to the Company on April 7, 1999 and the sale of the Company's stock to the
public on April 7, 1999.
In connection with the conversion, the Company issued 2,272,400 shares of
common stock for gross proceeds of $22.7 million. The aggregate purchase price
was determined by an independent appraisal. The Bank issued all its outstanding
capital stock to the Company in exchange for one-half of the net proceeds of the
offering. The Company accounted for the purchase in a manner similar to a
pooling of interests whereby assets and liabilities of the Bank maintain their
historical cost basis in the consolidated company.
3. EMPLOYEE STOCK OWNERSHIP PLAN
In connection with the conversion, the Bank also established an Employee
Stock Ownership Plan ("ESOP") for the benefit of its employees. The Company
issued 87,400 shares of common stock to the ESOP in exchange for a 12 year note
in the amount of approximately $874,000. The Bank will make contributions in the
amount necessary, when combined with any dividends earned by the ESOP on
unallocated shares, to make quarterly payments of principal and interest on the
note. As payments are made, the Company will release shares from collateral.
Released shares will be allocated to participants over the term of the note.
During the quarter ended September 30, 1999, the ESOP acquired an
additional 94,392 shares of the Company's common stock in the open market. When
combined with the shares previously purchased by the ESOP in the Company's
initial public offering, the ESOP owns 8% of the Company's outstanding shares.
The $980,411 for the ESOP purchase was borrowed from the Company and added to
the existing 12 year note.
5
<PAGE>
ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
FORWARD-LOOKING STATEMENTS
This report contains forward-looking statements within the meaning of the
federal securities laws. These statements are not historical facts, rather they
are statements based on the Company's current expectations regarding its
business strategies and their intended results and its future performance.
Forward-looking statements are preceded by terms such as "expects," "believes,"
"anticipates," "intends," and similar expressions. Forward-looking statements
are not guarantees of future performance. Numerous risks and uncertainties could
cause or contribute to the Company's actual results, performance, and
achievements to be materially different from those expressed or implied by the
forward-looking statements. Factors that may cause or contribute to these
differences include, without limitation, general economic conditions, including
changes in market interest rates and changes in monetary and fiscal policies of
the federal government; legislative and regulatory changes; the Company's
ability to remedy any computer malfunctions that may result from the advent of
year 2000; and other factors disclosed periodically in the Company's filings
with the Securities and Exchange Commission. Because of the risks and
uncertainties inherent in forward-looking statements, readers are cautioned not
to place undue reliance on them, whether included in this report or made
elsewhere from time to time by the Company or on its behalf. The Company assumes
no obligation to update any forward-looking statements.
GENERAL
Management's discussion and analysis of financial condition and results of
operations is intended to assist in understanding the financial condition and
results of operations of the Company. The information contained in this section
should be read in conjunction with the unaudited consolidated financial
statements and accompanying notes thereto.
COMPARISON OF FINANCIAL CONDITION AT DECEMBER 31, 1999 AND JUNE 30, 1999
Total consolidated assets of the Company decreased $4.1 million from $124.8
million at June 30, 1999 to $120.7 million at December 31, 1999. This was
primarily the result of using cash to fund deposit withdrawals.
Cash and cash equivalents, which are primarily comprised of demand deposits
at the Federal Home Loan Bank of Indianapolis (FHLB), decreased by $8.9 million
from $16.7 million at June 30, 1999 to $7.8 million at December 31, 1999. This
decline was the result of management shifting funds to the loan portfolio as
well as using a portion of its most liquid assets to fund the slight decline in
customer deposits.
Investment securities decreased $500,000 from $43.0 million at June 30,
1999 to $42.5 million at December 31, 1999. This decline was the result of the
Bank reinvesting a portion of the proceeds from investment security maturities
and principal repayments into its mortgage and consumer loan portfolios.
Net loans grew $6.0 million from $56.3 million at June 30, 1999 to $62.3
million at December 31, 1999. This increase is primarily attributable to a $3.6
million increase in consumer loans. The Bank has always been a strong mortgage
lender and continues to expand its consumer lending operation. During the
period, the Bank originated $25.0 million of indirect automobile loans of which
it retained $6.1 million for its own portfolio. It is management's intent to
sell 60%-80% of indirect automobile loan production and retain the remainder in
the Company's own portfolio.
6
<PAGE>
The allowance for loan losses increased from $274,000 at June 30, 1999 to
$334,000 at December 31, 1999. The ratios of the Company's allowance for loan
losses to total loans were 0.53% and 0.48% at December 31, 1999 and June 30,
1999, respectively. During that same period, the Company's non-performing assets
increased from $6,000 to $106,000. The ratios of the Company's allowance for
loan losses to total nonperforming loans were 477.14% and 4566.67% at December
31, 1999 and June 30, 1999, respectively.
Total deposits declined $3.6 million from $86.7 million at June 30, 1999 to
$83.1 million at December 31, 1999. This slight decline was primarily the result
of unusually competitive pricing for deposits.
Other liabilities decreased $162,000 from $1.2 million at June 30, 1999 to
$1.0 million at December 31, 1999. This decrease was primarily attributable to a
decrease in accounts payable.
Total stockholders' equity decreased $376,000 from $36.5 million at June
30, 1999 to $36.2 million at December 31, 1999. This decline was attributable to
the purchase of additional shares of stock for the employee stock ownership plan
(ESOP) totaling $980,000, less a $101,000 allocation of ESOP shares, and a
decrease of $18,000 in net unrealized gains on securities available for sale.
Increasing stockholders' equity were net income of $500,000 and an increase of
$21,000 to additional paid-in capital for a refund and a reduction of conversion
related expenses.
COMPARISON OF OPERATING RESULTS FOR THE THREE MONTHS ENDED DECEMBER 31,
1999 AND 1998
GENERAL. Net income for the quarter ended December 31, 1999 increased
$100,000 or 90.1% from $111,000 for the quarter ended December 31, 1998 to
$211,000 for the quarter ended December 31, 1999. This was primarily
attributable to an increase in the Company's net interest income as the
Company's net interest rate spread increased from 1.96% for the quarter ended
December 31, 1998 to 2.56% for the quarter ended December 31, 1999. As a result
of its stock offering, the Company also had a larger amount of interest-earning
assets compared to last year. The return on average assets was 0.70% for the
quarter ended December 31, 1999 compared to 0.40% for the same quarter during
1998 and the return on average equity was 2.35% for the quarter ended December
31, 1999 compared to 2.93% for the same quarter during 1998.
NET INTEREST INCOME. Net interest income for the quarter ended December 31,
1999 increased $425,000 from $655,000 during the quarter ended December 31, 1998
to $1.1 million for the quarter ended December 31, 1999.
The increase in net interest income was attributable in part to a $222,000
increase in total interest income from $1.8 million for the quarter ended
December 31, 1998 to $2.1 million for the same quarter during 1999 and was
primarily the result of a $433,000 increase in interest income from loans.
Average loans outstanding increased to $60.6 million with an average yield of
8.13% for the quarter ended December 31, 1999 from $38.8 with an average yield
of 8.24% for the same period in the prior year. This increase in interest income
was partially offset by a $96,000 decline in interest income from investments
and a $117,000 decline in interest income from deposits with other financial
institutions.
The increase in net interest income was also attributable to a $203,000
decline in interest expense from $1.2 million during the quarter ended December
31, 1998 to $1.0 million for the quarter ended December 31, 1999. This was the
result of average deposits declining from $91.2 million for the quarter ended
December 31, 1998 to $83.2 million for the quarter ended December 31, 1999, and
the average cost of those deposits declining from 4.90% to 4.63% for the same
respective periods. In addition, interest expense on borrowings declined $51,000
as the Company used a portion of the proceeds from its conversion to pay-off its
borrowings.
7
<PAGE>
PROVISION FOR LOAN LOSSES. The provision for loan losses for the quarter
ended December 31, 1999 was $49,000 compared to none for the same quarter in the
prior year. The provision reflects management's analysis of the Company's loan
portfolio based on information which is currently available to it at such time.
In particular, management considers the level of non-performing loans (if any)
and potential problem loans. The higher provision for the quarter reflects
overall growth in the Company's loan portfolio. While Company management
believes that the allowance for loan losses is sufficient based on information
currently available to it, no assurances can be made that future events,
conditions, or regulatory directives will not result in increased provisions for
loan losses or additions to the allowance for loan losses which may adversely
affect net income. Net charge-offs for the quarter ended December 31, 1999 were
$25,000 compared to zero for the same period last year.
NONINTEREST INCOME. Noninterest income totaled $226,000 for the quarter
ended December 31, 1999 compared to $81,000 for the same period in the prior
year, an increase of $145,000. The increase was primarily attributable to
$153,000 in fee income generated through the sale of consumer loans into the
secondary market.
NONINTEREST EXPENSE. Total noninterest expense increased to $952,000 for
the quarter ended December 31, 1999 as compared to $590,000 for the same period
in 1998, an increase of $362,000. Salaries and employee benefits totaled
$525,000 during the quarter ended December 31, 1999, which was $165,000 higher
than the $360,000 recorded during the same period in 1998. Approximately
$103,000 of the increase in salaries and employee benefits expense is
attributable to the addition of a new indirect lending department in January
1999. Compensation expense is also approximately $50,000 higher for the quarter
ended December 31,1999 as a result of the Company's ESOP, which was adopted in
conjunction with its initial public offering in April 1999. The balance of the
increase in salaries and employee benefits is mainly due to incentive
compensation bonuses and normal salary increases for employees other than those
previously noted.
Other noninterest expense increased $172,000, to $290,000 during the
quarter ended December 31, 1999 as compared to $118,000 during the same period
in 1998. Approximately $79,000 of the increase was due to legal and other fees
incurred in settlement of a lawsuit in connection with the acquisition of the
indirect lending department. The increased expense is also attributable to
professional fees and other expenses associated with being a public company,
which increased $44,000, a $28,000 increase in expenses associated with the new
indirect lending department, a $6,000 increase in advertising, and various other
small increases in several noninterest expense categories.
INCOME TAXES. Total income tax expense was $93,000 for the quarter ended
December 31, 1999, compared to $34,000 for the same period in 1998. The increase
is attributable to increased taxable income. The effective tax rates for the
quarters ended December 31, 1999 and 1998 were 30.6% and 23.4%.
COMPARISON OF OPERATING RESULTS FOR THE SIX MONTHS ENDED DECEMBER 31, 1999
AND 1998
GENERAL. Net income for the six months ended December 31, 1999 increased
$234,000 or 88.0% from $266,000 for the six months ended December 31, 1998 to
$500,000 for the six months ended December 31, 1999. This was primarily
attributable to an increase in the Company's net interest income as the
Company's net interest rate spread increased from 1.97% for the six months ended
December 31, 1998 to 2.42% for the six months ended December 31, 1999. As a
result of its stock offering, the Company also had a larger amount of
interest-earning assets compared to last year. The return on average assets was
0.81% for the six months ended December 31, 1999 compared to 0.48% for the same
period during 1998 and the return on average equity was 2.78% for the six months
ended December 31, 1999 compared to 3.52% for the same period during 1998.
NET INTEREST INCOME. Net interest income for the six months ended December
31, 1999 increased $803,000 from $1.3 million during the six months ended
December 31, 1998 to $2.1 million for the same period ended December 31, 1999.
8
<PAGE>
The increase in net interest income was attributable in part to a $431,000
increase in total interest income from $3.7 million for the six months ended
December 31, 1998 to $4.1 million for the same period during 1999 and was
primarily the result of a $845,000 increase in interest income from loans. The
average loans outstanding increased to $59.2 million with an average yield of
8.07% for the six months ended December 31, 1999 from $37.5 with an average
yield of 8.24% for the same period in the prior year. This increase in interest
income was partially offset by a $217,000 decline in interest income from
investments and a $196,000 decline in interest income from deposits with other
financial institutions.
The increase in net interest income was also attributable to a $371,000
decline in interest expense from $2.4 million during the six months ended
December 31, 1998 to $2.0 million for the six months ended December 31, 1999.
This was the result of average deposits declining from $90.7 million for the six
months ended December 31, 1998 to $84.6 million for the six months ended
December 31, 1999, and the average cost of those deposits declining from 4.93%
to 4.64% for the same respective periods. In addition, interest expense on
borrowings declined $104,000 as the Company used a portion of the proceeds from
its conversion to pay-off its borrowings.
PROVISION FOR LOAN LOSSES. The provision for loan losses for the six months
ended December 31, 1999 was $94,000 compared to none for the same period in the
prior year. The provision reflects management's analysis of the Company's loan
portfolio based on information which is currently available to it at such time.
In particular, management considers the level of non-performing loans (if any)
and potential problem loans. The higher provision for the quarter reflects
overall growth in the Company's loan portfolio. While Company management
believes that the allowance for loan losses is sufficient based on information
currently available to it, no assurances can be made that future events,
conditions, or regulatory directives will not result in increased provisions for
loan losses or additions to the allowance for loan losses which may adversely
affect net income. Net charge-offs for the six months ended December 31, 1999
were $35,000 compared to zero for the same period last year.
NONINTEREST INCOME. Noninterest income totaled $445,000 for the six months
ended December 31, 1999 compared to $156,000 for the same period in the prior
year, an increase of $289,000. The increase was primarily attributable to
$305,000 in fee income generated through the sale of consumer loans into the
secondary market.
NONINTEREST EXPENSE. Total noninterest expense increased to $1.7 million
for the six months ended December 31, 1999 as compared to $1.1 million for the
same period in 1998, an increase of $618,000. Salaries and employee benefits
totaled $936,000 during the six months ended December 31, 1999, which was
$295,000 higher than the $641,000 recorded during the same period in 1998.
Approximately $174,000 of the increase in salaries and employee benefits expense
is attributable to the addition of a new indirect lending department in January
1999. Compensation expense is also approximately $100,000 higher for the six
months ended December 31,1999 as a result of the Company's ESOP, which was
adopted in conjunction with its initial public offering in April 1999. The
balance of the increase in salaries and employee benefits is mainly due to
incentive compensation bonuses and normal salary increases for employees other
than those previously noted.
Other noninterest expense increased $274,000, to $505,000 during the six
months ended December 31, 1999 as compared to $231,000 during the same period in
1998. Approximately $89,000 of the increase was due to legal and other fees
incurred in settlement of a lawsuit in connection with the acquisition of the
indirect lending department. The increased expense is also attributable to
professional fees and other expenses associated with being a public company,
which increased $110,000, a $51,000 increase in expenses associated with the new
indirect lending department, a $6,000 increase in advertising, and various other
small increases in several noninterest expense categories.
INCOME TAXES. Total income tax expense was $240,000 for the six months
ended December 31, 1999, compared to $95,000 for the same period in 1998. The
increase is attributable to increased taxable income. The effective tax rates
for the six months ended December 31, 1999 and 1998 were 32.4% and 26.3%.
9
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
Federal regulations require First Federal to maintain levels of liquid
assets, such as cash and eligible investments. The required percentage has
varied from time to time based upon economic conditions and savings flows and is
currently 4% of the average daily balance of its net withdrawable savings
deposits and short-term borrowings. At December 31, 1999, First Federal's
liquidity ratio, defined as liquid assets as a percentage of net withdrawable
savings deposits and short-term borrowings, was 14.9%.
First Federal must maintain an adequate level of liquidity to ensure the
availability of sufficient funds to fund loan originations and deposit
withdrawals, to satisfy other financial commitments and to take advantage of
investment opportunities. First Federal invests excess funds in overnight
deposits and other short-term interest-bearing assets to provide liquidity to
meet these needs. At December 31, 1999, cash and cash equivalents totaled $7.8
million, or 6.5% of total assets. At December 31, 1999, First Federal had
commitments to fund loans of $2.7 million. At the same time, certificates of
deposit which are scheduled to mature in one year or less totaled $39.0 million.
Based upon historical experience, management believes the majority of maturing
certificates of deposit will remain with First Federal. In addition, management
of First Federal believes it can adjust the offering rates of certificates of
deposit to retain deposits in changing interest rate environments. If a
significant portion of these deposits are not retained by First Federal, First
Federal would be able to utilize Federal Home Loan Bank advances to fund deposit
withdrawals, which would result in an increase in interest expense to the extent
that the average rate paid on such advances exceeds the average rate paid on
deposits of similar duration.
Management believes its ability to generate funds internally will satisfy
its liquidity requirements. If First Federal requires funds beyond its ability
to generate them internally, it has the ability to borrow funds from the Federal
Home Loan Bank. At December 31, 1999, First Federal had approximately $15.0
million available to it under its borrowing arrangement with the Federal Home
Loan Bank. At December 31, 1999, First Federal had no borrowings from the
Federal Home Loan Bank.
Office of Thrift Supervision ("OTS") regulations require First Federal to
maintain specific amounts of capital. As of December 31, 1999, First Federal
exceeded its minimum capital requirements.
YEAR 2000 ISSUES
The year 2000 issue exists because many computer systems and applications
use two-digit date fields to designate a year. As the century date change
occurs, date-sensitive systems may recognize the year 2000 as 1900, or not at
all. This inability to recognize or properly treat the year 2000 may cause
erroneous results, ranging from system malfunctions to incorrect or incomplete
processing. As a user of computers, computer software and equipment utilizing
embedded microprocessors, failure to resolve year 2000 issues could cause
substantial disruption of First Federal's business and could have a material
adverse effect on First Federal's business, financial condition or results of
operations.
First Federal established a year 2000 committee in 1997 which is headed by
the Chief Operating Officer and includes all department heads. The committee
developed and implemented a comprehensive plan to make all information and
non-information technology assets year 2000 compliant. The committee provides
periodic reports to the Board of Directors in order to assist the directors in
their year 2000 readiness oversight role.
While there can be no assurances that First Federal's year 2000 plan has
effectively addressed the year 2000 issue, First Federal has not been notified,
and is unaware of, any vendor or service provider problems related to year 2000
and all systems have performed properly since January 1, 2000. Likewise, First
Federal is unaware of any year 2000 issues that have impaired the ability of
First Federal's borrowers to repay their debt.
10
<PAGE>
ITEM 3.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
First Bancorp does not maintain a trading account for any class of
financial instrument nor does it engage in hedging activities or purchase
high-risk derivative instruments. Furthermore, First Bancorp is not subject to
foreign currency exchange rate risk or commodity price risk.
First Bancorp uses interest rate sensitivity analysis to measure its
interest rate risk by computing changes in net portfolio value of its cash flows
from assets, liabilities and off-balance sheet items in the event of a range of
assumed changes in market interest rates. Net portfolio value represents the
market value of portfolio equity and is equal to the market value of assets
minus the market value of liabilities, with adjustments made for off-balance
sheet items. This analysis assesses the risk of loss in market risk sensitive
instruments in the event of a sudden and sustained 100 to 400 basis point
increase or decrease in market interest rates with no effect given to any steps
that management might take to counter the effect of that interest rate movement.
First Bancorp measures interest rate risk by modeling the change in net
portfolio value over a variety of interest rate scenarios.
Although First Bancorp has not yet completed its interest rate sensitivity
analysis for December 31, 1999, management anticipates there has been no
material change from the information disclosed in the Company's annual report to
shareholders' at June 30, 1999. The most recent interest rate sensitivity
analysis measures First Bancorp's interest rate risk at September 30, 1999.
There were no material changes in information in this analysis from the
information disclosed in the Company's annual report to shareholders' measuring
the Bank's interest rate risk at June 30, 1999.
11
<PAGE>
PART II. OTHER INFORMATION
ITEM 1.
LEGAL PROCEEDINGS.
Periodically, there have been various claims and lawsuits involving First
Federal, such as claims to enforce liens, condemnation proceedings on properties
in which First Federal holds security interests, claims involving the making and
servicing of real property loans and other issues incident to First Federal's
business. In the opinion of management, after consultation with First Federal's
legal counsel, no significant loss is expected from any of such pending claims
or lawsuits. First Federal is not a party to any material pending legal
proceedings.
ITEM 2.
CHANGES IN SECURITIES AND USE OF PROCEEDS.
None.
ITEM 3.
DEFAULTS UPON SENIOR SECURITIES.
None.
ITEM 4.
SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
The Annual Meeting of Stockholders of the Company was held on November 10,
1999. The results of the vote on the matters presented at the meeting is as
follows:
1. The following individuals were elected as directors, each for a
one-year term:
Vote For Vote Withheld
-------- -------------
Robert L. Clayton, Sr. 1,777,494 121,963
James L. Will, Jr. 1,777,694 121,763
The following individuals were elected as directors, each for a
two-year term:
Vote For Vote Withheld
-------- -------------
Herbert V. Dassel 1,777,494 121,963
Jerry Ziemer 1,777,544 121,913
The following individuals were elected as directors, each for a
three-year term:
Vote For Vote Withheld
-------- -------------
Frank E. Kern 1,759,574 139,883
Harold Duncan 1,777,494 121,963
2. The First Bancorp of Indiana, Inc. 1999 Stock-Based Incentive
Plan was approved by the stockholders by the following vote:
For 1,129,087; Against 255,475; Abstain 16,375
Broker non-votes totaled 498,520
12
<PAGE>
3. The appointment of Olive LLP as auditors for the Corporation for
the fiscal year ending June 30, 2000 was ratified by stockholders
by the following vote:
For 1,785,659 Against 106,190 Abstain 7,608
ITEM 5.
OTHER INFORMATION.
None.
ITEM 6.
EXHIBITS AND REPORTS ON FORM 8-K.
a. Exhibits
10 - First Bancorp of Indiana, Inc. Stock-Based Incentive Plan
27 - Financial Data Schedule
b. Forms 8-K
No Forms 8-K were filed during the quarter ended December 31, 1999.
13
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
FIRST BANCORP OF INDIANA, INC.
Dated: February 10, 2000 By: /s/ Harold Duncan
--------------------------------
Harold Duncan
President, Chief Executive Officer
and Chairman of the Board
(principal executive officer)
Dated: February 10, 2000 By: /s/ Christopher A. Bengert
--------------------------------
Christopher A. Bengert
Treasurer
(principal financial and accounting
officer)
14
<PAGE>
FIRST BANCORP OF INDIANA, INC.
1999 STOCK-BASED INCENTIVE PLAN
1. DEFINITIONS.
-----------
(a) "Affiliate" means any "parent corporation" or "subsidiary
corporation" of the Holding Company, as such terms are defined in Sections
424(e) and 424(f) of the Code.
(b) "Award" means, individually or collectively, a grant under the
Plan of Non-Statutory Stock Options, Incentive Stock Options and Stock Awards.
(c) "Award Agreement" means an agreement evidencing and setting
forth the terms of an Award.
(d) "Bank" means First Federal Savings Bank.
(e) "Board of Directors" means the board of directors of the
Holding Company.
(f) "Change in Control" of the Holding Company or the Bank means:
(i) an event of a nature that would be required to be reported in response to
Item 1(a) of the current report on Form 8-K, as in effect on the date hereof,
pursuant to Section 13 or 15(d) of the Exchange Act; or (ii) an event that
results in a change in control of the Bank or the Holding Company within the
meaning of the Home Owners' Loan Act of 1933, as amended, the Federal Deposit
Insurance Act, and the rules and regulations promulgated by the Office of Thrift
Supervision (or its predecessor agency), as in effect on the date hereof
(provided, that in applying the definition of change in control as set forth
under the rules and regulations of the OTS, the Board of Directors shall
substitute its judgment for that of the OTS); or (iii) without limitation such a
Change in Control shall be deemed to have occurred at such time as (A) any
"person" (as the term is used in Sections 13(d) and 14(d) of the Exchange Act)
is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the
Exchange Act), directly or indirectly, of voting securities of the Bank or the
Holding Company representing 20% or more of the Bank's or the Holding Company's
outstanding voting securities or the right to acquire such securities except for
any voting securities of the Bank purchased by the Holding Company and any
voting securities purchased by any employee benefit plan of the Holding Company
or its Subsidiaries, or (B) individuals who constitute the Board of Directors on
the date hereof (the "Incumbent Board") cease for any reason to constitute at
least a majority thereof, provided that any person becoming a director
subsequent to the date hereof whose election was approved by a vote of at least
three-quarters of the directors comprising the Incumbent Board, or whose
nomination for election by the Holding Company's stockholders was approved by a
Nominating Committee solely composed of members which are Incumbent Board
members, shall be, for purposes of this clause (B), considered as though he or
she were a member of the Incumbent Board, or (C) a plan of reorganization,
merger, consolidation, sale of all or substantially all the assets of the Bank
or the Holding Company or similar transaction occurs or is effectuated in which
the Bank or Holding Company is not the resulting entity; provided, however, that
such an event listed above will be deemed to have occurred or to have been
effectuated upon the receipt of all required federal regulatory approvals not
including the lapse of any statutory waiting periods, or (D) a proxy statement
has been distributed soliciting proxies from stockholders of the Holding
Company, by someone other than the current management of the Holding Company,
seeking stockholder approval of a plan of reorganization, merger or
consolidation of the Holding Company or Bank with one or more corporations as a
result of which the outstanding shares of the class of securities then subject
to such plan or transaction are exchanged for or converted into cash or property
or securities not issued by the Bank or the Holding Company, or (E) a tender
offer is made for 20% or more of the voting securities of the Bank or Holding
Company then outstanding by a person other than the Bank or Holding Company.
(g) "Code" means the Internal Revenue Code of 1986, as amended.
(h) "Committee" means the committee designated by the Board of
Directors, pursuant to Section 2 of the Plan, to administer the Plan.
<PAGE>
(i) "Common Stock" means the common stock of the Holding Company,
par value $.01 per share.
(j) "Date of Grant" means the effective date of an Award.
(k) "Disability" means any mental or physical condition with
respect to which the Participant qualifies for and receives benefits for under a
long-term disability plan of the Holding Company or an Affiliate, or in the
absence of such a long-term disability plan or coverage under such a plan,
"Disability" shall mean a physical or mental condition which, in the sole
discretion of the Committee, is reasonably expected to be of indefinite duration
and to substantially prevent the Participant from fulfilling his or her duties
or responsibilities to the Holding Company or an Affiliate.
(l) "Effective Date" means April 8, 2000, but only if, prior to
such date, the Plan is approved by the Holding Company's shareholders. The Plan
will be so approved if at an annual or special meeting of shareholders held
prior to such date a quorum is present and the majority of the votes cast at
such meeting by the holders of the Common Stock shall be cast in favor of its
approval.
(m) "Employee" means any person employed by the Holding Company or
an Affiliate. Directors who are employed by the Holding Company or an Affiliate
shall be considered Employees under the Plan.
(n) "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
(o) "Exercise Price" means the price at which a Participant may
purchase a share of Common Stock pursuant to an Option.
(p) "Fair Market Value" means the market price of Common Stock,
determined by the Committee as follows:
(i) If the Common Stock was traded on the date in
question on The Nasdaq Stock Market then the Fair
Market Value shall be equal to the closing price
reported for such date;
(ii) If the Common Stock was traded on a stock exchange on
the date in question, then the Fair Market Value
shall be equal to the closing price reported by the
applicable composite transactions report for such
date; and
(iii) If neither of the foregoing provisions is applicable,
then the Fair Market Value shall be determined by the
Committee in good faith on such basis as it deems
appropriate.
Whenever possible, the determination of Fair Market Value by the
Committee shall be based on the prices reported in The Wall Street Journal. The
Committee's determination of Fair Market Value shall be conclusive and binding
on all persons.
(q) "Holding Company" means First Bancorp of Indiana, Inc.
(r) "Incentive Stock Option" means a stock option granted to a
Participant, pursuant to Section 7 of the Plan, that is intended to meet the
requirements of Section 422 of the Code.
(s) "Non-Statutory Stock Option" means a stock option granted to a
Participant pursuant to the terms of the Plan but which is not intended to be
and is not identified as an Incentive Stock Option or a stock option granted
under the Plan which is intended to be and is identified as an Incentive Stock
Option but which does not meet the requirements of Section 422 of the Code.
2
<PAGE>
(t) "Option" means an Incentive Stock Option or Non-Statutory
Stock Option.
(u) "Outside Director" means a member of the board(s) of directors
of the Holding Company or an Affiliate who is not also an Employee of the
Holding Company or an Affiliate.
(v) "Participant" means any person who holds an outstanding Award.
(w) "Plan" means this First Bancorp of Indiana, Inc. 1999
Stock-Based Incentive Plan.
(x) "Retirement" means retirement from employment with the Holding
Company or an Affiliate in accordance with the then current retirement policies
of the Holding Company or Affiliate, as applicable. "Retirement" with respect to
an Outside Director means the termination of service from the board(s) of
directors of the Holding Company and any Affiliate following written notice to
such board(s) of directors of the Outside Director's intention to retire.
(y) "Stock Award" means an Award granted to a Participant pursuant
to Section 8 of the Plan.
(z) "Termination for Cause" means termination because of a
Participant's personal dishonesty, incompetence, willful misconduct, breach of
fiduciary duty involving personal profit, intentional failure to perform stated
duties, willful violation of any law, rule or regulation (other than traffic
violations or similar offenses) or material breach of any provision of any
employment agreement between the Holding Company and/or any subsidiary of the
Holding Company and a Participant.
(aa) "Trust" means a trust established by the Board of Directors in
connection with this Plan to hold Common Stock or other property for the
purposes set forth in the Plan.
(bb) "Trustee" means any person or entity approved by the Board of
Directors or its designee(s) to hold any of the Trust assets.
2. ADMINISTRATION.
--------------
(a) The Committee shall administer the Plan. The Committee shall
consist of two or more disinterested directors of the Holding Company, who shall
be appointed by the Board of Directors. A member of the Board of Directors shall
be deemed to be "disinterested" only if he or she satisfies such requirements as
the Securities and Exchange Commission may establish for non-employee directors
administering plans intended to qualify for exemption under Rule 16b-3 (or its
successor) under the Exchange Act.
(b) The Committee shall (i) select the Employees and Outside
Directors who are to receive Awards under the Plan, (ii) determine the type,
number, vesting requirements and other features and conditions of such Awards,
(iii) interpret the Plan and Award Agreements in all respects and (iv) make all
other decisions relating to the operation of the Plan. The Committee may adopt
such rules or guidelines as it deems appropriate to implement the Plan. The
Committee's determinations under the Plan shall be final and binding on all
persons.
3
<PAGE>
(c) Each Award shall be evidenced by a written agreement ("Award
Agreement") containing such provisions as may be required by the Plan and
otherwise approved by the Committee. Each Award Agreement shall constitute a
binding contract between the Holding Company or an Affiliate and the
Participant, and every Participant, upon acceptance of an Award Agreement, shall
be bound by the terms and restrictions of the Plan and the Award Agreement. The
terms of each Award Agreement shall be in accordance with the Plan, but each
Award Agreement may include any additional provisions and restrictions
determined by the Committee, in its discretion, provided that such additional
provisions and restrictions are not inconsistent with the terms of the Plan. In
particular and at a minimum, the Committee shall set forth in each Award
Agreement: (i) the type of Award granted; (ii) the Exercise Price of any Option;
(iii) the number of shares subject to the Award; (iv) the expiration date of the
Award; (v) the manner, time, and rate (cumulative or otherwise) of exercise or
vesting of such Award; and (vi) the restrictions, if any, placed upon such
Award, or upon shares which may be issued upon exercise of such Award. The
Chairman of the Committee and such other directors and officers as shall be
designated by the Committee is hereby authorized to execute Award Agreements on
behalf of the Company or an Affiliate and to cause them to be delivered to the
recipients of Awards.
(d) The Committee may delegate all authority for: (i) the
determination of forms of payment to be made by or received by the Plan and (ii)
the execution of any Award Agreement.
3. TYPES OF AWARDS.
---------------
The following Awards may be granted under the Plan:
(a) Non-Statutory Stock Options.
(b) Incentive Stock Options.
(c) Stock Awards.
4. STOCK SUBJECT TO THE PLAN.
-------------------------
Subject to adjustment as provided in Section 13 of the Plan, the number
of shares reserved for Awards under the Plan is 318,136. Subject to adjustment
as provided in Section 13 of the Plan, the number of shares reserved hereby for
purchase pursuant to the exercise of Options granted under the Plan is 227,240.
The number of the shares reserved for Stock Awards is 90,896. The shares of
Common Stock issued under the Plan may be either authorized but unissued shares
or authorized shares previously issued and acquired or reacquired by the Trustee
or the Holding Company, respectively. To the extent that Options and Stock
Awards are granted under the Plan, the shares underlying such Awards will be
unavailable for any other use including future grants under the Plan except
that, to the extent that Stock Awards or Options terminate, expire or are
forfeited without having vested or without having been exercised, new Awards may
be made with respect to these shares.
5. ELIGIBILITY.
-----------
Subject to the terms of the Plan, all Employees and Outside Directors
shall be eligible to receive Awards under the Plan. In addition, the Committee
may grant eligibility to consultants and advisors of the Holding Company or an
Affiliate, as it sees fit.
6. NON-STATUTORY STOCK OPTIONS.
---------------------------
The Committee may, subject to the limitations of the Plan and the
availability of shares of Common Stock reserved but not previously awarded under
the Plan, grant Non-Statutory Stock Options to eligible individuals upon such
terms and conditions as it may determine to the extent such terms and conditions
are consistent with the following provisions:
(a) Exercise Price. The Committee shall determine the Exercise
Price of each Non-Statutory Stock Option. However, the Exercise Price shall not
be less than 100% of the Fair Market Value of the Common Stock on the Date of
Grant.
(b) Terms of Non-statutory Stock Options. The Committee shall
determine the term during which a Participant may exercise a Non-Statutory Stock
Option, but in no event may a Participant exercise a Non-Statutory Stock Option,
in whole or in part, more than ten (10) years from the Date of Grant. The
Committee shall also determine the date on which each Non-Statutory Stock
Option, or any part thereof, first
4
<PAGE>
becomes exercisable and any terms or conditions a Participant must satisfy in
order to exercise each Non-Statutory Stock Option. The shares of Common Stock
underlying each Non-Statutory Stock Option may be purchased in whole or in part
by the Participant at any time during the term of such Non-Statutory Stock
Option, or any portion thereof, once the Non-Statutory Stock Option becomes
exercisable.
(c) Non-Transferability. Unless otherwise determined by the
Committee in accordance with this Section 6(c), a Participant may not transfer,
assign, hypothecate, or dispose of in any manner, other than by will or the laws
of intestate succession, a Non-Statutory Stock Option. The Committee may,
however, in its sole discretion, permit transferability or assignment of a
Non-Statutory Stock Option if such transfer or assignment is, in its sole
determination, for valid estate planning purposes and such transfer or
assignment is permitted under the Code and Rule 16b-3 under the Exchange Act.
For purposes of this Section 6(c), a transfer for valid estate planning purposes
includes, but is not limited to: (a) a transfer to a revocable intervivos trust
as to which the Participant is both the settlor and trustee, or (b) a transfer
for no consideration to: (i) any member of the Participant's Immediate Family,
(ii) any trust solely for the benefit of members of the Participant's Immediate
Family, (iii) any partnership whose only partners are members of the
Participant's Immediate Family, and (iv) any limited liability corporation or
corporate entity whose only members or equity owners are members of the
Participant's Immediate Family. For purposes of this Section 6(c), "Immediate
Family" includes, but is not necessarily limited to, a Participant's parents,
grandparents, spouse, children, grandchildren, siblings (including half bothers
and sisters), and individuals who are family members by adoption. Nothing
contained in this Section 6(c) shall be construed to require the Committee to
give its approval to any transfer or assignment of any Non-Statutory Stock
Option or portion thereof, and approval to transfer or assign any Non-Statutory
Stock Option or portion thereof does not mean that such approval will be given
with respect to any other Non-Statutory Stock Option or portion thereof. The
transferee or assignee of any Non-Statutory Stock Option shall be subject to all
of the terms and conditions applicable to such Non-Statutory Stock Option
immediately prior to the transfer or assignment and shall be subject to any
other conditions proscribed by the Committee with respect to such Non-Statutory
Stock Option.
(d) Termination of Employment or Service (General). Unless
otherwise determined by the Committee, upon the termination of a Participant's
employment or other service for any reason other than Retirement, Disability or
death, a Change in Control, or Termination for Cause, the Participant may
exercise only those Non-Statutory Stock Options that were immediately
exercisable by the Participant at the date of such termination and only for a
period of three (3) months following the date of such termination, or, if
sooner, until the expiration of the term of the Option.
(e) Termination of Employment or Service (Retirement). Unless
otherwise determined by the Committee, in the event of a Participant's
Retirement, the Participant may exercise only those Non-Statutory Stock Options
that were immediately exercisable by the Participant at the date of Retirement
and only for a period of one (1) year from the date of Retirement or, if sooner,
until the expiration of the term of the Option.
(f) Termination of Employment or Service (Disability or Death).
Unless otherwise determined by the Committee, in the event of the termination of
a Participant's employment or other service due to Disability or death, all
Non-Statutory Stock Options held by such Participant shall immediately become
exercisable and remain exercisable for a period one (1) year following the date
of such termination, or, if sooner, until the expiration of the term of the
Option.
(g) Termination of Employment or Service (Termination for Cause).
Unless otherwise determined by the Committee, in the event of a Participant's
Termination for Cause, all rights with respect to the Participant's
Non-Statutory Stock Options shall expire immediately upon the effective date of
such Termination for Cause.
(h) Acceleration Upon a Change in Control. In the event of a
Change in Control all Non-Statutory Stock Options held by a Participant as of
the date of the Change in Control shall immediately become exercisable and shall
remain exercisable until the expiration of the term of the Non-Statutory Stock
Options.
5
<PAGE>
(i) Payment. Payment due to a Participant upon the exercise of a
Non-Statutory Stock Option shall be made in the form of shares of Common Stock.
7. INCENTIVE STOCK OPTIONS.
-----------------------
The Committee may, subject to the limitations of the Plan and the
availability of shares of Common Stock reserved but unawarded under this Plan,
grant Incentive Stock Options to an Employee upon such terms and conditions as
it may determine to the extent such terms and conditions are consistent with the
following provisions:
(a) Exercise Price. The Committee shall determine the Exercise
Price of each Incentive Stock Option. However, the Exercise Price shall not be
less than 100% of the Fair Market Value of the Common Stock on the Date of
Grant; provided, however, that if at the time an Incentive Stock Option is
granted, the Employee owns or is treated as owning, for purposes of Section 422
of the Code, Common Stock representing more than 10% of the total combined
voting securities of the Holding Company ("10% Owner"), the Exercise Price shall
not be less than 110% of the Fair Market Value of the Common Stock on the Date
of Grant.
(b) Amounts of Incentive Stock Options. To the extent the
aggregate Fair Market Value of shares of Common Stock with respect to which
Incentive Stock Options that are exercisable for the first time by an Employee
during any calendar year under the Plan and any other stock option plan of the
Holding Company or an Affiliate exceeds $100,000, or such higher value as may be
permitted under Section 422 of the Code, such Options in excess of such limit
shall be treated as Non-Statutory Stock Options. Fair Market Value shall be
determined as of the Date of Grant with respect to each such Incentive Stock
Option.
(c) Terms of Incentive Stock Options. The Committee shall
determine the term during which a Participant may exercise an Incentive Stock
Option, but in no event may a Participant exercise an Incentive Stock Option, in
whole or in part, more than ten (10) years from the Date of Grant; provided,
however, that if at the time an Incentive Stock Option is granted to an Employee
who is a 10% Owner, the Incentive Stock Option granted to such Employee shall
not be exercisable after the expiration of five (5) years from the Date of
Grant. The Committee shall also determine the date on which each Incentive Stock
Option, or any part thereof, first becomes exercisable and any terms or
conditions a Participant must satisfy in order to exercise each Incentive Stock
Option. The shares of Common Stock underlying each Incentive Stock Option may be
purchased in whole or in part at any time during the term of such Incentive
Stock Option after such Option becomes exercisable.
(d) Non-Transferability. No Incentive Stock Option shall be
transferable except by will or the laws of descent and distribution and is
exercisable, during his or her lifetime, only by the Employee to whom the
Committee grants the Incentive Stock Option. The designation of a beneficiary
does not constitute a transfer of an Incentive Stock Option.
(e) Termination of Employment (General). Unless otherwise
determined by the Committee, upon the termination of a Participant's employment
or other service for any reason other than Retirement, Disability or death, a
Change in Control, or Termination for Cause, the Participant may exercise only
those Incentive Stock Options that were immediately exercisable by the
Participant at the date of such termination and only for a period of three (3)
months following the date of such termination, or, if sooner, until the
expiration of the term of the Option.
(f) Termination of Employment (Retirement). Unless otherwise
determined by the Committee, in the event of a Participant's Retirement, the
Participant may exercise only those Incentive Stock Options that were
immediately exercisable by the Participant at the date of Retirement and only
for a period of one (1) year from the date of Retirement, or, if sooner, until
the expiration of the term of the Option. Any Option originally designated as an
Incentive Stock Option shall be treated as a Non-Statutory Stock Option to the
extent the Option does not
6
<PAGE>
otherwise qualify as an Incentive Stock Option pursuant to Section 422 of the
Code.
(g) Termination of Employment (Disability or Death). Unless
otherwise determined by the Committee, in the event of the termination of a
Participant's employment or other service due to Disability or death, all
Incentive Stock Options held by such Participant shall immediately become
exercisable and remain exercisable for a period one (1) year following the date
of such termination, or, if sooner, until the expiration of the term of the
Option.
(h) Termination of Employment (Termination for Cause). Unless
otherwise determined by the Committee, in the event of an Employee's Termination
for Cause, all rights under such Employee's Incentive Stock Options shall expire
immediately upon the effective date of such Termination for Cause.
(i) Acceleration Upon a Change in Control. In the event of a
Change in Control all Incentive Stock Options held by a Participant as of the
date of the Change in Control shall immediately become exercisable and shall
remain exercisable until the expiration of the term of the Incentive Stock
Options. Any Option originally designated as an Incentive Stock Option shall be
treated as a Non-Statutory Stock Option to the extent the Option does not
otherwise qualify as an Incentive Stock Option pursuant to Section 422 of the
Code.
(j) Payment. Payment due to a Participant upon the exercise of an
Incentive Stock Option shall be made in the form of shares of Common Stock.
(k) Disqualifying Dispositions. Each Award Agreement with respect
to an Incentive Stock Option shall require the Participant to notify the
Committee of any disposition of shares of Common Stock issued pursuant to the
exercise of such Option under the circumstances described in Section 421(b) of
the Code (relating to certain disqualifying dispositions) within 10 days of such
disposition.
8. STOCK AWARDS.
------------
The Committee may make grants of Stock Awards, which shall consist of
the grant of some number of shares of Common Stock, to a Participant upon such
terms and conditions as it may determine to the extent such terms and conditions
are consistent with the following provisions:
(a) Grants of the Stock Awards. Stock Awards may only be made in
whole shares of Common Stock. Stock Awards may only be granted from shares
reserved under the Plan and available for award at the time the Stock Award is
made to the Participant.
(b) Terms of the Stock Awards. The Committee shall determine the
dates on which Stock Awards granted to a Participant shall vest and any terms or
conditions which must be satisfied prior to the vesting of any Stock Award or
portion thereof. Any such terms or conditions shall be determined by the
Committee as of the Date of Grant.
(c) Termination of Employment or Service (General). Unless
otherwise determined by the Committee, upon the termination of a Participant's
employment or service for any reason other than Retirement, Disability or death,
a Change in Control, or Termination for Cause, any Stock Awards in which the
Participant has not become vested as of the date of such termination shall be
forfeited and any rights the Participant had to such Stock Awards shall become
null and void.
(d) Termination of Employment or Service (Retirement). Unless
otherwise determined by the Committee, in the event of a Participant's
Retirement, any Stock Awards in which the Participant has not become vested as
of the date of Retirement shall be forfeited and any rights the Participant had
to such unvested Stock Awards shall become null and void.
7
<PAGE>
(e) Termination of Employment or Service (Disability or Death).
Unless otherwise determined by the Committee, in the event of a termination of
the Participant's service due to Disability or death all unvested Stock Awards
held by such Participant shall immediately vest as of the date of such
termination.
(f) Termination of Employment or Service (Termination for Cause).
Unless otherwise determined by the Committee, in the event of the Participant's
Termination for Cause, all Stock Awards in which the Participant had not become
vested as of the effective date of such Termination for Cause shall be forfeited
and any rights such Participant had to such unvested Stock Awards shall become
null and void.
(g) Acceleration Upon a Change in Control. In the event of a
Change in Control all unvested Stock Awards held by a Participant shall
immediately vest.
(h) Issuance of Certificates. Unless otherwise held in Trust and
registered in the name of the Trustee, reasonably promptly after the Date of
Grant with respect to shares of Common Stock pursuant to a Stock Award, the
Holding Company shall cause to be issued a stock certificate, registered in the
name of the Participant to whom such Stock Award was granted, evidencing such
shares; provided, that the Holding Company shall not cause such a stock
certificate to be issued unless it has received a stock power duly endorsed in
blank with respect to such shares. Each such stock certificate shall bear the
following legend:
"The transferability of this certificate and the shares of
stock represented hereby are subject to the restrictions,
terms and conditions (including forfeiture provisions and
restrictions against transfer) contained in the First Bancorp
of Indiana, Inc. 1999 Stock-Based Incentive Plan and Award
Agreement entered into between the registered owner of such
shares and First Bancorp of Indiana, Inc. or its Affiliates. A
copy of the Plan and Award Agreement is on file in the office
of the Corporate Secretary of First Bancorp of Indiana, Inc.
located at 2200 West Franklin Street, Evansville, Indiana
47712.
Such legend shall not be removed until the Participant becomes vested in such
shares pursuant to the terms of the Plan and Award Agreement. Each certificate
issued pursuant to this Section 8(h), in connection with a Stock Award, shall be
held by the Holding Company or its Affiliates, unless the Committee determines
otherwise.
(i) Non-Transferability. Except to the extent permitted by the
Code, the rules promulgated under Section 16(b) of the Exchange Act or any
successor statutes or rules:
(i) The recipient of a Stock Award shall not sell,
transfer, assign, pledge, or otherwise encumber
shares subject to the Stock Award until full vesting
of such shares has occurred. For purposes of this
section, the separation of beneficial ownership and
legal title through the use of any "swap" transaction
is deemed to be a prohibited encumbrance.
(ii) Unless determined otherwise by the Committee and
except in the event of the Participant's death or
pursuant to a domestic relations order, a Stock Award
is not transferable and may be earned in his or her
lifetime only by the Participant to whom it is
granted. Upon the death of a Participant, a Stock
Award is transferable by will or the laws of descent
and distribution. The designation of a beneficiary
shall not constitute a transfer.
(iii) If a recipient of a Stock Award is subject to the
provisions of Section 16 of the Exchange Act, shares
of Common Stock subject to such Stock Award may not,
without the written consent of the Committee (which
consent may be given in the Award
8
<PAGE>
Agreement), be sold or otherwise disposed of within
six (6) months following the date of grant of the
Stock Award.
(j) Accrual of Dividends. To the extent Stock Awards are held in
Trust and registered in the name of the Trustee, unless otherwise specified by
the Trust agreement, whenever shares of Common Stock underlying a Stock Award
are distributed to a Participant or beneficiary thereof under the Plan, such
Participant or beneficiary shall also be entitled to receive, with respect to
each such share distributed, a payment equal to any cash dividends and the
number of shares of Common Stock equal to any stock dividends, declared and paid
with respect to a share of the Common Stock if the record date for determining
shareholders entitled to receive such dividends falls between the date the
relevant Stock Award was granted and the date the relevant Stock Award or
installment thereof is issued. There shall also be distributed an appropriate
amount of net earnings, if any, of the Trust with respect to any dividends paid
out on the shares related to the Stock Award.
(k) Voting of Stock Awards. After a Stock Award has been granted
but for which the shares covered by such Stock Award have not yet been vested,
earned and distributed to the Participant pursuant to the Plan, the Participant
shall be entitled to vote or to direct the Trustee to vote, as the case may be,
such shares of Common Stock which the Stock Award covers subject to the rules
and procedures adopted by the Committee for this purpose and in a manner
consistent with the Trust agreement.
(l) Payment. Payment due to a Participant upon the redemption of a
Stock Award shall be made in the form of shares of Common Stock.
9. DEFERRED PAYMENTS.
-----------------
The Committee, in its discretion, may permit a Participant to elect to
defer receipt of all or any part of any cash or stock payment under the Plan, or
the Committee may determine to defer receipt by some or all Participants, of all
or part of any such payment. The Committee shall determine the terms and
conditions of any such deferral, including the period of deferral, the manner of
deferral, and the method for measuring appreciation on deferred amounts until
their payout.
10. METHOD OF EXERCISE OF OPTIONS.
-----------------------------
Subject to any applicable Award Agreement, any Option may be exercised
by the Participant in whole or in part at such time or times, and the
Participant may make payment of the Exercise Price in such form or forms
permitted by the Committee, including, without limitation, payment by delivery
of cash, Common Stock or other consideration (including, where permitted by law
and the Committee, Awards) having a Fair Market Value on the day immediately
preceding the exercise date equal to the total Exercise Price, or by any
combination of cash, shares of Common Stock and other consideration, including
exercise by means of a cashless exercise arrangement with a qualifying
broker-dealer, as the Committee may specify in the applicable Award Agreement.
11. RIGHTS OF PARTICIPANTS.
----------------------
No Participant shall have any rights as a shareholder with respect to
any shares of Common Stock covered by an Option until the date of issuance of a
stock certificate for such Common Stock. Nothing contained herein or in any
Award Agreement confers on any person any right to continue in the employ or
service of the Holding Company or an Affiliate or interferes in any way with the
right of the Holding Company or an Affiliate to terminate a Participant's
services.
9
<PAGE>
12. DESIGNATION OF BENEFICIARY.
--------------------------
A Participant may, with the consent of the Committee, designate a
person or persons to receive, in the event of death, any Award to which the
Participant would then be entitled. Such designation will be made upon forms
supplied by and delivered to the Holding Company and may be revoked in writing.
If a Participant fails effectively to designate a beneficiary, then the
Participant's estate will be deemed to be the beneficiary.
13. DILUTION AND OTHER ADJUSTMENTS.
------------------------------
In the event of any change in the outstanding shares of Common Stock by
reason of any stock dividend or split, recapitalization, merger, consolidation,
spin-off, reorganization, combination or exchange of shares, or other similar
corporate change, or other increase or decrease in such shares without receipt
or payment of consideration by the Holding Company, or in the event an
extraordinary capital distribution is made, the Committee may make such
adjustments to previously granted Awards, to prevent dilution, diminution, or
enlargement of the rights of the Participant, including any or all of the
following:
(a) adjustments in the aggregate number or kind of shares of
Common Stock or other securities that may underlie future
Awards under the Plan;
(b) adjustments in the aggregate number or kind of shares of
Common Stock or other securities underlying Awards already
made under the Plan;
(c) adjustments in the Exercise Price of outstanding Incentive
and/or Non-Statutory Stock Options.
No such adjustments may, however, materially change the value of benefits
available to a Participant under a previously granted Award. All Awards under
this Plan shall be binding upon any successors or assigns of the Holding
Company. Notwithstanding the above, in the event of an extraordinary capital
distribution, any adjustment under this Section 13 shall be subject to required
approval by the Office of Thrift Supervision.
14. TAXES.
-----
(a) Whenever under this Plan, cash or shares of Common Stock are
to be delivered upon exercise or payment of an Award or any other event with
respect to rights and benefits hereunder, the Committee shall be entitled to
require as a condition of delivery (i) that the Participant remit an amount
sufficient to satisfy all federal, state, and local withholding tax requirements
related thereto, (ii) that the withholding of such sums come from compensation
otherwise due to the Participant or from any shares of Common Stock due to the
Participant under this Plan or (iii) any combination of the foregoing; provided,
however, that no amount shall be withheld from any cash payment or shares of
Common Stock relating to an Award which was transferred by the Participant in
accordance with this Plan. Furthermore, Participants may direct the Committee to
instruct the Trustee to sell shares of Common Stock to be delivered upon the
payment of an Award to satisfy tax obligations.
(b) If any disqualifying disposition described in Section 7(k) is
made with respect to shares of Common Stock acquired under an Incentive Stock
Option granted pursuant to this Plan, or any transfer described in Section 6(c)
is made, or any election described in Section 15 is made, then the person making
such disqualifying disposition, transfer, or election shall remit to the Holding
Company or its Affiliates an amount sufficient to satisfy all federal, state,
and local withholding taxes thereby incurred; provided that, in lieu of or in
addition to the foregoing, the Holding Company or its Affiliates shall have the
right to withhold such sums from compensation otherwise due to the Participant,
or, except in the case of any transfer pursuant to Section 6(c), from any shares
of Common Stock due to the Participant under this Plan.
10
<PAGE>
15. NOTIFICATION UNDER SECTION 83(b).
--------------------------------
The Committee may, on the Date of Grant or any later date, prohibit a
Participant from making the election described below. If the Committee has not
prohibited such Participant from making such election, and the Participant
shall, in connection with the exercise of any Option, or the grant of any Stock
Award, make the election permitted under Section 83(b) of the Code, such
Participant shall notify the Committee of such election within 10 days of filing
notice of the election with the Internal Revenue Service, in addition to any
filing and notification required pursuant to regulations issued under the
authority of Section 83(b) of the Code.
16. AMENDMENT OF THE PLAN AND AWARDS.
--------------------------------
(a) Except as provided in paragraph (c) of this Section 16, the
Board of Directors may at any time, and from time to time, modify or amend the
Plan in any respect, prospectively or retroactively; provided, however, that
provisions governing grants of Incentive Stock Options shall be submitted for
shareholder approval to the extent required by law, regulation or otherwise.
Failure to ratify or approve amendments or modifications by shareholders shall
be effective only as to the specific amendment or modification requiring such
ratification or approval. Other provisions of this Plan will remain in full
force and effect. No such termination, modification or amendment may adversely
affect the rights of a Participant under an outstanding Award without the
written permission of such Participant.
(b) Except as provided in paragraph (c) of this Section 16, the
Committee may amend any Award Agreement, prospectively or retroactively;
provided, however, that no such amendment shall adversely affect the rights of
any Participant under an outstanding Award without the written consent of such
Participant.
(c) In no event shall the Board of Directors amend the Plan or
shall the Committee amend an Award Agreement in any manner that has the effect
of:
(i) Allowing any Option to be granted with an Exercise
Price below the Fair Market Value of the Common Stock
on the Date of Grant.
(ii) Allowing the Exercise Price of any Option previously
granted under the Plan to be reduced subsequent to
the Date of Award.
(d) Notwithstanding anything in this Plan or any Award Agreement
to the contrary, if any Award or right under this Plan would, in the opinion of
the Holding Company's accountants, cause a transaction to be ineligible for
pooling of interest accounting that would, but for such Award or right, be
eligible for such accounting treatment, the Committee, at its discretion, may
modify, adjust, eliminate or terminate the Award or right so that pooling of
interest accounting is available.
17. EFFECTIVE DATE OF PLAN.
----------------------
The Plan shall become effective on April 8, 2000, but only if, prior to
such date, the Plan is approved by the Holding Company's shareholders. The Plan
will be so approved if at an annual or special meeting of shareholders held
prior to such date a quorum is present and the majority of the votes cast at
such meeting by the holders of the Common Stock shall be cast in favor of its
approval. If the Plan is not approved by shareholders in accordance with the
regulations of the Internal Revenue Service, the Plan shall remain in full force
and effect, and any Incentive Stock Options granted under the Plan shall be
deemed to be Non-Statutory Stock Options.
11
<PAGE>
18. TERMINATION OF THE PLAN.
-----------------------
The right to grant Awards under the Plan will terminate upon the
earlier of: (i) ten (10) years after the Effective Date; (ii) the issuance of a
number of shares of Common Stock pursuant to the exercise of Options or the
distribution of Stock Awards is equivalent to the maximum number of shares
reserved under the Plan as set forth in Section 4 hereof. The Board of Directors
has the right to suspend or terminate the Plan at any time, provided that no
such action will, without the consent of a Participant, adversely affect a
Participant's vested rights under a previously granted Award.
19. APPLICABLE LAW.
--------------
The Plan will be administered in accordance with the laws of the State
of Indiana to the extent not pre-empted by applicable federal law.
20. TREATMENT OF UNVESTED, UNEXERCISED, OR NON-EXERCISABLE AWARDS UPON A
--------------------------------------------------------------------
CHANGE IN CONTROL.
------------------
In the event of a Change in Control where the Holding Company or the
Bank is not the surviving entity, the Board of Directors of the Holding Company
and/or the Bank, as applicable, shall require that the successor entity take one
of the following actions with respect to all Awards held by Participants at the
date of the Change in Control:
(a) Assume the Awards with the same terms and conditions as
granted to the Participant under this Plan; or
(b) Replace the Awards with comparable Awards, subject to the same
or more favorable terms and conditions as the Award granted to the Participant
under this Plan, whereby the Participant will be granted common stock or the
option to purchase common stock of the successor entity; or
(c) Replace the Awards with an immediate cash payment of
equivalent value.
12
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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<PERIOD-END> DEC-31-1999
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