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 March 31, 2000
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 (I.R.S. Employer
incorporation or organization) Identification No.)
2200 West Franklin Street, Evansville, Indiana 47712
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(812) 423-3196
- --------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
Not Applicable
- --------------------------------------------------------------------------------
(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: 2,132,300 shares of common
stock, par value $0.01 per share, were outstanding as of April 30, 2000.
<PAGE>
FIRST BANCORP OF INDIANA, INC. AND SUBSIDIARY
FORM 10-Q
FOR THE QUARTER ENDED MARCH 31, 2000
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 12
Item 6. Exhibits and Reports on Form 8-K 12
<PAGE>
<TABLE>
<CAPTION>
FIRST BANCORP OF INDIANA, INC.
AND SUBSIDIARY
Consolidated Balance Sheet
March 31, 2000 June 30, 1999
------------- -------------
(Unaudited)
<S> <C> <C>
Assets
Cash and due from banks $ 1,115,426 $ 1,105,134
Interest-bearing demand deposits 5,122,955 15,567,989
Federal funds sold 1,040,000 25,000
------------- -------------
Total cash and cash equivalents 7,278,381 16,698,123
Interest-bearing deposits 1,386,000 2,079,000
Investment securities
Available for sale 1,440,040 2,972,581
Held to maturity 47,750,609 40,003,256
------------- -------------
Total investment securities 49,190,649 42,975,837
Loans 63,219,023 56,582,900
Allowance for loan losses (366,148) (274,000)
------------- -------------
Net loans 62,852,875 56,308,900
Premises and equipment 1,550,766 1,508,570
Federal Home Loan Bank stock 727,400 727,400
Other assets 4,164,820 4,502,175
------------- -------------
Total assets $ 127,150,891 $ 124,800,005
============= =============
Liabilities
Deposits
Non-interest bearing $ 491,943 $ 419,865
Interest bearing 84,506,723 86,302,246
------------- -------------
Total deposits 84,998,666 86,722,111
Borrowings 5,000,000 0
Advances by borrowers for
taxes and insurance 563,092 381,226
Other liabilities 1,586,203 1,168,668
------------- -------------
Total liabilities 92,147,961 88,272,005
------------- -------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
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 - 2,272,400 shares 22,724 22,724
Additional paid-in capital 21,844,604 21,831,518
Retained earnings 16,113,747 15,473,935
Accumulated other comprehensive income 1,701 25,263
------------- -------------
37,982,776 37,353,440
Less:
Unallocated employee stock ownership plan shares (1,662,457) (825,440)
Treasury stock (1,317,389) 0
------------- -------------
Total stockholders' equity 35,002,930 36,528,000
------------- -------------
Total liabilities and stockholders' equity $ 127,150,891 $ 124,800,005
============= =============
</TABLE>
See notes to unaudited consolidated financial statements
2
<PAGE>
<TABLE>
<CAPTION>
FIRST BANCORP OF INDIANA, INC.
AND SUBSIDIARY
Consolidated Statement of Income
For the For the
Three Months Ended Nine Months Ended
March 31, March 31,
------------------------- -------------------------
2000 1999 2000 1999
---------- ---------- ---------- ----------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Interest Income
Loans receivable $1,263,324 $ 833,976 $3,650,957 $2,376,934
Investment securities 790,930 790,382 2,207,904 2,424,435
Deposits with financial institutions 122,895 155,924 368,310 597,372
Federal funds sold 9,332 7,662 26,996 25,600
Other interest and dividend income 14,469 14,450 43,804 43,841
---------- ---------- ---------- ----------
Total interest income 2,200,950 1,802,394 6,297,971 5,468,182
---------- ---------- ---------- ----------
Interest Expense
Deposits 987,880 1,069,327 2,952,073 3,306,073
Borrowings 75,425 44,120 75,425 148,040
Interest on stock subscription escrow 0 13,661 0 13,661
Other 17,280 14,425 46,114 38,210
---------- ---------- ---------- ----------
Total interest expense 1,080,585 1,141,533 3,073,612 3,505,984
---------- ---------- ---------- ----------
Net Interest Income 1,120,365 660,861 3,224,359 1,962,198
---------- ---------- ---------- ----------
Provision for Loan Losses 45,000 11,000 139,342 11,000
---------- ---------- ---------- ----------
Net Interest Income after Provision 1,075,365 649,861 3,085,017 1,951,198
Noninterest Income
Increase in cash surrrender values
of life insurance 23,690 26,600 71,786 73,268
Other Income 158,371 50,294 555,657 159,612
---------- ---------- ---------- ----------
Total noninterest income 182,061 76,894 627,443 232,880
---------- ---------- ---------- ----------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Noninterest Expense
Salaries and employee benefits 468,493 327,705 1,404,586 969,043
Net occupancy expense 40,438 48,814 134,507 135,424
Equipment expense 50,875 44,328 148,181 101,395
Deposit insurance expense 4,537 13,927 33,597 41,563
Data processing fees 43,048 30,030 95,182 82,831
Other expense 215,549 143,331 721,032 373,940
---------- ---------- ---------- ----------
Total noninterest expense 822,940 608,135 2,537,085 1,704,196
---------- ---------- ---------- ----------
Income Before Income Tax 434,486 118,620 1,175,375 479,882
Income tax expense 147,698 21,821 388,159 117,032
---------- ---------- ---------- ----------
Net Income $ 286,788 $ 96,799 $ 787,216 $ 362,850
========== ========== ========== ==========
Basic earnings per share $ 0.14 N/A $ 0.38 N/A
Diluted earnings per share $ 0.14 N/A $ 0.38 N/A
Weighted average number shares outstanding - Basic 2,014,882 0 2,083,044 0
Weighted average number shares outstanding - Diluted 2,014,882 0 2,083,044 0
</TABLE>
See notes to unaudited consolidated financial statements
2
<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
=====================================
Net income $286,788
Other comprehensive income,
net of tax--Unrealized losses on
securities (unaudited) (5,887)
--------
Comprehensive income (unaudited) $280,901
========
Employee Stock Ownership Plan
shares allocated (3,640)
Cash dividends paid ($0.07 per share)
Treasury shares purchased
-------------------------------------
Balances, March 31, 2000 (unaudited) 2,272,400 $22,724 $21,844,604
=====================================
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Accumulated
Other Unallocated
Retained Comprehensive ESOP Treasury
Earnings Income Shares Shares Total
-------- ------ ------ ------ -----
<S> <C> <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
=======================================================================
Net income 286,788 286,788
Other comprehensive income,
net of tax--Unrealized losses on
securities (unaudited) (5,887) (5,887)
Comprehensive income (unaudited)
Employee Stock Ownership Plan
shares allocated 38,648 35,008
Cash dividends paid ($0.07 per share) (147,404) (147,404)
Treasury shares purchased (1,317,389) (1,317,389)
-----------------------------------------------------------------------
Balances, March 31, 2000 (unaudited) $16,113,747 $1,701 ($1,662,457) ($1,317,389) $35,002,930
=======================================================================
</TABLE>
See notes to unaudited consolidated financial statements
3
<PAGE>
<TABLE>
<CAPTION>
FIRST BANCORP OF INDIANA
AND SUBSIDIARY
Consolidated Statement of Cash Flows
Nine Months Ended
March 31,
------------------------------
2000 1999
------------ ------------
(Unaudited)
<S> <C> <C>
Net Cash Provided (Used) by Operating Activities $ 1,847,039 ($ 95,880)
Investing Activities
Net change in interest-bearing deposits 693,000 298,000
Proceeds from maturities of securities available for sale 1,495,610 999,253
Purchases of securities held to maturity (27,259,587) (25,422,328)
Proceeds from maturities of securities held to maturity 19,473,581 33,294,915
Net change in loans (6,683,317) (12,380,566)
Net (Purchases) or Dispositions of premises and equipment (20,101) (106,215)
------------ ------------
Net cash used by investing activities (12,300,814) (3,316,941)
------------ ------------
Financing Activities
Net change in
Non-interest bearing, interest-bearing demand
and savings deposits (514,892) 7,354,673
Certificates of deposit (1,208,553) (1,996,552)
Advances by borrows for taxes and insurance 181,866 256,569
Stock subscription escrow 0 17,333,245
Increase (repayment of) long-term debt 5,000,000 (3,645,000)
Refunded conversion expenses 20,816 0
Purchase of ESOP shares (980,411) 0
Purchase treasury shares (1,317,389) 0
Dividends paid (147,404) 0
------------ ------------
Net cash provided (used) by financing activities 1,034,033 19,302,935
------------ ------------
Net Change in Cash and Cash Equivalents (9,419,742) 15,890,114
Cash and Cash Equivalents, Beginning of Period 16,698,123 11,689,069
------------ ------------
Cash and Cash Equivalents, End of Period $ 7,278,381 $ 27,579,183
============ ============
Additional Cash Flow Information
Interest paid 2,610,536 2,994,628
Income tax paid 557,319 105,000
</TABLE>
See notes to unaudited consolidated financial statements
4
<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 nine months ended March 31, 2000 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 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. 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. 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.
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; 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 MARCH 31, 2000 AND JUNE 30, 1999
Total consolidated assets of the Company increased $2.4 million from $124.8
million at June 30, 1999 to $127.2 million at March 31, 2000. This growth in
assets occurred primarily in investment securities and loans offset by a decline
in interest-bearing demand deposits. The growth in total assets was primarily
funded with $5.0 million in borrowings from the Federal Home Loan Bank of
Indianapolis (FHLB) offset by a decline in total deposits and the purchase of
Company stock.
Cash and cash equivalents, which are primarily comprised of demand deposits
at the FHLB, decreased by $9.4 million from $16.7 million at June 30, 1999 to
$7.3 million at March 31, 2000. This decline was the result of management
shifting funds to the investment securities and loan portfolios as well as using
a portion of its most liquid assets to fund the slight decline in customer
deposits.
Investment securities increased $6.2 million from $43.0 million at June 30,
1999 to $49.2 million at March 31, 2000. This increase was primarily the result
of management's effort to increase interest income by shifting funds from
interest-bearing demand deposits to higher yielding investment securities.
Net loans grew $6.6 million from $56.3 million at June 30, 1999 to $62.9
million at March 31, 2000. This increase is primarily attributable to a $4.1
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 $33.7 million of indirect automobile loans of which
it retained $8.3 million for its own portfolio. It is management's intent to
continue 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
$366,000 at March 31, 2000. The ratios of the Company's allowance for loan
losses to total loans were 0.58% and 0.48% at March 31, 2000 and June 30, 1999,
respectively. During that same period, the Company's non-performing assets
increased from $6,000 to $96,000. The ratios of the Company's allowance for loan
losses to total nonperforming loans were 381.25% and 4,566.67% at March 31, 2000
and June 30, 1999, respectively.
Total deposits declined $1.7 million from $86.7 million at June 30, 1999 to
$85.0 million at March 31, 2000. This slight decline was primarily the result of
unusually competitive pricing for deposits.
Borrowings increased from zero at June 30, 1999 to $5.0 million at March
31, 2000 as the Bank took advantage of its borrowing capacity as an alternative
to gathering deposits.
Other liabilities increased $418,000 from $1.2 million at June 30, 1999 to
$1.6 million at March 31, 2000. This increase was primarily attributable to an
increase in accrued interest payable on certificate of deposit accounts that
receive interest semi-annually.
Total stockholders' equity decreased $1.5 million from $36.5 million at
June 30, 1999 to $35.0 million at March 31, 2000. This decline was attributable
to the purchase of additional shares of stock for the employee stock ownership
plan (ESOP) totaling $980,000, less a $136,000 allocation of ESOP shares, the
purchase of Company stock totaling $1.3 million, a $147,000 dividend to
shareholder's, and a decrease of $24,000 in net unrealized gains on securities
available for sale. Increasing stockholders' equity were net income of $787,000
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 MARCH 31, 2000 AND
1999
GENERAL. Net income for the quarter ended March 31, 2000 increased $190,000
or 195.9% from $97,000 for the quarter ended March 31, 1999 to $287,000 for the
quarter ended March 31, 2000. This was primarily attributable to an increase in
the Company's net interest income as the Company's net interest rate spread
increased from 2.04% for the quarter ended March 31, 1999 to 2.54% for the
quarter ended March 31, 2000. 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 0.90% for the quarter ended March 31, 2000 compared
to 0.34% for the same quarter during 1999 and the return on average equity was
3.20% for the quarter ended March 31, 2000 compared to 2.54% for the same
quarter during 1999.
NET INTEREST INCOME. Net interest income for the quarter ended March 31,
2000 increased $460,000 from $661,000 during the quarter ended March 31, 1999 to
$1.1 million for the quarter ended March 31, 2000.
The increase in net interest income was attributable in part to a $399,000
increase in total interest income, from $1.8 million for the quarter ended March
31, 1999 to $2.2 million for the same quarter during 2000, and was primarily the
result of a $429,000 increase in interest income from loans. Average loans
outstanding increased to $62.1 million with an average yield of 8.13% for the
quarter ended March 31, 2000 from $42.3 million with an average yield of 7.90%
for the same period in the prior year. This increase in interest income was
partially
<PAGE>
offset by a $33,000 decline in interest income from deposits with other
financial institutions. The decline in interest income from deposits with other
financial institutions was primarily due to lower volume as the Bank held $17.3
million of stock subscription escrows at March 31, 1999 in conjunction with the
Conversion.
The increase in net interest income was also attributable to a $61,000
decline in interest expense to $1.1 million for the quarter ended March 31, 2000
as compared to the same period last year. This was primarily the result of
average deposits declining from $91.9 million for the quarter ended March 31,
1999 to $84.6 million for
7
<PAGE>
the quarter ended March 31, 2000, offset slightly by the average cost of those
deposits increasing from 4.65% to 4.67% for the same respective periods. Also
contributing to the reduction in interest expense was the elimination of
interest on stock subscription escrow accounts. The decline in interest expense
was partially offset by an increase in interest expense on borrowings from the
FHLB.
PROVISION FOR LOAN LOSSES. The provision for loan losses for the quarter
ended March 31, 2000 was $45,000 compared to $11,000 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 March 31, 2000 were
$13,000 compared to zero for the same period last year.
NONINTEREST INCOME. Noninterest income totaled $182,000 for the quarter
ended March 31, 2000 compared to $77,000 for the same period in the prior year,
an increase of $105,000. The increase was primarily attributable to $110,000 in
fee income generated through the sale of consumer loans into the secondary
market and was offset slightly by reduced fee income from the sale of mortgage
loans.
NONINTEREST EXPENSE. Total noninterest expense increased to $823,000 for
the quarter ended March 31, 2000 as compared to $608,000 for the same period in
1999, an increase of $215,000. Salaries and employee benefits totaled $468,000
during the quarter ended March 31, 2000, which was $140,000 higher than the
$328,000 recorded during the same period in 1999. Approximately $35,000 of the
increase in salaries and employee benefits is attributable to the Company's
ESOP, which was adopted in conjunction with its initial public offering in April
1999. Compensation expense is also approximately $30,000 higher for the three
months ended March 31, 2000 as a result of the addition of the indirect lending
department. Staffing levels for indirect lending increased gradually throughout
the quarter to seven employees at March 31, 1999. There were ten employees in
the indirect lending department at March 31, 2000 as additional staff was added
for collections and servicing. Additional branch administration and bookkeeping
personnel also added approximately $15,000 to salaries and employee benefits for
the period ended March 31, 2000 as compared to the same period last year.
Medical and retirement expenses are also higher by approximately $16,000 and
$6,000, respectively, for the quarter ended March 31, 2000. The balance of the
increase in salaries and employee benefits is mainly due to normal salary
increases for employees other than those mentioned above.
Other noninterest expense increased $73,000, to $216,000 during the quarter
ended March 31, 2000 as compared to $143,000 during the same period in 1999. The
increased expense is primarily attributable to professional fees and other
expenses associated with being a public company, which increased $40,000, for
the quarter ended March 31, 2000 as compared to zero for the same period one
year ago. The balance of the increase is due to a $19,000 increase in expenses
associated with the new indirect lending department, a $4,000 loss on the sale
of repossessed assets, a $4,000 increase in advertising, and various other small
increases in several noninterest expense categories.
<PAGE>
INCOME TAXES. Total income tax expense was $148,000 for the quarter ended
March 31, 2000, compared to $22,000 for the same period in 1999. The increase is
attributable to increased taxable income. The effective tax rates for the
quarters ended March 31, 2000 and 1999 were 34.1% and 18.5%.
8
<PAGE>
COMPARISON OF OPERATING RESULTS FOR THE NINE MONTHS ENDED MARCH 31, 2000 AND
1999
GENERAL. Net income for the nine months ended March 31, 2000 increased
$424,000 or 116.8% from $363,000 for the nine months ended March 31, 1999 to
$787,000 for the nine months ended March 31, 2000. This was primarily
attributable to an increase in the Company's net interest income as the
Company's net interest rate spread increased from 1.99% for the nine months
ended March 31, 1999 to 2.46% for the nine months ended March 31, 2000. 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
0.84% for the nine months ended March 31, 2000 compared to 0.43% for the same
period during 1999 and the return on average equity was 2.92% for the nine
months ended March 31, 2000 compared to 3.20% for the same period during 1999.
NET INTEREST INCOME. Net interest income for the nine months ended March
31, 2000 increased $1.3 million to $3.2 million as compared to the same period
in 1999.
The increase in net interest income was attributable in part to a $830,000
increase in total interest income from $5.5 million for the nine months ended
March 31, 1999 to $6.3 million for the same period during 2000 and was primarily
the result of a $1.3 million increase in interest income from loans. The average
loans outstanding increased to $60.2 million with an average yield of 8.09% for
the nine months ended March 31, 2000 from $39.0 million with an average yield of
8.12% 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 $229,000 decline in interest income from deposits with other financial
institutions.
The increase in net interest income was also attributable to a $432,000
decline in interest expense from $3.5 million during the nine months ended March
31, 1999 to $3.1 million for the nine months ended March 31, 2000. This was
primarily the result of average deposits declining from $91.1 million for the
nine months ended March 31, 1999 to $84.6 million for the nine months ended
March 31, 2000, and the average cost of those deposits declining from 4.84% to
4.65% for the same respective periods. In addition, interest expense on
borrowings declined $73,000, primarily due to lower average balance.
PROVISION FOR LOAN LOSSES. The provision for loan losses for the nine
months ended March 31, 2000 was $139,000 compared to $11,000 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 period 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 nine months ended March 31, 2000 were
$47,000 compared to zero for the same period last year.
NONINTEREST INCOME. Noninterest income totaled $627,000 for the nine months
ended March 31, 2000 compared to $233,000 for the same period in the prior year,
an increase of $394,000. The increase was primarily attributable to $413,000 in
fee income generated through the sale of consumer loans into the secondary
market and was offset by reduced fee income from the sale of mortgage loans.
<PAGE>
NONINTEREST EXPENSE. Total noninterest expense increased $833,000 to $2.5
million for the nine months ended March 31, 2000 as compared to $1.7 million for
the same period in 1999. Salaries and employee benefits totaled $1.4 million
during the nine months ended March 31, 2000, which was $436,000 higher than the
$969,000 recorded during the same period in 1999. Approximately $204,000 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 $136,000 higher for the nine months ended March
31, 2000 as a result of the Company's ESOP, which was adopted in conjunction
with its initial public offering in April 1999.
9
<PAGE>
Additional branch administration and bookkeeping personnel also added
approximately $20,000 to salaries and employee benefits for the period ended
March 31, 2000 as compared to the same period last year. Medical and retirement
expenses are also higher approximately $16,000 and $11,000, respectively for the
nine months ended March 31, 2000 as compared to the same period in 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 $347,000, to $721,000 during the nine
months ended March 31, 2000 as compared to $374,000 during the same period in
1999. 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 $150,000, a $70,000 increase in expenses associated with the new
indirect lending department, a $10,000 increase in advertising, and various
other small increases in several noninterest expense categories.
INCOME TAXES. Total income tax expense was $388,000 for the nine months
ended March 31, 2000, compared to $117,000 for the same period in 1999. The
increase is attributable to increased taxable income. The effective tax rates
for the nine months ended March 31, 2000 and 1999 were 33.0% and 24.4%.
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 March 31, 2000, First Federal's liquidity
ratio, defined as liquid assets as a percentage of net withdrawable savings
deposits and short-term borrowings, was 14.5%.
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 March 31, 2000, cash and cash equivalents totaled $7.3
million, or 5.7% of total assets. At March 31, 2000, First Federal had
commitments to fund loans of $3.5 million. At the same time, certificates of
deposit which are scheduled to mature in one year or less totaled $36.2 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 March 31, 2000, First Federal had approximately $10.0 million
available to it under its borrowing arrangement with the Federal Home Loan Bank.
<PAGE>
At March 31, 2000, First Federal had $5.0 million in borrowings from the Federal
Home Loan Bank.
Office of Thrift Supervision ("OTS") regulations require First Federal to
maintain specific amounts of capital. As of March 31, 2000, First Federal
exceeded its minimum capital requirements.
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 March 31, 2000, 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 December 31, 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.
None.
ITEM 5.
OTHER INFORMATION.
None.
ITEM 6.
EXHIBITS AND REPORTS ON FORM 8-K.
a. Exhibits
27 - Financial Data Schedule
b. Forms 8-K
A Form 8-K was filed March 22, 2000 reporting under Item 5 the death of
director Robert L. Clayton and the appointment of Michael Head to fill the
vacancy.
12
<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: May 10, 2000 By: /s/ Harold Duncan
-------------------
Harold Duncan
President, Chief Executive Officer
and Chairman of the Board
(principal executive officer)
Dated: May 10, 2000 By: /s/ Christopher A. Bengert
--------------------------
Christopher A. Bengert
Treasurer
(principal financial and accounting officer)
13
<TABLE> <S> <C>
<ARTICLE> 9
<CURRENCY> U.S. Dollars
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-2000
<PERIOD-START> JUL-01-1999
<PERIOD-END> MAR-31-2000
<EXCHANGE-RATE> 1
<CASH> 1,115,426
<INT-BEARING-DEPOSITS> 6,508,955
<FED-FUNDS-SOLD> 1,040,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 1,440,040
<INVESTMENTS-CARRYING> 47,750,609
<INVESTMENTS-MARKET> 46,682,256
<LOANS> 63,219,023
<ALLOWANCE> 366,148
<TOTAL-ASSETS> 127,150,891
<DEPOSITS> 84,998,666
<SHORT-TERM> 0
<LIABILITIES-OTHER> 2,149,295
<LONG-TERM> 5,000,000
0
0
<COMMON> 22,724
<OTHER-SE> 36,297,595
<TOTAL-LIABILITIES-AND-EQUITY> 127,150,891
<INTEREST-LOAN> 3,650,957
<INTEREST-INVEST> 2,603,210
<INTEREST-OTHER> 43,804
<INTEREST-TOTAL> 6,297,971
<INTEREST-DEPOSIT> 2,952,073
<INTEREST-EXPENSE> 3,073,612
<INTEREST-INCOME-NET> 3,224,359
<LOAN-LOSSES> 139,342
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 2,537,085
<INCOME-PRETAX> 1,175,375
<INCOME-PRE-EXTRAORDINARY> 1,175,375
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 787,216
<EPS-BASIC> 0.14
<EPS-DILUTED> 0.14
<YIELD-ACTUAL> 3.68
<LOANS-NON> 60,559
<LOANS-PAST> 34,987
<LOANS-TROUBLED> 6,503
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 274,000
<CHARGE-OFFS> 48,743
<RECOVERIES> 1,549
<ALLOWANCE-CLOSE> 366,148
<ALLOWANCE-DOMESTIC> 366,148
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
