<PAGE>
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
[ ] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
For the Fiscal Year Ended June 30, 2000
[X] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the transition period from January 1, 2000 to June 30, 2000
Commission File Number: 0-25971
INDIAN VILLAGE BANCORP, INC.
(Name of small business issuer in its charter)
PENNSYLVANIA 34-1891199
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
100 South Walnut Street, Gnadenhutten, Ohio 44629
(Address of principal executive offices) (Zip Code)
Issuer's telephone number, including area code: (740) 254-4313
Securities registered pursuant to Section 12 (b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, par value $0.01 per share
(Title of Class)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 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 _____
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Check if there is no disclosure of delinquent filers in response to Item
405 of Regulation S-B contained in this form, and no disclosure will be
contained, to the best of the registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of the Form 10-KSB
or any amendment to this Form 10-KSB. X
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The issuer's gross revenues for the six months ended June 30, 2000 were
$2,368,000.
The aggregate market value of the voting and non-voting common equity held
by non-affiliates was approximately $3.5 million, based upon the closing price
($11.30 per share) as quoted on the OTC Bulletin Board for September 1, 2000.
Solely for purposes of this calculation, the shares held by the directors and
officers of the registrant are deemed to be held by affiliates.
The number of shares outstanding of the registrant's Common Stock as of
September 1, 2000 was 423,304.
DOCUMENTS INCORPORATED BY REFERENCE
N/A
Transitional Small Business Disclosure Format (check one): Yes _____ No X
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INDEX
<TABLE>
<CAPTION>
Part I
Page
<S> <C>
Item 1. Description of Business....................................................................... 3
Item 2. Description of Property....................................................................... 27
Item 3. Legal Proceedings............................................................................. 28
Item 4. Submission of Matters to a Vote of Securities Holders......................................... 28
Part II
Item 5. Market for Common Equity and Related Stockholder Matters...................................... 28
Item 6. Management's Discussion and Analysis or Plan of Operation..................................... 29
Item 7. Financial Statements.......................................................................... 38
Item 8. Changes In and Disagreements with Accountants on Accounting and Financial Disclosure.......... 38
Part III
Item 9. Directors, Executive Officers, Promoters and Control Persons; Compliance with Section 16(a)
of the Exchange Act..................................................................... 40
Item 10. Executive Compensation........................................................................ 41
Item 11. Security Ownership of Certain Beneficial Owners and Management................................ 42
Item 12. Certain Relationships and Related Transactions................................................ 43
Item 13. Exhibits and Reports on Form 8-K.............................................................. 44
</TABLE>
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This report contains certain "forward-looking statements" within the
meaning of the federal securities laws. These statements are not historical
facts, rather statements based on Indian Village Bancorp, Inc.'s current
expectations regarding its business strategies, intended results and future
performance. Forward-looking statements are preceded by terms such as
"expects," "believes," "anticipates," "intends" and similar expressions.
Management's ability to predict results or the effect of future plans or
strategies is inherently uncertain. Factors which could affect actual results
include interest rate trends, the general economic climate in the market area in
which Indian Village Bancorp, Inc. operates, as well as nationwide, Indian
Village Bancorp, Inc.'s ability to control costs and expenses, competitive
products and pricing, loan delinquency rates and changes in federal and state
legislation and regulation. These factors should be considered in evaluating
the forward-looking statements and undue reliance should not be placed on such
statements. Indian Village Bancorp, Inc. assumes no obligation to update any
forward-looking statements.
PART I
Item 1. DESCRIPTION OF BUSINESS
General
Indian Village Bancorp, Inc., headquartered in Gnadenhutten, Ohio, was
formed in March 1999 as the holding company for Indian Village Community Bank in
connection with the conversion of Indian Village from mutual to stock form of
ownership. The conversion was completed on July 1, 1999 through the sale of
445,583 shares of common stock by Indian Village Bancorp at a price of $10.00
per share. Indian Village Bancorp's sole business activity is the ownership of
all of Indian Village's capital stock. Indian Village Bancorp does not transact
any material business other than through its subsidiary, Indian Village. Indian
Village Bancorp is subject to the regulation of the Office of Thrift Supervision
and the Securities and Exchange Commission. Indian Village Bancorp is listed on
the OTC Bulletin Board under the symbol IDVB.
Indian Village's principal business is attracting deposits from the
general public and originating loans secured by one-to-four family residential
real estate properties located in its market area. On June 29, 2000, Indian
Village converted from a federally chartered stock savings bank to an Ohio-
chartered stock savings bank. Indian Village is regulated by the Ohio Division
of Financial Institutions and the Federal Deposit Insurance Corporation. Indian
Village's deposits are federally insured by the Federal Deposit Insurance
Corporation. Indian Village is a member of the Federal Home Loan Bank System.
Market Area
Tuscarawas County in east central Ohio is Indian Village's primary market
area, although it also originates loans to borrowers and accepts deposits from
individuals residing in contiguous counties. Much of Tuscarawas County is rural
with dairy and grain farming being the primary businesses. Light manufacturing
and services are located in and around the towns of Dover and New Philadelphia.
Major industries include steel, machine tooling, chemicals and heavy machinery.
Because Tuscarawas County is primarily rural and its economy is based
predominately in agriculture, its demographics are generally weaker, on average,
than Ohio and the U.S. as a whole.
Competition
Indian Village faces intense competition for the attraction of deposits
and origination of loans in its primary market area. Its most direct competition
for deposits has historically come from the several commercial banks operating
in Indian Village's primary market area and, to a lesser extent, from other
financial institutions, such as brokerage firms, credit unions and insurance
companies. Particularly in times of high interest rates, Indian Village has
faced additional significant competition for investors' funds from short-term
money market securities and other corporate and government securities. Indian
Village's competition for loans comes primarily from the commercial banks and
loan brokers operating in its primary market area. Competition for deposits and
the origination of loans may limit Indian Village's growth in the future.
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Lending Activities
General. At June 30, 2000, Indian Village's net loans totaled $40.8
million, or 62.2% of total assets. Indian Village has concentrated its lending
activities on fixed-rate one- to four-family mortgage loans. To a lesser
extent, Indian Village also originates multi-family, commercial real estate,
land, residential construction loans, and consumer loans. Indian Village
occasionally purchases participation interests in multi-family and commercial
real estate loans originated by other lenders and secured by properties located
in other areas of Ohio.
Loan Portfolio Analysis. The following table presents the composition of
Indian Village's loan portfolio at the dates indicated. Indian Village had no
concentration of loans exceeding 10% of total loans receivable other than as
disclosed below.
<TABLE>
<CAPTION>
At June 30, At December 31,
-------------------------------------------------
2000 1999 1998
---------------------- ---------------------- ----------------------
Percent Percent Percent
Amount of Total Amount of Total Amount of Total
-------- ---------- -------- ---------- -------- ----------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C>
Real estate loans:
One- to four-family.................. $29,618 71.97% $28,413 75.54% $26,080 82.57%
Multi-family......................... 2,307 5.61 1,669 4.44 1,736 5.50
Commercial........................... 2,102 5.11 2,172 5.77 647 2.05
Construction......................... 1,632 3.97 1,251 3.33 677 2.14
Land................................. 254 0.62 437 1.16 135 0.43
------- ------ ------- ------ ------- ------
Total real estate loans............ 35,913 87.28 33,942 90.24 29,275 92.69
Consumer loans:
Home equity loans and lines
of credit........................... 1,703 4.14 1,185 3.15 887 2.81
Home improvement loans............... 738 1.79 420 1.12 301 0.95
Automobile........................... 961 2.34 789 2.10 516 1.63
Loans on deposit accounts............ 251 0.61 231 0.61 294 0.93
Unsecured............................ 85 0.21 89 0.24 12 0.04
Other................................ 1,408 3.42 898 2.39 274 0.87
------- ------ ------- ------ ------- ------
Total consumer loans............... 5,146 12.51 3,612 9.61 2,284 7.23
Commercial business loans.............. 94 0.21 60 0.15 27 0.08
------- ------ ------- ------ ------- ------
Total loans........................ 41,153 100.00% 37,614 100.00% 31,586 100.00%
====== ====== ======
Less:
Net deferred loan fees and costs..... (68) (68) (54)
Loans in process..................... (49) (23) (40)
Allowance for loan losses............ (237) (232) (218)
------- ------- -------
Net loans.......................... $40,799 $37,291 $31,274
======= ======= =======
</TABLE>
One- to Four-Family Real Estate Loans. Indian Village's primary lending
activity is the origination of loans secured by one- to four-family residences
located in its primary market area. One- to four-family mortgage loans are
generally held in Indian Village's portfolio for long-term investment.
At June 30, 2000, Indian Village's residential mortgage loan portfolio
consisted primarily of fixed-rate fully amortizing loans with maturities ranging
between 15 and 25 years. Management establishes the loan interest rate based on
market conditions. Indian Village generally retains these loans in its
portfolio because they generally do not conform to guidelines for sale in the
secondary market. These nonconforming characteristics generally relate to the
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characteristics of the real property, such as excess acreage or the lack of site
surveys, rather than the credit worthiness of the borrower. Indian Village
generally underwrites and documents its residential mortgage loans to secondary
market standards.
In order to improve its interest rate risk exposure, Indian Village offers
adjustable rate mortgage loans with an interest rate based on the one year
Constant Maturity Treasury Bill index that adjusts every year and with terms up
to 25 years. These loans have a minimum interest rate of 6% and a maximum
interest rate of 16% over the life of the loan. Interest rate adjustments are
limited to no more than 2% during any adjustment period. At June 30, 2000,
adjustable rate mortgage loans secured by one- to four-family residences
amounted to $882,000.
Adjustable rate mortgage loans, which Indian Village originates and retains
in its portfolio, will help reduce Indian Village's exposure to changes in
interest rates. There are, however, unquantifiable credit risks resulting from
the potential of increased costs due to changed rates to be paid by the
borrower. It is possible that during periods of rising interest rates the risk
of default on adjustable rate mortgage loans may increase as a result of
repricing and the increased payments required by the borrower. In addition,
although adjustable rate mortgage loans allow Indian Village to increase the
sensitivity of its asset base to changes in interest rates, the extent of this
interest sensitivity is limited by the annual and lifetime interest rate
adjustment limits. Because of these considerations Indian Village has no
assurance that yields on adjustable rate mortgage loans will be sufficient to
offset increases in Indian Village's cost of funds during periods of rising
interest rates. Indian Village believes these risks, which have not had a
material adverse effect on Indian Village to date, generally are less than the
risks associated with holding fixed-rate loans in its portfolio in a rising
interest rate environment.
Indian Village generally requires an acceptable attorney's opinion on the
status of its lien on all loans where real estate is the primary source of
security. Indian Village also requires that fire and casualty insurance and, if
appropriate, flood insurance be maintained in an amount at least equal to the
outstanding loan balance.
Indian Village's one- to four-family residential mortgage loans do not
exceed 80% of the appraised value of the security property. Indian Village does
not use private mortgage insurance which would permit it to make loans with
higher loan-to-value ratios. An independent certified appraiser generally
appraises all properties.
Multi-family and Commercial Real Estate Loans. Indian Village occasionally
originates and purchases mortgage loans for the acquisition and refinancing of
multi-family and commercial real estate properties. All purchased participation
interests are underwritten according to the same standards that Indian Village
would use if it were originating the underlying loans. Indian Village has no
written or oral commitments with any institution to purchase predetermined
numbers or types of participation interests. At June 30, 2000, purchased
participation interests amounted to $1.4 million. At June 30, 2000, Indian
Village's commercial real estate loans are secured by churches, storefronts, a
warehouse, and other commercial properties, all of which are located in Ohio.
Multi-family and commercial real estate loans are fully amortizing loans
that are generally originated with fixed interest rates, but are occasionally
originated with variable rates. Fixed rate loans are originated for terms up to
25 years. Variable rate loans are originated for terms up to 25 years. The
interest rate on variable rate loans adjusts at either one, three or five year
intervals.
Multi-family and commercial real estate lending affords Indian Village an
opportunity to receive interest at rates higher than those generally available
from one- to four-family residential lending. However, loans secured by these
properties usually are greater in amount and are more difficult to evaluate and
monitor and, therefore, involve a greater degree of risk than one- to four-
family residential mortgage loans. Because payments on loans secured by income
producing properties are often dependent on the successful operation and
management of the properties, repayment of these loans may be affected by
adverse conditions in the real estate market or the economy. Indian Village
seeks to minimize these risks by limiting the maximum loan-to-value ratio to up
to 80% for multi-family and commercial real estate loans and by strictly
scrutinizing the financial condition of the borrower, the cash flow of the
project, the quality of the collateral and the management of the property
securing the loan. Indian Village also generally obtains loan guarantees from
financially capable parties based on a review of personal financial statements.
5
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Residential Construction Loans. Indian Village originates residential
construction loans to local home builders and to individuals for the
construction and acquisition of personal residences. Indian Village's
construction loans to builders generally have fixed interest rates and are for a
term of six months. Loans to builders are typically made with a maximum loan to
value ratio of 80%. These loans are usually made to the builder before there is
an identified buyer for the completed home. Indian Village generally lends to
no more than three builders with whom it has long standing relationships and
limits each builder to no more than three homes under construction at a time. At
June 30, 2000, speculative construction loans to builders amounted to $87,000.
Construction loans to individuals are made on the same terms as Indian Village's
one- to four-family mortgage loans, but provide for the payment of interest only
during the construction phase, which is usually six months with a contingency
for an additional six months. At the end of the construction phase, the loan
converts to a permanent mortgage loan.
Before making a commitment to fund a construction loan, Indian Village
requires an appraisal of the property by an independent certified appraiser.
Indian Village also reviews and inspects each project before disbursement of
funds during the term of the construction loan. Loan proceeds are disbursed
after inspection based on the percentage of completion.
Construction lending affords Indian Village the opportunity to earn higher
interest rates with shorter terms to maturity relative to single-family
permanent mortgage lending. Construction lending, however, is generally
considered to involve a higher degree of risk than single-family permanent
mortgage lending because of the inherent difficulty in estimating both a
property's value at completion of the project and the estimated cost of the
project. These loans are generally more difficult to evaluate and monitor. If
the estimate of construction cost proves to be inaccurate, Indian Village may be
required to advance funds beyond the amount originally committed to protect the
value of the project. If the estimate of value upon completion proves to be
inaccurate, Indian Village may be confronted with a project whose value is
insufficient to assure full repayment. Projects may also be jeopardized by
disagreements between borrowers and builders and by the failure of builders to
pay subcontractors. Loans to builders to construct homes for which no purchaser
has been identified carry more risk because the payoff for the loan depends on
the builder's ability to sell the property before the construction loan is due.
Indian Village has attempted to minimize the foregoing risks by, among
other things, limiting its construction lending to residential properties. It is
also Indian Village's general policy to obtain regular financial statements from
builders so that it can monitor their financial strength and ability to repay.
Land Loans. Indian Village occasionally originates loans secured by
unimproved land. These loans have terms of up to 15 years and generally have
fixed interest rates and loan-to-value ratios of up to 65%.
Consumer Loans. Indian Village introduced home equity loans and lines of
credit in May 1996 and other consumer loans in April 1998. Indian Village
intends to increase its emphasis on consumer loans because they have shorter
maturities than real estate mortgage loans, which helps to reduce Indian
Village's interest rate risk exposure, and higher yields than real estate
mortgage loans.
Home equity loans are generally fixed rate loans that fully amortize over
terms up to 10 years. Home equity lines of credit are written with variable
interest rates. The loan-to-value ratios on both home equity loans and lines of
credit are generally limited to 80%, taking into account the outstanding balance
of the first mortgage loan.
Home improvement loans are generally fixed-rate loans that fully amortize
over terms up to 15 years. Home improvement loans are generally secured by a
second mortgage on the property being improved. The loan-to-value ratio
generally does not exceed 80%, taking into account the outstanding balance of
the first mortgage loan.
Automobile loans are generally fixed rate loans. Loans on new automobiles
are written with terms up to 66 months and with loan-to-value ratios not
exceeding 100% for new cars and 90% for used cars. Loans on used cars are
written for lesser terms depending on the age of the vehicle. Indian Village
does not engage in indirect consumer lending.
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Loans on deposit accounts generally carry interest rates up to 2% above the
rate paid on the deposit account securing the loan. The terms are generally
written for terms not exceeding five years, but may also be written as renewable
short term interest-only demand loans.
At June 30, 2000, Indian Village's other consumer loans generally consisted
of loans secured by various personal property other than real estate, and
secured lines of credit.
Consumer loans entail greater risk than do residential mortgage loans,
particularly in the case of loans that are unsecured or secured by rapidly
depreciating assets such as automobiles. In these cases, any repossessed
collateral for a defaulted consumer loan may not provide an adequate source of
repayment of the outstanding loan balance as a result of the greater likelihood
of damage, loss or depreciation. The remaining deficiency often does not warrant
further substantial collection efforts against the borrower beyond obtaining a
deficiency judgment. In addition, consumer loan collections are dependent on the
borrower's continuing financial stability, and thus are more likely to be
adversely affected by job loss, divorce, illness or personal bankruptcy.
Commercial Business Loans. Indian Village does not actively originate
commercial business loans. These loans are generally fixed-rate loans with
terms up to five years and secured by vehicle and business equipment.
Loans to One Borrower. The maximum amount that Indian Village may lend to
one borrower is limited by federal regulations. At June 30, 2000, Indian
Village's regulatory limit on loans to one borrower was $1.0 million. At that
date, Indian Village's largest amount of loans to one borrower, including the
borrower's related interests, was $831,000 and consisted of one multi-family
loan. These loans were performing according to their original terms at June 30,
2000.
Maturity of Loan Portfolio. The following table presents certain
information at June 30, 2000 regarding the dollar amount of loans maturing in
Indian Village's portfolio based on their contractual terms to maturity, but
does not include potential prepayments. Demand loans, loans having no stated
schedule of repayments and no stated maturity, and overdrafts are reported as
becoming due within one year. Loan balances do not include undisbursed loan
proceeds, unearned discounts, unearned income and allowance for loan losses.
<TABLE>
<CAPTION>
At June 30, 2000
-----------------------------------------------------------------------------
Multi-
One-to Family and
Four- Commercial Commercial Total
Family (1) Real Estate Construction Consumer Business Loans
------------ ------------ -------------- ---------- ------------ -------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C>
Amounts due in:
One year or less.......................... $ 90 $ -- $ 89 $1,385 $ -- $ 1,564
More than one year to three years......... 330 -- -- 334 13 677
More than three years to five years....... 316 142 -- 967 81 1,506
More than five years to 10 years.......... 3,731 103 -- 332 -- 4,166
More than 10 years to 15 years............ 14,036 2,574 665 311 -- 17,586
More than 15 years........................ 11,369 1,590 878 1,817 -- 15,654
------- ------ ------ ------ ---- -------
Total amount due....................... $29,872 $4,409 $1,632 $5,146 $ 94 $41,153
======= ====== ====== ====== ==== =======
</TABLE>
___________________
(1) Includes land loans.
7
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The following table presents the dollar amount of all loans at June 30,
2000 that are due after June 30, 2001.
<TABLE>
<CAPTION>
Due After June 30, 2001
----------------------------------
Fixed- Adjustable-
Rate Rate Total
-------- ------------- -------
(Dollars In Thousands)
<S> <C> <C> <C>
Amounts due in:
Real estate loans:
One- to four-family..................... $28,646 $ 882 $29,528
Multi-family............................ 191 2,116 2,307
Commercial.............................. 872 1,230 2,102
Construction............................ 1,133 410 1,543
Land.................................... 254 -- 254
------- ------ -------
Total real estate loans............... 31,096 4,638 35,734
Consumer loans.......................... 2,182 1,579 3,761
Commercial business loans............... 94 -- 94
------- ------ -------
Total loans.......................... $33,372 $6,217 $39,589
======= ====== =======
</TABLE>
Scheduled contractual principal repayments of loans do not reflect the
actual life of the loans. The average life of a loan is substantially less than
its contractual term because of prepayments. In addition, due-on-sale clauses on
loans generally give Indian Village the right to declare loans immediately due
and payable if, among other things, the borrower sells the real property with
the mortgage and the loan is not repaid. The average life of a mortgage loan
tends to increase, however, when current mortgage loan market rates are
substantially higher than rates on existing mortgage loans and, conversely,
tends to decrease when rates on existing mortgage loans are substantially higher
than current mortgage loan market rates.
Loan Solicitation and Processing. Indian Village's lending activities
follow written, non-discriminatory, underwriting standards and loan origination
procedures established by Indian Village's Board of Directors and management.
Loan originations come from a number of sources. The customary sources of loan
originations are realtors, referrals and existing customers. Indian Village does
not utilize mortgage brokers or other third-party originators. Loans less than
or equal to $150,000 may be approved by Marty R. Lindon or Martin Merryman with
one other Loan Committee member signature. Loans above $150,000 but less than
$300,000 are approved by the Loan Committee, comprised of Mr. Lindon, John A.
Beitzel and Mr. Merryman. Loans equal to or greater than $300,000 are approved
by the full Board of Directors.
Loan Originations, Purchases and Sales. Indian Village primarily originates
fixed-rate mortgage loans with amortization terms of up to 25 years.
In late 1998, Indian Village began originating mortgage loans for
Countrywide Home Loans Inc., an unrelated party. Generally, these loans are 30-
year fixed rate mortgage loans that Indian Village chooses not to originate for
its portfolio, either for investment or for sale, because of interest rate risk
management, or loans that do not meet the credit standards for loans that Indian
Village retains in its portfolio. Indian Village's functions are limited to
accepting the application, obtaining credit reports and appraisals, verifying
employment history and other application processing functions. Indian Village
generally receives a processing fee equal to 1% of the loan balance as
compensation. Countrywide underwrites the loan, issues any interest rate
commitment to the borrower, writes the loan on its own loan documents and funds
the loan at closing. These loans never become an asset of Indian Village,
exposing it to credit risk or interest rate risk. Furthermore, Countrywide has
no right of recourse against Indian Village on any of these loans. During the
six months ended June 30, 2000, Indian Village originated an immaterial dollar
amount of loans under this program and recorded an immaterial amount of income.
Occasionally, Indian Village purchases participation interests in multi-
family and commercial real estate loans secured by properties located in Ohio
but outside of its primary market area. Indian Village generally limits its
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participation interest to between 5% and 25%. Indian Village has established a
policy that limits the maximum participation interest per loan to $500,000 or
less. Generally, the lead lender retains the servicing rights. Indian Village
pays no fee on the loans it purchases and has no agreements or understandings
with any lender to purchase a predetermined amount of participation interests.
Indian Village underwrites all purchased participation interests according to
the underwriting standards it uses for loans it originates.
Except as for residential mortgage loans originated on behalf of a third
party private lender, as discussed above, Indian Village generally holds all
loans for long-term investment.
The following table presents total loans originated, purchased, sold and
repaid during the periods indicated.
<TABLE>
<CAPTION>
Six Months Year Ended December 31,
Ended --------------------------------
June 30, 2000 1999 1998
--------------- ------------ ------------
<S> <C> <C> <C>
(In thousands)
Total loans at beginning of period.................... $ 37,614 $ 31,586 $ 27,518
Originations:
Real estate:
One- to four-family.......................... 2,383 6,723 5,113
Multi-family................................. 840 574 560
Commercial................................... 100 879 205
Construction................................. 1,459 1,962 1,178
Land......................................... 103 616 112
--------------- ------------ ------------
Total real estate loans................... 4,885 10,754 7,168
Consumer loans.................................. 2,646 2,534 1,596
Commercial business............................. 40 68 --
--------------- ------------ ------------
Total loans originated.................... 7,571 13,356 8,764
Purchases.......................................... -- 800 --
Sales.............................................. -- -- --
Less:
Principal loan repayments and prepayments.......... (4,032) (8,128) (4,615)
Transfers to real estate owned..................... -- -- (81)
--------------- ------------ ------------
(4,032) (8,128) (4,696)
--------------- ------------ ------------
Net loan activity..................................... 3,539 6,028 4,068
--------------- ------------ ------------
Total loans at end of period.......................... $ 41,153 $ 37,614 $ 31,586
=============== ============ ============
</TABLE>
Loan Commitments. Indian Village issues commitments for mortgage loans
conditioned upon the occurrence of certain events. Commitments are made in
writing on specified terms and conditions and are honored for up to 30 days from
approval. At June 30, 2000, Indian Village had variable rate loan commitments
totaling $808,000, ranging in rates from 7.75% to 17.5%, and fixed-rate loan
commitments totaling, $1.5 million ranging in rates from 7.25% to 10.75%.
Loan Fees. In addition to interest earned on loans, Indian Village receives
income from fees in connection with loan originations, loan modifications, late
payments and for miscellaneous services related to its loans. Income from these
activities varies from period to period depending upon the volume and type of
loans made and competitive conditions.
Indian Village charges loan origination fees for fixed-rate loans which are
calculated as a percentage of the amount borrowed. As required by applicable
accounting procedures, loan origination fees and discount points in excess
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of loan origination costs are deferred and recognized over the contractual
remaining lives of the related loans on a level yield basis. Discounts and
premiums on loans purchased are accreted and amortized in the same manner. At
June 30, 2000, Indian Village had $68,000 of deferred loan fees. Indian Village
recognized an immaterial amount of deferred loan fees during the six months
ended June 30, 2000 in connection with loan refinancings, payoffs, sales and
ongoing amortization of outstanding loans.
Nonperforming Assets and Delinquencies. All loan payments are due on the
first day of each month. When a borrowers fails to make a required loan payment,
Indian Village attempts to cure the deficiency by contacting the borrower and
seeking the payment. A late notice is mailed on the 30th day of the month. In
most cases, deficiencies are cured promptly. If a delinquency continues beyond
the 30th day of the month, a phone call to the borrower is usually made on the
45th day of delinquency. On or about the 60th day of delinquency, Indian
Village sends a certified letter to the borrower giving the borrower 10 days in
which to work out a payment schedule. While Indian Village generally prefers to
work with borrowers to resolve problems, Indian Village will institute
foreclosure or other proceedings after the 90th day of a delinquency, as
necessary, to minimize any potential loss.
Management informs the Board of Directors monthly of the amount of loans
delinquent more than 60 days, all loans in foreclosure, and all foreclosed and
repossessed property that Indian Village owns.
Indian Village ceases accruing interest on mortgage loans when, in the
judgment of management, the probability of collection of interest is deemed to
be insufficient to warrant further accrual. Indian Village does not accrue
interest on mortgage loans past due 90 days or more when the estimated value of
collateral and collection efforts are deemed insufficient to ensure full
recovery.
10
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The following table presents information with respect to Indian Village's
nonperforming assets at the dates indicated.
<TABLE>
<CAPTION>
At June 30, At December 31,
--------------------------------
2000 1999 1998
-------------- ------------ ------------
<S> <C> <C> <C>
(Dollars in thousands)
Nonaccruing loans:
One- to four-family....................................... $ 292 $ 330 $ 241
Multi-family.............................................. -- -- --
Commercial real estate.................................... -- -- --
Construction.............................................. -- -- --
Land...................................................... -- -- --
Consumer.................................................. 35 7 87
Commercial business....................................... -- -- --
----- ----- -----
Total nonaccruing loans (1)............................ 327 337 328
Loans past due 90 days and accruing interest................. -- -- --
Real estate owned (2)........................................ 118 118 122
Other repossessed assets..................................... -- 13 23
----- ----- -----
Total nonperforming assets (3)......................... 445 468 473
Troubled debt restructurings................................. -- -- --
----- ----- -----
Troubled debt restructurings and total
nonperforming assets...................................... $ 445 $ 468 $ 473
===== ===== =====
Total nonperforming loans and troubled debt
restructurings as a percentage of total loans............. 0.79% 0.90% 1.04%
Total nonperforming assets and troubled debt
restructurings as a percentage of total assets............ 0.68% 0.79% 1.18%
</TABLE>
____________________
(1) Total nonaccruing loans equals total nonperforming loans.
(2) Real estate owned balances are shown net of related loss allowances.
(3) Nonperforming assets consist of nonperforming loans, impaired loans, real
estate owned and other repossessed assets.
Interest income that would have been recorded for the six months ended June
30, 2000 had nonaccruing loans been current according to their original terms
amounted to approximately $6,000. No interest was included in interest income
for the six months ended June 30, 2000 related to these loans.
Real Estate Owned. Real estate acquired by Indian Village as a result of
foreclosure or by deed-in-lieu of foreclosure is classified as real estate owned
until sold. When property is acquired it is recorded at fair market value at the
date of foreclosure, establishing a new cost basis. If the fair value declines,
Indian Village records a valuation allowance through expense. Costs after
acquisition are expensed. At June 30, 2000, Indian Village had $118,000 of real
estate owned, consisting of one residential property and one commercial
property.
Asset Classification. Indian Village has adopted a policy regarding
problem assets of Indian Village. The policy requires that Indian Village review
and classify its assets on a regular basis.
There are three classifications for problem assets: substandard, doubtful
and loss. Substandard assets have one or more defined weaknesses and are
characterized by the distinct possibility that Indian Village will sustain some
loss if the deficiencies are not corrected. Doubtful assets have the weaknesses
of substandard assets with the additional characteristic that the weaknesses
make collection or liquidation in full on the basis of currently existing facts,
conditions and values questionable, and there is a high possibility of loss. An
asset classified as loss is considered uncollectible and of such little value
that continuance as an asset of Indian Village is not warranted. If an asset or
portion
11
<PAGE>
thereof is classified as loss, Indian Village establishes specific allowances
for loan losses for the full amount of the portion of the asset classified as
loss. Assets that do not currently expose Indian Village to sufficient risk to
warrant classification in one of the aforementioned categories but possess
weaknesses are designated "special mention." Indian Village monitors "special
mention" assets.
The aggregate amounts of Indian Village's classified and special mention
assets at the dates indicated were as follows:
At June 30, At December 31,
------------------
2000 1999 1998
----------- ------- -------
(In thousands)
Classified assets:
Loss................................... $ -- $ -- $ --
Doubtful............................... -- -- --
Substandard............................ 445 468 416
Special mention........................ 295 20 173
At June 30, 2000, assets designated substandard consisted of real estate
owned of $118,000 and 11 residential mortgage loans and four consumer loans
totaling $327,000, and assets designated as special mention consisted of six
residential mortgage loans and three consumer loans.
Allowance for Loan Losses. In originating loans, Indian Village recognizes
that losses will be experienced and that the risk of loss will vary with, among
other things, the type of loan being made, the creditworthiness of the borrower
over the term of the loan, general economic conditions and, in the case of a
secured loan, the quality of the security for the loan. The allowance method is
used in providing for loan losses. Accordingly, all loan losses are charged to
the allowance and all recoveries are credited to it. The allowance for loan
losses is established through a provision for loan losses charged to operations.
The provision for loan losses is based on management's evaluation of the
collectibility of the loan portfolio, including past loan loss experience, known
and inherent risks in the nature and volume of the portfolio, information about
specific borrower situations and estimated collateral values, and economic
conditions.
At June 30, 2000, Indian Village had an allowance for loan losses of
$237,000. Although management believes that it uses the best information
available to establish the allowance for loan losses, future adjustments to the
allowance for loan losses may be necessary and results of operations could be
significantly and adversely affected if circumstances differ substantially from
the assumptions used in making the determinations. Furthermore, while Indian
Village believes it has established its existing allowance for loan losses as
required by generally accepted accounting principles, there can be no assurance
that regulators, in reviewing Indian Village's loan portfolio, will not request
Indian Village to increase significantly its allowance for loan losses. In
addition, because future events affecting borrowers and collateral cannot be
predicted with certainty, there can be no assurance that the existing allowance
for loan losses is adequate or that substantial increases will not be necessary
should the quality of any loans deteriorate as a result of the factors discussed
above. Any material increase in the allowance for loan losses may adversely
affect Indian Village's financial condition and results of operations.
12
<PAGE>
The following table presents an analysis of Indian Village's allowance for
loan losses.
<TABLE>
<CAPTION>
Year Ended
Six Months December 31,
Ended ------------------------------
June 30, 2000 1999 1998
----------------- ------------ ------------
<S> <C> <C> <C>
(Dollars in thousands)
Allowance for loan losses, beginning of period.................... $ 232 $ 218 $ 176
Charge-offs:
One- to four-family............................................ -- -- --
Multi-family................................................... -- -- --
Commercial..................................................... -- -- (18)
Construction................................................... -- -- --
Land........................................................... -- -- --
Consumer....................................................... -- -- --
Commercial business............................................ -- -- --
------ ------ -------
Total charge-offs........................................... -- -- (18)
Recoveries:
One- to four-family............................................ -- -- --
Multi-family................................................... -- -- --
Commercial..................................................... -- -- --
Construction................................................... -- -- --
Land........................................................... -- -- --
Consumer....................................................... -- -- --
Commercial business............................................ -- -- --
------ ------ -------
Total recoveries............................................ -- -- --
Net charge-offs................................................... -- -- (18)
Provision for loan losses......................................... 5 14 60
------ ------ -------
Allowance for loan losses, end of period.......................... $ 237 $ 232 $ 218
====== ====== =======
Net charge-offs to average interest-earning loans................. -- % -- % 0.06%
Allowance for loan losses to total loans.......................... 0.58% 0.62% 0.69%
Allowance for loan losses to nonperforming loans and
troubled debt restructurings................................... 72.48% 68.84% 66.46%
Net charge-offs to allowance for loan losses...................... --% --% 8.26%
</TABLE>
13
<PAGE>
The following table presents the approximate allocation of the allowance
for loan losses by loan category at the dates indicated. Management believes
that the allowance can be allocated by category only on an approximate basis.
The allocation of the allowance to each category is not necessarily indicative
of future losses and does not restrict the use of the allowance to absorb losses
in any other category.
<TABLE>
<CAPTION>
At June 30, At December 31,
-------------------------------------------------------------
2000 1999 1998
--------------------------------- ------------------------------ -----------------------------
Percent Percent
Percent of Percent of Percent of of Loans Percent of of Loans
Allowance Loans in Allowance in Each Allowance in Each
in Each Each in Each Category in Each Category
Category to Category Category to Category to
Total to Total to Total Total to Total Total
Amount Allowance Loans Amount Allowance Loans Amount Allowance Loans
-------- ----------- ---------- -------- ---------- -------- -------- ---------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
(Dollars in thousands)
Real estate loans:
One- to four-family........... $ 126 53.16% 71.97% $ 103 44.40% 75.54% $ 121 55.50% 82.57%
Multi-family.................. 7 2.95 5.61 8 3.45 4.44 9 4.13 5.50
Commercial.................... 13 5.49 5.11 8 3.45 5.77 5 2.29 2.05
Construction.................. 3 1.27 3.97 5 2.16 3.33 1 0.46 2.14
Land.......................... 2 0.84 0.62 4 1.72 1.16 1 0.46 0.43
Consumer loans................. 31 13.08 12.51 17 7.33 9.61 10 4.59 7.23
Commercial business
loans........................ 1 0.42 0.21 2 0.86 0.15 -- -- 0.08
Unallocated.................... 54 22.79 -- 85 36.36 -- 71 32.57 --
----- ------ ------ ----- ------ ------ ----- ------ ------
Total allowance
for loan losses............ $ 237 100.00% 100.00% $ 232 100.00% 100.00% $ 218 100.00% 100.00%
===== ====== ====== ===== ====== ====== ===== ====== ======
</TABLE>
Investment Activities
Federal and state regulations require Indian Village to maintain a prudent
amount of liquid assets to protect the safety and soundness of Indian Village.
Therefore, the investment policy of Indian Village as established by the board
of directors attempts to provide and maintain liquidity, generate a favorable
return on investments without incurring undue interest rate and credit risk and
complement Indian Village's lending activities. Indian Village's policies
generally limit investments to various types of liquid assets, including U.S.
Government obligations, securities of various federal agencies and of state and
municipal governments, deposits at the Federal Home Loan Bank of Cincinnati,
certificates of deposit of federally insured institutions, certain bankers'
acceptances and federal funds. Within certain limits, Indian Village may also
invest a portion of its assets in commercial paper and corporate debt
securities. Savings institutions like Indian Village are also required to
maintain an investment in Federal Home Loan Bank of Cincinnati stock.
Statement of Financial Accounting Standards No. 115, "Accounting for
Certain Investments in Debt and Equity Securities," requires that investments be
categorized as "held to maturity," "trading securities" or "available for sale,"
based on management's intent as to the ultimate disposition of each security.
Statement of Financial Accounting Standards No. 115 allows debt securities to be
classified as "held to maturity" and reported in financial statements at
amortized cost only if the reporting entity has the positive intent and ability
to hold those securities to maturity. Securities that might be sold in response
to changes in market interest rates, changes in the security's prepayment risk,
increases in loan demand, or other similar factors cannot be classified as "held
to maturity." Debt and equity securities held for current resale are classified
as "trading securities." These securities are reported at fair value, and
unrealized gains and losses on the securities would be included in earnings.
Indian Village does not currently use or maintain a trading account. Debt and
equity securities not classified as either "held to maturity" or "trading
securities" are classified as "available for sale." These securities are
reported at fair value, and unrealized gains and losses on the securities are
excluded from earnings and reported, net of deferred taxes, as a separate
component of equity. At June 30, 2000, all of Indian Village's mortgage-backed
securities and investment securities were classified as "available for sale."
14
<PAGE>
All of Indian Village's investment securities carry market risk insofar as
increases in market rates of interest may cause a decrease in their market
value. They also carry prepayment risk insofar as they may be called before
maturity in times of low market interest rates, so that Indian Village may have
to reinvest the funds at a lower interest rate. Indian Village's investment
policy does not permit engaging directly in hedging activities or purchasing
high risk mortgage derivative products. Investments are made based on certain
considerations, which include the interest rate, yield, settlement date and
maturity of the investment, Indian Village's liquidity position, and anticipated
cash needs and sources. The effect that the proposed investment would have on
Indian Village's credit and interest rate risk and risk-based capital is also
considered. Indian Village purchases investment securities to provide necessary
liquidity for day-to-day operations. Indian Village also purchases investment
securities when investable funds exceed loan demand.
The following table presents the amortized cost and fair value of Indian
Village's securities, by accounting classification and by type of security, at
the dates indicated.
<TABLE>
<CAPTION>
At June 30, At December 31,
--------------------------------------------
2000 1999 1998
--------------------- -------------------- ---------------------
Amortized Fair Amortized Fair Amortized Fair
Cost Value Cost Value Cost Value
--------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
(In thousands)
Investment securities available for sale:
Municipal securities............................... $ 1,986 $ 2,026 $ 1,470 $ 1,464 $ 147 $ 152
Equity securities.................................. 500 502 -- -- -- --
Corporate securities............................... 149 149 -- -- -- --
Obligations of U.S. Treasury and U.S.
government agencies.............................. 7,934 7,700 7,432 7,244 1,797 1,816
------- ------- ------- ------- ------ ------
Total........................................ 10,569 10,377 8,902 8,708 1,944 1,968
Mortgage-backed securities available for sale:
Private issues..................................... 1,525 1,447 1,521 1,435 -- --
Ginnie Mae......................................... 3,514 3,462 4,257 4,228 2,022 2,063
Fannie Mae......................................... 4,196 4,127 2,621 2,522 1,918 1,927
Freddie Mac........................................ 653 648 187 181 235 237
------- ------- ------- ------- ------ ------
Total........................................ 9,888 9,684 8,586 8,366 4,175 4,227
------- ------- ------- ------- ------ ------
Net unrealized gains (losses) on securities
available for sale................................. (396) N/A (414) N/A 76 N/A
------- ------- ------- ------- ------ ------
Total securities available for sale.......... $20,061 $20,061 $17,074 $17,074 $6,195 $6,195
======= ======= ======= ======= ====== ======
</TABLE>
Most of Indian Village's mortgage-backed securities are issued or
guaranteed by agencies of the U.S. Government. Accordingly, they carry lower
credit risk than mortgage-backed securities of a private issuer. Indian Village
also invests in private issue mortgage-backed securities and collateralized
mortgage obligations that carry investment grade ratings issued by nationally
recognized securities rating agencies. However, mortgage-backed securities still
carry market risk, the risk that increases in market interest rates may cause a
decrease in market value, and prepayment risk, the risk that the securities will
be repaid before maturity and that Indian Village will have to reinvest the
funds at a lower interest rate.
Occasionally, Indian Village invests in municipal obligations of local and
out-of-state entities, such as school districts. Out-of-state obligations are
generally rated by a nationally recognized credit rating service.
At June 30, 2000, Indian Village did not own any securities, other than
U.S. Government and agency securities, which had an aggregate book value in
excess of 10% of Indian Village's total equity at that date.
15
<PAGE>
The following presents the activity in the mortgage-backed securities and
investment securities portfolios for the periods indicated.
<TABLE>
<CAPTION>
Six Months
Ended Year Ended December 31,
June 30, ----------------------------
2000 1999 1998
------- ------- -------
(In thousands)
<S> <C> <C> <C>
Mortgage-backed securities (1):
Mortgage-backed securities, beginning of period.................. $ 8,366 $ 4,227 $ 3,783
Purchases........................................................ 2,400 5,782 2,336
Sales............................................................ (436) (226) (844)
Repayments and prepayments....................................... (594) (1,020) (1,022)
Increase (decrease) in net premium............................... (68) (124) (12)
Increase (decrease) in unrealized gain........................... 16 (273) (14)
------- ------- -------
Net increase in mortgage-backed securities.................... 1,318 4,139 444
------- ------- -------
Mortgage-backed securities, end of period........................ $ 9,684 $ 8,366 $ 4,227
======= ======= =======
Investment securities (2):
Investment securities, beginning of period....................... $ 8,708 $ 1,968 $ 3,534
Purchases........................................................ 2,530 9,505 2,125
Sales............................................................ (250) (1,250) (455)
Calls............................................................ -- (1,200) (2,900)
Maturities....................................................... -- -- (335)
Increase (decrease) in net premium............................... (613) (98) 1
Increase (decrease) in unrealized gain........................... 2 (217) (2)
------- ------- -------
Net increase (decrease) in investment securities.............. 1,669 6,740 (1,566)
------- ------- -------
Investment securities, end of period............................. $10,377 $ 8,708 $ 1,968
======= ======= =======
</TABLE>
_____________
(1) All mortgage-backed securities are classified as available for sale.
(2) All investment securities are classified as available for sale.
The following table presents certain information regarding the carrying
value, weighted average yields and maturities or periods to repricing of Indian
Village's debt securities at June 30, 2000, all of which are available for sale.
<TABLE>
<CAPTION>
Less Than One To After Five To After
One Year Five Years Ten Years Ten Years Totals
------------------ ---------------- ------------------ ------------------ -------------------
Weighted Weighted Weighted Weighted
Carrying Average Carrying Carrying Average Carrying Average Carrying Average
Value Yield Amount Value Value Yield Value Yield Value Yield
-------- -------- ------ -------- -------- -------- -------- -------- -------- ---------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Securities available for sale:
Investment securities:
Municipal securities (1)..... $-- -- % $ 147 5.68% $ 512 6.23% $1,357 8.35% $ 2,026 7.62%
Corporate securities......... -- -- -- -- 149 7.86 -- -- 149 7.86
Obligations of the U.S.
Treasury and U.S.
government agencies......... -- -- 479 6.17 5,081 7.75 2,140 7.46 7,700 7.57
Mortgage-backed securities..... 10 6.22 4,305 7.01 2,444 6.55 2,925 6.47 9,684 6.73
--- ---- ------ ---- ------ ---- ------ ---- ------- ----
Total.................... $10 6.22% $4,931 6.89% $8,186 7.16% $6,432 7.20% $19,559 7.10%
=== ==== ====== ==== ====== ==== ====== ==== ======= ====
</TABLE>
____________
(1) Weighted average yields for municipal securities are presented on a tax
equivalent basis based on an assumed rate of 34%
16
<PAGE>
Deposit Activities and Other Sources of Funds
General. Deposits are the major external source of funds for Indian
Village's lending and other investment activities. In addition, Indian Village
also generates funds internally from loan principal repayments and prepayments
and maturing investment securities. Scheduled loan repayments are a relatively
stable source of funds, while deposit inflows and outflows and loan prepayments
are influenced significantly by general interest rates and money market
conditions. Indian Village may use borrowings from the Federal Home Loan Bank of
Cincinnati to compensate for reductions in the availability of funds from other
sources. At June 30, 2000, Indian Village had no other borrowing arrangements
aside from Federal Home Loan Bank of Cincinnati advances.
Deposit Accounts. Nearly all of Indian Village's depositors reside in Ohio.
Indian Village's deposit products include money market accounts, passbook
accounts, and term certificate accounts ranging from six to sixty months.
Deposit account terms vary with the principal differences being the minimum
balance deposit, early withdrawal penalties and the interest rate. Indian
Village reviews its deposit mix and pricing weekly. Indian Village does not
utilize brokered deposits, nor has it aggressively sought jumbo certificates of
deposit.
Indian Village believes it is competitive in the interest rates it offers
on its deposit products. Indian Village determines the rates paid based on a
number of factors, including rates paid by competitors, Indian Village's need
for funds and cost of funds, borrowing costs and movements of market interest
rates. Historically, Indian Village has relied predominately on certificates of
deposit with terms of more than one year. In November, 1999, Indian Village
opened a new branch office in New Philadelphia, a more commercial area than
Gnadenhutten, which has attracted more transaction accounts to Indian Village.
In the unlikely event Indian Village is liquidated, depositors will be
entitled to full payment of their deposit accounts before any payment is made to
Indian Village Bancorp as the sole stockholder of Indian Village.
The following table indicates the amount of Indian Village's jumbo
certificate accounts by time remaining until maturity as of June 30, 2000. Jumbo
certificate accounts have principal balances of $100,000 or more.
Maturity Period Amount
--------------- -------------
(In thousands)
Three months or less.......................... $ 330
Over three through six months................. 860
Over six through twelve months................ 435
Over twelve months............................ 215
------
Total....................................... $1,840
======
17
<PAGE>
The following table presents information concerning average balances and
rates paid on Indian Village's deposit accounts at the dates indicated.
<TABLE>
<CAPTION>
Year Ended December 31,
Six Months Ended June 30, -----------------------------------------------------------------
2000 1999 1998
------------------------------- ------------------------------ --------------------------------
Percent Percent Percent
of Total of Total of Total
Average Average Average Average Average Average Average Average Average
Balance Deposits Rate Paid Balance Deposits Rate Paid Balance Deposits Rate Paid
------- -------- --------- ------- -------- --------- ------- -------- ----------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Passbook accounts........ $ 5,301 15.39% 3.00% $ 5,676 18.34% 2.84% $ 5,263 17.23% 3.27%
Money market
accounts................ 1,677 4.87 3.60 1,589 5.13 3.27 1,777 5.82 3.32
NOW accounts............. 1,316 3.82 2.60 1,028 3.32 1.85 815 2.67 1.96
Certificates of
deposit (1)............. 25,495 74.00 5.59 22,585 72.95 5.39 22,585 73.95 5.68
Noninterest-bearing
deposits:
Demand deposits......... 662 1.92 -- 79 0.26 -- 101 0.33 --
------- ------ ------- ------ ------- ------
Total average
deposits.............. $34,451 100.00% $30,957 100.00% $30,541 100.00%
======= ====== ======= ====== ======= ======
</TABLE>
______________
(1) Based on remaining maturity of certificates of deposit.
Deposit Flow. The following table presents the balances, with interest
credited, and changes in dollar amounts of deposits in the various types of
accounts offered by Indian Village between the dates indicated.
<TABLE>
<CAPTION>
Year Ended December 31,
Six Months Ended June 30, ------------------------------------------------------
2000 1999 1998
------------------------------- -------------------------------- -------------------
Percent Increase Percent Increase Percent
Amount of Total (Decrease) Amount of Total (Decrease) Amount of Total
------- -------- ---------- -------- -------- ---------- -------- --------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Passbook accounts..................... $ 5,217 14.26% $ 11 $ 5,206 15.70% $ (258) $ 5,464 17.70%
NOW accounts.......................... 1,639 4.48 393 1,246 3.76 409 837 2.71
Money market deposits................. 1,873 5.12 297 1,576 4.75 (119) 1,695 5.49
Fixed-rate certificates
maturing:
Within 1 year...................... 14,912 40.76 1,338 13,574 40.94 (774) 14,348 46.48
After 1 year, but
within 2 years................... 7,304 19.96 919 6,385 19.26 2,191 4,194 13.59
After 2 years, but
within 5 years.................. 4,574 12.50 (351) 4,925 14.86 678 4,247 13.76
After 5 years...................... -- -- -- -- -- -- -- --
------- ------ ------ ------- ------ ------ ------- ------
Total certificates................. 26,790 73.22 1,906 24,884 75.06 2,095 22,789 73.83
------- ------ ------ ------- ------ ------ ------- ------
Noninterest-bearing deposits:
Demand deposits.................... 1,067 2.92 826 241 0.73 160 81 0.27
------- ------ ------ ------- ------ ------ ------- ------
Total........................... $36,586 100.00% $3,433 $33,153 100.00% $2,287 $30,866 100.00%
======= ====== ====== ======= ====== ====== ======= ======
</TABLE>
18
<PAGE>
Time Deposits by Rates and Maturities. The following table presents the
amount of time deposits in Indian Village categorized by rates and maturities at
the dates indicated.
<TABLE>
<CAPTION>
Period to Maturity from June 30, 2000 At June 30, At December 31,
-------------------------------------------------------------- ----------- ------------------
Less than 1 - 2 2 - 3 3 - 4 After
One Year Years Years Years 4 Years Total 2000 1999 1998
---------- ------- ------- ------- --------- ------- ----------- -------- --------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
0.00 - 4.00% $ -- $ 5 $ -- $ -- $ -- $ 5 $ 5 $ 5 $ 39
4.01 - 5.00% 4,178 604 -- -- -- 4,782 4,782 8,442 3,142
5.01 - 6.00% 7,658 2,267 1,052 629 541 12,147 12,147 12,745 15,548
6.01 - 7.00% 3,076 4,428 1,581 -- 771 9,856 9,856 3,437 3,726
Over 7.00% -- -- -- -- -- -- -- 255 334
------- ------ ------ ------ ------ ------- ------- ------- -------
Total...... $14,912 $7,304 $2,633 $ 629 $1,312 $26,790 $26,709 $24,884 $22,789
======= ====== ====== ====== ====== ======= ======= ======= =======
</TABLE>
Deposit Activity. The following table presents the deposit activity of
Indian Village for the periods indicated.
<TABLE>
<CAPTION>
Six Months
Ended
June 30, Year Ended December 31,
------------- -------------------------
2000 1999 1998
------------- ---------- -----------
(In thousands)
<S> <C> <C> <C>
Beginning balance............................................. $33,153 $30,866 $30,277
Net deposits (withdrawals) before interest credited.......... 2,700 1,179 (629)
Interest credited............................................. 733 1,108 1,218
------- ------- -------
Net increase (decrease) in deposits........................... 3,433 2,287 589
------- ------- -------
Ending balance............................................. $36,586 $33,153 $30,866
======= ======= =======
</TABLE>
Borrowings. Indian Village has the ability to use advances from the Federal
Home Loan Bank of Cincinnati to supplement its supply of lendable funds and to
meet deposit withdrawal requirements. The Federal Home Loan Bank of Cincinnati
functions as a central reserve bank providing credit for savings associations
and certain other member financial institutions. As a member of the Federal Home
Loan Bank of Cincinnati, Indian Village is required to own capital stock in the
Federal Home Loan Bank of Cincinnati and is authorized to apply for advances on
the security of the capital stock and certain of its mortgage loans and other
assets, principally securities that are obligations of, or guaranteed by, the
U.S. Government or its agencies, provided certain creditworthiness standards
have been met. Advances are made under several different credit programs. Each
credit program has its own interest rate and range of maturities. Depending on
the program, limitations on the amount of advances are based on the financial
condition of the member institution and the adequacy of collateral pledged to
secure the credit. At June 30, 2000, Indian Village had the ability to borrow a
total of approximately $22.0 million from the Federal Home Loan Bank of
Cincinnati. At that date, Indian Village had outstanding advances of $20.3
million.
19
<PAGE>
The following tables presents certain information regarding Indian
Village's use of Federal Home Loan Bank of Cincinnati advances during the
periods and at the dates indicated.
<TABLE>
<CAPTION>
Year Ended
Six Months December 31,
Ended ----------------------------
June 30,
2000 1999 1998
----------- ------------- -----------
(Dollars in Thousands)
<S> <C> <C> <C>
Maximum amount of advances outstanding at any month end.......... $21,250 $18,200 $4,000
Approximate average advances outstanding......................... 19,417 9,678 2,351
Approximate weighted average rate paid on advances............... 5.82% 5.42% 5.78%
<CAPTION>
At December 31,
At June 30, ----------------------------
2000 1999 1998
----------- ------------- -----------
(Dollars in thousands)
<S> <C> <C> <C>
Balance outstanding at end of period............................. $20,250 $17,200 $4,000
Weighted average rate paid on advances........................... 5.92% 5.49% 5.14%
</TABLE>
REGULATION AND SUPERVISION
General
As a savings and loan holding company, Indian Village Bancorp is required
by federal law to file reports with, and otherwise comply with, the rules and
regulations of the Office of Thrift Supervision. Indian Village is an Ohio
chartered savings bank, a member of the Federal Home Loan Bank system, and its
deposit accounts are insured up to applicable limits by the Federal Deposit
Insurance Corporation through the Savings Association Insurance Fund. Indian
Village is subject to extensive regulation, examination and supervision by the
Federal Deposit Insurance Corporation and the Ohio Division of Financial
Institutions. Indian Village must file reports with the Ohio Division of
Financial Institutions and the Federal Deposit Insurance Corporation concerning
its activities and financial condition, in addition to obtaining regulatory
approvals prior to entering into certain transactions such as mergers with, or
acquisitions of, other financial institutions. There are periodic examinations
by the Ohio Division of Financial Institutions and the Federal Deposit Insurance
Corporation to test Indian Village's compliance with various regulatory
requirements. This regulation and supervision establishes a comprehensive
framework of activities in which an institution can engage and is intended
primarily for the protection of the insurance fund and depositors. The
regulatory structure also gives the regulatory authorities extensive discretion
in connection with their supervisory and enforcement activities and examination
policies, including policies with respect to the classification of assets and
the establishment of adequate loan loss reserves for regulatory purposes. Any
change in such policies, whether by the Ohio Division of Financial Institutions,
the Federal Deposit Insurance Corporation or the Congress, could have a material
adverse impact on the Company, Indian Village and their operations. Certain of
the regulatory requirements applicable to Indian Village and to Indian Village
Bancorp are referred to below or elsewhere in this report. The description of
statutory provisions and regulations applicable to savings institutions and
their holding companies set forth in this report does not purport to be a
complete description of such statutes and regulations and their effects on
Indian Village and Indian Village Bancorp.
Holding Company Regulation
Although Indian Village is an Ohio-chartered savings bank, Indian Village
Bancorp is a nondiversified unitary savings and loan holding company within the
meaning of federal law by virtue of Section 10(l) of the Home Owner's
20
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Loan Act. Indian Village Bancorp's status as a savings and loan holding company
is conditioned upon Indian Village's satisfaction of the QTL Test imposed by the
regulations of the Office of Thrift Supervision. See "Federal Regulations--QTL
Test." Under prior law, a unitary savings and loan holding company, such as
Indian Village Bancorp was not generally restricted as to the types of business
activities in which it may engage, provided that Indian Village continued to be
a qualified thrift lender. The Gramm-Leach-Bliley Act of 1999 provides that no
company may acquire control of a savings association after May 4, 1999 unless it
engages only in the financial activities permitted for financial holding
companies under the law or for multiple savings and loan holding companies as
described below. Further, the Gramm-Leach-Bliley Act specifies that savings and
loan holding companies may only engage in such activities. The Gramm-Leach-
Bliley Act, however, grandfathered the unrestricted authority for activities
with respect to unitary savings and loan holding companies existing, or subject
to an application filed, prior to May 4, 1999, such as Indian Village Bancorp,
so long as Indian Village continues to comply with the QTL Test. Upon any non-
supervisory acquisition by Indian Village Bancorp of another savings institution
or savings bank that meets the qualified thrift lender test and is deemed to be
a savings institution by the Office of Thrift Supervision, Indian Village
Bancorp would become a multiple savings and loan holding company (if the
acquired institution is held as a separate subsidiary) and would generally be
limited to activities permissible for bank holding companies under Section
4(c)(8) of the Bank Holding Company Act, subject to the prior approval of the
Office of Thrift Supervision, and certain activities authorized by Office of
Thrift Supervision regulation.
A savings and loan holding company is prohibited from, directly or
indirectly, acquiring more than 5% of the voting stock of another savings
institution or savings and loan holding company, without prior written approval
of the Office of Thrift Supervision and from acquiring or retaining control of a
depository institution that is not insured by the Federal Deposit Insurance
Corporation. In evaluating applications by holding companies to acquire savings
institutions, the Office of Thrift Supervision considers the financial and
managerial resources and future prospects of Indian Village Bancorp and
institution involved, the effect of the acquisition on the risk to the deposit
insurance funds, the convenience and needs of the community and competitive
factors.
The Office of Thrift Supervision may not approve any acquisition that would
result in a multiple savings and loan holding company controlling savings
institutions in more than one state, subject to two exceptions: (i) the approval
of interstate supervisory acquisitions by savings and loan holding companies and
(ii) the acquisition of a savings institution in another state if the laws of
the state of the target savings institution specifically permit such
acquisitions. The states vary in the extent to which they permit interstate
savings and loan holding company acquisitions.
Although savings and loan holding companies are not subject to specific
capital requirements or specific restrictions on the payment of dividends or
other capital distributions, federal regulations do prescribe such restrictions
on subsidiary savings institutions as described below. Indian Village must
notify the Office of Thrift Supervision 30 days before declaring any dividend to
Indian Village Bancorp. In addition, the financial impact of a holding company
on its subsidiary institution is a matter that is evaluated by the Office of
Thrift Supervision and the agency has authority to order cessation of activities
or divestiture of subsidiaries deemed to pose a threat to the safety and
soundness of the institution.
State Regulation
The Ohio Division of Financial Institutions is responsible for the
regulation and supervision of Ohio savings banks in accordance with the laws of
the State of Ohio. Ohio law prescribes the permissible investments and
activities of Ohio savings banks, including the types of lending that such banks
may engage in and the investments in real estate, subsidiaries and corporate or
government securities that such banks may make. The ability of Ohio savings
banks to engage in these state-authorized investments generally is subject to
various limitations under Federal Deposit Insurance Corporation regulations and
oversight by the Federal Deposit Insurance Corporation.
Any mergers involving, or acquisitions of control of, Ohio savings banks
are subject to the prior approval of the Ohio Division of Financial
Institutions. The Ohio Division of Financial Institutions may initiate certain
supervisory
21
<PAGE>
measures or formal enforcement actions against Ohio savings banks. Ultimately,
if the grounds provided by law exist, the Ohio Division of Financial
Institutions may place an Ohio savings bank in conservatorship or receivership.
The Ohio Division of Financial Institutions conducts regular examinations
of Indian Village approximately once a year. The Ohio Division of Financial
Institutions imposes assessments on Ohio savings banks based on the savings
bank's asset size to cover the cost of supervision and examination.
In addition to being governed by the laws of Ohio specifically governing
savings banks, Indian Village is also governed by Ohio corporate law, to the
extent such law does not conflict with the laws specifically governing savings
banks.
All Federal Deposit Insurance Corporation-insured state-chartered savings
banks and their subsidiaries have generally been limited to activities and
equity investments of the type and in the amount authorized for national banks,
notwithstanding state law. The Federal Deposit Insurance Corporation is
authorized to permit such institutions to engage in state authorized activities
or investments that do not meet this standard (other than non-subsidiary equity
investments) for institutions that meet all applicable capital requirements if
it is determined that such activities or investments do not pose a significant
risk to the Savings Association Insurance Fund. All non-subsidiary equity
investments not permitted for national banks were required to be divested by
December 19, 1996, pursuant to an Federal Deposit Insurance Corporation-approved
divestiture plan. The Federal Deposit Insurance Corporation restrictions on
state-chartered institutions have not affected the operations of Indian Village.
Federal Regulations
Capital Requirements. The Federal Deposit Insurance Corporation has adopted
risk-based capital guidelines to which Indian Village is subject. The guidelines
establish a systematic analytical framework that makes regulatory capital
requirements more sensitive to differences in risk profiles among banking
organizations. Indian Village is required to maintain certain levels of
regulatory capital in relation to regulatory risk-weighted assets. The ratio of
such regulatory capital to regulatory risk-weighted assets is referred to as
Indian Village's "risk-based capital ratio." Risk-based capital ratios are
determined by allocating assets and specified off-balance sheet items to four
risk-weighted categories ranging from 0% to 100%, with higher levels of capital
being required for the categories perceived as representing greater risk.
These guidelines divide a savings bank's capital into two tiers. The first
tier ("Tier I") includes common equity, retained earnings, certain non-
cumulative perpetual preferred stock (excluding auction rate issues) and
minority interests in equity accounts of consolidated subsidiaries, less
goodwill and other intangible assets (except mortgage servicing rights and
purchased credit card relationships subject to certain limitations).
Supplementary ("Tier II") capital includes, among other items, cumulative
perpetual and long-term limited-life preferred stock, mandatory convertible
securities, certain hybrid capital instruments, term subordinated debt and the
allowance for loan and lease losses limited to a maximum of 1.25% of risk
weighted assets, subject to certain limitations, less required deductions.
Savings banks are required to maintain a total risk-based capital ratio of 8%,
of which at least 4% must be Tier I capital.
In addition, the Federal Deposit Insurance Corporation has established
regulations prescribing a minimum Tier I leverage ratio (Tier I capital to
adjusted total assets as specified in the regulations). These regulations
provide for a minimum Tier I leverage ratio of 3% for banks that meet certain
specified criteria, including that they have the highest examination rating and
are not experiencing or anticipating significant growth. All other banks are
required to maintain a Tier I leverage ratio of at least 4%. The Federal Deposit
Insurance Corporation may, however, set higher capital requirements on
individual institutions when particular circumstances warrant. Savings banks
experiencing or anticipating significant growth are expected to maintain capital
ratios, including tangible capital positions, well above the minimum levels.
22
<PAGE>
The following is a summary of Indian Village's regulatory capital at June
30, 2000:
GAAP Capital to Total Assets................... 13.20%
Total Capital to Risk-Weighted Assets.......... 22.00%
Tier I Leverage Ratio.......................... 11.40%
The Federal Deposit Insurance Corporation, along with the other federal
banking agencies, have adopted a regulation providing that the agencies will
take account of the exposure of a bank's capital and economic value to changes
in interest rate risk in assessing a bank's capital adequacy.
Dividend Limitations. The Federal Deposit Insurance Corporation has
authority to use its enforcement powers to prohibit a savings bank from paying
dividends if, in its opinion, the payment of dividends would constitute an
unsafe or unsound practice. Under Ohio law, Indian Village is prohibited from
paying a dividend which would result in insolvency. Ohio law requires Indian
Village to obtain Division approval before payment of dividends in excess of net
profits for the current and two prior fiscal years, with certain adjustments.
Federal law prohibits the payment of dividends by a bank that will result in the
bank failing to meet applicable capital requirements on a pro forma basis.
--- -----
Additionally, Indian Village, as a subsidiary of a savings and loan holding
company, is required to provide the Office of Thrift Supervision with 30 days
prior written notice before declaring any dividend.
Standards for Safety and Soundness. The federal banking agencies have
adopted final regulations and Interagency Guidelines Prescribing Standards for
Safety and Soundness to implement safety and soundness standards used to
identify and address problems at insured depository institutions before capital
becomes impaired. If the appropriate federal banking agency determines that an
institution fails to meet any standard prescribed by the interagency guidelines,
the agency may require the institution to submit to the agency an acceptable
plan to achieve compliance with the standard, as required by the Federal Deposit
Insurance Act, as amended.
Prompt Corrective Regulatory Action. Federal law requires, among other
things, that federal bank regulatory authorities take "prompt corrective action"
with respect to banks that do not meet minimum capital requirements. The
severity of such action depends on the degree of under capitalization.
An institution is deemed to be "undercapitalized" if it has a total risk-
based capital ratio of less than 8%, a Tier I risk-based capital ratio of less
than 4%, or generally a leverage ratio of less than 4%. An institution is
deemed to be "significantly undercapitalized" if it has a total risk-based
capital ratio of less than 6%, a Tier I risk-based capital ratio of less than
3%, or a leverage ratio of less than 3%. An institution is deemed to be
"critically undercapitalized" if it has a ratio of tangible equity (as defined
in the regulations) to total assets that is equal to or less than 2%.
Subject to a narrow exception, the banking regulator is required to appoint
a receiver or conservator for an institution that is "critically
undercapitalized." The regulation also provides that a capital restoration plan
must be filed with the Federal Deposit Insurance Corporation within 45 days of
the date a savings institution receives notice that it is "undercapitalized,"
"significantly undercapitalized" or "critically undercapitalized." Compliance
with the plan must be guaranteed by any parent holding company. In addition,
numerous mandatory supervisory actions become immediately applicable to an
undercapitalized institution, including, but not limited to, increased
monitoring by regulators and restrictions on growth, capital distributions and
expansion. The Federal Deposit Insurance Corporation could also take any one of
a number of discretionary supervisory actions, including the issuance of a
capital directive and the replacement of senior executive officers and
directors.
Insurance of Deposit Accounts. Deposits of Indian Village are presently
insured by the Savings Association Insurance Fund. The Federal Deposit Insurance
Corporation maintains a risk-based assessment system by which institutions are
assigned to one of three categories based on their capitalization and one of
three subcategories based on examination ratings and other supervisory
information. An institution's assessment rate depends upon the categories to
which it is assigned. Assessment rates for Savings Association Insurance Fund
member institutions are determined
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<PAGE>
semiannually by the Federal Deposit Insurance Corporation and currently range
from zero basis points for the healthiest institutions to 27 basis points for
the riskiest.
In addition to the assessment for deposit insurance, institutions are
required to make payments on bonds issued in the late 1980s by the Financing
Corporation to recapitalize the predecessor to the Savings Association Insurance
Fund. During 1999, Finance Corporation payments for Savings Association
Insurance Fund members approximated 6.10 basis points, while Bank Insurance Fund
members paid 1.22 basis points. By law, there is equal sharing of Finance
Corporation payments between Savings Association Insurance Fund and Bank
Insurance Fund members beginning January 1, 2000.
Indian Village's assessment rate for six months ended June 30, 2000 was
.515 basis points and the premium paid for this period was $2,000. The Federal
Deposit Insurance Corporation has authority to increase insurance assessments.
A significant increase in Savings Association Insurance Fund insurance premiums
would likely have an adverse effect on the operating expenses and results of
operations of Indian Village. Management cannot predict what insurance
assessment rates will be in the future.
Insurance of deposits may be terminated by the Federal Deposit Insurance
Corporation upon a finding that the institution has engaged in unsafe or unsound
practices, is in an unsafe or unsound condition to continue operations or has
violated any applicable law, regulation, rule, order or condition imposed by the
Federal Deposit Insurance Corporation. The management of Indian Village does
not know of any practice, condition or violation that might lead to termination
of deposit insurance.
Transactions with Related Parties. Indian Village's authority to engage in
transactions with "affiliates" (e.g., any company that controls or is under
common control with an institution, including the Company and its non-savings
institution subsidiaries) is limited by federal law. The aggregate amount of
covered transactions with any individual affiliate is limited to 10% of the
capital and surplus of the savings institution. The aggregate amount of covered
transactions with all affiliates is limited to 20% of the savings institution's
capital and surplus. Certain transactions with affiliates are required to be
secured by collateral in an amount and of a type described in federal law and
the purchase of low quality assets from affiliates is generally prohibited.
Transactions with affiliates, including loans and asset purchases, must be on
terms and under circumstances, including credit standards, that are
substantially the same or at least as favorable to the institution as those
prevailing at the time for comparable transactions with non-affiliated
companies. In addition, institutions are prohibited from lending to any
affiliate that is engaged in activities that are not permissible for bank
holding companies and no institution may purchase the securities of any
affiliate other than a subsidiary.
Indian Village's authority to extend credit to executive officers,
directors and 10% shareholders, as well as entities such persons control, is
governed by federal law. Among other things, such loans are required to be made
on terms substantially the same as those offered to unaffiliated individuals and
to not involve more than the normal risk of repayment. There is an exception
for loans made pursuant to a benefit or compensation program that is widely
available to all employees of the institution and does not give preference to
insiders over other employees. Federal law places individual and aggregate
limits on the amount of loans Indian Village may make to insiders based, in
part, on Indian Village's capital position and requires certain board approval
procedures to be followed.
Enforcement. The Federal Deposit Insurance Corporation has primary
enforcement responsibility over Indian Village and has the authority to bring
actions against the institution and all institution-affiliated parties,
including stockholders, and any attorneys, appraisers and accountants who
knowingly or recklessly participate in wrongful action likely to have an adverse
effect on an insured institution. Formal enforcement action may range from the
issuance of a capital directive or cease and desist order to removal of officers
and/or directors to institution of receivership, conservatorship or termination
of deposit insurance. Civil penalties cover a wide range of violations and can
amount to $25,000 per day, or even $1 million per day in especially egregious
cases. Federal law also establishes criminal penalties for certain violations.
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<PAGE>
QTL Test. As a condition of Indian Village Bancorp's elected status as a
savings and loan holding company under Section 10(l) of the Home Owners Loan
Act, Indian Village must satisfy the QTL Test under the regulations of the
Office of Thrift Supervision. Under the test, a savings association is required
to either qualify as a "domestic building and loan association" under the
Internal Revenue Code or maintain at least 65% of its "portfolio assets" (total
assets less: (i) specified liquid assets up to 20% of total assets; (ii)
intangibles, including goodwill; and (iii) the value of property used to conduct
business) in certain "qualified thrift investments" (primarily residential
mortgages and related investments, including certain mortgage-backed securities)
in at least 9 months out of each 12 month period.
A savings institution that fails the qualified thrift lender test is
subject to certain operating restrictions and may be required to convert to a
bank charter. As of June 30, 2000, Indian Village maintained 77.0% of its
portfolio assets in qualified thrift investments and, therefore, met the
qualified thrift lender test. Recent legislation has expanded the extent to
which education loans, credit card loans and small business loans may be
considered "qualified thrift investments."
Federal Home Loan Bank System
Indian Village is a member of the Federal Home Loan Bank System, which
consists of 12 regional Federal Home Loan Banks. The Federal Home Loan Bank
provides a central credit facility primarily for member institutions. Indian
Village, as a member of the Federal Home Loan Bank, is required to acquire and
hold shares of capital stock in that Federal Home Loan Bank in an amount at
least equal to 1.0% of the aggregate principal amount of its unpaid residential
mortgage loans and similar obligations at the beginning of each year, or 1/20 of
its advances (borrowings) from the Federal Home Loan Bank, whichever is greater.
Indian Village was in compliance with this requirement with an investment in
Federal Home Loan Bank stock at June 30, 2000 of $1.1 million.
The Federal Home Loan Banks are required to provide funds for the
resolution of insolvent thrifts in the late 1980s and to contribute funds for
affordable housing programs. These requirements could reduce the amount of
dividends that the Federal Home Loan Banks pay to their members and could also
result in the Federal Home Loan Banks imposing a higher rate of interest on
advances to their members. If dividends were reduced, or interest on future
Federal Home Loan Bank advances increased, Indian Village's net interest income
would likely also be reduced. Recent legislation has changed the structure of
the Federal Home Loan Banks funding obligations for insolvent thrifts, revised
the capital structure of the Federal Home Loan Banks and implemented entirely
voluntary membership for Federal Home Loan Banks. Management cannot predict the
effect that these changes may have with respect to its Federal Home Loan Bank
membership.
Federal Reserve System
The Federal Reserve Board regulations require savings institutions to
maintain non-interest earning reserves against their transaction accounts
(primarily NOW and regular checking accounts). The regulations generally
provide that reserves be maintained against aggregate transaction accounts as
follows: for accounts aggregating $44.3 million or less (subject to adjustment
by the Federal Reserve Board) the reserve requirement is 3%; and for accounts
aggregating greater than $44.3 million, the reserve requirement is $1.329
million plus 10% (subject to adjustment by the Federal Reserve Board between 8%
and 14%) against that portion of total transaction accounts in excess of $44.3
million. The first $5.0 million of otherwise reservable balances (subject to
adjustments by the Federal Reserve Board) are exempted from the reserve
requirements. At June 30, 2000, Indian Village complied with the foregoing
requirements.
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FEDERAL AND STATE TAXATION
Federal Taxation
General. Indian Village Bancorp reports its income on a fiscal year,
unconsolidated basis using the accrual method of accounting. Indian Village
reports its income on a fiscal year, unconsolidated basis using the accrual
method of accounting. The federal income tax laws apply to Indian Village
Bancorp and Indian Village in the same manner as to other corporations with some
exceptions, including particularly Indian Village's reserve for bad debts
discussed below. The following discussion of tax matters is intended only as a
summary and does not purport to be a comprehensive description of the tax rules
applicable to Indian Village or Indian Village Bancorp. Indian Village's federal
tax returns have been either audited or closed under the statute of limitations
through tax year 1995. For its 2000 tax year, Indian Village's maximum federal
income tax rate was 34%.
Bad Debt Reserves. For fiscal years beginning before December 31, 1995,
thrift institutions which qualified under certain definitional tests and other
conditions of the Internal Revenue Code of 1986, as amended, were permitted to
use certain favorable provisions to calculate their deductions from taxable
income for annual additions to their bad debt reserve. A reserve could be
established for bad debts on qualifying real property loans, generally secured
by interests in real property improved or to be improved, under the percentage
of taxable income method or the experience method. The reserve for nonqualifying
loans was computed using the experience method.
Federal legislation enacted in 1996 repealed the reserve method of
accounting for bad debts for tax years beginning after 1995 and required savings
institutions to recapture or take into income certain portions of their
accumulated bad debt reserves. Thrift institutions eligible to be treated as
"small banks," those with assets of $500 million or less, are allowed to use the
experience method that applies to "small banks," while thrift institutions that
are treated as large banks, those with assets exceeding $500 million, are
required to use only the specific charge-off method. As a result, the
percentage of taxable income method of accounting for bad debts is no longer
available for any financial institution.
A thrift institution required to change its method of computing reserves
for bad debts will treat the change as a change in method of accounting,
initiated by the taxpayer, and having been made with the consent of the Internal
Revenue Service. Any adjustment required to be taken into income with respect
to a change in accounting method generally will be taken into income ratably
over a six-taxable year period, beginning with the first taxable year beginning
after 1995, subject to a 2-year suspension if the "residential loan requirement"
is satisfied. Under the residential loan requirement provision, the recapture
required by the new legislation will be suspended for each of two successive
taxable years, beginning with Indian Village's 1996 taxable year, in which
Indian Village originates a minimum of certain residential loans based upon the
average of the principal amounts of these loans that Indian Village makes during
its six taxable years preceding its current taxable year.
Indian Village is required to recapture or take into income over a six year
period the excess of the balance of its tax bad debt reserves as of December 31,
1995 over the balance of the reserves as of December 31, 1987. As a result,
Indian Village will incur an additional tax liability of approximately $35,000,
which is generally expected to be taken into income beginning in 1996 over a six
year period.
Distributions. If Indian Village makes "non-dividend distributions" to
Indian Village Bancorp, they will be considered to have been made from Indian
Village's unrecaptured tax bad debt reserves, including the balance of its
reserves as of December 31, 1987, to the extent of the "nondividend
distributions," and then from Indian Village's supplemental reserve for losses
on loans, to the extent of those reserves, and an amount based on the amount
distributed, but not more than the amount of those reserves, will be included in
Indian Village's taxable income. Non-dividend distributions include
distributions in excess of Indian Village's current and accumulated earnings and
profits, as calculated for federal income tax purposes, distributions in
redemption of stock, and distributions in partial or complete
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liquidation. Dividends paid out of Indian Village's current or accumulated
earnings and profits will not be so included in Indian Village's taxable income.
The amount of additional taxable income triggered by a non-dividend is an
amount that, when reduced by the tax attributable to the income, is equal to the
amount of the distribution. Therefore, if Indian Village makes a non-dividend
distribution to Indian Village Bancorp, approximately one and one-half times the
amount of the distribution not in excess of the amount of the reserves would be
includable in income for federal income tax purposes, assuming a 34% federal
corporate income tax rate. Indian Village does not intend to pay dividends that
would result in a recapture of any portion of its bad debt reserves.
Ohio Taxation
Indian Village Bancorp is subject to the Ohio corporation franchise tax,
which, as applied to it, is a tax measured by both net income and net worth. In
general, the tax liability is the greater of 5.1% on the first $50,000 of
computed Ohio taxable income and 8.5% of computed Ohio taxable income in excess
of $50,000, or 0.40% of taxable net worth. Under these alternative measures of
computing the tax liability, complex formulas determine the jurisdictions to
which total net income and total net worth are apportioned or allocated. The
minimum tax is $50 per year and maximum tax liability as measured by net worth
is limited to $150,000 per year.
A special litter tax also applies to all corporations, including Indian
Village Bancorp, subject to the Ohio corporation franchise tax. This litter tax
does not apply to "financial institutions." If a corporation pays franchise tax
on the basis of net income, the litter tax is equal to 0.11% of the first
$50,000 of computed Ohio taxable income and 0.22% of computed Ohio taxable
income in excess of $50,000. If a corporation pays franchise tax on the basis
of net worth, the litter tax is equal to 0.014% times taxable net worth.
A statutory exemption from the net worth tax is available to Indian Village
Bancorp if certain conditions are satisfied. Indian Village Bancorp expects to
qualify for this exemption, which would restrict its tax liability to the tax
measured by net income.
Indian Village is a "financial institution" for State of Ohio tax purposes.
Accordingly, it must pay the Ohio corporate franchise tax on "financial
institutions," which is imposed annually at a rate of 1.4% of the Indian
Village's apportioned book net worth, determined under generally accepted
accounting principles, less any statutory deduction. This tax rate is scheduled
to decrease to 1.3% in the year 2000. As a "financial institution," Indian
Village does not pay any Ohio tax based upon net income or net profits.
ITEM 2. DESCRIPTION OF PROPERTIES
The following table sets forth information relating to Indian Village's
offices as of June 30, 2000.
Year Net Book Owned/ Approximate
Location Opened Value(1) Leased Square Footage
--------- ------ ----------- ------ --------------
Main Office
-----------
100 South Walnut Street
Gnadenhutten, Ohio 1968 $ 258,000 Owned 7,600
Branch Office
-------------
635 West High Avenue(2)
New Philadelphia, Ohio 1999 1,306,000 Owned 4,200
______________
(1) Represents the net book value of land, buildings, furniture, fixtures and
equipment owned by Indian Village.
(2) Location of an automated teller machine.
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ITEM 3. LEGAL PROCEEDINGS
Indian Village Bancorp is not a party to any pending legal proceedings.
Periodically, there have been various claims and lawsuits involving Indian
Village, such as claims to enforce liens, condemnation proceedings on properties
in which Indian Village holds security interests, claims involving the making
and servicing of real property loans and other issues incident to Indian
Village's business. Indian Village is not a party to any pending legal
proceedings that it believes would have a material adverse effect on the
financial condition or operations of Indian Village.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The 2000 Annual Meeting of Stockholders was held on May 3, 2000. The
following matters were submitted to the stockholders.
1. Election of two directors to serve for a term of three years.
Number of Shares
----------------
For Withheld
--- --------
Directors elected at the meeting: John A. Beitzel 326,928 1,000
Cindy S. Knisely 318,728 9,200
<TABLE>
<CAPTION>
Number of Shares
-------------------------------------------------------------
For Against Abstained Non-Vote
------------ ------------- ------------- -------------
<S> <C> <C> <C> <C>
2. The approval of the Indian Village Bancorp,
Inc. 2000 Stock-Based Incentive Plan................ 296,766 4,682 4,050 140,085
3. The ratification of Crowe, Chizek and Company
LLP as independent auditors for the fiscal year
ending December 31, 2000............................ 326,328 100 1,500 117,655
</TABLE>
The directors whose terms continued and the years their terms expired are
as follows: Joanne Limbach (2001), Marty R. Lindon (2001), Vernon E. Mishler
(2001), Michael A. Cochran (2002) and Rebecca S. Mastin (2002).
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Stock Listing
Indian Village Bancorp common stock trades infrequently and is not traded
on any established securities market, although the stock is listed on the Over-
The-Counter Bulletin Board under the symbol "IDVB". In the past, parties
interested in buying and selling Indian Village Bancorp's stock have generally
been referred to Sweney Cartwright & Co.
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Price Range of Common Stock And Dividends
The high and low bid of the common stock of Indian Village Bancorp for each
quarter since the common stock began trading on July 1, 1999, as reported by
Sweney Cartwright & Co., and cash dividends paid by quarter were as follows:
<TABLE>
<CAPTION>
Cash
High Low Dividends
---------- ------------- -------------
<S> <C> <C> <C>
2000
----
Quarter ended June 30, 2000..................... $12.625 $ 10.50 $0.070
Quarter ended March 31, 2000.................... $ 12.25 $ 10.75 $0.065
1999
----
Quarter ended December 31, 1999................. 12.250 11.000 --
Quarter ended September 30, 1999................ 11.750 10.375 --
</TABLE>
Management does not have knowledge of the prices paid in all transactions
and has not verified the accuracy of those prices which have been reported.
Because of the lack of an established market for Indian Village Bancorp's stock,
these prices reflect inter-dealer prices with retail mark-up, mark-down or
commission and may not reflect the prices at which the stock would trade in an
active market or actual transactions.
At September 1, 2000, there were 423,304 common shares of Indian Village
Bancorp issued and outstanding (including unallocated employee stock ownership
plan shares) and there were 318 holders of record.
Indian Village Bancorp's ability to pay dividends depends primarily on the
ability of Indian Village to pay dividends to Indian Village Bancorp. See Note
2 to Notes to Consolidated Financial Statements for a discussion of the
restrictions on the ability of Indian Village to pay dividends.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
General
The following is management's analysis of Indian Village Bancorp's
consolidated financial condition as of June 30, 2000, compared to December 31,
1999 and Indian Village Bancorp's consolidated results of operations for the six
months ended June 30, 2000, compared to the six months ended June 30, 1999. This
discussion is designed to provide a more comprehensive review of the operating
results and financial position than could be obtained from an examination of the
consolidated financial statements alone. This analysis should be read in
conjunction with the consolidated financial statements and related footnotes and
the selected financial data included elsewhere in this report.
The conversion was consummated on July 1, 1999. A total of 445,583 common
shares of Indian Village Bancorp were sold at $10.00 per share and net proceeds
from the sale were $4,024,000 after deducting the costs of the conversion.
Indian Village Bancorp retained 50% of the net proceeds from the sale of common
shares. The remainder of the net proceeds was invested in the capital stock
issued by Indian Village to Indian Village Bancorp in connection with the
conversion.
Indian Village provides financial services through its main office in
Gnadenhutten, Ohio and branch office in New Philadelphia, Ohio. Its primary
deposit products are checking, savings and term certificate accounts, and its
primary lending products are residential mortgage, commercial and installment
loans. Substantially all loans are secured by specific items of collateral
including business assets, consumer assets and real estate. Commercial loans are
expected to be repaid from cash flow from operations of businesses. Real estate
loans are secured by both residential and commercial real estate.
29
<PAGE>
Forward Looking Statements
When used in this discussion or future filings by Indian Village Bancorp
with the Securities and Exchange Commission, or other public or shareholder
communications, or in oral statements made with the approval of an authorized
executive officer, the words or phrases "will likely result," "are expected to,"
"will continue," "is anticipated," "estimate," "project," "believe" or similar
expressions are intended to identify "forward-looking statements" within the
meaning of the Private Securities Litigation Reform Act of 1995. Indian Village
Bancorp cautions readers not to place undue reliance on any such forward-looking
statements, which speak only as of the date made, and to advise readers that
various factors, including but not limited to regional and national economic
conditions, changes in levels of market interest rates, credit risks of lending
activities and competitive and regulatory factors, could affect Indian Village
Bancorp's financial performance and could cause Indian Village Bancorp's actual
results for future periods to differ materially from those anticipated or
projected.
Indian Village Bancorp is not aware of any trends, events or uncertainties
that will have or are reasonably likely to have a material effect on its
liquidity, capital resources or operations except as discussed in this report.
Indian Village Bancorp is not aware of any current recommendations by regulatory
authorities that would have such effect if implemented.
Indian Village Bancorp does not undertake, and specifically disclaims, any
obligation to publicly release the result of any revisions which may be made to
any forward-looking statements to reflect occurrence of anticipated or
unanticipated events or circumstances after the date of such statements.
Comparison of Financial Condition at June 30, 2000 and December 31, 1999
Total assets at June 30, 2000 were $65.6 million compared to $59.4 million
at December 31, 1999, an increase of $6.2 million, or 10.4%. The increase in
total assets was primarily due to an increase in securities available for sale
of $3.0 million and an increase in net loans of $3.5 million. The increase in
loans consisted of an increase in consumer loans of $1.5 million, as well as
increases in one- to four-family residential real estate, multi-family
residential, and construction loans of $1.2 million, $638,000, and $381,000,
respectively. These increases are reflective of a stable economy and Indian
Village's more aggressive promotion of consumer loans. The increase in assets
was funded primarily by Federal Home Loan Bank advances and an increase in
deposits.
The $1.5 million, or 42.5%, increase in the consumer loan portfolio between
December 31, 1999 and June 30, 2000 consisted primarily of increases in home
equity loans and lines of credit of $518,000, other consumer loans of $510,000,
and automobile loans of $318,000. Consumer loans represented 12.5% and 9.6% of
gross loans at June 30, 2000 and December 31, 1999, respectively.
Total deposits were $36.6 million on June 30, 2000 compared to $33.2
million at December 31, 1999, an increase of $3.4 million, or 10.2%. The
increase in deposits consisted primarily of increases in certificates of deposit
totaling $1.9 million and increases in non-interest bearing demand deposit
accounts and negotiable order of withdrawal ("NOW") accounts aggregating $1.2
million. Management attributes the increase in overall deposits to the opening
of a new branch office in New Philadelphia, Ohio in the fourth quarter in 1999.
Almost all certificates of deposit issued by Indian Village Bancorp mature in
less than three years with the majority maturing in the next year.
As a secondary source of liquidity, Indian Village Bancorp obtains
borrowings from the FHLB of Cincinnati, from which it held advances totaling
$20.3 million at June 30, 2000 and $17.2 million at December 31, 1999. Due to
continued loan demand and in order to better leverage Indian Village's capital,
Indian Village Bancorp used these funds to originate mortgage and consumer loans
and purchase securities available for sale as well as provide for short-term
liquidity needs. Federal Home Loan Bank advances at June 30, 2000 consisted of
$2.3 million in short-term advances and $18.0 million in long-term advances of
which $12.5 million are callable. The long-term callable advances have specified
call dates ranging from one to five years at which the advances may
30
<PAGE>
be called at the option of the Federal Home Loan Bank. Additional advances may
be obtained from the Federal Home Loan Bank to fund future loan growth and
liquidity as needed.
Results of Operations
The general economic conditions, the monetary and fiscal policies of
federal agencies and the regulatory policies of agencies that regulate financial
institutions affect the operating results of Indian Village Bancorp. Interest
rates on competing investments and general market rates of interest influence
Indian Village Bancorp's cost of funds. Lending activities are influenced by the
demand for real estate loans and other types of loans, which in turn is affected
by the interest rates at which such loans are made, general economic conditions
and the availability of funds for lending activities.
Indian Village Bancorp's net income primarily depends on its net interest
income, which is the difference between the interest income earned on interest-
earning assets, such as loans and securities, and interest expense incurred on
interest-bearing liabilities, such as deposits and borrowings. The level of net
interest income is dependent on the interest rate environment and the volume and
composition of interest-earning assets and interest-bearing liabilities.
Provisions for loan losses, service charges, gains on the sale of assets, other
income, noninterest expense and income taxes also affect net income.
Comparison of Operating Results for the Six Months Ended June 30, 2000 and 1999
Net Income. Net income was $131,000 for the six months ended June 30, 2000
compared to $161,000 for the six months ended June 30, 1999. The decrease in net
income for the six months ended June 30, 2000 was primarily the result of an
increase in noninterest expense partially offset by an increase in net interest
income.
Net Interest Income. Net interest income totaled $943,000 for the six
months ended June 30, 2000, as compared to $712,000 for the six months ended
June 30, 2000, representing an increase of $231,000, or 32.4%. The change in net
interest income is attributable to an increase in the ratio of average interest-
earning assets to average interest -bearing liabilities offset by a decrease in
the interest rate spread. The increase in the ratio of average interest-earning
assets to average interest-bearing liabilities is primarily due to the net
proceeds received from Indian Village Bancorp's stock offering in connection
with the conversion of $4.0 million.
Interest and fees on loans increased approximately $232,000, or 16.9%, from
$1.4 million for the six months ended June 30, 1999 to $1.6 million for the six
months ended June 30, 2000. The increase in interest income was due to a higher
average balance of loans while maintaining a relatively stable yield.
Interest earned on securities totaled $719,000 for the six months ended
June 30, 2000, as compared to $203,000 for the six months ended June 30, 1999.
The increase was a result of higher average balances of securities combined with
an increased yield earned due to an increasing interest rate environment.
Interest on interest-bearing deposits and overnight deposits decreased to
$18,000 for the six months ended June 30, 2000, as compared to $27,000 for the
same period in 1999.
Interest paid on deposits increased $99,000, compared to the six months
ended June 30, 1999. The increase was a result of higher average balances of
deposits combined with an increased cost of funds due to an increasing interest
rate environment.
Interest on Federal Home Loan Bank advances totaled $562,000 for the six
months ended June 30, 2000, compared to $153,000 for the six months ended June
30, 1999. The increase was the result of a higher average balance of advances
and a higher cost of funds due to an increasing interest rate environment. The
31
<PAGE>
additional borrowings were used to provide funding for loan demand and to better
leverage Indian Village Bancorp's capital.
Provision for Loan Losses. Indian Village Bancorp maintains an allowance
for loan losses in an amount that, in management's judgment, is adequate to
absorb probable losses inherent in the loan portfolio. While management utilizes
its best judgment and information available, the ultimate adequacy of the
allowance depends on a variety of factors, including past loan loss experience,
known and inherent risks in the nature and volume of the portfolio, information
about specific borrower situations and estimated collateral values, economic
conditions, and other factors. The provision for loan losses is determined by
management as the amount to be added to the allowance for loan losses after net
charge-offs have been deducted to bring the allowance to a level which is
considered adequate to absorb probable losses inherent in the loan portfolio.
The provision for loan losses for the six months ended June 30, 2000
totaled $5,000 compared to $6,000 for the six months ended June 30, 1999. Indian
Village Bancorp did not experience any net charge-offs during the six months
ended June 30, 2000 and 1999. Indian Village Bancorp's low charge-off history is
the product of a variety of factors, including Indian Village Bancorp's
underwriting guidelines, which generally require a loan-to-value or projected
completed value ratio of 80% for the purchase or construction of one-to four-
family residential properties and 75% for commercial real estate and land loans,
established income information and defined ratios of debt to income. Despite
this history, Indian Village Bancorp cannot give any assurances as to the level
of future charge-offs.
Noninterest Income. Noninterest income includes service charges and other
fees, net gains on sales of securities available for sale and other income. For
the six months ended June 30, 2000, noninterest income totaled $28,000 compared
to $27,000 for the six months ended June 30, 1999. During the 2000 period,
Indian Village Bancorp experienced an increase of $14,000 in service charges and
other fees that was partially offset by a decrease of $13,000 in net gains on
sale of securities available for sale and other miscellaneous income.
Noninterest Expense. Noninterest expense totaled $828,000 for the six
months ended June 30, 2000 compared to $489,000 for the same period in 1999. The
increase in noninterest expense was primarily the result of a $180,000 increase
in salaries and employee benefits expense, a $60,000 increase in professional
and consulting expense, a $55,000 expense in occupancy and furniture and
equipment expense, and a $43,000 increase in other expense. The increase in
salaries and employees benefits expense was due primarily to increased staffing
as a result of opening the new branch and Indian Village Bancorp's decision to
terminate its defined benefit pension plan in 1999. Indian Village Bancorp
recognized a non-recurring expense of $79,000 in the second quarter of 2000
related to its pension plan at the time of settlement. Additional increases in
occupancy, furniture and fixtures expense, data processing expense and other
expense also resulted from the opening of the new branch office in November
1999. The increase in professional and consulting fees was due primarily to the
growth of Indian Village Bancorp and the reporting requirements associated with
becoming a public company.
Income Tax Expense. The volatility of income tax expense is primarily
attributable to the change in net income before income taxes. The provision for
income taxes totaled $7,000 for the six months ended June 30, 2000 compared to
$83,000 for the six months ended June 30, 1999. The decrease in the provision
for income taxes was the result of a decrease in net income before income taxes
combined with the tax effect of tax-exempt income partially offset by
nondeductible expenses.
Yields Earned and Rates Paid
The following table sets forth certain information relating to Indian
Village Bancorp's average balance sheet information and reflects the average
yield on interest-earning assets and the average cost of interest-bearing
liabilities for the periods indicated. Such yields and costs are derived by
dividing income or expense by the average
32
<PAGE>
balances of interest-earning assets or interest-bearing liabilities for the
periods presented. Average balances were derived from daily balances.
<TABLE>
<CAPTION>
Six Months Ended June 30,
----------------------------------------------------------------------------
2000 1999
-------------------------------------- ------------------------------------
Average Interest Average Average Interest Average
Outstanding Earned/ Yield/ Outstanding Earned/ Yield/
Balance paid Rate Balance paid Rate
----------- ----------- ----------- ------------ ----------- --------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Interest earning assets:
Loans (1)......................................... $39,455 $1,603 8.17% $33,718 $1,371 8.20%
Mortgage-backed securities........................ 9,196 325 6.92 4,213 129 6.24
Investment securities (2):
Taxable........................................ 8,493 348 8.07 2,157 72 6.77
Non-taxable (3)................................ 1,678 70 8.44 79 3 7.96
Interest-bearing deposits and federal funds
sold........................................... 1,034 18 3.50 1,101 27 4.95
------- ------ ------ ------- ------ ------
Total interest-earning assets.................. 59,856 2,364 7.94 41,268 1,602 7.83
Noninterest-earning assets........................... 2,889 960
------- -------
Total assets................................... $62,745 $42,228
======= =======
Interest-bearing liabilities:
Demand deposits................................... $ 1,316 17 2.60 $ 1,005 9 1.81
Savings accounts.................................. 5,301 79 3.00 5,650 84 3.00
Money market accounts............................. 1,677 30 3.60 1,646 27 3.21
Certificates of deposit........................... 25,495 709 5.59 22,767 616 5.46
------- ------ ------ ------- ------ ------
Total deposits................................. 33,789 835 4.97 31,068 736 4.78
FHLB advances..................................... 19,417 562 5.82 5,780 153 5.34
------- ------ ------ ------- ------ ------
Total interest-bearing liabilities............. 53,206 1,397 5.28 36,848 889 4.87
------ ------ ------ ------
Noninterest-bearing liabilities...................... 799 246
------- -------
Total liabilities.............................. 54,005 32,094
Equity............................................... 8,740 5,134
------- -------
Total liabilities and equity................... $62,745 $42,228
======= =======
Net interest income; interest-rate spread (4)........ $ 6,650 $ 4,420
======= =======
Net earning assets................................... $ 967 2.66% $ 713 2.96%
====== ====== ====== ======
Net interest margin.................................. 3.25% 3.48%
====== ======
Average interest-earning assets to interest-
bearing liabilities............................... 112.50% 112.00%
====== ======
</TABLE>
_________________
(1) Net of deferred loan fees and costs and loans in process and includes
nonperforming loans.
(2) Average balance includes unrealized gains and losses. Yield is based on
amortized cost.
(3) Average yield for municipal securities are presented on a tax equivalent
basis based on an assumed tax rate of 34%.
(4) Interest rate spread represents the difference between the yield on
interest-earning assets and the cost of interest-bearing liabilities.
(5) Net interest margin represents net interest income divided by average
interest-earning assets.
33
<PAGE>
<TABLE>
<CAPTION>
Year Ended December 31,
------------------------------------------------------------------------
1999 1998
----------------------------------- -----------------------------------
Average Interest Average Average Interest Average
Outstanding Earned/ Yield/ Outstanding Earned/ Yield/
Balance paid Rate Balance paid Rate
------------- --------- --------- ------------ --------- ----------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Interest earning assets:
Loans (1)........................................... $34,895 $2,853 8.18% $28,449 $2,450 8.61%
Mortgage-backed securities.......................... 5,219 354 6.78 3,874 280 7.23
Investment securities (2):
Taxable.......................................... 4,482 334 7.45 3,265 224 6.86
Non-taxable (3).................................. 141 14 9.93 502 30 5.98
Interest-bearing deposits and federal funds sold.... 1,437 62 4.31 976 46 4.71
------- ------ ------- ------
Total interest-earning assets.................... 46,174 3,617 7.83 37,066 3,030 8.17
------ ------
Noninterest-earning assets............................. 1,615 1,219
------- -------
Total assets..................................... $47,789 $38,285
======= =======
Interest-bearing liabilities:
Demand deposits..................................... $ 1,028 19 1.85 $ 815 16 1.96
Savings accounts.................................... 5,676 161 2.84 5,263 172 3.27
Money market accounts............................... 1,589 52 3.27 1,777 59 3.32
Certificates of deposit............................. 22,585 1,217 5.39 22,585 1,283 5.68
------- ------ ------- ------
Total deposits................................... 30,878 1,449 4.69 30,440 1,530 5.03
FHLB advances....................................... 9,678 525 5.42 2,351 136 5.78
------- ------ ------- ------
Total interest-bearing liabilities............... 40,556 1,974 4.87 32,791 1,666 5.08
------ ------
Noninterest-bearing liabilities........................ 348 439
------- -------
Total liabilities................................ 40,903 33,230
Equity................................................. 6,885 5,055
------- -------
Total liabilities and equity..................... $47,789 $38,285
======= =======
Net interest income; interest-rate spread (4).......... $1,643 2.96% $1,364 3.09%
====== ==== ====== ====
Net earning assets..................................... $ 5,618 $ 4,275
======= =======
Net interest margin.................................... 3.56% 3.68%
==== ====
Average interest-earning assets to interest-
bearing liabilities................................. 113.85% 113.04%
======= =======
</TABLE>
_________________
(1) Net of deferred loan fees and costs and loans in process and includes
nonperforming loans.
(2) Average balance includes unrealized gains and losses. Yield is based on
amortized cost.
(3) Average yield for municipal securities are presented on a tax equivalent
basis based on an assumed tax rate of 34%.
(4) Interest rate spread represents the difference between the yield on
interest-earning assets and the cost of interest-bearing liabilities.
(5) Net interest margin represents net interest income divided by average
interest-earning assets.
34
<PAGE>
Rate/Volume Analysis
The table below describes the extent to which changes in interest rates and
changes in volume of interest-earning assets and interest-bearing liabilities
have affected Indian Village Bancorp's interest income and expense for the
periods indicated. For each category of interest-earning assets and interest-
bearing liabilities, information is provided on changes attributable to (1)
changes in volume (multiplied by prior year rate), (2) changes in rate
(multiplied by prior year volume) and (3) total changes in rate and volume (the
sum of the prior columns). The combined effects of changes in both volume and
rate, that are not separately identified, have been allocated proportionately to
the change due to volume and the change due to rate:
<TABLE>
<CAPTION>
Six Months Ended Year Ended
June 30, 2000 December 31, 1999
vs. vs.
June 30, 1999 December 31, 1998
------------------------------------ ------------------------------------
Increase Increase
(Decrease) (Decrease)
due to due to
------------------------- ------------------------
Volume Rate Total Volume Rate Total
----------- ---------- --------- ----------- ---------- --------
(In thousands)
<S> <C> <C> <C> <C> <C> <C>
Interest income attributable to:
Loans........................................ $233 $ (1) $232 $532 $(129) $403
Mortgage-backed securities.................... 180 16 196 92 (18) 74
Investment securities:
Taxable.................................... 259 17 276 89 21 110
Non-taxable (1)............................ 67 -- 67 (29) 13 (16)
Interest-bearing deposits and federal
funds sold................................. (2) (7) (9) 20 (4) 16
---- ---- ---- ---- ----- ----
Total interest-earning assets.............. $737 $ 25 $762 $704 $(117) $587
==== ==== ==== ==== ===== ====
Interest expense attributable to:
Demand deposits............................... $ 3 $ 5 $ 8 $ 4 $ (1) $ 3
Savings accounts.............................. (5) -- (5) 13 (24) (11)
Money market accounts......................... 1 2 3 (6) (1) (7)
Certificates of deposit....................... 75 18 93 -- (66) (66)
Federal Home Loan Bank advances............... 393 16 409 398 (9) 389
---- ---- ---- ---- ----- ----
Total interest-bearing liabilities......... $467 $ 41 $508 $409 $(101) $308
==== ==== ==== ==== ===== ====
Net interest income.............................. $270 $(16) $254 $295 $ (16) $279
==== ==== ==== ==== ===== ====
</TABLE>
__________________
(1) Municipal securities are presented on a tax equivalent basis based on an
assumed tax rate of 34%.
Asset and Liability Management
Asset/liability management includes GAP measurement that determines, over
various time periods, interest-earning assets and interest-bearing liabilities
which are due to reprice at current market rates. A financial institution will
have a negative interest rate sensitivity GAP for a given period of time if the
amount of its interest-bearing liabilities maturing or repricing within that
period is greater than the total of the interest-earning assets maturing or
repricing within the same period. When interest rates increase, financial
institutions with a negative interest rate sensitivity GAP will be more likely
to experience increases in the cost of their liabilities faster than the
corresponding yields generated by their earning assets. Following the same
concept, as interest rates decrease, the cost of funds of financial institutions
with a negative interest-rate sensitivity GAP usually will decrease more rapidly
than the yields on the earning assets. As a
35
<PAGE>
general rule, the same changes in interest rates will usually have the opposite
effect on financial institutions structured with a positive interest-rate
sensitivity GAP.
Interest rate sensitivity varies with various types of interest-earning
assets and interest-bearing liabilities. Interest bearing deposits in other
banks for which the rates change daily and loans, which are tied to variable
indices, differ markedly from long-term securities and fixed-rate loans. Time
deposits over $100,000 and money market accounts are more interest rate
sensitive than NOW and savings accounts. The shorter-term interest rate
sensitivities are critical to reasonable measurement of interest rate
sensitivity GAP.
The following table presents the amounts of interest-earning assets and
interest-bearing liabilities outstanding at June 30, 2000, which are scheduled
to reprice or mature in each of the indicated time periods. Except as noted, the
amount of assets and liabilities that reprice or mature during a particular
period were calculated in relation to the actual contractual terms of the asset
or liability. The table, however, does not necessarily indicate the impact of
general interest rate changes on Indian Village's net interest income in part
because the repricing of certain categories of assets and liabilities is subject
to competition and other factors beyond the control of Indian Village. Because
of this limitation, certain assets and liabilities depicted as maturing or
repricing within a specific period may in fact mature or reprice at other times
and at different volumes.
<TABLE>
<CAPTION>
One Over
Up to 3 Three to 12 Through Five
Months Months Five Years Years Total
------------------------------------------------------------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C>
Interest-earning assets:
Loans (1)(4)............................... $ 5,137 $ 388 $ 4,413 $31,215 $41,153
Securities (1)............................. -- 10 4,931 16,219 21,160
Interest-bearing deposits.................. 307 -- -- -- 307
-------- -------- -------- ------- -------
Rate sensitive assets (RSA)................... 5,444 398 9,344 47,434 62,620
Interest-bearing liabilities:
Demand accounts (2)........................ 1,639 -- -- -- 1,639
Savings accounts (2)....................... 5,217 -- -- -- 5,217
Money market accounts (2).................. 1,873 -- -- -- 1,873
Certificates of deposit.................... 4,934 9,978 11,878 -- 26,790
FHLB advances.............................. 3,250 14,000 3,000 -- 20,250
-------- -------- -------- ------- -------
Rate sensitive liabilities (RSL).............. 16,913 23,978 14,878 -- 55,769
-------- -------- -------- ------- -------
Period GAP (3)................................ $(11,469) $(23,580) $ (5,534) $47,434 $ 6,851
======== ======== ======== ======= =======
Cumulative GAP................................ $(11,449) $(35,049) $(40,583) $ 6,851
======== ======== ======== =======
Percentage of RSA............................. (18.32)% (55.97)% (64.81)% 10.94%
======== ======== ======== =======
</TABLE>
__________________
(1) Loans and mortgage-backed securities are assumed to adjust based on their
contractual terms, with no assumptions as to prepayments. Securities also
include Federal Home Loan Bank stock and equity securities that have no
stated maturities and have been included in the over five years category.
(2) Management has included these accounts in the 0-3 month or less time horizon
based on past experience with rate adjustments on these accounts.
(3) GAP is defined as rate sensitive assets less rate sensitive liabilities and
may be expressed in dollars or as a percentage.
(4) Loans are presented gross and do not include net deferred loan costs and the
allowance for loan losses.
Liquidity and Capital Resources
Indian Village Bancorp's liquidity, primarily represented by cash and cash
equivalents, is a result of its operating, investing and financing activities.
These activities are summarized below for the six months ended June 30, 2000 and
1999 and the years ended December 31, 1999 and 1998.
36
<PAGE>
<TABLE>
<CAPTION>
Six Months Ended June 30, Year Ended December 31,
------------------------------- -----------------------------
2000 1999 1999 1998
----------- ----------- ----------- ------------
(In thousands)
<S> <C> <C> <C> <C>
Net income............................................ $ 131 $ 161 $ 288 $ 246
Adjustments to reconcile net income to
net cash from operating activities................. (40) 2,825 (83) (155)
------- ------- -------- -------
Net cash from operating activities.................... 91 2,986 205 91
Net cash from investing activities.................... (6,528) (4,870) (18,817) (3,806)
Net cash from financing activities.................... 6,184 3,585 19,155 3,589
------- ------- -------- -------
Net change in cash and cash equivalents............... (253) 1,701 543 (126)
Cash and cash equivalents at beginning of period...... 1,340 797 797 923
------- ------- -------- -------
Cash and cash equivalents at end of period............ $ 1,087 $ 2,498 $ 1,340 $ 797
======= ======= ======== =======
</TABLE>
Indian Village Bancorp's principal sources of funds are deposits, loan
repayments, maturities of securities and other funds provided by operations.
Indian Village Bancorp also has the ability to borrow from the Federal Home Loan
Bank. While scheduled loan repayments and maturing securities are relatively
predictable, deposit flows and early loan and mortgage-backed securities
prepayments are more influenced by interest rates, general economic conditions
and competition. Indian Village Bancorp maintains investments in liquid assets
based upon management's assessment of (1) need for funds, (2) expected deposit
flows, (3) yields available on short-term liquid assets and (4) objectives of
the asset/liability management program.
The Federal Deposit Insurance Corporation has adopted risk-based capital
ratio guidelines to which Indian Village is subject. The guidelines establish a
systematic analytical framework that makes regulatory capital requirements more
sensitive to differences in risk profiles among banking organizations. Risk-
based capital ratios are determined by allocating assets and specified off-
balance sheet commitments to four risk weighted categories, with higher levels
of capital being required for the categories perceived as representing greater
risk.
These guidelines divide a bank's capital into two tiers. The first tier
("Tier 1") includes common equity, certain non-cumulative perpetual preferred
stock (excluding auction rate issues), retained earnings and minority interests
in equity accounts of consolidated subsidiaries, less goodwill and certain other
intangible assets (except mortgage servicing rights and purchased credit card
relationships, subject to certain limitations). Supplementary ("Tier II")
capital includes, among other items, cumulative perpetual and long-term limited-
life preferred stock, mandatory convertible securities, certain hybrid capital
instruments, term subordinated debts and allowance for loan and lease losses,
subject to certain limitations, less required deductions. Banks are required to
maintain a total risk-based capital ratio of 8%, of which 4% must be Tier I
capital. The Federal Deposit Insurance Corporation may, however, set higher
capital requirements when a bank's particular circumstances warrant. Banks
experiencing or anticipating significant growth are expected to maintain a Tier
I leverage ratio, including tangible capital positions, well above the minimum
levels.
In addition, the Federal Deposit Insurance Corporation established
guidelines prescribing a minimum Tier I leverage ratio (Tier I capital to
adjusted total assets as specified in the guidelines). These guidelines provide
for a minimum Tier I leverage ratio of 3% for banks that meet certain specified
criteria, provided that they have the highest regulatory rating and are not
experiencing or anticipating significant growth. All other banks are required
to maintain a Tier I leverage ratio of 4%. At June 30, 2000, Indian Village
maintained a leverage ratio of 11.40% and total capital to risk weighted assets
ratio of 22.00%.
On June 30, 2000, Indian Village Bancorp had commitments to originate
fixed-rate loans totaling $1.5 million, and variable-rate loans totaling
$808,000. Loan commitments are generally for 30 days. Indian Village Bancorp
considers its liquidity and capital reserves sufficient to meet its outstanding
short- and long-term needs. See Note 12 of the Notes to Consolidated Financial
Statements.
37
<PAGE>
The following table summarizes regulatory capital requirements and Indian
Village's actual capital at June 30, 2000.
<TABLE>
<CAPTION>
Excess of Actual
Capital Over
Current Current
Actual Capital Requirement Requirement Applicable
------------------------- -------------------------- --------------------------
Assets
Amount Percent Amount Percent Amount Percent Total
------------ ---------- ------------- ---------- ------------- ---------- ----------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Tangible capital................ $7,242 11.40% $ 954 1.50% $6,288 9.90% $63,618
Core capital.................... 7,242 11.40 1,909 3.0 5,333 8.40 63,618
Total risk-based capital........ 7,479 22.00 2,719 8.0 4,760 14.00 33,983
</TABLE>
Impact of New Accounting Standards
Beginning July 1, 2000 a new accounting standard will require all
derivatives to be recorded at fair value. Unless designated as hedges, changes
in these fair values will be recorded in the income statement. Fair value
changes involving hedges will generally be recorded by offsetting gains and
losses on the hedge and on the hedged item, even if the fair value of the hedged
item is not otherwise recorded. This is not expected to have a material effect
but the effect will depend on derivative holdings when this standard applies.
Impact of Inflation and Changing Prices
The consolidated financial statements and notes included herein have been
prepared in accordance with generally accepted accounting principles. Generally
accepted accounting principles requires Indian Village Bancorp to measure
financial position and operating results primarily in terms of historic dollars.
Changes in the relative value of money due to inflation or recession are
generally not considered.
In management's opinion, changes in interest rates affect the financial
condition of a financial institution to a far greater degree than changes in the
inflation rate. While interest rates are greatly influenced by changes in the
inflation rate, they do not change at the same rate or in the same magnitude as
the inflation rate. Rather, interest rate volatility is based on changes in the
expected rate of inflation, as well as on changes in monetary and fiscal
policies.
ITEM 7. FINANCIAL STATEMENTS
The financial statements listed at Item 13 of Part III of this Form 10-KSB
are incorporated by reference into this Item 7 of Part II of this Form 10-KSB.
ITEM 8. CHANGE IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Before the year ended December 31, 1998, Indian Village's financial
statements were audited by Robb, Dixon, Francis, Davis, Oneson & Company. At the
recommendation of India Village's Audit Committee, Indian Village dismissed
Robb, Dixon, Francis, Davis, Oneson & Company and replaced it with Crowe, Chizek
and Company LLP, which was engaged on October 15, 1998. Indian Village's Board
of Directors approved the decision to change independent auditors on October 15,
1998.
38
<PAGE>
For the year ended December 31, 1997 and up to the date of the replacement
of the former accountant, there were no disagreements with the former accountant
on any matter of accounting principles or practices, financial statement
disclosure or auditing scope or procedure which, if not resolved to the
satisfaction of the former accountant, would have caused it to make a reference
to the subject matter of the disagreement in connection with its reports. The
independent auditors' report on the financial statements for the fiscal year
ended December 31, 1997 did not contain an adverse opinion or a disclaimer of
opinion, and was not qualified or modified as to uncertainty, audit scope, or
accounting principles.
39
<PAGE>
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
Directors
The following directors have terms ending in 2001:
Joanne Limbach is the President of Limbach, Nolan and Dantonio, Inc. D/B/A
Limbach and Associates, a state and local tax consulting firm located in
Columbus, Ohio. Ms. Limbach served as Tax Commissioner for the State of Ohio
from 1983 to 1991. Age 59. Director since 1997.
Marty R. Lindon has served as President and Chief Executive Officer of
Indian Village Bancorp and Indian Village since March 1999 and December 1998,
respectively. Before being appointed President and Chief Executive Officer of
Indian Village, he served as Vice President of Lending since 1993. Age 43.
Director since 1998.
Vernon E. Mishler is a retired Ohio State Auditor and public accountant.
Age 72. Director since 1989.
The following directors have terms ending in 2002:
Michael A. Cochran is an attorney in private practice. He is also Assistant
Prosecuting Attorney for Tuscarawas County, Ohio. Mr. Cochran also serves as
Corporate Secretary for Indian Village Bancorp and Indian Village. Age 50.
Director since 1995.
Rebecca S. Mastin owns Wendy's restaurant franchises. Age 47. Director
since 1996.
The following directors have terms ending in 2003:
John A. Beitzel has served as Executive Vice President of both Indian
Village Bancorp and Indian Village since 2000. He is retired as the elected
Tuscarawas County auditor. Age 52. Director since 1997.
Cindy S. Knisely, a certified public accountant, is the President of
Knisely & Associates Accounting and Financial Services, Inc., a certified public
accounting firm. Age 43. Director since 1997.
Executive Officers and Other Significant Employees Who Are Not Directors
The executive officers of Indian Village Bancorp and Indian Village are
elected annually and hold office until their successors have been elected and
qualified or until they are removed or replaced.
Lori S. Frantz was appointed Vice President, Treasurer and Chief Financial
Officer of Indian Village Bancorp in March 1999. Ms. Frantz has served as Vice
President of Indian Village since 1993 and Treasurer and Chief Financial Officer
since 1996. Age 40.
Martin L. Merryman joined Indian Village on July 1, 1999 and became Vice
President of Lending in September 1999. Before joining Indian Village he was a
Vice President of Lending at another local financial institution. Age 40.
Compliance with Section 16(a) of the Exchange Act
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
executive officers and directors, and persons who own more than 10% of any
registered class of the Company's equity securities, to file reports of
40
<PAGE>
ownership and changes in ownership with the Securities and Exchange Commission.
Executive officers, directors and greater than 10% stockholders are required by
regulation to furnish the Company with copies of all Section 16(a) reports they
file.
Based solely on the Company's review of copies of the reports it has
received and written representations provided to it from the individuals
required to file the reports, the Company believes that each of its executive
officers and directors has complied with applicable reporting requirements for
transactions in Indian Village Bancorp common stock during the six months ended
June 30, 2000.
ITEM 10. EXECUTIVE COMPENSATION
The following information is furnished for Marty R. Lindon. No executive
officer of Indian Village Bancorp or Indian Village received salary and bonus of
$100,000 or more during the six months ended June 30, 2000.
<TABLE>
<CAPTION>
Annual
Compensation(1)(2)
-----------------------------
All Other
Name and Position Year Salary Bonus Compensation
------------------- --------- ------------ ------------- ------------------
<S> <C> <C> <C> <C>
Marty R. Lindon 2000* $31,846 $ -- $739/(3)/
President and Chief 1999 64,000 10,000 3,514
Executive Officer 1998 41,000 7,000 4,686
</TABLE>
__________________
* For the six months ended June 30, 2000.
(1) Compensation information for 1997 has been omitted because Indian Village
Bancorp was not a public company nor a subsidiary of a public company at
that time.
(2) Does not include the aggregate amount of perquisites and other personal
benefits, which was less than $50,000 or 10% of the total annual salary and
bonus reported.
(3) Consists entirely of employer pension plan contribution. In 1999, Indian
Village terminated the pension plan and implemented a 401(k) plan.
Employment Agreement
Indian Village Bancorp and Indian Village have entered into a three-year
employment agreement with Mr. Lindon. Under the employment agreement, Mr.
Lindon's current annual salary is $68,000, which amount Indian Village pays and
may be increased at the discretion of the Board of Directors or an authorized
committee of the Board. On the anniversary of the commencement date of the
employment agreement, the term may be extended for an additional year at the
discretion of the Board. Indian Village Bancorp and Indian Village may terminate
the agreement at any time. Mr. Lindon may terminate the agreement if he is
assigned duties inconsistent with his initial position, duties, responsibilities
and status. The agreement may also terminate upon the occurrence of certain
events specified by federal regulations. If Mr. Lindon's employment is
terminated without cause or upon his voluntary termination following the
occurrence of an event described in the preceding sentence, Indian Village would
be required to honor the terms of the agreement through the expiration of the
current term, including payment of current cash compensation and continuation of
employee benefits.
The employment agreement also provides for a severance payment and other
benefits in the event of involuntary termination of employment in connection
with any change in control of Indian Village Bancorp or Indian Village. A
severance payment also will be provided on a similar basis in connection with a
voluntary termination of employment where, after a change in control, Mr. Lindon
is assigned duties inconsistent with his position, duties, responsibilities and
status immediately before a change in control.
41
<PAGE>
The maximum present value of the severance benefits under the employment
agreement is 2.99 times Mr. Lindon's average annual compensation during the
five-year period preceding the effective date of the change in control (the
"base amount"). The employment agreement provides that the value of the maximum
benefit may be distributed, at the executive's election, in the form of a lump
sum cash payment equal to 2.99 times the executive's base amount or a
combination of a cash payment and continued coverage under Indian Village's
health, life and disability programs for a 36-month period following the change
in control, the total value of which does not exceed 2.99 times the executive's
base amount. Section 280G of the Internal Revenue Code provides that severance
payments that equal or exceed three times the individual's base amount are
deemed to be "excess parachute payments" if they are contingent upon a change in
control. Individuals receiving excess parachute payments are subject to a 20%
excise tax on the amount of any excess parachute payments, and the Company would
not be entitled to deduct the amount of such excess payments.
The employment agreement restricts Mr. Lindon's right to compete against
Indian Village Bancorp and Indian Village for a period of one year from the date
of termination of the agreement if he voluntarily terminates employment, except
in the event of a change in control.
Directors' Compensation
Directors' Fees. Indian Village pays a monthly fee of $1,000 to each
director for service on the Board of Directors and any committees. Indian
Village Bancorp does not pay separate fees for service on its Board of
Directors.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table provides information as of June 30, 2000 with respect
to persons known to Indian Village Bancorp to be the beneficial owners of more
than 5% of Indian Village Bancorp's outstanding common stock. A person may be
considered to beneficially own any shares of common stock over which he or she
has, directly or indirectly, sole or shared voting or investing power.
<TABLE>
<CAPTION>
Number of Percent of Common
Name and Address Shares Owned Stock Outstanding
------------------- ----------------------- -----------------------------
<S> <C> <C>
Indian Village Community Bank 35,637/(1)/ 8.42%
Employee Stock Ownership Plan
100 South Walnut Street
Gnadenhutten, Ohio 44629
</TABLE>
_______________________
(1) Under the terms of the employee stock ownership plan, the employee stock
ownership plan trustees will vote shares allocated to participants'
accounts in the manner directed by the participants. Subject to their
fiduciary responsibility, the trustees will vote unallocated shares and
allocated shares for which no timely voting instructions are received in
the same proportion as shares for which they have received voting
instructions from participants. As of June 30, 2000, 2,376 shares had been
allocated to participants' accounts and 33,261 shares remain unallocated.
The trustees of the employee stock ownership plan are Michael A. Cochran
and Cindy S. Knisely.
42
<PAGE>
The following table provides information about the shares of Company common
stock that may be considered to be beneficially owned by each director of Indian
Village Bancorp and by all directors and executive officers of Indian Village
Bancorp as a group as of June 30, 2000. A person may be considered to
beneficially own any shares of common stock over which he or she has, directly
or indirectly, sole or shared voting or investment power. Unless otherwise
indicated, each of the named individuals has sole voting power and sole
investment power with respect to the number of shares shown.
<TABLE>
<CAPTION>
Number of Percent of Common Stock
Name Shares Owned Outstanding/(1)/
---------------------------------- ---------------------- ----------------------------
<S> <C> <C>
John A. Beitzel 10,200 2.41%
Michael A. Cochran 16,000 3.78
Cindy S. Knisely 7,600 1.80
Joanne Limbach 6,500 1.54
Marty R. Lindon 11,000 2.60
Rebecca S. Mastin 10,000 2.36
Vernon E. Mishler 10,000 2.36
------ -----
All directors and executive 75,930 17.94
officers as a group (8 persons)
</TABLE>
------------------------
(1) Based on 423,304 shares of Company common stock outstanding as of June 30,
2000.
(2) Includes 200 shares owned by Mr. Beitzel's spouse.
(3) Includes 5,000 shares owned by Mr. Cochran's spouse. Does not include
35,637 shares held by Indian Village's ESOP, for which Mr. Cochran serves as
a trustee.
(4) Includes 100 shares owned by Ms. Knisely's daughter. Does not include
35,637 shares held by Indian Village's ESOP, for which Ms. Knisely serves as
a trustee.
(5) Includes 500 shares owned by Mr. Lindon's daughter.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Loans and Extensions of Credit
Federal regulations require that all loans or extensions of credit to
executive officers and directors of insured financial institutions like Indian
Village must be made on substantially the same terms, including interest rates
and collateral, as those prevailing at the time for comparable transactions with
other persons, except for loans made pursuant to programs generally available to
all employees, and must not involve more than the normal risk of repayment or
present other unfavorable features. Indian Village, therefore, is prohibited
from making any new loans or extensions of credit to executive officers and
directors at different rates or terms than those offered to the general public,
except for loans made under programs generally available to all employees, and
Indian Village has adopted a policy to this effect. In addition, loans made to a
director or executive officer in an amount that, when aggregated with the amount
of all other loans to such person and his or her related interests, are in
excess of the greater of $25,000 or 5% of the institution's capital and surplus
(up to a maximum of $500,000) must be approved in advance by a majority of the
disinterested members of the Board of Directors. The aggregate outstanding
balance of loans by Indian Village to its executive officers and directors was
approximately $458,000 at June 30, 2000.
43
<PAGE>
Other Transactions
Michael A. Cochran performs legal services for Indian Village Bancorp and
Indian Village. During the six months ended June 30, 2000, Indian Village
Bancorp and Indian Village paid a total of $4,031 in legal fees to Mr. Cochran
for legal services rendered to Indian Village Bancorp and Indian Village, which
included a retainer fee of $1,500. These amounts in total did not represent
more than 5% of total legal fees that Mr. Cochran earned in 2000.
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K.
(a) (1) The following are filed as a part of this report under Item 7:
. Independent Auditors' Report
. Consolidated Statements of Financial Condition as of June 30,
2000 and December 31, 1999.
. Consolidated Statements of Income for the Six Months Ended
June 30, 2000 and 1999.
. Consolidated Statements of Equity for the Six Months Ended
June 30, 2000 and 1999.
. Consolidated Statements of Cash Flows for the Six Months
Ended June 30, 2000 and 1999.
. Notes to Consolidated Financial Statements
(2) All financial statement schedules are omitted because they are
not required or applicable, or the required information is shown
in the consolidated financial statements or the notes thereto.
(3) Exhibits
3.1 Articles of Incorporation of Indian Village Bancorp, Inc.(1)
3.2 Second Amended and Restated Bylaws of Indian Village
Bancorp, Inc.
4.0 Form of Stock Certificate of Indian Village Bancorp, Inc.(1)
10.1 Indian Village Community Bank Employee Stock Ownership Plan
Trust Agreement (2)
10.2 ESOP Loan Commitment Letter and ESOP Loan Documents (2)
10.3 Employment Agreement between Indian Village Community Bank,
Indian Village Bancorp, Inc. and Marty R. Lindon (2)
10.4 Employment Agreement between Indian Village Community
Bank, Indian Village Bancorp, Inc. and Lori S. Frantz (2)
10.5 Indian Village Community Bank Employee Severance
Compensation Plan (2)
10.6 Indian Village Bancorp, Inc. 2000 Stock-Based Incentive Plan
(3)
21.0 Subsidiary information is incorporated herein by reference
to Part I, Item 1, "Business--Subsidiary Activities"
27.0 Financial Data Schedule
____________________
(1) Incorporated herein by reference from the Exhibits to Form
SB-2, Registration Statement and amendments thereto,
initially filed on March 18, 1998, Registration No. 333-
74621.
44
<PAGE>
(2) Incorporated herein by reference from the exhibits to the
Form 10-QSB for the quarter ended September 30, 1999,
filed November 15, 2000.
(3) Incorporated herein by reference to the definitive proxy
statement for the 2000 annual meeting of stockholders
filed on March 27, 2000.
(b) Reports on Form 8-K
On May 18, 2000, Indian Village Bancorp filed a Current Report on Form 8-K
reporting that Indian Village Bancorp had charged its fiscal year end from
December 31 to June 30, effective June 30, 2000.
45
<PAGE>
CONFORMED
SIGNATURES
In accordance with Section 13 or 15(d) of the Securities Exchange Act of
1934, the Registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
INDIAN VILLAGE BANCORP, INC.
Date: September 27, 2000 By: /s/ Marty R. Lindon
------------------------------------
Marty R. Lindon
President and Chief Executive Officer
In accordance with the Exchange Act, this report has been signed below by
the following persons on behalf of the Registrant and in the capacities and on
the dates indicated.
<TABLE>
Name Title Date
---- ----- ----
<S> <C>
/s/ Marty R. Lindon President, Chief Executive September 27, 2000
---------------------
Marty R. Lindon Officer and Director
(principal executive officer)
/s/ Lori S. Frantz Vice President, Chief Financial Officer September 27, 2000
---------------------
Lori S. Frantz and Treasurer (principal financial and
accounting officer)
/s/ Rebecca S. Mastin Chairperson of the Board September 27, 2000
---------------------
Rebecca S. Mastin
/s/ John A. Beitzel Vice Chairman of the Board September 27, 2000
----------------------
John A. Beitzel
/s/ Michael A. Cochran Corporate Secretary and Director September 27, 2000
-----------------------
Michael A. Cochran
/s/ Vernon E. Mishler Director September 27, 2000
-----------------------
Vernon E. Mishler
/s/ Joanne Limbach Director September 27, 2000
-----------------------
Joanne Limbach
/s/ Cindy S. Knisely Director September 27, 2000
-----------------------
Cindy S. Knisely
</TABLE>
46
<PAGE>
REPORT OF INDEPENDENT AUDITORS
Board of Directors and Shareholders
Indian Village Bancorp, Inc.
Gnadenhutten, Ohio
We have audited the accompanying consolidated balance sheets of Indian Village
Bancorp, Inc. as of June 30, 2000 and December 31, 1999, and the related
consolidated statements of income, comprehensive income, shareholders' equity
and cash flows for the six months ended June 30, 2000. These financial
statements are the responsibility of the Corporation's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Indian Village
Bancorp, Inc. as of June 30, 2000 and December 31, 1999, and the results of its
operations and its cash flows for the six months ended June 30, 2000 in
conformity with generally accepted accounting principles.
/s/ Crowe, Chizek and Company LLP
Columbus, Ohio
July 19, 2000
________________________________________________________________________________
2.
<PAGE>
INDIAN VILLAGE BANCORP, INC.
CONSOLIDATED BALANCE SHEETS
June 30, 2000 and December 31, 1999
(Dollars in thousands, except per share amounts)
-------------------------------------------------------------------------------
<TABLE>
<CAPTION>
June 30, December 31,
2000 1999
---- ----
<S> <C> <C>
ASSETS
Cash and due from banks $ 980 $ 824
Interest-bearing deposits in other banks 107 516
------- -------
Total cash and cash equivalents 1,087 1,340
Time deposits 200 299
Securities available for sale at fair value 20,061 17,074
Loans, net of allowance for loan losses 40,799 37,291
Premises and equipment, net 1,564 1,591
Real estate owned 118 118
Federal Home Loan Bank stock 1,099 925
Accrued interest receivable 517 466
Other assets 199 258
------- -------
Total assets $65,644 $59,362
======= =======
LIABILITIES
Deposits $36,586 $33,153
Federal Home Loan Bank advances 20,250 17,200
Accrued interest payable 136 107
Other liabilities 15 153
------- -------
Total liabilities 56,987 50,613
SHAREHOLDERS' EQUITY
Preferred stock, $.01 par value, 1,000,000 shares authorized,
none outstanding -- --
Common stock, $.01 par value, 5,000,000 shares authorized,
445,583 shares issued 4 4
Additional paid-in captial 4,022 4,021
Retained earnings - substantially restricted 5,498 5,393
Unearned employee stock ownership plan shares (333) (344)
Treasury stock, at cost, 22,279 shares at June 30, 2000 (273) --
Accumulated other comprehensive income
Unrealized gains (losses) on securities available for sale (261) (273)
Additional minimum pension liability -- (52)
------- -------
Total accumulated other comprehensive income (loss) (261) (325)
------- -------
Total shareholders' equity 8,657 8,749
------- -------
Total liabilities and shareholders' equity $65,644 $59,362
======= =======
</TABLE>
________________________________________________________________________________
See accompanying notes to consolidated financial statements.
3.
<PAGE>
INDIAN VILLAGE BANCORP, INC.
CONSOLIDATED STATEMENTS OF INCOME
Six Months Ended June 30, 2000 and 1999 (Unaudited)
(Dollars in thousands, except per share amounts)
--------------------------------------------------------------------------------
Six Months Ended
June 30,
--------
2000 1999
---- ----
(Unaudited)
Interest and dividend income
Loans, including fees $1,603 $1,371
Securities 719 203
Interest-bearing deposits and Federal funds sold 18 27
------ ------
Total interest income 2,340 1,601
Interest expense
Deposits 835 736
Federal Home Loan Bank advances 562 153
------ ------
Total interest expense 1,397 889
------ ------
Net interest income 943 712
Provision for loan losses 5 6
------ ------
Net interest income after provision for loan losses 938 706
Noninterest income
Service charges and other fees 22 8
Gain on sale of securities available for sale, net 3 10
Other income 3 9
------ ------
Total noninterest income 28 27
Noninterest expense
Salaries and employee benefits 392 212
Occupancy and equipment 90 35
Professional and consulting fees 87 27
Franchise taxes 40 35
Data processing 42 41
Director and committee fees 33 38
Advertising 25 25
Stationary and supplies 16 16
Other expense 103 60
------ ------
Total noninterest expense 828 489
------ ------
Income before income taxes 138 244
Income tax expense 7 83
------ ------
Net income $ 131 $ 161
====== ======
Basic and diluted earnings per common share $ .32
======
________________________________________________________________________________
See accompanying notes to consolidated financial statements.
4.
<PAGE>
INDIAN VILLAGE BANCORP, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
Six Months Ended June 30, 2000 and 1999 (Unaudited)
(Dollars in thousands)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months Ended
June 30,
--------
2000 1999
---- ----
(Unaudited)
<S> <C> <C>
Net income $ 131 $ 161
Other comprehensive income, net of tax
Unrealized gains (losses) on securities available for sale
arising during period 10 (105)
Reclassification adjustment for accumulated (gains) losses
included in net income (2) (7)
----- -----
Net unrealized gains (losses) on securities 12 (112)
Additional minimum pension liability adjustment 52 --
----- -----
Other comprehensive income 64 (112)
Comprehensive income $ 195 $ 49
===== =====
</TABLE>
________________________________________________________________________________
See accompanying notes to consolidated financial statements.
5.
<PAGE>
INDIAN VILLAGE BANCORP, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
Six Months Ended June 30, 2000 and 1999 (Unaudited)
(Dollars in thousands)
<TABLE>
<CAPTION>
Unrealized
Additional Gain (Loss)
Additional Unearned Minimum on Securities
Common Paid-In Retained ESOP Treasury Pension Available
Stock Capital Earnings Shares Stock Liability for Sale Total
------ ---------- -------- -------- -------- ---------- ------------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, January 1, 1999 $ -- $ -- $5,105 $ -- $ -- $ (53) $ 50 $5,102
Net income for the
period (Unaudited) -- -- 161 -- -- -- -- 161
Other comprehensive
income (loss) (Unaudited) -- -- -- -- -- -- (112) (112)
------ ------ ------ ------ ------ ------ ------ ------
Balance, June 30, 1999 (Unaudited) $ -- $ -- $5,266 $ -- $ -- $ (53) $ (62) $5,151
====== ====== ====== ====== ====== ====== ====== ======
Balance, January 1, 2000 $ 4 $4,021 $5,393 $ (344) $ -- $ (52) $ (273) $8,749
Net income for the period -- -- 131 -- -- -- -- 131
Cash dividend - $.065 per share -- -- (26) -- -- -- -- (26)
Other comprehensive
income (loss) -- -- -- -- -- 52 12 64
Purchase of 22,279 shares of
treasury stock -- -- -- -- (273) -- -- (273)
Release of 1,188 ESOP shares -- 1 -- 11 -- -- -- 12
------ ------ ------ ------ ------ ------ ------ ------
Balance, June 30, 2000 $ -- $4,022 $5,498 $ (333) $ (273) $ -- $ (261) $8,657
====== ====== ====== ====== ====== ====== ====== ======
</TABLE>
See accompanying notes to consolidated financial statements.
6.
<PAGE>
INDIAN VILLAGE BANCORP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Six Months Ended June 30, 2000 and 1999 (Unaudited)
(In thousands)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months Ended
June 30,
--------
2000 1999
---- ----
(Unaudited)
<S> <C> <C>
Cash flows from operating activities
Net income $ 131 $ 161
Adjustments to reconcile net income to net cash from
operating activities:
Depreciation 51 16
Premium amortization, net of accretion (14) 8
Provision for loan losses 5 6
Federal Home Loan Bank stock dividends (36) (14)
(Gain) loss on sale of securities available for sale (3) (10)
Loss on termination of defined benefit pension plan 79 --
Compensation expense on ESOP shares 12 --
Net change in:
Accrued interest receivable and other assets (25) (290)
Accrued expenses and other liabilities (109) 3,109
------- -------
Net cash from operating activities 91 2,986
Cash flows from investing activities
Net change in time deposits 99 --
Purchases of securities available for sale (4,055) (2,541)
Proceeds from sales of securities available for sale 509 1,128
Proceeds from maturities of securities available for sale 594 1,307
Net change in loans (3,513) (4,487)
Premises and equipment expenditures, net (24) (277)
Purchases of Federal Home Loan Bank stock (138) --
------- -------
Net cash from investing activities (6,528) (4,870)
Cash flows from financing activities
Net change in deposits 3,433 85
Net change in short-term FHLB advances (450) 2,500
Repayment of long-term FHLB advances (2,000) --
Proceeds from long-term FHLB advances 5,500 1,000
Cash dividends paid (26) --
Purchases of treasury stock (273) --
------- -------
Net cash from financing activities 6,184 3,585
------- -------
Net change in cash and cash equivalents (253) 1,701
Cash and cash equivalents at beginning of year 1,340 797
------- -------
Cash and cash equivalents at end of year $ 1,087 $ 2,498
======= =======
Supplemental disclosures of cash flow information
Cash paid during the year for
Interest $ 1,368 $ 875
Income taxes 40 5
</TABLE>
See accompanying notes to consolidated financial statements.
7.
<PAGE>
INDIAN VILLAGE BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2000 and December 31, 1999
(Table dollar amounts in thousands, except per share amounts)
--------------------------------------------------------------------------------
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Operations and Principals of Consolidation: The consolidated
----------------------------------------------------
financial statements include the accounts of Indian Village Bancorp, Inc.
("IVB") and its wholly-owned subsidiary, Indian Village Community Bank ("Bank"),
a state chartered bank, together referred to as the Corporation. Intercompany
accounts and transactions have been eliminated in consolidation.
The Corporation's and Bank's revenues, operating income and assets are primarily
from the financial institution industry. The Bank is engaged in the business of
residential mortgage, commercial and consumer lending and consumer banking with
operations conducted through its main office located in Gnadenhutten, Ohio and a
branch office located in New Philadelphia, Ohio. These communities and the
contiguous areas are the source of substantially all the Bank's loan and deposit
activities. The majority of the Bank's income is derived from residential,
commercial and consumer lending activities and investments.
Business Segments: While the Corporation's chief decision-makers monitor the
-----------------
revenue streams of the various Corporation products and services, operations are
managed and financial performance is evaluated on a company-wide basis.
Accordingly, all of the Corporation's banking operations are considered by
management to be aggregated in one reportable operating segment.
Use of Estimates: To prepare financial statements in conformity with generally
----------------
accepted accounting principles, management makes estimates and assumptions based
on available information. These estimates and assumptions affect amounts
reported in the financial statements and disclosures provided, and future
results could differ. The allowance for loan losses, fair values of financial
instruments and pension obligations are particularly subject to change.
Cash Flows: Cash and cash equivalents includes cash, deposits with other
----------
financial institutions with original maturities less than 90 days and Federal
funds sold. Net cash flows are reported for loan and deposit transactions.
Securities: Securities are classified as held to maturity and carried at
----------
amortized cost when management has the positive intent and ability to hold them
to maturity. Securities are classified as available for sale when they might be
sold before maturity. Securities available for sale are carried at fair value,
with unrealized holding gains and losses reported in accumulated other
comprehensive income. Other securities such as Federal Home Loan Bank stock are
carried at cost.
Interest income includes amortization of purchased premium or discount. Gains
and losses on sales are based on the amortized cost of the security sold.
Securities are written down to fair value when a decline in fair value is not
temporary.
Loans: Loans are reported at the principal balance outstanding, net of unearned
-----
interest, deferred fees and costs, and the allowance for loan losses.
Interest income is reported on the interest method and includes amortization of
net deferred loan fees and costs over the contractual life of the loan.
Interest income is not reported when full loan repayment is in doubt, typically
when the loan is impaired or payments are past due over 90 days. Payments
received on such loans are reported as principal reductions.
(Continued)
8.
<PAGE>
INDIAN VILLAGE BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2000 and December 31, 1999
(Table dollar amounts in thousands, except per share amounts)
--------------------------------------------------------------------------------
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Allowance for Loan losses: The allowance for loan losses is a valuation
--------------------------
allowance for probable credit losses, increased by the provision for loan losses
and decreased by charge-offs less recoveries. Management estimates the allowance
balance required based on past loan loss experience, known and inherent risks in
the nature and volume of the portfolio, information about specific borrower
situations and estimated collateral values, economic conditions, and other
factors. Allocations of the allowance may be made for specific loans, but the
entire allowance is available for any loan that, in management's judgment,
should be charged-off.
A loan is impaired when full payment under the loan terms is not expected.
Impairment is evaluated in total for smaller-balance loans of similar nature
such as residential mortgage and consumer loans, and on an individual basis for
other loans. If a loan is impaired, a portion of the allowance is allocated so
the loan is reported, net, at the present value of estimated future cash flows
using the loan's existing rate or at the fair value of collateral if repayment
is expected solely from the collateral.
Premises and Equipment: Premises and equipment are stated at cost less
----------------------
accumulated depreciation. Depreciation expense is calculated using primarily the
straight-line method over the estimated useful lives of the assets. These assets
are reviewed for impairment when events indicate the carrying amount may not be
recoverable.
Real Estate Owned: Real estate acquired through or instead of loan foreclosure
-----------------
is initially recorded at the lower of cost or fair value less estimated costs to
sell when acquired, establishing a new cost basis. If the fair value declines, a
valuation allowance is recorded through expense. Costs after acquisition are
expensed.
Pension Plan: Pension expense is the net of service and interest cost, return
------------
on plan assets, and amortization of gains and losses not immediately recognized.
Employee Stock Ownership Plan: The cost of shares issued to the ESOP, but not
-----------------------------
yet allocated to participants, is shown as a reduction of shareholders' equity.
Compensation expense is based on the market price of shares as they are released
to participant accounts. Dividends on allocated ESOP shares reduce retained
earnings; dividends on unearned ESOP shares reduce debt and accrued interest.
Income Taxes: Income tax expense is the total of the current year income tax
------------
due or refundable and the change in deferred tax assets and liabilities.
Deferred tax assets and liabilities are the expected future tax amounts for the
temporary differences between carrying amounts and tax bases of assets and
liabilities, computed using enacted tax rates. A valuation allowance, if
needed, reduces deferred tax assets to the amount expected to be realized.
Concentration of Credit Risk: The Bank grants primarily one- to four-family
----------------------------
residential mortgage loans to customers in Tuscarawas County, Ohio. These
customers' ability to honor their contracts depends, to a certain extent, on the
economic conditions of Tuscarawas County. The Bank evaluates each customer's
creditworthiness on a case-by-case basis at the time of application. One- to
four-family residential mortgage loans comprise approximately 72% and 76% of the
Bank's loan portfolio as of June 30, 2000 and December 31, 1999.
(Continued)
9.
<PAGE>
INDIAN VILLAGE BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2000 and December 31, 1999
(Table dollar amounts in thousands, except per share amounts)
--------------------------------------------------------------------------------
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Financial Instruments: Financial instruments include credit instruments, such
---------------------
as commitments to make loans and standby letters of credit, issued to meet
customer-financing needs. The face amount for these items represents the
exposure to loss, before considering customer collateral or ability to repay.
Comprehensive Income: Comprehensive income consists of net income and other
--------------------
comprehensive income. Other comprehensive income includes unrealized gains and
losses on securities available for sale and changes in minimum pension liability
which are also recognized as separate components of equity.
Loss Contingencies: Loss contingencies, including claims and legal actions
------------------
arising in the ordinary course of business, are recorded as liabilities when the
likelihood of loss is probable and an amount or range of loss can be reasonably
estimated. Management does not believe there now are such matters that will
have a material effect on the financial statements.
Dividend Restriction: Banking regulations require maintaining certain capital
--------------------
levels and may limit the dividends paid by the Bank to IVB or by IVB to
shareholders.
Earnings per Common Share: Basic earnings per common share ("EPS") is net
-------------------------
income divided by the weighted-average number of common shares outstanding
during the period. ESOP shares are considered outstanding for this calculation
unless unearned. Diluted EPS reflects the potential dilution of securities that
could share in earnings such as stock options, warrants or other common stock
equivalents. The Corporation currently has no common stock equivalents. As
more fully discussed in Note 2, the Bank converted from the mutual to stock form
of ownership with the concurrent formation of a holding company effective July
1, 1999. Accordingly, no earnings per common share are shown for the six months
ended June 30, 1999, as prior to July 1, 1999, the Bank was a mutual company.
The financial information for the six months ended June 30, 1999 reflects the
Bank before the conversion.
Fair Value of Financial Instruments: Fair values of financial instruments are
-----------------------------------
estimated using relevant market information and other assumptions, as more fully
disclosed in a separate note. Fair value estimates involve uncertainties and
matters of significant judgment regarding interest rates, credit risk,
prepayments, and other factors, especially in the absence of broad markets for
particular items. Changes in assumptions or in market conditions could
significantly affect the estimates.
Reclassifications: Reclassifications of certain amounts in the 1999 financial
-----------------
statements have been made to conform to the 2000 presentation.
(Continued)
10.
<PAGE>
INDIAN VILLAGE BANCORP,INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2000 and December 31, 1999
(Table dollar amounts in thousands, except per share amounts)
--------------------------------------------------------------------------------
NOTE 2 -CONSUMMATION OF THE CONVERSION TO A STOCK SAVINGS BANK WITH THE
CONCURRENT FORMATION OF A HOLDING COMPANY
On January 20, 1999, the Board of Directors of the Bank, subject to regulatory
approval and approval by the members of the Bank, unanimously adopted a Plan of
Conversion under which the Bank would convert from a federally chartered mutual
savings bank to a federally chartered stock savings bank and concurrently form a
holding company to own 100% of the Bank's stock. The conversion was consummated
on July 1, 1999, and the Corporation sold its common stock in an amount equal to
the pro forma market value of the Bank after giving effect to the conversion. A
total of 445,583 common shares of the Corporation were sold at $10.00 per share.
The Corporation received net proceeds of $4,024,000, after deducting conversion
costs of $432,000.
The Corporation retained 50% of the net proceeds from the sale of common shares.
The remainder of the net proceeds was invested in the capital stock issued by
the Bank to the Corporation.
As part of the conversion, the Bank established a liquidation account in an
amount equal to its regulatory capital as of December 31, 1998. The liquidation
account will be maintained for the benefit of eligible depositors who continue
to maintain their accounts at the Bank after the conversion. The liquidation
account will be reduced annually to the extent that eligible depositors have
reduced their qualifying deposits. Subsequent increases will not restore an
eligible account holder's interest in the liquidation account. In the event of a
complete liquidation, each eligible depositor will be entitled to receive a
distribution from the liquidation account in an amount proportionate to the
current adjusted qualifying balances for accounts then held. The Bank may not
pay dividends that would reduce shareholders' equity below the required
liquidation account balance.
Under Office of Thrift Supervision ("OTS") regulations, limitations have been
imposed on all "capital distributions" by savings institutions, including cash
dividends. The regulation establishes a three-tiered system of restrictions,
with the greatest flexibility afforded to thrifts, like the Bank, that are both
well capitalized and given favorable qualitative examination ratings by the OTS.
NOTE 3 - SECURITIES AVAILABLE FOR SALE
The amortized cost and estimated fair values of securities available for sale
are summarized as follows:
<TABLE>
<CAPTION>
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
--------- ---------- ----------- -------
<S> <C> <C> <C> <C>
June 30, 2000
-------------
U.S. Government agencies $ 7,934 $-- $(233) $ 7,700
Obligations of states and
political subdivisions 1,986 40 -- 2,026
Corporate debt securities 149 -- -- 149
Mortgage-backed securities 9,888 25 (230) 9,684
Equity securities 500 2 -- 502
------- --- ----- -------
$20,457 $67 $(463) $20,061
======= === ===== =======
</TABLE>
(Continued)
11.
<PAGE>
INDIAN VILLAGE BANCORP,INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2000 and December 31, 1999
(Table dollar amounts in thousands, except per share amounts)
--------------------------------------------------------------------------------
NOTE 3 - SECURITIES AVAILABLE FOR SALE (Continued)
<TABLE>
<CAPTION>
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
--------- ---------- ---------- -------
December 31, 1999
-----------------
<S> <C> <C> <C> <C>
U.S. Government agencies $ 7,432 $ -- $(188) $ 7,244
Obligations of states and
political subdivisions 1,470 1 (7) 1,464
Mortgage-backed securities 8,586 16 (236) 8,366
------- ------- ----- -------
$17,488 $ 17 $(431) $17,074
======= ======= ===== =======
</TABLE>
During the six months ended June 30, 2000, the Corporation sold securities
available for sale for total proceeds of $509,000, resulting in gross realized
gains of approximately $6,000 and gross realized losses of approximately $3,000.
During the six months ended June 30, 1999 (unaudited), the Corporation sold
securities available for sale for total proceeds of $1,128,000, resulting in
gross realized gains of approximately $10,000. No other securities were sold
during six months ended June 30, 2000 or 1999 (unaudited).
The amortized cost and estimated fair values of debt securities available for
sale at June 30, 2000, by contractual maturity, are shown below. Actual
maturities may differ from contractual maturities because borrowers may have the
right to call or prepay obligations with or without call or prepayment
penalties. Securities not due at a single maturity date, primarily mortgage-
backed securities, are shown separately.
Amortized Fair
Cost Value
--------- -------
Due after one year through five years $ 642 $ 626
Due after five years through ten years 5,839 5,742
Due after ten years 3,588 3,507
Mortgage-backed securities 9,888 9,684
------- -------
$19,957 $19,559
======= =======
At June 30, 2000, securities with a carrying value of $3,190,000 were pledged to
secure FHLB advances. No securities were pledged to secure borrowings or public
deposits at December 31, 1999.
(Continued)
12.
<PAGE>
INDIAN VILLAGE BANCORP,INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2000 and December 31, 1999
(Table dollar amounts in thousands, except per share amounts)
--------------------------------------------------------------------------------
NOTE 4 - LOANS
Loans are summarized as follows:
<TABLE>
<CAPTION>
June 30, December 31,
2000 1999
---- ----
<S> <C> <C>
Real estate loans:
One- to four-family residential $29,618 $28,413
Multi-family residential 2,307 1,669
Nonresidential 2,102 2,172
Construction 1,632 1,251
Land 254 437
------- -------
35,913 33,942
Consumer loans:
Home equity loans and lines of credit 1,703 1,185
Home improvement 738 420
Automobile 961 789
Loans on deposit accounts 251 231
Unsecured 85 89
Other 1,408 898
------- -------
5,146 3,612
Commercial business loans 94 60
------- -------
41,153 37,614
Less:
Net deferred loan fees and costs (68) (68)
Loans in process (49) (23)
Allowance for loan losses (237) (232)
------- -------
$40,799 $37,291
======= =======
</TABLE>
Activity in the allowance for loan losses was as follows:
Six Months Ended
June 30,
--------
2000 1999
---- ----
(Unaudited)
Balance at beginning of period $ 232 $ 218
Provision for losses 5 6
Charge-offs -- --
Recoveries -- --
------- -------
Balance at end of period $ 237 $ 224
======= =======
(Continued)
13.
<PAGE>
INDIAN VILLAGE BANCORP,INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2000 and December 31, 1999
(Table dollar amounts in thousands, except per share amounts)
--------------------------------------------------------------------------------
NOTE 4 - LOANS (Continued)
Nonaccrual loans totaled approximately $327,000 and $337,000 at June 30, 2000
and December 31, 1999. Interest not recognized on nonaccrual loans totaled
approximately $6,000 and $5,000 for the six months ended June 30, 2000 and 1999
(unaudited). The Bank had no individual loans which were identified by
management as impaired or loans past due more than 90 days still accruing
interest at June 30, 2000 or December 31, 1999 or during the six months ended
June 30, 2000 or 1999 (unaudited).
A summary of activity on related party loans is as follows:
Six Months Ended
June 30, 2000
-------------
Beginning balance $452
New loans 15
Principal repayments (9)
----
Ending balance $458
====
NOTE 5 - ACCRUED INTEREST RECEIVABLE
Accrued interest receivable is summarized as follows:
June 30, December 31,
2000 1999
---- ----
Loans $ 232 $ 208
Securities 284 258
Time deposits 1 --
----- -----
$ 517 $ 466
===== =====
NOTE 6 - PREMISES AND EQUIPMENT
Premises and equipment are summarized as follows:
June 30, December 31,
2000 1999
---- ----
Land $ 260 $ 260
Buildings and improvements 1,180 1,176
Furniture, fixtures, and equipment 492 472
Automobiles 17 17
------- -------
Total cost 1,949 1,925
Accumulated depreciation (385) (334)
------- -------
$ 1,564 $ 1,591
======= =======
(Continued)
14.
<PAGE>
INDIAN VILLAGE BANCORP,INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2000 and December 31, 1999
(Table dollar amounts in thousands, except per share amounts)
--------------------------------------------------------------------------------
NOTE 7 - DEPOSITS
Deposits consisted of the following:
June 30, December 31,
2000 1999
------- -------
Non-interest bearing demand deposit accounts $ 1,067 $ 241
NOW accounts 1,639 1,246
Money market accounts 1,873 1,576
Savings accounts 5,217 5,206
Certificates of deposit 26,790 24,884
------- -------
$36,586 $33,153
======= =======
The aggregate amount of certificates of deposit accounts with balances of
$100,000 or more at June 30, 2000 and December 31, 1999 was $1,840,000 and
$713,000. Deposits greater than $100,000 are not federally insured.
At June 30, 2000, the scheduled maturities of time deposits were as follows:
Year ended June 30, 2001 $14,912
2002 7,304
2003 2,633
2004 629
2005 1,312
-------
$26,790
=======
Directors and officers of the Corporation are customers of the Bank in the
ordinary course of business. At June 30, 2000 and December 31, 1999, deposits
from officers and directors of the Corporation totaled approximately $179,000
and $195,000.
(Continued)
15.
<PAGE>
INDIAN VILLAGE BANCORP, INC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2000 and December 31, 1999
(Table dollar amounts in thousands, except per share amounts)
--------------------------------------------------------------------------------
NOTE 8 - FEDERAL HOME LOAN BANK ADVANCES
Outstanding Federal Home Loan Bank advances are summarized as follows:
<TABLE>
<CAPTION>
June 30, December 31,
2000 1999
---- ----
<S> <C> <C>
Short-term FHLB advances $ 2,250 $ 2,700
5.60% Fixed-rate advance, due April 2008, callable April 2001 2,000 2,000
5.93% Fixed-rate advance, due August 2008, callable August 2002 2,000 2,000
4.67% Fixed-rate advance, due April 2009, callable April 2000 -- 1,000
5.44% Fixed-rate advance, due April 2009, callable April 2004 1,000 1,000
6.29% Variable-rate advance, due April 2009 1,000 --
5.56% Fixed-rate advance, due August 2009, callable August 2000 5,000 5,000
5.64% Fixed-rate advance, due October 2009, callable October 2000 2,500 2,500
5.48% Fixed-rate advance, due November 2009, callable May 2000 -- 1,000
5.99% Convertible fixed-rate advance until January 2001,
due January 2010 1,500 --
6.11% Convertible fixed-rate advance until March 2001,
due March 2010 1,000 --
6.23% Convertible fixed-rate advance until March 2001,
due March 2010 2,000 --
------- -------
$20,250 $17,200
======= =======
</TABLE>
As a member of the Federal Home Loan Bank system, the Bank has the ability to
obtain borrowings up to a maximum total of 50% of Bank assets subject to the
level of qualified, pledgable one- to four-family residential real estate loans
and Federal Home Loan Bank stock. The interest rates on the convertible fixed-
rate advances are fixed for a specified number of years, then convertible at the
option of the FHLB. If the convertible option is exercised, the advance may be
prepaid without penalty.
Advances under the borrowing agreements are collateralized by a blanket pledge
of the Bank's residential mortgage loan portfolio, FHLB stock and other
securities as noted in Note 3.
NOTE 9 - INCOME TAXES
The provision for federal income tax consisted of the following components:
Six Months Ended
June 30,
2000 1999
---- ----
(Unaudited)
Current tax expense $ (16) $ 78
Deferred tax expense 23 5
----- -----
$ 7 $ 83
===== =====
(Continued)
16.
<PAGE>
INDIAN VILLAGE BANCORP, INC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2000 and December 31, 1999
(Table dollar amounts in thousands, except per share amounts)
--------------------------------------------------------------------------------
NOTE 9 - INCOME TAXES (Continued)
The difference between the financial statement income tax expense and amounts
computed by applying the statutory federal income tax rate of 34.0% to income
before income taxes was as follows:
<TABLE>
<CAPTION>
Six Months Ended
June 30,
2000 1999
---- ----
(Unaudited)
<S> <C> <C>
Income taxes computed at the statutory
tax rate on pretax income $ 47 $ 83
Tax effect of:
Tax-exempt income (14) --
Nondeductible expenses and other (26) --
----- -----
$ 7 $ 83
===== =====
</TABLE>
The sources of gross deferred tax assets and gross deferred tax liabilities
were as follows:
<TABLE>
<CAPTION>
June 30, December 31,
2000 1999
---- ----
<S> <C> <C>
Deferred tax assets:
Allowance for loan losses $ 75 $ 67
Accrued pension -- 25
Additional minimum pension liability -- 27
Unrealized loss on securities available for sale 135 141
Other 8 3
----- -----
Total deferred tax assets 218 263
----- -----
Deferred tax liabilities:
Depreciation (27) (26)
FHLB stock dividends (35) (23)
Other (5) (7)
----- -----
Total deferred tax liabilities (67) (56)
----- -----
Net deferred tax asset (liability) $ 151 $ 207
===== =====
</TABLE>
The Corporation, in accordance with SFAS No. 109, has not recorded a deferred
tax liability of approximately $199,000 related to approximately $584,000 of
cumulative special bad debt deductions, included in retained earnings, arising
through 1987. If the Bank was liquidated, or would otherwise cease to be in the
business of banking, or if tax laws were to change, this amount would be
expensed. Under 1996 tax law changes, bad debts are based on actual loss
experience and tax bad debt reserves accumulated since 1987 are to be reduced.
This requires payment of approximately $35,000 over six years beginning in 1996.
(Continued)
17.
<PAGE>
INDIAN VILLAGE BANCORP, INC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2000 and December 31, 1999
(Table dollar amounts in thousands, except per share amounts)
--------------------------------------------------------------------------------
NOTE 10 - RETIREMENT PLANS
During the year ended December 31, 1999, the Corporation amended its defined
benefit pension plan. The amendment specifically froze plan participation.
During the six months ended June 30, 2000, the Corporation received a favorable
determination letter from the Internal Revenue Service to terminate the plan and
distribute all the plan's assets. In June 2000, the Corporation terminated the
plan and settled all of its obligations by making lump-sum distributions. As a
result of terminating the plan, the Corporation recognized a loss of $79,000
during the six months ended June 30, 2000.
Effective January 1, 2000, the Corporation implemented a 401(k) and profit
sharing plan for all eligible employees to replace its pension plan. To be
eligible, an individual must have at least one year of service and must be 21 or
more years old. Eligible employees may contribute up to 15% of their
compensation subject to a maximum statutory limitation. The Corporation matches
100% of those contributions up to a maximum of 3% of the participant's
compensation. The Corporation may also make a discretionary contribution.
Employee contributions are always 100% vested. Employer contributions become
100% vested after the participant completes six years of service. The expense
related to this plan was approximately $7,000, for the six months ended June 30,
2000.
NOTE 11 - EMPLOYEE STOCK OWNERSHIP PLAN
The Bank has established an employee stock ownership plan ("ESOP") for the
benefit of substantially all employees of the Corporation and the Bank.. The
ESOP borrowed funds from Corporation with which to acquire common shares of the
Corporation. The loan is secured by the shares purchased with the loan proceeds
and will be repaid by the ESOP with funds from the Bank's discretionary
contributions to the ESOP and earnings on ESOP assets. The shares purchased
with the loan proceeds are held in a suspense account for allocation among
participants as the loan is repaid. When loan payments are made, ESOP shares
are allocated to participants based on relative compensation.
ESOP compensation expense was $12,000 for the six months ended June 30, 2000.
The ESOP shares as of June 30, 2000 and December 31, 1999 were as follows:
June 30, December 31,
2000 1999
---- ----
Shares released for allocation 2,376 1,188
Unreleased shares 33,261 34,449
------- --------
Total ESOP shares 35,637 35,637
======= ========
Fair value of unreleased shares $ 392 $ 402
======= ========
The ESOP provides for the repurchase of any stock distributed to a participant
at its fair market value. The fair market value of the allocated shares subject
to repurchase was approximately $28,000 and $14,000 at June 30, 2000 and
December 31, 1999.
(Continued)
18.
<PAGE>
INDIAN VILLAGE BANCORP, INC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2000 and December 31, 1999
(Table dollar amounts in thousands, except per share amounts)
--------------------------------------------------------------------------------
NOTE 12 - COMMITMENTS, OFF-BALANCE SHEET RISK AND CONTINGENCIES
The Corporation is a party to financial instruments with off-balance sheet risk
in the normal course of business to meet the financing needs of customers. These
financial instruments include commitments to make loans. The Corporation's
exposure to credit loss in case of nonperformance by the other party to the
financial instrument for commitments to make loans is represented by the
contractual amount of those instruments. The Corporation follows the same credit
policy to make such commitments as is followed for those loans recorded in the
financial statements.
As of June 30, 2000, variable rate and fixed rate commitments to make loans or
fund outstanding lines of credit amounted to approximately $808,000 and
$1,506,000. The interest rates on variable rate commitments ranged from 7.75% to
17.50% and the interest rates on fixed rate commitments ranged from 7.25% to
10.75% at June 30, 2000. As of December 31, 1999, variable rate and fixed rate
commitments to make loans or fund outstanding lines of credit amounted to
approximately $833,000 and $1,037,000. Since loan commitments may expire without
being used, the amounts do not necessarily represent future cash commitments.
The Corporation has entered into employment agreements with two officers of IVB
and the Bank. The agreements provide for a term of three years and for
extensions for a period of one year on each anniversary date, subject to review
and approval of the extensions by disinterested members of the Board of
Directors. The employment agreements also provide for a severance payment and
other benefits upon involuntary termination of employment in connection with any
change in control of IVB and the Bank. A severance package will also be paid on
a similar basis in connection with a voluntary termination of employment where,
after the change in control, the officer is assigned duties inconsistent with
his or her position, duties, responsibilities and status immediately before a
change in control. The employment agreements restrict the officers' right to
compete against IVB and the Bank for a period of one year from the date of
termination of the agreement if the officer voluntarily terminated employment,
except upon a change in control.
NOTE 13 - REGULATORY MATTERS
The Bank is subject to various regulatory capital requirements administered by
the federal regulatory agencies. Failure to meet minimum capital requirements
can initiate certain mandatory actions that, if undertaken, could have a direct
material affect on the Bank's financial statements. Under capital adequacy
guidelines and the regulatory framework for prompt corrective action, the Bank
must meet specific capital guidelines that involve quantitative measures of the
Bank's assets, liabilities and certain off-balance-sheet items as calculated
under regulatory accounting practices. The Bank's capital amounts and
classifications are also subject to qualitative judgments by the regulators
about the Bank's components, risk weightings and other factors. At June 30,
2000 and December 31, 1999, management believes the Bank complied with all
regulatory capital requirements. Based on the computed regulatory capital
ratios, the Bank was considered well capitalized under the Federal Deposit
Insurance Act at June 30, 2000 and December 31, 1999. Management believes no
conditions or events have occurred subsequent to last notification that would
cause the Bank's capital category to change.
(Continued)
19.
<PAGE>
INDIAN VILLAGE BANCORP,INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2000 and December 31, 1999
(Table dollar amounts in thousands, except per share amounts)
--------------------------------------------------------------------------------
NOTE 13 - REGULATORY MATTERS (Continued)
Actual capital levels and minimum required levels of the Bank are summarized as
follows:
<TABLE>
<CAPTION>
Minimum
Required To Be
Minimum Required Well Capitalized
For Capital Under Prompt Corrective
Actual Adequacy Purposes Action Regulations
-------------- ------------------ ------------------------
Amount Ratio Amount Ratio Amount Ratio
------ ------ --------- ------- ------------ ----------
<S> <C> <C> <C> <C> <C> <C>
June 30, 2000
Total capital (to risk-weighted assets) $7,479 22.0% $2,719 8.0% $3,398 10.0%
Tier 1 (core) capital (to
risk-weighted assets) 7,242 21.3 1,359 4.0 2,039 6.0
Tier 1 (core) capital (to adjusted
total assets) 7,242 11.4 2,545 4.0 3,181 5.0
Tangible capital (to adjusted
total assets) 7,242 11.4 954 1.5 N/A
December 31, 1999
Total capital (to risk-weighted assets) $7,237 25.3% $2,287 8.0% $2,859 10.0%
Tier 1 (core) capital (to
risk-weighted assets) 7,005 24.5 1,143 4.0 1,715 6.0
Tier 1 (core) capital (to adjusted
total assets) 7,005 11.7 2,394 4.0 2,992 5.0
Tangible capital (to adjusted
total assets) 7,005 11.7 898 1.5 N/A
</TABLE>
NOTE 14 - FAIR VALUES OF FINANCIAL INSTRUMENTS
The carrying amount and estimated fair values of financial instruments were as
follows:
<TABLE>
<CAPTION>
June 30, December 31,
2000 1999
---- ----
Carrying Estimated Carrying Estimated
Amount Fair Value Amount Fair Value
-------- ---------- ------------ ----------
<S> <C> <C> <C> <C>
Financial assets:
Cash and cash equivalents $ 1,087 $ 1,087 $ 1,340 $ 1,340
Time deposits 200 200 299 299
Securities available for sale 20,061 20,061 17,074 17,074
Loans, net 40,799 39,968 37,291 36,912
Federal Home Loan Bank stock 1,099 1,099 925 925
Accrued interest receivable 517 517 466 466
Financial liabilities:
Demand and savings deposits (9,796) (9,796) (8,269) (8,269)
Certificates of deposit (26,790) (26,607) (24,884) (24,862)
Federal Home Loan Bank advances (20,250) (20,064) (17,200) (15,409)
Accrued interest payable (136) (136) (107) (107)
</TABLE>
(Continued)
20.
<PAGE>
INDIAN VILLAGE BANCORP,INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2000 and December 31, 1999
(Table dollar amounts in thousands, except per share amounts)
--------------------------------------------------------------------------------
NOTE 16 - FAIR VALUES OF FINANCIAL INSTRUMENTS (Continued)
Carrying amount is the estimated fair value for cash and cash equivalents, time
deposits, Federal Home Loan Bank stock, accrued interest receivable and payable,
demand and savings deposits, and variable rate loans and Federal Home Loan Bank
advances that reprice frequently and fully. Security fair values are based on
market prices or dealer quotes, and if no such information is available, on the
rate and term of the security and information about the issuer. For fixed rate
loans and certificates of deposit and for variable rate loans with infrequent
repricing or repricing limits, fair value is based on discounted cash flows
using current market rates applied to the estimated life and credit risk. For
fixed rate Federal Home Loan Bank advances and for variable rate advances with
infrequent repricing or repricing limits, fair value is based on current rates
for similar financing. Callable advances whose interest rate is below current
market rates are assumed to be called. The estimated fair value for other
financial instruments and off-balance-sheet loan commitments approximate cost at
June 30, 2000 and December 31, 1999 and is not considered significant to this
presentation.
NOTE 15 - OTHER COMPREHENSIVE INCOME (LOSS)
The tax effects on the components of other comprehensive income were as follows:
<TABLE>
<CAPTION>
Six Months Ended
June 30,
2000 1999
----- -----
(Unaudited)
<S> <C> <C>
Unrealized gains (losses) on securities available for sale:
Unrealized gains (losses) arising during year $ 5 $ (52)
Reclassification adjustment for gains (losses) (1) (4)
----- -----
Net unrealized gain (losses) 6 (56)
Additional minimum pension liability 26 --
----- -----
Other comprehensive income (loss) $ 32 $ (56)
===== =====
</TABLE>
NOTE 16 - EARNINGS PER SHARE
The factors used in the earnings per share computation are as follows:
Six Months Ended
June 30, 1999
-----------------
Basic earnings per common share
Net income $ 131
========
Weighted average common shares issued 445,583
Less: Average treasury shares (3,272)
Less: Average unallocated ESOP shares (33,855)
--------
Weighted average shares outstanding 408,456
========
Basic earnings per common share $ .32
========
(Continued)
21.
<PAGE>
INDIAN VILLAGE BANCORP,INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2000 and December 31, 1999
(Table dollar amounts in thousands, except per share amounts)
--------------------------------------------------------------------------------
NOTE 17 - PARENT COMPANY ONLY CONDENSED FINANCIAL INFORMATION
Condensed financial information of Indian Village Bancorp, Inc. as of June 30,
2000 and December 31, 1999, and for the six months ended June 30, 2000 is as
follows:
CONDENSED BALANCE SHEET
June 30, 2000 and December 31, 1999
June 30, December 31,
2000 1999
---- ----
Assets
Cash and cash equivalents $ 1,343 $ 1,702
Investment in subsidiary 6,981 6,732
Loans receivable 343 350
Other assets 20 --
------- -------
Total assets $ 8,692 $ 8,784
======= =======
Liabilities
Other liabilities 35 $ 35
Shareholders' equity $ 8,657 8,749
------- -------
Total liabilities and shareholders' equity $ 8,692 $ 8,784
======= =======
CONDENSED STATEMENT OF INCOME
Six Months Ended June 30, 2000
Six Months Ended
June 30, 2000
-------------
Interest on loans $ 13
Operating expenses (72)
--------
Income (loss) before income taxes and equity in
undistributed earnings of subsidiary (59)
Income tax expense (benefit) (20)
-------
Income before equity in undistributed
earnings of subsidiary (39)
Equity in undistributed earnings of subsidiary 170
-------
Net income $ 131
=======
22.
<PAGE>
INDIAN VILLAGE BANCORP,INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2000 and December 31, 1999
(Table dollar amounts in thousands, except per share amounts)
--------------------------------------------------------------------------------
NOTE 17 - PARENT COMPANY ONLY CONDENSED FINANCIAL INFORMATION (Continued)
CONDENSED STATEMENT OF CASH FLOWS
Six Months Ended June 30, 2000
Six Months Ended
June 30, 2000
-------------
Cash flows from operating activities
Net income $ 131
Adjustments to reconcile net income to cash provided
by operations:
Net change in other assets and other liabilities (25)
Equity in undistributed income of subsidiary (170)
------
Net cash from operating activities (64)
Cash flows from investing activities
Proceeds from loan principal repayments 7
------
Net cash from investing activities 7
Cash flows from financing activities
Cash dividends paid (26)
Dividends on unallocated ESOP shares (3)
Purchases of treasury stock (273)
------
Net cash from financing activities (302)
------
Net change in cash and cash equivalents (359)
Cash and cash equivalents at beginning of period 1,702
------
Cash and cash equivalents at end of year $1,343
======
23.
