<PAGE> 1
United States Securities and Exchange Commission
Washington, D.C. 20549
Form 10-Q
(X) Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended June 30, 1995
or
( ) Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the Transition Period from ________ to ________
Commission File Number 0-14354
FIRST INDIANA CORPORATION
(Exact name of registrant as specified in its charter)
Indiana 35-1692825
(State or other jurisdiction of (I.R.S. Employer Identification
incorporation or organization) Number)
135 North Pennsylvania Street, Indianapolis, IN 46204
(Address of principal executive office) (Zip Code)
(317) 269-1200
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has
filed all reports required to be filed by Section 13 or 15(d)
of the Securities Exchange Act of 1934 during the preceding 12
months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes (X) No ( )
Indicate the number of shares outstanding of each of the
issuer's classes of common stock, as of the latest practicable
date:
Common Stock, par value $0.01 per share 6,839,056 Shares
Class Outstanding at 6/30/95
<PAGE> 2
FIRST INDIANA CORPORATION AND SUBSIDIARIES
FORM 10-Q
INDEX
Page
Part I Financial Highlights 3
Item 1. Financial Statements:
Consolidated Balance Sheets as of June 30, 1995 and 4
December 31, 1994
Consolidated Statements of Earnings for the Three and Six
Months Ended June 30, 1995 and 1994 5
Consolidated Statements of Shareholders' Equity for the
Six Months Ended June 30, 1995 6
Consolidated Statements of Cash Flows for the Six Months
Ended June 30, 1995 and 1994 7
Notes to Consolidated Financial Statements 8
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 10
Part II Other Information 17
Signatures 18
<PAGE> 3
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
First Indiana Corporation and Subsidiaries
(Dollars in Thousands, Except Per Share Data
For the Three Months Ended
June 30,
1995 1994
----------- -----------
<S> <C> <C>
Total Interest Income $ 31,178 $ 23,323
Total Interest Expense 16,910 11,460
Net Earnings 4,771 2,669
Primary Earnings Per Share 0.68 0.36
Fully Diluted Earnings Per Share 0.67 0.36
Dividends Per Share 0.14 0.13
Net Interest Margin 4.02 % 3.90 %
Net Interest Spread 3.53 3.52
Return on Average Equity 15.89 9.21
Return on Average Assets 1.30 0.82
Average Shares Outstanding 6,838,547 7,196,682
Primary Shares Outstanding 7,058,178 7,400,532
Fully Diluted Shares Outstanding 7,076,680 7,400,991
<CAPTION>
For the Six Months Ended
June 30,
1995 1994
----------- -----------
<S> <C> <C>
Total Interest Income $ 59,830 $ 46,398
Total Interest Expense 32,037 22,694
Net Earnings 9,071 4,674
Primary Earnings Per Share 1.27 0.63
Fully Diluted Earnings Per Share 1.26 0.63
Dividends Per Share 0.28 0.26
Net Interest Margin 4.00 % 3.88 %
Net Interest Spread 3.53 3.51
Return on Average Equity 15.10 8.11
Return on Average Assets 1.26 0.72
Average Shares Outstanding 6,951,100 7,187,623
Primary Shares Outstanding 7,156,969 7,402,664
Fully Diluted Shares Outstanding 7,191,300 7,402,881
<CAPTION>
At June 30,
1995 1994
----------- -----------
<S> <C> <C>
Assets $ 1,446,885 $ 1,309,190
Loans-Net 1,151,883 946,808
Deposits 1,068,865 1,006,313
Shareholders' Equity 121,976 116,630
Shareholders' Equity/Assets 8.43 % 8.91 %
Shareholders' Equity Per Share $ 17.84 $ 16.19
Market Closing Price 19.75 16.25
Price/Earnings Multiple 7.37 x 11.28 x
<CAPTION>
At June 30, 1995
Actual Required
Capital Ratios ----------- -----------
<S> <C> <C>
Tangible Capital/Total Assets 8.10 % 1.50 %
Core (Tier One) Capital/Total Assets 8.10 3.00
Risk-Based Capital/Risk-Weighted Assets 10.79 8.00
</TABLE>
<PAGE> 4
<TABLE>
<CAPTION>
CONSOLIDATED BALANCE SHEETS
First Indiana Corporation and Subsidiaries
(Dollars in Thousands, Except Per Share Data)
June 30, December 31,
1995 1994
---------- ------------
(Unaudited)
<S> <C> <C>
Assets
Cash $ 12,948 $ 24,684
Federal Funds Sold 15,000 15,000
-------- --------
Total Cash and Cash Equivalents 27,948 39,684
Investments Held for Sale 5,721 11,925
Investments (Market Value of $136,277 and $131,068) 136,497 137,604
Mortgage-Backed Securities Held for Sale 5,188 5,411
Mortgage-Backed Securities-Net (Market Value of
$58,156 and $61,828) 57,645 64,186
Loans Held for Sale 27,903 8,868
Loans Receivable 1,137,212 1,082,151
Less Allowance for Loan Losses 13,232 12,525
--------- ---------
Loans Receivable-Net 1,151,883 1,078,494
Premises and Equipment 13,100 13,333
Accrued Interest Receivable 10,055 9,812
Real Estate Owned-Net 3,990 5,796
Prepaid Expenses and Other Assets 34,858 28,636
--------- ---------
Total Assets $ 1,446,885 $ 1,394,881
========= =========
Liabilities and Shareholders' Equity
Liabilities
Non-Interest-Bearing Deposits $ 50,223 $ 38,250
Interest-Bearing Deposits 1,018,642 979,913
--------- ---------
Total Deposits 1,068,865 1,018,163
Federal Home Loan Bank Advances 189,131 201,155
Short-Term Borrowings 46,868 35,922
Accrued Interest Payable 1,815 1,696
Advances by Borrowers for Taxes and Insurance 3,193 2,356
Other Liabilities 7,930 7,296
--------- ---------
Total Liabilities 1,317,802 1,266,588
--------- ---------
Negative Goodwill 7,107 7,581
--------- ---------
Shareholders' Equity
Preferred Stock, $.01 Par Value: 2,000,000 Shares
Authorized; None Issued -- --
Common Stock, $.01 Par Value: 16,000,000 Shares
Authorized; 6,839,056 and 7,208,252 Shares Issued and
Outstanding 72 72
Paid-In Capital in Excess of Par 32,034 31,926
Retained Earnings 96,234 88,981
Net Unrealized Loss on Securities Available for Sale (14) (120)
Treasury Stock - at Cost, 391,778 in 1995 and 10,000 Sha (6,350) (147)
-------- --------
Total Shareholders' Equity 121,976 120,712
-------- --------
Total Liabilities and Shareholders' Equity $ 1,446,885 $ 1,394,881
========= ===========
See Notes to Consolidated Financial Statements
</TABLE>
<PAGE> 5
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF EARNINGS
First Indiana Corporation and Subsidiaries
(Dollars in Thousands, Except Per Share Data)
(Unaudited)
Three Months Ended June 30, Six Months Ended June 30,
--------------------------- ------------------------
1995 1994 1995 1994
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Interest Income
Loans $ 27,569 $ 19,245 $ 52,519 $ 38,259
Mortgage-Backed Securities 1,121 1,329 2,311 2,991
Investments 2,353 2,589 4,711 4,706
Federal Funds Sold and Interest-Bearing Deposits 135 160 289 442
---------- ---------- ---------- ----------
Total Interest Income 31,178 23,323 59,830 46,398
---------- ---------- ---------- ----------
Interest Expense
Deposits 12,527 9,346 24,097 18,601
Federal Home Loan Bank Advances 3,625 1,409 6,602 2,788
Short-Term Borrowings 758 2 1,338 4
Mortgage-Backed Bonds -- 703 -- 1,301
---------- ---------- ---------- ----------
Total Interest Expense 16,910 11,460 32,037 22,694
---------- ---------- ---------- ----------
Net Interest Income 14,268 11,863 27,793 23,704
Provision for Loan Losses 1,350 900 2,250 1,800
---------- ---------- ---------- ----------
Net Interest Income After Provision
for Loan Losses 12,918 10,963 25,543 21,904
---------- ---------- ---------- ----------
Non-Interest Income
Trading Account Activity -- -- -- (335)
Sale of Investments Held For Sale -- -- (51) --
Sale of Loans 1,710 (179) 1,829 (1,052)
Sale of Deposits -- -- 1,497 --
Dividends on Federal Home Loan Bank Stock 253 136 463 265
Loan Servicing Income 685 617 1,455 1,241
Loan Fees 646 762 1,133 1,288
Insurance Commissions 360 177 565 307
Accretion of Negative Goodwill 237 237 474 474
Other 1,027 1,042 1,938 1,950
---------- ---------- ---------- ----------
Total Non-Interest Income 4,918 2,792 9,303 4,138
---------- ---------- ---------- ----------
Non-Interest Expense
Salaries and Benefits 5,179 5,008 10,754 9,993
Net Occupancy 747 748 1,512 1,470
Deposit Insurance 554 577 1,090 1,163
Real Estate Owned Operations-Net (199) (138) (823) (396)
Equipment 1,164 1,095 2,318 2,114
Office Supplies and Postage 517 449 985 877
Other 2,041 1,744 4,129 3,381
---------- ---------- ---------- ----------
Total Non-Interest Expense 10,003 9,483 19,965 18,602
---------- ---------- ---------- ----------
Earnings Before Income Taxes 7,833 4,272 14,881 7,440
Income Taxes 3,062 1,603 5,810 2,766
---------- ---------- ---------- ----------
Net Earnings $ 4,771 $ 2,669 $ 9,071 $ 4,674
========== ========== ========== ==========
Primary Earnings Per Share $ 0.68 $ 0.36 $ 1.27 $ 0.63
========== ========== ========== ==========
Fully Diluted Earnings Per Share $ 0.67 $ 0.36 $ 1.26 $ 0.63
========== ========== ========== ==========
Dividends Per Common Share $ 0.14 $ 0.13 $ 0.28 $ 0.26
========== ========== ========== ==========
See Notes to Consolidated Financial Statements
</TABLE>
<PAGE> 6
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
First Indiana Corporation and Subsidiaries
(Dollars in Thousands, Except Per Share Data)
(Unaudited)
Net
Unrealized
Paid-In Loss on
Capital in Securities Total
Common Stock Excess Retained Available Treasury Shareholders'
Shares Amount of Par Earnings for Sale Stock Equity
-------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1994 7,208,252 $ 72 $ 31,926 $ 88,981 $ (120) $ (147) $ 120,712
Common Stock Issued Under Restricted
Stock Plans, Net of Amortization -- -- -- 132 -- -- 132
Exercise of Stock Options 12,582 -- 108 -- -- -- 108
Unrealized Gain on Securities Available
for Sale, Net of Income Taxes of $42 -- -- -- -- 106 -- 106
Net Earnings for the Six Months
Ended June 30, 1995 -- -- -- 9,071 -- -- 9,071
Dividends on Common Stock -- -- -- (1,950) -- -- (1,950)
Purchase of Treasury Stock (381,778) -- -- -- -- (6,203) (6,203)
-------------------------------------------------------------------------------------
Balance at June 30, 1995 6,839,056 $ 72 $ 32,034 $ 96,234 $ (14) $ (6,350) $ 121,976
=====================================================================================
See Notes to Consolidated Financial Statements
</TABLE>
<PAGE> 7
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF CASH FLOWS
First Indiana Corporation and Subsidiaries
(Dollars in Thousands)
(Unaudited)
Six Months Ended June 30,
-------------------------
1995 1994
-------------- -------------
<S> <C> <C>
Cash Flows from Operating Activities
Net Earnings $ 9,071 $ 4,674
Adjustments to Reconcile Net Earnings to:
Net Cash Provided (Used) by Operating Activities
(Gain) Loss on Sale of Loans, Mortgage-Backed Securities,
Investments and Deposits (3,277) 1,387
Amortization 731 730
Amortization of Restricted Stock Plan 132 94
Depreciation 935 944
Net (Accretion) Amortization of Loans and Mortgage-Backed Se (136) (224)
Provision for Loan Losses 2,250 1,800
Proceeds from Sales of Trading Securities -- 307,539
Purchase of Trading Securities -- (307,874)
Origination of Loans Held for Sale Net of Principal Collecte (33,638) (143,692)
Proceeds from Sale of Loans Held for Sale 16,432 190,170
Change In:
Accrued Interest Receivable (243) (800)
Other Assets (5,163) 5,725
Accrued Interest Payable 119 (324)
Other Liabilities 634 (1,705)
-------- --------
Net Cash Provided (Used) by Operating Activities (12,153) 58,444
-------- --------
Cash Flows from Investing Activities
Proceeds from Maturities of Investment Securities 5,410 2,394
Purchase of Investment Securities -- (66,381)
Proceeds from Sale of Investments Held for Sale 1,370 --
Principal Collected on Mortgage-Backed Securities 6,764 21,881
Origination of Loans Net of Principal Collected (174,213) (20,746)
Proceeds from Sale of Loans 117,876 1,819
Purchase of Premises and Equipment (703) (1,283)
-------- --------
Net Cash Used by Investing Activities (43,496) (62,316)
-------- --------
Cash Flows from Financing Activities
Net Change in Deposits 77,661 (8,995)
Proceeds from Sale of Deposits (25,462) --
Repayment of Federal Home Loan Bank Advances (206,024) (30,022)
Borrowings of Federal Home Loan Bank Advances 194,000 30,000
Net Change in Short-Term Borrowings 10,946 9,950
Net Change in Advances by Borrowers
for Taxes and Insurance 837 374
Stock Option Proceeds 108 206
Payment for Fractional Shares -- (6)
Dividends Paid (1,950) (1,870)
Purchase of Treasury Stock (6,203) --
-------- --------
Net Cash Provided (Used) by Financing Activities 43,913 (363)
-------- --------
Net Change in Cash and Cash Equivalents (11,736) (4,235)
Cash and Cash Equivalents at Beginning of Period 39,684 50,438
-------- --------
Cash and Cash Equivalents at End of Period $ 27,948 $ 46,203
======== ========
Supplemental Disclosures of Cash Flow Information
Cash Paid During the Period For:
Interest on Deposits, Advances, and
Other Borrowed Money $ 31,918 $ 23,018
Income Taxes 5,750 4,144
Transfer of Loans to Real Estate Owned 131 1,066
Transfer of Investments to Held For Sale - 20,450
Transfer of Mortgage-Backed Securities
to Held for Sale - 5,298
See Notes to Consolidated Financial Statements
</TABLE>
<PAGE> 8
FIRST INDIANA CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Six Months Ended June 30, 1995
(Unaudited)
Note 1 - Basis of Presentation
The foregoing consolidated financial statements are
unaudited. However, in the opinion of management, all
adjustments (comprising only normal recurring accruals)
necessary for a fair presentation of the financial statements
have been included. Results for any interim period are not
necessarily indicative of results to be expected for the year.
The consolidated financial statements include the accounts of
First Indiana Corporation and subsidiaries (the "Corporation").
The principal subsidiary of the Corporation is First Indiana
Bank and its subsidiaries (the "Bank"). A summary of the
Corporation's significant accounting policies is set forth in
Note 1 of the Notes to Consolidated Financial Statements in the
Corporation's Annual Report on Form 10-K for the year ended
December 31, 1994.
Note 2 - Earnings Per Share
Earnings per share for 1995 and 1994 are computed by
dividing net earnings by the primary and fully diluted shares
of common stock and common stock equivalents outstanding during
the period (7,058,178 and 7,076,680 for the three months ended
June 30, 1995; 7,400,532 and 7,400,991 for the three months
ended June 30, 1994; 7,156,969 and 7,191,300 for the six
months ended June 30, 1995; and 7,402,664 and 7,402,881 for the
six months ended June 30, 1994) after giving retroactive effect
to a four-for-three stock split in March 1994.
Note 3 - Accounting by Creditors for Impairment of a Loan
Allowances have been established for possible losses on
loans and real estate owned ("REO"). The provisions for losses
charged to operations are based on management's judgment of
current circumstances and the credit risk of the loan portfolio
and REO. Management believes that these allowances are
adequate. While management uses available information to
recognize losses on loans and REO, future additions to the
allowances may be necessary based on changes in economic
conditions. In addition, various regulatory agencies, as an
integral part of their examinations, periodically review these
allowances and may require the Corporation to recognize
additions to the allowance based on their judgment about
information available to them at the time of their examination.
As of January 1, 1995, the Bank adopted Statement of
Financial Accounting Standard No. 114, "Accounting by Creditors
for Impairment of a Loan." Under this standard, loans
considered to be impaired are reduced to the present value of
expected future cash flows or to the fair value of collateral
by allocating a portion of the allowance for loan losses to
such loans. If these allocations cause the allowance for loan
losses to require an increase, allocations are considered in
relation to the overall adequacy of the allowance for loan
losses and subsequent adjustments to the loss provision.
Adopting this standard will have no material impact in 1995.
<PAGE> 9
The recorded investment in impaired loans is periodically
adjusted to reflect cash payments, revised estimates of future
cash flows, and increases in the present value of expected cash
flows due to the passage of time. Cash payments representing
interest income are reported as such. Other cash payments are
reported as reductions in recorded investment. Increases or
decreases due to changes in estimates of future payments and
due to the passage of time are considered in relation to the
overall adequacy of the provision for the allowance for loan
losses.
At June 30, 1995, First Indiana identified an impaired
loan totaling $3,347,637 which had an allocated reserve of
$167,382.
Note 4 - Reclassifications
Certain amounts in the 1994 Consolidated Financial
Statements have been reclassified to conform to the 1995
presentation.
<PAGE> 10
Management's Discussion and Analysis of Results of Operations
and Financial Condition
Summary of Corporation's Results
First Indiana Corporation and subsidiaries had net
earnings of $4,771,000 for the second quarter of 1995, compared
with net earnings of $2,669,000 in the second quarter of 1994.
Earnings per share for the three months ended June 30, 1995
were $.67, compared with $.36 per share for the same period one
year ago.
For the first six months of 1995, net earnings were
$9,071,000, compared with $4,674,000 one year ago. For the six
months ended June 30, 1995, net earnings per share were $1.26,
compared with $.63 for the same period one year ago. Included
in net earnings is a first quarter non-recurring after-tax gain
of $914,000, or $.13 per share, from the sale of the deposits
of a banking center in Princeton, Indiana. Second quarter
earnings were enhanced by a non-recurring after-tax gain on the
sale of home equity loans totalling $829,000, or $.12 per
share. The Bank will continue to explore opportunities to sell
future home equity loans as a source of servicing fee income.
Cash dividends per share for the first six months of 1995 and
1994 were $.28 and $.26 per share, respectively.
Net Interest Income
Net interest income was $14,268,000 for the three months
ended June 30, 1995, compared with $11,863,000 for the three
months ended June 30, 1994. For the six months ended June 30,
1995, net interest income was $27,793,000, compared with
$23,704,000, for the six months ended June 30, 1994. The
increase in net interest income can be attributed to loan
growth.
Total loans outstanding grew 22 percent to $1,151,883,000
at June 30, 1995, compared with $946,808,000 one year earlier.
Much of the Bank's growth stemmed from two areas targeted for
aggressive expansion: home equity and residential construction
loans. At June 30, 1995, home equity loans outstanding were
$385,378,000, compared with $256,114,000 at June 30, 1994, a 50
percent increase. Residential construction loans stood at
$151,659,000, compared with $114,495,000 at June 30, 1994, a 32
percent increase. The Bank is capitalizing on consumer demand
for home equity loans and lines of credit by offering
streamlined approval, no closing costs or annual fees. These
products help maintain the Bank's competitive edge and further
enhance its reputation as an innovative real estate lender.
Interest income for the second quarter of 1995 was
$31,178,000, compared with $23,323,000 for the three months
ended June 30, 1994. Interest income for the six months ended
June 30, 1995 was $59,830,000, compared with $46,398,000, for
the same period in 1994. Interest expense for the second
quarter of 1995 was $16,910,000, compared with $11,460,000 for
the three months ended June 30, 1994. Interest expense for the
six months ended June 30, 1995 and 1994 was $32,037,000 and
$22,694,000.
During the second quarter of 1995, the Corporation's cost
of funds was 5.25 percent, compared with 4.14 percent one year
ago. For the six months ended June 30, 1995, the cost of funds
was 5.09 percent, compared with 4.09 percent one year ago. The
yield on earning assets was 8.78 percent for the second quarter
of 1995, compared with 7.66 percent one year ago. For the six
months ended June 30, 1995, the yield on earning assets was
8.62 percent, compared with 7.60 percent for the same period in
1994. Interest rates have increased since late 1994, and the
Corporation has benefited from being asset-sensitive because
the yield on earning assets rose faster than the cost of the
liabilities funding them.
<PAGE> 11
Annualized return on total average assets was 1.30
percent for the three months ended June 30, 1995, compared with
.82 percent for the same period in 1994. For the six months
ended June 30, 1995, the Corporation's annualized return on
total average assets was 1.26 percent, compared with .72
percent for the same period in 1994.
Net Interest Margin
Net interest margin consists of two components: interest-
rate spread and the contribution of interest-free funds
(primarily capital and other non-interest-bearing liabilities).
The following analysis of net interest margin reflects
the favorable impact of the Corporation's asset-sensitive
position.
<TABLE>
<CAPTION>
Three Months Ended June 30,
1995 1994
------------- -------------
<S> <C> <C>
(Dollars in Thousands)
Net Interest Income $ 14,268 $ 11,863
============= =============
Average Interest-Earning Assets $ 1,421,164 $ 1,217,981
Average Interest-Bearing Liabilities 1,288,119 1,107,958
------------- -------------
Average Interest-Free Funds $ 133,045 $ 110,023
============= =============
Yield on Interest-Earning Assets 8.78 % 7.66 %
Yield on Interest-Bearing Liabilities 5.25 4.14
------------- -------------
Interest-Rate Spread 3.53 3.52
Impact of Interest-Free Funds 0.49 0.38
------------- -------------
Net Interest Margin 4.02 % 3.90 %
============= =============
All non-accruing delinquent loans have been included in average interest-earning assets
</TABLE>
<TABLE>
<CAPTION>
Six Months Ended June 30,
1995 1994
------------- -------------
<S> <C> <C>
(Dollars in Thousands)
Net Interest Income $ 27,793 $ 23,704
============= =============
Average Interest-Earning Assets $ 1,388,567 $ 1,220,415
Average Interest-Bearing Liabilities 1,257,804 1,109,279
------------- -------------
Average Interest-Free Funds $ 130,763 $ 111,136
============= =============
Yield on Interest-Earning Assets 8.62 % 7.60 %
Yield on Interest-Bearing Liabilities 5.09 4.09
------------- -------------
Interest-Rate Spread 3.53 3.51
Impact of Interest-Free Funds 0.47 0.37
------------- -------------
Net Interest Margin 4.00 % 3.88 %
============= =============
All non-accruing delinquent loans have been included in average interest-earning assets
</TABLE>
<PAGE> 12
Non-Performing Assets and Summary of Loan Loss Experience
The following table analyzes the allowance for losses on
loans and real estate owned ("REO") for the six months ended
June 30, 1995 and 1994.
<TABLE>
<CAPTION>
Loan and REO Loss
Loan Loss Allowance REO Loss Allowance Allowance
---------------------- ------------------- -----------------
1995 1994 1995 1994 1995 1994
(Dollars in Thousands) -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Balance of Loss Allowance at
Beginning of Year $ 12,525 $ 11,506 $ 1,217 $ 1,483 $ 13,742 $ 12,989
Provision for Losses 2,250 1,800 - - 2,250 1,800
Charge-Offs - Residential (34) (54) (107) (41) (141) (95)
- Consumer (1,457) (720) (69) (43) (1,526) (763)
- Construction (18) (167) (67) (195) (85) (362)
- Business (46) (186) - - (46) (186)
- Commercial Real Est (105) - - - (105) -
Recoveries - Residential 3 3 153 62 156 65
- Consumer 90 80 19 - 109 80
- Construction 10 - 4 - 14 -
- Commercial Real Est 14 - - - 14 -
-------- -------- -------- -------- -------- --------
Balance at June 30, $ 13,232 $ 12,262 $ 1,150 $ 1,266 $ 14,382 $ 13,528
======== ======== ======== ======== ======== ========
Ratio of Allowance for Loan Losses
to Loans Receivable 1.14 % 1.28 %
Ratio of REO Loss Allowance to
Real Estate Owned 22.37 % 15.52 %
Ratio of Total Loan and REO Loss
Allowance to Non-Performing Assets 53.95 % 49.92 %
</TABLE>
Non-performing assets were $26,660,000, or 1.84 percent
of assets, at June 30, 1995. This compares with $29,077,000,
or 2.08 percent of assets, at December 31, 1994 and
$27,099,000, or 2.07 percent of assets, at June 30, 1994. This
category includes not only non-accrual loans and real estate
owned, but also restructured loans on which the Bank continues
to accrue interest. At June 30, 1995, $6,979,000 of non-
performing assets were restructured loans.
The Bank regularly reviews all non-performing assets to
evaluate the adequacy of the allowances for losses on loans and
REO. The allowance for loan losses is maintained through a
provision for loan losses, which is charged to earnings. The
provisions are determined in conjunction with management's
review and evaluation of current economic conditions, changes
in the character and size of the loan portfolio, estimated
charge-offs, and other pertinent information derived from a
quarterly review of the loan portfolio and REO properties.
The provision for losses on loans and REO in the second
quarter of 1995 was $1,350,000, compared with $900,000, in the
second quarter of 1994. For the six months ended June 30,
1995, the total provision for loan losses was $2,250,000,
compared with $1,800,000 for the same period in 1994. The
amount of the provision in 1995 was the result of management's
ongoing evaluation of the adequacy of its loan and real estate
owned loss allowances and the changing composition of the
Corporation's loan portfolio and REO. Management will continue
to evaluate the adequacy of the provision and will adjust it if
necessary to reflect changes in the amount or category of loans
originated.
<PAGE> 13
Non-Interest Income
Total non-interest income was $4,918,000 for the three
months ended June 30, 1995, compared with $2,792,000 for the
same period in 1994. For the six months ended June 30, 1995
and 1994, total non-interest income was $9,303,000 and
$4,138,000. Included in non-interest income in 1995 is a pre-
tax $1,497,000 gain from the sale of the deposits of a banking
center in Princeton, Indiana that did not fit strategically
with the Bank's plans for growth. Additionally, the Bank sold
$44,769,000 in fixed-rate home equity loans during the second
quarter at a pre-tax gain of $1,359,000.
Loan servicing income for the three and six months ended
June 30, 1995 increased from comparable amounts in 1994
principally because of lower residential loan prepayments. The
Bank purchased $310 million in residential mortgage loan
servicing rights in the second quarter of 1995.
Dividends on Federal Home Loan Bank stock increased
$117,000 and $198,000 for the three and six months ended June
30, 1995 compared with 1994, due to an increase in the amount
of stock held by First Indiana. Insurance commissions
increased $183,000 and $258,000 for the three and six months
ended June 30, 1995.
Non-Interest Expense
Total non-interest expense was $10,003,000 for the three
months ended June 30, 1995 compared with $9,483,000 for the
same period in 1994. Non-interest expense for the six months
ended June 30, 1995 and 1994 was $19,965,000 and $18,602,000.
Salaries and benefits increased $767,000 and $1,236,000 during
the three and six months ended June 30, 1995 because of an
additional pension accrual in the first quarter of 1995, higher
loan commissions, and increased staffing. Capitalized costs
increased $596,000 for the three months ended June 30, 1995
compared with a year ago due to increased consumer loan volume.
Marketing expense increased $508,000 for the six months ended
June 30, 1995 over last year because of a renewed commitment to
research, sales training, and advertising. Equipment expense
increased $69,000 and $204,000 for the three and six months
ended June 30, 1995. This increase is attributable to improved
technology in the Bank's branches and proof department.
Included in real estate owned operations-net are all of
the operating revenues and expenses associated with the
Corporation s real estate owned. Such net results improved by
$61,000 and $427,000 for the three and six months ended June
30, 1995 from one year ago. This improvement reflects a first
quarter gain of $713,000 on a payoff of a commercial real
estate REO property.
<PAGE> 14
Capital Resources and Liquidity
At June 30, 1995, shareholders equity was $121,976,000,
or 8.43 percent of total assets, compared with $120,712,000, or
8.65 percent, at December 31, 1994 and $116,630,000, or 8.91
percent, at June 30, 1994. The slight decrease in the equity-
to-asset ratio results from two factors: increased loan growth
and the Corporation's repurchase of its common stock under a
previously announced stock repurchase program.
The Bank continues to exceed all minimum capital
requirements. At June 30, 1995, the Bank s tangible and core
capital stood at $118,826,000, or 8.10 percent of assets,
$96,814,000 in excess of the 1.50 percent minimum tangible
capital and $74,801,000 in excess of the three percent minimum
required core capital. Risk-based capital equaled
$129,556,000, or 10.79 percent of risk-weighted assets,
$33,480,000 more than the minimum eight percent risk-based
level required.
<TABLE>
<CAPTION>
Regulatory Capital
June 30, 1995
-------------------------------------------------------------------
GAAP Tangible Core Risk-Based
(Dollars in Thousands) Capital Capital % Capital % Capital %
-------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
First Indiana Corporation Capital $ 121,976
==========
First Indiana Bank Capital $ 119,246 $ 119,246 $ 119,246 $ 119,246
==========
Additional Capital Items:
Non-Qualifying Servicing (420) (420) (420)
General Valuation Allowance - - 12,198
Land Loans above 80% Loan-to-Value - - (1,468)
---------- ---------- ----------
Computed Regulatory Capital 118,826 8.10 % 118,826 8.10 % 129,556 10.79%
Minimum Capital Requirement (22,012) 1.50 (44,025) 3.00 (96,076) 8.00
---------- ---------- ----------
Excess Regulatory Capital $ 96,814 $ 74,801 $ 33,480
========== ========== ==========
Fully Phased-in Requirement 1.50 % 3.00 % 8.00%
</TABLE>
The Corporation paid a quarterly dividend of $.14 per
common share June 15, 1995 to shareholders of record as of June
1, 1995. This reflects an increase from $.13 per share in
1994. On March 17, 1994, the Corporation effected a four-for-
three stock split. All per-share amounts have been adjusted to
reflect the stock split.
The Corporation conducts its business through its
subsidiaries. The main source of funds for the Corporation is
dividends from the Bank. The Corporation has no significant
assets other than its investment in the Bank.
Regulations of the former Federal Home Loan Bank Board
(the Bank Board ) required thrift institutions to maintain
minimum levels of certain liquid investments, as defined in the
regulations, of at least five percent of net withdrawable
assets. The director of the OTS shall set minimum liquidity
levels between four and 10 percent of assets. Current
regulations require a minimum liquidity level of five percent.
The Corporation s liquidity ratio at June 30, 1995, was 5.90
percent.
<PAGE> 15
Interest-Rate Sensitivity
The following schedule analyzes the difference in rate-
sensitive assets and liabilities or "gap" at June 30, 1995 and
December 31, 1994.
<TABLE>
<CAPTION>
Rate Sensitivity by Period of Maturity or Rate Change
June 30, 1995
Over 180 Over
% of Within Days to 1 Year to Over
(Dollars in Thousands) Rate Balance Total 180 Days 1 Year 5 Years 5 Years
------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Interest-Earning Assets
Investments Securities & Other 7.59% $ 157,218 11.35 % $ 15,879 $ 15,880 $ 95,558 $ 29,901
Loans Receivable (1)
Mortgage-Backed Securities 7.65 62,833 4.54 17,621 19,002 17,264 8,946
Residential Mortgage Loans 7.63 393,252 28.39 185,370 69,917 112,132 25,833
Commercial Real Estate Loans 10.30 59,480 4.29 19,506 10,017 16,866 13,091
Business Loans 10.28 50,248 3.63 38,572 1,557 10,119 -
Consumer Loans 10.35 510,476 36.85 270,097 20,457 114,790 105,132
Residential Construction Loans 9.41 151,659 10.95 135,803 - 15,123 733
-----------------------------------------------------------------------
Total 9.03 $ 1,385,166 100.00 % 682,848 136,830 381,852 183,636
======================= ----------------------------------------------
Interest-Bearing Liabilities
Deposits:
Demand Deposits (2) 1.54 $ 152,967 11.72 % - - - 152,967
Passbook Deposits (3) 2.99 65,842 5.05 27,259 1,376 9,689 27,518
Money Market Savings 5.28 183,883 14.09 183,883 - - -
Jumbo Certificates 6.08 102,069 7.82 71,021 5,333 25,715 -
Fixed-Rate Certificates 5.59 564,104 43.23 173,206 115,944 272,403 2,551
------------------------------------------------------------------------------
Total 4.84 1,068,865 81.91 455,369 122,653 307,807 183,036
Borrowings:
FHLB Advances 6.13 189,131 14.50 90,000 20,000 78,000 1,131
Short-Term Borrowings 6.09 46,868 3.59 46,868 - - -
------------------------------------------------------------------------------
Total 5.07 1,304,864 100.00 % 592,237 142,653 385,807 184,167
=========
Net-Other (4) 80,302 80,302
---------- -------------------------------------------
Total $1,385,166 592,237 142,653 385,807 264,469
-------------------------------------------
Rate-Sensitivity Gap $ 90,611 $ (5,823) $ (3,955) $ (80,833)
============================================
June 30, 1995
Cumulative Rate-Sensitivity Gap $ 90,611 $ 84,788 $ 80,833
===============================
Percent of Total Interest-Earning Assets 6.54 % 6.12 % 5.84 %
December 31, 1994 Gap
Cumulative Rate-Sensitivity Gap $ (1,536) $ 53,603 $ 59,450
===============================
Percent of Total Interest-Earning Assets (0.12)% 4.05 % 4.49 %
</TABLE>
(1) The distribution of fixed-rate loans is based upon
contractual maturity and scheduled contractual repayments
adjusted for estimated prepayments. For adjustable-rate
loans, interest rates adjust at intervals of six months
to five years. Included in Residential Mortgage Loans
are $27,903,000 of Loans Held for Resale.
(2) These deposits have been included in the Over 5 Years
category to reflect management's assumption that these
accounts are not rate-sensitive. This assumption is
based upon historic trends of these deposits through
periods of significant increases and decreases in
interest rates without changes in rates paid on these
deposits. Included in this category are NOW, money
market checking and non-interest bearing deposits. The
rate represents a blended rate on all deposit types in
the category.
(3) A portion of these deposits has been included in the Over
5 Years category to reflect management's assumption that
these accounts are not rate-sensitive. This assumption
is based upon the historic minimal decay rates on these
types of deposits experienced through periods of
significant increases and decreases in interest rates
without changes in rates paid on these deposits.
(4) Net - Other is the excess of other non-interest-bearing
liabilities and capital over other non-interest-bearing
assets.
<PAGE> 16
First Indiana engages in rigorous, formal asset/liability
management, the objectives of which are to manage interest-rate
risk, ensure adequate liquidity, and coordinate sources and
uses of funds. At June 30, 1995, the Corporation s cumulative
one-year interest-rate gap stood at 6.12 percent. This means
that 6.12 percent of First Indiana s assets will reprice within
one year without a corresponding repricing of the liabilities
they are funding. Rising interest rates will cause an increase
in net interest income, while declining rates will have the
opposite effect. The Corporation has placed itself in an asset-
sensitive position, to take advantage of rising interest rates.
Financial Condition
Total assets at June 30 1995, were $1,446,885,000, a
slight increase from $1,394,881,000 at December 31, 1994.
Loans and mortgage-backed securities-net at June 30,
1995, were $1,214,716,000, compared with $1,148,091,000 at
December 31, 1994. Consumer loans (consisting mainly of home
equity loans), construction loans and adjustable-rate mortgage
loans, which the Bank retains in its portfolio, accounted for
most of the increase. Mortgage-backed securities decreased
$6,764,000 due to prepayments.
In the second quarter of 1995, the Bank sold $72,855,000
of adjustable-rate residential mortgage loans at a gain of
$28,000.
In the past six months, consumer loans grew $36,010,000.
Expansion of consumer loans is one of the chief strategies for
improving the Corporation s interest income. Residential
construction loans grew a net $34,489,000 in the six months
ended June 30, 1995. The Corporation s loan servicing
portfolio amounted to $1,136,234,000 at June 30, 1995, compared
with $862,870,000 at June 30, 1994.
Total deposits were $1,068,865,000 at June 30, 1995,
compared with $1,018,163,000 at December 31, 1994. Non-
interest-bearing deposits consist of retail and commercial
checking accounts. Commercial checking accounts are expected
to become a more significant source of funds. Included in
commercial checking accounts at June 30, 1995 and December 31,
1994 were approximately $10,017,000 and $5,837,000 of escrow
balances maintained for loans serviced for others. Additional
funds were obtained through Federal Home Loan Bank advances.
Federal Home Loan Bank advances totaled $189,131,000 at June
30, 1995, compared with $201,155,000 at December 31, 1994.
In addition to deposits and advances, the Corporation
uses short-term repurchase agreements as sources of funds.
Borrowings will continue to be used in the short run to
compensate for periodic or other reductions in deposits or
inflows at less than projected levels, and long-term to support
mortgage lending activities.
<PAGE> 17
Other Information
Items 1, 2, 3 , 4 and 5 are not applicable.
Item 6. Exhibits and reports on Form 8-K
(a) Exhibits - None
(b) Reports on Form 8-K - There were no reports
on Form 8-K filed during the six months ended
June 30, 1995.
<PAGE> 18
Signatures
Pursuant to the requirements of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be
signed on its behalf by the undersigned thereunto duly
authorized.
First Indiana Corporation
August 7, 1995 Owen B. Melton, Jr.
-------------------
Owen B. Melton, Jr.
President
August 7, 1995 David L. Gray
-------------------
David L. Gray
Vice President and
Treasurer
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED JUNE 30, 1995 AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> JUN-30-1995
<CASH> 12,948
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 15,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 10,909
<INVESTMENTS-CARRYING> 194,142
<INVESTMENTS-MARKET> 194,433
<LOANS> 1,165,115
<ALLOWANCE> 13,232
<TOTAL-ASSETS> 1,446,885
<DEPOSITS> 1,068,865
<SHORT-TERM> 106,868
<LIABILITIES-OTHER> 20,045
<LONG-TERM> 129,131
<COMMON> 72
0
0
<OTHER-SE> 121,904
<TOTAL-LIABILITIES-AND-EQUITY> 1,446,885
<INTEREST-LOAN> 52,519
<INTEREST-INVEST> 7,022
<INTEREST-OTHER> 289
<INTEREST-TOTAL> 59,830
<INTEREST-DEPOSIT> 24,097
<INTEREST-EXPENSE> 32,037
<INTEREST-INCOME-NET> 27,793
<LOAN-LOSSES> 2,250
<SECURITIES-GAINS> (51)
<EXPENSE-OTHER> 19,965
<INCOME-PRETAX> 14,881
<INCOME-PRE-EXTRAORDINARY> 14,881
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 9,071
<EPS-PRIMARY> 1.27
<EPS-DILUTED> 1.26
<YIELD-ACTUAL> 4.00
<LOANS-NON> 13,870
<LOANS-PAST> 0
<LOANS-TROUBLED> 6,979
<LOANS-PROBLEM> 2,131
<ALLOWANCE-OPEN> 12,525
<CHARGE-OFFS> 1,660
<RECOVERIES> 117
<ALLOWANCE-CLOSE> 13,232
<ALLOWANCE-DOMESTIC> 0
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 2,011
</TABLE>
