<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 March 31, 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
incorporation or organization) Identification Number)
135 North Pennsylvania Street, 46204
Indianapolis, IN
(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 6,839,056 Shares
share
Class Outstanding at 4/30/95
<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 March 31, 1995
and December 31, 1994 4
Consolidated Statements of Earnings for the
Three Months Ended March 31, 1995 and 1994 5
Consolidated Statements of Shareholders' Equity
for the Three Months Ended March 31, 1995 6
Consolidated Statements of Cash Flows for the
Three Months Ended March 31, 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
March 31,
1995 1994
<S> <C> <C>
Total Interest Income $ 28,652 $ 23,075
Total Interest Expense 15,127 11,234
Net Earnings 4,300 2,005
Primary and Fully Diluted Earnings Per Share 0.59 0.27
Dividends Per Share 0.14 0.13
Net Interest Margin 3.99 % 3.87 %
Net Interest Spread 3.52 3.50
Return on Average Equity 14.31 7.00
Return on Average Assets 1.22 0.61
Average Shares Outstanding 7,063,654 7,178,564
Primary Shares Outstanding 7,255,759 7,404,795
Fully Diluted Shares Outstanding 7,268,683 7,404,808
<CAPTION>
At March 31,
1995 1994
<S> <C> <C>
Assets $ 1,475,157 $ 1,288,438
Loans-Net 1,173,705 934,096
Deposits 1,038,597 1,008,763
Shareholders' Equity 117,941 114,840
Shareholders' Equity/Assets 8.00 % 8.91 %
Shareholders' Equity Per Share $ 17.27 $ 15.96
Market Closing Price 17.00 15.25
Price/Earnings Multiple 7.20 x 14.12 x
<CAPTION>
At March 31, 1995
Actual Required
Capital Ratios
<S> <C> <C>
Tangible Capital/Total Assets 7.89 % 1.50 %
Core (Tier One) Capital/Total Assets 7.89 3.00
Risk-Based Capital/Risk-Weighted Assets 10.41 8.00
</TABLE>
<PAGE> 4
<TABLE>
<CAPTION>
CONSOLIDATED BALANCE SHEETS
First Indiana Corporation and Subsidiaries
(Dollars in Thousands, Except Per Share Data)
March 31, December 31,
1995 1994
(Unaudited)
<S> <C> <C>
Assets
Cash $ 25,826 $ 24,684
Federal Funds Sold 6,800 15,000
------------- -------------
Total Cash and Cash Equivalents 32,626 39,684
Investments Held for Sale 5,789 11,925
Investments (Market Value of $133,323 and $131,068) 137,059 137,604
Mortgage-Backed Securities Held for Sale 5,205 5,411
Mortgage-Backed Securities-Net (Market Value of
$59,800 and $61,828) 60,558 64,186
Loans Held for Sale 4,366 8,868
Loans Receivable 1,181,740 1,082,151
Less Allowance for Loan Losses 12,401 12,525
------------- -------------
Loans Receivable-Net 1,173,705 1,078,494
Premises and Equipment 13,175 13,333
Accrued Interest Receivable 10,285 9,812
Real Estate Owned-Net 5,277 5,796
Prepaid Expenses and Other Assets 31,478 28,636
------------- -------------
Total Assets $ 1,475,157 $ 1,394,881
============= =============
Liabilities and Shareholders' Equity
Liabilities
Non-Interest-Bearing Deposits $ 47,044 $ 38,250
Interest-Bearing Deposits 991,553 979,913
------------- -------------
Total Deposits 1,038,597 1,018,163
Federal Home Loan Bank Advances 249,131 201,155
Short-Term Borrowings 44,598 35,922
Accrued Interest Payable 2,330 1,696
Advances by Borrowers for Taxes and Insurance 4,398 2,356
Other Liabilities 10,818 7,296
------------- -------------
Total Liabilities 1,349,872 1,266,588
------------- -------------
Negative Goodwill 7,344 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; 6,827,474 and 7,208,252 Shares Issued and
Outstanding 72 72
Paid-In Capital in Excess of Par 31,932 31,926
Retained Earnings 92,335 88,981
Net Unrealized Loss on Securities Available for Sale (48) (120)
Treasury Stock - at Cost, 391,778 in 1995 and 10,000
Shares in 1994 (6,350) (147)
------------- -------------
Total Shareholders' Equity 117,941 120,712
------------- -------------
Total Liabilities and Shareholders' Equity $ 1,475,157 $ 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 March 31,
1995 1994
<S> <C> <C>
Interest Income
Loans $ 24,950 $ 19,014
Mortgage-Backed Securities 1,190 1,662
Investments 2,358 2,117
Federal Funds Sold and Interest-Bearing Deposits 154 282
--------- ------------
Total Interest Income 28,652 23,075
--------- ------------
Interest Expense
Deposits 11,570 9,255
Federal Home Loan Bank Advances 2,977 1,379
Short-Term Borrowings 580 2
Mortgage-Backed Bonds -- 598
--------- ------------
Total Interest Expense 15,127 11,234
--------- ------------
Net Interest Income 13,525 11,841
Provision for Loan Losses 900 900
--------- ------------
for Loan Losses 12,625 10,941
--------- ------------
Non-Interest Income
Trading Account Activity -- (335)
Sale of Investments Held For Sale (51) --
Sale of Loans 119 (873)
Sale of Deposits 1,497 --
Dividends on Federal Home Loan Bank Stock 210 129
Loan Servicing Income 770 624
Loan Fees 487 526
Insurance Commissions 205 129
Accretion of Negative Goodwill 237 237
Other 911 909
--------- ------------
Total Non-Interest Income 4,385 1,346
--------- ------------
Non-Interest Expense
Salaries and Benefits 5,575 4,985
Net Occupancy 765 722
Deposit Insurance 536 586
Real Estate Owned Operations-Net (624) (258)
Equipment 1,154 1,019
Office Supplies and Postage 468 429
Other 2,088 1,636
--------- ------------
Total Non-Interest Expense 9,962 9,119
--------- ------------
Earnings Before Income Taxes 7,048 3,168
Income Taxes 2,748 1,163
--------- ------------
Net Earnings $ 4,300 $ 2,005
========= ============
Earnings Per Share $ 0.59 $ 0.27
========= ============
Dividends Per Common Share $ 0.14 $ 0.13
========= ============
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 -- -- -- 47 -- -- 47
Exercise of Stock Options 1,000 -- 6 -- -- -- 6
Unrealized Loss on Securities Available
for Sale, Net of Income Taxes of ($33) -- -- -- -- 72 -- 72
Net Earnings for the Three Months
Ended March 31, 1995 -- -- -- 4,300 -- -- 4,300
Dividends on Common Stock -- -- -- (993) -- -- (993)
Purchase of Treasury Stock (381,778) -- -- -- -- (6,203) (6,203)
-----------------------------------------------------------------------------
Balance at March 31, 1995 6,827,474 $ 72 $ 31,932 $ 92,335 $ (48)$ (6,350)$ 117,941
=============================================================================
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)
Three Months Ended March 31,
1995 1994
<S> <C> <C>
Cash Flows from Operating Activities
Net Earnings $ 4,300 $ 2,005
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 (1,567) 1,208
Amortization 365 302
Amortization of Restricted Stock Plan 47 47
Depreciation 465 488
Net (Accretion) Amortization of Loans and Mortgage-Backed
Securities 325 (291)
Provision for Loan Losses 900 900
Proceeds from Sales of Trading Securities - 307,539
Purchase of Trading Securities - (307,874)
Origination of Loans Held for Sale Net of Principal Collected (8,178) (92,539)
Proceeds from Sale of Loans Held for Sale 12,799 115,467
Change In:
Accrued Interest Receivable (473) (774)
Other Assets (2,719) (554)
Accrued Interest Payable 634 (988)
Other Liabilities 3,522 871
-------- --------
Net Cash Provided by Operating Activities 10,420 25,807
-------- --------
Cash Flows from Investing Activities
Proceeds from Maturities of Investment Securities 5,022 291
Purchase of Investment Securities - (56,381)
Proceeds from Sale of Investments Held for Sale 1,370 -
Principal Collected on Mortgage-Backed Securities 3,834 11,703
Origination of Loans Net of Principal Collected (100,831) 17,622
Proceeds from Sale of Loans - 1,354
Purchase of Premises and Equipment (308) (705)
-------- --------
Net Cash Used by Investing Activities (90,913) (26,116)
-------- --------
Cash Flows from Financing Activities
Net Change in Deposits 47,393 (6,545)
Proceeds from Sale of Deposits (25,462) -
Repayment of Federal Home Loan Bank Advances (66,024) (15,022)
Borrowings of Federal Home Loan Bank Advances 114,000 -
Net Change in Short-Term Borrowings 8,676 -
Net Change in Advances by Borrowers
for Taxes and Insurance 2,042 1,763
Stock Option Proceeds 6 90
Payment for Fractional Shares - (6)
Dividends Paid (993) (935)
Purchase of Treasury Stock (6,203) -
-------- --------
Net Cash Provided (Used) by Financing Activities 73,435 (20,655)
-------- --------
Net Change in Cash and Cash Equivalents (7,058) (20,964)
Cash and Cash Equivalents at Beginning of Period 39,684 50,438
-------- --------
Cash and Cash Equivalents at End of Period $ 32,626 $ 29,474
======== ========
Supplemental Disclosures of Cash Flow Information
Cash Paid During the Period For:
Interest on Deposits, Advances, and
Other Borrowed Money $ 14,493 $ 12,222
Income Taxes 600 344
Transfer of Loans to Real Estate Owned 107 571
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
Three Months Ended March 31, 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 (7,255,759 and 7,268,683 for the three months ending March
31, 1995 and 7,404,795 and 7,404,808 for the three months ended
March 31, 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 March 31, 1995, First Indiana identified an impaired loan
totaling $3,359,511 to which a reserve of $167,976 was allocated.
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 $4,300,000 for the first quarter of 1995, compared with net
earnings of $2,005,000 in the first quarter of 1994. Earnings
per share for the three months ended March 31, 1995 were $.59,
compared with $.27 per share for the same period one year ago.
Included in first quarter earnings is a 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. Without this
non-recurring item, First Indiana's core earnings for the quarter
of $3,386,000, or $.46 per share, reflect a 70 percent increase
over the first quarter of 1994. Cash dividends per share for the
first three months of 1995 and 1994 were $.14 and $.13 per share,
respectively.
Net Interest Income
Net interest income was $13,525,000 for the three months
ended March 31, 1995, compared with $11,841,000 for the three
months ended March 31, 1994. The increase in net interest income
can be attributed to loan growth.
Total loans outstanding grew 26 percent to $1,173,705,000 at
March 31, 1995, compared with $934,096,000 one year earlier.
Much of the Bank's growth stemmed from two areas targeted for
aggressive expansion: home equity and residential construction
loans. At March 31, 1995, home equity loans outstanding were
$381,681,000, compared with $235,526,000 at March 31, 1994, a 62
percent increase. Residential construction loans stood at
$135,847,000, compared with $114,422,000 at March 31, 1994, a 19
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, and no appraisal.
These products help maintain the Bank's competitive edge and
further enhance its reputation as an innovative real estate
lender.
Interest income for the first quarter of 1995 was
$28,652,000, compared to $23,075,000 for the three months ended
March 31, 1994. Interest expense for the first quarter of 1995
was $15,127,000, compared to $11,234,000 for the three months
ended March 31, 1994.
During the first quarter of 1995, the Corporation's cost of
funds was 4.93 percent, compared with 4.05 percent one year ago.
The yield on earning assets was 8.45 percent for the first
quarter of 1995, compared to 7.55 percent one year ago. 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.
Annualized return on total average assets was 1.22 percent
for the three months ended March 31, 1995, compared to .61
percent for the same period in 1994.
<PAGE> 11
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 March 31,
1995 1994
<S> <C> <C>
(Dollars in Thousands)
Net Interest Income $ 13,525 $ 11,841
================ ================
Average Interest-Earning Assets $ 1,356,243 $ 1,222,852
Average Interest-Bearing Liabilities 1,227,493 1,110,599
---------------- ----------------
Average Interest-Free Funds $ 128,750 $ 112,253
================ ================
Yield on Interest-Earning Assets 8.45 % 7.55 %
Yield on Interest-Bearing Liabilities 4.93 4.05
---------------- ----------------
Interest-Rate Spread 3.52 3.50
Impact of Interest-Free Funds 0.47 0.37
---------------- ----------------
Net Interest Margin 3.99 % 3.87 %
================ ================
All non-accruing delinquent loans have been included in average interest-earning assets.
</TABLE>
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 three months ended
March 31, 1995 and 1994.
<TABLE>
<CAPTION>
Loan and REO Loss
Loan Loss Allowance REO Loss Allowance Allowance
1995 1994 1995 1994 1995 1994
<S> <C> <C> <C> <C> <C> <C>
(Dollars in Thousands)
Balance of Loss Allowance at
Beginning of Year $ 12,525 $ 11,506 $ 1,217 $ 1,483 $ 13,742 $ 12,989
Provision for Losses 900 900 - - 900 900
Charge-Offs - Residential (34) (34) (50) (11) (84) (45)
- Consumer (921) (391) (15) (2) (936) (393)
- Construction (17) - (62) - (79) -
- Business - (91) - - - (91)
- Commercial Real Estate (105) - - - (105) -
Recoveries - Residential 1 - 23 7 24 7
- Consumer 42 35 - 11 42 46
- Construction 10 - 4 - 14 -
---------------------------------------------------------------------
Balance at March 31, 1995 $ 12,401 $ 11,925 $ 1,117 $ 1,488 $ 13,518 $ 13,413
=====================================================================
Ratio of Allowance for Loan Losses
to Loans Receivable 1.05 % 1.26 %
Ratio of REO Loss Allowance to
Real Estate Owned 17.47 % 10.64 %
Ratio of Total Loan and REO Loss
Allowance to Non-Performing Assets 48.68 % 37.97 %
</TABLE>
<PAGE> 12
Non-performing assets were $27,769,000, or 1.88 percent of
assets, at March 31, 1995. This compares with $29,077,000, or
2.08 percent of assets, at December 31, 1994 and $35,324,000 or
2.74 percent of assets, at March 31, 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 March 31, 1995, $6,996,000 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 first
quarter of 1995 was $900,000, the same as the first quarter of
1994. The amount of the provision in the first quarter of 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.
Non-Interest Income
Total non-interest income was $4,385,000 for the three
months ended March 31, 1995, compared with $1,346,000 for the
same period in 1994. Included in non-interest income is a
$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.
In addition, First Indiana realized higher gains on the sale
of loans in the secondary market as the mortgage banking
environment improved. The Bank incurred a $1,208,000 loss from
mortgage banking and trading activity in the first quarter of
1994, but has taken steps to guard against a recurrence of these
losses through closer monitoring of the mortgage banking pipeline
and the closing of the Bank's trading desk.
Loan servicing income for the three months ended March 31,
1995 increased $146,000 over 1994 principally because of fewer
residential loan prepayments.
Dividends on Federal Home Loan Bank stock increased $81,000
for the three months ended March 31, 1995 compared to 1994, due
to an increase in the amount of stock held by First Indiana.
Insurance commissions increased $76,000 for the three months
ended March 31, 1995.
<PAGE> 13
Non-Interest Expense
Total non-interest expense was $9,962,000 for the three
months ended March 31, 1995, compared to $9,119,000 for the same
period in 1994. Salaries and benefits increased $470,000
primarily due to an additional pension accrual made in the first
quarter of 1995. Capitalized costs decreased $120,000 compared
to a year ago due to lower residential mortgage loan volume
reducing the amounts available for offsetting the Bank's loan
officers' salaries and benefits. This led to lower expense
credits for capitalized salaries and benefits, despite reductions
in the number of loan officers. Marketing expense increased
$360,000 over the same period in 1994 because of a renewed
commitment to research, sales training, and advertising.
Equipment expense increased $135,000 for the three months ended
March 31, 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 decreased by $366,000 for
the three months ended March 31, 1995 from one year ago. This
improvement for the three months reflects a gain of $713,000 on a
payoff of a commercial real estate REO property.
Capital Resources and Liquidity
The Corporation's financial strength continues to be
reflected in its shareholders' equity-to-assets ratio. At March
31, 1995, shareholders' equity was $117,941,000, or 8.00 percent
of total assets, compared to $120,712,000, or 8.65 percent at
December 31, 1994 and $114,840,000 or 8.91 percent at March 31,
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 March 31, 1995, the Bank's tangible and core
capital stood at $116,146,000, or 7.89 percent of assets,
$94,054,000 in excess of the 1.50 percent minimum tangible
capital and $71,962,000 in excess of the three percent minimum
required core capital. Risk-based capital equaled $126,528,000,
or 10.41 percent of risk-weighted assets, $29,333,000 more than
the minimum eight percent risk-based level required.
<TABLE>
<CAPTION>
Regulatory Capital
March 31, 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 $ 117,941
===========
First Indiana Bank Capital $ 116,146 $ 116,146 $ 116,146 $ 116,146
===========
Additional Capital Items:
General Valuation Allowance - - 11,368
Land Loans above 80% Loan-to-Value - - (986)
--------- --------- ---------
Computed Regulatory Capital 116,146 7.89 % 116,146 7.89 % 126,528 10.41 %
Minimum Capital Requirement (22,092) 1.50 (44,184) 3.00 (97,195) 8.00
--------- --------- ---------
Excess Regulatory Capital $ 94,054 $ 71,962 $ 29,333
========= ========= =========
Fully Phased-in Requirement 1.50 % 3.00 % 8.00 %
</TABLE>
<PAGE> 14
The Corporation paid a quarterly dividend of $.14 per common
share March 16, 1995 to shareholders of record as of March 2,
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. Pending the issuance of
the new OTS regulations, First Indiana intends to maintain
liquidity of a least five percent of net withdrawable assets
under the former Bank Board regulations. The Corporation's
liquidity ratio at March 31, 1995, was 5.60 percent.
<PAGE> 15
Interest-Rate Sensitivity
The following schedule analyzes the difference in rate-
sensitive assets and liabilities or "gap" at March 31, 1995 and
December 31, 1994.
<TABLE>
<CAPTION>
Rate Sensitivity by Period of Maturity or Rate Change
March 31, 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 7.70 % $ 149,648 10.68 % $ 7,596 $ 923 $ 99,354 $ 41,775
Loans Receivable (1)
Mortgage-Backed Securities 7.41 65,763 4.69 31,244 9,753 18,843 5,923
Residential Mortgage Loans 7.62 431,709 30.80 250,326 45,281 86,912 49,190
Commercial Real Estate Loans 9.50 60,885 4.35 18,765 10,255 17,673 14,192
Business Loans 10.61 44,111 3.15 34,331 1,113 8,574 93
Consumer Loans 9.93 513,554 36.64 215,140 34,847 179,336 84,231
Residential Construction Loans 9.69 135,847 9.69 122,258 - 6,387 7,202
------------------------------------------------------------------------
Total 8.84 $ 1,401,517 100.00 % 679,660 102,172 417,079 202,606
======================== ----------------------------------------------
Interest-Bearing Liabilities
Deposits:
Demand Deposits (2) 1.56 $ 145,921 10.95 % - - - 145,921
Passbook Deposits (3) 2.99 75,968 5.70 37,385 1,376 9,689 27,518
Money Market Savings 5.05 163,297 12.26 163,297 - - -
Jumbo Certificates 6.15 86,112 6.46 80,314 4,440 1,358 -
Fixed-Rate Certificates 5.46 567,299 42.58 188,083 84,292 294,924 -
------------------------------------------------------------------------
Total 4.72 1,038,597 77.95 469,079 90,108 305,971 173,439
Borrowings:
FHLB Advances 6.27 249,131 18.70 150,000 - 98,000 1,131
Short-Term Borrowings 6.17 44,598 3.35 44,598 - - -
------------------------------------------------------------------------
Total 5.06 1,332,326 100.00 % 663,677 90,108 403,971 174,570
=========
Net-Other (4) 69,191 69,191
--------------- ------------------------------------------------
Total $ 1,401,517 663,677 90,108 403,971 243,761
=============== ------------------------------------------------
Rate-Sensitivity Gap $ 15,983 $ 12,064 $ 13,108 $ (41,155)
================================================
March 31, 1995
Cumulative Rate-Sensitivity Gap $ 15,983 $ 28,047 $ 41,155
Percent of Total Interest-Earning Assets 1.14 % 2.00 % 2.94 %
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
$4,366,000 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 March 31, 1995, the Corporation's cumulative one-
year interest-rate gap stood at a positive 2.00 percent. This
means that 2.00 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 in order to take advantage of rising
interest rates.
Financial Condition
Total assets at March 31 1995, were $1,475,157,000, a slight
increase from $1,394,881,000 at December 31, 1994.
Loans and mortgage-backed securities-net at March 31, 1995,
were $1,239,468,000, compared to $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 $3,834,000 due to
prepayments.
In the past three months, consumer loans grew $39,076,000.
Expansion of consumer loans is one of the chief strategies for
improving the Corporation's interest income. Residential
construction loans grew a net $18,677,000 in the three months
ended March 31, 1995. The Corporation's loan servicing portfolio
amounted to $789,985,000 at March 31, 1995, compared to
$851,091,000 at March 31, 1994.
Total deposits were $1,038,597,000 at March 31, 1995,
compared to $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 March 31, 1995 and December 31, 1994 were
approximately $9,745,000 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 $249,131,000 at March 31, 1995,
compared to $204,155,000 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 short-term 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 , and 5 are not applicable.
Item 4. Submission of matters to Vote of Security Holders.
An annual meeting of shareholders was held April 19,
1995. The following directors were elected at this
meeting.
<TABLE>
<CAPTION>
Votes For Votes Withheld
<S> <C> <C>
Robert H. McKinney 6,819,285 20,264
Owen B. Melton, Jr. 6,819,578 19,971
Michael L. Smith 6,819,753 19,796
</TABLE>
The following directors' terms of office continued
after the meeting.
Gerald L. Bepko
Douglas W. Huemme
John W. Wynne
H. J. Baker
Marni McKinney
Phyllis W. Minott
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 three months ended March
31, 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
May 8, 1995 Owen B. Melton, Jr.
---------------------------
Owen B. Melton, Jr.
President
May 8, 1995 David L. Gray
---------------------------
David L. Gray
Vice President and Treasurer
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
ALL REPORTED NUMBERS ARE UNAUDITED
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-1-1995
<PERIOD-END> MAR-31-1995
<CASH> 25,826
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 6,800
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 10,994
<INVESTMENTS-CARRYING> 197,617
<INVESTMENTS-MARKET> 193,123
<LOANS> 1,186,106
<ALLOWANCE> 12,401
<TOTAL-ASSETS> 1,475,157
<DEPOSITS> 1,038,597
<SHORT-TERM> 154,598
<LIABILITIES-OTHER> 24,890
<LONG-TERM> 139,131
<COMMON> 72
0
0
<OTHER-SE> 117,869
<TOTAL-LIABILITIES-AND-EQUITY> 1,475,157
<INTEREST-LOAN> 24,950
<INTEREST-INVEST> 3,548
<INTEREST-OTHER> 154
<INTEREST-TOTAL> 28,652
<INTEREST-DEPOSIT> 11,570
<INTEREST-EXPENSE> 15,127
<INTEREST-INCOME-NET> 13,525
<LOAN-LOSSES> 900
<SECURITIES-GAINS> (51)
<EXPENSE-OTHER> 9,962
<INCOME-PRETAX> 7,048
<INCOME-PRE-EXTRAORDINARY> 7,048
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,300
<EPS-PRIMARY> .59
<EPS-DILUTED> .59
<YIELD-ACTUAL> 3.99
<LOANS-NON> 13,263
<LOANS-PAST> 0
<LOANS-TROUBLED> 6,996
<LOANS-PROBLEM> 4,111
<ALLOWANCE-OPEN> 12,525
<CHARGE-OFFS> 1,077
<RECOVERIES> 53
<ALLOWANCE-CLOSE> 12,401
<ALLOWANCE-DOMESTIC> 0
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 2,040
</TABLE>
