<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 September 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 6,878,370 Shares
Class Outstanding at 10/31/95
<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 September 30, 4
1995 and December 31, 1994
Consolidated Statements of Earnings for the Three
and Nine Months Ended September 30, 1995 and 1994 5
Consolidated Statements of Shareholders' Equity
for the Nine Months Ended September 30, 1995 6
Consolidated Statements of Cash Flows for the
Nine Months Ended September 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)
(Unaudited)
For the Three Months Ended
September 30,
1995 1994
------------- -----------
<S> <C> <C>
Total Interest Income $ 31,510 $ 24,637
Total Interest Expense 16,749 12,204
Net Earnings 4,174 3,002
Primary Earnings Per Share 0.59 0.40
Fully Diluted Earnings Per Share 0.59 0.40
Dividends Per Share 0.14 0.13
Net Interest Margin 4.17 % 4.01 %
Net Interest Spread 3.64 3.62
Return on Average Equity 13.43 10.18
Return on Average Assets 1.13 0.91
Average Shares Outstanding 6,861,544 7,211,611
Primary Shares Outstanding 7,117,287 7,420,148
Fully Diluted Shares Outstanding 7,133,757 7,437,155
<CAPTION>
For the Nine Months Ended
September 30,
1995 1994
----------- ------------
<S> <C> <C>
Total Interest Income $ 91,340 $ 71,035
Total Interest Expense 48,786 34,898
Net Earnings 13,245 7,676
Primary Earnings Per Share 1.85 1.04
Fully Diluted Earnings Per Share 1.84 1.03
Dividends Per Share 0.42 0.39
Net Interest Margin 4.06 % 3.93 %
Net Interest Spread 3.57 3.55
Return on Average Equity 14.53 8.81
Return on Average Assets 1.22 0.78
Average Shares Outstanding 6,921,248 7,195,636
Primary Shares Outstanding 7,143,741 7,408,482
Fully Diluted Shares Outstanding 7,204,385 7,426,825
<CAPTION>
At September 30,
1995 1994
---------- -----------
<S> <C> <C>
Assets $ 1,517,920 $ 1,349,251
Loans-Net 1,235,765 1,014,503
Deposits 1,112,049 1,012,238
Shareholders' Equity 125,540 118,844
Shareholders' Equity/Assets 8.27 % 8.81 %
Shareholders' Equity Per Share $ 18.27 $ 16.46
Market Closing Price 25.00 18.25
Price/Earnings Multiple 10.59 x 11.41 x
<CAPTION>
At September 30, 1995
Actual Required
------------ ------------
Capital Ratios
<S> <C> <C>
Tangible Capital/Total Assets 7.98 % 1.50 %
Core (Tier One) Capital/Total Assets 7.98 % 3.00 %
Risk-Based Capital/Risk-Weighted Assets 10.68 % 8.00 %
</TABLE>
<PAGE> 4
<TABLE>
<CAPTION>
CONSOLIDATED BALANCE SHEETS
First Indiana Corporation and Subsidiaries
(Dollars in Thousands, Except Per Share Data)
September 30, December 31,
1995 1994
------------- -------------
(Unaudited)
<S> <C> <C>
Assets
Cash $ 15,344 $ 24,684
Federal Funds Sold 9,500 15,000
------------- -------------
Total Cash and Cash Equivalents 24,844 39,684
Investments Held for Sale 5,708 11,925
Investments (Market Value of $132,976 and $131,068) 132,905 137,604
Mortgage-Backed Securities Held For Sale 95 5,411
Mortgage-Backed Securities - Net(Market Value of
$53,977 and $61,828) 53,393 64,186
Loans Held for Sale 58,810 8,868
Loans Receivable 1,191,037 1,082,151
Less Allowance for Loan Losses 14,082 12,525
------------- -------------
Loans Receivable - Net 1,235,765 1,078,494
Premises and Equipment 13,056 13,333
Accrued Interest Receivable 11,535 9,812
Real Estate Owned - Net 5,188 5,796
Prepaid Expenses and Other Assets 35,431 28,636
------------- -------------
Total Assets $ 1,517,920 $ 1,394,881
============= =============
Liabilities and Shareholders' Equity
Liabilities
Non-Interest-Bearing Deposits $ 60,144 $ 38,250
Interest-Bearing Deposits 1,051,905 979,913
------------- -------------
Total Deposits 1,112,049 1,018,163
Federal Home Loan Bank Advances 214,131 201,155
Short-Term Borrowings 43,564 35,922
Accrued Interest Payable 3,738 1,696
Advances by Borrowers for Taxes and Insurance 4,373 2,356
Other Liabilities 7,655 7,296
------------- -------------
Total Liabilities 1,385,510 1,266,588
------------- -------------
Negative Goodwill 6,870 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; 6,870,055 and 7,208,252 Shares Issued and
Outstanding 73 72
Paid-In Capital in Excess of Par 32,471 31,926
Retained Earnings 99,357 88,981
Net Unrealized Loss on Securities Available For Sale (11) (120)
Treasury Stock-at Cost, 391,778 Shares in 1995 and 10,000
Shares in 1994 (6,350) (147)
------------- -------------
Total Shareholders' Equity 125,540 120,712
------------- -------------
Total Liabilities and Shareholders' Equity $ 1,517,920 $ 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 Nine Months Ended
September 30, September 30,
------------------------------------------------
1995 1994 1995 1994
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Interest Income
Loans $ 27,826 $ 20,611 $ 80,345 $ 58,870
Mortgage-Backed Securities 1,155 1,280 3,466 4,271
Investments 2,374 2,601 7,085 7,307
Federal Funds Sold and Interest-
Bearing Deposits 155 145 444 587
-------- -------- -------- --------
Total Interest Income 31,510 24,637 91,340 71,035
-------- -------- -------- --------
Interest Expense
Deposits 12,991 9,985 37,088 28,586
Federal Home Loan Bank Advances 3,061 1,686 9,663 4,474
Short-Term Borrowings 697 115 2,035 119
Mortgage-Backed Bonds - 418 - 1,719
-------- -------- -------- --------
Total Interest Expense 16,749 12,204 48,786 34,898
-------- -------- -------- --------
Net Interest Income 14,761 12,433 42,554 36,137
Provision for Loan Losses 1,600 900 3,850 2,700
-------- -------- -------- --------
Net Interest Income After Provision
For Loan Losses 13,161 11,533 38,704 33,437
-------- -------- -------- --------
Non-Interest Income
Sale of Investments (7) - (7) -
Trading Account Activity - - - (335)
Sale of Investments Held For Sale - - (51) -
Sale of Loans 370 183 2,199 (869)
Sale of Deposits - - 1,497 -
Dividends on Federal Home Loan Bank Stock 267 152 730 417
Loan Servicing Income 725 806 2,180 2,047
Loan Fees 537 563 1,670 1,851
Insurance Commissions 367 238 932 544
Accretion of Negative Goodwill 237 237 711 711
Other 1,005 958 2,943 2,909
-------- -------- -------- --------
Total Non-Interest Income 3,501 3,137 12,804 7,275
-------- -------- -------- --------
Non-Interest Expense
Salaries and Benefits 5,173 4,895 15,927 14,888
Net Occupancy 774 789 2,286 2,259
Deposit Insurance 591 578 1,681 1,741
Real Estate Owned Operations - Net (109) 116 (932) (280)
Equipment 1,135 1,061 3,453 3,175
Office Supplies and Postage 487 418 1,472 1,296
Other 2,105 1,992 6,234 5,372
-------- -------- -------- --------
Total Non-Interest Expense 10,156 9,849 30,121 28,451
-------- -------- -------- --------
Earnings Before Income Taxes 6,506 4,821 21,387 12,261
Income Taxes 2,332 1,819 8,142 4,585
-------- -------- -------- --------
Net Earnings $ 4,174 $ 3,002 $ 13,245 $ 7,676
======== ======== ======== ========
Primary Earnings Per Share $ 0.59 $ 0.40 $ 1.85 $ 1.04
======== ======== ======== ========
Fully Diluted Earnings Per Share $ 0.59 $ 0.40 $ 1.84 $ 1.03
======== ======== ======== ========
Dividends Per Common Share $ 0.14 $ 0.13 $ 0.42 $ 0.39
======== ======== ======== ========
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 Securities Total
Common Stock in 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 - - 236 43 - - 279
Exercise of Stock Options 43,581 1 309 - - - 310
Unrealized Gain on Securities Available
for Sale, Net of Income Taxes of $50 - - - - 109 - 109
Net Earnings For The Nine Months
Ended September 30, 1995 - - - 13,245 - - 13,245
Dividends on Common Stock - - - (2,912) - - (2,912)
Purchase of Treasury Stock (381,778) - - - - (6,203) (6,203)
-----------------------------------------------------------------------------------
Balance at September 30, 1995 6,870,055 $73 $32,471 $99,357 ($11) ($6,350) $125,540
===================================================================================
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)
Nine Months Ended September 30,
-------------------------------
1995 1994
---------- --------
<S> <C> <C>
Cash Flows from Operating Activities
Net Earnings $ 13,245 $ 7,676
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 (3,643) 1,204
Amortization 1,317 1,220
Amortization of Restricted Stock Plan 279 141
Depreciation 1,408 1,419
Net (Accretion) Amortization of Loans and
Mortgage-Backed Securities (310) (223)
Provision for Loan Losses 3,850 2,700
Proceeds From Sales of Trading Securities -- 307,539
Purchase of Trading Securities -- (307,874)
Origination of Loans Held For Sale Net of
Principal Collected (114,002) (163,490)
Proceeds from Sale of Loans Held for Sale 66,259 220,835
Change In:
Accrued Interest Receivable (1,723) 56
Other Assets (7,518) 7,193
Accrued Interest Payable 2,042 (1,378)
Other Liabilities 359 (540)
------------ ---------
Net Cash Provided (Used) by Operating Activities (38,437) 76,478
------------ ---------
Cash Flows from Investing Activities
Proceeds from Maturities of Investment Securities 5,730 17,913
Proceeds from Sale of Investment Securities 2,993 --
Purchase of Investment Securities -- (66,381)
Proceeds from Sale of Investments Held for Sale 1,369 --
Principal Collected on Mortgage-Backed Securities 16,109 27,632
Originations of Loans Net of Principal Collected (235,781) (100,935)
Proceeds from Sale of Loans 125,100 1,819
Purchase of Premises and Equipment (1,136) (1,449)
------------ ---------
Net Cash Used by Investing Activities (85,616) (121,401)
------------ ---------
Cash Flows from Financing Activities
Net Change in Deposits 120,845 (3,070)
Proceeds from Sale of Deposits (25,462) --
Maturity of Mortgage-Backed Bond -- (50,000)
Repayment of Federal Home Loan Bank Advances (321,024) (136,722)
Borrowings of Federal Home Loan Bank Advances 334,000 207,100
Net Change in Short-Term Borrowings 7,642 20,313
Net Change in Advances by Borrowers
for Taxes and Insurance 2,017 1,659
Stock Option Proceeds 310 326
Payment for Fractional Shares -- (6)
Dividends Paid (2,912) (2,809)
Purchase of Treasury Stock (6,203) --
------------ ---------
Net Cash Provided by Financing Activities 109,213 36,791
------------ ---------
Net Change in Cash and Cash Equivalents (14,840) (8,132)
Cash and Cash Equivalents at Beginning of Period 39,684 50,438
------------ ---------
Cash and Cash Equivalents at End of Period $ 24,844 $ 42,306
============ =========
Supplemental Disclosures of Cash Flow Information
Cash Paid During the Period For:
Interest on Deposits, Advances, and
Other Borrowed Money $ 46,744 $ 36,276
Income Taxes 9,625 5,544
Transfer of Loans to Real Estate Owned 188 1,975
Transfer of Investments to Held For Sale -- 20,450
Transfer of Mortgage-Backed Securities
to Held for Sale -- 5,048
See Notes to Consolidated Financial Statements
</TABLE>
<PAGE> 8
FIRST INDIANA CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Nine Months Ended September 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 (7,117,287 and 7,133,757 for the three months ended
September 30, 1995; 7,420,148 and 7,437,155 for the three
months ended September 30, 1994; 7,143,741 and 7,204,385 for
the nine months ended September 30, 1995; and 7,408,482 and
7,426,825 for the nine months ended September 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 is not
expected to have a material impact on earnings 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 September 30, 1995, First Indiana identified an
impaired loan totaling $3,339,575 which had an allocated reserve
of $166,979.
Note 4 - Current Regulatory Issues
Bills pending in Congress propose a one-time assessment
on all SAIF-insured deposits in the range of 85 cents to 90 cents
per $100 of domestic deposits. This one-time assessment is
intended to recapitalize the Savings Association Insurance Fund
to the required level of 1.25% of insured deposits, and could be
payable in the fourth quarter of 1995 or early 1996.
If the assessment is made, the effect on First Indiana
would be a pre-tax charge of approximately $9,300,000, or
$5,200,000 after tax.
Note 5 - 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 $4,174,000 for the third quarter of 1995, compared
with net earnings of $3,002,000 in the third quarter of 1994.
Earnings per share for the three months ended September 30,
1995 were $.59, compared with $.40 per share for the same
period one year ago.
For the first nine months of 1995, net earnings were
$13,245,000, compared with $7,676,000 one year ago. For the
nine months ended September 30, 1995, net earnings per share
were $1.84, compared with $1.03 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 an after-tax gain on the sale
of home equity loans totalling $890,000, or $.13 per share. The
Bank will continue to explore opportunities to sell future home
equity loans as a means of generating servicing fee income. Cash
dividends per share for the first nine months of 1995 and 1994
were $.42 and $.39 per share, respectively.
Net Interest Income
Net interest income was $14,761,000 for the three months
ended September 30, 1995, compared with $12,433,000 for the
three months ended September 30, 1994. For the nine months
ended September 30, 1995, net interest income was $42,554,000,
compared with $36,137,000 for the nine months ended
September 30, 1994. The increase in net interest income can be
attributed to loan growth.
Total loans outstanding grew 22 percent to
$1,235,765,000 at September 30, 1995, compared with
$1,014,503,000 one year earlier. Much of the Bank's growth
stemmed from two areas targeted for aggressive expansion: home
equity and residential construction loans. At September 30,
1995, home equity loans outstanding were $440,974,000,
compared with $289,819,000 at September 30, 1994, a 52
percent increase. Residential construction loans stood at
$148,757,000, compared with $115,299,000 at September 30,
1994, a 29 percent increase. The Bank is capitalizing on
consumer demand for home equity loans and lines of credit by
offering streamlined approval and 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 third quarter of 1995 was
$31,510,000, compared with $24,637,000 for the three months
ended September 30, 1994. Interest income for the nine months
ended September 30, 1995 was $91,340,000, compared with
$71,035,000 for the same period in 1994. Interest expense for
the third quarter of 1995 was $16,749,000, compared with
$12,204,000 for the three months ended September 30, 1994.
Interest expense for the nine months ended September 30, 1995
and 1994 was $48,786,000 and $34,898,000.
<PAGE> 11
During the third quarter of 1995, the Corporation's cost
of funds was 5.27 percent, compared with 4.32 percent one year
ago. For the nine months ended September 30, 1995, the cost of
funds was 5.15 percent, compared with 4.17 percent one year
ago. The yield on earning assets was 8.91 percent for the third
quarter of 1995, compared with 7.94 percent one year ago. For
the nine months ended September 30, 1995, the yield on earning
assets was 8.72 percent, compared with 7.72 percent for the same
period in 1994. Growth in higher-yielding loans and lower cost
checking deposits contributed to the stronger margin.
Annualized return on total average assets was 1.13
percent for the three months ended September 30, 1995,
compared with .91 percent for the same period in 1994. For the
nine months ended September 30, 1995, the Corporation's
annualized return on total average assets was 1.22 percent,
compared with .78 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 September 30,
(Dollars in Thousands) 1995 1994
----------- ----------
<S> <C> <C>
Net Interest Income $ 14,761 $ 12,433
=========== ==========
Average Interest-Earning Assets $ 1,414,241 $ 1,240,460
Average Interest-Bearing Liabilities 1,271,385 1,129,076
----------- ----------
Average Interest-Free Funds $ 142,856 $ 111,384
=========== ==========
Yield on Interest-Earning Assets 8.91% 7.94%
Yield on Interest-Bearing Liabilities 5.27% 4.32%
----------- ----------
Interest-Rate Spread 3.64% 3.62%
Impact of Interest-Free Funds 0.53% 0.39%
----------- ----------
Net Interest Margin 4.17% 4.01%
=========== ==========
All non-accruing delinquent loans have been included in average interest-earning assets.
</TABLE>
<TABLE>
<CAPTION>
Nine Months Ended September 30,
(Dollars in Thousands) 1995 1994
----------- ----------
<S> <C> <C>
Net Interest Income $ 42,554 $ 36,137
=========== ==========
Average Interest-Earning Assets $ 1,397,125 $ 1,227,097
Average Interest-Bearing Liabilities 1,262,333 1,115,879
----------- ----------
Average Interest-Free Funds $ 134,792 $ 111,218
=========== ==========
Yield on Interest-Earning Assets 8.72% 7.72%
Yield on Interest-Bearing Liabilities 5.15% 4.17%
----------- ----------
Interest-Rate Spread 3.57% 3.55%
Impact of Interest-Free Funds 0.49% 0.38%
----------- ----------
Net Interest Margin 4.06% 3.93%
=========== ==========
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 nine months ended
September 30, 1995 and 1994.
<TABLE>
<CAPTION>
Loan REO Loss Loan & REO
Loss Allowance Allowance Loss 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 3,850 2,700 -- -- 3,850 2,700
Charge-Offs -- Residential (33) (65) (130) (56) (163) (121)
-- Consumer (2,217) (1,144) (87) (71) (2,304) (1,215)
-- Construction (33) (194) (69) (172) (102) (366)
-- Business (55) (387) -- -- (55) (387)
-- Commercial Real Estate (105) -- -- -- (105) 0
Recoveries -- Residential 3 3 153 72 156 75
-- Consumer 123 125 39 -- 162 125
-- Construction 10 -- 5 4 15 4
-- Commercial Real Estate 14 -- -- -- 14 0
------- ------- ------- ------ ------- --------
Balance at September 30, $14,082 $12,544 $1,128 $1,260 $15,210 $13,804
======= ======= ======= ====== ======= ========
Ratio of Allowance for Loan Losses
to Loans Receivable 1.13% 1.22%
Ratio of REO Loss Allowance to Real Estate Owned 17.86% 17.86%
Ratio of Total Loan and REO Loss Allowance to
Non-Performing Assets 54.78% 45.78%
</TABLE>
Non-performing assets were $27,765,000, or 1.83 percent
of assets, at September 30, 1995. This compares with
$29,077,000, or 2.08 percent of assets, at December 31, 1994
and $30,153,000, or 2.23 percent of assets, at September 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 September 30, 1995, $6,963,000
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 third
quarter of 1995 was $1,600,000, compared with $900,000 in the
third quarter of 1994. For the nine months ended September 30,
1995, the total provision for loan losses was $3,850,000,
compared with $2,700,000 for the same period in 1994. The
Bank raised the provision because of overall loan growth,
especially in consumer loans. 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 $3,501,000 for the three
months ended September 30, 1995, compared with $3,137,000
for the same period in 1994. For the nine months ended
September 30, 1995 and 1994, total non-interest income was
$12,804,000 and $7,275,000. Included in non-interest income in
1995 is an after-tax $914,000 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 $44,977,000 in fixed-rate home equity loans during the
second quarter at an after-tax gain of $890,000.
Loan servicing income for the nine months ended
September 30, 1995 increased from the comparable period in
1994 principally due to the purchase of additional mortgage loan
servicing rights. 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
$115,000 and $313,000 for the three and nine months ended
September 30, 1995 compared with the same periods in 1994,
due to an increase in dividend yield and the amount of stock held
by First Indiana. Insurance commissions increased $129,000 and
$388,000 for the three and nine months ended September 30,
1995.
Non-Interest Expense
Total non-interest expense was $10,156,000 for the three
months ended September 30, 1995, compared with $9,849,000
for the same period in 1994. Non-interest expense for the nine
months ended September 30, 1995 and 1994 was $30,121,000
and $28,451,000. Salaries and benefits increased $963,000 and
$2,200,000 during the three and nine months ended September
30, 1995 because of higher loan commissions associated with the
increased growth in loan production. Capitalized costs increased
$685,000 and $1,161,000 for the three and nine months ended
September 30, 1995 compared with a year ago due to increased
consumer loan volume. Marketing expense increased $506,000
for the nine months ended September 30, 1995 over last year
because of a renewed commitment to research, sales training, and
advertising. Equipment expense increased $74,000 and $278,000
for the three and nine months ended September 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
$225,000 and $652,000 for the three and nine months ended
September 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 September 30, 1995, shareholders' equity was
$125,540,000, or 8.27 percent of total assets, compared with
$120,712,000, or 8.65 percent, at December 31, 1994 and
$118,844,000, or 8.81 percent, at September 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.
The Bank continues to exceed all minimum capital
requirements. At September 30, 1995, the Bank's tangible and
core capital stood at $122,768,000, or 7.98 percent of assets,
$99,700,000 in excess of the 1.50 percent minimum tangible
capital and $76,631,000 in excess of the three percent minimum
required core capital. Risk-based capital equaled $134,724,000,
or 10.68 percent of risk-weighted assets, $33,826,000 more than
the minimum eight percent risk-based level required.
<TABLE>
<CAPTION>
Regulatory Capital
September 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 $125,540
First Indiana Bank Capital $123,442 $123,442 $123,442 $123,442
Additional Capital Items:
Non-Qualifying Servicing (674) (674) (674)
General Valuation Allowance - - 13,047
Land Loans above 80% Loan-to-Value - - (1,091)
-------- -------- ---------
Computed Regulatory Capital 122,768 7.98% 122,768 7.98% 134,724 10.68%
Minimum Capital Requirement (23,068) 1.50% (46,137) 3.00%(100,898) 8.00%
-------- -------- ---------
Excess Regulatory Capital $99,700 $76,631 $33,826
======== ======== =========
Fully Phased-in Requirement 1.50% 3.00% 8.00%
</TABLE>
The Corporation paid a quarterly dividend of $.14 per
common share September 15, 1995 to shareholders of record
as of September 7, 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 September 30,
1995, was 5.80 percent.
<PAGE> 15
Interest-Rate Sensitivity
The following schedule analyzes the difference in rate-sensitive
assets and liabilities or gap at September 30, 1995 and December 31, 1994.
<TABLE>
<CAPTION>
Rate Sensitivity by Period of Maturity or Rate Change
September 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
Investment Securities & Other 7.59% $ 148,113 10.20%$ 10,375 15,957 92,154 29,627
Loans Receivable (1)
Mortgage-Backed Securities 7.71% 53,488 3.69% 16,358 9,164 14,042 13,924
Residential Mortgage Loans 7.78% 432,165 29.77% 208,468 68,478 127,009 28,210
Commercial Real Estate Loans 10.18% 57,137 3.94% 19,179 9,780 16,012 12,166
Business Loans 9.70% 59,720 4.11% 45,922 2,300 11,498 --
Consumer Loans 10.23% 552,068 38.04% 215,843 43,876 177,129 115,220
Residential Construction Loans 9.19% 148,757 10.25% 133,352 -- 14,838 567
---------------------------------------------------------------------
Total 9.01% $ 1,451,448 100.00% 649,497 149,555 452,682 199,714
======================= -------------------------------------------
Interest-Bearing Liabilities
Deposits:
Demand Deposits (2) 1.49% $ 152,733 11.15%$ -- -- -- 152,733
Passbook Deposits (3) 2.99% 58,046 4.24% 19,463 1,376 9,689 27,518
Money Market Savings 5.15% 204,389 14.92% 204,389 -- -- --
Jumbo Certificates 5.94% 154,126 11.25% 100,595 3,302 50,229 --
Fixed-Rate Certificates 5.64% 542,755 39.62% 179,817 135,586 227,352 --
-------------------------------------------------------------------
Total 4.88% 1,112,049 81.18% 504,264 140,264 287,270 180,251
Borrowings:
FHLB Advances 6.01% 214,131 15.64%$ 90,000 25,000 98,000 1,131
Short-Term Borrowings 5.88% 43,564 3.18% 43,564 -- -- --
-------------------------------------------------------------------
Total 5.09% 1,369,744 100.00% 637,828 165,264 385,270 181,382
=======
Net - Other (4) 81,704 81,704
--------- -------------------------------------------
Total $ 1,451,448 637,828 165,264 385,270 263,086
========= -------------------------------------------
Rate Sensitivity Gap $ 11,669 $ (15,709)$ 67,412 $ (63,372)
===========================================
September 30, 1995
Cumulative Rate-Sensitivity Gap $ 11,669 $ (4,040)$ 63,372
===============================
Percent of Total Interest-Earning Assets 0.80% -0.28% 4.37%
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%
(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 $34,207,000 of Loans Held for Resale. Included in
Consumer Loans are $24,603,000 of Home Equity 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.
</TABLE>
<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 September 30, 1995, the Corporation's cumulative
one-year interest-rate gap stood at negative .28 percent. This
means that .28 percent of First Indiana's liabilities will reprice
within one year without a corresponding repricing of the assets
they are funding.
Financial Condition
Total assets at September 30, 1995, were
$1,517,920,000, a slight increase from $1,394,881,000 at
December 31, 1994.
During the third quarter, the Bank sold a corporate debt
security held in portfolio for a loss of ($7,200). The
deterioriation of the credit quality of the issuer triggered the sale.
Loans and mortgage-backed securities-net at September
30, 1995, were $1,289,253,000, 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
$16,109,000 due to prepayments.
In the past nine months, consumer loans grew
$77,603,000. Expansion of consumer loans is one of the main
strategies for improving the Corporation's interest income.
Residential construction loans grew a net $31,587,000 in the nine
months ended September 30, 1995. The Corporation's loan
servicing portfolio amounted to $1,124,529,000 at September 30,
1995, compared with $830,450,000 at September 30, 1994.
Total deposits were $1,112,049,000 at September 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 September 30, 1995 and
December 31, 1994 were approximately $11,914,000 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
$214,131,000 at September 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 nine
months ended September 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
November 1, 1995 /s/Owen B. Melton, Jr.
------------------------
Owen B. Melton, Jr.
President
November 1, 1995 /s/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 nine months ended September 30, 1995 and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> SEP-30-1995
<CASH> 15,344
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 9,500
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 5,803
<INVESTMENTS-CARRYING> 186,298
<INVESTMENTS-MARKET> 186,953
<LOANS> 1,249,847
<ALLOWANCE> 14,082
<TOTAL-ASSETS> 1,517,920
<DEPOSITS> 1,112,049
<SHORT-TERM> 108,564
<LIABILITIES-OTHER> 22,636
<LONG-TERM> 149,131
<COMMON> 73
0
0
<OTHER-SE> 125,467
<TOTAL-LIABILITIES-AND-EQUITY> 1,517,920
<INTEREST-LOAN> 80,345
<INTEREST-INVEST> 10,551
<INTEREST-OTHER> 444
<INTEREST-TOTAL> 91,340
<INTEREST-DEPOSIT> 37,088
<INTEREST-EXPENSE> 48,786
<INTEREST-INCOME-NET> 42,554
<LOAN-LOSSES> 3,850
<SECURITIES-GAINS> (58)
<EXPENSE-OTHER> 30,121
<INCOME-PRETAX> 21,387
<INCOME-PRE-EXTRAORDINARY> 21,387
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 13,245
<EPS-PRIMARY> 1.85
<EPS-DILUTED> 1.84
<YIELD-ACTUAL> 4.06
<LOANS-NON> 14,547
<LOANS-PAST> 0
<LOANS-TROUBLED> 6,963
<LOANS-PROBLEM> 4,396
<ALLOWANCE-OPEN> 12,525
<CHARGE-OFFS> 2,443
<RECOVERIES> 150
<ALLOWANCE-CLOSE> 14,082
<ALLOWANCE-DOMESTIC> 0
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 2,291
</TABLE>
