UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K
Annual Report Pursuant to Section 13 or 15(d) of The Securities Exchange
Act of 1934
For the Fiscal year ended December 31, 1999
Commission File Number 33-10149
SVB&T Corporation
(Exact name of registrant as specified in its charter)
Indiana
(State or other jurisdiction of incorporation or organization)
35-1539978
(Employer Identification (I.R.S.) No.)
College and Maple Streets, French Lick, Indiana 47432
(Address of principal executive offices, including Zip Code)
(812) 936-9961
(Registrant's Telephone Number, including Area Code)
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: None
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 by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained to the
best of registrant's knowledge in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K. _X_
The aggregate market value of the voting stock held by nonaffiliated
shareholders of the registrant computed by reference to the price at which the
stock was sold or the average bid and asked prices of such stock, as of March
15, 2000 was approximately $14,561,410.
The number of shares outstanding of each of the registrant's classes of common
stock as of March 17, 2000 was 745,028.
Portions of the 1999 Annual Report to Shareholders for the year ended December
31, 1999 are incorporated by reference into Part II.
SVB&T Corporation 1999 Annual Report on Form 10-K
Table of Contents
Part I
Item 1. Business 3
Item 2. Property 9
Item 3. Legal Proceedings 9
Item 4. Submission of Matters to a Vote of Security Holders 9
Part II
Item 5. Market for Registrants Common Equity and Related Stockholder
Matters 9
Item 6. Selected Financial Data 10
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations 11
Item 8. Financial Statement and Supplementary Data 22
Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure 22
Part III
Item 10. Directors and Executive Officers of the Registrant 22
Item 11. Executive Compensation 24
Item 12. Security Ownership of Certain Beneficial Owners and Management 31
Item 13. Certain Relationships and Related Transactions 31
Part IV
Item 14. Exhibits, Financial Statement Schedules and Reports on
Form 8-K 31
Signatures 32
Index to Exhibits 33
PART I
Item 1. Business
General. SVB&T Corporation (the "Company") is a registered bank holding
company under the Bank Holding Company Act with its principal office in French
Lick, Indiana. The Company has elected to be governed by the Indiana Business
Corporation Law (IBCL).
The Company's sole subsidiary is Springs Valley Bank & Trust Company (the
"Bank"), which operates two banking offices in Orange County, Indiana, two
offices in Dubois County, Indiana and a banking office in Clark County,
Indiana. The Company became a holding company for the Bank in early 1983. At
present, the business of the Company is the management of the operations of
the Bank. The Bank is engaged in the business of providing a wide range of
financial services which include:
(I) maintaining demand, savings, and time deposits of individuals,
partnerships, corporations, associations, and government entities;
(II) extension of credit through loans to individuals, and to small and
medium sized businesses;
(III) purchase of obligations of federal, state, county and municipal
authorities and agencies;
(IV) providing a wide range of fiduciary services for personal and
corporate trusts;
(V) providing collection and deposit services for businesses and
individuals as well as providing currency and change for check
cashing and business operations;
(VI) acting as an agent for credit life, health and disability
insurance, property and casualty insurance, and health insurance;
and
(VII) acting as a broker for residential and commercial real estate.
(VIII) providing financial Services and access to products to meet the
clients needs.
The bank competes in the financial services industry in the counties of
Orange, Dubois, Clark and surrounding counties in Indiana. Competition
includes other financial institutions, credit unions, brokerage firms,
acceptance corporations and other organizations that offer banking related
services in our area.
The bank employees 106 full-time equivalents which are provided benefits and
with whom it enjoys excellent relations.
The bank serves as the local depository, and trust administrator for Kimball
International, Inc. ("Kimball") an interest of a majority of the Board of
Directors of the Company. The deposits of Kimball represent approximately 4%
of the certificates of deposit and money market deposits of the Bank. In
addition, the Bank has loans outstanding with individuals who are employees of
Kimball representing in excess of 14% of the Bank's total loans. Accordingly,
the cash flow of Kimball can have a significant impact on the deposit and loan
functions and earnings of the Bank.
At December 31, 1999, the company had total assets of $217 million, total
deposits of $181 million, and total equity capital of $20 million.
REGULATORY CONSIDERATIONS
Regulation of the Company and Affiliates
The Company is registered as a bank holding company and is subject to the
regulations of the Board of Governors of the Federal Reserve System ("Federal
Reserve") under the Bank Holding Company Act of 1956, as amended ("BHC Act").
Bank holding companies are required to file periodic reports with and are
subject to periodic examination by the Federal Reserve. The Federal Reserve
has issued regulations under the BHC Act requiring a bank holding company to
serve as a source of financial and managerial strength to its subsidiary
banks. It is the policy of the Federal Reserve that, pursuant to this
requirement, a bank holding company should stand ready to use its resources to
provide adequate capital funds to its subsidiary banks during periods of
financial stress or adversity.
Additionally, under the Federal Deposit Insurance Corporation Improvement Act
of 1991 ("FDICIA"), a bank holding company is required to guarantee the
compliance of any insured depository institution subsidiary that may become
"undercapitalized" (as defined in the statute) with the terms of any capital
restoration plan filed by such subsidiary with its appropriate federal
banking agency up to the lesser of (i) an amount equal to 5% of the
intuition's total assets at the time the institution became undercapitalized,
or (ii) the amount that is necessary (or would have been necessary) to bring
the institution into compliance with all applicable capital standards as of
the time the institution fails to comply with such capital restoration plan.
Under the BHC Act, the Federal Reserve has the authority to require a bank
holding company to terminate any activity or relinquish control of a nonbank
subsidiary (other than a nonbank subsidiary of a bank) upon the Federal
Reserve's determination that such activity or control constitutes a serious
risk to the financial soundness and stability of any bank subsidiary of the
bank holding company.
The Bank, which is a bank chartered by the State of Indiana, is supervised,
regulated and examined by the Indiana Department of Financial Institutions and
by the Federal Deposit Insurance Corporation ("FDIC"). Each regulator has the
authority to issue cease-and-desist orders if it determines that activities of
the Bank represent an unsafe and unsound banking practice or a violation of
law. Both federal and state law extensively regulate various aspects of the
banking business such as reserve requirements, truth-in-lending and truth-in-
savings disclosure, equal credit opportunity, fair credit reporting, community
reinvestment activities, trading in securities and other aspects of banking
operations. Current federal law also requires banks, among other things, to
make deposited funds available within specified time periods.
Under FDICIA, as implemented by final regulations adopted by the FDIC, FDIC-
insured state banks are prohibited, subject to certain exceptions, from
directly or indirectly acquiring or retaining any equity investments of a
type, or in an amount, that are not permissible for a national bank. FDICIA,
as implemented by FDIC regulations, also prohibits FDIC-insured state banks
and their subsidiaries, subject to certain exceptions, from engaging as
principal in any activity that is not permitted for a national bank or its
subsidiary, respectively, unless the bank meets, and continues to meet, its
minimum regulatory capital requirements and the FDIC determines the activity
would not pose a significant risk to the deposit insurance fund of which the
bank is a member. Impermissible investments and activities must be divested
or discontinued within certain time frames set by the FDIC in accordance with
FDICIA. These restrictions are not currently expected to have a material
impact on the operations of the Bank.
The Company and the Bank are subject to Sections 22(h), 23A and 23B of the
Federal Reserve Act, which restricts financial transactions between banks and
their directors, executive officers, principal shareholders, and affiliated
companies. These statutes also limit credit transactions between a depository
institution and its executive officers and its affiliates, prescribe terms and
conditions for affiliate transactions deemed to be consistent with safe and
sound banking practice, and restrict the types of collateral security
permitted in connection with an institution's extension of credit to an
affiliate.
Capital Adequacy Guidelines
Bank holding companies with consolidated assets in excess of $150 million, or
bank holding companies with consolidated assets of less than $150 million
which are engaged in nonbank activity involving significant leverage or which
have a significant amount of outstanding debt held by the general public, are
required to comply with the Federal Reserve's risk-based capital guidelines
which require a minimum ratio of total capital to risk-weighted assets
(including certain off-balance sheet activities such as standby letters of
credit) of 8%. At least half of the total required capital, or 4%, must be
"Tier 1 capital," consisting principally of common shareholders' equity,
noncumulative perpetual preferred stock, a limited amount of cumulative
perpetual preferred stock and minority interest in the equity accounts of
consolidated subsidiaries, less certain goodwill items. The remainder ("Tier
2 capital") may consist of a limited amount of subordinated debt and
intermediate-term preferred stock, certain hybrid capital instruments and
other debt securities, cumulative perpetual preferred stock, and a limited
amount of the general loan loss allowance. In addition to the risk-based
capital guidelines, the Federal Reserve has adopted a Tier 1 (leverage)
capital ratio under which the bank holding company must maintain a minimum
level of Tier 1 capital to average total consolidated assets of 3% in the case
of bank holding companies which have the highest regulatory examination
ratings and are not contemplating significant growth or expansion. All other
bank holding companies are expected to maintain a ratio of at least 1% above
the stated minimum.
The following are the Company's regulatory capital ratios as of December 31,
1999:
Tier 1 Capital: 12.80%
Total Capital: 13.80%
Leverage Ratio: 10.50%
The Bank is required to meet similar capital adequacy ratios. The FDIC has
adopted risk-based capital ratio guidelines to which depository institutions
under its supervision are subject. The guidelines establish a systematic
analytical framework that makes regulatory capital requirements more sensitive
to differences in risk profiles among banking organizations. Risk-based
capital ratios are determined by allocating assets and specified off-balance
sheet commitments to four risk weighted categories, with higher levels of
capital being required for the categories perceived as representing greater
risk. Like the capital guidelines established by the Federal Reserve, these
guidelines divide an institution's capital into two tiers. Depository
institutions are required to maintain a total risk-based capital ratio of 8%,
of which 4% must be Tier 1 capital. The agencies may, however, set higher
capital requirements when an institution's particular circumstances warrant.
Depository institutions experiencing or anticipating significant growth are
expected to maintain capital ratios, including tangible capital positions,
well above the minimum levels. In addition, the agencies established
guidelines prescribing a minimum Tier 1 leverage ratio of 3% for depository
institutions that meet certain specified criteria, including that they have
the highest regulatory rating and are not experiencing or anticipating
significant growth. All other institutions are required to maintain a Tier 1
leverage ratio of 3% plus an additional 100 to 200 basis points.
The following are the Bank's regulatory capital ratios as of December 31,
1997:
Tier 1 Capital: 12.19%
Total Capital: 13.19%
Leverage Ratio: 9.94%
The FDIC includes, in its evaluations of a bank's capital adequacy, an
assessment of the bank's exposure to declines in the economic value of the
bank's capital due to changes in interest rates. In 1996, the FDIC, along
with the Office of the Comptroller of the Currency and the Federal Reserve,
issued a joint policy statement to provide guidance on sound practices for
managing interest rate risk. The statement sets forth the factors the federal
regulatory examiners will use to determine the adequacy of a bank's capital
for interest rate risk. These qualitative factors include the adequacy and
effectiveness of the bank's internal interest rate risk management process and
the level of interest rate exposure. Other qualitative factors that will be
considered include the size of the bank, the nature and complexity of its
activities, the adequacy of its capital and earnings in relation to the bank's
overall risk profile, and its earning exposure to interest rate movements.
The interagency supervisory policy statement describes the responsibilities of
a bank's board of directors in implementing a risk management process and the
requirements of the bank's senior management in ensuring the effective
management of interest rate risk. Further, the statement specifies the
elements that a risk management process must contain.
The Federal Reserve and the FDIC have issued final regulations further
revising their risk-based capital standards to include a supervisory framework
for measuring market risk. The effect of these regulations is that any bank
holding company or bank which has significant exposure to market risk must
measure such risk using its own internal model, subject to the requirements
contained in the regulations, and must maintain adequate capital to support
that exposure. These regulations apply to any bank holding company or bank
whose trading activity equals 10% or more of its total assets, or whose
trading activity equals $1 billion or more. Examiners may require a bank
holding company or bank that does not meet the applicability criteria to
comply with the capital requirements if necessary for safety and soundness
purposes. These regulations contain supplemental rules to determine qualifying
and excess capital, calculate risk-weighted assets, calculate market risk
equivalent assets and calculate risk-based capital ratios adjusted for market
risk.
Branching and Acquisitions
Branching by the Bank is subject to the jurisdiction, and requires the prior
approval, of the FDIC and the Indiana Department of Financial Institutions.
Under current law, banks chartered by the State of Indiana may establish
branches throughout the state and in other states. Congress authorized
interstate branching, with certain limitations, beginning in 1997. In 1996,
the Indiana General Assembly adopted statutes authorizing Indiana financial
institutions to establish one or more branches in states other than Indiana
through interstate merger transactions and to establish one or more interstate
branches through de novo branching or the acquisition of a branch.
Bank holding companies, such as the Company, are prohibited by the BHC Act
from acquiring direct or indirect control of more than 5% of the outstanding
shares of any class of voting stock or substantially all of the assets of any
bank or savings association or merging or consolidating with another bank
holding company without prior approval of the Federal Reserve. Additionally,
the Company is prohibited by the BHC Act from engaging in or from acquiring
ownership or control of more than 5% of the outstanding shares of any class of
voting stock of any company engaged in a nonbanking business unless such
business is determined by the Federal Reserve, as of the day before the date
of enactment of the Gramm-Leach-Bliley Act, to be so closely related to
banking as to be a proper incident thereto. The BHC Act does not place
territorial restrictions on the activities of such nonbanking-related
activities.
The BHC Act specifically authorizes a bank holding company, upon receipt of
appropriate approvals from the Federal Reserve and the Director of the Office
of Thrift Supervision ("OTS"), to acquire control of any savings association or
thrift holding company. Similarly, a thrift holding company may acquire
control of a bank. A savings association acquired by a bank holding company
cannot continue any non-banking activities not authorized for bank holding
companies.
Interstate Banking
The Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994 allows
bank holding companies to acquire banks anywhere in the United States subject
to certain state restrictions, and permits an insured bank to merge with an
insured bank in another state without regard to whether such merger is
prohibited by state law. Additionally, an out-of-state bank may acquire the
branches of an insured bank in another state without acquiring the entire
bank; provided, however, that the law of the state where the branch is located
permits such an acquisition. Bank holding companies also may merge existing
bank subsidiaries located in different states into one bank.
An insured bank subsidiary may act as an agent for an affiliated bank or
savings association in offering limited banking services (receive deposits,
renew time deposits, close loans, service loans and receive payments on loans
obligations) both within the same state and across state lines.
Prompt Corrective Action
Federal bank regulatory authorities are required to take "prompt corrective
action" with respect to banks which do not meet minimum capital requirements.
For these purposes, there are five capital tiers: well capitalized,
adequately capitalized, undercapitalized, significantly undercapitalized and
critically undercapitalized.
The FDIC has adopted regulations to implement the prompt corrective action
provisions of FDICIA. Among other things, the regulations define the relevant
capital measures for the five capital categories. An institution is deemed to
be "well capitalized" if it has a total risk-based capital ratio of 10% or
greater, a Tier 1 risk-based capital ratio of 6% or greater, and a leverage
ratio of 5% or greater, and is not subject to a regulatory order, agreement or
directive to meet and maintain a specific capital level for any capital
measure. An institution is deemed to be "adequately capitalized" if it has a
total risk-based capital ratio of 8% or greater, a Tier 1 risk-based capital
ratio of 4% or greater, and generally a leverage ratio 4% or greater. An
institution is deemed to be "undercapitalized" if it has a total risk-based
capital ratio of less than 8% or a Tier 1 risk-based capital ratio of 4% or
greater and generally a leverage ratio of less than 4%, and "significantly
undercapitalized" if it has a total risk-based capital ratio of less than 6%,
a Tier 1 risk-based capital ratio of less than 3%, or a leverage ratio of less
than 3%. An institution is deemed to be "critically undercapitalized" if it
has a ratio of tangible equity (as defined in the regulations) to total assets
that is equal to or less than 2%.
"Undercapitalized" banks are subject to growth limitations and are required to
submit a capital restoration plan. A bank's compliance with such plan is
required to be guaranteed by any company that controls the undercapitalized
institution as described above. If an "undercapitalized" bank fails to submit
an acceptable plan, it is treated as if it is significantly undercapitalized.
"Significantly undercapitalized" banks are subject to one or more of a number
of requirements and restrictions, including an order by the FDIC to sell
sufficient voting stock to become adequately capitalized, requirements to
reduce total assets and cease receipt of deposits from correspondent banks,
and restrictions on compensation of executive officers. "Critically
undercapitalized" institutions may not, beginning 60 days after becoming
"critically undercapitalized," make any payment of principal or interest on
certain subordinated debt or extend credit for a highly leveraged transaction
or enter into any transaction outside the ordinary course of business. In
addition, "critically undercapitalized" institutions are subject to
appointment of a receiver or conservator.
Safety and Soundness Standards
The FDIC, the Office of Thrift Supervision, the Federal Reserve Board and the
Office of the Comptroller of the Currency have published final guidelines
implementing the FDICIA requirement that the federal banking agencies
establish operational and managerial standards to promote the safety and
soundness of federally insured depository institutions. The guidelines
establish standards for internal controls, information systems, internal audit
systems, loan documentation, credit underwriting, interest rate exposure,
asset growth, asset quality, earnings, compensation, fees and benefits, and
specifically prohibit, as an unsafe and unsound practice, excessive
compensation that could lead to a material loss to an institution. If an
institution fails to comply with any of the standards set forth in the
guidelines, the institution's primary federal regulator may require the
institution to submit a plan for achieving and maintaining compliance.
Failure to submit an acceptable compliance plan, or failure to adhere to a
compliance plan that has been accepted by the appropriate regulator, would
constitute grounds for further enforcement action.
Deposit Insurance
The deposits of the Bank are insured up to $100,000 per insured account, by
the Bank Insurance Fund ("BIF") administered by the FDIC. Accordingly, the
Bank pays deposit insurance premiums to BIF. FDIC regulations implement a
transitional risk-based assessment system whereby a base insurance premium
will be adjusted according to the capital category and supervisory category to
which an institution is assigned. The supervisory subgroup to which an
institution is assigned by the FDIC is confidential and may not be disclosed.
Deposit insurance assessments may increase depending upon the category and
subcategory, if any, to which the bank is assigned by the FDIC. If the FDIC
believes that an increase in the insurance rates is necessary, it may increase
the insurance premiums applicable to BIF. Any increase in insurance
assessments could have an adverse effect on the earnings of the Bank.
Recent Legislation
On November 12, 1999 the President of the United States signed into law the
Gramm-Leach-Bliley Act ("GLBA"). The GLBA contains a number of provisions that
will fundamentally alter the banking and financial services industries. The
GLBA repeals Section 20 of the Banking Act of 1933, commonly known as the
Glass-Steagall Act, which generally has separated commercial from investment
banking. The GLBA will also for the first time allow banks, securities firms
and insurance companies to affiliate in a new financial holding company
structure.
Under the GLBA, national bank affiliates will be able to conduct a broad range
of financial activities, including providing insurance and securities
services. However, the national bank must be well-capitalized and well-
managed. In addition, insurance and securities activities will be
functionally regulated. For example, the Securities and Exchange Commission
will regulate most national bank affiliates' securities activities and the
states will regulate their insurance activities. The GLBA preserves the
thrift charter, but bars new unitary thrift holding companies from approval
that were applied for after May 4, 1999.
It is not possible to predict what impact the GLBA will have on the Company
and the Bank. One consequence may be increased competition from large
financial services companies, that under the GLBA, will be permitted to
provide many types of financial services to customers. Another consequence
will be the imposition of new regulations regarding the privacy of consumer
and customer financial information. Recently, regulations were proposed
governing the privacy of financial information of bank customers. The privacy
regulations, which will apply to the Company and the Bank, are due to be
finalized in May, with an effective date next fall.
Additional Matters
In addition to the matters discussed above, the Company and the Bank are
subject to additional regulation of their activities, including a variety of
consumer protection regulations affecting their lending, deposit and
collection activities and regulations affecting secondary mortgage market
activities.
The extensive regulation, supervision and examination of financial
institutions by the bank regulatory agencies is intended primarily for the
protection of the insurance fund and depositors. Moreover, such regulation
imposes substantial restrictions on the operations and activities of such
institutions, and grants to regulators broad discretion in connection with
their supervisory and enforcement activities and examination policies,
including policies with respect to classification of assets and establishment
of adequate loan loss reserves. Any changes in such regulations, whether by
legislation or regulatory action, could have a material impact on the Bank and
its operations. The Company cannot predict what, if any, future actions may
be taken by legislative or regulatory authorities or what impact any such
actions may have on the operations of the Bank.
The earnings of financial institutions are also affected by general economic
conditions and prevailing interest rates, both domestic and foreign and by the
monetary and fiscal policies of the United States Government and its various
agencies, particularly the Federal Reserve.
Additional legislation and administrative actions affecting the banking
industry is often considered by Congress, state legislatures and various
regulatory agencies, including those referred to above. It cannot be
predicted with certainty whether such legislation of administrative action
will be enacted or the extent to which the banking industry in general or the
Company and the Bank in particular would be affected thereby.
Item 2. Property
The Bank properties consist of the home office, located at 505 South Maple
Street in French Lick, Indiana, and branch offices located at Broadway Avenue
in West Baden Springs; 1500 Main Street in Jasper, Indiana; 865 3rd Avenue in
Jasper, Indiana; and 614 E Water Street in Borden, Indiana, as well as ten
automated teller machines, five in Jasper, one in West Baden, one in French
Lick, one in Borden, one in Salem and one in Santa Claus. All cities are
located in Indiana. The Company has no separate offices.
Item 3. Legal Proceedings
As a part of its ordinary course of business, the Bank is a party in law suits
involving claims to the ownership of funds in particular accounts and
involving the collection of delinquent accounts (such as garnishment
proceedings). All such litigation is incidental to the Bank's business.
Management believes that no litigation is threatened or pending in which the
Company or the Bank faces potential loss or exposure which will materially
affect the stockholders' equity or the Bank's financial position.
Item 4. Submission of Matters to a Vote of Security Holders
Not Applicable.
PART II
Item 5. Market for Registrants Common Equity and Related Stockholder Matters
Shares of the common stock of the Company are not traded on any national or
regional exchange or in the over-the-counter market. Accordingly, there is no
established market for the common stock. These are occasional trades as a
result of private negotiations not involving a broker or a dealer.
According to the information available to the Company the following table
displays the high and low selling prices for each quarter for 1998 and 1999.
Other trades may have occurred at prices of which the Company was not aware.
Year Quarter High/Per Share Low/Per Share
1999 1 $38 $35
2 $35 $35
3 $35 $35
4 $38 $38
1998 1 N/A N/A
2 $35 $35
3 $33 $33
4 $31 $31
The company has 328 shareholders on record as of March 10, 2000.
The following table sets forth the cash dividends of the company for the two
most recent fiscal years:
Cash Dividends Per Share
1st 2nd 3rd 4th
Year Quarter Quarter Quarter Quarter
1999 $.15 $.18 $.18 $.18
1998 $.15 $.15 $.15 $.15
The holders of the Company's Common Stock are entitled to cash dividends when,
and if declared by its Board of Directors out of funds legally available
therefor. The Company intends to pay a reasonable dividend, while maintaining
capital adequacy. Funds for the payment of cash dividends by the Company are
obtained primarily from dividends paid to it by the Bank. The Bank is
restricted by Indiana law and regulations of the Department of Financial
Institutions, State of Indiana, and the Federal Deposit Insurance Corporation
as to the maximum amount of dividends it can pay without prior approval. At
December 31, 1999 approximately $3,080,000 of the Bank's retained earnings
were available for dividend payments to the Corporation. There is no
assurance as to future dividends since they are dependent upon earnings,
general economic conditions, financial condition, capital requirements,
regulatory limitations, and other factors as may be appropriate in determining
dividend policy.
PART II
Item 6. Selected Financial Data
(dollars in thousands except per share data)
Summary of Operations 1999 1998 1997 1996 1995
Interest and Fees on Loans $ 13,341 $ 12,480 $ 11,599 $ 10,317 $ 9,734
Interest on Investments 1,666 2,055 2,929 3,767 3,826
Total Interest Income 15,007 14,535 14,528 14,084 13,560
Interest on Deposits 6,781 7,161 7,475 7,468 7,625
Interest on Short-term
Borrowing 8 43 157 63 0
Interest on Long-term Debt 540 12 0 0 0
Total Interest Expense 7,329 7,216 7,632 7,531 7,625
Net Interest Income 7,678 7,319 6,896 6,553 5,935
Provision for Loan Losses 850 580 400 290 314
Net Interest Income after
Provision for Loan Loss 6,828 6,739 6,496 6,263 5,621
Service Charges on Deposit
Accounts 533 615 505 365 311
Other Income 1,172 1,260 1,254 1,241 1,199
Total Other Income 1,705 1,875 1,759 1,606 1,510
Salaries and Benefits 3,614 3,381 3,295 3,236 2,966
Other Expenses 2,811 2,361 2,343 2,322 2,502
Total Other Expenses 6,425 5,742 5,638 5,558 5,468
Income Before Income Tax 2,108 2,872 2,617 2,311 1,663
Income Tax Expense 703 1,043 922 650 450
Net Income 1,405 1,829 1,695 1,661 1,213
Year-end Balances
Total Assets 217,394 182,741 190,404 184,362 189,877
Total Loans, Net 173,492 142,563 139,202 121,530 111,150
Total Long-term Debt 9,100 1,000 0 0 0
Total Deposits 181,276 159,331 165,871 151,595 171,765
Total Shareholders' Equity 20,369 20,333 18,715 17,330 16,372
Per Share Data
Net Income 1.88 2.45 2.27 2.23 1.63
Cash Dividends .69 .60 .54 .48 .46
Shareholders' Equity,
End of Year 27.30 27.18 25.09 23.24 21.95
Other Data at Year-end
Number of Employees 106 104 107 115 109
Weighted Average Number
of Shares 745,994 745,806 745,800 745,800 745,800
Return on Assets .70 .98 .90 .87 .64
Return on Shareholders' Equity 6.90 9.66 10.43 9.86 7.41
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
THREE-YEAR AVERAGE BALANCE SHEET AND NET INTEREST ANALYSIS (Taxable
equivalent basis, dollars in thousands)
1999 1998 1997
Avg. Int. Yield/ Avg. Int. Yield/ Avg. Int. Yield/
ASSETS Bal. & Fees Rate Bal. & Fees Rate Bal. & Fees Rate
Earning Assets:
Interest-bearing
deposits in other
banks 67 3 4.48% 82 4 4.88% 32 1 3.13%
Federal funds sold 3,323 167 5.03% 3,285 181 5.51% 2,378 131
5.51%
Investment securities:
U.S. Treasury and
Gov't Agencies &
mortgage backed 14,748 885 6.00% 22,772 1,371 6.02% 35,649 2,264 6.35%
States and political
subdivisions 9,887 723 7.31% 8,422 634 7.53% 9,018 670 7.43%
Other securities 1,774 115 6.48% 1,076 74 6.88% 1,075 76 7.07%
TOTAL INVESTMENT
SECURITIES 26,409 1,723 6.52% 32,270 2,079 6.44% 45,742 3,010 6.58%
Loans: (1) (2)
Commercial 39,196 3,451 8.80% 33,295 3,068 9.21% 27,520 2,522 9.16%
Installment, net of
unearned income 44,519 4,090 9.19% 46,602 4,292 9.21% 44,796 4,232 9.45%
Real Estate 74,459 5,662 7.60% 60,094 5,000 8.32% 56,753 4,732 8.34%
Credit Card
and Other 1,033 13813.36% 837 11613.86% 908 11312.44%
TOTAL LOANS 159,207 13,341 8.38%140,828 12,476 8.86%129,977 11,599 8.92%
TOTAL EARNING
ASSETS 189,006 15,234 8.06%176,465 14,740 8.35%178,129 14,741 8.28%
Less: Allowance
for Losses (1,394) (1,254) (1,356)
Non-Earning Assets:
Cash and due
from banks 4,904 4,867 4,876
Other Assets 7,055 7,183 7,177
TOTAL ASSETS 199,571 187,261 188,826
LIABILITIES & SHAREHOLDERS EQUITY
Interest-bearing liabilities
Savings and daily interest
checking 43,248 1,029 2.38% 43,159 1,192 2.76% 45,203 1,412 3.12%
Money market
accounts 32,266 1,426 4.42% 30,482 1,468 4.82% 26,681 1,289 4.83%
Certificates of
deposit $100,000
and over 26,864 1,467 5.46% 22,120 1,222 5.52% 31,920 1,815 5.69%
Other time deposits53,019 2,859 5.39% 57,502 3,279 5.70% 51,665 2,959 5.73%
TOTAL INTEREST-
BEARING DEPOSITS 155,397 6,781 4.36%153,263 7,161 4.67%155,469 7,475 4.81%
Borrowing 9,690 548 5.66% 1,017 55 5.41% 2,715 157 5.78%
TOTAL INTEREST-BEARING
LIABILITIES 165,087 7,329 4.44%154,280 7,216 4.68%158,184 7,632 4.82%
Non-interest bearing
liabilities:
Demand deposits 12,594 12,099 12,534
Other liabilities 1,540 1,946 1,855
Shareholder's
equity 20,350 18,936 16,253
TOTAL LIABILITIES
AND SHAREHOLDERS
EQUITY 199,571 187,261 188,826
INTEREST MARGIN RECAP:
Interest income/
earning assets 15,234 8.06% 14,740 8.35% 14,741 8.28%
Interest expense/
earning assets 7,329 3.88% 7,216 4.09% 7,632 4.28%
New yield on interest
earning assets 7,905 4.18% 7,524 4.26% 7,109 3.99%
(1) Includes principal balances of nonaccural loans. Interest income
relating to nonaccrual loans is not included.
(2) The amount of loan fees is not material in any of the years presented.
Introduction
SVB&T Corporation is a registered bank holding company under the Bank Holding
Company Act. The Corporations principal office is located in French Lick,
Indiana. The Corporation's sole subsidiary is Springs Valley Bank and Trust
Company, which operate offices in French Lick and West Baden, in Orange
County, two offices in Jasper, located in Dubois County, and one office in
Borden, Indiana located in Clark County. The subsidiary offers a wide range
of banking, financial, insurance and realty services to individuals and
businesses in Orange, Dubois, Clark and surrounding counties in Southern
Indiana. The following managements' discussion and analysis provides
information concerning SVB&T Corporation's financial condition and results of
operation. This discussion and analysis should be read in conjunction with
the holding company's financial statements and related footnotes which are
presented in this document.
Results of Operation
Net Income
Net income for 1999 was $1,404,000.
The table below is a comparison of the net income for the years 1997 thru
1999. This table also displays the percentage and dollar amount changes which
occurred during the last three years.
Increase/ %Increase/
Decrease from Decrease from
Year Net Income Prior Year Prior Year
1999 $1,404,000 $(425,000) (23.24%)
1998 1,829,000 134,000 7.88%
1997 1,695,000 35,000 2.08%
SVB&T Corporation's net income has decreased during the last year. The main
contributing factor to this decrease is an increase in operating expenses and
a large loan charge off from a court ruling dating back to 1991.
Total net income before tax for 1999 decreased $425,000 from 1998. The
projected net income for 2000 will be near the level of 1998.
Net Interest Income
Net interest income is the difference between interest and fees earned on
loans and investments, and interest paid on interest bearing liabilities.
This is the Bank's primary source of income. In this discussion, net interest
income is presented on a tax equivalent basis.
All tax-exempt income earned on securities of state and political subdivision
has been increased to an amount that would have been earned on a taxable
basis. This places taxable and non-taxable income on a more comparable basis
and makes the comparisons more meaningful.
In 1999, tax equivalent net interest income of $7,902,000 increased by
$382,000 or 5.08% from 1998 levels. In 1998, tax equivalent net interest
income of $7,520,000 increased by $412,000 or 5.80% from 1997 levels. Net
interest income has increased during both decreasing rates of prior years and
currently during this rate upswing.
CHANGES IN NET INTEREST INCOME (Table 1) (Tax equivalent basis, dollars in
thousands)
Change from Prior Year
1999 1998 1997 1999 1998
Interest income on:
Loans 13,341 12,476 11,599 6.93% 7.56%
Investment securities 1,723 2,079 3,010 -17.12% -30.93%
Federal funds sold 167 181 131 -7.73% 38.17%
Due from FHLB 3 4 1 -25.00% 300.00%
Total interest income 15,234 14,740 14,741 3.35% -0.01%
Interest expense on:
Savings and daily
interest checking 1,029 1,192 1,412 -13.67% -15.58%
Money market deposits 1,426 1,468 1,289 -2.86% 13.89%
Certificates of
deposit of $100,000
& over 1,467 1,222 1,815 20.05% -32.67%
Other time deposits 2,859 3,279 2,959 -12.81% 10.81%
All other borrowing 548 55 157 896.36% -64.97%
Total interest expense 7,329 7,216 7,632 1.57% -5.45%
Net interest income 7,905 7,524 7,109 5.06% 5.84%
Net interest margin 4.18% 4.26% 3.99%
RATE VOLUME ANALYSIS OF CHANGES IN NET INTEREST INCOME (Table 2) (Taxable
equivalent basis, dollars in thousands)
1999 vs 1998 1998 vs 1997
Dollar Attributed to Dollar Attributed to
Change Volume Rate Change Volume
Rate
Interest income on:
Loans 865 1,584 (719) 877 965 (88)
Investment securities (356) (380) 24 (931) (877) (54)
Federal funds sold (14) 2 (16) 50 50 0
Due from FHLB (1) (1) (0) 3 2 1
Total interest income 494 1,205 (711) (1) 140 (141)
Interest expense on:
Savings and daily interest
checking (163) 2 (165) (220) (60) (160)
Money market deposits (42) 82 (124) 179 183 (4)
Certificates of deposit of
$100,000 and over 245 261 (16) (593) (549) (44)
Other time deposits (420) (249) (171) 320 334 (14)
All other borrowing 493 480 13 (102) (95) (7)
Total interest expense 113 576 (463) (416) (187) (229)
Net interest income 381 629 (248) 415 327 88
The variance not due solely to rate or volume is allocated equally between the
rate and volume variances.
Provision for Loan Losses
The provision for loan losses was $850,000 in 1999; $580,000 in 1998; and
$400,000 in 1997. As of December 31, 1999, the provision was .93% of loans
outstanding. The allowance for loan losses increased $521,064 during 1999.
Management made a special allocation to the allowance account for $250,000
partly to accommodate the significant growth that has occurred in loan
outstanding. Management's analysis indicates the current allowance is
adequate to fund anticipated future needs.
Other Income
Total other income for 1999 was $1,681,098. This is a 10.35% decrease from
1998's other income of $1,875,093.
The primary source of other income is Trust Income. Trust Income for 1999 was
$733,422, as compared to $836,653 for 1998. This is a 12.34% decrease for the
year. This $103,231 decrease is due mainly to an adjustment to trustee income
that was made to one of our largest trust accounts. The adjustment was a
decrease in over $240,000 of fee income. When considering that this was a
$240,000 decrease, and our overall Trust Income was down only $103,231, this
shows that we did make a considerable amount in additional income through new
and existing accounts.
Other areas of decreased income include DDA Service Charge. Income at
$29,470.77 down from $77,987.07 in 1998. Returned check charges have declined
slightly during 1999.
Account Analysis Fee was implemented for some of our larger business customers
during 1999. This resulted in $41,092.88 of fee income for the year.
Other Expenses
Total other expenses for 1999 were $6,557,304. This is an increase of 11.14%
over 1998.
Salaries and employee benefits are two largest other expense categories.
Salaries and employee benefits were $3,609,911 for 1999. This is 55.05% of
total other expenses. This compares with 57.09% for 1998. The number of
employees has remained consistent over the past several years. Increase in
salaries and employee benefits expenses represent normal pay increases for the
bank's employees.
Hospitalization and Disability expense increased $68,718 for 1999. This is a
27.95% increase for the year compared to a 36.13% increase for 1998. The bank
is self insured in regard to hospitalization insurance. Expense level depends
on claims filed.
There was a 41.62% increase in Seminars/Training expense for 1999. We are
continually making an effort to keep our employees trained on the latest
information and regulations.
Maintenance Contracts Expense was down by $74,735, while Computer Expense is
up by $144,871. The reason for this fluctuation in these expenses is due to
the reclassification of sereval expenses as computer expense. Also Computer
Expense increased due to the preparation and supplies needed for Y2K.
Furniture & Fixture Depreciation Expense is up by 20.37%. This is due to a
full year of depreciation expensed on the previous year's computer system
upgrade. We also did additional system upgrading and miscellaneous remodeling
during 1999.
Loan Expense is up by $184,394. This increase is due largely to the bank
being required to take an additional $125,000 in loan expense. This expense
involved a court case dating back to 1991. The Supreme Court ruled on it in
1999.
Other Real Estate Expense increased by $17,382. The main cause of this
increase is the loss taken on vehicles that were repossessed by the bank.
The bank continues its efforts to maintain control over its operational costs
and is continually looking for ways to implement cost saving programs.
Income Tax
SVB&T Corporation records income tax expense based on the transactions
reported in its financial statements, consisting of taxes currently payable
and deferred tax. Deferred taxes result because of the recognition of certain
items of income and expense in different years for financial statement and
tax purposes. These differences relate primarily to the gain or loss on
available-for-sale investment securities, loan losses, depreciation, and loan
origination fees.
Differences between the effective tax rate on SVB&T Corporation's income
before income tax (as reported in the consolidated statement income) and the
federal statutory rate of 34% result from tax exempt interest income, state
income taxes, and alternative minimum taxes. Note 10 of the consolidated
financial statements contain additional information about SVB&T Corporation's
income taxes.
Income tax expense for 1999 was $703,000 compared to $1,042,800 in 1998 and
$921,600 in 1997. The effective tax rate was 33.46% in 1999, 36.81% in 1998,
and 35.21% in 1997. The effective rate decreased in 1999 compared to 1998 due
to increased overhead expenses and increase allowance for loan losses, and in
1998 compared to 1997 because of increased income.
Financial Condition
As of December 31, 1999 total assets increased to $217,394,000, a 19.18%
increase from December 31, 1998 total of $182,741,000. Average total assets
in 1999 of $199,571,000 were $12,310,000 greater than the 1998 average of
$187,261,000.
Total deposits increased to $181,276,000 at December 31, 1999 from
$159,331,000 at December 31, 1998 an increase of $21,945,000 or 13.77%.
Net loans at year-end 1999 were $173,492,000 up $30,929,000 or 21.69% above
the 1998 year-end total of $142,563,000. Average loans outstanding of
$159,207,000 in 1999 increased by $19,633,000 or 14.07% over the 1998 average
loans outstanding of $139,574,000. Loan growth was funded primarily by
Federal Home Loan Bank Advances and the increase in deposits.
Total investment securities available for sale at year-end 1999 were
$24,898,000 and at year-end 1998 were $25,475,000. Investment securities have
been stated at market value since 1993, when the Bank adopted the FASB No. 115
accounting and classified all securities as available for sale.
Uses of Funds
Money Market Investments
Money market investments (federal funds sold and certificates of deposits with
other banks) are used by the Corporation to meet lending and liquidity
requirements. At December 31, 1999, money market investments were $5,275,000
an increase of $2,415,000 over December 31, 1998 balance of $2,860,000.
Investment Securities
The investment security portfolio is used as a means of investing funds over
and above those needed for lending and liquidity requirements. Investment
securities are purchased with the intent and ability to hold until maturity.
However, all securities are categorized as available for sale. Increases or
decreases in the market value of securities are charged directly to
stockholder equity.
During 1999, average investment securities decreased by $5,861,000 or 18.16%
as compared to the $32,270,000 for 1998. This reduction funded loans and the
decrease in non-core deposits.
The following table presents an analysis of the investment securities
portfolio for 1999, 1998 and 1997.
Investment Securities Available for Sale
(Dollars in thousands) December 31
Investment securities available for sale: 1999 1998 1997
U.S. Treasury 0 0 0
U.S. Government agencies and corp. 14,087 15,208 28,516
Mortgage-backed pass-through securities 125 203 297
Collateralized mortgage obligations:
Agency 0 0 0
Corporate 0 0 0
State and Political subdivisions 10,705 8,803 8,796
Other Securities 882 1,537 1,078
Net unrealized gain (loss) (901) 315 (67)
Total Carrying Value 24,898 26,066 38,620
Maturities and Average Yields of Investment Securities
Available for Sale at December 31, 1999
1999 1998
Estimated
Estimated
Amortized Market Amortized Market
Cost Value Cost Value
Securities Available for Sale
Due in 1 yr or less 2,879,693 2,837,746 1,193,090
1,198,897
Due after 1 yr but with in 5 yrs 12,680,155 12,317,083 13,078,961
13,196,491
Due after 5 yrs but within 10 yrs 7,431,806 7,143,173 8,818,517
8,953,616
Due after 10 yrs 2,683,163 2,468,392 1,866,734
1,915,037
Total Securities 25,674,817 24,766,394 24,957,302
25,264,041 Mortgage backed securities 124,837 131,827
202,817 210,878
Total 25,799,654 24,898,221 25,160,119
25,474,919
Loans
Loans outstanding at December 31, 1999 were $175,119,328 an increase of
$31,450,329 or 21.9% over December 31, 19998.
Real Estate loans continue to be the largest component of the loan portfolio
at $98,851,417. This an increase of $18,048,714 or 22.3% over December 31,
1997.
Individual loans for household and other personal expenditures continues as
the second largest loan category for the bank. This category decreased
$175,313 or .4% in 1999 to $46,294,540. This segment of the market continues
to be very competitive. The bank makes loans that have acceptable
underwriting and a reasonable price structure. Growth at the expense of
credit quality or unprofitable business are not desirable.
The bank uses loan participations with other banks and brokers to supplement
loan volume when local market loans cannot provide sufficient volume. On
December 31, 1999, the bank had a total of $38,639,290 in purchased loans.
That represents a 68.1% increase from December 31, 1998. The bank carefully
monitors individual loan participations as well as concentrations in a
particular industry segment or geographic area.
Commercial and industrial loans were $21,945,285 at December 31, 1999. This
is a 65.1% increase over December 31, 1998. This increase and the 4,803,099
increase in construction loans are due primarily to participation loan
activity.
Agricultural lending and leasing activities continue to be minor parts of the
portfolio. The bank does not anticipate any significant growth in either of
these areas.
Following is a schedule showing the breakdown of loans by type of loan and the
maturity schedule of the loan portfolio.
Loan Portfolio
1999 1998 1997 1996 1995
Percent Percent Percent Percent Percent
Amt of Total Amt of Total Amt of Total Amt of Total Amt of Total
Commercial,
financial &
agricultural 23,261 13.27 14,57710.20 18,722 13.3 16,228 13.2 12,744 5.3
Real estate -
construction 6,490 3.70 1,687 1.20 1,322 0.9 64 0.1 131 0.1
Real estate -
mortgage 98,851 56.40 80,803 56.7 79,491 56.4 67,859 55.1 64,585 57.2
Consumer
installment 46,295 26.42 46,470 32.6 40,859 29.0 38,452 31.2 35,341 31.3
Banker
Acceptances 0 0 0 0 0 0 0 0 0 0
Economic dev.
rev. bonds 0 0 0 0 0 0 24 0 41 .1
Repurchase
Agreement 0 0 0 0 0 0 0 0 0 0
Lease Financing 363 .21 336 .24 437 .31 538 .4 0 0
TOTAL 175,260 100 143,873 100 140,831 100 123,165 100 112,842 100
Less:
Unearned income 141 204 227 305 343
Allowance for
loan losses 1,627 1,106 1,402 1,329 1,349
Total loans 173,492 142,563 139,202 121,531 111,150
Selected Loan Maturity and Interest Rate Sensitivity
December 31, 1999 (dollars in thousands)
MATURITY Rate Structure For Loans
Maturing
Over One Over Predetermined Floating or
One Year Yr through Five Interest Adjustable
or Less Five Yrs Years TOTAL Rate Rate
Commercial,
financial and
agricultural 7,137 7,755 8,369 23,261 10,642 12,619
Real Estate
Construction 2,841 3,555 94 6,490 2,079 4,411
TOTALS 9,978 11,310 8,463 29,751 12,721 17,030
Capital Resources
Stockholders' equity at December 31, 1999 increased to $20,369,000 from
December 31, 1998 equity of $20,333,000. The increase of $36,000 was a result
of earnings $1,405,000 less dividends of $514,667 less unrealized losses on
securities available for sale of $734,000. Capital ratios are used by Federal
bank regulators to measure a bank's strength. The Bank's ratios are well
above Federal requirements.
Source of Funds
Deposits
The main source of funding for earning assets are deposits. During 1999, the
average deposits of $167,991,000 funded 89% of the average earning assets.
Average total deposits for 1999 increased by $2,629,000, or 1.59% as compared
to 1998 average deposit totals.
There has been a movement in average deposits over the past two years. Many
customers are seeking higher rates of return on investments and have moved
into alternative investments such as stocks and mutual funds. Management has
funded reductions of deposits with advances from the Federal Home Loan Bank
and Federal Funds purchased. Management will seek to increase deposits at a
time when deposits can be lent or invested at a profitable spread.
Maturities of Time Deposits December 31, 1999
(dollars in thousands) Certificates Other Time
of Deposit Deposits Over
Over $100,000 $100,000 TOTAL
Three months or less 15,091 734 15,825
Over three months through one year 7,131 0 7,131
Over one year through three years 3,486 0 3,486
Over three years 1,858 0 1,858
TOTAL 27,566 734 28,300
Risk Management
Lending and Loan Administration
Loan administration for the Bank is the responsibility of the President and
the senior officers of the Bank. The board deems these officers have the
knowledge and experience necessary to satisfactorily manage the lending
activities of the Bank.
Lending authority is granted to individual officers as the board feels is
appropriate. For loans exceeding an individual officer's limit, a loan
committee structure is in place to allow the timely and prudent review of loan
requests. Loans above certain predetermined limits must be reviewed and
approved by two board members prior to approval of the loan.
A presentation is made at each board meeting regarding the operation of the
loan department. Topics discussed include current activities, watch list and
non-accrual loans, and any other loan-related issue that should be brought to
the board. Reports covering the activities of the loan department are
prepared for each board member.
A loan review committee reviews all loan review activities including the
calculation of the loan loss reserve necessary to accommodate loans that may
be charged off at some future time.
The loan loss reserve is calculated monthly. It is based on the historical
performance of the loan portfolio as well as current and projected conditions
for specific credits. The Bank's loan loss experience is summarized below:
Allowance for Loan Losses
(dollars in thousands)
1999 1998 1997 1996 1995
Balance as of January 1 1,106 1,403 1,330 1,349 1,322
Provision for Loan Losses 850 580 400 290 314
Recoveries of Prior Loan Losses 114 182 106 77 76
Loan Losses charged to the Allowance (443)(1,059) (433) (386) (363)
Balance as of December 31 1,627 1,106 1,403 1,330 1,349
Loans are placed on non-accrual status when a payment (principal and/or
interest) is more than 90 days past due. All income on these loans is then
recognized on a cash basis until the loan is paid off or management believes
that the quality of the loan has improved enough to warrant returning the loan
to accrual status.
Non-performing loans are loans on non-accrual and assets such as other real
estate and repossessions being held for sale. Following is a schedule of
those loan categories for the previous five years.
Non-performing Assets (dollars in thousands)
1999 1998 1997 1996 1995
Total Loans on non-accrual
(non-performing loans) 1,406 857 1,832 1,338 1,040
Other Real Estate 44 53 0 53 296
Total non-performing assets 1,450 910 1,832 1,391 1,336
Total non-performing loans as a
percentage of loans .81% .60% 1.30% 1.09% .94%
Total non-performing assets as
a percentage of loans and ORE .81% .63% 1.30% 1.13% 1.20%
Liquidity and Interest Rate Sensitivity
SVB&T Corporation considers management of liquidity and interest rate
sensitivity to be two of its most important responsibilities. Liquidity
requirements arise from loan demand and deposit withdrawals. The objective of
liquidity management is to match the availability of funds with anticipated
loan and withdrawal activity. Interest rate sensitivity management seeks to
match sufficient amounts of interest sensitive assets with interest sensitive
liabilities. A matching of the assets and liabilities results in more
consistent earnings and provides protection in case of sudden interest rate
changes.
Liquidity requirements are monitored on a daily basis. Main sources of short-
term liquidity are cash due from banks and federal funds sold. Longer term
liquidity planning includes funds available from normal maturities of
certificates of deposit with other bank maturities of investment securities,
loan principal payments income from operations, new deposits and alternative
funding sources. These sources of funds are sufficient to meet the company's
liquidity needs.
In the management of interest rate sensitivity, a cumulative sensitivity ratio
of less than 100% is normal in the one year or less repricing time period.
The Company realizes the potential for income reduction should interest rates
increase. At that time, restructuring of the investment portfolio would occur
to increase the sensitivity ratio to a manageable position.
The chart on this and the following page shows the Bank's interest rate
sensitivity position as of December 31, 1999.
INTEREST RATE SENSITIVITY ANALYSIS (dollars in thousands)
0 to 3 4 to 6 7 to 12 1 to 5 Over 5
Months Months Months Years Years Total
Interest Earning Assets
Federal funds sold 5,275 0 0 0 0 5,275
Interest bearing deposits
in banks 0 0 0 0 0 0
Investment securities 597 100 272 12,680 12,151 25,800
Loans 43,722 21,217 40,114 49,700 20,358 175,111
Total Interest Earning
Assets 49,594 21,317 40,386 62,380 32,509 206,186
Interest Bearing Liabilities
Interest bearing NOW, savings,
and money market deposits 49,828 8,342 4,993 4,170 0 67,333
Time deposits under
$100,000 17,273 10,888 15,001 20,379 0 63,541
Time deposits over $100,000 15,091 2,838 3,487 6,150 734 28,300
Borrowed funds 5,000 0 0 5,000 4,100 14,100
Total Interest Bearing
Liabilities 87,192 22,068 23,481 35,699 4,834 173,274
Interest Sensitivity Gap
Current (37,598) (751) 16,905 26,681 27,675
Interest Sensitivity Gap
Cumulative (37,598) (38,349) (21,444) 5,237 32,912
Sensitivity Ratio
Cumulative 57% 65% 84% 103% 119%
Year 2000
The bank prepared for the Year 2000 calendar change by testing all internal
systems, evaluation external supplies and preparing contingency plans for any
reasonable expectation. On January 1, 2000 employees of the bank tested all
systems and found no problems. On January 3, 2000 the bank opened for
business as usual. It is impossible to calculate the total expenses of this
project. Many costs were indirect or opportunity costs. The bank estimates
direct expenses that can be attributed to Y2K were $225,000 in 1999.
Quarterly Results of Operations March 31 June 30 Sept 30 Dec 31
1999
Interest income 3,407 3,646 3,943 4,011
Interest expense 1,605 1,747 1,947 2,030
Net interest income 1,802 1,899 1,996 1,981
Provision for loan losses 135 565 75 75
Net securities gains 0 (3) 0 0
Non-interest income 383 389 425 508
Non-interest expense 1,458 1,724 1,641 1,603
Income before income taxes 592 (1) 705 811
Income taxes 195 (43) 235 316
Net income 397 42 470 495
Net income per share:
Primary net income per share .53 .06 .63 .66
1998
Interest income 3,672 3,638 3,693 3,532
Interest expense 1,881 1,826 1,848 1,661
Net interest income 1,791 1,812 1,845 1,871
Provision for loan losses 120 120 145 195
Net securities gains 0 0 0 2
Non-interest income 415 434 478 546
Non-interest expense 1,397 1,402 1,464 1,479
Income before income taxes 689 724 714 745
Income taxes 245 245 247 306
Net income 444 479 467 439
Net income per share:
Primary net income per share .59 .64 .63 .59
Item 8. Financial Statements and Supplementary Data
The Registrant's Annual Report to Shareholders for the year ended December 31,
1999 are incorporated herein by reference.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
Not Applicable.
PART III
Item 10. Directors and Executive Officers of the Registrant
The following table shows the earlier of the year the named individual became
a Director of the Corporation or the Bank. All Directors have been Directors
of the Corporation since its formation in 1982, except for Gary R. Critser,
Brian K. Habig, Hilbert Lindsey, Ronald G. Seals, Ronald J. Thyen and James C.
Tucker, who became Directors of the Corporation in the years indicated below.
Shares beneficially Owned
Name, Present Principal (Percentage of Outstanding Foot
Occupation and Age Year Common Shares) Note
Elected
Gary P. Critser 1999 800
Senior Executive Vice President (.11%)
Secretary & Treasurer
Kimball International, Inc.
63
Brian K. Habig 1987 6,348 1
Proposal Center Manager (.85%)
Kimball Electronics Group
Kimball International, Inc.
43
Douglas A. Habig 1973 104,117 2
Chairman of the Board & CEO (14.01%)
Kimball International, Inc.
53
John B. Habig 1963 90,825 3
Chairman of the Board (12.22%)
Springs Valley Bank & Trust Company
67
Thomas L. Habig 1959 86,419 4
Vice Chairman of the Board (11.63%)
Kimball International, Inc.
Secretary, SVB&T Corporation
71
Hilbert Lindsey 1988 3,699
Vice President (.50%)
Lindsey Lumber & Builders Supply, Inc.
65
Ronald G. Seals 1989 420 5
President & CEO (.06%)
Springs Valley Bank & Trust Company
61
Ronald J. Sermersheim 1976 20,508 6
Vice President, Environment, Health & Safety (2.76%)
Kimball International, Inc.
60
Ronald J. Thyen 1999 10,816 7
Senior Executive Vice President (1.46%)
Operations Officer, Furniture & Cabinets
Kimball International, Inc
63
James C. Tucker 1989 14,895 8
Attorney-at-Law (2.00%)
Tucker & Tucker, P.C.
53
Reita Nicholson 352
Asst. Secretary, SVB&T Corporation (.05%)
52
David Rees NONE
Chief Financial Officer, SVB&T Corporation
41
Total Directors & Officer Groups 339,199
(45.65%)
1 The above amount includes 2,088 shares held by Kyle Thomas Habig, the son
of Mr. Brian K. Habig.
2 The above amount includes 66,206 shares held in the Revocable Trust
Account of Arnold F. Habig, over which Mr. Douglas A. Habig has shared
voting authority with Mr. John B. Habig and Mr. Thomas L. Habig. Also
includes 14,056 shares held by the Kimball Habig Foundation, over which
Mr. Douglas A. Habig exercises voting authority. The above amount
includes 2,008 shares held by Nancy L. Habig, the wife of Mr. Douglas A. H
Habig, 2,224 shares held by Joshua David Habig, and 2,088 shares held by
Jill Ellen Habig, who are children of Mr. Habig.
3 The above amount includes 3,124 shares held by Carma Jane Habig, the wife
of Mr. John B. Habig, 2,048 shares held by Baden-Baden for John B. Habig
FBO Jon Hudson and 888 shares held by Baden-Baden for John B. Habig FBO
Andrew Zunk, who are the grandsons of Mr. Habig and 66,206 shares held in
the Revocable Trust Account of Arnold F. Habig, over which Mr. John B.
Habig has shared voting authority with Mr. Douglas A. Habig and Mr. Thomas
L. Habig.
4 Mr. Thomas L. Habig is Secretary for SVB&T Corporation as well as Springs
Valley Bank & Trust Company. Total shares owned include 2,088 shares held
by Roberta Habig, the wife of Mr. Thomas L. Habig, and 66,206 shares held
in the Revocable Trust Account of Arnold F. Habig over which Mr. Thomas L.
Habig has shared voting authority with Mr. Douglas A. Habig and Mr. John
B. Habig.
5 Mr. Ronald G. Seals is President and CEO for Springs Valley Bank & Trust
Company as well as SVB&T Corporation. The above amount includes 200
shares held jointly by Mr. Ronald G. Seals and his wife, Nancy E. Seals.
6 Mr. Ronald J. Sermersheim serves as Vice President for SVB&T Corporation.
7 The above shares include 8,816 shares held in the Herbert E. Thyen
Revocable Trust, over which Mr. Ronald J. Thyen has shared voting
authority with other Trustees, including Springs Valley Bank & Trust
Company.
8 The above shares include 14,176 shares held by James M. Tucker Trust of
which Mr. James C. Tucker is Trustee.
Board Committees and Meetings
The Board of Directors of the Corporation and the Bank hold regular bimonthly
meetings and other special meetings. The Board of Directors of the
Corporation held six (6) regular meetings, and the Board of Directors of the
Bank held six (6) regular meetings and one (1) special meeting during 1999.
In addition to meeting as a group, all members of each Board devote their time
and talents to certain of the following standing committees: Executive
Committee, Audit & Compliance Committee, Trust Committee, Executive
Compensation Committee, Nomination Committee, Executive Loan Committee and the
Retirement Profit Sharing Trust Advisory Committee.
The Audit Committee reviews significant audit and accounting principles,
policies, and practices, reviews the performance of the internal auditing
functions and reviews examination reports of the Federal and State regulatory
agencies. In carrying out its duties, the Committee meets with the
independent auditors, approves the services to be performed by the independent
auditors and reviews the degree of independence of the auditors. The members
of the Audit Committee are Messrs. Ronald J. Sermersheim (Chairman), Brian K.
Habig and James C. Tucker. The Audit Committee met six (6) times in 1999.
The Bank has an Executive Compensation Committee to review and recommend to
the directors salary and bonus programs for the Senior Bank Officers. The
members of the Executive Compensation Committee are Messrs. James C. Tucker
(Chairman), Randall Catt, Ronald J. Sermersheim and Gary P. Critser.
The Nomination Committee reviews, appoints and recommends to the Board the
nomination of Board Members for the Corporation for the ensuing year. The
members of the Nomination Committee are Messrs. Thomas L. Habig (Chairman),
John B. Habig and Ronald J. Thyen. The Nomination Committee met one (1) time
in 1999.
Director Compensation
Directors of the Bank receive compensation of $1,500 per meeting attended. In
addition, directors holding committee positions are
compensated $200 per meeting attended, if such committee meeting does not take
place on a board meeting date. No separate fees are paid for services as a
director of the Corporation.
Pursuant to the 1997 Directors Stock Compensation Plan, Directors of the
Corporation can elect to receive up to 100% of board fees for a calendar year
in common stock of the Corporation, determined by dividing the amount of fees
elected to be received in stock by the fair market value of a share of the
Common Stock of the Corporation as of the last day of such calendar year. The
Corporation has reserved 16,000 shares for issuance under this Plan. One
thousand six hundred sixty one (1,661) shares were issued for year 1999 in the
following amounts to the following Directors for fees which would have
otherwise been paid.
The 1997 Directors Stock Option Plan, designed to work in connection with the
Directors Stock Compensation Plan, provides for the granting of non-qualified
stock options to Directors for Common Stock of the Corporation. Under the
terms of this Plan, each Director is granted an option to purchase 50% of the
number of shares received by the Director pursuant to such Director's
elections under the 1997 Directors Stock Compensation Plan discussed above.
The exercise price of the options will be no less than the fair market value
of a share of common stock on the last day of the calendar year preceding the
date on which the options are granted. The options vest and become
exercisable on the second anniversary of the date of grant. The Corporation
has reserved 8,000 shares for issuance under this Plan. The Corporation has
granted options for 829 shares for 1999 in the following amounts to the
following Directors:
DIRECTOR 1999 1999
STOCK OPTIONS
ISSUED GRANTED
Arnold F. Habig 32 16
Brian K. Habig 0 0
Douglas A. Habig 0 0
John B. Habig 260 130
Thomas L. Habig 121 60
Gary P. Critser 159 79
Hilbert Lindsey 260 130
Ronald G. Seals 126 63
Ronald J. Sermersheim 260 130
Herbert E. Thyen 32 16
Ronald J. Thyen 159 79
James C. Tucker 252 126
TOTALS: 1,661 829
Item 11. Executive Compensation
Compensation Committee Report
Officers of the Corporation are not compensated for their services in such
capacity. All officers of the Corporation are also officers of the Bank and
are compensated in their capacity as Bank officers. Decisions on compensation
of the Bank s executives are made by the Board of Directors of the Bank, upon
the recommendation of the Executive Compensation Committee of the Board. Set
forth below is a report submitted by Messrs. Randall Catt, Ronald J.
Sermersheim, Gary P. Critser, and James C. Tucker (Chairman) in their capacity
as the Board s Executive Compensation Committee addressing the Bank s
compensation policies for 1999 as they affected all executive officers of the
Bank and Mr. Seals who, for 1999, was the Bank s most highly paid executive
whose total annual salary and bonus exceeded $100,000.
Compensation Policies Toward Executive Officers
The Executive Compensation Committee s executive compensation policies are
designed to provide competitive levels of compensation to the executive
officers and to reward officers for satisfactory performance of the
Corporation and the Bank as a whole. There are no established goals or
standards relating to performance of the Corporation or the Bank which have
been utilized in setting the base salary portion of an individual employee's
compensation.
Base Salary
Each executive officer's base salary is reviewed individually by the Executive
Compensation Committee. The Executive Compensation Committee also reviews
various banking salary surveys provided by other entities which provide
information concerning average salary information within the banking industry.
The background data for this information is typically generated from over 100
banks located in the Midwest with approximately $200 million to $500 million
in assets. The salary portion of the executive officers' compensation is then
typically established at a level near the average salary compensation of
officers included in the survey with similar job responsibilities.
Annual Bonus Amounts
The Bank's Incentive Bonus Plan ("Bonus Plan") for 1999 was based upon the
banks Return on Assets (ROA) and the officers base salary. The Incentive
Bonus Plan provided cash bonuses for Executive Officers equal to fifteen
percent (15%) of their base pay.
Other Compensation Plans
At various times in the past the Bank has adopted certain broad-based employee
benefit plans in which the senior executives are permitted to participate on
the same terms as non-executive employees who meet applicable eligibility
criteria, subject to any legal limitations on the amount that may be
contributed or the benefits that may be payable under the plans.
Benefits
The Bank provides medical and pension benefits to the senior executives that
are generally available to other Bank employees. The amount of perquisites,
as determined in accordance with the rules of the Securities and Exchange
Commission relating to executive compensation, did not exceed 10% of salary
and bonus for fiscal 1999.
Mr. Seals' 1999 Compensation
Regulations of the Securities and Exchange Commission require that the
Compensation Committee disclose the Committee's basis for compensation
reported for the CEO. Mr. Seals' salary and bonus in 1999 were determined in
the same manner as discussed above for other senior executives. The Board of
Directors and the Executive Compensation Committee believes that Mr. Seals has
managed the Bank well.
Compensation Committee Insider Participation
During the past fiscal year, Mr. Seals, the Bank s Chief Executive Officer,
served on the Board of Directors, but did not serve on the Executive
Compensation Committee. Mr. Seals did not participate in any discussion or
vote with respect to his salary or bonus as an executive officer and excused
himself from the room during the discussion by the Board of Directors of his
compensation.
Summary Compensation Table
The following table sets forth for the fiscal years ending December 31, 1999,
1998 and 1997 the cash compensation paid by the Bank, as well as certain other
compensation paid or awarded during those years, to the Chief Executive
Officer and any other executive officer whose total annual salary and bonus
exceeded $100,000 during the fiscal year ended December 31, 1999.
Name and Principal Position Year Annual Compensation
Salary(1) Bonus (2)
Ronald G. Seals 1999 $126,000 $13,300
President, CEO 1998 $121,000 $42,250 (3)
and Director 1997 $119,000 $29,750
1 While officers enjoy certain perquisites, such perquisites do not exceed
the lesser of $50,000 or 10% of such officer s salary and bonus and are not
required to be disclosed by applicable rules of the Securities and Exchange
Commission.
2 The bonus amounts are payable pursuant to the Bank's Incentive Bonus Plan
of the Bank, as described in the "Compensation Committee Report."
3 Includes $5,950 from 1997 bonus which was paid in 1998.
Potential Realizable
Value at Assumed Annual
Rates of Stock Appreciation
For Option Term
Name Expiration 0% 5% 10%
Date ($) ($) ($)
Ronald G. Seals 01-29-09 $0.00 $39,473 $77,214
1996 Key Employees' Stock Option and Stock Appreciation Rights Plan
The Corporation has adopted a stock option and stock appreciation rights
program (the "Plan") for officers and key employees of the Corporation and the
Bank. The Board of Directors of the Corporation believes these programs
provide an important incentive to those who will be instrumental to the
success of the Corporation and of the Bank. The Corporation has reserved
20,000 shares for issuance under the Plan. The Plan will expire on December
31, 2005.
The Plan provides for the grant of "incentive stock options" within the
meaning of Section 422 of the Internal Revenue Code, the grant of nonqualified
stock options, and the grant of stock appreciation rights ("SARs"). Options
and SARs may be granted under the Plan only to officers and other key
employees who are in positions to make significant contributions to the
success of the Corporation. The Executive Compensation Committee of the Board
of Directors of the Bank administers the Plan. No member of this committee is
eligible to receive options or SARs under the Plan at any time such individual
serves on this committee.
Options are exercisable upon such terms and conditions as may be determined by
the Executive Compensation Committee, but in no event will any stock options
be exercisable later than ten years after date of grant. Options granted
under the Plan will vest and become exercisable at the times determined by the
Executive Compensation Committee. The exercise price for all options granted
under the Plan will not be less than the fair market value of the shares on
the date of grant.
The Executive Compensation Committee may also grant SARs in conjunction with
all or part of any option granted under the Plan at the time of the grant of
the option. Each SAR will (1) expire when the underlying option expires, and
(2) become exercisable only when and to the extent that the underlying option
is eligible to be exercised. The "economic value" of a SAR may not exceed 100%
of the difference between the exercise price of the number of shares covered
by the underlying option and the fair market value of such shares. SARs may
be exercised by surrendering the underlying option, at which point the
underlying option shall no longer be exercisable (to the extent the options
are surrendered upon exercise of the related SAR). Upon exercise of a SAR,
the optionee is entitled to receive the economic value of such SAR, in cash,
in shares of common stock of the Corporation, or any combination thereof as
determined by the Executive Compensation Committee.
Option Grants In Last Fiscal Year
The following table provides details regarding stock options granted to Mr.
Seals in 1999. In addition, there are shown the hypothetical gains or "option
spreads" that would exist for respective options. These gains are based on
assumed rates of annual compound stock price appreciation of five percent (5%)
and ten percent (10%) from the date the options were granted over the full
option term. Gains are reported net of the option exercise price, but before
any effect of taxes. In assessing these values, it should be kept in mind
that no matter what value is placed on a stock option on the date of grant,
its ultimate value will be dependent on the market value of the Corporation's
stock at a future date, and that value would depend on the efforts of such
executive to foster the future success of the Corporation for the benefit of
all shareholders. The amounts reflected in this table may not necessarily be
achieved.
Individual Grants
Name Number of Shares Percent Exercise Market
Underlying Of Total Or Base Price
Options Options Price On Date
Granted Granted ($/Sh) Of Grant
(#) In Fiscal ($/Sh)
Year
(%)
Ronald G. Seals 1,275 42% $38.00 $38.00
Fiscal Year-End Option Values Table
The following table shows the shares covered by the exercisable and non-
exercisable stock options by Mr. Seals as of December 31, 1999. Also reported
are the values for "in-the-money" options which represent the positive spread
between the exercise price of any such existing stock options and the year-end
price of the Corporation's Common Stock at December 31, 1999. For purposes of
the following table, the year-end price of the stock was assumed to be $38.00.
Because there is not an established trading market for the Common Stock, the
assumed price of $38.00 may not reflect the actual price which would be paid
for shares of the Common Stock in an active or established trading market and
should not necessarily be relied upon when determining the value of a
shareholder's investments.
Name Number of Shares Value of Unexercised
Underlying Unexercised In-the-Money Options
Options at Fiscal Year End At Fiscal Year End
(#) ($)
Exercisable Unexercisable Exercisable Unexercisable
Ronald G. Seals 1,895 2,380 $21,120 $15,880
Employee Benefit Plan
Profit Sharing Retirement Plan. The Bank sponsors a tax-qualified profit
sharing retirement plan which includes, effective as of January 1, 1996, a
qualified cash or deferred (i.e., "401(k)") arrangement and a discretionary
company contribution ("Profit Sharing Plan"). The Profit Sharing Plan covers
substantially all employees of the Bank; an employee becomes a participant
under the plan on the first January 1st or July 1st which coincides with or
next follows after twelve (12) consecutive months during which the employee
completed at least one thousand (1,000) hours of employment for the
Corporation or the Bank. The Bank makes discretionary "profit sharing"
contributions under the Profit Sharing Plan and allows participants to make
salary deferral and rollover contributions. Participants' salary deferral
contributions may be made, on pre-income tax basis, in an amount ranging from
1% to 15% of the participant's "compensation" (as defined). Participants'
salary deferral and rollover contributions are fully vested when made;
discretionary profit sharing contributions are subject to a vesting schedule
pursuant to which participants become vested on a graduated basis, at the rate
of 10% per year for the first four full years of service and at the rate of
20% per year thereafter so that a participant will become fully vested in the
Bank's profit sharing contributions after completing seven full years of
service. In addition, a participant will become fully vested in the balance
of his or her account attributable to the Bank's discretionary profit sharing
contributions on death, "disability" (as defined), attaining age 65 and
termination of the plan. All amounts contributed to the Profit Sharing Plan
are invested by the Bank, as Trustee, for the benefit of all participants and
their designated beneficiaries.
Upon termination of employment with the Bank or Corporation for any reason, a
participant (or his or her designated beneficiary) will be entitled to receive
the vested balance of his accounts under the Profit Sharing Plan.
Participants may elect to receive the vested balance of their accounts in
either a single lump sum or in monthly, quarterly or annual installments over
a fixed period of time, not to exceed the life expectancy of the participant
or the joint life and last survivor expectancy of the participant and his or
her designated beneficiary. The Profit Sharing Plan also provides for the
distribution of the participant salary deferrals on account of "financial
hardship" (as defined) and authorizes the making of loans to participants from
that portion of their Profit Sharing Plan account attributable to salary
deferral contributions.
Item 12. Security Ownership of Certain Beneficial Owners and Management
Principal Shareholders
The following information is given as of April 14, 2000, for each person known
to the Corporation to be the beneficial owner of more than 5% of the Common
stock of the Corporation.
Amount and Nature Percent
Name and Address Of Beneficial Ownership of Class
Doug A. Habig 104,117 14.01%*
Jasper, IN
John B. Habig 90,825 12.22%**
Jasper, IN
Thomas L. Habig 86,419 11.63%***
Jasper, IN
Springs Valley Bank & Trust Company 144,920 19.50%****
Trustee for Kimball International, Inc.
Retirement Trust
P.O. Box 830
Jasper, IN 47547-0830
* The above amount includes 2,008 shares held by Nancy L. Habig, the wife
of Mr. Douglas A. Habig, 2,224 shares held by Joshua David Habig, and
2,088 shares held by Jill Ellen Habig, children of Mr. Douglas A.
Habig. The above amount includes 66,206 shares held in the revocable
Trust Account of Arnold F. Habig over which Mr. Douglas A. Habig has
voting authority with Mr. John B. Habig, and Mr. Thomas L. Habig. Also
included are 14,056 shares held by the Kimball Habig Foundation, over
which Mr. Douglas A. Habig exercises voting authority.
** The above amount includes 3,124 shares held by Carma Jane Habig, the
wife of Mr. John B. Habig, 888 shares held by Baden-Baden for John B.
Habig FBO Andrew Zunk, and 2,048 shares held by Baden-Baden for John B.
Habig FBO Jon Hudson, grandchildren of Mr. John B. Habig. The above
amount also includes 66,206 shares held in the Revocable Trust of
Arnold F. Habig over which Mr. John B. Habig has shared voting
authority with Mr. Douglas A. Habig and Mr. Thomas L. Habig.
*** The above amount includes 66,206 shares held in the Revocable Trust
Account of Arnold F. Habig, over which Mr. Thomas L. Habig has shared
voting authority with Mr. Douglas A. Habig and Mr. John B. Habig and
2,088 shares held by Roberta Habig, wife of Mr. Thomas L. Habig.
**** Baden-Baden is nominee holder of beneficial shares owned by Springs
Valley Bank & Trust Company as Trustee for Kimball International, Inc.
Retirement Trust. These shares are voted by an independent third
party.
Item 13. Certain Relationships and Related Transactions
Certain Transactions
During 1999, certain directors and officers of the Corporation and their
associates were customers of and had transactions in the ordinary course of
business with the Bank. Additional transactions may be expected to take place
in the future between such persons and the Bank. All transactions were made
and are expected to be made on substantially the same terms, including
interest rates and collateral on loans, as those prevailing at the time for
comparable transactions with other persons and did not involve and are not
expected to involve more than the normal risk of collectability or present
other unfavorable features.
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(a) Financial Statements - (as referred to in Item 8)
(b) No reports on Form 8-K were filed with the Commission during the fourth
quarter of 1999.
(c) Exhibits - The following exhibits are filed herewith:
Exhibit 11 - Statement Re: Computation of Per Share Earnings
Exhibit 13 - Annual Report to Shareholders for the year ended December
31, 1999 (incorporated in part into this form 10-K by
reference)
Exhibit 21 - Subsidiaries of the Registrant
Exhibit 23 - Consent of Independent Public Auditors
(d) Financial Statement Schedules - This information is omitted since the
required information is not applicable to the Registrant.
Exhibit 27 - Financial data schedule
Signatures
Pursuant to the requirements of Section 13 or 15 (d) 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.
SVB&T Corporation
By:
Ronald G. Seals,
President & C.E.O. 3/19/99
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed by the following persons on behalf of the Registrant
and in the capacities and on the dates indicated.
By: By:
John B. Habig David Rees
Chairman of the Board 3/27/00 Principal Financial and Accounting 3/27/00
Officer
By: By:
Douglas A. Habig, Director 3/27/00 Ronald G. Seals,
Principal Executive Officer and 3/27/00
Director
By: By:
Gary P. Critser, Director 3/27/00 Brian K. Habig, Director 3/27/00
By: By:
Thomas L. Habig, Director 3/27/00 James C. Tucker, Director 3/27/00
By: By:
Ronald J. Sermersheim, Director Hilbert Lindsey, Director 3/27/00
3/27/00
By:
Ronald J. Thyen, Director 3/27/00
Index to Exhibits
Sequential
Page # Exhibit # Exhibit
54 11 Statement Re: Computation of Per Share Earnings
35 13 Annual Report to Shareholders for the year ended
December 31, 1998
54 21 Subsidiaries of the Registrant
54 23 Consent of Independent Auditors
27 Financial Data Schedule
Exhibit 13
During the past year SVB&T Corporation enjoyed excellent growth in deposits
and loans. However, we experienced a decline in earnings from the previous
year.
Financial Highlights of the year:
Net income decreased 23% to $1,404,557.
Net income per share was $1.88 down from $2.45 earned in 1998.
Cash dividends increased from $.60 per share to $.69 per share up 15%.
Book value per share is $27.41.
Deposits increased $22 million to $181 million.
Loans increased $31 million to $173 million.
Financial Highlights details are contained in the following reports.
January 1, 2000 is a thing of the past, and refreshing it is. Now we can
concentrate our efforts toward what we do best, banking. Significant amounts
of physical and financial resources were directed toward the computer
conversion (Y2K) in the past two years. The efforts of our industry and our
bank proved successful. There were no Y2K problems experienced by Springs
Valley Bank.
Income decreased in 1999 to $1.4 million from our record year 1998 of $1.8
million. The decline in income was a result of one time non-recurring
expenses plus a significant addition to the loan loss reserve account. Our
reserve account was increased by $521 thousand to accommodate our $30 million
increase in loans.
Our bank enjoyed an excellent year of growth. Deposits grew from $159 million
to $181 million up 13.8%, loans increased from $145 million to $173 million an
increase of 19.3%, and total assets increased from $182 million to $217
million up 19.2%. The excellent growth achieved in 1999 was a result of the
efforts put forth by our dedicated staff and the positive quality of their
work.
We continue to modernize and upgrade our systems and equipment to provide our
customers with the best possible banking services. A new teller system was
installed this year, along with new upgrades for our data processing
operations. Numerous small enhancements to our electronic systems were
necessary to accommodate the millennium change.
Technology is transforming the banking industry. Springs Valley Bank will
continue to modernize equipment and operational procedures to gain the
advantage of the electronic technologies now available to our industry. Check
Imaging, Internet Banking, and Electronic Payments are all in the near future
for our bank.
Our entire community was saddened by the loss of our founder and Chairman, Mr.
Arnold F. Habig, and long time Director Herbert Thyen. Mr. Habig organized
Springs Valley Bank to provide banking in its best tradition to his Kimball
employees and the citizens of Orange and Dubois Counties. We are committed to
carry on with his sincere concern of providing the best of service to our
communities. Mr Thyen was a co-founder of Kimball International, a community
leader, and a dedicated member of our board of directors for 40 years.
Mr. John B. Habig was elected Chairman of the Board in May of 1999. John has
been a member of our board of directors since January 1959. He has been a
positive contributor to our bank's growth and prosperity. Mr. Ronald J.
Thyen, senior executive vice president of Kimball International, and Mr. Gary
P. Critser, senior executive vice president and treasurer of Kimball
International were elected as directors of our bank and holding company. We
look forwad to a long and prosperous relationship with our new directors.
Our staff and directors thank you for your ongoing support and loyalty. We
will continue to endeavor to earn and be worthy of your confidence and trust.
Sincerely,
JOHN B. HABIG RONALD G. SEALS
Chairman of the Board President & CEO
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
December 31
1999 1998
ASSETS
Cash and cash equivalents
Cash and due from banks $ 5,472,105 $ 4,195,084
Interest-bearing deposits with banks 18,461 79,396
Federal funds sold 5,275,000 2,860,000
Total cash and cash equivalents 10,765,566 7,134,480
Investment securities, available
for sale, at market value 24,898,221 25,474,919
Investment securities, held to
maturity, at cost 1,205,000 590,700
Loans
Loans, net of unearned interest 175,119,328 143,668,999
Allowance for loan losses (1,627,141) (1,106,077)
Net loans 173,492,187 142,562,922
Buildings and equipment 4,522,625 4,820,650
Interest receivable 1,463,745 1,195,693
Deferred income taxes 165,121 0
Other assets 881,926 961,682
Total assets $217,394,391 $182,741,046
LIABILITIES
Deposits
Non-interest bearing $ 22,101,790 $ 12,747,399
Interest bearing 159,174,275 146,584,093
Total deposits 181,276,065 159,331,492
Short-term borrowings 5,000,000 0
Interest payable 783,971 712,651
Deferred income taxes 0 549,999
Other liabilities 865,326 813,410
Long-term borrowings 9,100,000 1,000,000
Total liabilities $197,025,362 $162,407,552
COMMITMENTS AND CONTINGENT LIABILITIES
SHAREHOLDERS EQUITY
Common stock (No par value:
800,000 shares authorized and issued) 200,000 200,000
Surplus 6,170,109 6,124,070
Retained earnings 15,544,930 14,655,040
Accumulated other comprehensive income:
Net unrealized gains (losses) on investment
securities available for sale (544,375) 190,107
Treasury stock at cost (56,767 shares
1999, 53,701 shares 1998) (1,001,635) (835,723)
Total shareholders' equity 20,369,029 20,333,494
Total liabilities and shareholders'
equity $217,394,391 $182,741,046
See notes to consolidated financial statements.
CONSOLIDATED STATEMENTS OF INCOME
Year Ended December 31
1999 1998 1997
Interest Income
Loans and fees on loans 13,340,512 $ 12,479,514 $ 11,599,189
Investment securities:
Taxable 999,481 1,441,684 2,386,565
Tax exempt 500,291 432,465 411,263
Federal funds sold 166,728 180,856 130,745
Total interest income 15,007,012 14,534,510 14,527,762
Interest Expense
Deposits 6,781,089 7,160,680 7,475,407
Short-term borrowings 7,834 42,804 156,431
Long-term borrowings 540,108 12,550 0
Total interest expense 7,329,031 7,216,034 7,631,838
Net Interest Income 7,677,981 7,318,485 6,895,924
Provision for loan losses 850,000 580,000 400,000
Net Interest Income After Provision
for Loan Losses 6,827,981 6,738,485 6,495,924
Non-interest income
Trust Department income 725,423 836,653 816,328
Service charges on deposit acct. 533,290 615,274 505,042
Insurance and claims processing 157,290 172,448 177,219
Other operating income 292,293 248,664 254,815
Realized security gains (3,173) 2,055 5,406
Total non-interest income 1,705,123 1,875,094 1,758,810
Non-Interest Expense
Salaries and employee benefits 3,613,674 3,381,270 3,294,708
Premises and equipment expense 1,135,080 1,167,626 1,095,822
Deposit insurance expense 18,970 19,921 20,367
Other operating expenses 1,657,823 1,172,780 1,226,701
Total non-interest expenses 6,425,547 5,741,597 5,637,598
Income Before Income Taxes 2,107,557 2,871,982 2,617,136
Income taxes 703,000 1,042,800 921,600
Net Income $ 1,404,557 $ 1,829,182 $ 1,695,536
Per Share
Net Income $ 1.88 $2.45 $ 2.27
Cash Dividends $.66 $ .60 $ .54
Average Shares Outstanding 745,997 748,006 745,800
See notes to consolidated financial statements.
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS EQUITY
Accumulated
Other Total
Common Capital Retained Comprehensive Treasury shareholders
Stock Surplus Earnings Income Stock Equity
BALANCE
JAN. 1,1997 $200,000 $6,094,233 $11,981,683 $(133,400) $(813,000)$17,329,516
COMPREHENSIVE
INCOME 1997
Net income 1,695,536 1,695,536
Change in unrealized gain
(loss) on securities available
for sale, net of deferred
income tax of $61,092 98,547 98,547
Less reclassifications for
gain included in net
income (5,406) (5,406)
TOTAL COMPREHENSIVE
INCOME 1,788,677
Cash dividends (402,732) (402,732)
BALANCE
DEC. 31,1997 200,000 6,094,233 13,274,487 (40,259) (813,000) 18,715,461
COMPREHENSIVE
INCOME 1998
Net income 1,829,182 1,829,182
Change in unrealized gain
(loss) on securities available
for sale, net of deferred
income tax of $151,098 232,521 232,521
Less reclassifications for
gain included in net
income (2,155) (2,155)
TOTAL COMPREHENSIVE
INCOME
2,059,548
Cash dividends (448,629)
(448,629)
Sold 2,387 shares of treasury
stock 29,837 35,805 65,642
Purchased 1,888 shares of treasury
stock (58,528) (58,528)
BALANCE
DEC. 31,1998 200,000 6,124,070 14,655,040 190,107 (835,723) 20,333,494
COMPREHENSIVE INCOME 1999
Net income 1,404,557 1,404,557
Change in unrealized gain
(loss) on securities available
for sale, net of deferred
income tax of $481,757 (737,655) (737,655)
Plus reclassifications for
losses included in net
income 3,173 3,173
TOTAL COMPREHENSIVE
INCOME
670,075
Cash dividends (514,667) (514,667)
Sold 2,148 shares of treasury
stock 46,039 32,220 78,259
Purchased 5,214 shares of
treasury stock (198,132) (198,132)
BALANCE
DEC. 31,1999 200,000 $6,170,109 $15,544,930$(544,375)$(1,001,635)$20,369,029
See notes to consolidated financial statements.
Consolidated Statements of Cash Flows
Year Ended December 31
1999 1998 1997
Operating Activities:
Net income $ 1,404,557 $1,829,182 $ 1,695,536
Adjustments to reconcile net
income to net cash provided by
operating activities:
Provision for loan losses 850,000 580,000 400,000
Depreciation 461,119 468,307 416,270
Investment securities amortization 50,786 41,291 18,927
Investment securities (gains,
losses) 3,173 (2,155) (5,406)
Gain on sale of building 0 0 (19,700)
Loss on abandoned equipment 87,314 0 0
Deferred income taxes (233,370) 93,769 2,716
(Increase) decrease in interest
receivable and other assets (228,296) (76,687) 115,331
Increase in interest payable and
other liabilities 123,236 13,676 186,180
NET CASH PROVIDED BY
OPERATING ACTIVITIES 2,518,519 2,947,383 2,809,854
Investing Activities:
Proceeds from sales and
maturities of investment
securities available for sale 7,220,309 30,330,259 15,743,865
Purchases of investment
securities available for sale (7,913,802) (17,420,427) (3,700,315)
Purchases of investment
securities held to maturity (614,300) (12,400) (10,900)
Proceeds from the sale of buildings 0 0 68,653
Proceeds sale of loans 84,000 4,236,717 2,670,447
Proceeds sale of other real
estate 40,000 0 68,950
Net increase in loans (31,863,265) (8,177,819) (20,757,523)
Additions to buildings
and equipment (250,408) (255,734) (457,862)
NET CASH PROVIDED (USED) BY
INVESTING ACTIVITIES (33,297,466) 8,700,596 (6,374,685)
Financing Activities:
Net increase (decrease)
in deposits 21,944,573 (6,539,911) 14,276,354
Net(decrease) in federal
funds purchased 0 0 (8,870,000)
Net increase(decrease)
in short-term borrowings 5,000,000 (4,000,000) (1,000,000)
Increase in long-term
borrowings 8,100,000 1,000,000 0
Sale of treasury stock 78,259 65,642 0
Purchase of treasury stock (198,132) (58,528) 0
Cash dividends (514,667) (448,629) (402,732)
NET CASH PROVIDED (USED) BY
FINANCING ACTIVITIES 34,410,033 (9,981,426) 4,003,622
Increase in Cash and
Cash Equivalents 3,631,086 1,666,553 438,791
Cash and cash equivalents
beginning of year 7,134,480 5,467,927 5,029,136
Cash and Cash Equivalents At
End of Year $10,765,566 $ 7,134,480 $ 5,467,927
SUPPLEMENTAL DISCLOSURES:
Cash paid during the year
for income taxes $ 876,673 $ 822,317 $ 865,260
Cash paid during the year
for interest $ 7,257,711 $ 7,327,681 $ 7,557,568
See notes to consolidated financial statements.
Notes to Consolidated Financial Statements
Note 1 - Summary of Significant Accounting Policies
Basis of Presentation - The accounting and reporting policies of SVB&T
Corporation and Subsidiary (the Bank) are in accordance with generally
accepted accounting principles and conform to general practices within the
banking industry. The more significant of the principles used in preparing the
financial statements are briefly described below.
Principles of Consolidation - The consolidated financial statements include
the accounts of SVB&T
Corporation and its wholly owned subsidiary, Springs Valley Bank & Trust
Company. All significant intercompany balances and transactions have been
eliminated.
Nature of Operations - SVB&T Corporation operates under a charter from the
State of Indiana and provides full banking services, including trust services.
As a state bank, SVB&T Corporation is subject to regulation by the Department
of Financial Institutions of the State of Indiana and the Federal Deposit
Insurance Corporation. The area served by the Bank is primarily Orange,
Clark, Dubois and the surrounding counties in Southern Indiana.
Estimates - The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Cash and Cash Equivalents - Cash and cash equivalents include cash, due from
banks, interest-bearing deposits with banks and federal funds sold.
Generally, federal funds are sold for one day periods.
Investment Securities Available for Sale - The Bank buys investment debt
securities with the intent and ability to hold these securities to maturity.
However, management has determined that all debt securities would be available
for sale in response to certain situations, such as changes in interest rates
and prepayment risk, need for liquidity, changes in availability and yield on
alternative investments, and changes in funding sources and terms. At
December 31, 1999 and 1998, debt securities are reported at estimated market
values in the statement of financial condition. Unrealized holding gains and
losses are excluded from earnings and are reported net of tax as a separate
component of shareholders equity of comprehensive income. Accreted discounts
and amortized premiums are included in earnings using the straight line
method. Gains or losses on dispositions are computed using the specific
identification method.
Investment Securities Held to Maturity - The Bank owns stock in the Federal
Home Loan Bank of Indianapolis. This stock is classified as held to maturity
and is carried at cost.
Loans - Loans that management has both the intent and ability to hold for the
foreseeable future or until maturity or pay off are reported at their
outstanding unpaid principal balances, adjusted for charge-offs, the allowance
for loan losses and any deferred fees or costs on originated loans.
Interest income on commercial loans, simple interest installment loans and
real estate mortgage loans is recognized based on the outstanding principal
balances at the stated rates. Real estate mortgage loan origination fees and
costs are amortized over the life of the loan. Accrual of interest income on
loans and impaired loans is discontinued when payments have become delinquent
for 90 days. Upon non-accrual status, all accrued interest receivable on a
loan is written off. Any subsequent payments are applied to interest until
all interest due is totally paid. Any remaining amounts are applied to
principal.
As part of its interest rate risk management, the Bank sells fixed rate
mortgage loans into the secondary market. At December 31, 1999, there were no
mortgage loans available for sale.
Allowance for Loan Losses - The allowance for loan losses is an amount that
management believes will be adequate to absorb possible losses on existing
loans that may become uncollectible, based on evaluations of collectibility
and prior loan loss experience. The evaluations take into consideration such
factors as changes in the nature and volume of the loan portfolio, overall
portfolio quality, review of specific problem loans, and current economic
conditions and trends that may affect the borrowers ability to pay. The
allowance is established by a provision for loan losses charged to expense.
Loans are written off against the allowance when management believes that the
collectibility of the principal is unlikely.
Notes to Consolidated Financial Statements
Note 1 - Summary of Significant Accounting Policies (Continued)
Buildings and Equipment - Buildings and equipment are stated at cost less
accumulated depreciation. Buildings are depreciated on the straight line
method using lives ranging from 10 to 40 years. Equipment is depreciated on
the straight line method using lives ranging from 5 to 10 years.
Other Real Estate - Real estate acquired in foreclosures is carried at the
lower of the outstanding loan balance plus accrued interest or fair value of
the property. Amounts necessary to write loans down to fair value are charged
to the allowance for loan losses.
Income Tax - Income taxes are provided for the tax effects of transactions
reported in the financial statements and consist of taxes currently due plus
deferred taxes related primarily to differences between the basis of
available-for-sale investment securities, allowance for loan losses,
accumulated depreciation and loan origination fees. The deferred tax asset or
liability represents the future tax return consequences of those differences.
SVB&T Corporation and Springs Valley Bank & Trust file consolidated income tax
returns. Income tax expense is allocated to each according to actual earnings
prior to consolidation.
Net Income Per Share - Net income per share of common stock is computed by
dividing net income by the weighted average number of shares of common stock
outstanding during the period.
Note 2 - Effect Of Changes In Accounting Principles
Effective in 1998, the Bank adopted FASB Statement No. 130, "Reporting
Comprehensive Income". The adoption of this accounting standard did not effect
the Bank's financial condition or results of operations. It established new
rules for reporting comprehensive income which have been reflected in these
financial statements.
Note 3 - Restriction On Cash And Due From Banks
The Bank is required to maintain average funds in cash and on deposit with the
Federal Reserve Bank. The average balance required at December 31, 1999 was
$969,000.
Notes To Consolidated Financial Statements
Notes Consolidated Financial Statements
Note 4 - Investment Securities
The amortized cost and estimated market values of investment securities at
December 31, 1999 and
1998 were as follows:
December 31, 1999
Unrealized Unrealized Estimated
Amortized Holding Holding Market
Securities Available for Sale Cost Gains Losses Value
U.S. Government corporations and
agencies $14,087,359 $ 1,286 $(562,264)$13,526,381
States and political
subdivisions $10,705,421 40,691 (340,799) 10,405,313
Mortgage-backed securities $18,124,837 6,990 0 131,827
Other securities $18,882,037 0 (47,337) 834,700
Total $25,799,654 $ 48,967 $ 950,400$ 24,898,221
Unrealized Unrealized Estimated
Amortized Holding Holding Market
Securities Held to Maturity Cost Gains Losses Value
Equity securities $1,205,000 $0 $ 0 $ 1,205,000
December 31, 1998
Unrealized Unrealized Estimated
Amortized Holding Holding Market
Securities Available for Sale Cost Gains Losses Value
U.S. Government corporations and
agencies $15,208,346 $117,771 $0 $5,326,117
States and political
subdivisions $18,803,457 209,396 (13,934) 8,998,919
Mortgage-backed securities $18,202,817 8,061 0 210,878
Other securities $18,945,499 0 (6,494) 939,005
Total $25,160,119 $335,228 $ (20,428)$25,474,919
Unrealized Unrealized Estimated
Amortized Holding Holding Market
Securities Held to Maturity Cost Gains Losses Value
Equity securities $ 590,700 $ 0 $ 0 $ 590,700
The amortized cost and estimated market values of available for sale
securities at December 31, 1999 and 1998 by contractual maturity follows.
Expected maturities may differ from contractual maturities because some
borrowers have the right to call or prepay certain obligations with or without
call or prepayment penalties.
1999 1998
Estimated Estimated
Amortized Market Amortized Market
Securities Available for Sale Cost Value Cost Value
Due in one year or less $ 2,879,693 $2,837,746 $1,193,090 $1,198,897
Due after one year but
within five years 12,680,155 12,317,083 13,078,961 13,196,491
Due after five years but
within ten years $17,431,806 7,143,173 8,818,517 8,953,616
Due after ten years $12,683,163 2,468,392 1,866,734 1,915,037
25,674,817 24,766,394 24,957,302 25,264,041
Mortgage-backed securities 124,837 131,827 202,817 210,878
Total $25,799,654 $25,898,221 $25,160,119 $25,474,919
Securities available for sale with amortized cost of $14,087,359 at December
31,1999 and $16,208,346 at December 31, 1998 were pledged as collateral on
public and other deposits held by the Bank.
Proceeds from sales of securities available for sale during 1999, 1998 and
1997 were $2,000,888, $1,500,000 and $3,986,890. In 1999, gains of $-0- and
losses of $3,173 were realized. In 1998, gains of $2,055 and losses of $-0-
were realized. In 1997, gains of $6,834 and losses of $1,428 were realized.
Notes To Consolidated Financial Statements
Note 5 - Loans
Loans at December 31, 1999 and 1998 are comprised of the following:
1999 1998
Commercial and industrial loans $21,945,285 $13,288,770
Real estate loans (including $1,702,613
and $1,087,000 secured by farm land) 98,851,417 80,802,703
Construction loans 6,489,880 1,686,781
Agricultural production financing and
other loans to farmers 1,316,334 1,288,661
Individuals' loans for household and other
personal expenditures 46,294,540 46,469,853
Lease financing 362,883 336,293
175,260,339 143,873,061
Less: Unearned income on loans 141,011 204,062
Total loans $175,119,328 $143,668,999
At December 31, 1999 and 1998, the Bank had loans of $1,301,967 and $1,448,563
that were specifically classified as impaired. The average balance of these
loans during 1999, 1998 and 1997 was $1,274,676, $1,454,157, and $1,996,569.
The allowance for loan losses contained specifically allocated amounts for
these loans at December 31, 1999 and 1998 of $532,151 and $271,403. The
following is a summary of cash receipts on the loans and how they were applied
in 1999, 1998 and 1997.
1999 1998 1997
Cash receipts applied to principal $ 66,234 $74,529 $ 100,939
Cash receipts recognized as interest income 102,885 136,502 108,594
Total cash received $ 169,119 $211,031 $ 209,533
All 1 to 4 family residential, first mortgage loans have been pledged as
collateral for debt with the Federal Home Loan Bank of Indianapolis. The
amounts pledged at December 31, 1999 and 1998 are as follows:
1999 1998
Loans pledged as collateral $ 73,252,093 $59,063,000
Note 6 -Allowance for Loan Losses
The changes in the allowance for loan losses for the years 1999, 1998 and 1997
are as follows:
1999 1998 1997
Balance, January 1 $ 1,106,077 $ 1,402,500 $ 1,329,295
Loans charged-off (442,969) (1,059,108) (433,234)
Recoveries 114,033 182,685 106,439
Net charged-off (328,936) (876,423) (326,795)
Provision for loan losses 850,000 580,000 400,000
Balance, December 31 $ 1,627,141 $ 1,106,077 $ 1,402,500
Note 7 - Buildings and Equipments
Balances in the buildings, equipment, and related accumulated depreciation
accounts at December 31, 1999 and 1998 are as follows:
1999 1998
Land and bank buildings $ 4,957,677 $ 4,932,467
Equipment, furniture and fixtures 4,002,806 5,336,523
Totals 8,980,483 10,268,990
Less accumulated depreciation 4,457,858 5,448,340
Net $ 4,522,625 $ 4,820,650
Depreciation expense was $461,119 for 1999, $468,307 for 1998, and $416,270
for 1997.
Note 8 - Deposits
Deposits at December 31, 1999 and 1998 are as follows:
1999 1998
Demand, non-interest bearing $22,101,790 $12,747,399
Demand, interest-bearing 18,974,856 18,037,489
Savings 60,200,400 60,204,853
Time deposits, $100,000 and over 28,300,000 22,120,000
Other time deposits 51,699,019 46,221,751
Total deposits $ 181,276,065 $ 159,331,492
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 8 - Deposits (Continued)
As of December 31, 1999, the scheduled maturities of time deposits are as
follows:
2000 $55,380,964
2001 14,981,743
2002 1,860,968
2003 1,698,542
2004 and thereafter 6,076,802
$ 79,999,019
Note 9 - Other Short-Term Borrowings
Other short-term borrowings at December 31, 1999 and 1998 are as follows:
1999 1998
Federal Home Loan Bank advance,
due June 23, 2000, 6.205% adjustable,
collateralized by a blanket collateral
agreement on qualified mortgage loans
and securities $5,000,000 $ 0
Note 10 - Long-Term Borrowings
Long-term borrowings at December 31,1999 and 1998 are as follows:
1999 1998
Federal Home Loan Bank Indianapolis
advance, principal due October 5,
2005, interest payable monthly, 5.02%
fixed collateralized by a blanket
collateral agreement on qualified
mortgage loans and securities $1,000,000 $1,000,000
Federal Home Loan Bank Indianapolis
advance, principal due February 24,2004,
interest payable monthly, 5.19% fixed
collateralized by a blanket collateral
agreement on qualified mortgage loans and
securities $5,000,000 $ 0
Federal Home Loan Bank Indianapolis advance,
principal due July 17, 2006, interest
payable monthly, 6.69% fixed collateralized
by a blanket collateral agreement on qualified
mortgage loans and securities $3,100,000 $ 0
Total long-term borrowings $9,100,000 $1,000,000
As of December 31, 1999, long-term borrowings are scheduled to mature as
follows: $5,000,000 in 2004, $1,000,000 in 2005 and $3,100,000 in 2006.
At December 31, 1999, the Bank has the following lines of credit available:
Federal Home Loan Bank Indianapolis $10,000,000
Bank One Indianapolis $ 8,500,000
Bank One Kentucky $ 2,500,000
Federal Reserve Bank of St. Louis $ 3,500,000
Note 11 - Employee Benefit Plan
The Bank has a trusteed, defined contribution, profit-sharing plan, which
covers substantially all Employees. Contributions to the plan are based on a
percentage of eligible employees' yearly compensation and are subject to the
discretion of the Board of Directors. The Bank's expense for the plan for the
years ended December 31, 1999, 1998 and 1997 was $154,203, $142,483, and
$136,527.
The Bank also has an employee benefit plan which includes a self-insured
medical plan, a wholly insured term life insurance plan and a long-term
disability plan, which covers most employees. The self-insured medical plan
carries an insurance override to protect the Bank against major increases in
claims. The Bank's contributions to the plan for the years ended December 31,
1999, 1998, and 1997 were $347,940, $278,876 and $245,401.
Note 12 - Income Taxes
The components of the provision for income taxes are:
1999 1998 1997
Federal income taxes currently payable $ 695,375 $ 708,424 $ 689,531
Deferred Federal income taxes (183,375) 73,776 2,069
Provision for Federal income taxes for
the year $ 512,000 $ 782,200 $ 691,600
State income taxes currently payable $ 240,995 $ 240,607 $ 229,353
Deferred state income taxes (49,995) 19,993 647
Provision for state income taxes for the year $ 191,000 $ 260,600 $ 230,000
Deferred income taxes in the statement of financial condition are carried as a
net amount. The deferred tax assets and deferred tax liabilities that are
combined to arrive at the net carrying amounts at December 31, 1999 and 1998
are as follows:
Deferred Tax Assets: 1999 1998
Allowance for loan losses $ 505,352 $ 298,434
Unrealized losses on securities
available for sale 357,058 0
Loan fees 63,659 67,306
Other 32,143 36,525
Total asset 958,212 402,265
Deferred Tax Liabilities:
Unrealized gains on securities
available for sale 0 (124,692)
Depreciation (793,091) (827,572)
Net deferred tax (liability) $ 165,121 $(549,999)
Note 13 - Related Party Transactions
Officers and directors of Kimball International, Inc. of Jasper, Indiana, and
Kimball International, Inc. Retirement Trust own in excess of 50% of the
outstanding capital stock of SVB&T Corporation. The Bank is the principal
depository for Kimball International, Inc. and is also the trustee for the
Kimball International Retirement Trust. Amounts on deposit with the Bank by
Kimball International, Kimball International Retirement Plan and Employee
Benefit Plan were $4,119,644 at December 31, 1999 and $2,475,521 at December
31,1998.
The Bank serves as Trustee for Kimball International's retirement and employee
benefit plans and rents office space to Kimball. Fees paid to the Bank for
these services by Kimball International in 1999, 1998 and 1997 were $446,207,
$547,704, and $658,000. Amounts receivable from Kimball International for
these services were $75,000 at December 31, 1999, $-0- at December 31,1998 and
$-0- at December 31, 1997.
In the ordinary course of business, the Bank makes loans to executive
officers, directors, principal shareholders, their related companies and
family members. These loans are made on substantially the same terms as those
with unrelated parties and do not involve unusual risks of collectibility.
Total loans to executive officers, directors and principal shareholders for
1999 were as follows:
Balance, January 1, 1999 $2,537,303
New loans 3,108,150
Repayments (279,763)
Changes in persons included 423,925
Balance, December 31, 1999 $5,789,615
Note 14 - Lease Commitments
Minimum lease payments at December 31, 1999, under operating lease
commitments, total $-0-. Operating expenses include rental expense of $600 in
1999, $600 in 1998 and $30,856 in 1997.
Note 15 - Commitments And Contingent Liabilities
The Bank is party to financial transactions involving off-balance-sheet risk
in the normal course of business. These financial transactions include
commitments to extend credit and standby letters of credit. These
transactions involve, to varying degrees, elements of credit risk in excess of
the amounts recognized in the statement of condition. The contract amounts of
these transactions reflect the extent of involvement the Corporation has in
the particular financial instruments.
The Bank's exposure to credit loss in the event of nonperformance by the other
party for commitments to extend credit and standby letters of credit is
represented by the contractual amount of those instruments. The Bank uses the
same credit policies when entering into these off-balance-sheet transactions
as it does for on-balance-sheet transactions.
Financial transactions with off-balance-sheet credit risk at December 31, 1999
and 1998 were as follows:
1999 1998
Commitments to extend credit $25,006,059 $16,118,386
Standby letters of credit $ 471,300 $ 611,300
Commitments to extend credit are agreements to lend to a customer as long as
there is no violation of conditions established in the contract. Commitments
generally have fixed expiration dates or other termination clauses. Since
many of the commitments are expected to expire without being drawn upon, the
total commitment amounts do not necessarily represent future cash
requirements. The Bank evaluates each customer's creditworthiness on a
case-by-case basis. The amount of collateral obtained, if deemed necessary by
the Bank upon extension of credit, is based on management's credit evaluation
of the counterparty. Collateral held varies but may include accounts
receivable, inventory, property, plant, and equipment, and income-producing
commercial properties.
Standby letters of credit are conditional commitments issued by the Bank to
guarantee the performance of a customer to a third party. Letters of credit
are primarily issued to support private borrowing arrangements. The credit
risk involved in issuing letters of credit is essentially the same as that
involved in extending loans to customers.
The Bank is subject to claims and lawsuits which arise in the ordinary course
of business. Based on information presently available and advice received
from legal counsel representing the Bank in connection with such claims and
lawsuits, it is the opinion of management that the disposition or ultimate
determination of such claims and lawsuits will not have a material adverse
effect on the consolidated financial position of the Company.
Note 16 - Restrictions on Retained Earnings
SVB&T Corporation's principal source of funds for dividends is Springs Valley
Bank & Trust Company, its wholly owned subsidiary. The amount of dividends
that the Bank may pay SVB&T Corporation without regulatory approval is limited
by state law to defined net income for 1999, 1998 and 1997 less any dividends
paid in those years. In addition, Federal regulations require the Bank to
maintain certain capital levels based on risk-weighted assets. At December
31, 1999, approximately $3,080,000 of the Bank's retained earnings were
available for dividend payments to the SVB&T Corporation.
Note 17 - Regulatory Matters
The Bank is subject to various regulatory capital requirements administered by
the federal banking agencies. Failure to meet minimum capital requirements can
initiate certain mandatory and possible additional discretionary actions by
regulators that, if undertaken, could have a direct material effect on the
Banks financial statements. Under capital adequacy guidelines and the
regulatory framework for prompt corrective action, the Bank must meet specific
capital guidelines that involve quantitative measures of the Banks assets,
liabilities, and certain off-balance-sheet items as calculated under
regulatory accounting practices. The Banks capital amounts and classification
are also subject to qualitative judgments by the regulators about components,
risk weightings, and other factors.
Quantitative measures established by regulation to ensure capital adequacy
require the Bank to maintain minimum amounts and ratios (set forth in the
table below) of Total Capital and Tier 1 Capital (as defined in the
regulations) to risk-weighted assets (as defined), and of Tier 1 Capital (as
defined) to average assets (as defined). Management believes, as of December
31, 1999, that
the Bank meets all capital adequacy requirements to which it is subject.
As of December 31, 1999 the Bank was categorized by the FDIC as well-
capitalized under the regulatory framework for prompt corrective action. To
remain categorized as well-capitalized the Bank must maintain minimum total
risk-based, Tier 1 risk-based, and Tier 1 leverage ratios as set forth in the
table below. There are no conditions or events since the notification that
management believes have changed the institutions category.
The Banks consolidated actual capital amounts and ratios are also presented in
the table below.
Banks Amounts Required for Required to be.
As of December 31, 1999: and Ratio Regulatory Purposes Well
Capitalized
Tier 1 Capital to Risk-
Weighted Assets $20,898,004 $ 6,528,360 $ 9,792,540
12.8% 4.0%
6% or higher
Total Capital to Risk-
Weighted Assets $22,525,145 $13,056,720 $16,320,900
13.8% 8.0%
10% or higher
Tier 1 Capital to Average
Assets $20,898,004 $ 7,992,828 $ 9,991,035
10.5% 4.0%
5% or higher
As of December 31, 1998:
Tier 1 Capital to Risk-
Weighted Assets $19,065,698 $ 5,191,229 $ 6,489,037
14.7% 4.0%
5% or higher
Total Capital to Risk-
Weighted Assets $20,171,775 $10,382,459 $12,978,074
15.5% 8.0%
10% or higher
Tier 1 Capital to Average
Assets $19,065,698 $ 7,264,712 $ 9,080,890
10.5% 4.0%
5% or higher
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 18 - Concentrations of Credit
At December 31, 1999 the total amount of due from banks included $1,388,373
with Bank One Kentucky, $397,906 with Old National Bank and $149,496 with
German American Bank, which is in excess of the Federal Deposit Insurance
Corporation's insured limit of $100,000 per institution.
The majority of investments in state and municipal securities involve
governmental entities in the State of Indiana.
Approximately 75% of the Bank's loans, commitments and letters of credit have
been granted to customers in the Bank's market area of Orange, Dubois and
surrounding counties in Southern Indiana. The remaining 25% of the Bank's
loans have been made to a diversified mix of customers in central Indiana, in
participation with financial institutions in that area. These loans account
for a majority of the Bank's commercial and commercial real estate lending
activities. The concentrations of credit by type of loan are set forth in
Note 5. Although the Bank has a diversified loan portfolio, a substantial
portion of its customers' ability to honor their loan contracts is dependent
on the strength of the manufacturing economic sectors in the Southern Indiana
area.
Note 19 - Fair Values OF Financial Instruments
Carrying amounts and estimated fair values of financial instruments at
December 31, 1999 and 1998 are as follows:
1999 1998
Carrying Estimated Carrying Estimated
Amount Fair Value Amount Fair Value
ASSETS
Cash and cash equivalents $ 5,472,105 $ 5,472,105 $ 7,134,480 $ 7,134,480
Investment securities 26,103,221 26,103,221 26,065,619 26,065,619
Loans 173,492,187 172,525,979 142,562,922 144,740,788
Interest receivable 1,463,745 1,463,745 1,195,693 1,195,693
LIABILITIES
Deposits $181,276,065 $182,123,787 $159,331,492 $160,449,268
Short-term borrowings 5,000,000 5,000,000 0 0
Long-term borrowings 9,100,000 8,605,269 1,000,000 967,461
Interest Payable 783,971 783,971 712,651 712,651
The following methods and assumptions were used to estimate the fair value of
each class of financial instruments.
Cash and Cash Equivalents
The carrying amounts reported in the consolidated statements of financial
condition for cash and federal funds sold is a reasonable estimate of their
fair value Investment Securities Fair values for investment securities are
based on quoted market prices.
Loans
For variable rate loans and short-term fixed rate loans that adjust rates
frequently, fair values are based on the carrying value of those loans. For
long-term fixed rate loans, the fair values are estimated by discounting
future cash flows using current interest rates at which similar loans would be
made to borrowers of similar credit quality. For other financial instruments
classified as loans (bankers acceptances, economic development revenue bonds,
and securities purchased Under reverse repurchase agreements), fair values are
based on the carrying value of those instruments. Anticipated future loan
losses have been deducted.
Interest Receivable
The carrying amount of accrued interest receivable is a reasonable estimate of
its fair value.
Deposit Liabilities
The carrying values of demand deposit, NOW, savings and money market savings
accounts are equal to the amount payable on demand at the reporting date and
as such are the fair value. For variable rate time deposits (IRA deposits)
which reprice quarterly, fair values are based on the carrying value of the
accounts. The fair value of fixed rate certificates of deposit is estimated
by discounting the future cash flows using the current rates offered for
deposits of similar remaining maturities.
Short-Term Borrowings
The carrying amounts short-term borrowings are reasonable estimates of their
fair values.
Interest Payable
The carrying amount of accrued interest payable is a reasonable estimate of
its fair value.
Long-Term Borrowings
The fair value of fixed rate, long-term borrowings is estimated by discounting
the future cash flows using current rates for borrowings of similar
maturities.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 20 - Parent Company Only Financial Statements
Presented below are the condensed, parent company only, financial statements
of SVB&T Corporation:
December 31
Condensed Balance Sheet 1999 1998
ASSETS
Cash in bank with subsidiary $14,736 $21,541
Investment in subsidiary 19,176,938 19,272,405
Buildings and equipment 1,770,277 1,812,395
Other assets 156,200 142,000
Total assets $21,118,151 $21,248,341
LIABILITIES
Accrued Expenses $ 86,182 $74,999
Dividends payable 133,781 111,945
Long-term debt with subsidiary 216,471 435,839
Deferred income taxes 312,688 292,064
Total liabilities 749,122 914,847
SHAREHOLDERS' EQUITY
Common stock 200,000 200,000
Surplus 6,170,109 6,124,070
Retained Earnings 15,544,930 14,655,040
Accumulated other comprehensive income (544,375) 190,107
Treasury stock (1,001,635) (835,723)
Total shareholders' equity 20,369,029 20,333,494
Total liabilities and shareholders'
equity $21,118,151 $21,248,341
Long-term debt with subsidiary consisted of:
Mortgage payable to Springs Valley
Bank & Trust Company, Jasper, Indiana
(the wholly owned subsidiary of SVB&T
Corporation), variable interest rate,
8.50% at December 31, 1999 payable in
monthly installments through 2000, secured
by branch bank building in Jasper,
Indiana $216,471 $ 435,839
The scheduled principal reduction of long-term debt at December 31, 1999 is as
follows: 2000 $216,471, and thereafter $-0-.
Years Ended December 31
Condensed Statement of Income 1999 1998 1997
INCOME
Dividends from subsidiary $ 687,280 $ 475,700 $ 475,700
Rent from subsidiary 300,000 300,000 300,000
Total income 987,280 775,700 775,700
EXPENSE
Depreciation 64,335 65,584 66,834
Interest on long-term debt 26,120 46,947 61,535
Other expenses 79,885 76,198 58,223
Total expense 170,340 188,729 186,592
Income before income taxes and
equity in undistributed earnings
of subsidiary 816,940 586,971 589,108
Income tax expense 51,400 45,900 46,100
Income before equity in undistributed
earnings of subsidiary 765,540 541,071 543,008
Equity in undistributed earnings
of subsidiary 639,017 1,288,111 1,152,528
Net income $1,404,557 $1,829,182 $1,695,536
Note 20 - Parent Company Only Financial Statements (Continued)
Years Ended December 31
Condensed Statement of Cash Flows 1999 1998 1997
Operating Activities:
Net income $1,404,557 $1,829,182 $1,695,536
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation 64,335 65,584 66,834
Undistributed net income of subsidiary (639,017) (1,288,111) (1,152,528)
Deferred income taxes 20,625 20,901 20,962
(Increase) decrease in other assets (14,200) (35,500) (25,560)
Increase (decrease) in accrued expenses
and dividends payable 33,020 (2,559) 38,189
Net cash provided by operating activities 869,320 589,497 643,433
Investing Activities:
Additions to buildings and equipment (22,217) (4,069) 0
Net cash used by investing activities (22,217) (4,069) 0
Financing Activities:
Net treasury stock activity (119,873) 7,114 0
Dividends paid (514,667) (448,629) (402,732)
Principal payment on long-term debt (219,368) (216,228) (169,470)
Net cash used by financing activities (853,908) (657,743) (572,202)
Increase (decrease) in cash and cash
equivalents (6,805) (72,315) 71,231
Cash and cash equivalents beginning of
year 21,541 93,856 22,625
Cash and cash equivalents end of year $ 14,736 $ 21,541 $ 93,856
To The Shareholders and Board of Directors
SVB&T Corporation and Subsidiary
French Lick, Indiana
We have audited the accompanying consolidated statements of financial
condition of SVB&T Corporation and Subsidiary as of December 31, 1999 and 199,
and the related consolidated statements of income, comprehensive income,
changes in shareholders' equity and cash flows for each of the three years in
the period ended December 31, 1999. These financial statements are the
responsibility of the Corporation's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position
of SVB&T Corporation and Subsidiary at December 31, 1999 and 1998, and the
consolidated results of their operations and cash flows for each of the three
years in the period ended December 31, 1999, in conformity with generally
accepted accounting principles.
NONTE & COMPANY LLC
Certified Public Accountants
Jasper, Indiana
January 28, 2000
"Upon written request, SVB&T Corporation will provide financial data as
reported on Securities and Exchange Commission Form 10K. Written requests are
to be addressed to David Rees, Sr. Vice President, Cashier and CFO, SVB&T
Corporation, P.O. Box 191, French Lick, IN 47432."
SUMMARIZED FINANCIAL DATA
(Dollars in thousands, except per share)
1999 1998 1997 1996 1995
EARNINGS FOR THE YEAR
Net interest income $ 7,678 $ 7,318 $ 6,896 $ 6,553 $ 5,935
Provision for loan losses 850 580 400 290 314
Non-interest income 1,705 1,875 1,759 1,606 1,510
Non-interest expenses 6,426 5,742 5,638 5,558 5,468
Net income 1,405 1,829 1,696 1,661 1,213
PER SHARE
Shares outstanding 745,994 748,006 745,800 745,800 745,800
Net income 1.88 2.45 2.27 2.23 1.63
Cash dividends paid 0.69 0.60 0.54 0.48 0.46
Book value 27.41 27.18 25.09 23.24 21.95
FINANCIAL CONDITION AT YEAR END
LOANS
Real estate 98,851 80,803 79,491 67,859 64,585
Consumer 46,295 46,470 40,859 38,452 35,341
All other 29,751 16,396 20,254 16,548 12,573
Allowance for loan losses (1,627) (1,106) (1,403) (1,329) (1,349)
Net loans 173,270 142,563 139,201 121,530 111,150
INVESTMENTS AND FUNDS SOLD
U.S. and Agency 13,526 15,326 28,395 39,468 43,274
Municipal 10,405 8,999 8,837 9,610 13,635
Federal funds and other 7,447 4,010 1,710 867 9,550
Total investments and
funds sold 31,378 28,335 38,942 49,945 66,459
TOTAL ASSETS 217,394 182,741 190,404 184,362 189,877
DEPOSITS
Demand deposits 41,077 30,785 26,032 26,665 26,431
Certificates and IRAs 79,969 68,341 80,573 73,300 99,101
Savings and club 60,200 60,205 59,266 51,630 46,233
Total deposits 181,246 159,331 165,871 151,595 171,765
SHAREHOLDERS' EQUITY $ 20,369 $ 20,333 $ 18,716 $ 17,330 $ 16,372
Exhibit 11 - Statement Re: Computation of Per Share Earnings
Year Ended December 31,
1999 1998 1997
Primary
Weighted average shares
outstanding $ 745,994 $ 748,006 $ 745,800
Net Income 1,404,557 1,829,182 1,695,536
Net income per common share $ 1.88 $ 2.45 $ 2.27
SVB&T Corporation has no common stock equivalents
Exhibit 21 - Subsidiaries of the Registrant
State of
Subsidiary Incorporation
Springs Valley Bank & Trust Company Indiana
Exhibit 23 - Consent of Independent Auditors
We consent to the incorporation by reference in this Annual Report (Form 10-K)
of SVB&T Corporation of our report dated January 28, 2000, included in the
1999 Annual Report to Shareholders of SVB&T Corporation.
NONTE & COMPANY LLC
Certified Public Accountant
Jasper, Indiana
March 30, 2000
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