SCHEDULE 14A
Information Required in Proxy Statement
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
Filed by the Registrant: Yes.
Filed by a Party other than the Registrant: No.
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as Permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or
Section 240.14a-12
1ST BANCORP
(Name Of Registrant As Specified In Its Charter)
1ST BANCORP
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4)
and 0-11
(1) Title of each class of securities to which transaction
applies: N/A
(2) Aggregate number of securities to which transaction
applies: N/A
(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (Set forth
the amount on which the filing fee is calculated and
state how it was determined): N/A
(4) Proposed maximum aggregate value of transaction: N/A
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials
[ ] Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for which
the offsetting fee was paid previously. Identify the previous
filing by registration statement number, or the Form or
Schedule and the date of its filing. N/A
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE>
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To Be Held On Thursday, October 23, 1997
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of 1ST
BANCORP (the "Corporation") will be held at the Vincennes Elks Country Club,
2715 Washington Avenue, Vincennes, Indiana 47591 on Thursday, October 23, 1997,
at 10:30 a.m., Eastern Standard time, for the following purposes, which are more
completely set forth in the accompanying Proxy Statement:
(1) To elect three directors for terms of three years, each to
serve until his or her successor has been elected and
qualified; and
(2) To transact such other business as may come before the
meeting.
The Board of Directors has fixed September 8, 1997, as the voting record
date for the determination of shareholders entitled to notice of and to vote at
the Annual Meeting and at any adjournment thereof. Only shareholders of record
at the close of business on that date will be entitled to notice of and to vote
at the Annual Meeting or at any such adjournment.
BY ORDER OF THE BOARD OF
DIRECTORS
/s/ Mary Lynn Stenftenagel
Mary Lynn Stenftenagel
Secretary-Treasurer
Vincennes, Indiana
September 26, 1997
================================================================================
YOU ARE CORDIALLY INVITED TO ATTEND THE ANNUAL MEETING. IT IS IMPORTANT
THAT YOUR SHARES BE REPRESENTED REGARDLESS OF THE NUMBER YOU OWN. EVEN IF YOU
PLAN TO BE PRESENT, YOU ARE URGED TO COMPLETE, SIGN, DATE, AND RETURN THE
ENCLOSED PROXY PROMPTLY IN THE ENVELOPE PROVIDED. IF YOU ATTEND THIS MEETING,
YOU MAY VOTE EITHER IN PERSON OR BY YOUR PROXY. ANY PROXY GIVEN MAY BE REVOKED
BY YOU IN WRITING OR IN PERSON AT ANY TIME PRIOR TO THE EXERCISE THEREOF.
================================================================================
<PAGE>
1ST BANCORP
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
This Proxy Statement is furnished to the holders of common stock, $1.00
par value per share ("Common Stock"), of 1ST BANCORP (the "Corporation") in
connection with the solicitation of proxies on behalf of the Board of Directors
to be used at the Annual Meeting of Shareholders to be held at the Vincennes
Elks Country Club, 2715 Washington Avenue, Vincennes, Indiana 47591 on Thursday,
October 23, 1997, at 10:30 a.m., Eastern Standard time, and at any adjournment
thereof for the purposes set forth in the Notice of Annual Meeting. The
principal asset of the Corporation consists of 100% of the issued and
outstanding shares of common stock, $1.00 par value per share, of First Federal
Bank, A Federal Savings Bank ("First Federal"). This Proxy Statement is expected
to be mailed to the shareholders on or about September 26, 1997.
The proxy solicited hereby, if properly signed and returned to the
Corporation and not revoked prior to its use, will be voted in accordance with
the instructions contained therein. If no contrary instructions are given, each
proxy received will be voted for the matters described below and, upon the
transaction of such other business as may properly come before the meeting, in
accordance with the best judgment of the persons appointed as proxies.
Any shareholder giving a proxy has the power to revoke it at any time
before it is exercised by (i) filing with the Secretary of the Corporation
written notice thereof (Mary Lynn Stenftenagel, 101 North Third Street,
Vincennes, Indiana 47591), (ii) submitting a duly executed proxy bearing a later
date, or (iii) by appearing at the Annual Meeting and giving the Secretary
notice of his or her intention to vote in person. Proxies solicited hereby may
be exercised only at the Annual Meeting and any adjournment thereof and will not
be used for any other meeting.
VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF
Only shareholders of record at the close of business on September 8,
1997 ("Voting Record Date"), will be entitled to vote at the Annual Meeting. On
the Voting Record Date, there were 691,460 shares of Common Stock issued and
outstanding, and the Corporation had no other class of equity securities
outstanding. Each share of Common Stock is entitled to one vote at the Annual
Meeting on all matters properly presented at the Annual Meeting. A majority of
the votes entitled to be cast, in person or by proxy, at the meeting is
necessary for a quorum. In determining whether a quorum is present, shareholders
who abstain, cast broker non-votes, or withhold authority to vote on one or more
director nominees will be deemed present at the meeting.
The following table sets forth certain information regarding the
beneficial ownership of the Common Stock as of September 8, 1997, by each person
who is known by the Corporation to own beneficially 5% or more of the
outstanding shares of Common Stock of the Corporation. As of January 10, 1997,
the Corporation effected a 5% stock dividend with respect to its shares of
Common Stock. All share and per share figures set forth in this Proxy Statement
have been adjusted to reflect that stock dividend.
<TABLE>
<CAPTION>
Number of Shares of
Name and Address of Common Stock Beneficially Percent of
Beneficial Owner Owned (1)(2) Class
- ---------------------------------------------------------------------- -------------------
<S> <C> <C>
Rahmi Soyugenc 66,599(3) 9.63%
119 LaDonna Boulevard
Evansville, Indiana 47711
Joseph H. Moss 50,000 7.23%
1100 Circle 75 Parkway
Suite 800
Atlanta, Georgia 30339
Tidal Insurance Company Limited 29,988(4) 4.33%
c/o S.T.A.R. Corporate Management
Hibiscus Square
Grand Turk
Turks & Caicos Islands
British West Indies
Dierberg Four, L.P. 29,822(4) 4.31%
c/o First Securities America, Inc.
Suite 404
135 N. Meramec
Clayton, Missouri
63105
</TABLE>
- -------------------------
(1) Under applicable regulations, shares are deemed to be beneficially
owned by a "person" if he or she directly or indirectly has or shares
the power to vote or dispose of the shares. Unless otherwise indicated,
the named beneficial owner has sole voting and dispositive power with
respect to the shares.
(2) The information in this chart is based on Schedule 13D Reports and
amendments thereto filed by the above listed individuals with the
Securities and Exchange Commission (the "SEC") containing information
concerning shares held by them, and written communications from the
shareholders. It does not reflect any changes in those shareholdings
which may have occurred since the date of such filings, amendments, or
communications.
(3) These shares include 2,756 shares held solely by Mr. Soyugenc's wife.
(4) While Tidal Insurance Company Limited and Dierberg Four, L.P. each
beneficially own under 5% of the Corporation's outstanding shares, each
of these shareholders filed a Schedule 13D with the SEC and the
Corporation. James and Mary Dierberg, and their three children, control
Dierberg Four, L.P. which controls Tidal Insurance Company Limited.
Tidal Insurance Company Limited and Dierberg Four, L.P. each disclaims
beneficial ownership of the Common Stock owned by the other party.
<PAGE>
PROPOSAL I - ELECTION OF DIRECTORS
The By-Laws of the Corporation provide that the Board of Directors shall
determine the number of directors, between 5 and 15, and currently it has
established a board of nine members. The By-Laws further provide that the Board
of Directors is to be divided into three classes as nearly equal in number as
possible. The members of each class are to be elected for a term of three years
and until their successors are elected and qualified. One class of directors is
to be elected annually.
Unless otherwise directed, each proxy executed and returned by a
shareholder will be voted for the election of the nominees listed below. If any
person named as nominee should be unable or unwilling to stand for election at
the time of the Annual Meeting, the proxy holders will nominate and vote for a
replacement nominee recommended by the Board of Directors. At this time, the
Board of Directors knows of no reason why the nominees listed below may not be
able to serve as directors if elected. Each of the nominees is a current
director of the Corporation.
Directors are elected by a plurality of the votes cast. Plurality means
that the individuals who receive the largest number of votes cast are elected up
to the maximum number of directors to be chosen at the meeting. Abstentions,
broker non-votes, and instructions on the accompanying proxy to withhold
authority to vote for one or more of the nominees will result in the respective
nominees receiving fewer votes. However, the number of votes otherwise received
by the nominee will not be reduced by such action.
The following tables set forth certain information regarding the nominees
for the position of director of the Corporation and each director of the
Corporation whose term continues, including the principal occupations of such
persons during at least the past five years and the number and percent of shares
of Common Stock beneficially owned by such persons as of the Voting Record Date.
No nominee for director or director is related to any other nominee for director
or director or executive officer of the Corporation by blood, marriage, or
adoption, and there are no arrangements or understandings between any nominee
and any other person pursuant to which such nominee was selected. The table also
sets forth the number of shares of Corporation Common Stock beneficially owned
by all directors and executive officers as a group.
<TABLE>
<CAPTION>
Common Stock
Principal Director Director Beneficially
Occupation of the of First Term Owned as of
During the Last Corporation Federal To September 8,
Name and Age Five Years Since Since Expire 1997(1)
- ------------ ---------- ----- ----- ------
-----------------------------
<S> <C> <C> <C> <C> <C> <C>
Nominees
James W. Director of the Corporation 1993 1993 2000 224(2) .03%
Bobe and of First Federal;
(Age 53) President, Bobe Farms, Inc.
(farming)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Common Stock
Principal Director Director Beneficially
Occupation of the of First Term Owned as of
During the Last Corporation Federal To September 8,
Name and Age Five Years Since Since Expire 1997(1)
- ------------ ---------- ----- ----- ------
----------------------------
Amount %
<S> <C> <C> <C> <C> <C> <C>
C. James Chairman of the Board and 1989 1966 2000 20,840(3)(8) 3.01%
McCormick Chief Executive Officer of
(Age 72) the Corporation and Chairman
of the Board of First Federal;
Chairman of McCormick, Inc.
and Commercial Rentals, Inc.,
and President of JAMAC Corp.,
all located in Vincennes, Indiana;
Vice Chairman and Director of
Golf Hosts, Inc.(resort owner
and operator located in
Tarpon Springs, Florida)
Mary Lynn Director and Secretary- 1989 1988 2000 17,233(8) 2.50%
Stenftenagel Treasurer of the Corporation;
(Age 43) Director, Executive Vice
President, Secretary, and Chief
Financial Officer of First Federal
Directors Continuing In Office
R. William Director of the Corporation 1991 1971 1999 20,984(4) 3.03%
Ballard and First Federal Bank
(Age 63) Retired from First Federal
Frank D. President and Director of 1989 1984 1999 23,310(5)(8) 3.38%
Baracani the Corporation and President,
(Age 55) Chief Executive Officer and
Director of First Federal
Donald G. Vice President and Director 1989 1988 1998 30,983 4.48%
Bell of the Corporation; Director
(Age 67) of First Federal; Retired Senior
Partner with the law firm of Hart,
Bell, Cummings, Ewing & Stuckey
Vincennes, Indiana
Ruth Mix Director of the Corporation 1991 1981 1998 3,403 0.49%
Carnahan and Director and Treasurer
(Age 78) of First Federal; Secretary-
Treasurer of Carnahan
Grain, Inc.,
Edwardsport, Indiana
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Common Stock
Principal Director Director Beneficially
Occupation of the of First Term Owned as of
During the Last Corporation Federal To September 8,
Name and Age Five Years Since Since Expire 1997(1)
- ------------ ---------- ----- ----- ------
------------------------------
Amount %
<S> <C> <C> <C> <C> <C> <C>
Rahmi Director of the Corporation 1991 1989 1998 66,599(6) 9.63%
Soyugenc and of First Federal; President
(Age 66) of Evansville Metal Products,
Evansville, Indiana
John J. Vice Chairman of the Board 1989 1984 1999 18,022(7) 2.60%
Summers of the Corporation and First
(Age 67) Federal; retired President of
Hamilton Glass Products, Inc.,
Vincennes, Indiana
All directors and executive
officers as a group (9 persons) 201,598(9) 29.15%
- ---------------------------
</TABLE>
(1) Based upon information furnished by the respective directors. Unless
otherwise indicated, the named beneficial owner has sole voting and
dispositive power with respect to the shares.
(2) All shares are owned jointly by Mr. Bobe and his wife.
(3) 5,844 of these shares are in the name of Bettye McCormick with Mr.
McCormick as personal representative, 6,373 are owned by each of two of
Mr. McCormick's adult children, and 2,250 are owned by a third adult
child of Mr. McCormick (collectively these beneficial owners are
referred to as the "McCormick Family".) Except for the 5,844 shares to
which Mr. McCormick may be considered a beneficial owner, each member
of the "McCormick Family" disclaims beneficial ownership of the shares
held of record by each other member.
(4) Of these shares, 3,752 shares are owned jointly with Mr. Ballard's
wife.
(5) Of these shares, 13,054 shares are owned jointly by Mr. Baracani and
his wife and 33 shares are held in trust for Mr . Baracani's daughter.
(6) These shares include 2,756 shares held solely by Mr. Soyugenc's wife.
(7) All shares are owned by Mr. Summers' wife.
(8) Excludes stock options for 4,000 shares which are not exercisable until
January 1, 1998.
(9) Excludes stock options for 12,000 shares which are not exercisable
until January 1, 1998.
The Board of Directors and its Committees
During the year ended June 30, 1997, the Board of Directors of the
Corporation met twelve times. No incumbent director of the Corporation attended
fewer than 75% of the aggregate total number of meetings of the Board of
Directors of the Corporation held during the last fiscal year and the total
number of meetings held by all committees of the Board on which he or she served
during the last fiscal year. The standing committees of the Board of Directors
of the Corporation are the Nominating Committee, Audit Committee, Executive
Committee, Option Administration Committee, By-Laws and Corporate Affairs
Committee, and Personnel Committee. All committee members are appointed by the
Board of Directors.
<PAGE>
The Nominating Committee selects nominees for election as directors of the
Corporation. The Nominating Committee met one time in the fiscal year ended June
30, 1997. The Nominating Committee which nominated the director nominees set
forth in this Proxy Statement consisted of Mr. Ballard (Chairman), Mr. Bell and
Mrs. Carnahan. Although the Nominating Committee of the Corporation will
consider nominees recommended by shareholders, it has not actively solicited
recommendations for nominees from shareholders nor has it established procedures
for this purpose. Article 4.14 of the Corporation's By-Laws provides that
shareholders entitled to vote for the election of directors may name nominees
for election to the Board of Directors. Under the Corporation's By-Laws, written
notice of a proposed nomination must be received by the Secretary of the
Corporation not less than 20 days prior to any annual meeting of shareholders,
provided that if fewer than 30 days' notice of the meeting is given to
shareholders, such written notice shall be received not later than the close of
the tenth day following the day on which notice of the meeting was mailed to
shareholders.
The Audit Committee reviews the records and affairs of the Corporation to
determine its financial condition, oversees the adequacy of the systems of
internal control, and monitors the Corporation's adherence in accounting and
financial reporting to generally accepted accounting principles and regulatory
accounting principles, as appropriate. The Audit Committee, which currently
consists of Messrs. Soyugenc (Chairman), Bell, Bobe, Ballard, and Summers and
Mrs. Carnahan, met six times in fiscal 1997.
The Option Administration Committee administers the 1ST BANCORP Stock
Option Plan and the 1ST BANCORP Employee Stock Purchase Plan. The Option
Administration Committee, which currently consists of Messrs. Bell (Chairman),
Summers, and Soyugenc, and Mrs. Carnahan, met two times in fiscal 1997.
The By-Laws and Corporate Affairs Committee, which reviews the
Corporation's and First Federal's By-Laws and suggests amendments to them from
time to time, met one time during the last fiscal year. Its members are Messrs.
McCormick, Summers, Baracani, Bell, Soyugenc, Ballard and Bobe, Mrs. Carnahan,
and Ms. Stenftenagel.
The Personnel Committee reviews, oversees and recommends to the Board
various employee related programs such as the Management Incentive Plan, salary
adjustments and employee insurance. Its members currently consisting of Messrs.
Summers (Chairman), Bell, Bobe, Soyugenc, Ballard and Mrs. Carnahan, met seven
times in 1997.
Management Remuneration and Related Transactions
Remuneration of Named Executive Officers
During the fiscal year ended June 30, 1997, no cash compensation was paid
directly by the Corporation to any of its executive officers. Each of such
officers was compensated by First Federal. However, the corporation reimbursed
First Federal for certain of these compensation expenses.
The following table sets forth information as to annual, long-term and
other compensation for services in all capacities to the Corporation and its
subsidiaries for the last three fiscal years, of (i) the individual who served
as chief executive officer of the Corporation during the fiscal year ended June
30, 1997, and (ii) each executive officer of the Corporation serving as such
during the 1997 fiscal year, who earned over $100,000 in salary and bonuses
during that year (the "Named Executive Officers").
<PAGE>
<TABLE>
<CAPTION>
Summary Compensation Table
Long Term
Annual Compensation Compensation
------------------------------------------------------------------------
Awards
---------------------------
Other Annual Restricted Securities All
Name and Principal Fiscal Compensation Stock Underlying Other
Position Year Salary($)(1) Bonus($)(2) ($)(3) Awards($) Options(#) Compensation($)
- -------- ---- ------------ ------------------ ---------- ---------- ---------------
<S> <C> <C> <C> <C> <C> <C>
C. James McCormick 1997 $43,531 $25,000 - - 4,000 -
Chairman of the Board 1996 41,865 34,729 - - - -
and Chief Executive 1995 41,519 33,000 - - - -
Officer of the Corporation
and Chairman of the Board
of First Federal
Frank D. Baracani 1997 $105,845 $72,000 - - 4,190 -
President and Director 1996 101,626 97,000 - - 171 -
of the Corporation 1995 97,146 92,000 - - 168 -
and First Federal and
Chief Executive Officer
of First Federal
Mary Lynn Stenftenagel 1997 72,616 $48,000 - - 4,626 -
Director and Secretary- 1996 69,471 64,000 - - 555 -
Treasurer of the 1995 66,484 60,000 - - 529 -
Corporation, Director,
Executive Vice President,
Secretary, and
Chief Financial Officer
of First Federal
</TABLE>
(1) Salary consists of salary and directors' fees. Directors' fees were
deferred by these individuals pursuant to the Corporation's Director
Deferred Compensation Plan.
(2) The bonus amounts are paid pursuant to First Federal's Management
Incentive Plan and were accrued in fiscal years to which they relate.
(3) The Named Executive Officers of the Corporation receive certain
perquisites, but the incremental cost of providing such perquisites does
not exceed the lesser of $50,000 or 10% of the officer's salary and bonus.
Stock Options
The following table sets forth information related to options granted
during fiscal year 1997 to each of the Named Executive Officers:
Option Grants-Last Fiscal Year
<TABLE>
<CAPTION>
% of Total
Options Granted to Exercise or
Options Employees Base Price
Name Granted (#) in Fiscal Year ($/Share) Expiration Date
- ---------------------- ------------- ------------------ ------------- ---------------
<S> <C> <C> <C> <C>
C. James McCormick 4,000 (1) 25.52% $30.03 (1) 6/30/02
Frank D. Baracani 4,000 (1) 23.52% $30.03 (1) 6/30/02
190 (2) 5.33% $21.04 (2) 6/30/97
Mary Lynn Stenftenagel 4,000 (1) 23.52% $30.03 (1) 6/30/02
626 (2) 17.56% $21.04 (2) 6/30/97
</TABLE>
(1) Option to acquire shares of the Corporation's Common Stock pursuant to a
grant under the 1ST BANCORP Stock Option Plan. These options were granted
at the fair market value of the shares (calculated by using the average
bid and asked price) at June 30, 1997, which was $30.03 per share.
(2) Options to acquire shares of the Corporation's Common Stock pursuant to
the Corporation's Employee Stock Purchase Plan. The option exercise price
equaled 85% of the lower of the market value of a share of Corporation
Common Stock on July 1, 1996 and on June 30, 1997, which was $24.75 per
share.
<PAGE>
The following table shows stock option exercises by the Named Executive
Officers during fiscal 1997, including the aggregate value realized by such
officers on the date of exercise. The following table includes the number of
shares covered by stock options held by the Named Executive Officers as of June
30, 1997. Also reported are the values for "in-the-money" options (options whose
exercise price is lower than the market value of the shares at fiscal year end)
which represent the spread between the exercise price of any such existing stock
options and the year-end market price of the stock.
Aggregate Option Exercises in Last Fiscal Year and
Outstanding Stock Option Grants and Value Realized As of 6/30/97
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Shares Value Realized Underlying Unexercised In-the-Money
Acquired on at Exercise Options at Fiscal Year End Options at Fiscal Year End
Name Exercise(#) Date($)(1) Exercisable Unexercisable Exercisable Unexercisable
- ---- ----------- ---------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
C. James McCormick - - - 4,000 - -
Frank D. Baracani 190 $ 1,708 - 4,000 - -
Lynn Stenftenagel 626 $ 5,628 - 4,000 - -
</TABLE>
(1) Aggregate market value of the shares covered by the option less the
aggregate price paid by the Named Executive Officer.
(2) Options granted by the Board of Directors on June 30, 1997 at the current
market price of $30.03 per share.
Director's Fees
For fiscal 1997, no director of the Corporation was paid any director fees.
Directors of First Federal are paid $600 for each regular monthly meeting of the
Board of directors of First Federal and members of committees of First Federal's
Board of Directors who are not employees of the Corporation subsidiaries are
paid $300 per Committee meeting attended.
Director Deferred Compensation Plan
Effective July 1, 1993, First Federal entered into deferred compensation
agreements with each of its directors. Under the Agreements, First Federal will
defer an amount equal to $600 to which the director would otherwise be entitled
from First Federal for each month of the deferral. The director will have the
option of apportioning the deferral between a guaranteed investment account
which provides a fixed rate of return and a phantom unit account which provides
a return equivalent to the appreciation in the Corporation's Common Stock during
the period of the deferral. At the time the director reaches his or her normal
retirement date, the value of his or her guaranteed account and phantom stock
account will be annuitized and provide him or her with 180 monthly payments.
There are other provisions in the Agreement which provide for earlier payment in
the case of disability or in the case of death. In addition, there is a one time
burial benefit equal to $10,000.
Indebtedness of Management
Since the beginning of its fiscal year ended June 30, 1997, First Federal
had outstanding from time to time loans which were made to the directors and
executive officers of the Corporation and their associates, as defined in
Regulations of the SEC. First Federal offers loans to its directors, officers
and employees. However, all of such loans were made in the ordinary course of
business, at substantially the same terms, including interest rates and
collateral, as those prevailing at the time for comparable transactions with
nonaffiliated persons and did not involve more than the normal risk of
collectibility or present other unfavorable features.
<PAGE>
Transactions with Affiliates
During fiscal 1997 the Corporation and its subsidiaries retained the law
firm of Hart, Bell, Cummings, Ewing & Stuckey ("Hart, Bell"), of which firm Mr.
Donald G. Bell, director of the Corporation and First Federal, is a retired
partner. The Corporation intends to retain such law firm in a similar capacity
in fiscal 1997.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the 1934 Act requires that the Corporation's officers and
directors and persons who own more than 10% of the Corporation's Common Stock
file reports of ownership and changes in ownership with the Securities and
Exchange Commission (the "SEC"). Officers, directors and greater than 10%
shareholders are required by SEC regulation to furnish the Corporation with
copies of all Section 16(a) forms that they file.
Based solely on its review of the copies of such forms received by it,
and/or written representations from certain reporting persons that no Forms 5
were required for those persons, the Corporation believes that during the fiscal
year ended June 30, 1997, all filing requirements applicable to its officers,
directors and greater than 10% beneficial owners with respect to Section 16(a)
of the 1934 Act were satisfied in a timely manner.
ACCOUNTANTS
The firm of KPMG Peat Marwick LLP has been selected as the Corporation's
principal independent accountant for the current year. KPMG Peat Marwick LLP has
served as the Corporation's principal accountant since fiscal 1990. A
representative of KPMG Peat Marwick LLP will be present at the Annual Meeting
with the opportunity to make a statement if he so desires. He will be available
to respond to any appropriate questions shareholders may have.
SHAREHOLDER PROPOSALS
Any proposal which a shareholder wishes to have presented at the next
Annual Meeting of the Corporation must be received at the Main office of the
Corporation for the inclusion in the proxy statement no later than 120 days in
advance of September 26, 1998. Any such proposals should be sent to the
attention of the Secretary of the Corporation at 101 North Third Street,
Vincennes, Indiana 47591.
OTHER MATTERS
Management is not aware of any business to come before the Annual Meeting
other than those matters described above in the Proxy Statement. However, if any
other matters should properly come before the Annual Meeting, it is intended
that the proxies solicited hereby will be voted with respect to those other
matters in accordance with the judgment of the persons voting the proxies.
The cost of solicitation of proxies will be borne by the Corporation. The
Corporation will reimburse brokerage firms and other custodians, nominees and
fiduciaries for reasonable expenses incurred by them in sending proxy materials
to the beneficial owners of the Common Stock. In addition to solicitation by
mail, directors, officers and employees of the Corporation may solicit proxies
personally or by telephone without additional compensation.
<PAGE>
ANNUAL REPORTS
A copy of the Corporation's Annual Report to Shareholders for the year
ended June 30, 1997, accompanies this Proxy Statement. Such Annual Report is not
part of the proxy solicitation materials.
By Order of the Board of Directors
/s/ Mary Lynn Stenftenagel
Mary Lynn Stenftenagel
September 26, 1997 Secretary-/Treasurer
1997
[COVER]
1ST BANCORP
ANNUAL
REPORT
<PAGE>
Table of Contents
1ST BANCORP AND SUBSIDIARIES
Message to the Shareholders................................................ 2
Selected Financial Highlights.............................................. 3
Board of Directors......................................................... 4
Business Discussion........................................................ 5
Management's Discussion and Analysis of
Results of Operations and Financial Condition.............................. 7
Independent Auditors' Report............................................... 16
Consolidated Statements of Financial Condition............................. 17
Consolidated Statements of Earnings........................................ 18
Consolidated Statements of Stockholders' Equity............................ 19
Consolidated Statements of Cash Flows...................................... 20
Notes to Consolidated Financial Statements................................. 20
Management and Office Locations............................................ 38
Senior Management.......................................................... 39
Corporate Information...................................................... 40
<PAGE>
[PHOTO OF C. JAMES MCCORMICK
AND FRANK BARACANI]
Message to the Shareholders:
During each of the past two fiscal years, the occurrence of one-time events
conversely affected the Corporation's earnings. 1ST BANCORP's earnings dropped
to $821,000 during fiscal 1997 because of a special industry-wide assessment to
recapitalize the Savings Association Insurance Fund (SAIF) which resulted in a
$1,330,000 charge to Bank earnings. This compares to record net earnings of
$5,762,000 during fiscal 1996 when two branch banking offices were sold, thereby
greatly enhancing earnings for the year. Earnings per share were $1.17 during
1997 as compared to $8.22 during 1996.
Although the recapitalization of the SAIF negatively impacted fiscal 1997
earnings, it was a positive event for the future of the industry. The SAIF
recapitalization will positively impact the future earnings of the Corporation
when the ongoing annual deposit insurance assessments will be greatly reduced.
In addition to dealing with the SAIF assessment, it was a busy year for First
Federal Bank, A Federal Savings Bank. All loan administrative functions were
relocated to Vincennes in June, 1997, affording more standardized procedures and
control, as well as substantially decreased overhead expenses. Only one
nonconforming mortgage loan production office, in Evansville, Indiana, remains
in operation. Overhead for the three loan production offices that were closed in
the consolidation process exceeded $2.0 million annually. Therefore, operations
in fiscal 1998 should reflect this cost savings. On the retail side, we opened a
branch office in Vincennes during the fiscal year, thereby affording greater
customer service in our primary market area.
First Financial Insurance Agency, Inc. had a busy year as well. An office was
opened in Princeton, Indiana, which has already proven to be successful. The
size of the agency doubled with the purchase of the book of insurance business
of a local insurance agency. This purchase also expanded the Agency's market
share of business and provided additional insurance products to Agency
customers. Currently, First Financial represents 26 insurance companies.
In addition to the restructuring of the loan offices which will reduce operating
expenses, we also accomplished the goal of increasing the net interest margin.
The margin increased to 2.52% during fiscal 1997 as compared to 2.36% during
fiscal 1996. This is the highest net interest margin experienced by the
Corporation since fiscal year 1994. We have chosen to increase the margin in an
orderly manner and therefore this process is ongoing. A major factor in the
increased interest rate margin has been placing higher rate nonconforming
mortgage loan product in portfolio thereby increasing the yield on loans to
8.47% in 1997 from 8.36% in 1996, during a time of decreasing interest rates in
the market as a whole.
Although collection efforts are strong, nonperforming assets increased to $2.5
million, or .9% of assets at June 30, 1997 as compared to $.8 million, or .3% of
assets at June 30, 1996. This increase was due to an increase in both conforming
and nonconforming loan delinquencies, mostly attributed to customer
bankruptcies. Acknowledging this increase in substandard assets, we have
increased our general valuation allowance to $650,000 at June 30, 1997 from
$392,000 at June 30, 1996, an increase of over 65%. Total allowance for loan
losses at June 30, 1997 aggregated $1.2 million, or .8% of net loans receivable.
This compares to $.9 million, or .6% of net loans receivable at June 30, 1996.
We also have discontinued some high risk programs, such as the 100% loan
program, after evaluation indicated the reward did not offset the risk.
We wish to acknowledge the contributions of R. William "Bill" Ballard and
Carroll C. Hamner who retired from the Bank with over 75 years combined
experience in the financial industry, including a combined 53 years at First
Federal. We are pleased that Bill will remain on the Board of Directors and
Carroll will continue employment with the Bank on a part-time basis so we will
have the benefit of their counsel and experience.
1ST BANCORP continues to focus on maximizing earnings and shareholder value. We
feel the strategies put in place in regard to overhead reduction and yield
enhancement, coupled with the reduction in the SAIF premium, have positioned the
Corporation for a successful fiscal 1998.
As always, we wish to thank our shareholders, associates, and customers for
their continued loyalty and support.
Sincerely,
/s/ C. James McCormick /s/ Frank Baracani
C. James McCormick Frank Baracani
CEO and Chairman of the Board President
<PAGE>
Selected Financial Highlights
<TABLE>
<CAPTION>
1997 1996 1995 1994 1993
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Summary of Earnings (Dollars in thousands except per share amounts)
(For the year ended June 30):
Interest Income 19,694 20,875 19,903 15,506 16,149
Interest Expense 13,292 14,520 13,419 8,955 9,405
Provision for Loan Losses 373 83 100 75 115
Non-Interest Income 3,098 10,391 5,384 3,434 3,705
Non-Interest Expense 8,555 7,528 7,898 7,459 6,836
Income Taxes (249) 3,373 1,440 808 1,222
Net Earnings 821 5,762 2,430 1,643 2,276
- ----------------------------------------------------------------------------------------------------
Earnings Per Share (1) $ 1.17 $ 8.22 $ 3.54 $ 2.31 $ 3.42
====================================================================================================
Financial Condition
(As of June 30):
Total Assets 270,490 263,483 312,759 253,560 230,293
Securities Available for Sale 11,588 10,499 -- 5,758 1,307
Securities Held to Maturity 44,065 43,624 72,005 51,119 25,990
Loans 174,609 169,339 206,923 176,181 178,004
Deposits 144,316 137,148 209,805 172,791 172,413
Borrowings 100,296 100,885 79,387 59,520 37,200
Stockholders' Equity 22,333 21,729 16,333 13,520 12,854
- ----------------------------------------------------------------------------------------------------
Stockholders' Equity Per Share (1)(2) $ 32.00 $ 31.05 $ 23.36 $ 21.71 $ 20.17
====================================================================================================
Supplemental Data
(At or for the year ended June 30):
Yield on Interest-Earning Assets 7.77% 7.75% 7.22% 6.87% 7.78%
Cost of Interest-Earning Liabilities 5.54% 5.67% 5.02% 4.18% 4.76%
Net Interest-Rate Spread 2.23% 2.08% 2.20% 2.69% 3.02%
Net Interest-Rate Margin 2.52% 2.36% 2.35% 2.89% 3.25%
Return on Average Total Assets 0.31% 2.05% 0.84% 0.70% 1.03%
Return on Average Shareholders' Equity 3.79% 29.45% 16.62% 12.24% 20.10%
Equity to Assets Ratio 8.26% 8.25% 5.22% 5.33% 5.58%
Cash Dividends Per Share (1) $ 0.39 $ 0.37 $ 0.18 $ 0.18 $ 0.13
Dividend Payout Ratio 33.37% 4.52% 5.13% 7.81% 3.99%
====================================================================================================
</TABLE>
(1) All per share calculations have been adjusted for the 5-for-4 stock split
effective July 15, 1992 and the 5% stock dividends issued February 9, 1996
and January 10, 1997.
(2) Calculated by dividing total equity by number of shares of common stock
outstanding at year end.
<PAGE>
BOARD OF DIRECTORS
[PHOTO OF BOARD OF DIRECTORS]
Front row, left to right:
John J. Summers, Vice Chairman
Retired President
Hamilton Glass Products, Inc.
C. James McCormick, Chairman & CEO*
Chairman of the Board -
McCormick, Inc., Bestway Express, Inc.,
and President of JAMAC Corp.
Frank Baracani, President*
President and Chief Executive Officer,
First Federal Bank,
A Federal Savings Bank
Lynn Stenftenagel, Secretary/Treasurer*
Executive Vice President, Secretary,
Chief Financial Officer,
First Federal Bank,
A Federal Savings Bank
Back row, left to right:
James W. Bobe
Farmer and County Commissioner
Rahmi Soyugenc
Chairman of the Board and President -
Evansville Metal Products, Inc.,
President - National Anodizing &
Plating, Keller Street Corporation
Ruth Mix Carnahan
Secretary-Treasurer, Carnahan Grain, Inc.
Donald G. Bell, Vice President
Retired Senior Partner - Hart, Bell, Cummings,
Ewing & Stuckey, Attorneys-at-Law
R. William Ballard
Retired Senior Vice President,
First Federal Bank,
A Federal Savings Bank
All of the above directors of 1ST BANCORP are also
directors of First Federal Bank, A Federal Savings Bank
*Also director and officer of First Financial Insurance
Agency, Inc. and First Title Company
<PAGE>
BUSINESS DISCUSSION
1ST BANCORP, an Indiana corporation formed in 1988 (the "Corporation"), is a
nondiversified, unitary savings and loan holding company whose principal
subsidiary is First Federal Bank, A Federal Savings Bank ("First Federal" or the
"Bank"). The Bank operates two retail banking offices in Vincennes, Indiana and
a loan production office in Evansville, Indiana.
Other Corporation subsidiaries include First Financial Insurance Agency, Inc.
("First Financial" or the "Agency"), a full service insurance agency, and First
Title Company, a currently inactive corporation.
Lending
First Federal continues its commitment to residential mortgage lending, but at
the same time, offers ancillary types of lending for customer convenience and to
diversify the loan portfolio. The Bank has always put mortgage lending in the
forefront of its business opportunities and has a successful track record in
efficiently satisfying the housing needs of targeted communities.
First Federal funded $117.0 million in loans during fiscal 1997 as compared to
$172.4 million in loans during fiscal 1996. The decreased loan volume resulted
from reduced conforming retail loan volume during 1997 as compared to 1996.
Nonconforming loan volume increased slightly during the year.
Conventional conforming mortgage and consumer loan fundings aggregated $46.8
million during fiscal 1997 as compared to $106.5 million during 1996. The Bank
maintained its market share of mortgage loans in its designated lending area
during 1997 as compared to 1996. This decrease in fundings is attributed to the
sales of the Tipton and Kokomo branch offices in December, 1995, the
discontinuance of the wholesale correspondent mortgage program in the first
quarter of fiscal year 1997, and the general economic conditions which resulted
in decreased mortgage and consumer loan activity in the Bank's lending area
during 1997.
First Federal is committed to efficiently providing the credit needs of the
Vincennes and surrounding communities. However, with the decreased volume in
conventional mortgage lending and the decreasing profits provided by such
lending, the Bank continues its focus on the nonconforming mortgage market. This
market provides loans to a wider range of qualifying mortgage customers.
During fiscal 1997, $70.2 million of nonconforming loans were funded as compared
to $65.9 million of nonconforming mortgage loans in 1996. These loans were
generated during the year by loan production offices located in Indiana, Ohio,
and Kentucky. Toward the end of fiscal 1997, nonconforming loan production had
decreased substantially because of the influx of new mortgage companies and
mortgage brokers into the nonconforming loan business, so the decision was made
to restructure the Bank's nonconforming loan division. Only the Evansville,
Indiana loan production office remains open, and all administrative functions
are conducted from the home office. This restructuring resulted in a substantial
decrease in overhead and operating expenses.
A portion of the high quality nonconforming mortgage loans are retained in the
portfolio for yield. The remainder of the nonconforming loans are sold,
servicing released, to other companies, in order to preserve asset quality and
to generate non-interest income. During the year, most of the conforming
mortgage loans were sold in the secondary market with servicing retained by the
Bank; however, a portion of the new conforming lending was placed in the
portfolio. Retaining conforming mortgage loans in portfolio served to balance
the loan portfolio and also enhanced yield since the rates were higher than for
alternative investments. During the year, First Federal sold $76.2 million of
residential mortgage loans as compared to the sale of $161.4 million of
residential mortgage loans during fiscal 1996.
<PAGE>
At June 30, 1997, the Bank maintained a high quality loan portfolio with a
concentration in residential real estate as shown in the following table:
Real Estate Loans:
Construction Loans on:
1-4 family dwelling units $ 2,038,000 1.4%
Permanent Mortgages on:
1-4 family dwelling units 126,039,000 84.0%
5 or more dwelling units 2,969,000 2.0%
Nonresidential property 3,619,000 2.4%
Land 2,562,000 1.7%
Consumer Loans 12,748,000 8.5%
- ------------------------------------------------------------
Total Loans $149,975,000 100.0%
============================================================
Over 94% of the total loan portfolio at June 30, 1997 consisted of residential
real estate or consumer loans. Of the total $117.0 million loans processed
during fiscal year 1997, over 99% was for residential or consumer purposes.
At June 30, 1997, nonperforming assets totaled $2.5 million, or .9% of total
assets. This compares to $.8 million, or .3% of assets at June 30, 1996. This
increase is attributed to several factors, including general economic conditions
and the abundance of consumer bankruptcies being experienced throughout the
country and in our primary lending area. Loan quality continues to be of major
importance and strong effort is being made to ensure a quality portfolio.
General valuation allowances have been increased to prepare for potential future
losses in the portfolio.
Total allowance for loan losses at June 30, 1997 aggregated $1.2 million, or .8%
of net loans receivable. This compares to $.9 million, or .6% of net loans
receivable at June 30, 1996. The provision for loan losses was $373,000 during
fiscal 1997 as compared to $83,000 during fiscal 1996. Management believes the
allowance is adequate to absorb potential future losses.
Retail Banking
The Bank operates two banking offices in Vincennes, Indiana. A variety of
savings products and conveniences are offered by First Federal. Checking
accounts, money market deposit accounts, and savings certificates are offered at
competitive interest rates. Wire services, travelers' checks, money orders,
savings bonds, ATM services, bank by mail, and automatic transfers are offered
for customer convenience.
An extensive array of loan products is also offered. Fixed rate, adjustable
rate, and balloon mortgages, as well as consumer loan products, credit cards,
and overdraft and home equity lines of credit are available. Nonconforming
mortgage loans are also offered, thus providing mortgage service for all
segments of the communities being served.
Insurance
First Financial Insurance Agency, Inc. has offices in Vincennes and Princeton,
Indiana. The Agency continues to grow in insurance volume and in the number of
companies represented. During fiscal 1997, the Agency purchased the book of
business of a local insurance agency, thereby doubling the premium base. At June
30, 1997, the Agency represented 18 property and casualty insurance companies.
First Financial provides a full line of insurance products, including home,
auto, farm and commercial coverages. The Agency also markets various health and
life insurance products through its affiliation with 8 additional companies.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
This report contains certain forward looking statements that inherently involve
a number of risks and uncertainties. Among the factors that could cause actual
results to differ materially are the following: general economic conditions in
the Corporation's market area, the deterioration in the financial strength of
the Corporation's loan customers, and increased competition in the nonconforming
lending arena.
Results of Operations and Financial Condition
1ST BANCORP's net earnings during fiscal year 1997 were $821,000 as compared to
$5,762,000 during fiscal 1996 and $2,430,000 during 1995. Earnings per share
were $1.17 during 1997, $8.22 during 1996, and $3.54 during 1995. Dividends per
common share were $.39 in 1997, $.37 in 1996, and $.18 in 1995.
1ST BANCORP's assets increased to $270,490,000 at June 30, 1997 as compared to
$263,483,000 at June 30, 1996. Stockholders' equity at June 30, 1997 was
$22,333,000, an increase of $604,000 from stockholders' equity of $21,729,000 at
June 30, 1996.
Interest Rate Environment and Corporate Strategic Planning
The interest rate environment plays an important role in the strategic planning,
new business, and earnings of the Corporation. This year, interest rates
fluctuated less than in previous years and the trend was one of slightly
declining rates overall.
With the increased volume in nonconforming mortgage originations, the effect of
interest rate fluctuations to the Corporation is somewhat mitigated because
rates do not move as quickly in the nonconforming mortgage market as in the
conforming mortgage market.
<PAGE>
Net Interest Income
<TABLE>
<CAPTION>
1997 1996 1995
----------------------------- ------------------------- ------------------------
Average Yield Average Yield Average Yield
Balance Interest Rate Balance Interest Rate Balance Interest Rate
------- -------- ---- ------- -------- ---- ------- -------- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Interest Earning Assets:
Short-Term Investments and
Interest Bearing Deposits $12,579 $677 5.38% $17,825 $955 5.36% $12,332 $666 5.40%
Investment and Trading
Account Securities 62,237 3,870 6.22% 59,777 3,893 6.51% 70,067 4,144 5.91%
Loans 178,746 15,147 8.47% 191,735 16,027 8.36% 193,020 15,093 7.82%
---------------------------- ------------------------- ------------------------
Total Interest Earning Assets 253,562 19,694 7.77% 269,337 20,875 7.75% 275,419 19,903 7.22%
Allowance for Loan Losses (979) (886) (855)
Other Assets 12,764 13,221 15,383
------- ------- -------
Total Assets 265,347 281,672 289,947
======= ======= =======
LIABILITIES AND
STOCKHOLDERS' EQUITY
Interest Bearing Liabilities:
Deposits 139,674 7,678 5.50% 163,793 9,073 5.54% 191,350 8,977 4.69%
Short-Term Borrowings 964 53 5.50% 3,368 154 4.57% 6,186 379 6.13%
Federal Home Loan Bank Advances
and Other Borrowings 99,218 5,561 5.60% 89,103 5,293 5.94% 69,645 4,063 5.83%
---------------------------- ------------------------- ------------------------
Total Interest Bearing Liabilities 239,856 13,292 5.54% 256,264 14,520 5.67% 267,181 13,419 5.02%
Other Liabilities 3,821 5,842 8,149
Stockholders' Equity 21,670 19,566 14,617
------- ------- -------
Total Liabilities and
Stockholders' Equity 265,347 281,672 289,947
======= ======= =======
Net Interest Income / Spread 6,402 2.23% 6,355 2.08% 6,484 2.20%
============== ============== =============
Net Interest Margin 2.52% 2.36% 2.35%
==== ==== ====
</TABLE>
Net interest income is affected by both the volume and rates of interest
earnings assets and interest bearing liabilities. Net interest income before
provision for loan losses was $6,402,000 in 1997 as compared to $6,355,000 in
1996 and $6,484,000 in 1995. The increase in 1997 from the level in 1996 is due
to the increase in the net interest spread and net interest margin during a time
in which the volume of interest earning assets and interest bearing liabilities
decreased. The decrease in 1996 from the level in 1995 is due to a lower volume
of interest earning assets and interest bearing liabilities which was not offset
by a substantially increased net interest margin as was the case during 1997.
Interest income was $19,694,000 in 1997 as compared to $20,875,000 in 1996 and
$19,903,000 in 1995. Interest expense was $13,292,000 in 1997 as compared to
$14,520,000 in 1996 and $13,419,000 in 1995. These levels are reflective of the
interest rate fluctuations and the various operating strategies implemented
during the three year period as discussed below.
The annualized average yield on interest earning assets has increased during the
past three years because of changes in the economic environment and because of
the increased volume of high yielding nonconforming mortgage loans being placed
in the portfolio. The average yield on interest earning assets increased to
7.77% during 1997 from 7.75% during 1996 and 7.22% during 1995. The annualized
average cost of interest bearing liabilities has fluctuated during the period,
decreasing to 5.54% during 1997 from 5.67% during 1996 and as compared to 5.02%
during 1995. The net interest spread has increased to 2.23% in 1997 as compared
to 2.08% during 1996 and 2.20% in 1995.
<PAGE>
Fiscal 1997 vs. Fiscal 1996
The average levels of interest earning assets and interest bearing liabilities
decreased substantially during 1997 as compared to 1996. This was caused by the
branch sales which took place in December, 1995. Yet, net interest income
actually increased during the period.
Cash management was challenging during 1997 because of the fluctuating level of
loan fundings on a monthly basis and the timing of loan sales. The average
balance of short-term investments and interest bearing deposits decreased to
$12,579,000 during 1997 as compared to $17,825,000 in 1996 because of less
necessity to keep cash on hand during a time of decreased loan volume. The
average yield stayed relatively stable at 5.38% during 1997 as compared to 5.36%
in 1996.
Average investment and trading account securities increased during 1997 to
$62,237,000 from $59,777,000 in 1996. The average interest rate decreased to
6.22% during 1997 from 6.51% during 1996. This occurred because reinvestment of
excess cash and proceeds from called investment securities was at lower interest
rates due to the decline in interest rates during the year.
Average loans decreased to $178,746,000 during 1997 from $191,735,000 during
1996. Offsetting this decline was an increase in the average yield on loans to
8.47% during 1997 from 8.36% during 1996. The decline in the average loan volume
resulted from the branch sales, and the increased yield resulted from placing
higher yielding nonconforming loans in portfolio during the year.
With the increased loan yield, offset by the decline in the yield on investment
and trading account securities, the overall yield on total interest earning
assets increased to 7.77% during 1997 as compared to 7.75% during 1996. More
importantly, however, for net interest income purposes, was the decrease in the
average cost of interest bearing liabilities during the year.
With the declining interest rate environment, the cost of average deposits
decreased to 5.50% during 1997 as compared to 5.54% during 1996. The average
balance of deposits also declined during the year to $139,674,000 during 1997
from $163,793,000 during 1996, because of the branch sales in December 1995 and
the use of borrowings in lieu of higher cost brokered deposits.
Likewise, the cost of Federal Home Loan Bank advances and other borrowed money
decreased to 5.60% during the year as compared to 5.94% during 1996 because of
the declining interest rate environment. The level of average borrowings
increased to $99,218,000 during 1997 as compared to $89,103,000 during 1996
because the price of such borrowings was less than the price of brokered
deposits with similar terms.
Fiscal 1996 vs. Fiscal 1995
Because of the branch sales in December 1995, cash management was an increased
strategic concern during fiscal 1996. The average yield on short-term
investments and interest bearing deposits remained relatively stable at 5.36%
during 1996 as compared to 5.40% during 1995, however the average balance
increased to $17,825,000 during 1996 from $12,332,000 during 1995. Alternative
cash sources were necessary to fund the cash outflow resulting from the branch
sales. Funds were obtained through increased borrowing and brokered funds as
well as through the sale of loans and securities. However, these funds were not
immediately reinvested because strategic planning called for investing in high
yield nonconforming loans as such loans became available. Therefore, this cash
was generating income at overnight funds rates until invested in loans.
Because of the opportunity allowed by the FASB Special Report on implementation
of Statement 115, the investment portfolio was restructured in December 1995.
This resulted in the sale of securities which decreased the average balance in
investment and trading account securities to $59,777,000 in 1996 as compared to
$70,067,000 in 1995. These investment securities had a substantially improved
yield of 6.51% during 1996 as compared to 5.91% during 1995.
<PAGE>
The Corporation's average loan balance stayed relatively constant at
$191,735,000 during 1996 compared to $193,020,000 during 1995. However, the
yield increased by 54 basis points to 8.36% during 1996 from 7.82% during 1995.
This increase in yield resulted from the sale of lower yielding loans during the
year and the replacement of these loans in portfolio by the higher yielding
nonconforming loans.
While all the restructuring on the asset side resulted in an increased yield on
earning assets, the restructuring of the liability side resulted in an
offsetting larger increase in the cost of interest bearing liabilities. With the
outflow of savings occurring as a result of the branch sales, cash was obtained
through brokered savings and through increased borrowings.
The average deposits during 1996 decreased to $163,793,000 from $191,350,000
during 1995 because of the deposit outflow associated with the branch sales,
offset somewhat by an increase in brokered deposits. Because the deposits that
were sold included transaction accounts and passbook funds, the average cost of
these transferred deposits was relatively low. Thus, the average cost of
interest bearing deposits rose to 5.54% in 1996 as compared to 4.69% during
1995. Although not reflected in net interest income, the decrease in deposits
resulted in a decreased federal deposit insurance premium expense. This is
reflected in non-interest expense.
To supplement cash flow, additional funds were borrowed during 1996. The average
balance of Federal Home Loan Bank advances and other borrowings increased to
$89,103,000 in 1996 from $69,645,000 in 1995. Even though the average cost of
such borrowings remained relatively constant at 5.94% during 1996 as compared to
5.83% during 1995, the increased volume contributed to the increased cost of
interest bearing liabilities.
Net interest margin
Another factor that must be considered is the contribution of interest free
funds on the interest rate spread, which is the basis of the interest rate
margin. Average interest earning assets exceeded average interest bearing
liabilities by $13,706,000 in 1997, by $13,073,000 in 1996, and by $8,238,000 in
1995. An excess of interest earning assets effectively contributes interest free
funds as an integral part of the interest rate margin. Thus, the Corporation's
net interest margin exceeded the spread by 29 basis points in 1997, by 28 basis
points in 1996, and by 15 basis points in 1995.
Non-Interest Income
Non-interest income decreased in 1997 to $3,098,000 from $10,391,000 in 1996,
and as compared to $5,384,000 in 1995. The major reason for the $7,293,000
decrease during 1997 was the $7,274,000 gain on sale of the branch offices
during 1996.
Net gain on sales of loans stayed relatively constant at $2,124,000 during 1997
as compared to $2,026,000 during 1996. Net gains on sales of loans during 1995
was $582,000. The increases in 1996 and 1997 were because of the sale of
nonconforming loans which generate a strong gain on sale and are not as rate
sensitive as conforming mortgage loans. The adoption of FAS 122 for fiscal years
1996 and later, resulted in increased gain on sale of loans due to the
capitalization of originated mortgage servicing rights ($366,000 during 1997 and
$454,000 during 1996.) Total loan sales aggregated $76,202,000 in 1997,
$161,422,000 in 1996, and $32,835,000 in 1995. Included in the loan sales during
1997 and 1996, respectively, were $37,709,000 and $27,910,000 in nonconforming
loans.
A $29,000 net loss on sales of securities was recognized during 1997 as compared
to a net loss of $111,000 during 1996 and net gains of $16,000 in 1995. The loss
in 1996 was incurred because of the opportunity afforded by the issuance of the
FASB Special Report, "A Guide to Implementation of Statement 115 on Accounting
for Certain Investments in Debt and Equity Securities," to restructure the
investment portfolio. Lower yielding securities were sold to improve investment
yield on the remaining portfolio.
<PAGE>
Income from fees and service charges increased to $341,000 during 1997 from
$296,000 in 1996, and as compared to $981,000 in 1995. The level of fees is
significantly affected by servicing fee income on loans serviced for other
owners. The Bank retains .25% servicing fee on fixed rate loans and .375%
servicing fee on adjustable rate loans that have been sold in the secondary
market. Loans sold to others, with servicing retained by the Bank, totaled
$112,642,000 at June 30, 1997, $81,353,000 at June 30, 1996, and $193,058,000 at
June 30, 1995.
Other non-interest income decreased to $662,000 in 1997 from $906,000 in 1996
and from $3,805,000 in 1995. Of this income, $237,000 during 1996 and $2,980,000
during 1995 resulted from the sale of FHLMC and FNMA servicing rights. These
servicing rights were sold to minimize prepayment risk associated with the
projected lowering long term interest rate scenario. Additionally, in years
prior to 1996, these servicing rights were sold to recognize currently the value
in net income; with the adoption of FAS 122, this is no longer necessary, as the
value of the servicing rights is recognized currently. Accordingly, no servicing
rights were sold during 1997.
Non-Interest Expense
Non-interest expense increased to $8,555,000 in 1997 from $7,528,000 in 1996, as
compared to $7,898,000 in 1995. The increase in 1997 is attributed to the
one-time pre-tax charge of $1,330,000 to federal insurance premiums for an
industry-wide special assessment by the FDIC to recapitalize the SAIF. As a
result of this one-time assessment, the Bank's deposit insurance premiums will
be reduced in the future.
Compensation and employee benefits, the major component of non-interest expense,
decreased to $4,195,000 in 1997 from $4,273,000 in 1996 and from $4,442,000 in
1995. The decreases during 1997 and 1996 were from the decrease in employees
resulting from the branch sales in December 1995.
Net occupancy decreased to $719,000 in 1997 from $746,000 in 1996 and from
$815,000 during 1995. This is also due to the sale of the branch offices.
Income Taxes
The Corporation generated an income tax expense of ($249,000) in fiscal 1997 as
compared to $3,373,000 in fiscal 1996 and $1,440,000 in fiscal 1995. The
negative tax expense in fiscal 1997 resulted from the Corporation's investment
in an affordable housing senior citizen project that produces tax credits.
Because of the SAIF assessment which lowered earnings, the total amount of tax
credits could not be used as related to fiscal 1997 income, however, tax laws
allowed the credits to be carried back to the prior year when income was
sufficient for the Corporation to use the full fiscal 1997 allocated credit.
<PAGE>
Financial Condition
The Corporation's total assets increased to $270,490,000 at June 30, 1997 from
$263,483,000 at June 30, 1996. Total cash and cash equivalents decreased by
$4,805,000 to $20,294,000 at June 30, 1997 from $25,099,000 at June 30, 1996.
This decrease was due to less necessity for cash to fund a decreasing pipeline
of mortgage loans.
Net loans receivable decreased to $146,840,000 at June 30, 1997 from
$150,749,000 at June 30, 1996. This decrease resulted from the decreased
mortgage volume, the continued decision to sell lower grade nonconforming loans
to mitigate credit risk, and the continued decision to sell conforming loans to
mitigate interest rate risk. The loans held for sale increased to $27,769,000
from $18,590,000 at June 30, 1996 because adjustable rate loans are currently
being placed in the held for sale portfolio for liquidity purposes.
Prepaid expenses and other assets increased by $4,475,000 during the year mainly
because of the pending settlement of a $4,111,000 loan sale. Total deposits
increased to $144,316,000 at June 30, 1997 from $137,148,000 at June 30, 1996.
Brokered deposits are used to supplement savings deposits obtained in the
Vincennes area. Total brokered savings increased to $45,100,000 at June 30, 1997
from $34,058,000 at June 30, 1996.
Capital Resources
At June 30, 1997, stockholders' equity was $22,333,000, an increase of $604,000
over total stockholders' equity of $21,729,000 at June 30, 1996.
The Corporation is subject to regulation as a savings and loan holding company
by the Office of Thrift Supervision. The Bank, as a subsidiary of a savings and
loan holding company, is subject to certain restrictions in its dealings with
the Corporation. The Bank is also subject to the regulatory requirements
applicable to a federal savings bank.
Current capital regulations require savings institutions to have minimum
tangible capital equal to 1.5% of total assets and a minimum 3% core capital
ratio. Additionally, savings institutions are required to meet a risk-based
capital ratio equal to 8% of risk-weighted assets. At June 30, 1997, the Bank
exceeded all capital requirements.
Minimum capital standards place savings institutions into one of five
categories, from "critically undercapitalized" to "well-capitalized," depending
on levels of three measures of capital. A well-capitalized institution, as
defined by the regulations, would have a total risk-based capital ratio of at
least 10%, a Tier 1 (core) risk-based capital ratio of at least 6%, and a
leverage (core) risk-based capital ratio of at least 5%. At June 30, 1997, First
Federal was classified as "well-capitalized."
<PAGE>
The following is a summary of the Bank's regulatory capital and capital
requirements at June 30, 1997:
<TABLE>
<CAPTION>
Core/ Tier 1 Total
GAAP Tangible Tangible Leverage Risk-Based Risk-Based
Capital Capital Equity Capital Capital Capital
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1ST BANCORP GAAP Capital $22,333,000
First Federal GAAP Capital $22,367,000 $22,367,000 $22,367,000 $22,367,000 $22,367,000 $22,367,000
Capital Adjustments:
Unrealized Loss on Investment Securities 109,000 109,000 109,000 109,000 109,000
General Valuation Allowance 650,000
Disallowed (40,000) (40,000) (40,000) (40,000) (40,000)
----------------------------------------------------------------------
Regulatory Computed Capital 22,436,000 22,436,000 22,436,000 22,436,000 23,086,000
======================================================================
Total Assets:
Adjusted Total Assets 270,568,000 270,568,000 270,568,000 - -
Risk-Weighted Assets - - - 144,438,000 144,438,000
----------------------------------------------------------------------
Regulatory Computed Assets 270,568,000 270,568,000 270,568,000 144,438,000 144,438,000
======================================================================
Regulatory Capital Ratio 8.29% 8.29% 8.29% 15.53% 15.98%
==== ==== ==== ===== =====
Regulatory Capital Category:
OTS Minimum Requirements 1.50% 3.00% 8.00%
==== ==== ====
Prompt Corrective Action Requirements:
Not Critically Undercapitalized Equal to 2.00%
====
Well Capitalized Equal to or Greater Than 5.00% 6.00% 10.00%
==== ==== =====
</TABLE>
Asset and Liability Management
Thrift institutions are subject to interest rate risk to the degree that
interest-bearing liabilities, primarily deposits and borrowings with relatively
short-term maturities, mature or reprice more rapidly, or on a different basis,
than interest-earning assets. While having liabilities that mature or reprice
more frequently on average than assets will be beneficial in times of declining
interest rates, such an asset/liability structure will result in lower net
income or net losses during periods of rising interest rates, unless offset by
other factors such as non-interest income. Thus, the Corporation's operating
results are affected by changes in the level of market rates of interest.
An asset/liability management program has been designed and implemented to
stabilize and improve earnings by managing interest rate risk without adversely
affecting asset quality. This program involves the coordination of sources and
uses of funds and the evaluation of changing market rate relationships. In this
process, the Corporation's interest rate risk is analyzed using gap analysis and
simulation analysis produced in-house and by the OTS.
Management closely monitors the asset/liability mix and adjusts policies and
strategies to manage the impact of fluctuating interest rates on operating
results. The following table sets forth the repricing of the Corporation's
interest earning assets and interest bearing liabilities at June 30, 1997.
Prepayment assumptions and decay rates have been applied to more accurately
reflect the asset/liability gap.
<PAGE>
<TABLE>
<CAPTION>
At June 30, 1997
Maturing or Repricing Within
-----------------------------------------------------------------
Average 1 Year 1 to 3 3 to 5 More than
Rate Total Or Less Years Years 5 Years
------------------------------------------------------------------
(Dollars in Thousands)
Rate Sensitive Assets
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Loans Receivable (1)
Adjustable Rate Mortgage loans 8.34% $88,757 $67,391 $8,658 $8,767 $3,941
Fixed Rate Mortgage loans 8.55% 76,239 30,399 25,914 9,930 9,996
Nonmortgage Loans 9.73% 12,748 6,514 3,540 1,691 1,003
Investments 6.36% 80,365 24,712 12,407 12,803 30,443
------------------------------------------------------------------
Total Rate Sensitive Assets 7.86% $258,109 $129,016 $50,519 $33,191 $45,383
=====================================================================================================
Rate Sensitive Liabilities
- -----------------------------------------------------------------------------------------------------
Deposits
Fixed Maturity Deposits 5.81% $121,108 $91,623 $24,123 $3,123 $2,239
Other Deposits (2) 3.85% 23,208 16,545 2,501 1,475 2,687
FHLB Advances and Other Borrowings 5.67% 100,296 43,198 46,013 10,396 689
------------------------------------------------------------------
Total Rate Sensitive Liabilities 5.57% $244,612 $151,366 $72,637 $14,994 $5,615
=====================================================================================================
Total Asset/Liability Gap $13,497 ($22,350) ($22,118) $18,197 $39,768
Cumulative Asset/Liability Gap $13,497 ($22,350) ($44,468) ($26,271) $13,497
Cumulative Gap as a Percentage of
Total Assets - 1997 -8.26% -16.44% -9.71% 4.99%
Cumulative Gap as a Percentage of
Total Assets - 1996 -4.05% -21.35% -9.47% 6.56%
</TABLE>
- -----------------------------------
(1) The distribution of fixed rate loans is based upon contractual maturity and
scheduled contractual repayments adjusted for estimated prepayments. For
adjustable rate loans, interest rates adjust at intervals of one month to
seven years.
(2) A portion of these transaction account balances has been included in the
More Than 5 Years category to reflect management's assumption that these
accounts are not rate sensitive.
Liquidity
The Corporation conducts substantially all its business through its thrift
subsidiary. The main source of funds for 1ST BANCORP is dividends from the Bank.
The Corporation's primary sources of funds are the Bank's deposits, which
totaled $144,316,000 at June 30, 1997, and borrowings, which totaled
$100,296,000 at June 30, 1997. During the year, cash flow needs were also
supplied by loan payments, proceeds from sales of loans and securities, and
securities sold under agreement to repurchase.
Scheduled loan payments are a relatively stable source of funds, but loan
payoffs, the sale of loans, and deposit inflows and outflows fluctuate
significantly, depending on market interest rates and economic conditions.
Management does not expect any of these items to occur in amounts that would
exert pressure on the Corporation's ability to meet consumer demand for
liquidity or the regulatory liquidity requirements.
Historically, the Bank has maintained its liquid assets above the minimum
requirements imposed by OTS regulations and at a level believed by management
adequate to meet requirements of normal daily activities. Regulations require
thrift institutions to maintain minimum levels of certain liquid investments, as
defined in the regulations, of at least 5% of net withdrawable assets. At June
30, 1997, First Federal's regulatory liquidity ratio was 10.44%.
<PAGE>
[KPMG Peat Marwick LLP Letterhead]
Independent Auditors' Report
The Board of Directors
1ST BANCORP:
We have audited the accompanying consolidated statements of financial condition
of 1ST BANCORP and subsidiaries as of June 30, 1997 and 1996 and the related
consolidated statements of earnings, stockholders' equity and cash flows for
each of the years in the three year period ended June 30, 1997. These
consolidated financial statements are the responsibility of the Corporation's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audit.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of 1ST BANCORP and
subsidiaries as of June 30, 1997 and 1996, and the results of their operations
and their cash flows for each of the years in the three year period ended June
30, 1997 in conformity with generally accepted accounting principles.
/s/ KPMG Peat Marwaick LLP
Indianapolis, Indiana
July 17, 1997
<PAGE>
1ST BANCORP AND SUBSIDIARIES
Consolidated Statements of Financial Condition
June 30, 1997 and 1996
<TABLE>
<CAPTION>
Assets 1997 1996
------ ---- ----
<S> <C> <C>
Cash and cash equivalents:
Interest bearing deposits $ 19,771,000 24,689,000
Non-interest bearing deposits 523,000 410,000
------------ ------------
Cash and cash equivalents 20,294,000 25,099,000
------------ ------------
Securities available for sale (note 2) 11,588,000 10,499,000
Securities held to maturity (market value of $43,556,000
and $42,184,000) (note 3) 44,065,000 43,624,000
Loans receivable, net (notes 4 and 8) 146,840,000 150,749,000
Loans held for sale 27,769,000 18,590,000
Accrued interest receivable:
Securities 1,081,000 1,036,000
Loans 1,099,000 1,179,000
Stock in FHLB of Indianapolis, at cost 4,941,000 4,864,000
Office premises and equipment (note 6) 3,225,000 2,950,000
Real estate owned 397,000 177,000
Prepaid expenses and other assets 9,191,000 4,716,000
------------ ------------
$ 270,490,000 263,483,000
=========== ===========
Liabilities and Stockholders' Equity
Liabilities:
Deposits (note 7) 144,316,000 137,148,000
Advances from FHLB and other borrowings (note 8) 100,296,000 100,885,000
Advance payments by borrowers for taxes and insurance 304,000 492,000
Accrued interest payable on deposits 1,194,000 816,000
Accrued expenses and other liabilities 2,047,000 2,413,000
------------ ------------
248,157,000 241,754,000
Stockholders' equity (note 9):
Preferred stock, no par value; shares authorized
of 2,000,000, none outstanding - -
Common stock, $1 par value; shares authorized of 5,000,000;
shares issued and outstanding of 697,897 and 699,889 698,000 667,000
Paid-in capital 2,642,000 2,747,000
Retained earnings, substantially restricted 19,102,000 18,560,000
Unrealized depreciation on securities available for sale
(note 2) (109,000) (245,000)
------------ ------------
22,333,000 21,729,000
Commitments (note 14)
$ 270,490,000 263,483,000
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
1ST BANCORP AND SUBSIDIARIES
Consolidated Statements of Earnings
Years ended June 30, 1997, 1996 and 1995
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Interest income:
Loans $ 15,147,000 16,027,000 15,093,000
Securities 3,852,000 3,890,000 4,136,000
Trading account securities 18,000 3,000 8,000
Other short-term investments and
interest bearing deposits 677,000 955,000 666,000
------------ ------------ ------------
Total interest income 19,694,000 20,875,000 19,903,000
---------- ---------- ----------
Interest expense:
Deposits (note 7) 7,678,000 9,073,000 8,977,000
Short-term borrowings 53,000 154,000 379,000
FHLB advances and other borrowings 5,561,000 5,293,000 4,063,000
----------- ----------- -----------
Total interest expense 13,292,000 14,520,000 13,419,000
---------- ---------- ----------
Net interest income before
provision for loan losses 6,402,000 6,355,000 6,484,000
Provision for loan losses (note 4) 373,000 83,000 100,000
------------ ------------- ------------
Net interest income after
provision for loan losses 6,029,000 6,272,000 6,384,000
----------- ----------- -----------
Non-interest income:
Fees and service charges 341,000 296,000 981,000
Net gain (loss) on sales of securities available
for sale and trading account securities (note 2) (29,000) (111,000) 16,000
Net gain on sales of loans 2,124,000 2,026,000 582,000
Net gain on sale of branch offices (note 13) - 7,274,000 -
Other (note 5) 662,000 906,000 3,805,000
------------ ------------ -----------
Total non-interest income 3,098,000 10,391,000 5,384,000
----------- ---------- -----------
Non-interest expense:
Compensation and employee benefits 4,195,000 4,273,000 4,442,000
Net occupancy 719,000 746,000 815,000
Federal insurance premiums (note 7) 1,589,000 469,000 494,000
Other 2,052,000 2,040,000 2,147,000
----------- ----------- -----------
Total non-interest expense 8,555,000 7,528,000 7,898,000
----------- ----------- -----------
Earnings before income taxes 572,000 9,135,000 3,870,000
Income taxes (note 12) (249,000) 3,373,000 1,440,000
------------ ----------- -----------
Net earnings $ 821,000 5,762,000 2,430,000
============ =========== ===========
Earnings per share (note 10) 1.17 8.22 3.54
==== ==== ====
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
1ST BANCORP AND SUBSIDIARIES
Consolidated Statements of Stockholders' Equity
Years ended June 30, 1997, 1996 and 1995
<TABLE>
<CAPTION>
Unrealized Total
depreciation on stock-
Common Paid-in Retained securities avail- holders'
stock capital earnings able for sale equity
<S> <C> <C> <C> <C> <C>
Balance at June 30, 1994 $ 565,000 2,429,000 10,749,000 (223,000) 13,520,000
Issuance of common stock through employee
stock purchase plan (note 9) 2,000 37,000 - - 39,000
Exercise of options for common stock (note 9) 66,000 338,000 - - 404,000
Issuance of common stock through dividend re-
investment and shareholder stock purchase plan 1,000 21,000 - - 22,000
Dividends ($.18 per share) - - (115,000) - (115,000)
Change in net unrealized depreciation on securities
available for sale (note 2) - - - 33,000 33,000
Net earnings - - 2,430,000 - 2,430,000
--------------------------- ----------------------- -----------
Balance at June 30, 1995 634,000 2,825,000 13,064,000 (190,000) 16,333,000
Issuance of common stock through employee stock
purchase plan (note 9) 5,000 77,000 - - 82,000
Issuance of common stock through dividend re-
investment and shareholder stock purchase plan 2,000 53,000 - - 55,000
Purchase and retirement of common stock (note 9) (6,000) (176,000) - - (182,000)
Issuance of 33,111 shares of common stock at par
value for 5% stock dividend
plus cash in lieu of
fractional shares 32,000 (32,000) (5,000) - (5,000)
Dividends ($.37 per share) - - (261,000) - (261,000)
Change in net unrealized depreciation on securities
available for sale (note 2) - - - (55,000) (55,000)
Net earnings - - 5,762,000 - 5,762,000
--------------------------- ----------------------- -----------
Balance at June 30, 1996 667,000 2,747,000 18,560,000 (245,000) 21,729,000
Issuance of common stock through employee stock
purchase plan (note 9) 3,000 76,000 - - 79,000
Issuance of common stock through dividend re-
investment and shareholder stock purchase plan 2,000 52,000 - - 54,000
Purchase and retirement of common stock (note 9) (7,000) (200,000) - - (207,000)
Issuance of 33,013 shares of common stock at par
value for 5% stock dividend
plus cash in lieu of
fractional shares 33,000 (33,000) (5,000) - (5,000)
Dividends ($.39 per share) - - (274,000) - (274,000)
Change in net unrealized depreciation on securities
available for sale (note 2) - - - 136,000 136,000
Net earnings - - 821,000 - 821,000
--------------------------- ------------------------ ------------
Balance at June 30, 1997 $ 698,000 2,642,000 19,102,000 (109,000) 22,333,000
======= ========= ========== ======= ==========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
1ST BANCORP AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Years ended June 30, 1997, 1996 and 1995
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
Net cash flows from operating activities:
<S> <C> <C> <C>
Net earnings $ 821,000 5,762,000 2,430,000
Adjustments to reconcile net earnings to net cash provided
(used) by operating activities:
Depreciation and amortization 348,000 300,000 188,000
Amortization of mortgage servicing rights 153,000 107,000 486,000
Gain on sale of loans (2,124,000) (2,026,000) (582,000)
Loss (gain) on sale of securities 29,000 111,000 (16,000)
Gain on sale of branch - (7,274,000) -
Loss on sale of equipment 54,000 - -
Net change in loans held for sale (9,179,000) (13,486,000) (1,740,000)
Provision for loan losses 373,000 83,000 100,000
Change in accrued interest receivable 35,000 107,000 (702,000)
Change in prepaid expenses and other assets (476,000) 635,000 21,000
Change in accrued expenses and other liabilities (79,000) (1,646,000) 443,000
Loss on investment in limited partnership 122,000 263,000 146,000
------------ ------------------------------
Net cash provided (used) by operating activities (9,923,000) (17,064,000) 774,000
----------- ------------ ----------------
Cash flows from investing activities:
Purchases of securities held to maturity (3,519,000) (34,262,000) (15,989,000)
Proceeds from maturities of securities held to maturity 3,062,000 16,872,000 -
Purchases of securities available for sale (31,913,000) (46,074,000) -
Proceeds from maturity of securities available for sale 1,192,000 5,015,000 693,000
Proceeds from sale of securities available for sale 29,826,000 76,159,000 -
Principal collected on loans, net of originations 1,379,000 (12,802,000) (28,227,000)
Purchase of life insurance policies (35,000) - -
Purchase of stock of FHLB of Indianapolis (77,000) (988,000) (1,378,000)
Purchases of office premises and equipment (615,000) (154,000) (187,000)
Investment in limited partnership - - (2,500,000)
Proceeds from sale of office premises and equipment-branch sales - 1,316,000 -
Proceeds from sale of loans-branch sales - 28,875,000 -
Sale of deposits-branch sales - (77,406,000) -
Proceeds from bulk sale of loans - 37,937,000 -
Other (220,000) (32,000) 225,000
------------ -------------- --------------
Net cash used by investing activities (920,000) (5,544,000) (47,363,000)
------------ ------------ ------------
Cash flows from financing activities:
Net increase in deposits 7,168,000 11,017,000 37,014,000
Proceeds from FHLB advances and other borrowings 83,768,000 202,544,000 193,031,000
Repayment of FHLB advances and other borrowings (84,357,000) (181,046,000) (173,164,000)
Proceeds from issuance of common stock 133,000 137,000 465,000
Purchase and retirement of common stock (207,000) (182,000) -
Payment of dividends on common stock (279,000) (266,000) (115,000)
Decrease in advance payments by borrowers for interest and taxes (188,000) (1,829,000) (961,000)
------------ ------------- --------------
Net cash provided by financing activities 6,038,000 30,375,000 56,270,000
----------- ------------ ------------
Net increase (decrease) in cash and cash equivalents (4,805,000) 7,767,000 9,681,000
Cash and cash equivalents at beginning of year 25,099,000 17,332,000 7,651,000
---------- ------------ -------------
Cash and cash equivalents at end of year $ 20,294,000 25,099,000 17,332,000
========== ============ ============
Additional disclosures:
Interest paid $ 12,917,000 14,170,000 13,028,000
========== ============ ============
Income taxes paid $ 287,000 4,700,000 584,000
============ ============ ============
Transfer of investment securities
held to maturity to available
for sale account $ - 45,838,000 -
=========== ============ ============
Transfer of mortgage-backed securities
available for sale to held
to maturity account $ - - 231,000
=========== ============ ============
Transfer of investment securities
available for sale to held
to maturity account $ - - 4,598,000
============ ============ ============
Transfer of loans receivable to
prepaid expenses and other assets $ 4,111,000 - -
=========== ============== ============
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
(Continued)
1ST BANCORP AND SUBSIDIARIES
Notes to Consolidated Financial Statements
June 30, 1997, 1996 and 1995
(1) Summary of Significant Accounting Policies
Principles of Consolidation
The consolidated financial statements include the accounts of 1ST BANCORP
(the "Corporation") and its subsidiaries, First Federal Bank, A Federal
Savings Bank and subsidiary (the "Bank"), First Financial Insurance
Agency, Inc. and First Title Company. All significant intercompany
transactions and balances have been eliminated in consolidation.
The accounting and reporting policies of the Corporation and the Bank
conform to generally accepted accounting principles. In preparing the
financial statements, management is required to make estimates and
assumptions that affect the reported amounts of assets and liabilities as
of the date of the consolidated statement of financial condition and
consolidated statement of earnings for the period.
Actual results could differ from those estimates.
The Bank is subject to competition from other financial institutions and
is regulated by certain federal agencies and undergoes periodic
examination by those regulatory authorities.
Cash and Cash Equivalents
For purposes of reporting cash flows, cash and cash equivalents include
cash on hand and amounts due from banks.
Securities Held to Maturity and Available for Sale
Securities classified as available for sale are securities that the
Corporation intends to hold for an indefinite period of time, but not
necessarily until maturity, and include securities that management might
use as part of its asset-liability strategy, or that may be sold in
response to changes in interest rates, changes in prepayment risk, the
need to increase regulatory capital or other similar factors, and which
are carried at market value. Unrealized holding gains and losses, net of
tax, on available for sale securities are reported as a net amount in a
separate component of stockholders' equity until realized. Securities
classified as held to maturity are securities that the Corporation has
both the ability and positive intent to hold to maturity and are carried
at cost adjusted for amortization of premium or accretion of discount.
Gains and losses on securities are computed on a specific identification
basis.
Loans Receivable and Real Estate Owned
Loans receivable are considered long-term investments, and accordingly,
are carried at historical cost.
<PAGE>
1ST BANCORP AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Continued)
The Bank provides specific valuation allowances for estimated losses on
loans and real estate owned when a significant and permanent decline in
value occurs. As of July 1, 1995, the Bank adopted Statement of Financial
Accounting Standard No. 114, Accounting by Creditors for Impairment of a
Loan. Under this standard, loans considered to be impaired are reduced to
the present value of expected future cash flows or to fair value of
collateral by allocating a portion of the allowance for loan losses to
such loans. If these allocations cause the allowance for loan losses to
require an increase, allocations are considered in relation to the
overall adequacy of the allowance for loan losses and subsequent
adjustment to the loss provision. Adopting this standard did not have an
impact on the 1996 financial statements. In providing valuation
allowances, through a charge to operations, the estimated net realizable
value of the underlying collateral and the costs of holding real estate
are considered. Non-specific valuation allowances for estimated losses
are established based on management's judgment of current economic
conditions and the credit risk of the loan portfolio and real estate
owned.
Management believes the allowance for loan losses is adequate. While
management uses available information to recognize losses on loans,
future additions to the allowance may be necessary based on changes in
economic conditions and borrower circumstances. In addition, various
regulatory agencies, as an integral part of their examination process,
periodically review the Bank's allowance for loan losses. Such agencies
may require the Bank to recognize additions to the allowance based on
their judgments about information available to them at the time of their
examination.
Real estate properties acquired through, or in lieu of, loan foreclosure
are to be sold and are initially recorded at fair value at the date of
foreclosure establishing a new cost basis. After foreclosure, valuations
are periodically performed by management and the real estate is carried
at the lower of carrying amount or fair value less cost to sell.
Loan Fees and Related Costs
Loan origination and commitment fees and certain direct loan origination
costs are deferred, and the net amount is amortized over the contractual
life of the related loan as an adjustment of the loan's yield using the
interest method.
Mortgage Banking Activities
The Bank originates and purchases certain mortgage loans for sale in the
secondary market. During the origination and purchase period, mortgage
loans are designated as held either for investment purposes or for sale.
Mortgage loans held for sale are carried at the lower of amortized cost
or market value determined on an aggregate basis.
Gains and losses on the sale of loans are reflected in operations at the
time of sale and are determined by the difference between net sales
proceeds and the carrying value of the loans, adjusted for normal
servicing fees. The Bank recognizes, as separate assets, rights to
service mortgage loans for others however those servicing rights are
acquired.
<PAGE>
The Bank hedges its interest rate risk on fixed rate loan commitments
expected to close and the inventory of mortgage loans held for sale.
Related hedging gains and losses are recognized at the time gains or
losses are recognized on the related loans sold. The Bank does not
anticipate any loss on open commitments at June 30, 1997.
As of July 1, 1995, the Bank adopted the provisions of Statement of
Financial Accounting Standards No. 122, Accounting for Servicing Rights
("SFAS 122"). For servicing retained loan sales, SFAS 122 requires the
capitalization of the cost of mortgage service rights, regardless of
whether those rights were acquired through purchase or origination.
Effective December 31, 1996, SFAS 122 was superseded by Statement of
Financial Accounting Standards No. 125, Accounting for Transfers and
Servicing of Financial Assets and Extinguishment of Liabilities ("SFAS
125"). The Bank's accounting for mortgage servicing rights was not
changed by SFAS 125. Prior to the adoption of SFAS 122 and SFAS 125, only
purchased servicing rights were capitalized.
Beginning with the adoption of SFAS 122, the total cost of mortgage
loans, whether originated or purchased, with the intent to sell is
allocated between the loan servicing right and the mortgage loan without
servicing based on their relative fair values at the date of sale. The
capitalized cost of loan servicing rights is amortized in proportion to
and over the period of, estimated net servicing revenue. Mortgage
servicing rights are periodically evaluated for impairment by stratifying
them based on the predominant risk characteristics of the underlying
serviced loan.
Office Premises and Equipment
Office premises and equipment are stated at cost, less accumulated
depreciation provided on the straight-line basis over the estimated
useful lives of the various classes of assets.
FHLB Stock
Federal law requires a member institution of the Federal Home Loan Bank
System to hold common stock of its district FHLB according to a
predetermined formula. This investment is stated at cost, which
represents redemption value.
Pension Plan
Pension expense for the Bank's defined benefit pension plan is computed
on the basis of accepted actuarial methods. It is the Bank's policy to
fund pension costs accrued.
Income Taxes
The Corporation and its subsidiaries file consolidated income tax
returns. Deferred tax assets and liabilities are recognized for the
estimated future tax consequences attributable to differences between the
financial statement carrying amounts of existing assets and liabilities
and their respective tax bases. Deferred tax assets and liabilities are
measured using enacted tax rates in effect for the year in which those
temporary differences are expected to be recovered or settled. The effect
on deferred tax assets and liabilities of a change in tax rate is
recognized in income in the period that includes the enactment date.
<PAGE>
Reclassifications
Certain amounts in the 1996 and 1995 consolidated financial statements
have been reclassified to conform to the 1997 presentation.
(2) Securities Available for Sale
Securities available for sale consist of the following at June 30:
<TABLE>
<CAPTION>
1997
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
<S> <C> <C> <C>
Mortgage-backed securities:
FHLMC $ 2,206,000 - (33,000) 2,173,000
Investments:
U.S. Treasury and agency obligations 9,563,000 - (148,000) 9,415,000
----------- ---------- ------- -----------
$ 11,769,000 - (181,000) 11,588,000
========== ========== ======= ==========
</TABLE>
<TABLE>
<CAPTION>
1996
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
<S> <C> <C> <C>
Mortgage-backed securities:
FHLMC $ 2,402,000 - (47,000) 2,355,000
Investments:
U.S. Treasury and agency obligations 8,505,000 - (361,000) 8,144,000
----------- ---------- ------- -----------
$ 10,907,000 - (408,000) 10,499,000
========== ========== ======= ==========
</TABLE>
A reclassification of investment securities from the held to maturity
portfolio to the available for sale portfolio occurred during the quarter
ended December 31, 1995, in accordance with the FASB Special Report, "A
Guide to Implementation of Statement 115 on Accounting for Certain
Investment in Debt and Equity Securities," which was issued November 15,
1995. The investment securities that were reclassified had a carrying
value of $45,838,000 and a market value of $46,061,000 at the time of
transfer.
For the year ended June 30, 1997, gross realized losses on sales of
investment securities available for sale were $19,000. For the year ended
June 30, 1996, gross realized gains and gross realized losses from the
sales of investment securities available for sale were $118,000 and
$294,000, respectively, and from the sales of mortgage-backed securities
available for sale were $57,000 and $4,000, respectively. For the year
ended June 30, 1995, gross realized gains and gross realized losses from
the sales of mortgage-backed securities available for sale were $5,000
and $7,000, respectively.
<PAGE>
For the year ended June 30, 1997, gross realized gains and gross realized
losses on sales of trading account securities were $13,000 and $23,000,
for the year ended June 30, 1996, gross realized gains and gross realized
losses were $13,000 and $1,000, respectively; and for the year ended June
30, 1995, gross realized gains were $18,000.
At June 30, 1997, the contractual maturity of securities available for
sale follows:
Amortized Market
cost value
Due after one year through five years $ 1,005,000 994,000
Due after five years through ten years 4,560,000 4,491,000
Due after ten years 3,998,000 3,930,000
Mortgage-backed securities 2,206,000 2,173,000
----------- -----------
$ 11,769,000 11,588,000
========== ==========
(3) Securities Held to Maturity
Securities held to maturity at June 30 consist of:
<TABLE>
<CAPTION>
1997
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
<S> <C> <C> <C> <C>
U.S. Treasury and agency
obligations $ 43,747,000 41,000 (553,000) 43,235,000
Mortgage-backed securities 318,000 5,000 (2,000) 321,000
------------ ------- --------- ------------
$ 44,065,000 46,000 (555,000) 43,556,000
========== ====== ======= ==========
</TABLE>
<TABLE>
<CAPTION>
1996
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
<S> <C> <C> <C> <C>
U.S. Treasury and agency
obligations $ 43,242,000 - (1,441,000) 41,801,000
Mortgage-backed securities 382,000 3,000 (2,000) 383,000
------------ ----- ----------- -----------
$ 43,624,000 3,000 (1,443,000) 42,184,000
========== ===== ========= ==========
</TABLE>
<PAGE>
At June 30, 1997, the contractual maturity of securities held to maturity
follows:
Amortized Market
cost value
Due after one year through five years $ 24,209,000 23,905,000
Due after five years through ten years 11,346,000 11,156,000
Due after ten years 8,192,000 8,174,000
Maturity-backed securities 318,000 321,000
------------ ------------
$ 44,065,000 43,556,000
========== ==========
(4) Loans Receivable
Loans receivable at June 30 consist of:
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Real estate loans:
Mortgage $ 135,189,000 141,247,000
Construction 2,038,000 2,171,000
Consumer and other loans 12,748,000 10,010,000
------------ -----------
149,975,000 153,428,000
Less:
Undisbursed loan funds (1,536,000) (1,297,000)
Deferred loan fees and unamortized premiums
and discounts, net (441,000) (486,000)
Allowance for loan losses (1,158,000) (896,000)
------------- -------------
(3,135,000) (2,679,000)
$ 146,840,000 150,749,000
=========== ===========
Weighted average interest rate 8.53% 8.23%
==== ====
</TABLE>
At June 30, 1997, the majority of the Bank's residential and consumer
loans receivable are located in central and southern Indiana and southern
Illinois.
Activity in the allowance for loan losses for the years ended June 30
consists of:
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Balance at beginning of year $ 896,000 878,000 817,000
Provision charged to operations 373,000 83,000 100,000
Loans charged off, net of recoveries (111,000) (65,000) (39,000)
---------- -------- --------
Balance at end of year $ 1,158,000 896,000 878,000
========= ======= =======
</TABLE>
<PAGE>
Non accrual loans amounted to $2,330,000 and $846,000 at June 30, 1997
and 1996, respectively.
The Bank makes loans to its officers and directors in the normal course
of business. These loans are made on substantially the same terms,
including interest rate and collateral, as those prevailing at the time
for comparable transactions with other customers and do not involve more
than the normal risk of collectibility. Activity in these loans for the
year ended June 30, 1997 consists of:
Balance at beginning of the year $ 408,000
Loans originated 435,000
Repayments (229,000)
-------
Balance at end of year $ 614,000
=======
(5) Mortgage Banking
The amount of loans serviced by the Bank for the benefit of others was
$112,642,000, $81,353,000 and $193,058,000 at June 30, 1997, 1996 and
1995, respectively.
At June 30, 1997 and 1996, unamortized loan servicing rights totaled
$819,000 and $591,000, respectively, and are included in prepaid expenses
and other assets in the consolidated statement of financial condition.
For the years ended June 30, 1997 and 1996, the Bank capitalized $366,000
and $454,000, respectively, of servicing rights on loans that were
originated through its loan origination network and retail banking
offices. The Bank had definitive plans to sell these mortgage loans and
retain the servicing rights.
During the year ended June 30, 1996, the Bank sold approximately
$161,082,000 of its FHLMC and FNMA loan servicing portfolio which
resulted in a gain of $237,000. During the year ended June 30, 1995, the
Bank sold approximately $380,462,000 of its FHLMC loan servicing
portfolio which resulted in a gain of $2,980,000. All such gains and
losses are included in other non-interest income in the consolidated
statements of earnings. No sales of the Bank's loan servicing portfolio
occurred in 1997.
<PAGE>
(6) Office Premises and Equipment
Office premises and equipment at June 30 consist of:
1997 1996
---- ----
Land and improvements $ 345,000 315,000
Buildings and improvements 2,952,000 2,773,000
Furniture and equipment 1,986,000 1,756,000
--------- ---------
5,283,000 4,844,000
Less accumulated depreciation 2,058,000 1,894,000
--------- ---------
$ 3,225,000 2,950,000
========= =========
(7) Deposits
Deposits at June 30 consist of:
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Passbook accounts (2.86% and 2.91% at
June 30, 1997 and 1996) $ 4,264,000 4,592,000
Variable rate savings accounts (6.00% and 5.75% at
June 30, 1997 and 1996) 6,766,000 3,015,000
NOW and Super NOW accounts (0.00%-3.25% and
0.00%-3.26% at June 30, 1997 and 1996) 9,163,000 9,563,000
Money market accounts (weighted average rate of
4.06% and 3.93% at June 30, 1997 and 1996) 3,015,000 3,089,000
------------- -------------
23,208,000 20,259,000
Certificates:
Less than 4% 191,000 269,000
4% - 4.99% 4,435,000 7,235,000
5% - 5.99% 77,581,000 70,495,000
6% - 6.99% 25,478,000 25,612,000
7% - 7.99% 12,228,000 12,030,000
8% - 9.99% 1,055,000 1,081,000
10% or more 140,000 167,000
-------------- --------------
121,108,000 116,889,000
$ 144,316,000 137,148,000
=========== ===========
Weighted average cost of all deposits 5.49% 5.46%
==== ====
</TABLE>
<PAGE>
Scheduled maturities of certificates at June 30, 1997 are summarized as
follows:
Year ending June 30,
1998 $ 91,623,000
1999 17,127,000
2000 6,996,000
2001 1,824,000
2002 1,299,000
Thereafter 2,239,000
-------------
$ 121,108,000
Included in certificates at June 30, 1997 and 1996 are approximately
$8,828,000 and $12,619,000, respectively, of certificates greater than
$100,000.
Eligible savings accounts are insured by the full faith and credit of the
United States government up to $100,000 under the Federal Deposit
Insurance Corporation's Savings Association Insurance Fund (SAIF) at June
30, 1997.
Interest expense by type of deposit for the years ended June 30 follows:
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Passbook and variable rate savings
accounts $ 316,000 392,000 525,000
NOW, Super NOW and Money Market 375,000 652,000 947,000
Certificates 6,987,000 8,029,000 7,505,000
--------- --------- ---------
$ 7,678,000 9,073,000 8,977,000
========= ========= =========
</TABLE>
Net earnings for the year ended June 30, 1997 include a one-time pre-tax
charge of $1,330,000 to federal insurance premiums for an industry-wide
special assessment by the FDIC to recapitalize SAIF, which insures the
Bank's customers' deposits. As a result of this one-time assessment, the
Bank's deposit insurance premiums will be reduced in the future.
<PAGE>
(8) Advances From FHLB and Other Borrowings
Advances from FHLB and other borrowings at June 30 consist of:
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Advances from FHLB collateralized by qualifying
mortgages, investment securities and mortgage-backed
securities (as defined) equal to 125% of FHLB advances $ 98,815,000 97,276,000
Promissory note with interest payable at prime rate
(as defined) plus 1/2% (9.0% and 8.75% at June 30, 1997
and 1996) with principal payments of $49,375 due quarterly
through December 30, 2004. Collateralized by 100% of the
common stock of the Bank 1,481,000 1,679,000
Securities sold under agreement to repurchase with a
weighted average interest rate of 4.85% at June 30, 1996 - 1,930,000
------------------ -------------
$ 100,296,000 100,885,000
=========== ===========
</TABLE>
The interest rates on the advances from FHLB at June 30, 1997 were as
follows: $5,000,000 at 5.46%, $5,000,000 at 5.43%, $3,617,000 at 4.96%,
$10,000,000 at 5.62%, $13,000,000 at 5.66%, $10,000,000 at 5.39%,
$198,000 at 5.91%, $10,000,000 at 5.50%, $9,000,000 at 5.85%, $3,000,000
at 5.83%, and $30,000,000 of variable rate advances with a rate at June
30, 1997 of 5.775%. The interest rates on the advances from FHLB at June
30, 1996 were as follows: $10,000,000 at 5.46%, $10,000,000 at 5.78%,
$10,000,000 at 5.80%, $13,000,000 at 5.66%, $5,000,000 at 5.43%,
$5,000,000 at 5.71%, $4,051,000 at 4.96%, $10,000,000 at 5.62%,
$10,000,000 at 5.39%, $225,000 at 5.91%, and $20,000,000 of variable rate
advances with a rate at June 30, 1996 of 5.48%. The weighted average
interest rate of all borrowings was 5.62% and 5.56% at June 30, 1997 and
1996, respectively.
Securities sold under agreements to repurchase ("Reverse Repurchases")
represent an indebtedness of the Bank secured by U.S. treasury and agency
obligations, to be repurchased upon maturity. Reverse repurchases
averaged $964,000, $2,956,000 and $5,299,000 for the years ended June 30,
1997, 1996 and 1995, respectively, with maximum amounts outstanding at
any month-end of $4,020,000, $8,838,000 and $12,186,000 during the years
ended June 30, 1997, 1996 and 1995, respectively.
<PAGE>
Advances from FHLB and other borrowings at June 30, 1997 are scheduled to
mature as follows:
FHLB Other
Maturity Advances Borrowings Total
-------- -------- ---------- -----
1998 $ 43,000,000 198,000 43,198,000
1999 26,617,000 198,000 26,815,000
2000 19,000,000 198,000 19,198,000
2001 - 198,000 198,000
2002 10,000,000 198,000 10,198,000
Thereafter 198,000 491,000 689,000
------------ ---------- -------------
$ 98,815,000 1,481,000 100,296,000
========== ========= ===========
(9) Stockholders' Equity
The Corporation is subject to regulation as a savings and loan holding
company by the Office of Thrift Supervision ("OTS"). The Bank, as a
subsidiary of a savings and loan holding company, is subject to certain
restrictions in its dealings with the Corporation. The Bank is further
subject to the regulatory requirements applicable to a federal savings
bank.
Thrift institutions are required to maintain risk-based capital of 8.0%
of risk-weighted assets. At June 30, 1997, the Bank's risk-based capital
ratio of 16.0% exceeded the required amount. Risk-based capital is
defined as the Bank's core capital adjusted by certain items. Risk
weighting of assets is derived from assigning one of four risk-weighted
categories to an institution's assets, based on the degree of credit risk
associated with the asset. The categories range from zero percent for
low-risk assets (such as United States Treasury securities) to 100% for
high-risk assets (such as real estate owned). The carrying value of each
asset is then multiplied by the risk weighting applicable to the asset
category. The sum of the products of the calculation equals total
risk-weighted assets.
Savings institutions are also required to maintain a minimum leverage
ratio under which core capital must equal at least 3% of total assets,
but no less than the minimum required by the Office of the Comptroller of
the Currency ("OCC") for national banks which minimum currently stands
between 4% and 5% for other than the highest rated institutions. The
Bank's primary regulator, OTS, is expected to adopt the OCC minimum. The
components of core capital are the same as those set by the OCC for
national banks, and consist of common equity plus non-cumulative
preferred stock and minority interests in consolidated subsidiaries,
minus certain intangible assets. At June 30, 1997, the Bank's core
capital and leverage ratio of 8.3% were in excess of the required
amounts.
The OTS has minimum capital standards that place savings institutions
into one of five categories, from "critically undercapitalized" to
"well-capitalized," depending on levels of three measures of capital. A
well-capitalized institution as defined by the regulations has a total
risk-based capital ratio of at least 10 percent, a Tier 1 (core)
risk-based capital ratio of at least six percent, and a leverage (core)
capital ratio of at least five percent. At June 30, 1997, the Bank was
classified as well-capitalized with a total risked based capital ratio of
16.0%, a Tier 1 risked-based capital ratio of 15.5% and a leverage (core)
capital ratio of 8.3%.
<PAGE>
The OTS has regulations governing dividend payments, stock redemptions,
and other capital distributions, including upstreaming of dividends by a
savings institution to a holding company. Under these regulations, the
Bank may, without prior OTS approval, make distributions to the
Corporation of up to 100% of its net earnings during the calendar year,
plus an amount that would reduce by half its excess capital over its
fully phased-in capital requirement at the beginning of the calendar
year. The Corporation is not subject to any regulatory restrictions
regarding payments of dividends to its shareholders, other than
restrictions under Indiana law.
At the time of conversion, the Bank established a liquidation account
which equaled the Bank's retained earnings as of the date of the latest
statement of financial condition included in the offering document. The
liquidation account will be maintained for the benefit of depositors, as
of the eligibility record date, who continue to maintain their deposits
in the Bank after conversion. In the event of a complete liquidation (and
only in such event), each eligible depositor will be entitled to receive
a liquidation distribution from the liquidation account, in the
proportionate amount to the then current adjusted balance for deposits
then held, before liquidation distribution may be made with respect to
the shareholders. Except for the repurchase of stock and payment of
dividends by the Bank, the existence of the liquidation account does not
restrict the use or application of such retained earnings.
On November 22, 1996, the Board of Directors approved a 5% common stock
dividend. Also, on December 21, 1995, the Board of Directors approved a
5% common stock dividend. All share and per share data have been
retroactively restated to reflect the stock dividends.
Stock Option Plans
The Corporation has a stock option plan under which 165,375 authorized
but unissued common stock were reserved. Under the plan, 96,469
non-qualified stock options were granted at $5.44 per share to outside
directors and 41,344 incentive stock options and 10,336 non-qualified
stock options were granted at $5.44 and $5.58 per share, respectively, to
certain key employees. Of the 41,344 incentive stock options granted to
certain key employees, 1,654 options were canceled in 1994. All options
granted had been exercised or canceled as of June 30, 1996. In 1997,
17,000 incentive stock options were granted at $30.03 to certain key
employees.
Shares reserved and options outstanding under the plans are as follows:
<TABLE>
<CAPTION>
Shares reserved Options Price per
for future grant outstanding share
<S> <C> <C> <C> <C>
Balance at June 30, 1994 17,226 74,834 $ 5.44 - 5.58
Exercised in 1994 - (73,180) 5.44 - 5.58
Canceled in 1994 1,654 (1,654) -
------- -------
Balance at June 30, 1995 and 1996 18,880 - -
Granted (17,000) 17,000 30.03
------ ------
Balance at June 30, 1997 1,880 17,000 30.03
======= ======
</TABLE>
<PAGE>
SFAS No. 123, Accounting for Stock-Based Compensation, defines a fair
value method of accounting for stock options and similar equity
instruments. Under the fair value method, compensation cost is measured
at the grant date based on the fair value of the award and is recognized
over the service period which is usually the vesting period. Companies
are encouraged, but not required to adopt the fair value method of
accounting for employee stock-based transactions. Companies are also
permitted to continue to account for such transactions under Accounting
Principles Board Opinion (APB) No. 25, Accounting for Stock Issued to
Employees, but are required to disclose in a note to the financial
statements pro-forma net earnings and earnings per share as if the
company had applied the new method of accounting. The Company applied APB
No. 25 in accounting for its stock-based compensation plans. Had
compensation cost been determined on the basis of fair value pursuant to
SFAS No. 123, for options granted in 1997, net earnings and earnings per
share would have been as follows:
Net earnings:
As reported $ 821,000
=======
Pro forma $ 724,000
=======
Earnings per share:
As reported $ 1.17
==========
Pro forma $ 1.04
==========
The following weighted average assumptions were used in 1997 in the
option pricing model: a risk free interest rate of 6.39%; an expected
life of the options of 5 years; an expected dividend yield of 1.33%; and
a volatility factor of .27. Due to the inclusion of only 1997 option
grants, the effects of applying SFAS No. 123 in 1997 may not be
representative of the pro-forma impact in future years.
Stock Purchase Plans
The Corporation maintains an Employee Stock Purchase Plan whereby
full-time employees of First Federal Bank, A Federal Savings Bank (the
"Bank") and First Financial Insurance Agency, Inc. can purchase the
Corporation's common stock at a discount. The purchase price of the
shares under this plan is 85% of the fair market value of such stock at
the beginning or end of the offering period, whichever is lesser. A total
of 15,750 authorized but unissued shares were reserved for issuance under
this plan. No shares have been issued under this plan as of June 30,
1997. Under a former plan, with identical terms as the existing plan, a
total of 3,749, 5,474 and 2,636 shares were issued and purchased by
employees in 1997, 1996 and 1995, respectively, with a total of 13,781
shares issued under the former plan.
<PAGE>
Stock Repurchase Plan
In August 1996, the Board authorized the repurchase of up to 5% of the
outstanding shares of common stock (703,638 shares were outstanding at
the time), subject to market conditions, over a two year period which
expires in August 1998. During the year ended June 30, 1997, 7,383 shares
of common stock were repurchased at an average price per share of $28.04.
Under a similar plan, 6,677 shares were repurchased in 1996 at an average
price of $27.21.
(10) Earnings Per Share
Earnings per share have been computed on the basis of the weighted
average number of common shares outstanding and the dilutive effect of
stock options during the years presented using the treasury stock method.
The weighted average number of shares outstanding used in the computation
was 699,507, 701,273 and 683,226 in 1997, 1996 and 1995, respectively.
(11) Employee Benefit Plans
Substantially all employees are covered under a noncontributory defined
benefit pension plan. Net periodic pension expense for the years ended
June 30 consists of the following:
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Service cost $ 128,000 177,000 170,000
Interest cost 79,000 124,000 123,000
Actual return on assets (173,000) (87,000) (234,000)
Net amortization and deferral 76,000 (34,000) 139,000
-------- -------- -------
Net periodic pension expense $ 110,000 180,000 198,000
======= ======= =======
</TABLE>
Prior service cost is being amortized over the average remaining service
period of active employees at the effective date of the amendment.
<PAGE>
Accumulated plan benefit information for the Bank's plan is as follows:
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Actuarial present value of projected benefit obligations:
Vested benefit obligation $ 721,000 754,000
Nonvested benefit obligation 60,000 87,000
----------- -----------
Total accumulated benefit obligation 781,000 841,000
Additional benefits based upon
estimated future salary levels 190,000 157,000
---------- ----------
Total projected benefit obligation 971,000 998,000
Fair market value of plan assets 1,336,000 1,257,000
--------- ---------
Fair market value of plan assets over
projected benefit obligation 365,000 259,000
Unrecognized prior service cost (28,000) (31,000)
Unrecognized gain (355,000) (291,000)
Unrecognized transition asset 6,000 6,000
------------ ------------
Accrued pension cost $ (12,000) (57,000)
=========== ===========
</TABLE>
The weighted-average assumed rate of return used in determining the net
periodic pension cost for 1997 and 1996 was 8.0% and in determining the
actuarial present value of accumulated benefit obligations at June 30,
1997 and 1996 was 7.5%, and the weighted-average rate of increase in
future compensation levels used for 1997 and 1996 was 5.0%.
The Bank has an Incentive Bonus Plan for certain salaried employees. The
bonus pool for the years ended June 30, 1997, 1996 and 1995 was $220,000,
$300,000 and $345,000, respectively.
Effective July 1, 1993, the Board of Directors approved a supplemental
retirement plan (Officer Plan) for certain key officers. The Officer Plan
provides a target benefit to eligible employees based on their projected
salary at time of retirement. Effective July 1, 1993, the Board of
Directors also approved a deferred compensation agreement for the
directors (Directors Plan). The Directors Plan allows the directors to
defer their monthly director fee. The deferred fees accrue interest and
will be paid out over a ten-year period once the director retires. Both
plans provide certain additional survivor benefits in the case of death
before retirement. In connection with the plans, on July 1, 1993 the Bank
purchased life insurance policies on certain of the officers and
directors participating in the plans. During the years ended June 30,
1997, 1996 and 1995, the Bank expensed $102,000, $99,000 and $100,000,
respectively, under the plans and recognized $65,000, $41,000 and
$79,000, respectively, related to life insurance policy cash surrender
values. In addition to the expense for the year ended June 30, 1996,
$133,000 related to benefits for officers terminated as a result of the
branch sales was charged against the gain on sale of branches.
<PAGE>
(12) Income Taxes
The components of the provision (benefit) for income taxes for the years
ended June 30 consist of:
1997 1996 1995
---- ---- ----
Current:
Federal $ (213,000) 2,881,000 1,090,000
State income taxes 71,000 843,000 339,000
Deferred (107,000) (351,000) 11,000
------- ---------- -----------
$ (249,000) 3,373,000 1,440,000
======= ========= =========
The differences between the effective income tax rate and the statutory
Federal corporate rate consist of:
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Statutory Federal income tax rate 34.0% 34.0 34.0
Increase (decrease) in taxes resulting from:
State taxes, net of federal benefit 8.2 6.1 5.8
Affordable housing tax credit (60.0) - -
Refund of prior year taxes (26.0) - -
Increase in cash surrender value of life insurance (3.8) (0.2) (0.7)
Other 4.1 (3.0) (1.9)
----- ---- ----
Effective tax rate (43.5)% 36.9 37.2
==== ==== ====
</TABLE>
<PAGE>
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and liabilities at June 30 consist
of:
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Deferred tax assets:
Deferred loan fees $ 41,000 61,000
Securities available for sale 72,000 163,000
Allowance for loan losses for financial reporting purposes 260,000 157,000
Deferred compensation and benefits 270,000 224,000
Other 26,000 82,000
-------- --------
669,000 687,000
Deferred tax liabilities:
Purchased mortgage servicing 57,000 74,000
Originated mortgage servicing 270,000 163,000
Excess tax depreciation 85,000 144,000
FHLB stock dividend 52,000 52,000
Allowance for loan losses for tax purposes in
excess of base year allowance 125,000 156,000
Other 46,000 80,000
-------- --------
635,000 669,000
Net deferred tax asset $ 34,000 18,000
======== ========
</TABLE>
Under the Internal Revenue Code, through 1996 the Bank was allowed a
special bad debt deduction related to additions to tax bad debt reserves
established for the purpose of absorbing losses. Subject to certain
limitations, the Bank was permitted to deduct from taxable income an
allowance for bad debts based on a percentage of taxable income before
such deductions or actual loss experience. The Bank generally computed
its annual addition to its bad debt reserves using the percentage of
taxable income method; however, due to certain limitations in 1996, the
Bank was only allowed a deduction based on actual loss experience.
Under legislation enacted in 1996, beginning in fiscal 1997, the Bank is
no longer allowed a special bad debt deduction using a percentage of
taxable income method. Also, beginning in 1997, the Bank is required to
recapture its excess bad debt reserve over its 1987 base year reserve
over a six-year period. The amount has been provided in the Bank's
deferred tax liability.
Retained earnings at June 30, 1997, includes approximately $2,300,000 for
which no provision for federal income taxes has been made. This amount
represents allocations of income for allowable bad debt deductions.
Reduction of amounts so allocated for purposes other than tax bad debt
losses will create taxable income which will be subject to the then
current corporate income tax rate. It is not contemplated that amounts
allocated to bad debt deductions will be used in any manner to create
taxable income.
<PAGE>
Financial Services of Southern Indiana Corp. ("Financial Services"), a
subsidiary of the Bank, became a limited partner in House Investments,
Shady Oak, L.P. during 1994. Under the terms of the partnership
agreement, Financial Services contributed capital of $2,500,000 in 1995.
The Partnership owns and operates an apartment complex which qualifies
for affordable housing tax credits. The investment is being accounted for
using the equity method. The Bank also provided a mortgage loan to the
partnership in August 1996 which had a balance of $2,287,000 at June 30,
1997.
(13) Sale of Branches
On December 16, 1995, the Corporation completed the sale of certain
assets and certain liabilities of two of the Bank's full-service retail
branch offices in Tipton and Kokomo, Indiana resulting in a pre-tax gain
of $7,274,000. The transaction consisted of the sale of certain mortgage
and consumer loans, office premises and equipment and the transfer of
certain deposit liabilities.
(14) Commitments and Contingencies
The Bank had outstanding commitments to originate and sell loans and
mortgage-backed securities of $5,255,000 and $30,112,000, and $2,555,000
and $11,147,000 at June 30, 1997 and 1996, respectively. The Bank had no
outstanding commitments to purchase loans, mortgage-backed securities,
and investments at June 30, 1997. These commitments, which are subject to
certain limitations, extend over varying periods of time with the
majority to be fulfilled over a 12-month period. The Bank does not
project any losses will be incurred as a result of these commitments. The
majority of the commitments to originate loans are for fixed rate
mortgage loans at rates ranging from 7.875% to 13.45% and adjustable rate
mortgage loans at rates ranging from 7.25% to 9.63% at June 30, 1997.
<PAGE>
(15) Parent Company Financial Information
Following is condensed financial information of the Corporation:
Condensed Statements of Financial Condition
June 30,
Assets 1997 1996
------ ---- ----
Cash $ 691,000 281,000
Investment in subsidiaries 23,091,000 23,104,000
Due from subsidiary 33,000 21,000
Other assets 16,000 19,000
------------- -------------
$ 23,831,000 23,425,000
========== ==========
Liabilities and Stockholders' Equity
Long-term debt 1,481,000 1,679,000
Accounts payable and accrued expenses 17,000 17,000
------------- -------------
1,498,000 1,696,000
Stockholders' equity 22,333,000 21,729,000
---------- ----------
$ 23,831,000 23,425,000
========== ==========
Condensed Statements of Earnings
<TABLE>
<CAPTION>
Year ended June 30,
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Dividend from subsidiaries $ 1,600,000 550,000 100,000
Other operating income 27,000 38,000 105,000
Operating expenses (242,000) (263,000) (249,000)
---------- ---------- ----------
1,385,000 325,000 (44,000)
Income tax benefit 85,000 89,000 75,000
----------- ----------- -----------
Income before equity in undistributed
earnings of subsidiaries 1,470,000 414,000 31,000
Equity in undistributed earnings of subsidiaries (649,000) 5,348,000 2,399,000
---------- --------- ---------
Net earnings $ 821,000 5,762,000 2,430,000
========== ========= =========
</TABLE>
<PAGE>
Condensed Statements of Cash Flows
<TABLE>
<CAPTION>
Year ended June 30,
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Net cash flows from operating activities:
Net earnings $ 821,000 5,762,000 2,430,000
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Equity in undistributed earnings of subsidiaries 649,000 (5,348,000) (2,399,000)
Change in accounts payable and accrued expenses - - 11,000
Change in due from subsidiary (12,000) 25,000 (33,000)
Change in other assets 3,000 1,000 (6,000)
------------ ------------ ------------
Net cash provided by operating activities 1,461,000 440,000 3,000
--------- ---------- ------------
Cash flows from investing activities:
Capital contributions to subsidiaries (500,000) - (1,000,000)
---------- --------------- ---------
Net cash used by investing activities (500,000) - (1,000,000)
---------- --------------- ---------
Cash flows from financing activities:
Proceeds from long-term debt - - 1,000,000
Repayment of long-term debt (198,000) (197,000) (174,000)
Dividends to stockholders (279,000) (266,000) (115,000)
Purchase of common shares (207,000) (182,000) -
Proceeds from issuance of common stock 133,000 137,000 465,000
---------- ---------- ----------
Net cash provided (used) by financing
activities (551,000) (508,000) 1,176,000
---------- ---------- ---------
Net increase (decrease) in cash and cash equivalents 410,000 (68,000) 179,000
Cash and cash equivalents at beginning of year 281,000 349,000 170,000
---------- ---------- ----------
Cash and cash equivalents at end of year $ 691,000 281,000 349,000
========== ========== ==========
</TABLE>
<PAGE>
(16) Fair Value of Financial Instruments
The following disclosure of fair value information is made in accordance
with the requirements of Statement of Financial Accounting Standards No.
107, "Disclosures About Fair Value of Financial Instruments." SFAS No.
107 requires disclosure of fair value information about financial
instruments, whether or not recognized in the balance sheet, for which it
is practicable to estimate value. The estimated fair value amounts have
been determined by the Corporation using available market information and
other appropriate valuation techniques. These techniques are
significantly affected by the assumptions used, such as the discount rate
and estimates of future cash flows. Accordingly, the estimates made
herein are not necessarily indicative of the amounts 1ST BANCORP could
realize in a current market exchange and the use of different market
assumptions and/or estimation methods may have a material effect on the
estimated fair value amount.
The following schedule includes the book value and estimated fair value
of all financial assets and liabilities, as well as certain off balance
sheet items, at June 30, 1997.
<TABLE>
<CAPTION>
Carrying Estimated
(In thousands) amount fair value
<S> <C> <C>
Assets
Cash and cash equivalents $ 20,294 20,294
Securities including securities available for sale 55,653 55,144
Loans receivable including loans held for sale, net 174,609 173,651
Accrued interest receivable 2,180 2,180
Stock in FHLB of Indianapolis 4,941 4,941
Residential mortgage loan servicing 819 1,005
Liabilities
Deposits 144,316 143,241
Borrowings:
FHLB advances 98,815 97,599
Long-term borrowing 1,481 1,481
Advance payments by borrowers for taxes and insurance 304 304
Accrued interest payable 1,194 1,194
</TABLE>
The following valuation methods and assumptions were used by the
Corporation in estimating the fair value of its financial instruments.
Cash and Cash Equivalents. The fair value of cash and cash equivalents
approximates carrying value.
Securities. Fair values are based on quoted market prices.
<PAGE>
Loans Receivable Including Loans Held for Sale, Net. The fair value of
loans is estimated by discounting the estimated future cash flows using
market rates at which similar loans would be made to borrowers with
similar credit ratings and similar maturities. Contractual cash flows for
all types of loans were adjusted for prepayment estimates consistent with
those used by the Office of Thrift Supervision at June 30, 1997.
Accrued Interest Receivable. The fair value of these financial
instruments approximates carrying value.
Stock in FHLB of Indianapolis. The fair value of FHLB stock is based on
the price at which it may be resold to the FHLB.
Residential Mortgage Loan Servicing. The fair value of residential
mortgage loan servicing rights is determined based on an internal
valuation using the estimated discounted net cash flows to be received
less the estimated cost of servicing.
Deposits. The fair value of deposits is calculated using a discounted
cash flow analysis that applies market interest and decay estimates
consistent with those used by the Office of Thrift Supervision at June
30, 1997, for similar deposit accounts.
FHLB Advances. Fair values for fixed-maturity fixed-rate FHLB advances
and fix-maturity variable rate advances are calculated using a discounted
cash flow analysis applying market interest rates for similar borrowings.
Long-term Borrowing. The long-term borrowing is an adjustable instrument
tied to the prime interest rate. Fair value approximates carrying value.
Advance Payments by Borrowers for Taxes and Insurance. The fair value
approximates carrying value.
Accrued Interest Payable. The fair value of these financial instruments
approximates carrying value.
<PAGE>
Management and Office Locations
1ST BANCORP AND SUBSIDIARIES
Officers of First Federal Bank, A Federal Savings Bank
C. James McCormick, Chairman of the Board
Frank Baracani, President and Chief Executive Officer
Lynn Stenftenagel, Executive Vice President, CFO and Secretary
Ruth Mix Carnahan, Treasurer
Bradley M. Rust, Senior Vice President/Controller
Gerald R. Belanger, Senior Vice President
Carroll C. Hamner, Senior Vice President
Laura E. Bogard, Vice President
Cheryl A. Otten, Vice President
Paula J. Pesch, Vice President
Jay A. Baker, Assistant Vice President
Doris J. Blackburn, Assistant Vice President
Kathy L. Clinkenbeard, Assistant Vice President
Lynn Elliott, Assistant Vice President
Kelly J. Gay, Assistant Vice President
Ruth E. Hunter, Assistant Vice President
Rana M. Lee, Assistant Vice President
Randall W. Pratt, Assistant Vice President
Carol A. Witshork, Assistant Vice President
Glenda L. Berryman, Assistant Secretary
T. Rene' Buck, Internal Auditor and Compliance Officer
Officers of First Financial Insurance Agency, Inc.
C. James McCormick, Chairman of the Board
Frank Baracani, President and Chief Executive Officer
J. Timothy Tresslar, Vice President and General Manager
Lynn Stenftenagel, Secretary and Treasurer
Office Locations
1ST BANCORP
Corporate Headquarters:
101 N. Third Street
Vincennes, Indiana 47591
(812) 885-2255
(800) 688-3865
First Federal Bank, A Federal Savings Bank
Main Office:
101 N. Third Street
Vincennes, Indiana 47591
(812) 882-4528
(800) 688-4528
Willow Street Drive Up Branch:
1700 Willow Street
Vincennes, Indiana 47591
(812) 885-6085
Main Office Annex:
102 N. Fifth Street
Vincennes, Indiana 47591
(812) 885-2255
(800) 688-3865
Evansville Loan Origination Office:
125 N. Weinbach, Suite 730
Evansville, Indiana 47711
(812) 476-4441
(888) 476-4441
First Financial Insurance Agency, Inc.
Main Office:
626 Veterans Drive
Vincennes, Indiana 47591
(812) 886-7283
Princeton Office:
108 South 5th Ave.
Princeton, IN 47670
(812) 385-2659
<PAGE>
SENIOR MANAGEMENT
[PHOTO OF SENIOR MANAGEMENT]
Front row, left to right:
Bradley M. Rust
Senior Vice President and Controller
Carroll C. Hamner
Senior Vice President
Lending Services
C. James McCormick
Chairman of the Board
Frank Baracani
President and CEO
Gerald R. Belanger
Senior Vice President
Human Resources
Back row, left to right
J. Timothy Tresslar *
Vice President and General Manager
First Financial Insurance Agency,Inc.
Cheryl A. Otten
Vice President
Savings
Paula J. Pesch
Vice President
Secondary Market
Laura E. Bogard
Vice President
Mortgage Lending
Lynn Stenftenagel
Executive Vice President
Secretary and CFO
*Not an Officer of First Federal Bank, A Federal Savings Bank
<PAGE>
Corporate Information
1ST BANCORP AND SUBSIDIARIES
Corporate Headquarters
101 North Third Street, Vincennes, Indiana 47591
Annex - 102 North Fifth Street, Vincennes, Indiana 47591
(812) 885-2255
General Counsel
Hart, Bell, Cummings, Ewing & Stuckey, Vincennes, Indiana
Special Counsel
Barnes & Thornburg, Indianapolis, Indiana
Transfer Agent
Fifth Third Bank
Corporate Trust Operations
38 Fountain Square Plaza
MD#1050F5
Cincinnati, Ohio 45202
(800) 837-2755
Independent Public Accountants
KPMG Peat Marwick LLP, Indianapolis, Indiana
Statement of Policy
1ST BANCORP is an equal opportunity employer.
Form 1O-K Report
Forms 1O-K and 1O-Q, as filed with the SEC, are available without charge by
writing to Lynn Stenftenagel, 1ST BANCORP, 101 North Third Street, Vincennes,
Indiana 47591 or by calling (812) 885-2255.
Shareholder Information
At July 31, 1997, there were 390 shareholders of record and 691,461 shares
of common stock outstanding.
Market Information
1ST BANCORP common stock is traded on NASDAQ under the symbol FBCV. The
following table sets forth the high and low bid prices per share of common stock
for the periods indicated. This information was furnished by the NASD.
Quarter Ended High Low
June 1997 33.25 30.00
March 1997 32.00 28.50
December 1996 31.50 27.25
September 1996 32.00 26.00
June 1996 28.00 26.00
March 1996 29.75 29.00
December 1995 31.75 30.50
September 1995 35.00 33.00
Internet Address
http://www.businesswire.com/cnn/fbcv.htm
<PAGE>
[BACK COVER]
[1ST BANCORP LOGO]
Third & Busseron Streets P.O. Box 1417 Vincennes, Indiana
