FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20552
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly period Ended December 31, 1996
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _________________to ________________
Commission File Number
0-17915
1ST BANCORP
--------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Indiana 35-1775411
- -------------------------------------- ------------------------------------
(State of other jurisdiction of (I.R.S. Employer Identification
Incorporation or organization) Number)
101 N. Third Street
Vincennes, Indiana 47591
- -------------------------------------- ------------------------------------
(Address of principal executive office) (Zip Code)
Registrant's telephone number, including are code: (812) 882-4528
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES_____X_________NO______________
As of February 5, 1997, there were 697,261 Shares of the Registrant's Common
Stock issued and outstanding.
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<PAGE>
1ST BANCORP AND SUBSIDIARIES
INDEX
Page
PART I. FINANCIAL INFORMATION: Number
Item 1. Financial Statements
Consolidated Condensed Statements
of Financial Condition,
December 31, 1996 and June 30,
1996 (Unaudited) 3
Consolidated Condensed Statements
of Earnings (Loss), Three Months and Six Months
Ended December 31, 1996 and 1995 (Unaudited) 4
Consolidated Condensed Statements of
Cash Flows, Six Months Ended
December 31, 1996 and 1995
(Unaudited) 5
Notes to Consolidated Condensed
Financial Statements (Unaudited) 6-7
Item 2. Management's Discussion and Analysis
of Financial Condition and Results
of Operations 8-14
PART II. OTHER INFORMATION 15-16
SIGNATURES 17
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<PAGE>
1ST BANCORP AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF FINANCIAL CONDITION
(Unaudited and in Thousands)
<TABLE>
<CAPTION>
December 31, June 30,
1996 1996
--------- ---------
<S> <C> <C>
ASSETS
Cash and cash equivalents:
Interest bearing deposits $ 9,563 $ 24,689
Non-interest bearing deposits 449 410
--------- ---------
Cash and cash equivalents 10,012 25,099
--------- ---------
Securities available for sale 8,672 10,499
Securities held to maturity (market value
of $45,529,000 at December 31, 1996 and
$42,184,000 at June 30, 1996) 46,080 43,624
Loans receivable, net 164,194 150,749
Loans held for sale 17,068 18,590
Accrued interest receivable:
Securities 998 1,036
Loans 1,080 1,179
Stock in FHLB of Indianapolis, at cost 4,864 4,864
Office premises and equipment 2,868 2,950
Real estate owned 491 177
Prepaid expenses and other assets 5,384 4,716
--------- ---------
TOTAL ASSETS $ 261,711 $ 263,483
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Deposits $ 134,879 $ 137,148
Advances from FHLB and other borrowings 102,442 100,885
Advance payments by borrowers for taxes and insurance 339 492
Accrued interest payable on deposits 905 816
Accrued expenses and other liabilities 1,767 2,413
--------- ---------
Total Liabilities $ 240,332 $ 241,754
--------- ---------
Stockholders' Equity:
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 697,261 at December 31, 1996 and
699,889 at June 30, 1996 $ 664 $ 667
Paid-in capital 2,651 2,747
Retained earnings, substantially restricted 18,171 18,560
Unrealized depreciation on securities (107) (245)
--------- ---------
Total Stockholders' Equity $ 21,379 $ 21,729
--------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 261,711 $ 263,483
========= =========
</TABLE>
See Notes to Consolidated Condensed Financial Statements.
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1ST BANCORP AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF EARNINGS (LOSS)
(Unaudited and in Thousands, Except Per Share Data)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
December 31, December 31,
-------------------- --------------------
1996 1995 1996 1995
-------- -------- -------- --------
<S> <C> <C> <C> <C>
INTEREST INCOME:
Loans $ 3,751 $ 4,188 $ 7,346 $ 8,410
Investment securities 929 1,035 1,856 2,223
Other short-term investments and
interest bearing deposits 128 221 315 438
-------- -------- -------- --------
Total Interest Income 4,808 5,444 9,517 11,071
-------- -------- -------- --------
INTEREST EXPENSE:
Deposits 1,877 2,497 3,706 5,269
Short-term borrowings 4 32 25 56
FHLB advances and other borrowings 1,403 1,314 2,820 2,477
-------- -------- -------- --------
Total Interest Expense 3,284 3,843 6,551 7,802
-------- -------- -------- --------
NET INTEREST INCOME BEFORE
PROVISION FOR LOAN LOSSES 1,524 1,601 2,966 3,269
Provision for loan losses 40 20 86 45
-------- -------- -------- --------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 1,484 1,581 2,880 3,224
-------- -------- -------- --------
NON-INTEREST INCOME:
Fees and service charges 88 60 172 155
Net gain (loss) on sales of investment securities available
for sale and trading account investments 2 (123) 2 (122)
Net gain on sales of loans 548 513 1,201 996
Net gain on sale of branch offices -- 7,274 -- 7,274
Other 170 184 306 590
-------- -------- -------- --------
Total Non-Interest Income 808 7,908 1,681 8,893
-------- -------- -------- --------
NON-INTEREST EXPENSE:
Compensation and employee benefits 940 1,206 1,985 2,240
Net occupancy 179 198 360 403
Federal insurance premiums 80 132 1,509 268
Other 475 636 1,144 1,106
-------- -------- -------- --------
Total Non-Interest Expense 1,674 2,172 4,998 4,017
-------- -------- -------- --------
Earnings (Loss) Before Income Taxes 618 7,317 (437) 8,100
Income Taxes 242 2,735 (182) 3,030
-------- -------- -------- --------
NET EARNINGS (LOSS) $ 376 $ 4,582 ($ 255) $ 5,070
======== ======== ======== ========
EARNINGS (LOSS) PER SHARE:
Primary $ 0.53 $ 6.51 ($ 0.37) $ 7.20
Fully-diluted $ 0.53 $ 6.51 ($ 0.37) $ 7.20
</TABLE>
See Notes to Consolidated Condensed Financial Statements
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<PAGE>
1ST BANCORP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited and in Thousands)
<TABLE>
<CAPTION>
Six Months Ended
December 31,
1996 1995
-------- --------
<S> <C> <C>
Net Cash Flow From Operating Activities:
Net earnings (loss) ($ 255) $ 5,070
Adjustments to reconcile net cash provided by operating activities:
Depreciation and amortization 139 165
Amortization of mortgage servicing rights 54 69
Gain on sale of loans (1,201) (996)
Gain (Loss) on sale of securities (2) 122
Gain on sale of branches -- (7,274)
Net change in loans held for sale 1,522 (3,827)
Provision for loan losses 86 45
Decrease in accrued interest receivable 137 908
Decrease (increase) in prepaid expenses and other assets (661) 223
Increase (decrease) in accrued expenses and other liabilities (649) 1,166
Undistributed loss of investment in limited partnership 67 183
-------- --------
NET CASH USED BY OPERATING ACTIVITIES (763) (4,146)
-------- --------
Cash Flows From Investing Activities:
Purchase of investment and mortgage-backed securities
available for sale (8,968) (2,000)
Proceeds from maturities, calls, repayment of principal and sales
of investment and mortgage-backed securities available for sale 11,030 38,078
Purchase of investment and mortgage-backed securities (2,515) (16,120)
Proceeds from maturities, calls, and repayment of principal of
investment and mortgage-backed securities 56 13,421
Principal collected on loans, net of originations (12,423) 938
Purchases of life insurance policies (35) --
Purchases of stock of FHLB of Indianpolis -- (500)
Purchases of office premises and equipment (57) (92)
Proceeds from sale of office premises and equipment - branch sales -- 1,316
Proceeds from sale of loans - branch sales -- 28,875
Sale of deposits - branch sales -- (78,473)
Other (314) 2
-------- --------
NET CASH USED BY INVESTING ACTIVITIES (13,226) (14,555)
-------- --------
Cash Flows From Financing Activities:
Net increase (decrease) in deposits (2,269) 733
Proceeds from FHLB advances and other borrowings 42,844 73,014
Repayment of FHLB advances and other borrowings (41,287) (57,499)
Proceeds from issuance of common stock 108 109
Purchase and retirement of common stock (207) (181)
Payment of dividends on common stock (134) (128)
Decrease in advance payments by borrowers
for taxes and insurance (153) (1,593)
--------
NET CASH PROVIDED (USED) BY FINANCING ACTIVITIES (1,098) 14,455
-------- --------
NET DECREASE IN CASH AND CASH EQUIVALENTS (15,087) (4,246)
Cash and Cash Equivalents at Beginning of Period 25,099 17,332
-------- --------
Cash and Cash Equivalents at End of Period $ 10,012 $ 13,086
======== ========
</TABLE>
See Notes to Consolidated Condensed Financial Statements
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1ST BANCORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited)
Note 1. In the opinion of management, the accompanying unaudited consolidated
condensed financial statements contain all adjustments necessary for a fair
presentation. The results of operations for the interim periods are not
necessarily indicative of the results which may be expected for an entire year.
These financial statements are condensed and do not contain all disclosures
required by generally accepted accounting principles which would be included in
a complete set of financial statements.
Note 2. Stock Dividend
On November 22, 1996, the Board of Directors approved a 5% common stock dividend
with a record date of December 27, 1996, and payment date of January 10, 1997.
All share and per share data have been adjusted to reflect the 5% stock
dividend.
Note 3. Earnings Per Share
Primary earnings per share and fully-diluted 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 not exercised during the
periods presented using the treasury stock method. The weighted average number
of shares outstanding for use in the earnings per share computations was 702,646
and 703,001 for the three months ended and 700,709 and 703,738 for the six
months ended December 31, 1996 and 1995, respectively.
Note 4. 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 its 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 to date. Under a
former plan, with identical terms, 13,781 authorized but unissued shares were
reserved for issuance. A total of 3,749 shares were issued and purchased by
employees in the first quarter of fiscal year 1997 for the fiscal 1996 plan year
under the former plan. A total of 11,472 shares were issued under the former
plan.
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1ST BANCORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited)
Note 5. 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 quarter ended December 31, 1996, 7,383 shares of common
stock were repurchased. These 7,383 shares represent the cumulative total
purchased under this plan to date.
Note 6. Savings Association Insurance Fund ("SAIF") Recapitalization
On September 30, 1996, the federal government mandated an industry wide
assessment to recapitalize the SAIF, which is a part of the Federal Deposit
Insurance Corporation ("FDIC"). The special assessment was charged to savings
associations with insured deposits by the SAIF. The assessment was calculated at
0.657% of insured deposits as of March 31, 1995. The Bank's portion of the
assessment was $1,330,000 and is included in non-interest expense for the six
months ended December 31, 1996.
Note 7. Branch Sales
On December 16, 1995, 1ST BANCORP completed the sale of certain assets and
certain liabilities (the "Branch Sales") 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 certain deposit liabilities.
Note 8. Reclassifications
Certain amounts in the fiscal year 1996 consolidated financial statements have
been reclassified to conform to the fiscal year 1997 presentation.
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<PAGE>
1ST BANCORP AND SUBSIDIARIES
Management's Discussion and Analysis of Financial Condition
and Results of Operations
(a) Financial Condition:
Total assets decreased slightly to $261,711,000 at December 31, 1996, compared
to total assets of $263,483,000 at June 30, 1996. While there was only a slight
reduction in total assets, cash and cash equivalents declined significantly
during the six months ended December 31, 1996. The decline in cash and cash
equivalents was used to fund an increased loan portfolio.
Cash and cash equivalents declined by $15,087,000, or 60.11%, to $10,012,000 at
December 31, 1996, from $25,099,000 at June 30, 1996. At June 30, 1996, cash and
cash equivalents were at above normal levels primarily due to a significant bulk
sale of lower yielding conforming mortgage loans during the fourth quarter of
fiscal year 1996. Funds from the sale were invested primarily in higher yielding
nonconforming mortgage loans during the six months ended December 31, 1996.
Investment securities consist primarily of U.S. Agency securities. The majority
of securities have either a "call" or "step-up" feature, which provides the Bank
with flexibility under varying interest rate scenarios. In a falling interest
rate environment, the securities with a "call" feature would be called by the
issuer. The rates paid on the "step-up" securities increase after a period of
time. Generally, the rates increase on the securities several times prior to
maturity.
The level of investment securities held to maturity (including mortgage-backed
securities) increased by $2,456,000, or 5.63%, to $46,080,000, at December 31,
1996, from $43,624,000 at June 30, 1996. Investment securities available for
sale (including mortgage-backed securities) declined by $1,827,000, or 17.40%,
to $8,672,000 at December 31, 1996, from $10,499,000 at June 30, 1996.
Net loans receivable increased by $13,445,000, or 8.92%, to $164,194,000 at
December 31, 1996, from $150,749,000 at June 30, 1996. The increase in net loans
receivable is attributable to residential mortgage loan production. Growth
occurred in both the conforming and non-conforming mortgage loan portfolios.
Emphasis continues to be placed on increasing the non-conforming loan portfolio
to further enhance the Bank's net interest margin.
Loan production during the six months ended December 31, 1996 decreased compared
to the same period of the prior year. During the six months ended December 31,
1996, the Bank funded $68.1 million of loans compared to $82.4 million of loans
during the six months ended December 31, 1995. Primarily responsible for the
decrease in loan production was the decrease of purchased one-to-four family
mortgage loans. This type of production totaled $2.0 million for the six months
ended December 31, 1996, compared with $13.1 million for the same period of the
prior year.
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<PAGE>
1ST BANCORP AND SUBSIDIARIES
Management's Discussion and Analysis of Financial Condition
and Results of Operations
During the six months ended December 31, 1996, non-conforming mortgage lending
constituted $42.3 million, or 62.12%, of total loans funded during the period.
During the six months ended December 31, 1996, $24.7 million of non-conforming
loans were sold on a non-recourse basis in the secondary market. The remainder
of the loans, typically the highest quality loans, are retained in portfolio to
increase the net interest margin. Non-conforming loans, including those held for
sale, increased to $55.7 million at December 31, 1996 compared to $39.9 million
at June 30, 1996.
Loans held for sale totaled $17,068,000 at December 31, 1996, a decrease of
$1,522,000, or 8.19%, from $18,590,000 at June 30, 1996. Primarily responsible
for the change in the level of loans held for sale is the timing of the sale of
bulk packages of non-conforming loans.
At December 31, 1996, non-performing assets totaled $2,126,000 or .82% of total
assets. This compares to $732,000 of non-performing assets, or .29% of total
assets, at June 30, 1996. The increase in non-performing assets was primarily
the result of one-to-four family mortgage loans becoming 90 days or more past
due and the addition of three single family real estate owned properties. The
increased level of one-to-four family mortgage loans 90 or more days past due
are due to increased conforming and non-conforming delinquencies.
The table below sets forth the amounts and categories of 1ST BANCORP's
non-performing assets (non-accrual loans and other non-performing assets) for
the balance sheet dates presented. Loans are reviewed regularly and are
generally placed on non-accrual status when they become contractually past due
90 days or more.
December 31, June 30,
1996 1996
-------------------------------
(In thousands)
Non-performing assets:
Non-accrual loans $1,635 $ 555
Other non-performing assets (1) 491 177
Restructured loans -- --
------ ------
Total non-performing assets $2,126 $ 732
Non-performing assets to total assets .82% .29%
(1) Certain assets acquired through foreclosures or deeds in lieu of
foreclosure, which are included in the Consolidated Condensed Statement of
Financial Condition as real estate owned.
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<PAGE>
1ST BANCORP AND SUBSIDIARIES
Management's Discussion and Analysis of Financial Condition
and Results of Operations
During the six months ended December 31, 1996, the Bank established, through
operations, provisions for loan losses totaling $86,000. In addition, the Bank
realized net charge-offs through its allowance for loan loss accounts of
$38,000. The Bank's allowance for loan loss was $944,000 at December 31, 1996
and $896,000 at June 30, 1996.
Prepaid expenses and other assets increased to $5,384,000 at December 31, 1996
from $4,716,000 at June 30, 1996. The increase was primarily attributable to the
purchase of the book of business of an existing independent insurance agency
during December 1996. The book of business was merged with the existing customer
base of First Financial Insurance Agency, Inc. As a result of the acquisition,
First Financial Insurance, Inc. opened a full service insurance office in
Princeton, Indiana in addition to its existing full service office in Vincennes,
Indiana.
Total deposits decreased by $2,269,000, or 1.65%, to $134,879,000 at December
31, 1996 from $137,148,000 at June 30, 1996. The decrease in deposits resulted
primarily from the maturity of brokered deposits during the six months ended
December 31, 1996.
Advances from the Federal Home Loan Bank ("FHLB") and other borrowings increased
by $1,557,000, or 1.54%, to $102,442,000 at December 31, 1996 from $100,885,000
at June 30, 1996. The slight increase in borrowed money resulted primarily from
an increased usage of short-term borrowed funds near the calendar year end to
offset decrease in deposits.
Accrued expenses and other liabilities decreased to $1,767,000 at December 31,
1996, from $2,413,000 at June 30, 1996. The decrease is primarily attributable
to two items. First, accrued income tax payable decreased by $273,000 due to the
net loss realized for the six months ended December 31, 1996. The net loss is
directly attributable to the SAIF assessment. The assessment expense was
recognized during the first quarter of fiscal 1997 on a tax effected basis, and
was paid during the second quarter of fiscal 1997. Second, the management
incentive plan payable was distributed during the first quarter of fiscal year
1997 for the fiscal 1996 plan year.
(b) Results of Operations:
During the three months ended December 31, 1996, 1ST BANCORP had net income of
$376,000, or $0.53 per share, compared to net earnings of $4,582,000, or $6.51
per share, for the three months ended December 31, 1995. During the six months
ended December 31, 1996, 1ST BANCORP recorded a net loss of $255,000, or $0.37
per share, compared to net earnings of $5,070,000, or $7.20 per share, for the
six months ended December 31, 1995.
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<PAGE>
1ST BANCORP AND SUBSIDIARIES
Management's Discussion and Analysis of Financial Condition
and Results of Operations
The net loss for the six months ended December 31, 1996, was a direct result of
the one-time assessment of $1,330,000 for the recapitalization of the SAIF. The
higher level of earnings for the three and six months ended December 31, 1995
resulted from the pre-tax gain of $7,274,000 from the Branch Sales.
Net interest income before provision for loan losses was $1,524,000 for the
three months ended December 31, 1996, compared to $1,601,000 for the three
months ended December 31, 1995. The net interest margin was 2.45% for the three
months ended December 31, 1996 compared to 2.24% for the three months ended
December 31, 1995. Net interest income before provision for loan losses was
$2,966,000 for the six months ended December 31, 1996, compared to $3,269,000
for the six months ended December 31, 1995. The net interest margin was 2.37%
for the six months ended December 31, 1996 compared to 2.24% for the six months
ended December 31, 1995.
The lower level of net interest income for both the three and six months ended
December 31, 1996 was the result of a lower volume of interest-earning assets
and interest-bearing liabilities. The lower levels of interest-earning assets
and interest-bearing liabilities compared with the prior year were the result of
the Branch Sales during the second quarter of fiscal 1996. However, the average
excess of interest-earning assets over interest-bearing liabilities was greater
during the three and six months ended December 31, 1996 as compared to the same
periods of the prior year. This enabled the net interest margin as a percent of
total assets to expand despite the Bank's reduced size. In addition, continued
emphasis on non-conforming loan originations, which typically are higher
yielding than conforming loan products, has augmented the expansion of the net
interest margin by enhancing the yield on interest-earning assets.
Non-interest income for the three months ended December 31, 1996 totaled
$808,000 compared to $7,908,000 for the three months ended December 31, 1995.
Non-interest income for the six months ended December 31, 1996 totaled
$1,681,000 compared to $8,893,000 for the six months ended December 31, 1995.
The lower level of non-interest income for the three and six months ended
December 31, 1996 as compared to same period of the prior year, was directly
attributable to the Branch Sales.
The net gain on the sale of investment securities available for sale and trading
account investments totaled $2,000 for the three and six months ended December
31, 1996 compared with a net loss of $123,000 for the three months and a net
loss of $122,000 for the six months ended December 31, 1995. The net loss for
the three and six months ended December 31, 1995 resulted primarily from the
sale of available for sale securities in order to fund the sale of deposits that
was a part of the Branch Sales. There was only minimal activity in the available
for sale and trading accounts during the three and six months ended December 31,
1996.
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<PAGE>
1ST BANCORP AND SUBSIDIARIES
Management's Discussion and Analysis of Financial Condition
and Results of Operations
The gain on sale of mortgage loans totaled $548,000 for the quarter ended
December 31, 1996 compared to $513,000 for the quarter ended December 31, 1995.
The gain on sale of mortgage loans totaled $1,201,000 for the six months ended
December 31, 1996 compared to $996,000 for the six months ended December 31,
1995. The total volume of mortgage loan sales declined for the six months ended
December 31, 1996 to $41.0 million from $50.8 million for the same period of the
prior year. However, the type of loans sold changed to a majority of
non-conforming loan sales from a majority of conforming loan sales, which
resulted in the increased gain on sale of loans. Non-conforming loan sales
totaled $24.7 million for the six months ended December 31, 1996 compared with
$9.9 million for the same period of the prior year. Non-conforming loans have
been sold at higher gain levels compared with conforming loan sales due to
pricing methodology differences (including loan origination fees collected) at
the time the loans are originated.
"Other" non-interest income remained relatively stable during the three months
ended December 31, 1996 and totaled $170,000 compared with $184,000 during the
three months ended December 31, 1995. "Other" non-interest income totaled
$306,000 for the six months ended December 31, 1996 compared to $590,000 for the
six months ended December 31, 1995. The lower level of "Other" non-interest
income resulted from two primary items. First, there were no sales of mortgage
servicing rights during the six months ended December 31, 1996 compared to a net
gain of $237,000 on the sale of mortgage servicing rights during the six months
ended December 31, 1995. Second, service charges for deposit accounts declined
during the six months ended December 31, 1996 compared with the same period of
the prior year. The decline was attributable to the reduction of deposit
accounts which resulted from the Branch Sales.
Non-interest expense totaled $1,674,000 for the three months ended December 31,
1996, compared to $2,172,000 for the three months ended December 31, 1995.
Non-interest expense totaled $4,998,000 for the six months ended December 31,
1996, compared to $4,017,000 for the six months ended December 31, 1995.
On September 30, 1996, the federal government mandated an industry wide
assessment to recapitalize the SAIF, which is a part of the FDIC. The special
assessment was charged to savings associations with insured deposits by the
SAIF. The assessment was calculated at 0.657% of insured deposits as of March
31, 1995. The Bank's portion of the assessment was $1,330,000 and was included
in non-interest expense for the first quarter of fiscal 1997 and paid during the
second quarter of fiscal 1997. While the immediate effect on earnings of the
one-time assessment is significant, future earnings will be augmented by lower
deposit insurance premiums. The Bank began paying an assessment of 0.065%
premium for insured deposits as of January 1, 1997, compared with the previous
assessment rate of 0.23%.
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<PAGE>
1ST BANCORP AND SUBSIDIARIES
Management's Discussion and Analysis of Financial Condition
and Results of Operations
Federal insurance premium expense totaled $80,000 for the quarter ended December
31, 1996 compared to $132,000 for the quarter ended December 31, 1995. The lower
expense resulted from a reduced assessment rate as mandated by the FDIC and a
lower level of insured deposits as compared with the prior year.The assessment
to recapitalize the SAIF is directly responsible for the significant increase in
non-interest expense for the six months ended December 31, 1996. Federal
insurance premium expense totaled $1,509,000 for the six months ended December
31, 1996 compared to $268,000 the six months ended December 31, 1995.
Compensation and employee benefits expense totaled $940,000 for the three months
ended December 31, 1996 compared to $1,206,000 for three months ended December
31, 1996. Compensation and employee benefits expense totaled $1,985,000 for the
six months ended December 31, 1996 compared to $2,240,000 for six months ended
December 31, 1996. The lower level of compensation and employee benefit expense
are primarily due to lower expenses associated with the management incentive
plan and from a reduced number of employees which resulted from the Branch
Sales.
"Other" non-interest expense totaled $475,000 for the three months ended
December 31, 1996 compared to $636,000 for the three months ended December 31,
1996. The lower expense was primarily due to a lower operating loss of the
affordable housing tax credit apartment project that the Bank's wholly owned
subsidiary Financial Services of Southern Indiana Corporation is invested in as
a limited partner. "Other" non-interest expense remained relatively stable and
totaled $1,144,000 for the six months ended December 31, 1996 compared to
$1,106,000 for the six months ended December 31, 1995.
(c) Capital Resources and Liquidity:
The Corporation is subject to regulation as a savings and loan holding company
by the Office of Thrift Supervision ("OTS"). First Federal Bank, A Federal
Savings 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
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 8.0% of risk-weighted assets. At December 31, 1996, the
Bank met all current capital requirements.
-13-
<PAGE>
1ST BANCORP AND SUBSIDIARIES
Management's Discussion and Analysis of Financial Condition
and Results of Operations
The following is a summary of the Bank's regulatory capital and capital
requirements at December 31, 1996:
<TABLE>
<CAPTION>
Tangible Core Risk-Based
Capital Capital Capital
<S> <C> <C> <C>
Regulatory Capital $21,940,000 $21,940,000 $22,392,000
Minimum Capital Requirement 3,906,000 7,811,000 11,368,000
----------- ------------- ------------
Excess Capital $18,034,000 $14,129,000 $11,024,000
Regulatory Capital Ratio 8.43% 8.43% 15.76%
Required Capital Ratio 1.50% 3.00% 8.00%
</TABLE>
During the quarter ended December 31, 1996, 1ST BANCORP paid a $0.10 cash
dividend per share to shareholders. This is the seventeenth consecutive
quarterly dividend 1ST BANCORP has paid to shareholders.
Liquidity measures the Bank's ability to meet savings withdrawals and lending
commitments. Management believes that liquidity is adequate to meet current
requirements, including the funding of $27,566,000 in loan commitments and
$1,212,000 of loans in process outstanding at December 31, 1996. The majority of
these commitments are expected to be funded within the three month period ending
March 31, 1997. At December 31, 1996, the Bank had $3,966,000 in outstanding
commitments to sell mortgage loans and mortgage-backed securities. The Bank
maintains liquidity of at least 5% of net withdrawable assets. The liquidity
ratio at December 31, 1996 was 7.96%.
There are no other known trends, events, or uncertainties, including current
recommendations by regulatory authorities, that should have, or that are
reasonably likely to have, a material effect on the liquidity, capital
resources, or operations of 1ST BANCORP.
-14-
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
First Federal is involved in two lawsuits that are not in the ordinary course of
business. The first involves a discrimination complaint filed regarding the
Bank's lending practices. The second lawsuit was filed by a title company
providing closing services for a mortgage loan that was purchased by the Bank
from a third party mortgage company subsequent to closing, and alleges the
mortgage company was acting as an agent for the Bank and failed to provide funds
for closing the transaction in exchange for the note and deed of trust. First
Federal received a summary judgement in its favor in this case. The plaintiffs
are appealing the court's decision. It is the opinion of management that, based
on current information available, the ultimate resolutions of these matters will
not have a material adverse effect on the Corporation's financial position.
Other than the above, neither 1ST BANCORP nor its subsidiaries is involved in
any legal proceedings, other than routine proceedings occurring in the ordinary
course of its business.
Item 4. Submission of Matters to a Vote of Security Holders.
On October 24, 1996, the Annual Meeting of Shareholders was held and the results
of which follow. The meeting was held prior to the declaration of the 5% stock
dividend, therefore, the voting results do not reflect any effects of the stock
dividend.
<TABLE>
<CAPTION>
Against or Broker
For Withheld Abstain Non-votes
<S> <C> <C> <C> <C>
Election of R. William
Ballard as Director for
term expiring in 1999 491,574 47,774 0 0
Election of Frank D.
Baracani as Director for
term expiring in 1999 484,667 54,681 0 0
Election of John J.
Summers as Director for
term expiring in 1999 484,701 54,647 0 0
Approval and ratification
of 1ST BANCORP 1997
Employee Stock Purchase
Plan 474,964 59,160 2,622 0
</TABLE>
-15-
<PAGE>
Item 6. Exhibits and Reports on Form 8-K
a) The following exhibit is filed herewith: Exhibit 27 Financial Data Schedule
b) Reports on Form 8-K -- There were no reports on Form 8-K filed during the
three months ended December 31, 1996.
-16-
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
1ST BANCORP
Date: February 13, 1997 By: /s/ C. James McCormick
--------------------------
C. James McCormick, Chairman and
Chief Executive Officer
Date: February 13, 1997 By: /s/ Frank D. Baracani
-----------------------------
Frank D. Baracani, President
Date: February 13, 1997 By: /s/ Mary Lynn Stenftenagel
---------------------------------
Mary Lynn Stenftenagel,
Secretary-Treasurer and
Chief Accounting Officer
-17-
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM 1ST BANCORP
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000840458
<NAME> 1ST BANCORP
<MULTIPLIER> 1,000
<CURRENCY> U.S. Dollars
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> OCT-1-1996
<PERIOD-END> DEC-31-1996
<EXCHANGE-RATE> 1.000
<CASH> $449
<INT-BEARING-DEPOSITS> 9,563
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 8,672
<INVESTMENTS-CARRYING> 46,080
<INVESTMENTS-MARKET> 45,529
<LOANS> 182,206
<ALLOWANCE> 944
<TOTAL-ASSETS> 261,711
<DEPOSITS> 134,879
<SHORT-TERM> 4,020
<LIABILITIES-OTHER> 3,011
<LONG-TERM> 98,422
<COMMON> 664
0
0
<OTHER-SE> 20,715
<TOTAL-LIABILITIES-AND-EQUITY> 261,711
<INTEREST-LOAN> 7,346
<INTEREST-INVEST> 1,856
<INTEREST-OTHER> 315
<INTEREST-TOTAL> 9,517
<INTEREST-DEPOSIT> 3,706
<INTEREST-EXPENSE> 6,551
<INTEREST-INCOME-NET> 2,966
<LOAN-LOSSES> 86
<SECURITIES-GAINS> 2
<EXPENSE-OTHER> 4,998
<INCOME-PRETAX> (437)
<INCOME-PRE-EXTRAORDINARY> (255)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (255)
<EPS-PRIMARY> ($0.37)
<EPS-DILUTED> ($0.37)
<YIELD-ACTUAL> 7.60
<LOANS-NON> 1,635
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 1,767
<ALLOWANCE-OPEN> 896
<CHARGE-OFFS> 44
<RECOVERIES> 6
<ALLOWANCE-CLOSE> 944
<ALLOWANCE-DOMESTIC> 492
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 452
</TABLE>
