SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT
Pursuant to Section 13 or 15 (d) of
The Securities Exchange Act of 1934
For the Quarter Ended:
---------------------
June 30, 2000 Commission File Number 0-18392
-------
Ameriana Bancorp
Indiana 35-1782688
------------------------------- -------------------------------
(State or other jurisdiction of (I.R.S. employer identification
incorporation or organization) number)
2118 Bundy Avenue, New Castle, Indiana 47362-1048
-------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, include area code (765) 529-2230
--------------
Securities registered pursuant to Section 12(g) of Act:
Common Stock, par value $1.00 per share
---------------------------------------
(Title of Class)
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 XX NO
-- ---
As of August 8, 2000, there were issued and outstanding 3,146,616 shares of the
registrant's common stock.
1 of 17 Pages
<PAGE>
AMERIANA BANCORP AND SUBSIDIARIES
CONTENTS
PART I - FINANCIAL INFORMATION Page No.
-------
ITEM 1 - Financial statements
Consolidated Condensed Statements of Condition
as of June 30, 2000, December 31, 1999 and
June 30, 1999..................................................3
Consolidated Condensed Statements of Income for
the Three Months and Six Months Ended
June 30, 2000 and 1999.........................................4
Consolidated Condensed Statements of Cash Flows for
the Six Months Ended June 30, 2000 and 1999....................5
Notes to Consolidated Condensed Financial Statements...........6
ITEM 2 - Management's Discussion and Analysis of
Financial Condition and Results of
Operations.....................................................7
ITEM 3 - Quantitative and Qualitative Disclosure
About Interest Rate Risk......................................10
PART II - OTHER INFORMATION...............................................14
SIGNATURES..................................................................15
EDGAR - Financial Data Schedule...........................................16
2
<PAGE>
PART I - FINANCIAL INFORMATION
AMERIANA BANCORP AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CONDITION - Unaudited
<TABLE>
<CAPTION>
June 30, 2000 December 31, 1999 June 30, 1999
------------- ----------------- -------------
<S> <C> <C> <C>
Assets
Cash on hand and in other institutions $ 8,027,510 $ 14,636,884 $ 8,168,612
Interest-bearing demand deposits 5,142,146 5,295,715 3,485,820
Interest-bearing time deposits 100,000 1,499,000 4,686,000
Investment securities held to maturity (fair
value of $81,844,000, $81,481,000
and $76,732,000, respectively) 87,816,517 87,735,008 80,115,975
Mortgage-backed securities held to maturity (fair
value of $12,557,000, $14,787,000
and $16,978,000, respectively) 12,759,880 14,970,002 17,090,362
Mortgage loans held for sale 385,000 207,400 529,500
Loans receivable 379,252,168 326,804,739 266,109,279
Allowance for loan losses (1,293,351) (1,534,278) (1,326,474)
-------------- -------------- -------------
Net loans receivable 377,958,817 325,270,461 264,782,805
Real estate owned 100,172 100 55,549
Premises and equipment 7,345,440 7,117,271 5,960,723
Stock in Federal Home Loan Bank 5,730,400 4,341,300 3,629,100
Mortgage servicing rights 876,990 910,273 943,069
Investments in unconsolidated affiliates 1,105,424 1,179,244 1,277,657
Intangible assets 1,760,960 1,852,360 1,947,810
Cash surrender value of life insurance 16,715,537 16,117,534 15,759,472
Other assets 5,087,075 5,216,868 4,651,329
-------------- -------------- -------------
Total assets $ 530,911,868 $ 486,349,420 $ 413,083,783
============== ============== =============
Liabilities and Shareholders' Equity
Liabilities:
Deposits:
Noninterest-bearing $ 16,819,602 $ 16,308,154 $ 15,390,297
Interest-bearing 348,858,752 339,450,706 320,214,792
-------------- -------------- -------------
Total deposits 365,678,354 355,758,860 335,605,089
Advances from Federal Home Loan Bank 113,755,782 82,510,982 27,066,286
Notes payable 2,770,456 -- --
Drafts payable 4,204,595 3,901,316 2,785,494
Advances by borrowers for taxes and insurance 695,808 823,111 487,718
Other liabilities 2,773,366 3,326,611 3,142,357
-------------- -------------- -------------
Total liabilities 489,878,361 446,320,880 369,086,944
Shareholders' equity:
Preferred stock (5,000,000 shares authorized;
none issued) -- -- --
Common stock ($1.00 par value; authorized
15,000,000 shares; issued shares:
3,146,616; 3,145,791 and 3,389,876,
respectively) 3,146,616 3,145,791 3,389,876
Additional paid-in capital 499,532 492,227 4,915,392
Retained earnings-substantially restricted 37,387,359 36,390,522 35,691,571
-------------- -------------- -------------
Total shareholders' equity 41,033,507 40,028,540 43,996,839
-------------- -------------- -------------
Total liabilities and shareholders' equity $ 530,911,868 $ 486,349,420 $ 413,083,783
============== ============== =============
</TABLE>
See accompanying notes.
3
<PAGE>
AMERIANA BANCORP AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF INCOME - Unaudited
<TABLE>
<CAPTION>
Three Months Ended Six MonthS Ended
June 30, June 30,
---------------------- -------------------------
2000 1999 2000 1999
---------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
Interest Income:
Interest on loans $7,253,252 $5,105,651 $13,848,065 $10,243,732
Interest on mortgage-backed securities 236,032 281,349 468,262 585,781
Interest on investment securities 1,513,937 1,201,574 3,025,717 2,179,044
Other interest and dividend income 149,325 293,459 311,857 760,468
---------- ---------- ----------- -----------
Total interest income 9,152,546 6,882,033 17,653,901 13,769,025
Interest Expense:
Interest on deposits 4,250,920 3,532,917 8,283,687 7,141,482
Interest on FHLB advances and other loans 1,738,513 268,879 3,091,412 494,727
---------- ---------- ----------- -----------
Total interest expense 5,989,433 3,801,796 11,375,099 7,636,209
---------- ---------- ----------- -----------
Net interest income 3,163,113 3,080,237 6,278,802 6,132,816
Provision for Loan Losses 109,000 30,000 179,000 67,500
---------- ---------- ----------- -----------
Net interest income after provision
for loan losses 3,054,113 3,050,237 6,099,802 6,065,316
Other Income:
Net loan servicing fees 76,018 62,689 156,588 119,041
Other fees and service charges 301,924 238,463 574,702 458,157
Brokerage and insurance commissions 268,607 312,426 589,409 659,680
Net loss on investments in unconsolidated
affiliates (32,320) (98,048) (73,820) (146,798)
Gains on sales of loans and servicing rights 16,870 154,245 34,225 316,694
Increase in cash surrender value of life insurance 186,978 65,525 598,003 79,645
Other 38,780 35,955 75,551 64,944
---------- ---------- ----------- -----------
Total other income 856,857 771,255 1,954,658 1,551,363
Other Expense:
Salaries and employee benefits 1,639,553 1,490,497 3,335,788 2,940,103
Net occupancy expense 383,977 339,678 730,372 702,970
Federal insurance premium 18,465 45,226 37,648 91,786
Data processing expense 77,600 63,150 142,638 143,211
Printing and office supplies 85,696 68,700 162,384 172,202
Amortization of intangible assets 45,701 47,725 91,401 94,960
Other 496,826 505,910 937,365 999,040
---------- ---------- ----------- -----------
Total other expense 2,747,818 2,560,886 5,437,596 5,144,272
---------- ---------- ----------- -----------
Income before income taxes 1,163,152 1,260,606 2,616,864 2,472,407
Income taxes 287,430 399,756 676,043 814,151
---------- ---------- ----------- -----------
Net Income $ 875,722 $ 860,850 $ 1,940,821 1,658,256
========== ========== =========== ===========
Basic Earnings Per Share $ 0.28 $ 0.25 $ 0.62 $ 0.48
========== ========== =========== ===========
Diluted Earnings Per Share $ 0.28 $ 0.25 $ 0.62 $ 0.48
========== ========== =========== ===========
Dividends Declared Per Share $ 0.15 $ 0.15 $ 0.30 $ 0.30
========== ========== =========== ===========
</TABLE>
See accompanying notes.
4
<PAGE>
AMERIANA BANCORP AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS - Unaudited
<TABLE>
<CAPTION>
Six Months Ended June 30,
----------------------------
2000 1999
----------- -----------
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 1,940,821 $ 1,658,256
Adjustments to reconcile net income to net
cash provided by operating activities:
Provisions for losses on loans and real estate owned 179,000 75,000
Depreciation and amortization 232,934 280,923
Equity in loss of limited partnership 73,820 146,798
Mortgage servicing rights amortization 48,307 127,280
Goodwill amortization 91,400 94,960
Deferred income taxes -- (2,615)
Losses on sales of real estate owned 26,828 1,761
Increase in cash surrender value of life insurance (598,003) (87,734)
Mortgage loans originated for sale (3,584,144) (19,021,576)
Proceeds from sales of Mortgage loans 3,425,745 22,937,175
Gains on sales of loans and servicing rights (34,225) (257,244)
Decrease (increase) in other assets 129,793 (295,179)
Increase (Decrease) in drafts payable 303,279 (1,568,298)
Decrease in other liabilities (680,702) (1,272,063)
------------ ------------
Net cash provided by operating activities 1,554,853 2,817,444
INVESTING ACTIVITIES
Net change in interest-bearing time deposits 1,399,000 (1,199,000)
Purchase of investment securities held to maturity -- (35,500,444)
Proceeds from calls of securities held to maturity -- 6,992,969
Principal collected on mortgage-backed securities held
to maturity 2,183,199 3,076,979
Net change in loans (53,082,621) (3,078,562)
Proceeds from sale of real estate owned 83,600 73,954
Net purchases of premises and equipment (515,503) (128,029)
Premiums paid on life insurance -- (15,461,000)
Other investing activities (1,384,521) (41,456)
------------ ------------
Net cash used by investing activities (51,316,846) (45,264,589)
FINANCING ACTIVITIES
Net change in demand and passbook deposits 2,610,542 6,089,108
Net change in certificates of deposit 7,308,952 (4,473,322)
Advances from Federal Home Loan Bank 175,200,000 12,500,000
Repayment of Federal Home Loan Bank advances (143,955,200) (2,534,413)
Increase in notes payable 2,770,456 --
Proceeds from exercise of stock options 8,131 66,937
Purchase of common stock -- (2,047,470)
Cash dividends paid (943,831) (1,050,500)
------------ ------------
Net cash provided by financing activities 42,999,050 8,550,340
------------ ------------
Decrease in cash and cash equivalents (6,762,943) (33,896,805)
Cash and cash equivalents at beginning of period 19,932,599 45,551,237
------------ ------------
Cash and cash equivalents at end of period $ 13,169,656 $ 11,654,432
============ ============
Supplemental information:
Interest paid $ 11,450,355 $ 7,772,312
Income taxes paid 250,000 1,120,000
</TABLE>
See accompanying notes.
5
<PAGE>
AMERIANA BANCORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
----------------------------------------------------
NOTE A - - BASIS OF PRESENTATION
The unaudited interim consolidated condensed financial statements have been
prepared in accordance with the instructions to Form 10-Q and, therefore, do not
include all information and disclosures required by generally accepted
accounting principles for complete financial statements. In the opinion of
management, the financial statements reflect all adjustments (comprised only of
normal recurring adjustments and accruals) necessary to present fairly the
Company's financial position as of June 30, 2000 and December 31, 1999, and the
results of operations for the three month and six month periods ended June 30,
2000 and 1999 and changes in cash flows for the six months ended June 30, 2000
and 1999. A summary of the Company's significant accounting policies is set
forth in Note 1 of Notes to Consolidated Financial Statements in the Company's
annual report on Form 10-K for the year ended December 31, 1999.
NOTE B - - SHAREHOLDERS' EQUITY
On May 18, 2000, the Board of Directors declared a quarterly cash dividend of
$.15 per share. This dividend, totaling $471,992, was accrued for payment to
shareholders of record on June 16, 2000, and was paid on July 7, 2000.
During the quarter ended March 31, 2000, 825 new shares were issued from
exercise of stock options and total equity increased $8,131 due to cash proceeds
and tax benefits of the stock option exercises. No exercises of stock options
were completed in the second quarter of 2000.
Earnings per share were computed as follows:
<TABLE>
<CAPTION>
Three Months Ended June 30,
---------------------------------
2000 1999
-------------------------------------------------------------------------------------------------
Weighted Per Weighted Per
Average Share Average Share
Income Shares Amount Income Shares Amount
-------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Basic Earnings per Share:
Income available to
Common shareholders $875,722 3,146,616 $.28 $860,850 3,419,487 $ .25
Effect of dilutive stock options -- 78 -- 26,179
-------------------------------------------------------------------------------------------------
Diluted Earnings Per Share:
Income available to
common shareholders and
assumed conversions $875,722 3,146,694 $.28 $860,850 3,445,666 $ .25
-------------------------------------------------------------------------------------------------
<CAPTION>
-------------------------------------------------------------------------------------------------
Six Months Ended June 30,
----------------------------------
2000 1999
-------------------------------------------------------------------------------------------------
Weighted Per Weighted Per
Average Share Average Share
Income Shares Amount Income Shares Amount
-------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Basic Earnings per Share:
Income available to
Common shareholders $1,940,821 3,146,285 $.62 $1,658,256 3,454,866 $ .48
Effect of dilutive stock options -- 136 -- 29,844
-------------------------------------------------------------------------------------------------
Diluted Earnings Per Share:
Income available to
common shareholders and
assumed conversions $1,940,821 3,146,421 $.62 $1,658,256 3,484,710 $ .48
-------------------------------------------------------------------------------------------------
</TABLE>
6
<PAGE>
AMERIANA BANCORP AND SUBSIDIARIES
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
General
-------
This Quarterly Report on Form 10-Q ("Form Q") may contain statements which
constitute forward looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995. These statements appear in a number of
places in this Form 10-Q and include statements regarding the intent, belief,
outlook, estimate or expectations of the Company primarily with respect to
future events and future financial performance. Readers of this Form 10-Q are
cautioned that any such forward looking statements are not guarantees of future
events or performance and involve risks and uncertainties, and that actual
results may differ materially from those in the forward looking statements as a
result of various factors. The accompanying information contained in this Form
10-Q identifies important factors that could cause such differences. These
factors include changes in interest rates; loss of deposits and loan demand to
other financial institutions; substantial changes in financial markets; changes
in real estate values and the real estate market or regulatory changes.
The largest components of the Company's total revenue and total expenses are
interest income and interest expense, respectively. Consequently, the Company's
earnings are primarily dependent on its net interest income, which is determined
by (i) the difference between rates of interest earned on interest-earning
assets and rates paid on interest-bearing liabilities ("interest rate spread"),
and (ii) the relative amounts of interest-earning assets and interest-bearing
liabilities. Levels of other income and operating expenses also significantly
affect net income.
Management believes that interest rate risk, i. e., the sensitivity of income
and net asset values to changes in interest rates, is one of the most
significant determinants of the Company's ability to generate future earnings.
Accordingly, the Company has implemented a long-range plan intended to minimize
the effect of changes in interest rates on operations. The asset and liability
management policies of the Company are designed to stabilize long-term net
interest income by managing the repricing terms, rates an relative amounts of
interest-earning assets and interest-bearing liabilities.
RESULTS OF OPERATIONS
---------------------
During the first six months of 2000, the loan volume consisted of variable rate
consumer mortgages, consumer loans and commercial real estate loans. The loans
outstanding increased $52,447,429 and 16.05% to $379,252,168 during the six
months from $326,804,739 at December 31, 1999. The mortgage loans held for sale
increased to $385,000 at June 30, 2000, from $207,400 at December 31, 1999, and
consists of loans that had been committed to be sold to the secondary market and
had not been delivered as of the end of the period.
Sales of loans to the secondary market significantly decreased to $3,425,745
during the first six months of 2000 compared to $22,937,175 during the same
period in 1999. This had a significant effect on the gain on sale of loans in
2000. See comments on other income for detail of gains on loans sold. This
reduction is due to consumer mortgages being made as variable rate loans and
being retained in portfolio verses in 1999 more of these loans were made as
fixed rate loans and sold to the secondary market.
The net interest spread, difference between yield on interest-earning assets and
cost on interest-bearing liabilities, has decreased .50% during the second
quarter of 2000 compared to the same period in 1999 and has decreased .34%
during the first six months of 2000 compared to 1999. Rates in general have
increased and using the Prime rate as an
7
<PAGE>
indicator, it remained at 7.75% all during the first six months of 1999 and
increased six times during the last twelve month period ended June 30, 2000.
Prime averaged 9.25% during the second quarter of 2000 and 8.97% during the
first six months of 2000. The net yield decrease is due to the interest yield
increase of .38% on interest-earning average assets for the second quarter being
more than offset by the .88% rate increase in cost on interest-bearing average
liabilities for the second quarter. The fact that yields on average assets did
not increase as fast as costs of liabilities during 2000 is the result of making
variable rate consumer mortgages, at lower rates than fixed rate consumer
mortgages during 1999 and retaining them in portfolio. The larger increase of
the cost of liabilities has resulted from increased rates on the Federal Home
Loan Bank ("FHLB") borrowings and deposit costs during 2000. The FHLB borrowings
and certificates of deposits were extended to longer-term borrowings to more
closely match asset maturities in order to lower the interest rate risk and
resulted in increased costs during 2000 and especially the second quarter of
2000. The yield on average earning assets increased .31% during the first half
of 2000 while the yield on average interest bearing liabilities increased .65%.
The following table summarizes the Company's average net interest-earning assets
and average interest-bearing liabilities with the accompanying average rates for
the second quarter and first six months of 2000 and 1999:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
------------------ ----------------
June 30, June 30,
------------------ ----------------
2000 1999 2000 1999
---- ---- ---- ----
(Dollars in Thousands)
<S> <C> <C> <C> <C>
Interest-earning assets $478,867 $378,390 $466,232 $380,518
Interest-bearing liabilities 445,795 337,498 436,713 336,484
------- ------- ------- -------
Net interest-earning assets $ 33,072 $ 40,892 $ 29,519 $ 44,034
------- ------- ------- -------
Average yield on:
Interest-earning assets 7.68% 7.30% 7.61% 7.30%
Interest-bearing liabilities 5.40 4.52 5.23 4.58
---- ---- ---- ----
Net interest spread 2.28% 2.78% 2.38% 2.72%
---- ---- ---- ----
</TABLE>
Net interest income for the second quarter 2000 was $3,163,113 and was $82,876
and 2.69% more than $3,080,237 during the second quarter of 1999. This increase
is due to higher interest expense being more than offset by higher interest
income. The $2,270,000 increase in interest income on average interest-earning
assets is a combination of an increase of $1,970,000 because of the increase in
the volume mix of average outstanding interest-bearing assets plus $300,000
because of increased rates on average interest-earning assets. The increase of
$2,187,000 in cost of interest-bearing liabilities is a combination of an
increase of $1,681,000 from higher average balances and $506,000 from higher
rates on average interest-bearing liabilities. The net interest margin ratio,
which is net interest income divided by average earning assets, decreased to
2.66% for the second quarter 2000 compared to 3.27% for the second quarter of
1999.
Net interest income for the first six months of 2000 was $6,278,802 and was
$145,986 and 2.38% more than $6,132,816 during the first six months of 1999.
This increase is due to higher interest expense being more than offset by higher
interest income. The $3,885,000 increase in interest income on average
interest-earning assets is a combination of an increase of $3,336,000 because of
the increase in the volume mix of average outstanding interest-bearing assets
plus $549,000 because of increased rates on average interest-earning assets. The
increase of $3,739,000 in cost of interest-bearing liabilities is a combination
of an increase of $3,009,000 from higher average balances and $730,000 from
higher rates on average interest-bearing liabilities. The net interest margin
ratio, which is net interest income divided by average earning assets, decreased
to 2.71% for the first six months of 2000 compared to 3.25% for the first six
months of 1999.
8
<PAGE>
The following table sets forth the details of the rate and volume change for the
second quarter and first six months of 2000 compared to the second quarter and
first six months of 1999, respectively:
<TABLE>
<CAPTION>
Three Months Ended June 30, Six Months Ended June 30,
2000 vs. 1999 2000 vs. 1999
------------- -------------
Increase (Decrease) Increase (Decrease)
Due to Change in Due to Change in
---------------- ----------------
(Dollars in Thousands)
---------------------
Volume Rate Net Change Volume Rate Net Change
------ ---- ---------- ------ ---- ----------
<S> <C> <C> <C> <C> <C> <C>
Interest Income:
Loans and mortgage-backed securities $1,969 $ 133 $2,102 $3,370 $ 116 $3,486
Other interest-earning assets 1 167 168 (34) 433 399
----- ---- ----- ------ ---- -----
Total interest-earning assets 1,970 300 2,270 3,336 549 3,885
----- ---- ----- ------ ---- -----
Interest Expense:
Deposits 320 398 718 579 564 1,143
FHLB advance and other loans 1,361 108 1,469 2,430 166 2,596
----- ---- ----- ----- ---- -----
Total interest-bearing liabilities 1,681 506 2,187 3,009 730 3,739
----- --- ----- ----- ---- -----
Change in net interest income $ 289 $(206) $ 83 $ 327 $ (181) $ 146
----- ---- ----- ----- ----- ------
</TABLE>
The provision for loan losses was $109,000 during the second quarter of 2000
compared to $30,000 during the same period in 1999. The provision for loan
losses for the six months ended June 30, 2000, was $179,000 compared to $67,500
for the first six months of 1999. Net charge-offs were $420,000 and $25,000 for
2000 and 1999 first six months, respectively. A large portion of the net
charge-offs during 2000 included a loan for $172,000 charged-off during the
first quarter and it had been identified and provided for during the last
quarter of 1999. Another large portion of the 2000 charge-offs included a loan
charged-off during the second quarter for $205,000, which may be at least
partially recovered, but the recovery may take years to complete. The following
table summarizes the Company's non-performing assets at:
<TABLE>
<CAPTION>
June 30, December 31, June 30,
2000 1999 1999
---- ---- -----
(Dollars in Thousands)
<S> <C> <C> <C>
Loans:
Non-accrual $ 619 $1,171 $ 828
Over 90 days delinquent 38 25 152
Trouble debt restructured 640 751 805
Real estate owned (at market value) 100 0 56
---- ----- -----
Total $1,397 $1,947 $1,841
----- ----- -----
</TABLE>
Management believes the allowance for loan losses is adequate and that
sufficient provision has been provided to absorb any losses, which may
ultimately be incurred on non-performing loans and the remainder of the
portfolio. The allowance for loan losses as a percentage of loans at the end of
the period was .34%, .47% and .50% at June 30, 2000, December 31, 1999 and June
30, 1999, respectively.
Total other income for the second quarter of 2000 increased $85,602 and 11.10%
to $856,857 from $771,255 in the same period during 1999. Total other income for
the six months ended June 30, 2000, was up $403,295 and 26.00% to $1,954,658
from $1,551,363 during the first six months of 1999. As noted earlier, sales of
loans to the secondary market reduced dramatically in 2000 compared to 1999 and
gains on sales of loans and servicing rights during the second quarter of 2000
decreased $137,375 and 89.06% to $16,870 from $154,245 during the same period in
1999. Gains on sales of loans and servicing rights decreased $282,469 and 89.19%
during the six months ended June 30, 2000, to $34,225 from $316,694 during the
same period in 1999. Brokerage and insurance commissions decreased $70,271 and
10.65% for the six months due to lower loan demand. Gains for the six months
were noted in net loan servicing fees increasing $37,547 and 31.54%, other fees
and servicing increasing $116,545 and 25.44% and net loss on investment in
unconsolidated affiliate increasing because of the loss being lower by $72,978
and 49.71%. Cash surrender value of life insurance had a significant increase to
$598,003 in 2000 versus only $79,645 in 1999 for an increase of $518,358. The
banks invested in insurance products during the second quarter of 1999 and this
investment partially accounted for the large increase in insurance income. This
category also
9
<PAGE>
included one-time adjustments to certain cash surrender values on life insurance
policies carried on retired executives in the amount of approximately $197,000
that was booked in first quarter 2000.
Total other expense increased $186,932 and 7.30% during the second quarter of
2000 to $2,747,818 from $2,560,886 during the same period in 1999 and increased
$293,324 and 5.70% to $5,437,596 during the first six months of 2000 from
$5,144,272 during the first six months of 1999. The majority of these expense
increases are due to operating one more branch in 2000 than in 1999 and
operating a trust department in 2000 and not in 1999. The efficiency ratio,
which is other expense (not including amortization of goodwill) divided by net
interest income before the provision for loan losses plus other income,
decreased to 67.22% for the second quarter of 2000 compared to 65.25% for the
second quarter of 1999 and increased to 64.93% for the first six months of 2000
compared to 65.71% for the first six months of 1999.
The tax rate during the second quarter of 2000 was 24.71% and was 25.83% for the
first six months of 2000 compared to 31.71% and 32.93% for the same periods in
1999. These tax rate decreases are mostly due to the nontaxable income from the
life insurance policies in 2000 compared to 1999.
FINANCIAL CONDITION
-------------------
The Company's principal sources of funds are cash generated from operations,
deposits, loan principal repayments and advances from the FHLB. As of June 30,
2000, the Company's cash and interest-bearing demand deposits totaled
$13,169,656 and 2.48% of total assets. This compares with $19,932,599 and 4.10%
of total assets at December 31, 1999. The Company's banking subsidiaries,
Ameriana Bank and Trust of Indiana ("ABI") and Ameriana Bank of Ohio ("ABO")
have regulatory liquidity ratios of 9.30% and 7.71%, respectively, which exceeds
the 4.0% liquidity base set by the Office of Thrift Supervision ("OTS").
The regulatory minimum net worth requirement of 8% for ABI and ABO under the
most stringent of the three capital regulations (total risk-based capital to
risk-weighted assets) at June 30, 2000, was $18,512,000 and $5,124,000,
respectively. At June 30, 2000, ABI had total risk-based capital of $33,342,000
and a 14.41% ratio and ABO had risk-based capital of $8,609,000 and a 13.44%
ratio.
At June 30, 2000, the Company's commitments for loans in process totaled
$20,273,000, with 95% being for real estate secured loans. Management believes
the Company's liquidity and other sources of funds will be sufficient to fund
all outstanding commitments and other cash needs.
ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT INTEREST RATE RISK
Interest Rate Risk
ABI and ABO are subject to interest rate risk to the degree that their
interest-bearing liabilities, deposits and FHLB borrowings, mature or reprice at
different rates than their interest-earning assets. Although having liabilities
that mature or reprice less frequently on average than assets will be beneficial
in times of rising interest rates, such an asset/liability structure will result
in lower net income during periods of declining interest rates, unless offset by
other factors.
It is important to ABI and ABO to manage the relationship between interest rates
and the effect on their net portfolio value ("NPV"). This approach calculates
the difference between the present value of expected cash flows from assets and
the present value of expected cash flows from liabilities, as well as cash flows
from off-balance sheet contracts. Assets and liabilities are managed within the
context of the marketplace,
10
<PAGE>
regulatory limitations and within its limits on the amount of change in NPV,
which is acceptable given certain interest rate changes.
The OTS issued a regulation, which uses a net market value methodology to
measure the interest rate risk exposure of savings associations. Under this OTS
regulation an institution's "normal" level of interest rate risk in the event of
an assumed change in interest rates is a decrease in the institution's NPV in an
amount not exceeding 2% of the present value of its assets. Savings associations
with over $300 million in assets or less than a 12% risk-based capital ratio are
required to file OTS Schedule CMR. Data from Schedule CMR is used by the OTS to
calculate changes in NPV (and the related "normal" level of interest rate risk)
based upon certain interest rate changes (discussed below). Associations, which
do not meet either of the filing requirements, are not required to file OTS
Schedule CMR, but may do so voluntarily. ABI and ABO both file Schedule CMR. As
ABO does not meet either of these requirements, it is not required to file
Schedule CMR, although it does so voluntarily. Under the regulation,
associations that must file are required to take a deduction (the interest rate
risk capital component) from their total capital available to calculate their
risk-based capital requirement if their interest rate exposure is greater than
"normal." The amount of that deduction is one-half of the difference between (a)
the institution's actual calculated exposure to a 200 basis point interest rate
increase or decrease (whichever results in the greater pro forma decrease in
NPV) and (b) its "normal" level of exposure which is 2% of the present value of
its assets on the Thrift Financial Report filed two quarters earlier.
The following information and schedules for ABO and ABI are required
information. The current analysis for ABO and ABI performed by the OTS as of
June 30, 2000, has not been received from the OTS and the following interest
rate risk measurements for ABO and ABI are being submitted with information from
the OTS analysis as of March 31, 2000. Management believes there has been no
significant increase in the interest rate risk measures since March 31, 2000,
for either ABO or ABI. Both banks have instituted measures to reduce their
interest rate risk results by extending maturities of deposits and FHLB advances
and by retaining more variable verses fixed rate loans.
Presented below, as of March 31,2000, is an analysis performed by the OTS of
ABO's interest rate risk as measured by changes in NPV for instantaneous and
sustained parallel shifts in the yield curve, in 100 basis point increments, up
and down 300 basis points. At September 30, 1999, 2% of the present value of
ABO's assets was $2.206 million. Because the interest rate risk of a 200 basis
point increase in market rates (which was greater than the interest rate risk of
a 200 basis point decrease) was $5.803 million at March 31, 2000, ABO would have
been required to make a $1.799 million deduction from its total capital
available to calculate its risk-based capital requirement. This reduction in
capital would reduce ABO's risk-based capital ratio to 10.60% from 13.47%, which
is still in excess of the required risk-based capital ratio of 8.0%.
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------------------
NPV as Percent of
Net Portfolio Value Present Value of Assets
----------------------------------------------------------------------------------------------------------------------------
Change Dollar Dollar Percent
in Rates Amount Change Change NPV Ratio Change
----------------------------------------------------------------------------------------------------------------------------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C>
+300 bp* $ -1,055 $ -8,747 -114% -0.95% -719 bp
+200 bp 1,890 -5,803 -75 1.64 -461 bp
+100 bp 4,847 -2,845 -37 4.06 -218 bp
0 bp 7,693 6.24
-100 bp 10,005 2,312 +30 7.91 +166 bp
-200 bp 10,743 3,050 +40 8.37 +212 bp
-300 bp 11,206 3,513 +46 8.62 +238 bp
* basis points
</TABLE>
11
<PAGE>
Also presented below, as of March 31,2000, is an analysis, performed by the OTS,
of ABI's interest rate risk as measured by changes in NPV for instantaneous and
sustained parallel shifts in the yield curve, in 100 basis point increments, up
and down 300 basis points. At September 30, 1999, 2% of the present value of
ABI's assets was $6.997 million. Because the interest rate risk of a 200 basis
point increase in market rates (which was greater than the interest rate risk of
a 200 basis point decrease) was $14.040 million at March 31, 2000, ABI would
have been required to make a $3.522 million deduction from its total capital
available to calculate its risk-based capital requirement. This reduction in
capital would reduce ABI's risk-based capital ratio to 13.54% from 15.18%, which
is still in excess of the required risk-based capital ratio of 8.0%.
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------------------
NPV as Percent of
Net Portfolio Value Present Value of Assets
----------------------------------------------------------------------------------------------------------------------------
Change Dollar Dollar Percent
in Rates Amount Change Change NPV Ratio Change
----------------------------------------------------------------------------------------------------------------------------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C>
+300 bp* $ 13,158 $ -20,958 -61% 3.75% -531 bp
+200 bp 20,076 -14,040 -41 5.59 -347 bp
+100 bp 27,105 -7,011 -21 7.37 -169 bp
0 bp 34,116 9.06
-100 bp 39,487 5,371 +16 10.29 +123 bp
-200 bp 39,250 5,134 +15 10.18 +112 bp
-300 bp 38,949 4,833 +14 10.06 +100 bp
* basis points`
</TABLE>
Presented below, as of March 31, 1999, is an analysis performed by the OTS of
ABO's interest rate risk as measured by changes in NPV for instantaneous and
sustained parallel shifts in the yield curve, in 100 basis point increments, up
and down 300 basis points. At September 30, 1998, 2% of the present value of
ABO's assets was $1.933 million. Because the interest rate risk of a 200 basis
point increase in market rates (which was greater than the interest rate risk of
a 200 basis point decrease) was $1.585 million at March 31, 1999, ABO would not
have been required to make a capital deduction.
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------------------
NPV as Percent of
Net Portfolio Value Present Value of Assets
----------------------------------------------------------------------------------------------------------------------------
Change Dollar Dollar Percent
in Rates Amount Change Change NPV Ratio Change
----------------------------------------------------------------------------------------------------------------------------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C>
+300 bp* $ 10,062 $ -2,753 -21% 11.69% -215 bp
+200 bp 11,230 -1,585 -12 12.70 -114 bp
+100 bp 12,175 -640 -5 13.44 -40 bp
0 bp 12,815 13.84
-100 bp 13,408 593 +5 14.17 +33 bp
-200 bp 14,215 1,400 +11 14.66 +82 bp
-300 bp 15,445 2,630 +21 15.48 +164 bp
* basis points
</TABLE>
Also presented below, as of March 31, 1999, is an analysis, performed by the
OTS, of ABI's interest rate risk as measured by changes in NPV for instantaneous
and sustained parallel shifts in the yield curve, in 100 basis point increments,
up and down 300 basis points. At September 30, 1998, 2% of the present value of
ABI's assets was $6.204 million. Because the interest rate risk of a 200 basis
point increase in market rates (which was greater than the interest rate risk of
a 200 basis point decrease) was $10.439 million at March 31, 1999, ABI would
have been required to make a $2.118 million
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<PAGE>
deduction from its total capital available to calculate its risk based capital
requirement. This reduction in capital would reduce ABI's risk-based capital
ratio to 19.82% from 21.15%, which is still far in excess of the required
risk-based capital ratio of 8.0%.
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------------------
NPV as Percent of
Net Portfolio Value Present Value of Assets
----------------------------------------------------------------------------------------------------------------------------
Change Dollar Dollar Percent
in Rates Amount Change Change NPV Ratio Change
----------------------------------------------------------------------------------------------------------------------------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C>
+300 bp* $ 28,851 $ -16,148 -36% 9.47% -433 bp
+200 bp 34,560 -10,439 -23 11.08 -273 bp
+100 bp 39,949 -5,050 -11 12.52 -129 bp
0 bp 44,999 13.81
-100 bp 50,570 5,572 +12 15.17 +136 bp
-200 bp 56,865 11,866 +26 16.64 +283 bp
-300 bp 64,420 19,422 +43 18.33 +453 bp
* basis points
</TABLE>
As with any method of measuring interest rate risk, certain shortcomings are
inherent in the methods of analysis presented above. For example, although
certain assets and liabilities may have similar maturities or periods to
repricing, they may react in different degrees to changes in market interest
rates. Also, the interest rates on certain types of assets and liabilities may
fluctuate in advance of changes in market interest rates, while interest rates
on other types may lag behind changes in market rates. Additionally, certain
assets, such as adjustable-rate loans, have features that restrict changes in
interest rates on a short-term basis and over the life of the asset. Further, in
the event of a change in interest rates, expected rates of prepayments on loans
and early withdrawals from certificates could likely deviate significantly from
those assumed in calculating the table. Finally, the ability of many borrowers
to service their debt may decrease in the event of an interest rate increase.
The Company considers all of these factors in monitoring its exposure to
interest rate risk.
OTHER
-----
Ameriana Bancorp has requested permission from the OTS to merge ABO and ABI into
one institution with ABI being the survivor. This merger is being implemented
because of the efficiencies it will provide.
The Securities and Exchange Commission ("SEC") maintains reports, proxy
information, statements and other information regarding registrants that file
electronically with the SEC, including the Company. The address is
(http://www.sec.gov).
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<PAGE>
PART II - OTHER INFORMATION
ITEM 1 - Legal Proceedings
-----------------
No changes have taken place in regard to the legal proceedings
disclosed in the registrant's report on Form 10-K for the year ended
December 31, 1999.
ITEM 2 - Changes in Securities
---------------------
Not Applicable
ITEM 3 - Defaults in Senior Securities
-----------------------------
Not Applicable
ITEM 4 - Submission of Matters to a Vote of Security Holders
---------------------------------------------------
On May 18, 2000, the Company held its 2000 annual meeting of
shareholders. A total of 2,527,788 shares, or 80.3% of the Company's
shares outstanding, were represented at the meeting either in person
or by proxy.
Two Directors were nominated by the Company's Board of Directors to
serve new three-year terms expiring in 2003. The nominees and the
voting results for each are listed below:
For Withheld
--------- --------
R. Scott Hayes 2,497,372 98.8% 30,416 1.2%
Michael E. Kent 2,498,323 98.8% 29,465 1.2%
The following Directors, whose three year terms of service have not
expired, continue as Directors of the Company:
Donald C. Danielson, Paul W. Prior, Harry J. Bailey
Charles M. Drackett Jr. and Ronald R. Pritzke.
The Shareholders ratified the appointment of Olive LLP as auditors
for the Company for the fiscal year ended December 31, 2000. A total
of 2,504,205 and 99.1% of shares voted in favor of this proposal,
15,978 and .6% of shares voted against the proposal and 7,605 and .3%
of shares abstained from voting on the proposal.
ITEM 5 - Other Information
-----------------
Not Applicable
ITEM 6 - Exhibits and Reports on Form 8-K
--------------------------------
Not Applicable
14
<PAGE>
SIGNATURES
AMERIANA BANCORP AND SUBSIDIARIES
Pursuant to the requirements of Section 13 or 15 (d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
AMERIANA BANCORP
DATE: August 8, 2000 /s/ Harry J. Bailey
-------------- -------------------
Harry J. Bailey
President and
Chief Executive Officer
(Duly Authorized Representative)
DATE: August 8, 2000 /s/ Richard E. Welling
-------------- ----------------------
Richard E. Welling
Senior Vice President-Treasurer
(Principal Financial Officer
and Accounting Officer)
15
