U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.
FORM 10Q-SB
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1996
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934 FOR THE TRANSITION PERIOD FROM ______ TO ______
Commission File Number 000-21671
---------
THE NATIONAL BANK OF INDIANAPOLIS CORPORATION
-----------------------------------------------
(Name of Small Business Issuer in its charter)
INDIANA 35-1887991
- - ---------------------------------------------------------------------------
(State of incorporation) I.R.S. Employer
Identification Number
107 N. PENNSYLVANIA STREET, SUITE 700, INDIANAPOLIS, INDIANA 46204
-------------------------------------------------------------------
(Address of principal executive offices and zip code)
(317) 261-9000
--------------
(Issuer's telephone number)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15 (d) of the Exchange Act during the past 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 September 30, 1996, there were 1,821,775 Common Shares outstanding.
Transitional Small Business Disclosure Format (Check one):
Yes No X
----- -----
<PAGE>
TABLE OF CONTENTS
THE NATIONAL BANK OF INDIANAPOLIS CORPORATION
Report on Form 10-QSB
for Quarter Ended
September 30, 1996
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Consolidated Balance Sheets - September 30, 1996
and December 31, 1995 . . . . . . . . . . . . . . . . . . . . 1
Consolidated Statements of Operations - Three months
ended September 30, 1996 and 1995 . . . . . . . . . . . . . . 2
Consolidated Statements of Operations - Nine months
ended September 30, 1996 and 1995 . . . . . . . . . . . . . . 3
Consolidated Statements of Cash Flows - Nine months
ended September 30, 1996 and 1995 . . . . . . . . . . . . . . 4
Notes to Consolidated Financial Statements . . . . . . . . . 5
Item 2. Management's Discussion and Analysis . . . . . . . . . . . . 6-9
PART II - OTHER INFORMATION
Item 1. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . 10
Item 2. Changes in Securities . . . . . . . . . . . . . . . . . . . . 10
Item 3. Default Upon Senior Securities . . . . . . . . . . . . . . . 10
Item 4. Submission of Matters to a Vote of Security Holders . . . . . 10
Item 5. Other Information . . . . . . . . . . . . . . . . . . . . . . 10
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . 10
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
<PAGE>
THE NATIONAL BANK OF INDIANAPOLIS CORPORATION
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
September 30 December 31
1996 1995
(unaudited) (unaudited)
------------------------------------
<S> <C> <C>
ASSETS
Cash and due from banks $ 15,501,823 $ 7,832,817
Federal funds sold 15,325,000 12,550,000
Investment securities
U.S. Treasuries 4,441,470 5,533,805
U.S. Government agencies 14,945,014 4,949,355
Collateralized mortgage obligations 17,361,704 9,536,829
Other securities 5,795,267 6,349,731
------------------------------------
Total investment securities 42,543,455 26,369,720
Loans 111,975,464 70,538,097
Less: Allowance for loan losses (1,282,000) (985,000)
------------------------------------
Net loans 110,693,464 69,553,097
Premises and equipment 3,684,104 3,487,107
Accrued interest 1,027,418 599,593
Other assets 121,715 139,094
------------------------------------
Total assets $188,896,979 $120,531,428
====================================
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
Noninterest-bearing demand deposits $ 24,871,437 $ 17,144,277
Money market and saving deposits 72,733,027 47,422,437
Certificates of deposit over $100,000 24,882,580 14,569,622
Other time deposits 39,302,639 19,172,344
------------------------------------
Total deposits 161,789,683 98,308,680
Security repurchase agreements 10,533,891 5,964,512
Other liabilities 863,050 553,231
------------------------------------
Total liabilities 173,186,624 104,826,423
Shareholders' equity:
Common stock, no par value:
Authorized shares; 3,000,000
Issued and outstanding shares; 1996 - 1,827,775
1995 - 1,795,663 18,645,376 18,324,671
Retained earnings-deficit (2,970,861) (2,819,104)
Net unrealized gains (losses) 35,840 199,438
------------------------------------
Total shareholders' equity 15,710,355 15,705,005
------------------------------------
Total liabilities and shareholders' equity $188,896,979 $120,531,428
====================================
</TABLE>
1
<PAGE>
THE NATIONAL BANK OF INDIANAPOLIS CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
<TABLE>
<CAPTION>
Three months ended
September 30
1996 1995
---------------------------
<S> <C> <C>
Interest Income:
Interest and fees on loans 2,014,836 1,104,020
Interest on investment securities 664,731 323,971
Interest on federal funds sold 306,584 295,201
---------------------------
Total interest income 2,986,151 1,723,192
Interest expense 1,730,783 983,642
---------------------------
Net interest income 1,255,368 739,550
Provision for loan losses 99,000 150,000
---------------------------
Net interest income after provision for loan losses 1,156,368 589,550
Other operating income:
Trust fees and commissions 141,553 49,589
Service charges and fees on deposit accounts 47,491 30,995
Net securities gains/(losses) 769 0
Other 39,539 23,695
---------------------------
Total operating income 229,352 104,279
Other operating expenses:
Salaries, wages and employee benefits 734,817 464,935
Net occupancy expense 118,865 72,856
Furniture and equipment expense 118,702 69,600
Data processing 68,325 35,494
Other expenses 288,647 213,114
---------------------------
Total other operating expenses 1,329,356 855,999
---------------------------
Net loss $ 56,364 $ (162,170)
===========================
Net loss per common share (based on average number
of common shares outstanding) $0.03 $(0.11)
===========================
Average number of shares of common stock 1,821,775 1,425,697
===========================
</TABLE>
2
<PAGE>
THE NATIONAL BANK OF INDIANAPOLIS CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
<TABLE>
<CAPTION>
Nine months ended September 30
1996 1995
------------------------------------
<S> <C> <C>
Interest income:
Interest and fees on loans $ 5,224,093 $ 2,772,217
Interest on investment securities 1,485,978 804,171
Interest on federal funds sold 969,661 677,128
------------------------------------
Total interest income 7,679,732 4,253,516
Interest expense 4,335,679 2,323,962
------------------------------------
Net interest income 3,344,053 1,929,554
Provision for loan losses 297,000 450,000
------------------------------------
Net interest income after provision for loan losses 3,047,053 1,479,554
Other operating income:
Trust fees and commissions 426,550 139,045
Service charges and fees on deposit accounts 124,033 77,903
Net securities gains/(losses) 22,950 (2,394)
Other 111,433 58,290
------------------------------------
Total other operating income 684,966 272,844
Other operating expenses:
Salaries, wages and employee benefits 2,061,059 1,265,477
Net occupancy expense 343,629 214,341
Furniture and equipment expense 350,908 199,253
Data processing 201,576 99,872
Other expenses 926,604 694,882
------------------------------------
Total other operating expenses 3,883,776 2,473,825
------------------------------------
Net loss $ (151,757) $ (721,427)
====================================
Net loss per common share (based on average number
of common shares outstanding) $ (0.08) $ (0.51)
====================================
Average number of shares of common stock 1,819,460 1,419,176
====================================
</TABLE>
3
<PAGE>
The National Bank of Indianapolis Corporation
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
Nine Months ended September 30
1996 1995
------------------------------------
<S> <C> <C>
OPERATING ACTIVITIES
Net loss $ (151,757) $ (721,427)
Adjustments to reconcile net loss to net cash
provided (used) by operating activities:
Provision for loan losses 297,000 450,000
Depreciation and amortization 406,229 230,533
Amortization of intangibles - 31,480
Net accretion of investments (120,594) (89,556)
Loss (gain) on sale of investment securities (20,950) 2,394
Increase (decrease) in:
Interest receivable (427,824) (280,634)
Other liabilities 308,184 139,090)
Other assets 17,379 (11,980)
------------------------------------
Net cash provided (used) by operating activities 305,667 (250,100)
------------------------------------
INVESTING ACTIVITIES
Net change in federal funds sold (2,775,000) (11,175,000)
Proceeds from maturities of investment securities
held to maturity 2,722,315 560,350
Proceeds from maturities of investment securities
available for sale 8,135,494 661,837
Proceeds from sales of investment securities 3,004,844 3,470,141
Purchases of investment securities held to maturity (3,906,421) (4,136,110)
Purchases of investment securities available for sale (26,150,021) (7,832,734)
Net increase in loans (41,437,367) (24,918,032)
Purchases of bank premises and equipment (603,227) (963,860)
------------------------------------
Net cash used by investing activities (61,009,383) (44,333,408)
------------------------------------
FINANCING ACTIVITIES
Net increase in deposits 63,481,003 40,141,741
Increase in security repurchase agreements 4,571,014 3,953,047
Proceeds from issuance of stock 320,705 1,787,130
------------------------------------
Net cash provided by financing activities 68,372,722 45,881,918
------------------------------------
Increase in Cash and Cash Equivalents 7,669,006 1,298,410
Cash and Cash Equivalents and Beginning of Year 7,832,817 2,992,429
Cash and Cash Equivalents and End of Period $15,501,823 $ 4,290,839
====================================
Interest Paid $ 4,219,243 $ 2,195,347
====================================
</TABLE>
4
<PAGE>
The National Bank of Indianapolis Corporation
Notes to Consolidated Financial Statements
September 30, 1996
NOTE 1: BASIS OF PRESENTATION
The interim financial data is unaudited; however, in the opinion of
management, the interim data includes all adjustments, consisting only
of normal recurring adjustments, necessary for a fair statement of the
results for the interim periods. Results for interim periods are not
necessarily indicative of the results for a full year. The consolidated
financial statements of The National Bank of Indianapolis Corporation
(the Corporation) have been prepared in accordance with the requirements
of Regulation S-B and supplementary financial information included
therein, if any, has been prepared in accordance with Item 310(b) of
Regulation S-B and, therefore, omit or condense certain footnotes and
other information normally included in financial statements prepared in
accordance with generally accepted accounting principles. These
financial statements should be read in conjunction with the audited
financial statements of the Company and the notes thereto as of December
31, 1995, included in the Corporation's Form 10-SB.
5
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATION
RESULTS OF OPERATIONS
Nine months Ended September 30, 1996 Compared to the Nine months Ended
September 30, 1995
The Company's results of operations depends primarily on the level of
its net interest income, its non-interest income and its operating
expenses. Net loss decreased $569,670 or 78.9% to $151,757 for the nine
months ended September 30, 1996 from $721,427 for the nine months ended
September 30, 1995. This decrease is primarily due to the growth of the
Bank allowing for more interest earning assets and net interest income
compared to the same period during 1995, thereby offsetting more of the
operating expenses.
Net Interest Income
- - -------------------
Net interest income increased $1,414,499 or 73.3% to $3,344,053 for the
nine months ended September 30, 1996, from $1,929,554 for the nine
months ended September 30, 1995. This increase was due to an increase
in interest income of $3,426,216 as compared to only a $2,011,717
increase in interest expense.
Total interest income increased $3,426,216 for the nine months ended
September 30, 1996 to $7,679,732 from $4,253,516 for the nine months
ended September 30, 1995. This increase is primarily a result of
average total loans for the nine months ended September 30, 1996 being
$86,401,749 compared to average total loans of $42,941,914 for the nine
months ended September 30, 1995. The loan portfolio produces the
highest yield of all earning assets. Investment portfolio income
increased $681,807 or 84.8% to $1,485,978 for the period ended September
30, 1996, as compared to $804,171 for the period ended September 30,
1995. This increase is primarily a result of the increase in the
average investment securities portfolio from $16,298,458 for the period
ended September 30, 1995, to $30,659,197 for the period ended September
30, 1996. Interest on federal funds sold also increased due to an
increase in average federal funds sold of $8,859,383 for the period
ended September 30, 1996 over the same period the previous year.
Total interest expense increased $2,011,717 or 86.6% to $4,335,679 for
the nine months ended September 30, 1996, from $2,323,962 for the nine
months ended September 30, 1996. This increase is due to an increase in
interest bearing deposits. Total interest bearing deposits averaged
$109,325,989 for the nine months ended September 30, 1996 as compared to
$55,986,374 for the nine months ended September 30, 1995. The average
cost of interest bearing liabilities for the nine months ended September
30, 1996, was approximately 4.97% as compared to average cost of
interest bearing liabilities of approximately 5.37% for the nine months
ended September 30, 1995.
6
<PAGE>
Provision for Loan Losses
- - -------------------------
The amount charged to the provision for loan losses by the Bank is based
on management's evaluation as to the amounts required to maintain an
allowance adequate to provide for potential losses inherent in the loan
portfolio. The level of this allowance is dependent upon the total
amount of past due and non-performing loans, general economic conditions
and management's assessment of potential losses based upon internal
credit evaluations of loan portfolios and particular loans. Loans are
entirely to borrowers in central Indiana.
During the nine months ended September 30, 1996, $297,000 was charged to
the provision for loan losses compared to $450,000 for the nine months
ended September 30, 1995. At September 30, 1996, the allowance was
$1,282,000 or 1.14% of total loans. This compares to an allowance of
$835,000 or 1.5% as of September 30, 1995. There were no charge-offs
for the nine month periods ended September 30, 1996 and 1995. Loans
past due over 30 days totaled $133,772 or .12% of total loans at
September 30, 1996. There were no loans past due over 30 days at
September 30, 1995.
Other Operating Income
- - ----------------------
Other operating income for the nine months ended September 30, 1996,
increased $412,122 or 151.1% to $684,966 from $272,844 for the nine
months ended September 30, 1995. The increase is primarily due to an
increase in trust fees and commissions of $287,505 for the nine months
ended September 30, 1996. The increase in trust income is attributable
to the increase in average total assets under trust management of
approximately $95,000,000 for the nine months ended September 30, 1996
over the same period the previous year.
Other Operating Expenses
- - ------------------------
Other operating expenses for the nine months ended September 30, 1996
increased $1,409,951 or 60.0% to $3,883,776 from $2,473,825 for the nine
months ended September 30, 1995. Salaries, wages and employee benefits
increased $795,582 or 62.9% to $2,061,059 for the period ended September
30, 1996 from $1,265,477 for the period ended September 30, 1995. This
increase is primarily due to the increase in the number of employees
from 34 full time equivalents at September 30, 1995 to 58 full time
equivalents at September 30, 1996 to staff the expanded trust department
and two new branch locations. Net occupancy expense increased $129,288
for the period ended September 30, 1996 over the same period the
previous year primarily due to the additional rent expense for the trust
department expansion. Furniture and equipment expense increased $151,655
for the period ended September 30, 1996 over the same period the
previous year primarily due to the increased depreciation for the Bash
Road branch and trust department expansion. Data processing expenses
increased $101,704 for the period ended September 30, 1996 over the same
period the previous year primarily due to increased service bureau fees
relating to increased transaction activity by the Bank and trust
department.
7
<PAGE>
LIQUIDITY AND INTEREST RATE SENSITIVITY
The Company must maintain an adequate liquidity position in order to
respond to the short-term demand for funds caused by withdrawals from
deposit accounts, extensions of credit and for the payment of operating
expenses. Maintaining this position of adequate liquidity is
accomplished through the management of a combination of liquid assets;
those which can be converted into cash and access to additional sources
of funds. Primary liquid assets of the Company are cash and due from
banks, federal funds sold, investments held as "available for sale" and
maturing loans. Federal funds sold represent the Company's primary
source of immediate liquidity and were maintained at a level adequate to
meet immediate needs. Federal funds averaged $23,313,595 and
$14,454,212 for the nine months ended September 30, 1996 and 1995,
respectively. Maturities in the Company's loan and investment
portfolios are monitored regularly to avoid matching short-term deposits
with long-term loans and investments. Other assets and liabilities are
also monitored to provide the proper balance between liquidity, safety,
and profitability. This monitoring process must be continuous due to
the constant flow of cash which is inherent in a financial institution.
The Company actively manages its interest rate sensitive assets and
liabilities to reduce the impact of interest rate fluctuations. At
September 30, 1996, the Company's rate sensitive liabilities exceeded
rate sensitive assets due within one year by $15,881,825.
As part of managing liquidity, the Company monitors its loan to deposit
ratio on a daily basis. At September 30, 1996 the ratio was 75.41%
which is within the Company's acceptable range.
The Company experienced an increase in cash and cash equivalents, its
primary source of liquidity, of $7,669,006 during the first nine months
of 1996. The primary financing activity of deposit growth provided net
cash of $63,481,004. Investing activities used $61,009,384 of which
increased lending used $41,437,367 and increased purchase of investment
securities available-for-sale used $26,150,021.
The Company's management believes its liquidity sources are adequate to
meet its operating needs and does not know of any trends, events of
uncertainties that may result in a significant adverse effect on the
Company's liquidity position.
8
<PAGE>
CAPITAL RESOURCES
The Company's only source of capital since commencing operations has
been from issuance of common stock and results of operations. It has
not issued long term debt nor does it have any long term debt facility
arrangements. In late 1995, the Company increased its common stock by
approximately $5,000,000 with the sale of 400,000 shares. Capital for
the Company is above regulatory requirements at September 30, 1996.
Pertinent capital ratios for the Company as of September 30, 1996 are as
follows:
Minimum
Actual Requirements
-------------------------------
Tier 1 risk-based capital ratio 12.39% 6.00%
Total risk-based capital ratio 13.48% 10.00%
Leverage ratio 8.27% 5.00%
Dividends from the Bank to the Company may not exceed the undivided
profits of the Bank (included in consolidated retained earnings) without
prior approval of a federal regulatory agency. In addition, Federal
banking laws limit the amount of loans the Bank may make to the Company,
subject to certain collateral requirements. No dividends were declared,
or loans made, during 1996 or 1995 by the Bank to the Company.
NEW ACCOUNTING PRONOUNCEMENTS
ACCOUNTING FOR MORTGAGE SERVICING RIGHTS
The Financial Accounting Standards Board issued Statement 122,
"Accounting for Mortgage Servicing Rights," to be applied prospectively
in fiscal years beginning after December 15, 1995. The Statement
requires the Bank to account for mortgage servicing rights, obtained
through either the purchase or origination of mortgage loans, at their
relative fair value and separately from the loan asset, for any mortgage
loan to be sold or securitized with servicing rights retained. The
Bank's application of this statement in 1996 has not had a material
effect on operations or the financial statements as no loans have been
sold since operations of the Corporation commenced.
ACCOUNTING FOR STOCK-BASED COMPENSATION
The Financial Accounting Standards Board issued Statement 123,
"Accounting for Stock-Based Compensation," to be effective for financial
statements for fiscal years beginning after December 15, 1995. This
Statement establishes financial accounting and reporting standards for
stock-based employee compensation plans. Those plans include all
arrangements by which employees receive shares of Corporation stock,
including stock options and restricted stock plans. The Corporation's
application of this statement in 1996 is not anticipated to have a
material effect on the financial statements.
9
<PAGE>
OTHER INFORMATION
Item 1. Legal Proceedings
Neither The National Bank of Indianapolis Corporation nor its
subsidiary is a party to any pending legal proceedings which
Management believes would have a material effect upon the
operations or financial condition of The National Bank of
Indianapolis Corporation.
Item 2. Changes in Securities - Not applicable.
Item 3. Defaults Upon Senior Securities - Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders - Not
applicable.
Item 5. Other Information - Not applicable.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits - Exhibit 27 - Financial Data Schedule
(b) Reports on Form 8-K - Not applicable
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.
Date: November 13, 1996
THE NATIONAL BANK OF INDIANAPOLIS CORPORATION
/s/ DEBRA L. ROSS
-----------------------------------
Debra L. Ross
Chief Financial Officer & Chief Accounting Officer
10
<TABLE> <S> <C>
<ARTICLE> 9
<S> <C> <C>
<PERIOD-TYPE> 9-MOS 9-MOS
<FISCAL-YEAR-END> DEC-31-1996 DEC-31-1995
<PERIOD-START> JAN-01-1996 JAN-01-1995
<PERIOD-END> SEP-30-1996 SEP-30-1995
<CASH> 15,501,823 493,523
<INT-BEARING-DEPOSITS> 136,918,247 72,713,840
<FED-FUNDS-SOLD> 15,325,000 17,300,000
<TRADING-ASSETS> 0 0
<INVESTMENTS-HELD-FOR-SALE> 31,329,557 13,290,821
<INVESTMENTS-CARRYING> 11,213,897 8,870,100
<INVESTMENTS-MARKET> 11,276,496 8,960,235
<LOANS> 111,975,464 57,345,271
<ALLOWANCE> (1,282,000) (835,000)
<TOTAL-ASSETS> 188,896,979 104,024,357
<DEPOSITS> 161,789,684 86,771,766
<SHORT-TERM> 10,533,891 4,031,090
<LIABILITIES-OTHER> 863,050 384,678
<LONG-TERM> 0 0
0 0
0 0
<COMMON> 18,645,376 15,418,355
<OTHER-SE> (2,935,021) (2,581,531)
<TOTAL-LIABILITIES-AND-EQUITY> 188,896,979 104,024,357
<INTEREST-LOAN> 5,224,093 2,772,217
<INTEREST-INVEST> 1,485,978 804,171
<INTEREST-OTHER> 969,661 677,128
<INTEREST-TOTAL> 7,679,732 4,253,516
<INTEREST-DEPOSIT> 4,335,679 2,323,962
<INTEREST-EXPENSE> 4,335,679 2,323,962
<INTEREST-INCOME-NET> 3,344,053 1,929,554
<LOAN-LOSSES> 297,000 450,000
<SECURITIES-GAINS> 22,950 (2,394)
<EXPENSE-OTHER> 3,883,776 2,473,825
<INCOME-PRETAX> (151,757) (721,427)
<INCOME-PRE-EXTRAORDINARY> (151,757) (721,427)
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (151,757) (721,427)
<EPS-PRIMARY> (.08) (.51)
<EPS-DILUTED> (.06) (.47)
<YIELD-ACTUAL> 7.21 7.73
<LOANS-NON> 0 0
<LOANS-PAST> 133,771 0
<LOANS-TROUBLED> 0 0
<LOANS-PROBLEM> 0 0
<ALLOWANCE-OPEN> 985,000 385,000
<CHARGE-OFFS> 0 0
<RECOVERIES> 0 0
<ALLOWANCE-CLOSE> 1,282,000 835,000
<ALLOWANCE-DOMESTIC> 0 0
<ALLOWANCE-FOREIGN> 0 0
<ALLOWANCE-UNALLOCATED> 1,282,000 835,000
</TABLE>
