U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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 MARCH 31, 1997
[ ] 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 March 31, 1997, there were 1,823,575 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 10Q-SB
for Quarter Ended
March 31, 1997
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Consolidated Balance Sheets - March 31, 1997
and December 31, 1996 . . . . . . . . . . . . . . . . . . . . . 1
Consolidated Statements of Operations - Three months
ended March 31, 1997 and 1996 . . . . . . . . . . . . . . . . . 2
Consolidated Statements of Cash Flows - Three months
ended March 31, 1997 and 1996 . . . . . . . . . . . . . . . . . 3
Notes to Consolidated Financial Statements . . . . . . . . . . . 4
Item 2. Management's Discussion and Analysis . . . . . . . . . . . . 5 - 8
PART II - OTHER INFORMATION
Item 1. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . 9
Item 2. Changes in Securities . . . . . . . . . . . . . . . . . . . . . 9
Item 3. Default Upon Senior Securities . . . . . . . . . . . . . . . . . 9
Item 4. Submission of Matters to a Vote of Security Holders . . . . . . 9
Item 5. Other Information . . . . . . . . . . . . . . . . . . . . . . . 9
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . . . 9
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
<PAGE>
The National Bank of Indianapolis Corporation
Consolidated Balance Sheets
<TABLE>
<CAPTION>
MARCH 31 DECEMBER 31
1997 1996
(UNAUDITED) (NOTE)
-----------------------------------
<S> <C> <C>
ASSETS
Cash and due from banks $ 7,752,652 $ 14,776,994
Federal funds sold 15,900,000 20,675,000
Investment securities:
Available-for-sale securities 41,665,495 28,981,801
Held-to-maturity securities 11,478,816 10,005,711
-----------------------------------
Total investment securities 53,144,311 38,987,512
Loans 130,240,586 122,831,573
Less: Allowance for loan losses (1,511,800) (1,355,800)
-----------------------------------
Net loans 128,728,786 121,475,773
Premises and equipment 3,487,987 3,576,117
Accrued interest 1,214,317 1,197,510
Other assets 602,209 429,473
-----------------------------------
Total assets $ 210,830,262 $ 201,118,379
===================================
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
Noninterest-bearing demand deposits 25,935,172 $30,401,651
Money market and saving deposits 82,262,322 71,989,482
Time deposits over $100,000 28,759,749 26,213,617
Other time deposits 45,286,902 41,543,312
-----------------------------------
Total deposits 182,244,145 170,148,062
Security repurchase agreements 9,559,401 11,983,349
FHLB advances 2,000,000 2,000,000
Other liabilities 927,216 987,664
-----------------------------------
Total liabilities $ 194,730,762 $ 185,119,075
Shareholders' equity:
Common stock, no par value:
Authorized shares - 3,000,000
Issued and outstanding shares; 1997 - 1,823,575;
1996 - 1,821,775 18,663,376 18,645,376
Retained earnings-deficit (2,559,292) (2,741,520)
Net unrealized gains (losses) on available-for-sale securities (4,584) 95,448
-----------------------------------
Total shareholders' equity 16,099,500 15,999,304
-----------------------------------
Total liabilities and shareholders' equity $ 210,830,262 $ 201,118,379
===================================
</TABLE>
Note: The balance sheet at December 31, 1996 has been derived from the audited
financial statements at that date but does not include all of the information
and footnotes required by generally accepted accounting principles for complete
financial statements. See notes to condensed consolidated financial statements.
1
<PAGE>
The National Bank of Indianapolis Corporation
Consolidated Statements of Income
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31
1997 1996
------------------------------------
<S> <C> <C>
Interest income:
Interest and fees on loans $ 2,547,317 $ 1,495,917
Interest on investment securities 662,632 394,254
Interest on federal funds sold 205,557 291,742
------------------------------------
Total interest income 3,415,506 2,181,913
Interest expense:
Interest on deposits 1,784,853 1,112,351
Interest on repurchase agreements 117,057 80,773
Interest on FHLB advances 32,000 -
------------------------------------
Total interest expense 1,933,910 1,193,124
------------------------------------
Net interest income 1,481,596 988,789
Provision for loan losses 156,000 99,000
------------------------------------
Net interest income after provision for loan losses 1,325,596 889,789
Other operating income:
Trust fees and commissions 158,186 141,075
Service charges and fees on deposit accounts 55,863 35,487
Net securities gains (losses) - 22,180
Other 42,076 35,665
------------------------------------
Total other operating income 256,125 234,407
Other operating expenses:
Salaries, wages and employee benefits 760,919 687,790
Net occupancy expense 124,480 111,780
Furniture and equipment expense 104,947 106,879
Professional services 106,849 100,998
Data processing 83,243 62,484
Other expenses 219,055 222,201
------------------------------------
Total other operating expenses 1,399,499 1,292,132
------------------------------------
Net income (loss) $ 182,228 $ (167,936)
====================================
Net income (loss) per common share (based on average number
of common shares outstanding) $ 0.10 $ (0.09)
====================================
Average number of shares of common stock 1,823,155 1,816,209
====================================
</TABLE>
2
<PAGE>
The National Bank of Indianapolis Corporation
Consolidated Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31
1997 1996
---------------------------------
<S> <C> <C>
OPERATING ACTIVITIES
Net income (loss) $ 182,228 $ (167,936)
Adjustments to reconcile net income (loss) to net cash provided
(used) by operating activities:
Provision for loan losses 156,000 99,000
Depreciation and amortization 123,837 121,919
Net accretion of investments (63,068) (42,136)
Increase (decrease) in:
Interest receivable (16,807) (163,306)
Other assets (172,736) (108,512)
Other liabilities (60,448) 194,471
---------------------------------
Net cash provided (used) by operating activities 149,006 (66,500)
INVESTING ACTIVITIES
Net change in federal funds sold 4,775,000 (18,750,000)
Loss (gain) on sale of investment securities available for sale - (22,180)
Proceeds from maturities of investment securities held to
maturity 1,479,028 559,216
Proceeds from maturities of investment securities
available for sale 8,099,916 2,000,000
Proceeds from sales of investment securities available for
sale - 2,003,438
Purchases of investment securities held to maturity (2,951,250) (497,656)
Purchases of investment securities available for sale (20,821,457) (3,042,919)
Net increase in loans (7,409,013) (8,517,453)
Purchases of premises and equipment (35,707) (324,543)
---------------------------------
Net cash used by investing activities (16,863,483) (26,592,097)
FINANCING ACTIVITIES
Net increase in deposits 12,096,083 23,033,303
Increase (decrease) in security repurchase agreements (2,423,948) 1,057,757
Proceeds from issuance of stock 18,000 290,813
---------------------------------
Net cash provided by financing activities 9,690,135 24,381,873
---------------------------------
Decrease in cash and cash equivalents (7,024,342) (2,276,724)
Cash and cash equivalents at beginning of year 14,776,994 7,832,817
---------------------------------
Cash and cash equivalents at end of period $ 7,752,652 $ 5,556,093
=================================
Interest paid $ 1,795,238 $ 2,195,347
=================================
</TABLE>
3
<PAGE>
THE NATIONAL BANK OF INDIANAPOLIS
CORPORATION
Notes to Consolidated Financial Statements
March 31, 1997
NOTE 1: BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-QSB and
Article 10 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of management, all
adjustments (consisting of normal recurring accruals) considered necessary for
a fair presentation have been included. Operating results for the three month
period ended March 31, 1997 is not necessarily indicative of the results that
may be expected for the year ended December 31, 1997. For further information,
refer to the consolidated financial statements and footnotes thereto included
in the Corporation's Form 10-KSB for the year ended December 31, 1996.
4
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATION
RESULTS OF OPERATIONS
Three months Ended March 31, 1997 Compared to the Three months Ended March 31,
1996:
The Corporation's results of operations depends primarily on the level of its
net interest income, its non-interest income and its operating expenses. Net
interest income depends on the volume of and rates associated with interest
earning assets and interest bearing liabilities which results in the net
interest spread. The Corporation had net income of $182,228 for the three
months ended March 31, 1997 compared to a net loss of $167,936 for the three
months ended March 31, 1996. This change 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 1996, thereby offsetting more of the
operating expenses.
Net Interest Income
- -------------------
Net interest income increased $492,807 or 49.8% to $1,481,596 for the three
months ended March 31, 1997 from $988,789 for the three months ended March 31,
1996. Total interest income increased $1,233,593 for the three months ended
March 31, 1997 to $3,415,506 from $2,181,913 for the three months ended March
31, 1996. This increase is primarily a result of average total loans for the
three months ended March 31, 1997 being approximately $126,723,000 compared to
average total loans of approximately $73,819,000 for the three months ended
March 31, 1996. The loan portfolio produces the highest yield of all earning
assets. Investment portfolio income increased $268,378 or 68.1% to $662,632
for the three months ended March 31, 1997, as compared to $394,254 for the
three months ended March 31, 1996. This increase is primarily a result of the
increase in the average investment securities portfolio from approximately
$24,837,000 for the three months ended March 31, 1996, to approximately
$41,011,000 for the three months ended March 31, 1997. Interest on federal
funds sold decreased due to a decrease in average federal funds sold of
approximately $6,371,000 for the three months ended March 31, 1997 over the
same period the previous year.
Total interest expense increased $740,786 or 62.1% to $1,933,910 for the three
months ended March 31, 1997, from $1,193,124 for the three months ended March
31, 1996. This increase is due to an increase in interest bearing deposits
and an advance from FHLB. Total interest bearing liabilities averaged
approximately $157,905,000 for the three months ended March 31, 1997 as
compared to approximately $93,584,000 for the three months ended March 31,
1996. The average cost of interest bearing liabilities at March 31, 1997, was
approximately 5.00% as compared to average cost of interest bearing
liabilities of approximately 4.93% at March 31, 1996. The rate increase
was due to an overall movement in the market.
5
<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 three months ended March 31, 1997, $156,000 was charged to the
provision for loan losses compared to $99,000 for the three months ended March
31, 1996. At March 31, 1997, the allowance was $1,511,800 or 1.16% of total
loans. This compares to an allowance of $1,084,000 or 1.37% as of March 31,
1996. Loans past due over 30 days totaled $79,830 or 0.06% of total loans at
March 31, 1997. There were no loans past due over 30 days at March 31, 1996.
Other Operating Income
- ----------------------
Other operating income for the three months ended March 31, 1997, increased
$21,718 or 9.3% to $256,125 from $234,407 for the three months ended March 31,
1996. The increase is primarily due to an increase in service charges and
fees on deposit accounts of $20,376 or 57.4% from $35,487 for the three months
ended March 31, 1996 to $55,863 for the three months ended March 31, 1997.
This increase is attributable to the increase in average demand deposit
accounts of $29,233,000 from approximately $69,419,000 at March 31, 1996 to
approximately $98,652,000 at March 31, 1997. The increase in other operating
income is also attributable to an increase in trust fees and commissions of
$17,111 or 12.13% from $141,075 for the three months ended March 31, 1996 to
$158,186 for the three months ended March 31, 1997. The increase in trust
income is attributable to the increase in total assets under trust management
of approximately $36,600,000 from approximately $177,800,000 at March 31, 1996
to approximately $214,400,000 at March 31, 1997.
Other Operating Expenses
- ------------------------
Other operating expenses for the three months ended March 31, 1997 increased
$107,367 or 8.3% to $1,399,499 from $1,292,132 for the three months ended
March 31, 1996. Salaries, wages and employee benefits increased $73,129 or
10.6% to $760,919 for the three months ended March 31, 1997 from $687,790 for
the three months ended March 31, 1996. This increase is primarily due to the
increase in the number of employees from 58 full time equivalents at March 31,
1996 to 61 full time equivalents at March 31, 1997. Net occupancy expense
increased $12,700 for the three months ended March 31, 1997 over the same
period the previous year primarily due to the additional expense related to
the remodeling of the trust department. Furniture and equipment expense
decreased $1,932 for the three months ended March 31, 1997 over the same
period the previous year primarily due to a reduction in depreciation expense
resulting from fully depreciated assets. Professional services expense
increased $5,851 or 5.8% from $100,998 for the three months ended March 31,
1996 to $106,849 for the three months ended March 31, 1997 due to increased
costs associated with initial public reporting. Data processing expenses
increased $20,759 for the three months ended March 31, 1997 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.
6
<PAGE>
LIQUIDITY AND INTEREST RATE SENSITIVITY
The Corporation 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 Corporation are cash and due from banks, federal funds sold, investments
held as available for sale and maturing loans. Federal funds sold represent
the Corporations primary source of immediate liquidity and were maintained at
a level adequate to meet immediate needs. Federal funds averaged
approximately $15,596,000 and $21,967,000 for the three months ended March 31,
1997 and 1996, respectively. Maturities in the Corporation'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 Corporation actively manages its interest rate sensitive assets and
liabilities to reduce the impact of interest rate fluctuations. At March 31,
1997, the Corporation's rate sensitive liabilities exceeded rate sensitive
assets due within one year by $15,914,000.
As part of managing liquidity, the Corporation monitors its loan to deposit
ratio on a daily basis. At March 31, 1997 the ratio was 71.5 percent which is
within the Corporation's acceptable range.
The Corporation experienced a decrease in cash and cash equivalents, its
primary source of liquidity, of $7,024,342 during the first three months of
1997. The primary financing activity of deposit growth provided net cash of
$9,672,135. Lending used $7,409,013, investments used $14,193,763, and,
decreasing federal funds sold provided $4,775,000. The Corporation's
management believes its liquidity sources are adequate to meet its operating
needs and does not know of any trends, events or uncertainties that may result
in a significant adverse effect on the Corporation's liquidity position.
7
<PAGE>
CAPITAL RESOURCES
The Corporation'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. The
Bank has incurred indebtedness pursuant to a FHLB advance at a rate of 6.40%
maturing August 1, 2001. The Bank may add indebtedness of this nature in the
future if determined to be in the best interest of the Bank. Capital for the
Corporation is above regulatory requirements at March 31, 1997. Pertinent
capital ratios for the Corporation as of March 31, 1997 are as follows:
Minimum
Actual Requirements
------ ------------
Tier 1 risk-based capital ratio 11.9% 4.0%
Total risk-based capital ratio 13.1% 8.0%
Leverage ratio 8.2% 4.0%
Dividends from the Bank to the Corporation 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 Corporation, subject to
certain collateral requirements. No dividends were declared, or loans made,
during 1997 or 1996 by the Bank to the Corporation.
NEW ACCOUNTING PRONOUNCEMENTS
EARNINGS PER SHARE
In February 1997, the Financial Accounting Standards Board issued Statement
128, Earnings per Share, effective for periods ending after December 15,
1997. At that time, the Corporation will be required to change the method
currently used to compute earnings per share and to restate all prior periods.
Under the new requirements for calculating primary earnings per share, the
dilutive effect of stock options will be excluded. The impact of Statement
128 on the calculation of basic and fully diluted earnings per share is not
expected to be material.
8
<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:
THE NATIONAL BANK OF INDIANAPOLIS CORPORATION
/s/ Debra L. Ross
--------------------------------------
Debra L. Ross
Chief Financial Officer
9
<TABLE> <S> <C>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 7,752,652
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 15,900,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 41,665,495
<INVESTMENTS-CARRYING> 11,478,816
<INVESTMENTS-MARKET> 11,440,425
<LOANS> 130,240,586
<ALLOWANCE> (1,511,800)
<TOTAL-ASSETS> 210,830,262
<DEPOSITS> 182,244,145
<SHORT-TERM> 9,559,401
<LIABILITIES-OTHER> 927,216
<LONG-TERM> 2,000,000
0
0
<COMMON> 18,663,376
<OTHER-SE> (2,563,876)
<TOTAL-LIABILITIES-AND-EQUITY> 210,830,262
<INTEREST-LOAN> 2,547,317
<INTEREST-INVEST> 662,632
<INTEREST-OTHER> 205,557
<INTEREST-TOTAL> 3,415,506
<INTEREST-DEPOSIT> 1,784,853
<INTEREST-EXPENSE> 1,933,910
<INTEREST-INCOME-NET> 1,481,596
<LOAN-LOSSES> 156,000
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 1,399,499
<INCOME-PRETAX> 182,228
<INCOME-PRE-EXTRAORDINARY> 182,228
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 182,228
<EPS-PRIMARY> 0.10
<EPS-DILUTED> 0.10
<YIELD-ACTUAL> 7.33
<LOANS-NON> 77,913
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 1,355,800
<CHARGE-OFFS> 0
<RECOVERIES> 0
<ALLOWANCE-CLOSE> 1,511,800
<ALLOWANCE-DOMESTIC> 0
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 1,511,800
</TABLE>
