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, 1998
[ ] 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, 1998, there were 1,904,833 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, 1998
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Consolidated Balance Sheets - March 31, 1998
and December 31, 1997 . . . . . . . . . . . . . . . . . . . 1
Consolidated Statements of Operations - Three months
ended March 31, 1998 and 1997 . . . . . . . . . . . . . . . 2
Consolidated Statements of Cash Flows - Three months
ended March 31, 1998 and 1997 . . . . . . . . . . . . . . . 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
1998 1997
(UNAUDITED) (NOTE)
---------------------------------
<S> <C> <C>
ASSETS
Cash and due from banks $ 18,418,448 $ 11,446,150
Federal funds sold 37,790,000 15,425,000
Investment securities
Available-for-sale securities 48,560,017 40,846,522
Held-to-maturity securities 11,869,111 12,298,686
---------------------------------
Total investment securities 60,429,128 53,145,208
Loans 167,010,320 157,905,008
Less: Allowance for loan losses (2,096,385) (1,963,040)
---------------------------------
Net loans 164,913,935 155,941,968
Premises and equipment 3,854,944 3,707,907
Accrued interest 1,480,713 1,685,761
Other assets 1,193,012 546,714
---------------------------------
Total assets $288,080,180 $243,066,708
=================================
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
Noninterest-bearing demand deposits $ 36,014,093 $ 33,601,383
Money market and saving deposits 108,713,844 82,651,421
Time deposits over $100,000 34,193,316 33,384,744
Other time deposits 61,230,575 53,596,091
---------------------------------
Total deposits 240,151,828 203,233,639
Security repurchase agreements 26,270,330 19,341,555
FHLB advances 2,000,000 2,000,000
Other liabilities 1,763,491 1,097,267
---------------------------------
Total liabilities 270,185,649 225,672,461
Shareholders' equity:
Common stock, no par value:
Authorized shares - 1998 and 1997 - 3,000,000
Issued and outstanding shares; 1998 - 1,904,833;
1997-1,901,433 19,699,078 19,661,133
Unearned compensation (650,357) (699,942)
Retained earnings-deficit (1,233,840) (1,567,392)
Accumulated comprehensive income 79,650 448
---------------------------------
Total shareholders' equity 17,894,531 17,394,247
---------------------------------
Total liabilities and shareholders' equity $288,080,180 $243,066,708
=================================
</TABLE>
Note: The balance sheet at December 31, 1997 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
1998 1997
-------------------------------
<S> <C> <C>
Interest income:
Interest and fees on loans $ 3,333,320 $ 2,547,317
Interest on investment securities 842,290 662,632
Interest on federal funds sold 434,342 205,557
-------------------------------
Total interest income 4,609,952 3,415,506
Interest expense:
Interest on deposits 2,345,141 1,784,853
Interest on repurchase agreements 282,540 117,057
Interest on FHLB advances 32,000 32,000
-------------------------------
Total interest expense 2,659,681 1,933,910
-------------------------------
Net interest income 1,950,271 1,481,596
Provision for loan losses 156,000 156,000
-------------------------------
Net interest income after provision for loan losses 1,794,271 1,325,596
Other operating income:
Trust fees and commissions 210,664 158,186
Service charges and fees on deposit accounts 70,653 55,863
Net gain on sale of mortgage loans 19,975 -
Other 97,549 42,076
-------------------------------
Total other operating income 398,841 256,125
Other operating expenses:
Salaries, wages and employee benefits 1,043,138 760,919
Net occupancy 135,028 124,480
Furniture and equipment 111,753 104,947
Professional services 122,901 106,849
Data processing 104,761 83,243
Other 341,979 219,055
-------------------------------
Total other operating expenses 1,859,560 1,399,499
Interest income: -------------------------------
Net income $ 333,552 $ 182,228
===============================
Basic earnings per share $ 0.18 $ 0.10
===============================
Diluted earnings per share $ 0.17 $ 0.10
===============================
</TABLE>
2
<PAGE>
The National Bank of Indianapolis Corporation
Consolidated Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31
1998 1997
--------------------------------
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 333,552 $ 182,228
Adjustments to reconcile net income to net cash provided
(used) by operating activities:
Provision for loan losses 156,000 156,000
Depreciation and amortization 126,697 123,837
Net accretion of investments (159,878) (63,068)
(Increase) decrease in:
Interest receivable 205,048 (16,807)
Other assets
Increase (decrease) in: (705,170) (172,736)
Other liabilities 666,224 (60,448)
--------------------------------
Net cash provided by operating activities 622,473 149,006
INVESTING ACTIVITIES
Net change in federal funds sold (22,365,000) 4,775,000
Proceeds from maturities of investment securities held to
maturity 9,101,619 1,479,028
Proceeds from maturities of investment securities
available for sale 21,044,036 8,099,916
Purchases of investment securities held to maturity (8,266,759) (2,951,250)
Purchases of investment securities available for sale (27,696,864) (20,821,457)
Net increase in loans (9,127,967) (7,409,013)
Purchases of premises and equipment (273,734) (35,707)
--------------------------------
Net cash used by investing activities (37,584,669) (16,863,483)
FINANCING ACTIVITIES
Net increase in deposits 36,918,189 12,096,083
Increase (decrease) in security repurchase agreements 6,928,775 (2,423,948)
Proceeds from issuance of stock 87,530 18,000
--------------------------------
Net cash provided by financing activities 43,934,494 9,690,135
--------------------------------
Increase (decrease) in cash and cash equivalents 6,972,298 (7,024,342)
Cash and cash equivalents at beginning of year 11,446,150 14,776,994
--------------------------------
Cash and cash equivalents at end of period $ 18,418,448 $ 7,752,652
================================
Interest paid $ 2,586,758 $ 1,795,238
================================
</TABLE>
3
<PAGE>
THE NATIONAL BANK OF INDIANAPOLIS
CORPORATION
Notes to Consolidated Financial Statements
March 31, 1998
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, 1998 is not necessarily indicative of the results that
may be expected for the year ended December 31, 1998. 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, 1997.
NOTE 2: INCOME TAXES
The Corporation reported no tax expense for either of the three months ended
March 31, 1998 or March 31, 1997 due to the effects of deductible temporary
differences and reductions of a deferred tax asset valuation allowance.
NOTE 3: NEW ACCOUNTING PRONOUNCEMENTS
As of January 1, 1998, the Corporation adopted Statement 130, "Reporting
Comprehensive Income. Statement 130 establishes new rules for the reporting
and display of comprehensive income and its components; however, the adoption
of this Statement had no impact on the Corporation's net income or
shareholders' equity. Statement 130 requires unrealized gains or losses on
the Corporation's available-for-sale securities, which prior to adoption were
reported separately in shareholders' equity to be included in other
comprehensive income. Prior year financial statements have been reclassified
to conform to the requirements of Statement 130.
During the first quarter of 1998 and 1997, total comprehensive income amounted
to $412,754 and $177,644.
4
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATION
RESULTS OF OPERATIONS
Three months Ended March 31, 1998 Compared to the Three months Ended March 31,
1997:
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 $333,552 for the three
months ended March 31, 1998 compared to a net income of $182,228 for the three
months ended March 31, 1997. 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 1997, thereby offsetting more of the
operating expenses.
Net Interest Income
- -------------------
Net interest income increased $468,675 or 31.6% to $1,950,271 for the three
months ended March 31, 1998 from $1,481,596 for the three months ended March
31, 1997. Total interest income increased $1,194,446 for the three months
ended March 31, 1998 to $4,609,952 from $3,415,506 for the three months ended
March 31, 1997. This increase is primarily a result of average total loans for
the three months ended March 31, 1998 being approximately $164,634,000
compared to average total loans of approximately $126,723,000 for the three
months ended March 31, 1997. The loan portfolio produces the highest yield of
all earning assets. Investment portfolio income increased $179,658 or 27.1%
to $842,290 for the three months ended March 31, 1998, as compared to $662,632
for the three months ended March 31, 1997. This increase is primarily a
result of the increase in the average investment securities portfolio from
approximately $41,011,000 for the three months ended March 31, 1997, to
approximately $51,628,000 for the three months ended March 31, 1998. Interest
on federal funds sold increased due to an increase in average federal funds
sold of approximately $16,255,000 for the three months ended March 31, 1998
over the same period the previous year.
Total interest expense increased $725,771 or 37.5% to $2,659,681 for the three
months ended March 31, 1998, from $1,933,910 for the three months ended March
31, 1997. This increase is due to an increase in interest bearing deposits.
Total interest bearing liabilities averaged approximately $213,338,000 for the
three months ended March 31, 1998 as compared to approximately $157,905,000
for the three months ended March 31, 1997. The average cost of interest
bearing liabilities at March 31, 1998 and March 31, 1997 was approximately
5.0%.
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, 1998, $156,000 was charged to the
provision for loan losses compared to $156,000 for the three months ended
March 31, 1997. At March 31, 1998, the allowance was $2,096,385 or 1.26% of
total loans. This compares to an allowance of $1,511,800 or 1.16% as of March
31, 1997. Loans past due over 30 days totaled $64,922 or 0.03% of total loans
at March 31, 1998 compared to $79,830 or 0.06% of total loans at March 31,
1997.
Other Operating Income
- ----------------------
Other operating income for the three months ended March 31, 1998, increased
$142,716 or 55.7% to $398,841 from $256,125 for the three months ended March
31, 1997. The increase is primarily due to an increase in service charges and
fees on deposit accounts of $14,790 or 2.6% from $55,863 for the three months
ended March 31, 1997 to $70,653 for the three months ended March 31, 1998.
This increase is attributable to the increase in average demand deposit
accounts of $34,415,000 from approximately $98,652,000 at March 31, 1997 to
approximately $133,066,000 at March 31, 1998. The increase in other
operating income is also attributable to an increase in trust fees and
commissions of $52,478 or 33.2% from $158,186 for the three months ended March
31, 1997 to $210,664 for the three months ended March 31, 1998. The increase
in trust income is attributable to the increase in total assets under trust
management of approximately $80,600,000 from approximately $214,400,000 at
March 31, 1997 to approximately $295,000,000 at March 31, 1998. A net gain on
the sale of mortgage loans of $19,975 for the three months ended March 31,
1998 compared to $0 for the three months ended March 31, 1997 also contributed
to the increase in other operating income.
Other Operating Expenses
- ------------------------
Other operating expenses for the three months ended March 31, 1998 increased
$460,061 or 32.9% to $1,859,560 from $1,399,499 for the three months ended
March 31, 1997. Salaries, wages and employee benefits increased $282,219 or
37.1% to $1,043,138 for the three months ended March 31, 1998 from $760,919
for the three months ended March 31, 1997. This increase is primarily due to
the increase in the number of employees from 61 full time equivalents at March
31, 1997 to 76 full time equivalents at March 31, 1998. Net occupancy expense
increased $10,548 for the three months ended March 31, 1998 over the same
period the previous year. Furniture and equipment expense increased $6,806
for the three months ended March 31, 1998 over the same period the previous
year. Professional services expense increased $16,052 or 15.0% from $106,849
for the three months ended March 31, 1997 to $122,901 for the three months
ended March 31, 1998.
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 Corporation's primary source of immediate liquidity and were maintained at
a level adequate to meet immediate needs. Federal funds averaged
approximately $31,851,000 and $15,596,000 for the three months ended March 31,
1998 and 1997, 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,
1998, the Corporation's rate sensitive liabilities exceeded rate sensitive
assets due within one year by $12,542,251.
As part of managing liquidity, the Corporation monitors its loan to deposit
ratio on a daily basis. At March 31, 1998 the ratio was 69.5 percent which is
within the Corporation's acceptable range.
The Corporation experienced an increase in cash and cash equivalents, its
primary source of liquidity, of $6,972,298 during the first three months of
1998. The primary financing activity of deposit growth provided net cash of
$36,918,189. Lending used $9,127,967, investments used $5,817,968, and
increasing federal funds sold used $22,365,000. 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, 1998. Pertinent
capital ratios for the Corporation as of March 31, 1998 are as follows:
Minimum
Actual Requirements
------ ------------
Tier 1 risk-based capital ratio 9.88% 4.0%
Total risk-based capital ratio 11.04% 8.0%
Leverage ratio 6.74% 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 1998 or 1997 by the Bank to the Corporation.
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 Holder - 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: May 5, 1998
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-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 12,418,448
<INT-BEARING-DEPOSITS> 6,000,000
<FED-FUNDS-SOLD> 37,790,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 48,560,017
<INVESTMENTS-CARRYING> 11,869,111
<INVESTMENTS-MARKET> 11,986,869
<LOANS> 167,010,320
<ALLOWANCE> (2,096,385)
<TOTAL-ASSETS> 288,080,180
<DEPOSITS> 240,151,828
<SHORT-TERM> 26,270,330
<LIABILITIES-OTHER> 1,763,491
<LONG-TERM> 2,000,000
0
0
<COMMON> 19,048,721
<OTHER-SE> (1,154,190)
<TOTAL-LIABILITIES-AND-EQUITY> 288,080,180
<INTEREST-LOAN> 3,333,320
<INTEREST-INVEST> 842,290
<INTEREST-OTHER> 434,342
<INTEREST-TOTAL> 4,609,952
<INTEREST-DEPOSIT> 2,345,141
<INTEREST-EXPENSE> 2,659,681
<INTEREST-INCOME-NET> 1,950,271
<LOAN-LOSSES> 156,000
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 398,841
<INCOME-PRETAX> 333,552
<INCOME-PRE-EXTRAORDINARY> 333,552
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 333,552
<EPS-PRIMARY> 0.18
<EPS-DILUTED> 0.17
<YIELD-ACTUAL> 7.41
<LOANS-NON> 32,525
<LOANS-PAST> 64,922
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 1,963,040
<CHARGE-OFFS> 24,406
<RECOVERIES> 1,750
<ALLOWANCE-CLOSE> 2,096,385
<ALLOWANCE-DOMESTIC> 0
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 2,096,385
</TABLE>
