<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------------
FORM 10-Q
Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
--------------------------------------
(Mark One)
[X] Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934.
For the quarterly period ended JUNE 30, 1996, or
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934.
For the transition period from to
------------------ ---------------
Commission File Number: 0-26128
NORTHWEST INDIANA BANCORP
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Indiana 35-1927981
- - - --------------------------------------------- ----------------------
(State or other jurisdiction of incorporation (I.R.S. Employer
or organization) Identification Number)
9204 Columbia Avenue
Munster, Indiana 46321
- - - --------------------------------------- -----------
(Address of principal executive office) (ZIP code)
Registrant's telephone number, including area code: (219) 836-9690
----------------
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]
There were 689,777 shares of the registrant's Common Stock, without par value,
outstanding at June 30, 1996.
<PAGE> 2
NORTHWEST INDIANA BANCORP
INDEX
-----
<TABLE>
<CAPTION>
Page
Number
------
<S> <C>
PART I. Consolidated Financial Statements
Item 1. Consolidated Financial Statements of NorthWest Indiana Bancorp
Consolidated Balance Sheets, June 30, 1996 and December 31, 1995 1
Consolidated Statements of Income, Three Months and Six Months
Ended June 30, 1996 and 1995 2
Consolidated Statements of Changes in Stockholders' Equity, Three
Months and Six Months Ended June 30, 1996 and 1995 3
Consolidated Statements of Cash Flow, Six Months Ended June 30,
1996 and 1995 4
Notes to Consolidated Financial Statements 5 - 6
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations 7 - 13
PART II. Other Information 14
SIGNATURES 15
</TABLE>
<PAGE> 3
NORTHWEST INDIANA BANCORP
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
June 30, December 31,
1996 1995
------------- -------------
ASSETS
<S> <C> <C>
Cash and non-interest bearing balances in financial institutions .. $ 6,962,512 $ 6,952,377
Interest bearing balances in financial institutions ............... 2,658,835 6,151,327
Federal funds sold ................................................ 615,000 1,840,000
------------- -------------
Total cash and cash equivalents ............................... 10,236,347 14,943,704
Securities held-to-maturity (market value: June 30, 1996 -
$43,151,000; December 31, 1995 - $36,682,000) ................... 43,683,776 36,404,381
Federal Home Loan Bank common stock
(cost approximates market value) ................................ 1,596,700 1,596,700
Loans held for sale ............................................... 307,294 --
Loans receivable .................................................. 233,956,966 222,292,700
Less: allowance for loan loss ..................................... (2,845,470) (2,829,681)
------------- -------------
Net loans receivable .......................................... 231,111,496 219,463,019
Accrued interest receivable ....................................... 2,203,838 2,091,874
Premises and equipment ............................................ 5,889,237 5,256,785
Foreclosed real estate ............................................ 217,564 86,366
Other assets ...................................................... 1,120,053 1,068,110
------------- -------------
Total assets .................................................. $ 296,366,305 $ 280,910,939
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Non-interest bearing deposits ................................... $ 15,695,871 $ 11,497,478
Interest bearing deposits ....................................... 244,179,699 236,447,211
------------- -------------
Total deposits ................................................ 259,875,570 247,944,689
Borrowed funds .................................................... 6,006,573 3,138,829
Accrued expenses and other liabilities ............................ 2,568,876 2,623,293
------------- -------------
Total liabilities ............................................. 268,451,019 253,706,811
Commitments and contingencies (Note 5)
Stockholders' Equity
Preferred stock, no par or stated value;
10,000,000 shares authorized, none outstanding .................. -- --
Common stock, no par or stated value; 20,000,000 shares authorized;
issued and outstanding; June 30, 1996 - 689,777 shares;
December 31, 1995 - 689,718 shares .............................. 344,889 344,859
Additional paid-in capital ........................................ 2,929,224 2,927,595
Retained earnings - substantially restricted ...................... 24,641,173 23,931,674
------------- -------------
Total stockholders' equity .................................... 27,915,286 27,204,128
------------- -------------
Total liabilities and stockholders' equity .................... $ 296,366,305 $ 280,910,939
============= =============
</TABLE>
See accompanying notes to consolidated financial statements.
(1)
<PAGE> 4
NORTHWEST INDIANA BANCORP
CONSOLIDATED INCOME STATEMENT
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
1996 1995 1996 1995
----------- ---------- ------------ -----------
<S> <C> <C> <C> <C>
Interest income:
Real estate loans ....................................... $ 4,311,462 $4,244,582 $ 8,562,784 $ 8,493,403
Commercial loans ........................................ 395,778 360,043 750,224 709,949
Consumer loans .......................................... 86,719 70,876 166,013 136,747
----------- ---------- ------------ -----------
Total loan interest ................................. 4,793,959 4,675,501 9,479,021 9,340,099
Securities held-to-maturity ............................. 664,867 482,660 1,274,730 929,633
Other interest earning assets ........................... 72,800 112,316 224,841 154,547
----------- ---------- ------------ -----------
Total interest income ............................... 5,531,626 5,270,477 10,978,592 10,424,279
Interest expense:
Deposits ................................................ 2,733,661 2,572,433 5,506,829 4,916,564
Borrowed funds .......................................... 43,593 35,182 79,404 59,175
----------- ---------- ------------ -----------
Total interest expense .............................. 2,777,254 2,607,615 5,586,233 4,975,739
Net interest income ....................................... 2,754,372 2,662,862 5,392,359 5,448,540
Provision for loan losses ................................. 17,500 17,500 32,500 45,000
----------- ---------- ------------ -----------
Net interest income after provision for loan losses ....... 2,736,872 2,645,362 5,359,859 5,403,540
Noninterest income:
Gain/(loss) on sale of interest earning assets .......... (4,638) 3,149 (4,895) 5,926
Fees and service charges ................................ 107,454 101,552 238,968 214,908
Trust operations ........................................ 61,874 37,570 108,119 86,287
Other ................................................... -- 2,571 -- 3,521
----------- ---------- ------------ -----------
Total noninterest income ............................ 164,690 144,842 342,192 310,642
Noninterest expense:
Compensation and benefits ............................... 750,206 720,659 1,545,466 1,451,000
Occupancy and equipment ................................. 261,227 211,440 505,622 428,284
Federal insurance premium ............................... 140,299 131,989 278,430 264,019
Advertising ............................................. 38,962 44,043 84,891 79,458
Data processing ......................................... 73,808 69,210 139,809 131,420
Other ................................................... 367,230 373,445 706,396 733,422
----------- ---------- ------------ -----------
Total noninterest expense ........................... 1,631,732 1,550,786 3,260,614 3,087,603
Income before income taxes ................................ 1,269,830 1,239,418 2,441,437 2,626,579
Income tax expense ........................................ 506,600 493,425 973,200 1,047,000
----------- ---------- ------------ -----------
Net income ................................................ $ 763,230 $ 745,993 $ 1,468,237 $ 1,579,579
=========== ========== ============ ===========
Earnings per common and common equivalent share (Note 6):
Net Income ................................................ $ 1.11 $ 1.08 $ 2.13 $ 2.29
=========== ========== ============ ===========
Dividends declared per common share ....................... $ 0.55 $ 0.55 $ 1.10 $ 1.10
</TABLE>
See accompanying notes to consolidated financial statements
(2)
<PAGE> 5
NORTHWEST INDIANA BANCORP
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
1996 1995 1996 1995
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Balance beginning of period ......................... $ 27,530,810 $ 26,063,948 $ 27,204,128 $ 25,606,009
Stock option plan, 59 shares of common stock
issued at $18.63 - $42.50 per share in 1996 and
527 shares of common stock issued at $18.63 -
$23.00 per share in 1995 ...................... 624 6,872 1,660 10,198
Cash dividends declared, $1.10 per share in
1996 and 1995 ................................. (379,378) (379,357) (758,739) (758,330)
Net income ...................................... 763,230 745,993 1,468,237 1,579,579
------------ ------------ ------------ ------------
Balance end of period ............................... $ 27,915,286 $ 26,437,456 $ 27,915,286 $ 26,437,456
============ ============ ============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
(3)
<PAGE> 6
NORTHWEST INDIANA BANCORP
CONSOLIDATED STATEMENTS OF CASH FLOW
(UNAUDITED)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
1996 1995
------------ -----------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net income ............................................................. $ 1,468,237 $ 1,579,579
------------ -----------
Adjustments to reconcile net income to
net cash provided by operating activities:
Origination of loans for sale ...................................... (580,400) (255,100)
Sale of loans originated for sale .................................. 268,211 307,426
Depreciation and amortization, net of accretion .................... 244,945 190,664
Net gains on sale of loans ......................................... (3,311) (5,926)
Net gains on sale of foreclosed real estate ........................ -- (196)
Provision for loan losses .......................................... 32,500 45,000
Unrealized losses on mortgage loans held for sale .................. 8,206 --
Net change in unearned interest on loans ........................... 3,776 (10,039)
Change in deferred loan fees ....................................... 23,490 (34,717)
Change in interest receivable ...................................... (111,964) (9,398)
Change in other assets ............................................. (51,943) (143,126)
Change in accrued expenses and other liabilities ................... (54,417) (620,284)
------------ -----------
Total adjustments ................................................ (220,907) (535,696)
------------ -----------
Net cash from operating activities ............................ 1,247,330 1,043,883
------------ -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Change in interest bearing time deposits in other financial institutions -- 493,472
Proceeds from maturities of securities held-to-maturity ................ 7,171,429 3,500,000
Purchase of securities held-to-maturity ................................ (14,671,206) (6,494,844)
Purchase of Federal Home Loan Bank stock ............................... -- (171,600)
Principal collected on mortgage-backed securities ...................... 235,437 236,984
Loan participations purchased .......................................... -- (33,440)
Loans made net of payments received .................................... (11,839,441) 1,857,142
Purchase of property plant and equipment ............................... (892,452) (670,042)
Proceeds from sale of foreclosed real estate ........................... -- 87,246
------------ -----------
Net cash from investing activities .................................. (19,996,233) (1,195,082)
------------ -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Change in deposits ..................................................... 11,930,881 5,234,277
Change in borrowed funds ............................................... 2,867,744 (409,710)
Proceeds from issuance of capital stock ................................ 1,660 10,198
Cash dividends paid .................................................... (758,739) (758,330)
------------ -----------
Net cash from financing activities .................................. 14,041,546 4,076,435
------------ -----------
Net change in cash and cash equivalents ............................. (4,707,357) 3,925,236
Cash and cash equivalents at beginning of period ....................... 14,943,704 5,743,060
------------ -----------
Cash and cash equivalents at end of period ............................. $ 10,236,347 $ 9,668,296
============ ===========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest ............................................................ $ 5,569,437 $ 4,941,909
Income taxes ........................................................ $ 755,000 $ 1,103,000
</TABLE>
See accompanying notes to consolidated financial statements
(4)
<PAGE> 7
NORTHWEST INDIANA BANCORP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - BASIS OF PRESENTATION
The consolidated financial statements include the accounts of NorthWest
Indiana Bancorp (the Company), its wholly-owned subsidiary, Peoples Bank SB (the
Bank), and the Bank's wholly-owned subsidiaries. The Company has no other
business activity other than being a holding company for the Bank. The
accompanying unaudited consolidated financial statements were prepared in
accordance with instructions for Form 10-Q and, therefore, do not include all
disclosures required by generally accepted accounting principles for complete
presentation of financial statements. In the opinion of management, the
consolidated financial statements contain all adjustments (consisting only of
normal recurring accruals) necessary to present fairly the balance sheets of the
Company as of June 30, 1996 and December 31, 1995, and the statements of income
and changes in stockholders' equity for the three months and six months ended
June 30, 1996 and 1995, and cash flows for the six months ended June 30, 1996
and 1995. The income reported for the three month and six month periods ended
June 30, 1996 is not necessarily indicative of the results to be expected for
the full year.
NOTE 2 - CONCENTRATIONS OF CREDIT RISK
The Bank grants residential, commercial real estate, commercial
business and installment loans to customers in its primary market area of Lake
County, in northwest Indiana. Substantially all loans are secured by specific
items of collateral including residences, business assets and consumer assets.
NOTE 3 - RECLASSIFICATIONS
Certain amounts reported in the December 31, 1995 consolidated
financial statements have been reclassified to conform to the June 30, 1996
presentation. All reclassifications are of a normal recurring nature.
NOTE 4 - CONSOLIDATED BALANCE SHEETS
The Balance Sheet of December 31, 1995 has been taken from the audited
financial statements at that date.
NOTE 5 - COMMITMENTS AND CONTINGENCIES
The Bank is a party to financial instruments in the normal course of
business to meet financing needs of its customers and to reduce its own exposure
to fluctuating interest rates. These financial instruments include commitments
to make loans and standby letters of credit.
Exposure to credit loss in the event of nonperformance by the other
party to the financial instrument for commitments to make loans and standby
letters of credit is represented by the contractual amount of those instruments.
The Bank uses the same credit policy to make such commitments as it uses for
on-balance-sheet items.
At June 30, 1996 and December 31, 1995, commitments to make loans
totaled $29.8 million and $27.2 million, respectively and standby letters of
credit totaled $486 thousand and $489 thousand, respectively. At June 30, 1996,
$26.2 million (88%) of the commitments were at variable rates.
Since commitments to make loans may expire without being used, the
amount does not necessarily represent future cash commitments. Collateral
obtained upon exercise of the commitment is determined using management's credit
evaluation of the borrower, and may include accounts receivable, inventory,
property, land and other items.
(5)
<PAGE> 8
NOTE 6 - EARNINGS PER COMMON SHARE
The weighted average number of shares used in the calculation of
earnings per share during the three month periods ended June 30, 1996 and 1995
were 689,750 and 689,229, respectively. The weighted average number of shares
used in the calculation of earnings per share during the six month periods ended
June 30, 1996 and 1995 were 689,735 and 689,138, respectively. The effect of
common stock equivalents is not material in these periods.
(6)
<PAGE> 9
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
SUMMARY
NorthWest Indiana Bancorp, an Indiana corporation (NWIB or the
Company), is the holding company for Peoples Bank SB (the Bank), an Indiana
stock savings bank. Peoples Bank SB is a wholly owned subsidiary of NWIB. The
Company has no other business activity other than being the holding company for
Peoples Bank SB. At June 30, 1996, the Company had total assets of $296.4
million and total deposits of $259.9 million. Stockholders' equity totaled $27.9
million or 9.4% of total assets, with book value per share at $40.47. Net income
for the six months ended June 30, 1996, was $1.5 million, or $2.13 per share.
The annualized return on average assets (ROA) was 1.03%, while the annualized
return on average stockholders' equity (ROE) was 10.62%, for the six month
period.
FINANCIAL CONDITION
During the six months ended June 30, 1996, total assets increased by
$15.5 million (5.5%), with interest-earning assets increasing by $14.5 million
(5.4%). Total deposits and borrowed funds increased by $14.8 million (5.9%). At
June 30, 1996, interest-earning assets totaled $282.8 million and represented
95.4% of total assets. Loans receivable and loans held for sale totaled $234.3
million and represented 82.8% of interest-earning assets, 79.0% of total assets
and 90.1% of total deposits. The loan portfolio includes $11.3 million (4.8%) in
construction and development loans, $148.5 million (63.4%) in residential
mortgage loans, $53.0 million (22.6%) in commercial and multifamily real estate
loans, $17.1 million (7.3%) in commercial business loans and $4.4 million (1.9%)
in consumer loans. During the six months ended June 30, 1996, loans increased by
$12.0 million (5.4%), as increased loan demand within the Bank's market area
resulted in growth in the real estate, commercial business and consumer loan
portfolios. Adjustable rate loans comprised 60% of the total investment in loans
at June 30, 1996.
The Bank is primarily a portfolio lender. Mortgage banking activities
are limited to the sale of fixed rate mortgage loans with contractual maturities
of thirty years. These loans are sold in the secondary market because of the
additional exposure to interest rate risk associated with this product. The Bank
retains the servicing on all loans sold in the secondary market. During the six
months ending June 30, 1996, the Bank sold $265 thousand in fixed rate mortgage
loans. The amount includes five loans. At June 30, 1996, the Bank had three
loans, totaling $307 thousand, classified as held for sale.
The primary objective of the investment portfolio is to provide for the
liquidity needs of the Bank and to contribute to profitability by providing a
stable flow of dependable earnings. Funds are generally invested in federal
funds, interest-bearing deposits in other financial institutions, U.S.
government securities and federal agency obligations. Investments are generally
for terms ranging from one day to five years. At June 30, 1996, the investment
portfolio totaled $45.3 million which included $43.7 million in securities
held-to-maturity and $1.6 million in Federal Home Loan Bank (FHLB) of
Indianapolis common stock. The investment portfolio consists of 64.0% in U.S.
government agency debt securities, 27.7% in U.S. government debt securities,
4.8% in U.S. government agency mortgage-backed securities, and 3.5% in FHLB
common stock. In addition, the Bank had $2.7 million in interest-bearing
deposits at the FHLB and $615 thousand in federal funds. During the six months
ended June 30, 1996, the size of the investment portfolio increased by $7.3
million (19.2%), while
(7)
<PAGE> 10
interest-bearing deposits and federal funds decreased by $4.7 million (59%). The
increase in the investment portfolio was due to deposit growth and the
investment of overnight funds into securities.
Management believes that the credit risk profile of the earning asset
portfolio is relatively low. At June 30, 1996, the Bank had $1.1 million in
non-performing loans. The June 30, 1996, balance includes $403 thousand in loans
accounted for on a non-accrual basis and $657 thousand in accruing loans which
were contractually past due 90 days or more. The total of these non-performing
loans represents 0.45% of the total loan portfolio and 0.36% of total assets. At
June 30, 1996, the Bank had $218 thousand in foreclosed real estate. The total
represents 0.07% of total assets.
The table which follows sets forth information with respect to the
number (#) and balances (Amount) of non-performing assets and related ratios for
the periods indicated. The amounts are stated in thousands (000's).
<TABLE>
<CAPTION>
June 30, December 31,
1996 1995
# Amount # Amount
- ------ - ------
<S> <C> <C> <C> <C>
Loans accounted for on a non-accrual basis:
Real estate loans:
Residential 7 $ 238 11 $ 361
Commercial - --- - ---
Commercial business loans 5 119 - ---
Consumer loans 1 46 1 11
-- ------ ---- ------
Total 13 $ 403 12 $ 372
== ====== ==== ======
Accruing loans which are contractually past due 90 days or more:
Real estate loans:
Residential 15 $ 650 19 $637
Commercial - --- - ---
Commercial business loans - --- - ---
Consumer loans 1 7 1 46
-- ------ ---- ------
Total 16 $ 657 20 $ 683
== ====== ==== ======
Total of non-accrual and 90 days or more past due loans 29 $1,060 32 $1,055
== ====== ==== ======
Foreclosed real estate 4 $ 218 2 $ 86
== ====== ==== ======
Ratio of non-performing loans to total assets 0.36% 0.38%
Ratio of non-performing loans to total loans 0.45% 0.47%
Ratio of foreclosed real estate to total assets 0.07% 0.03%
Ratio of non-performing assets to total assets 0.43% 0.41%
</TABLE>
(8)
<PAGE> 11
At June 30, 1996, $572 thousand of the Bank's loans were classified as
substandard. The total represents 22 loans. There were no loans classified as
doubtful or loss. Management does not anticipate that any of the non-performing
loans or classified loans will materially impact future operations, liquidity
or capital resources. At June 30, 1996, there were no material credits which
would cause management to have serious doubts as to the ability of such
borrowers to comply with loan repayment terms.
Because some loans may not be repaid in accordance with contractual
agreements an allowance for loan losses (ALL) has been maintained. While
management may periodically allocate portions of the allowance for specific
problem loans, the entire allowance is available to absorb all credit losses
that arise from the loan portfolio and is not segregated for, or allocated to,
any particular loan or group of loans. During the six months ended June 30,
1996, additions to the ALL account totaled $32 thousand compared to $45 thousand
for the six months ended June 30, 1995. Charge-offs net of recoveries totaled
$17 thousand during the current period. The amount provided during the current
six months was based on loan activity, current economic conditions and
management's assessment of portfolio risk. At June 30, 1996, the balance in the
ALL account totaled $2.8 million, which is considered adequate by management
after evaluation of the loan portfolio, past experience and current economic and
market conditions.
The table below sets forth the allocation of the ALL and related ratios
on the dates indicated. The amounts are stated in thousands (000's).
<TABLE>
<CAPTION>
June 30, 1996 December 31, 1995
------------- -----------------
<S> <C> <C> <C> <C>
Real estate loans:
Residential $ 372 13% $ 372 13%
Commercial 865 30 860 30
Construction & Development 137 5 130 5
Commercial business loans 650 23 650 23
Consumer loans 110 4 110 4
Unallocated 711 25 708 25
------ --- ------ ---
Total $2,845 100% $2,830 100%
====== === ====== ===
Ratio of ALL to loans outstanding 1.21% 1.27%
Ratio of ALL to non-performing loans 268.4% 268.3%
</TABLE>
At June 30, 1996, no portion of the ALL was allocated to impaired loan
balances as the Bank had no loans considered to be impaired loans as of, or for
the six months ended June 30, 1996. The allocation of the ALL reflects
consideration of the facts and circumstances that affect the repayment of
individual loans, as well as, loans which have been pooled as of the evaluation
date.
Deposits are the major source of funds for lending and other investment
purposes. At June 30, 1996, deposits totaled $259.9 million. During the six
months ending June 30, 1996, savings accounts increased $2.1 million (5.1%), NOW
accounts increased $3.7 million (17.5%), checking accounts increased $4.2
million (36.5%), money market deposit accounts (MMDA's) increased $1.4 million
(6.4%) and certificates of deposit increased by $535 thousand (0.4%). At June
30, 1996, the deposit base was comprised of 16.9% savings accounts, 8.7% MMDA's,
9.6% NOW accounts, 6.0% checking accounts and 58.8% certificates of deposit. At
(9)
<PAGE> 12
June 30, 1996, repurchase agreements totaled $3.7 million. Other short-term
borrowings totaled $2.3 million. The Company had no long-term borrowings.
LIQUIDITY AND CAPITAL RESOURCES
Liquidity refers to the ability to generate sufficient cash to fund
current loan demand, meet savings deposit withdrawals and pay operating
expenses. Changes in the liquidity position result from operating, investing and
financing activities. Cash flows from operating activities are generally the
cash effects of transactions and other events that enter into the determination
of net income. The primary investing activities include loan originations, loan
repayments, investment in interest-bearing deposits in other financial
institutions, and the purchase and maturity of investment securities. Financing
activities focus almost entirely on the generation of customer deposits. In
addition, the Bank offers repurchase agreements which generally mature within
one year and has established a line of credit with the FHLB.
During the six months ended June 30, 1996, there was a net decrease in
cash and cash equivalents of $4.7 million. The reduction was due to the $4.7
million decrease in interest-bearing deposits in other financial institutions
and federal funds, as funds were used for loan originations and the purchase of
securities. The primary sources of cash were deposit growth which totaled $11.9
million and cash provided by operating activities of $1.2 million. The six
months ended June 30, 1996, reflects a significant increase in loan originations
and deposit growth compared to the six months ended June 30, 1995. Cash was also
used for the payment of common stock dividends of $759 thousand and the
construction of a new branch facility located in Merrillville, Indiana. The new
facility represents the Company's commitment to quality service and community
development, and provides opportunities to expand market share by attracting
additional deposits and loans from the surrounding areas. The new facility is
scheduled to open during the third quarter of 1996. The new facility is not
expected to have a material impact on noninterest expense.
At June 30, 1996, outstanding commitments to fund loans totaled $29.8
million. Approximately 88% of the commitments were at variable rates. The Bank
has sufficient cash flow and borrowing capacity to fund outstanding commitments
and to maintain proper levels of liquidity.
Management strongly believes that safety and soundness is enhanced by
maintaining a high level of capital. During the six months ended June 30, 1996,
stockholders' equity increased by $711 thousand (2.6%). The increase resulted
primarily from earnings of $1.5 million during the period. In addition, $2
thousand represents proceeds from the exercised rights of 60 stock options. The
reduction of $759 thousand represents cash dividends for the six month period.
The Company is subject to risk-based capital guidelines adopted by the
Board of Governors of the Federal Reserve System (the FRB), and the Bank is
subject to risk-based capital guidelines adopted by the FDIC. As applied to the
Company and the Bank, the FRB and FDIC capital requirements are substantially
identical. The Company and the Bank are required to maintain a total risk-based
capital ratio of 8%, of which 4% must be Tier I capital. In addition, the FRB
and FDIC regulations provide for a minimum Tier I leverage ratio (Tier I capital
to adjusted total assets) of 3% for financial institutions that meet certain
specified criteria, including that they have the highest regulatory rating and
are not experiencing or anticipating significant growth. All other financial
institutions are required to maintain a Tier I leverage ratio of 3% plus an
additional cushion of at least one to two percent.
(10)
<PAGE> 13
The following table shows that, at June 30, 1996, the Company's capital
exceeded all regulatory capital requirements. At June 30, 1996, the Company's
and the Bank's regulatory capital ratios were identical.
<TABLE>
<CAPTION>
Actual Required
------ --------
<S> <C> <C>
Tier I capital to risk-weighted assets 15.4% 4.0%
Total risk-based capital to risk-weighted assets 16.7% 8.0%
Tier I capital leverage ratio 9.4% 3.0%
</TABLE>
RESULTS OF OPERATIONS - COMPARISON OF THE QUARTER ENDED JUNE 30, 1996 TO THE
QUARTER ENDED JUNE 30, 1995
The Company's earnings are dependent upon the earnings of the Bank. The
Bank's earnings are primarily dependent upon net interest margin. The net
interest margin is the difference between interest income earned on loans and
investments and interest expense paid on deposits and borrowings stated as a
percentage of average total assets. Net income for the quarter ended June 30,
1996, was $763 thousand compared to $746 thousand for the quarter ended June 30,
1995, an increase of $17 thousand (2.3%). The earnings represent a return on
average assets of 1.05% for the current quarter compared to 1.10% for the
quarter ended June 30, 1995. The return on average equity was 10.94% for the
current quarter compared to 11.34% for the quarter ended June 30, 1995. The
increase in earnings was due to the growth of interest-earning assets, a
reduction in the cost of funds and increased noninterest income.
Net interest income for the quarter ended June 30, 1996, increased by
$92 thousand (3.4%) compared to the three months ended June 30, 1995. The
improvement in net interest income was due to total interest income increasing
by $261 thousand (5.0%) during the current period, while total interest expense
increased by $169 thousand (6.5%). The net interest margin for the current
quarter was 3.81%, compared to 3.93% for the three months ended June 30, 1995.
During the three months ended June 30, 1996, interest income from loans
increased by $261 thousand (5.0%) compared to the three months ended June 30,
1995. The weighted average yield on loans outstanding was 8.36% for the current
quarter compared to 8.46% for the quarter ended June 30, 1995. Loan growth has
contributed to the increase in interest income. During the three months ended
June 30, 1996, interest income on investments and other deposits increased by
$143 thousand (24.0%) compared to the quarter ended June 30, 1995. The increase
was due to higher yields and portfolio growth during the current quarter. The
weighted average yield on the investment portfolio for the quarter ended June
30, 1996, was 6.02% compared to 5.87% for the quarter ended June 30, 1995. The
combined weighted average yield on total interest-earning assets was 7.95% for
the quarter ended June 30, 1996, compared to 8.06% for the quarter ended June
30, 1995.
Interest expense for deposits increased by $161 thousand (6.3%), during
the current quarter compared to the three months ended June 30, 1995. The
increase was due to deposit growth. The weighted average rate paid on deposits
for the three months ended June 30, 1996, was 4.29% compared to 4.32% for the
quarter ended June 30, 1995. Interest expense on short-term borrowings increased
by $8 thousand during the current quarter due to higher average balances for
repurchase agreements during the period. The combined weighted average
(11)
<PAGE> 14
rate paid on deposits and borrowings for the quarter ended June 30, 1995, was
4.29% compared to 4.33% for the quarter ended June 30, 1995. The impact of the
7.95% return on interest-earning assets and the 4.29% cost of funds resulted in
an interest rate spread of 3.65% for the current quarter, compared to 3.73% for
the quarter ended June 30, 1995.
Noninterest income for the quarter ended June 30, 1996, was $20
thousand (13.7%) greater than that reported during the three months ended June
30, 1995. The improvement was due to increased Trust operations income of $24
thousand (64.7%) and increased income from fees and service charges of $6
thousand (5.8%). Noninterest expenses for the quarter ended June 30, 1996,
increased by $81 thousand (5.2%) compared to the three months ended June 30,
1995. The increase in occupancy and equipment expense was due to the operation
of the new East Chicago, Indiana, branch facility which opened during September
1995 and depreciation related to investments in technology. Other expense
changes were due to standard increases in bank operations. Despite the increase
in operating expenses, the Company's efficiency ratio for the quarter ended June
30, 1996, was 55.9%. The ratio is determined by dividing total noninterest
expense by the sum of net interest income and total noninterest income for the
period.
Income tax expenses for the three months ended June 30, 1996, totaled
$507 thousand compared to $493 thousand for the three months ended June 30,
1995, an increase of $13 thousand (2.7%). The increase was due to an increase in
pretax earnings during the current quarter.
RESULTS OF OPERATIONS - COMPARISON OF THE SIX MONTHS ENDED JUNE 30, 1996 TO THE
SIX MONTHS ENDED JUNE 30, 1995
Net income for the six months ended June 30, 1996, was $1.5 million
compared to $1.6 million for the six months ended June 30, 1995, a decrease of
$111 thousand ( 7.1%). The earnings represent a return on average assets of
1.03% for the current six months compared to 1.18% for the six months ended June
30, 1995. The return on average equity was 10.62% for the current period
compared to 12.14% for the six months ended June 30, 1995. The decrease in
earnings was due to a decrease in net interest margin, caused by lower yields on
interest-earning assets and a higher cost of funds during the current period.
Net interest income for the six months ended June 30, 1996, decreased
by $56 thousand (1.0%) compared to the six months ended June 30, 1995. While
total interest income increased by $554 thousand (5.3%) during the period, total
interest expense increased by $610 thousand (12.3%), causing the decrease in net
interest income. The net interest margin for the current period was 3.77%,
compared to 4.05% for the six months ended June 30, 1995.
During the six months ended June 30, 1996, interest income from loans
increased by $139 thousand (1.5%) compared to the six months ended June 30,
1995. The weighted average yield on loans outstanding was 8.38% for the current
period compared to 8.42% for the six months ended June 30, 1995. Larger
portfolio balances have contributed to the increase in interest income. During
the six months ended June 30, 1996, interest income on investments and other
deposits increased by $415 thousand (38.4%) compared to the six months ended
June 30, 1995. The increase was due to higher yields and portfolio growth during
the current period. The weighted average yield on the investment portfolio for
the six months ended June 30, 1996, was 6.06% compared to 5.81% for the six
months ended June 30, 1995. The combined weighted average yield on
(12)
<PAGE> 15
total interest-earning assets was 7.97% for the six months ended June 30, 1996,
compared to 8.04% for the six months ended June 30, 1995.
Interest expense for deposits increased by $590 thousand (12.0%),
during the current six months compared to the six months ended June 30, 1995.
The increase was due to the repricing of existing deposits at higher interest
rates and deposit growth. The weighted average rate paid on deposits for the six
months ended June 30, 1996, was 4.37% compared to 4.18% for the six months ended
June 30, 1995. Interest expense on short-term borrowings increased by $20
thousand during the current six months due to higher average balances for
repurchase agreements during the period. The combined weighted average rate paid
on deposits and borrowings for the six months ended June 30, 1996, was 4.37%
compared to 4.19% for the six months ended June 30, 1995. The impact of the
7.97% return on interest-earning assets and the 4.37% cost of funds resulted in
an interest rate spread of 3.60% for the current six months, compared to 3.86%
for the six months ended June 30, 1995.
Noninterest income for the six months ended June 30, 1996, was $32
thousand (10.2%) greater than that reported during the six months ended June 30,
1995. The improvement was due to increased Trust operations income of $22
thousand (25.3%) and increased income from fees and service charges of $24
thousand (11.2%). Noninterest expenses for the six months ended June 30, 1996,
increased by $173 thousand (5.6%) compared to the six months ended June 30,
1995. The increase in compensation and benefits was due to additional staffing
and annual salary increases. The increase in occupancy and equipment expense was
due to the operation of the new East Chicago, Indiana, branch facility which
opened during September 1995 and depreciation related to investments in
technology. Other expense changes were due to standard increases in bank
operations. The Company's efficiency ratio for the six months ended June 30,
1996, was 56.9%. The ratio is determined by dividing total noninterest expense
by the sum of net interest income and total noninterest income for the period.
Income tax expenses for the six months ended June 30, 1996, totaled
$973 thousand compared to $1.0 million for the six months ended June 30, 1995, a
decrease of $74 thousand (7.1%). The decrease was due to a decrease in pretax
earnings during the current period.
(13)
<PAGE> 16
PART II - Other Information
---------------------------
Item 1. Legal Proceedings
-----------------
The registrant is not party to any legal proceedings.
No significant changes in legal proceedings of the Bank
occurred during the quarter.
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
---------------------------------------------------
NorthWest Indiana Bancorp held its annual meeting of
shareholders on April 18, 1996. At this meeting the security
holders:
1. Elected the following directors for the registrant,
whose term of office continued after the meeting:
<TABLE>
<CAPTION>
Number of Votes
For Withheld
--------- --------
<S> <C> <C>
James J. Crandall 522,537 3,086
Lourdes M. Dennison 522,537 3,086
Gloria C. Gray 522,537 3,086
</TABLE>
Other directors whose term of office as a director
continued after the meeting include:
<TABLE>
<S> <C> <C>
David A. Bochnowski Leroy F. Cataldi
Jerome F. Vrabel John J. Wadas, Jr.
</TABLE>
2. Ratified the appointment of Crowe, Chizek and Company as
the auditors for the registrant for the year ending
December 31, 1996.
<TABLE>
Number of Votes
For Against Abstain
--- ------- -------
<S> <C> <C> <C>
522,045 50 3,528
</TABLE>
Item 5. Other Information
-----------------
Not Applicable.
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
(a) Exhibits.
--------
(27) Financial Data Schedule
(b) Reports on Form 8-K. None.
-------------------
(14)
<PAGE> 17
SIGNATURES
----------
Pursuant to the requirement 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.
NORTHWEST INDIANA BANCORP
-------------------------
Date: August 5, 1996 /s/ David A. Bochnowski
-------------------------------------------------
David A. Bochnowski
Chairman of the Board and Chief Executive Officer
Date: August 5, 1996 /s/ Edward J. Furticella
-------------------------------------------------
Edward J. Furticella
Vice President, Chief Financial Officer and Treasurer
(15)
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 6,963
<INT-BEARING-DEPOSITS> 2,659
<FED-FUNDS-SOLD> 615
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 1,597
<INVESTMENTS-CARRYING> 43,684
<INVESTMENTS-MARKET> 43,151
<LOANS> 234,264
<ALLOWANCE> 2,845
<TOTAL-ASSETS> 296,366
<DEPOSITS> 259,876
<SHORT-TERM> 6,007
<LIABILITIES-OTHER> 2,568
<LONG-TERM> 0
<COMMON> 345
0
0
<OTHER-SE> 27,570
<TOTAL-LIABILITIES-AND-EQUITY> 296,366
<INTEREST-LOAN> 9,479
<INTEREST-INVEST> 1,275
<INTEREST-OTHER> 225
<INTEREST-TOTAL> 10,979
<INTEREST-DEPOSIT> 5,507
<INTEREST-EXPENSE> 5,586
<INTEREST-INCOME-NET> 5,393
<LOAN-LOSSES> 32
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 3,261
<INCOME-PRETAX> 2,441
<INCOME-PRE-EXTRAORDINARY> 2,441
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,468
<EPS-PRIMARY> 2.13
<EPS-DILUTED> 2.13
<YIELD-ACTUAL> 3.91
<LOANS-NON> 403
<LOANS-PAST> 657
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 2,830
<CHARGE-OFFS> 17
<RECOVERIES> 0
<ALLOWANCE-CLOSE> 2,845
<ALLOWANCE-DOMESTIC> 2,134
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 711
</TABLE>
