<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 MARCH 31, 1997, or
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934.
For the transition period from to
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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 1,381,415 shares of the registrant's Common Stock, without par value,
outstanding at March 31, 1997.
<PAGE> 2
<TABLE>
<CAPTION>
NORTHWEST INDIANA BANCORP
INDEX
-----
Page
Number
------
<S> <C>
PART I. Consolidated Financial Statements
Item 1. Consolidated Financial Statements of NorthWest Indiana Bancorp
Consolidated Balance Sheets, March 31, 1997 and December 31, 1996 1
Consolidated Statements of Income, Three Months Ended March 31, 1997 and 1996 2
Consolidated Statements of Changes in Stockholders' Equity, Three Months Ended
March 31, 1997 and 1996 3
Consolidated Statements of Cash Flows, Three Months Ended March 31, 1997 and
1996 4
Notes to Consolidated Financial Statements 5 - 6
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations 7 - 12
PART II. Other Information 13
SIGNATURES 14
</TABLE>
<PAGE> 3
NorthWest Indiana Bancorp
Consolidated Balance Sheets
(unaudited)
<TABLE>
<CAPTION>
March 31, December 31,
1997 1996
------------- ------------
ASSETS
<S> <C> <C>
Cash and non-interest bearing balances in financial institutions ............... $ 6,690,353 $ 5,508,822
Interest bearing balances in financial institutions ............................ - 1,000,000
------------- ------------
Total cash and cash equivalents ............................................ 6,690,353 6,508,822
Securities held-to-maturity (market value: March 31, 1997 -
$35,655,000; December 31, 1996 - $39,909,000) ................................ 36,018,763 38,427,292
Federal Home Loan Bank common stock
(cost approximates market value) ............................................. 1,596,700 1,596,700
Loans receivable ............................................................... 246,657,764 244,695,883
Less: allowance for loan losses ................................................ (2,930,805) (2,887,005)
------------- ------------
Net loans receivable ....................................................... 243,726,959 241,808,878
Accrued interest receivable .................................................... 2,202,850 2,152,672
Premises and equipment ......................................................... 7,077,862 7,085,982
Foreclosed real estate ......................................................... 82,433 188,886
Other assets ................................................................... 1,045,338 1,649,268
------------- ------------
Total assets ............................................................... $298,441,258 $299,418,500
============= ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Non-interest bearing deposits ................................................ $ 15,381,051 $ 12,878,557
Interest bearing deposits .................................................... 244,650,709 243,541,120
------------- ------------
Total deposits ............................................................. 260,031,760 256,419,677
Borrowed funds ................................................................. 6,662,094 12,260,507
Accrued expenses and other liabilities ......................................... 3,517,370 2,923,079
------------- ------------
Total liabilities .......................................................... 270,211,224 271,603,263
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; March 31, 1997 - 1,381,415 shares;
December 31, 1996 - 1,379,595 shares ......................................... 345,354 344,899
Additional paid-in capital ..................................................... 2,947,010 2,929,587
Retained earnings - substantially restricted ................................... 24,937,670 24,540,751
------------- ------------
Total stockholders' equity ................................................. 28,230,034 27,815,237
------------- ------------
Total liabilities and stockholders' equity ................................. $ 298,441,258 $299,418,500
============= ============
</TABLE>
See accompanying notes to consolidated financial statements.
1
<PAGE> 4
NorthWest Indiana Bancorp
Consolidated Statements of Income
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
1997 1996
----------- -----------
<S> <C> <C>
Interest income:
Real estate loans ............................... $ 4,551,225 $ 4,251,322
Commercial loans ................................ 376,473 354,446
Consumer loans .................................. 106,935 79,294
----------- -----------
Total loan interest ......................... 5,034,633 4,685,062
Securities held-to-maturity ..................... 602,415 609,863
Other interest earning assets ................... 31,631 152,041
----------- -----------
Total interest income ....................... 5,668,679 5,446,966
Interest expense:
Deposits ........................................ 2,702,470 2,773,168
Borrowed funds .................................. 87,640 35,811
----------- -----------
Total interest expense ...................... 2,790,110 2,808,979
Net interest income ............................... 2,878,569 2,637,987
Provision for loan losses ......................... 49,000 15,000
----------- -----------
Net interest income after provision for loan losses 2,829,569 2,622,987
Noninterest income:
Gain/(loss) on sale of interest earning assets .. 6,605 (257)
Gain on sale of foreclosed real estate .......... 16,837 -
Fees and service charges ........................ 164,123 131,514
Trust operations ................................ 94,410 46,245
Other ........................................... 57,960 -
----------- -----------
Total noninterest income .................... 339,935 177,502
Noninterest expense:
Compensation and benefits ....................... 864,842 795,260
Occupancy and equipment ......................... 314,568 244,395
Federal insurance premium ....................... 41,206 138,131
Advertising ..................................... 45,117 45,929
Data processing ................................. 82,589 66,001
Other ........................................... 423,004 339,166
----------- -----------
Total noninterest expense ................... 1,771,326 1,628,882
Income before income taxes ........................ 1,398,178 1,171,607
Income tax expense/(benefit) ...................... 559,200 466,600
----------- -----------
Net income/(loss) ................................. $ 838,978 $ 705,007
=========== ===========
Earnings per common and common equivalent share:
Net Income/(loss) ................................. $ 0.61 $ 0.51
=========== ===========
Dividends declared per common share ............... $ 0.32 $ 0.28
</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
March 31,
1997 1996
------------ ------------
<S> <C> <C>
Balance beginning of period ........................ $ 27,815,237 $ 27,204,128
Stock option plan, 1,820 shares of common stock
issued at $9.31 - $21.25 per share in 1997 and
30 shares of common stock issued at $9.31 -
$21.25 per share in 1996 ..................... 17,878 1,036
Cash dividends declared, $.32 per share in 1997
and $.275 per share in 1996 .................. (442,059) (379,361)
Net income ..................................... 838,978 705,007
------------ ------------
Balance end of period .............................. $ 28,230,034 $ 27,530,810
============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE> 6
NorthWest Indiana Bancorp
Consolidated Statements of Cash Flows
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
1997 1996
------------ ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income .......................................................... $ 838,978 $ 705,007
------------ ------------
Adjustments to reconcile net income to net cash provided by operating
activities:
Origination of loans for sale ................................... (563,400) (424,500)
Sale of loans originated for sale ............................... 567,024 225,221
Depreciation and amortization, net of accretion ................. 168,569 96,308
Net gains on sale of loans ...................................... (6,605) (2,621)
Net gain on sale of fixed assets ................................ (41,051) -
Net gains on sale of foreclosed real estate ..................... (16,837) -
Provision for loan losses ....................................... 49,000 15,000
Unrealized losses on mortgage loans held for sale ............... - 2,877
Net change in unearned interest on loans ........................ (1,341) 3,074
Change in deferred loan fees .................................... (10,896) 28,128
Change in interest receivable ................................... (50,178) (2,153)
Change in other assets .......................................... 603,930 (11,801)
Change in accrued expenses and other liabilities ................ 594,291 155,385
------------ ------------
Total adjustments ............................................. 1,292,506 84,918
------------ ------------
Net cash from operating activities ......................... 2,131,484 789,925
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from maturities of securities held-to-maturity ............. 2,328,571 4,171,429
Purchase of securities held-to-maturity ............................. - (6,611,797)
Principal collected on mortgage-backed securities ................... 67,389 117,548
Loans made net of payments received ................................. (1,951,443) (3,061,633)
Purchase of property plant and equipment ............................ (106,829) (410,859)
Proceeds from sale of foreclosed real estate ........................ 122,870 -
------------ ------------
Net cash from investing activities ............................... 460,558 (5,795,312)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Change in deposits .................................................. 3,612,083 6,507,896
Repayment of FHLB advances .......................................... (7,000,000) -
Change in other borrowed funds ...................................... 1,401,587 558,889
Proceeds from issuance of capital stock ............................. 17,878 1,036
Cash dividends paid ................................................. (442,059) (379,361)
------------ ------------
Net cash from financing activities ............................... (2,410,511) 6,688,460
------------ ------------
Net change in cash and cash equivalents .......................... 181,531 1,683,073
Cash and cash equivalents at beginning of period .................... 6,508,822 14,943,704
------------ ------------
Cash and cash equivalents at end of period .......................... $ 6,690,353 $ 16,626,777
============ ============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest ......................................................... $ 2,774,537 $ 2,787,843
Income taxes ..................................................... - $ 60,000
</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 March 31, 1997 and December 31, 1996, and the statements of income
and changes in stockholders' equity for the three months ended March 31, 1997
and 1996, and cash flows for the three months ended March 31, 1997 and 1996. The
income reported for the three month period ended March 31, 1997 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, 1996 consolidated
financial statements have been reclassified to conform to the March 31, 1997
presentation. All reclassifications are of a normal recurring nature.
NOTE 4 - CONSOLIDATED BALANCE SHEETS
The balance sheet of December 31, 1996 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 March 31, 1997 and December 31, 1996, commitments to make loans
totaled $41.4 million and $34.1 million, respectively and standby letters of
credit totaled $532 thousand and $519 thousand, respectively. At March 31, 1997,
$35.8 million (86%) 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 months ended March 31, 1997 and 1996 were
1,380,280 and 1,379,440, 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 March 31, 1997, the Company had total assets of $298.4 million and total
deposits of $260.0 million. Stockholders' equity totaled $28.2 million or 9.5%
of total assets, with book value per share at $20.44. The annualized return on
average assets (ROA) was 1.14%, while the annualized return on average
stockholders' equity (ROE) was 11.87%, for the three month period.
FINANCIAL CONDITION
During the three months ended Mach 31, 1997, total assets decreased by
$978 thousand (0.3%), with interest-earning assets decreasing by $1.5 million
(0.5%). The decrease was due primarily to the $3.4 million reduction in
securities held-to-maturity and interest bearing balances in financial
institutions as funds were used to reduce short-term borrowings by $5.6 million.
Total loans increased by $2.0 million (0.8%) while total deposits increased by
$3.6 million (1.4%). At March 31, 1997, interest-earning assets totaled $284.3
million and represented 95.3% of total assets. Loans receivable totaled $246.7
million and represented 86.8% of interest-earning assets, 82.6% of total assets
and 94.9% of total deposits. The loan portfolio includes $13.4 million (5.4%) in
construction and development loans, $151.7 million (61.5%) in residential
mortgage loans, $59.3 million (24.1%) in commercial and multifamily real estate
loans, $5.3 million (2.2%) in consumer loans, and $17.0 million (6.8%) in
commercial business and other loans. Adjustable rate loans comprised 63% of the
total investment in loans at March 31, 1997.
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
three months ending March 31, 1997, the Bank sold $563 thousand in fixed rate
mortgage loans. The amount includes 5 loans. Net gains realized from the sales
totaled $7 thousand. Mortgage loan servicing income totaled $5 thousand. At
March 31, 1997, the Bank had no loans 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 balances in financial institutions, U.S. government
securities and federal agency obligations. Interest-bearing balances in
financial institutions include overnight deposits at the Federal Home Loan Bank
of Indianapolis (FHLBI). Investments are generally for terms ranging from one
day to five years. At March 31, 1997, the investment portfolio totaled $37.6
million and was invested as follows: 62.8% in U.S. government agency debt
securities, 28.0% in U.S. government debt securities, 5.0% in U.S. government
agency mortgage-backed securities, and
7
<PAGE> 10
4.2% in FHLB common stock. During the three months ended March 31, 1997,
investment securities decreased by $2.4 million (6.0%) as funds were used to
reduce short-term borrowings and provide funding for loan portfolio growth.
Management believes that the credit risk profile of the earning asset
portfolio is relatively low. At March 31, 1997, the Bank had $1.2 million in
non-performing loans. The March 31, 1997 balance includes $806 thousand in loans
accounted for on a non-accrual basis and $378 thousand in accruing loans which
were contractually past due 90 days or more. The total of these non-performing
loans represents 0.48% of the total loan portfolio and 0.40% of total assets. At
March 31, 1997, the Bank had $82 thousand in foreclosed real estate. The total
represents 0.03% 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>
March 31, 1997 December 31, 1996
# Amount # Amount
-- ------ -- ------
<S> <C> <C> <C> <C>
Loans accounted for on a non-accrual basis:
Real estate loans:
Residential 14 $ 630 14 $ 583
Commercial 1 45 1 45
Commercial business loans 2 80 2 111
Consumer loans 4 51 2 49
-- ------ -- ------
Total 21 $ 806 19 $ 788
== ====== == ======
Accruing loans which are contractually past due 90 days or more:
Real estate loans:
Residential 10 $ 320 5 $ 373
Commercial 1 52 -- --
Commercial business loans -- -- 1 5
Consumer loans 1 6 1 1
-- ------ -- ------
Total 12 $ 378 7 $ 379
== ====== == ======
Total of non-accrual and 90 days or more past due loans 33 $1,184 26 $1,167
== ====== == ======
Foreclosed real estate 2 $ 82 3 $ 189
== ====== == ======
Ratio of non-performing loans to total assets 0.40% 0.39%
Ratio of non-performing loans to total loans 0.48% 0.48%
Ratio of foreclosed real estate to total assets 0.03% 0.06%
Ratio of non-performing assets to total assets 0.42% 0.45%
</TABLE>
At March 31, 1997, $1.1 million of the Bank's loans were classified as
substandard. The total represents 21 loans. There were no loans classified as
doubtful or loss. Management does not anticipate that any of the non-
8
<PAGE> 11
performing loans or classified loans will materially impact future operations,
liquidity or capital resources. At March 31, 1997, 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 three months ended March 31,
1997, additions to the ALL account totaled $49 thousand compared to $15 thousand
for the three months ended March 31, 1996. Charge-offs net of recoveries totaled
$5 thousand during the current period. The amount provided during the current
three months was based on loan activity, current economic conditions and
management's assessment of portfolio risk. At March 31, 1997, the balance in the
ALL account totaled $2.9 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 in thousands (000's). The percent
columns represent the percentage of loans in each category to total loans.
<TABLE>
<CAPTION>
March 31, 1997 December 31, 1996
-------------- -----------------
<S> <C> <C> <C> <C>
Real estate loans:
Residential $ 372 61.5% $ 372 61.8%
Commercial 913 24.1 880 23.4
Construction & Development 153 5.4 153 5.4
Consumer loans 110 2.2 110 2.0
Commercial business loans and other loans 650 6.8 650 7.4
Unallocated 733 722
------ ----- ------ -----
Total $2,931 100.0% $2,887 100.0%
====== ===== ====== =====
Ratio of ALL to loans outstanding 1.19% 1.18%
Ratio of ALL to non-performing loans 247.6% 247.4%
</TABLE>
At March 31, 1997, 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 three months ended March 31, 1997. 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 March 31, 1997, deposits totaled $260.0 million . During the three
months ending March 31, 1997, deposit growth totaled $3.6 million ( 1.4%).
Savings accounts increased $688 thousand (1.6%), NOW accounts decreased $876
thousand (3.7%), checking accounts increased $2.5 million (19.4%), money market
deposit accounts (MMDA's) increased $1.1 million (5.2%) and certificates of
deposit increased by $139 thousand (0.1%). At March 31, 1997, the deposit base
was comprised of 17.1% savings accounts, 9.0% MMDA's, 8.9% NOW accounts, 5.9%
checking accounts and 59.1% certificates of deposit. At
<PAGE> 12
March 31, 1997, repurchase agreements totaled $4.0 million. Other short-term
borrowings totaled $2.7 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 utilizes short-term borrowings, i.e., repurchase agreements
and advances from the FHLBI as a source of funds.
During the three months ended March 31, 1997, cash and cash equivalents
increased by $182 thousand compared to $1.7 million for the three months ended
March 31, 1996. The primary sources of cash were deposit growth and cash
provided by operating activities. The primary uses of cash were the funding of
loan growth, the reduction of short-term borrowings, and the payment of common
stock dividends. During the current quarter cash provided by operating
activities totaled $2.1 million compared to $790 thousand for the three months
ended March 31, 1996. Cash flows from investing activities totaled $461 thousand
as the proceeds from maturing securities were used to fund loan growth and
reduce short-term borrowings. Cash flows from financing activities totaled
($2.4) million as deposit growth was used to reduce short-term borrowings.
At March 31, 1997, outstanding commitments to fund loans totaled $41.4
million. Approximately 86% 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 three months ended March 31,
1997, stockholders' equity increased by $415 thousand (1.5%). The increase
resulted primarily from earnings of $839 thousand during the period. In
addition, $18 thousand represents proceeds from the exercise of 1,820 stock
options. The reduction of $442 thousand represents cash dividends for the three
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 March 31, 1997, the Company's
capital exceeded all regulatory capital requirements. At March 31, 1997, the
Company's and the Bank's regulatory capital ratios were identical. The dollar
amounts are in millions.
<TABLE>
<CAPTION>
Required for To be well
Actual adequate capital capitalized
------------ ---------------- ------------
Amount Ratio Amount Ratio Amount Ratio
------------ --------- ----- ------ -----
<S> <C> <C> <C> <C> <C> <C>
Total risk-based capital
to risk-weighted assets $30.6 16.1% $15.2 8.0% $ 19.0 10.0%
Tier 1 capital
to risk-weighted assets $28.2 14.8% $ 7.6 4.0% $ 11.4 6.0%
Tier I capital to
total assets $28.2 9.5% $ 9.0 3.0% $ 14.9 5.0%
</TABLE>
RESULTS OF OPERATIONS - COMPARISON OF THE QUARTER ENDED MARCH 31, 1997 TO THE
QUARTER ENDED MARCH 31, 1996
Net income for the three months ended March 31, 1997 was $839 thousand
compared to $705 thousand for the quarter ended March 31, 1996, an increase of
$134 thousand (19.0%). The earnings represent a ROA of 1.14% for the current
quarter compared to 1.00% for the quarter ended March 31, 1996. The ROE was
11.87% for the current quarter compared to 10.29% for the quarter ended March
31, 1996.
Net interest income for the three months ended March 31, 1997 was $2.9
million, up $241 thousand (9.1%) from $2.8 million for the three months ended
March 31, 1996. The increase in net interest income was due to the growth in
average interest-earning assets, stable yields on interest-earning assets and a
lower cost of funds. Interest-earning assets averaged $282.6 million for the
current quarter, up $9.7 million (3.6%) from $272.9 million for the three months
ended March 31, 1996. The net interest margin for the current quarter was 3.90%
compared to 3.73% for the three months ended March 31, 1996. The increase was
due to higher yields on interest-earning assets and a lower cost of funds.
During the current quarter total interest income increased by $222 thousand
(4.1%) while total interest expense decreased by $19 thousand (0.7%).
During the three months ended March 31, 1997, interest income from
loans increased by $350 thousand (7.5%) compared to the three months ended March
31, 1996. The weighted average yield on loans outstanding was 8.31% for the
current quarter compared to 8.40% for the three months ended March 31, 1996.
Higher average loan balances have contributed to the increase in interest income
as loans averaged $242.3 million for the current quarter, up $19.3 million
(8.7%) from $223.0 for the three months ended March 31, 1996. During the three
months ended March 31, 1997, interest income on investments and other deposits
decreased by $128 thousand (16.8%) compared to the quarter ended March 31, 1996.
The decrease was due to lower average balances as maturing securities and
short-term investments were used to fund loan growth. Securities and other
deposits averaged $40.3 million for the current quarter, down $9.6 million
(19.2%) from $49.9 million for the three months ended March 31, 1996. The
weighted average yield on investments and other deposits was 6.30% for the
quarter ended March 31, 1997 compared to 6.10% for the quarter ended March 31,
1996. The increase in yield was due to a reduction in the average balances for
federal funds sold and
11
<PAGE> 14
interest bearing balances in financial institutions. The combined weighted
average yield on total interest-earning assets was 8.02% for the quarter ended
March 31, 1997 compared to 7.98% for the quarter ended March 31, 1996.
Interest expense for deposits decreased by $71 thousand (2.6%) during
the current quarter compared to the three months ended March 31, 1996. The
decrease was due to a lower cost of deposits. The weighted average rate paid on
deposits for the three months ended March 31, 1997 was 4.20% compared to 4.44%
for the quarter ended March 31, 1996. Deposit balances averaged $257.2 million
for the current quarter, up $7.4 million (3.0%) from $249.8 for the quarter
ended March 31, 1996. Interest expense on short-term borrowings increased by $52
thousand (144.7%) during the current quarter due to increased cost and higher
average balances. Borrowed funds averaged $7.1 million during the quarter ended
March 31, 1997, up $4.1 million (136.7%) from $3.0 million for the quarter ended
March 31, 1996. The weighted average cost of short-term borrowings was 4.91% for
the current quarter compared to 4.81% for the three months ended March 31, 1996.
The combined weighted average rate paid on deposits and borrowings for the
quarter ended March 31, 1997 was 4.22% compared to 4.45% for the quarter ended
March 31, 1996. The impact of the 8.02% return on interest-earning assets and
the 4.22% cost of funds resulted in an interest rate spread of 3.80% for the
current quarter compared to 3.53% for the quarter ended March 31, 1996.
Noninterest income for the quarter ended March 31, 1997 was $340
thousand, up $162 thousand (91.5%) from $178 thousand for the three months ended
March 31, 1996. The increase was due to gains from the sale of fixed rate loans,
foreclosed real estate and other real estate properties held by the Bank. In
addition, income from fees and service charges increased $33 thousand (24.8%),
while income from Trust operations increased by $48 thousand (104.2%).
Noninterest expense for the quarter ended March 31, 1997 was $1.8
million, up $142 thousand (8.7%) from $1.6 million for the three months ended
March 31, 1996. In general, increases in noninterest expense have resulted from
the expansion of the Bank's operations and the investment in new technologies.
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 Merrillville, Indiana, branch facility which opened
during September 1996, and depreciation related to investments in technology.
Other expense changes were due to standard increases in bank operations. The
decrease in the federal insurance premium reflects lower premiums for Savings
Association Insurance Fund (SAIF) deposits due to the recapitalization of SAIF
during 1996. The Company's efficiency ratio, for the current quarter was 55.0%
compared to 57.9% for the quarter ended March 31, 1996. 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 March 31, 1997 totaled
$559 thousand compared to $467 thousand for the three months ended March 31,
1996, an increase of $93 thousand (19.9%). The increase was due to an increase
in pretax earnings during the current quarter.
12
<PAGE> 15
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
---------------------------------------------------
Not Applicable.
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.
--------------------
13
<PAGE> 16
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: May 9, 1997 /s/ David A Bochnowski
------------------------------
David A. Bochnowski
Chairman of the Board and Chief Executive Officer
Date: May 9, 1997 /s/ Edward J. Furticella
------------------------------
Edward J. Furticella
Vice President, Chief Financial Officer and Treasurer
14
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