SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-QSB
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2000
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15 (d) OF THE
EXCHANGE ACT
For the transition period from to
Commission file number 0-26012.
NORTHEAST INDIANA BANCORP, INC.
(Exact Name of Small Business Issuer as Specified in its Charter)
Delaware 35-1948594
------------------------------ -------------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
648 North Jefferson Street, Huntington, IN 46750
----------------------------------------------------
(Address of principal executive offices) (Zip Code)
Issuer's telephone number, including area code: (219) 356-3311
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 Issuer was required to file such reports), and
(2) has been subject to such requirements for the past 90 days.
YES [X] NO [ ]
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date:
CLASS OUTSTANDING AT MAY 4, 2000
- --------------------- ---------------------------
Common Stock, par value $.01 per share 1,743,036
Transitional Small Business Disclosure Format: YES [ ] NO [X]
<PAGE>
NORTHEAST INDIANA BANCORP, INC.
INDEX
Page
PART 1. FINANCIAL INFORMATION (UNAUDITED)
Item 1. Financial Statements (Condensed)
Consolidated Balance Sheets
March 31, 2000 and December 31, 1999 1
Consolidated Statements of Income for the
three months ended March 31, 2000 and 1999 2
Consolidated Statement of Changes in Shareholders'
Equity for the three months ended March 31, 2000 3
Consolidated Statements of Cash Flows for the three
months ended March 31, 2000 and 1999 4
Notes to Consolidated Financial Statements 5
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 8
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 14
Item 2. Change In Securities 14
Item 3. Defaults Upon Senior Securities 14
Item 4. Submissions of Matter to a Vote
of Security Holders 14
Item 5. Other Information 15
Item 6. Exhibits and Reports on Form 8-K 15
Signature page 16
<PAGE>
<TABLE>
<CAPTION>
NORTHEAST INDIANA BANCORP, INC.
CONSOLIDATED BALANCE SHEETS
March 31, 2000 And December 31, 1999
March 31, December 31,
2000 1999
(Unaudited)
ASSETS
<S> <C> <C>
Interest earning cash and cash equivalents $ 4,398,782 $ 2,938,701
Noninterest earning cash and cash equivalents 2,112,863 2,960,502
------------- --------------
Total cash and cash equivalents 6,511,645 5,899,203
Interest-earning deposits in financial institutions 100,000 100,000
Securities available for sale 33,152,210 33,192,217
Securities held to maturity (fair value: March 31, 2000- $420,251;
December 31, 1999 - $456,511) 420,251 456,511
Loans receivable, net of allowance for loan losses March 31, 2000
$1,876,987 and December 31, 1999 $1,766,700 209,063,014 208,394,576
Accrued interest receivable 983,635 839,967
Premises and equipment 2,295,754 2,292,342
Investments in limited liability partnerships 1,304,732 1,332,128
Other assets 2,914,347 2,239,874
------------- --------------
Total assets $ 256,745,588 $ 254,746,818
============= =============
LIABILITIES AND SHAREHOLDERS' EQUITY
Demand deposits $ 4,619,909 $ 4,407,411
Savings 10,231,057 9,709,295
NOW and MMDDA 28,903,106 30,544,441
Other time deposits 97,746,000 98,550,446
------------- --------------
Total deposits 141,500,072 143,211,593
Borrowed funds 87,994,439 84,753,919
Accrued expenses and other liabilities 1,303,850 1,126,007
------------- --------------
Total liabilities 230,798,361 229,091,519
Shareholders' equity
Preferred Stock 500,000 shares authorized; 0 shares issued -- --
Common stock, $.01 par value: 4,000,000 shares
authorized; 2,640,672 shares issued at
March 31, 2000 and December 31,1999 26,407 26,407
Additional paid in capital 28,743,036 28,733,423
Retained earnings, substantially restricted 10,985,894 10,641,144
Unearned employee stock ownership plan shares (1,018,325) (1,018,325)
Unearned recognition and retention plan shares (173,814) (229,851)
Net unrealized appreciation on securities available
for sale (543,060) (543,742)
Treasury stock, 897,636 and 887,152 common shares, at
cost, at March 31, 2000 and December 31, 1999 (12,072,911) (11,953,757)
------------- --------------
Total shareholders' equity 25,947,227 25,655,299
Total liabilities and shareholders' equity $ 256,745,588 $ 254,746,818
============= ===============
</TABLE>
See accompanying notes to financial statements
1
<PAGE>
<TABLE>
<CAPTION>
NORTHEAST INDIANA BANCORP, INC.
CONSOLIDATED STATEMENTS OF INCOME
Three months ended March 31, 2000 and 1999
Three months ended
March 31,
2000 1999
---- ----
(Unaudited)
Interest income
<S> <C> <C>
Loans, including fees $ 4,234,434 $ 3,770,467
Taxable securities 548,478 226,915
Non-taxable securities 5,817 6,487
Deposits with banks 52,190 46,266
------------- --------------
Total interest income 4,840,919 4,050,135
Interest expense
Deposits 1,677,744 1,328,343
Borrowed funds 1,234,806 837,869
------------- --------------
Total interest expense 2,912,550 2,166,212
Net interest income 1,928,369 1,883,923
Provision for loan losses 191,250 100,500
------------- --------------
Net interest income after provision for loan
losses 1,737,119 1,783,423
Noninterest income
Service charges on deposit accounts 85,794 73,050
Loan servicing fees 52,607 67,843
Other 91,095 48,398
------------- --------------
Total noninterest income 229,496 189,291
Noninterest expense
Salaries and employee benefits 589,547 523,479
Occupancy 116,180 99,190
Data processing 143,860 126,566
Insurance expense 6,360 19,714
Professional fees 63,065 38,874
Correspondent bank charges 55,970 52,528
Other expense 194,231 171,052
------------- --------------
Total noninterest expense 1,169,213 1,031,403
------------- --------------
Income before income taxes 797,402 941,311
Income tax expense 278,428 360,287
------------- --------------
Net income $ 518,974 $ 581,024
============= ============
Comprehensive income $ 519,656 $ 556,241
============= ============
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Basic earnings per common share $ 0.32 $ 0.35
Diluted earnings per common share $ 0.32 $ 0.34
Net interest margin 3.14% 3.70%
Return on average assets 0.81% 1.10%
Return on average equity 8.03% 9.18%
Shareholder's Equity to assets 10.11% 11.74%
</TABLE>
See accompanying notes to financial statements
2
<PAGE>
<TABLE>
<CAPTION>
NORTHEAST INDIANA BANCORP, INC.
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDER'S EQUITY
Three months ended March 31, 2000
(Unaudited)
Unearned
Employee Unearned
Additional Stock Recognition
Common Paid-in Retained Ownership And Retention
Stock Capital Earnings Plan Shares Plan Shares
----- ------- -------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Earnings
Balance, December 31, 1999 26,407 28,733,423 10,641,144 (1,018,325) (229,851)
Net Income March 31, 2000 518,974
Total other comprehensive income
Comprehensive income
Dividends Paid $.10 per share year to date (174,224)
Purchase of 14,422 shares of Treasury Stock
Sale of 4,422 shares of Treasury Stock (5,942)
Shares committed to be released under ESOP 15,426
Purchase of 500 shares for RRP 129 (5,656)
Amortization of RRP Contributions net of 984 (61,693)
RRP Shares forfeited
---------- ----------- ------------ ------------ -------------
Balance at March 31, 2000 26,407 28,743,036 10,985,894 (1,018,325) (173,814)
========== =========== ============ ============ =============
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Net
Unrealized
Appreciation
on Securities Total
Available- Treasury Shareholders'
For Sale Stock Equity
-------- ------------- --------------
<S> <C> <C> <C>
Balance, December 31, 1999 (543,742) (11,953,757) 25,655,299
Net Income March 31, 2000 518,974
Total other comprehensive income 682 682
Comprehensive income 519,656
Dividends Paid $.10 per share year to date (174,224)
Purchase of 14,422 shares of Treasury Stock (162,583) (162,583)
Sale of 4,422 shares of Treasury Stock 48,879 42,937
Shares committed to be released under ESOP 15,426
Purchase of 500 shares for RRP 5,527 -
Amortization of RRP Contributions net of 984 (10,977) 50,716
RRP Shares forfeited
------------- ------------- ----------
Balance at March 31, 2000 (543,060) (12,072,911) 25,947,227
============= ============= ==========
</TABLE>
See accompanying notes to financial statements
3
<PAGE>
<TABLE>
<CAPTION>
NORTHEAST INDIANA BANCORP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Three months ended March 31, 2000 and 1999
Three months ended
March 31,
2000 1999
---- ----
(Unaudited)
<S> <C> <C>
Cash flows from operating activities
Net income $ 518,974 $ 581,024
Adjustments to reconcile net income
to net cash from operating activities
Depreciation and amortization 117,573 55,256
Provision for loan losses 191,250 100,500
Net (gain) loss on sale of foreclosed real estate 4,437 (1,811)
Net (gain) loss on sale of premises and equipment 14,452 -
Net (gain) loss on sale of securities available for sale 1,563 -
Reduction of obligation under ESOP 15,426 31,640
Amortization of RRP 50,716 52,971
Net change in:
Other assets (645,541) 506,155
Accrued interest receivable (143,668) 70,415
Accrued expenses and other liabilities 177,843 (198,191)
----------- ----------
Total adjustments (215,949) 616,935
----------- ----------
Net cash from operating activities 303,025 1,197,959
Cash flows from investing activities
Purchases of securities available for sale (5,057,675) (689,783)
Proceeds from maturities and principal payments
of securities available for sale 67,874 2,356,987
Proceeds from maturities and principal payments
of securities held to maturity 36,212 35,264
Proceeds from sale of securities available for sale 4,998,438 -
Purchases of loans - -
Proceeds from sale of loans - -
Net change in loans (938,066) (4.824,301)
Proceeds from sale of foreclosed real estate 44,563 92,856
Expenditures on premises and equipment (77,433) (151,537)
Proceeds from sale of premises and equipment 375 -
----------- ----------
Net cash from investing activities (925,712) (3,180,514)
Cash flows from financing activities
Net change in deposits (1,711,521) (165,262)
Advances from FHLB 45,000,000 27,000,000
Repayment of FHLB advances (41,499,772) (24,999,745)
Payments of demand notes - (390,000)
Net change in other borrowed funds (259,708) 513,412
Dividends paid (174,224) (150,112)
Purchase of stock (162,583) (333,225)
Sale of treasury stock 42,937 7,476
----------- ----------
Net cash from financing activities 1,235,129 1,482,544
----------- ----------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Net change in cash and cash equivalents 612,442 (500,011)
Cash and cash equivalents at beginning of period 5,899,203 6,295,637
----------- ----------
Cash and cash equivalents at end of period $ 6,511,645 $ 5,795,626
============ ==========
Cash paid for:
Interest $ 2,777,447 $ 2,163,139
Income taxes 82,000 50,000
Non-cash transactions:
Investment in obligation relative to limited partnership $ - $ -
Transfer from loans to other real estate 78,378 32,829
</TABLE>
See accompanying notes to financial statements
4
<PAGE>
NORTHEAST INDIANA BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2000
NOTE 1 - BASIS OF PRESENTATION
The unaudited information for the three months ended March 31, 2000 and 1999
includes the results of operations of Northeast Indiana Bancorp, Inc.
("Northeast Indiana Bancorp") and its wholly-owned subsidiary, First Federal
Savings Bank ("First Federal") and its wholly owned subsidiary, Northeast
Indiana Financial, Inc. ("Northeast Indiana Financial"). In the opinion of
management, the information reflects all adjustments (consisting only of normal
recurring adjustments) necessary for a fair presentation of the results of
operations for the three month period reported but should not be considered as
indicative of the results to be expected for the full year.
NOTE 2 - EMPLOYEE STOCK OWNERSHIP PLAN
The Company has established an employee stock ownership plan ("ESOP"). At the
date of conversion the ESOP purchased 211,261 shares of common stock (restated)
of Northeast Indiana Bancorp, which was financed, by Northeast Indiana Bancorp
and collateralized by the shares purchased. The borrowing is payable in
semi-annual principal payments of $72,000 over a 12 year period plus interest.
All employees of First Federal are eligible to participate in the ESOP after
they attain age 21 and complete one year of service during which they worked at
least 1,000 hours. As of December 31, 1999, 88,044 shares have been distributed
to the plan participants.
NOTE 3 - EARNINGS PER SHARE
Basic earnings per share are based on weighted-average common shares
outstanding. Diluted earnings per share further assume issue of any dilutive
potential common shares. The following table has been restated to reflect the
10% stock dividend announced on October 26, 1999 and payable on November 22,
1999 to shareholders of record on November 8, 1999.
<TABLE>
<CAPTION>
Three months ended
March 31,
2000 1999
---- ----
<S> <C> <C>
Earnings Per Share
Net income available to common shareholders $ 518,974 $ 581,024
Weighted average common shares outstanding 1,606,319 1,650,047
Basic Earnings Per Share $ 0.32 $ 0.35
Earnings Per Share Assuming Dilution
Net income available to common shareholders $ 518,974 $ 581,024
Weighted average common shares outstanding 1,606,319 1,650,047
Add: dilutive effects of assumed exercises of
incentive stock options and non qualified
stock options 30,268 64,916
Weighted average and dilutive common shares
outstanding 1,636,587 1,714,963
Diluted earnings per share $ 0.32 $ 0.34
</TABLE>
5
<PAGE>
NORTHEAST INDIANA BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2000
NOTE 4 - COMMON STOCK DIVIDENDS
On April 21, 2000 the Board of Directors of Northeast Indiana Bancorp, Inc.
announced a quarterly cash dividend of $.10 per share. The dividend will be paid
on May 22, 2000 to shareholders of record on May 8, 2000. The payment of the
cash dividend will reduce shareholders' equity (second quarter) by approximately
$174,000.
Common share amounts, market values and price per share disclosures related to
stock repurchase programs, stock based compensation plans and earnings and
dividends per share disclosures have been restated for the 10% stock dividend
declared on October 26, 1999. Stock dividends for 20% or less are reported by
transferring the market value, as of the ex-dividend date, of the stock issued
from retained earnings to common stock and additional paid-in-capital.
Fractional shares will be rounded up to the next whole share.
NOTE 5 - STOCK REPURCHASE PLAN
On June 29, 1999 Northeast Indiana Bancorp announced a new stock repurchase
program to repurchase 10% of the outstanding shares in the open market as
Treasury shares over the next twelve months. This program will include up to
180,165 shares. As of May 4, 2000, 53,100 shares have been repurchased under
this program since its announcement.
There were also 4,422 shares repurchased from exercised options year to date
through May 4, 2000 and 984 shares of RRP's relinquished due to early
retirement.
6
<PAGE>
NORTHEAST INDIANA BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2000
NOTE 6 - REGULATORY CAPITAL REQUIREMENTS
Pursuant to federal regulatory agencies, savings institutions must meet three
separate minimum capital-to-asset requirements. The following table summarizes,
as of March 31, 2000, the capital requirements for First Federal under those
regulatory requirements and First Federal's actual capital ratios. As of March
31, 2000, First Federal substantially exceeded all current regulatory capital
standards.
<TABLE>
<CAPTION>
Minimum Required For Minimum Required To Be Well
Capital Adequacy Purpose Capitalized Under Prompt
Actual Corrective Action Regulations
Amount Ratio Amount Ratio Amount Ratio
------ ------- ------ ------- ------ -------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Total Capital
(to risk weighted assets) $25,517 15.59% $13,096 8.0% $16,370 10.0%
Tier 1 (core) capital
(to risk weighted assets) 24,354 14.88% 6,548 4.0% 9,822 6.0%
Tier 1(core) capital
(to adjusted total assets) 24,354 9.47% 10,291 4.0% 12,864 5.0%
Tier 1 (core) capital
(to average assets) 24,354 9.53% 10,217 4.0% 12,772 5.0%
</TABLE>
7
<PAGE>
NORTHEAST INDIANA BANCORP, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND
RESULTS OF OPERATIONS
GENERAL
Northeast Indiana Bancorp, Inc. ("Northeast Indiana Bancorp") was formed as a
Delaware corporation in March, 1995, for the purpose of issuing common stock and
owning all the common stock of First Federal Savings Bank ("First Federal") as a
unitary thrift holding company. Prior to the conversion, Northeast Indiana
Bancorp did not engage in any material operations and at March 31, 2000, had no
significant assets other than the investment in the capital stock of First
Federal and cash and cash equivalents.
The principal business of savings banks, including First Federal, has
historically consisted of attracting deposits from the general public and making
loans secured by residential real estate. First Federal's earnings are primarily
dependent on net interest income, the difference between interest income and
interest expense. Interest income is a function of the balances of loans and
investments outstanding during the period and the yield earned on such assets.
Interest expense is the function of the balances of deposits and borrowings.
First Federal's earnings are also affected by provisions for loan losses,
service charge and fee income, and other non-interest income, operating expenses
and income taxes. Operating expenses consist primarily of employee compensation
and benefits, occupancy and equipment expenses, data processing, federal deposit
insurance premiums and other general administrative expenses.
The most significant outside factors influencing the operations of First Federal
Savings Bank and other savings institutions include general economic conditions,
competition in the local market place and related monetary and fiscal policies
of agencies that regulate financial institutions. More specifically, the cost of
funds is influenced by interest rates on competing investments and general
market rates of interest. Lending activities are influenced by the demand for
real estate financing and other types of loans, which in turn is affected by the
interest rates at which such loans may be offered and other factors affecting
loan demand and funds availability.
TRUST AND FINANCIAL SERVICES
During the year of 1998, First Federal established a trust department, which
began operations in the fourth quarter. At the end of March 31, 2000, $20.4
million was held under asset management. In February 1999, Northeast Indiana
Bancorp announced the establishment of Northeast Indiana Financial, Inc., a
wholly owned subsidiary of First Federal. Northeast Indiana Financial, Inc.
provides brokerage services through the purchase of mutual funds, annuities,
stocks and bonds for its customers. Until these operations are well established,
management expects a slight negative impact to net income.
8
<PAGE>
NORTHEAST INDIANA BANCORP, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND
RESULTS OF OPERATIONS
FINANCIAL CONDITION
Northeast Indiana Bancorp's total assets increased $2.0 million or 0.79% from
$254.7 million at December 31, 1999 to $256.7 million at March 31, 2000. This
increase was due primarily to funds generated from increased borrowings of $3.2
million net of decreased deposits of $1.7 million.
Net loans receivable increased $668,000 or 0.32% from $208.4 million at December
31, 1999 to $209.1 million at March 31, 2000. The increase in loans during the
first three months of 2000 was in mortgage loan products which accounted for
$728,000 of the increase along with a $798,000 increase in commercial lending
and $748,000 decrease in consumer lending. This growth was because of the
generally favorable market conditions. Allowances for loan losses increased
approximately $110,000 through the three months ended March 31, 2000. This
increase was to provide a general allowance for the increases in non-residential
real estate, commercial and credit cards loans. The allowance of $1.9 million
includes $714,000 of specific reserves for loans or partial loans classified as
substandard.
INVESTMENTS
Securities available-for-sale remained unchanged at $33.2 million for the period
December 31, 1999 to March 31, 2000. Investments of $5.1 million were purchased
to replenish the $5.1 million of calls, payments, maturities and sales of
investments.
RESULTS OF OPERATIONS
Northeast Indiana Bancorp had net income of $519,000 or $0.32 per diluted share
for the three months ended March 31, 2000 compared to $581,000 or $0.34 per
diluted share for the three months ended March 31, 1999. Note that all per share
earnings have been restated to reflect the 10% stock dividend paid on November
22, 1999.
Net interest income remained unchanged at $1.9 million for the three months
ended March 31, 2000 compared to $1.9 million for the three months ended March
31, 1999. Interest income increased $791,000 to $4.8 million for March 31, 2000
compared to $4.1 million for March 31, 1999. For the first quarter interest
expense increased $747,000 to $2.9 million for the quarter ended March 31, 2000
compared to $2.2 million March 31, 1999.
9
<PAGE>
NORTHEAST INDIANA BANCORP, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS (CONTINUED)
Provisions for loan losses increased by $91,000 for the three months ended March
31, 2000 compared to the same period ended March 31, 1999. The increases
provisions are discussed in more detail under the non-performing assets and
allowance for loan loss section.
Non-interest income increased to $229,000 for the three months ended March 31,
2000 compared to $189,000 for the comparable period in 1999. This represents an
increase of $40,000 or 21.2% for the three months ended March 31, 2000. This
increase is from service fees on deposits and other income including fee income
from Trust and Financial Services and insurance.
Non-interest expense increased to $1.2 million for the three months ended March
31, 2000 compared to $1.0 million for the corresponding period in 1999. This
represents an increase of $200,000 for the three months ended March 31, 2000.
This increase is due partially to higher salaries and benefits reflecting
increases in compensation for 2000 and additional employees added to support
customer service as we grow. Data processing expense has increased $17,000 for
the three months ended March 31, 2000 due to software upgrades and increased
processing volume and fees.
Income tax expense decreased for the three months ended March 31, 2000 due to
lower taxable income compared to 1999 and an increase in the available tax
credits from the Northeast Indiana Bancorp's investment in a low income housing
project.
NON-PERFORMING ASSETS AND ALLOWANCE FOR LOAN LOSSES
The allowance for loan losses is established through a provision for loan losses
based on management's quarterly asset classification review and evaluation of
the risk inherent in its loan portfolio and changes in the nature and volume of
its loan activity. Such evaluation, which considers among other matters, the
estimated value of the underlying collateral, economic conditions, cash flow
analysis, historical loan loss experience, discussion held with delinquent
borrowers and other factors that warrant recognition in providing for an
adequate allowance for loan loss. As a result of this review process, management
recorded provisions for loan losses in the amount of $191,000 for the three
months ended March 31, 2000 compared to $100,000 for the same period ended March
31, 1999. The current provision for the first quarter is anticipated to continue
for the second quarter 2000 as we continue to recognize the need for higher
allowances due to the higher risks associated with commercial and consumer loans
and the specific reserves set up for several classified loans.
NON-PERFORMING ASSETS AND ALLOWANCE FOR LOAN LOSSES (CONTINUED)
The non-performing assets to total assets ratio is one indicator of the exposure
to credit risk. Non-performing assets of First Federal consist of the
non-accruing loans, troubled debt restructuring and real estate owned which has
10
<PAGE>
NORTHEAST INDIANA BANCORP, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND
RESULTS OF OPERATIONS
been acquired as a result of foreclosure or insubstance foreclosure. The
following table summarizes in thousands the various categories of non-performing
assets:
<TABLE>
<CAPTION>
March 31 December 31
2000 1999
---- ----
<S> <C> <C>
Non-performing loans
One-to-four-family $ 342 $ 339
Multi-family 23 22
Commercial real estate - 247
Construction or development 693 683
Consumer 463 186
Commercial Business 354 233
--------- ----------
Total 1,875 1,710
--------- ----------
Foreclosed assets
One-to-four-family 78 49
Commercial - -
--------- ----------
Total 78 49
--------- ----------
Repossessed Assets
Consumer 51 14
--------- ----------
Total 51 14
--------- ----------
Total non-performing assets 2,004 1,773
========= ==========
Total non-performing assets as a
percentage of total assets 0.78% 0.70%
========= ==========
</TABLE>
Total non-performing assets increased from $1.8 million to $2.0 million or 0.78%
of total assets at March 31, 2000 from 0.70% of total assets at December 31,
1999.
LIQUIDITY AND CAPITAL RESOURCES
First Federal is required to maintain specific amounts of regulatory capital
pursuant to regulations of the Office of Thrift Supervision (OTS). Those capital
requirements follow: a risk-based capital standard expressed as a percent of
risk adjusted assets, a leverage ratio of core capital to total assets, and a
core capital ratio expressed
11
<PAGE>
NORTHEAST INDIANA BANCORP, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND
RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES (CONTINUED)
as a percent of total adjusted assets. At March 31, 2000, First Federal exceeded
all regulatory capital standards.
At March 31, 2000, First Federal's risk based capital was $25.5 million or
15.59% of risk adjusted assets, which exceeds the $13.1 million and the 8.0% OTS
requirement by $12.4 million and 7.59%. First Federal's core capital at March
31, 2000 is $24.4 million or 9.47%, which exceeds the OTS requirement of $10.3
million, and 4.00% by $14.1 million and 5.47%.
First Federal's primary sources of funds are deposits, FHLB advances, principal
and interest payments of loans, operations income and short-term investments.
Deposit flows and mortgage payments are greatly influenced by general interest
rates, economic conditions and competition.
Current OTS regulations require that First Federal maintain cash and eligible
investments in an amount equal to at least 4% of its average daily balance of
net withdrawable customer deposit accounts and short-term borrowings to assure
its ability to meet demands for withdrawals and repayment of short-term
borrowings. As of March 31, 2000, First Federal's liquidity ratio was 11.70%,
which is in excess of the minimum regulatory requirements.
First Federal uses its capital resources principally to meet its ongoing
commitments to fund maturing certificates of deposit and loan commitments,
maintain its liquidity, and meet operating expenses. As of March 31, 2000, First
Federal had commitments to originate loans and to fund open lines of credit
totaling $23.2 million. First Federal considers its liquidity and capital
resources to be adequate to meet its foreseeable short and long-term needs.
First Federal expects to be able to fund or refinance, on a timely basis, its
material commitments and long-term liabilities.
First Federal, however, has grown substantially for the last several years and
therefore our liquidity position has tightened as we have leveraged our capital.
First Federal now expects asset growth to slow as rates increase therefore
reducing loan demand.
FORWARD-LOOKING STATEMENTS
When used in this filing and in future filings by Northeast Indiana Bancorp with
the Securities and Exchange Commission, in Northeast Indiana Bancorp's press
releases or other public or shareholder communications, or in oral statements
made with the
12
<PAGE>
NORTHEAST INDIANA BANCORP, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND
RESULTS OF OPERATIONS
FORWARD-LOOKING STATEMENTS (CONTINUED)
approval of an authorized executive officer, the words or phrases "would be,"
"will allow," "intends to," "will likely result," "are expected to," "will
continue," "is anticipated," "estimate," "project" or similar expressions are
intended to identify "forward-looking statements" within the meaning of the
Private Securities Litigation Reform Act of 1995. Such statements are subject to
risks and uncertainties, including but not limited to changes in economic
conditions in Northeast Indiana Bancorp's market area, changes in policies by
regulatory agencies, fluctuations in interest rates, demand for loans in
Northeast Indiana Bancorp's market area and competition, all or some of which
could cause actual results to differ materially from historical earnings and
those presently anticipated or projected.
Northeast Indiana Bancorp wishes to caution readers not to place undue reliance
on any such forward-looking statements, which speak only as of the date made,
and advises readers that various factors, including regional and national
economic conditions, substantial changes in levels of market interest rates,
credit and other risks of lending and investment activities and competitive and
regulatory factors, could affect Northeast Indiana Bancorp's financial
performance and could cause Northeast Indiana Bancorp's actual results for
future periods to differ materially from those anticipated or projected.
Northeast Indiana Bancorp does not undertake, and specifically disclaims any
obligation, to update any forward-looking statements to reflect occurrences or
unanticipated events or circumstances after the date of such statements.
13
<PAGE>
NORTHEAST INDIANA BANCORP, INC.
PART II
Other Information
ITEM 1 - LEGAL PROCEEDING
Northeast Indiana Bancorp and First Federal are involved from
time to time, as plaintiff or defendant in various legal actions
arising from the normal course of their businesses. While the
ultimate outcome of these proceedings cannot be predicted with
certainty, it is the opinion of management that the resolution of
these proceedings should not have a material effect on Northeast
Indiana Bancorp's results of operations on a consolidated basis.
ITEM 2 - CHANGES IN SECURITIES
None
ITEM 3 - DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDER
(a) The Annual Meeting of Shareholders ("the meeting") of Northeast
Indiana Bancorp, Inc. was held on April 19, 2000. The matters
approved by shareholders at the meeting and the number of votes
cast for, against or withheld (as well as the number of
abstentions) as to each matter are set forth below:
(1) The election of the following directors for a three year term:
Votes
-----
For Withheld
--- --------
Michael S. Zahn 1,279,678 32,979
Randall C. Rider 1,281,594 31,063
(2) Ratification of Crowe, Chizek and Company LLP as auditors for
the year ending December 31, 2000:
Votes
-----
For Against Withheld
--- ------- --------
1,283,898 18,161 10,598
14
<PAGE>
NORTHEAST INDIANA BANCORP, INC.
PART II
Other Information
Continued
ITEM 5 - OTHER INFORMATION
None
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
None
(b) Reports on Form 8-K
(1) January 18, 2000 Announcing Fourth Quarter Earnings
(2) January 26, 2000 Announcing Cash Dividends
(3) April 21, 2000 Announcing First Quarter Earnings, Cash
Dividends and Annual Meeting Results
15
<PAGE>
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.
NORTHEAST INDIANA BANCORP, INC.
Date: May 15, 2000 By: /S/ Stephen E. Zahn
-------------------
STEPHEN E. ZAHN
President and Chief Executive Officer
(Duly Authorized Officer)
Date: May 15, 2000 By: /S/ Darrell E. Blocker
-----------------------
DARRELL E. BLOCKER
Senior Vice President and
Chief Financial Officer
(Principal Financial Officer)
16
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<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-END> MAR-31-2000
<CASH> 2,112,863
<INT-BEARING-DEPOSITS> 4,498,782
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
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<ALLOWANCE> 1,876,987
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<DEPOSITS> 141,500,072
<SHORT-TERM> 51,854,439
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0
0
<COMMON> 26,407
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<EXPENSE-OTHER> 1,169,213
<INCOME-PRETAX> 797,402
<INCOME-PRE-EXTRAORDINARY> 518,974
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<NET-INCOME> 518,974
<EPS-BASIC> 0.32
<EPS-DILUTED> 0.32
<YIELD-ACTUAL> 3.14
<LOANS-NON> 1,875,000
<LOANS-PAST> 0
<LOANS-TROUBLED> 25,800
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