SECURITIES & EXCHANGE COMMISSION WASHINGTON D.C. 20549 FORM 10-Q __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 _____ 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 33-10149 SVB&T Corporation 1500 Main Street Jasper, IN 47546 Telephone (812) 634-1010 State of Incorporation - Indiana I.R.S. Employer Identification No. 35-1539978 NOT APPLICABLE Former name, former address and fiscal year, if changed since last report. 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, and (2) has been subject to the filing requirements for at least the past 90 days. Yes _X__ No ____ Indicate the number of shares outstanding of each of the issuer's classes of common stock. The Registrant has one class of common stock (no par value) with approximately 372,900 shares outstanding at June 30, 1996. The Registrant holds 27,100 shares in the form of Treasury Stock. SVB&T CORPORATION FORM 10-Q INDEX PART I. FINANCIAL INFORMATION Item 1. Financial Statements Page No. Consolidated Balance Sheet June 30, 1996 and 1995 and December 31, 1995................ 3 Consolidated Statement of Income Three and six months ended June 30, 1996 and 1995........... 4 Consolidated Statement of Cash Flows Six months ended June 30, 1996 and 1995..................... 5 Consolidated Statement of Changes in Shareholders' Equity Six months ended June 30, 1996 and 1995..................... 6 Notes to Consolidated Financial Statements................... 7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations................................... 8-10 PART II. OTHER INFORMATION............................................ 11 SIGNATURES............................................................ 12 SVB&T CORPORATION CONSOLIDATED BALANCE SHEET June 30, June 30, December 31, (unaudited) 1996 1995 1995 ASSETS: Cash and due from banks 3,667,844 4,635,626 4,087,658 Federal funds sold 8,080,000 9,055,000 9,550,000 Total cash and cash equivalents 11,747,825 13,690,626 13,637,658 Interest bearing deposits in other banks 0 0 0 Investment securities, available for sale (carried at market value) 59,059,570 57,136,622 56,908,873 Loans Loans, net of unearned interest 117,617,972 109,910,593 112,498,492 Allowance for loan losses (1,383,233) (1,368,704) (1,348,927) Net loans 116,234,739 108,541,889 111,149,565 Buildings and equipment 5,169,711 5,151,530 5,077,140 Other real estate 31,150 0 295,720 Interest receivable 1,526,009 1,452,173 1,537,370 Deferred income taxes 36,355 0 0 Other assets 1,279,566 1,997,991 1,270,449 Total Assets 195,084,944 187,970,831 189,876,775 LIABILITIES: Deposits Non-interest bearing demand 15,348,313 14,156,416 12,501,765 Interest bearing 162,090,703 156,470,930 159,262,811 Total Deposits 177,439,016 170,627,346 171,764,576 Long-term debt 0 0 0 Interest payable 763,978 1,033,429 865,352 Deferred income taxes 0 233,311 434,439 Other liabilities 609,002 446,035 440,281 Total Liabilities 178,811,996 172,340,121 173,504,648 SHAREHOLDERS' EQUITY: Common stock 200,000 200,000 200,000 Capital surplus 6,094,233 6,094,233 6,094,233 Retained earnings 11,293,580 10,157,392 10,674,978 Net unrealized gain (loss) on investment securities (501,865) (7,915) 215,916 Treasury stock at cost (27,100 shares) (813,000) (813,000) (813,000) Total Shareholders' Equity 16,272,948 15,630,710 16,372,127 Total Liabilities and Shareholders' Equity 195,084,944 187,970,831 189,876,775 The accompanying notes are an integral part of this statement. SVB&T CORPORATION CONSOLIDATED STATEMENT OF INCOME Three Months Six Months Ended June 30, Ended June 30, (unaudited) 1996 1995 1996 1995 ________________________________________________________________________ INTEREST INCOME: Loans and fees on loans 2,512,248 2,403,626 4,996,953 4,696,538 Investment securities: Taxable 736,839 581,295 1,468,493 1,110,811 Non-taxable 133,106 238,468 268,875 498,875 Federal funds sold and securities purchased under agreements to resell 61,449 109,558 213,239 232,516 Deposits with banks 0 0 0 0 Total Interest Income 3,443,642 3,332,947 6,947,560 6,538,740 INTEREST EXPENSE: Deposits 1,851,849 1,894,938 3,775,017 3,653,254 Long-term debt 0 0 0 0 Total interest expense 1,851,849 1,894,938 3,775,017 3,653,254 Net interest income 1,591,793 1,438,009 3,172,543 2,885,486 Provision for loan losses 75,000 60,000 150,000 140,000 Net interest income after provision for loan losses 1,516,793 1,378,009 3,022,543 2,745,486 NON-INTEREST INCOME: Trust fees 153,223 153,209 307,201 304,484 Service charges on deposit accounts 83,227 79,001 156,650 150,722 Insurance and claims processing 51,253 116,856 93,654 237,936 Securities gains (losses), net 162 0 162 0 Other Income 68,944 34,647 123,451 48,909 Total Non-interest Income 356,809 383,713 681,118 742,051 NON-INTEREST EXPENSE: Salaries and employee benefits 758,746 714,432 1,543,135 1,451,562 Premise and equipment expense 304,435 291,832 566,569 561,657 Other real estate expense 588 5,711 5,575 11,764 FDIC Deposit expense 500 93,765 1,000 187,530 Telephone expense 39,039 36,086 66,451 79,345 Postage expense 24,342 30,193 59,236 73,154 Other expenses 223,485 227,015 419,069 437,086 Total non-interest expense 1,351,135 1,399,034 2,661,035 2,802,098 Income before income taxes 522,467 362,688 1,042,626 685,439 Provision for income tax 136,760 88,000 248,760 165,000 Net Income 385,707 274,688 793,866 520,439 NET INCOME PER COMMON SHARE: Primary 1.04 0.74 2.13 1.40 Weighted average common shares outstanding 372,900 372,900 372,900 372,900 DIVIDENDS DECLARED: Cash dividends 0.24 0.23 0.47 0.46 The accompanying notes are an integral part of this statement. SVB&T CORPORATION CONSOLIDATED STATEMENT OF CASH FLOWS Six Months Ended June 30, (unaudited) 1996 1995 ___________________________________________________________________________ CASH FLOWS FROM OPERATING ACTIVITIES: Net income 793,866 520,439 ADJUSTMENTS TO RECONCILE NET INCOME TO CASH PROVIDED FROM OPERATING ACTIVITIES: Depreciation 214,120 213,071 Net premium amortization (discount accretion) of investment securities 27,629 393,399 Provision of loan losses 150,000 140,000 Decrease(increase) in interest receivable 11,361 84,576 (Increase) decrease in other assets (9,117) (903,854) Increase (decrease) in accrued expenses and other liabilities 67,347 425,851 Net cash flows provided by operating activities 1,255,206 873,482 CASH FLOWS FROM INVESTING ACTIVITIES: Net increase of interest bearing deposits in other banks 0 0 Purchase of investment securities available for sale (7,170,725) (4,930,781) Proceeds from maturities and paydowns of investment securities available for sale 3,803,804 2,505,000 Net (increase) decrease in loans (4,970,604) (2,975,975) Purchase of premises and equipment (306,691) (162,587) Net cash flows used in investing activities (8,644,216) (5,564,343) CASH FLOWS FROM FINANCING ACTIVITIES: Net increase (decrease) in deposits and short-term borrowings Non-interest bearing demand 2,846,548 1,960,890 Total interest-bearing deposits 2,827,892 553,131 Principal payment on long-term debt 0 0 Cash dividends paid (175,263) (171,534) Net cash flows provided by (used in) financing activities 5,499,177 2,342,487 Net decrease in cash equivalents (1,889,833) (2,348,374) Cash and cash equivalents at beginning of period 13,637,658 16,039,000 Cash and cash equivalents at end of period 11,747,825 13,690,626 Total interest paid 3,876,399 1,595,396 Total taxes paid 224,689 187,685 The accompanying notes are an integral part of this statement. SVB&T CORPORATION CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY Six Months Ended June 30, (unaudited) 1996 1995 _______________________________________________________________________________ Balance, beginning of period 16,372,127 14,034,021 Net income 793,866 520,439 Cash dividends (175,263) (171,534) Net unrealized gain (loss) on investment securities (717,782) 1,247,784 Balance, end of period 16,272,948 15,630,710 The accompanying notes are an integral part of this statement. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Principles of Consolidation - The consolidated financial statements include the accounts of SVB&T Corporation and its wholly owned subsidiary, Springs Valley Bank & Trust Company. All significant intercompany balances and transactions have been eliminated. All adjustments which are, in the opinion of management, necessary for a fair presentation of the results for the periods reported, consisting only of normal adjustments, have been included in the accompanying unaudited consolidated condensed financial statements. The results of operations for six month period ended June 30, 1996 is not necessarily indicative of those expected for the remainder of the year. June 30, 1996 June 30, 1995 Dec. 31, 1995 ________________________________________________________________________________ INVESTMENT SECURITIES: U.S. treasury securities 0 0 0 U.S. Government corporations & agencies 47,542,334 36,693,696 42,852,928 States and political subdivisions 10,076,634 19,928,215 13,635,404 Mortgage - backed securities 373,602 514,711 420,541 Other domestic securities 500,000 0 0 FHLB Stock 567,000 0 0 Total Investment Securities 59,059,570 57,136,622 56,908,873 June 30, 1996 June 30, 1995 Dec. 31, 1995 ________________________________________________________________________________ LOANS: Commercial and industrial loans 15,046,842 7,411,820 12,267,206 Real estate loans 65,055,382 67,954,450 64,584,906 Construction loans 68,652 349,717 131,197 Agricultural production financing and other loans to farmers 1,179,543 762,955 476,747 Individual loans for household and other personal expense 36,514,261 32,664,142 35,340,970 Economic development revenue bonds 0 0 40,551 Securities purchased under reverse repurchase agreement on a term basis 0 1,060,000 0 Less: Unearned income on loans (246,708) (292,491) (343,085) Total Loans 117,617,972 109,910,593 112,498,492 PART I ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS SUMMARY OF OPERATING RESULTS EARNINGS ANALYSIS Net income for the first three months of $793,866 represents an increase of $273,427 or 53% from the $520,439 reported for the same period last year. The second quarter earnings of $385,707 represents an increase of $111,019 or 40% from the $274,688 reported for the second quarter of 1995. The income increase is a direct result of a increase net interest margin. The bank is liability sensitive, thus in a declining rate environment it anticipates widening interest rate margins and increased earnings. Declining total non-interest expense have decreased by 5% from 1995. NET INTEREST INCOME Springs Valley Bank & Trust Company is a very liability sensitive bank. Interest bearing deposits reprice much faster than interest bearing loans and investments. In a declining environment, the bank's income increased because of a widening interest spread. Thus, our interest spreads have become larger and income has returned to a more acceptable position. The interest spread is improving. This subject is reviewed in greater detail in the following management comments. SVB&T Corporation's primary source of earnings is net interest income, which is the difference between interest earned on loans and other investments and the interest incurred for deposits. In the first six months of 1996, net interest income increased by $287,057 or 10% for the same period in 1995. The second quarter net interest income for 1995 increased by $153,784 or 11% compared to the second quarter of 1995. The improvement in the net interest income is due to deposits repricing at lower rates faster than our assets. OTHER INCOME Other income of $681,118 for the first two quarters of 1996 is $60,933 or 8% less than the same period for 1995. Insurance commission income was overstated by $74,000 in 1994. The error was discovered in the first quarter of 1995. Income was lowered in January 1995 to correct the 1994 overstated income. The second quarter decrease of other income, 1996 compared to 1995 is $26,904. The bank discontinued its insurance claims processing department. The elimination of the claims processing department accounts for the second quarter other income decrease. NON-INTEREST EXPENSES For the first six months of 1996, other expenses decreased by $141,063 or 5% compared to the same period of 1995. The three months ended June 30, 1996 total other expense was $47,899 or 3% decrease over the same period for 1995. This decrease is principally the effect of decreased FDIC deposit expense. ANALYSIS OF FINANCIAL CONDITION ALLOWANCE FOR POSSIBLE LOAN LOSSES The Corporation's allowance for loan losses was $1,383,233 at June 30, 1996 compared to $1,368,704 at June 30, 1995 and $1,348,927 as of December 31, 1995. At June 30, 1996 the allowance for possible loan losses was 1.18% of total loans, net for unearned interest. This compares to an allowance of 1.25% at June 30, 1995. Net charge offs for the first six months of 1996 were $115,694 compared to $111,694 for the same period last year. Based on management's review of the portfolio, management believes the allowance of $1,383,233 is adequate. LIQUIDITY AND ASSET/LIABILITY MANAGEMENT The Corporation's objective in liquidity management is to manage the assets and liabilities to meet the needs of borrowers while allowing for the possibility of deposit withdrawals. The primary purpose of asset/liability management is to minimize the effect on net income of changes in interest rates and to maintain a prudent match within specified time periods of rate-sensitive assets and rate-sensitive liabilities. As of June 30, 1996 the rate-sensitive assets were 78% of rate-sensitive liabilities in the 1-180 day maturity category and 88% in the 181-365 day range. These positions are within acceptable ranges as determined by funds management policy. The Corporation's Funds Management Committee meets weekly to monitor and effect changes necessary in the liquidity and rate-sensitivity positions. CAPITAL Total shareholders' equity as of June 30, 1996 was $16,272,948 compared to $15,630,710 for the same period last year. The shareholder's equity has decreased by $99,179 or 1% from December 31, 1995 to June 30, 1996. This decrease primarily is attributed to a change in net unrealized loss on investment securities, which was a $215,916 gain at December 31, 1995 to a net loss of $501,865 at June 30, 1996. (ANALYSIS OF FINANCIAL CONDITIONS CONTINUED) As of June 30, 1996 the bank's leverage capital ratio was 8.89% which compared to 8.32% at June 30, 1995. As of June 30, 1996 the bank's tier II risk-based capital ratio was 15.51% compared to 15.12% at June 30, 1995. These ratios are in excess of regulatory requirements of 3% for leverage capital and 8% for tier II risk-based capital. PART II OTHER INFORMATION Item 1 - LEGAL PROCEEDINGS None Item 2 - CHANGES IN SECURITIES None Item 3 - DEFAULTS UPON SENIOR SECURITIES None Item 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS (a) The annual meeting of shareholders of the corporation was held on May 14, 1996. (b) The following were elected directors of the corporation for a term of one year and until their successors are elected and qualified: Arnold F. Habig, Brian K. Habig, Douglas A. Habig, John B. Habig, Thomas L. Habig, Maurice R. Kuper, Hilbert Lindsey, Ronald G. Seals, R.J. Sermersheim, H.E. Thyen, and James C. Tucker. (c) The shareholders unanimously approved the action of the directors and officers since the 1995 annual meeting of shareholders. A total of 130,037 shares were voted in person and 203,942 shares voted by proxy. This totals 333,979 shares voted in approval of the 372,900 shares outstanding. Item 5 - OTHER INFORMATION None Item 6 - EXHIBITS AND REPORTS OF FORM 8-K None 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. SVB&T Corporation (Registrant) By: Ronald G. Seals President and Chief Executive Officer By: David Rees Principal Financial Officer Date: August 9, 1996