EXHIBIT 99(a)
LAFAYETTE BANCORPORATION
Lafayette, Indiana
CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2000, 1999 and 1998
CONTENTS
REPORT OF INDEPENDENT AUDITORS
CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEETS
CONSOLIDATED STATEMENTS OF INCOME
CONSOLIDATED STATEMENTS OF CHANGES IN
SHAREHOLDERS' EQUITY
CONSOLIDATED STATEMENTS OF CASH FLOWS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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1.
REPORT OF INDEPENDENT AUDITORS
Board of Directors and Shareholders
Lafayette Bancorporation
Lafayette, Indiana
We have audited the accompanying consolidated balance sheets of Lafayette
Bancorporation as of December 31, 2000 and 1999 and the related consolidated
statements of income, changes in shareholders' equity and cash flows for each of
the three years in the period ended December 31, 2000. These financial
statements are the responsibility of the Corporation's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Lafayette
Bancorporation as of December 31, 2000 and 1999, and the results of its
operations and its cash flows for each of the three years in the period ended
December 31, 2000 in conformity with generally accepted accounting principles.
Crowe, Chizek and Company LLP
Indianapolis, Indiana
January 25, 2001
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2.
LAFAYETTE BANCORPORATION
CONSOLIDATED BALANCE SHEETS
December 31, 2000 and 1999
(Dollar amounts in thousands)
- --------------------------------------------------------------------------------
2000 1999
--------- ---------
ASSETS
Cash and due from banks $ 26,452 $ 28,287
Interest-bearing deposits in other financial institutions 21,820 83
Federal funds sold 25,200 2,200
--------- ---------
Total cash and cash equivalents 73,472 30,570
Securities available-for-sale 78,857 79,722
Securities held-to-maturity (fair value
$4,580 and $4,709) 4,484 4,712
Loans held for sale 5,949 3,174
Loans 537,725 489,070
Less: Allowance for loan losses (5,071) (4,618)
--------- ---------
Net loans 532,654 484,452
FHLB stock, at cost 2,200 1,897
Premises, furniture and equipment, net 11,353 10,583
Intangible assets 13,007 13,747
Accrued interest receivable and other assets 19,171 16,292
--------- ---------
Total assets $ 741,147 $ 645,149
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities
Noninterest-bearing deposits $ 70,866 $ 63,206
Interest-bearing demand and savings deposits 230,984 229,302
Interest-bearing time deposits 276,447 229,739
--------- ---------
Total deposits 578,297 522,247
Short-term borrowings 55,572 27,273
FHLB advances 35,737 30,027
Note payable 11,550 12,950
Accrued interest payable and other liabilities 7,190 6,867
--------- ---------
Total liabilities 688,346 599,364
Shareholders' equity
Common stock, no par value: 5,000,000 shares
authorized; 3,953,616 and 3,586,140 shares issued and outstanding 3,954 3,586
Additional paid-in capital 38,024 32,886
Retained earnings 11,086 11,269
Accumulated other comprehensive income (263) (1,956)
--------- ---------
Total shareholders' equity 52,801 45,785
--------- ---------
Total liabilities and shareholders' equity $ 741,147 $ 645,149
========= =========
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See accompanying notes.
3.
LAFAYETTE BANCORPORATION
CONSOLIDATED STATEMENTS OF INCOME
Years ended December 31, 2000, 1999 and 1998
(Dollar amounts in thousands, except per share data)
- --------------------------------------------------------------------------------
2000 1999 1998
-------- -------- -------
INTEREST INCOME
Loans, including related fees $ 46,620 $ 38,520 $29,810
Taxable securities 3,318 3,831 3,217
Tax exempt securities 1,664 1,529 991
Other 784 510 707
-------- -------- -------
Total interest income 52,386 44,390 34,725
INTEREST EXPENSE
Deposits 23,016 18,024 14,906
Short-term borrowings 1,773 1,358 712
Other borrowings 2,616 2,161 1,345
-------- -------- -------
Total interest expense 27,405 21,543 16,963
-------- -------- -------
NET INTEREST INCOME 24,981 22,847 17,762
Provision for loan losses 1,200 1,060 980
-------- -------- -------
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 23,781 21,787 16,782
Noninterest income
Fiduciary activities 1,187 1,134 964
Service charges on deposit accounts 1,880 1,581 1,309
Net realized gain/(loss) on securities (12) (144) 6
Net gain on loan sales 659 942 1,255
Other service charges and fees 1,042 923 727
Investment product commissions 758 318 357
Other 311 371 298
-------- -------- -------
Total noninterest income 5,825 5,125 4,916
Noninterest expense
Salaries and employee benefits 10,681 9,836 8,206
Occupancy, net 1,247 1,073 891
Equipment 1,731 1,314 1,054
Intangible amortization 740 597 81
Other 4,777 4,714 3,378
-------- -------- -------
Total noninterest expenses 19,176 17,534 13,610
-------- -------- -------
INCOME BEFORE INCOME TAXES 10,430 9,378 8,088
Income taxes 3,514 3,027 2,711
-------- -------- -------
NET INCOME $ 6,916 $ 6,351 $ 5,377
======== ======== =======
Basic earnings per share $ 1.75 $ 1.61 $ 1.36
======== ======== =======
Diluted earnings per share $ 1.74 $ 1.57 $ 1.34
======== ======== =======
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See accompanying notes.
4.
LAFAYETTE BANCORPORATION
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
Years ended December 31, 2000, 1999 and 1998
(Dollar amounts in thousands, except per share data)
- --------------------------------------------------------------------------------
Accumulated
Additional Other Total
Common Paid-in Retained Comprehensive Treasury Shareholders'
Stock Capital Earnings Income Stock Equity
----- ------- -------- ------ ----- ------
Balance, January 1, 1998 $ 2,174 $ 24,555 $ 11,927 $ (90) $ (97) $ 38,469
Comprehensive income
Net income 5,377 5,377
Change in net unrealized
gain/ (loss) on securities
available-for-sale 48 48
--------
Total comprehensive
income 5,425
Issue 2,825 shares under
stock option plan 2 67 69
10% Stock dividend,
217,640 shares 218 7,998 (8,216) --
Cash dividends
($.34 per share) (1,341) (1,341)
Purchase 188 treasury shares (8) (8)
-------- -------- -------- -------- -------- --------
Balance, December 31, 1998 2,394 32,620 7,747 (42) (105) 42,614
Comprehensive income
Net income 6,351 6,351
Change in net unrealized
gain/ (loss) on securities
available-for-sale (1,914) (1,914)
--------
Total comprehensive
income 4,437
Issue 11,884 shares under
stock option plan 12 266 278
3-2 stock split,
1,200,738 shares 1,201 (1,201) --
Cash dividends
($.39 per share) (1,540) (1,540)
Purchase 105 treasury shares (4) (4)
Retire 20,517 treasury shares (21) (88) 109 --
-------- -------- -------- -------- -------- --------
Balance, December 31, 1999 3,586 32,886 11,269 (1,956) -- 45,785
Comprehensive income
Net income 6,916 6,916
Change in net unrealized
gain/ (loss) on securities
available-for-sale 1,693 1,693
--------
Total comprehensive
income 8,609
Issue 8,448 shares under
stock option plan 9 108 117
10% Stock dividend
359,043 shares 359 5,030 (5,393) (4)
Cash dividends
($.43 per share) (1,706) (1,706)
-------- -------- -------- -------- -------- --------
BALANCE, DECEMBER 31, 2000 $ 3,954 $ 38,024 $ 11,086 $ (263) $ -- $ 52,801
======== ======== ======== ======== ======== ========
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See accompanying notes.
5.
LAFAYETTE BANCORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years ended December 31, 2000, 1999 and 1998
(Dollar amounts in thousands)
- --------------------------------------------------------------------------------
2000 1999 1998
---- ---- ----
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 6,916 $ 6,351 $ 5,377
Adjustments to reconcile net income to net
cash from operating activities
Depreciation 1,339 948 646
Net amortization 722 726 311
Provision for loan losses 1,200 1,060 980
Net realized (gain)/loss on securities 12 144 (6)
Net realized (gain) loss on sale of
other real estate (5) -- (43)
Change in assets and liabilities
Loans originated for sale (56,201) (67,547) (86,291)
Loans sold 53,426 74,459 83,845
Accrued interest receivable
and other assets (4,410) (1,947) (1,402)
Accrued interest payable
and other liabilities 323 1,314 446
-------- -------- --------
Net cash from operating activities 3,322 15,508 3,863
CASH FLOWS FROM INVESTING ACTIVITIES
Change in interest-bearing balances with
other financial institutions -- 671 (671)
Purchase of securities available-for-sale (86,815) (172,049) (54,270)
Proceeds from sales of securities available-for-sale 82,375 56,027 3,592
Proceeds from maturities of securities
available-for-sale 8,119 109,826 40,176
Purchase of securities held-to-maturity -- (2,000) (2,532)
Proceeds from maturities of securities
held-to-maturity 229 2,160 2,906
Loans made to customers, net of payments collected (49,452) (78,085) (41,804)
Purchase of Federal Home Loan Bank stock (303) (358) (297)
Property and equipment expenditures (2,109) (3,578) (2,416)
Proceeds from sales of other real estate 470 -- 251
-------- -------- --------
Net cash from investing activities (47,486) (87,386) (55,065)
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(Continued)
6.
LAFAYETTE BANCORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
Years ended December 31, 2000, 1999, and 1998
(Dollar amounts in thousands)
- --------------------------------------------------------------------------------
2000 1999 1998
---- ---- ----
CASH FLOWS FROM FINANCING ACTIVITIES
Net change in deposit accounts $ 56,050 $ 9,686 $ 40,351
Cash received in branch acquisition for
liabilities assumed, net of assets acquired -- 45,266 --
Net change in short-term borrowings 28,299 10,871 (3,970)
Proceeds from other borrowings 22,000 30,000 4,800
Payments on other borrowings (17,690) (10,877) (832)
Common stock issued 117 278 69
Dividends paid (1,706) (1,540) (1,341)
Purchase of fractional shares from stock dividend (4) -- --
Purchase of treasury stock -- (4) (8)
-------- -------- --------
Net cash from financing activities 87,066 83,680 39,069
-------- -------- --------
Net change in cash and cash equivalents 42,902 11,802 (12,133)
Cash and cash equivalents at beginning of year 30,570 18,768 30,901
-------- -------- --------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 73,472 $ 30,570 $ 18,768
======== ======== ========
Supplemental disclosures of cash flow information
Cash paid during the period for
Interest $ 26,882 $ 20,765 $ 16,824
Income taxes 3,405 3,168 2,939
Non-cash investing and financing activities
Loans transferred to other real estate $ 50 $ 465 $ --
See also Note 18 regarding 1999 branch acquisition.
- --------------------------------------------------------------------------------
See accompanying notes.
7.
LAFAYETTE BANCORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2000, 1999 and 1998
(Dollar amounts in thousands, except per share data)
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NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Operations and Principles of Consolidation: The consolidated financial
statements include the accounts of Lafayette Bancorporation (Corporation) and
its wholly owned subsidiary, Lafayette Bank and Trust Company (Bank), after
elimination of significant intercompany transactions and accounts.
The Corporation provides financial services to its customers, primarily
commercial and retail banking and trust services, with operations conducted
through its main office and 16 branches located in Tippecanoe, White, and Jasper
Counties in Indiana. The majority of the Corporation's revenue is derived from
commercial and retail business lending activities and investments. Although the
overall loan portfolio is diversified, the economy of Tippecanoe County is
heavily dependent on Purdue University, one of the area's largest employers, and
the economy of White and Jasper County is heavily dependent on the agricultural
industry. The majority of the Bank's loans are secured by specific items of
collateral including business assets, real property and consumer assets.
Use of Estimates: Management must make estimates and assumptions in preparing
financial statements that affect the amounts reported therein and the
disclosures provided. These estimates and assumptions may change in the future
and future results could differ from these estimates. Estimates that are more
susceptible to change in the near term include the allowance for loan losses,
the fair value of securities and other financial instruments, and the
determination and carrying value of impaired loans.
Securities: Securities are classified as held-to-maturity and carried at
amortized cost when management has the positive intent and ability to hold them
to maturity. Securities are classified as available-for-sale when they might be
sold before maturity. Securities available-for-sale are reported at fair value,
with unrealized gains or losses included in other comprehensive income.
Realized gains or losses are determined based on the amortized cost of the
specific security sold. Interest and dividend income, adjusted by amortization
of purchase premium or discount, is included in earnings.
Loans Held for Sale: The Bank sells certain fixed-rate first mortgage loans in
the secondary market on a servicing-released basis. Mortgage loans held for sale
are carried at the lower of cost or estimated market value determined on an
aggregate basis.
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(Continued)
8.
LAFAYETTE BANCORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2000, 1999 and 1998
(Dollar amounts in thousands, except per share data)
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NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Loans: Interest on real estate, commercial and most installment loans is accrued
over the term of the loans based on the principal outstanding. The recognition
of interest income is discontinued when, in management's judgment, the interest
will not be collectible in the normal course of business. Loans are evaluated
for non-accrual when the loan is impaired or payments are past due over 90 days.
Interest received is recognized on the cash basis or cost recovery method until
qualifying for return to accrual status. Accrual is resumed when all
contractually due payments are brought current and future payments are
reasonably assured. The Bank defers loan fees, net of certain direct loan
origination costs. The net amount deferred is reported in the balance sheet as
part of loans and is recognized into interest income over the term of the loan
using a method which approximates a level-yield.
Allowance for Loan Losses: The allowance for loan losses is a valuation
allowance for probable incurred credit losses, increased by the provision for
loan losses and decreased by charge-offs less recoveries. Management estimates
the allowance balance required using past loan loss experience, the nature and
volume of the portfolio, information about specific borrower situations and
estimated collateral values, economic conditions, and other factors. Allocations
of the allowance may be made for specific loans, but the entire allowance is
available for any loan that, in management's judgment, should be charged-off.
Loan losses are charged against the allowance when management believes the
uncollectibility of a loan balance is confirmed.
Loan impairment is recognized if a loan's full principal or interest payments
are not expected to be received. Loans considered to be impaired are reduced to
the present value of expected future cash flows using the loans' existing rate
or to the fair value of collateral if repayment is expected solely from the
collateral, by allocating a portion of the allowance for loan losses to such
loans. Smaller-balance homogeneous loans are evaluated for impairment in total.
Such loans include residential real estate loans secured by one to four family
residences and installment loans to individuals for household, family and other
personal expenditures. Commercial and agricultural loans are evaluated
individually for impairment.
Premises, Furniture and Equipment: Premises, furniture and equipment are stated
at cost less accumulated depreciation. Depreciation expense is recognized over
the estimated useful lives of the assets, principally on the straight-line
method.
Foreclosed Assets: Assets acquired through or instead of loan foreclosure are
initially recorded at fair value when acquired, establishing a new cost basis.
If fair value declines, a valuation allowance is recorded through expense.
Holding costs after acquisition are expensed.
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(Continued)
9.
LAFAYETTE BANCORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2000, 1999 and 1998
(Dollar amounts in thousands, except per share data)
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NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Long-term Assets: These assets are reviewed for impairment when events indicate
their carrying amounts may not be recoverable from future undiscounted cash
flows. If impaired, the assets are recorded at discounted amounts.
Repurchase Agreements: Substantially all repurchase agreement liabilities
represent amounts advanced by various customers. Securities are pledged to cover
these liabilities, which are not covered by federal deposit insurance. The Bank
retains possession of and control over pledged securities.
Intangibles: Intangibles include goodwill and core deposit intangibles. Goodwill
is amortized on the straight-line method over 15 to 25 years, and core deposit
is amortized on an accelerated method over 10 years. Intangibles are assessed
for impairment based on estimated undiscounted cash flows, and written down if
necessary.
Stock Compensation: Expense for employee compensation under stock option plans
is based on Opinion 25, with expense reported only if options are granted below
market price at grant date. Pro forma disclosures of net income and earnings per
share are provided as if the fair value method of Financial Accounting Standard
No. 123 were used for stock-based compensation.
Income Taxes: Deferred tax liabilities and assets are determined at each balance
sheet date. They are measured by applying enacted tax laws to future taxable
income or expense resulting from differences in the financial statement and tax
basis of assets and liabilities. Valuation allowances are established when
necessary to reduce deferred tax assets to the amount expected to be realized.
Income tax expense is the tax payable or refundable for the period plus or minus
the change during the period in deferred tax assets and liabilities.
Earnings Per Share: Basic earnings per share is net income divided by the
weighted average number of common shares outstanding during the period. Diluted
earnings per share includes the dilutive effect of additional potential common
shares issuable under stock options. Earnings and dividends per share are
restated for all stock splits and dividends through the date of issue of the
financial statements.
Statement of Cash Flows: Cash and cash equivalents are defined to include cash
on hand, amounts due from banks, and federal funds sold. The Corporation reports
net cash flows for customer loan transactions, deposit transactions, and
short-term borrowings.
- --------------------------------------------------------------------------------
(Continued)
10.
LAFAYETTE BANCORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2000, 1999 and 1998
(Dollar amounts in thousands, except per share data)
- --------------------------------------------------------------------------------
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Financial Instruments: Financial instruments include credit instruments, such as
commitments to make loans and standby letters of credit, issued to meet customer
financing needs. The face amount for these items represents the exposure to
loss, before considering customer collateral or ability to repay.
Fair Values of Financial Instruments: Fair values of financial instruments are
estimated using relevant market information and other assumptions, as more fully
disclosed separately. Fair value estimates involve uncertainties and matters of
significant judgment regarding interest rates, credit risk, prepayments, and
other factors, especially in the absence of broad markets for particular items.
Changes in assumptions or in market conditions could significantly affect the
estimates.
Loss Contingencies: Loss contingencies, including claims and legal actions
arising in the ordinary course of business, are recorded as liabilities when the
likelihood of loss is probable and an amount or range of loss can be reasonably
estimated. Management does not believe there are now such matters that will have
a material effect on the financial statements.
Comprehensive Income: Comprehensive income consists of net income and other
comprehensive income. Other comprehensive income includes unrealized gains and
losses on securities available for sale, which are also recognized as a separate
component of equity.
Dividend Restriction: Banking regulations require maintaining certain capital
levels and may limit the dividends paid by the bank to the holding company or by
the holding company to shareholders.
Industry Segments: Internal financial information is primarily reported and
aggregated in three lines of business, banking, mortgage banking and trust
services.
New Accounting Pronouncements: Beginning January 1, 2001, a new accounting
standard will require all derivatives to be recorded at fair value. Unless
designated as hedges, changes in these fair values will be recorded in the
income statement. Fair value changes involving hedges will generally be recorded
by offsetting gains and losses on the hedge and on the hedged item, even if the
fair value of the hedged item is not otherwise recorded. Adoption of this
standard on January 1, 2001 did not have a material effect on the financial
statements.
Reclassifications: Some items in the prior financial statements were
reclassified to conform to the current presentation.
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(Continued)
11.
LAFAYETTE BANCORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2000, 1999 and 1998
(Dollar amounts in thousands, except per share data)
- --------------------------------------------------------------------------------
NOTE 2 - SECURITIES
The amortized cost and fair values of securities are as follows at December 31,
2000:
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
---- ----- ------ -----
SECURITIES AVAILABLE-FOR-SALE
U.S. Government and its agencies $ 4,201 $ 10 $ (18) $ 4,193
Obligations of states and political
subdivisions 30,880 418 (286) 31,012
Corporate obligations 3,953 48 -- 4,001
Mortgage-backed and other
asset-backed securities 37,699 58 (652) 37,105
Other securities 2,560 515 (529) 2,546
------- ------- -------- -------
$79,293 $ 1,049 $ (1,485) $78,857
======= ======= ======== =======
SECURITIES HELD-TO-MATURITY
Obligations of states and political
subdivisions $ 4,484 $ 98 $ (2) $ 4,580
======= ======= ======== =======
The amortized cost and fair values of securities are as follows at December 31,
1999:
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
---- ----- ------ -----
SECURITIES AVAILABLE-FOR-SALE
U.S. Government and its agencies $ 5,207 $ -- $ (202) $ 5,005
Obligations of states and political
subdivisions 28,785 10 (1,527) 27,268
Corporate obligations 2,000 -- (27) 1,973
Mortgage-backed and other
asset-backed securities 44,402 35 (1,549) 42,888
Other securities 2,567 21 -- 2,588
------- ------- -------- -------
$82,961 $ 66 $ (3,305) $79,722
======= ======= ======== =======
SECURITIES HELD-TO-MATURITY
Obligations of states and political
subdivisions $ 4,712 $ 40 $ (43) $ 4,709
======= ======= ======== =======
Gross gains of $2, $35 and $6 and gross losses of $14, $179 and $0 were realized
on sales of securities available-for-sale in 2000, 1999 and 1998.
- --------------------------------------------------------------------------------
(Continued)
12.
LAFAYETTE BANCORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2000, 1999 and 1998
(Dollar amounts in thousands, except per share data)
- --------------------------------------------------------------------------------
NOTE 2 - SECURITIES (Continued)
The amortized cost and estimated market value of securities at December 31,
2000, by contractual maturity, are shown below. Securities not due at a single
maturity date are shown separately.
Available-for-Sale Held-to-Maturity
------------------ ----------------
Amortized Fair Amortized Fair
Cost Value Cost Value
---- ----- ---- -----
Due in 1 year or less $ -- $ -- $ 415 $ 415
Due after 1 year through
5 years 6,805 6,826 1,353 1,394
Due after five years through
10 years 10,730 10,754 1,632 1,686
Due after 10 years 24,059 24,172 1,084 1,085
------- ------- ------ ------
Subtotal 41,594 41,752 4,484 4,580
Mortgage-backed and other asset-
backed securities 37,699 37,105 -- --
------- ------- ------ ------
Total $79,293 $78,857 $4,484 $4,580
======= ======= ====== ======
Securities with a carrying value of $57,405 and $28,206 at December 31, 2000 and
1999 were pledged to secure public deposits and repurchase agreements. See Note
8 regarding additional securities pledges.
At December 31, 2000 and 1999, mortgage-backed securities include collateralized
mortgage obligations (CMO's) and real estate mortgage investment conduits
(REMIC's) with an amortized cost of $17,295 and $20,256 and fair value of
$16,753 and $19,144, all of which are issued by U.S. Government agencies. At
December 31, 2000 and 1999, approximately $8,481 and $8,432 are variable rate,
with the remainder fixed rate.
- --------------------------------------------------------------------------------
(Continued)
13.
LAFAYETTE BANCORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2000, 1999 and 1998
(Dollar amounts in thousands, except per share data)
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NOTE 3 - LOANS
Loans are comprised of the following as of December 31:
2000 1999
---- ----
Commercial and agricultural loans $215,087 $192,760
Real estate construction 54,768 47,375
Residential real estate loans 212,190 197,181
Installment loans to individuals 50,696 51,754
Commercial paper 4,984 --
-------- --------
Total $537,725 $489,070
======== ========
Non-performing loans consist of the following at December 31:
2000 1999
---- ----
Loans past due 90 days or more $ 1,052 $ 584
Non-accrual loans 2,718 622
Restructured loans 55 114
-------- --------
Total $ 3,825 $ 1,320
======== ========
Information regarding impaired loans is as follows:
2000 1999
---- ----
Year-end impaired loans
With no allowance for loan losses allocated $ 25 $ 70
With allowance for loan losses allocated 5,151 576
Amount of the allowance allocated 1,658 151
Average balance of impaired loans during the year 2,885 697
Interest income recognized during impairment 55 3
Cash-basis interest income recognized 41 3
The Bank had $34 and $14 of loans on non-accrual at December 31, 2000 or 1999
that management did not deem to be impaired.
- --------------------------------------------------------------------------------
(Continued)
14.
LAFAYETTE BANCORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2000, 1999 and 1998
(Dollar amounts in thousands, except per share data)
- --------------------------------------------------------------------------------
NOTE 3 - LOANS (Continued)
Certain directors and officers of the Corporation and Bank were customers of the
Bank in the ordinary course of business. Loan activity with these related
parties is as follows:
Balance as of January 1, 2000 $ 989
Change in persons included --
New loans 231
Loan payments (310)
-------
Balance as of December 31, 2000 $ 910
=======
NOTE 4 - ALLOWANCE FOR LOAN LOSSES
The activity in the allowance for loan losses is as follows:
2000 1999 1998
---- ---- ----
Balance, January 1 $ 4,618 $ 4,241 $ 3,464
Provision charged to operations 1,200 1,060 980
Loans charged-off (877) (829) (411)
Recoveries on loans previously charged-off 130 146 208
------- ------- -------
Balance, December 31 $ 5,071 $ 4,618 $ 4,241
======= ======= =======
NOTE 5 - PREMISES, FURNITURE AND EQUIPMENT
A summary of premises, furniture and equipment by major category follows:
2000 1999
---- ----
Land $ 870 $ 870
Buildings and improvements 8,782 8,468
Leasehold improvements 1,786 1,296
Furniture and equipment 9,781 9,922
-------- --------
Total 21,219 20,556
Accumulated depreciation (9,866) (9,973)
-------- --------
Premises, furniture and equipment, net $ 11,353 $ 10,583
======== ========
- --------------------------------------------------------------------------------
(Continued)
15.
LAFAYETTE BANCORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2000, 1999 and 1998
(Dollar amounts in thousands, except per share data)
- --------------------------------------------------------------------------------
NOTE 6 - INTEREST-BEARING TIME DEPOSITS
Time deposits of $100 or greater totaled $53,514 and $38,665 at December 31,
2000 and 1999.
At December 31, 2000, the scheduled maturities of time deposits are as follows:
2001 $ 147,135
2002 89,613
2003 34,173
2004 2,633
2005 2,401
Thereafter 492
--------
Total $ 276,447
=========
NOTE 7 - SHORT-TERM BORROWINGS
Short-term borrowings are comprised of the following at year-end:
2000 1999
---- ----
Balance of repurchase agreements outstanding $ 54,275 $ 24,645
Balance of treasury tax and loan open-end note 1,297 2,628
-------- --------
Total short-term borrowings $ 55,572 $ 27,273
======== ========
At December 31, 2000 and 1999, the Corporation had $1,054 and $240 in related
party repurchase agreements.
- --------------------------------------------------------------------------------
(Continued)
16.
LAFAYETTE BANCORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2000, 1999 and 1998
(Dollar amounts in thousands, except per share data)
- --------------------------------------------------------------------------------
NOTE 8 - FHLB ADVANCES AND NOTE PAYABLE
FHLB advances and note payable outstanding at December 31 consist of the
following:
2000 1999
---- ----
Federal Home Loan Bank advances; annual principal payments; various
maturities with final maturity May 15, 2008; interest payable monthly at
various fixed interest rates from 5.45% - 6.82%; secured by a blanket
pledge of the Bank's obligations of the U.S. Government and U.S. Government
agencies and one-to-four family residential mortgage loans. $ 8,737 $ 9,527
Federal Home Loan Bank advances; principal callable one year from date of
advance and quarterly thereafter, otherwise, principal payments due at
maturity, with final maturities in 2002 and 2010; interest payable monthly
at various fixed interest rates from 4.98%-6.20%; secured by a blanket
pledge of the Bank's obligations of the U.S. Government and U.S. Government
agencies and one-to-four family residential mortgage loans. 27,000 20,500
-------- --------
Total FHLB advances 35,737 30,027
Note payable to Northern Trust Company; quarterly principal payments of
$350 required; matures March 31, 2006; interest payable monthly at a
variable rate, which is currently 8.28% based on the Federal Funds rate
plus an applicable margin based on the Corporation's existing capital
ratios; obligation is unsecured but subject to various covenants, including
defined minimum return on average assets, tangible net worth, capital
ratios, loan loss allowance to non-performing loans ratio, and maximum
non-performing assets. At year-end, the Corporation was in compliance with
all covenants. 11,550 12,950
-------- --------
Total $ 47,287 $ 42,977
======== ========
Annual principal payments required are as follows:
2001 $ 2,155
2002 7,399
2003 4,426
2004 1,479
2005 1,485
Thereafter 30,343
----------
Total FHLB advances and note payable $ 47,287
==========
- --------------------------------------------------------------------------------
(Continued)
17.
LAFAYETTE BANCORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2000, 1999 and 1998
(Dollar amounts in thousands, except per share data)
- --------------------------------------------------------------------------------
NOTE 9 - EMPLOYEE BENEFIT PLANS
The following sets forth the defined benefit pension plan's funded status and
amount recognized in the balance sheet at December 31 (amounts computed as of
September 30, 2000 and 1999):
2000 1999
---- ----
Change in benefit obligation:
Beginning benefit obligation $ 12,626 $ 12,240
Service cost 783 647
Interest cost 928 812
Actuarial (gain) loss (503) (648)
Benefits paid (520) (425)
-------- --------
Ending benefit obligation 13,314 12,626
Change in plan assets, at fair value:
Beginning plan assets 16,603 15,199
Actual return 258 1,829
Employer contribution -- --
Benefits paid (520) (425)
-------- --------
Ending plan assets 16,341 16,603
-------- --------
Funded status 3,027 3,977
Unrecognized net actuarial (gain) loss (382) (1,134)
Unrecognized prior service cost 19 20
Unrecognized transition asset (631) (782)
-------- --------
Prepaid benefit cost $ 2,033 $ 2,081
======== ========
The components of pension expense and related actuarial assumptions were as
follows.
2000 1999 1998
---- ---- ----
Service cost $ 783 $ 647 $ 612
Interest cost 928 812 803
Expected return on plan assets (1,513) (1,386) (1,341)
Amortization of prior service cost 2 2 2
Amortization of transition asset (151) (151) (151)
-------- -------- --------
$ 49 $ (76) $ (75)
======== ======== ========
Discount rate on benefit obligation 7.50% 7.50% 6.75%
Long-term expected rate of return
on plan assets 9.25 9.25 9.25
Rate of compensation increase 4.00 4.00 4.00
At December 31, 2000 and 1999, the plan's assets include Lafayette
Bancorporation common stock of $582 and $1,028. At December 31, 2000 and 1999
the plan's assets also included Lafayette Bank and Trust Company certificates of
deposit of $436 and $421.
- --------------------------------------------------------------------------------
(Continued)
18.
LAFAYETTE BANCORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2000, 1999 and 1998
(Dollar amounts in thousands, except per share data)
- --------------------------------------------------------------------------------
NOTE 9 - EMPLOYEE BENEFIT PLANS (Continued)
The Bank maintains a retirement savings plan covering substantially all
employees. The plan requires employees to complete one year of service and be 21
years of age before entering the plan. The plan allows for Bank contributions at
an annually determined matching percentage of the first 4% of employee salary
contributions, as well as an annual discretionary contribution. Total 401(k)
contributions charged to expense were $161, $140 and $116 for 2000, 1999 and
1998.
The Bank maintains a deferred compensation plan for the benefit of certain
directors. Under the plan, the Bank agrees, in return for the directors
deferring the receipt of a portion of their current compensation, to pay a
retirement benefit computed as the amount of the compensation deferred plus
accrued interest at a variable rate. Accrued benefits payable totaled $1,289 and
$1,049 at December 31, 2000 and 1999. Deferred compensation expense was $106 for
2000, and $90 for 1999 and 1998. In conjunction with the plan formation, the
Bank purchased life insurance on the directors. In November 2000 the Bank
purchased $2,995 in additional life insurance coverage. The cash surrender value
of that insurance is carried as an other asset on the consolidated balance
sheet, and was approximately $6,834 and $3,678 at December 31, 2000 and 1999.
NOTE 10 - POSTRETIREMENT BENEFITS
The Bank sponsors a postretirement benefit plan which provides defined medical
benefits. Retirees contribute an amount equal to their individual applicable
premium to provide the coverage, less 30%, which is paid monthly by the Bank.
Retirees must pay 100% of medical premiums for all dependent coverage. The plan
is not funded and has no assets.
- --------------------------------------------------------------------------------
(Continued)
19.
LAFAYETTE BANCORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2000, 1999 and 1998
(Dollar amounts in thousands, except per share data)
- --------------------------------------------------------------------------------
NOTE 10 - POSTRETIREMENT BENEFITS (Continued)
The following sets forth the plan's benefit obligation and amounts recognized in
the balance sheet at December 31:
2000 1999
---- ----
Change in postretirement benefit obligation:
Beginning benefit obligation $ 550 $ 494
Unrecognized net actuarial (gain) loss (159) --
Service cost 35 31
Interest cost 38 34
Benefits paid, net (10) (9)
----- -----
Ending benefit obligation 454 550
Unrecognized net gain 302 153
----- -----
Accrued benefit obligation $ 756 $ 703
===== =====
Components of net periodic postretirement benefit cost as of December 31:
2000 1999 1998
---- ---- ----
Service cost $ 35 $ 31 $ 28
Interest cost 38 34 31
Amortization of unrecognized gain (10) (11) (14)
----- ----- -----
Benefit cost $ 63 $ 54 $ 45
===== ===== =====
For measurement purposes, the annual rate of increase in the per capita cost of
covered health care benefits assumed was 8% for 2000, and 11.5% for 1999 and
1998, with the rate assumed to decrease to 6% over the next two years in the
2000 calculation, and to 5.5% over the next two years in the 1999 and 1998
calculation. The health care cost trend is a significant assumption. However,
either an increase or decrease in the assumed health care cost trend rates by 1%
in each year would affect the accumulated postretirement benefit obligation as
of December 31, 2000 and the aggregate service and interest cost components of
net periodic postretirement benefit cost for the year then ended by amounts not
considered to be material.
The weighted average discount rate used in determining the accumulated
postretirement benefit obligation was 8% for 2000, and 7% for 1999 and 1998.
- --------------------------------------------------------------------------------
(Continued)
20.
LAFAYETTE BANCORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2000, 1999 and 1998
(Dollar amounts in thousands, except per share data)
- --------------------------------------------------------------------------------
NOTE 11 - STOCK APPRECIATION RIGHTS AND STOCK OPTION PLAN
The Corporation maintains an Officers' Stock Appreciation Rights Plan for
granting rights to certain officers, under which all available rights have been
granted. Upon exercise of a stock appreciation right, the holder may receive
cash equal to the excess of the fair market value of common stock at the date of
exercise over the option price. Stock appreciation rights are vested at 20% per
year and must be exercised within 10 years of grant. The plan expires May 2002.
Granted rights outstanding were fully vested and consisted of 38,105 at an
option price of $3.66 for 2000, and 54,605 at an option price of $3.66 for 1999.
In 2000, 16,500 rights were exercised when the fair market value was $23.18 per
share. In 1999, 18,150 rights were exercised when the fair market value was
$24.62 per share. The aforementioned amounts of rights and prices are adjusted
for stock dividends and splits. Compensation expense (benefit) charged to
operations in 2000, 1999 and 1998 was ($376), $14 and $450 and is based on an
increase (decrease) in market value. The liability at December 31, 2000 and 1999
was $356 and $1,053.
The Corporation has established two nonqualified stock option plans to provide
stock options to directors and key members of management. One plan was adopted
in 1995 ("1995 Plan") and the other in 1998 ("1998 Plan"). There are no shares
of common stock remaining available for grant under the 1995 Plan. The total
number of shares of common stock remaining available for grant to directors and
management under the 1998 Plan is 4,967 and 37,675, respectively. All shares for
both plans were available for grant at a price equal to the market price of the
stock at the date of grant.
Under the 1995 Plan, options granted to directors at the effective date are
exercisable any time after the date of grant, and options granted to directors
elected after the effective date are exercisable after two years. Under the 1998
Plan, options granted to directors at the effective date and directors elected
after the effective date are exercisable after two years. Options granted to
management under both plans become 20% exercisable after one year and 20% each
subsequent year. Both plans are effective for five years and options must be
exercised within ten years from the date of grant.
- --------------------------------------------------------------------------------
(Continued)
21.
LAFAYETTE BANCORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2000, 1999 and 1998
(Dollar amounts in thousands, except per share data)
- --------------------------------------------------------------------------------
NOTE 11 - STOCK APPRECIATION RIGHTS AND STOCK OPTION PLAN (Continued)
A summary of the Corporation's stock option activity, and related information
for the years ended December 31, follows (adjusted for stock dividends and
splits):
---------2 0 0 0--------- ---------1 9 9 9--------
Weighted Weighted
Average Average
Exercise Exercise
Options Price Options Price
------- ----- ------- -----
Outstanding beginning of year 215,337 $ 13.75 227,427 $ 12.89
Granted 20,075 15.23 14,834 24.70
Exercised (9,144) 11.37 (17,166) 11.26
Forfeited (8,441) 15.69 (9,758) 14.72
----------- ---------- ----------- ----------
Outstanding end of year 217,827 $ 13.91 215,337 $ 13.75
=========== ========== =========== ==========
Exercisable at end of year 159,867 $ 12.94 134,309 $ 12.00
=========== ========== =========== ==========
Weighted average fair value per
option granted during the year $ 2.19 $ 3.98
Options outstanding at December 31, 2000 include 169,479 with exercise prices
ranging from $10.39 to $15.23 (weighted average exercise price of $11.77) and a
weighted average remaining life of 6.23 years; and 48,348 with exercise prices
ranging from $17.63 to $24.70 (weighted average exercise price of $21.40) and a
weighted average remaining life of 8.27 years. Options exercisable at December
31, 2000 include 127,791 with exercise prices ranging from $10.39 to $13.34
(weighted average exercise price of $11.07); and 32,076 with exercise prices
ranging from $17.63 to $24.70 (weighted average exercise price of $20.39).
Pro forma information regarding net income and earnings per share has been
determined as if the Corporation had accounted for its stock options under the
fair value method. The fair value for these options was estimated at the date of
grant using a Black-Scholes option pricing model with the following weighted
average assumptions for the years 2000, 1999 and 1998, respectively: risk-free
interest rates of 6.7%, 5.4% and 5.6%; dividend yields of 3% for 2000 and 2% for
1999 and 1998, respectively; volatility factors of the expected market price of
the Corporation's common stock of .24, .13 and .16; and a weighted average
expected life of the options of five years for management options and two years
for directors' options.
- --------------------------------------------------------------------------------
(Continued)
22.
LAFAYETTE BANCORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2000, 1999 and 1998
(Dollar amounts in thousands, except per share data)
- --------------------------------------------------------------------------------
NOTE 11 - STOCK APPRECIATION RIGHTS AND STOCK OPTION PLAN (Continued)
For purposes of pro forma disclosures, the estimated fair value of the options
is amortized to expense over the options' vesting period. The Corporation's pro
forma information follows (in thousands except for earnings per share
information):
2000 1999 1998
---- ---- ----
Pro forma net income $ 6,859 $ 6,270 $ 5,242
Pro forma earnings per share
Basic $ 1.74 $ 1.59 $ 1.33
Diluted $ 1.72 $ 1.55 $ 1.30
In future years, the pro forma effect of not applying this standard may increase
if additional options are granted.
NOTE 12 - INCOME TAXES
Income taxes consist of the following:
2000 1999 1998
---- ---- ----
Currently payable $ 3,498 $ 3,004 $ 3,085
Deferred income taxes (benefit) 3 (50) (385)
Non-qualified stock option benefit
allocated to additional paid-in capital 13 73 11
------- ------- -------
Total $ 3,514 $ 3,027 $ 2,711
======= ======= =======
The following is a reconciliation of statutory federal income taxes and the
amount computed by applying the statutory rate of 34% to income before income
taxes:
2000 1999 1998
---- ---- ----
Statutory rate applied to income before
income taxes $ 3,546 $ 3,188 $ 2,750
Add/(deduct)
Tax exempt interest income (486) (430) (337)
State tax expense (net of
federal benefit) 474 417 358
Other (20) (148) (60)
------- ------- -------
Total $ 3,514 $ 3,027 $ 2,711
======= ======= =======
- --------------------------------------------------------------------------------
(Continued)
23.
LAFAYETTE BANCORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2000, 1999 and 1998
(Dollar amounts in thousands, except per share data)
- --------------------------------------------------------------------------------
NOTE 12 - INCOME TAXES (Continued)
The net deferred tax asset reflected in the consolidated balance sheet is
comprised of the following components as of December 31:
2000 1999
---- ----
Deferred tax assets
Allowance for loan losses $ 1,380 $ 1,053
Accrued stock appreciation rights 139 417
Accrued post-retirement benefit obligation 426 372
Deferred compensation 470 381
Deferred loan fees 57 42
Net unrealized loss on securities available-for-sale 173 1,283
-------- -------
Total tax assets 2,645 3,548
Deferred tax liabilities
Depreciation (341) (280)
Net pension benefit (795) (825)
Intangible asset amortization (186) (93)
Other (248) (162)
-------- -------
Total deferred tax liabilities (1,570) (1,360)
Valuation allowance -- --
-------- -------
Net deferred tax asset $ 1,075 $ 2,188
======== =======
NOTE 13 - PER SHARE DATA
The following table illustrates the computation of basic and diluted earnings
per share. Weighted average shares outstanding have been restated for all
periods for stock splits and dividends.
2000 1999 1998
---- ---- ----
Basic earnings per share
Net income $ 6,916 $ 6,351 $ 5,377
Weighted average shares outstanding 3,950,297 3,940,024 3,940,123
----------- ----------- -----------
Basic earnings per share $ 1.75 $ 1.61 $ 1.36
=========== ========== ===========
Diluted earnings per share
Net income $ 6,916 $ 6,351 $ 5,377
Weighted average shares outstanding 3,950,297 3,940,024 3,940,123
Diluted effect of assumed exercise
of stock options 35,224 94,364 87,137
----------- ----------- -----------
Diluted average shares outstanding 3,985,521 4,034,388 4,027,260
----------- ----------- -----------
Diluted earnings per share $ 1.74 $ 1.57 $ 1.34
=========== ========== ===========
- --------------------------------------------------------------------------------
(Continued)
24.
LAFAYETTE BANCORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2000, 1999 and 1998
(Dollar amounts in thousands, except per share data)
- --------------------------------------------------------------------------------
NOTE 14 - CAPITAL REQUIREMENTS
The Corporation and Bank are subject to various regulatory capital requirements
administered by federal and state banking agencies. Capital adequacy guidelines
and prompt corrective action regulations involve quantitative measures of
assets, liabilities, and certain off-balance-sheet items calculated under
regulatory accounting practices. Capital amounts and classifications are also
subject to qualitative judgements by regulators. Failure to meet capital
requirements can initiate regulatory action.
Quantitative measures established by regulation to ensure capital adequacy
require the Corporation and Bank to maintain minimum amounts and ratios (set
forth in the following table) of total and Tier 1 capital (as defined in the
regulations) to risk-weighted assets (as defined), and of Tier 1 capital (as
defined) to average assets (as defined).
Prompt corrective action regulations provide five classifications: well
capitalized, adequately capitalized, undercapitalized, significantly
undercapitalized, and critically undercapitalized, although these terms are not
used to represent overall financial condition. If adequately capitalized,
regulatory approval is required to accept brokered deposits. If
undercapitalized, the institution may be required to limit capital
distributions, limit asset growth and expansion, and prepare capital restoration
plans.
On March 12, 1999 the Corporation's wholly-owned subsidiary bank acquired three
branches in Jasper County, Indiana. As a result of this transaction consolidated
and bank-only capital levels were reduced. The Corporation borrowed $14,000 and
contributed $13,000 to the Bank in order for the bank to maintain its
well-capitalized status. As of December 31, 2000, the Bank was categorized as
well-capitalized under the regulatory framework for prompt corrective action. To
be categorized as well-capitalized, the Bank must maintain minimum total
risk-based, Tier 1 risk-based, and Tier 1 leverage ratios as set forth in the
table. The Corporation was categorized as undercapitalized as of December 31,
1999, as the total capital ratio was slightly below the minimum required level
for capital adequacy purposes. The Corporation returned to adequately
capitalized status as of March 31, 2000 and has maintained that status through
December 31, 2000. Although the Corporation's capital was slightly below the
minimum at December 31, 1999, no corrective regulatory action was initiated by
the banking regulatory authorities and management anticipates maintaining its
adequately capitalized status in the foreseeable future.
- --------------------------------------------------------------------------------
(Continued)
25.
LAFAYETTE BANCORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2000, 1999 and 1998
(Dollar amounts in thousands, except per share data)
- --------------------------------------------------------------------------------
NOTE 14 - CAPITAL REQUIREMENTS (Continued)
The actual capital amounts and ratios are presented in the following table (in
millions) for the Corporation and the Bank.
Minimum Required To
Minimum Required Be Well-Capitalized
For Capital Under Prompt Corrective
Actual Adequacy Purposes Action Regulations
------ ----------------- ------------------
Amount Ratio Amount Ratio Amount Ratio
------ ----- ------ ----- ------ -----
2000
Total capital to risk weighted assets
Consolidated $ 45.1 8.33% $ 43.3 8.00% $ 54.1 10.00%
Lafayette Bank and Trust 55.5 10.19 43.6 8.00 54.5 10.00
Tier 1 capital to risk weighted assets
Consolidated 40.0 7.40 21.7 4.00 32.5 6.00
Lafayette Bank and Trust 50.5 9.26 21.8 4.00 32.7 6.00
Tier 1 capital to average assets
Consolidated 40.0 5.79 27.7 4.00 34.6 5.00
Lafayette Bank and Trust 50.5 7.29 27.7 4.00 34.6 5.00
1999
Total capital to risk weighted assets
Consolidated $ 38.6 7.99% $ 38.7 8.00% $ 48.3 10.00%
Lafayette Bank and Trust 50.2 10.33 38.9 8.00 48.6 10.00
Tier 1 capital to risk weighted assets
Consolidated 34.0 7.04 19.3 4.00 29.0 6.00
Lafayette Bank and Trust 45.6 9.38 19.4 4.00 29.1 6.00
Tier 1 capital to average assets
Consolidated 34.0 5.42 25.1 4.00 31.4 5.00
Lafayette Bank and Trust 45.6 7.22 25.2 4.00 31.5 5.00
The Bank is also subject to state regulations restricting the amount of
dividends payable to the Corporation. At December 31, 2000, the Bank had $7,979
of retained earnings available for dividends under these regulations.
- --------------------------------------------------------------------------------
(Continued)
26.
LAFAYETTE BANCORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2000, 1999 and 1998
(Dollar amounts in thousands, except per share data)
- --------------------------------------------------------------------------------
NOTE 15 - COMMITMENTS AND CONTINGENT LIABILITIES
The Bank leases branch facilities under operating leases expiring in various
years through 2007. Expense for leased premises was $281, $244 and $219 for
2000, 1999 and 1998.
Future minimum lease payments are as follows:
2001 $ 282
2002 282
2003 261
2004 222
2005 161
Thereafter 90
-------
Total $ 1,298
=======
In the ordinary course of business, the Bank has loans, commitments and
contingent liabilities, such as guarantees and commitments to extend credit,
which are not reflected in the consolidated balance sheet. The Bank's 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 December 31, off-balance sheet financial instruments whose contract amount
represents credit risk are summarized as follows:
2000 1999
---- ----
Unused lines of credit $ 64,987 $ 59,753
Commitments to make loans 7,229 10,987
Standby letters of credit 1,585 4,235
Commercial letters of credit -- 21
Since many commitments to make loans 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. These commitments are generally variable rate or carry a term of
one year or less.
The cash balance required to be maintained on hand or on deposit with the
Federal Reserve was $9,639 and $9,434 at December 31, 2000 and 1999. These
reserves do not earn interest.
- --------------------------------------------------------------------------------
(Continued)
27.
LAFAYETTE BANCORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2000, 1999 and 1998
(Dollar amounts in thousands, except per share data)
- --------------------------------------------------------------------------------
NOTE 16 - DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying value and estimated fair values of the Corporation's financial
instruments as of December 31 are as follows:
-----------2 0 0 0--------- -----------1 9 9 9---------
Carrying Fair Carrying Fair
Value Value Value Value
----- ----- -----
Financial assets
Cash and cash equivalents $ 73,472 $ 73,472 $ 30,570 $ 30,570
Securities available-for-sale 78,857 78,857 79,722 79,722
Securities held-to-maturity 4,484 4,580 4,712 4,709
Loans held for sale 5,949 6,058 3,174 3,204
Loans, net 532,654 524,222 484,452 479,127
FHLB stock 2,200 2,200 1,897 1,897
Accrued interest receivable 7,830 7,830 6,833 6,833
Financial liabilities
Deposits $ (578,297) $ (580,115) $ (522,247) $ (522,033)
Short-term borrowings (55,572) (55,572) (27,273) (27,273)
FHLB advances (35,737) (35,903) (30,027) (29,602)
Note payable (11,550) (11,550) (12,950) (12,950)
Accrued interest payable (2,772) (2,772) (2,249) (2,249)
The following methods and assumptions were used to estimate the fair value of
each class of financial instruments for which it is practicable to estimate that
value. The carrying amount is considered to estimate fair value for cash and
short-term instruments, demand deposits, short-term borrowings, accrued
interest, and variable rate loans, deposits and note payable that re-price
frequently and fully. Securities fair values are based on quoted market prices
or, if no quotes are available, on the rate and term of the security and on
information about the issuer. For loans held for sale, the fair value of loans
held for sale is based on quoted market prices. For commercial, real estate,
consumer, and other loans, fair value is estimated by discounting future cash
flows using the current rates at which similar loans would be made to borrowers
with similar credit ratings and for the same remaining maturities. FHLB stock is
restricted in nature and is not actively traded on a secondary market and the
carrying amount is a reasonable estimate of fair value. The fair value of
fixed-maturity certificates of deposit is estimated using the rates currently
offered for deposits of similar remaining maturities. For FHLB advances, fair
value is estimated using rates currently available to the Corporation for debt
with similar terms and remaining maturities. The estimated fair value for
off-balance sheet loan commitments approximates carrying value and are not
considered significant to this presentation.
- --------------------------------------------------------------------------------
(Continued)
28.
LAFAYETTE BANCORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2000, 1999 and 1998
(Dollar amounts in thousands, except per share data)
- --------------------------------------------------------------------------------
NOTE 17 - PARENT COMPANY STATEMENTS
Presented below are condensed balance sheets, statements of income and cash
flows for the parent company:
CONDENSED BALANCE SHEETS
December 31
2000 1999
---- ----
ASSETS
Cash on deposit with subsidiary $ 1,901 $ 2,568
Investment in bank 63,221 57,350
Other assets 265 490
------- -------
$65,387 $60,408
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Note payable $11,550 $12,950
Other liabilities 1,036 1,673
Shareholders' equity 52,801 45,785
------- -------
$65,387 $60,408
======= =======
CONDENSED STATEMENTS OF INCOME
Years ended December 31
2000 1999 1998
---- ---- ----
OPERATING INCOME
Dividends received from subsidiary bank $ 3,200 $ 2,960 $1,850
Interest income 74 75 26
------- ------- ------
3,274 3,035 1,876
OPERATING EXPENSES
Interest expense 1,007 749 --
Compensation expense (benefit) (376) 14 450
Other operating expenses 119 111 93
------- ------- ------
750 874 543
INCOME BEFORE INCOME TAXES AND EQUITY IN
UNDISTRIBUTED EARNINGS OF BANK 2,524 2,161 1,333
Income tax benefit 215 389 205
------- ------- ------
Income before equity in undistributed earnings of bank 2,739 2,550 1,538
Equity in undistributed earnings of bank 4,177 3,801 3,839
------- ------- ------
NET INCOME 6,916 6,351 5,377
Other comprehensive income, net of tax 1,693 (1,914) 48
------- ------- ------
COMPREHENSIVE INCOME $ 8,609 $ 4,437 $5,425
======= ======= ======
- --------------------------------------------------------------------------------
(Continued)
29.
LAFAYETTE BANCORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2000, 1999 and 1998
(Dollar amounts in thousands, except per share data)
- --------------------------------------------------------------------------------
NOTE 17 - PARENT COMPANY STATEMENTS (Continued)
CONDENSED STATEMENTS OF CASH FLOWS
Years ended December 31
2000 1999 1998
---- ---- ----
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 6,916 $ 6,351 $ 5,377
Adjustments to reconcile net income to net cash
from operating activities
Amortization of deferred costs 6 6 6
Equity in undistributed earnings of bank (4,177) (3,801) (3,839)
Other assets and other liabilities (419) (160) 466
-------- --------- --------
Net cash from operating activities 2,326 2,396 2,010
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from note payable -- 14,000 --
Principal payments on note payable (1,400) (1,050) --
Capital contribution to subsidiary bank -- (13,000) --
Common stock issued 117 278 69
Dividends paid (1,706) (1,540) (1,341)
Purchase of fractional shares (4) -- --
Purchase of treasury shares -- (4) (8)
-------- --------- --------
Net cash from financing activities (2,993) (1,316) (1,280)
-------- --------- --------
Net change in cash and cash equivalents (667) 1,080 730
Cash and cash equivalents at beginning of year 2,568 1,488 758
-------- --------- --------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 1,901 $ 2,568 $ 1,488
======== ========= ========
NOTE 18 - BRANCH ACQUISITION
In March 1999, the Bank purchased three branches located in DeMotte, Remington,
and Rensselaer, Indiana.
The fair value of assets acquired was $71,749 (consisting primarily of goodwill
and core deposit intangibles of $13,510, and commercial loans, net of a $563
purchase adjustment for credit quality), the fair value of liabilities assumed
was $117,015 (consisting primarily of customer deposits), and the Bank received
$45,266 of cash at settlement.
- --------------------------------------------------------------------------------
(Continued)
30.
LAFAYETTE BANCORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2000, 1999 and 1998
(Dollar amounts in thousands, except per share data)
- --------------------------------------------------------------------------------
NOTE 19 - OTHER COMPREHENSIVE INCOME
Other comprehensive income components and related taxes were as follows:
2000 1999 1998
---- ---- ----
Unrealized holding gains (losses) on
securities available-for-sale $ 2,791 $(3,314) $ 85
Less: reclassification adjustments for gains
and losses later recognized in income 12 144 (6)
------- ------- ----
Net unrealized gains (losses) 2,803 (3,170) 79
Tax effect (1,110) 1,256 (31)
------- ------- ----
Other comprehensive income $ 1,693 $(1,914) $ 48
======= ======= ====
NOTE 20 - QUARTERLY FINANCIAL DATA (UNAUDITED)
Earnings per Share
Interest Net Interest Net ------------------
Income Income Income Basic Fully Diluted
------ ------ ------ ----- -------------
2000
First quarter $12,123 $6,084 $1,798 $ .46 $ .45
Second quarter 12,878 6,297 1,807 .46 .46
Third quarter 13,427 6,226 1,634 .41 .41
Fourth quarter 13,958 6,374 1,677 .42 .42
1999
First quarter $ 9,483 $4,911 $1,519 $ .38 $ .37
Second quarter 11,267 5,815 1,650 .42 .41
Third quarter 11,693 6,022 1,750 .44 .43
Fourth quarter 11,947 6,099 1,432 .37 .36
Earnings per share amounts have been restated for subsequent stock divid ends
and splits.
- --------------------------------------------------------------------------------
(Continued)
31.
LAFAYETTE BANCORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2000, 1999 and 1998
(Dollar amounts in thousands, except per share data)
- --------------------------------------------------------------------------------
NOTE 21 - SEGMENT INFORMATION
The Corporation's operations include three primary segments: banking, mortgage
banking, and trust services. Through its banking subsidiary's locations in
Tippecanoe, Jasper and White Counties, the Corporation provides traditional
community banking services, such as accepting deposits and making commercial,
residential and consumer loans. Mortgage banking activities include the
origination of residential mortgage loans for sale on a servicing released basis
to various investors. The Corporation's trust department provides both personal
and corporate trust services.
The Corporation's three reportable segments are determined by the products and
services offered. Loans, investments and deposits comprise the primary revenues
and expenses of the banking operation, net gains on loans sold account for the
revenues in the mortgage banking segment, and trust administration fees provide
the primary revenues in the trust department.
The following segment financial information has been derived from the internal
profitability reporting system utilized by management to monitor and manage the
financial performance of the Corporation. The accounting policies of the three
segments are the same as those described in the summary of significant
accounting policies. The Corporation evaluates segment performance based on
profit or loss before income taxes. The evaluation process for the mortgage
banking and trust segments include only direct expenses, while certain indirect
expenses, including goodwill, are absorbed by the banking operation. The
difference between segment totals and consolidated totals are holding company
amounts and income tax expense.
- --------------------------------------------------------------------------------
(Continued)
32.
LAFAYETTE BANCORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2000, 1999 and 1998
(Dollar amounts in thousands, except per share data)
- --------------------------------------------------------------------------------
NOTE 21 - SEGMENT INFORMATION (Continued)
2000
- ---- Mortgage Total
Banking Banking Trust Segments
------- ------- ----- --------
Net interest income $ 25,769 $ 146 $ -- $ 25,915
Net gain on loan sales -- 659 -- 659
Other revenue 3,973 6 1,187 5,166
Non-cash items:
Depreciation 1,243 48 48 1,339
Provision for loan loss 1,200 -- -- 1,200
Segment profit, before taxes 10,655 67 385 11,107
Segment assets 734,581 6,122 179 740,822
1999
- ---- Mortgage Total
Banking Banking Trust Segments
------- ------- ----- --------
Net interest income $ 23,310 $ 211 $ -- $ 23,521
Net gain on loan sales -- 942 -- 942
Other revenue 2,959 90 1,134 4,183
Noncash items:
Depreciation 868 42 38 948
Provision for loan loss 1,060 -- -- 1,060
Segment profit, before taxes 9,328 459 390 10,177
Segment assets 641,132 3,325 202 644,659
1998
- ---- Mortgage Total
Banking Banking Trust Segments
------- ------- ----- --------
Net interest income $ 17,239 $ 497 $ -- $ 17,736
Net gain on loan sales -- 1,255 -- 1,255
Other revenue 2,685 12 964 3,661
Noncash items:
Depreciation 594 27 25 646
Provision for loan loss 980 -- -- 980
Segment profit, before taxes 7,636 760 209 8,605
Segment assets 473,019 10,224 167 483,410
- --------------------------------------------------------------------------------
32.