SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-K
Annual Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
For the fiscal year ended December 31, 1995 Commission file number 0-12422
INDIANA UNITED BANCORP
(Exact name of registrant as specified in its charter)
Indiana 35-1562245
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
201 North Broadway
Greensburg, Indiana 47240
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code: (812) 663-4711
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
Common shares, no-par value
(Title of Class)
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K.
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes x No
The aggregate market value (not necessarily a reliable indication of the
price at which more than a limited number of shares would trade) of the
voting stock held by non-affiliates of the registrant was $17,882,000
as of March 2, 1996.
As of March 2, 1996, there were outstanding 1,250,897 common shares, without
par value, of the registrant.
DOCUMENTS INCORPORATED BY REFERENCE
Part of Form 10-K
Documents Into Which Incorporated
1995 Annual Report to Shareholders Part II (Items 5 through 8)
Definitive Proxy Statement for
Annual Meeting of Shareholders
to be held May 21, 1996 Part III(Items 10 through 13)
EXHIBIT INDEX: Page 8
FORM 10-K TABLE OF CONTENTS
Page
Part I
Item 1 - Business 3
Item 2 - Properties 6
Item 3 - Legal Proceedings 6
Item 4 - Submission of Matters to a Vote of Security Holders 6
Part II
Item 5 - Market For the Registrant's Common Equity and
Related Stockholder Matters 6
Item 6 - Selected Financial Data 6
Item 7 - Management's Discussion and Analysis of Financial
Condition and Results of Operations 7
Item 8 - Financial Statements and Supplementary Data 7
Item 9 - Disagreements on Accounting and Financial Disclosure 7
Part III
Item 10 - Directors and Executive Officers of the Registrant (See below)
Item 11 - Executive Compensation (See below)
Item 12 - Security Ownership of Certain Beneficial
Owners and Management (See below)
Item 13 - Certain Relationships and Related Transactions (See below)
Part IV
Item 14 - Exhibits, Financial Statement Schedules, and
Reports on Form 8-K 8
Signatures 9
Pursuant to General Instruction G, the information called for by Items 10,
11, 12 and 13 is omitted by Indiana United Bancorp since Indiana United
Bancorp will file with the Commission a definitive proxy statement pursuant
to regulation 14A not later than 120 days after the close of the fiscal year
containing the information required by Items 10, 11, 12 and 13.
PART I
ITEM 1. BUSINESS.
General
Indiana United Bancorp ("Company") was initially formed in Owensboro,
Kentucky, in 1982 as First Commonwealth Bancorp. The Company reincorporated
under the laws of the State of Indiana under its present name in 1983, and
relocated in Greensburg, Indiana, in anticipation of acquiring Union Bank and
Trust Company of Greensburg. In 1987, Peoples Bank in Portland, Indiana was
acquired and as of December 31, 1991, Regional Federal Savings Bank, New
Albany, Indiana ("Regional Bank") was acquired. Effective July 1, 1994, the
Company merged Union Bank and Trust Company of Greensburg into Peoples Bank,
Portland, and renamed the combined bank, Union Bank and Trust Company of
Indiana ("Union Bank"). Through these subsidiaries ("Banks"), the Company
operates twelve offices with 154 full-time equivalent employees in eastern
and southern Indiana. As of December 31, 1995, the Company had consolidated
assets of $313 million, consolidated deposits of $262 million and
shareholders' equity of $28 million.
Through its subsidiaries, the Company offers a broad range of financial
services, including: accepting time and transaction deposits; making
consumer, commercial, agri-business and real estate mortgage loans; issuing
credit cards; renting safe deposit facilities; providing general agency
personal and business insurance services; providing personal and corporate
trust services; and providing other corporate services such as payroll
processing, letters of credit and repurchase agreements.
Currently, national retailing and manufacturing subsidiaries, brokerage and
insurance firms, and credit unions are fierce competitors within the
financial services industry. The relaxation of regulatory constraints as to
geographic expansion has also intensified competition among more traditional
providers of banking services. The permissibility of banks and bank holding
companies to acquire thrift institutions will undoubtedly further redefine
the competitive marketplace.
The Company's subsidiaries are located in non-metropolitan areas and their
business is centered in loans and deposits generated within markets
considered to be largely rural in nature. In addition to competing
vigorously with other banks, thrift institutions, credit unions and finance
companies located within their service areas, they also compete, directly and
indirectly, with all providers of financial services.
Employees
As of December 31, 1995, the Company and its subsidiaries had approximately
154 full-time equivalent employees to whom it provides a variety of benefits
and with whom it enjoys excellent relations.
Regulation and Supervision of the Company
The Company is a bank holding company ("BHC") within the meaning of the Bank
Holding Company Act of 1956, as amended ("BHCA"). This Act subjects BHCs to
regulations of the Federal Reserve Board ("FRB") and restricts the business
of BHCs to banking and related activities. In addition, Indiana United
is a nondiversified unitary savings and loan holding company subject to
regulations, examinations, supervision and reporting requirements of the
Office of Thrift Supervision ("OTS").
Under the BHCA, a BHC is, with limited exceptions, prohibited from acquiring
direct or indirect ownership or control of voting stock of any company which
is not a bank or engaging in any activity other than managing or controlling
banks. A BHC may, however, own shares of a company engaged in activities which
the FRB has determined to be so closely related to banking or managing or
controlling banks as to be a proper incident thereto.
Acquisitions by the Company of banks and savings associations are subject to
federal and state regulation. Any acquisition by the Company of more than
five percent of the voting stock of any bank requires prior approval of the
FRB. Acquisition of savings associations is also subject to the approval of
the OTS.
Indiana law permits BHCs to acquire BHCs and banks out of state on a
reciprocal basis, subject to certain limitations. Under current law, the
Company may acquire banks, and may be acquired by BHCs, located in any state
in the United States which permits reciprocal entry by Indiana BHCs. Under
the BHCA, BHCs may acquire savings associations without geographic restrictions.
A BHC and its subsidiaries are prohibited from engaging in certain tying
arrangements in connection with the extension of credit, lease or sale of
property, or the provision of any property or service.
Under FRB policy, the Company is expected to act as a source of financial
strength to, and commit resources to support, its affiliates. As a result of
such policy, the Company may be required to commit resources to its affiliate
banks in circumstances where it might not otherwise do so.
Regulation and Supervision of the Subsidiary Banks
Union Bank is supervised, regulated and examined by the Indiana Department of
Financial Institutions ("DFI") and the Federal Deposit Insurance Corporation
("FDIC"). Regional Bank is supervised, regulated and examined by the OTS. A
cease-and-desist order may be issued against the banks, if the respective
agency finds that the activities of the bank represents an unsafe and unsound
banking practice or violation of law.
The deposits of Union Bank are insured by the Bank Insurance Fund ("BIF") of
the FDIC. The deposits of Regional Bank are insured by the Savings
Association Insurance Fund ("SAIF") of the FDIC. The FDIC has the authority
to change premiums twice per year. Effective January, 1996, the FDIC reduced
insurance rates paid by banks to a range from 0 to 27 basis points per $100
of deposits for the semiannual assessment period from January 1 to June 30,
1996. Insurance premiums paid into the SAIF remained at a range from 23 to
31 basis points. The FDIC is authorized to make limited adjustments to the
BIF rate schedule without notice as deemed necessary by the FDIC to maintain
the BIF designated reserve ratio. Increases in the rate schedule for either
the BIF or SAIF would adversely impact earnings of the Company and Banks
while decreases in the rate schedule would have a positive impact on earnings.
Branching by banks in Indiana is subject to the jurisdiction, and requires
the prior approval, of the bank's or savings bank's primary federal
regulatory authority and, if the branching bank is a state bank, of the DFI.
Under Indiana law, the banks may branch anywhere in the state.
The Company is a legal entity separate and distinct from its subsidiary
banks. There are various legal limitations on the extent to which the Banks
can supply funds to the Company. The principal source of the Company's funds
consists of dividends from its subsidiary banks. State and Federal law
restrict the amount of dividends which may be paid by banks and savings
banks. In addition, the Banks are subject to certain restrictions on
extensions of credit to the Company, on investments in the stock or other
securities of the Company and in taking such stock or securities as
collateral for loans.
Legislation
The Federal Deposit Insurance Corporation Improvement Act of 1991 ("FDICIA")
directs that each federal banking agency prescribe standards for depository
institutions relating to internal controls, information systems, internal
audit systems, loan documentation, credit underwriting, interest rate
exposure, asset growth, management compensation, a maximum ratio of
classified assets to capital, minimum earnings sufficient to absorb losses, a
minimum ratio of market value to book value of publicly traded shares and
such other standards as agency deems appropriate. The federal banking
agencies have issued guidelines establishing safety and soundness,
operational and managerial and compensation standards and has proposed
guidelines for asset quality and earnings.
Certain regulations define relevant capital measures for five capital
categories. A "well capitalized" institution is one that has a total
risk-based capital ratio of at least 10%, a Tier 1 risk-based capital ratio
of at least 8%, a leverage ratio of at least 5% and is not subject to
regulatory direction to maintain a specific level for any capital measure.
An "adequately capitalized" institution is one that has ratios greater than
8%, 4% and 4%. An institution is "undercapitalized" if its respective ratios
are less than 8%, 4% and 4%. "Significantly undercapitalized" institutions
have ratios of less than 6%, 3% and 3%. An institution is deemed to be
"critically undercapitalized" if it has a ratio of tangible equity to total
assets that is 2% or less. Institutions with capital ratios at levels of
"undercapitalized" or lower are subject to various limitations which, in most
situations, will reduce the competitiveness of the institution.
The Riegle Community Development and Regulatory Improvement Act of 1994
("Act") was signed into law in 1994. The Act contains seven titles
pertaining to community development and home ownership protection, small
business capital formation, paperwork reduction and regulatory improvement,
money laundering and flood insurance.
The Act also allows for interstate banking and branching regardless of
whether such activity is permissible under state law. Beginning in
September, 1995, BHCs could acquire banks anywhere in the United States
subject to certain state restrictions. Beginning June 1, 1997, an insured
bank may merge with an insured bank in another state without regard to
whether such merger is prohibited by state law. An out-of-state bank may
acquire the branches of an insured bank in another state without acquiring the
entire bank; provided that the law in the state where the branch is located
permits such an acquisition. States may permit interstate branching earlier
than June 1, 1997, where both states permit it by statute. Effective in
March, 1996, Indiana permits interstate branching subject to certain
conditions. BHCs may merge existing bank subsidiaries located in different
states into one bank.
Capital Requirements
The Company and its subsidiary banks must meet certain minimum capital
requirements mandated by the FRB, FDIC, OTS and DFI. These regulatory
agencies require BHCs and banks to maintain certain minimum ratios of primary
capital to total assets and total capital to total assets. The FRB requires
BHCN to maintain a minimum Tier 1 leverage ratio to 3 percent capital to
total assets; however, for all but the most highly rated institutions which
do not anticipate significant growth, the minimum Tier 1 leverage ratio is
3 percent plus an additional cushion of 100 to 200 basis points. As of
December 31, 1995, the Company's leverage ratio of capital to total assets
was 8.8 percent.
The FRB, OTS and FDIC each have approved the imposition of "risk-adjusted"
capital ratios on BHCs and financial institutions. The Company and its
subsidiaries had capital to assets ratios and risk-adjusted capital ratios at
December 31, 1995, in excess of the applicable regulatory minimum
requirements.
The following table summarizes the Company's risk-adjusted capital ratios
under FRB guidelines at December 31, 1995:
Company's Regulatory
Consolidated Minimum
Ratio Requirement
Tier 1 Capital to Risk-Weighted Assets Ratio 15.3% 4%
Total Capital to Risk-Weighted Assets Ratio 16.6% 8%
Legislation currently beung considered by Congress could have a significant
adverse impact on the operations of the Registrant. Such legislation includes
a proposal to recapitalize the SAIF through the imposition of a special
assessment on SAIF-insured deposits. The Company cannot predict whether this
proposed legislation will be enacted or what its final form will be; but the
Company has estimated that the special assessment could approximate $700,000
on a pre-tax basis.
ITEM 2. PROPERTIES.
Indiana United Bancorp owns no physical properties and has no need for space
other than is available at the offices of its subsidiaries. Its subsidiaries
own, free of encumbrances, all of the facilities from which they conduct
business, except for a portion of the land upon which the Union Bank has
constructed its principal office and drive-in facility in Portland, which is
under long term lease arrangements and the IGA supermarket branch in
Greensburg. All facilities are considered adequate for present and near-term
needs. During 1995, the Company opened the IGA supermarket branch in
Greensburg, Indiana and the Allison Lane branch in Jeffersonville, Indiana.
With the opening of these two branches, the Company now has 12 locations,
Union Bank has 9 locations and Regional Bank has 3 locations. At December
31, 1995 the Company had $6,025,000 invested in premises and equipment.
ITEM 3. LEGAL PROCEEDINGS.
The subsidiaries are parties (both plaintiff and defendant) to ordinary
litigation incidental to the conduct of business. Management is presently
not aware of any such claims.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matters were submitted during the fourth quarter of 1995 to a vote of
security holders, through the solicitation of proxies or otherwise.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS.
The information required under this item is incorporated by reference to the
inside back cover of the Company's Annual Report to Shareholders, Exhibit 13.
ITEM 6. SELECTED FINANCIAL DATA.
The information required under this item is incorporated by reference to page
4 of the Company's Annual Report to Shareholders, Exhibit 13.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
The information required under this item is incorporated by reference to
pages 4 through 16 of the Company's Annual Report to Shareholders, Exhibit 13.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The financial statements and supplementary data required under this item are
incorporated herein by reference to pages 17 through 27 of the Company's
Annual Report to Shareholders, Exhibit 13.
ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.
In connection with its audits for the two most recent fiscal years ended
December 31, 1995, there have been no disagreements (as defined in Item 4(b)
of Form 8-K) with the Company's independent certified public accountants on
any matter of accounting principles or practices, financial statement
disclosure or auditing scope or procedure.
PART IV
ITEM 14--EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
Annual
Report Form 10-K
Page Page
Number Number
(a)1. Financial statements
Indiana United Bancorp and Subsidiary
Independent auditor's report 17 28
Consolidated balance sheet at December
31, 1995 and 1994 18 29
Consolidated statement of income, years
ended December 31, 1995, 1994 and 1993 19 30
Consolidated statement of cash flows,
year ended December 31, 1995, 1994 and
1993 20 31
Consolidated statement of changes in
shareholders' equity, years ended
December 31, 1995, 1994 and 1993 21 32
Notes to consolidated financial
statements 21-27 32-38
(a)2. Financial statement schedules
All schedules are omitted because they
are not applicable or not required, or
because the required information is
included in the consolidated financial
statements or related notes.
(a)3. Exhibits:
3.1 Articles of Incorporation (incorporated
by reference to Registrant's
Registration Statement on Form S-1
(Registration No. 33-06334), filed June
16, 1986, Exhibit 3.1), as amended by
Articles of Incorporation and that
certain Statement of Designation of
Rights and Preferences of Series M-1987
Preferred Shares of Registrant
(incorporated by reference to the
Registrant's Annual Report on Form 10-K
for the fiscal year ended December 31,
1987, Exhibit 3(c) and Exhibit 3(d),
Commission File No. 0-12422)
3.2 Bylaws of the Registrant (incorporated by
reference to the Registrant's annual
Report on Form 10-K for the fiscal year
ended December 31, 1992, Exhibit 3.2,
Commission File No. 0-12422)
10.1 Loan Agreement dated December 31, 1991
between Registrant and Merchants National
Bank and Trust Company, Indianapolis,
Indiana (incorporated by reference to the
Registrants' Annual Report on Form 10-K
for the fiscal year ended December 31,
1991, Exhibit 10.1,
10.2 Employment Agreement dated as of July 1,
1989 between Registrant's subsidiary,
Regional Federal Savings Bank, and
director and executive officer Robert E.
Kleehamer, as amended by that Amendment
to Employment Agreement dated as of
September 19, 1991 (incorporated by
reference to the Registrant's Annual
Report on Form 10-K for the fiscal year
ended December 31, 1991, Exhibit 10.2,
Commission File No. 0-12422)
13 1994 Annual Report to Shareholders
(except for the pages and information
thereof expressly incorporated by
reference in this Form 10-K, the Annual
Report to Shareholders is provided
solely for the information of the
Securities and Exchange Commission and
is not deemed "filed" as part of this
Form 10-K) 10-41
21 List of subsidiaries of the Registrant 42
23 Consent of Geo. S. Olive & Co. LLC 43
(b) Reports on Form 8-K
No reports on Form 8-K were filed for
the three months ended December 31, 1995
Pursuant to the requirements of Section 13 or 15(d) 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, on the 26th day
of March, 1996.
INDIANA UNITED BANCORP
By
Robert E. Hoptry, President
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report on Form 10-K has been signed by the following persons on behalf of the
registrant and in the capacities with the Company and on the dates indicated.
Signature Capacity Date
Director March 26, 1996
William G. Barron
Treasurer March 26, 1996
Jay B. Fager [Chief Financial Officer]
Director March 26, 1996
Philip A. Frantz
Director March 26, 1996
Glenn D. Higdon
Chairman of the Board and March 26, 1996
Robert E. Hoptry President [Chief Executive Officer]
Director March 26, 1996
Martin G. Wilson
Director March 26, 1996
Edward J. Zoeller