Growing
Relationships
Indiana United Bancorp
1995 Annual Report
Contents
Financial Highlights 1
Message to Shareholders 2
Management's Discussion and Analysis 4
Report of Management on Responsibility
for Financial Information 17
Report of Independent Certified
Public Accountants 17
Financial Statements 18
Notes to Financial Statements 21
Management Directory 28
Shareholder Information IBC
Indiana United Bancorp ("Company") is a registered bank holding
company incorporated under the laws of Indiana in 1983,
commensurate with its acquisition of Union Bank and Trust Company
of Greensburg, Indiana. The Company acquired The Peoples Bank,
Portland, Indiana in 1987, and Regional Federal Savings Bank, New
Albany, Indiana ("Regional Bank") at the end of 1991. With the
latter, Indiana United Bancorp became one of a small group of
holding companies throughout the nation to operate both commercial
banking and thrift subsidiaries. Union Bank and Trust Company of
Indiana ("Union Bank") was created by the consolidation of the
Greensburg and Portland operations in 1994. It's history traces
back to 1873, and it holds Indiana state banking charter #1. At
December 31, 1995, Union Bank held assets totaling $208 million and
through its nine banking offices, ranked first in market share in
Decatur County and second in Jay County. Regional Bank's assets
totalled $105 million, held by three banking offices in Floyd and
Clark counties. Both subsidiaries offer competitive commercial and
consumer loan and deposit related services. Union Bank also
operates a general line insurance agency and offers a broad range
of personal and business trust services.
Financial Highlights
(Dollar amounts in thousands Percent
except per share data) 1995 1994 Change
For the Year
Net interest income $10,983 $11,301 (2.8)
Provision for loan losses 30 115 (73.9)
Net income 2,529 2,870 (11.9)
Common dividends paid 863 683 26.4
Per Common Share
Net income $1.91 $2.17 (12.0)
Dividends paid .69 .60 15.0
Book value-end of period
Excluding SFAS No. 115
adjustment 20.83 19.60 6.3
Including SFAS No. 115
adjustment 20.98 17.49 20.0
Market price-end of period 25.00 21.00 19.0
At Year End
Total assets $313,067 $306,047 2.3
Total loans 201,355 194,736 3.4
Allowance for loan losses 2,754 2,784 (1.1)
Total Deposits 262,346 261,371 0.4
Long-term debt 6,000 7,500 (20.0)
Preferred stock 2,000 2,400 (16.7)
Shareholders' equity 28,245 24,282 16.3
Financial Ratios
Return on average assets .82% .86% (4.7)
Return on everage common
shareholders' equity 9.71% 12.18% (20.3)
Allowance for loan losses
to total loans (year end) 1.33% 1.43% (7.0)
Shareholders' equity to
total assets (year end) 9.02% 7.93% 13.7
Tier 1 capital to total
assets 8.84% 8.69% 1.7
Total capital to risk-
adjusted assets 16.57% 17.11% (3.2)
Number of common shares
outstanding 1,250,897 1,250,897
Number of common shareholders 1,452 1,475 (1.6)
Number of employees (FTE) 154 157 (1.9)
Planning for Growth
(picture)
Since 1988...the annual
total return of Indiana
United common stock
averaged 18.3%...
(picture)
...Indiana United's
management team now
has the greatest depth and
experience in its history...
(picture)
...we intend to pursue
merger and acquisition
opportunities more
aggressively than ever...
(picture)
...I expect 1996 earnings
to outperform 1995 by a
sizeable margin.
Message to Shareholders
I am pleased to report our financial performance in 1995 produced
a 19% gain in income from recurring operations over 1994. But even
more importantly, we also sustained our momentum in fully attaining
the primary objectives of strategies implemented in 1994. A year
ago, my message identified our strategic objectives as eliminating
marginal business segments, improving our net interest margin, and
redirecting resources into our highest potential markets. Our
objectives were advanced in 1994 by merging two of our
subsidiaries, divesting three banking offices, and reducing
expensive, non-core, deposits.
We completed this strategic transition in 1995 by opening a fully-
staffed supermarket branch in Greensburg and expanding into
Jeffersonville with a new full service banking office. The
$500,000 renovation of Regional Bank's main office, completed in
October, has greatly enhanced customer service and improved
operating efficiency. In addition, our net interest margin soared
20 basis points, far exceeding the minimal gains projected for peer
banks.
The September appointment of Mike Bauer as President and Chief
Executive Officer of Regional Bank further strengthens our
competitive position in southern Indiana. Mike is a successful
career banking executive with keen insights gained from leading a
high performance bank in the fiercely competitive greater Chicago
market. Both Indiana United subsidiaries are now led by results-
driven bankers who share a vision of excellence and a commitment to
high asset quality and responsive customer service. We believe
Indiana United's management team now has the greatest depth and
experience in its history.
One of the greatest challenges to our planning effort is the
accelerating velocity of change occurring within the banking
industry. Our future performance will greatly depend on our
continued ability to accurately assess and quickly respond to the
forces of change. That is why planning remains a critical and
constantly evolving process at Indiana untied.
A major force driving change is technology. Once confined to
backroom operations, technology now touches every product and
service we offer. Continued expansion of our information
infrastructure and delivery systems are top priorities as we
prepare to enter the 21st century. We believe this commitment to
technology investment is integral to attaining our growth, service
and performance goals.
The recent trend of consolidation among the nation's largest and
best performing banks is also influencing our planning priorities.
Most of these transactions are strategic alliances formed from
positions of strength...not weakness. Many appear to be influenced
by the increasing capital demands of technology investment and the
redundancy of banking offices. Most appear to anticipate expanded
interstate banking in mid 1997.
Expansion through merger and acquisition has long been a priority
of indiana United, and has been a significant factor in our growth.
I believe the advantages of merging well managed community banks
far exceed the limited opportunities available to smaller, less
visionary organizations. The added benefit of sharing the
increased costs of today's technology lends even greater importance
to such transactions. While we continue to target growth within
the markets we now serve, we intend to pursue merger and
acquisition opportunities more aggressively than ever. We will
not, however, enter into any transaction not offering clear
advantages to our shareholders and customers.
The banking industry has shown extraordinary resolve in responding
to the serious problems it faced only a few years ago. It's self
help philosophy has succeeded far beyond the most optimistic
forecasts. Unfortunately, the thrift industry now appears unable
to repay its 1989 taxpayer funded bailout and still remain
competitive. Congress is expected to enact further corrective
thrift legislation once the budget stalemate is resolved.
One proposal now under consideration eliminates thrift charters and
regulators, converts thrifts to commercial banks, combines the FDIC
deposit insurance funds, and transfers to banks the liability for
repayment of interest on bonds issued in the bailout. It also
eliminates the special thrift tax accounting treatment for loan
losses and waives any resulting tax liability. A nonrecurring
deposit-based assessment would be levied against all thrifts by the
FDIC.
Even though Indiana united would incur an assessment of about
$700,000 under this proposal, I strongly favor its passage. The
long-term advantages to indiana united would more than offset its
high initial cost. In fact, we project the full recapture of this
expense in less than three years.
During 1995, we implemented an internal sales training program
promoting a service-based sales culture. Employees are now
learning communication techniques to discover and effectively
respond to the needs of present and prospective customers. By
preparing our staff to confidently suggest appropriate products and
services, we hope to maximize the mutual benefits of relationship
banking. This commitment to service excellence is the defining
difference at Indiana United, and a major reason why we're...:the
Bank For All Of You".
The introduction of our new Foundation Checking Account in January
and The Check Card later in the quarter are expected to propel our
growth in 1996. The Foundation Account earns an above market
interest rate on checking balances, has no minimum balance
requirement, and accesses many other products and services at
reduced or fully waived fees. The Check Card is a debit card
accessed through any ATM or merchant accepting Visa.
Our growing array of services is extremely competitive and is
virtually unconstrained by geographic boundaries. We would be
pleased to assist you in discovering the benefits of our loan,
deposit or trust services, and welcome your inquiry through the
return of the enclosed response card.
There is growing expectation of further reductions in interest
rates in 1996 which, if accurate, could also favorably impact our
performance. Excluding any special FDIC assessment, or any
unforeseen event such as a steep downturn in the economy, I expect
1996 earnings to outperform 1995 by a sizable margin. This gain is
expected to be fueled by asset and deposit growth, an improved net
interest margin, continued high asset quality and tight rein of
noninterest expenses.
Since paying out initial common dividend in 1988, dividends have
increased at least 15% each year. The annual total return of
Indiana United Bancorp common stock during this period averaged
18.3%, assuming reinvestment of dividends. We expect to continue
both of these strong records of performance in 1996 and, if effort
and commitment are barometers of achievement, I am confident we
will succeed.
Robert E. Hoptry
Chairman and President
January 22, 1996
Management's Discussion and Analysis
Overview
Indiana United Bancorp ("Company") operates under the broad tenets
of a long-term strategic plan (" Plan") designed to improve the
Company's financial performance, expand its competitive ability and
enhance long-term shareholder value. The Plan is premised on the
belief of the Company's board of directors that the Company can
best promote long-term shareholder interests by continuing as an
independently owned community banking organization
In conformance with the Plan, during 1994, the Company consolidated
the operations of its two commercial banking subsidiaries to form
Union Bank and Trust Company of Indiana ("Union Bank"), and sold
three underperforming branches of Regional Federal Savings Bank
("Regional Bank"). The Company believes each of those actions
increased its operating efficiency and the latter improved its net
interest margin. The Plan also focused on improving net interest
margin by reducing the Company's dependence on expensive, non-core
deposits. As anticipated, these strategies resulted in a
substantial decline in deposits based upon year end comparisons of
1994 and 1993.
During 1995, the Company initiated actions which are expected to
build a stronger customer base in its primary markets. The Company
invested approximately $500,000 to renovate Regional Bank's main
office and $500,000 to open two new branch offices. The renovation
allows for direct lobby access of all customer service and loan
personnel, and greatly improves drive-up and electronic banking
service.
The Allison Lane branch in Jeffersonville was opened by Regional
Bank to provide greater access to present and prospective customers
in Clark County. Due to the recent completion of ongoing road
improvements near this branch, management considers 1996 to be the
appropriate period to measure the success of this branch. Union
Bank opened the IGA supermarket branch in Greensburg, exclusively
providing seven-day banking and extended hours to the community.
Entry into new markets will be pursued through exploration of
acquisition opportunities.
A continuing tenet of the Plan is to establish and cultivate more
pro-active relationships with financial analysts and market makers
in the Company's stock. In 1995, management met with prominent
financial analysts to share Indiana United Bancorp's success story.
Continued contacts with potential market makers and other financial
analysts are planned in 1996.
Also in 1995, the Company initiated a sales philosophy supported by
a performance-based employee incentive program. The initial phase
of this program included sales-oriented training for all customer
service personnel. During 1996, sales training will be provided to
all personnel, and customer service personnel will receive advanced
sales training. During 1996, many technological improvements will
be initiated. Certain of these improvements, such as upgrading
communication lines, will provide faster response time for customer
transactions. Others represent capital investments which will
allow the Company to continue to effectively compete in the
financial services industry. The dynamics of the Plan assure
continually evolving objectives, and the extent of the Company's
success will depend upon how well it anticipates and responds to
competitive changes within its markets, the interest rate
environment and other external forces.
Results of Operations
Annual net income, excluding the effect of a change in accounting
method in 1993, has ranged between $2,472,000 and $2,870,000 for
the last three years. The year 1994 included a $1,229,000 gain on
the sale of three underperforming Regional Bank branches and a loss
of $154,000 on the sale of securities. These non-recurring items
resulted in additional net income of $650,000. There were no
significant non-recurring income or expense items in 1995.
Non-interest income in 1995 reflected a decline in the volume of
insurance commissions related to the disruptions of restructuring
and relocating the Company's Jay County insurance operations in
1994. Non-interest expense in 1995 reflects reduced Federal
Deposit Insurance Corporation ("FDIC") assessments due to a lower
deposit insurance assessment rate and full year benefits from the
1994 subsidiary consolidation and branch sale. Professional fees
also decreased in 1995 as compared to the prior year.
Net income per common share from recurring operations equaled $1.91
in 1995, compared to $1.58 in 1994, and $1.83 in 1993. Including
an accounting method change for income taxes, 1993 earnings equaled
$2.19 per share. The gain realized on the sale of Regional Bank's
branches increased 1994 earnings per share to $2.17 (see Table 1).
The Company's return on average total assets was .82% in 1995, .86%
in 1994, and .81% in 1993. Return on average common shareholders'
equity was 9.71% in 1995, 12.18% in 1994, and 12.61% in 1993.
Net Interest Income
Net interest income is influenced by the volume and yield of
earning assets and the cost of interest-bearing liabilities. Net
interest margin reflects the mix of interest-bearing and
noninterest-bearing liabilities that fund earning assets, as well
as interest spreads between the rates earned on these assets and
the rates paid on interest-bearing liabilities. Net interest
income of $11,095,000 in 1995 decreased 3% from $11,436,000 in
1994, which was 5% below 1993 (see Tables 2 and 5).
Throughout 1994 and much of 1995, many of the Company's local
competitors offered interest rates on long-term certificates of
deposit significantly above national market averages. The Company
believes this strategy will depress future years earnings of these
competitors and elected not to engage in such activity. The
Company instead employed a deposit pricing strategy focused on
retaining and attracting shorter-term funds in anticipation of a
lower interest rate environment in 1995 and 1996. The Company
believes its ability to reprice these deposits in the near term
will improve its net interest margin relative to average peer
performance. As expected, deposits declined during 1994 and the
early part of 1995. By mid 1995, many of these competitors had
reduced or eliminated rate premiums on long-term deposits and, by
year end, the Company's competitive disadvantage in attracting
these funds was minimal.
Although many of the Company's peer group competitors are expected
to report flat or marginally changed net interest margins in 1995,
the Company increased its net interest margin by 20 basis points.
During 1994 and 1995, the Company increased its net interest margin
by 25 basis points, compared to latest available data indicating
peer average gains of only 4 basis points.
The Company retained an outside investment advisor in early 1994 to
assist in the administration of the investment portfolio. Several
changes in the investment portfolio were made, primarily during the
first half of 1994, resulting in net losses of $154,000 on the sale
of securities. Although many of the changes were designed to
improve portfolio duration and reduce extension risk, yields also
improved. The average yield on investment securities increased 65
basis points in 1995 compared to 1994 and now closely parallels the
Company's peer group average.
The changes in interest income and interest expense resulting from
changes in volume and rate are summarized in Tables 2 and 3.
Variances have been allocated on the basis of the absolute
relationship between volume and rate.
Provision for Loan Losses
This topic is discussed under the heading "Loans, Credit Risk and
the Allowance and Provision for Possible Loan Losses"
Non-interest Income
Non-interest income normalized in 1995 after benefiting from a gain
of $1,229,000 from the sale of branches in 1994. Excluding the
sale, non-interest income in 1995 exceeded 1994 by $97,000 or 7%.
Securities transactions in 1995 resulted in a gain of $16,000
versus a loss of $154,000 in 1994.
Insurance commissions continue to represent the largest component
of recurring non-interest income, equaling 32%, 37% and 36% in the
years 1995, 1994 and 1993. Declines of $36,000 in 1995 and
$71,000 in 1994 reflect reorganization and relocation disruptions
of insurance operations in Jay County. Insurance income is
expected to increase in 1996. Service charges on deposit accounts
decreased in 1995 and 1994, primarily reflecting reduced interest-
bearing demand deposits and higher earnings credits offsetting
activity charges on commercial accounts. Deposit growth and
interest rate variables are expected to generate greater service
charge income in 1996.
Non-interest Expense
The largest component of non-interest expense is personnel
expense. Personnel expenses declined in 1995 by $86,000, or 1.9%,
following a $60,000 decline in 1994. Both of these declines were
impacted by the sale of branches and the consolidation of
commercial banking subsidiaries. The average number of full-time
equivalent employees in 1995 was 15 persons less than the average
1994 staffing level, even with the opening of two new branches
during this year. Normal staff salary adjustments and increased
benefit costs were incurred in 1995, including $53,000 earned by
employees in connection with the performance incentive compensation
plan. Personnel expenses in 1993 included a nonrecurring expense
of $100,000 associated with attaining long-term strategic
objectives. Personnel expenses in 1996 are not expected to change
materially from 1995.
Effective January 1, 1995, the Company adopted SFAS No.106,
Employers' Accounting for Postretirement Benefits Other Than
Pensions, which focuses principally on postretirement health care
benefits. SFAS No.106 requires the accrual of these benefits over
the period the employee performs the service to earn the benefits
rather than the prior practice of accounting for these benefits on
the cash basis. The adoption of SFAS No.106 did not have any
material effect on operations or financial condition in 1995.
Expenses related to premises and equipment declined 3.4% in 1995
and 5.8% in 1994, due to the sale of branches. Professional fees
in 1994 were elevated by expenses incurred to an investment
advisor. The investment advisory service was discontinued in early
1995.
Deposit insurance was $271,000 less in 1995, than the prior year
due to a lower rate and lower volume of deposits on which the
insurance premium is calculated. In mid 1995, the FDIC reduced
deposit insurance premiums paid by soundly managed commercial
banks, including Union Bank, by 83%. Since the bank insurance fund
reached a mandated funding level in 1995, the assessment rate for
the Company's commercial bank has been further reduced to the
$2,000 minimum level permissable in 1996. The FDIC has also
decided to retain the current premium rates paid by thrift
institutions, and is currently evaluating several proposals for the
recapitalization of the Savings Association Insurance Fund
("SAIF"). It is possible Congress will pass legislation to merge
the bank and thrift components of the FDIC insurance fund,
ultimately mandating the conversion of thrifts to commercial bank
charters. Such legislation is likely to result in a one-time
assessment of all thrift institutions, which, if based upon deposit
balances as of March 31, 1995 as now proposed, would result in a
nonrecurring pre-tax charge of approximately $700,000 for Regional
Bank. Subsequent to the one-time charge, Regional Bank's
assessment rate should decrease to the current level of commercial
banks. Other operating expenses decreased 11% in 1995 with no
significant dollar change in any individual expense item.
Income Taxes
Income tax expense for 1995 was $1,651,000 compared to $1,864,000
for 1994, and the effective rate was 40% for 1995, 39% in 1994 and
37% in 1993. The Company and its subsidiaries will file a
consolidated federal income tax return for 1995. The Statement of
Financial Accounting Standards No. 109, Accounting for Income
Taxes, was adopted by the Company effective January 1, 1993. The
change resulted in a nonrecurring increase of $450,000 in 1993
earnings.
Financial Condition
Total average assets and their components reflect decreases
attributable to the sale of Regional Bank's branches in late
October, 1994. In connection with the sale, total assets were
reduced by approximately $24,000,000 consisting of loans of
$13,350,000, fixed assets of $1,150,000 and securities of
$9,500,000 sold to fund the sale. Total deposits were affected by
a comparable aggregate amount. Total average assets for 1994 would
have been reduced by approximately $20,000,000 had the branch sale
occurred on January 1, 1994.
Year-end assets increased to $313,067,000 from $306,047,000 at
December 31, 1994. Cash and cash equivalents and short-term
investments increased to provide funding for loans scheduled to
close shortly after December 31, 1995 and in anticipation of
customary January withdrawals of public funds. Securities sales,
maturities and repayments were used to fund loan growth in 1995.
Average earning assets have represented 95% of average total assets
for the past three years. Average loans represented 65% of average
assets in 1995 compared to 62% in 1994 and 57% in 1993. Management
intends to continue its emphasis on loan growth in 1996.
Average interest-bearing deposits decreased in 1995 compared to
1994, as a result of previously mentioned deposit pricing
strategies and the sale of branches. Although total deposits
increased only slightly in 1995 compared to 1994, the components
changed dramatically. Noninterest-bearing deposits increased
approximately $2,000,000. Interest-bearing demand deposits
decreased approximately $10,000,000 reflecting transfers to short-
term certificates of deposit and a premium passbook savings account
introduced in 1995. Savings, certificates of deposit and other
time deposits increased approximately $9,000,000 in 1995.
Long-term debt is the Company's loan for the purchase of Regional
Bank and Union Bank, and is secured by the capital stock of the
Company's subsidiaries. Interest adjusts quarterly to the lender's
prime rate, less 25 basis points. The Company successfully
renegotiated the rate with the lender in mid 1995 and the new rate
became effective July 1, 1995. The Company believes it has
complied with all terms and covenants of the loan agreement. The
Company prepaid $750,000 on long-term debt in 1995, and intends to
make additional prepayments in 1996.
Shareholders' equity was $28,245,000 on December 31, 1995 compared
to $24,282,000 in 1994. Book value per common share increased to
$20.98 or 20% from $17.49 at year end 1994. The unrealized gain on
securities available for sale, net of taxes, totaled $195,000 or
$.15 per share in 1995 compared to an unrealized loss of $2,641,000
or $2.11 per share in 1994. Excluding the net unrealized gains or
losses on securities available for sale, book value per share was
$20.83 or an increase of 6% over the comparable book value at year
end 1994. A 10% common stock dividend was issued to shareholders
of record in December 1994. The Company redeemed $400,000 of its
preferred stock in 1995 and $300,000 in 1994. The Company may
redeem additional preferred stock in 1996.
Loans, Credit Risk and the Allowance and Provision for Possible
Loan Losses
Loans remain the Company's largest concentration of assets and
continue to represent the greatest risk. The loan underwriting
standards observed by each of the Company's subsidiaries are viewed
by management as a deterrent to the emergence of an abnormal level
of problem loans and a subsequent increase in net chargeoffs. The
Company's conservative loan underwriting standards have
historically resulted in higher loan quality and lower levels of
net chargeoffs than peer bank averages. The Company also believes
credit risks are elevated by undue concentrations of loans in
specific industry segments and loans to out of area borrowers.
Accordingly, the Company's board of directors regularly monitors
such concentrations to determine compliance with its restrictive
loan allocation policy.
Total loans increased 3%, primarily reflecting the expansion of the
consumer loan portfolio and management's emphasis on indirect
automobile financing during 1995. Consumer loans increased 32% in
1995 compared to 1994. The Company intends to continue this
emphasis on increasing consumer loans in 1996 to provide greater
diversification within the portfolio and to generate higher yields
than residential real estate loans. Although the Company limits
its exposure to long-term fixed rate residential mortgage loans and
generally observes 20% downpayment guidelines, it will begin
originating both fixed rate loans and loans with little or no
downpayment for a non-competing mortgage lender during 1996. This
program will assist the Company in serving all segments of the
community without incuring unacceptable levels of credit exposure
or interest rate risk. The origination of these loans will also
provide additional fee income.
The Company regards its ability to identify and correct loan
quality problems as one of its greatest strengths. Loans are
placed in a nonaccruing status when in management's judgment the
collateral value and/or the borrower's financial condition does not
justify accruing interest. As a general rule, commercial and real
estate mortgage loans are reclassified to nonaccruing status at or
before becoming 90 days past due. Interest previously recorded but
not deemed collectible is reversed and charged against current
income. Subsequent interest income on non-accrual loans is
thereafter recognized only when collected. Non-real estate secured
consumer loans are not placed in non-accruing status, but are
charged-off when policy- determined delinquent status is reached.
Net chargeoffs were $60,000 in 1995, $13,000 in 1994 and $361,000
in 1993. As a percentage of average loans, net chargeoffs equaled
.03%, .08% and .18% in 1995, 1994 and 1993. In each of these
years, the Company significantly outperformed its peer group's net
loan loss average.
Management maintains a listing of loans warranting either the
assignment of a specific reserve amount or other special
administrative attention. This listing, together with a listing of
all classified loans, nonaccrual loans and loans delinquent 30 days
or more, is reviewed monthly by the board of directors of each
subsidiary.
The ability to absorb loan losses promptly when problems are
identified is invaluable to a banking organization. Most often,
losses incurred as a result of quick collection action are much
lower than losses incurred after prolonged legal proceedings.
Accordingly, the Company observes the practice of quickly
initiating stringent collection efforts in the very early stages of
loan delinquency.
The adequacy of the allowance for loan losses in each subsidiary is
reviewed at least monthly. The determination of the provision
amount in any period is based on management's continuing review and
evaluation of loan loss experience, changes in the composition of
the loan portfolio, current economic conditions, the amount of
loans presently outstanding, and the amount and composition of
growth expectations. The allowance for loan losses as of December
31, 1995, is considered adequate by management. See Tables 6, 7,
10, 11 and 12, for quantitative support of this narrative loan
analysis.
The Company adopted SFAS No.114 and No.118, Accounting by Creditors
for Impairment of a Loan and Accounting by Creditors for Impairment
of a Loan - Income Recognition and Disclosures, on January 1, 1995.
Impaired loans are measured by the present value of expected future
cash flows, or the fair value of the collateral of the loan, if
collateral dependent. The amount of impaired loans at December 31,
1995 was not material.
Investment Securities
Investment securities offer flexibility in the Company's management
of interest rate risk, and is the primary means by which the
Company provides liquidity and responds to changing maturity
characteristics of assets and liabilities. The Company's
investment policy prohibits trading activities and does not allow
investment in high risk derivative products or junk bonds.
Effective January 1, 1994, the Company adopted new accounting rules
for securities. The rules require that each security must be
individually designated as a "held to maturity" (HTM) security or
as an "available for sale" (AFS) security.
Late in 1995, the Financial Accounting Standards Board allowed an
unprecendented "one time" transition reclassification. While the
vast majority of the Company's investments were already designated
AFS, the Company took this opportunity to reclassify all remaining
HTM securities to AFS to provide even greater management
flexibility in responding to changes within financial markets.
As of December 31, 1995, all investment securities are classified
as AFS and are carried at fair value with unrealized gains and
losses, net of taxes, excluded from earnings and reported as a
separate component of shareholders' equity. A net unrealized gain
of $195,000 was recorded to adjust the AFS portfolio to current
market value at December 31, 1995, compared to a net unrealized
loss of $2,641,000 at December 31, 1994.
At year end 1995, the yield of the investment securities portfolio
was 6.33%, representing a substantial increase over the 6.16% at
year end 1994, and 5.56% at year end 1993. In 1993, mortgage-
backed securities experienced accelerated paydowns, thereby
decreasing the effective yield for the year. An investment advisor
was retained in early 1994, and a substantial restructuring of the
portfolio occurred. This restructuring was the primary source of
a $154,000 loss on the sale of securities, which also included the
liquidation of securities to fund the sale of branches in the
fourth quarter. These actions, together with a general increase in
interest rates, produced the yield gain in 1994. Securities were
liquidated to provide a primary funding source for the sale of
Regional Bank's branches on October 28, 1994.
Commencing in 1994, management reduced the variable portion of the
investment securities portfolio. Variable rate securities
comprised 55% of the total portfolio on December 31, 1995 compared
to 65% for December 31, 1993. The reduction of variable rate
securities extended the weighted average life of the portfolio to
1.14 years as compared to .84 years in 1993.
SFAS No.119, Disclosure about Derivative Financial Instruments and
Fair Value of Financial Instruments, requires disclosures about
derivative financial instruments - futures, forward swap and option
contracts, and other financial instruments with similar
characteristics was effective for 1995 for the Company. During
1995, the Company did not have any derivative financial instruments
as defined in SFAS No.119.
Sources of Funds
The Company relies primarily on customer deposits and securities
sold under repurchase agreements, along with shareholders' equity
to fund earning assets. On an infrequent basis, Federal Home Loan
Bank ("FHLB) advances are used to provide additional funds. The
Company is not aware of any recommendations by regulatory
authorities which would materially affect liquidity, capital
resources or operations.
Deposits generated within local markets provide the major source of
funding for earning assets. Average total deposits were 88% and
89% of total earning assets in 1995 and 1994. Total interest-
bearing deposits averaged 90%, 92% and 93% of average total
deposits during 1995, 1994 and 1993. Management intends to
continue trying to increase the percentage of transaction-related
deposits to total deposits due to the positive effect on earnings.
Securities sold under repurchase agreements ("repos") are high
denomination investments utilized by public entities and commercial
customers as an element of their cash management programs. Repos
are not subject to FDIC assessment so they are less costly than
large certificates of deposit. With the reduction in the FDIC
assessment, repos will not have the cost advantage previously held.
Management expects large denomination certificates of deposit to
become more widely used in 1996 to replace a portion of the funds
previously invested in repos.
Short-term borrowings increased 23% at year end 1995 compared to
1994. FHLB advances represented most of this increase. FHLB
advances were used to fund loans and other earning assets.
Depending upon the level of loan demand, management may elect to
use additional FHLB advances in 1996.
The Company continued to prepay long-term debt in 1995. Long-term
debt decreased $1,500,000 in 1995, of which $750,000 represented
reductions in excess of scheduled repayment. Management expects
to continue its history of accelerated payments in 1996.
Capital Resources
Total shareholders' equity was $28,245,000 at December 31, 1995,
and includes $2,000,000 of preferred stock. The Company redeemed
$400,000 of preferred stock in 1995 and $300,000 in both 1993 and
1994. It expects to redeem an additional amount in 1996.
The Federal Reserve Board has adopted risk-based capital guidelines
which assign risk weightings to assets and off-balance sheet items.
The Company's core capital (Tier 1) consists of shareholders'
equity less goodwill, while total capital consists of core capital,
certain debt instruments and a portion of the allowance for credit
losses. At December 31, 1995, Tier 1 capital to total assets was
8.84%. Total capital to risk-adjusted assets was 16.57%. Both
ratios substantially exceed all regulatory definitions of a well-
capitalized institution.
1994 shareholders' equity was impacted by the Company's initial
decision to categorize a large portion of its securities portfolio
as AFS under accounting rules adopted January 1, 1994. Securities
in this category are carried at fair value, and shareholders'
equity is adjusted to reflect unrealized gains and losses, net of
taxes. On November 29, 1995, in accordance with the transition
reclassification allowed by the Financial Accounting Standards
Board, securities previously classified as held to maturity were
transferred to available for sale. As of December 31, 1995, 100%
of the investment portfolio is designated as availabe for sale. No
adjustment to shareholders' equity is recorded prior to 1994.
The Company declared and paid common dividends of $.69 per share in
1995, and $.60 in 1994. Book value per common share increased 20%
to $20.98 from $17.49 in 1994. The net adjustment for AFS
securities increased book value by $.15 and decreased book value by
$2.11 at December 31, 1995 and 1994. Depending on market
conditions, the adjustment for AFS securities can cause significant
fluctuations in equity. The dividend payment rate on preferred
stock was 6.34% during each of the last three years. A 10% common
stock dividend was issued prior to year end 1994.
Liquidity
Liquidity management involves maintaining sufficient cash levels to
fund operations and to meet the requirements of borrowers,
depositors, and creditors. Higher levels of liquidity bear higher
corresponding costs, measured in terms of lower yields on short-
term, more liquird earning assets, and higher interest expense
involved in extending liability maturities. Liquid assets include
cash and cash equivalents, money market instruments, and securities
maturing within one year. In addition, the Company holds
$74,803,000 of AFS securities maturing after one year which can be
sold to meet liquidity needs.
Liquidity is reinforced by maintaining a relatively stable funding
base, which is achieved by diversifying funding sources, extending
the contractual maturity of liabilities, and limiting reliance on
volatile short-term purchased funds. The Company's stategy is to
fund assets to the maximum extent possible with core deposits,
which provide a sizable source of relatively stable and low-cost
funds. Average core deposits funded approximately 86% of total
earning assets at December 31, 1995. Short-term funding needs can
arise from declines in deposits or other funding sources, drawdowns
of loan commitments, and requests for new loans.
Shareholders' equity and long-term debt also contribute to
liquidity by reducing the need to continually rely on short-term
purchased funds. At the end of 1995, long-term debt totalled 2% of
total assets and 21% of total shareholders' equity versus 2% of
total assets and 31% of total shareholders' equity at December 31,
1994.
Management believes the Company has sufficient liquidity to meet
all reasonable borrower, depositor, and creditor needs in the
present economic environment.
Interest Rate Risk
At year end 1995, the Company held approximately $193,159,000 in
assets, comprised of securities, loans, short-term investments, and
federal funds sold, which were interest sensitive in one year or
less time horizons. The Company's interest rate sensitivity
analysis for the year ended December 31, 1995 appears in Table 14.
Core deposits are distributed or spread among the various repricing
categories based upon historical patterns of repricing which are
reviewed periodically by management. The assumptions regarding
these repricings characteristics greatly influence conclusions
regarding interest sensitivity. Management believes its
assumptions regarding these liabilities are reasonable.
Effective asset/liability management requires the maintenance of a
proper ratio between maturing or repriceable interest-earning
assets and interest-bearing liabilities. It is the policy of the
Company that rate-sensitive assets less rate-sensitive liabilites
to total assets be kept within a range of 80% to 130%. The
Company's strategy is to remain near neutral when rates are likely
to remain stable and shifting slightly toward a negative gap when
rates are expected to decline and a positive gap when rates are
expected to rise.
The Company is continuing to pursue a strategy to attain a neutral
to a slightly negative gap position in the belief that the current
interest rate cycle has peaked. In any event, the Company does not
anticipate that its earnings will be materially impacted in 1996
regardless of the direction interest rates may trend.
Effects of Changing Prices
The Company's asset and liability structure is substantially
different from that of an industrial company in that most of its
assets and liabilities are monetary in nature. Management believes
the impact of inflation on financial results depends upon the
Company's ability to react to changes in interest rates and, by
such reaction, reduce the inflationary impact on performance.
Interest rates do not necessarily move in the same direction at the
same time, or at the same magnitude, as the prices of other goods
and services. As discussed previously, management relies on its
ability to manage the relationship between interest-sensitive
assets and liabilities to protect against wide interest rate
fluctuations, including those resulting from inflation.
Future Accounting Changes
The FASB has issued SFAS No.121, Accounting for the Impairment of
Long-Lived Assets to be Disposed Of. This Statement establishes
guidance for recognizing and measuring impairment loses and
requires that the carrying amount of impaired assets be reduced to
fair value. Long-lived assets and certain identifiable intangibles
must be reviewed for impairment whenever events indicate that the
carrying amount of the assets may not be recoverable.
SFAS No.121 is effective in 1996 for the Company. Management does
not believe the adoption of SFAS No.121 will have any material
effect on results of operation or financial condition in 1996.
SFAS No.122, Accounting for Mortgage Servicing Rights, pertains to
mortgage banking and financial institutions that conduct operations
that are substantially similar to the primary operations of a
mortgage banking enterprise. The Statement eliminates the
accounting distinction between mortgage servicing rights that are
acquired through loan origination activities and those acquired
through purchase transactions. Under this Statement, if the
Company enters into mortgage banking activities and sells or
securitizes loans and retains the mortgage servicing rights, the
Company must allocate the total cost of the mortgage loans to the
mortgage servicing rights and the loans (without the rights) based
on their relative fair values.
SFAS No.122 is effective for the Company in 1996. Since the
Company does not currently engage in mortgage banking activities,
it does not expect adoption of this Statement to have any material
effect on 1996 operations or financial position.
SFAS No.123, Stock Based Compensation, is effective for the Company
in 1996. This Statement requires expanded disclosures rather than
recognition of compensation cost as was originally required by the
exposure draft of this Statement for fixed, at the money, options.
However, employers are encouraged to recognize the cost of stock-
based compensation plans in their financial statements. Currently,
the Company has no stock-based compensation plans and adoption of
SFAS No. 123 is not expected to have any effect on 1996 financial
statements.
Tables included in Annual Report
(Table dollar amounts in thousands)
Table 1 -- Selected Financial Data Summary*
1995 1994 1993 1992 1991
Results of Operations
For the year
Net interest income $10,983 $11,301 $11,881 $12,484 $7,308
Provision for loan
losses 30 115 357 686 102
Non-interest income 1,456 2,588 1,628 1,572 1,321
Non-interest expense 8,229 9,040 9,243 8,834 5,687
Income before income
tax and accounting
method change 4,180 4,734 3,909 4,536 2,840
Income tax 1,651 1,864 1,438 1,674 940
Income before accounting
method change 2,529 2,870 2,472 2,862 1,900
Accounting method change 450
Net income 2,529 2,870 2,922 2,862 1,900
Dividends paid on common
stock 863 683 580 478 257
Dividends paid on
preferred stock 139 157 185 190 190
Per Common Share
Income before accounting
method change $1.91 $2.17 $1.83 $2.14 $2.05
Net income 1.91 2.17 2.19 2.14 2.05
Dividends paid .69 .60 .51 .42 .34
Book value--end of period
Excluding SFAS No. 115
adjustment 20.83 19.60 17.99 16.27 14.51
Including SFAS No. 115
adjustment 20.98 17.49
Market price--end of
period 25.00 21.00 22.28 19.80 13.39
At Year End
Total assets $313,067$306,047 $355,992$368,924$373,764
Securities and other
investments 94,110 96,270 133,747 146,593 145,737
Total loans 201,355 194,736 205,508 204,000 206,597
Allowance for loan
losses 2,754 2,784 2,682 2,686 3,008
Total deposits 262,346 261,371 310,063 323,777 323,522
Long-term debt 6,000 7,500 9,375 10,645 14,705
Preferred stock 2,000 2,400 2,700 3,000 3,000
Shareholders' equity 28,245 24,282 25,203 23,347 21,154
Financial Ratios
Return on average
assets .82% .86% .81% .79% .92%
Return on average
common shareholders'
equity 9.71 12.18 12.61 13.88 14.65
Allowance for loan
losses to total
loans (year end) 1.37 1.43 1.31 1.32 1.46
Shareholders' equity to
total assets (year end) 9.02 7.93 7.08 6.33 5.66
Tier I capital to total
assets 8.84 8.69 7.01 6.25 5.51
Total capital to risk-
adjusted assets 16.57 17.11 14.12 13.34 11.72
Average equity to average
total assets 8.70 7.39 6.83 6.11 7.09
Dividend payout ratio 39.64 25.15 21.16 17.89 15.03
* The Company acquired Regional Bank effective December 31, 1991
and sold three of Regional Bank's branches in October, 1994. The
acquisition and sale affects comparative analysis in certain
information in this table.
Table 2 -- Changes in Net Interest Income and Net Interest Margin
(Taxable Equivalent Basis)*
Percent Change
1995 1994 1993 1995/94 1994/93
Interest income
Loans $16,938 $15,941 $16,536 6.3 (3.6)
Securities 5,655 6,265 7,572 (9.7) (17.3)
Federal funds
sold 305 116 242 162.9 (52.1)
Short-term
investments 49 15 37 226.7 (59.5)
Total interest
income 22,947 22,337 24,387 2.7 (8.4)
Interest expense
NOW and super NOW
accounts 833 832 847 0.1 (1.8)
Money market
investment
accounts 1,297 1,216 1,367 6.7 (11.0)
Savings deposits 894 742 750 20.5 (1.1)
Certificates of
deposit and
other time
deposits 7,284 6,997 8,429 4.1 (17.0)
Borrowings 1,544 1,114 952 38.6 17.0
Total interest
expense 11,852 10,901 12,345 8.7 (11.7)
Net interest
income $11,095 $11,436 $12,042 (3.0) (5.0)
Net interest
margin 3.77% 3.57% 3.52% 5.6 1.4
* Adjusted to reflect income related to securities and loans exempt
from Federal income taxes reduced by nondeductible portion of
interest expense.
Table 3 -- Volume/Rate Analysis of Changes in Net Interest Income
(Taxable Equivalent Basis)*
1995 vs. 1994 1994 vs. 1993
Volume Rate Total Volume Rate Total
Interest income
Loans $(505) $1,502 $997 $64 $(659) $(595)
Investment
securities (1,270) 660 (610) (941) (366) (1,307)
Federal funds
sold 131 58 189 (200) 74 (126)
Short-term
investments 17 17 34 (13) (9) (22)
Total interest
income (1,627) 2,237 610 (1,090) (960) (2,050)
Interest expense
NOW and super
NOW accounts (114) 115 1 (2) (13) (15)
Money market
investment
accounts (255) 336 81 (175) 24 (151)
Savings deposits (38) 190 152 19 (27) (8)
Certificates of
deposit (886) 1,173 287 (942) (489) (1,431)
Borrowings 60 370 430 (83) 244 161
Total interest
expense (1,233) 2,184 951 (1,183) (261) (1,444)
Change in net
interest income$ (394) $53 (341) $93 $(699) (606)
Change in
taxable
equivalent
adjustments 23 26
Change in net
interest income
after taxable
equivalent
adjustments $ (318) $(580)
*Adjusted to reflect income related to securities and loans exempt
from Federal income taxes reduced by nondeductible portion of
interest expense.
Table 4 -- Non-interest Income and Expense
Percent Change
1995 1994 1993 1995/94 1994/93
Non-interest income
Insurance commissions $473 $509 $580 (7.1) (12.2)
Trust fees 189 200 196 (5.5) 2.0
Service charges on deposit
accounts 450 475 542 (5.3) (12.4)
Securities gains (losses) 16 (154) 15
Gain on sale of branches 1,229
Other income 328 329 295 (0.3) 11.5
Total non-interest
income $1,456 $2,588 $1,628 (43.7) 59.0
Non-interest expense
Salaries and employee
benefits $4,467 $4,553 $4,613 (1.9) (1.3)
Premises and equipment
expense 1,469 1,521 1,615 (3.4) (5.8)
Professional fees 205 395 258 (48.1) 53.1
Amortization of
intangibles 40 46 54 (13.0) (14.8)
FDIC insurance 395 666 639 (40.7) 4.2
Other expense 1,653 1,859 2,064 (11.1) (9.9)
Total non-interest
expense $8,229 $9,040 $9,243 (9.0) (2.2)
Net non-interest expense
as a percent of average
assets 2.20% 1.93% 2.11%
Table 5 -- Average Balance Sheet and Net Interest Analysis
(Taxable Equivalent Basis)*
DECEMBER 31, 1995
Average Yield/
Balance Interest Rate
Assets
Short-term investments $812 $49 6.03%
Federal funds sold 5,196 305 5.87
Securities
Taxable 85,421 5,326 6.24
Tax-exempt 4,327 329 7.60
Total securities 89,748 5,655 6.30
Loans:**
Commercial 64,589 6,116 9.47
Real estate mortgage 116,314 8,815 7.58
Consumer 15,760 1,807 11.47
Government guaranteed loans 2,383 200 8.39
Total loans 199,046 16,938 8.51
Total earning assets 294,802 22,947 7.79
Allowance for loan losses (2,732)
Unrealized losses on securities (1,054)
Cash and due from banks 7,744
Premises and equipment 5,799
Other assets 3,104
Total assets $307,663
Liabilities
Interest-bearing deposits:
NOW and super NOW accounts $30,906 833 2.70
Money market investment accounts 35,369 1,297 3.67
Savings 26,979 894 3.31
Certificates of deposit and other
time deposits 136,952 7,284 5.32
Total interest-bearing deposits 230,206 10,308 4.48
Short-term borrowings 15,947 932 5.84
Long-term debt 6,950 612 8.81
Total interest-bearing
liabilities 253,103 11,852 4.68
Noninterest-bearing demand
deposits 24,545
Other liabilities 3,243
Total liabilities 280,891
Shareholders' equity 26,772
Total liabilities and shareholders'
equity $307,663 $11,852 4.02***
Net interest income $11,095 3.77%
Conversion of tax exempt income
to a fully taxable equivalent
basis using a marginal rate of 34% $112
* Adjusted to reflect income related to securities and loans
exempt from Federal income taxes reduced by nondeductible
portion of interest expense.
** Nonaccruning loans have been included in the average balances.
*** Total interest expense divided by total earnings assets.
Table 5 -- Average Balance Sheet and Net Interest Analysis
(Taxable Equivalent Basis)*
DECEMBER 31, 1994
Average Yield/
Balance Interest Rate
Assets
Short-term investments $451 $15 3.33%
Federal funds sold 2,751 116 4.22
Securities
Taxable 105,941 5,871 5.54
Tax-exempt 4,916 394 8.01
Total securities 110,857 6,265 5.65
Loans:**
Commercial 66,002 5,697 8.63
Real estate mortgage 123,423 8,521 6.90
Consumer 14,179 1,530 10.79
Government guaranteed loans 3,064 193 6.30
Total loans 206,668 15,941 7.71
Total earning assets 320,727 22,337 6.97
Allowance for loan losses (2,760)
Unrealized losses on securities (1,471)
Cash and due from banks 7,633
Premises and equipment 6,297
Other assets 4,425
Total assets $334,851
Liabilities
Interest-bearing deposits:
NOW and super NOW accounts $35,435 832 2.35
Money market investment accounts 43,527 1,216 2.79
Savings 28,357 742 2.62
Certificates of deposit and other
time deposits 155,317 6,997 4.50
Total interest-bearing deposits 262,636 9,787 3.73
Short-term borrowings 11,694 483 4.13
Long-term debt 8,835 631 7.14
Total interest-bearing
liabilities 283,165 10,901 3.85
Noninterest-bearing demand
deposits 23,678
Other liabilities 3,250
Total liabilities 310,093
Shareholders' equity 24,758
Total liabilities and shareholders'
equity $334,851 $10,901 3.40***
Net interest income $11,436 3.57%
Conversion of tax exempt income
to a fully taxable equivalent
basis using a marginal rate of 34% $135
* Adjusted to reflect income related to securities and loans
exempt from Federal income taxes reduced by nondeductible
portion of interest expense.
** Nonaccruning loans have been included in the average balances.
*** Total interest expense divided by total earnings assets.
Table 5 -- Average Balance Sheet and Net Interest Analysis
(Taxable Equivalent Basis)*
DECEMBER 31, 1993
Average Yield/
Balance Interest Rate
Assets
Short-term investments $782 $37 4.73%
Federal funds sold 8,083 242 2.99
Securities
Taxable 121,413 7,099 5.85
Tax-exempt 5,781 473 8.18
Total securities 127,194 7,572 5.95
Loans:**
Commercial 60,974 5,246 8.60
Real estate mortgage 125,896 9,416 7.48
Consumer 15,658 1,677 10.71
Government guaranteed loans 3,537 197 5.57
Total loans 206,065 16,536 8.02
Total earning assets 342,124 24,387 7.13
Allowance for loan losses (2,708)
Unrealized losses on securities
Cash and due from banks 8,565
Premises and equipment 6,862
Other assets 5,439
Total assets $360,282
Liabilities
Interest-bearing deposits:
NOW and super NOW accounts $35,538 847 2.38
Money market investment accounts 49,806 1,367 2.74
Savings 27,651 750 2.71
Certificates of deposit and other
time deposits 175,772 8,428 4.80
Total interest-bearing deposits 288,767 11,392 3.95
Short-term borrowings 11,239 323 2.87
Long-term debt 10,313 630 6.10
Total interest-bearing
liabilities 310,319 12,345 3.98
Noninterest-bearing demand
deposits 21,672
Other liabilities 3,671
Total liabilities 335,662
Shareholders' equity 24,620
Total liabilities and shareholders'
equity $360,282 $12,345 3.61***
Net interest income $12,042 3.52%
Conversion of tax exempt income
to a fully taxable equivalent
basis using a marginal rate of 34% $161
* Adjusted to reflect income related to securities and loans
exempt from Federal income taxes reduced by nondeductible
portion of interest expense.
** Nonaccruning loans have been included in the average balances.
*** Total interest expense divided by total earnings assets.
Table 6 -- Underperforming Loans
1995 1994 1993 1992 1991
Nonaccruing loans $1,569 $1,030 $1,208 $2,543 $3,564
Accruing loans
contractually past due
90 days or more as to
principal or interest
payments 34 113 1,866
Restructured loans 16 267 2,287
Total $1,603 $1,143 $1,224 $2,810 $7,717
Percent of total
loans .8% .6% .6% 1.4% 3.7%
Table 7 -- Summary of Allowance for Loan Losses
1995 1994 1993 1992 1991
Balance at January 1 $2,784 $2,682 $2,686 $3,008 $1,682
Chargeoffs
Commercial 91 6 239 1,123 57
Real estate mortgage 38 65 189 44 25
Consumer 31 21 17 95 151
Total chargeoffs 160 92 445 1,262 233
Recoveries
Commercial 61 37 52 199 57
Real estate mortgage 27 15 7 29
Consumer 12 27 32 47 96
Total recoveries 100 79 84 253 182
Net chargeoffs 60 13 361 1,009 51
Addition resulting
from acquisition 1,275
Provision for loan
losses 30 115 357 687 102
Balance at
December 31 $2,754 $2,784 $2,682 $2,686 $3,008
Net chargeoffs to
average loans .03% .01% .18% .48% .05%
Provision for loan
losses to average
loans .02% .06% .17% .33% .10%
Allowance to total
loans at year end 1.37% 1.43% 1.31% 1.32% 1.46%
Table 8 -- Average Deposits
1995 1994 1993
Amount Rate Amount Rate Amount Rate
Demand $24,545 $23,678 $21,672
NOW and super
NOW accounts 30,906 2.70% 35,435 2.35% 35,538 2.38%
Money market
investment
accounts 35,369 3.67 43,527 2.79 49,806 2.74
Savings 26,979 3.31 28,357 2.62 27,651 2.71
Certificates
of deposit
and other
time
deposits 136,952 5.32 155,317 4.50 175,772 4.80
Totals $254,751 4.05% $286,314 3.42% $310,439 3.66%
As of December 31, 1995, certificates of deposit of $100,000 or
more mature as follows:
3 Months 3 - 6 6 - 12 Over 12
or Less Months Months Months Total
Certificates of
deposit $8,989 $6,953 $4,974 $2,596 $23,512
Percent 38% 30% 21% 11% 100%
Table 9 -- Short-term Borrowings
1995 1994 1993
Repurchase Agreements
Balance at December 31 $10,735 $9,977 $6,654
Maximum outstanding at any
month end 15,174 16,384 13,013
Daily average amount
outstanding 10,162 9,041 9,767
Weighted daily average
interest rate 5.67% 3.99% 2.86%
Weighted daily interest
rate at December 31 5.28% 5.39% 2.79%
Information related to repurchase agreements is shown in the table
above and information on other short-term borrowings is not
required since the average balances outstanding during the periods
were less than 30% of shareholders' equity.
Table 10 -- Loan Portfolio
December 31
1995 1994 1993 1992 1991
Types of loans
Commercial $7,796 $7,595 $11,028 $16,300 $14,671
Agricultural
production
financing and
othe loans to
farmers 9,996 7,859 8,845 7,471 7,994
Commercial
real estate
mortgage 24,129 25,619 27,036 32,645 35,633
Residential
real estate
mortgage 103,239 101,455 111,600 101,953 101,556
Farm real
estate 28,910 28,358 25,483 22,064 15,024
Construction
and
development 6,863 7,161 3,455 1,786 4,792
Consumer 18,342 13,870 14,752 17,992 22,491
Government
guaranteed
loans 2,080 2,819 3,309 3,789 4,436
Total loans $201,355 $194,736 $205,508 $204,000 $206,597
Table 11 -- Maturities and Sensitivities of Commercial,
Construction and Certain Other Loans to
Changes in Interest Rates at December 31, 1995
Within 1 - 5 Over
1 Year Years 5 Years Total
Loan type
Commercial $6,189 $1,490 $117 $7,796
Agricultural
production
financing and
other loans to
farmers 9,364 205 427 9,996
Construction 6,863 6,863
Government
guaranteed loans 187 1,893 2,080
Totals $22,416 $1,882 $2,437 $26,735
Percent 83.9% 7.0% 9.1% 100.0%
Rate sensitivity
Fixed rate $2,875 $1,372 $543 $4,790
Variable rate 19,541 510 1,894 21,945
Totals $22,416 $1,882 $2,437 $26,735
Table 12 -- Allocation of the Allowance for Loan Losses
1995 1994 1993
December 31 Amount Percent Amount Percent Amount Percent
Real estate
Residential $134 5% $146 5% $142 5%
Farm real estate 14 14 1
Commercial 575 21 702 25 468 18
Construction and
development 75 3 52 2 35 1
Total real estate 798 29 914 33 645 24
Commercial
Agribusiness 117 4 151 5 182 7
Other commercial 445 16 131 5 226 8
Total commercial 562 20 282 10 408 15
Consumer 131 5 66 2 83 3
Unallocated 1,263 46 1,522 55 1,546 58
Total $2,754 100% $2,784 100% $2,682 100%
Table 12 -- Allocation of the Allowance for Loan Losses
1992 1991
December 31 Amount Percent Amount Percent
Real estate
Residential $ 87 3% $202 7%
Farm real estate
Commercial 705 26 963 32
Construction and
development 16 1 124 4
Total real estate 808 30 1,289 43
Commercial
Agribusiness 191 7 273 9
Other commercial 323 12 291 10
Total commercial 514 19 564 19
Consumer 109 4 152 5
Unallocated 1,255 47 1,003 33
Total $2,686 100% $3,008 100%
The allocation is based primarily on previous credit loss
experience, adjusted for changes in the risk characteristics of
each category. Additional amounts are allocated based on an
evaluation of the loss potential of individual troubled loans and
the anticipated effect of economic conditions on both individual
loans and loan categories. Because the allocation is based on
estimates and subjective judgement, it is not necessarily
indicative of the specific amounts or loan categories in which
losses may ultimately occur.
Table 13 -- Investment Securities
(Carrying Values at December 31)
Beyond
Within 1 - 5 5 - 10 10 Total
1 Year Years Years Years 1995
Available for sale
U.S. Treasury $ 999 $ 2,019 $ 3,018
Federal agencies 3,968 6,163 $2,281 12,412
State and municipal 774 1,695 1,225 $340 4,034
Mortgage-backed
securities 107 5,470 3,143 52,047 60,767
Corporate obligations 420 420
Total available for
sale $5,848 $15,347 $6,649 $52,807 $80,651
Weighted average
yield* 5.21% 5.36% 7.66% 6.49% 6.33%
Amounts in the table above are based on scheduled maturity dates.
Variable interest rates are subject to change not less than
annually based upon certain interest rate indexes. Expected
maturities will differ from contractual maturities because issuers
may have the right to call or prepay obligations with or without
call or prepayment penalties.
As of December 31, 1995, there are no corporate bonds and other
securities which represent more than 10% of shareholders' equity.
*Adjusted to reflect income related to securities exempt from
Federal income taxes reduced by nondeductible portion of interest
expense.
Table 14 -- Rate Sensitivity Analysis at December 31, 1995
Maturing or Repricing
3 Months 1 Year 3 Years
Rate-sensitive assets (RSA) $100,487 $92,672 $40,055
Rate-sensitive
liabilities (RSL) 92,435 87,631 49,622
Rate sensitivity gap
(assets less liabilities) $8,052 $5,041 $(9,567)
Rate sensitivity gap
(cumulative) $8,052 $13,093 $3,526
Percent of total assets
(cumulative) 2.6% 4.2% 1.1%
Rate-sensitive assets/
liabilities (cumulative) 108.7% 107.3% 101.5%
Table 14 -- Rate Sensitivity Analysis at December 31, 1995
Maturing or Repricing
Over 5
Years or
5 Years Insensitive Total
Rate-sensitive assets (RSA) $ 24,094 $55,759 $313,067
Rate-sensitive
liabilities (RSL) 21,433 61,946 313,067
Rate sensitivity gap
(assets less liabilities) $2,661 $(6,187)
Rate sensitivity gap
(cumulative) $6,187
Percent of total assets
(cumulative) 2.0%
Rate-sensitive assets/
liabilities (cumulative) 102.5%
Table 15 -- Quarterly Financial Information
1995
Fourth Third Second First
Total interest income $5,908 $5,784 $5,658 $5,485
Total interest expense 3,047 3,060 2,986 2,758
Net interest income 2,861 2,724 2,672 2,727
Provision for loan losses 12 9 6 3
Net interest income after
provision for loan losses 2,849 2,715 2,666 2,724
Non-interest income 343 334 430 350
Non-interest expense 1,961 2,003 2,103 2,163
Income before income tax 1,231 1,046 993 911
Income tax 485 417 392 357
Net income 746 629 601 554
Net income per common share .57 .47 .45 .41
Dividends paid per common
share .20 .17 .16 .16
1994
Fourth Third Second First
Total interest income $5,504 $5,660 $5,566 $5,472
Total interest expense 2,691 2,768 2,702 2,740
Net interest income 2,813 2,892 2,864 2,732
Provision for loan losses 30 42 43
Net interest income after
provision for loan losses 2,813 2,862 2,822 2,689
Non-interest income 1,593 369 231 393
Non-interest expense 2,074 2,304 2,364 2,297
Income before income tax 2,332 927 689 785
Income tax 929 358 272 304
Net income 1,403 569 417 481
Net income per common share 1.08 .43 .30 .36
Dividends paid per common
share .16 .15 .15 .14
GRAPHS INCLUDED IN THE ANNUAL REPORT
Common Dividend Payout Ratio Dividends Per Common Share
(Percent) (Dollars)
YEAR PERCENT YEAR DOLLARS
1991 15.03% 1991 .34
1992 17.89% 1992 .42
1993 21.16% 1993 .51
1994 25.15% 1994 .60
1995 36.12% 1995 .69
Long Term Debt Net Interest Margin
(Millions of Dollars) (Percent)
YEAR DOLLARS YEAR PERCENT
1991 14.7 1991 3.78%
1992 10.6 1992 3.66%
1993 9.4 1993 3.52%
1994 7.5 1994 3.57%
1995 6.0 1995 3.77%
Long Term Debt/Equity Book Value Per Share
(Percent)
YEAR PERCENT YEAR
1991 69.51% 1991 14.51
1992 45.59% 1992 16.27
1993 37.20% 1993 17.99
1994 30.89% 1994 17.49
1995 21.24% 1995 20.98
Overhead Expense to Tier 1 Capital to
Average Assets Total Assets
(Percent) (Percent)
PEER
YEAR IUB GROUP AVG. YEAR PERCENT
1991 2.75% 3.68% 1991 5.51%
1992 2.43% 3.76% 1992 6.25%
1993 2.57% 3.64% 1993 7.01%
1994 2.70% 3.42% 1994 8.69%
1995 2.76% 3.38%* 1995 8.84%
(*through 9-30-95)
Net Loan Losses to Nonperforming Assets to
Average Loans Total Assets
(Percent) (Percent)
PEER PEER
YEAR IUB GROUP AVG. YEAR IUB GROUP AVG.
1991 .05% .78% 1991 1.76% 2.48%
1992 .48% .62% 1992 1.13% 1.88%
1993 .18% .39% 1993 .81% 1.25%
1994 .01% .25% 1994 .41% .98%
1995 .03% .19%* 1995 .52% .85%*
(*through 9-30-95) (*through 9-30-95)
Net Income
(Thousand of Dollars)
OPERATING NON-RECURRING
YEAR INCOME INCOME
1991 1,900
1992 2,862
1993 2,472 450
1994 2,125 745
1995 2,529
Report of Management on Responsibility for Financial Information
The consolidated financial statements and related financial
information presented in this annual report have been prepared by
the management of Indiana united Bancorp in accordance with
generally accepted accounting principles, and include amounts based
on management's best estimates and judgements at the time of
preparation. In presenting this financial information, management
is responsible for its integrity, content and consistency of
preparation.
To meet this responsibility, management maintains a system on
internal controls, policies, and administrative procedures designed
to provide reasonable assurance that transactions are recorded
accurately. As an integral part of the internal control structure,
the Company maintains a professional staff of internal auditors who
monitor compliance with regulations, policies and procedures, and
assess the effectiveness of the internal control structure. In
addition, the Company's audit committee, which is comprised
entirely of outside directors, meets periodically with management,
internal auditors and/or independent auditors to review the scope
and results of audit activities and the responses thereto by
management. Internal auditors, independent auditors and banking
regulators have unrestricted access to the audit committee.
Management believes the Company's system provides a basis for the
preparation of reliable financial statements.
The Company's consolidated financial statements have been audited
by Geo. S. Olive & Co. LLC. Their Responsibility is to express an
opinion as to the integrity of the Company's consolidated financial
statements and, in performing their audit, to evaluate the
Company's internal control structure to the extent they deem
necessary in order to issue such opinion. As described further in
their report that follows, their opinion is based on their audit,
which was conducted in accordance with generally accepted auditing
standards and is believed by them to provide a reasonable basis for
their opinion. The selection of Geo. S. Olive & Co. LLC was
approved by the Board of Directors and ratified by shareholders.
/s/Robert E. Hoptry /s/Jay B. Fager
Robert E. Hoptry Jay B. Fager
Chief Executive Officer Chief Financial Officer
Report of Independent Certified Public Accountants
To the Shareholders and
Board of Directors
Indiana United Bancorp
Greensburg, Indiana
We have audited the consolidated balance sheet of Indiana United
Bancorp and subsidiaries as of December 31, 1995 and 1994, 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, 1995. These consolidated financial statements
are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated
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 described
above present fairly, in all material respects, the consolidated
financial position of Indiana United Bancorp and subsidiaries as of
December 31, 1995 and 1994, and the results of their operations and
their cash flows for each of the three years in the period ended
December 31, 1995, in conformity with generally accepted accounting
principles.
As discussed in the notes to the consolidated financial statements,
the Company changed its method of accounting for investments in
securities in 1994 and income taxes in 1993.
/s/Geo. S. Olive & Co.
Indianapolis, Indiana
January 26, 1996
Consolidated Balance Sheet
December 31 1995 1994
Assets
Cash and due from banks $ 11,707,236 $ 8,549,379
Interest-bearing demand
deposits 71,698 156,242
Federal funds sold 7,150,000 2,875,000
Cash and cash equivalents 18,928,934 11,580,621
Short-term investments 5,100,000 147,157
Investment securities
Available for sale 80,650,912 83,838,926
Held to maturity 8,114,803
Total investment securities 80,650,912 91,953,729
Loans 201,354,517 194,735,848
Allowance for loan losses (2,754,227) (2,783,889)
Net loans 198,600,290 191,951,959
Premises and equipment 6,024,994 5,459,802
Federal Home Loan Bank stock 1,137,815 1,137,815
Income receivable 1,974,331 1,895,961
Core deposit intangibles 141,638 182,106
Other assets 508,094 1,737,994
Total assets $313,067,008 $306,047,144
Liabilities
Deposits
Noninterest bearing $ 30,335,037 $ 28,360,361
Interest bearing 232,011,066 233,010,316
Total deposits 262,346,103 261,370,677
Short-term borrowings 13,240,300 10,800,874
Long-term debt 6,000,000 7,500,000
Interest payable 1,388,635 864,340
Other liabilities 1,846,551 1,229,195
Total liabilities 284,821,589 281,765,086
Commitments and Contingencies
Shareholders' Equity
Preferred stock
Authorized-400,000 shares
Issued and outstanding-20,000
and 24,000 Series M-1987
convertible preferred shares 2,000,000 2,400,000
Common stock, $1 par value
Authorized-3,000,000 shares
Issued and outstanding-
1,250,897 shares 1,250,897 1,250,897
Paid-in capital 10,677,045 10,677,045
Retained earnings 14,122,382 12,595,589
Net unrealized gain (loss) on
securities available for sale 195,095 (2,641,473)
Total shareholders' equity 28,245,419 24,282,058
Total liabilities and
shareholders' equity $313,067,008 $306,047,144
See notes to consolidated financial statements.
Consolidated Statement of Income
Year Ended December 31 1995 1994 1993
Interest Income
Loans receivable $16,938,330 $15,940,601 $16,536,492
Investment securities
Taxable 5,326,297 5,871,583 7,099,319
Tax exempt 216,816 259,772 311,778
Federal funds sold 304,619 115,626 241,834
Short-term investments 49,002 15,075 36,686
Total interest income 22,835,064 22,202,657 24,226,109
Interest Expense
Deposits 10,307,724 9,787,434 11,392,325
Short-term borrowings 931,944 482,907 323,341
Long-term debt 611,978 630,901 629,475
Total interest expense 11,851,646 10,901,242 12,345,141
Net Interest Income 10,983,418 11,301,415 11,880,968
Provision for loan losses 30,000 115,000 357,000
Net Interest Income After
Provision for Loan Losses 10,953,418 11,186,415 11,523,968
Noninterest Income
Insurance commissions 472,998 508,935 580,370
Fiduciary activities 189,417 200,241 195,553
Service charges on deposit
accounts 450,060 474,896 541,608
Securities gains (losses), net 16,296 (154,297) 15,192
Gain on sale of branches 1,228,751
Other income 328,032 329,346 295,348
Total noninterest income 1,456,803 2,587,872 1,628,071
Noninterest Expense
Salaries and employee benefits 4,467,408 4,552,848 4,612,984
Net occupancy expenses 804,977 835,351 888,867
Equipment expenses 664,109 685,805 726,458
Professional fees 204,578 395,383 258,090
Deposit insurance expense 394,672 666,402 639,404
Amortization of core deposit
intangibles 40,468 45,527 53,854
Other expenses 1,653,251 1,858,864 2,063,202
Total noninterest expense 8,229,463 9,040,180 9,242,859
Income Before Income Tax and
Cumulative Effect of Change in
Accounting Method 4,180,758 4,734,107 3,909,180
Income tax expense 1,651,366 1,863,756 1,437,625
Income Before Cumulative Effect
of Change in Accounting Method 2,529,392 2,870,351 2,471,555
Cumulative Effect of Change in
Method of Accounting for
Income Taxes 450,000
Net Income $2,529,392 $ 2,870,351 $ 2,921,555
Per Common Share
Income before cumulative
effect of change in
accounting method $ 1.91 $ 2.17 $ 1.83
Net income 1.91 2.17 2.19
Weighted Average Shares
Outstanding 1,250,897 1,250,897 1,250,897
See notes to consolidated financial statements
Consolidated Statement of Changes in Shareholders' Equity
Preferred Stock Common Stock
Shares Amount Shares Amount
Balances,
January 1, 1993 30,000 $3,000,000 1,137,578 $1,137,578
Net income for 1993
Cash dividends
Preferred stock-
$6.34 per share
Common stock-
$.51 per share
Redemption of preferred
stock (3,000) (300,000)
Balances,
December 31, 1993 27,000 2,700,000 1,137,578 1,137,578
Net income for 1994
Cash dividends
Preferred stock-
$6.34 per share
Common stock-
$.60 share
10% stock dividend 113,319 113,319
Adjustment for cash paid
in lieu of issuing
fractional shares
Cumulative effect of
change in method of
accounting for
securities, net of
taxes of $555,129
Net change in unrealized
loss on securities
available for sale,
net of taxes of
$2,287,561
Redemption of preferred
stock (3,000) (300,000)
Balances,
December 31, 1994 24,000 2,400,000 1,250,897 1,250,897
Net income for 1995
Cash dividends
Preferred stock-
$6.34 per share
Common stock-
$.69 share
Net change in unrealized
loss on securities
available for sale,
net of taxes of
$1,860,514
Redemption of preferred
stock (4,000) (400,000)
Balances,
December 31, 1995 20,000 $2,000,000 1,250,897 $1,250,897
See notes to consolidated financial statements.
Consolidated Statement of Changes in Shareholders' Equity
Net
Unrealized
Gain (Loss)
On Securities
Paid-In Retained Available For
Capital Earnings Sale Total
Balances, January 1,
1993 $8,099,038 $11,110,504 $23,347,120
Net income for 1993 2,921,555 2,921,555
Cash dividends
Preferred stock-
$6.34 per share (185,445) (185,445)
Common stock-
$.51 per share (580,165) (580,165)
Redemption of preferred
stock (300,000)
Balances, December 31,
1993 8,099,038 13,266,449 25,203,065
Net income for 1994 2,870,351 2,870,351
Cash dividends
Preferred stock-
$6.34 per share (156,915) (156,915)
Common stock-
$.60 share (682,546) (682,546)
10% stock dividend 2,578,007 (2,691,326)
Adjustment for cash paid
in lieu of issuing
fractional shares (10,424) (10,424)
Cumulative effect of
change in method of
accounting for
securities, net of
taxes of $555,129 $846,177 846,177
Net change in unrealized
loss on securities
available for sale, net
of taxes of $2,287,561 (3,487,650) (3,487,650)
Redemption of preferred
stock (300,000)
Balances, December 31,
1994 10,677,045 12,595,589 (2,641,473) 24,282,058
Net income for 1995 2,529,392 2,529,392
Cash dividends
Preferred stock-
$6.34 per share (139,480) (139,480)
Common stock-
$.69 share (863,119) (863,119)
Net change in unrealized
loss on securities
available for sale, net
of taxes of $1,860,514 2,836,568 2,836,568
Redemption of preferred
stock (400,000)
Balances, December 31,
1995 $10,677,045 $14,122,382 $195,095 $28,245,419
See notes to consolidated financial statements.
Consolidated Statement of Cash Flows
Year Ended December 31 1995 1994 1993
Operating Activities
Net income $ 2,529,392 $ 2,870,351 $ 2,921,555
Adjustments to reconcile net
income to net cash provided by
operating activities
Provision for loan losses 30,000 115,000 357,000
Depreciation and amortization 623,686 621,777 710,620
Deferred income tax (60,950) (158,955) (511,761)
Securities amortization, net 105,445 128,563 119,710
Amortization of fair value
adjustments on loans and deposits 81,544 (34,768) (182,942)
Amortization of core deposit
intangibles 40,468 45,527 53,854
Securities (gains) losses (16,296) 154,297 (15,192)
Net change in
Income receivable (78,370) 68,069 524,479
Interest payable 524,295 52,213 (32,175)
Gain on sale of branches (1,228,751)
Other adjustments 44,534 152,967 410,832
Net cash provided by operating
activities 3,823,748 2,786,290 4,355,980
Investing Activities
Net change in short-term
investments (4,952,843) 100,825 100,418
Purchases of securities available
for sale (5,738,936)(24,219,400)
Proceeds from maturities and
paydowns of securities available
for sale 11,841,444 27,871,655
Proceeds from sales of securities
available for sale 9,369,943 26,477,204
Purchases of securities held to
maturity (324,520) (2,429,679) (58,876,397)
Proceeds from maturities and
paydowns of securities held to
maturity 752,427 791,211 61,756,230
Proceeds from sales of securities
held to maturity 2,279,420
Net change in loans (6,833,403) (2,475,422) (2,719,668)
Purchases of premises and
equipment (1,195,505) (454,942) (372,033)
Proceeds from sale of other real
estate 63,177 1,579,817 1,260,253
Net cash and cash equivalents paid
in branch sales (9,019,963)
Other investing activities 10,000 17,573 (26,953)
Net cash provided by investing
activities 2,991,784 18,238,879 3,401,270
Financing Activities
Net change in
Noninterest-bearing, NOW, money
market and savings deposits (3,040,069) (7,872,722) (2,945,321)
Certificates of deposit 4,036,023 (16,212,020) (10,682,445)
Short-term borrowings 439,426 2,331,938 (826,000)
Repayment of long-term debt (1,500,000) (1,875,000) (1,270,000)
FHLB advances 5,190,000
Repayment of FHLB advances (3,190,000)
Cash dividends (1,002,599) (839,461) (765,610)
Redemption of preferred stock (400,000) (300,000) (300,000)
Other financing activities (10,424)
Net cash provided (used) by
financing activities 532,781 (24,777,689) (16,789,376)
Net Increase (Decrease) in Cash and
Cash Equivalents 7,348,313 (3,752,520) (9,032,126)
Cash and Cash Equivalents, Beginning
of Year 11,580,621 15,333,141 24,365,267
Cash and Cash Equivalents, End of
Year $18,928,934 $11,580,621 $15,333,141
Additional Cash Flows Information
Interest paid $11,327,351 $10,931,300 $12,377,300
Income tax paid 1,943,281 1,628,500 1,568,800
See notes to consolidated financial statements.
Notes to Consolidated Financial Statements
(Table Dollar Amounts in Thousands)
NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accounting and reporting policies of Indiana United Bancorp ("Company"), and
its wholly owned subsidiaries, ("Banks"), conform to generally accepted
accounting principles and reporting practices followed by the banking
industry. The more significant of the policies are described below.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the amounts reported in the financial statements and accompanying
notes. Actual results could differ from those estimates.
The Company is a bank holding company whose principal activity is the
ownership and management of the Banks. Union Bank and Trust Company of
Indiana ("Union Bank") headquartered in Greensburg, Indiana operates under a
state charter and is subject to regulation by the Indiana Department of
Financial Institutions and the Federal Deposit Insurance Corporation
("FDIC"). Regional Federal Savings Bank ("Regional Bank"), headquartered in
New Albany, Indiana is a federally-chartered thrift and is subject to
regulation by the Office of Thrift Supervision and the FDIC.
The Banks generate commercial, mortgage and consumer loans and receive
deposits from customers located primarily in Decatur, Floyd and Jay Counties,
Indiana, and surrounding counties. The Banks' loans are generally secured by
specific items of collateral including real property, consumer assets and
business assets. Although the Banks have diversified loan portfolios, a
substantial portion of their debtors' ability to honor their contracts is
dependent upon economic conditions in the agricultural industry.
Consolidation-The consolidated financial statements include the accounts of
the Company and the Banks after elimination of all material intercompany
transactions and accounts.
Investment Securities-The Company adopted Statement of Financial Accounting
Standards ("SFAS") No. 115, Accounting For Certain Investments in Debt and
Equity Securities, on January 1, 1994.
Debt securities are classified as held to maturity ("HTM") when the Company
has the positive intent and ability to hold the securities to maturity.
Securities HTM are carried at amortized cost.
Debt securities not classified as HTM are classified as available for sale
("AFG"). Securities AFS are carried at fair value with unrealized gains and
losses reported separately through shareholders' equity, net of tax.
Notes to Consolidated Financial Statements
(Table Dollar Amounts in Thousands)
Amortization of premiums and accretion of discounts are recorded as interest
income from securities. Realized gains and losses are recorded as net
security gains (losses). Gains and losses on sales of securities are
determined on the specific-identification method.
At January 1, 1994, investment securities with an approximate carrying value
of $125,081,000 were reclassified as AFS. This reclassification resulted in
an increase in total shareholders' equity, net of tax, of $846,177.
Prior to the adoption of SFAS No. 115, investment securities were carried at
cost, adjusted for amortization of premiums and discounts. Realized gains
and losses on sales were included in other income. Gains and losses on the
sales of securities were determined on the specific-identification method.
Loans are carried at the principal amount outstanding. Interest income is
accrued on the principal balances of loans. Loans are placed in a nonaccrual
status when the collection of interest becomes doubtful. Interest income
previously accrued but not deemed collectible is reversed and charged against
current income. Interest on these loans is then recognized as income when
collected. Certain loan fees and direct costs are being deferred and
amortized as an adjustment of yield on the loans.
Provision for loan losses and the adequacy of the allowance for loan losses are
based on management's continuing review and evaluation of the loan portfolio,
current economic conditions, past loss experience and other pertinent
factors. Impaired loans are measured by the present value of expected cash
flows, or the fair value of the collateral of the loan, if collateral
dependent.
The determination of the adequacy of the allowance for loan losses is based on
estimates that are particularly susceptible to significant changes in the
economic environment and market conditions. Management believes that as of
December 31, 1995, the allowance for loan losses is adequate based on
information currently available. A worsening or protracted economic decline
in the area within which the Company operates would increase the likelihood
of additional losses due to credit and market risks and could create the need
for additional loss reserves.
Premises and equipment are carried at cost net of accumulated depreciation.
Depreciation is computed using the straight-line method for premises and the
declining-balance method for equipment based principally on the estimated
useful lives of the assets. Maintenance and repairs are expensed as incurred
while major additions and improvements are capitalized. Gains and losses on
dispositions are included in current operations.
Federal Home Loan Bank stock is a required investment for institutions that are
members of the Federal Home Loan Bank ("FHLB") system. The required
investment in the common stock is based on a predetermined formula.
Core deposit intangibles resulting from the value of the future stream of income
allocated to customer deposits acquired in acquisitions is being amortized
over a period of 15 years using accelerated methods.
Notes to Consolidated Financial Statements
(Table Dollar Amounts in Thousands)
Advertising costs are expensed as incurred.
Income tax in the consolidated statement of income includes deferred income tax
provisions or benefits for all significant temporary differences in
recognizing income and expenses for financial reporting and income tax
purposes. The Company files consolidated income tax returns with its
subsidiaries.
Earnings per share have been computed based upon the weighted average common
shares and common equivalent shares outstanding during each year, after
retroactive adjustment for the 10% stock dividend in 1994.
RESTRICTION ON CASH AND DUE FROM BANKS
The Banks are required to maintain reserve funds in cash and/or on deposit
with the Federal Reserve Bank. The reserve required at December 31, 1995,
was $1,313,000.
INVESTMENT SECURITIES
December 31, 1995
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
Available for sale
U.S. Treasury $ 3,016 $ 12 $ 10 $3,018
Federal agencies 12,257 259 104 12,412
State and municipal 3,955 80 1 4,034
Mortgage-backed securities 60,610 582 425 60,767
Corporate obligations 480 60 420
Total investment
securities $80,318 $933 $600 $80,651
December 31, 1994
Available for sale
U.S. Treasury $3,221 $ 138 $ 3,083
Federal agencies 9,921 $ 6 629 9,298
State and municipal 2,064 11 15 2,060
Mortgage-backed securities 70,281 35 3,421 66,895
Corporate obligations 2,590 2 89 2,503
Total available for sale 88,077 54 4,292 83,839
Held to maturity
Federal agencies 1,100 32 1,068
State and municipal 3,012 76 2,936
Mortgage-backed securities 4,003 307 3,696
Total held to maturity 8,115 415 7,700
Total investment
securities $96,192 $54 $4,707 $91,539
Notes to Consolidated Financial Statements
(Table Dollar Amounts in Thousands)
The amortized cost and fair value of securities AFS at December 31, 1995 by
contractual maturity, are shown below. Expected maturities will differ from
contractual maturities because issuers may have the right to call or prepay
obligations with or without call or prepayment penalties.
Maturity Distribution at December 31
Amortized Fair
Cost Value
Within one year $ 5,771 $ 5,741
Two through five years 9,920 9,877
Six through ten years 3,213 3,506
After ten years 804 760
19,708 19,884
Mortgage-backed securities 60,610 60,767
Totals $80,318 $80,651
Securities with a carrying value of $23,621,600 and $25,552,000 were pledged at
December 31, 1995 and 1994 to secure certain deposits and for other purposes as
permitted or required by law.
On November 29, 1995, the Company transferred certain securities from held to
maturity to available for sale in accordance with a transition
reclassification allowed by the Financial Accounting Standards Board. Such
securities had a carrying value of $7,794,116 and a fair value of $7,906,261.
Proceeds from sales of securities available for sale during 1995 and 1994
were $9,369,943 and $26,477,204. Gross gains of $160,945 and $71,348 and
gross losses of $144,649 and $225,645 were realized on those sales in 1995
and 1994, respectively.
Proceeds from sales of securities HTM during 1993 were $2,279,420. Gross
gains of $15,192 were realized on those sales.
The tax expense (benefit) for gains (losses) on security transactions for
each of the three years in the period ended December 31, 1995 was $6,400,
$(61,100) and $6,100.
LOANS AND ALLOWANCE
December 31 1995 1994
Commercial and industrial loans $ 7,796 $ 7,595
Agricultural production financing 9,996 7,859
Farm real estate 28,910 28,358
Commercial real estate 24,129 25,619
Residential real estate 103,239 101,455
Construction and development 6,863 7,161
Consumer 18,342 13,870
Government guaranteed loans 2,080 2,819
Total loans $201,355 $194,736
Notes to Consolidated Financial Statements
(Table Dollar Amounts in Thousands)
December 31 1995 1994 1993
Allowance for loan losses
Balances, January 1 $2,784 $2,682 $2,686
Provision for losses 30 115 357
Recoveries on loans 100 79 84
Loans charged off (160) (92) (445)
Balances, December 31 $2,754 $2,784 $2,682
The Company adopted SFAS No. 114 and No. 118, Accounting by Creditors for
Impairment of a Loan and Accounting by Creditors for Impairment of a Loan -
Income Recognition and Disclosures, on January 1, 1995. Impaired loans are
measured by the present value of expected future cash flows, or the fair
value of the collateral of the loan, if collateral dependent. The amount of
impaired loans at December 31, 1995 was not material. Underperforming loans,
other than impaired, consisting primarily of nonaccrual loans were
$1,603,000, $1,143,000 and $1,224,000 at December 31, 1995, 1994 and 1993,
respectively.
The Banks have entered into transactions with certain directors, executive
officers, significant shareholders and their affiliates or associates
(related parties). Such transactions were made in the ordinary course of
business on substantially the same terms and conditions, including interest
rates and collateral, as those prevailing at the same time for comparable
transactions with other customers, and did not, in the opinion of management,
involve more than normal credit risk or present other unfavorable features.
The aggregate amount of loans, as defined, to such related parties was as
follows:
1995 1994
Balances, January 1 $5,124 $5,805
Changes in composition of related parties (399) 1,174
New loans, including renewals 2,382 1,276
Payments, etc., including renewals (1,166) (3,131)
Balances, December 31 $5,941 $5,124
Notes to Consolidated Financial Statements
(Table Dollar Amounts in Thousands)
PREMISES AND EQUIPMENT
December 31 1995 1994
Land $ 909 $ 720
Buildings 7,054 6,516
Equipment 4,720 4,422
Total cost 12,683 11,658
Accumulated depreciation (6,658) (6,198)
Net $6,025 $5,460
DEPOSITS
December 31 1995 1994
Noninterest bearing $ 30,335 $ 28,360
Interest-bearing demand 64,649 74,635
Savings deposits 28,828 23,857
Certificates and other time
deposits of $100,000 or more 23,512 16,420
Other certificates and time
deposits 115,022 118,099
Total deposits $262,346 $261,371
Certificates maturing in years ending after December 31, 1995:
1996 $ 87,655
1997 25,046
1998 15,957
1999 4,907
2000 4,131
Thereafter 838
$138,534
Notes to Consolidated Financial Statements
(Table Dollar Amounts in Thousands)
SHORT-TERM BORROWINGS
December 31 1995 1994
FHLB advances $ 2,000
Securities sold under repurchase agreements 10,735 $ 9,977
U. S. Treasury demand notes 505 824
Total short-term borrowings $13,240 $10,801
Securities sold under agreement to repurchase consist of obligations of the
Company to other parties. The obligations are secured by U. S. Treasury
securities and Federal agencies, and such collateral is held by a safekeeping
agent. The following table summarizes certain information on these
repurchase agreements.
As of and for the Year Ended December 31 1995 1994
Book value $10,735 $ 9,977
Collateral amortized cost 20,494 22,529
Collateral market value 20,761 21,504
Average balance of agreements during year 10,270 9,832
Highest month-end balance during year 15,174 16,384
Interest payable at end of year 19 21
Weighted average interest rate at end of year 5.19% 5.39%
The Company has a FHLB advance of $2,000,000 outstanding at December 31,
1995. The advance is due March 20, 1996 with interest payable monthly at a
rate of 5.841%. The FHLB advance is secured by first-mortgage loans. The
advance is subject to restrictions or penalties in the event of prepayment.
LONG-TERM DEBT
Long-term debt at December 31, 1995 consisted of a $6,000,000 secured term loan.
In January, 1992, the Company converted a line of credit to an $11,200,000
six-year secured term loan. Interest is payable quarterly and was at the
lender's base rate through June 30, 1995. Commencing July 1, 1995, the
interest rate converted to the lender's base rate, less .25%. Principal
payments are due semiannually. The loan is secured by all Bank stock and the
loan agreement contains restrictions on debt, guarantees and mergers, in
addition to other affirmative and negative covenants.
Annual principal payment requirements are $750,000 in 1996 and $5,250,000 in
1997.
Notes to Consolidated Financial Statements
(Table Dollar Amounts in Thousands)
INCOME TAX
Year Ended December 31 1995 1994 1993
Income tax expense
Currently payable
Federal $1,317 $1,560 $1,127
State 395 463 372
1,712 2,023 1,499
Deferred
Federal (50) (128) (49)
State (11) (31) (12)
Total income tax expense $1,651 $1,864 $1,438
Year Ended December 31 1995 1994 1993
Reconciliation of federal
statutory to actual tax expense
Federal statutory income
tax at 34% $1,421 $1,610 $1,329
Tax exempt interest (63) (77) (102)
Effect of state income taxes 253 285 238
Other 40 46 (27)
$1,651 $1,864 $1,438
A cumulative net deferred tax liability is included in other liabilities at
December 31, 1995, and a cumulative net deferred tax asset is included in
other assets at December 31, 1994. The components of the asset (liability)
are as follows:
December 31 1995 1994
Differences in accounting for loans $(263) $(301)
Differences in accounting for securities (49) (62)
Differences in accounting for premises and equipment (730) (786)
Differences in depreciation methods (160) (130)
Differences in accounting for loan losses 506 497
Differences in accounting for securities available
for sale (138) 1,712
State income tax 13 15
Other (11) 12
$(832) $957
Assets $519 $2,236
Liabilities (1,351) (1,279)
$(832) $ 957
During 1993, the Company adopted SFAS No. 109, Accounting for Income Taxes.
As a result, the beginning deferred tax liability was reduced by $450,000,
which is reported as the cumulative effect of a change in accounting method.
Notes to Consolidated Financial Statements
(Table Dollar Amounts in Thousands)
COMMITMENTS AND CONTINGENT LIABILITIES
In the normal course of business there are outstanding commitments and
contingent liabilities, such as commitments to extend credit and standby
letters of credit, which are not included in the accompanying financial
statements. The Banks' exposure to credit loss in the event of
nonperformance by the other party to the financial instruments for
commitments to extend credit and standby letters of credit is represented by
the contractual or notional amount of those instruments. The Banks use the
same credit policies in making such commitments as they do for instruments that
are included in the consolidated balance sheet.
Financial instruments whose contract amount represents credit risk as of
December 31 were as follows:
1995 1994
Commitments to extend credit $21,097 $20,380
Standby letters of credit 155 61
Commitments to extend credit are agreements to lend to a customer as long as
there is no violation of any condition established in the contract.
Commitments generally have fixed expiration dates or other termination
clauses and may require payment of a fee. Since many of the commitments are
expected to expire without being drawn upon, the total commitment amounts do
not necessarily represent future cash requirements. Collateral held varies
but may include accounts receivable, inventory, property and equipment, and
income-producing commercial properties. Standby letters of credit are
conditional commitments issued by the Banks to guarantee the performance of a
customer to a third party.
The Company and Banks may from time to time to be subject to claims and lawsuits
which arise primarily in the ordinary course of business. Management is
presently not aware of any such claims.
The deposits of Regional Bank are insured by the Savings Association Insurance
Fund ("SAIF") which, together with the Bank Insurance Fund ("BIF"), is
administered by the FDIC. SAIF members are presently subject to substantially
higher deposit insurance premiums because SAIF has not yet achieved its
required level of reserves. A proposed SAIF recapitalization plan provides
for a special assessment of approximately .85% of deposits on all SAIF-
insured institutions to enable SAIF to achieve its required level of
reserves. Based on Regional Bank's deposits as of March 31, 1995, as originally
proposed, this assessment equates to approximately $700,000 before taxes.
Accordingly, this special assessment would significantly increase non-
interest expense and adversely affect the Company's results of operations.
Conversely, assuming continuation of Regional Bank's present capital ratio
and most recent supervisory rating, and assuming the insurance premium for
BIF and SAIF members again equalize, future deposit insurance premiums are
expected to decrease and significantly reduce future period non-interest
expenses.
Notes to Consolidated Financial Statements
(Table Dollar Amounts in Thousands)
PREFERRED SHARES
In 1987, the Company issued 30,000 shares of no-par value, $100 stated value,
preferred stock whose holders are entitled to receive preferential and
cumulative quarterly dividends at an annual rate that provides an assumed
corporate shareholder an after-tax return of 5.7%. For 1993 through 1995,
cash dividends were paid at the rate of 6.34% per annum. The shares are
entitled to a preference in liquidation in the amount of $100 per share plus
accrued and unpaid dividends, but are not entitled to vote except upon the
occurrence of certain specified events.
The Company has the right to redeem the preferred shares at any time in the
amount of $100 per share plus accrued and unpaid dividends. The preferred
shares are convertible into common stock, but not redeemable, at the holder's
option if the Company has not redeemed them within 10 years from the date of
their issuance, or upon the occurrence of certain other specified events.
The preferred shares are convertible at 115% of the net book value per common
share at the date of conversion. The Company redeemed 4,000 shares of
preferred stock in 1995 and 3,000 shares in each 1994 and in 1993. The total
redemption price was $400,000 in 1995, $300,000 in 1994 and $300,000 in 1993.
The Company's Articles of Incorporation permit the board of directors,
without further shareholder approval, to establish the relative rights,
designations, preferences and limitations or restrictions of the Company's
preferred stock prior to the issuance thereof.
RESTRICITONS ON DIVIDENDS
Without prior approval, Union Bank is restricted by Indiana law and
regulations of the Department of Financial Institutions, State of Indiana,
and the FDIC as to the maximum amount of dividends they can pay to the parent
to the balance of the undivided profits account, adjusted for defined bad
debts and subject to capital maintenance requirements.
The Office of Thrift Supervision ("OTS") regulations provide that a savings
bank which meets fully phased-in 1994 capital requirements and is subjected
only to "normal supervision", such as Regional Bank, may pay out 100% of net
income to date over the calendar year and 50% surplus capital existing at the
beginning of the calendar year without supervisory approval, but with 30 days
prior notice to OTS.
At December 31, 1995, total shareholder's equity of Banks was $32,325,000 of
which $20,872,000 was restricted from dividend distribution to the Company.
As a practical matter, the Banks restrict dividends to a lesser amount
because of the need to maintain an adequate capital structure.
Notes to Consolidated Financial Statements
(Table Dollar Amounts in Thousands)
LOAN SERVICING
Mortgage loans serviced for others are not included in the accompanying
financial statements. The unpaid balances of these loans consist of the
following:
December 31 1995 1994
Mortgage loan portfolios serviced for
FHLMC $ 851 $ 984
FNMA 1,451 1,753
$2,302 $2,737
EMPLOYEE BENEFITS
The Company has a defined-contribution retirement plan in which substantially
all employees may participate. The Company matched employees' contributions
at the rate of $.65 for 1995, and $.60 for 1994 and 1993 for each dollar
contributed.
In addition, the Company contributed 6.5% of total compensation plus an
additional 5.7% of each participant's compensation in excess of $61,200 in
1995, $60,600 in 1994 and $57,600 in 1993. Expense for the plan was $295,862
in 1995, $273,053 in 1994, and $266,709 in 1993.
The Company has determined it has no material postretirement benefit liability.
FAIR VALUES OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used to estimate the fair value of
each class of financial instrument:
Cash and Cash Equivalents-The fair value of cash and cash equivalents
approximates carrying value.
Short-term Investments-The fair value of short-term investments approximates
carrying value.
Securities-Fair values are based on quoted market prices.
Loans-For both short-term loans and variable-rate loans that reprice
frequently and with no significant change in credit risk, fair values are
based on carrying values. The fair value for other loans are estimated using
discounted cash flow analyses, using interest rates currently being offered
for loans with similar terms to borrowers of similar credit quality.
Income Receivable/Interest Payable-The fair value of these amounts approximates
carrying values.
Notes to Consolidated Financial Statements
(Table Dollar Amounts in Thousands)
FHLB Stock-Fair value of FHLB stock is based on the price at which it may be
resold to the FHLB.
Deposits-The fair values of noninterest-bearing, interest-bearing demand, and
savings accounts are equal to the amount payable on demand at the balance
sheet date. The carrying amounts for variable rate, fixed-term certificates
of deposit approximate their fair values at the balance sheet date. Fair
values for fixed-rate certificates of deposit are estimated using a
discounted cash flow calculation that applies interest rates currently being
offered on certificates to a schedule of aggregated expected monthly
maturities on such time deposits.
Short-term Borrowings-The interest rates for short-term borrowings
approximate market rates, thus the fair value approximates carrying value.
Long-term Debt-Long-term debt consists of an adjustable instrument tied to a
variable market interest rate. Fair value approximates carrying value.
The estimated fair values of the Company's financial instruments are as follows:
1995 1994
Carrying Fair Carrying Fair
Amount Value Amount Value
Assets
Cash and cash equivalents $18,929 $18,929 $11,581 $11,581
Short-term investments 5,100 5,100 147 147
Securities available for sale 80,651 80,651 83,839 83,839
Securities held to maturity 8,115 7,700
Loans, net 198,600 199,316 191,952 191,602
Stock in FHLB 1,138 1,138 1,138 1,138
Income receivable 1,974 1,974 1,896 1,896
Liabilities
Deposits 262,346 262,831 261,371 257,391
Borrowings
Short-term 13,240 13,240 10,801 10,801
Long-term 6,000 6,000 7,500 7,500
Interest payable 1,389 1,389 864 864
OTHER MATTERS
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. All customer services continue in both
markets, while streamlining back-room operations is expected to maximize
internal efficiencies.
In October, 1994, the Company sold three underperforming branches of Regional
Bank including loans, deposits and fixed assets in order to concentrate
Regional Bank's resources in its primary market area. The sale resulted in a
gain of $1,228,751 which is shown separately in the consolidated statement of
income.
Notes to Consolidated Financial Statements
(Table Dollar Amounts in Thousands)
CONDENSED FINANCIAL INFORMATION
(Parent Company Only)
Presented below is condensed financial information as to financial position,
results of operations and cash flows of the Company:
Condensed Balance Sheet
December 31 1995 1994
Assets
Cash on deposit and repurchase agreements $ 1,940 $ 1,607
Investment in subsidiaries 32,325 30,161
Other assets 128 118
Total assets $34,393 $31,886
Liabilities
Long-term debt $ 6,000 $ 7,500
Other liabilities 148 104
Total liabilities 6,148 7,604
Shareholders' Equity 28,245 24,282
Total liabilities and shareholders'
equity $34,393 $31,886
Condensed Statement of Income
Year Ended December 31 1995 1994 1993
Income
Dividends from subsidiaries $4,000 $2,425 $3,800
Fees from subsidiaries 55 88 340
Other income 73 77 85
Total income 4,128 2,590 4,225
Expenses
Interest expense 612 631 620
Salaries and benefits 506 413 454
Professional fees 84 117 100
Other expenses 236 210 248
Total expenses 1,438 1,371 1,422
Income before income tax and
equity in undistributed
Income of subsidiaries 2,690 1,219 2,803
Income tax benefit 511 463 388
Income before equity in
undistributed income of
subsidiaries 3,201 1,682 3,191
Equity in undistributed
income of subsidiaries (672) 1,188 (269)
Net Income $2,529 $2,870 $2,922
Notes to Consolidated Financial Statements
(Table Dollar Amounts in Thousands)
Condensed Statement of Cash Flows
Year Ended December 31 1995 1994 1993
Operating Activities
Net income $2,529 $2,870 $2,922
(Undistributed) income of subsidiaries 672 (1,188) 269
Other adjustments 52 13 (15)
Net cash provided by operating activities 3,253 1,695 3,176
Investing Activities
Purchase of equipment (17) (34) (15)
Proceeds from sale of equipment 18
Net cash used by investing activities (17) (16) (15)
Financing Activities
Payments on long-term debt (1,500) (1,800) (1,200)
Cash dividends (1,003) (839) (765)
Redemption of preferred stock (400) (300) (300)
Other financing activities (10)
Net cash used by financing activities (2,903) (2,949) (2,265)
Net Increase (Decrease) in Cash and Cash
Equivalents 333 (1,270) 896
Cash on Deposit and Repurchase Agreements,
Beginning of Year 1,607 2,877 1,981
Cash on Deposit and Repurchase Agreements,
End of Year $1,940 $1,607 $2,877
Indiana United Bancorp Directory
Directors
William G. Barron
Chariman and president
Barron Homes, Inc.
Philip A. Frantz
Attorney; Partner
Coldren and Frantz
Glenn D. Higdon
President
Marlin Enterprises, Inc.
Robert E. Hoptry
Chairman and President
Indiana United Bancorp
Martin G. Wilson
Farmer
Edward J. Zoeller
President
E.M. Cummings Veneer
Officers
Robert E. hoptry
Chairman and President
Daryl R. Tressler
Vice President
Michael K. Bauer
Vice President
Sue Fawbush
Vice President and Secretary
Jay B. Fager
Treasurer and Chief Financial
Officer
Dennis M. Flack
Vice PResident, Director of
Marketing and Training
Dawn M. Schwering
Marketing Coordinator
Suzanne Kendall
Auditor
Subsidiaries Directory
Union Bank and Trust Company
Directors
William G. Barron
Chairman and President
Barron Homes, Inc.
Philip A. Frantz
Attorney; Partner
Coldren and Frantz
Robert E. Hoptry
Chairman and President
Indiana United Bancorp
Lawrence R. Rueff, D.V.M.
Veterinarian
Daryl R. Tressler
Chairman and President
Union Bank and Trust Company
John G. Young
Chairman and Chief Executive Officer
Jay Garment Co.
Executive Administration
Daryl R. Tressler
Chairman and President
Division Managers
W. Brent Hoptry
Senior Vice PResident
Lending Division
Glenn R. Raver
Senior Vice President
Retail Services and Operations Divisions
Dee M. Knueven
Senior Insurance Officer and Manager
Insurance Division
Daniel F. Anderson
Senior Trust Officer
Trust Division
James L. Green
Controller
Financial Planning and Controll
Regional Federal Savings Bank
Directors
William G. Barron
Chairman and President
Barron Homes, Inc.
Michael K. Bauer
President and Chief Executive Officer
Regional Federal Savings Bank
Robert E. Hoptry
Chairman and President
Indiana United Bancorp
Michael J. Kapfhammer
President
Buckhead Grill
Charles E. MacGregor
Attorney
Wyatt, Tarrant, Combs and Orbison
Marvin L. Slung
Sales Representative
Jeb Advertising
Edward J. Zoeller
President
E.M. Cummings Veneer
Executive Administration
Michael K. Bauer
President and Chief Executive Officer
Robert E. Hoptry
Chairman
Division Managers
Dennis R. Morrison
Senior Vice President
Lending Division
Carmen L. Glenn
Vice President and Treasurer
Financial Planning and Operations
Division
Michael P. Kempf
Vice President
Wholesale Banking Division
James S. Honour, Jr.
Vice President
Retail Services Division
Indiana United Bancorp Board of Directors
(picture) (picture) (picture)
William G. Barron Philip A. Frantz Glenn D. Higdon
(picture) (picture) (picture)
Robert E. Hoptry Martin G. Wilson Edward J. Zoeller
Shareholder Information
Annual Meeting
Tuesday, May 21, 1996, 10:00 AM
Conference Center, Second Floor
Union Bank and Trust Company
201 N. Broadway Street
Greensburg, Indiana 47240
Corporate Address
Indiana United Bancorp
201 N. Broadway Street
Post Office Box 87
Greensburg, Indiana 47240
Form 10-K
Copies of the Company's 1995 Form 10-K filed with
the Securities and Exchange Commission are available
without charge to all shareholders upon request. Please
direct requests to Jay B. Fager, Treasurer and Chief
Financial Officer.
Transfer Agent
Securities Transfer Department
Mid America Bank of Louisville
Post Office Box 1497
Louisville, Kentucky 40201-1497
(800)925-0810
Common Shares
The common shares of the Company are listed on the
NASDAQ National Market System. In newspaper listings.
Company shares are frequently listed as IndUtd.
The trading symbol is IUBC.
Market Makers
Market Makers in the Company's common stock
include:
J.J.B. Hilliard/W.L. Lyons, Inc.
NatCity Investments, Inc.
The range of known per share prices by calendar quarter,
based on actual transactions, excluding commissions, is shown below.
1995 Q4 Q3 Q2 Q1
High 28 27 1/2 23 23
Low 25 19 1/2 20 19 1/2
Last Sale 25 27 20 1/2 22 1/2
1994
High 22 3/4 21 7/8 22 1/2 23
Low 19 1/8 20 19 3/4 21 7/8
Last Sale 21 21 7/8 20 23