Report To Shareholders - First Quarter, 1997
Our first quarter performance greatly exceeded the first
quarter of 1996 and provides a solid foundation for a
successful year. Improvement was achieved in every material
segment of the balance sheet and income statement. Net
income of $891,833 was $194,949 or 28% above first quarter,
1996. Earnings per share of $.71 were 31.5% above the
similar 1996 period. The quarterly dividend increased to
$.23 per share, and was $.03 or 15% above first quarter,
1996.
In mid-1995, we launched a strategy to diversify our loan
portfolio by focusing on the expansion of
consumer loan totals. This strategy has been quite
successful. During the last twelve months, consumer loans
have grown by 70% and now total more than $32 million.
Consumer loans now comprise 14.0% of total loans versus 9.5%
when our strategy was initiated. Commercial loans have also
experienced above average growth, increasing 15% since March
31, 1996. Total loans as a percentage of deposits now equal
83.6%, compared to 78.1% a year ago.
This excellent loan growth has not compromised our historic
high asset quality standards. Over the past twelve months,
non-performing loans declined 75%, from $1,301,000 to
$320,000 and equalled only .14% of total loans on March 31,
1997. Net loan losses during the first quarter totalled
only .02% of total loans and the loan loss reserve equalled
779% of non-performing loans. Each of these asset quality
measurements are significantly superior to latest available
peer averages. We are very pleased with this high quality
loan growth and expect continued growth throughout 1997.
Our net interest margin rose 13 basis points from March 31,
1996 and 31 basis points over the March 1995 level. Non-
interest income increased 20%, helped by gains in service
charge income. Non-interest expense increased less than 1%,
with reductions in deposit insurance premiums offsetting
normal operating cost increases.
During the first quarter, Indiana United initiated an
automatic dividend reinvestment plan. I am pleased to
report 485 shareholders, representing 237,000 shares,
participated in the plan in time to include the first
quarter dividend. This initial response exceeded our
expectations of first quarter enrollment and confirms this
plan is truly a "value added" shareholder service.
Shortly before the end of the first quarter, the Federal
Reserve Board ("FRB") increased the short-term borrowing
rate to banks by 25 basis points, and this increase is
already beginning to impact the cost of borrowing by
individuals and businesses across the nation. It appears
likely that the FRB will consider one or more additional
rate hikes over the coming months. These actions are
intended to slow growth in an economy the FRB views as
becoming overstimulated. In such event, growth will
probably slow somewhat at Indiana United and other banking
organizations. Even so, Indiana United is well positioned
to absorb the impact of such actions by the FRB, and we do
not now foresee any likely circumstances which would impair
our ability to attain improved earnings in 1997, compared to
1996 results.
We continually seek to enhance shareholder value and we
sincerely appreciate your support.
Thank you for sharing our confidence in the future of
Indiana United.
Robert E. Hoptry
Chairman and President
Financial Highlights - First Quarter 1997
(in thousands, except per share data)
Three Months Ended
March 31
Percent
1997 1996 Change
ENDING BALANCE SHEET DATA
Total Assets $329,226 $303,285 8.6%
Total Loans 228,575 199,787 14.4
Total Deposits 278,398 255,819 8.8
Total Common Equity 28,100 26,404 6.4
AVERAGE BALANCE SHEET DATA
Total Assets $326,166 $306,309 6.5%
Total Loans 223,710 200,427 11.6
Total Deposits 275,323 255,628 7.7
Total Common Equity 27,908 26,365 5.9
EARNINGS
Net Income $891,833 $696,884 28.0%
Net Income Per Share 0.71 0.54 31.5
Dividends Paid Per Share 0.23 0.20 15.0
KEY RATIOS
Return on average equity 12.96% 10.23%
Return on average assets 1.11 0.92
Net Interest Margin 4.09 3.96
Efficiency Ratio 57.09 62.94
SHARE DATA
Book Value Per Share $22.46 $21.11 6.4%
Closing Market Price 33.25 24.25 37.1
Common Shares Outstanding 1,250,897 1,250,897
SHAREHOLDER INFORMATION
The common shares of the Company are listed on the NASDAQ National Market
System under the symbol IUBC. In newspaper listings, the Company's shares
are frequently listed under IndUtd.
Graphs
Year Percent
Return on Average Common Equity (%) 1995 9.19
1996 10.23
1997 12.96
Return on Average Assets (%) 1995 0.74
1996 0.92
1997 1.11
Net Interest Margin (%) 1995 3.78
1996 3.96
1997 4.09
Efficiency Ratio (%) 1995 70.32
1996 62.94
1997 57.09
Primary market makers are: The Company's Transfer Agentis:
J.J.B. Hilliard / W.L. Lyons, Inc. Securities Transfer Department
NatCity Investments, Inc. Mid America Bank of Louisville
Stifel, Nicolaus & Company, Inc. P.O. Box 1497
Louisville, KY 40201-1497
(800) 925-0810