SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-----------------------
FORM 10-Q
Quarterly Report Under Section 13 or 15 (d)
of the Securities Exchange Act of 1934
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For Quarterly Period Ended Commission File Number
March 31, 1996 0-17379
INDIANA FEDERAL CORPORATION
---------------------------
(Exact name of registrant as specified in its charter)
Delaware 35-1735820
---------------------------- -------------------------------
(State or other jurisdiction (I.R.S. Employer Identification
of incorporation or Number)
organization)
56 Washington Street
Valparaiso, Indiana 46383
--------------------- -----------
(Address of principal (Zip Code)
executive offices)
Registrant's telephone number, including area code: (219) 462-4131
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes x No
----------- ----------
As of May 9, 1996, there were 4,737,330 outstanding shares of the
registrant's Common Stock.
INDIANA FEDERAL CORPORATION
INDEX
Page
Number
PART I. FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial
Statements (unaudited)
Condensed Consolidated Statements of
Financial Condition
March 31, 1996 and December 31, 1995 2 - 3
Condensed Consolidated Statements of Income,
Three Months Ended March 31, 1996 and 1995 4
Consolidated Statements of Cash Flow, Three Months
Ended March 31, 1996 and 1995 5 - 6
Notes to Condensed Consolidated Financial Statements 7 - 9
Item 2. Management's Discussion and Analysis
of Financial Condition and Results
of Operations 10 - 14
PART II. OTHER INFORMATION 15
SIGNATURES 16
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (UNAUDITED)
INDIANA FEDERAL CORPORATION AND SUBSIDIARIES
ASSETS
------
MARCH 31, DECEMBER 31,
1996 1995
--------------- --------------
Cash $ 16,012,288 $ 22,894,745
Interest-earning deposits in other institutions 151,444 178,207
Federal funds loaned -- 5,375,000
--------------- --------------
Total Cash and Cash Equivalents 16,163,732 28,447,952
Investment securities:
Available-for-sale 69,583,998 72,672,893
Mortgage-backed securities:
Available-for-sale 25,441,654 26,737,343
Loans receivable 532,954,625 529,348,028
Allowance for loan losses (6,640,035) (6,655,071)
--------------- --------------
Loans Receivable, Net 526,314,590 522,692,957
Loans held for sale 21,684,086 16,044,609
Real estate held for sale, acquired through foreclosure 4,213,576 4,413,617
Office properties and equipment 10,752,329 10,919,615
Federal Home Loan Bank stock 7,739,700 7,739,700
Accrued interest receivable 4,726,847 5,005,115
Goodwill and deposit base intangible 5,012,675 5,160,639
Investment in Section 42 properties 6,579,498 6,679,081
Investment in single premium life insurance policies 12,127,575 10,793,759
Other assets 7,379,667 4,025,810
--------------- --------------
TOTAL ASSETS $ 717,719,927 $ 721,333,090
=============== ==============
2
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (UNAUDITED)
INDIANA FEDERAL CORPORATION AND SUBSIDIARIES
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
MARCH 31, DECEMBER 31,
1996 1995
--------------- --------------
Deposits $ 546,879,815 $ 532,895,925
Federal Home Loan Bank advances
and other borrowings 95,014,028 114,105,475
Advance payments by borrowers for
taxes and insurance 2,814,662 1,409,051
Other liabilities 2,506,930 2,192,463
--------------- --------------
TOTAL LIABILITIES 647,215,435 650,602,914
--------------- --------------
Shareholders' Equity
Serial Preferred Stock, par value $.01
per share; authorized: 5,000,000 shares;
none issued -- --
Common Stock, par value $.01 per share;
authorized: 10,000,000 shares; issued
1996--5,840,329 shares, 1995--5,823,946 shares 58,403 58,239
Additional paid-in capital 27,524,590 27,428,077
Unrealized gain on available-for-sale securities,
net of deferred income taxes 91,412 779,343
Retained earnings 51,752,486 51,443,400
Treasury Stock, at cost
March 1996 and December 1995 - 1,103,000 shares (8,628,949) (8,628,949)
Guaranteed ESOP obligation (293,450) (349,934)
--------------- --------------
TOTAL SHAREHOLDERS' EQUITY 70,504,492 70,730,176
--------------- --------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 717,719,927 $ 721,333,090
=============== ==============
3
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
INDIANA FEDERAL CORPORATION AND SUBSIDIARIES
THREE MONTHS ENDED
MARCH 31,
1996 1995
--------------- --------------
Interest income:
Interest on loans $ 11,691,030 $ 11,264,810
Interest on mortgage-backed securities 460,958 490,202
Interest and dividends on investment securities 1,205,028 1,963,190
--------------- --------------
Total Interest Income 13,357,016 13,718,202
Interest expense:
Interest on deposits 5,850,772 5,328,968
Interest on FHLB advances and other borrowings 1,460,139 2,056,964
--------------- --------------
Total Interest Expense 7,310,911 7,385,932
--------------- --------------
Net Interest Income 6,046,105 6,332,270
Provision for loan losses 50,000 144,151
--------------- --------------
Net Interest Income After Provision for Loan Losses 5,996,105 6,188,119
Other income:
Commissions on sales of insurance and securities 363,450 302,155
Loss on sale of real estate owned (2,046) (2,905)
Gain (loss) on sale of mortgage loans (17,670) 5,313
Loss on valuation of mortgage loans (195,071) --
Loss on sale of securities (20,313) (384,311)
Customer service fees 376,533 338,090
Other 544,651 350,419
--------------- --------------
Total Other Income 1,049,534 608,761
Other expenses:
Salaries and employee benefits 2,208,142 2,250,525
Net occupancy expense 381,703 377,280
Furniture and equipment expense 424,974 382,077
Federal insurance premiums 262,500 289,833
Marketing 118,510 144,924
Other general and administrative expenses 1,467,073 1,259,319
--------------- --------------
Total Other Expenses 4,862,902 4,703,958
--------------- --------------
Income Before Income Taxes 2,182,737 2,092,922
Income Tax Expense 546,100 552,070
--------------- --------------
Net Income $ 1,636,637 $ 1,540,852
=============== ==============
Amounts per common share:
Net Income $0.34 $0.32
===== =====
Cash Dividend Paid $0.28 $0.365
===== ======
4
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
INDIANA FEDERAL CORPORATION AND SUBSIDIARIES
THREE MONTHS ENDED
MARCH 31,
1996 1995
--------------- --------------
OPERATING ACTIVITIES
Net income $ 1,636,637 $ 1,540,852
Adjustments to reconcile net income to net cash
provided (used) by operating activities:
Provision for loan losses 50,000 144,151
Originations of loans held for sale (9,673,832) (2,269,496)
Cost of loans sold 4,034,355 2,276,855
Provision for depreciation and amortization 561,741 379,206
Amortization (accretion) of premiums and discounts, net (160,995) 46,615
Proceeds from sales of trading securities 4,076,563 --
Purchases of trading securities (4,096,875) --
Deferred federal income taxes (167,819) (153,196)
Decrease in interest receivable 953,897 539,265
Decrease in interest payable 33,245 56,278
Net losses on sale of securities 20,313 384,311
Net losses on sale of real estate owned 2,046 2,905
Net (gains) losses on sale and valuation of mortgage 212,741 (5,313)
Net change in other assets and liabilities (2,593,738) (2,209,121)
--------------- --------------
Net Cash Provided (Used) by Operating Activities (5,111,721) 733,312
--------------- --------------
INVESTING ACTIVITIES
Purchase of Forrest Holdings, Inc. stock (2,500,000) --
Proceeds from maturities and sales of securities
available-for-sale 6,585,000 49,581,955
Purchases of securities available-for-sale (3,475,768) (4,070,000)
Principal payments on mortgage-backed securities -- 292,220
Principal payments on mortgage-backed securities
available-for-sale 1,025,225 778,037
Purchases of loans -- (122,000)
Loan originations and principal payments on loans (3,591,250) (5,322,940)
Purchases of office properties and equipment (486,067) (366,488)
Proceeds from sale of real estate 146,695 --
Payment for purchase of NCB Corp., net -- (6,467,096)
--------------- --------------
Net Cash Provided (Used) by Investing Activities (2,296,165) 34,303,688
--------------- --------------
FINANCING ACTIVITIES
Net decrease in non-certificate accounts (1,923,053) (18,486,054)
Net increase in certificates of deposit 15,906,943 6,538,213
Proceeds from Federal Home Loan Bank advances 10,000,000 15,000,000
Repayments on Federal Home Loan Bank advances (32,626,213) (4,136,900)
Net increase (decrease) in other borrowings 3,591,250 (35,635,000)
Net increase in advance payments by borrowers
for taxes and insurance 1,405,611 1,336,351
5
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (Continued)
INDIANA FEDERAL CORPORATION AND SUBSIDIARIES
THREE MONTHS ENDED
MARCH 31,
1996 1995
--------------- -------------
FINANCING ACTIVITIES (Continued)
Cash dividends $ (1,327,550) $ (1,716,293)
Purchase of treasury stock -- (233,934)
Exercise of stock options 96,678 234,716
--------------- --------------
Net Cash Used by Financing Activities (4,876,334) (37,098,901)
--------------- --------------
Decrease in Cash and Cash Equivalents (12,284,220) (2,061,901)
Cash and Cash Equivalents at Beginning of Year 28,447,952 18,535,270
--------------- --------------
Cash and Cash Equivalents at End of Quarter $ 16,163,732 $ 16,473,369
=============== ==============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION - CASH PAID DURING THE PERIOD:
Interest:
Deposits $ 5,777,123 $ 5,230,399
Federal Home Loan Bank advances and other borrowings 1,493,384 2,115,446
--------------- --------------
$ 7,270,507 $ 7,345,845
=============== ==============
Income Taxes $ 500,000 $ 440,000
SUPPLEMENTAL DISCLOSURE OF NON-CASH
INVESTING ACTIVITY:
Loans transferred to real estate owned $ 0 $ 1,000,310
6
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
INDIANA FEDERAL CORPORATION AND SUBSIDIARIES
March 31, 1996
NOTE 1 - Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with generally accepted accounting principles
for interim financial information and with instructions to Form 10-Q and
Article 10 of regulation S-X. Accordingly, such statements do not include
all of the information and footnotes required by generally accepted
accounting principles for complete financial statements. In the opinion of
management, all adjustments (consisting of normal recurring accruals)
considered necessary for a fair presentation have been included. Operating
results for the three month period ended March 31, 1996 are not necessarily
indicative of the results that may be expected for the year ending December
31, 1996.
NOTE 2 - Earnings Per Share
Earnings per share of common stock have been determined by dividing net
income for the period by the weighted average number of shares of common
stock equivalents outstanding. Common stock options in the calculation
assumes purchase of treasury stock with the option proceeds at the average
market price for the period (when dilutive).
NOTE 3 - Reclassification
Certain amounts in the 1995 condensed consolidated financial statements have
been reclassified to conform with the 1996 presentation.
NOTE 4 - Marketable Debt and Mortgage-Backed Securities
The following is a summary of available-for-sale securities at March 31,
1996:
Gross Gross Estimated
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
-------------- ------------- -------------- --------------
Securities available-for-sale:
U.S. Government and agency securities $ 21,633,059 $ 205,675 $ (268,148) $ 21,570,586
Collateralized mortgage obligations 34,685,565 108,568 (241,439) 34,552,694
Municipal securities 1,443,955 47,134 -- 1,491,089
Corporate debt securities 12,005,090 5,019 (40,480) 11,969,629
-------------- ------------- ------------- --------------
Total investment securities 69,767,669 366,396 (550,067) 69,583,998
Mortgage-backed securities 25,106,712 457,914 (122,972) 25,441,654
-------------- ------------- ------------- --------------
Total securities available-for-sale $94,874,381 $ 824,310 $ (673,039) $95,025,652
============== ============= ============= ==============
7
Securities
available-for-sale
---------------------------------
Estimated
Amortized Market
Cost Value
-------------- -------------
Due in one year or less $ 12,469,476 $ 12,525,606
Due after one year through five years 16,021,125 16,033,678
Due after five years through ten years 11,789,246 11,540,828
Due after ten years 29,487,822 29,483,886
-------------- -------------
Total investment securities 69,767,669 69,583,998
Mortgage-backed securities 25,106,712 25,441,654
-------------- -------------
Total securities $ 94,874,381 $ 95,025,652
============== =============
NOTE 5 - Accounting by Creditors for Impaired Loans
On January 1, 1995, the Corporation adopted Statement of Financial
Accounting Standards (SFAS) No. 114, "Accounting by Creditors for Impairment
of a Loan." Under the new standard, the allowance for credit losses related
to loans that are identified for evaluation in accordance with Statement 114
is based on discounted cash flows using the loan's initial effective
interest rate or the fair value of the collateral for certain collateral
dependent loans. A loan is considered impaired when a creditor will be
unable to collect all amounts due according to the contractual terms of the
loan agreement.
In accordance with Statement 114, a loan is classified as in-substance
foreclosure when the Bank has taken possession of the collateral regardless
of whether formal foreclosure proceedings take place. Loans previously
classified as in-substance foreclosure but which the Company had not taken
possession of the collateral continue to be classified as loans.
At March 31, 1996, the recorded investment in loans that are considered to
be impaired under Statement 114 was $5.7 million of which $4.2 million were
on a non-accrual basis. The average recorded investment in impaired loans
during the three months ended March 31, 1996 was $6.0 million. For the
three months ended March 31, 1996, the Bank recognized interest income on
those impaired loans of $40,000.
NOTE 6 - Accounting for Mortgage Servicing Rights
The Bank originates and purchases mortgage loans for sale in the secondary
market, and sells the loans with servicing either retained or released.
Effective January 1, 1996, the Bank adopted SFAS No. 122 on accounting for
mortgage servicing rights. For servicing retained, this Statement requires
capitalizing the cost of mortgage servicing rights, regardless of whether
those rights were acquired through origination or purchase activities.
8
Beginning in 1996, the total cost of mortgage loans purchased or originated
with the intent to sell is allocated between the loan servicing right and
the mortgage loan without servicing, based on their relative fair values at
the date of origination or purchase. The capitalized cost of loan servicing
rights is amortized in proportion to, and over the period of, estimated net
future servicing revenue. Estimated servicing costs include direct costs
associated with performing the servicing function and appropriate
allocations of other costs.
Mortgage servicing rights are periodically evaluated for impairment.
Impairment represents the excess of cost of an individual mortgage servicing
rights stratum over its fair value, and is recognized through a valuation
allowance. The amount capitalized approximated the market value of
servicing rights at March 31, 1996 and, accordingly, no valuation allowance
for servicing rights was established. Quoted market prices were used to
estimate the fair value of servicing rights at March 31, 1996.
The amount capitalized during the first quarter of 1996 was $214,137. The
capitalized amount is being amortized over the estimated lives of the loans
and the amortization in the first quarter amounted to $8,220. At March 31,
1996 the fair value of capitalized mortgage servicing rights totaled
$205,917.
NOTE 7 - Investment in Forrest Holdings, Inc.
On February 2, 1996, the Corporation purchased for $2.5 million a one-third
interest in Forrest Holdings, Inc. of Oak Brook, Illinois. Forrest
Holdings, Inc. owns and operates Forrest Financial Corporation, a leasing
company which provides financing solutions for the acquisition of
information systems, including equipment, software, training and
maintenance.
9
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
INDIANA FEDERAL CORPORATION
FINANCIAL CONDITION
Indiana Federal Corporation (the "Corporation") the parent company of
Indiana Federal Bank for Savings (the "Bank"), had total assets of $717.7
million at March 31, 1996, compared to total assets of $721.3 million at
December 31, 1995.
Total investment securities declined to $69.6 million at March 31, 1995 from
$72.7 million at December 31, 1995. This decline was due in part to the
sale of $1.4 million of U.S. Government Agency Securities which were called
in advance of their maturity, as well as normal maturities and principal
repayments. In addition, the investment security balance reflected net
unrealized losses of $184,000 at March 31, 1996 compared to net unrealized
gains of $691,000 at December 31, 1995. Mortgage-backed securities declined
to $25.4 million at March 31, 1996 from $26.7 million at December 31, 1995.
The decline in mortgage-backed securities was due to principal repayments.
The net loan portfolio balance at March 31, 1996 increased to $526.3 million
from $522.7 million at December 31, 1995. One- to four-family mortgage,
income producing property, consumer and commercial loans originated and
purchased during the three months ended March 31, 1996 were $27.6 million,
$3.2 million, $8.7 million and $12.5 million, respectively, totaling $52.0
million or $11.5 million more than the $40.5 million originated and
purchased during the same period a year ago. Loan repayments totaled $42.7
million for the three months ended March 31, 1996 compared to $29.8 million
for the same period last year. Sales of one- to four-family fixed-rate
mortgage loans increased to $4.0 million for the three months ended March
31, 1996 from $2.3 million for the same period a year ago.
Of the $27.6 million in one- to four-family mortgage loans originated and
purchased, $11.4 million or 41.3 percent consisted of adjustable-rate
mortgage loans including $5.7 million in short-term construction loans. The
remaining $16.2 million of one- to four-family mortgage loan volume
represented long-term, fixed-rate loan origination. Included in fixed-rate
loan originations were $4.4 million of 15 year loans which were retained in
the loan portfolio, $2.1 million of 30 year FHA and VA loans which were
purchased from correspondents and $9.7 million which were originated for
sale. Fixed-rate loans held for sale at March 31, 1996 increased to $21.7
million from $16.0 million at December 31, 1995. Loans held for sale are
accounted for on a lower of cost or market basis. As of March 31, 1996, the
Bank had recorded a net adjustment of $195,000 to reduce the book value of
these loans to their fair market value.
10
Deposits increased to $546.9 million at March 31, 1996 from $532.9 million
at December 31, 1995. The Bank had a net increase of $15.9 million in
certificate of deposit balances which more than offset a $1.9 million
decrease in passbook, money market and other transaction account balances
for the three months ended March 31, 1996.
Shareholders' equity decreased to $70.5 million or $14.88 per share at March
31, 1996 from $70.7 million or $14.98 per share at December 31, 1995. The
decline in shareholders' equity was in part the result of a $688,000
decrease in unrealized gains on available-for-sale securities.
ASSET/LIABILITY MANAGEMENT
Management attempts to control fluctuations in net interest income which
result from an imbalance in the volume of assets and liabilities repricing
during a period of time. The Bank attempts to mitigate its interest rate
risk exposure by managing the maturity, prepayment and repricing
characteristics of assets and liabilities. The Bank retains certain fixed-
rate and adjustable-rate loans and sells in the secondary market conforming
thirty-year fixed-rate mortgage loans. At March 31, 1996, the volume of
liabilities repricing in one year or less exceeded the volume of assets
repricing in one year or less by $105 million or a negative 14.6 percent of
the Bank's total assets. This figure compares to a negative 12.38 percent
one year gap at December 31, 1995.
NON-PERFORMING ASSETS AND LOAN LOSS RESERVES
Indiana Federal's non-performing assets decreased to $10.1 million or 1.41
percent of total assets at March 31, 1996 from $11.0 million or 1.53 percent
of total assets at December 31, 1995. The improvement in non-performing
assets was in part the result of a decline of $500,000 in delinquent
residential loans to $1.0 million at March 31, 1996. In addition, the Bank
sold a residential repossessed property with a book value of $149,000 at a
small loss during the first quarter of 1996.
Management continuously reviews the various loan portfolios to determine
appropriate loan loss reserve levels. Factors considered in these reviews
include, but are not limited to, general economic conditions, loan mix,
historical charge-offs, condition of the underlying collateral and the
ability of the borrower to repay the loan. In addition, on January 1, 1995,
the Corporation adopted SFAS No. 114, "Accounting by Creditors for
Impairment of a Loan," which requires that impaired loans be measured based
on the present value of expected future cash flows. Management, as a result
of this review process, recorded provision for loan losses of $50,000 for
the three months ended March 31, 1996 compared to $144,000 for the same
period last year.
Based on available information, management believes that the allowance for
loan losses is adequate to absorb potential losses in the portfolio;
however, future additions to the allowance may be necessary, based on
changes in economic conditions. In addition,
11
various regulatory agencies periodically review the allowance for loan
losses, and may require that additions be made based upon their judgement of
information available to them at the time of their examination. At March
31, 1996, the Bank's allowance for loan losses totaled $6.6 million or 1.26
percent of net loans receivable compared to $6.7 million or 1.27 percent of
net loans receivable at December 31, 1995.
RESULTS OF OPERATIONS
The Corporation recorded earnings of $1.6 million or $.34 per share for the
three months ended March 31, 1996 compared to $1.5 million or $.32 per share
for the same period last year. The return on average shareholders' equity
declined to 9.27 percent for the three months ended March 31, 1996 compared
to 10.50 percent for the same period in 1995. The return of average assets
was .91 percent for the three months ended March 31, 1996 compared to .94
percent for the same period last year.
The Corporation's net income is primarily dependent upon the difference
between interest earned on its loans and investments and interest paid on
deposits and borrowings. Indiana Federal's net interest income after
provision for loan losses for the three months ended March 31, 1996
decreased to $6.0 million compared to $6.2 million for the same period in
1995. The Corporation's average interest-earning assets and interest
bearing liabilities declined by $33.0 million in the three months ended
March 31, 1996 compared to the same period last year due to a $50.0 million
leveraging strategy which management chose to unwind in March 1995. The net
interest margin increased to 3.68 percent for the three months ended March
31, 1996 compared to 3.63 percent for the same period last year.
Other income increased to $1.0 million for the three months ended March 31,
1996 from $600,000 for the same period a year ago. Excluding gains and
losses on the sale of assets and a valuation allowance of $195,000 on the
$21.7 million loans held for sale portfolio, other income increased to $1.3
million for the three months ended March 31, 1996 compared to $985,000 for
the same period last year. Included in other income for the three months
ended March 31, 1996 is a $200,000 prepayment penalty which was collected
from the borrower on the payoff of an income producing property loan.
Other expenses increased by 3.4 percent to $4.9 million for the three months
ended March 31, 1996 compared to $4.7 million for the same period a year
ago. The increase in expenses was primarily due to higher data processing
costs, telephone and personnel expenses, and to the amortization of goodwill
related to the January 1995 acquisition of the NCB Corporation.
The deposits of savings associations such as the Bank are presently insured
by the Savings Association Insurance Fund (the "SAIF"), which, along with
the Bank Insurance Fund (the "BIF"), is one of the two insurance funds
administered by the FDIC. Financial institutions which are members of the
BIF are experiencing substantially lower deposit insurance premiums because
the BIF has achieved its required level of reserves while the SAIF has not
yet achieved its required reserves. A capitalization plan for the SAIF
under
12
consideration by Congress reportedly provides for a special assessment of
0.85% to 0.90% of deposits to be imposed on all SAIF insured institutions to
enable the SAIF to achieve its required level of reserves. If the proposed
assessment of 0.80% to 0.90% was effected based on deposits as of March 31,
1996 (as proposed), the Bank's special assessment would amount to
approximately $4.6 million to $4.9 million, before taxes, respectively.
Accordingly, this special assessment would significantly increase non-
interest expense and adversely effect the Company's results of operations.
Conversely, depending upon the Bank's capital level and supervisory rating,
and assuming the insurance premium levels for BIF and SAIF members are again
equalized, future deposit insurance premiums are expected to decrease
significantly, to as low as .04% of deposits from the .23% of deposits
currently paid by the Bank, which would reduce non-interest expense for
future periods.
Income tax expenses totaled $546,000, an effective tax rate of 25.0 percent
for the three month period ended March 31, 1996 compared to $552,000, an
effective tax rate of 26.4 percent for the same period last year. Provision
for income tax expense for the three month periods ended March 31, 1996 and
1995 included tax credits of $321,000 and $237,000 respectively, which are
attributable to the equity investment in low and moderate income housing
projects by the Corporation's subsidiary IndFed Mortgage Company.
LIQUIDITY AND CAPITAL RESOURCES
Indiana Federal maintains certain levels of cash and other liquid assets to
fund normal volumes of loan commitments, savings deposit activity and other
obligations. The Office of Thrift Supervision requires thrifts to maintain
their liquidity ratio (cash and cash equivalent investments to net
withdrawable deposits and borrowing due within one year) in excess of five
percent. As of March 31, 1996 and 1995, the Bank's liquidity ratio was 6.95
percent and 7.96 percent, respectively, which were both in excess of the
minimum regulatory requirement.
Indiana Federal's primary sources of funds include loan repayments/advances
from the FHLB of Indianapolis, reverse repurchase agreements, deposits and
loan sales. At March 31, 1996, the Corporation had commitments to originate
$31.9 million of loans (including $6.1 million in unused lines of credit).
At the same date, scheduled maturities of certificates of deposit during the
succeeding 12 months amounted to $252.7 million (including $77.2 million
within three months or less) and schedule maturities of FHLB advances during
such 12-month period amounted to $60.2 million. Management considers its
current liquidity and additional sources of funds adequate to meet
outstanding loan commitments.
Current regulatory standards impose the following capital requirements:
risk-based capital standard expressed as a percent of risk-adjusted assets,
a leverage ratio of core capital to total adjusted assets and a tangible
capital ratio expressed as a percent of total adjusted assets. As of March
31, 1996, the Bank substantially exceeded all regulatory capital
requirements.
13
At March 31, 1996, the Bank's tangible capital was $48.1 million or 6.85
percent of adjusted total assets, which was in excess of the 1.5 percent
requirement by $37.6 million. In addition, at March 31, 1996, the Bank had
core capital of $53.1 million or 7.51 percent of adjusted total assets,
which exceeded the 3.0 percent requirement by $31.9 million. The Bank also
had risk-based capital of $58.5 million at March 31, 1996 or 12.97 percent,
which exceeded the 8.0 percent risk based capital requirement by $22.4
million.
At March 31, 1996, the Corporation had acquired a total of 1,103,000 shares
of its outstanding common shares through its previously announced share
repurchase programs. The Corporation did not acquire any shares in the
first quarter of 1996.
The Board of Directors approved a $.28 per share, or $1,327,550 cash
dividend for the first quarter of 1996. The first quarter dividend included
a separate dividend of $.10 per share, which when added to the $.66 per
share previously paid in 1995 resulted in a total dividend of $.76 per share
for the full year. The full year dividend of $.76 per share was 50 percent
of 1995 earnings of $1.51 per share. The dividend payout ratio of 50
percent was consistent with the Company's dividend policy, which anticipates
paying from 35 percent to 55 percent of calendar year earnings.
14
INDIANA FEDERAL CORPORATION
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
None
Item 2. Changes in Securities
None
Item 3. Defaults Upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
A. Exhibit 27 - Financial Data Schedule
B. Two 8-K's filed by the Registrant
1. A press release dated January 25, 1996 was filed by the
registrant with the SEC on January 30, 1996 reporting
fourth quarter 1995 earnings.
2. A press release dated February 2, 1996 was filed on the
same date with the SEC announcing an investment by the
Registrant in Forrest Holdings, Inc. of Oak Brook,
Illinois.
15
INDIANA FEDERAL CORPORATION
SIGNATURES
Pursuant to the requirement of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Indiana Federal Corporation
---------------------------
Registrant
Date: May 10, 1996 /s/ Peter R. Candela
------------------- ----------------------------------
Peter R. Candela
President/Chief Executive Officer
Date: May 10, 1996 /s/ George J. Eberhardt
------------------- ----------------------------------
George J. Eberhardt
Executive Vice President/
Chief Financial Officer
16