SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-QSB
[ X ] QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended June 30, 2001
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15 (d) OF THE EXCHANGE ACT
For the transition period from ___________ to ___________
Commission file number 0-26012.
NORTHEAST INDIANA BANCORP, INC.
(Exact Name of Small Business Issuer as Specified in its Charter)
Delaware 35-1948594
- ------------------------------- -------------------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
648 North Jefferson Street, Huntington, IN 46750
--------------------------------------------------
(Address of principal executive offices) (Zip Code)
Issuer's telephone number, including area code: (219) 356-3311
Check whether the Issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the Issuer was required to file such reports), and (2) has been
subject to such requirements for the past 90 days. YES [X] NO [ ]
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date:
CLASS OUTSTANDING AT August 2, 2001
- --------------------------------------------------------------------------------
Common Stock, par value $.01 per share 1,613,536
Transitional Small Business Disclosure Format: YES [ ] NO [ X ]
NORTHEAST INDIANA BANCORP, INC.
INDEX
PART 1. FINANCIAL INFORMATION (UNAUDITED) PAGE NO.
Item 1. Financial Statements
Consolidated Balance Sheets
June 30, 2001 and December 31, 2000 1
Consolidated Statements of Income for the
three and six months ended June 30, 2001 and 2000 2
Consolidated Statement of Changes in Shareholders' Equity
for the six months ended June 30, 2001 3
Consolidated Statements of Cash Flows for the six
months ended June 30, 2001 and 2000 4
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis or Plan of Operation 8
PART II. OTHER INFORMATION 14
Signature page 16
NORTHEAST INDIANA BANCORP, INC.
CONSOLIDATED BALANCE SHEETS
June 30, 2001 And December 31, 2000
June 30, December 31,
2001 2000
(Unaudited)
ASSETS
Interest earning cash and cash equivalents $ 11,792,271 $ 3,208,993
Noninterest earning cash and cash equivalents 2,032,763 3,367,273
------------- -------------
Total cash and cash equivalents 13,825,034 6,576,266
Securities available for sale 32,917,198 31,226,026
Securities held to maturity (fair value:
June 30, 2001- $345,000; December 31, 2000 - $383,000) 345,000 383,000
Loans receivable, net of allowance for loan losses: June 30,
2001 - $2,230,506; and December 31, 2000 - $2,001,172 185,451,683 200,151,133
Accrued interest receivable 737,376 895,612
Premises and equipment, net 2,287,160 2,244,179
Investments in limited liability partnerships 1,625,011 1,703,839
Other assets 3,443,423 3,914,247
------------- -------------
Total assets $ 240,631,885 $ 247,094,302
============= =============
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits
Demand deposits $ 4,584,375 $ 4,571,661
Savings 9,301,404 9,265,835
NOW and MMDDA 28,402,580 30,896,868
Time deposits 101,387,783 102,071,754
------------- -------------
Total deposits 143,676,142 146,806,118
Borrowed funds 69,414,747 72,538,670
Accrued expenses and other liabilities 1,051,688 1,175,757
------------- -------------
Total liabilities 214,142,577 220,520,545
Shareholders' equity
Preferred Stock, no par value: 500,000 shares authorized; 0 shares issued -- --
Common stock, $.01 par value: 4,000,000 shares authorized;
at June 30, 2001: 2,640,672 shares issued, 1,622,536 shares outstanding
at December 31, 2000: 2,640,672 shares issued, 1,692,536
shares outstanding 26,407 26,407
Additional paid in capital 28,832,951 28,817,843
Retained earnings, substantially restricted 11,754,082 11,213,771
Unearned employee stock ownership plan shares (693,757) (766,395)
Unearned recognition and retention plan shares (16,878) (21,196)
Accumulated other comprehensive income (loss), net of tax 48,924 (55,418)
Treasury stock, 1,018,136 and 948,136 common shares, at
cost, at June 30, 2001 and December 31, 2000 (13,462,421) (12,641,255)
Total shareholders' equity 26,489,308 26,573,757
------------- -------------
Total liabilities and shareholders' equity $ 240,631,885 $ 247,094,302
============= =============
See accompanying notes to financial statements
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1.
NORTHEAST INDIANA BANCORP, INC.
CONSOLIDATED STATEMENTS OF INCOME
Three and six months ended June 30, 2001 and 2000
Three months ended Six months ended
June 30, June 30,
2001 2000 2001 2000
---- ---- ---- ----
(Unaudited)
Interest income
Loans, including fees $ 3,939,491 $ 4,297,346 $ 7,952,352 $ 8,531,780
Taxable securities 418,557 567,664 877,993 1,116,141
Non-taxable securities 50,914 5,544 64,185 11,362
Deposits with financial institutions 130,818 61,630 180,910 113,820
----------- ----------- ----------- -----------
Total interest income 4,539,780 4,932,184 9,075,440 9,773,103
Interest expense
Deposits 1,894,395 1,593,214 3,866,907 3,270,957
Borrowed funds 920,449 1,479,554 1,835,454 2,714,360
----------- ----------- ----------- -----------
Total interest expense 2,814,844 3,072,768 5,702,361 5,985,317
Net interest income 1,724,936 1,859,416 3,373,079 3,787,786
Provision for loan losses 100,000 191,250 250,000 382,500
----------- ----------- ----------- -----------
Net interest income after provision
for loan losses 1,624,936 1,668,166 3,123,079 3,405,286
Noninterest income
Service charges on deposit accounts 94,660 93,161 183,301 178,956
Net loss on sale of securities -- (1,563) -- (1,563)
Net gain on sale of loans 57,162 -- 88,421 --
Other service charges or fees 147,791 133,590 314,175 277,292
----------- ----------- ----------- -----------
Total noninterest income 299,613 225,188 585,897 454,685
Noninterest expense
Salaries and employee benefits 588,568 601,453 1,163,742 1,191,000
Occupancy 118,114 103,661 232,113 219,841
Data processing 154,499 137,286 315,203 281,147
Deposit insurance premium 6,949 7,402 13,446 13,762
Professional fees 60,535 56,025 143,731 119,090
Correspondent bank charges 59,679 60,894 112,655 116,864
Other expense 186,308 196,765 425,113 390,996
----------- ----------- ----------- -----------
Total noninterest expense 1,174,652 1,163,486 2,406,003 2,332,700
Income before income taxes 749,897 729,868 1,302,973 1,527,271
Income tax expense 234,660 225,270 395,035 503,698
----------- ----------- ----------- -----------
Net income $ 515,237 $ 504,598 $ 907,938 $ 1,023,573
=========== =========== =========== ===========
Comprehensive income $ 493,444 $ 574,030 $ 1,012,280 $ 1,093,686
=========== =========== =========== ===========
Basic earnings per share $ 0.33 $ 0.32 $ 0.58 $ 0.64
Diluted earnings per share $ 0.33 $ 0.31 $ 0.57 $ 0.63
Net interest margin 2.95% 3.03% 2.91% 3.08%
Return on average assets 0.84% 0.79% 0.75% 0.80%
Return on average equity 7.73% 7.77% 6.80% 7.90%
Shareholders' equity to assets 11.01% 10.30%
See accompanying notes to financial statements
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2.
NORTHEAST INDIANA BANCORP, INC.
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
Six months ended June 30, 2001
- -----------------------------------------------------------------------------------------------------------------------------------
(Unaudited)
Unearned
Employee Unearned
Additional Stock Recognition
Common Paid-in Retained Ownership And Retention
Stock Capital Earnings Plan Shares Plan Shares
----- ------- -------- ----------- -----------
Balance, January 1, 2001 26,407 28,817,843 11,213,771 (766,395) (21,196)
Net Income June 30, 2001 907,938
Other comprehensive income:
Net change in unrealized gains(losses)
on securities available for sale
Total tax effect
Total other comprehensive income
Comprehensive income
Dividends Paid $.22 per share year to date (367,627)
Purchase of 88,417 shares of treasury stock
Issuance of 18,417 shares of treasury stock upon
exercise of options
(24,069)
Tax effect on stock plans 3,971
8,794 shares committed to be released under ESOP 35,206 72,638
Amortization of RRP contributions 4,318
--------- ----------- ----------- -------- -------
Balance at June 30, 2001 26,407 28,832,951 11,754,082 (693,757) (16,878)
========= =========== =========== ======== =======
Accumulated
Other
Comprehensive Total
Income (loss), Treasury Shareholders'
Net of Tax Stock Equity
---------- ----- ------
Balance, January 1, 2001 (55,418) (12,641,255) 26,573,757
Net Income June 30, 2001 907,938
Other comprehensive income:
Net change in unrealized gains(losses)
on securities available for sale 172,901
Total tax effect (68,559)
-----------
Total other comprehensive income 104,342 104,342
-----------
Comprehensive income 1,012,280
Dividends Paid $.22 per share year to date (367,627)
Purchase of 88,417 shares of treasury stock (1,024,065) (1,024,065)
Issuance of 18,417 shares of treasury stock upon
exercise of options
202,899 178,830
Tax effect on stock plans 3,971
8,794 shares committed to be released under ESOP 107,844
Amortization of RRP contributions 4,318
----------- ----------- -----------
Balance at June 30, 2001 48,924 (13,462,421) 26,489,308
=========== =========== ===========
See accompanying notes to financial statements
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3.
NORTHEAST INDIANA BANCORP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Six months ended June 30, 2001 and 2000
- ---------------------------------------------------------------------------------------------------------------------
Six months ended
June 30,
2001 2000
------------- -------------
(Unaudited)
Cash flows from operating activities
Net income $ 907,938 $ 1,023,573
Adjustments to reconcile net income
to net cash from operating activities
Depreciation and amortization 211,668 200,551
Provision for loan losses 250,000 382,500
Net (gain) loss on sale of:
Foreclosed real estate and repossessed assets 37,394 59,191
Premises and equipment -- 14,377
Securities available for sale -- 1,563
Loans held for sale (88,421) --
Originations of loans held for sale (5,223,451) --
Proceeds from loans sold 5,311,872 --
Reduction of obligation under ESOP 107,844 100,861
Amortization of RRP 4,318 101,433
Net change in:
Other assets (10,023) (789,608)
Accrued interest receivable 158,236 (53,851)
Accrued expenses and other liabilities (124,069) 18,126
------------- -------------
Total adjustments 635,368 35,143
------------- -------------
Net cash from operating activities 1,543,306 1,058,716
Cash flows from investing activities
Net decrease in interest-bearing deposits
in financial institutions -- 100,000
Purchases of securities available for sale (14,568,458) (5,070,223)
Proceeds from maturities and principal payments of:
Securities available for sale 13,052,419 179,884
Securities held to maturity 38,000 36,316
Proceeds from sales of securities available for sale -- 4,998,438
Proceeds from sales of securities held to maturity -- --
Purchases of loans (79,997) (1,006,837)
Net change in loans 13,464,882 (335,059)
Proceeds from sale of participation loans 650,000 --
Proceeds from sale of foreclosed real estate and repossessed vehicles 793,430 195,646
Expenditures on premises and equipment (178,053) (110,287)
Proceeds from sale of premises and equipment -- 450
------------- -------------
Net cash from investing activities 13,172,223 (1,011,672)
Cash flows from financing activities
Net change in deposits (3,129,976) (16,850,780)
Advances from FHLB 29,000,000 102,000,000
Repayment of FHLB advances (31,399,663) (86,099,545)
Payments of demand notes (125,000) (25,000)
Net change in other borrowed funds (599,260) 891,203
Dividends paid (367,627) (348,528)
Purchase of stock (1,024,065) (278,520)
Sale of treasury stock 178,830 42,937
------------- -------------
Net cash from financing activities (7,466,761) (668,233)
------------- -------------
Net change in cash and cash equivalents 7,248,768 (621,189)
Cash and cash equivalents at beginning of period 6,576,266 5,899,203
------------- -------------
Cash and cash equivalents at end of period $ 13,825,034 $ 5,278,014
============= =============
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Continued
4.
NORTHEAST INDIANA BANCORP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Six months ended June 30, 2001 and 2000
- ---------------------------------------------------------------------------------------------------------------------
Six months ended
June 30,
2001 2000
------------- -------------
(Unaudited)
Cash paid for:
Interest $5,755,485 $5,977,053
Income taxes 401,700 671,700
Non-cash transactions:
Investment in obligation relative to limited partnership $ -- $ 500,000
Transfer from loans to other real estate and repossessed assets 414,565 656,783
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5.
NORTHEAST INDIANA BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2001
- --------------------------------------------------------------------------------
NOTE 1 - BASIS OF PRESENTATION
The unaudited information for the three and six months ended June 30, 2001 and
2000 includes the results of operations of Northeast Indiana Bancorp, Inc.
("Northeast Indiana Bancorp") and its wholly-owned subsidiary, First Federal
Savings Bank ("First Federal") and its wholly owned subsidiary, Northeast
Indiana Financial, Inc.("Northeast Indiana Financial"). In the opinion of
management, the information reflects all adjustments (consisting only of normal
recurring adjustments) necessary for a fair presentation of the results of
operations for the three and six month periods reported but should not be
considered as indicative of the results to be expected for the full year.
NOTE 2 - EARNINGS PER SHARE
Basic earnings per share is based on weighted-average common shares outstanding.
Diluted earnings per share further assumes issue of any dilutive potential
common shares.
Three months ended Six months ended
------------------ ----------------
June 30, June 30,
-------- --------
2001 2000 2001 2000
---------- ---------- ---------- ----------
Earnings Per Share
Net Income available to common shareholders $ 515,237 $ 504,598 $ 907,938 $1,023,573
Weighted average common shares outstanding 1,556,315 1,600,061 1,574,536 1,603,190
Basic Earnings Per Share $ 0.33 $ 0.32 $ 0.58 $ 0.64
Earnings Per Share Assuming Dilution
Net Income available to common shareholders $ 515,237 $ 504,598 $ 907,938 $1,023,573
Weighted average common shares outstanding 1,556,315 1,600,061 1,574,536 1,603,190
Add: dilutive effects of assumed exercises of
incentive stock options and non qualified
stock options 18,216 12,674 26,830 28,443
---------- ---------- ---------- ----------
Weighted average and dilutive common shares
Outstanding 1,574,531 1,612,735 1,601,366 1,631,633
Diluted earnings per share $ 0.33 $ 0.31 $ 0.57 $ 0.63
NOTE 3 - COMMON STOCK DIVIDENDS
On July 30, 2001, the Board of Directors of Northeast Indiana Bancorp, Inc.
announced a quarterly cash dividend of $.11 per share. The dividend will be paid
on August 27, 2001 to shareholders of record on August 17, 2001. The payment of
the cash dividend will reduce shareholders' equity (third quarter) by
approximately $177,000.
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Continued
6.
NORTHEAST INDIANA BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2001
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NOTE 4 - STOCK REPURCHASE PLAN
On August 4, 2000, Northeast Indiana Bancorp announced a stock repurchase
program to repurchase up to 6.75% of the outstanding shares in the open market
as Treasury shares over the next twelve months. On August 2, 2001 this program
was completed.
There were also 18,417 shares repurchased from exercised options year to date
through August 2, 2001.
NOTE 5 - REGULATORY CAPITAL REQUIREMENTS
Pursuant to federal regulatory agencies, savings institutions must meet three
separate minimum capital-to-asset requirements. The following table summarizes,
as of June 30, 2001, the capital requirements for First Federal under federal
regulatory agencies and First Federal's actual capital ratios. As of June 30,
2001, First Federal substantially exceeded all current regulatory capital
standards.
Minimum Required To Be Well
Minimum Required For Capitalized Under Prompt
Actual Capital Adequacy Purpose Corrective Action Regulations
Amount Ratio Amount Ratio Amount Ratio
------ ----- ------ ----- ------ -----
(Dollars in thousands)
Total Capital
(to risk weighted assets) $ 24,770 16.0% $ 12,330 8.0% $ 15,413 10.0%
Tier 1 (core) capital (to risk weighted assets)
24,718 16.0% 6,165 4.0% 9,248 6.0%
Tier 1(core) capital (to adjusted total assets)
24,718 10.3% 9,613 4.0% 12,016 5.0%
Tier 1 (core) capital (to average assets)
24,718 10.3% 9,556 4.0% 11,945 5.0%
NOTE 6 - RECLASSIFICATIONS
Certain amounts in the 2000 consolidated financial statements have been
reclassified to conform to the 2001 presentation.
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7.
NORTHEAST INDIANA BANCORP, INC.
MANAGEMENTS DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
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GENERAL
Northeast Indiana Bancorp, Inc. ("Northeast Indiana Bancorp") was formed as a
Delaware corporation in March, 1995, for the purpose of issuing common stock and
owning all the common stock of First Federal Savings Bank ("First Federal") as a
unitary thrift holding company. Prior to the conversion, Northeast Indiana
Bancorp did not engage in any material operations and at June 30, 2001, had no
significant assets other than the investment in the capital stock of First
Federal and cash and cash equivalents.
The principal business of savings banks, including First Federal, has
historically consisted of attracting deposits from the general public and making
loans secured by residential real estate. First Federal's earnings are primarily
dependent on net interest income, the difference between interest income and
interest expense. Interest income is a function of the balances of loans and
investments outstanding during the period and the yield earned on such assets.
Interest expense is the function of the balances of deposits and borrowings.
First Federal's earnings are also affected by provisions for loan losses,
service charge and fee income, and other non-interest income, operating expenses
and income taxes. Operating expenses consist primarily of employee compensation
and benefits, occupancy and equipment expenses, data processing, federal deposit
insurance premiums and other general administrative expenses.
The most significant outside factors influencing the operations of First Federal
Savings Bank and other savings institutions include general economic conditions,
competition in the local market place and related monetary and fiscal policies
of agencies that regulate financial institutions. More specifically, the cost of
funds is influenced by interest rates on competing investments and general
market rates of interest. Lending activities are influenced by the demand for
real estate financing and other types of loans, which in turn is affected by the
interest rates at which such loans may be offered and other factors affecting
loan demand and funds availability.
TRUST AND FINANCIAL SERVICES
During the year of 1998, First Federal established a trust department, which
began operations in the fourth quarter. At the end of June 30, 2001,
approximately $26.1 million in trust assets were held under management. In
February 1999, Northeast Indiana Bancorp announced the establishment of
Northeast Indiana Financial, Inc., a wholly-owned subsidiary of First Federal.
Northeast Indiana Financial, Inc. will provide brokerage services through the
purchase of mutual funds, annuities, stocks and bonds for its customers. Until
these operations are well established, management expects a slight negative
impact to net income.
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8.
NORTHEAST INDIANA BANCORP, INC.
MANAGEMENTS DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
- --------------------------------------------------------------------------------
FINANCIAL CONDITION
Northeast Indiana Bancorp's total assets decreased $6.4 million or 2.59% from
$247.1 million at December 31, 2000 to $240.7 million at June 30, 2001. This
decrease was due primarily to a decrease in net loans receivable.
Net loans receivable decreased $14.7 million or 7.34% from $200.2 million at
December 31, 2000 to $185.5 million at June 30, 2001. The decrease in loans
during the first six months of 2001 was in construction loan products which
accounted for $2.2 million of the decrease along with a $2.6 million decrease in
commercial lending, a $761,000 decrease in consumer lending and a $8.4 million
decrease in mortgages. We also originated $5.2 million in residential mortgages
sold to the secondary market with servicing retained during the first half of
the year. Allowances for loan losses increased approximately $230,000 through
the six months ended June 30, 2001. Securities available-for-sale increased $1.7
million or 5.4% from $31.2 million to $32.9 million for the period December 31,
2000 to June 30, 2001. Borrowed funds have been reduced by $3.1 million
predominately by reducing FHLB advances, which provides improved liquidity at
the bank level.
RESULTS OF OPERATIONS
Northeast Indiana Bancorp had net income of $515,000 or $0.33 per diluted share
and $908,000 or $0.57 per diluted share for the three and six months ended June
30, 2001 compared to $505,000 or $0.31 per diluted share and $1.0 million or
$0.63 per diluted share for the three and six months ended June 30, 2000.
Net interest income decreased to $1.7 million for the three months ended June
30, 2001 compared to $1.9 million for the three months ended June 30, 2000. Net
interest income decreased to $3.4 million from $3.8 million for the six months
ended June 30, 2001 and June 30, 2000 respectively. Interest income for the
quarter decreased $392,000 to $4.5 million for June 30, 2001 compared to $4.9
million for June 30,2000. Interest income for the six months ended June 30, 2001
was $9.1 million compared to $9.8 million for the six months ended June 30, 2000
a decrease of $698,000 or 7.14%. Of the $698,000 decrease, 74% of the variance
is attributed to volume while 26% of the variance is related to rates. For the
second quarter, interest expense decreased $258,000 to $2.8 million for the
quarter ended June 30, 2001 compared to $3.1 million June 30, 2000. Interest
expense for the six months ended June 30, 2001 was approximately $5.7 million a
decrease of $283,000 compared to $6.0 million expensed for the same period ended
June 30, 2000. This decrease is due to borrowed funds and time deposits
repricing at lower rates as they mature and lower average balances. During the
first half of 2001 we have reduced both our wholesale time deposits and our FHLB
advances.
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Continued
9.
NORTHEAST INDIANA BANCORP, INC.
MANAGEMENTS DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
- --------------------------------------------------------------------------------
RESULTS OF OPERATIONS (CONTINUED)
Provisions for loan losses decreased by $91,000 for the three months ended June
30, 2001 compared to the same period ended June 30, 2000. The decreases to
provisions are discussed in more detail under non-performing assets and
allowances for loan losses.
Non-interest income increased to $300,000 for the three months ended June 30,
2001 compared to $225,000 for the comparable period in 2000. This represents an
increase of $75,000 for the quarter over the same period last year. Non-interest
income increased to $586,000 compared to $455,000 for the six months ended June
30, 2001 and 2000 respectively. Of the $131,000 or 28.8%, increase, $88,000 is
from the gain on sale of loans; other increases include trust income and bank
owned life insurance (BOLI).
Non-interest expense was steady at $1.2 million and $2.4 million for the three
and six months ended June 30, 2001 compared to $1.2 million and $2.3 million for
the corresponding periods in 2000. This represents a small increase of $73,000
for the six months ended June 30, 2001 compared to the corresponding period in
2000. This increase is due to higher occupancy expense for 2001. Data processing
expense has increased to $154,000 and $315,000 for the three and six months
ended June 30, 2001 due to software upgrades and increased fees compared to
$137,000 and $281,000 for the same periods ended June 30, 2000.
Income tax expense decreased for the six months ended June 30, 2001 due to lower
taxable income compared to the same period in 2000 and an increase in the
available tax credits from First Federal's investment in low income housing
projects. This decrease was reflected in an effective tax rate of 30.3% compared
to 33.0% for the six months ended June 30, 2001 and 2000 respectively.
NON-PERFORMING ASSETS AND ALLOWANCE FOR LOAN LOSSES
The allowance for loan losses is established through a provision for loan losses
based on management's quarterly asset classification review and evaluation of
the risk inherent in its loan portfolio and changes in the nature and volume of
its loan activity. Such evaluation, which considers among other matters, the
estimated value of the underlying collateral, economic conditions, cash flow
analysis, historical loan loss experience, discussions held with delinquent
borrowers and other factors that warrant recognition in providing for an
adequate allowance for loan loss. As a result of this review process, management
recorded provisions for loan losses in the amount of $100,000 and $250,000 for
the three and six months ended June 30, 2001 compared to $191,000 and $383,000
for the same periods ended June 30, 2000.
Management continues to be proactive with commercial loan grading and tracking
as we recognize the current economic slowdown. The non-performing assets were
reduced by several factors particularly the sale of $416,000 in repossessed
assets and improvement in the construction or development loan area by $472,000.
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Continued
10.
NORTHEAST INDIANA BANCORP, INC.
MANAGEMENTS DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
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NON-PERFORMING ASSETS AND ALLOWANCE FOR LOAN LOSSES (Continued)
The non-performing assets to total assets ratio is one indicator of the exposure
to credit risk. Non-performing assets of First Federal consist of the
non-accruing loans, troubled debt restructuring and real estate owned which has
been acquired as a result of foreclosure. The following table summarizes in
thousands the various categories of non-performing assets:
June 30 December 31
2001 2000
------ ------
Non-accruing loans
One-to-four family $2,693 $ 608
Multi- family 28 29
Commercial real estate 2,598 708
Construction or development -- 472
Consumer 1,361 1,684
Commercial business 445 198
------ ------
Total 7,125 3,699
------ ------
Foreclosed assets
One -to-four -family -- --
Commercial -- --
Land 185 185
------ ------
Total 185 185
Repossessed assets
123 89
Consumer -- 450
Commercial
------ ------
Total 123 539
Total non-performing assets $7,433 $4,423
Total non-performing assets as a percentage
Of total assets 3.09% 1.79%
Total non-performing assets increased from $4.4 million to $7.4 million or 3.09%
of total assets at June 30, 2001 from 1.79% of total assets at December 31,
2000. The $2.7 million in the one-to-four family includes $2.2 million in loans
secured by one-to four family residential rental properties that continue to be
on non-accrual status at June 30, 2001 due to weakness in cash flows. These
rental properties were identified as impaired at December 31, 2000 but were not
included in non-performing assets at December 31, 2000. Although the loans are
on non-accrual, the bank now is receiving the majority of interest only payments
on a cash basis. Non-performing commercial real estate increased primarily
because two borrowers ($2.0 million of principal) were ninety days past due as
of June 30, 2001. Both borrowers have been making partial payments during the
year and are nearly current on interest due. We had established a $250,000
specific reserve for one of the borrowers and no loss is anticipated on the
second borrower.
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Continued
11.
NORTHEAST INDIANA BANCORP, INC.
MANAGEMENTS DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
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NON-PERFORMING ASSETS AND ALLOWANCE FOR LOAN LOSSES (Continued)
Impaired loans at June 30, 2001 were $6.2 million compared to $8.4 million at
December 31, 2000. No new impaired loans were added during the second quarter
2001.
LIQUIDITY AND CAPITAL RESOURCES
First Federal is required to maintain specific amounts of regulatory capital
pursuant to regulations of the Office of Thrift Supervision (OTS). Those capital
requirements follow: a risk-based capital standard expressed as a percent of
risk adjusted assets, a leverage ratio of core capital to total assets, and a
core capital ratio expressed as a percent of total adjusted assets. At June 30,
2001, First Federal exceeded all regulatory capital standards.
At June 30, 2001, First Federal's risk based capital was $24.8 million or 16.0%
of risk adjusted assets, which exceeds the $12.3 million and the 8.0% OTS
requirement by $12.5 million and 8.0%. First Federal's core capital at June 30,
2001 is $24.7 million or 10.3% of average assets, which exceeds the OTS
requirement of $9.6 million and 4.00% by $15.1 million and 6.3%.
First Federal's primary sources of funds are deposits, FHLB advances, principal
and interest payments of loans, operations income and short-term investments.
Deposit flows and mortgage payments are greatly influenced by general interest
rates, economic conditions and competition.
First Federal uses its capital resources principally to meet its ongoing
commitments to fund maturing certificates of deposit and loan commitments,
maintain its liquidity, and meet operating expenses. As of June 30, 2001, First
Federal had commitments to originate loans and to fund open lines of credit
totaling $15.9 million. First Federal considers its liquidity and capital
resources to be adequate to meet its foreseeable short and long term needs.
First Federal expects to be able to fund or refinance, on a timely basis, its
material commitments and long-term liabilities.
First Federal, however, had grown substantially over the previous years and
therefore our liquidity position had tightened as we leveraged our capital.
First Federal's liquidity position has improved during 2001. This improvement
can be attributed to the following: a decline in overall loan demand, the
selling of $5 million of residential mortgage loans and the substantial
reduction of borrowings primarily by paying down FHLB advances.
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Continued
12.
NORTHEAST INDIANA BANCORP, INC.
MANAGEMENTS DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
- --------------------------------------------------------------------------------
FORWARD-LOOKING STATEMENTS
When used in this filing and in future filings by Northeast Indiana Bancorp with
the Securities and Exchange Commission, in Northeast Indiana Bancorp's press
releases or other public or shareholder communications, or in oral statements
made with the approval of an authorized executive officer, the words or phrases
"would be," "will allow," "intends to," "will likely result," "are expected to,"
"will continue," "is anticipated," "estimate," "project" or similar expressions
are intended to identify "forward-looking statements" within the meaning of the
Private Securities Litigation Reform Act of 1995.
Such statements are subject to risks and uncertainties, including but not
limited to changes in economic conditions in Northeast Indiana Bancorp's market
area, changes in policies by regulatory agencies, fluctuations in interest
rates, demand for loans in Northeast Indiana Bancorp's market area and
competition, all or some of which could cause actual results to differ
materially from historical earnings and those presently anticipated or
projected.
Northeast Indiana Bancorp wishes to caution readers not to place undue reliance
on any such forward-looking statements, which speak only as of the date made,
and advises readers that various factors, including regional and national
economic conditions, substantial changes in levels of market interest rates,
credit and other risks of lending and investment activities and competitive and
regulatory factors, could affect Northeast Indiana Bancorp's financial
performance and could cause Northeast Indiana Bancorp's actual results for
future periods to differ materially from those anticipated or projected.
Northeast Indiana Bancorp does not undertake, and specifically disclaims any
obligation, to update any forward-looking statements to reflect occurrences or
unanticipated events or circumstances after the date of such statements.
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13.
NORTHEAST INDIANA BANCORP, INC.
PART II
Other Information
ITEM 1 - LEGAL PROCEEDINGS
Northeast Indiana Bancorp and First Federal are involved from
time to time, as plaintiff or defendant in various legal actions
arising from the normal course of their businesses. While the
ultimate outcome of these proceedings cannot be predicted with
certainty, it is the opinion of management that the resolution of
these proceedings should not have a material effect on Northeast
Indiana Bancorp's results of operations on a consolidated basis.
ITEM 2 - CHANGES IN SECURITIES
None
ITEM 3 - DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
(a) The Annual Meeting of Shareholders ("the meeting") of Northeast
Indiana Bancorp, Inc. was held on April 25, 2001. The matters
approved by shareholders at the meeting and the number of votes
cast for, against or withheld (as well as the number of
abstentions) as to each matter are set forth below:
(1) The election of the following directors for a three year
term:
Votes
-----
For Withheld
--------- --------
Stephen E. Zahn 1,130,892 198,296
Dan L. Stephan 1,096,891 232,327
(2) Ratification of Crowe, Chizek and Company LLP as auditors for
the year ending December 31, 2001: Votes
For Against Withheld
1,312,305 13,306 3,577
ITEM 5 - OTHER INFORMATION
None
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14.
NORTHEAST INDIANA BANCORP, INC.
PART II (Continued)
Other Information
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
None
(b) Reports on Form 8-K
(1) April 17, 2001 Announcing First Quarter Earnings
(2) April 26, 2001 Announcing Cash Dividend and Annual Meeting
Results
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15.
SIGNATURES
Pursuant to the requirements 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.
NORTHEAST INDIANA BANCORP, INC.
Date: August 14, 2001 By: /S/ STEPHEN E. ZAHN
-------------------
Stephen E. Zahn
President and Chief Executive Officer
(Duly Authorized Officer)
Date: August 14, 2001 By: /S/ DARRELL E. BLOCKER
----------------------
Darrell E. Blocker
Senior Vice President and
Chief Financial Officer
(Principal Financial Officer)
16.