FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR QUARTER ENDED SEPTEMBER 30, 1999
------------------
COMMISSION FILE NUMBER 0-12422
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INDIANA UNITED BANCORP
----------------------
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
INDIANA 35-1562245
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(STATE OR OTHER JURISDICTION OF (IRS EMPLOYER INCORPORATION OR
ORGANIZATION) IDENTIFICATION NO.)
201 NORTH BROADWAY GREENSBURG, INDIANA 47240
---------------------------------------------------------------
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
(812) 663-0157
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(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
NOT APPLICABLE
--------------
(FORMER NAME, FORMER ADDRESS AND FORMER FISCAL YEAR,
IF CHANGED SINCE LAST REPORT.)
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 SEPTEMBER 30, 1999 THERE WERE OUTSTANDING 4,855,541 SHARES,
WITHOUT PAR VALUE OF THE REGISTRANT.
INDIANA UNITED BANCORP
FORM 10-Q
INDEX
Page
No.
PART I. FINANCIAL INFORMATION ----
Item 1. Financial Statements
Consolidated Condensed Balance Sheet 3
Consolidated Condensed Statement of Income 4
Consolidated Condensed Statement of Changes in
Shareholders' Equity 5
Consolidated Condensed Statement of Cash Flows 6
Notes to Consolidated Condensed Financial Statements 7-10
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 11-23
Item 3. Quantitative and Qualitative Disclosures About
Market Risk 24-25
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 26
Signatures 27
2
INDIANA UNITED BANCORP
FORM 10-Q
CONSOLIDATED CONDENSED BALANCE SHEET
(UNAUDITED)
(DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA)
SEPTEMBER 30, DECEMBER 31,
ASSETS 1999 1998
---- ----
Cash and due from banks $ 26,648 $ 25,549
Interest-bearing demand deposits 29 31
Federal funds sold 250 19,855
--------- ---------
Cash and cash equivalents 26,927 45,435
Interest bearing time deposits 998 1,498
Securities
Available for sale 235,690 178,008
Held to maturity 18,331 19,591
Loans held for sale 4,465 10,972
Loans 605,827 539,404
Less: Allowance for loan losses 6,800 6,099
--------- ---------
Net loans 599,027 533,305
Premises and equipment (net) 14,657 12,498
Intangible assets 24,407 12,818
Other assets 12,902 13,820
--------- ---------
Total assets $ 937,404 $ 827,945
========= =========
LIABILITIES
Deposits $ 803,360 $ 709,871
Short-term borrowings 22,519 20,032
Federal Home Loan Bank advances 17,500 10,000
Long-term debt 6,700 --
Other liabilities 5,105 6,421
--------- ---------
Total liabilities 855,184 746,324
--------- ---------
Guaranteed preferred beneficial interests in
company's subordinated debentures 22,425 22,425
SHAREHOLDERS' EQUITY Common stock $1 stated value:
Authorized--10,000,000 shares, Issued and
outstanding, 4,855,541 and 4,774,628 shares 2,428 2,387
Paid-in capital 23,137 21,742
Retained Earnings 37,197 34,363
Accumulated comprehensive income (2,967) 704
--------- ---------
Total shareholders' equity 59,795 59,196
--------- ---------
Total liabilities and shareholders' equity $ 937,404 $ 827,945
========= =========
See notes to consolidated condensed financial statements
3
INDIANA UNITED BANCORP
FORM 10-Q
CONSOLIDATED CONDENSED STATEMENT OF INCOME
(UNAUDITED)
(DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA)
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30
1999 1998 1999 1998
---- ---- ---- ----
INTEREST INCOME:
Loans, including fees $ 12,789 $ 11,291 $ 36,037 $ 32,809
Investment securities 3,804 2,186 10,816 5,957
Other interest earning assets 161 349 1,021 1,561
-------- -------- -------- --------
Total interest income 16,754 13,826 47,874 40,327
INTEREST EXPENSE:
Deposits 7,541 6,500 22,400 18,738
Trust preferred securities 501 511 1,503 1,513
Other borrowings 523 234 1,327 739
-------- -------- -------- --------
Total interest expense 8,565 7,245 25,230 20,990
-------- -------- -------- --------
NET INTEREST INCOME 8,189 6,581 22,644 19,337
Provision for loan losses 387 293 1,104 858
-------- -------- -------- --------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 7,802 6,288 21,540 18,479
NONINTEREST INCOME:
Securities gains (losses) 5 24 (8) 36
Other operating income 1,352 1,302 4,453 3,992
-------- -------- -------- --------
Total noninterest income 1,357 1,326 4,445 4,028
NONINTEREST EXPENSE 6,377 4,948 18,234 14,810
-------- -------- -------- --------
INCOME BEFORE INCOME TAX 2,782 2,666 7,751 7,697
Income tax expense 932 938 2,599 3,055
-------- -------- -------- --------
NET INCOME $ 1,850 $ 1,728 $ 5,152 $ 4,462
======== ======== ======== ========
Net income per share (basic) $ 0.38 $ 0.36 $ 1.07 $ 0.97
Net income per share (diluted) $ 0.38 $ 0.36 $ 1.07 $ 0.97
Cash dividends declared $ 0.16 $ 0.145 $ 0.48 $ 0.435
See notes to consolidated condensed financial statements.
4
INDIANA UNITED BANCORP
FORM 10-Q
CONSOLIDATED CONDENSED STATEMENT OF CHANGES TO SHAREHOLDERS' EQUITY
(UNAUDITED)
(DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA)
1999 1998
---- ----
Balance, January 1 $ 59,196 $ 55,006
Comprehensive income:
Net income 5,152 4,642
Change in unrealized gains (losses) on
available for sale securities (3,671) 802
-------- --------
Comprehensive income
Additional shares issued 1,436 --
Exercise of stock options -- 520
Cash dividends on common stock (2,318) (1,980)
-------- --------
Balance, September 30 $ 59,795 $ 58,990
======== ========
See notes to consolidated condensed financial statements.
5
INDIANA UNITED BANCORP
FORM 10-Q
CONSOLIDATED CONDENSED STATEMENT OF CASH FLOWS
(UNAUDITED)
(DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA)
Nine months ended
September 30
1999 1998
---- ----
Cash flows from operating activities:
Net income $ 5,152 $ 4,642
Adjustments to reconcile net income to net cash
provided by operating activities:
Provision for loan losses 1,104 858
Depreciation and amortization 1,180 895
Amortization of intangibles 1,223 184
Investment securities (gains) losses 8 (36)
Change in loans held-for-sale 6,507 (2,752)
Other adjustments 416 (2,594)
--------- ---------
Net cash provided by operating activities 15,590 1,197
--------- ---------
Cash flows from investing activities:
Purchases of held-to-maturity securities (3,533) (959)
Proceeds from maturities and paydowns
Of securities held-to-maturity 4,759 4,817
Purchases of securities available for sale (107,081) (59,606)
Proceeds from maturities and paydowns
Of securities available for sale 33,942 17,809
Proceeds from sales of securities available for sale 10,697 6,040
Net change in loans (66,670) (25,278)
Purchases of premises and equipment (3,192) (1,495)
Net change in deposits with other financial
Institutions 500 (499)
Other investment activities -- 271
Cash received from branch acquisitions 92,535 64,871
--------- ---------
Net cash provided (used) by investing activities (38,043) 5,971
--------- ---------
Cash flows from financing activities:
Net change in deposits (10,424) (9,228)
Short-term borrowings 9,987 (6,168)
Proceeds of long term debt 8,000 --
Pay-down on long term debt (1,300)
Proceeds from issuance of stock -- 520
Cash dividends (2,318) (1,980)
--------- ---------
Net cash provided (used) by financing activities 3,945 (16,856)
Net decrease in cash and cash equivalents (18,508) (9,688)
Cash and cash equivalents, beginning of period 45,435 73,213
--------- ---------
Cash and cash equivalents, end of period $ 26,927 $ 63,525
========= =========
See notes to consolidated condensed financial statements
6
INDIANA UNITED BANCORP
FORM 10-Q
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(DOLLAR AMOUNTS IN THOUSANDS EXCEPT PER SHARE DATA)
NOTE 1.
- -------
The significant accounting policies followed by Indiana United Bancorp
("Company"), its wholly owned bank subsidiaries, Union Bank and Trust Company of
Indiana ("Union Bank"), Regional Federal Savings Bank ("Regional Bank") and
People's Trust Company ("People's"), and its subsidiary IUB Capital Trust, for
interim financial reporting are consistent with the accounting policies followed
for annual financial reporting. On April 30, 1998, the Company completed the
merger with P.T.C. Bancorp ("PTC"), Brookville, Indiana. The transaction was
accounted for using the pooling-of-interests method of accounting. Company
results reported herein include the financial position and results of operations
of the Company combined with the financial position and results of operations of
P.T.C. as if the merger had occurred on January 1, 1998. All adjustments,
consisting only of normal recurring adjustments, which in the opinion of
management are necessary for a fair presentation of the results for the periods
reported, have been included in the accompanying consolidated financial
statements. The results of operations for the nine months ended September 30,
1999 are not necessarily indicative of those expected for the remainder of the
year.
NOTE 2.
- -------
On July 31, 1998, the Company approved a 2-for-1 stock split, under which each
share of its common stock outstanding at the close of business on August 17,
1998 was converted into two shares of common stock. The additional certificates
were distributed to stockholders on August 31, 1998. As a result of the stock
split, the number of shares outstanding increased from 2,387,314 to 4,774,628
shares. Unless otherwise noted, all share and per share data have been restated
for the 2-for-1 stock split.
NOTE 3.
- -------
During 1999, the Company purchased four branches within its target market areas.
The branch acquisitions were completed during the quarter ended March 31,1999
and resulted in the purchase of $ 104,100 in deposits, $600 in fixed assets and
$1,900 million in loans. The premium paid for these branches was $ 11,500. The
Company opened two new branches "de novo" in late April 1999. These branches are
located in Chesterfield, and Anderson, Indiana.
NOTE 4.
- -------
On May 31, 1999, the Company acquired the property and casualty insurance
business of Andy Anderson Insurance Agency, Inc. d/b/a/ The Anderson Group,
Owensboro, Kentucky ("The Anderson Group"). The acquisition was effected through
a merger transaction in which The Anderson Group was merged into a newly formed
subsidiary of the Company, The Insurance Group, Inc. ("The Insurance Group"),
7
INDIANA UNITED BANCORP
FORM 10-Q
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(DOLLAR AMOUNTS IN THOUSANDS EXCEPT PER SHARE DATA)
NOTE 4 (CONT'D)
- ---------------
formed for the purpose of effecting the merger transaction. In this merger
transaction, the Company issued 80,913 shares of its common stock to The
Anderson Group shareholders, increasing the number of outstanding shares of
common stock to 4,855,541. The transaction has been accounted for under the
purchase method of accounting.
Subsequently, the Company caused The Insurance Group to become a wholly owned
subsidiary of Union Bank and Trust by transferring its ownership in The
Insurance Group to that bank subsidiary. The general lines insurance business
previously conducted by Union Bank and Trust in Greensburg and Portland, Indiana
will be conducted through The Insurance Group subsidiary.
NOTE 5.
- -------
September 30,1999 December 31,1998
Amortized Fair Amortized Fair
Securities Available for Sale Cost Value Cost Value
- ----------------------------- ---- ----- ---- -----
Federal agencies $143,478 $140,967 $ 96,903 $ 97,975
State and municipal 25,663 24,457 9,627 9,822
Corporate and other securities 28,360 27,803 29,590 29,382
Mortgage-backed securities 40,630 40,231 38,545 38,709
Federal Home Loan Bank Stock 2,232 2,232 2,120 2,120
-------- -------- -------- --------
Totals $240,363 $235,690 $176,785 $178,008
======== ======== ======== ========
September 30,1999 December 31,1998
Amortized Fair Amortized Fair
Securities Held to Maturity Cost Value Cost Value
- --------------------------- ---- ----- ---- -----
State and municipal $ 17,311 $ 17,220 $ 18,609 $ 18,936
Corporate and other securities 1,020 1,086 982 1,080
-------- -------- -------- --------
Totals $ 18,331 $ 18,306 $ 19,591 $ 20,016
======== ======== ======== ========
NOTE 6
- ------
September 30 December 31
1999 1998
---- ----
Loans
Commercial and industrial loans $ 41,606 $ 29,084
Agricultural production financing 17,894 14,983
Farm real estate 40,983 36,906
Commercial real estate mortgage 84,143 95,800
Residential real estate mortgage 293,213 246,491
Construction and development 37,417 30,772
Consumer 80,706 70,966
State and political 9,069 13,249
Government guaranteed loans purchased 796 1,153
-------- --------
Total loans $605,827 $539,404
======== ========
8
INDIANA UNITED BANCORP
FORM 10-Q
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(DOLLAR AMOUNTS IN THOUSANDS EXCEPT PER SHARE DATA)
1999 1998
==== ====
Non-performing loans
Non-accrual loans $3,980 $3,709
Accruing loans contractually past due 90 days
or more as to principal or interest payments 594 195
------ ------
Total non-performing loans $4,574 $3,904
====== ======
1999 1998
==== ====
Allowance for loan losses:
Balances January 1 $6,099 $5,451
Provision for losses 1,104 858
Recoveries on loans 232 239
Loans charged off (635) (618)
------ ------
Balance, September 30, $6,800 $5,930
====== ======
NOTE 7.
- -------
September 30 December 31
1999 1998
---- ----
Deposits:
Non-interest-bearing demand $ 77,661 $ 66,102
Interest-bearing demand 213,579 159,661
Savings 77,408 75,272
Certificates of deposit $100,000 or more 76,058 68,821
Other certificates and time deposits 358,654 340,015
-------- --------
Total deposits $803,360 $709,871
======== ========
NOTE 8.
- -------
September 30 December 31
1999 1998
---- ----
Short-term borrowings:
Federal funds purchased $ 4,500
Securities sold under repurchase agreements 19,623 $19,607
U.S. Treasury demand notes 2,896 425
------- -------
Total short-term borrowings $22,519 $20,032
======= =======
9
INDIANA UNITED BANCORP
FORM 10-Q
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(DOLLAR AMOUNTS IN THOUSANDS EXCEPT PER SHARE DATA)
NOTE 9.
- -------
EARNINGS PER SHARE (EPS) WERE COMPUTED AS FOLLOWS:
FOR THREE MONTHS ENDED
September 30 September 30
1999 1998
---- ----
Weighted Per Weighted Per
Basic earnings per Net Average Share Net Average Share
share: Income Shares Amount Income Shares Amount
------ ------ ------ ------ ------ ------
Income available
to common
shareholders $1,850 4,855,541 $0.38 $1,728 4,774,628 $0.36
====== ========= ===== ====== ========= =====
FOR NINE MONTHS ENDED
Basic earnings per
share:
Income available
To common
shareholders $5,152 4,810,787 $1.07 $4,642 4,746,070 $0.98
------ ------
Effect of dilutive
securities 16,596
------
Diluted earnings per share:
Income available
to common
shareholders
and assumed
conversion $5,152 4,810,787 $1.07 $4,642 4,762,666 $0.97
====== ========= ===== ====== ========= =====
10
INDIANA UNITED BANCORP
FORM 10-Q
MANAGEMENT'S DISCUSSION AND ANALYSIS
(DOLLAR AMOUNTS IN THOUSANDS EXCEPT PER SHARE DATA)
FORWARD-LOOKING STATEMENTS
Except for historical information contained herein, the discussion in this Form
10-Q quarterly report includes certain forward-looking statements based upon
management expectations. Factors which could cause future results to differ from
these expectations include the following: general economic conditions;
legislative and regulatory initiatives; monetary and fiscal policies of the
federal government; deposit flows; the cost of funds; general market rates of
interest; interest rates on competing investments; demand for loan products;
demand for financial services; changes in accounting policies or guidelines; and
changes in the quality or composition of the Company's loan and investment
portfolios.
The Company does not undertake and specifically disclaims any obligation to
update any forward-looking statements to reflect the occurrence of anticipated
or unanticipated events or circumstances after the date of such statements.
OVERVIEW
- --------
STRATEGIC PLAN
The 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 pursuing strategies that will
continue to preserve its community-focused philosophy. The dynamics of the Plan
assure continually evolving goals and 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.
BUSINESS COMBINATION
On April 30, 1998, the Company completed the merger with P.T.C.Bancorp,
Brookville, Indiana. The transaction was accounted for using the
pooling-of-interests method of accounting. The Company issued 2,272,834 shares
of its common stock to shareholders of PTC. Merger and related costs of $926
were charged against net income during the quarter ended June 30, 1998. The
financial information contained herein reflects the merger and reports the
financial condition and results of operations as though the merger occurred as
of January 1, 1998.
ACQUISITION OF PROPERTY AND CASUALTY INSURANCE BUSINESS
On May 31, 1999, the Company acquired the property and casualty insurance
business of Andy Anderson Insurance Agency, Inc. d/b/a/ The Anderson Group,
Owensboro, Kentucky ("The Anderson Group"). The acquisition was effected through
a merger transaction in which The Anderson Group was merged into a newly formed
subsidiary of the Company, The Insurance Group, Inc. ("The Insurance Group"),
formed for the purpose of effecting the merger transaction. In this merger
transaction, the Company
11
INDIANA UNITED BANCORP
FORM 10-Q
MANAGEMENT'S DISCUSSION AND ANALYSIS
(DOLLAR AMOUNTS IN THOUSANDS EXCEPT PER SHARE DATA)
issued 80,913 shares of its common stock to The Anderson Group shareholders,
increasing the number of outstanding shares of common stock to 4,855,541. The
transaction has been accounted for under the purchase method of accounting.
Subsequently, the Company caused The Insurance Group to become a wholly owned
subsidiary of Union Bank and Trust by transferring its ownership in The
Insurance Group to that bank subsidiary. The general lines insurance business
previously conducted by Union Bank and Trust in Greensburg and Portland, Indiana
will be conducted through The Insurance Group subsidiary.
BUSINESS STRATEGY
The Company holds either first or second market share positions as measured by
total deposits in several of the markets it serves and intends to pursue growth
strategies that result in meaningful market share positions in other rural or
suburban communities. The Company has sought to identify potential acquisitions
in markets that offer prospects of benefiting from its community banking
philosophy and will likely result in meaningful market share.
In conformity with this strategy, the Company on April 30, 1998 merged with PTC,
a bank holding company headquartered in Brookville, Indiana with total assets of
$322,000. The transaction was regarded by both companies as a merger of equals
and has integrated the management and directors of both organizations.
PTC was also community focused, serving rural communities with populations of 10
thousand or less in markets contiguous to the Company's existing locations. PTC
conducted its banking business through 17 offices located in the Indiana
counties of Dearborn, Franklin, Henry, Jefferson, Ripley, Rush, Fayette,
Switzerland and Wayne.
Many larger mid-west banking companies have had an accelerated program of branch
divestitures. Many of these branch locations have been in communities that are
compatible with the Company's growth strategies. The Company has bid
competitively in order to expand its presence in these targeted markets.
The Company previously reported acquiring three branches in Alexandria,
Anderson, and Fortville, Indiana having deposits of approximately $32,000.
Subsequently, the Company acquired a branch in Frankton, Indiana. To complement
this geographic symmetry of locations within 15 miles of Anderson, the Company
acquired two branch facilities: one in Chesterfield, Indiana and the other in
Anderson. These branches opened "de-novo" as no deposits accompanied the
purchase in late April of this year. Alexandria, Anderson and Fortville were
converted on July 17, 1998, with the Frankton purchase completed in December.
These branches are now integrated into Union Bank and represent deposits of
approximately $70,000 in the greater Anderson market.
The Company also acquired three branches strategically located in Regional
Bank's market. These branches are located in Charlestown, Georgetown, and
Galena, Indiana and added more than $55,000 of deposits to Regional Bank's
customer base in Clark and Floyd counties. These branches were converted in
September 1998.
12
INDIANA UNITED BANCORP
FORM 10-Q
MANAGEMENT'S DISCUSSION AND ANALYSIS
(DOLLAR AMOUNTS IN THOUSANDS EXCEPT PER SHARE DATA)
In the quarter ended March 31, 1999 the Company acquired four branches located
in or adjacent to People's Trust Company's market. One of these branches is
located in Cambridge City, which is in Wayne County where People's Trust Company
already operates three offices. Two offices are in New Castle and one office is
in Knightstown and all three are located in the adjacent county of Henry. This
acquisition added $100,000 of deposits to People's customer base, which now
operates 20 offices in nine eastern and southeastern counties of Indiana. In
March of 1999 PTC closed the Arlington, Indiana branch and merged it with the
Rushville, Indiana branch due to the low business volume. Prior to this it had
been operated on part-time basis.
Management realized that if the Company was successful in increasing assets
significantly through branch acquisitions, the regulatory capital of the Company
would have been below levels acceptable to management and regulatory
authorities. In preparation for significant growth, the Company issued $22,425
of cumulative Trust Preferred Securities in December 1997. These securities are
used to meet regulatory capital requirements within prescribed limits. The
Company has utilized a portion of the net proceeds received to retire its
long-term debt and employed the remaining funds to finance growth which included
branch acquisitions, the establishment of de novo branches, possible
acquisitions of other financial institutions and various other corporate
purposes.
While the Company has been successful in achieving the deposit growth levels
anticipated, the interest cost of the Trust Preferred Securities will have an
adverse affect on 1999 results because the integration of more than $225 million
of deposits into the Company has not been immediately offset by a like amount of
quality credits. Management believes its growth strategies will lead to
increased opportunities and profitability and is in the best interests of
shareholders in the long-term.
YEAR 2000 COMPUTER ISSUES
The Year 2000 Issue refers to a number of date-related problems that may affect
software applications, including codes imbedded in chips and other hardware
devices. These problems include software programs that identify a year by the
last two digits so that a year identified as "00" would be recognized as the
year "1900" rather than the year "2000."
STATE OF READINESS
The company has completed the process of identifying and assessing the extent to
which the Year 2000 Issue could affect its equipment, business systems, and
products. As part of its Year 2000 issue assessment, the company has taken into
account whether third parties, with which the Company has material
relationships, including the U.S. Government and Federal Reserve System, are
Year 2000 compliant. The Company's formalized plan is comprised of the following
phases; (1) development of plan; (2) development of an inventory and assessment
of risks; (3) Identification of internally developed software; (4) testing of
all vendor and non-vendor developed software; (5) implementation of upgrades or
replacement of non-compliance items; and (6) developing
13
INDIANA UNITED BANCORP
FORM 10-Q
MANAGEMENT'S DISCUSSION AND ANALYSIS
(DOLLAR AMOUNTS IN THOUSANDS EXCEPT PER SHARE DATA)
of a contingency and recovery plan for unforeseen events. The Company has
completed the first five phases and is continuing in the contingency and
recovery mode in anticipation of any unusual situations.
COSTS
The Company's expenses have been limited to internal costs incurred in the Year
2000-issue assessment process. The Company does not separately track such
internal costs which are principally associated with payroll expenses, but
estimates that the Year 2000 compliance costs for 1998 and the first half of
1999 were minimal. The Company estimates that the total costs of the Company's
formalized plan, as described above, will be approximately $150. However, there
can be no assurance that the Company will not incur any unanticipated costs in
completing its Year 2000 Compliance Project.
RISKS
As a result of completing the first two phases of its formalized plan, the
Company has identified and developed remediation plans for some significant
risks. These risks relate to vendors, suppliers, distributors, customers, and
other third parties, as well as the Company's own internal information and
operation systems. Any failure by the Company or third parties to ensure that
the applicable computer systems are Year 2000 compliant could have a material
adverse effect on the Company's operations, liquidity and financial position.
Any failure of the Company's products to perform could result in claims against
the Company.
CONTINGENCY PLANS
The Company has and will continue to develop contingency strategies, as
appropriate, as part of its Year 2000 plan. These contingency strategies include
identifying alternate suppliers, developing procedures to override internal
computer systems, increasing inventory levels, and reallocating internal
resources as necessary.
RESULTS OF OPERATIONS
Earnings for the third quarter of 1999 increased 7.06% to $1,850 as compared to
the same quarter of 1998. Earnings for the first three quarters of 1999
increased 10.99% to $5,152 as compared to the same period in 1998.
Net interest income, non-interest income and non-interest expense all increased
for comparable periods disclosed. Merger expenses of $926 were recorded in the
second quarter of 1998.
Per share earnings (diluted) for the third quarter equaled $.38 in 1999,
compared to $.36 in 1998. Per share earnings (diluted) for the three quarters of
1999 and 1998 were $1.07 and $.97 respectively.
The Company's return on average total assets for the third quarter was .78% in
1999 compared to .96% in 1998. Year-to-date return on average assets was .75%
and .89%
14
INDIANA UNITED BANCORP
FORM 10-Q
MANAGEMENT'S DISCUSSION AND ANALYSIS
(DOLLAR AMOUNTS IN THOUSANDS EXCEPT PER SHARE DATA)
for 1999 and 1998. Return on average shareholders' equity for the third quarter
was 12.41% in 1999 and 11.41% in 1998. Year-to-date return on average
shareholders' equity was11.57% and 10.90% for 1999 and 1998 respectively.
NET INTEREST INCOME
The volume and yield of earning assets and the cost of interest-bearing
liabilities influence net interest income. Net interest margin reflects the mix
of interest-bearing and non-interest-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. Third quarter net interest
income of $8,189 in 1999 increased 24.43% from $6,581 in 1998. The first nine
months of net interest income increased by $3,307 or 17.10% over the same period
in 1998.
Throughout the past two years, the Company employed a deposit-pricing strategy
focused on retaining and attracting lower cost short-to-moderate term funds.
Management correctly anticipated a relatively flat interest rate environment
throughout this period. The Company believes this strategy greatly enhanced net
interest income and will also have a positive effect on current year earnings.
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
Third quarter non-interest income in 1999 exceeded the prior year by $31 or
2.34%. Non-interest income in the first nine months of 1999 exceeded the prior
year period by $417 or 10.35%. Security losses of $8 were realized in the first
nine months of 1999 compared to a $36 gain for the same nine month period last
year.
Service charges for the respective third quarters of 1999 and 1998 were $674 and
$474. This also increased for the first nine months of 1999 over the same period
in 1998 by $556 primarily due to continued growth in interest-bearing checking
accounts. Deposit growth and interest rate variables affect service charge
income. Trust income for the nine months increased $33 over 1998 due to estate
income and a strong stock market. The level of estate assets administered may
cause trust income to fluctuate significantly from year to year.
Mortgage banking income, which consists of gains (losses) on loan sales and
service fee income was $250 lower for the third quarter of 1999 compared to the
same period in 1998, and $514 less for the nine month period ended September 30,
1999 compared to the same period in 1998. Decreased mortgage origination sales
activity began late in 1998 and has continued. During this period of time, the
long-term interest rates charged on mortgages increased and the Company
experienced reduced refinancing and origination activity of a saleable nature.
15
INDIANA UNITED BANCORP
FORM 10-Q
MANAGEMENT'S DISCUSSION AND ANALYSIS
(DOLLAR AMOUNTS IN THOUSANDS EXCEPT PER SHARE DATA)
NON-INTEREST INCOME
Three months Nine months
Ended ended
September 30 September 30
1999 1998 1999 1998
---- ---- ---- ----
Trust fees $ 81 $ 72 $248 $215
Insurance commissions 220 131 549 397
Mortgage banking income 44 294 807 1,321
Service charges on deposit accounts 674 474 1,925 1,369
Gain (loss) on sales of securities 5 24 (8) 36
Other income 333 331 924 690
------ ------ ------ ------
Total $1,357 $1,326 $4,445 $4,028
====== ====== ====== ======
NON-INTEREST EXPENSE
The largest component of non-interest expense is personnel expense. Personnel
expenses increased in the first nine months of 1999 by $2,200, or 28.62% as
compared to the prior year period. Normal staff salary adjustments and increased
benefit costs were incurred in both 1999 and 1998 as well as the cost of
staffing 12 new branches since June 30 of last year. Salary expense for the net
additional branches accounts for $1,800 of the increase to date.
The increases in premises and equipment expense for both the current quarter and
year to date 1999 over 1998 are due to the increase in the number of branches
discussed earlier.
The increase in professional fees for the three months ended September 30, 1999
versus the same period in 1998 are the result of cost allocations between and
timing of merger costs and regular professional fees in 1998.
Amortization of core deposit intangibles and goodwill for both the quarter and
nine month period of 1999 exceeded comparable periods 1998 as the result of
amortization of premiums paid on branches and deposits acquired (net 12) over
the past 18 months.
Deposit insurance premiums for the first nine months were $2 more in 1999 than
the prior year period due to higher levels of deposits combined with a refund
received by Regional. Since the Bank Insurance Fund ("BIF") reached a mandated
funding level in 1995, the assessment rate for the Company's commercial banks
was reduced to the $2 minimum level permissible in 1996, and increased to 1.29
cents per $100 of deposits in 1998 and 1997, which is the lowest prevailing
assessment rate.
A ratio frequently used to measure the efficiency of a financial institution is
computed by dividing non-interest expense by the total of tax-effected net
interest income plus non-interest income excluding securities gains or losses.
The lower the ratio, the more efficient the Company is in managing net interest
margin, non-interest income and non-interest expense. The Company's efficiency
ratios were 65.67% for the first three quarters of 1999 compared to 65.05% for
the same period in 1998. The change in the
16
INDIANA UNITED BANCORP
FORM 10-Q
MANAGEMENT'S DISCUSSION AND ANALYSIS
(DOLLAR AMOUNTS IN THOUSANDS EXCEPT PER SHARE DATA)
efficiency ratio is due to a combination of increased cost of the additional
branches combined with lower net interest margin that will exist until the
deposits of these branches can be more profitably invested in loans.
NON INTEREST EXPENSE Three months Nine Months
ended ended
Sep 30 Sep 30
1999 1998 1999 1998
---- ---- ---- ----
Salaries and employee benefits $3,385 $2,766 $9,886 $7,686
Premises and equipment expenses 866 723 2,604 2,107
Professional fees 142 92 356 295
Amortization of core deposit intangibles and goodwill
454 152 1,223 279
Deposit insurance/supervisory assessment 21 30 101 99
Merger expenses -- -- -- 926
Other operating expenses 1,509 1,185 4,064 3,418
------ ------ ------- -------
Total $6,377 $4,948 $18,234 $14,810
====== ====== ======= =======
INCOME TAXES
The effective tax rate for the first nine months was 33.53% for 1999 and 39.69%
for 1998. The Company and its subsidiaries will file consolidated income tax
returns for 1999.
FINANCIAL CONDITION
Total assets at September 30, 1999 increased $109,459 since the end of 1998.
Average earning assets represented 93.06% of average total assets for the first
nine months of 1999 compared to 94.83% for the same period of 1998. The addition
of new fixed assets and deposit premium connected with the branch acquisitions
has been the major factor in the decrease of this ratio. Average loans
represented approximately 73.01% of average deposits in the first nine months of
1999 and 83.26% for a comparable period in 1998. Management intends to continue
its emphasis on loan growth throughout 1999, to increase these averages. Average
loans as a percent of assets were 62.90% and 70.62% for the nine month period
ended September 30, 1999 and 1998 respectively.
The increase in deposits of $93,489 from December 31, 1998 to September 30, 1999
is due mainly to the branch acquisitions mentioned previously. Long term debt in
1999 represented the Company's loan for the purchase of the PTC branches in
1999. In February the Company borrowed $8,000 from National City Bank at a
floating rate based upon LIBOR. This borrowing was paid down to $6,700 in August
of 1999. In addition the Company established a $3,000 line of credit as a cash
management tool. Federal Home Loan Bank ("FHLB") advances represented the
balance of long-term debt as of the 1999 and 1998 dates. The FHLB advances were
used to fund loans and other earning assets of Regional Bank.
17
INDIANA UNITED BANCORP
FORM 10-Q
MANAGEMENT'S DISCUSSION AND ANALYSIS
(DOLLAR AMOUNTS IN THOUSANDS EXCEPT PER SHARE DATA)
Trust Preferred Securities in the amount of $22,425 were issued on December 9,
1997. The holders of the Trust Preferred Securities are entitled to receive
preferential cumulative cash distributions, payable quarterly, at the annual
rate of 8.75% of the liquidation amount of $10 per security. The Company has the
right, so long as no default has occurred, to defer payment of interest at any
time, or from time to time for a period not to exceed 20 consecutive quarters
with respect to each deferral period. Currently, management has no intention of
deferring the payment of interest. The Trust Preferred Securities have a
preference under certain circumstances with respect to cash distributions and
amounts payable on liquidation, redemption or otherwise over the common stock.
The holders of the Trust Preferred Securities have no voting rights except in
limited circumstances.
The Trust Preferred Securities are traded on the NASDAQ National Market under
the symbol "IUBCP". The Trust Preferred Securities are not insured by the BIF,
SAIF or FDIC, or by any other governmental agency. The Trust Preferred
Securities qualify as Tier 1 capital or core capital with respect to the Company
under the risk based capital guidelines established by the Federal Reserve.
Under such guidelines, the Trust Preferred Securities cannot constitute more
than 25% of the total core capital of the Company. The amount of Trust Preferred
Securities in excess of the 25% limitation will constitute Tier 2 capital, or
supplementary capital, of the Company.
Shareholders' equity was $59,795 on September 30,1999 compared to $59,196 on
December 31, 1998. Book value per common share decreased to $12.31 or .73% from
$12.40 at year-end 1998. The unrealized loss on securities available for sale,
net of taxes, totaled $2,967 or $.61 per share at September 30, 1999 compared to
an unrealized gain of $ 704 or $.15 per share at December 31, 1998. Excluding
the net unrealized gains and losses on securities available for sale, book value
per share would be $12.93 at September 30, 1999 or an increase of 5.55% over the
comparable book value at year-end 1998.
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
charge-offs.
The Company's conservative loan underwriting standards have historically
resulted in higher loan quality and lower levels of net charge-offs than peer
bank averages. The Company also believes credit risks may be elevated if undue
concentrations of loans in specific industry segments and to out of area
borrowers are incurred. Accordingly, the Company's Board of Directors regularly
monitors such concentrations to determine compliance with its loan allocation
policy. The Company believes it has no undue concentrations of loans.
Total loans increased $66,423 or 12.31% since December 31, 1998 spread across
the variety of loans the Company participates in. The greatest increase is in
the mortgage
18
INDIANA UNITED BANCORP
FORM 10-Q
MANAGEMENT'S DISCUSSION AND ANALYSIS
(DOLLAR AMOUNTS IN THOUSANDS EXCEPT PER SHARE DATA)
loan portfolio due largely to originations in the current mortgage interest rate
environment.
Residential real estate loans continue to represent a significant portion of the
total loan portfolio. Such loans represented 48.40% of total loans at September
30, 1999 and 45.70% at December 31, 1998.
The Company's recent emphasis on increasing consumer loans has provided greater
diversification within the portfolio and generated higher gross yields than
residential real estate loans.
On September 30, 1998, the Company had $4,465 of residential real estate loans
held for sale. Prior to the merger with PTC, the Company traditionally made
loans only for its own portfolio and did not follow the practice of many other
financial institutions of originating loans for sale in the secondary market.
People's had engaged in mortgage banking activities for a period of time. In
early 1999, mortgage loan sales activity stagnated and has continued to the
present time and as a result the portfolio of shorter term mortgages increases.
The Company regards its ability to identify and correct loan quality problems as
one of its greatest strengths. Loans are placed on non-accrual status when in
management's judgment the collateral value and/or the borrower's financial
condition do not justify accruing interest. As a general rule, commercial and
real estate loans are reclassified to non-accruing 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 payments
collected on non-accrual loans may thereafter be recognized as interest income
or may be applied as a reduction of the loan balance, as circumstances warrant.
Non-real estate secured consumer loans are not placed in non-accruing status,
but are charged off when policy-determined delinquent status is reached. The
provision for loan losses was $1,104 in the first nine months of 1999 compared
to $858 the same period in 1998. The provisions in 1999 and 1998 reflected both
overall loan growth and an increase in greater risk-profile consumer loans.
Net charge-offs were $403 for the first nine months of 1999 compared to $379 for
the comparable period in 1998. As a percentage of average loans, net charge-offs
equaled .07 % and .08% respectively for the nine month period ended September
30, 1999 and 1998. On a quarter to quarter basis the net charge-offs were $165
and $180 for 1999 and 1998 respectively. In prior years, the Company
outperformed its peer group's net loan loss average and that trend is expected
to continue in 1999. Management is not aware of any trend which is likely to
cause the level of net charge-offs in 1999 to materially exceed the level of
charge-offs experienced in 1998, beyond the impact of loans acquired as the
result of the purchase of branches.
Foreclosed real estate held by the Company at September 30, 1999 was $209 and
$54 at December 31, 1998.
Management maintains a listing of loans warranting either the assignment of a
specific reserve amount or other special administrative attention. The Board of
Directors of each
19
INDIANA UNITED BANCORP
FORM 10-Q
MANAGEMENT'S DISCUSSION AND ANALYSIS
(DOLLAR AMOUNTS IN THOUSANDS EXCEPT PER SHARE DATA)
subsidiary reviews this listing monthly, together with a listing of all
classified loans, non-accrual loans and loans delinquent 30 days or more.
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
prompt, aggressive collection actions are much lower than losses incurred after
prolonged legal proceedings. Accordingly, the Company observes the practice of
quickly initiating stringent collection efforts in the 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 September 30, 1999 is
considered adequate by management.
INVESTMENT SECURITIES
Investment securities offer flexibility in the Company's management of interest
rate risk, and are an important source of liquidity as a response to changing
characteristics of assets and liabilities. The Company's investment policy
prohibits trading activities and does not allow investment in high-risk
derivative products, junk bonds or foreign investments.
As of September 30, 1999, $235,690 of investment securities are classified as
"available for sale" ("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. An unrealized pre-tax loss of $4,673 was
recorded to adjust the AFS portfolio to current market value at September 30,
1999, compared to an unrealized pre-tax gain of $1,223 at December 31, 1998.
Since 1997, the Company has lengthened the maturity of security purchases,
relative to the present balance of the portfolio. In the current interest rate
environment, with a flat yield curve, most security purchases have had a stated
maturity not exceeding five years.
SOURCES OF FUNDS
The Company relies primarily on customer deposits, securities sold under
repurchase agreements ("Repos") and shareholders' equity to fund earning assets.
FHLB advances are also used to provide additional funding.
Deposits generated within local markets provide the major source of funding for
earning assets. Total deposits funded 92.31% and 92.41% of total earning assets
at September 30, 1999 and 1998. Total interest-bearing deposits averaged 90.54%
and 90.62% of average total deposits for the periods ending September 30, 1999
and 1998,
20
INDIANA UNITED BANCORP
FORM 10-Q
MANAGEMENT'S DISCUSSION AND ANALYSIS
(DOLLAR AMOUNTS IN THOUSANDS EXCEPT PER SHARE DATA)
respectively. Management constantly strives to increase the percentage of
transaction-related deposits to total deposits due to the positive effect on
earnings.
Short-term borrowings increased $2,487 or 12.42% primarily due to the increase
in the use of Repos. Repos are high denomination investments utilized by public
entities and commercial customers as an element of their cash management
responsibilities. 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 do not offer as much cost advantage as previously experienced.
Management has utilized large denomination certificates of deposit since
year-end 1996 to replace a portion of customer funds previously invested in
Repos.
The Company has two FHLB advances, one for $10,000 that matures in early 2002
and one for $7,500 that is on a day-to-day basis. In February,1999 the Company
borrowed $8,000 in long term debt (see Financial Condition section)
CAPITAL RESOURCES
Total shareholders' equity increased $599 to $59,795 at September 30, 1999 as
compared to December 31, 1998.
The Federal Reserve Board and other regulatory agencies have adopted risk-based
capital guidelines that assign risk weightings to assets and off-balance sheet
items. The Company's core capital consists of shareholders' equity less AFS
adjustment, while Tier 1 consists of core capital less goodwill and intangibles.
Trust preferred securities qualify as Tier 1 capital or core capital with
respect to the Company under the risk-based capital guidelines established by
the Federal Reserve. Under such guidelines, capital received from the proceeds
of the sale of trust preferred securities cannot constitute more than 25% of the
total core capital of the Company. Consequently, the amount of trust preferred
securities in excess of the 25% limitation will constitute Tier 2 capital of the
Company. Total regulatory capital consists of Tier 1, certain debt instruments
and a portion of the allowance for credit losses. At September 30, 1999, Tier 1
capital to total average assets was 6.50%. Tier 1 capital to risk-adjusted
assets was 10.14%. Total capital to risk-adjusted assets was 11.56%. All three
ratios substantially exceed all required ratios established for bank holding
companies. Risk-adjusted capital levels of the Company's subsidiary banks exceed
regulatory definitions of well-capitalized institutions.
The Company declared and paid common dividends of $.48 per share in the first
nine months of 1999 and $.435 for the same period in 1998. Book value per common
share at September 30, 1999 decreased to $12.31 from $12.40 at year-end 1998.
The net adjustment for AFS securities decreased book value by $.61 at September
30, 1999 and increased book value by $.15 at December 31, 1998. Depending on
market conditions, the adjustment for AFS securities can cause significant
fluctuations in equity.
LIQUIDITY
21
INDIANA UNITED BANCORP
FORM 10-Q
MANAGEMENT'S DISCUSSION AND ANALYSIS
(DOLLAR AMOUNTS IN THOUSANDS EXCEPT PER SHARE DATA)
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 liquid earning assets, and higher interest
expense involved in extending liability maturities. Liquid assets include cash
and cash equivalents, loans and securities maturing within one year, and money
market instruments. In addition, the Company holds AFS securities maturing after
one year, which can be sold to meet liquidity needs.
Maintaining a relatively stable funding base, which is achieved by diversifying
funding sources and extending the contractual maturity of liabilities, supports
liquidity and limits reliance on volatile short-term purchased funds. Short-term
funding needs arise from declines in deposits or other funding sources, funding
of loan commitments and requests for new loans. The Company's strategy is to
fund assets to the maximum extent possible with core deposits that provide a
sizable source of relatively stable and low-cost funds. Average core deposits
funded approximately 79.16% of total earning assets for the nine months ended
September 30, 1999 compared to approximately 76.90% for the comparable period
ended September 30, 1998.
Management believes the Company has sufficient liquidity to meet all reasonable
borrower, depositor, and creditor needs in the present economic environment. In
addition, the affiliates have access to the Federal Home Loan Bank for borrowing
purposes. The Company has not received any recommendations from regulatory
authorities that would materially affect liquidity, capital resources or
operations.
RATE SENSITIVITY AND INTEREST RATE RISK
At September 30, 1999, the Company held approximately $ 303,288 in assets
comprised of securities, loans, short-term investments, and federal funds sold,
which were interest sensitive in one year or less time horizons. Core deposits
are distributed or spread among the various re-pricing categories based upon
historical patterns of re-pricing, which are reviewed periodically by
management. The assumptions regarding these re-pricing 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 liabilities to total assets are kept within a range of 80% to
130%. The Company will seek to attain a neutral gap position in 1999 based upon
its belief that the current interest rate environment will experience
incremental changes but will not be volatile in 1999. In any event, the Company
does not anticipate that its earnings will be materially impacted in 1999,
regardless of the extent or the direction interest rates may vary.
Asset/liability management strategies are developed by the Company to manage
market risk. Market risk is the risk of loss in financial instruments including
investments, loans, deposits and borrowings arising from adverse changes in
prices/rates. Interest rate risk is the Company's primary market risk exposure,
and represents the sensitivity of
22
INDIANA UNITED BANCORP
FORM 10-Q
MANAGEMENT'S DISCUSSION AND ANALYSIS
(DOLLAR AMOUNTS IN THOUSANDS EXCEPT PER SHARE DATA)
earnings to changes in market interest rates. Strategies are developed that
impact asset/liability committee activities based on interest rate risk
sensitivity, board policy limits, desired sensitivity gaps and interest rate
trends.
OTHER
The Securities and Exchange Commission ("Commission") maintains a Web site that
contains reports, proxy and information statements and other information
regarding registrants that file electronically with the Commission, including
the Company. That address is http://www.sec.gov.
23
INDIANA UNITED BANCORP
QUANTITATIVE AND QUALITATIVE DISCLOSURES
ABOUT MARKET RISK
(DOLLAR AMOUNTS IN THOUSANDS EXCEPT PER SHARE DATA)
Item 3. Quantitative and Qualitative Disclosures about Market Risk
PRINCIPAL CASH FLOWS AND WEIGHTED AVERAGE INTEREST RATES BY MATURITY DATES
ASSETS:
- -------
Fair
Investments 1999 2000 2001 2002 2003 Thereafter Total Value
---- ---- ---- ---- ---- ---------- ----- -----
Fixed 3,366 20,906 38,280 19,896 26,816 113,295 222,559 217,924
Rates 5.39% 5.22% 5.52% 5.40% 5.56% 6.02% 5.74%
Variable 0 4,000 1,488 0 0 30,647 36,135 36,072
Rates: 6.25% 5.03% 5.73% 0.00% 0.00% 6.36% 6.18%
Total Investments 258,694 253,996
Loans Fair
Months 12 13-24 25-36 37-48 49-60 Thereafter Total Value
-- ----- ----- ----- ----- ---------- ----- -----
Fixed 51,464 22,575 24,320 24,094 30,029 117,433 269,915 271,777
Rates: 8.44% 8.47% 8.99% 8.29% 8.32% 7.66% 8.08%
Variable 248,458 32,438 34,872 9,817 8,008 6,784 340,377 340,717
Rates: 8.19% 7.93% 8.03% 7.68% 7.67% 7.48% 8.03%
Total Loans 610,292 612,495
LIABILITIES:
NOW, MMDA & SAVINGS:
290,987 290,987 290,987
Rates: 2.39% 2.39%
Fair
CERTIFICATES OF DEPOSIT: 1999 2000 2001 2002 2003 Thereafter Total Value
---- ---- ---- ---- ---- ---------- ----- -----
Fixed & Variable 216,622 152,534 39,938 12,958 10,520 2,140 434,712 438,711
Rates 4.91% 5.06% 5.30% 5.44% 5.43% 5.29% 5.04%
Total CD's 434,712 438,711
Total Interest Bearing
Deposits 725,699 729,698
24
INDIANA UNITED BANCORP
QUANTITATIVE AND QUALITATIVE DISCLOSURES
ABOUT MARKET RISK
(DOLLAR AMOUNTS IN THOUSANDS EXCEPT PER SHARE DATA)
Fair
Borrowings: 1999 2000 2001 2002 2003 Thereafter Total Value
---- ---- ---- ---- ---- ---------- ----- -----
Fed Funds Purch. Rep.
Agree. & Demand Note
Fixed: 1,989 1,989 1,989
Rates 4.35% 4.35%
Variable 20,530 20,530 20,590
Rates: 4.50% 4.50%
Total 22,519 17,951
FHLB Advances
Fixed 10,000 10,000 10,000
Rate 5.35% 5.35%
Variable 7,500 7,500 7,500
Rate 5.75% 5.75%
Total 17,500 17,500
Long-term debt 6,700 6,700 6,700
Variable 7.10% 7.10%
Rates
Trust Preferred Market # Shares
Securities Price 2,242.5 22,425 21,864
Rates 9.75 8.75% 8.75%
The preceding table provides information about the Company's significant
financial instruments at September 30, 1999 that are sensitive to changes in
interest rates. The table presents principal cash flows and related weighted
average interest rates by maturity dates.
The table presents only a static measurement of asset and liability volumes
based on maturity, cash flow estimates and interest rates. It does not reflect
the differences in the timing and degree of repricing of assets and liabilities
due to interest rate changes. In analyzing interest rate sensitivity, management
considers these differences and incorporates other assumptions and factors, such
as balance sheet growth and prepayments, to better measure interest rate risk.
The Company cannot make any assurances as to the outcome of these assumptions,
nor can it assess the impact of customer product preference changes and
competitive factors as well as other internal and external variables. In
addition, this analysis cannot reflect actions taken by the asset/liability
management committees; therefore, this analysis should not be relied upon as
indicative of expected operating results.
25
INDIANA UNITED BANCORP
FORM 10-Q
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
a) The following exhibits are furnished in accordance with the
provisions of Item 601 of Regulation S-K.
27: Financial Data Schedule (electronic filing only)
b) Reports on Form 8-K
There were no reports filed on Form 8-K for the third quarter of
1999.
No other information is required to be filed under Part II of this form.
26
INDIANA UNITED BANCORP
FORM 10-Q
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
INDIANA UNITED BANCORP
November 4, 1999
By: /s/ James L.Saner Sr
--------------------------------------------
James L. Saner Sr
President and Chief Executive Officer
November 4,1999
By: /s/ Donald A. Benziger
--------------------------------------------
Donald A. Benziger
Senior Vice President & Chief Financial Officer
27