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FORM 10-QSB
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20552
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES ACT OF 1934
For the Quarterly Period Ended March 31, 2001
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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Commission File Number
0-24501
BLUE RIVER BANCSHARES, INC.
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(Exact name of small business issuer as specified in its charter)
Indiana 35-2016637
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
29 East Washington Street
Shelbyville, Indiana 46176
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(Address of principal executive office) (Zip Code)
Issuer's telephone number, including area code:
(317) 398-9721
Check whether the issuer (1) has filed all reports required to be filed by
section 13 or 15 (d) of the Securities Exchange Act of 1934 during the past 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
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As of March 31, 2001, there were 1,549,913 shares of the Registrant's Common
Stock issued outstanding.
Transitional Small Business Disclosure Format.
(Check one): Yes No X
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BLUE RIVER BANCSHARES, INC. AND SUBSIDIARY
INDEX
PAGE
NUMBER
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PART I. FINANCIAL INFORMATION:
Item 1. Financial Statements:
Consolidated Statement of Financial Condition (Unaudited)
as of March 31, 2001 3
Consolidated Statement of Operations (Unaudited)
three month periods ended March 31, 2001 and 2000 4
Consolidated Statements of Cash Flows (Unaudited)
three month periods ended March 31, 2001 and 2000 5
Notes to Consolidated Financial Statements (Unaudited) 6-7
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 8-12
PART II. OTHER INFORMATION: 13
Item 1. Legal Proceedings
Item 2. Changes in Securities and Use of Proceeds
Item 3. Defaults upon Senior Securities
Item 4. Submission of Matters to a Vote of Security Holders
Item 5. Other information
Item 6. Exhibits and Reports on Form 8-K
SIGNATURE PAGE 14
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BLUE RIVER BANCSHARES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF FINANCIAL CONDITION (Unaudited)
AS OF MARCH 31, 2001
ASSETS
Cash and due from banks $ 3,107,843
Interest-bearing deposits with banks 7,027,261
Investment securities available for sale 17,760,936
Investment securities held to maturity 322,136
Loans receivable, net 109,832,956
Stock of FHLB Indianapolis 2,153,000
Accrued interest receivable 1,043,401
Deferred and refundable income taxes 1,276,673
Premises and equipment, net 2,830,055
Real estate owned 12,406
Prepaid expenses and other assets 453,110
Goodwill, net 2,588,390
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TOTAL ASSETS $ 148,408,167
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LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES:
Deposits $ 122,399,911
FHLB advances 10,000,000
Accrued expenses and other liabilities 532,496
Accrued interest payable 862,705
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Total liabilities 133,795,112
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Commitments and contingencies
SHAREHOLDERS' EQUITY:
Common stock, without par value: 1,549,913 shares
issued and outstanding 16,579,196
Accumulated deficit (2,071,892)
Unrealized gain on available for sale securities 105,751
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Total shareholders' equity 14,613,055
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TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 148,408,167
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See notes to consolidated financial statements (unaudited).
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BLUE RIVER BANCSHARES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
FOR THE THREE MONTH PERIODS ENDED MARCH 31, 2001 AND 2000
2001 2000
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INTEREST INCOME:
Loans receivable $ 2,392,583 $ 2,323,143
Securities 298,798 438,640
Interest-bearing deposits 64,110 86,680
Dividends from FHLB 42,470 42,825
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Total interest income 2,797,961 2,891,288
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INTEREST EXPENSE:
Interest expense on deposits 1,629,838 1,322,970
Interest expense on FHLB and other borrowings 161,099 455,560
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Total interest expense 1,790,937 1,778,530
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NET INTEREST INCOME BEFORE
PROVISION FOR LOAN LOSSES 1,007,024 1,112,758
PROVISION FOR LOAN LOSSES 45,000 75,000
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NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 962,024 1,037,758
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NON-INTEREST INCOME:
Service charges and fees 61,319 53,204
Gain on sale of premises and equipment 8,550 0
Other 63,382 38,942
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Total non-interest income 133,251 92,146
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NON-INTEREST EXPENSE:
Salaries and employee benefits 566,807 555,493
Premises and equipment 185,311 193,130
Federal deposit insurance 31,973 28,439
Data processing 126,723 108,563
Advertising and promotion 20,108 76,006
Bank fees and charges 19,589 18,858
Directors fees 23,940 28,350
Professional fees 143,886 78,956
Stationery, supplies and printing 40,490 24,390
Goodwill amortization 53,103 53,103
Other 115,752 162,200
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Total non-interest expense 1,327,682 1,327,488
(LOSS)/EARNINGS BEFORE INCOME TAX (232,407) (197,584)
INCOME TAX (BENEFIT)/EXPENSE (76,763) (60,497)
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NET LOSS/EARNINGS $ (155,644) $ (137,087)
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BASIC AND DILUTIVE LOSS PER SHARE $ (0.10) $ (0.09)
See notes to consolidated financial statements (unaudited).
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BLUE RIVER BANCSHARES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
FOR THE THREE MONTH PERIODS ENDED MARCH 31, 2001 AND 2000
Three Months Three Months
Ended Ended
March 31, March 31,
2001 2000
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (155,644) $ (137,087)
Adjustments to reconcile net loss to net cash from
operating activities
Depreciation and amortization 131,175 140,277
Provision for loan losses 45,000 75,000
Gain on sales of premises and equipment (8,550) 0
Changes in assets and liabilities:
Accrued interest receivable 55,063 1,122
Other assets (110,349) (228,720)
Other liabilities 518,567 282,992
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Net cash from operating activities 475,262 133,584
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CASH FLOWS FROM INVESTING ACTIVITIES
Loan originations, net of principal repayments 1,891,726 (3,115,647)
Principal maturities collected on securities 1,882,672 708,129
Net proceeds from sale/(purchases of) premises and equipment 14,397 (68,386)
Purchases of available-for-sale securities 0 (8,828,764)
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Net cash provided by/(used in) investing activities 3,788,795 (11,304,668)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from FHLB advances and other borrowings 0 7,750,000
Payment of FHLB advances and other borrowings (2,500,000) (17,358,800)
Net change in deposits (10,713,230) 22,046,134
Proceeds from issuance of Common Stock 0 10,366
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Net cash from financing activities (13,213,230) 12,447,700
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NET INCREASE/(DECREASE) IN CASH AND EQUIVALENTS (8,949,173) 1,276,616
CASH AND EQUIVALENTS, BEGINNING OF PERIOD 19,084,277 7,282,990
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CASH AND EQUIVALENTS, END OF PERIOD $ 10,135,104 $ 8,559,606
============ ============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Interest paid 1,184,000 946,000
See notes to consolidated financial statements (unaudited)
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BLUE RIVER BANCSHARES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
FOR THE THREE MONTH PERIODS ENDED MARCH 31, 2001 AND 2000
1. BASIS OF CONSOLIDATION AND PRESENTATION
The unaudited consolidated financial statements include the accounts of
Blue River Bancshares, Inc. (the Company") and its wholly-owned
subsidiary Shelby County Bank (the "Bank"). Summary of significant
accounting policies is set forth in Note 1 of the Notes to the
Consolidated Financial Statements of the Company included in the
December 31, 2000 Annual Report to Shareholders.
The accompanying consolidated interim financial statements at March 31,
2001, and the three month periods ended March 31, 2001 and 2000, are
unaudited and have been prepared in accordance with instructions to
Form 10-QSB. In the opinion of management, the financial statements
include all the adjustments (which include only normal recurring
adjustments) necessary to present fairly the financial position,
results of operations and cash flows for such periods.
2. COMPREHENSIVE INCOME
In accordance with SFAS No. 130, reclassification adjustments have been
determined for all components of other comprehensive income reported in
the consolidated statements of changes in shareholders' equity. Amounts
are presented within those statements for the three month periods ended
March 31, 2001 and 2000.
Three Months Ended Three Months Ended
March 31, 2001 March 31, 2000
Other comprehensive income before tax:
Net unrealized gains/(losses) on available-for-sale securities $ 326,949 $ (39,133)
Less: reclassification adjustment for gains realized in net
income 0 0
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Other comprehensive income/(loss) before income taxes 326,949 (39,133)
Income tax expense/(benefit) related to items of other
comprehensive income 129,992 (15,558)
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Other comprehensive income/(loss), net of tax $ 196,957 $ (23,575)
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3. NEW ACCOUNTING PRONOUNCEMENTS
In June 1998, SFAS No. 133, ("SFAS 133") Accounting for Derivative
Instruments and Hedging Activities, was issued. This statement was
amended by Statement of Financial Accounting Standards No. 137 ("SFAS
137"), Accounting for Derivative Instruments and Hedging Activities -
Deferral of the Effective Date of SFAS 133. SFAS 133, as amended by
SFAS 137, is effective for all fiscal quarters of all fiscal years
beginning after June 15, 2000. This statement establishes accounting
and reporting standards for derivative instruments and for hedging
activities. It requires that an entity recognize all derivatives as
either assets or liabilities in the statement of financial condition
and measure those instruments at fair value. If certain conditions are
met, a derivative may be specifically designated as a fair value hedge,
a cash flow hedge, or a hedge of foreign currency exposure. The
accounting for changes in the fair value of a derivative (that is,
gains and losses) depends on the intended use of the derivative and the
resulting designation. The Company adopted this statement on January 1,
2001, and the adoption of this statement had no material impact on the
financial condition, results of operations or cash flows of the
Company.
4. SEGMENT INFORMATION
In accordance with SFAS No. 131, the Company has disclosed all required
information relating to its one operating segment, Community Banking.
5. REGULATORY MATTERS
On July 10, 2000 the Office of Thrift Supervision issued a letter which
formally designated the Bank to be in "troubled condition" based upon
the preliminary findings of the OTS' then ongoing examination of the
Bank. The OTS expressed supervisory concern relating to the Bank's
management, operating losses, interest rate risk sensitivity, internal
controls and loan documentation. Pursuant to the letter, the Bank is
subject to the following restrictions: (i) no increase in total assets
during any quarter in excess of an amount equal to interest credited on
deposits during the quarter without prior written approval of the OTS,
(ii) prior OTS approval of all executive compensation and agreements
and the hiring of any executive officer, director or consultant or
changing the responsibilities of any current executive officer, (iii)
prior written notice to the OTS of all transactions between the Bank
and its affiliates, (iv) prior OTS approval of all transactions between
the Bank and third parties outside the normal course of business and
(v) no golden parachute payments by the Bank, unless permissible
pursuant to applicable law.
6. SUBSEQUENT EVENTS
On April 5, 2001, the OTS notified the Bank in writing that the
business plan and budget submitted by the Bank has been approved.
Although the Bank is no longer subject to the growth restrictions
previously imposed by the OTS, the Bank may not make any significant
changes to its business plan and budget without prior approval of the
OTS. The Bank's business plan and budget contemplates minimal growth in
the forseeable future. However, there can be no assurances that the
Bank will grow. In fact, depending on business conditions, the Bank's
size may decrease.
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PART I - ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Certain statements throughout this section regarding the Company's and the
Bank's financial position, business strategy and plans and objectives of
management for future operations are forward-looking statements rather than
historical or current facts. When used in this section, words such as
"anticipate," "believe," "estimate," "expect," "intend" and similar expressions,
as they relate to the Company and the Bank or their respective management,
identify forward-looking statements. Such forward-looking statements are based
on the beliefs of management of the Company and the Bank as well as assumptions
made by and information currently available to management of the Company and the
Bank. Such statements are inherently uncertain, and there can be no assurance
that the underlying assumptions will prove to be valid. Actual results could
differ materially from those contemplated by the forward-looking statements as a
result of certain factors, including but not limited to competitive factors and
pricing pressures, changes in legal and regulatory requirements, technological
change, product development risks and general economic conditions, including,
but not limited to, changes in interest rates, loss of deposits and loans to
other savings and financial institutions, substantial changes in financial
markets, substantial changes in real estate values and the real estate market
and unanticipated results in pending legal proceedings. Such statements reflect
the current view of the Company and the Bank with respect to future events and
are subject to these and other risks, uncertainties and assumptions relating to
the operations, results of operations, growth strategy and liquidity of the
Company and the Bank.
FINANCIAL CONDITION:
Total assets at March 31, 2001, were $148,408,000, a decrease of $12,660,000
from total assets of $161,068,000 at December 31, 2000. The Company has
emphasized balance sheet shrinkage in an effort to curb interest rate
sensitivity concerns, as well as to maintain capital levels which exceed
requirements to be considered "well capitalized" under regulatory guidelines.
Available-for-sale investment securities at March 31, 2001 were $17,761,000, a
decrease of $1,557,000 from $19,318,000 at December 31, 2000. The Company did
not transact either sale or purchase transactions during the quarter, but
absorbed cash received from a combination of mortgage-backed securities
principal payments, debt instrument maturities, and calls of a portion of the
Bank's structured debt securities. Total net loans receivable decreased from
$111,772,000 at December 31, 2000 to $109,833,000 at March 31, 2001. This
reduction in loans results from normal repayment by the Bank's borrowers, as
well as a reduced volume of loan originations as the Bank complied with the
growth restrictions imposed by the Office of Thrift Supervision. Residential
mortgages at March 31, 2001 were $45,671,000, a decrease of $1,725,000 from
March 31, 2000. Commercial loans and Commercial loans secured with real estate
were $45,765,000 at March 31, 2001 compared to $43,893,000 at March 31, 2000.
Consumer and home equity loans decreased $3,421,000 to $20,333,000 at March 31,
2001.
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MARCH 31, MARCH 31,
2001 2000
Residential mortgages $ 45,670,611 $ 47,396,974
Commercial loans secured by real estate 30,600,933 28,031,974
Commercial and agriculture 15,164,270 15,860,682
Consumer loans 16,903,421 18,840,814
Home equity loans 3,430,283 4,913,059
Less allowance for loan losses (1,936,562) (917,805)
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Total loans receivable, net $ 109,832,956 $ 114,125,698
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MARCH 31, MARCH 31,
2001 2000
Non-performing loans consists of the following:
Non-accrual loans $ 2,999,484 $ 645,799
Real estate owned - net 12,406 446,849
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Total non-performing loans $ 3,011,890 $ 1,092,648
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Non-performing loans to total loans 2.69% 0.95%
The Bank stops accruing interest on loans that become delinquent in excess of 90
days. At March 31, 2001 loans in non-accruing status were $2,999,000, an
increase of $2,353,000 from March 31, 2000, and an increase of $940,000 from
December 31, 2000. The Bank's real estate owned, containing properties
foreclosed upon, is unchanged when compared to December 31, 2000, and has
decreased $435,000 from March 31, 2000.
Total liabilities at March 31, 2001 were $133,795,000, a decrease of $12,701,000
compared to $146,496,000 at December 31, 2000. Deposits at March 31, 2001 were
$122,400,000 compared to $133,120,000 at December 31, 2000, a decrease of
$10,720,000. The Company continues to focus efforts on retail deposits and has
continued to absorb the loss of maturing jumbo certificates held by public
entities.
Shareholders' equity at March 31, 2001 was $14,613,000, an increase of $41,000
compared to December 31, 2000. This increase is the result of a $197,000
appreciation of the Company's available-for-sale securities portfolio, net of
income tax offset by the Company's net operating loss of ($156,000).
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Activity in the allowance for loan losses consists of the following:
THREE MONTHS THREE MONTHS
ENDED ENDED
MARCH 31, MARCH 31,
2001 2000
Balance, beginning of period $ 1,943,741 $ 854,985
Add:
Provision for loan losses 45,000 75,000
Recoveries of loans previously charged off 6,319 110
Less: Gross charge-offs:
Residential real estate loans 0 (12,290)
Consumer/Commercial loans (58,498) 0
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Balance, end of period $ 1,936,562 $ 917,805
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Net charge-offs to total average loans outstanding 0.05% 0.04%
Allowance to total average loans outstanding 1.71% 0.81%
Allowance for loan losses at March 31, 2001 was $1,937,000, an increase of
$1,019,000 from March 31, 2000, and an decrease of $7,000 from December 31,
2000. An analysis of the allowance for loan losses is performed quarterly by
management to assess the appropriate levels of allowance for loan losses. This
analysis is performed to recognize specific reserves allocated to classified
assets, assess portfolio growth, and to monitor trends in loan delinquencies and
charge-offs.
RESULTS OF OPERATIONS: Three Month Period Ended March 31, 2001
During the three month period ended March 31, 2001, the Company's net loss
increased to ($156,000) compared to a net loss of ($137,000) during the three
month period ended March 31, 2000. Net income before taxes declined ($35,000) to
a net loss before tax of ($232,000) compared to a net loss before tax of
($197,000) for the three months ended March 31, 2000. This difference is
comprised mostly of a decrease in net interest income before provision for loan
losses of ($106,000), offset by a reduction in provision for loan losses of
($30,000), and an increase in non-interest income of $41,000.
Interest income decreased ($93,000) from $2,891,000 for the three month period
ended March 31, 2000 to $2,798,000 for the three month period ended March 31,
2001. Interest income from loans was $2,393,000 for the three month period ended
March 31, 2001, an increase of $69,000 over the same period in 2000. The
increase in loan interest income consists of a favorable variance of $83,000 due
to increased yield on loans, a favorable variance of $6,000 due to higher
average balances, offset by unfavorable variances of ($20,000) due to the first
quarter of 2001 having one less day than was contained in the first quarter of
2000 due to leap year ("calendar variance"). Interest income on investment
securities decreased ($140,000) to $299,000 for the three month period ended
March 31, 2001, resulting from a unfavorable variances of ($126,000) due to a
decrease in average balances, ($10,000) due to lower yields, and a ($4,000)
calendar variance. Interest income on interest bearing deposits decreased
($23,000) to $64,000 for the three month period ended March 31, 2001, resulting
from an unfavorable variance of ($21,000) due to lower average balances, and an
unfavorable rate variance of ($1,000) due to lower yields. Interest expense for
the three month period ended March 31, 2001 was $1,791,000 compared to
$1,779,000 for the three month period ended March 31, 2000. Interest expense on
deposit accounts increased from $1,323,000 for the three month period ended
March 31, 2000 to $1,630,000 for the three month period ended March 31, 2001.
The increase in interest expense on deposits consists of a $133,000 increase due
to increased deposit balances and a $183,000 increase due to increased rates and
a higher average level of certificates of deposit balances compared to 2000,
offset by a favorable calendar variance of ($9,000). Interest expense on
advances from the Federal Home Loan Bank ("FHLB") decreased to $161,000 for 2001
compared to $455,000 for 2000. The decrease in average balances related to FHLB
advances accounts for an decrease
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of ($302,000), a ($5,000) reduction due to calendar variance, offset by a
$12,000 increase due to increased rates on advances.
Total non-interest income was $133,000 for the three month period ended March
31, 2001, compared to $92,000 for the same period in 2000. Service charges and
fee increased $8,000 over the first quarter of 2000. The Company realized an
$8,000 gain on sale of assets during the first quarter of 2001, while no such
gains were taken during the same period in 2000. Revenues derived from automated
teller machines and debit cards increased $3,000 and origination fees from
secondary market mortgage activities increased $17,000 over levels recognized in
the first quarter of 2000.
Non interest expenses totaled $1,328,000 for the three month period ended March
31, 2001, compared to $1,327,000 during the three month period ended March 31,
2000. The $65,000 increase in professional fees and $16,000 increase in
stationery and supplies reflect accrual of professional services and costs of
printing and distribution of annual reports and proxy statements. Salaries and
benefits increased at only 2% over the 2000 levels. Data processing increased
$18,000 over the prior year, due primarily to increased transaction levels and
increased numbers of accounts being serviced. Three areas best illustrate a
higher level of fiscal constraint being deployed. Premises and equipment costs
declined $8,000 for the quarter, resulting mostly from disposal of company-owned
automobiles. Additionally, advertising and promotion expenditures were decreased
$56,000 from 2000 levels, resulting from budget reductions, as well as decreased
advertising campaigns resulting from the imposition of growth restrictions. The
Company also significantly reduced expenditures related to customer meals and
entertainment, realizing a $50,000 reduction in such expenditures when compared
to the first quarter of 2000.
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CAPITAL RESOURCES AND LIQUIDITY
The Company is subject to regulation as a savings and loan holding company, and
is subject to certain restrictions in its dealings with the Bank. The Bank is
subject to the regulatory requirements applicable to a federal savings bank.
Current capital regulations require savings institutions to have minimum
tangible capital equal to 1.5% of total assets and a core capital ratio equal to
3.0% of total assets. Additionally, savings institutions are required to meet a
risk based capital ratio equal to 8.0% for risk-weighted assets, as defined. At
September 30, 2000, the Bank satisfied all capital requirements.
The following is a summary of the Bank's regulatory capital and capital
requirements at March 31, 2001 based on capital regulations currently in effect
for savings institutions.
TANGIBLE CORE RISK-BASED
CAPITAL CAPITAL CAPITAL
Regulatory capital $ 10,093 $ 10,093 $ 11,454
Minimum capital requirement 2,156 4,312 8,664
---------- ---------- ----------
Excess capital $ 7,937 $ 5,781 $ 2,790
========== ========== ==========
Regulatory capital ratio 7.02% 7.02% 10.58%
Required capital ratio 1.50% 3.00% 8.00%
---------- ---------- ----------
Ratio excess 5.52% 4.02% 2.58%
========== ========== ==========
Liquidity measures the Bank's ability to meet its savings withdrawals and
lending commitments. Management believes that the Bank's liquidity is adequate
to meet current requirements. The Bank maintains liquidity of at least 4% of net
withdrawable assets. At March 31, 2001, its regulatory liquidity ratio was
8.25%.
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V. OTHER INFORMATION
Item 1. Legal Proceedings
Neither the Company nor the Bank are engaged in any legal
proceedings of a material nature at the present time. From
time to time, the Bank is a party to legal proceedings wherein
it enforces its security interest in mortgage loans made by
it.
Item 2. Changes in Securities and Use of Proceeds
None
Item 3. Defaults upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other information
None
Item 6. Exhibits and Reports on Form 8-K
None
* * * * *
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on behalf of the undersigned
thereto duly authorized.
Blue River Bancshares, Inc.
Date: May 11, 2001 By: /s/ Bradley A. Long
-----------------------------
Bradley A. Long, Vice President,
Chief Financial Officer and Treasurer
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