UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 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 March 31, 2005
OR
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to __________
Commission File Number
0-24501
BLUE RIVER BANCSHARES, INC.
---------------------------
(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
As of May 16, 2005 there were 3,507,150 shares of the Registrant's Common Stock
issued and outstanding.
Transitional Small Business Disclosure Format.
(Check one): Yes [ ] No [X]
BLUE RIVER BANCSHARES, INC.
TABLE OF CONTENTS
PAGE
NUMBER
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PART I. FINANCIAL INFORMATION:
Item 1. Financial Statements:
Consolidated Statements of Financial Condition (Unaudited) as
of March 31, 2005 and December 31, 2004 3
Consolidated Statements of Operations and Comprehensive Income
(Unaudited) for the three months ended March 31, 2005 and 2004 4
Consolidated Statements of Cash Flows (Unaudited) for the
three months ended March 31, 2005 and 2004 5
Notes to Consolidated Financial Statements (Unaudited) 6-9
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations 10-20
Item 3. Controls and Procedures 21
PART II. OTHER INFORMATION: 22
Item 1. Legal Proceedings
Item 2. Unregistered Sales of Equity 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
SIGNATURE PAGE 23
EXHIBIT INDEX 24
PART 1 FINANCIAL STATEMENTS
ITEM 1. FINANCIAL STATEMENTS
BLUE RIVER BANCSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (UNAUDITED)
AS OF MARCH 31, 2005 AND DECEMBER 31, 2004
MARCH 31, DECEMBER 31,
2005 2004
ASSETS
ASSETS:
Cash and cash equivalents:
Cash and due from banks $ 4,517,662 $ 3,572,243
Interest-bearing deposits 5,592,002 1,542,765
-------------- -------------
Total cash and cash equivalents 10,109,664 5,115,008
Securities available for sale 29,915,654 32,361,376
Securities held to maturity 18,438 19,073
Loans receivable, net of allowance for loan losses of $1,977,511 and
$1,919,193 153,753,057 155,508,075
Stock in FHLB, at cost 2,927,400 2,896,400
Deferred income taxes, net 2,860,068 2,650,679
Premises and equipment, net 1,959,091 1,992,349
Other real estate owned 1,328,375 1,415,351
Accrued interest receivable and other assets 1,217,025 1,128,719
Core deposit intangible 362,065 379,306
Goodwill 3,159,051 3,159,051
-------------- -------------
TOTAL ASSETS $ 207,609,888 $ 206,625,387
============== =============
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES:
Interest bearing deposits $ 148,844,573 $ 151,358,006
Non-interest bearing deposits 22,922,086 18,972,486
Fed funds purchased - 427,000
Advances from FHLB 15,142,525 15,091,393
Note payable 4,000,000 4,000,000
Accrued interest and other liabilities 1,061,731 992,237
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Total liabilities 191,970,915 190,841,122
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SHAREHOLDERS' EQUITY:
Preferred stock, no par value, 2,000,000 shares
authorized, none issued - -
Common stock, no par value, 15,000,000 shares authorized, 3,406,150
shares issued and outstanding 24,635,162 24,635,162
Accumulated deficit (8,578,688) (8,782,422)
Accumulated other comprehensive income/(loss) (417,501) (68,475)
-------------- -------------
Total shareholders' equity 15,638,973 15,784,265
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TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 207,609,888 $ 206,625,387
============== =============
See accompanying notes to consolidated financial statements.
- 3 -
BLUE RIVER BANCSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (UNAUDITED)
FOR THE THREE MONTH PERIODS ENDED MARCH 31, 2005 AND 2004
2005 2004
INTEREST INCOME:
Loans receivable $ 2,347,844 $ 1,868,221
Securities 335,087 446,758
Interest-bearing deposits 32,387 5,858
Dividends from FHLB 31,118 33,451
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Total interest income 2,746,436 2,354,288
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INTEREST EXPENSE:
Interest expense on deposits 914,761 626,194
Interest expense on FHLB and other borrowings 176,551 188,574
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Total interest expense 1,091,312 814,768
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NET INTEREST INCOME BEFORE PROVISION FOR LOAN LOSSES 1,655,124 1,539,520
PROVISION FOR LOAN LOSSES 52,500 97,500
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NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 1,602,624 1,442,020
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NON-INTEREST INCOME:
Service charges and fees 101,027 76,944
Secondary market mortgage fees 125,328 63,117
Gain on sale of securities - 97,563
Other 37,709 83,840
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Total non-interest income 264,064 321,464
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NON-INTEREST EXPENSE:
Salaries and employee benefits 835,872 727,408
Premises and equipment 188,521 207,132
Federal deposit insurance and OTS assessment 16,242 12,511
Data processing 154,786 150,645
Advertising and promotion 40,536 17,797
Bank fees and charges 25,823 23,660
Directors fees 53,850 58,450
Professional fees 93,970 112,560
Stationery, supplies and printing 19,140 30,981
Merger expense 69,335 -
Core deposit intangible 17,241 16,425
Other 147,638 220,072
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Total non-interest expense 1,662,954 1,577,641
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INCOME BEFORE INCOME TAX 203,734 185,843
INCOME TAX EXPENSE (BENEFIT) - -
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NET INCOME $ 203,734 $ 185,843
============== =============
COMPREHENSIVE INCOME (LOSS) $ (145,292) $ 166,011
============== =============
Basic earnings per share $ 0.06 $ 0.05
============== =============
Diluted earnings per share $ 0.06 $ 0.05
============== =============
See accompanying notes to consolidated financial statements (unaudited).
- 4 -
BLUE RIVER BANCSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
FOR THE THREE MONTH PERIODS ENDED MARCH 31, 2005 AND 2004
2005 2004
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 203,734 $ 185,843
Adjustments to reconcile net income to net cash from operating activities:
Depreciation and purchase accounting amortization 24,166 487,665
Net amortization (accretion) of securities 9,908 38,566
Provision for loan losses 52,500 97,500
FHLB stock dividends (31,000) (38,700)
(Gain) on sale of securities available for sale - (97,563)
(Gain) on sale of other real estate owned (30,672) (35,848)
Changes in assets and liabilities:
Accrued interest receivable 77,121 85,785
Other assets (165,426) 424,921
Accrued interest payable and other liabilities 69,494 (5,289)
-------------- -------------
Net cash from operating activities 209,825 1,142,880
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CASH FLOWS FROM INVESTING ACTIVITIES:
Loan funded, net of collections 1,605,649 (13,185,598)
Maturities and paydowns of securities available for sale 1,877,398 2,294,689
Maturities and paydowns of securities held to maturity 635 110,354
Proceeds from sales of securities available-for-sale - 9,575,112
Purchases of securities available-for-sale - (3,499,490)
Purchase of premises and equipment (28,279) (15,898)
Proceeds from sale of real estate owned 117,648 521,702
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Net cash from investing activities 3,573,051 (4,199,129)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Additional offering costs from proceeds of rights offering - (2,455)
Net change in fed funds purchased (427,000) -
Repayment of FHLB advances (4,163,894) (40,258,487)
Proceeds from FHLB advances 4,219,409 38,685,000
Net increase in deposits 1,583,265 4,050,950
-------------- -------------
Net cash from financing activities 1,211,780 2,475,008
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NET INCREASE (DECREASE) IN CASH AND EQUIVALENTS 4,994,656 (581,241)
CASH AND EQUIVALENTS, Beginning of period 5,115,008 7,802,303
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CASH AND EQUIVALENTS, End of period $ 10,109,664 $ 7,221,062
============== =============
See accompanying notes to consolidated financial statements (unaudited).
- 5 -
BLUE RIVER BANCSHARES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
AS OF AND FOR THE THREE MONTH PERIODS ENDED MARCH 31, 2005 AND 2004
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
subsidiaries Shelby County Bank and Paramount Bank (formally known as
Unified Banking Company) (collectively the "Banks") and the wholly owned
subsidiaries of Shelby County Bank. A 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, 2004 Annual Report
to Shareholders.
The accompanying consolidated interim financial statements at March 31,
2005, and for the three months ended March 31, 2004 are unaudited and have
been prepared in accordance with instructions to Form 10-QSB. In the
opinion of management, the financial statements include all adjustments
(which include only normal recurring adjustments) necessary to present
fairly the financial position, results of operations and cash flows for
such periods.
In accordance with SFAS No. 131, the Company has disclosed all required
information relating to its one operating segment, community banking.
2. DESCRIPTION OF BUSINESS
The Banks provide financial services to south central Indiana through
Shelby County Bank's main office in Shelbyville and three other full
service branches in Shelbyville, Morristown, and St. Paul, Indiana and to
the city of Lexington, and Fayette County, Kentucky through Paramount
Bank's one office located in Lexington, Kentucky.
The Banks are subject to competition from other financial institutions and
other financial services providers and are regulated by certain federal
agencies and undergo periodic examinations by those regulatory
authorities.
3. RESTATEMENT OF DEFERRED LOAN COSTS AND FEES ON HOME EQUITY LOANS
During the 2004 year end audit of the financial statements, it was
determined that the Company was incorrectly accounting for deferred loan
fees and costs on home equity loans. This resulted in a $178,000 reduction
in 2004 net income. Subsequently, the Company determined that it needed to
restate its 2004 quarterly financials to reflect the $178,000 reduction in
net income to properly document the full effect of the accounting error on
each of the quarters in 2004. The Company has determined that the earnings
reported during 2004 will be reduced by $41,000 for the first quarter,
$55,000 for the second quarter and $52,000 for the third quarter. This
information is provided in detail in the following tables for the three
months ended March 31, 2004, June 30, 2004 and September 30, 2004 and for
the six months ended June 30, 2004 and for the nine months ended September
30, 2004.
- 6 -
THREE MONTHS ENDED THREE MONTHS ENDED THREE MONTHS ENDED
MARCH 31, 2004 JUNE 30, 2004 SEPTEMBER 30, 2004
-------------------------- ---------------------------- --------------------------
AS PREVIOUSLY AS PREVIOUSLY AS PREVIOUSLY
REPORTED AS RESTATED REPORTED AS RESTATED REPORTED AS RESTATED
------------- ----------- ------------- ----------- ------------- -----------
Net Income (Loss) $ 227,025 $ 185,843 $ (56,877) $ (112,317) $ (92,206) $ (144,119)
Interest Income 2,358,966 2,354,288 2,390,671 2,381,095 2,625,497 2,609,620
Net Interest Income before
the Provision for Loan Losses 1,544,198 1,539,520 1,400,830 1,391,254 1,568,092 1,552,215
Non Interest Expense 1,541,137 1,577,641 1,630,484 1,676,348 1,769,950 1,805,986
Basic earnings (loss) per share 0.07 0.05 (0.02) (0.03) (0.03) (0.04)
Diluted earnings (loss) per share 0.07 0.05 (0.02) (0.03) (0.03) (0.04)
SIX MONTHS ENDED NINE MONTHS ENDED
JUNE 30, 2004 SEPTEMBER 30, 2004
-------------------------- -----------------------------
AS PREVIOUSLY AS PREVIOUSLY
REPORTED AS RESTATED REPORTED AS RESTATED
------------- ----------- ------------- -------------
Net Income (Loss) $ 170,148 $ 73,526 $ 77,943 $ (70,593)
Interest Income 4,749,637 4,735,383 7,375,132 7,345,001
Net Interest Income before
the Provision for Loan Losses 2,945,028 2,930,774 4,513,115 4,482,984
Non Interest Expense 3,171,621 3,253,989 4,941,566 5,059,971
Basic earnings (loss) per share 0.05 0.02 0.02 (0.02)
Diluted earnings (loss) per share 0.05 0.02 0.02 (0.02)
4. COMMON SHARE INFORMATION
Earnings per share of common stock is based on the weighted average number
of basic shares and dilutive shares outstanding.
The following is a reconciliation of the weighted average common shares
for the basic and diluted earnings per share computations:
FOR THE THREE MONTHS ENDED
MARCH 31,
--------------------------
2005 2004
Basic earnings per share:
Weighted average common shares 3,406,150 3,406,150
========= =========
Diluted earnings per share:
Weighted average common shares 3,406,150 3,406,150
Dilutive effect of stock options 1,092 7,926
--------- ---------
Weighted average common shares and incremental shares 3,407,242 3,414,076
========= =========
For the three months ended March 31, 2005 and the three months ended March
31, 2004, 166,360, and 122,350 stock options were not considered in the
calculation of the dilutive effect of stock options as they were
anti-dilutive.
- 7 -
5. STOCK BASED COMPENSATION
At March 31, 2005, the Company had stock-based employee compensation
plans. The Company accounts for those plans under the recognition and
measurement principles of APB Opinion No. 25, "Accounting for Stock Issued
to Employees," and related interpretations. No stock-based employee
compensation cost is reflected in net income, as all options granted under
those plans had an exercise price equal to the market value of the
underlying common stock on the date of grant. The following table
illustrates the effect on net income and earnings per share if the company
had applied the fair value recognition provisions of SFAS 123, "Accounting
for Stock-Based Compensation," to stock-based employee compensation.
MARCH 31,
2005 2004
Net income:
Net income as reported $ 203,734 $ 185,843
Deduct total stock based employee compensation
expense determined under fair value based method for
all awards, net of related tax effects and reversals of
prior period expense due to forfeitures 23,441 (8,079)
------------- ---------
Pro forma, net income $ 227,175 $ 177,764
============= =========
Net earnings per share:
Basic earnings per share $ 0.06 $ 0.05
Diluted earnings per share $ 0.06 $ 0.05
Pro forma earnings per share:
Basic earnings per share $ 0.07 $ 0.05
Diluted earnings per share $ 0.07 $ 0.05
6. INCOME TAXES
The Company maintains a valuation allowance against a portion of the
deferred tax assets because management believes it is more likely than not
that a portion of the benefit associated with the deferred tax asset will
not be realized. During 2005 and 2004, management's estimate of the
deferred tax asset realization did not change significantly and the
Company recorded changes in its valuation allowance to offset a change in
the deferred tax assets, resulting in no income tax expense for 2005 or
2004. The Company has generated federal and state operating losses
carryforwards totaling $4.5 million. The net operating loss carryforwards,
if unused will begin to expire in 2020 through 2024.
7. AFFILIATION AND MERGER WITH HEARTLAND BANCSHARES, INC.
On August 31, 2004, the Company and Heartland Bancshares, Inc.
("Heartland"), Franklin, Indiana, entered into an Agreement of Affiliation
and Merger which provided for Heartland to merge with and into to the
Company. On February 10, 2005, the Company and Heartland mutually agreed
to terminate the merger agreement and certain other related agreements,
including the reciprocal stock option agreements entered into by the
Company and Heartland in connection with the merger agreement. During the
third and fourth quarters of 2004, the Company incurred costs of $274,000
related to the proposed merger and $134,000 of severance payments made to
our former President, as a result of our proposed merger with Heartland
Bancshares, Inc. These costs were expensed by the Company since it was
expected that Heartland would be the acquiring entity in the merger.
Additional costs of $69,000 related to this merger were expensed in the
first quarter of 2005.
- 8 -
8. NEW ACCOUNTING PRONOUNCEMENTS
EITF Issue 03-1, The Meaning of Other-Than-Temporary Impairment and Its
Application to Certain Investments, contains accounting guidance regarding
other-than-temporary impairment on securities that was to take effect for
the quarter ended September 30, 2004. However, the effective date of
portions of this guidance has been delayed, and more interpretive guidance
is to be issued in the near future. The effect of this new and pending
guidance on the Company's financial statements is not known, but it is
possible this guidance could change management's assessment of
other-than-temporary impairment in future periods.
9. SUBSEQUENT EVENT
On April 26, 2005, the Board of Directors of the Company approved the
offer and sale of up to $600,000 worth of its common stock to certain
accredited investors, including, without limitation, the officers and
directors of the Company in a private placement under Section 4(2) of the
Securities Act of 1933 and Rule 506 of Regulation D promulgated
thereunder. On April 29, 2005 the price of $5.00 per share was determined
by the Executive Committee of the Board of Directors of the Company.
Subsequently, the Company sold 101,000 shares of common stock at a price
of $5.00 per share, or $505,000 in the aggregate. The private placement
closed on May 6, 2005.
- 9 -
PART I - ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Management's discussion and analysis of financial condition and results of
operations is intended to assist in understanding the financial condition and
results of operations of the Company. The information contained in this
discussion should be read in conjunction with the unaudited condensed
consolidated financial statements and accompanying notes thereto.
FORWARD LOOKING STATEMENTS
Further, this Quarterly Report on Form 10-QSB may contain certain
forward-looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995. Statements in this report which express "belief",
"intention", "expectation", "prospects", as well as other statements which are
not historical fact, are forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995. These forward-looking
statements involve risk and uncertainties which may cause actual results to
differ materially from those in such statements. Some of the factors that may
generally cause actual results to differ materially from projection, forecasts,
estimates and expectations include, but are not limited to (i) changes in the
interest rate environment, (ii) competitive pressures among financial
institutions, (iii) general economic conditions on local or national levels,
(iv) political developments, wars or other hostilities that may disrupt or
increase volatility in securities markets, (v) legislative or regulatory
changes, (vi) changes in prepayment speeds of loans or securities, (vii) changes
in loan sale volumes, charge-offs and loan loss provisions, (viii) changes in
legal or regulatory proceedings, and (ix) the impact of reputation risk created
by these developments on such matters as business generation or retention. Such
statements reflect the current view of the Company and the Banks 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 Banks. The Company undertakes no duty to
update any forward looking statement to reflect events or circumstances after
the date on which the forward looking statement is made or to reflect the
occurrence of unanticipated events.
COMPANY OVERVIEW
The Company is a holding company for its principal banking subsidiaries, Shelby
County Bank and Paramount Bank. The Company's net income is derived principally
from the operating results of its banking subsidiaries. The principal sources of
the Company's revenue are interest and fees on loans; deposit service charges;
interest on security investments; and, origination fees on mortgage loans
brokered. The Banks' lending activity consists of short-to-medium-term consumer
and commercial loans, including home equity lines of credit; personal loans for
home improvement, autos and other consumer goods; residential real estate loans;
and, commercial real estate and operating loans. Funding activities at the
subsidiary Banks include a full range of deposit accounts, including demand
deposits; NOW accounts; money market accounts; and certificates of deposit.
Also, funding is supplemented with deposits gathered from local and state
governments and through borrowings from the Federal Home Loan Banks. The Company
maintains a $4,000,000 loan from a commercial bank.
Shelby County Bank is a federally chartered savings bank located in Shelbyville,
Indiana and Paramount Bank is a federally chartered savings bank located in
Lexington, Kentucky. The Banks provide full-service banking to businesses and
residents within their communities and surrounding areas. The Banks place
particular emphasis on serving their clients with a broad range of services
delivered by experienced professionals concerned with building strong and
long-term relationships.
- 10 -
CRITICAL ACCOUNTING POLICIES
The preparation of financial statements in conformity with U.S. generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
The Company's critical accounting policies include the following:
An analysis of the allowance for loan losses is performed monthly by the Banks'
management to assess the appropriate levels of allowance for loan losses. This
analysis is performed to recognize specific reserves allocated to classified
assets, to monitor trends in loan delinquencies and charge-offs and to consider
portfolio composition. Specific reserves are established based upon review of
individual borrowers identified in the classified loan list, establishing the
probable incurred losses associated with such borrowers, including comparison of
loan balances versus estimated liquidation values of collateral based upon
independent information sources or appraisals performed by board-approved
licensed appraisers. The remaining pool of loans, excluding those classified or
delinquent is the source for the general loan loss reserve. Management evaluates
this general reserve using loan loss statistics by various types of loans, as
published periodically by the OTS, or the Banks' historical losses and
multiplying such loss percentages to the Banks' distribution of portfolio
balances. The calculated reserve is compared to the Banks' existing reserve to
establish the provision necessary to bring the actual reserve balance in
compliance with the findings of the allowance analysis.
A valuation allowance reduces deferred tax assets to the amount management
believes is more likely than not to be realized. In evaluating the realization
of deferred tax assets, management considers the likelihood that sufficient
taxable income of appropriate character will be generated within carry forward
periods, including consideration of available tax planning strategies. During
2004 and 2003, management's estimate of deferred tax asset realization did not
change significantly, and the valuation allowance was adjusted to offset the net
change in deferred tax assets during the periods.
MANAGEMENT OVERVIEW
Overview of Financial Condition at March 31, 2005 and December 31, 2004
On a consolidated basis, the Company's total assets as of March 31, 2005 were
$207,610,000 compared to total assets of $206,625,000 at December 31, 2004. As
of March 31, 2005, gross loans were $155,731,000 compared to gross loans of
$157,427,000 at December 31, 2004. Deposits were $171,767,000 at March 31, 2005
compared to $170,330,000 at December 31, 2004. Total capital was $15,639,000 at
March 31, 2005 compared to $15,784,000 at December 31, 2004. Outstanding shares
of common stock were 3,406,150 as of March 31, 2005 and December 31, 2004.
The Company has continued to be asset sensitive, with a large amount of variable
rate loans tied to prime, and the Company is benefiting from the prime rate
increases. During the remainder of 2005, the Company believes loan balances will
continue to increase net interest income, without reducing credit quality.
Management and staff at both Shelby County Bank and Paramount Bank will continue
to work diligently at implementing growth plans and strategies as the Company
expects meaningful results from these actions this year.
- 11 -
Overview of Results of Operations for the Three Months Ended March 31, 2005 and
2004
For the quarter ended March 31, 2005, the Company's net consolidated income was
$204,000. This compares to consolidated net income of $186,000 for the same
period of 2004. Basic earnings per share was $0.06 for the quarter ended March
31, 2005 compared to $0.05 earnings per share for the quarter ended March 31,
2004. Weighted average outstanding shares (basic) for the first quarter of 2005
and the first quarter of 2004 were 3,406,150. The Company benefited from
amortization of purchase accounting adjustments from the acquisition of
Paramount Bank. The benefit of the purchase accounting for the three months
ended March 31, 2005 was $87,000. However, this benefit will be decreasing in
the future.
Net interest income for the three months ended March 31, 2005 increased 7.5%
from the period ended March 31, 2004. This increase can be attributed to a
rising interest rate environment with increases in the prime lending rate from
4.00% to 5.75%. The Banks will continue to benefit from the increases in the
prime interest rate as a large amount of the loan portfolio has variable rates.
Another factor contributing to the increase was increased loan growth at Shelby
County Bank during 2004.
Overall non-interest income decreased 18% for the three month period ended March
31, 2005 compared to the three month period ended March 31, 2004. Primarily this
reduction was comprised of decreases in net gains on sales of available for sale
securities and other income. These decreases were offset by increases in
secondary market mortgage loan fees and in service charges and fees on deposit
accounts.
Non-interest expense increased 5.4% for the three months ended March 31, 2005
compared to the same period of 2004. This increase was primarily due to
additional professional costs incurred in the first quarter of 2005 related to
the terminated merger with Heartland Bancshares, Inc. In addition, the costs to
manage and reduce real estate owned remains very high. The Company expects to
materially reduce this non-earning asset category during the second quarter of
2005. Paramount Bank incurred increased expenses in advertising and promotion
for the three months ended March 31, 2005 compared to the three months ended
March 31, 2004. These additional costs were the result of increased efforts to
promote and advertise the bank in its local market area. In the fourth quarter
of 2004, the Banks formally negotiated enhanced, more cost effective insurance
contracts. This benefit to other non-interest expense offset the increases in
this category.
- 12 -
FINANCIAL CONDITION
The Company's total assets at March 31, 2005 were $207,610,000, an increase of
$985,000 from December 31, 2004. Primarily the change consists of an increase in
cash and cash equivalents of $4,995,000, offset by a decrease in securities
available-for-sale of $2,446,000, a decrease in net loans of $1,755,000 and a
decrease in other real estate owned of $87,000. During the first quarter of
2005, Shelby County Bank continued to focus its efforts on maintaining its "well
capitalized" status, therefore loan growth has slowed. However, the Banks do
foresee the loan balances growing during the remainder of this year. During the
end of the third quarter 2004, it was necessary for Shelby County Bank to
participate $4,000,000 of its commercial loan and home equity loan portfolios to
other banks. This was accomplished in order to continue its "well capitalized"
status. The Banks are strategically maintaining their "well capitalized" status
while continuing to focus on improving net interest income and overall
profitability.
The investment portfolio balances have decreased to $29,934,000 at March 31,
2005 from $32,380,000 at December 31, 2004. There was a $1,000,000 call of a
U.S. Agency available-for-sale security which contributed to the decline in
investments. Additional decreases in the investments were due to average
repayments of approximately $293,000 per month on the mortgage-backed-securities
and a decline in the market value of securities available-for-sale of $558,000.
The call and repayments were replaced by liquid funds to help improve "well
capitalized" ratios. In the future the Banks will continue to invest in
primarily in GNMA mortgage-backed securities. These investment products receive
favorable risk-based capital treatment.
The Banks' interest-bearing deposits within other banks increased $4,049,000 to
$5,592,000 from $1,543,000 at December 31, 2004. The large amount of
interest-bearing deposits within other banks is primarily the result of one
large account at Paramount Bank which has significant volatility in the amount
of overnight deposits which they maintain. The Company's liquidity position is
the primary source of additional capital for infusion into its banking
subsidiaries. During the year ended December 31, 2004, the Banks had
significantly increased their use of funds as a result of increased loan demand
and maturities of higher interest rate certificates of deposit. Due to the
Company's current liquidity sources, the Company anticipates the need for
additional external funding over the next six months to fund the growth of the
Banks. In addition to the private placement which was authorized by the Board of
Directors in April 2005 and completed in May 2005, the Company may consider a
private placement of equity, additional bank borrowing and a private placement
of preferred stock securities, either convertible or nonconvertible. The private
placement raised approximately $505,000 of capital for the Company.
The Banks' net loans decreased $1,755,000 from December 31, 2004 to $153,753,000
at March 31, 2005. During the three month period ended March 31, 2005, the Banks
slowed loan growth to maintain their "well capitalized" status. However, future
growth is expected to accelerate in the commercial lending market as well as in
the home equity market. These loan products provide the opportunity for
increased profitability and continued improvement interest rate sensitivity
while maintaining the banks' "well capitalized" status.
- 13 -
LOANS RECEIVABLE
MARCH 31, DECEMBER 31,
2005 2004
Real Estate Mortgage Loans:
One-to-four family $ 42,811,387 $ 44,643,438
Non Residential 34,913,738 32,578,619
Home equity loans 34,420,759 33,852,662
Consumer loans 9,162,023 9,076,135
Commercial loans, including participations 34,422,661 37,276,414
------------- -------------
Total gross loans 155,730,568 157,427,268
------------- -------------
Less allowance for loan losses (1,977,511) (1,919,193)
------------- -------------
Total loans receivable, net $ 153,753,057 $ 155,508,075
============= =============
NON-PERFORMING LOANS
MARCH 31, DECEMBER 31,
2005 2004
Non-performing loans consist of the following:
Non-accrual loans $1,582,049 $ 462,473
Ninety (90) days past due 834,203 1,445,792
---------- ----------
Total non-performing loans $2,416,252 $1,908,265
========== ==========
Non-performing loans to total loans 1.55% 1.21%
Non-performing assets are defined as: (1) loans in non-accrual status where the
ultimate collection of interest is uncertain; (2) loans past due ninety days or
more as to principal or interest (and where continued accrual has been
specifically approved); and (3) loans which have been renegotiated to provide a
reduction or deferral of interest or principal because of deterioration in the
financial condition of the borrower. At March 31, 2005, the Banks reported
approximately $1,582,000 of non-accrual loans, an increase of $1,120,000 from
December 31, 2004, and $834,000 in loans ninety days past due, a decrease of
$612,000 from December 31, 2004. There is an increase in the non-performing
loans to total gross loans from 1.21% at December 31, 2004 to 1.55% at March 31,
2005. The Banks maintain a reserve for loan losses to cover losses incurred when
loans default. Loans in all categories are charged-off when they are deemed
uncollectible.
Activity in the allowance for loan losses consists of the following:
- 14 -
THREE MONTHS ENDED
MARCH, 31
------------------------------------
2005 2004
Balance, beginning of period $ 1,919,193 $ 1,681,005
Add:
Provision for loan losses 52,500 97,500
Recoveries of loans previously charged off 20,738 723
Less gross charge-offs: - -
Residential real estate loans - -
Consumer/commercial loans (14,920) (104,535)
----------- -------------
Balance, end of period $ 1,977,511 $ 1,674,693
=========== =============
Net charge-offs to total average loans outstanding (annualized) 0.00% 0.08%
Allowance to total average loans outstanding 1.26% .26%
Allowance for loan losses at March 31, 2005 was $1,978,000, an increase of
$59,000 from December 31, 2004. The Company's provision for loan losses for the
first quarter of 2005 was $53,000 and its net recoveries were approximately
$6,000. An analysis of the allowance for loan losses is performed monthly by the
Banks' management to assess the appropriate levels of allowance for loan losses.
Specific reserves are established based upon review of individual borrowers
identified in the classified loan list, establishing the probability of loss
associated with such borrowers, including comparison of loan balances versus
estimated liquidation values of collateral based upon independent information
sources or appraisals performed by board-approved licensed appraisers. The
remaining pool of loans, excluding those classified or delinquent is the source
for the general loan loss reserve. Management evaluates this general reserve
using loan loss statistics by various types of loans, as published periodically
by the OTS, FDIC, the Banks' historical losses or by the Chief Credit Officer's
recommendations and by multiplying such loss percentages to the Banks'
distribution of portfolio balances since management believes this will be
representative of losses inherent in the portfolio. The calculated reserve is
compared to the Banks' existing reserve to establish the provision necessary to
bring the actual reserve balance in compliance with the findings of the
allowance analysis performed by management. The reason for the increase in the
allowance was primarily due to these monthly assessments resulting in monthly
provisions. There were no residential real estate loan charge-offs or recoveries
for the period. Consumer and commercial loan charge-offs consisted primarily of
five loans. There were recoveries of six loans previously charged off of
$21,000. The allowance to total average loans outstanding remained flat at 1.26%
for the three month period ended March 31, 2005 and for the three month period
ended March 31, 2004. For the three month period ended March 31, 2005, the
allowance to total average loans outstanding decreased 5 basis points from 1.31%
at December 31, 2004.
Total liabilities at March 31, 2005 were $191,971,000, an increase of $1,130,000
compared to $190,841,000 at December 31, 2004. Deposits at March 31, 2005 were
$171,767,000 compared to $170,330,000 at December 31, 2004, an increase of
$1,437,000. Accordingly, other borrowings have decreased by $375,000 to
$19,143,000 at March 31, 2005 from $19,518,000 at December 31, 2004. Management
continues to emphasize the benefits of gathering non-certificate depository
funding as a means of decreasing the Banks' overall funding costs, improving
levels of fee income derived from depository relationships, and encouraging a
stronger relationship with its customer base. By acquiring primarily transaction
accounts, the Banks are less susceptible to loss of accounts during periods of
volatile interest rates.
Shareholders' equity at March 31, 2005 was $15,639,000, a decrease of $145,000
compared to $15,784,000 at December 31, 2004. The change in equity resulted from
net income of $204,000, offset by a decrease of $349,000 from reductions in the
fair value of the Company's available-for-sale investment portfolio.
- 15 -
RESULTS OF OPERATIONS: Three Months Ended March 31, 2005
During the three month period ended March 31, 2005, the Company's net income was
$204,000 compared to net income of $186,000 reported for the three month period
ended March 31, 2004. There was no income tax expense for the three month period
ended March 31, 2005 and for the three month period ended March 31, 2004. The
Company maintains a valuation allowance on a portion of its deferred tax assets.
During 2005 and 2004, management's estimate of the deferred tax asset
realization did not change significantly and the Company recorded changes in its
valuation allowance to offset a change in the deferred tax assets, resulting in
no income tax expense for 2005 or 2004.
During the 2004 year end audit of the financial statements, it was determined
that the Company was incorrectly accounting for deferred loan fees and costs on
home equity loans. This resulted in a $178,000 reduction in 2004 net income.
Subsequently, the Company determined that it needed to restate its 2004
quarterly financials to reflect the $178,000 reduction in net income to properly
document the full effect of the accounting error on each of the quarters in
2004. The Company has determined that the earnings reported during 2004 will be
reduced by $41,000 for the first quarter, $55,000 for the second quarter and
$52,000 for the third quarter. This information is provided in detail in Note 3
to the consolidated financial statements.
The Company's comparative performance showed an increase in net interest income
before provision for loan losses of $115,000, a decrease in the provision for
loan losses of $45,000, a decrease in non-interest income of $57,000, and an
increase in non-interest expenses of $85,000.
The increase in net interest income before provision for loan losses resulted
from an increase in interest income of $392,000, offset by an increase in
interest expense of $277,000. The increase in interest income was primarily due
to $480,000 from loan growth in 2004 and prime interest rate increases. These
increases were offset by decreases of $88,000 in the investment portfolio and
interest bearing deposits as a result of decreases in volume. The major variance
in interest expense is $282,000 and is attributed to increases in rates of
certificates of deposits and increased volume. Additionally there was a net
increase of $7,000 related other interest bearing deposits. The increase in
interest expense due to certificates of deposits and other deposits was offset
by a decrease in interest expense on borrowings of $12,000 and was primarily the
result of a reduction in the volume in borrowings, specifically at Paramount
Bank.
Interest income and fees from loans increased from $1,868,000 for the three
month period ended March 31, 2004 to $2,348,000 for the three month period ended
March 31, 2005. This increase was comprised of a favorable variance of $339,000
due to higher average loan balances of $22,993,000, and a favorable variance of
$141,000 due to an increase of 40 basis points in the effective yield on loans.
The increase in yield was largely due to increases in the prime interest rate,
increased balances in variable rate products, as well as higher yields on new
loans originated during the period. The overall yield on loans increased to
6.01% for the three month period ended March 31, 2005 from 5.61% for the three
month period ended March 31, 2004.
Interest income from investment securities decreased $112,000 to $335,000 for
the three months ended March 31, 2005, when compared to the three month period
ended March 31, 2004. This decrease resulted from an unfavorable variance of
$167,000 from a decrease in average investment balances of $16,103,000. These
decreases were due to maturities, repayments of mortgage-backed-securities and
sales occurring in 2004 and were the result of efforts to improve interest rate
sensitivity, risk-based capital, manage liquidity and concentrate on loan
growth. The unfavorable variance due to volume was offset by an increased
variance of $55,000 due to investment yields being 51 basis points higher over
the prior period ended March 31, 2004. During the three month period ended March
31, 2005, there were principal payment reductions in the
mortgage-backed-securities of $877,000 and a $1,000,000 call of a U.S Agency
available for sale security. The Banks will continue to invest primarily in
agency securities and mortgage-backed securities. Both of these investment
products receive favorable risk-based capital treatment.
Interest expense on deposits increased $289,000 to $915,000 for the three month
period ended March 31, 2005, compared to $626,000 for the three month period
ended March 31, 2004. This increase was comprised of an unfavorable variance of
$66,000 due to an increase in average deposit balances of $10,630,000
- 16 -
primarily in certificates of deposit, and an unfavorable variance of $223,000
due to an increase in average rates on deposits from 1.79% to 2.44%. This
unfavorable rate variance was created by higher certificate rates on new
certificates of deposit, as well as increased rates applied to core deposit
products such as savings and money market accounts. Additionally, increases in
certificates of deposit, specifically at Shelby County Bank were used as funding
sources to offset maturities of high rate promotional certificates of deposits.
Interest expense on FHLB advances and other borrowings decreased $12,000 from
$189,000 for the three-month period ended March 31, 2004 to $177,000 for the
three month period ended March 31, 2005. This decrease was the result of a
favorable variance of $40,000 due to a decrease in the average borrowing balance
of $4,439,000, primarily at Paramount Bank and an unfavorable variance of
$28,000 due to an increase in interest rates from 3.29% to 3.83%.
For the three month period ended March 31, 2005, the provision for loan losses
was $52,500 compared to $97,500 for the three month period ended March 31, 2004.
The decrease of $45,000 is primarily attributed to Shelby County Bank. There was
no provision for loan losses at Shelby County Bank for the three month period
ended March 31, 2005 as management determined by analysis of the provision that
the reserve was provided for adequately. Another factor contributing to this
decision was due to the net decrease of $110,000 in charge-offs for the three
month period ended March 31, 2005 compared to the three month period ended March
31, 2004. Please refer to the additional information related to the allowance
for loan losses in the financial condition discussion.
Total non-interest income was $264,000 for the three-month period ended March
31, 2005 compared to $321,000 for the three month period ended March 31, 2004.
Of this decrease, $98,000 can be attributed to the result of net gains on
securities available-for-sale, a decrease in other income and a decrease in
other income from sales of other assets of $45,000. Decreases in other income
were in part the result of a sale of a building owned by the Company during the
fourth quarter of 2004 and which resulted in the reduction of $8,000 in rental
income for the three months ended March 31, 2005, compared to the three months
ended March 31, 2004. Additionally there were decreases in other
non-interest-income relating to decreases in gains on other real estate owned
and other assets. Offsetting these decreases there was an increase of $62,000 in
secondary market mortgage loan fees and $24,000 from service charges and fees on
deposit accounts.
Non-interest expenses totaled $1,663,000 for the three month period ended March
31, 2005, compared to $1,578,000 during the three month period ended March 31,
2004. Of the increase, $69,000 can be attributed to the terminated merger with
Heartland Bancshares, Inc.
Changes in non-interest expenses consist of the following:
- 17 -
THREE MONTHS ENDED CHANGE FROM
MARCH 31, 2004
------------------------------
2005 2004
Salaries and employee benefits $ 835,872 $ 727,408 $ 108,464
Occupancy $ 188,521 207,132 (18,611)
Federal deposit insurance 16,242 12,511 3,731
Data Processing 154,786 150,645 4,141
Advertising and promotion 40,536 17,797 22,739
Bank fees and charges 25,823 23,660 2,163
Director Fees 53,850 58,450 (4,600)
Professional Fees 93,970 112,560 (18,590)
Stationery, supplies and printing 19,140 30,981 (11,841)
Core deposit intangible 17,241 16,425 816
Merger costs 69,335 - 69,335
Other Expenses 147,638 220,072 (72,434)
----------- ----------- -----------
$ 1,662,954 $ 1,577,641 $ 85,313
=========== =========== ===========
Other major fluctuations in non-interest expense include an increase in salaries
and employee benefits of $108,000. This increase is in part due to decreased
loan growth at Shelby County Bank for the period ended March 31, 2005 and the
impact on salary deferred loan fees and costs related to that slowed growth.
Other increases to salaries were the result of additions to staff and salary
increases. Advertising and promotion expenses have increased $23,000 from the
three months ended March 31, 2004 to the three months ended March 31, 2005 due
from an increase of $18,000 in these expenses at Paramount Bank associated with
management's attention to promoting and marketing the bank in its local area.
These increases were offset primarily by decreases in professional fees,
supplies and occupancy. Professional fees decreased by $19,000 as Shelby County
Bank has focused their efforts in reducing non-earning assets and the costs
associated with them. Occupancy has also decreased $19,000 when comparing the
two periods. A primary reason for the reduction was the result of a sale of a
property owned by the Company in the fourth quarter of 2004 and the $7,000 in
occupancy costs associated with maintaining that property during the three
months ended March 31, 2004. Other reductions in occupancy were due to fixed
assets becoming fully depreciated during 2004 and the first quarter ended March
31, 2005. Stationary and supplies as well decreased $12,000 as there is a
concentrated effort at the Banks to reduce such expenses as they relate to cost
containment. Additionally, director fees have decreased $5,000 for the period
ended March 31, 2005 compared to the period ended March 31, 2004. This is the
result of a change in the role of some directors who previously served on both
Blue River Bancshares' Board of Directors as well as Shelby County Bank's Board
of Directors and who currently only serve at the bank level. These expenses will
be increasing in the future however, as there are vacancies on both Banks' Board
of Directors as well as the Company's. Other expenses have decreased $73,000,
primarily the result of decreases in the Banks' insurance premiums.
CAPITAL RESOURCES AND LIQUIDITY
The Company and the Banks are subject to various capital requirements
administered by the federal banking agencies. Failure to meet minimum capital
requirements can initiate certain mandatory and possibly additional
discretionary actions by regulators that, if undertaken, could have a direct
material effect on the financial statements. The Board of Directors of the
Company has set as an objective to maintain capital levels required for
qualification as "well-capitalized". The capital ratios of the Banks have been
diminished due to two primary factors: continued operating losses and the
disallowance of the Banks' deferred tax assets in determining regulatory capital
ratios.
Capital amounts and classification are also subject to qualitative judgments by
regulators involving capital components, risk weights and other factors. The
risk weights assigned to various financial instruments are taken into
consideration in setting operating parameters related to the mix of loans and
investments with the objective to maximize earnings attained through the use of
available equity capital.
- 18 -
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. At March 31,
2005, the Banks satisfied all capital requirements. The Banks will continue to
monitor closely their risk-weighted assets and risk-based capital to maximize
returns while striving to maintain the "well-capitalized" designation.
The following table sets forth the actual and minimum capital amounts to be
adequately capitalized and ratios of Shelby County Bank as of March 31, 2005:
For Capital Adequacy Purposes:
SHELBY COUNTY BANK
TOTAL
TANGIBLE CORE RISK-BASED
CAPITAL CAPITAL CAPITAL
(DOLLARS IN THOUSANDS)
Bank Amount $8,019 $8,019 $ 9,101
Required Amount 1,854 3,708 7,211
------ ------ -------
Excess $6,165 $4,311 $ 1,890
====== ====== =======
Bank Ratio 6.49% 6.49% 10.10%
Required Ratio 1.50% 3.00% 8.00%
------ ------ -------
Ratio Excess 4.99% 3.49% 2.10%
====== ====== =======
The following table sets forth the actual and minimum capital amounts to be
adequately capitalized and ratios of Paramount as of March 31, 2005:
For Capital Adequacy Purposes:
PARAMOUNT BANK
TOTAL
TANGIBLE CORE RISK-BASED
CAPITAL CAPITAL CAPITAL
(DOLLARS IN THOUSANDS)
Bank Amount $6,206 $6,206 $6,936
Required Amount 1,179 2,357 4,661
------ ------ ------
Excess $5,027 $3,849 $2,275
====== ====== ======
Bank Ratio 7.90% 7.90% 11.91%
Required Ratio 1.50% 3.00% 8.00%
------ ------ ------
Ratio Excess 6.40% 4.90% 3.91%
====== ====== ======
Liquidity measures the Banks' ability to meet their savings withdrawals and
lending commitments. Management believes that the Banks' liquidity is adequate
to meet current requirements. The Banks maintain liquidity of at least 4% of net
withdrawable assets. At March 31, 2005, Shelby County Bank's regulatory
liquidity ratio was 8.58% and Paramount Bank's regulatory liquidity ratio was
14.80%.
- 19 -
The Company's liquidity position is the primary source of additional capital for
infusion into its banking subsidiaries. During the three months ended March 31,
2005, the Banks have significantly increased their use of funds as a result of
loan demand and maturities of higher interest rate certificates of deposit. Due
to the Company's current liquidity sources, the Company anticipates the need for
additional external funding over the next six months to fund the growth of the
Banks. In addition to the private placement which was authorized by the Board of
Directors in April 2005 and completed in May 2005, the Company may consider a
private placement of equity, additional bank borrowing and a private placement
of preferred stock securities, either convertible or nonconvertible. The private
placement raised approximately $505,000 of capital for the Company.
The primary function of liquidity and interest rate sensitivity management is to
provide for and assure an ongoing flow of funds that is adequate to meet all
current and future financial needs of the Banks. Such financial needs include
funding credit commitments, satisfying deposit withdrawal requests, purchasing
property and equipment and paying operating expenses. The funding sources of
liquidity are principally the maturing assets, payments on loans issued by the
Banks, net deposit growth, and other borrowings. The purpose of liquidity
management is to match sources of funds with anticipated customer borrowings and
withdrawals and other obligations along with ensuring a dependable funding base.
Alternative sources of liquidity include acquiring jumbo certificates resulting
from local government bidding, liquidation of marketable investment securities,
sales and/or securitization of pools of loans, and additional draws against
available credit at the FHLB.
- 20 -
PART I - ITEM 3
CONTROLS AND PROCEDURES
EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES
As of the end of the period covered by this report, we carried out an evaluation
(the "Evaluation"), under the supervision and with the participation of our
Chief Executive Officer ("CEO") and Controller, of the effectiveness of the
design and operation of our disclosure controls and procedures ("Disclosure
Controls"). Based on the Evaluation, our CEO and Controller concluded that,
subject to the limitations noted below, our Disclosure Controls are effective in
timely alerting them to material information required to be included in our
periodic SEC reports.
CHANGES IN INTERNAL CONTROLS
The Company has made a significant change in its internal controls over
financial reporting subsequent to December 31, 2004 that has materially affected
the Company's internal control over financial reporting. During the 2004 year
end audit of the financial statements it was determined that the Company was
incorrectly accounting for FASB 91 cost deferrals on home equity loans. This
resulted in a $178,000 reduction in 2004 net income. During the first quarter of
2005 the Company has implemented additional internal controls over the financial
reporting for FASB 91 cost deferrals, including an independent analytical review
of those cost deferrals, designed to prevent this error from occurring again in
the future.
LIMITATIONS ON THE EFFECTIVENESS OF CONTROLS
Our management, including our CEO and Controller, does not expect that our
Disclosure Controls and internal controls will prevent all errors and all fraud.
A control system, no matter how well conceived and operated, can provide only
reasonable, not absolute, assurance that the objectives of the control system
are met. Further, the design of a control system must reflect the fact that
there are resource constraints, and the benefits of controls must be considered
relative to their costs. Because of the inherent limitations in all control
systems, no evaluation of controls can provide absolute assurance that all
control issues and instances of fraud, if any within the Company have been
detected. These inherent limitations include the realities that judgments in
decision-making can be faulty, and that breakdowns can occur because of simple
error or mistake. Additionally, controls can be circumvented by the individual
acts of some persons, by collusion of two or more people, or by management
override of the control.
The design of any system of controls also is based in part upon certain
assumptions about the likelihood of future events, and there can only be
reasonable assurance that any design will succeed in achieving its stated goals
under all potential future conditions; over time, control may become inadequate
because of changes in conditions, or the degree of compliance with the policies
or procedures may deteriorate. Because of the inherent limitations in a
cost-effective control system, misstatements due to error or fraud may occur and
not be detected.
CEO AND CONTROLLER CERTIFICATIONS
Appearing as exhibits to this report there are Certifications of the CEO and
Controller. The Certifications are required in accord with Section 302 of the
Sarbanes-Oxley Act of 2002 (the Section 302 Certifications). This Item of this
report, which you are currently reading is the information concerning the
Evaluation referred to in the Section 302 Certifications and this information
should be read in conjunction with the Section 302 Certifications for a more
complete understanding of the topics presented.
- 21 -
PART II
OTHER INFORMATION
Item 1. Legal Proceedings
None
Item 2. Unregistered Sales of Equity 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
The exhibits to this Form 10-QSB are listed in the attached
Exhibit Index.
******
- 22 -
SIGNATURES
In accordance with the requirements of the Exchange Act, the Registrant caused
this report to be signed on behalf of the undersigned, thereto duly authorized.
Blue River Bancshares, Inc.
Date: May 16, 2005 By: /s/ Patrice M. Lima
-----------------------------
Patrice M. Lima, Vice President, Controller
(Principal Financial Officer & Chief
Accounting Officer)
- 23 -
EXHIBIT INDEX
Document Description
Exhibit No.
- -----------
31.1 Certification of Principal Executive Officer pursuant to Rule
15d-14(a) of the 1934 Act.
31.2 Certification of Principal Financial Officer pursuant to Rule
15d-14(a) of the 1934 Act.
32.1 Certification of Principal Executive Officer pursuant to Section
906 of the Sarbanes-Oxley Act of 2002
32.2 Certification of Principal Financial Officer pursuant to Section
906 of the Sarbanes-Oxley Act of 2002
- 24 -