SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------------
FORM 10-Q
Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
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(Mark One)
[X] Quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934.
For the quarterly period ended JUNE 30, 1997, or
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934.
For the transition period from ______________to____________
Commission File Number: 0-26128
NORTHWEST INDIANA BANCORP
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(Exact name of registrant as specified in its charter)
Indiana 35-1927981
- --------------------------------------------- ----------------
(State or other jurisdiction of incorporation (I.R.S. Employer
or organization) Identification Number)
9204 Columbia Avenue
Munster, Indiana 46321
- --------------------------------------- ----------
(Address of principal executive office) (ZIP code)
Registrant's telephone number, including area code: (219) 836-9690
---------------
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 [ ]
There were 1,381,438 shares of the registrant's Common Stock, without par value,
outstanding at June 30, 1997.
NORTHWEST INDIANA BANCORP
INDEX
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Page
Number
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PART I. Consolidated Financial Statements
Item 1. Consolidated Financial Statements of
NorthWest Indiana Bancorp
Consolidated Balance Sheets, June 30, 1997 and
December 31, 1996 1
Consolidated Statements of Income, Three Months and
Six Months Ended June 30, 1997 and 1996 2
Consolidated Statements of Changes in Stockholders'
Equity, Three Months and Six Months Ended June 30,
1997 and 1996 3
Consolidated Statements of Cash Flows, Three Months
and Six Months Ended June 30, 1997 and 1996 4
Notes to Consolidated Financial Statements 5 - 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 7 - 14
PART II. Other Information 15
SIGNATURES 16
NorthWest Indiana Bancorp
Consolidated Balance Sheets
(unaudited)
June 30, December 31,
1997 1996
------------- -------------
ASSETS
Cash and non-interest bearing balances in financial institutions ........... $ 7,236,928 $ 5,508,822
Interest bearing balances in financial institutions ........................ 865,000 1,000,000
------------- -------------
Total cash and cash equivalents ........................................ 8,101,928 6,508,822
Securities held-to-maturity (market value: June 30, 1997 -
$32,773,000; December 31, 1996 - $39,909,000) ............................ 32,888,491 38,427,292
Federal Home Loan Bank common stock
(cost approximates market value) ......................................... 1,646,000 1,596,700
Loans receivable ........................................................... 253,659,732 244,695,883
Less: allowance for loan losses ............................................ (2,962,805) (2,887,005)
------------- -------------
Net loans receivable ................................................... 250,696,927 241,808,878
Accrued interest receivable ................................................ 2,163,274 2,152,672
Premises and equipment ..................................................... 6,976,728 7,085,982
Foreclosed real estate ..................................................... 316,620 188,886
Other assets ............................................................... 1,074,879 1,649,268
------------- -------------
Total assets ........................................................... $ 303,864,847 $ 299,418,500
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Non-interest bearing deposits ............................................ $ 15,544,318 $ 12,878,557
Interest bearing deposits ................................................ 245,212,053 243,541,120
------------- -------------
Total deposits ......................................................... 260,593,104 256,419,677
Borrowed funds ............................................................. 11,853,817 12,260,507
Accrued expenses and other liabilities ..................................... 2,785,842 2,923,079
------------- -------------
Total liabilities ...................................................... 275,232,763 271,603,263
Stockholders' Equity
Preferred stock, no par or stated value;
10,000,000 shares authorized, none outstanding ........................... -- --
Common stock, no par or stated value; 20,000,000 shares authorized;
issued and outstanding; June 30, 1997 - 1,381,438 shares;
December 31, 1996 - 1,379,595 shares ..................................... 345,360 344,899
Additional paid-in capital ................................................. 2,947,241 2,929,587
Retained earnings - substantially restricted ............................... 25,339,483 24,540,751
------------- -------------
Total stockholders' equity ............................................. 28,632,084 27,815,237
------------- -------------
Total liabilities and stockholders' equity ............................. $ 303,864,847 $ 299,418,500
============= =============
See accompanying notes to consolidated financial statements.
1
NorthWest Indiana Bancorp
Consolidated Statements of Income
(unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
1997 1996 1997 1996
------------ ------------ ------------ ------------
Interest income:
Real estate loans .......................................... $ 4,705,379 $ 4,311,462 $ 9,256,604 $ 8,562,784
Commercial loans ........................................... 420,239 395,778 796,712 750,224
Consumer loans ............................................. 115,501 86,719 222,436 166,013
------------ ------------ ------------ ------------
Total loan interest .................................... 5,241,119 4,793,959 10,275,752 9,479,021
Securities held-to-maturity ................................ 584,044 664,867 1,186,459 1,274,730
Other interest earning assets .............................. 28,484 72,800 60,115 224,841
------------ ------------ ------------ ------------
Total interest income .................................. 5,853,647 5,531,626 11,522,326 10,978,592
Interest expense:
Deposits ................................................... 2,806,423 2,733,661 5,508,893 5,506,829
Borrowed funds ............................................. 91,236 43,593 178,876 79,404
------------ ------------ ------------ ------------
Total interest expense ................................. 2,897,659 2,777,254 5,687,769 5,586,233
Net interest income .......................................... 2,955,988 2,754,372 5,834,557 5,392,359
Provision for loan losses .................................... 32,000 17,500 81,000 32,500
------------ ------------ ------------ ------------
Net interest income after provision for loan losses .......... 2,923,988 2,736,872 5,753,557 5,359,859
Noninterest income:
Gain/(loss) on sale of interest earning assets ............. 6,927 (4,638) 13,532 (4,895)
Gain on sale of foreclosed real estate ..................... 0 -- 16,837 --
Fees and service charges ................................... 147,629 107,454 311,752 238,968
Trust operations ........................................... 60,251 61,874 154,661 108,119
Other ...................................................... 1,200 -- 59,160 --
------------ ------------ ------------ ------------
Total noninterest income ............................... 216,007 164,690 555,942 342,192
Noninterest expense:
Compensation and benefits .................................. 841,506 750,206 1,706,348 1,545,466
Occupancy and equipment .................................... 326,984 261,227 641,552 505,622
Federal insurance premium .................................. 40,972 140,299 82,178 278,430
Advertising ................................................ 39,353 38,962 84,470 84,891
Data processing ............................................ 87,560 73,808 170,149 139,809
Other ...................................................... 409,547 367,230 832,551 706,396
------------ ------------ ------------ ------------
Total noninterest expense .............................. 1,745,922 1,631,732 3,517,248 3,260,614
Income before income taxes ................................... 1,394,073 1,269,830 2,792,251 2,441,437
Income tax expense/(benefit) ................................. 550,200 506,600 1,109,400 973,200
------------ ------------ ------------ ------------
Net income/(loss) ............................................ $ 843,873 $ 763,230 $ 1,682,851 $ 1,468,237
============ ============ ============ ============
Earnings per common and common equivalent share:
Net Income/(loss) ............................................ $ 0.61 $ 0.56 $ 1.22 $ 1.07
============ ============ ============ ============
Dividends declared per common share .......................... $ 0.32 $ 0.28 $ 0.64 $ 0.55
See accompanying notes to consolidated financial statements
2
NorthWest Indiana Bancorp
Consolidated Statements of Changes in Stockholders' Equity
(unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
1997 1996 1997 1996
------------- ------------ ------------ ------------
Balance beginning of period ........................................ $ 28,230,034 $ 27,530,810 $ 27,815,237 $ 25,606,009
Stock option plan, 1,844 shares of common stock
issued at $9.31 - $21.25 per share in 1997 and
1,054 shares of common stock issued at $9.31 -
$11.50 per share in 1996 ..................................... 237 624 18,115 10,198
Cash dividends declared, $.64 per share in 1997
and $.55 per share in 1996 ................................... (442,060) (379,378) (884,119) (758,330)
Net income ..................................................... 843,873 763,230 1,682,851 1,579,579
------------ ------------ ------------ ------------
Balance end of period .............................................. $ 28,632,084 $ 27,915,286 $ 28,632,084 $ 26,437,456
============ ============ ============ ============
See accompanying notes to consolidated financial statements.
3
NorthWest Indiana Bancorp
Consolidated Statements of Cash Flows
(unaudited)
Six Months Ended
June 30,
1997 1996
------------ -------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income ................................................................... $ 1,682,851 $ 1,468,237
------------ ------------
Adjustments to reconcile net income to net cash provided by operating
activities:
Origination of loans for sale ............................................ (916,500) (580,400)
Sale of loans originated for sale ........................................ 927,051 268,211
Depreciation and amortization, net of accretion .......................... 284,788 244,945
Net gains on sale of loans ............................................... (13,532) (3,311)
Net gain on sale of fixed assets ......................................... (41,051) --
Net gains on sale of foreclosed real estate .............................. (16,837) --
Provision for loan losses ................................................ 81,000 32,500
Unrealized losses on mortgage loans held for sale ........................ -- 8,206
Net change in unearned interest on loans ................................. (2,146) 3,776
Change in deferred loan fees ............................................. (21,519) 23,490
Change in interest receivable ............................................ (10,602) (111,964)
Change in other assets ................................................... 574,389 (51,943)
Change in accrued expenses and other liabilities ......................... (137,237) (54,417)
------------ ------------
Total adjustments ...................................................... 707,804 (220,907)
------------ ------------
Net cash from operating activities .................................. 2,390,655 1,247,330
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from maturities of securities held-to-maturity ...................... 5,328,571 7,171,429
Purchase of securities held-to-maturity ...................................... -- (14,671,206)
Purchase of Federal Home Loan Bank common stock .............................. (49,300) --
Principal collected on mortgage-backed securities ............................ 185,442 235,437
Loans made net of payments received .......................................... (9,176,170) (11,839,441)
Purchase of property plant and equipment ..................................... (109,695) (892,452)
Proceeds from sale of foreclosed real estate ................................. 122,870 --
------------ ------------
Net cash from investing activities ........................................ (3,698,282) (19,996,233)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Change in deposits ........................................................... 4,173,427 11,930,881
Change in other borrowed funds ............................................... (406,690) 2,867,744
Proceeds from issuance of capital stock ...................................... 18,115 1,660
Cash dividends paid .......................................................... (884,119) (758,739)
------------ ------------
Net cash from financing activities ........................................ 2,900,733 14,041,546
------------ ------------
Net change in cash and cash equivalents ................................... 1,593,106 (4,707,357)
Cash and cash equivalents at beginning of period ............................. 6,508,822 14,943,704
------------ ------------
Cash and cash equivalents at end of period ................................... $ 8,101,928 $ 10,236,347
============ ============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest .................................................................. $ 5,664,629 $ 5,569,437
Income taxes .............................................................. 970,000 $ 755,000
See accompanying notes to consolidated financial statements.
4
NORTHWEST INDIANA BANCORP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - BASIS OF PRESENTATION
The consolidated financial statements include the accounts of NorthWest
Indiana Bancorp (the Company), its wholly-owned subsidiary, Peoples Bank SB (the
Bank), and the Bank's wholly-owned subsidiaries. The Company has no other
business activity other than being a holding company for the Bank. The
accompanying unaudited consolidated financial statements were prepared in
accordance with instructions for Form 10-Q and, therefore, do not include all
disclosures required by generally accepted accounting principles for complete
presentation of financial statements. In the opinion of management, the
consolidated financial statements contain all adjustments (consisting only of
normal recurring accruals) necessary to present fairly the balance sheets of the
Company as of June 30, 1997 and December 31, 1996, and the statements of income
and changes in stockholders' equity for the three and six months ended June 30,
1997 and 1996, and cash flows for the six months ended June 30, 1997 and 1996.
The income reported for the six month period ended June 30, 1997 is not
necessarily indicative of the results to be expected for the full year.
NOTE 2 - CONCENTRATIONS OF CREDIT RISK
The Bank grants residential, commercial real estate, commercial
business and installment loans to customers in its primary market area of Lake
County, in northwest Indiana. Substantially all loans are secured by specific
items of collateral including residences, business assets and consumer assets.
NOTE 3 - RECLASSIFICATIONS
Certain amounts reported in the December 31, 1996 consolidated
financial statements have been reclassified to conform to the June 30, 1997
presentation. All reclassifications are of a normal recurring nature.
NOTE 4 - CONSOLIDATED BALANCE SHEETS
The balance sheet of December 31, 1996 has been taken from the audited
financial statements at that date.
NOTE 5 - COMMITMENTS AND CONTINGENCIES
The Bank is a party to financial instruments in the normal course of
business to meet financing needs of its customers and to reduce its own exposure
to fluctuating interest rates. These financial instruments include commitments
to make loans and standby letters of credit.
Exposure to credit loss in the event of nonperformance by the other
party to the financial instrument for commitments to make loans and standby
letters of credit is represented by the contractual amount of those instruments.
The Bank uses the same credit policy to make such commitments as it uses for
on-balance-sheet items.
At June 30, 1997 and December 31, 1996, commitments to make loans
totaled $42.3 million and $34.1 million, respectively and standby letters of
credit totaled $323 thousand and $519 thousand, respectively. At June 30, 1997,
$32.4 million (77%) of the commitments were at variable rates.
Since commitments to make loans may expire without being used, the
amount does not necessarily represent future cash commitments. Collateral
obtained upon exercise of the commitment is determined using management's credit
evaluation of the borrower, and may include accounts receivable, inventory,
property, land and other items.
5
NOTE 6 - EARNINGS PER COMMON SHARE
The weighted average number of shares used in the calculation of
earnings per share during the three months ended June 30, 1997 and 1996 were
1,381,421 and 1,379,500, respectively. The weighted average number of shares
used in the calculation of earnings per share during the six months ended June
30, 1997 and 1996 were 1,380,851 and 1,379,470, respectively. The effect of
common stock equivalents is not material in these periods.
6
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
SUMMARY
NorthWest Indiana Bancorp, an Indiana corporation (NWIB or the Company), is
the holding company for Peoples Bank SB (the Bank), an Indiana stock savings
bank. Peoples Bank SB is a wholly owned subsidiary of NWIB. The Company has no
other business activity other than being the holding company for Peoples Bank
SB.
At June 30, 1997, the Company had total assets of $303.9 million and total
deposits of $260.6 million. Stockholders' equity totaled $28.6 million or 9.4%
of total assets, with book value per share at $20.73. The annualized return on
average assets (ROA) was 1.13%, while the annualized return on average
stockholders' equity (ROE) was 11.83%, for the six month period.
FINANCIAL CONDITION
During the six months ended June 30, 1997, total assets increased by
$4.4 million (1.5%), with interest-earning assets increasing by $3.3 million
(1.2%). Total loans increased by $9.0 million (3.7%). The increase in loans was
funded with deposit growth of $4.2 million (1.6%) and maturing securities as the
securities held-to-maturity portfolio decreased $5.5 million (13.7%). At June
30, 1997, interest-earning assets totaled $289.1 million and represented 95.1%
of total assets. Loans receivable totaled $253.7 million and represented 87.8%
of interest-earning assets, 83.5% of total assets and 97.3% of total deposits.
The loan portfolio includes $15.2 million (6.0%) in construction and development
loans, $153.6 million (60.6%) in residential mortgage loans, $60.5 million
(23.8%) in commercial and multifamily real estate loans, $5.5 million (2.2%) in
consumer loans, and $18.9 million (7.4%) in commercial business and other loans.
Adjustable rate loans comprised 64% of the total investment in loans at June 30,
1997.
The Bank is primarily a portfolio lender. Mortgage banking activities
are limited to the sale of fixed rate mortgage loans with contractual maturities
of thirty years. These loans are sold in the secondary market because of the
additional exposure to interest rate risk associated with this product. The Bank
retains the servicing on all loans sold in the secondary market. During the six
months ending June 30, 1997, the Bank sold $917 thousand in fixed rate mortgage
loans. The amount includes 10 loans. Net gains realized from the sales totaled
$14 thousand. Mortgage loan servicing income totaled $10 thousand. At June 30,
1997, the Bank had no loans classified as held for sale.
The primary objective of the investment portfolio is to provide for the
liquidity needs of the Bank and to contribute to profitability by providing a
stable flow of dependable earnings. Funds are generally invested in federal
funds, interest-bearing balances in financial institutions, U.S. government
securities and federal agency obligations. Interest-bearing balances in
financial institutions include overnight deposits at the Federal Home Loan Bank
of Indianapolis (FHLBI). Investments are generally for terms ranging from one
day to five years. At June 30, 1997, the investment portfolio totaled $34.5
million and was invested as follows: 64.0% in U.S. government
7
agency debt securities, 26.2% in U.S. government debt securities, 5.0% in U.S.
government agency mortgage-backed securities, and 4.8% in FHLB common stock.
During the six months ended June 30, 1997, investment securities decreased by
$5.5 million (13.7%) as funds were used to provide funding for loan portfolio
growth.
Management believes that the credit risk profile of the earning asset
portfolio is relatively low. At June 30, 1997, the Bank had $1.4 million in
non-performing loans. The June 30, 1997 balance includes $726 thousand in loans
accounted for on a non-accrual basis and $668 thousand in accruing loans which
were contractually past due 90 days or more. The total of these non-performing
loans represents 0.55% of the total loan portfolio and 0.46% of total assets. At
June 30, 1997, the Bank had $317 thousand in foreclosed real estate. The total
represents 0.10% of total assets.
The table which follows sets forth information with respect to the
number (#) and balances (Amount) of non-performing assets and related ratios for
the periods indicated. The amounts are stated in thousands (000's).
June 30, 1997 December 31, 1996
# Amount # Amount
--- ------ --- ------
Loans accounted for on a non-accrual basis:
Real estate loans:
Residential 16 $ 636 14 $ 583
Commercial 1 66 1 45
Commercial business loans 1 14 2 111
Consumer loans 4 10 2 49
-- ------ -- ------
Total 22 $ 726 19 $ 788
== ====== == ======
Accruing loans which are contractually past due 90 days or more:
Real estate loans:
Residential 13 $ 581 5 $ 373
Commercial - -- - --
Commercial business loans - -- 1 5
Consumer loans 3 87 1 1
-- ------ -- ------
Total 16 $ 668 7 $ 379
== ====== == ======
Total of non-accrual and 90 days or more past due loans 38 $1,394 26 $1,167
== ====== == ======
Foreclosed real estate 5 $ 317 3 $ 189
== ====== == ======
Ratio of non-performing loans to total assets 0.46% 0.39%
Ratio of non-performing loans to total loans 0.55% 0.48%
Ratio of foreclosed real estate to total assets 0.10% 0.06%
Ratio of non-performing assets to total assets 0.56% 0.45%
8
At June 30, 1997, $1.1 million of the Bank's loans were classified as
substandard. The total represents 29 loans. Two loans totaling $20 thousand were
classified as doubtful. There were no loans classified as loss. Management does
not anticipate that any of the non-performing loans or classified loans will
materially impact future operations, liquidity or capital resources. At June 30,
1997, there were no material credits which would cause management to have
serious doubts as to the ability of such borrowers to comply with loan repayment
terms.
Because some loans may not be repaid in accordance with contractual
agreements an allowance for loan losses (ALL) has been maintained. While
management may periodically allocate portions of the allowance for specific
problem loans, the entire allowance is available to absorb all credit losses
that arise from the loan portfolio and is not segregated for, or allocated to,
any particular loan or group of loans. During the six months ended June 30,
1997, additions to the ALL account totaled $81 thousand compared to $33 thousand
for the six months ended June 30, 1996. Charge-offs net of recoveries totaled $5
thousand during the current period. The amount provided during the current
period was based on loan activity, current economic conditions and management's
assessment of portfolio risk. At June 30, 1997, the balance in the ALL account
totaled $3.0 million, which is considered adequate by management after
evaluation of the loan portfolio, past experience and current economic and
market conditions.
The table below sets forth the allocation of the ALL and related ratios
on the dates indicated. The amounts are in thousands (000's). The percent
columns represent the percentage of loans in each category to total loans.
June 30, 1997 December 31, 1996
------------------- -------------------
Real estate loans:
Residential $ 372 60.6% $ 372 61.8%
Commercial & Multifamily 913 23.8 880 23.4
Construction & Development 151 6.0 153 5.4
Consumer loans 125 2.2 110 2.0
Commercial business loans and other loans 661 7.4 650 7.4
Unallocated 741 722
------ ----- ------ -----
Total $2,963 100.0% $2,887 100.0%
====== ===== ====== =====
Ratio of ALL to loans outstanding 1.17% 1.18%
Ratio of ALL to non-performing loans 212.6% 247.4%
At June 30, 1997, no portion of the ALL was allocated to impaired loan
balances as the Bank had no loans considered to be impaired loans as of, or for
the six months ended June 30, 1997. The allocation of the ALL reflects
consideration of the facts and circumstances that affect the repayment of
individual loans, as well as, loans which have been pooled as of the evaluation
date.
Deposits are the major source of funds for lending and other investment
purposes. At June 30, 1997, deposits totaled $260.6 million . During the six
months ending June 30, 1997, deposit growth totaled $4.2 million ( 1.6%).
Savings accounts decreased $16 thousand (0.0%), checking accounts increased $1.2
million (3.3%), money market deposit accounts (MMDA's) increased $597 thousand
(2.7%) and certificates of deposit increased by $2.4
9
million (1.5%). At June 30, 1997, the deposit base was comprised of 16.7%
savings accounts, 8.8% MMDA's, 14.6% checking accounts and 59.9% certificates of
deposit. At June 30, 1997, repurchase agreements totaled $3.5 million. Other
short-term borrowings totaled $8.4 million, of which $7.0 million represents a
variable rate advance from the FHLBI. The Company had no long-term borrowings.
LIQUIDITY AND CAPITAL RESOURCES
Liquidity refers to the ability to generate sufficient cash to fund
current loan demand, meet savings deposit withdrawals and pay operating
expenses. Changes in the liquidity position result from operating, investing and
financing activities. Cash flows from operating activities are generally the
cash effects of transactions and other events that enter into the determination
of net income. The primary investing activities include loan originations, loan
repayments, investment in interest-bearing deposits in other financial
institutions, and the purchase and maturity of investment securities. Financing
activities focus almost entirely on the generation of customer deposits. In
addition, the Bank utilizes short-term borrowings, i.e., repurchase agreements
and advances from the FHLBI as a source of funds.
During the six months ended June 30, 1997, cash and cash equivalents
increased by $1.6 million compared to a decrease in cash and cash equivalents of
$4.7 million for the six months ended June 30, 1996. The primary sources of cash
were proceeds from maturities of securities held-to-maturity, deposit growth and
cash provided by operating activities. The primary uses of cash were the funding
of loan growth, the payment of common stock dividends and the reduction of
short-term borrowings. During the current period cash provided by operating
activities totaled $2.4 million compared to $1.2 million for the six months
ended June 30, 1996. Cash outflows from investing activities totaled $3.7
million reflecting the increase in loan originations during the period. Cash
flows from financing activities totaled $2.9 million as deposit growth was used
to fund loan growth.
At June 30, 1997, outstanding commitments to fund loans totaled $42.3
million. Approximately 77% of the commitments were at variable rates. The Bank
has sufficient cash flow and borrowing capacity to fund outstanding commitments
and to maintain proper levels of liquidity.
Management strongly believes that safety and soundness is enhanced by
maintaining a high level of capital. During the six months ended June 30, 1997,
stockholders' equity increased by $817 thousand (2.9%). The increase resulted
primarily from earnings of $1.7 million during the period. In addition, $18
thousand represents proceeds from the exercise of 1,844 stock options. The
reduction of $884 thousand represents cash dividends for the six month period.
The Company is subject to risk-based capital guidelines adopted by the
Board of Governors of the Federal Reserve System (the FRB), and the Bank is
subject to risk-based capital guidelines adopted by the FDIC. As applied to the
Company and the Bank, the FRB and FDIC capital requirements are substantially
identical. The Company and the Bank are required to maintain a total risk-based
capital ratio of 8%, of which 4% must be Tier I capital. In addition, the FRB
and FDIC regulations provide for a minimum Tier I leverage ratio (Tier I capital
to adjusted total assets) of 3% for financial institutions that meet certain
specified criteria, including that they have the
10
highest regulatory rating and are not experiencing or anticipating significant
growth. All other financial institutions are required to maintain a Tier I
leverage ratio of 3% plus an additional cushion of at least one to two percent.
The following table shows that, at June 30, 1997, the Company's capital
exceeded all regulatory capital requirements. At June 30, 1997, the Company's
and the Bank's regulatory capital ratios were identical. The dollar amounts are
in millions.
Required for To be well
Actual adequate capital capitalized
------------- ------------------ -----------
Amount Ratio Amount Ratio Amount Ratio
------------ ------ ----- ------------
Total risk-based capital
to risk-weighted assets $31.1 15.7% $15.8 8.0% $19.8 10.0%
Tier 1 capital
to risk-weighted assets $28.6 14.5% $ 7.9 4.0% $11.9 6.0%
Tier I capital to
total assets $28.6 9.4% $ 9.1 3.0% $15.2 5.0%
RESULTS OF OPERATIONS - COMPARISON OF THE QUARTER ENDED JUNE 30, 1997 TO THE
QUARTER ENDED JUNE 30, 1996
Net income for the three months ended June 30, 1997 was $844 thousand
compared to $763 thousand for the quarter ended June 30, 1996, an increase of
$81 thousand (10.6%). The earnings represent a ROA of 1.12% for the current
quarter compared to 1.05% for the quarter ended June 30, 1996. The ROE was
11.94% for the current quarter compared to 10.94% for the quarter ended June 30,
1996.
Net interest income for the three months ended June 30, 1997 was $3.0
million, up $202 thousand (7.3%) from $2.8 million for the three months ended
June 30, 1996. The increase in net interest income was due to the growth in
average interest-earning assets, increasing yields on interest-earning assets
and a stable cost of funds. Interest-earning assets averaged $287.2 million for
the current quarter, up $8.8 million (3.1%) from $278.4 million for the three
months ended June 30, 1996. The net interest margin for the current quarter was
3.94% compared to 3.81% for the three months ended June 30, 1996. The increase
was due to higher yields on interest-earning assets and a stable cost of funds.
During the current quarter total interest income increased by $321 thousand
(5.8%) while total interest expense increased by $120 thousand (4.3%).
During the three months ended June 30, 1997, interest income from loans
increased by $447 thousand (9.3%) compared to the three months ended June 30,
1996. The increase was due to an increase in yield and an increase in average
daily balances for the loan portfolio. The weighted average yield on loans
outstanding was 8.40% for the current quarter compared to 8.36% for the three
months ended June 30, 1996. Higher average loan balances have contributed to the
increase in interest income as loans averaged $249.7 million for the current
quarter, up $20.3 million (8.9%) from $229.4 for the three months ended June 30,
1996. During the three months ended June 30, 1997, interest income on
investments and other deposits decreased by $126 thousand (17.1%) compared to
the quarter ended June 30, 1996. The decrease was due to lower average balances
as maturing securities and short-
11
term investments were used to fund loan growth. Securities and other deposits
averaged $37.4 million for the current quarter, down $11.6 million (23.6%) from
$49.0 million for the three months ended June 30, 1996. The weighted average
yield on investments and other deposits was 6.54% for the quarter ended June 30,
1997 compared to 6.02% for the quarter ended June 30, 1996. The combined
weighted average yield on total interest-earning assets was 8.15% for the
quarter ended June 30, 1997 compared to 7.95% for the quarter ended June 30,
1996.
Interest expense for deposits increased by $72 thousand (2.6%) during
the current quarter compared to the three months ended June 30, 1996. The
increase was due to an increase in average daily balances. The weighted average
rate paid on deposits for the three months ended June 30, 1997 was 4.30%
compared to 4.29% for the quarter ended June 30, 1996. Deposit balances averaged
$261.3 million for the current quarter, up $6.4 million (2.5%) from $254.9 for
the quarter ended June 30, 1996. Interest expense on short-term borrowings
increased by $48 thousand (111.6%) during the current quarter due to increased
cost and higher average daily balances. The weighted average cost of short-term
borrowings was 5.11% for the current quarter compared to 4.50% for the three
months ended June 30, 1996. Borrowed funds averaged $7.1 million during the
quarter ended June 30, 1997, up $3.2 million (82.1%) from $3.9 million for the
quarter ended June 30, 1996. The combined weighted average rate paid on deposits
and borrowings for the quarter ended June 30, 1997 was 4.31% compared to 4.30%
for the quarter ended June 30, 1996. The impact of the 8.15% return on
interest-earning assets and the 4.31% cost of funds resulted in an interest rate
spread of 3.84% for the current quarter compared to 3.65% for the quarter ended
June 30, 1996.
Noninterest income for the quarter ended June 30, 1997 was $216
thousand, up $51 thousand (30.9%) from $165 thousand for the three months ended
June 30, 1996. The increase was due to gains from the sale of fixed rate loans
and increased income from fees and service charges.
Noninterest expense for the quarter ended June 30, 1997 was $1.7
million, up $114 thousand (7.0%) from $1.6 million for the three months ended
June 30, 1996. In general, increases in noninterest expense have resulted from
the expansion of the Bank's operations and the investment in new technologies.
The increase in compensation and benefits was due to additional staffing and
annual salary increases. The increase in occupancy and equipment expense was due
to the operation of the new Merrillville, Indiana, branch facility which opened
during September 1996, and depreciation related to investments in technology.
Other expense changes were due to standard increases in bank operations. The
decrease in the federal insurance premium reflects lower premiums for Savings
Association Insurance Fund (SAIF) deposits due to the recapitalization of SAIF
during 1996. The Company's efficiency ratio, for the current quarter was 55.0%
compared to 55.9% for the quarter ended June 30, 1996. The ratio is determined
by dividing total noninterest expense by the sum of net interest income and
total noninterest income for the period.
Income tax expenses for the three months ended June 30, 1997 totaled
$550 thousand compared to $507 thousand for the three months ended June 30,
1996, an increase of $43 thousand (8.5%). The increase was due to an increase in
pretax earnings during the current quarter.
12
RESULTS OF OPERATIONS - COMPARISON OF THE SIX MONTHS ENDED JUNE 30, 1997 TO THE
SIX MONTHS ENDED JUNE 30, 1996
Net income for the six months ended June 30, 1997 was $1.7 million
compared to $1.5 million for the six months ended June 30, 1996, an increase of
$215 thousand (14.6%). The earnings represent a ROA of 1.13% for the current
period compared to 1.03% for the six months ended June 30, 1996. The ROE was
11.83% for the current period compared to 10.62% for the six months ended June
30, 1996.
Net interest income for the six months ended June 30, 1997 was $5.8
million, up $442 thousand (8.2%) from $5.4 million for the six months ended June
30, 1996. The increase in net interest income was due to the growth in average
interest-earning assets, increasing yields on interest-earning assets and a
lower cost of funds. Interest-earning assets averaged $284.9 million for the
current period, up $9.2 million (3.3%) from $275.7 million for the six months
ended June 30, 1996. The net interest margin for the current period was 3.92%
compared to 3.77% for the six months ended June 30, 1996. The increase was due
to higher yields on interest-earning assets and a lower cost of funds. During
the current six months total interest income increased by $543 thousand (4.9%)
while total interest expense increased by $101 thousand (1.8%).
During the six months ended June 30, 1997, interest income from loans
increased by $797 thousand (8.4%) compared to the six months ended June 30,
1996. The increase was due to an increase in average daily balances for the loan
portfolio. The weighted average yield on loans outstanding was 8.35% for the
current period compared to 8.38% for the six months ended June 30, 1996. Higher
average loan balances have contributed to the increase in interest income as
loans averaged $246.0 million for the current period, up $19.8 million (8.8%)
from $226.2 for the six months ended June 30, 1996. During the six months ended
June 30, 1997, interest income on investments and other deposits decreased by
$254 thousand (16.9%) compared to the six months ended June 30, 1996. The
decrease was due to lower average balances as maturing securities and short-term
investments were used to fund loan growth. Securities and other deposits
averaged $38.8 million for the current period, down $10.7 million (21.6%) from
$49.5 million for the six months ended June 30, 1996. The weighted average yield
on investments and other deposits was 6.42% for the six months ended June 30,
1997 compared to 6.06% for the six months ended June 30, 1996. The combined
weighted average yield on total interest-earning assets was 8.09% for the six
months ended June 30, 1997 compared to 7.97% for the six months ended June 30,
1996.
Interest expense for deposits remained stable, increasing by $1
thousand (0.0%) during the current period compared to the six months ended June
30, 1996. The weighted average rate paid on deposits for the six months ended
June 30, 1997 was 4.27% compared to 4.37% for the six months ended June 30,
1996. Deposit balances averaged $259.3 million for the current period, up $7.0
million (2.8%) from $252.3 for the six months ended June 30, 1996. Interest
expense on short-term borrowings increased by $100 thousand (126.6%) during the
current period due to increased cost and higher average daily balances. The
weighted average cost of short-term borrowings was 5.01% for the current six
months compared to 4.63% for the six months ended June 30, 1996. Borrowed funds
averaged $7.1 million during the six months ended June 30, 1997, up $3.7 million
(108.8%) from $3.4 million for the six months ended June 30, 1996. The combined
weighted average rate paid on deposits and borrowings for the six months ended
June 30, 1997 was 4.27% compared to 4.37% for the six months ended June
13
30, 1996. The impact of the 8.09% return on interest-earning assets and the
4.27% cost of funds resulted in an interest rate spread of 3.82% for the current
six months compared to 3.60% for the six months ended June 30, 1996.
Noninterest income for the six months ended June 30, 1997 was $556
thousand, up $214 thousand (62.6%) from $342 thousand for the six months ended
June 30, 1996. During the current period income from fees and service charges
increased $72 thousand (30.1%), while income from Trust operations increased by
$47 thousand (43.5%). In addition, gains from the sale of fixed rate loans,
foreclosed real estate and other real estate properties held by the Bank
contributed to the increase in noninterest income.
Noninterest expense for the six months ended June 30, 1997 was $3.5
million, up $257 thousand (7.9%) from $3.3 million for the six months ended June
30, 1996. The increase in compensation and benefits was due to additional
staffing and annual salary increases. The increase in occupancy and equipment
expense was due to the operation of the new Merrillville, Indiana, branch
facility which opened during September 1996, and depreciation related to
investments in technology. Other expense changes were due to standard increases
in bank operations. The decrease in the federal insurance premium reflects lower
premiums for Savings Association Insurance Fund (SAIF) deposits due to the
recapitalization of SAIF during 1996. The Company's efficiency ratio, for the
current six months was 55.0% compared to 56.9% for the six months ended June 30,
1996.
Income tax expenses for the six months ended June 30, 1997 totaled $1.1
million compared to $1.0 million for the six months ended June 30, 1996, an
increase of $136 thousand (14.0%). The increase was due to an increase in pretax
earnings during the current six months.
14
PART II - Other Information
---------------------------
Item 1. Legal Proceedings
-----------------
The registrant is not party to any legal proceedings. No significant
changes in legal proceedings of the Bank occurred during the quarter.
Item 2. Changes in Securities
---------------------
Not Applicable.
Item 3. Defaults Upon Senior Securities
-------------------------------
Not Applicable.
Item 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
NorthWest Indiana Bancorp held its annual meeting of
shareholders on April 17, 1997. At this meeting the security
holders:
1. Elected the following directors for the registrant, whose
term of office continued after the meeting:
Number of Votes
For Withheld
--- --------
David A. Bochnowski 980,403 835
Jerome F. Vrabel 980,203 1,035
Other directors whose term of office as a director continued
after the meeting include:
James J. Crandall Leroy F. Cataldi Gloria C. Gray
Lourdes M. Dennison John J. Wadas, Jr. Stanley E. Mize
2. Ratified the appointment of Crowe, Chizek and Company LLP
as the auditors for the registrant for the year ending
December 31, 1997.
Number of Votes: For Against Abstain
--- ------- -------
976,086 0 5,152
Item 5. Other Information
-----------------
Not Applicable.
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
(a) Exhibits.
--------
(27) Financial Data Schedule
(b) Reports on Form 8-K. None.
-------------------
15
SIGNATURES
Pursuant to the requirement of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
NORTHWEST INDIANA BANCORP
Date: August 8, 1997 /s/ David A. Bochnowski
---------------------------------------
David A. Bochnowski
Chairman of the Board and Chief Executive
Officer
Date: August 8, 1997 /s/ Edward J. Furticella
---------------------------------------
Edward J. Furticella
Vice President, Chief Financial Officer
and Treasurer
16