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SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-K
Annual Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
For the fiscal year ended December 31, 1996 Commission file number 0-12422
INDIANA UNITED BANCORP
(Exact name of registrant as specified in its charter)
Indiana 35-1562245
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
201 North Broadway
Greensburg, Indiana 47240
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code: (812) 663-4711
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
Common shares, no-par value
(Title of Class)
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K. x
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
The aggregate market value (not necessarily a reliable indication of the price
at which more than a limited number of shares would trade) of the voting stock
held by non-affiliates of the registrant was $25,678,500 as of March 20, 1997.
As of March 20, 1997, there were outstanding 1,250,897 common shares, without
par value, of the registrant.
DOCUMENTS INCORPORATED BY REFERENCE
Part of Form 10-K
Documents Into Which Incorporated
1996 Annual Report to Shareholders Part II (Items 5 through 8)
Definitive Proxy Statement fo
Annual Meeting of Shareholders
to be held May 20, 1997 Part III (Items 10 through 13)
EXHIBIT INDEX: Page 9
FORM 10-K TABLE OF CONTENTS
Page
Part I
Item 1 - Business 3
Item 2 - Properties 6
Item 3 - Legal Proceedings 6
Item 4 - Submission of Matters to a Vote of
Security Holders 6
Part II
Item 5 - Market For the Registrant's Common
Equity and related Stockholder
Matters 6
Item 6 - Selected Financial Data 6
Item 7 - Management's Discussion and Analysis
of Financial Condition and Results
of Operations 7
Item 8 - Financial Statements and
Supplementary Data 7
Item 9 - Disagreements on Accounting and
Financial Disclosure 7
Part III
Item 10 - Directors and Executive Officers
of the Registrant (See below)
Item 11 - Executive Compensation (See below)
Item 12 - Security Ownership of Certain
Beneficial Owners and
Management (See below)
Item 13 - Certain Relationships and
Related Transactions (See below)
Part IV
Item 14 - Exhibits, Financial Statement
Schedules, and Reports on
Form 8-K 8
Signatures 10
Pursuant to General Instruction G, the information called for by Items 10,
11, 12 and 13 is omitted by Indiana United Bancorp since Indiana United
Bancorp will file with the Commission a definitive proxy statement pursuant
to regulation 14A not later than 120 days after the close of the fiscal year
containing the information required by Items 10, 11, 12 and 13.
PART I
ITEM 1. BUSINESS.
General
Indiana United Bancorp ("Company") was initially formed in Owensboro, Kentucky,
in 1982 as First Commonwealth Bancorp. The Company reincorporated under the
laws of the State of Indiana under its present name in 1983, and relocated in
Greensburg, Indiana, in anticipation of acquiring Union Bank and Trust Company
of Greensburg. In 1987, Peoples Bank in Portland, Indiana was acquired and as
of December 31, 1991, Regional Federal Savings Bank, New Albany, Indiana
("Regional Bank") was acquired. Effective July 1, 1994, the Company merged
Union Bank and Trust Company of Greensburg into Peoples Bank, Portland, and
renamed the combined bank, Union Bank and Trust Company of Indiana ("Union
Bank"). Through these subsidiaries ("Banks"), the Company operates twelve
offices with 143 full-time equivalent employees in eastern and southern Indiana.
As of December 31, 1996, the Company had consolidated assets of $328 million,
consolidated deposits of $276 million and shareholders' equity of $28 million.
Through its subsidiaries, the Company offers a broad range of financial
services, including: accepting time and transaction deposits; making consumer,
commercial, agri-business and real estate mortgage loans; issuing credit
cards; renting safe deposit facilities; providing general agency personal and
business insurance services; providing personal and corporate trust services;
and providing other corporate services such as payroll processing, letters of
credit and repurchase agreements.
Currently, national retailing and manufacturing subsidiaries, brokerage and
insurance firms, and credit unions are fierce competitors within the financial
services industry. The relaxation of regulatory constraints as to geographic
expansion has also intensified competition among more traditional providers of
banking services. The permissibility of banks and bank holding companies to
acquire thrift institutions will undoubtedly further redefine the competitive
marketplace.
The Company's subsidiaries are located in non-metropolitan areas and their
business is centered in loans and deposits generated within markets considered
to be largely rural in nature. In addition to competing vigorously with other
banks, thrift institutions, credit unions and finance companies located within
their service areas, they also compete, directly and indirectly, with all
providers of financial services.
Employees
As of December 31, 1996, the Company and its subsidiaries had approximately
143 full-time equivalent employees to whom it provides a variety of benefits
and with whom it enjoys excellent relations.
Regulation and Supervision of the Company
The Company is a bank holding company ("BHC") within the meaning of the Bank
Holding Company Act of 1956, as amended ("BHCA"). This Act subjects BHCs to
regulations of the Federal Reserve Board ("FRB") and restricts the business
of BHCs to banking and related activities. In addition, Indiana United is a
nondiversified unitary savings and loan holding company subject to regulations,
examinations, supervision and reporting requirements of the Office of Thrift
Supervision ("OTS").
Under the BHCA, a BHC is, with limited exceptions, prohibited from acquiring
direct or indirect ownership or control of voting stock of any company which
is not a bank or engaging in any activity other than managing or controlling
banks. A BHC may, however, own shares of a company engaged in activities which
the FRB has determined to be so closely related to banking or managing or
controlling banks as to be a proper incident thereto.
Acquisitions by the Company of banks and savings associations are subject to
federal and state regulation. Any acquisition by the Company of more than
five percent of the voting stock of any bank requires prior approval of the
FRB. Acquisition of savings associations is also subject to the approval of
the OTS.
Indiana law permits BHCs to acquire BHCs and banks out of state on a
reciprocal basis, subject to certain limitations. Under current law, the
Company may acquire banks, and may be acquired by BHCs, located in any state
in the United States which permits reciprocal entry by Indiana BHCs. Under
the BHCA, BHCs may acquire savings associations without geographic restrictions.
A BHC and its subsidiaries are prohibited from engaging in certain tying
arrangements in connection with the extension of credit, lease or sale of
property, or the provision of any property or service.
The Company is under the jurisdiction of the Securities and Exchange
Commission ("SEC) and state securities commission for matters relating to the
offering and sale of its securities. The Company is subject to the SEC's
rules and regulations relating to periodic reporting, reporting to shareholders,
proxy solicitation and insider trading.
The Company's income is principally derived from dividends paid on the common
stock of its subsidiaries. The payment of these dividends is subject to certain
regulatory restrictions.
Under FRB policy, the Company is expected to act as a source of financial
strength to, and commit resources to support, its affiliates. As a result of
such policy, the Company may be required to commit resources to its affiliate
banks in circumstances where it might not otherwise do so.
Regulation and Supervision of the Subsidiary Banks
Union Bank is supervised, regulated and examined by the Indiana Department of
Financial Institutions ("DFI") and the Federal Deposit Insurance Corporation
("FDIC"). Regional Bank is supervised, regulated and examined by the OTS. A
cease-and-desist order may be issued against the banks, if the respective
agency finds that the activities of the bank represents an unsafe and unsound
banking practice or violation of law.
The deposits of Union Bank are insured by the Bank Insurance Fund ("BIF") of
the FDIC. The deposits of Regional Bank are insured by the Savings Association
Insurance Fund ("SAIF") of the FDIC. The FDIC has the authority to change
premiums twice per year. Commencing in 1997 through 1999, thrift institutions
will pay approximately five times higher assessment rates than commercial banks
(6.44 cents versus 1.29 cents per $100). After the three year period, BIF and
SAIF-insured institutions will pay the same assessment rate of 2.43 cents per
$100 of deposits. Based on Current deposit levels, Union Bank deposit insurance
expense will increase approximately $22,000 and Regional Bank will save
approximately $155,000 compared to the assessment rates paid in 1996 as a
result of these changes.
Branching by banks in Indiana is subject to the jurisdiction, and requires
the prior approval, of the bank's or savings bank's primary federal regulatory
authority and, if the branching bank is a state bank, of the DFI. Under
Indiana law, the banks may branch anywhere in the state.
The Company is a legal entity separate and distinct from its subsidiary Banks.
There are various legal limitations on the extent to which the Banks can supply
funds to the Company. The principal source of the Company's funds consists of
dividends from its subsidiary Banks. State and Federal law restrict the amount
of dividends which may be paid by banks and savings banks. In addition, the
Banks are subject to certain restrictions on extensions of credit to the
Company, on investments in the stock or other securities of the Company and
in taking such stock or securities as collateral for loans.
Legislation
The Federal Deposit Insurance Corporation Act of 1991 ("FDICIA") represented
a comprehensive and fundamental change to banking supervision and mandates the
development of additional regulations governing almost every aspect of the
operations, management and supervision of banks and BHCs.
FDICIA also included several supervisory reforms related to the frequency of
regulatory examinations and audit requirements. FDICIA also required the
adoption of safety and soundness standards on matters such as loan underwriting
and documentation, and compensation and other employee benefits; mandated
consumer protection disclosures with respect to deposit accounts; and the
establishment of a risk-based deposit insurance system. To date, many of the
provisions of FDICIA have been implemented.
FDICIA requires banking regulators to take prompt corrective actions with
respect to depository institutions that fall below certain capital levels and
prohibit any depository institution from making a capital distribution that
would cause it to be considered undercapitalized. Banking regulators were
also required to revise their capital standards to take into account interest
rate risk. A policy statement has been proposed providing a supervisory
framework to measure and monitor interest rate risk at individual banks.
Banks may use an internal model which provides a measure of the change in a
bank's economic value. The results of the supervisory and internal models
would be one factor regulators will consider in their assessment of capital
adequacy. Other factors will also be considered.
Certain regulations define relevant capital measures for five capital
categories. A "well capitalized" institution is one that has a total risk-
based capital ratio of at least 10%, a Tier 1 risk-based capital ratio of at
least 8%, a leverage ratio of at least 5% and is not subject to regulatory
direction to maintain a specific level for any capital measure. An "adequately
capitalized" institution is one that has ratios greater than 8%, 4% and 4%. An
institution is "undercapitalized" if its respective ratios are less than 8%,
4% and 4%. "Significantly undercapitalized" institutions have ratios of less
than 6%, 3% and 3%. An institution is deemed to be "critically
undercapitalized" if it has a ratio of tangible equity to total assets that
is 2% or less. Institutions with capital ratios at levels of "undercapitalized"
or lower are subject to various limitations which, in most situations, will
reduce the competitiveness of the institution.
The Riegle Community Development and Regulatory Improvement Act of 1994 ("Act")
was signed into law in 1994. The Act contains seven titles pertaining to
community development and home ownership protection, small business capital
formation, paperwork reduction and regulatory improvement, money laundering
and flood insurance. No regulations have yet been approved.
In September, 1994, the Riegle-Neal Interstate Banking and Branching
Efficiency Act of 1994 ("Branching Act") was enacted. In general, the
Branching Act permits BHCs that are adequately capitalized and adequately
managed to acquire banks located in any other state after September 1995,
subject to certain total deposit limitations. The Branching Act permits full
interstate branching after June 1, 1997. States may elect to prohibit
interstate branching and merger transactions if they enact legislation before
June 1, 1997 that applies equally to all out-of-state banks and expressly
prohibits mergers involving out-of-state banks.
The monetary policies of regulatory authorities have a significant effect on
the operating results of banks and BHCs. The nature of future monetary
policies and the effect of such policies on the future business and earnings
of the Company and its subsidiaries cannot be predicted.
The Deposit Insurance Funds Act was enacted in 1996 and contained several
major provisions. The new law recapitalized the SAIF by a one-time
assessment on all SAIF-insured deposits. For 1997 through 1999 the banking
industry will help pay for the Financing Corp. ("FICO") bond interest payments
at an assessment rate that is one-fifth the rate paid by thrifts. Beginning
January 1, 2000, the FICO interest payments will be paid pro-rata by banks and
thrifts. Deposit shifting is prohibited for three years and the $2,000 annual
minimum deposit insurance assessment were repealed. The BIF and SAIF will be
merged on January 1, 1999 providing a law is passed by that date merging the
bank and thrift charters. In addition, there were more than forty regulatory
relief provisions in this bill.
Capital Requirements
The Company and its subsidiary Banks must meet certain minimum capital
requirements mandated by the FRB, FDIC, OTS and DFI. These regulatory
agencies require BHCs and banks to maintain certain minimum ratios of primary
capital to total assets and total capital to total assets. The FRB requires
BHCN to maintain a minimum Tier 1 leverage ratio to 3 percent capital to total
assets; however, for all but the most highly rated institutions which do not
anticipate significant growth, the minimum Tier 1 leverage ratio is 3 percent
plus an additional cushion of 100 to 200 basis points. As of December 31,
1996, the Company's leverage ratio of capital to total assets was 8.33 percent.
The FRB, OTS and FDIC each have approved the imposition of "risk-adjusted"
capital ratios on BHCs and financial institutions. The Company and its
subsidiaries had capital to assets ratios and risk-adjusted capital ratios at
December 31, 1996, in excess of the applicable regulatory minimum requirements.
ITEM 2. PROPERTIES.
Indiana United Bancorp owns no physical properties and has no need for space
other than is available at the offices of its subsidiaries. Its subsidiaries
own, free of encumbrances, all of the facilities from which they conduct
business, except for a portion of the land upon which the Union Bank has
constructed its principal office and drive-in facility in Portland, which is
under long term lease arrangements and the IGA supermarket branch in Greensburg.
The Company is considering relocating certain Union Bank branches and intends
to relocate the Grantline Branch of Regional Bank. Relocating the Grantline
Branch and the possibility of relocating certain Union Bank branches is
intended to increase visibility, enhance drive-thru banking and ATM
accessibility and improve ingress and egress. The Company has 12 locations
of which Union Bank has 9 locations and Regional Bank has 3 locations. At
December 31, 1996, the Company had $5,919,000 invested in premises and
equipment.
ITEM 3. LEGAL PROCEEDINGS.
The subsidiaries may be parties (both plaintiff and defendant) to ordinary
litigation incidental to the conduct of business. Management is presently not
aware of any such claims.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matters were submitted during the fourth quarter of 1996 to a vote of
security holders, through the solicitation of proxies or otherwise.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS.
The information required under this item is incorporated by reference to the
inside back cover of the Company's Annual Report to Shareholders, Exhibit 13.
ITEM 6. SELECTED FINANCIAL DATA.
The information required under this item is incorporated by reference to
page 4 of the Company's Annual Report to Shareholders, Exhibit 13.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.
The information required under this item is incorporated by reference to
pages 4 through 16 of the Company's Annual Report to Shareholders, Exhibit 13.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY
DATA.
The financial statements and supplementary data required under this item are
incorporated herein by reference to pages 17 through 27 of the Company's
Annual Report to Shareholders, Exhibit 13.
ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.
In connection with its audits for the two most recent fiscal years ended
December 31, 1996, there have been no disagreements (as defined in Item 4(b)
of Form 8-K) with the Company's independent certified public accountants on
any matter of accounting principles or practices, financial statement
disclosure or auditing scope or procedure.
PART IV
ITEM 14--EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
Annual Report Form 10-K
Page Number Page Number
(a)1. Financial statements
Indiana United Bancorp and Subsidiary
Independent auditor's report 17 28
Consolidated balance sheet
at December 31, 1996 and 1995 18 29
Consolidated statement of income,
years ended December 31, 1996,
1995 and 1994 19 30
Consolidated statement of cash flows,
years ended December 31, 1996, 1995
and 1994 20 31
Consolidated statement of changes in
shareholders' equity, years ended
December 31, 1996, 1995 and 1994 21 32
Notes to consolidated financial 21-27 32-38
financial statements 21-27 32-38
(a)2. Financial statement schedules
All schedules are omitted because they
are not applicable or not required, or
because the required information is
included in the consolidated financial
statements or related notes.
(a)3. Exhibits:
3.1 Articles of Incorporation
(incorporated by reference to
Registrant's Registration
Statement on Form S-1
(Registration No. 33-06334),
filed June 16, 1986, Exhibit 3.1),
as amended by Articles of
Incorporation and that certain
Statement of Designation of
Rights and Preferences of Series
M-1987 Preferred Shares of Registrant
(incorporated by reference to the
Registrant's Annual Report on
Form 10-K for the fiscal year ended
December 31, 1987, Exhibit 3(c) and
Exhibit 3(d), Commission File No.0-
12422)
3.2 Bylaws of the Registrant
(incorporated by reference to
the Registrant's annual Report on
Form 10-K for the fiscal year ended
December 31, 1992, Exhibit 3.2,
Commission File No. 0-12422)
10.1 Loan Agreement dated
December 31, 1991 between
Registrant and Merchants National
Bank and Trust Company,
Indianapolis, Indiana
(incorporated by reference to
the Registrants' Annual Report on
Form 10-K for the fiscal year ended
December 31, 1991, Exhibit 10.1,
Commission File No. 0-12422)
10.2 Employment Agreement dated as of
July 1, 1989 between Registrant's
subsidiary, Regional Federal
Savings Bank, and director and
executive officer Robert E. Kleehamer,
as amended by that Amendment to
Employment Agreement dated as of
September 19, 1991 (incorporated by
reference to the Registrant's
Annual Report on Form 10-K for
the fiscal year ended December 31,
1991, Exhibit 10.2, Commission File
No. 0-12422)
13 1996 Annual Report to Shareholders
(except for the pages and information
thereof expressly incorporated by
reference in this Form 10-K, the
Annual Report to Shareholders is
provided solely for the information
of the Securities and Exchange
Commission and is not deemed
"filed" as part of this Form 10-K) 10-41
21 List of subsidiaries of the Registrant 42
23 Consent of Geo. S. Olive & Co. LLC 43
27 Financial Data Schedule 44
(b) Reports on Form 8-K
No reports on Form 8-K were filed for
the three months ended December 31, 1996
Pursuant to the requirements of Section 13 or 15(d) 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, on the 26th day of
March, 1997.
INDIANA UNITED BANCORP
By /s/ Robert E. Hoptry
Robert E. Hoptry, President
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report on Form 10-K has been signed by the following persons on behalf of
the registrant and in the capacities with the Company and on the dates
indicated.
Signature Capacity Date
/s/ William G. Barron Director March 26, 1997
William G. Barron
/s/ Jay B. Fager Treasurer March 26, 1997
Jay B. Fager [Chief Financial
Officer]
/s/ Philip A. Frantz Director March 26, 1997
Philip A. Frantz
/s/ Glenn D. Higdon Director March 26, 1997
Glenn D. Higdon
/s/ Robert E. Hoptry Chairman of the March 26, 1997
Robert E. Hoptry the Board and
President
[Chief Executive
Officer]
/s/ Martin G. Wilson Director March 26, 1997
Martin G. Wilson
/s/ Edward J. Zoeller Director March 26, 1997
Edward J. Zoeller