UNITED STATES 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, 2001
Commission File Number 33-10149
SVB&T Corporation
(Exact name of registrant as specified in its charter)
Indiana
(State or other jurisdiction of incorporation or organization)
35-1539978
(Employer Identification (I.R.S.) No.)
College and Maple Streets, French Lick, Indiana 47432
(Address of principal executive offices, including Zip Code)
(812) 936-9961
(Registrant's Telephone Number, including Area Code)
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: None
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___
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_
The aggregate market value of the voting stock held by nonaffiliated
shareholders of the registrant computed by reference to the price at which the
stock was sold or the average bid and asked prices of such stock, as of March
15, 2002 was approximately $14,128,614.
The number of shares outstanding of each of the registrant's classes of common
stock as of March 15, 2002 was 601,864.
Portions of the 2001 Annual Report to Shareholders for the year ended December
31, 2001 are incorporated by reference into Part II.
SVB&T Corporation 2000 Annual Report on Form 10-K
Table of Contents
Part I
Item 1. Business 3
Item 2. Property 9
Item 3. Legal Proceedings 9
Item 4. Submission of Matters to a Vote of Security Holders 9
Part II
Item 5. Market for Registrants Common Equity and Related
Stockholder
Matters 9
Item 6. Selected Financial Data 10
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations 11
Item 8. Financial Statement and Supplementary Data 22
Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure 22
Part III
Item 10. Directors and Executive Officers of the Registrant 22
Item 11. Executive Compensation 24
Item 12. Security Ownership of Certain Beneficial Owners and Management 31
Item 13. Certain Relationships and Related Transactions 31
Part IV
Item 14. Exhibits, Financial Statement Schedules and Reports on
Form 8-K 31
Signatures 32
Index to Exhibits 33
PART I
Item 1. Business
General. SVB&T Corporation (the "Company") is a registered bank holding
company under the Bank Holding Company Act with its principal office in French
Lick, Indiana. The Company has elected to be governed by the Indiana Business
Corporation Law (IBCL).
The Company's sole subsidiary is Springs Valley Bank & Trust Company (the
"Bank"), which operates two banking offices in Orange County, Indiana, three
offices in Dubois County, Indiana and a banking office in Clark County,
Indiana. The Company became a holding company for the Bank in early 1983. At
present, the business of the Company is the management of the operations of
the Bank. The Bank is engaged in the business of providing a wide range of
financial services which include:
(I) maintaining demand, savings, and time deposits of individuals,
partnerships, corporations, associations, and government entities;
(II) extension of credit through loans to individuals, and to small
and medium sized businesses;
(III) purchase of obligations of federal, state, county and
municipal authorities and agencies;
(IV) providing a wide range of fiduciary services for personal
and corporate trusts;
(V) providing collection and deposit services for businesses
and individuals as well as providing currency and change
for check cashing and business operations;
(VI) acting as an agent for, property and casualty insurance,
and health insurance; and owning a interest in a Reinsurance
Company
For credit insurance products
(VII) acting as a broker for residential and commercial real estate.
(VIII) providing financial Services and access to products to meet
the clients needs.
The Bank competes in the financial services industry in the counties of
Orange, Dubois, Clark and surrounding counties in Indiana. Competition
includes other financial institutions, credit unions, brokerage firms,
acceptance corporations and other organizations that offer banking related
services in our area.
The Bank employees 113 full-time equivalents which are provided benefits and
with whom it enjoys excellent relations.
The Bank serves as the local depository, and provides trust services for
Kimball International, Inc. ("Kimball") an interest of a majority of the Board
of Directors of the Company. The deposits of Kimball represent approximately
4% of the deposits of the bank. In addition, the Bank has loans outstanding
with individuals who are employees of Kimball representing in excess of 10% of
the Bank's total loans. Accordingly, the cash flow of Kimball can have a
significant impact on the deposit and loan functions and earnings of the Bank.
At December 31, 2001, the company had total assets of $240 million, total
deposits of $182 million, and total equity capital of $23 million.
SUPERVISION AND REGULATION
Both the Company and the Bank operate in highly regulated environments and are
subject to supervision and regulation by several governmental regulatory
agencies, including the Federal Reserve Board, the FDIC, and the Indiana
Department of Financial Institutions. The laws and regulations established by
these agencies are generally intended to protect depositors, not
shareholders. Changes in applicable laws, regulations, governmental policies,
income tax laws and accounting principles may have a material effect on our
business and prospects. The following summary is qualified by reference to
the statutory and regulatory provisions discussed.
SVB&T Corporation
The Bank Holding Company Act. Because the Company owns all of the outstanding
capital stock of the Bank, it is registered as a bank holding company under
the federal Bank Holding Company Act of 1956 and is subject to periodic
examination by the Federal Reserve and required to file periodic reports of
its operations and any additional information that the Federal Reserve may
require.
Investments, Control, and Activities. With some limited exceptions, the Bank
Holding Company Act requires every bank holding company to obtain the prior
approval of the Federal Reserve before acquiring another bank holding company
or acquiring more than 5% of the voting shares of a bank (unless it already
owns or controls the majority of such shares).
Bank holding companies are prohibited, with certain limited exceptions, from
engaging in activities other than those of banking or of managing or
controlling banks. They are also prohibited from acquiring ownership or
control of voting shares or assets of any company which is not a bank or bank
holding company, other than subsidiary companies furnishing services to
or performing services for their subsidiaries, and other subsidiaries engaged
in activities which the Federal Reserve Board determines to be so closely
related to banking or managing or controlling banks as to be incidental to
these operations. The Bank Holding Company Act does not place territorial
restrictions on the activities of such nonbanking-related activities.
Banks, securities firms and insurance companies may now affiliate in a new
financial holding company structure. The Company does not currently plan to
engage in any activity other than owning the stock of the Bank.
Dividends. The Federal Reserve's policy is that a bank holding company
experiencing earnings weaknesses should not pay cash dividends exceeding its
net income or which could only be funded in ways that weakened the bank
holding company's financial health, such as by borrowing. Additionally, the
Federal Reserve possesses enforcement powers over bank holding companies and
their non-bank subsidiaries to prevent or remedy actions that represent unsafe
or unsound practices or violations of applicable statutes and regulations.
Among these powers is the ability to proscribe the payment of dividends by
banks and bank holding companies.
Source of Strength. In accordance with Federal Reserve Board policy, the
Company is expected to act as a source of financial strength to the Bank and
to commit resources to support the Bank in circumstances in which the Company
might not otherwise do so.
Springs Valley Bank & Trust Company
General Regulatory Supervision. The Bank is an Indiana-chartered banking
corporation subject to examination by the Indiana Department of Financial
Institutions. The Indiana Department of Financial Institutions and the FDIC
regulate or monitor virtually all areas of the Bank's operations. The Bank
must undergo regular on site examinations by the FDIC and DFI and must
submit annual reports to the FDIC and the DFI.
Lending Limits. Under Indiana law, the total loans and extensions of credit
by an Indiana- chartered bank to a borrower outstanding at one time and not
fully secured may not exceed 15% of the bank's capital and unimpaired
surplus.
Deposit Insurance. Deposits in the Bank are insured by the FDIC up to a
maximum amount, which is generally $100,000 per depositor subject to
aggregation rules. The Bank is subject to deposit insurance assessment by the
FDIC pursuant to its regulations establishing a risk-related deposit insurance
assessment system, based upon the institution's capital levels and risk
profile. The Bank is also subject to assessment for the Financial Corporation
(FICO) to service the interest on its bond obligations. The amount assessed
on individual institutions, including the Bank, by FICO is in addition to the
amount paid for deposit insurance according to the risk-related assessment
rate schedule. Increases in deposit insurance premiums or changes in risk
classification will increase the Bank's cost of funds, which the Bank may not
be able to pass on to its customers.
Transactions with Affiliates and Insiders. The Bank is subject to limitations
on the amount of loans or extensions of credit to, or investments in, or
certain other transactions with, affiliates and on the amount of advances to
third parties collateralized by the securities or obligations of affiliates.
Furthermore, within the foregoing limitations as to amount, each covered
transaction must meet specified collateral requirements. Compliance is also
required with certain provisions designed to avoid the taking of low quality
assets. The Bank is prohibited from engaging in certain transactions with
certain affiliates unless the transactions are on terms substantially the same
as, or at least as favorable to such institution or its subsidiaries as, those
prevailing at the time for comparable transactons with nonaffiliated
companies.
Extensions of credit by the Bank to its executive officers, directors, certain
principal shareholders, and their related interests must:
be made on substantially the same terms, including interest rates
and collateral, as those prevailing at the time for comparable
transactions with third parties; and
not involve more than the normal risk of repayment or present other
unfavorable features.
Dividends. Under Indiana law, the Bank may pay dividends from its undivided
profits in an amount declared by its board of directors, subject to prior
approval of the Indiana Department of Financial Institutions if the proposed
dividend, when added to all prior dividends declared during the current
calendar year, would be greater than the current year's "net profits" and
retained "net profits" for the previous two calendar years.
Federal law generally prohibits the Bank from paying a dividend to its holding
company if the depository institution would thereafter be undercapitalized.
The FDIC may prevent an insured bank from paying dividends if the bank is in
default of payment of any assessment due to the FDIC. In addition, payment of
dividends by a bank may be prevented by the applicable federal regulatory
authority if such payment is determined, by reason of the financial condition
of such bank, to be an unsafe and unsound banking practice.
Branching and Acquisitions. Branching by the Bank requires the prior approval
of the FDIC and the DFI. Under current law, Indiana chartered banks may
establish branches throughout the state and in other states. Congress
authorized interstate branching, with certain limitations, beginning in 1997.
Indiana law authorizes an Indiana bank to establish one or more branches
in states other than Indiana through interstate merger transactions and to
establish one or more interstate branches through de novo branching or the
acquisition of a branch.
Community Reinvestment Act. The Community Reinvestment Act requires that the
FDIC evaluate the record of the Bank in meeting the credit needs of its local
community, including low and moderate income neighborhoods. These factors are
also considered in evaluating mergers,acquisitions, and applications to open a
branch or facility. Failure to adequately meet these criteria could result in
the imposition of additional requirements and limitations on the Bank.
Capital Regulations. The federal bank regulatory authorities have adopted
risk-based capital guidelines for banks and bank holding companies that are
designed to make regulatory capital requirements more sensitive to differences
in risk profiles among banks and bank holding companies and account for
off-balance sheet items. Risk-based capital ratios are determined by
allocating assets and specified off-balance sheet commitments to four risk
weighted categories of 0%, 20%, 50%, or 100%, with higher levels of capital
being required for the categories perceived as representing greater risk. The
guidelines are minimums, and the federal regulators have noted that banks and
bank holding companies contemplating significant expansion programs should not
allow expansion to diminish their capital ratios and should maintain ratios in
excess of the minimums.
Neither the Company nor the Bank has received any notice indicating that
either is subject to higher capital requirements.
The federal bank regulatory authorities have also implemented a leverage ratio
to supplement to the risk-based guidelines. The principal objective of the
leverage ratio is to place a constraint on the maximum degree to which a bank
holding company may leverage its equity capital base.
At December 31, 2001, the company had total assets of $240 million, total
deposits of $182 million, and total equity capital of $23 million.
The following are the Company's regulatory capital ratios as of December 31,
2001:
Tier 1 Capital: 13.00%
Total Capital: 14.10%
Leverage Ratio: 9.60%
The following are the Bank's regulatory capital ratios as of December 31,
2001:
Tier 1 Capital: 12.20%
Total Capital: 13.40%
Leverage Ratio: 9.00%
The Bank is also subject to the FDIC's "prompt corrective action" regulations,
which implement a capital-based regulatory scheme designed to promote early
intervention for troubled banks. This framework contains five categories of
compliance with regulatory capital requirements, including "well capitalized,"
"adequately capitalized," "undercapitalized," "significantly
undercapitalized," and "critically undercapitalized." As of December 31,
2000, the Bank was qualified as "well capitalized." It should be noted that a
bank's capital category is determined solely for the purpose of applying the
FDIC's "prompt corrective action" regulations and that the capital category
may not constitute an accurate representation of the bank's overall
financial condition or prospects. The degree of regulatory scrutiny of a
financial institution increases, and the permissible activities of the
institution decreases, as it moves downward through the capital categories.
Bank holding companies controlling financial institutions can be required to
boost the institutions' capital and to partially guarantee the institutions'
performance.
Other Regulations. Interest and other charges collected or contracted for by
the Bank are subject to state usury laws and federal laws concerning interest
rates. The Bank's loan operations are also subject to federal laws applicable
to credit transactions, such as the:
Truth-In-Lending Act, governing disclosures of credit terms to
consumer borrowers;
Home Mortgage Disclosure Act of 1975, requiring financial
institutions to provide information to enable the public and
public officials to determine whether a financial institution
is fulfilling its obligation to help meet the housing
needs of the community it serves;
Equal Credit Opportunity Act, prohibiting discrimination on the
basis of race, creed or other prohibited factors in extending
credit;
Fair Credit Reporting Act of 1978, governing the use and
provision of information to credit reporting agencies;
Fair Debt Collection Act, governing the manner in which
consumer debts may be collected by collection agencies; and
rules and regulations of the various federal agencies charged
with the responsibility of implementing such federal laws.
The deposit operations of the Bank also are subject to the:
Right to Financial Privacy Act, which imposes a duty to
maintain confidentiality of consumer financial records and
prescribes procedures for complying with administrative
subpoenas of financial records; and
Electronic Funds Transfer Act, and Regulation E issued by the
Federal Reserve Board to implement that Act, which governs
automatic deposits to and withdrawals from deposit accounts
and customers' rights and liabilities arising from the use of
automated teller machines and other electronic banking
service.
Enforcement Powers. Federal regulatory agencies may assess civil and criminal
penalties against depository institutions and certain "institution-affiliated
parties," including management, employees, and agents of a financial
institution, as well as independent contractors and consultants such as
attorneys and accountants and others who participate in the conduct of the
financial institution's affairs. In addition, regulators may commence
enforcement actions against institutions and institution-affiliated parties.
Possible enforcement actions include the termination of deposit insurance.
Furthermore, regulators may issue cease-and-desist orders to, among other
things, require affirmative action to correct any harm resulting from a
violation or practice, including restitution, reimbursement, indemnifications
or guarantees against loss. A financial institution may also be ordered to
restrict its growth, dispose of certain assets, rescind agreements or
contracts, or take other actions as determined by the regulator to be
appropriate.
Effect of Governmental Monetary Policies. The earnings of the Company and the
Bank are affected by domestic economic conditions and the monetary and fiscal
policies of the United States government and its agencies. The Federal
Reserve Bank's monetary policies have had, and are likely to continue to have,
an important impact on the operating results of commercial banks
through its power to implement national monetary policy in order, among other
things, to curb inflation or combat a recession. The monetary policies of the
Federal Reserve Board have major effects upon the levels of bank loans,
investments and deposits through its open market operations in United States
government securities and through its regulation of the discount rate on
borrowings of member banks and the reserve requirements against member bank
deposits. It is not possible to predict the nature or impact of future
changes in monetary and fiscal policies.
Item 2. Property
The Bank properties consist of the home office, located at 505 South Maple
Street in French Lick, Indiana, and branch offices located at Broadway Avenue
in West Baden Springs; 1500 Main Street in Jasper, Indiana; 865 3rd Avenue in
Jasper, Indiana; and 614 E Water Street in Borden, Indiana; and a leased
office at 241 US 231 South in Jasper, as well as twelve automated teller
machines, six in Jasper, one in West Baden, one in French Lick, one in Borden,
one in Salem, one in Santa Claus and one in Huntingburg. All cities are
located in Indiana. The Company has no separate offices.
Item 3. Legal Proceedings
As a part of its ordinary course of business, the Bank is a party in law suits
involving claims to the ownership of funds in particular accounts and
involving the collection of delinquent accounts (such as garnishment
proceedings). All such litigation is incidental to the Bank's business.
Management believes that no litigation is threatened or pending in which the
Company or the Bank faces potential loss or exposure which will materially
affect the stockholders' equity or the Bank's financial position.
Item 4. Submission of Matters to a Vote of Security Holders
Not Applicable.
PART II
Item 5. Market for Registrants Common Equity and Related Stockholder Matters
Shares of the common stock of the Company are not traded on any national or
regional exchange or in the over-the-counter market. Accordingly, there is no
established market for the common stock. These are occasional trades as a
result of private negotiations not involving a broker or a dealer.
According to the information available to the Company the following table
displays the high and low selling prices for each quarter for 2000 and 2001.
Other trades may have occurred at prices of which the Company was not aware.
Year Quarter High/Per Share Low/Per Share
2001 1 $39 $39
2 N/A N/A
3 $30 $30
4 $30 $30
2000 1 $40 $38
2 $40 $38
3 N/A N/A
4 $40 $39
The company has 328 shareholders on record as of March 10, 2001.
The following table sets forth the cash dividends of the company for the two
most recent fiscal years:
Cash Dividends Per Share
1st 2nd 3rd 4th
Year Quarter Quarter Quarter Quarter
2001 $.18 $.18 $.18 $.18
2000 $.18 $.18 $.18 $.18
The holders of the Company's Common Stock are entitled to cash dividends when,
and if declared by its Board of Directors out of funds legally available
therefor. The Company intends to pay a reasonable dividend, while maintaining
capital adequacy. Funds for the payment of cash dividends by the Company are
obtained primarily from dividends paid to it by the Bank. The Bank is
restricted by Indiana law and regulations of the Department of Financial
Institutions, State of Indiana, and the Federal Deposit Insurance Corporation
as to the maximum amount of dividends it can pay without prior approval. At
December 31, 2001 approximately $3,055,000 of the Bank's retained earnings
were available for dividend payments to the Corporation. There is no
assurance as to future dividends since they are dependent upon earnings,
general economic conditions, financial condition, capital requirements,
regulatory limitations, and other factors as may be appropriate in determining
dividend policy.
PART II
Item 6. Selected Financial Data
(dollars in thousands except per share data)
Summary of Operations 2001 2000 1999 1998 1997
Interest and Fees on Loans $ 17,176 $ 16,933 $ 13,341 $ 12,480 $ 11,599
Interest on Investments 1,416 1,778 1,666 2,055 2,929
Total Interest Income 18,592 18,711 15,007 14,535 14,528
Interest on Deposits 8,056 8,135 6,781 7,161 7,475
Interest on Short-term
Borrowing 10 148 8 43 157
Interest on Long-term Debt 1,832 1,766 540 12 0
Total Interest Expense 9,899 10,049 7,329 7,216 7,632
Net Interest Income 8,694 8,662 7,678 7,319 6,896
Provision for Loan Losses 1,120 300 850 580 400
Net Interest Income after
Provision for Loan Loss 7,574 8,362 6,828 6,739 6,496
Service Charges on Deposit
Accounts 579 534 533 615 505
Other Income 1,209 1,209 1,172 1,260
1,254
Total Other Income 1,789 1,743 1,705 1,875 1,759
Salaries and Benefits 4,179 3,870 3,614 3,381 3,295
Other Expenses 2,979 3,108 2,811 2,361 2,343
Total Other Expenses 7,158 6,978 6,452 5,742 5,638
Income Before Income Tax 2,205 3,127 2,108 2,872 2,617
Income Tax Expense 608 1,088 703 1,043 922
Net Income 1,597 2,039 1,405 1,829 1,695
Year-end Balances
Total Assets 240,450 247,227 217,394 182,741 190,404
Total Loans, Net 203,707 203,001 173,492 142,563 139,202
Total Long-term Debt 29,100 31,100 9,100 1,000 0
Total Deposits 181,740 186,360 181,276 159,331 165,871
Total Shareholders' Equity 23,653 22,469 20,369 20,333 18,715
Per Share Data
Net Income 2.14 2.74 1.88 2.45 2.27
Cash Dividends .72 .72 .69 .60 .54
Shareholders' Equity,
End of Year 31.77 30.16 27.30 27.18 25.09
Other Data at Year-end
Number of Employees 113 111 106 104 107
Weighted Average Number
of Shares 746,372 745,017 745,994 745,806 745,800
Return on Assets .65% .86% .70% .98%
.90%
Return on Shareholders' Equity 7.11% 10.01% 6.90% 9.66% 10.43%
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations
THREE-YEAR AVERAGE BALANCE SHEET AND NET INTEREST ANALYSIS (Taxable
equivalent basis, dollars in thousands)
2001 2000 1999
Avg. Int. Yield/ Avg. Int. Yield/ Avg. Int. Yield/
ASSETS Bal. & Fees Rate Bal. & Fees Rate Bal. & Fees Rate
Earning Assets:
Interest-bearing
deposits in other
banks 441 12 2.72% 69 3 4.35% 67 3
4.48% Federal funds sold 2,623 91 3.74% 1,309 73 5.58% 3,323
167 5.03%
Investment securities:
U.S. Treasury and
Gov't Agencies &
mortgage backed 6,474 385 5.95% 14,828 927 6.25% 14,748 885 6.00%
States and political
subdivisions 14,557 1,094 7.52% 11,321 849 7.50% 9,887 723 7.31%
Other securities 2,577 188 7.30% 2,445 194 7.93% 1,774 115 6.48%
TOTAL INVESTMENT
SECURITIES 23,608 1,667 7.06% 28,594 1,970 6.89% 26,409 1,723 6.52%
Loans: (1) (2)
Commercial 63,043 4,989 7.91% 53,966 5,004 9.27% 39,196 3,451 8.80%
Installment, net of
unearned income 47,165 4,251 9.01% 48,437 4,612 9.52% 44,519 4,090 9.19%
Real Estate 97,658 7,831 8.02% 87,707 7,182 8.19% 74,459 5,662 7.60%
Credit Card
and Other 811 10613.07% 1,059 13512.75% 1,033 13813.36%
TOTAL LOANS 208,677 17,177 8.23%191,169 16,933 8.86%159,207 13,341 8.38%
TOTAL EARNING
ASSETS 235,349 18,947 8.05%221,141 18,979 8.58%189,006 15,234 8.06%
Less: Allowance
for Losses (1,751) (1,671) (1,394)
Non-Earning Assets:
Cash and due
from banks 4,807 4,806 4,904
Other Assets 7,426 7,470 7,055
TOTAL ASSETS 245,831 231,746 199,571
LIABILITIES & SHAREHOLDERS EQUITY
Interest-bearing liabilities
Savings and daily interest
checking 39,123 888 2.27% 40,167 959 2.39% 43,248 1,029 2.38%
Money market
accounts 40,639 1,482 3.65% 37,194 2,078 5.59% 32,266 1,426 4.42%
Certificates of
deposit $100,000
and over 23,274 1,360 5.84% 31,498 1,859 5.90% 26,864 1,467 5.46%
Other time deposits74,327 4,326 5.82% 55,621 3,239 5.82% 53,019 2,859 5.39%
TOTAL INTEREST-
BEARING DEPOSITS 177,363 8,056 4.54%164,480 8,135 4.95%155,397 6,781 4.36%
Borrowing 29,818 1,842 6.18% 30,815 1,914 6.21% 9,690 548 5.66%
TOTAL INTEREST-BEARING
LIABILITIES 207,181 9,898 4.78%195,295 10,049 5.15%165,087 7,329 4.44%
Non-interest bearing
liabilities:
Demand deposits 13,262 13,362 12,594
Other liabilities 2,327 1,670 1,540
Shareholder's
equity 23,061 21,419 20,350
TOTAL LIABILITIES
AND SHAREHOLDERS
EQUITY 245,831 231,746 199,571
INTEREST MARGIN RECAP:
Interest income/
earning assets 18,947 8.05% 18,979 8.58% 15,234 8.06%
Interest expense/
earning assets 9,898 4.21% 10,049 4.54% 7,329 3.88%
New yield on interest
earning assets 9,049 3.84% 8,930 4.04% 7,905 4.18%
(1) Includes principal balances of nonaccural loans. Interest
income relating to nonaccrual loans is not included.
(2) The amount of loan fees is not material in any of the years presented.
Introduction
SVB&T Corporation is a registered bank holding company under the Bank Holding
Company Act. The Corporations principal office is located in French Lick,
Indiana. The Corporation's sole subsidiary is Springs Valley Bank and Trust
Company, which operate offices in French Lick and West Baden, in Orange
County, three offices in Jasper, located in Dubois County, and one office in
Borden, Indiana located in Clark County. The subsidiary offers a wide range
of banking, financial, insurance and realty services to individuals and
businesses in Orange, Dubois, Clark and surrounding counties in Southern
Indiana. The following managements' discussion and analysis provides
information concerning SVB&T Corporation's financial condition and results of
operation. This discussion and analysis should be read in conjunction with
the holding company's financial statements and related footnotes which are
presented in this document.
Results of Operation
Net Income
Net income for 2000 was $1,597,209.
The table below is a comparison of the net income for the years 1999 thru
2001. This table also displays the percentage and dollar amount changes which
occurred during the last three years.
Increase/
%Increase/ Decrease
from Decrease from
Year Net Income Prior Year Prior Year
2001 $1,597,209 $(441,791) (21.67%)
2000 2,039,000 635,000 45.23%
1999 1,404,000 (425,000) (23.24%)
SVB&T Corporation's net income has decreased during the last year. The main
contributing factors to this decrease is an increase in provision loan loss
expense.
Total net income before tax for 2001 decreased $922,023 which results in a
29.48% decrease.
Net Interest Income
Net interest income is the difference between interest and fees earned on
loans and investments, and interest paid on interest bearing liabilities.
This is the Bank's primary source of income. In this discussion, net interest
income is presented on a tax equivalent basis.
All tax-exempt income earned on securities of state and political subdivision
has been increased to an amount that would have been earned on a taxable
basis. This places taxable and non-taxable income on a more comparable basis
and makes the comparisons more meaningful.
In 2001, tax equivalent net interest income of $9,049,000 increased by
$119,000, which resulted in a 1.33% increase. The net interest income from
2000 was $8,930,000 which was a $1,025,000 over the 1999 net interest income
of 7,905,000.
CHANGES IN NET INTEREST INCOME (Table 1) (Tax equivalent basis, dollars in
thousands)
Change from Prior Year
2001 2000 1999 2001 2000
Interest income on:
Loans 17,177 16,933 13,341 1.44% 26.92%
Investment securities 1,667 1,970 1,723 -15.38% 14.34%
Federal funds sold 91 73 167 24.66% -56.29%
Due from FHLB 12 3 3 300.00%
0.00%
Total interest income 18,947 18,979 15,234 -0.17% 24.58%
Interest expense on:
Savings and daily
interest checking 888 959 1,029 -7.40% -6.80%
Money market deposits 1,482 2,078 1,426 -28.68% 45.72%
Certificates of
deposit of $100,000
& over 1,360 1,859 1,467 26.84% 26.72%
Other time deposits 4,326 3,239 2,859 33.56% 13.29%
All other borrowing 1,842 1,914 548 -3.76% 249.27%
Total interest expense 9,898 10,049 7,329 -1.50% 37.11%
Net interest income 9,049 8,930 7,905 1.33% 12.97%
Net interest margin 3.84% 4.04% 4.18%
RATE VOLUME ANALYSIS OF CHANGES IN NET INTEREST INCOME (Table 2) (Taxable
equivalent basis, dollars in thousands)
2001 vs 2000 2000 vs 1999
Dollar Attributed to Dollar Attributed to
Change Volume Rate Change Volume
Rate
Interest income on:
Loans 244 1,496 (1,252) 3,592 2,755 837
Investment securities (303) (348) 45 247 147 100
Federal funds sold 18 59 (41) (94) (107) 13
Due from FHLB 9 13 (4) 0 0
(0)
Total interest income (32)1,220 (1,252) 3,745 2,795 950
Interest expense on:
Savings and daily interest
checking (71) (24) (47) (70) (73) 3
Money market deposits (596) 159 (755) 652 247
405 Certificates of deposit of
$100,000 and over (499) (483) (16) 392 263
129 Other time deposits 1,087 1,089 (2) 380
146 234
All other borrowing (72) (62) (10) 1,366 1,253
113
Total interest expense (151) 679 (830) 2,720 1,836 884
Net interest income 119 541 (422) 1,025 959 66
The variance not due solely to rate or volume is allocated equally between the
rate and volume variances.
Provision for Loan Losses
The provision for loan losses was $1,120,000 in 2001; $300,000 in 2000; and
$8500,000 in 1999. As of December 31, 2001, the provision was 1.01% of loans
outstanding. The allowance for loan losses increased $426,000 during 2001.
Management's analysis indicates the current allowance is adequate to fund
anticipated future needs. These additional reserves are due to a softening of
the economy through 2001 and a more conservative approach on the amount of
funds necessary for our participation loans.
Other Income
Total other income for 2001 was $1,788,796, which is a $46,008, 2.64%
increase over 2000's total other income of $1,742,788.
The two primary sources of other income were trust income and service charges
income. Trust income accounts for 30.35% of total other income, however, it
has decreased 28.5% from 2000. This decrease is due to the termination of
SVB&T's trustee services to Kimball International, Inc.for their retirement
account.
Service charge income is up 8.53%, from 2000. This is due largely to a
tightening of our overdraft refunding policy.
In addition to the above referenced line items - net gain on sales of loans
was a major contributor to other income. This is a result of selling in house
fixed rate loans 2001 was the first year for this and resulted in $181,905 in
income which is 10.17% of other income.
Insurance income, other operating income and realized security gains (losses)
make up the remainder of total other income category. As a total the accounts
resulted in $484,991 of income for 2001.
Other Expenses
Total other expenses for 2001 were $7,157,686. This is a $180,198, 2.52%
increase over the 2000 total of $6,977,488.
Salaries and employee benefits are the two largest expense categories.
Salaries and employee benefits expense for 2001 were 4.179,233. This is an
increase of $309,583 over 2001, which results in an 8% increase. This
increase in expenses represent an increase in the number of employees and
normal pay and benefit increases for the banks employees.
Personal property tax was up by $25,000 as compared to 2001. This was due to
a higher assessment value for 2001.
Software Amortization expense increased 29.98% as compared to 2001. The
$49,000 increase was due to a decrease in the number of years over which
Software is being amortized.
Loan expense also increased for 2001. This increase is due to repoed assets
being sold at $28,000 less than anticipated resulting a current year earning
reduction.
Income Tax
SVB&T Corporation records income tax expense based on the transactions
reported in its financial statements, consisting of taxes currently payable
and deferred tax. Deferred taxes result because of the recognition of
certain
items of income and expense in different years for financial statement and
tax purposes. These differences relate primarily to the gain or loss on
available-for-sale investment securities, loan losses, depreciation, and loan
origination fees.
Differences between the effective tax rate on SVB&T Corporation's income
before income tax (as reported in the consolidated statement income) and the
federal statutory rate of 34% result from tax exempt interest income, state
income taxes, and alternative minimum taxes. Note 10 of the consolidated
financial statements contains additional information about SVB&T
Corporation's
income taxes.
Income tax expense for 2001 was $608,000 compared to $1,088,000 in 2000 and
$703,000 in 1999. The effective tax rate was 27.57% in 2001, 34.80% in 2000,
and 33.46% in 1999. The effective rate decreased in 2001 compared to 2000 due
to an increased tax-free income. In 2000 compared to 1999, the effective rate
changed very little.
Financial Condition
As of December 31, 2001 total assets decreased to $240,450,000, a 2.74%
decrease from December 31, 2000 total of $247,227,000. Average total assets
in 2001 of $245,831,000 were $14,085,000 greater than the 2000 average of
$231,746,000.
Total deposits decreased to $181,740,000 at December 31, 2001 from
$186,360,000 at December 31, 2000 a decrease of $4,890,000 or 2.62%.
Net loans at year-end 2001 were $203,707,000 up $706,000 or .35% above
the 2000 year-end total of $203,001,000. Average loans outstanding of
$208,677,000 in 2001 increased by $17,508,000 or 9.20% over the 2000 average
loans outstanding of $191,169,000. Loan balances remained stable as the bank
was not aggressive in loan volume.
Total investment securities available for sale at year-end 2001 were
$20,072,000 and at year-end 2000 were $28,592,000. Investment securities have
been stated at market value since 1993, when the Bank adopted the FASB No. 115
accounting and classified all securities as available for sale.
Uses of Funds
Money Market Investments
Money market investments (federal funds sold and certificates of deposits with
other banks) are used by the Corporation to meet lending and liquidity
requirements. At December 31, 2001 and December 31, 2000, money market
investments were $0.
Investment Securities
The investment security portfolio is used as a means of investing funds over
and above those needed for lending and liquidity requirements. Investment
securities are purchased with the intent and ability to hold until maturity.
However, all securities are categorized as available for sale. Increases or
decreases in the market value of securities are charged directly to
stockholder equity.
The following table presents an analysis of the investment securities
portfolio for 2001, 2000 and 1999.
Investment Securities Available for Sale
(Dollars in thousands) December 31
Investment securities available for sale: 2001 2000 1999
U.S. Treasury 0 0 0
U.S. Government agencies and corp. 4,006 15,052 14,087
Mortgage-backed pass-through securities 66 73 125
Collateralized mortgage obligations:
Agency 0 0 0
Corporate 0 0 0
State and Political subdivisions 15,083 12,619 10,705
Other Securities 714 873 882
Net unrealized gain (loss) 204 (25) (901)
Total Carrying Value 20,072 28,592 24,898
Maturities and Average Yields of Investment Securities
Available for Sale at December 31, 1999
2001 2000
Estimated Estimated
Amortized Market Amortized Market
Cost Value Cost Value
Securities Available for Sale
Due in 1 yr or less 2,619,929 2,665,865 2,489,936 2,465,658
Due after 1 yr but with in 5 yrs 4,148,616 4,276,034 13,383,583 13,330,572
Due after 5 yrs but within 10 yrs 7,419,372 7,522,767 8,640,040 8,659,174
Due after 10 yrs 5,614,497 5,535,182 4,030,085 4,061,211
Total Securities 19,802,414 19,999,839 28,543,644
28,516,615 Mortgage backed securities 65,696 72,061
72,644 75,114
Total 19,868,110 20,071,900 28,616,288
28,591,729
Loans
Loans outstanding at December 31, 2001 were $205,889,148. This is an increase
of $1,092,803 or .53% over December 31, 2000.
Real Estate loans continue to be the largest component of the loan portfolio
at $104,923,219. This an increase of $1,822,945 or 1.8%.
Commercial and industrial loans were $46,102,714 at December 31, 2001. This
is an $5,235,295 increase over December 31, 2000. This increase is due
primarily to loan participation activity.
The bank uses loan participations with other banks and brokers to supplement
loan volume when local demand does not provide sufficient volume. On December
31, 2001 the bank had $48,618,234 in purchased loans. That represents a 9.5%
decrease from December 31, 2000. The bank carefully monitors each
Participation and reviews concentrations either by geographic area or
industrial segment.
Individual loans for household and other personal purposes were 36,925,315.
This is a decrease of $4,393,320 or 10.6% from December 31, 2000. The bank
continues to experience severe competitive pressures in the retail loan
sector. The bank does not desire to make loans that are not profitable or do
not meet its underwriting standards.
Construction loans decreased $2,446,200 or 14.2% from December 31, 2000. The
balance December 31, 2001 was $14,727,425. These construction loans are
primarily related to participations with other banks and brokers. The
decrease reflects a lack of good opportunities as the economy softened in
2001.
Agricultural lending and leasing activities continue to be minor parts of the
portfolio. The bank does not anticipate any significant growth in either of
these areas.
Following is a schedule showing the breakdown of loans by type of loan and the
maturity schedule of the loan portfolio.
Loan Portfolio
2001 2000 1999 1998 1997
Percent Percent Percent Percent Percent
Amt of Total Amt of Total Amt of Total Amt of Total Amt of Total
Commercial,
financial &
agricultural 48,682 23.64 42,618 20.81 23,261 10.20 18,722 13.3 16,228 13.2
Real estate -
construction 14,727 7.15 17,174 8.39 6,490 3.70 1,687 1.20 1,322 0.9
Real estate -
mortgage 104,923 50.96 103,100 50.34 98,851 56.4 80,803 56.7 79,491
56.4
Consumer
installment 36,925 17.93 41,319 20.18 46,295 26.42 46,470 32.6 40,859 29.0
Banker
Acceptances 0 0 0 0 0 0 0 0 0 0
Economic dev.
rev. bonds 0 0 0 0 0 0 0 0 0 0
Repurchase
Agreement 0 0 0 0 0 0 0 0 0 0
Lease Financing 631 .31 585 .29 363 .21 336 .24 437 .31
TOTAL 205,888 100 204,796 100175,260 100143,873 100 140,831 100
Less:
Unearned income 85 124 141 204 227
Allowance for
loan losses 2,097 1,671 1,627 1,106 1,402
Total loans 203,706 203,001 173,492 142,536 139,202
Selected Loan Maturity and Interest Rate Sensitivity
December 31, 1999 (dollars in thousands)
MATURITY Rate Structure For
Loans Maturing
Over One Over Predetermined Floating or
One Year Yr through Five Interest Adjustable
or Less Five Yrs Years TOTAL Rate Rate
Commercial,
financial and
agricultural 11,501 15,774 21,407 48,682 19,556 29,126
Real Estate
Construction 7,123 4,598 3,006 14,727 3,097 11,630
TOTALS 18,624 20,372 24,413 63,409 22,653 40,756
Capital Resources
Stockholders' equity at December 31, 2001 increased to $23,653,000 from
December 31, 2000 equity of $22,469,000. The increase of $1,184,000 was a
result of earnings and the change in unrealized gains and loss on securities.
Capital ratios are used by Federal bank regulators to measure a
bank's strength. The Bank's ratios are well above Federal requirements.
Source of Funds
Deposits
The main source of funding for earning assets are deposits. During 2001, the
average deposits of $190,625,000 funded 81% of the average earning assets.
Average total deposits for 2001 increased by $12,783,000, or 7.20% as compared
to 2000 average deposit totals.
Customers are seeking higher rates of return on investments and have moved
into alternative investments such as stocks and mutual funds. Management has
funded some loan growth with advances from the Federal Home Loan Bank
and Federal Funds purchased. Management will continue to seek increases in
deposits when deposits can be lent or invested at a profitable spread.
Maturities of Time Deposits December 31, 2001
(dollars in thousands) Certificates
of Deposit
Over $100,000
Three months or less 8,113
Over three months through one year 7,973
Over one year through three years 5,129
Over three years 2,923
TOTAL 24,138
Risk Management
Lending and Loan Administration
Loan administration for the Bank is the responsibility of the President and
the senior officers of the Bank. The board deems these officers have the
knowledge and experience necessary to satisfactorily manage the lending
activities of the Bank.
Lending authority is granted to individual officers as the board feels is
appropriate. For loans exceeding an individual officer's limit, a loan
committee structure is in place to allow the timely and prudent review of loan
requests. Loans above certain predetermined limits must be reviewed and
approved by two board members prior to approval of the loan.
A presentation is made at each board meeting regarding the operation of the
loan department. Topics discussed include current activities, watch list and
non-accrual loans, and any other loan-related issue that should be brought to
the board. Reports covering the activities of the loan department are
prepared for each board member.
A loan review committee reviews all loan review activities including the
calculation of the loan loss reserve necessary to accommodate loans that may
be charged off at some future time.
The loan loss reserve is calculated quarterly. It is based on the historical
performance of the loan portfolio as well as current and projected conditions
for specific credits. The Bank's loan loss experience is summarized below:
Allowance for Loan Losses
(dollars in thousands)
2001 2000 1999 1998 1997
Balance as of January 1 1,671 1,627 1,106 1,403 1,330
Provision for Loan Losses 1,120 300 850 580 400
Recoveries of Prior Loan Losses 100 321 114 182 106
Loan Losses charged to the Allowance (794) (577) 443 1,059 (433)
Balance as of December 31 2,097 1,671 1,627 1,106 1,403
Loans are placed on non-accrual status when a payment (principal and/or
interest) is more than 90 days past due. All income on these loans is then
recognized on a cash basis until the loan is paid off or management believes
that the quality of the loan has improved enough to warrant returning the loan
to accrual status.
Included in the Non-Performing Asset total for December 31, 2001 are three
participation loans with a total balance of $1,369,760. Management believes
that any loss from the collection of these secured loans will be minimal and
is covered by the balance in the Allowance for Loan Loss account.
Non-performing loans are loans on non-accrual and assets such as other real
estate and repossessions being held for sale. Following is a schedule of
those loan categories for the previous five years.
Non-performing Assets (dollars in thousands)
2001 2000 1999 1998 1997
Total Loans on non-accrual
(non-performing loans) 4,164 2,002 1,406 857
1,832 Other Real Estate 397 133 44
53 0
Total non-performing assets 4,561 2,135 1,450 910
1,832
Total non-performing loans as a
percentage of loans 2.22% 1.04% .81% .60% 1.30%
Total non-performing assets as
a percentage of loans and ORE 2.22% 1.04% .81% .63% 1.30%
Liquidity and Interest Rate Sensitivity
SVB&T Corporation considers management of liquidity and interest rate
sensitivity to be two of its most important responsibilities. Liquidity
requirements arise from loan demand and deposit withdrawals. The objective
of
liquidity management is to match the availability of funds with anticipated
loan and withdrawal activity. Interest rate sensitivity management seeks to
match sufficient amounts of interest sensitive assets with interest sensitive
liabilities. A matching of the assets and liabilities results in more
consistent earnings and provides protection in case of sudden interest rate
changes.
Liquidity requirements are monitored on a daily basis. Main sources of short-
term liquidity are cash due from banks and federal funds sold. Longer term
liquidity planning includes funds available from normal maturities of
certificates of deposit with other bank maturities of investment securities,
loan principal payments income from operations, new deposits and alternative
funding sources. These sources of funds are sufficient to meet the company's
liquidity needs.
In the management of interest rate sensitivity, a cumulative sensitivity ratio
of less than 100% is normal in the one year or less repricing time period.
The Company realizes the potential for income reduction should interest rates
increase. At that time, restructuring of the investment portfolio would occur
to increase the sensitivity ratio to a manageable position.
The chart on this and the following page shows the Bank's interest rate
sensitivity position as of December 31, 1999.
INTEREST RATE SENSITIVITY ANALYSIS (dollars in thousands)
0 to 3 4 to 6 7 to 12 1 to 5 Over 5
Months Months Months Years Years Total
Interest Earning Assets
Federal funds sold 0 0 0 0 0 0
Interest bearing deposits
in banks 40 0 0 0 0 40
Investment securities 0 0 2,666 4,276 13,130 20,072
Loans 48,423 21,872 33,100 64,517 37,892 205,804
Total Interest Earning
Assets 48,463 21,872 35,766 68,793 51,022 225,916
Interest Bearing Liabilities
Interest bearing NOW, savings,
and money market deposits 67,967 7,093 5,000 5,000 0 85,060
Time deposits under
$100,000 17,146 5,727 14,819 22,764 242
60,698
Time deposits over $100,000 8,501 2,050 5,797 7,052 442 23,842
Borrowed funds 4,100 0 0 11,100 18,000 33,200
Total Interest Bearing
Liabilities 97,714 14,870 25,616 45,916 18,684 202,800
Interest Sensitivity Gap
Current (49,251) 7,002 10,150 22,877 32,338
Interest Sensitivity Gap
Cumulative (49,251) (42,249) (32,099) (9,222) 23,116
Sensitivity Ratio
Cumulative 50% 62% 77% 95% 113%
Quarterly Results of Operations March 31 June 30 Sept 30 Dec 31
2001
Interest income 4,905 4,842 4,595 4,250
Interest expense 2,743 2,593 2,415 2,147
Net interest income 2,162 2,249 2,180 2,103
Provision for loan losses 180 130 105 705
Net securities gains 0 0 11 0
Non-interest income 364 383 369 673
Non-interest expense 1,810 1,794 1,830
1,724
Income before income taxes 536 708 614
347
Income taxes 167 239 196
6
Net income 369 469 418
347
Net income per share:
Primary net income per share .49 .63 .56 .46
2000
Interest income 4,336 4,522 4,784 5,069
Interest expense 2,174 2,398 2,670 2,807
Net interest income 2,162 2,124 2,114 2,262
Provision for loan losses 75 75 75
75
Net securities gains 0 0 0 0
Non-interest income 381 412 407 543
Non-interest expense 1,709 1,598 1,744 1,927
Income before income taxes 759 863 702 803
Income taxes 284 265 224 315
Net income 475 598 478 488
Net income per share:
Primary net income per share .64 .80 .64 .66
Item 8. Financial Statements and Supplementary Data
The Registrant's Annual Report to Shareholders for the year ended December 31,
2001 are incorporated herein by reference.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
Not Applicable.
PART III
The following table shows the earlier of the year the named individual became
a Director of the Corporation or the Bank. All Directors have been Directors
of the Corporation since its formation in 1982, except for Gary P. Critser,
Brian K. Habig, Hilbert Lindsey, Ronald G. Seals, Ronald J. Thyen and James C.
Tucker, who became Directors of the Corporation in the years indicated below.
NOMINEES FOR ELECTION AS A DIRECTOR ON MAY 21, 2002
Name, Shares beneficially Owned Foot
Present Principal Year (Percentage of Outstanding
Note
Occupation Elected Common Shares)
Gary P. Critser 1999 1,580
Retired .26%
Kimball International, Inc.
65
Brian K. Habig 1987 10,056 1
National Sales & Marketing Manager 1.67%
Jackson of Danville
Kimball International, Inc.
45
Douglas A. Habig 1973 100,257 2
Chairman of the Board & CEO 16.66%
Kimball International, Inc.
55
John B. Habig 1959 90,626 3
Chairman of the Board 15.06%
Springs Valley Bank & Trust Company
69
Thomas L. Habig 1959 78,911 4
Vice Chairman of the Board 13.11%
Kimball International, Inc.
Secretary, SVB&T Corporation
73
Hilbert Lindsey 1988 4,591
Vice President .76%
Lindsey Lumber & Builders Supply, Inc.
67
Ronald G. Seals 1989 725 5
President & CEO .12%
Springs Valley Bank & Trust Company
63
Ronald J. Sermersheim 1976 21,418 6
Vice President, Environment, 3.56%
Health & Safety
Kimball International, Inc.
62
Ronald J. Thyen 1999 11,674 7
Senior Executive Vice President 1.94%
Operations Officer, Furniture & Cabinets
Kimball International, Inc.
65
James C. Tucker 1989 15,808 8
Attorney-at-Law 2.63%
Tucker & Tucker, P.C.
55
1 The above amount includes 1026 shares held by Kimberly A. Habig, the
wife of Mr. Brian K. Habig and 3,088 shares held by Kyle Thomas Habig,
the son of Mr. Brian K. Habig.
2 The above amount includes 66,356 shares held in the Irrevocable Trust
Account of Arnold F. Habig, over which Mr. Douglas A. Habig has shared
voting authority with Mr. John B. Habig and Mr. Thomas L. Habig. Also
includes 14,056 share held by the Kimball Habig Foundation, over which
Mr. Douglas A. Habig exercises voting authority. The above amount
includes 2,008 shares held by Nancy L. Habig, the wife of Mr. Douglas A.
Habig, The above amount includes 66,356 shares held in the Irrevocable
Trust Account of Arnold F. Habig, over which Mr. John B. Habig has
shared voting authority with Mr. Douglas A. Habig and Mr. Thomas L.
Habig. The above amount includes 3,124 shares held by Carma Jane Habig,
the wife of Mr. John B. Habig, 1,080 shares held by Baden-Baden for
John B. Habig FBO Hannah Zunk and 888 shares held by Baden-Baden for
John B. Habig FBO Andrew Zunk, who are the grandchildren of Mr. John
B. Habig.
4 Mr. Thomas L. Habig is Secretary for SVB&T Corporation as well as
Springs Valley Bank & Trust Company. The above amount includes 66,356
shares held in the Irrevocable Trust Account of Arnold F. Habig, over
which Mr. Thomas L. Habig has shared voting authority with Mr. Douglas
A. Habig and Mr. John B. Habig. The above amount includes 2,088 shares
held in the Roberta Habig Revocable Trust, the wife of Mr. Thomas L.
Habig and 10,420 shares held in the Thomas L. Habig Revocable Trust,
over which Mr. Thomas L. Habig has voting rights.
5 Mr. Ronald G. Seals is President and CEO for Springs Valley Bank & Trust
Company as well as SVB&T Corporation. The above amount includes 200
shares held jointly by Mr. Ronald G. Seals and his wife, Nancy E. Seals.
6 Mr. Ronald J. Sermersheim serves as Vice President for SVB&T
Corporation.
7 The above shares include 8,864 shares held in the Herbert E. Thyen
Irrevocable Trust, over which Mr. Ronald J. Thyen has shared voting
authority with other Trustees, including Springs Valley Bank & Trust
Company.
8 The above shares include 14,176 shares held by the James M. Tucker
Trust, of which Mr. James C. Tucker is Trustee.
Family Relationships of Directors Messrs. Douglas A. Habig, John B. Habig and
Thomas L. Habig are brothers. Mr. Brian K. Habig is the son of Mr. Thomas L.
Habig.
Board Committees and Meetings
The Board of Directors of the Corporation and the Bank hold regular bimonthly
meetings and other special meetings. The Board of Directors of the
Corporation held six (6) regular meetings, and the Board of Directors of the
Bank held six (6) regular meetings and one (1) special meeting during 2001.
In addition to meeting as a group, all members of each Board devote their time
and talents to certain of the following standing committees: Executive
Committee, Audit & Compliance Committee, Trust Committee, Executive
Compensation Committee, Nomination Committee, Executive Loan Committee and the
Retirement Profit Sharing Trust Advisory Committee. In 2001, all directors
attended at least 75% of the meetings of the board, including committee
meetings of which they were members.
The Audit Committee reviews significant audit and accounting principles,
policies, and practices, reviews the performance of the internal auditing
functions and reviews examination reports of the Federal and State regulatory
agencies. In carrying out its duties, the Committee meets with the
independent auditors, approves the services to be performed by the independent
auditors and reviews the degree of independence of the auditors. The members
of the Audit Committee are Messrs. Ronald J. Sermersheim (Chairman), Brian K.
Habig and James C. Tucker. The Audit Committee met six (6) times in 2001.
The Bank has an Executive Compensation Committee to review and recommend to
the directors salary and bonus programs for the Senior Bank Officers. The
members of the Executive Compensation Committee are Messrs. James C. Tucker
(Chairman), Randall Catt, Ronald J.C. Sermersheim and Gary P. Critser.
The Nomination Committee reviews, appoints and recommends to the Board the
nomination of Board Members for the Corporation for the ensuing year. The
embers of the Nomination Committee include Messrs. Thomas L. Habig (Chairman),
John B. Habig and Ronald J. Thyen. The Nomination Committee met one (1) time
in 2001.
Director Compensation
Directors of the Bank receive compensation of $1,700 per meeting attended.
In addition, directors holding committee positions are compensated $200 per
meeting attended, if such committee meeting does not take place on a board
meeting date. No separate fees are paid for services as a director of the
Corporation.
Pursuant to the 1997 Directors Stock Compensation Plan, Directors of the
Corporation can elect to receive up to 100% of board fees for a calendar year
in common stock of the Corporation, determined by dividing the amount of fees
elected to be received in stock by the fair market value of a share of the
Common Stock of the Corporation as of the last day of such calendar year. The
Corporation has reserved 16,000 shares for issuance under this Plan. Two
thousand one hundred ninety seven (2,197) shares were issued for year 2001 in
the amounts set forth in the following table for fees which would have
otherwise been paid.
The 1997 Directors Stock Option Plan, designed to work in connection with the
Directors Stock Compensation Plan, provides for the granting of non-qualified
stock options to Directors for Common Stock of the Corporation. Under the
terms of this Plan, each Director is granted an option to purchase 50% of the
number of shares received by the Director pursuant to such Director's
elections under the 1997 Directors Stock Compensation Plan discussed above.
The exercise price of the options will be no less than the fair market value
of a share of common stock on the last day of the calendar year preceding the
date on which the options are granted. The options vest and become
exercisable on the second anniversary of the date of grant. The Corporation
has reserved 8,000 shares for issuance under this Plan. The Corporation
granted options for one thousand one hundred (1,100) shares for 2001 in the
following amounts to the following Directors:
DIRECTOR 2001 2001
STOCK OPTIONS
ISSUED GRANTED
Gary P. Critser 273 137
Brian K. Habig 302 151
Douglas A. Habig 302 151
John B. Habig 0 0
Thomas L. Habig 151 76
Hilbert Lindsey 273 137
Ronald G. Seals 0 0
Ronald J. Sermersheim 302 151
Ronald J. Thyen 292 146
James C. Tucker 302 151
TOTALS: 2,197 1,100
Certain Transactions
During 2001, certain directors and officers of the Corporation and their
associates were customers of and had transactions in the ordinary course of
business with the Bank. Additional transactions may be expected to take place
in the future between such persons and the Bank. All transactions were made
and are expected to be made on substantially the same terms, including
interest rates and collateral on loans, as those prevailing at the time for
comparable transactions with other persons and did not involve and are not
expected to involve more than the normal risk of collectability or present
other unfavorable features.
Stock Transaction
On January 18, 2002, the Company purchased in a negotiated transaction 144,920
shares (19.46% of the total shares outstanding) of its common stock at $40.00
per share. The owner of the shares was the Kimball International, Inc.
Retirement Trust, which currently owns 0% of the Company's issued and
outstanding shares. Douglas A. Habig and Thomas A. Habig, each of whom are
directors of the Company and the Bank, are the Chairman and Vice Chairman,
respectively, of Kimball International, Inc. In connection with the purchase
of these shares, the Company and the Bank were advised in writing, by an
independent third-party financial advisor engaged by the Bank, that the price
to be paid for the shares in the transaction would be fair to the Company and
its shareholders from a financial point of view.
PRINCIPAL SHAREHOLDERS
The following information is given as of April 12, 2002, for each person known
to the Corporation to be the beneficial owner of more than 5% of the Common
stock of the Corporation.
Amount and Nature
Percent Name and Address Beneficial Ownership
of Class
Douglas A. Habig 100,257 16.66%*
Jasper, IN
John B. Habig 90,626 15.06%**
Jasper, IN
Thomas A. Habig 78,911 13.11%***
Jasper, IN
* The above amount includes 66,356 shares held in the Irrevocable Trust
Account of Arnold F. Habig, over which Mr. Douglas A. Habig has shared
voting authority with Mr. John B. Habig and Mr. Thomas L. Habig. Also
includes 14,056 shares held by the Kimball Habig Foundation, over which
Mr. Douglas A. Habig exercises voting authority. The above amount
includes 2,008 shares held by Nancy L. Habig, the wife of Mr. Douglas A.
Habig,
** The above amount includes 66,356 shares held in the Irrevocable Trust
Account of Arnold F. Habig, over which Mr. John B. Habig has shared
voting authority with Mr. Douglas A. Habig and Mr. Thomas L. Habig. The
above amount includes 3,124 shares held by Carma Jane Habig, the wife of
Mr. John B. Habig, 1,080 shares held by Baden-Baden for John B. Habig
FBO Hannah Zunk and 888 shares held by Baden-Baden for John B. Habig FBO
Andrew Zunk, who are the grandchildren of Mr. John B. Habig.
*** Mr. Thomas L. Habig is Secretary for SVB&T Corporation as well as Springs
Valley Bank & Trust Company. The above amount includes 66,356 shares
held in the Irrevocable Trust Account of Arnold F. Habig, over which Mr.
Thomas L. Habig has shared voting authority with Mr. Douglas A. Habig and
Mr. John B. Habig. The above amount includes 2,088 shares held in the
Roberta Habig Revocable Trust, the wife of Mr. Thomas L. Habig and 10,420
shares held in the Thomas L. Habig Revocable Trust.
EXECUTIVE COMPENSATION COMPENSATION OF OFFICERS
Compensation Committee Report
Officers of the Corporation are not compensated for their services in such
capacity. All officers of the Corporation are also officers of the Bank and
are compensated in their capacity as Bank officers. Decisions on compensation
of the Bank&WP1-9;s executives are made by the Board of Directors of the Bank,
upon
the recommendation of the Executive Compensation Committee of the Board
("Committee"). Each member of the Committee except Mr. Randall Catt is a
non-employee director. Mr. Catt is not a director and is not an employee.
Set forth below is a report submitted by Messrs. Randall Catt, Gary P.
Critser, Ronald J. Sermersheim and James C. Tucker (Chairman) in their
capacity as the Compensation Committee addressing the Bank&WP1-9;s
compensation
policies for 2001 as they affected all executive officers of the Bank and Mr.
Ronald G. Seals who, for 2001, was the Bank&WP1-9;s most highly paid executive
whose
total annual salary and bonus exceeded $100,000.
Compensation Policies Toward Executive Officers
The Committee&WP1-9;s executive compensation policies are designed to provide
competitive levels of compensation to the executive officers and to reward
officers for satisfactory performance of the Corporation and the Bank as a
whole. There are no established goals or standards relating to performance of
the Corporation or the Bank which have been utilized in setting the base
salary portion of an individual employee's compensation.
Base Salary
Each executive officer is reviewed individually by the Committee. The
Committee also reviews a bank salary survey prepared by Crowe Chizek and
Company LLP which contains benchmark salary information. The background data
for this information is typically generated from over 100 banks located in the
Midwest with approximately $200 million to $500 million in assets. The
salary portion of the executive officers' compensation is then typically
established at a level near the average salary compensation of officers
included in the survey with similar job responsibilities.
Annual Bonus Amounts
The Bank's Incentive Bonus Plan ("Bonus Plan") for 2001 was based upon the
banks Return on Assets (ROA) and the officer's base salary. The Incentive
Bonus Plan provided cash bonuses for executive officers equal to five percent
(5%) of their base pay.
Other Compensation Plans
At various times in the past the Bank has adopted certain broad-based employee
benefit plans in which the senior executives are permitted to participate on
the same terms as non-executive employees who meet applicable eligibility
criteria, subject to any legal limitations on the amount that may be
contributed or the benefits that may be payable under the plans.
Benefits
The Bank provides medical and pension benefits to the senior executives that
are generally available to other Bank employees. The amount of perquisites,
as determined in accordance with the rules of the Securities and Exchange
Commission relating to executive compensation, did not exceed 10% of salary
and bonus for fiscal 2001.
Executive Compensation for 2001
Regulations of the Securities and Exchange Commission require that the
Compensation Committee disclose the Committee's basis for compensation
reported for the CEO. Mr. Ronald G. Seals' salary and bonus in 2001 were
determined in the same manner as discussed above for other senior executives.
The Board of Directors and the Committee believes that Mr. Seals has managed
the Bank well.
Compensation Committee Insider Participation
During the past fiscal year, Mr. Ronald G. Seals, the Bank&WP1-9;s Chief
Executive
Officer, served on the Board of Directors, but did not serve on the Executive
Compensation Committee. Mr. Seals did not participate in any discussion or
vote with respect to his salary or bonus as an executive officer and excused
himself from the room during the discussion by the Board of Directors of his
compensation.
Summary Compensation Table
The following table sets forth for the fiscal years ending December 31, 2001,
2000, and 1999 the cash compensation paid by the Bank, as well as certain
other compensation paid or awarded during those years, to the Chief Executive
Officer and any other executive officer whose total annual salary and bonus
exceeded $100,000 during the fiscal year ended December 31, 2001.
Name and Principal Position Year Annual Compensation
Salary(1) Bonus (2)
Ronald G. Seals
President, CEO
and Director 2001 $144,000 $ 7,200
2000 $132,000 $33,000
1999 $126,000 $13,300
1 While officers enjoy certain perquisites, such perquisites do not exceed
the lesser of $50,000 or 10% of such officer&WP1-9;s salary and bonus and
are not
required to be disclosed by applicable rules of the Securities and Exchange
Commission.
2 The bonus amounts are payable pursuant to the Bank's Incentive Bonus Plan
of the Bank, as described in the "Compensation Committee Report."
1996 Key Employees' Stock Option and Stock Appreciation Rights Plan
The 1996 stock option and stock appreciation rights program (the "Plan")
provides for the grant of "incentive stock options" within the meaning of
Section 422 of the Internal Revenue Code, the grant of non-qualified stock
options, and the grant of stock appreciation rights ("SARs") to officers and
key employees of the Corporation and the Bank. The Board of Directors of the
Corporation believes these programs provide an important incentive to those
who will be instrumental to the success of the Corporation and of the Bank.
The Corporation has reserved 20,000 shares for issuance under the Plan. The
Executive Compensation Committee of the Board of Directors of the Bank
administers the Plan.
2001 Equity Incentive Plan
The 2001 Equity Incentive Plan (the "Incentive Plan")provides for the grant of
"incentive stock options", the grant of non-qualified stock options, the grant
of "SARs" and the grant of performance shares to officers and key employees of
the Corporation and the Bank. The Board of Directors of the Corporation
believes the Incentive Plan provides an important incentive to those who will
be instrumental to the success of the Corporation and of the Bank. The
Corporation has reserved 70,000 shares for issuance under the Incentive Plan.
The Compensation Committee may also grant performance shares which must have
an initial value equal to the fair market value of the shares on the date of
grant, and will only be earned upon terms and conditions determined by the
Executive Compensation Committee. All performance goals established as a
condition for earning any performance shares must provide for a targeted level
or levels of financial performance with respect to one or more of the
following business criteria: (a) return on assets, (b) income
before interest and taxes, (c) net income, (d) total shareholder return, (e)
return on equity, and (f) Bank operating income. After the grant of a
performance share, the Compensation Committee has the discretion to reduce or
waive any performance goals or related business criteria applicable to that
performance hare. At the end of the applicable performance period, payment
of earned performance shares will be made in cash, in shares of common stock
of the Corporation, or any combination thereof as determined by the
Compensation Committee.
Option Grants In Last Fiscal Year
The following table provides details regarding stock options granted to Mr.
Ronald G. Seals in 2001. In addition, there are shown the hypothetical gains
or "option spreads" that would exist for respective options. These gains are
based on assumed rates of annual compound stock price appreciation of five
percent (5%) and ten percent (10%) from the date the options were granted over
the full option term. Gains are reported net of the option exercise price,
but before any effect of taxes. In assessing these values, it should be kept
in mind that no matter what value is placed on a stock option on the date of
grant, its ultimate value will be dependent on the market value of the
Corporation's stock at a future date, and that value would depend on the
efforts of such executive to foster the future success of the Corporation for
the benefit of all shareholders. The amounts reflected in this table may not
necessarily be achieved.
Individual Grants
Name Number of Shares Percent Exercise Market
Underlying Of Total or Base Price
Options Options Price On Date
Granted Granted ($/Sh) Of Grant
(#) In Fiscal ($/Sh)
Ronald G. Seals 1,700 23% $30.00 $30.00
Potential Realizable
Value at Assumed Annual
Rates of Stack Appreciation
For Option Term
Name Expiration 0% 5% 10%
Date ($) (%) (%)
Ronald G. Seals 01-16-06 $0.00 $14,090 $31,136
1 The market price is determined by the Board of Directors after reference
to a valuation of the Corporation's stock as of December 31 of each year
by an independent valuation firm and other factors the Board of Directors
considers relevant.
Fiscal Year-End Option Values Table
The following table shows the shares covered by the exercisable and non-
exercisable stock options by Mr. Ronald G. Seals as of December 31, 2001.
Also
reported are the values for "in-the-money" options which represent the
positive
spread between the exercise price of any such existing stock options and the
year-end price of the Common Stock at December 31, 2001. For purposes of the
following table, the year-end price of the stock is $38.50
Name Number of Shares Value of Unexercised
Underlying Unexercised In-the-Money Options
Options at Fiscal Year End At Fiscal Year End
(#) ($)
Exercisable Unexercisable Exercisable Unexercisable
Ronald G. Seals 4,425 3,050 $38,823 $14,665
Employee Benefit Plan
The Bank sponsors a tax-qualified profit sharing retirement plan which
includes,
effective as of January 1, 1996, a qualified cash or deferred (i.e., "401(k)")
arrangement and a discretionary company contribution ("Profit Sharing Plan").
The Profit Sharing Plan covers substantially all employees of the Bank; an
employee becomes a participant under the plan on the first January 1st or
July 1st which coincides with or next follows after twelve (12) consecutive
months during which the employee completed at least one thousand (1,000) hours
of employment for the Corporation or the Bank.
The Bank makes discretionary "profit sharing" contributions under the Profit
Sharing Plan and allows participants to make salary deferral and rollover
contributions. Participants' salary deferral contributions may be made, on
pre-
income tax basis, in an amount ranging from 1% to 15% of the participant's
"compensation" (as defined). Participants' salary deferral and rollover
contributions are fully vested when made; discretionary profit sharing
contributions are subject to a vesting schedule pursuant to which participants
become vested on a graduated basis, at the rate of 10% per year for the first
four full years of service and at the rate of 20% per year thereafter so that
a
participant will become fully vested in the Bank's profit sharing
contributions
after completing seven full years of service. In addition, a participant will
become fully vested in the balance of his or her account attributable to the
Bank's discretionary profit sharing contributions on death, "disability" (as
defined), attaining age 65 and termination of the plan. All amounts
contributed
to the Profit Sharing Plan are invested by the Bank, as Trustee, for the
benefit
of all participants and their designated beneficiaries.
Upon termination of employment with the Bank or Corporation for any reason, a
participant (or his or her designated beneficiary) will be entitled to receive
the vested balance of his accounts under the Profit Sharing Plan.
Participants
may elect to receive the vested balance of their accounts in either a single
lump
sum or in monthly, quarterly or annual installments over a fixed period of
time, not to exceed the life expectancy of the participant or the joint life
and
last survivor expectancy of the participant and his or her designated
beneficiary. The Profit Sharing Plan also provides for the distribution of
the
participant salary deferrals on account of "financial hardship" (as defined)
and
authorizes the making of loans to participants from that portion of their
Profit
Sharing Plan accounts attributable to salary deferral contributions.
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(a) Financial Statements - (as referred to in Item 8)
(b) No reports on Form 8-K were filed with the Commission during the
fourth quarter of 2001.
(c) Exhibits - The following exhibits are filed herewith:
Exhibit 11 - Statement Re: Computation of Per Share Earnings
Exhibit 13 - Annual Report to Shareholders for the year ended
December 31, 2001 (incorporated in part into this form
10-K by reference)
Exhibit 21 - Subsidiaries of the Registrant
Exhibit 23 - Consent of Independent Public Auditors
(d) Financial Statement Schedules - This information is omitted since
the required information is not applicable to the Registrant.
Exhibit 27 - Financial data schedule
Signatures
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.
SVB&T Corporation
By:
Ronald G. Seals,
President & C.E.O. 3/22/02
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed by the following persons on behalf of the Registrant
and in the capacities and on the dates indicated.
By: By:
John B. Habig David Rees
Chairman of the Board 3/22/02 Principal Financial and Accounting 3/22/02
Officer
By: By:
Douglas A. Habig, Director 3/22/02 Ronald G. Seals,
Principal Executive Officer and
3/22/02
Director
By: By:
Gary P. Critser, Director 3/22/02 Brian K. Habig, Director 3/22/02
By: By:
Thomas L. Habig, Director 3/22/02 James C. Tucker, Director 3/22/02
By: By:
Ronald J. Sermersheim, Director Hilbert Lindsey, Director 3/22/02
3/22/02
By:
Ronald J. Thyen, Director 3/22/02
Index to Exhibits
Sequential
Page # Exhibit # Exhibit
54 11 Statement Re: Computation of Per Share Earnings
35 13 Annual Report to Shareholders for the year ended
December 31, 1998
54 21 Subsidiaries of the Registrant
54 23 Consent of Independent Auditors
27 Financial Data Schedule
Exhibit 13
Message to our share owners:
As with many other financial institutions, the year 2001 was a difficult year
in
growth and earnings for Springs Valley Bank & Trust Company. Due to a
weakening
economy, the tragedy of September 11th and a significant decline in trust
assets,
bank earnings were down $442,000 from our record earnings of 2000. Total
assets
decreased $6,777,000.
Financial highlights for the year:
Net income $1,597,209, down 21.7%
Income per share: $2.14, down from $2.74
Book value per share $31.69, up $1.53
Total assets $240 million, down 2.7%
Deposits $181 million, down 2.5%
Following a year of significant growth in 2000, management decided to
stabilize
our balance sheet due to a softening economy. In 2001 an increase in our
deposit
base was not necessary to fund loan growth. Therefore, a very conservative
approach was taken toward rates paid on deposit accounts. Additionally, we
sold
a total of $10,000,000 in fixed rate mortgages into the secondary market. This
sale of loans plus a decrease in loan demand necessitated a conservative
approach
toward deposit growth.
The sale of fixed rate mortgage loans into the secondary market will be a
significant benefit for future growth and earnings of the bank by providing
more
funds to service future customer needs. By selling our fixed rate loans we
have
eliminated the risk of interest rate increases in the future. However, we
maintain the servicing rights for these sold loans, thus maintaining contact
with
our borrowing customers. This process positions us to sell other bank services
to these borrowers.
Due to the large loan growth experienced in 2000 and a weakening economy in
2001,
we decided that an increase in our Loan Loss Reserve account was necessary. We
had been maintaining our reserve total at about .8% of total loans. With over
$1,000,000 transferred from earnings to reserves, we increased our reserve
account by $426,000 for a total of over 1% of outstanding loans. It is our
intention to maintain our reserve totals at or above 1% of total loans.
In early 2001 Kimball International withdrew their company's Pension Profit
Sharing Plan from our trust department. The loss of this account was not a
surprise. We were notified over a year in advance that the account would be
transferred out of the bank. The retirement plan was restructured to permit
participants to self-direct their pension funds. Springs Valley Bank's trust
department is not equipped to provide this service to the seven thousand plus
employees of Kimball International.
With the loss of the Kimball trust account, our trust assets decreased from
$500
million to $200 million. A trust operation of this size is still very large
for
a community bank. The size of our trust department will permit a very
profitable
operation for the bank. We will maintain our qualified staff and be very
aggressive in growing for the future.
In early 2001 we were presented with the opportunity to repurchase 144,200
shares
of the Company's common stock in a negotiated purchase. It is uncommon for
such
a large block of shares to become available. After a review and analysis of
the
financial implications of the repurchase of this block of shares, which
represented approximately 20% of the total shares outstanding, we decided to
pursue the transaction. The transaction required certain regulatory approvals,
which were obtained in early 2002. On January 18, 2002, the Company completed
the
repurchase at $40.00 per share. In connection with the transaction, the Bank
was
advised in writing, by an independent third-party financial advisor engaged by
the Bank, that the price to be paid for the shares in the transaction would be
fair to the Company and its shareholders from a financial point of view. Our
analysis indicates this transaction will be accretive to earning per share in
2002 and subsequent years.
Although 2001 was a difficult year for the bank we are not disappointed with
our
final results. In many areas the adverse experiences have made us a stronger
organization. One of the most positive things we have for future prosperity is
our dedicated staff. We continuously strive to provide our customers with the
latest in banking technology and convenience along with the best personal
service
possible.
The year 2002 will be very special for our bank as we celebrate 100 years of
service to southwest Indiana. We are planning several exciting activities
throughout the year to commemorate our century of service and to thank those
who
have helped achieve this milestone.
Please accept this expression of gratitude from the directors and staff of
Springs Valley Bank & Trust for your continued support. You have brought us
business and referred business to us actions we view as special compliments.
We
remain dedicated to the kind of effort needed to justify your continued
goodwill
and support.
Sincerely,
John B. Habig Ronald G. Seals
Chairman of the Board President & CEO
SVB & T CORPORATION AND SUBSIDIARY
FRENCH LICK, INDIANA
Consolidated Statements of Financial Condition
December 31,
2001 2000
ASSETS
Cash and cash equivalents
Cash and due from banks $4,811,902 $5,824,159
Interest-bearing deposits with banks 39,754 49,263
Total cash and cash equivalents 4,851,656 5,873,422
Investment securities, available for
sale, at market value 20,071,900 28,591,729
Loans Held for sale 2,359,499 0
Loans
Loans, net of unearned interest 205,804,166 204,672,215
Allowance for loan losses (2,097,423) (1,670,912)
Net loans 203,706,743 203,001,303
Federal Home Loan Bank stock
and other stock, at cost 2,005,150 1,855,000
Buildings and equipment 4,281,034 4,607,584
Interest receivable 1,509,538 1,886,009
Other assets 1,664,707 1,412,280
Total assets $240,450,227 $247,227,327
LIABILITIES
Deposits
Non-interest bearing $12,139,389 $13,800,356
Interest bearing 169,600,771 172,559,814
Total deposits 181,740,169 186,360,170
Federal funds purchased 4,100,000 2,765,000
Short-term borrowings 0 2,500,000
Interest payable 1,089,317 964,086
Deferred income taxes 74,972 133,931
Other liabilities 692,500 935,428
Long-term borrowings 29,100,000 31,100,000
Total liabilities 216,796,958 224,758,615
COMMITMENTS AND CONTINGENT LIABILITIES
SHAREHOLDERS' EQUITY
Common stock (No par value: 800,000
shares authorized and issued) 200,000 200,000
Surplus 6,253,296 6,210,711
,Retained earnings 18,107,429 17,047,543
Accumulated other comprehensive income:
Net unrealized gains (losses) on
investment securities
available for sale 123,069 (14,832)
Treasury stock at cost (54,972 shares
2000, 56,767 shares 1999) (1,030,525) (974,710)
Total shareholders' equity 23,653,269 22,468,712
Total liabilities and shareholders'
equity $240,450,227 $247,227,327
See Notes to Consolidated Financial Statements
SVB & T CORPORATION AND SUBSIDIARY
FRENCH LICK, INDIANA
Consolidated Statements of Income
Year Ended December 31,
2001 2000 1999
INTEREST INCOME
Loans and fees on loans $17,176,908 $16,932,878 $13,340,512
Investment securities
Taxable 416,135 974,194 932,315
Tax exempt 738,438 581,318 500,291
Dividends 157,216 146,459 67,166
Federal funds sold
and other 103,328 76,564 166,728
Total interest income 18,592,025 18,711,413 15,007,012
INTEREST EXPENSE
Deposits 8,056,027 8,134,830 6,781,089
Short-term borrowings 10,296 148,231 7,834
Long-term borrowings 1,831,603 1,766,420 540,108
Total interest expense 9,897,926 10,049,481 7,329,031
NET INTEREST INCOME 8,694,099 8,661,932 7,677,981
Provision for loan losses 1,120,000 300,000 850,000
NET INTEREST INCOME AFTER PROVISION FOR
LOAN LOSSES 7,574,099 8,361,932 6,827,981
NON-INTEREST INCOME
Trust Department income 542,834 760,159 725,423
Service charges on deposit accounts 579,066 533,539 533,290
Net gain on sales of loans 181,905 0 0
Insurance income 171,228 160,645 157,290
Other operating income 302,970 298,272 292,293
Realized security gains (losses) 10,793 (9,827) (3,173)
Total non-interest income 1,788,796 1,742,788 1,705,123
NON-INTEREST EXPENSE
Salaries and employee benefits 4,179,233 3,869,650 3,613,674
Premises and equipment expense 1,280,768 1,392,219 1,135,080
Deposit insurance expense 35,379 35,597 18,970
Other operating expenses 1,662,306 1,680,022 1,657,823
Total non-interest expense 7,157,686 6,977,488 6,425,547
INCOME BEFORE INCOME TAXES 2,205,209 3,127,232 2,107,557
Income taxes 608,000 1,088,200 703,000
NET INCOME $1,597,209 $2,039,032 $1,404,557
EARNINGS PER SHARE
Basic $2.14 $2.74 $1.88
Diluted $2.13 $2.73 $1.88
AVERAGE SHARES OUTSTANDING
Basic 746,372 745,017 745,994
Diluted 748,201 746,429 747,949
See Notes to Consolidated Financial Statement
SVB & T CORPORATION AND SUBSIDIARY
FRENCH LICK, INDIANA
Consolidated Statements of Cash Flows
Year Ended December 31,
2001 2000 1999
OPERATING ACTIVITIES:
Net income $1,597,209 $2,039,033 $1,404,557
Adjustments to reconcile
net income to net cash
provided by operating activities:
Provision for loan losses 1,120,000 300,000 850,000
Depreciation 519,645 511,215 461,119
Investment securities amortization 11,176 23,740 50,786
Investment securities (gains) lossses (10,793) 24,263 3,173
Proceeds from sales of residential
mortgage loans held for sale 10,128,918 0 0
Net gains on sale of loans (181,905) 0 0
Increase in residential mortgage
loans held for sale (12,306,512) 0 0
Loss on sale of equipment 0 14,636 0
Loss on abandoned equipment 0 0 87,314
Gain on sale of other real estate (9,802) (43,100) 0
Deferred income taxes (147,693) (40,623) (233,370)
(Increase) decrease in interest
receivable and other assets 388,483 (863,118) (228,296)
Increase in interest payable and
other liabilities (119,412) 242,561 123,236
NET CASH PROVIDED BY OPERATING
ACTIVITIES 989,314 2,208,607 2,518,519
INVESTING ACTIVITIES;
Proceeds from sales and maturities
of investment securities available
for sale 12,355,576 2,386,071 7,220,309
Purchases of investment available
for sale (3,607,780) (5,250,709) (7,913,802)
Purchases of investment securities
held to maturity (150,150) (650,000) (614,300)
Proceeds from the sale of equipment 0 33,030 0
Proceeds - sale of loans 450,000 0 84,000
Proceeds - sale of other real estate 147,802 126,500 40,000
Net increase in loans (2,677,879) (29,982,016) (31,863,265)
Additions to buildings and equipment (193,095) (643,839) (250,408)
NET CASH PROVIDED (USED) BY INVESTING
ACTIVITIES 6,324,474 (33,980,963) (33,297,466)
FINANCING ACTIVITIES;
Net increase (decrease) in deposits (4,620,001) 5,084,105 21,944,573
Net increase in federal funds purchased1,335,000 2,765,000 0
Net increase (decrease) in short-term
borrowings (2,500,000) (5,000,000) 5,000,000
Increase in long-term borrowings (2,000,000) 24,500,000
8,100,000
Sale of treasury stock 85,170 67,527 78,259
Purchase of treasury stock (98,400) 0 (198,132)
Cash dividends (537,323) (536,420) (514,667)
NET CASH PROVIDED (USED) BY FINANCING
ACTIVITIES (8,335,554) 26,880,212 34,410,033
INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS (1,021,766) (4,892,144) 3,631,086
Cash and cash equivalents beginning
of year 5,873,422 10,765,566 7,134,480
CASH AND CASH EQUIVALENTS AT END
OF YEAR $4,851,656 $ 5,873,422 $10,765,566
SUPPLEMENTAL DISCLOSURES;
Cash paid during the year for:
Income taxes $ 935,795 $1,172,783 $876,673
Interest $9,772,695 $9,869,366 $7,257,711
See Notes to Consolidated Financial Statement
SVB & T CORPORATION AND SUBSIDIARY
FRENCH LICK, INDIANA
Consolidated Statements of Changes in Shareholders' Equity
Accumulated
Other Total
Common Capital Retained Comprehensive Treasury Shareholders'
Stock Surplus Earnings Income Stock Equity
BALANCE,
JANUARY 1,1999$200,000$6,124,070$14,655,040$ 190,107 $(835,723) $20,333,494
COMPREHENSIVE INCOME 1999
Net income 1,404,557 1,404,557
Change in unrealized gain
(loss) on securities available
for sale, net of deferred
income tax of $481,757 (737,655) (737,655)
Less reclassifications for
gain included in net
income 3,173 3,173
TOTAL COMPREHENSIVE
INCOME 670,075
Cash dividends (514,667) (514,667)
Sold 2,148 shares of treasury
stock 46,039 32,220 78,259
Purchased 5,214 shares of
treasury stock (198,132) (198,132)
BALANCE,
DECEMBER 31, 1999200,0006,170,10915,544,930 (544,375) (1,001,635)
20,369,029
COMPREHENSIVE INCOME 2000
Net income 2,039,033 2,039,033
Change in unrealized gain
(loss) on securities available
for sale, net of deferred
income tax of $347,329 505,280 505,280
Less reclassifications for
losses included in net
income 24,263 24,263
TOTAL COMPREHENSIVE
INCOME 2,568,576
Cash dividends (536,420) (536,420)
Sold 1,795 shares of treasury
stock 40,602 26,925 67,527
BALANCE,
DECEMBER 31, 2000200,0006,210,711 17,047,543(14,832) (974,710) 22,468,712
COMPREHENSIVE INCOME 2001
Net income 1,597,209 1,597,209
Change in unrealized gain
(loss) on securities available
for sale, net of deferred
income tax of $90,449 127,108 127,108
Plus reclassifications for
losses included in net
income 10,793 10,793
TOTAL COMPREHENSIVE
INCOME 1,735,110
Cash dividends (537,323) (537,323)
Sold 2,839 shares of treasury
stock 42,585 42,585 85,170
Purchased 3,280 shares of
treasury stock (98,400)
(98,400)
BALANCE,
DECEMBER 31, 2001$200,000$6,253,296$18,107,429 $123,069
$(1,030,525)$23,653,269
See Notes to Consolidated Financial Statements
SVB & T CORPORATION AND SUBSIDIARY
FRENCH LICK, INDIANA
Notes to Consolidated Financial Statements
NOTE 1--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation - The accounting and reporting policies of SVB & T
Corporation and Subsidiary (the Bank) are in accordance with generally
accepted accounting principles and conform to general practices within the
banking industry. The more significant of the principles used in preparing
the financial statements are briefly described below.
Principles of Consolidation - The consolidated financial statements include
the accounts of SVB & T Corporation and its wholly owned subsidiary, Springs
Valley Bank & Trust Company. All significant intercompany balances and
transactions have been eliminated.
Nature of Operations - SVB & T Corporation operates under a charter from the
State of Indiana and provides full banking services, including trust
services.
As a state bank, Springs Valley Bank & Trust Company is subject to regulation
by the Department of Financial Institutions of the State of Indiana and the
Federal Deposit Insurance Corporation. The area served by the Bank is
primarily Orange, Dubois and the surrounding counties in Southern Indiana.
Estimates - The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Cash and Cash Equivalents - Cash and cash equivalents include cash, due from
banks, interest-earing deposits with banks and federal funds sold. Generally,
federal funds are sold for one-day periods.
Investment Securities Available for Sale -The Bank buys investment debt
securities with the intent and ability to hold these securities to maturity.
However, management has determined that all debt securities would be available
for sale in response to certain situations, such as changes in interest rates
and prepayment risk, need for liquidity, changes in availability and yield on
alternative investments, and changes in funding sources and terms. At
December 31, 2001 and 2000, debt securities are reported at estimated market
values in the statement of financial condition. Unrealized holding gains and
losses are excluded from earnings and are reported net of tax as a separate
component of shareholders' equity of comprehensive income. Accreted discounts
and amortized premiums are included in earnings over the life of the
security.
Gains or losses on dispositions are computed using the specific identification
method.
Investment Securities Held to Maturity - The Bank owns stock in the Federal
Home Loan Bank of Indianapolis. This stock is classified as held to maturity
and is carried at cost.
Loans Held for Sale - Loans originated and intended for sale in the secondary
market are carried at the lower of cost or estimated fair value in the
aggregate. Net unrealized losses, if any, are recognized through a valuation
allowance by charges to income.
SVB & T CORPORATION AND SUBSIDIARY
FRENCH LICK, INDIANA
Notes to Consolidated Financial Statements
NOTE 1--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Loans - Loans that management has both the intent and ability to hold for the
foreseeable future or until maturity or pay off are reported at their
outstanding unpaid principal balances, adjusted for charge-offs, the allowance
for loan losses and any deferred fees or costs on originated loans. Interest
income on commercial loans, simple interest installment loans and real estate
mortgage loans is recognized based on the outstanding principal balances at
the stated rates. Real estate mortgage loan origination fees and costs are
amortized over the life of the loan. Accrual of interest income on loans and
impaired loans is discontinued when payments have become delinquent for 90
days. Upon non-accrual status, all accrued interest receivable on a loan is
written off. Interest income on non-accrual loans is accounted for on the
cash basis until the loan is written off or qualifies for return to accrual.
Allowance for Loan Losses - The allowance for loan losses is an amount that
management believes will be adequate to absorb possible losses on existing
loans that may become uncollectible, based on evaluations of collectibility
and prior loan loss experience. The evaluations take into consideration such
factors as changes in the nature and volume of the loan portfolio, overall
portfolio quality, review of specific problem loans, and current economic
conditions and trends that may affect the borrowers' ability to pay. The
allowance is established by a provision for loan losses charged to expense.
Loans are written off against the allowance when management believes that the
collectibility of the principal is unlikely. Subsequent recoveries, if any,
are credited to the allowance.
A loan is considered impaired when, based on current information and events,
it is probable that the Company will be unable to collect the scheduled
payments of principal or interest when due according to the contractual terms
of the loan agreement. Factors considered by management in determining
impairment include payment status, collateral value, and the probability of
collecting scheduled principal and interest payments when due. Loans that
experience insignificant payment delays and payment shortfalls generally are
not classified as impaired. Management determines the significance of payment
delays and payment shortfalls on a case-by-case basis, taking into
consideration all of the circumstances surrounding the loan and the borrower,
including the length of the delay, the reasons for the delay, the borrower's
prior payment record, and the amount of the shortfall in relation to the
principal and interest owed. Impairment is measured on a loan by loan basis
for commercial and construction loans by either the present value of expected
future cash flows discounted at the loan's effective interest rate, the loan's
obtainable market price, or the fair value of the collateral if the loan is
collateral dependent.
Large groups of smaller balance homogeneous loans are collectively evaluated
for impairment. Accordingly, the Corporation does not separately identify
individual consumer and residential loans for impairment disclosures.
Buildings and Equipment - Buildings and equipment are stated at cost less
accumulated depreciation. Buildings are depreciated on the straight-line
method using lives ranging from 10 to 40 years. Equipment is depreciated on
the straight-line method using lives ranging from 5 to 10 years.
SVB & T CORPORATION AND SUBSIDIARY
FRENCH LICK, INDIANA
Notes to Consolidated Financial Statements
NOTE 1--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Other Real Estate - Real estate acquired in foreclosures is carried in other
assets at the lower of the outstanding loan balance plus accrued interest or
fair value of the property. Amounts necessary to write loans down to fair
value are charged to the allowance for loan losses. Real estate acquired in
foreclosures is $397,440 at December 31, 2001 and $133,000 at December 31,
2000.
Servicing - Servicing assets are recognized as separate assets when rights are
retained after the sale of loans. Capitalized servicing rights are reported
in other assets and are amortized into noninterest income in proportion to,
and over the period of, the estimated future net servicing income of the
underlying financial assets. Servicing assets are evaluated for impairment
based upon the fair value of the rights as compared to amortized cost.
Income Tax - Income taxes are provided for the tax effects of transactions
reported in the financial statements and consist of taxes currently due plus
deferred taxes related primarily to differences between the basis of
available-for-sale investment securities, allowance for loan losses,
accumulated depreciation and loan origination fees. The deferred tax asset or
liability represents the future tax return consequences of those differences
(the liability method). SVB & T Corporation and Springs Valley Bank & Trust
file consolidated income tax returns. Income tax expense is allocated to each
according to actual earnings prior to consolidation.
Stock Option Plans - The Bank grants stock options to certain employees and
directors, which are accounted for under the rules of APB Opinion 25. The
options are granted at the market price on the grant date. No compensation
expense is recorded in the financial statements for the options. Pro forma
disclosures as required by FASB Statement No. 123 "Accounting for Stock-Based
Compensation" are included in Note 16.
Comprehensive Income - Generally accepted accounting principles require that
recognized revenue, expenses, gains and losses be included in net income.
Certain other changes in assets and liabilities caused by unrealized gains and
losses on available-for-sale securities, are reported as a separate component
of shareholders' equity in the consolidated statements of financial
condition.
These unrealized gains and losses on available-for-sale securities and net
income, are the components of comprehensive income.
SVB & T CORPORATION AND SUBSIDIARY
FRENCH LICK, INDIANA
Notes to Consolidated Financial Statements
NOTE 1--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Net Income Per Share - Basic net income per share is computed by dividing net
income by the weighted average number of shares of common stock outstanding
during the period. Diluted net income per share is computed as above and
assumes the dilutive effect of additional common shares issuable under stock
option plans. The following table reconciles the amounts reported in the
financial statements:
BASIC EARNINGS PER SHARE: 2001 2000 1999
Net income $1,597,209 $2,039,032 $1,404,557
Average shares outstanding 746,372 745,017 745,994
Basic earnings per share $ 2.14 $ 2.74 $ 1.88
DILUTED EARNINGS PER SHARE:
Net income $1,597,209 $2,039,032 $1,404,557
Average shares outstanding 746,372 745,017 745,994
Stock options, net 1,829 664 1,955
Diluted average shares outstanding 748,201 745,681 747,949
Diluted earnings per share $ 2.13 $ 2.73 $ 1.88
Trust Assets - Trust assets are not assets of the Company and are not included
in the financial statements
Reclassifications - Certain prior year amounts have been reclassified to
conform with the 2001 presentation. These reclassifications had no effect on
net income.
NOTE 2--EFFECT OF CHANGES IN ACCOUNTING PRINCIPLES
Effective January 1, 2002, the Company will adopt FASB Statement No. 142
"Goodwill and Other Intangible Assets". The adoption of this accounting
standard will change the way the Company accounts for goodwill. The effect of
adopting this accounting standard will not materially affect the financial
statements of the Company.
NOTE 3--RESTRICTION ON CASH AND DUE FROM BANKS
The Bank is required to maintain average funds in cash and on deposit with the
Federal Reserve Bank. The average balance required was $715,000 at December
31, 2001 and $916,000 at December 31, 2000.
SVB & T CORPORATION AND SUBSIDIARY
FRENCH LICK, INDIANA
Notes to Consolidated Financial Statements
NOTE 4--INVESTMENT SECURITIES
The amortized costs and estimated market values of investment securities at
December 31, 2001 and 2000 were as follows:
December 31, 2001
Unrealized Unrealized Estimate
Amortized Holding Holding Market
Cost Gains Losses
Value
Securities Available
for Sale U.S. Government
corporations and
agencies $4,005,916 $ 83,154 $ 0 $4,089,070
States and political
subdivisions 15,082,601 253,214 175,102 15,160,713
Mortgage-backed
securities 65,696 6,365 0 72,061
Other securities 713,897 36,159 0 750,056
Total $19,868,110 $ 378,892 $175,102 $20,071,900
December 31, 2000
Unrealized Unrealized Estimated
Amortized Holding Holding Market
Cost Gains Losses Value
Securities Available
for Sale U.S. Government
corporations and
agencies $15,051,788 $ 633 $(130,255)
$14,922,166
States and political
subdivisions 12,619,004 240,958 (117,945) 12,742,017
Mortgage-backed
securities 72,644 2,470 0 75,114
Other securities 872,852 0 (20,420) 852,432
Total $28,616,288 $ 244,061 $(268,620) $28,591,729
The amortized cost and estimated market values of securities available for
sale at December 31, 2001 and 2000, by contractual maturity follows. Expected
maturities may differ from contractual maturities because some borrowers have
the right to call or prepay certain obligations with or without call or
prepayment penalties.
2001 2000
Estimated Estimated
Amortized Market Amortized Market
Cost Value Cost Value
Securities Available for Sale
Due in one year or less $ 2,619,929 $ 2,665,856 $ 2,489,936 $2,465,658
Due after one year but within
five years 4,148,616 4,276,034 13,383,583 13,330,572
Due after five years but within
ten years 7,419,372 7,522,767 8,640,040 8,659,174
Due after ten years 5,614,497 5,535,182 4,030,085 4,061,211
19,802,414 19,999,839 28,543,644 28,516,615
Mortgage backed securities 65,696 72,061 72,644 75,114
Total $19,868,110 $20,071,900 $28,616,288$28,591,729
Securities available for sale with amortized cost of $4,005,916 at December
31, 2001 and $15,051,788 at December 31, 2000 were pledged as collateral on
debt of the Bank.
SVB & T CORPORATION AND SUBSIDIARY
FRENCH LICK, INDIANA
Notes to Consolidated Financial Statements
NOTE 4--INVESTMENT SECURITIES (Continued)
Proceeds from sales of securities available for sale during 2001, 2000 and
1999 were $2,877,200, $1,153,842 and $2,000,888. In 2001, gains of $10,793
and losses of $-0- were realized. In 2000, gains of $-0- and losses of $9,826
were realized. In 1999, gains of $-0- and losses of $3,173 were realized.
NOTE 5--LOANS
Loans at December 31, 2001 and 2000 are comprised of the following:
2001 2000
Commercial and industrial loans $ 46,102,714 $ 40,867,419
Real estate loans (including $3,338,772
and $2,137,752 secured by farm land) 104,923,219 103,100,274
Construction loans 14,727,425 17,173,625
Agricultural production financing and
other loans to farmers 2,579,860 1,751,194
Individuals' loans for household and
other personal expenditures 36,925,315 41,318,635
Lease financing 630,615 585,198
205,889,148 204,796,345
Less: Unearned income on loans 84,982 124,130
Total loans $205,804,166 $204,672,215
Information concerning impaired loans at December 31, 2001, 2000 and 1999 is
as follows:
2001 2000 1999
Impaired loans with a related
allowance for loss $ 588,386 $1,098,513 $1,301,967
Impaired loans without a related
allowance for loss 4,153,303 981,884 939,940
Total impaired loans 4,741,689 2,080,397 2,241,907
Average balance of impaired loans 4,851,447 2,259,799 1,274,676
Allocated allowance for loan losses
on impaired losses 270,403 525,043 532,151
Cash receipts applied to principal 164,351 322,952 66,234
Cash receipts applied as interest income 317,044 203,664 102,885
Total cash received $ 481,395 $ 526,616 $ 169,119
All 1 to 4 family residential, first mortgage loans have been pledged as
collateral for debt with the Federal Home Loan Bank of Indianapolis. The
amounts pledged at December 31, 2001, 2000 and 1999 are as follows:
2001 2000 1999
Loans pledged as collateral $82,458,446 $78,129,312 $73,252,093
SVB & T CORPORATION AND SUBSIDIARY
FRENCH LICK INDIANA
Notes to Consolidated Financial Statements
NOTE 6--ALLOWANCE FOR LOAN LOSSES
The changes in the allowance for loan losses for the year 2001, 2000 and 1999
are as follows:
2001 2000 1999
Balance, January 1 $ 1,670,912 $ 1,627,141 $ 1,106,077
Loans charged-off (793,553) (576,981) (442,969)
Recoveries 100,064 320,752 114,033
Net charged-off (693,489) (256,229) (328,936)
Provision for loan losses 1,120,000 300,000 850,000
Balance, December 31 $ 2,097,423 $ 1,670,912 $ 1,627,141
NOTE 7--BUILDINGS AND EQUIPMENT
Balances in the buildings, equipment, and related accumulated depreciation
accounts at December 31, 2001 and 2000 are as follows:
2001 2000
Land and bank buildings $ 5,010,740 $ 4,996,301
Equipment, furniture and fixtures 4,737,185 4,558,533
Totals 9,747,925 9,554,834
Less accumulated depreciation 5,466,891 4,947,250
Net $ 4,281,034 $ 4,607,584
Depreciation expense was $519,645 for 2001, $511,215 in 2000 and $461,119 in
1998.
NOTE 8--DEPOSITS
Deposits at December 31, 2001 and 2000 are as follows:
2001 2000
Demand, non-interest bearing $ 12,139,398 $ 18,752,398
Demand, interest-bearing 18,373,746 12,028,056
Savings 66,686,606 66,622,544
Time deposits, $100,000 and over 23,842,211 29,170,918
Other time deposits 60,698,208 59,786,254
$181,740,169 $186,360,170
As of December 31, 2001 the scheduled maturities of time deposits are as
follows:
2002 $38,904,256
2003 12,974,308
2004 11,236,751
2005 12,660,951
2006 and thereafter 8,764,153
$84,540,419
SVB & T CORPORATION AND SUBSIDIARY
FRENCH LICK, INDIANA
Notes to Consolidated Financial Statements
NOTE 9--OTHER SHORT-TERM BORROWINGS
Other short-term borrowings at December 31, 2001 and 2000 are as follows:
2001 2000
Federal Funds purchased from Bank One,
Indiana, unsecured, 1.875% at
December 31, 2001 and 6.875% at
December 31, 2000 $4,100,000 $ 2,765,000
Federal Home Loan Bank Indianapolis advance,
due January 23, 2001, 6.3% adjustable,
collateralized by a blanket collateral
agreement on qualified mortgage loans
and securities $ 0 $ 2,500,000
NOTE 10--LONG-TERM BORROWINGS
Long-term borrowings at December 31, 2001 and 2000 are as follows:
Federal Home Loan Bank Indianapolis advances, payable monthly, collateralized
by a blanket collateral agreement on qualified mortgage loans and securities:
Maturity Date Conversion Option Date Rate 2001 2000
February 24, 2004 5.19% $ 0 $ 5,000,000
March 15, 2005 March 15, 2002 6.32% 7,000,000 7,000,000
October 15, 2005 N/A 5.02% 1,000,000 1,000,000
July 17, 2006 N/A 6.69% 3,100,000 3,100,000
April 19, 2010 April 19, 2002 6.18% 10,000,000 10,000,000
June 7,2010 March 6, 2002 6.53% 5,000,000 5,000,000
February 28, 2011 April 27, 2002 4.48% 3,000,000 0
Total long-term borrowings $ 29,100,000 $31,100,000
On the conversion option date and quarterly thereafter, the Federal Home Loan
Bank can convert the entire advance to an adjustable rate advance which
reprices quarterly. If the conversion option is exercised by the FHLB, the
Company has the option to pay-off the advance without prepayment penalties.
If FHLB does not exercise the conversion option the Company cannot prepay the
advance without significant penalties.
As of December 31, 2001 long-term borrowings are scheduled to mature as
follows:
2002 $ 0
2003 0
2004 0
2005 8,000,000
2006 3,100,000
Thereafter 18,000,000
$ 29,100,000
At December 31, 2001, the Bank has $30,840,000 available under a secured line
of credit and $7,900,000 available under two unsecured lines. These line of
credit are short-term and renew annually.
SVB & T CORPORATION AND SUBSIDIARY
FRENCH LICK, INDIANA
Notes to Consolidated Financial Statements
NOTE 11--EMPLOYEE BENEFIT PLANS
The Bank has a trusteed, defined contribution, profit-sharing plan, which
covers substantially all employees. Contributions to the plan are based on a
percentage of eligible employees' yearly compensation and are subject to the
discretion of the Board of Directors. The Bank's expense for the plan for the
years ended December 31, 2001, 2000 and 1999 was $125,609, $183,691 and
$154,203.
The Bank also has an employee benefit plan, which includes a self-insured
medical plan, a wholly insured term-life insurance plan and a long-term
disability plan, which covers most employees. The self-insured medical plan
carries an insurance override to protect the Bank against major increases in
claims. The Bank's contributions to the plan for the years ended December 31,
2001, 2000 and 1999 were $315,668, $296,159 and $347,940.
NOTE 12--INCOME TAXES
The components of the provision for income taxes are:
2001 2000 1999
Federal income taxes currently payable $ 552,882 $ 843,703 $ 695,375
Deferred Federal income taxes (113,882) (31,703) (183,375)
Provision for Federal income taxes for
the year $ 439,000 $ 812,000 $ 512,000
State income taxes currently payable $ 202,811 $ 285,120 $ 240,995
Deferred state income taxes (33,811) (8,920) (49,995)
Provision for state income taxes for the year $ 169,000 $ 276,200 $ 191,000
Deferred income taxes in the statement of financial condition are carried as a
net amount. The deferred tax assets and deferred tax liabilities that are
combined to arrive at the net carrying amounts at December 31, 2001 and 2000
are as follows:
2001 2000
Deferred Tax Assets:
Allowance for loan losses $ 637,643 $ 511,220
Unrealized losses on securities available
for sale 0 9,728
Loan fees 33,661 56,343
Other 10,978 16,541
Total asset 682,282 593,832
Deferred Tax Liabilities:
Depreciation (676,533) (727,763)
Unrealized gains on securities available
for sale (80,721) 0
Net deferred tax liability $(74,972) $ (133,931)
SVB & T CORPORATION AND SUBSIDIARY
FRENCH LICK, INDIANA
Notes to Consolidated Financial Statements
NOTE 12--INCOME TAXES (Continued)
The difference between the Federal income tax rate and the Bank's effective
tax rate is as follows:
2001 2000 1999
Income tax at Federal tax rate of 34% $ 749,771 $ 1,063,259 $ 714,385
Tax effect of:
Tax exempt interest (206,939) (156,386) (140,656)
Other (27,232) (1,852) 3,211
Tax credit (12,000) 0 0
State income taxes, net of Federal effect 104,400 183,179 126,060
Total income taxes $ 608,000 $ 1,088,200 $ 703,000
Effective tax rate 27.57% 34.80% 33.46%
NOTE 13--RELATED PARTY TRANSACTIONS
Officers and directors of Kimball International, Inc. of Jasper, Indiana and
Kimball International, Inc. Retirement Trust own in excess of 50% of the
outstanding capital stock of SVB & T Corporation. The Bank is the local
depository for Kimball International, Inc. Amounts on deposit with the Bank
by Kimball International and Kimball International Employee Benefit Plan were
$906,377 at December 31, 2001 and $9,209,359 at December 31, 2000.
The Bank serves as Trustee for Kimball International's employee benefit plans
and rents office space to Kimball. The Bank also served as trustee for
Kimball International's retirement plan until April 2001. Fees paid to the
Bank for these services by Kimball International in 2001, 2000 and 1999 were
$200,000, $426,574 and $446,207. Amounts receivable from Kimball
International for these services were $39,000 at December 31, 2001, $124,500
at December 31, 2000 and $75,000 at December 31, 1999. Kimball International,
Inc. changed retirement plan trustees in April 2001. The Bank expects that
fees from Kimball will decrease to approximately $80,000 annually in 2002 and
thereafter.
In the ordinary course of business, the Bank makes loans to executive
officers, directors, principal shareholders, their related companies and
family members. These loans are made on substantially the same terms as those
with unrelated parties and do not involve unusual risks of collectability.
Total loans to executive officers, directors and principal shareholders for
2001 were as follows:
Balance, January 1, 2001 $ 5,143,854
New loans 819,650
Repayments (350,565)
Changes in persons included 0
Balance, December 31, 2001 $ 5,612,939
NOTE 14--LEASE COMMITMENTS
Minimum lease payments at December 31, 2001, under operating lease
commitments, total $-0-. Operating expenses include rental expense of $31,172
in 2001, $22,935 in 2000 and $21,260 in 1999.
SVB & T CORPORATION AND SUBSIDIARY
FRENCH LICK, INDIANA
Notes to Consolidated Financial Statements
NOTE 15--COMMITMENTS AND CONTINGENT LIABILITIES
The Bank is party to financial transactions involving off-balance-sheet risk
in the normal course of business. These financial transactions include
commitments to extend credit and standby letters of credit. These
transactions involve, to varying degrees, elements of credit risk in excess of
the amounts recognized in the statement of condition. The contract amounts of
these transactions reflect the extent of involvement the Corporation has in
the particular financial instruments.
The Bank's exposure to credit loss in the event of nonperformance by the other
party for commitments to extend credit and standby letters of credit is
represented by the contractual amount of those instruments. The Bank uses the
same credit policies when entering into these off-balance-sheet transactions
as it does for on-balance-sheet transactions.
Financial transactions with off-balance-sheet credit risk at December 31, 2001
and 2000 were as follows:
2001 2000
Commitments to extend credit $10,391,000 $12,960,000
Standby letters of credit $ 385,000 $ 360,355
Commitments to extend credit are agreements to lend to a customer as long as
there is no violation of conditions established in the contract. Commitments
generally have fixed expiration dates or other termination clauses. Since
many of the commitments are expected to expire without being drawn upon, the
total commitment amounts do not necessarily represent future cash
requirements. The Bank evaluates each customer's creditworthiness on a case-
by-case basis. The amount of collateral obtained, if deemed necessary by the
Bank upon extension of credit, is based on management's credit evaluation of
the counterparty. Collateral held varies but may include accounts receivable,
inventory, property and equipment, and income-producing commercial properties.
Standby letters of credit are conditional commitments issued by the Bank to
guarantee the performance of a customer to a third party. Letters of credit
are primarily issued to support private borrowing arrangements. The credit
risk involved in issuing letters of credit is essentially the same as that
involved in extending loans to customers.
The Bank is subject to claims and lawsuits which arise in the ordinary course
of business. Based on information presently available and advice received
from legal counsel representing the Bank in connection with such claims and
lawsuits, it is the opinion of management that the disposition or ultimate
determination of such claims and lawsuits will not have a material adverse
effect on the consolidated financial position of the Company.
SVB & T CORPORATION AND SUBSIDIARY
FRENCH LICK, INDIANA
Notes to Consolidated Financial Statements
NOTE 16--STOCK OPTION PLANS
SVB & T Corporation maintains two stock option plans for certain employees and
directors. 70,000 shares of stock were reserved for these plans and 45,993
remain available. Options are granted annually with an exercise price equal
to the fair market value on the date the options are granted. The options
vary in length from 5 to 10 years.
Options granted and exercised are as follows:
Number Average Exercise Price
Balance, January 1, 1999 7,192 $26.32
Granted 3,814 $38.00
Exercised (463) $29.90
Balance, December 31, 1999 10,543 $30.96
Granted 4,229 $38.00
Exercised (134) $38.00
Balance, December 31, 2000 14,638 $32.46
Granted 8,772 $30.00
Exercised 0 $ .00
Balance, December 31, 2001 23,410 $31.57
Pro forma information required of companies not adopting FASB No. 123 is as
follows:
2001 2000 1999
Pro forma net income $ 1,563,176 $ 2,024,214 $ 1,393,481
Pro forma basic earning per share $ 2.09 $ 2.72 $ 1.87
Pro forma diluted $ 2.09 $ 2.71 $ 1.86
NOTE 17--STOCKHOLDERS' EQUITY
The Company has committed to purchase 144,920 shares of its outstanding common
stock from a related party shareholder. The total purchase price will be
approximately $5,940,000. All regulatory agency approvals have been
received.
The purchase will take place in January 2002. Purchase of this stock will not
result in capital ratios which are less than well capitalized.
NOTE 18--RESTRICTIONS ON RETAINED EARNINGS
SVB & T Corporation's principal source of funds for dividends is Springs
Valley Bank & Trust Company, its wholly owned subsidiary. The amount of
dividends that the Bank may pay SVB & T Corporation without regulatory
approval is limited by state law to defined net income for 2001, 2000 and 1999
less any dividends paid in those years. In addition, Federal regulations
require the Bank to maintain certain capital levels based on risk-weighted
assets. At December 31, 2001, approximately $3,055,000 of the Bank's retained
earnings were available for dividend payments to the SVB & T Corporation.
SVB & T CORPORATION AND SUBSIDIARY
FRENCH LICK, INDIANA
Notes to Consolidated Financial Statements
NOTE 19--REGULATORY MATTERS
The Bank is subject to various regulatory capital requirements administered by
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
Bank's financial statements. Under capital adequacy guidelines and the
regulatory framework for prompt corrective action, the Bank must meet specific
capital guidelines that involve quantitative measures of the Bank's assets,
liabilities, and certain off-balance-sheet items as calculated under
regulatory accounting practices. The Bank's capital amounts and
classification are also subject to qualitative judgments by the regulators
about components, risk weightings, and other factors.
Quantitative measures established by regulation to ensure capital adequacy
require the Bank to maintain minimum amounts and ratios of Total Capital to
risk-weighted assets (minimum 8%), Tier 1 Capital to risk-weighted assets
(minimum 4%), and of Tier 1 Capital to average assets (minimum 4%).
Management believes, as of December 31, 2001, that the Bank meets all capital
adequacy requirements to which it is subject.
As of December 31, 2001, the Bank was categorized by the FDIC as well
capitalized under the regulatory framework for prompt corrective action. To
remain categorized as well capitalized the Bank must maintain minimum total
risk-based, Tier 1 risk-based, and Tier 1 leverage ratios as set forth in the
table below. There are no conditions or events since the notification that
management believes have changed the institution's category.
The Bank's consolidated actual capital amounts and ratios are presented in the
table below.
Consolidated Required for Required to be
Amounts and Regulatory Well
Ratio Purposes Capitalize
As of December 31, 2001:
Tier 1 Capital to Risk-
Weighted Assets $ 23,517,000 $21,867,000 $ 10,754,000
13.0% 12.2% 6.0%
Total Capital to Risk-
Weighted Assets $ 25,615,000 $23,964,000 $ 17,923,000
14.1% 13.4% 10.0%
Tier 1 Capital to Average
Assets $ 23,517,000 $21,867,000 $ 12,208,000
9.6% 9.0% 5.0%
As of December 31, 2000:
Tier 1 Capital to Risk-
Weighted Assets $ 22,469,344 $20,909,185 $ 10,917,213
12.4% 11.6% 6.0%
Total Capital to Risk-
Weighted Assets $ 24,140,256 $22,580,097 $ 18,195,355
13.3% 12.5% 10.0%
Tier 1 Capital to Average
Assets $ 22,469,344 $20,909,185 $ 11,564,382
9.7% 9.1% 5.0%
SVB & T CORPORATION AND SUBSIDIARY
FRENCH LICK, INDIANA
Notes to Consolidated Financial Statements
NOTE 20--CONCENTRATIONS OF CREDIT
At December 31, 2001, the total amount of due from banks included $1,788,177
with Bank One Kentucky, $136,274 with German American Bank and $270,439 with
Old National Bank, which is in excess of the Federal Deposit Insurance
Corporation's insured limit of $100,000 per institution.
The majority of investments in state and municipal securities involve
governmental entities in the State of Indiana.
Approximately 77% of the Bank's loans, commitments and letters of credit have
been granted to customers in the Bank's market area of Orange, Dubois and
surrounding counties in Southern Indiana. The remaining 23% of the Bank's
loans have been made to a diversified mix of customers in central Indiana, in
participation with financial institutions in that area. These loans account
for a majority of the Bank's commercial and commercial real estate lending
activities. The concentrations of credit by type of loan are set forth in
Note 5. Although the Bank has a diversified loan portfolio, a substantial
portion of its customers' ability to honor their loan contracts is dependent
on the strength of the manufacturing economic sector in the Southern Indiana
area.
NOTE 21--FAIR VALUES OF FINANCIAL INSTRUMENTS
Carrying amounts and estimated fair values of financial instruments at
December 31, 2001 and 2000 are as follows:
2001 2000
Carrying Estimated Carrying Estimated
Amount Fair Value Amount Fair Value
ASSETS
Cash and cash equivalents $ 4,851,656 $ 4,851,656 $ 5,873,422 $5,873,422
Investment securities 20,071,900 20,071,900 28,591,729 28,591,729
Loans and loans
held for sale (net) 206,066,242 207,384,390 203,001,303 204,816,648
FHLB and other stock 2,005,150 2,005,150 1,855,000 1,855,000
Interest receivable 1,509,538 1,509,538 1,886,009 1,886,009
LIABILITIES
Deposits $181,740,169 $184,138,600 $186,360,170$186,365,074
Short-term borrowings 4,100,000 4,100,000 5,265,000 5,265,000
Long-term borrowings 29,100,000 29,545,225 31,100,000 31,100,000
Interest payable 1,089,317 1,089,317 964,086 964,086
The following methods and assumptions were used to estimate the fair value of
each class of financial instruments.
Cash and Cash Equivalents - The carrying amounts reported in the consolidated
statements of financial condition for cash and federal funds sold is a
reasonable estimate of their fair value.
Investment Securities - Fair values for investment securities are based on
quoted market prices.
SVB & T CORPORATION AND SUBSIDIARY
FRENCH LICK, INDIANA
Notes to Consolidated Financial Statements
NOTE 21--FAIR VALUES OF FINANCIAL INSTRUMENTS (Continued)
Loans - For variable rate loans and short-term fixed rate loans that adjust
rates frequently, fair values are based on the carrying value of those loans.
For long-term fixed rate loans, the fair values are estimated by discounting
future cash flows using current interest rates at which similar loans would be
made to borrowers of similar credit quality. For other financial instruments
classified as loans (bankers acceptances, economic development revenue bonds,
and securities purchased under reverse repurchase agreements), fair values are
based on the carrying value of those instruments. Anticipated future loan
losses have been deducted.
Interest Receivable - The carrying amount of accrued interest receivable is a
reasonable estimate of its fair value.
Deposit Liabilities - The carrying value of demand deposit, NOW, savings and
money market savings accounts are equal to the amount payable on demand at the
reporting date and as such are the fair value. For variable rate time
deposits (IRA deposits) which reprice quarterly, fair values are based on the
carrying value of the accounts. The fair value of fixed rate certificates of
deposit is estimated by discounting the future cash flows using the current
rates offered for deposits of similar remaining maturities.
Short-term Borrowings - The carrying amounts short-term borrowings are
reasonable estimates of their fair values.
Interest Payable - The carrying amount of accrued interest payable is a
reasonable estimate of its fair value.
Long-term Borrowings - The fair value of fixed rate, long-term borrowings is
estimated by discounting the future cash flows using current rates for
borrowings of similar maturities.
SVB & T CORPORATION AND SUBSIDIARY
FRENCH LICK, INDIANA
Notes to Consolidated Financial Statements
NOTE 22--PARENT COMPANY ONLY FINANCIAL STATEMENTS
Presented below are the condensed, parent company only, financial statements
of SVB & T Corporation:
December 31,
Condensed Balance Sheet 2001 2000
ASSETS
Cash in bank with subsidiary $ 66,785 $ 176,277
Investment in subsidiary 22,003,080 20,908,553
Buildings and equipment 1,680,531 1,746,975
Other assets 498,455 199,100
Total assets $24,248,851 $23,030,905
LIABILITIES
Accrued expenses $ 106,957 $ 92,596
Dividends payable 133,888 134,105
Deferred income taxes 354,737 335,492
Total liabilities 595,582 562,193
SHAREHOLDERS' EQUITY
Common stock 200,000 200,000
Surplus 6,253,296 6,210,711
Retained earnings 18,107,429 17,047,543
Accumulated other comprehensive income 123,069 (14,832)
Treasury stock (1,030,525) (974,710)
Total shareholders' equity 23,653,269 22,468,712
Total liabilities and shareholders'
equity $24,248,851 $23,030,905
SVB & T CORPORATION AND SUBSIDIARY
FRENCH LICK, INDIANA
Notes to Consolidated Financial Statements
NOTE 22--PARENT COMPANY ONLY FINANCIAL STATEMENTS (Continued)
Years Ended December 31,
Condensed Statement of Income 2001 2000 1999
INCOME
Dividend income $ 20,750 $ 11,000 $ 0
Dividends from subsidiary 526,820 783,840 687,280
Rent from subsidiary 300,000 300,000 300,000
Total income 847,570 1,094,840 987,280
EXPENSE
Depreciation 66,444 66,103 64,335
Interest on long-term debt 0 9,618 26,120
Other expenses 68,544 120,958 79,885
Total expense 134,988 196,679 170,340
Income before income taxes and equity in
undistributed earnings of subsidiary 712,582 898,161 816,940
Income tax expense 72,000 61,200 51,400
Income before equity in undistributed
earnings of subsidiary 640,582 836,961 765,540
Equity in undistributed earnings of
subsidiary 956,627 1,202,071 639,017
Net income $ 1,597,209 $ 2,039,032 $ 1,404,557
SVB & T CORPORATION AND SUBSIDIARY
FRENCH LICK, INDIANA
Notes to Consolidated Financial Statements
NOTE 22--PARENT COMPANY ONLY FINANCIAL STATEMENTS
Years Ended December 31,
Condensed Statement of Cash Flows 2001 2000 1999
Operating Activities:
Net income $ 1,597,209 $ 2,039,032 $ 1,404,557
Adjustments to reconcile net
income to net cash provided
by operating activities:
Depreciation 66,444 66,103 64,335
Undistributed net income of
subsidiary (956,627) (1,202,071) (639,017)
Deferred income taxes 19,245 22,804 20,625
(Increase) decrease in other assets (299,355) (42,900) (14,200)
Increase (decrease) in accrued
expenses, dividends payable and
payable to subsidiary 14,145 6,738 33,020
Net cash provided by operating
activities 441,061 889,706 869,320
Investing Activities:
Additions to buildings and equipment 0 (42,801) (22,217)
Net cash used by investing activities 0 (42,801) (22,217)
Financing Activities:
Net treasury stock activity (13,230) 67,527 (119,873)
Dividends paid (537,323) (536,420) (514,667)
Principal payment on long-term debt 0 (216,471) (219,368)
Net cash used by financing activities (550,553) (685,364) (853,908)
Increase (decrease) in cash and cash
equivalents (109,492) 161,541 (6,805)
Cash and cash equivalents at beginning
of year 176,277 14,736 21,541
Cash and cash equivalents end of year$ 66,785 $ 176,277 $ 14,736
INDEPENDENT AUDITOR'S REPORT
To the Shareholders and Board of Directors
SVB & T Corporation and Subsidiary
French Lick, Indiana
We have audited the accompanying consolidated statements of financial
condition of SVB & T Corporation and Subsidiary as of December 31, 2001 and
2000, and the related consolidated statements of income, changes in
shareholders' equity and cash flows for each of the three years in the period
ended December 31, 2001. These financial statements are the responsibility of
the Corporation's management. Our responsibility is to express an opinion on
these financial statements based on our audits.
We conducted our audits in accordance with U.S. generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position
of SVB & T Corporation and Subsidiary at December 31, 2001 and 2000, and the
consolidated results of their operations and cash flows for each of the three
years in the period ended December 31, 2001, in conformity with U.S. generally
accepted accounting principles.
Nonte & Company LLC
Certified Public Accountants
Jasper, Indiana
January 28, 2002
Exhibit 11 - Statement Re: Computation of Per Share Earnings
Year Ended December 31,
2001 2000 1999
Primary
Weighted average shares
outstanding $ 746,372 $ 745,017 $ 745,994
Net Income 1,597,209 2,039,032 1,404,557
Net income per common share $ 2.14 $ 2.74 $ 1.88
SVB&T Corporation has no common stock equivalents
Exhibit 21 - Subsidiaries of the Registrant
State of
Subsidiary Incorporation
Springs Valley Bank & Trust Company Indiana
Exhibit 23 - Consent of Independent Auditors
We consent to the incorporation by reference in this Annual Report (Form 10-K)
of SVB&T Corporation of our report dated January 28, 2002, included in the
2000
Annual Report to Shareholders of SVB&T Corporation.
NONTE & COMPANY LLC
Certified Public Accountant
Jasper, Indiana
March 21, 2002