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, 2002
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, 2003 was approximately $15,398,800.
The number of shares outstanding of each of the registrant's classes of
common stock as of March 15, 2003 was 600,220.
Portions of the 2002 Annual Report to Shareholders for the year ended
December 31, 2002 are incorporated by reference into Part II.
SVB&T Corporation 2002 Annual Report on Form 10-K
Table of Contents
Part I
Item 1. Business 3
Item 2. Property 10
Item 3. Legal Proceedings 10
Item 4. Submission of Matters to a Vote of Security Holders 10
Part II
Item 5. Market for Registrant's Common Equity and Related Stockholder
Matters 10
Item 6. Selected Financial Data 11
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations 12
Item 8. Financial Statement and Supplementary Data 23
Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure 23
Part III
Item 10. Directors and Executive Officers of the Registrant 23
Item 11. Security Ownership of Certain Beneficial Owners and Management 28
Item 12. Executive Compensation 28
Item 14 Controls and Procedures 33
Part IV
Item 15. Exhibits, Financial Statement Schedules and Reports on
Form 8-K 33
Signatures 33
Index to Exhibits 36
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 an interest in a Reinsurance Company
For credit insurance products
(VII) acting as a broker for residential and commercial real estate.
(VII) 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
3% of the deposits of the bank. In addition, the Bank has loans outstanding
with individuals who are employees of Kimball representing in excess of 7% 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, 2002, the company had total assets of $242 million, total
deposits of $181 million, and total equity capital of $19 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 transactions 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, 2002, the company had total assets of $242 million, total
Deposits of $181 million, and total equity capital of $19 million.
The following are the Company's regulatory capital ratios as of December 31,
2002:
Tier 1 Capital: 10.40%
Total Capital: 11.60%
Leverage Ratio: 7.50%
The following are the Bank's regulatory capital ratios as of December 31,
2002:
Tier 1 Capital: 11.70%
Total Capital: 13.00%
Leverage Ratio: 8.40%
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, 2002, 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.
Sarbanes-Oxley Act of 2002
Sarbanes-Oxley Act of 2002. On July 30, 2002, President George W. Bush signed
into law the Sarbanes-Oxley Act of 2002 (the "Sarbanes-Oxley Act"). The
Sarbanes-Oxley Act implements a broad range of corporate governance and
accounting measures for public companies designed to promote honesty and
transparency in corporate America and better protect investors from the type
of corporate and accounting scandals that have occurred during the past year.
The Sarbanes-Oxley Act's principal legislation includes:
the creation of an independent accounting oversight board;
auditor independence provisions which restrict non-audit services
that accountants may provide to their audit clients;
additional corporate governance and responsibility measures,
including the requirement that the chief executive officer and chief
financial officer certify financial statements;
the forfeiture of bonuses or other incentive-based compensation and
profits from the sale of an issuer's securities by directors and
senior officers in the twelve month period following initial
publication of any financial statements that later require
restatement;
an increase the oversight of, and enhancement of certain
requirements relating to audit committees of public companies and
how they interact with the company's independent auditors;
requirement that audit committee members must be independent and are
absolutely barred from accepting consulting, advisory or other
compensatory fees from the issuer;
requirement that companies disclose whether at least one member of
the committee is a "financial expert" (as such term will be defined
by the Securities and Exchange Commission) and if not, why not;
expanded disclosure requirements for corporate insiders, including
accelerated reporting of stock transactions by insiders and a
prohibition on insider trading during pension blackout periods;
a prohibition on personal loans to directors and officers, except
certain loans made by insured financial institutions;
disclosure of a code of ethics and filing a Form 8-K for a change or
waiver of such code;
mandatory disclosure by analysts of potential conflicts of interest;
and
a range of enhanced penalties for fraud and other violations.
Although we anticipate that we will incur additional expense in complying
with the provisions of the Sarbanes-Oxley Act and the resulting regulations,
management does not expect that such compliance will have a material impact on
our results of operations or financial condition.
USA Patriot Act
USA Patriot Act. On October 26, 2001, President George W. Bush signed the
United and Strengthening America by Providing Appropriate Tools Required to
Intercept and Obstruct Terrorism Act of 2001 (the "USA Patriot Act"). The
USA Patriot Act is intended to strengthen the ability of U. S. Law Enforcement
to combat terrorism on a variety of fronts. The potential impact of the USA
Patriot Act on financial institutions is significant and wide-ranging. The
USA Patriot Act contains sweeping anti-money laundering and financial
transparency laws and requires financial institutions to implement additional
policies and procedures with respect to, or additional measures designed to
address, any or all of the following matters, among others: money laundering,
suspicious activities and currency transaction reporting; and currency crimes.
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 eleven automated teller
machines, six in Jasper, one in West Baden, one in French Lick, one in Borden,
one in Salem 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
2002 1 $40.00 $31.00
2 $38.50 $38.50
3 $38.50 $38.50
4 $38.50 $38.50
2001 1 $39.00 $39.00
2 N/A N/A
3 $30.00 $30.00
4 $30.00 $30.00
The company has 344 shareholders on record as of March 20, 2003.
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
2002 $.18 $.18 $.18 $.18
2001 $.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, 2002 approximately $770,000 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 2002 2001 2000 1999 1998
Interest and Fees on Loans $ 14,014 $ 17,176 $ 16,933 $ 13,341 $ 12,480
Interest on Investments 1,482 1,416 1,778 1,666 2,055
Total Interest Income 15,496 18,592 18,711 15,007 14,535
Interest on Deposits 5,742 8,056 8,135 6,781 7,161
Interest on Short-term
Borrowing 1 10 148 8 43
Interest on Long-term Debt 2,279 1,832 1,766 540 12
Total Interest Expense 8,022 9,899 10,049 7,329 7,216
Net Interest Income 7,474 8,694 8,662 7,678 7,319
Provision for Loan Losses 959 1,120 300 850 580
Net Interest Income after
Provision for Loan Loss 6,515 7,574 8,362 6,828 6,739
Service Charges on Deposit
Accounts 711 579 534 533 615
Other Income 1,494 1,209 1,209 1,172 1,260
Total Other Income 2,205 1,789 1,743 1,705 1,875
Salaries and Benefits 4,270 4,179 3,870 3,614 3,381
Other Expenses 3,056 2,979 3,108 2,811 2,361
Total Other Expenses 7,326 7,158 6,978 6,452 5,742
Income Before Income Tax 1,394 2,205 3,127 2,108 2,872
Income Tax Expense 275 608 1,088 703 1,043
Net Income 1,119 1,597 2,039 1,405 1,829
Year-end Balances
Total Assets 242,183 240,450 247,227 217,394 182,741
Total Loans, Net 183,361 203,707 203,001 173,492 142,563
Total Long-term Debt 40,042 29,100 31,100 9,100 1,000
Total Deposits 181,320 181,740 186,360 181,276 159,331
Total Shareholders' Equity 18,768 23,653 22,469 20,369 20,333
Per Share Data
Net Income 1.86 2.14 2.74 1.88 2.45
Cash Dividends .72 .72 .72 .69 .60
Shareholders' Equity,
End of Year 31.33 31.77 30.16 27.30 27.18
Other Data at Year-end
Number of Employees 113 113 111 106 104
Weighted Average Number
of Shares 601,179 746,372 745,017 745,994 745,806
Return on Assets .49% .65% .86% .70% .98%
Return on Shareholders' Equity 6.35% 7.11% 10.01% 6.90% 9.66%
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)
2002 2001 2000
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 2,381 23 0.97% 441 12 2.72% 69 3 4.35%
Federal funds sold 5,256 90 1.71% 2,623 91 3.47% 1,309 73 5.58%
Investment securities:
U.S. Treasury and
Gov't Agencies &
mortgage backed 8,896 393 4.42% 6,474 385 5.95% 14,828 927 6.25%
States and political
subdivisions 14,959 1,105 7.39% 14,557 1,094 7.52% 11,321 849 7.50%
Other securities 2,018 120 5.95% 2,577 188 7.30% 2,445 194 7.93%
TOTAL INVESTMENT
SECURITIES 25,873 1,618 6.25% 23,608 1,667 7.06% 28,594 1,970 6.89%
Loans: (1) (2)
Commercial 59,302 3,668 6.19% 63,043 4,989 7.91% 53,966 5,004 9.27%
Installment, net of
unearned income 44,868 3,710 8.27% 47,165 4,251 9.01% 48,437 4,612 9.52%
Real Estate 94,110 6,534 6.94% 97,658 7,831 8.02% 87,707 7,182 8.19%
Credit Card
and Other 733 10213.92% 811 10613.07% 1,059 135 12.75%
TOTAL LOANS 199,013 14,014 7.04%208,677 17,177 8.23%191,169 16,933 8.86%
TOTAL EARNING
ASSETS 232,523 15,745 6.77%235,349 18,947 8.05%221,141 18,979 8.58%
Less: Allowance
for Losses (2,138) (1,751) (1,671)
Non-Earning Assets:
Cash and due
from banks 4,648 4,807 4,806
Other Assets 12,970 7,426 7,470
TOTAL ASSETS 248,003 245,831 231,746
LIABILITIES & SHAREHOLDERS EQUITY
Interest-bearing liabilities
Savings and daily interest
checking 44,362 771 1.74% 39,123 888 2.27% 40,167 959 2.39%
Money market
accounts 34,591 520 1.50% 40,639 1,482 3.65% 37,194 2,078 5.59%
Certificates of
deposit $100,000
and over 24,779 1,091 4.40% 23,274 1,360 5.84% 31,498 1,859 5.90%
Other time deposits71,343 3,360 4.71% 74,327 4,326 5.82% 55,621 3,239 5.82%
TOTAL INTEREST-
BEARING DEPOSITS 175,075 5,742 3.28%177,363 8,056 4.54%164,480 8,135 4.95%
Borrowing 40,095 2,280 5.69% 29,818 1,842 6.18% 30,815 1,914 6.21%
TOTAL INTEREST-BEARING
LIABILITIES 215,170 8,022 3.73%207,181 9,898 4.78%195,29510,049 5.15%
Non-interest bearing
liabilities:
Demand deposits 11,748 13,262 13,362
Other liabilities 2,068 2,327 1,670
Shareholder's
equity 19,017 23,061 21,419
TOTAL LIABILITIES
AND SHAREHOLDERS
EQUITY 248,003 245,831 231,746
INTEREST MARGIN RECAP:
Interest income/
earning assets 15,745 6.77% 18,947 8.05% 18,979 8.58%
Interest expense/
earning assets 8,022 3.45% 9,898 4.21% 10,049 4.54%
New yield on interest
earning assets 7,723 3.32% 9,049 3.84% 8,930 4.04%
(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 Corporation's 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 2002 was $1,119,000.
The table below is a comparison of the net income for the years 2000 thru
2002. 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
2002 $1,119,000 $(478,000) (29.93%)
2001 1,597,000 (442,000) (21.68%)
2000 2,039,000 635,000 45.23%
SVB&T Corporation's net income has decreased during the last year. The main
contributing factors to this decrease is a decrease in interest and fee
income on loans.
Total net income before tax for 2002 decreased $811,000 which results in a
36.78% 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 2002, tax equivalent net interest income of $7,723,000 decreased by
$1,326,000, which resulted in a 14.65% decrease. The decrease in net interest
income is due to the decrease in loan volume and the large volume of
non-accrual loans. The net interest income from 2001 was $9,048,000 which was
an increase or $119,000 over the 2000 net interest income of 8,930,000.
CHANGES IN NET INTEREST INCOME (Table 1) (Tax equivalent basis, dollars in
thousands)
Change from Prior Year
2002 2001 2000 2002 2001
Interest income on:
Loans 14,014 17,177 16,933 -18.41% 1.44%
Investment securities 1,618 1,667 1,970 - 2.94% -15.38%
Federal funds sold 90 91 73 -1.10% 24.66%
Due from FHLB 23 12 3 91.67% 300.00%
Total interest income 15,745 18,947 18,979 -16.90% -0.17 %
Interest expense on:
Savings and daily
interest checking 771 888 959 -13.18% -7.40%
Money market deposits 520 1,482 2,078 -64.91% -28.68%
Certificates of
deposit of $100,000
& over 1,091 1,360 1,859 -19.78% -26.84%
Other time deposits 3,360 4,326 3,239 -22.33% 33.56%
All other borrowing 2,280 1,842 1,914 23.78% -3.76%
Total interest expense 8,022 9,898 10,049 -18.95% -1.50%
Net interest income 7,723 9,049 8,930 -14.65% 1.33%
Net interest margin 3.32% 3.84% 4.04%
RATE VOLUME ANALYSIS OF CHANGES IN NET INTEREST INCOME (Table 2) (Taxable
equivalent basis, dollars in thousands)
2002 vs 2001 2001 vs 2000
Dollar Attributed to Dollar Attributed to
Change Volume Rate Change Volume Rate
Interest income on:
Loans (3,163) (739) (2,424) 244 1,496 (1,252)
Investment securities (49) 151 (200) (303) (348) 45
Federal funds sold (1) 68 (69) 18 59 (41)
Due from FHLB 11 36 (25) 9 13 (4)
Total interest income (3,202) (484) (2,718) (32) 1,220 (1,252)
Interest expense on:
Savings and daily interest
checking (117) 105 (222) (71) (24) (47)
Money market deposits (962) (156) (806) (596) 159 (755)
Certificates of deposit of
$100,000 and over (269) 77 (346) (499) (483) (16)
Other time deposits (966) (157) (809) 1,087 1,089 (2)
All other borrowing 438 610 (172) (72) (62) (10)
Total interest expense (1,876) 479 (2,355) (151) 679 (830)
Net interest income (1,326) (963) (363) 119 541 (422)
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 $959,000 in 2002; $1,120,000 in 2001; and
$300,000 in 2000. As of December 31, 2002, the provision was 1.17% of loans
outstanding. Management's analysis is that the provision is adequate to fund
anticipated future losses. Management has taken a conservative approach to
future participation lending. Several participation loans have not performed
as expected. The level of the provision takes into account management's
analysis of the exposure in these loans.
Other Income
Total other income for 2002 was $2,205,000, which is a $416,000, 23.25%
increase over 2001's total other income of $1,789,000.
The two primary sources of other income were trust income and service charges
income. Trust income accounts for 22.36% of total other income, however, it
has decreased 9.21% from 2001. 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 33.68%, from 2001. This is due largely to a
A new overdraft protection program implemented.
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 and resulted in $310,000 income which is 14.06% 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 $628,000 of income for 2002.
Other Expenses
Total other expenses for 2002 were $7,326,000. This is a $168,000, 2.35%
increase over the 2001 total of $7,158,000.
Salaries and employee benefits are the two largest expense categories.
Salaries and employee benefits expense for 2002 were 4,270,000. This is an
increase of $91,000 over 2001, which results in an 2.18% increase. The bank
has a self-insured medical plan which covers an insurance override to protect
the bank against major increases and claims. The banks contribution's to the
plan increased by $135,000.
There was an increase in legal expenses and Other Real Estate expenses. The
Legal expenses increased due to an increase in loan collections. Other Real
Estate expense increased due to several properties being adjusted to FMV.
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 and state
income taxes. Note 12 in the consolidated financial statements contains
additional information about the corporation's income taxes.
Income tax expense for 2002 was $275,000 compared to $608,000 in 2001 and
$1,088,000 in 2000. The effective tax rate was 19.73% in 2002 compared to
27.57% in 2001 and 24.80% in 2000. The effective tax rate has decreased in
2002 and 2001 because tax-free income, while comparable in amount for these
two years, had a greater percentage effect because of lower taxable income
from other sources.
Financial Condition
As of December 31, 2002 total assets increased to $242,183,000 .72%
increase from December 31, 2001 total of $240,450,000.
Total deposits decreased to $181,320,000 at December 31, 2002 from
$181,740,000 at December 31, 2001 a decrease of $420,000 or .23%.
Net loans at year-end 2002 were $183,361,000 down $20,346 or 9.99% from
the 2001 year-end total of $203,707,000.
Total investment securities available for sale at year-end 2002 were
$27,912,000 and at year-end 2001 were $20,072,000. 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, 2002, money market investments were $4,607,000
and were zero on December 31, 2001.
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 2002, 2001 and 2000.
Investment Securities Available for Sale
(Dollars in thousands) December 31
Investment securities available for sale: 2002 2001 2000
U.S. Treasury 0 0 0
U.S. Government agencies and corp. 10,852 4,006 15,052
Mortgage-backed pass-through securities 58 66 73
Collateralized mortgage obligations:
Agency 0 0 0
Corporate 0 0 0
State and Political subdivisions 16,097 15,083 12,619
Other Securities 0 714 873
Net unrealized gain (loss) 905 204 (25)
Total Carrying Value 27,912 20,072 28,592
Maturities and Average Yields of Investment Securities
Available for Sale at December 31, 2002 and 2001
2002 2001
Estimated Estimated
Amortized Market Amortized Market
Cost Value Cost Value
Securities Available for Sale
Due in 1 yr or less 6,546 6,636 2,620 2,666
Due after 1 yr but with in 5 yrs 8,975 9,272 4,149 4,276
Due after 5 yrs but within 10 yrs 7,180 7,558 7,419 7,523
Due after 10 yrs 4,249 4,381 5,614 5,535
Total Securities 26,950 27,847 19,802 20,000
Mortgage backed securities 58 65 66 72
Total 27,008 27,912 19,868 20,072
Loans
Loans outstanding at December 31, 2002 were $185,662,000. This is a decrease
of $20,267,000 or 9.8% from December 31, 2001.
Real estate loans continue to be the largest component of the portfolio at
$94,595,000. This is a decrease of 9.8% from December 31, 2001.
Commercial and industrial loans were $49,977,000 at December 31, 2001. This is
a $3,874,000 increase from December 31, 2001. This growth continues to be in
the loan participations purchased category.
The bank continues to use loan participations purchased as a means of
providing loan balances when the bank's local markets do not provide
sufficient volume. On December 31, 2002, the bank had $44,627,000 outstanding
in participation loans purchased. This is a decrease of 8.2% from December 31,
2001. Management has elected to use conservative underwriting practices in
acquiring new participation loans. As current loans are paid down or off, the
bank expects these participation loan balances to continue to decline.
Individual loans for household and other personal purposes were $28,146,000 at
December 31, 2002. This is a decrease of $8,779,000 or 23.8% from December 31,
2001. A soft economy and extreme competitive pressures have contributed to
this decline. The bank continues to seek quality loans in this area.
Construction loans decreased $4,377,000 or 29.7% from December 31, 2001 with a
remaining outstanding balance of $10,350,000. This activity is primarily
related to participation loans. As mentioned previously, quality opportunities
have not been available.
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
2002 2001 2000 1999 1998
Percent Percent Percent Percent Percent
Amt of Total Amt of Total Amt of Total Amt of Total Amt of Total
Commercial,
financial &
agricultural 52,289 28.17 48,682 23.64 42,618 20.81 18,722 10.20 18,722 13.3
Real estate -
construction 10,350 5.57 14,727 7.15 17,174 8.39 1,687 3.70 1,687 1.20
Real estate -
mortgage 94,595 50.96 104,923 50.96 103,100 50.34 80,803 56.4 80,803 56.7
Consumer
installment 28,020 15.09 36,925 17.93 41,319 20.18 46,470 26.42 46,470 32.6
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 397 .21 631 .31 585 .21 363 .21 336 .24
TOTAL 185,651 100 205,888 100204,796 100143,873 100 143,873 100
Less:
Unearned income 114 85 124 204 204
Allowance for
loan losses 2,176 2,097 1,671 1,106 1,106
Total loans 183,361 203,706 203,001 142,536 142,536
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 27,524 18,466 5,044 51,034 24,155 26,879
Real Estate
Construction 4,917 2,191 233 7,341 4,405 2,936
TOTALS 32,441 20,657 5,277 58,375 28,560 29,815
Capital Resources
The corporation purchased in a negotiated transaction 144,920 shares (19.46%
of the total outstanding shares) of its common stock at $40 per share. This
purchase reduced total equity by over $5,800,000.
Source of Funds
Deposits
The main source of funding for earning assets are deposits. During 2002, the
average deposits of $186,823,000 funded 80% of the average earning assets.
Average total deposits for 2002 decreased by $3,800,000, or 1.99% as compared
to 2001 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
been conservative on deposit rate pricing. 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 5,838
Over three months through one year 4,019
Over one year through three years 8,059
Over three years 7,697
TOTAL 25,613
Risk Management
Lending and Loan Administration
Loan administration for the bank is the responsibility of the President and
designated 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 individual authority, a committee structure
is in place to allow the timely and prudent review of loan requests. Loans
above a predetermined level require the approval of two board members before
being approved and funded.
A presentation is made at each board meeting regarding the operation of the
loan department. Reports covering all phases of the loan operation are
prepared and distributed in advance to board members.
A loan review committee reviews activity on loans sampled by the loan review
officer, the calculation of the loan loss reserve provision, and the
resolution of all problem loans or loans that have the potential for being a
problem. With the pending retirement of the bank's loan review officer,
management expects to outsource at least a portion of the loan review
function.
The required loan loss reserve provision is calculated monthly. 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)
2002 2001 2000 1999 1998
Balance as of January 1 2,097 1,671 1,627 1,106 1,403
Provision for Loan Losses 959 1,120 300 850 580
Recoveries of Prior Loan Losses 97 100 321 114 182
Loan Losses charged to the Allowance (977) (794) (577) 443 1,059
Balance as of December 31 2,176 2,097 1,671 1,627 1,106
Loans are placed on non-accrual and interest received is posted on a cash
basis whenever a loan is ninety days delinquent or in management's judgment is
impaired to such an extent that repayment is not assured. Loans in non-accrual
status are evaluated individually and returned to accrual only when, in
management's judgment, the quality of the loan of the loan has improved
sufficiently to warrant such an action.
Non-performing loans were $5,482,000 on December 31, 2002. Of that total,
$4,329,000 was in the loan participation portfolio. A soft economy as well as
a variety of individual loan issues have caused this portfolio not to perform
up to original expectations. Management is confident that it has adequately
reserved for any losses that might occur in this portfolio. Management is
actively pursuing collection of these loans and expects that all remaining
principal balances will be collected.
Non-performing loans are loans on non-accrual and assets like other real
estate and repossessions held for sale. Following is a schedule of those loan
categories for the previous five years.
Non-performing Assets (dollars in thousands)
2002 2001 2000 1999 1998
Total Loans on non-accrual
(non-performing loans) 5,544 4,164 2.002 1,406 857
Other Real Estate 1,111 397 133 44 53
Total non-performing assets 6,655 4,561 2,135 1,450 910
Total non-performing loans as a
percentage of loans 3.54% 2.22% 1.04% .81% .60%
Total non-performing assets as
a percentage of loans and ORE 3.52% 2.22% 1.04% .81% .63%
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 4,607 0 0 0 0 4,607
Interest bearing deposits
in banks 1,615 0 0 0 0 1,615
Investment securities 301 0 1,038 7,400 19,173 27,912
Loans 53,804 16,360 34,309 60,965 22,687 188,125
Total Interest Earning
Assets 60,327 16,360 35,347 68,365 41,860 222,259
Interest Bearing Liabilities
Interest bearing NOW, savings,
and money market deposits 46,335 7,629 5,488 4,573 0 64,025
Time deposits under
$100,000 11,986 4,362 7,519 51,364 219 75,450
Time deposits over $100,000 5,839 1,951 2,067 15,756 0 25,613
Borrowed funds 0 0 0 18,100 18,000 36,100
Total Interest Bearing
Liabilities 64,160 13,942 15,074 89,793 18,219 201,188
Interest Sensitivity Gap
Current (3,833) 2,418 20,273 (21,428) 23,641
Interest Sensitivity Gap
Cumulative (3,833) (1,415) 18,858 (2,570) 21,071
Sensitivity Ratio
Cumulative 94% 98% 120% 98% 110%
Quarterly Results of Operations March 31 June 30 Sept 30 Dec 31
2002
Interest income 3,985 4,145 3,692 3,554
Interest expense 2,003 2,046 2,033 1,940
Net interest income 1,982 2,099 1,659 1,765
Provision for loan losses 70 105 105 679
Net securities gains 0 0 0 0
Non-interest income 414 331 690 871
Non-interest expense 1,714 1,793 1,827 1,973
Income before income taxes 585 532 417 (140)
Income taxes 198 161 99 (183)
Net income 387 371 318 43
Net income per share:
Primary net income per share .64 .62 .53 .22
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
Item 8. Financial Statements and Supplementary Data
The Registrant's Annual Report to Shareholders for the year ended December 31,
2002 are incorporated herein by reference.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
Not Applicable.
PART III
Item 10. Directors and Executive Officers of the Registrant
ELECTION OF DIRECTORS
The nominees for election shall be the nine persons listed below. Each
nominee has been nominated by the Board of Directors to hold office for a term
of one year ending in 2004 and until his respective successor is elected and
qualified. Each of the nominees has indicated that he will accept nomination
and election as a director. If any nominee listed in the table below should
become unavailable for any reason, which the Board of Directors does not
anticipate, the proxy will be voted for a substitute nominee or nominees, if
any, who may be selected by the Board of Directors prior to or at the meeting.
The following table shows the earlier of the year the named individual became
a Director of the Corporation or the Bank.
NOMINEES FOR ELECTION AS A DIRECTOR ON MAY 20, 2003
Name, Shares beneficially Owned Foot
Present Principal Year (Percentage of Outstanding Note
Occupation Elected Common Shares)
Gary P. Critser 1999 2,360 1
Retired .39%
Kimball International, Inc.
66
Brian K. Habig 1987 11,134 2
Self Employed 1.86%
46
Douglas A. Habig 1973 100,257 3
Chairman of the Board & CEO 16.71%
Kimball International, Inc.
56
John B. Habig 1959 90,779 4
Chairman of the Board 15.13%
Springs Valley Bank & Trust Company
70
Hilbert Lindsey 1988 4,982
Vice President .83%
Lindsey Lumber & Builders Supply, Inc.
68
Ronald G. Seals 1989 1,176 5
President & CEO .19%
Springs Valley Bank & Trust Company
64
Ronald J. Sermersheim 1976 23,699 6
Vice President, Environment, 3.95%
Health & Safety
Kimball International, Inc.
63
Ronald J. Thyen 1999 11,929 7
Senior Executive Vice President 1.98%
Operations Officer, Furniture & Cabinets
Kimball International, Inc.
66
James C. Tucker 1989 16,214 8
Attorney-at-Law 2.70%
Tucker & Tucker, P.C.
56
1 The above amount includes 1,953 shares held in the Gary P. Critser Trust
and 152 shares held in the Phyllis J. Critser Trust. Phyllis J. Critser is
the wife of Gary P. Critser.
2 The above amount includes 1,311 shares held by Kimberly A. Habig, the
wife of Mr. Brian K. Habig and 3,358 shares held in the Kyle Thomas Habig
Trust of which Mr. Brian K. Habig is trustee.
3 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. Also includes 14,056 shares held by the
Kimball International 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,
4 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. The above amount includes 3,124 shares
held in the Carma Jane Habig Revocable Trust, Carma Jane Habig is the wife of
Mr. John B. Habig. Also included are 19,178 shares held in the John B. Habig
Revocable Trust, 1,080 shares held in the Hannah R. Zunk Irrevocable Trust,
and 888 shares held in the Andrew H. Zunk Irrevocable Trust of which Mr. John
B. Habig is trustee.
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
The above amount includes 2,000 shares held in the A.C. Sermersheim Trust in
which Mr. Ronald J. Sermersheim is trustee.
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 amount includes 14,176 shares held jointly with Sharon R.
Tucker, the wife of James C. Tucker.
Family Relationships of Directors
Messrs. Douglas A. Habig and John B. Habig are brothers.
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 two special meetings during 2002. 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, Nominating Committee, Executive Loan Committee and the
Retirement Profit Sharing Trust Advisory Committee. In 2002, 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 committee
has met with the independent auditors and has determined that the audit
process is sound. The members of the Audit Committee are Messrs. Ronald J.
Sermersheim (Chairman), Brian K. Habig and Gary P. Critser. The Audit
Committee met six (6) times in 2002.
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. Sermersheim and Gary P. Critser. The
Executive Compensation Committee met one (1) time in 2002.
The Nominating Committee reviews, appoints and recommends to the Board the
nomination of Board Members for the Corporation for the ensuing year. The
members of the Nominating Committee include Messrs. Ronald J. Thyen
(Chairman), John B. Habig and Hilbert Lindsey. The Nominating Committee met
one (1) time in 2002.
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. One
thousand five hundred thirteen (1,513) shares were issued for year 2002 in the
amounts set forth in the following table for fees that 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 seven hundred fifty five (755) shares for 2002 in the
following amounts to the following Directors:
DIRECTOR 2002 DEFERRED FEES 2002 OPTIONS
SHARES ISSUED GRANTED
Gary P. Critser 255 127
Brian K. Habig 238 119
Douglas A. Habig 0 0
John B. Habig 0 0
Thomas L. Habig 34 17
Hilbert Lindsey 238 119
Ronald G. Seals 0 0
Ronald J. Sermersheim 238 119
Ronald J. Thyen 255 127
James C. Tucker 255 127
TOTALS 1,513 755
Certain Transactions
During 2002, 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 director of the Company and the
bank, is the Chairman 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.
Item 11 Security Ownership of certain Beneficial Owners and Management
PRINCIPAL SHAREHOLDERS
The following information is given as of April 11, 2003, 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
Name and Address of Beneficial Ownership Percent of Class
Douglas A. Habig 100,257 16.71%*
Jasper, IN
John B. Habig 90,779 15.13%**
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. Also includes 14,056 shares held by the
Kimball International 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. The above amount includes 3,124 shares
held in the Carma Jane Habig Revocable Trust, Carma Jane Habig is the wife of
Mr. John B. Habig. Also included are 19,178 shares held in the John B. Habig
Revocable Trust, 1,080 shares held in the Hannah R. Zunk Irrevocable Trust,
and 888 shares held in the Andrew H. Zunk Irrevocable Trust of which Mr. John
B. Habig is trustee.
Item 12. Executive Compensation
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 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's compensation
policies for 2002 as they affected all executive officers of the Bank and Mr.
Ronald G. Seals who, for 2002, was the Bank s most highly paid executive whose
total annual salary and bonus exceeded $100,000.
Compensation Policies Toward Executive Officers
The Committee 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
The Committee reviews each executive officer individually. The Committee also
reviews a bank salary survey prepared by Crowe Chizek and Company LLP that
contains benchmark salary information. The background data for this
information is typically generated from over 80 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 to banks of similar size.
Annual Bonus Amounts
The Bank's Incentive Bonus Plan ("Bonus Plan") for 2002 was based upon the
bank's Return on Assets (ROA) and the officer's base salary.
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 2002.
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 2002 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 satisfactorily.
Compensation Committee Insider Participation
During the past fiscal year, Mr. Ronald G. Seals, the Bank'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, 2002,
2001, and 2000 the cash compensation paid by the Bank, as well as certain
other compensation paid or awarded during those years, to the Chief Executive
Officer. No other executive officer's annual salary and bonus exceeded
$100,000 during the fiscal year ended December 31, 2002.
Name and Principal Position Year Annual Compensation
Salary (1) Bonus(2)
Ronald G. Seals
President, CEO
and Director 2002 $144,000 $0
2001 $144,000 $7,200
2000 $132,000 $33,300
1 While officers enjoy certain perquisites, such perquisites do not exceed
the lesser of $50,000 or 10% of such officers 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 share. 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 2002. 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 1,500 20% $38.50 $38.50
Potential Realizable
Value at Assumed Annual
Rates of Stack Appreciation
For Option Term
Name Expiration 5% 10%
Date (%) (%)
Ronald G. Seals 1-15-07 $15,955 $35,257
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, 2002.
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, 2002. For purposes
of the following table, the year-end price of the stock is $40.50.
Name Number of Shares Value of Unexercised
Underlying Unexercised In-the-Money Options
Options at Fiscal Year End At Fiscal Year End
(#) ($)
Exercisable Unexercisable Exercisable Unexercisable
Ronald G. Seals 5,037 2,965 $35,476 $14,310
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 70% 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. The Bank, as Trustee, invests all amounts contributed to the Profit
Sharing Plan 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 account in a
single lump sum. 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.
Item 13. Controls and Procedures
Within 90 days of the filing of this report, the Company conducted a review
and evaluation of its disclosure controls and procedures, under the
supervision and with the participation of the Company's Chief Executive
Officer and Chief Financial Officer. Based upon this review, the Chief
Executive Officer and Chief Financial Officer concluded that the Company's
disclosure controls and procedures were adequate and effective to ensure that
information required to be disclosed is recorded, processed, summarized, and
reported in a timely manner.
There were no significant changes in the Company's internal controls or in
other factors that could significantly affect these controls subsequent to the
date of the evaluation described above, nor were there any significant
deficiencies or material weaknesses in the controls which required corrective
action.
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, 2002 (incorporated in part into this form 10-K by
reference)
Exhibit 21 - Subsidiaries of the Registrant
Exhibit 23 - Consent of Independent Public Auditors
Exhibit 99.1 - CEO Certification
Exhibit 99.2 - CFO Certification
(d) Financial Statement Schedules - This information is omitted since the
required information is not applicable to the Registrant.
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. 3/22/03
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 3/22/03 Principal Financial and Accounting 3/22/03
Officer
By: By:
Douglas A. Habig, Director 3/22/03 Ronald G. Seals,
Principal Executive Officer and 3/22/03
Director
By: By:
Gary P. Critser, Director 3/22/03 Brian K. Habig, Director 3/22/03
By:
James C. Tucker, Director 3/22/03
By: By:
Ronald J. Sermersheim, Director Hilbert Lindsey, Director 3/22/03
3/22/03
By:
Ronald J. Thyen, Director 3/22/03
CERTIFICATIONS
I, David Rees, certify that:
1. I have reviewed this annual report on Form 10-K of SVB&T Corporation;
2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities,
particularly during the period in which this quarterly report is being
prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
c) presented in this anual report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal controls;
and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including any
corrective actions with regard to significant deficiencies and material
weaknesses.
Date: November 15, 2002
David Rees, Principal Financial Officer
I, Ronald G. Seals, certify that:
1. I have reviewed this annual report on Form 10-K of SVB&T Corporation;
2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities,
particularly during the period in which this quarterly report is being
prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
c) presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal controls;
and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including any
corrective actions with regard to significant deficiencies and material
weaknesses.
Date: November 15, 2002
Ronald G. Seals, President and Chief Executive Officer
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, 2002
54 21 Subsidiaries of the Registrant
54 23 Consent of Independent Auditors
27 Financial Data Schedule
Exhibit 13
Message to Our Shareholders
Given the current economic environment, achieving corporate profitability has
become very challenging over the past few years. However, we at Springs
Valley Bank & Trust Company (SVB&T) remain dedicated in our efforts to meet
the needs of our customers. Employees are driven to provide for customer
financial needs, enhancing their ability to manage financial affairs. We
continue to invest in ever-more sophisticated technology in an effort to
enhance customer convenience and banking efficiency.
While striving to help our customers achieve success we are not losing sight
of our required efforts to provide superior returns to our shareholders.
Increasing equity ownership and paying adequate dividends will provide a
proper balance between growth and income. It is a continuing challenge to
properly invest in enterprises that generate shareholder returns and improve
customer convenience.
The goals of satisfying customers and providing for shareholders is a true
balancing act. We at SVB&T think that these are complementary goals.
Management believes that successful customer and shareholder strategies go
hand-in-hand. We believe that endeavors that bring us closer to our customers
and make us partners in helping to plan their financial successes are the
efforts that create value for our shareholders. Becoming more involved with
our customers provides increased retention of those customers. In turn, other
banking requirements of our customers evolve into additional business. The
main point is that quality, caring, and reliable service lead to customer
acquisition and retention. As we increase our customer base we will increase
the value of our shareholder's investment.
At the close of 2002 Springs Valley Bank &Trust Company completed 100 years of
financial service to our communities and customers. Several exciting
activities were enjoyed throughout the year to commemorate our Century of
Service. We thank those customers and shareholders who helped us achieve this
milestone.
Financial highlights for the year 2002:
Net Income $1,119,000, down 30%
Income per share $1.86, down from $2.14
Book value per share $31.33, down from $31.69
Total assets $242,000,000, up .7%
Deposits $181,000,000, no change
Details are contained in the following reports.
Bank earnings were negatively impacted by eleven cuts in interest rates during
the past year. Prime rate, the best interest rate charged by large banks,
decreased from 9.5% to 4.25%. The large and rapid decrease in interest rates
created a narrowing of interest spread in all banks. Interest spread is the
difference between yield on earning assets and the cost of interest bearing
funds.
As did many financial institutions, we experienced some collection problems in
our loan portfolio. Some losses were taken in our commercial loans. We added
$959,000 to our loan reserve account. This addition covered all losses and
also increased our reserve account for any possible future losses.
The Sarbanes-Oxley Act of 2002 was also a negative impact on bank earnings.
Enacted in July 2002, it regulates accounting and corporate governance of
public companies accounting practices. It directly impacts public companies
that report to the Securities and Exchange Commission (SEC). This Act is
proving burdensome and costly for most financial institutions because of the
additional regulations that must be met.
Although 2002 was not one of our best earnings years, we did achieve success
in our technology areas. We were able to activate our on-line banking this
year and are currently serving 1,412 customers with this service. Phone
banking is also new this year. There are 1,651 customers using this service.
To accommodate our customers and grow profitably we will continue to improve
technology in all areas of the bank.
Our entire community was saddened by the loss of our long time Director, Mr.
Thomas Habig. Tom was involved with the purchase of our bank when his father,
Arnold F. Habig, acquired the bank in 1958. Everyone who knew him will miss
Tom. He was a caring and gracious person.
The Directors, Officers, and Staff of SVB&T appreciate your support. We
remain dedicated in our efforts to satisfy our customers and you, our
shareholders.
Cordially,
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,
2002 2001
ASSETS (Dollars in thousands)
Cash and cash equivalents
Cash and due from banks $6,728 $4,812
Interest-bearing deposits with banks 1,615 40
Federal funds sold 4,607 0
Total cash and cash equivalents 12,950 4,852
Investment securities, available for sale
at market value 27,912 20,072
Loans held for sale 2,588 2,359
Loans
Loans, net of unearned interest 185,537 205,804
Allowance for loan losses (2,176) (2,097)
Net loans 183,361 203,707
Federal Home Loan Bank stock and other
stock, at cost 2,055 2,005
Buildings and equipment 4,196 4,281
Accrued interest receivable 1,383 1,510
Cash value of life insurance 5,148 0
Foreclosed real estate 1,111 397
Other assets 1,479 1,267
Total assets $242,183 $240,450
LIABILITIES
Deposits
Non-interest bearing $12,371 $12,139
Interest bearing 168,949 169,601
Total deposits 181,320 181,740
Federal funds purchased 0 4,100
Accrued interest payable 1,189 1,089
Deferred income taxes 345 75
Other liabilities 519 693
Long-term borrowings 40,042 29,100
Total liabilities 223,415 216,797
COMMITMENTS AND CONTINGENT LIABILITIES (Note 15)
SHAREHOLDERS' EQUITY
Common stock (No par value: 800,000 shares
authorized and issued) 200 200
Capital surplus 6,308 6,254
Retained earnings 18,793 18,107
Accumulated other comprehensive income 546 123
Treasury stock at cost (201,005 shares
2002, 55,413 shares 2001) (7,079) (1,031)
Total shareholders' equity 18,768 23,653
Total liabilities and shareholders'
Equity $242,183 $240,450
See Notes to Consolidated Financial Statements
SVB & T CORPORATION AND SUBSIDIARY
FRENCH LICK, INDIANA
Consolidated Statements of Income
Year Ended December 31,
2002 2001 2000
(Dollars in thousands, except per share data)
INTEREST AND DIVIDEND INCOME
Loans and fees on loans $14,014 $17,177 $16,933
Investment securities
Taxable 491 416 974
Tax exempt 759 739 581
Dividends 120 157 146
Federal funds
and other 112 103 77
Total interest and dividend income 15,496 18,592 18,711
INTEREST EXPENSE
Deposits 5,742 8,056 8,135
Short-term borrowings 1 10 148
Long-term borrowings 2,279 1,832 1,766
Total interest expense 8,022 9,898 10,049
NET INTEREST INCOME 7,474 8,694 8,662
Provision for loan losses 959 1,120 300
NET INTEREST INCOME AFTER PROVISION FOR
LOAN LOSSES 6,515 7,574 8,362
NON-INTEREST INCOME
Trust Department income 493 543 760
Service charges on deposit accounts 774 579 534
Net gain on sales of loans 310 182 0
Insurance income 167 171 161
Other operating income 452 303 298
Net security gains (losses) 9 11 (10)
Total non-interest income 2,205 1,789 1,743
NON-INTEREST EXPENSE
Salaries and employee benefits 4,270 4,179 3,870
Premises and equipment expense 1,413 1,281 1,392
Deposit insurance expense 32 36 36
Other operating expenses 1,611 1,662 1,680
Total non-interest expense 7,326 7,158 6,978
INCOME BEFORE INCOME TAXES 1,394 2,205 3,127
Income taxes 275 608 1,088
NET INCOME $1,119 $1,597 $2,039
EARNINGS PER SHARE
Basic $1.86 $2.14 $2.74
Diluted $1.85 $2.13 $2.73
AVERAGE SHARES OUTSTANDING
Basic 601,179 746,372 745,017
Diluted 604,624 748,201 746,429
See Notes to Consolidated Financial Statement
SVB & T CORPORATION AND SUBSIDIARY
FRENCH LICK, INDIANA
Consolidated Statements of Cash Flows
Year Ended December 31,
2002 2001 2000
OPERATING ACTIVITIES: (Dollars in thousands)
Net income $1,119 $1,597 $2,039
Adjustments to reconcile net
income to net cash
provided by operating activities:
Provision for loan losses 959 1,120 300
Depreciation 507 520 512
Investment securities amortization 103 11 24
Investment securities (gains) losses (8) (10) 24
Proceeds from sales of residential
mortgage loans held for sale 16,813 10,129 0
Net gains on sale of loans (310) (182) 0
Increase in residential mortgage
loans held for sale (18,644) (12,307) 0
Loss on sale of equipment 3 0 15
Increase in cash value of life insurance (148) 0 0
(Gain) loss on sale of other real estate 75 (10) (43)
Deferred income taxes (48) (148) (41)
(Increase) decrease in interest
receivable and other assets (78) 389 (863)
Increase (decrease) in interest payable
and other liabilities (40) (119) 242
NET CASH PROVIDED BY OPERATING
ACTIVITIES 303 990 2,209
INVESTING ACTIVITIES;
Proceeds from sales and maturities
of investment securities available
for sale 6,524 12,355 2,386
Purchases of investment available
for sale (13,759) (3,608) (5,251)
Purchases of FHLB stock and other
Stock (50) (150) (650)
Purchases of Bank owned life insurance (5,000) 0 0
Proceeds from the sale of equipment 27 0 33
Proceeds - sale of loan participations 0 450 0
Proceeds - sale of other real estate 432 148 127
Net (increase) decrease in loans 20,078 (2,678)(29,982)
Additions to buildings and equipment (452) (193) (644)
NET CASH PROVIDED (USED) BY INVESTING
ACTIVITIES 7,800 6,324 (33,981)
SVB & T CORPORATION AND SUBSIDIARY
FRENCH LICK, INDIANA
Consolidated Statements of Cash Flows
Year Ended December 31,
2002 2001 2000
(Dollars in thousands)
FINANCING ACTIVITIES;
Net increase (decrease) in deposits (420) (4,620) 5,084
Net increase (decrease) in federal
funds purchased (4,100) 1,335 2,765
Net increase (decrease) in short-term
Borrowings 0 (2,500) (5,000)
Proceeds from long-term borrowings 11,300 0 24,500
Repayment of long-term debt (358) (2,000) 0
Sale of treasury stock 106 85 67
Purchase of treasury stock (6,100) (98) 0
Cash dividends (433) (537) (536)
NET CASH PROVIDED (USED) BY FINANCING
ACTIVITIES (5) (8,335) 26,880
INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS 8,098 (1,021) (4,892)
Cash and cash equivalents beginning
of year 4,852 5,873 10,765
CASH AND CASH EQUIVALENTS AT END
OF YEAR $12,950 $4,852 $5,873
SUPPLEMENTAL DISCLOSURES:
Cash paid during the year for:
Income taxes $539 $936 $1,173
Interest $7,922 $9,773 $9,869
See Notes to Consolidated Financial Statement
SVB & T CORPORATION AND SUBSIDIARY
FRENCH LICK, INDIANA
Consolidated Statements of Changes in Shareholders' Equity
Accumulated Common Stk
Other Surplus
Retained Comprehensive Treasury Total
Earnings Income Stock Equity
(Dollars in thousands)
JANUARY 1, 2000 $15,544 $(544) $5,368 $20,368
COMPREHENSIVE INCOME 2000
Net income 2,039 2,039
Change in unrealized gain
(loss) on securities available
for sale, net of deferred
income tax of $347 505 505
Plus reclassifications for
losses included in net income 24 24
TOTAL COMPREHENSIVE INCOME 2,568
Cash dividends (536) (536)
Sold 1,795 shares treas Stk 68 68
DECEMBER 31, 2000 17,047 (15) 5,436 22,468
COMPREHENSIVE INCOME 2001
Net income 1,597 1,597
Change in unrealized gain
(loss) on securities available
for sale, net of deferred
income tax of $90 149 149
Less reclassifications for
gains included in net income (11) (11)
TOTAL COMPREHENSIVE INCOME 1,735
Cash dividends (537) (537)
Sold 2,839 shs treas stk 85 85
Purch 3,280 shs treas stk (98) (98)
DECEMBER 31, 2001 18,107 123 5,423 23,653
COMPREHENSIVE INCOME 2002
Net income 1,119 1,119
Change in unrealized gain
(loss) on securities available
for sale, net of deferred
income tax of $277 431 431
Plus reclassifications for
gains included in net income (8) (8)
TOTAL COMPREHENSIVE INCOME 1,542
Cash dividends (433) (433)
Sold 2,197 shs treas stk 85 85
Purch 149,030 shs treas stk (6,100) (6,100)
Issued 1,241 shs of treasury
stock under stock
option plans 21 21
DECEMBER 31, 2002 $18,793 $546 $(571) $18,768
See Notes to Consolidated Financial Statements
SVB & T CORPORATION AND SUBSIDIARY
FRENCH LICK, INDIANA
Notes to Consolidated Financial Statements
(Dollars in thousands, except per share data)
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-bearing
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, 2002 and 2001, 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 in other
comprehensive income. Accreted discounts and amortized premiums are included
SVB & T CORPORATION AND SUBSIDIARY
FRENCH LICK, INDIANA
Notes to Consolidated Financial Statements
(Dollars in thousands, except per share data)
in earnings over the life of the security. Gains or losses on dispositions
are computed using the specific identification method.
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.
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.
FHLB Stock and Other Stock
The Bank owns stock in the Federal Home Loan Bank of Indianapolis and other
restricted stock. This stock is carried at cost.
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
SVB & T CORPORATION AND SUBSIDIARY
FRENCH LICK, INDIANA
Notes to Consolidated Financial Statements
(Dollars in thousands, except per share data)
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.
Foreclosed Real Estate
Real estate acquired in foreclosures is held for sale and is initially
recorded 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. Subsequent to
foreclosure, valuations are periodically performed by management and assets
are carried at the lower of the carrying amount or fair value. Any future
revenue, expenses or carrying amount write downs associated with the real
estate is recognized in current operating results.
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. Fair value is
determined using prices for similar assets with similar characteristics.
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.
SVB & T CORPORATION AND SUBSIDIARY
FRENCH LICK, INDIANA
Notes to Consolidated Financial Statements
(Dollars in thousands, except per share data)
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.
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:
2002 2001 2000
BASIC EARNINGS PER SHARE
Net Income $ 1,119 $1,597 $2,039
Average Shares outstanding 601 746 745
Basic earnings per share 1.86 2.14 2.74
DILUTED EARNINGS PER SHARE:
Net Income 1,119 1,597 2,039
Average shares outstanding 601 746 745
Stock options, net 4 2 1
Diluted average shares outstanding 605 748 746
Diluted earnings per share $ 1.85 $ 2.13 $ 2.73
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 2002
presentation. These reclassifications had no effect on net income.
SVB & T CORPORATION AND SUBSIDIARY
FRENCH LICK, INDIANA
Notes to Consolidated Financial Statements
(Dollars in thousands, except per share data)
NOTE 2-EFFECT OF CHANGES IN ACCOUNTING PRINCIPLES
Effective January 1, 2003, the Company will adopt SOP 01-6 Accounting by
Certain Entities that Lend or Finance the Activities of Others. 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 $582 at December 31,
2002 and $715 at December 31, 2001.
NOTE 4-INVESTMENT SECURITIES
The amortized costs and fair value of investment securities at December 31,
2002 and 2001 were as follows:
December 31, 2002
Unrealized Unrealized
Amortized Holding Holding
Securities Available for Sale Cost Gains Losses Fair Value
U.S. Government corporations and
Agencies $ 10,852 $ 178 $ 1 $ 11,029
States and political subdivisions 15,385 692 35 16,042
Mortgage-backed securities 58 7 0 65
Other securities 713 63 0 776
Total $ 27,008 $ 940 $ 36 $ 27,912
December 31, 2001
Unrealized Unrealized
Amortized Holding Holding
Securities Available for Sale Cost Gains Losses Fair Value
U.S. Government corporations and
Agencies $ 4,006 $ 83 $ 0 $ 4,089
States and political subdivisions 15,082 254 175 15,161
Mortgage-backed securities 66 6 0 72
Other securities 714 36 0 750
Total $ 19,868 $ 379 $ 175 $ 20,072
The amortized cost and fair value of securities available for sale at December
31, 2002 and 2001, 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.
SVB & T CORPORATION AND SUBSIDIARY
FRENCH LICK, INDIANA
Notes to Consolidated Financial Statements
(Dollars in thousands, except per share data)
2002 2001
Amortized Amortized
Cost Fair Value Cost Fair Value
Securities Available for Sale
Due in one year or less $ 6,546 $ 6,636 $ 2,620 $ 2,666
Due after one year but within
five years 8,975 9,272 4,149 4,276
Due after five years but within
ten years 7,180 7,558 7,419 7,523
Due after ten years 4,249 4,381 5,614 5,535
26,950 27,847 19,802 20,000
Mortgage backed securities 58 65 66 72
Total $ 27,008 $27,912 $ 19,868 $ 20,072
Securities available for sale with amortized cost of $10,852 at December 31,
2002 and $4,006 at December 31, 2001 were pledged as collateral on debt of the
Bank.
NOTE 4-INVESTMENT SECURITIES (Continued)
Proceeds from sales of securities available for sale during 2002, 2001 and
2000 were $495, $2,877 and $1,154. In 2002, gains of $9 and losses of $-0-
were realized. In 2001, gains of $11 and losses of $-0- were realized. In
2000, gains of $-0- and losses of $10 were realized.
NOTE 5-LOANS
Loans at December 31, 2002 and 2001 are comprised of the following:
2002 2001
Commercial and industrial loans $ 49,977 $ 46,103
Real estate loans (including $3,181
and $3,339 secured by farm land) 94,595 104,923
Construction loans 10,350 14,727
Agricultural production financing and
other loans to farmers 2,186 2,580
Individuals' loans for household and
other personal expenditures 28,146 36,925
Lease financing 397 631
185,651 205,889
Less: Unearned income on loans 114 85
Total loans 185,537 $ 205,804
SVB & T CORPORATION AND SUBSIDIARY
FRENCH LICK, INDIANA
Notes to Consolidated Financial Statements
(Dollars in thousands, except per share data)
Information concerning impaired loans at December 31, 2002, 2001 and 2000 is
as follows:
2002 2001 2000
Impaired loans with a related
allowance for loss $ 2,597 $ 588 $ 1,099
Impaired loans without a related
allowance for loss 6,238 4,154 982
Total impaired loans 8,835 4,742 2,081
Average balance of impaired loans 9,239 4,851 2,259
Allocated allowance for loan losses
on impaired losses 450 270 525
Cash receipts applied to principal 929 164 323
Cash receipts applied as interest income 400 317 204
Total cash received $ 1,329 $ 481 $ 527
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, 2002, 2001 and 2000 are as follows:
2002 2001 2000
Loans pledged as collateral $ 71,750 $ 82,458 $ 78,129
Loans serviced for others are not included in the consolidated statements of
financial condition. The unpaid principal balances of mortgage loans serviced
for others were $26,681 and $13,147 at December 31, 2002 and 2001.
The balance of servicing rights included in other assets at December 31, 2002
and 2001 was $227 and $104. Carrying values approximate the fair values of
the assets.
The following summarizes the activity in mortgage servicing rights:
2002 2001 2000
Mortgage services rights capitalized $ 126 $ 105 $ 0
Mortgage services rights amortized 4 1 0
Valuation allowance 0 0 0
SVB & T CORPORATION AND SUBSIDIARY
FRENCH LICK, INDIANA
Notes to Consolidated Financial Statements
(Dollars in thousands, except per share data)
NOTE 6-ALLOWANCE FOR LOAN LOSSES
The changes in the allowance for loan losses for the year 2002, 2001 and 2000
are as follows:
2002 2001 2000
Balance, January 1 $ 2,097 $ 1,671 $ 1,627
Loans charged-off (978) (794) (577)
Recoveries 98 100 321
Net charged-off (880) (694) (256)
Provision for loan losses 959 1,120 300
Balance, December 31 $ 2,176 $ 2,097 $ 1,671
NOTE 7-BUILDINGS AND EQUIPMENT
Balances in the buildings, equipment, and related accumulated depreciation
accounts at December 31, 2002 and 2001 are as follows:
2002 2001
Land and bank buildings $ 5,162 $ 5,011
Equipment, furniture and fixtures 4,947 4,737
Totals 10,109 9,748
Less accumulated depreciation 5,913 5,467
Net $ 4,196 $ 4,281
Depreciation expense was $507 for 2002, $520 in 2001 and $511 in 2000.
NOTE 8-DEPOSITS
Deposits at December 31, 2002 and 2001 are as follows:
2002 2001
Demand, non-interest bearing $ 12,371 $ 12,139
Demand, interest-bearing 19,540 18,374
Savings 61,736 66,687
Time deposits, $100,000 and over 25,613 23,842
Other time deposits 62,060 60,698
$ 181,320 $ 181,740
As of December 31, 2002 the scheduled maturities of time deposits are as
follows:
2003 $ 26,799
2004 27,671
2005 11,134
2006 16,115
2007 and thereafter 5,954
$ 87,673
SVB & T CORPORATION AND SUBSIDIARY
FRENCH LICK, INDIANA
Notes to Consolidated Financial Statements
(Dollars in thousands, except per share data)
NOTE 9-OTHER SHORT-TERM BORROWINGS
Short-term borrowings at December 31, 2002 and 2001 are as follows:
2002 2001
Federal Funds purchased from Bank One,
Indiana, unsecured, 1.875% at December 31, 2001 $ 0 $ 4,100
NOTE 10-LONG-TERM BORROWINGS
Long-term borrowings at December 31, 2002 and 2001 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 Option Date Rate 2002 2001
March 15, 2005 March 15, 2002 6.32% $ 7,000 $ 7,000
October 15, 2005 N/A 5.02% 1,000 1,000
July 17, 2006 N/A 6.69% 3,100 3,100
April 19, 2010 April 19, 2002 6.18% 10,000 10,000
June 7, 2010 March 6, 2002 6.53% 5,000 5,000
February 28, 2011 April 27, 2002 4.48% 3,000 3,000
January 5, 2004 N/A 3.63% 2,000 0
January 4, 2006 N/A 4.97% 5,000 0
Total Federal Home Loan Bank
Advances 36,100 29,100
Notes Payable:
Independent Bankers' Bank,
payable annually,collateralized
by all assets of the holding
company, interest rate adj.monthly 3.38% 3,942 0
Total long-term borrowings $ 40,042 $ 29,100
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, 2002 long-term borrowings are scheduled to mature as
follows:
2003 $ 358
2004 2,358
2005 8,358
2006 8,458
2007 358
Thereafter 20,152
$ 40,042
SVB & T CORPORATION AND SUBSIDIARY
FRENCH LICK, INDIANA
Notes to Consolidated Financial Statements
(Dollars in thousands, except per share data)
At December 31, 2002, the Bank has $17,287 available under a secured line of
credit and $7,500 available under two unsecured lines. These line of credit
are short-term and renew annually.
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 pre-tax net income and are subject to the discretion of the
Board of Directors. The Bank's expense for the plan for the years ended
December 31, 2002, 2001 and 2000 was $105, $127 and $184.
The Bank 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, 2002, 2001
and 2000 were $427, $316 and $296.
In 2002, the Bank started a bank owned life insurance plan covering 15
management employees. Under the plan, the Bank will pay beneficiaries a
predetermined cash benefit at the death of a participant. The program is non-
vesting. A participant must meet Bank retirement requirements to remain
eligible after terminating employment. The entire future benefit obligation
for all participants of $3,625 was settled by the purchase of $10,868 of
single premium life insurance policies at a cost of $5,000. The Bank owns all
policies. At December 31, 2002, these policies had a surrender value of
$5,148. This amount is carried as an asset in the statement of financial
condition.
NOTE 12-INCOME TAXES
The components of the provision for income taxes are:
2002 2001 2000
Federal income taxes currently payable $ 219 $ 553 $ 844
Deferred Federal income taxes (44) (114) (32)
Provision for Federal income taxes
for the year $ 175 $ 439 $ 812
State income taxes currently payable $ 104 $ 203 $ 285
Deferred state income taxes (4) (34) (9)
Provision for state income taxes
for the year $ 100 $ 169 $ 276
SVB & T CORPORATION AND SUBSIDIARY
FRENCH LICK, INDIANA
Notes to Consolidated Financial Statements
(Dollars in thousands, except per share data)
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, 2002 and 2001
are as follows:
2002 2001
Deferred Tax Assets:
Allowance for loan losses $ 680 $ 638
Loan fees 26 34
Alternative minimum tax credit carryover 39 0
Other 85 11
Total asset 830 683
Deferred Tax Liabilities:
Depreciation and software amortization (817) (677)
Unrealized gains on securities available
for sale (358) (81)
Net deferred tax liability $ (345) $ (75)
The difference between the Federal income tax rate and the Bank's effective
tax rate is as follows:
2002 2001 2000
Income tax at Federal tax rate of 34% $ 474 $ 750 $ 1,063
Tax effect of:
Tax exempt interest (218) (207) (156)
Other (46) (39) (2)
State income taxes, net of Federal effect 65 104 183
Total income taxes $ 275 $ 608 $ 1,088
Effective tax rate 19.74% 27.57% 34.80%
The Bank has $56 of alternative minimum tax credit carry forward which has no
expiration period.
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
$872 at December 31, 2002 and $906 at December 31, 2001.
The Bank serves as Trustee for Kimball International's employee benefit plans.
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 2002, 2001 and 2000 were $76, $200 and $427. Amounts
receivable from Kimball International for these services were $38 at December
31, 2002, $39 at December 31, 2001 and $124 at December 31, 2000.
SVB & T CORPORATION AND SUBSIDIARY
FRENCH LICK, INDIANA
Notes to Consolidated Financial Statements
(Dollars in thousands, except per share data)
NOTE 13 RELATED PARTY TRANSACTIONS (CONTINUED)
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
2002 were as follows:
Balance, January 1, 2002 $ 5,612
New loans 364
Repayments (661)
Changes in persons included 0
Balance, December 31, 2002 $ 5,315
NOTE 14-LEASE COMMITMENTS
Minimum lease payments at December 31, 2002, under operating lease
commitments, total $-0-. Operating expenses include rental expense of $35 in
2002, $31 in 2001 and $23 in 2000.
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, 2002
and 2001 were as follows:
2002 2001
Commitments to extend credit $ 17,950 $ 10,391
Standby letters of credit $ 312 $ 385
SVB & T CORPORATION AND SUBSIDIARY
FRENCH LICK, INDIANA
Notes to Consolidated Financial Statements
(Dollars in thousands, except per share data)
NOTE 15-COMMITMENTS AND CONTINGENT LIABILITIES (CONTINUED)
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.
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 38,593
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:
Average Exercise
Number Price
Balance, January 1, 2000 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
Granted 7,400 $38.50
Exercised (3,771) $25.99
Balance, December 31, 2002 27,039 $34.25
SVB & T CORPORATION AND SUBSIDIARY
FRENCH LICK, INDIANA
Notes to Consolidated Financial Statements
(Dollars in thousands, except per share data)
NOTE 16-STOCK OPTION PLANS (CONTINUED)
Pro forma information required of companies not adopting FASB No. 123 is as
follows:
2002 2001 2000
Pro forma net income $ 1,103 $ 1,563 $ 2,024
Pro forma basic earning per share $ 1.83 $ 2.09 $ 2.72
Pro forma diluted $ 1.82 $ 2.09 $ 2.71
NOTE 17-STOCKHOLDERS' EQUITY
In January 2002, the Company purchased 144,920 shares of its outstanding
common stock from a related party shareholder. The total purchase price was
$5,941. All regulatory agencies approved the purchase. Purchase of this
stock did not result in capital ratios which were 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 2002, 2001 and 2000
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, 2002, approximately $770 of the Bank's retained
earnings were available for dividend payments to the SVB & T Corporation.
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, 2002, that the Bank meets all capital
adequacy requirements to which it is subject.
SVB & T CORPORATION AND SUBSIDIARY
FRENCH LICK, INDIANA
Notes to Consolidated Financial Statements
(Dollars in thousands, except per share data)
NOTE 19-REGULATORY MATTERS (CONTINUED)
As of December 31, 2002, 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 Bank Required for
Amounts and Amounts Bank to be Well
As of December 31, 2002:
Tier 1 Capital to Risk-Weighted Assets $ 18,209 $ 20,410 $ 10,438
10.4% 11.7% 6.0%
Total Capital to Risk-Weighted Assets $ 20,385 $ 22,585 $ 17,397
11.6% 13.0% 10.0%
Tier 1 Capital to Average Assets $ 18,209 $ 20,410 $ 12,183
7.5% 8.4% 5.0%
As of December 31, 2001:
Tier 1 Capital to Risk-Weighted Assets $ 23,517 $ 21,867 $ 10,754
13.0% 12.2% 6.0%
Total Capital to Risk-Weighted Assets $ 25,615 $ 23,964 $ 17,923
14.1% 13.4% 10.0%
Tier 1 Capital to Average Assets $ 23,517 $ 21,867 $ 12,208
9.6% 9.0% 5.0%
The Indiana Department of Financial Institutions (DFI) conducted a regulatory
examination of Springs Valley Bank & Trust Company in late 2002. The DFI
classified $485 of loans as losses, directed the Bank to write off these loans
against the allowance for loan losses and directed that the allowance be
restored to its previous level. All of these transactions are reflected in
the December 31, 2002 financial statements.
In addition the Bank will be required to take corrective actions concerning
its credit underwriting, loan administration, budgeting, liquidity monitoring
and call report preparation.
The board of directors will submit quarterly progress reports to the
regulatory agencies. The Bank will be examined by the FDIC within the next
year.
SVB & T CORPORATION AND SUBSIDIARY
FRENCH LICK, INDIANA
Notes to Consolidated Financial Statements
(Dollars in thousands, except per share data)
NOTE 20-CONCENTRATIONS OF CREDIT
At December 31, 2002, the total amount of due from banks included $8,431 with
Independent Bankers' Bank, $1,615 with Federal Home Loan Bank of Indianapolis,
$126 with Bank One Kentucky, and $102 with Old National Bank, which is in
excess of the Federal Deposit Insurance Corporation's insured limit of $100
per institution.
The majority of investments in state and municipal securities involve
governmental entities in the State of Indiana.
Approximately 76% 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 24% 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, 2002 and 2001 are as follows:
2002 2001
Carrying Estimated Carrying Estimated
Amount Fair Value Amount Fair Value
ASSETS
Cash and cash equivalents $ 12,950 $ 12,950 $ 4,852 $ 4,852
Investment securities 27,912 27,912 20,072 20,072
Loans and loans held for sale
(net) 185,949 188,507 206,066 207,384
FHLB and other stock 2,055 2,055 2,005 2,005
Interest receivable 1,383 1,383 1,510 1,510
LIABILITIES
Deposits $ 181,320 $ 185,457 $ 181,740 $ 184,139
Short-term borrowings 0 0 4,100 4,100
Long-term borrowings 40,042 43,512 29,100 29,545
Interest payable 1,189 1,189 1,089 1,089
The following methods and assumptions were used to estimate the fair value of
each class of financial instruments.
SVB & T CORPORATION AND SUBSIDIARY
FRENCH LICK, INDIANA
Notes to Consolidated Financial Statements
(Dollars in thousands, except per share data)
NOTE 21-FAIR VALUES OF FINANCIAL INSTRUMENTS (CONTINUED)
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.
Loans and Loans Held for Sale
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.
FHLB and Other Stock
The carrying amount of FHLB and other stock is a reasonable estimate of their
fair value.
Interest Receivable
The carrying amount of accrued interest receivable is a reasonable estimate of
its fair value.
Deposits
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.
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
(Dollars in thousands, except per share data)
NOTE 21-FAIR VALUES OF FINANCIAL INSTRUMENTS (CONTINUED
Interest Payable
The carrying amount of accrued interest payable is a reasonable estimate of
its fair value.
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 2002 2001
ASSETS (In thousands)
Cash in bank with subsidiary $ 238 $ 67
Investment in subsidiary 20,992 20,303
Buildings and equipment 1,707 1,681
Other assets 322 2,198
Total assets $ 23,259 $ 24,249
LIABILITIES
Accrued expenses $ 63 $ 107
Dividends payable 108 134
Long-term borrowings 3,942 0
Deferred income taxes 378 355
Total liabilities 4,491 596
SHAREHOLDERS' EQUITY
Common stock 200 200
Surplus 6,308 6,253
Retained earnings 18,793 18,107
Accumulated other comprehensive income 546 123
Treasury stock (7,079) (1,030)
Total shareholders' equity 18,768 23,653
Total liabilities and shareholders' equity $ 23,259 $ 24,249
SVB & T CORPORATION AND SUBSIDIARY
FRENCH LICK, INDIANA
Notes to Consolidated Financial Statements
(Dollars in thousands, except per share data)
NOTE 22-PARENT COMPANY ONLY FINANCIAL STATEMENTS (Continued)
Years Ended December 31,
Condensed Statement of Income 2002 2001 2000
INCOME (In thousands)
Dividend income $ 12 $ 20 $ 11
Dividends from subsidiary 878 2,227 784
Rent from subsidiary 300 300 300
Total income 1,190 2,547 1,095
EXPENSE
Depreciation 68 66 66
Interest on long-term debt 158 0 10
Other expenses 138 69 121
Total expense 364 135 197
Income before income taxes and equity
in undistributed earnings of subsidiary 826 2,412 898
Income tax expense (27) 72 61
Income before equity in undistributed
earnings of subsidiary 853 2,340 837
Equity in undistributed earnings of
Subsidiary 266 0 1,202
Dividends received in excess of earnings of
Subsidiary 0 (743) 0
Net income $ 1,119 $ 1,597 $ 2,039
SVB & T CORPORATION AND SUBSIDIARY
FRENCH LICK, INDIANA
Notes to Consolidated Financial Statements
(Dollars in thousands, except per share data)
NOTE 22-PARENT COMPANY ONLY FINANCIAL STATEMENTS
Years Ended December 31,
Condensed Statement of Cash Flows 2002 2001 2000
Operating Activities: (In thousands)
Net income $ 1,119 $ 1,597 $ 2,039
Adjustments to reconcile net
income to net cash provided by
operating activities:
Depreciation 67 66 66
(Undistributed) excess net income
of subsidiary (266) 743 (1,202)
Deferred income taxes 23 19 23
(Increase) decrease in other assets 1,877 (1,998) (43)
Increase (decrease) in accrued
expenses and dividends payable (70) 14 7
Net cash provided by operating activities 2,750 441 890
Investing Activities:
Additions to buildings and equipment (94) 0 (43)
Net cash used by investing activities (94) 0 (43)
Financing Activities:
Net treasury stock activity (5,994) (13) 67
Dividends paid (433) (537) (536)
Increase in long-term debt 4,300 0 0
Principal payment on long-term debt (358) 0 (216)
Net cash used by financing activities (2,485) (550) (685)
Increase (decrease) in cash and cash
Equivalents 171 (109) 162
Cash and cash equivalents at beginning of year 67 176 14
Cash and cash equivalents end of year $ 238 $ 67 $ 176
NOTE 23-FOURTH QUARTER RESULTS (Unaudited)
During the fourth quarter ended December 31, 2002, the Bank recognized a $679
provision for loan losses. The total provision for loan losses in the year
ended December 31, 2002 was $959.
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, 2002 and
2001, 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, 2002. 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, 2002 and 2001, and the
consolidated results of their operations and cash flows for each of the three
years in the period ended December 31, 2002, in conformity with U.S. generally
accepted accounting principles.
Nonte & Company LLC
Certified Public Accountants
Jasper, Indiana
March 21, 2003
Exhibit 11 - Statement Re: Computation of Per Share Earnings
Year Ended December 31,
2001 2001 2000
Primary
Weighted average shares
outstanding $ 601,179 $ 746,372 $ 745,017
Net Income 1,119,000 1,597,209 2,039,032
Net income per common share $ 1.86 $ 2.14 $ 2.74
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 March 21, 2003, included in the
2002 Annual Report to Shareholders of SVB&T Corporation.
NONTE & COMPANY LLC
Certified Public Accountant
Jasper, Indiana
March 26, 2003
Exhibit 99.1 CEO Certifications
CETIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION
906 OF THE SARBANES - OXLEY ACT OF 2002
In connection with the annual Report of SVBT & Corporation (the 'Company') on
Form 10-K for the year ending December 31, 2002 as filed with the Securities
And Exchange Commission on the date hereof (the 'Report'), I Ronald G. Seals,
Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. 1350, as
adopted pursuant to 906 of the Sarbanes - Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of section 13 (a) or
15 (d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all
material respects, the financial condition and result of operations
of the company.
Ronald G. Seals
Chief Executive Officer
March 28, 2003
The foregoing certification is being furnished solely pursuant to 18 U.S.C.
1350 and not for any other purpose, and is subject to the knowledge standard
contained in 18 U.S.C. 1350.
Exhibit 99.2
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSANT TO
SECTION 906 OF THE SARBANES - OXLEY ACT OF 2002
In connection with the Annual Report of SVB&T Corporation (the 'Company')
On form 10-K for the year ending December 31, 2002 as filed with the
Securities and Exchange Commission on the date hereof (the 'Report'), I,
David Rees, Principal Financial Officer of the Company, certify, pursuant to
18 U.S.C. 1350, as adopted pursuant to 906 of the Sarbanes - Oxley Act of
2002, that:
(1) The report fully complies with the requirements of section 13 (a) or
15 (d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all
Material Respects, the financial condition and result of
Operations of the company.
David Rees
Chief Financial Officer
March 28, 2003
The foregoing certification is being furnished solely pursuant to 18 U.S.C.
1350 and not for any other purpose, and is subject to the knowledge standard
contained in 18 U.S.C. 1350.
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