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SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-K
Annual Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the fiscal year ended December 31, 1999 Commission file number 0-12422
INDIANA UNITED BANCORP
(Exact name of registrant as specified in its charter)
Indiana 35-1562245
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization Identification No.
201 North Broadway
Greensburg, Indiana 47240
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code: (812) 663-0157
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act
Common shares, no-par value
(Title of Class)
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. /X/
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes /X/ No
The aggregate market value (not necessarily a reliable indication of the price
at which more than a limited number of shares would trade) of the voting stock
held by non-affiliates of the registrant was $80,116,427 as of March 18, 2000.
As of March 18, 2000, there were outstanding 4,855,541 common shares, without
par value, of the registrant.
DOCUMENTS INCORPORATED BY REFERENCE
Part of Form 10-K
Documents Into Which Incorporated
--------- -----------------------
1999 Annual Report to Shareholders Part II (Items 5 through 9)
Definitive Proxy Statement for Annual
Meeting of Shareholders to be held
May 31, 2000 Part III (Items 10 through 13)
EXHIBIT INDEX: Page 9
FORM 10-K TABLE OF CONTENTS
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Part I Page
Item 1 Business 3
Item 2 Properties 9
Item 3 Legal Proceedings 9
Item 4 Submission of Matters to a Vote of Security Holders 9
Part II
Item 5 Market For the Registrant's Common Equity and 9
Related Stockholder Matters
Item 6 Selected Financial Data 9
Item 7 Management's Discussion and Analysis of Financial 9
Condition and Results Of Operations
Item 7A Quantitative and Qualitative Disclosures About Market Risk 9
Item 8 Financial Statements and Supplementary Data 9
Item 9 Disagreements on Accounting and Financial Disclosure 9
Part III
Item 10 Directors and Executive Officers of the Registrant See below
Item 11 Executive Compensation See below
Item 12 Security Ownership of Certain Beneficial Owners See below
and Management
Item 13 Certain Relationships and Related Transactions See below
Part IV
Item 14 Exhibits, Financial Statement Schedules, and Reports See below
on Form 8-K
Pursuant to General Instruction G, the information called for by Items 10-13 is
omitted by Indiana United Bancorp since Indiana United Bancorp will file with
the Commission a definitive proxy statement to shareholders pursuant to
regulation 14A not later than 120 days after the close of the fiscal year
containing the information required by Items 10-13
2
PART I
ITEM 1. BUSINESS
- -----------------
(Dollars in thousands except per share data)
GENERAL
Indiana United Bancorp ("Company") was initially formed in Owensboro, Kentucky,
in 1982 as First Commonwealth Bancorp. The Company reincorporated under the laws
of the State of Indiana under its present name in 1983, and relocated to
Greensburg, Indiana, in anticipation of acquiring Union Bank and Trust Company
of Greensburg. In 1987, Peoples Bank in Portland, Indiana was acquired and as of
December 31, 1991, Regional Federal Savings Bank, New Albany, Indiana ("Regional
Bank") was acquired. Effective July 1, 1994, the Company merged Union Bank and
Trust Company of Greensburg into Peoples Bank, Portland, and renamed the
combined bank, Union Bank and Trust Company of Indiana ("Union Bank").
On April 30, 1998, the Company completed a merger of equals with P.T.C. Bancorp,
Brookville, Indiana. People's Trust Company, ("People's Trust"), the wholly
owned subsidiary of P.T.C. Bancorp, had more than $300,000 in assets. This
transaction was regarded by both companies as a merger of equals and was
accounted for as a "pooling of interests" for accounting and financial reporting
purposes.
Effective April 1, 1999, the Company acquired the property and casualty
insurance business lines of Andy Anderson Insurance Agency, Inc. d/b/a The
Anderson Group, Owensboro, Kentucky ("The Anderson Group"). The results of
operations have been included in these financial statements since the
acquisition date under the purchase method of accounting. The acquisition was
effected by the purchase of net assets and expertise and The Anderson Group was
integrated into a newly formed subsidiary of the Company, The Insurance Group,
Inc. ("The Insurance Group"). The Company issued 80,913 shares of its common
stock to The Anderson Group shareholders, valued at $1,364. Assets total $2,180
(including cash of $250) and liabilities assumed of $780. Assets acquired
include goodwill of $1,628, which is being amortized over 15 years under the
straight-line method. Under the agreement, the acquirees will obtain additional
shares of company stock as defined in the agreement if certain financial targets
are attained during the measurement period, which ends March 31, 2002.
Subsequently, the Company caused The Insurance Group to become a wholly owned
subsidiary of Union Bank by transferring its ownership in The Insurance Group to
that bank subsidiary. The general lines insurance business previously conducted
by Union Bank in Greensburg and Portland, Indiana will be is now conducted
through The Insurance Group subsidiary.
On November 9, 1999 the Company announced a definitive agreement to acquire
First Affiliated Bancorp ("First Affiliated") of Watseka, Illinois and its
wholly owned banking subsidiary, Capstone Bank N. A. The transaction will be
accounted for using the pooling-of-interests method of accounting. The Company
will issue approximately 1,020,000 shares of its common stock to the in this
acquisition. The conversion rate will be 4.4167shares of Company stock for each
outstanding share of First Affiliated. As of December 31, 1999 First Affiliated
had $131,358 in assets and, $116,520 in deposits with four banking offices in
Illinois and one in Indiana.
The Company operates 40 offices in 15 Indiana counties with 404 employees. As of
December 31, 1999, the Company had consolidated assets of $978,893, consolidated
deposits of $824,385 and shareholders' equity of $59,209.
Through its Banks, the Company offers a broad range of financial services,
including: accepting time and transaction deposits; making consumer, commercial,
agribusiness and real estate mortgage loans; issuing credit cards; renting safe
deposit facilities; providing general agency personal and business insurance
services; providing personal and corporate trust services; and providing other
corporate services such as letters of credit and repurchase agreements.
3
The lending activities of the Banks are separated into primarily the categories
of commercial/agricultural, real estate and consumer. Loans are originated by
the lending officers of the Banks subject to limitations set forth in lending
policies. The Board of Directors reviews and approves loans up to the Banks'
legal lending limit, monitors concentrations of credit, problem and past due
loans and charge-offs of uncollectible loans and formulates loan policy. The
Banks maintain conservative loan policies and underwriting practices in order to
address and manage loan risks. These policies and practices include granting
loans on a sound and collectible basis, serving the legitimate needs of the
community and the general market area while obtaining a balance between maximum
yield and minimum risk, ensuring that primary and secondary sources of repayment
are adequate in relation to the amount of the loan, developing and maintaining
adequate diversification of the loan portfolio as a whole and of the loans
within each category and developing and applying adequate collection policies.
Commercial loans include secured and unsecured loans, including real estate
loans, to individuals and companies and to governmental units within the market
area of the Banks for a myriad of business purposes.
Agricultural loans are generated in the Banks' markets. Most of the loans are
real estate loans on farm properties. Loans are also made for agricultural
production and such loans are generally reviewed annually.
Residential real estate lending has been the largest component of the loan
portfolio for many years. All affiliate banks have generated residential
mortgages for their own portfolios. In addition, People's Trust has been
originating residential mortgages for sale into the secondary market since 1990
and has extended its expertise to the other affiliates so that in 1999 all
affiliates originate for the secondary market as well as continue to grow
their internal portfolios. At December 13, 1999, the Company was servicing a
$181,150 portfolio, which increased from $150,523 and $110,341 at year-end 1998
and 1997. By originating loans for sale in the secondary market, the Company can
more fully satisfy customer demand for fixed rate residential mortgages and
increase fee income.
Consumer lending includes secured and unsecured loans for personal, family or
household purposes, such as automobile installment loans and personal lines of
credit. Consumer lending has increased throughout 1999 allowing the Company to
grow its portfolio to $79,154. In addition to providing greater diversification
within the loan portfolio, consumer loans also provide a higher gross yield than
residential real estate mortgages.
The principal source of revenues for the Company is interest and fees on loans,
which accounted for 69.5% of total revenues in 1999, 73.7% in 1998 and 74.4% in
1997.
The Company's investment securities portfolio is primarily comprised of U. S.
Treasuries, federal agencies, state and municipal bonds, mortgage-backed
securities and corporate securities. The Company has classified 92.7% of its
investment portfolio as available for sale, with market value changes reported
separately in shareholders' equity. Funds invested in the investment portfolio
generally represent funds not immediately required to meet loan demand. The
Company's investment portfolio accounted for 20.4% of total revenues in 1999,
14.6% in 1998 and 15.4% in 1997. As of December 31, 1999, the Company had not
identified any securities as being "high risk" as defined by the FFIEC
Supervisory Policy Statement on Securities Activities.
The primary sources of funds for the Banks are deposits generated in local
market areas. To attract and retain stable deposits, the Banks market various
programs for demand, savings and time deposit accounts. These programs include
interest and non-interest bearing demand and individual retirement accounts. The
Company also purchased four branch facilities and their deposits in the first
quarter of 1999 from a large regional competitors. In all, more than $104,000 in
deposits were acquired, together with approximately $2,000 in consumer and small
business loans. Union Bank purchased two former branch facilities and opened
them "de novo" in April 1999 to expand its market.
4
Currently, national retailing and manufacturing subsidiaries, brokerage and
insurance firms and credit unions are fierce competitors within the financial
services industry. Mergers between financial institutions within Indiana and
neighboring states, which became permissible under the Interstate Banking and
Branching Efficiency Act of 1994, have added competitive pressure. The
permissibility of banks and bank holding companies to acquire thrift
institutions will undoubtedly further redefine the competitive marketplace.
The Company's Banks are located in predominantly non-metropolitan areas and
their business is centered in loans and deposits generated within markets
considered largely rural in nature. In addition to competing vigorously with
other banks, thrift institutions, credit unions and finance companies located
within their service areas, they also compete, directly and indirectly, with all
providers of financial services.
EMPLOYEES
As of December 31, 1999, the Company and its subsidiaries had approximately 404
full-time equivalent employees to whom it provides a variety of benefits and
with whom it enjoys excellent relations.
REGULATION AND SUPERVISION OF THE COMPANY
The Company is a bank holding company ("BHC") within the meaning of the Bank
Holding Company Act of 1956, as amended ("ACT"). This Act subjects BHCs to
regulations of the Federal Reserve Board ("FRB") and restricts the business of
BHCs to banking and related activities. In addition, the Company is a
non-diversified unitary savings and loan holding company subject to regulations,
examinations, supervision and reporting requirements of the Office of Thrift
Supervision ("OTS").
Under the ACT, a BHC is, with limited exceptions, prohibited from acquiring
direct or indirect ownership or control of voting stock of any company that is
not a bank or engaging in any activity other than managing or controlling banks.
A BHC may, however, own shares of a company engaged in activities which the FRB
has determined to be so closely related to banking or managing or controlling
banks as to be a proper incident thereto. These activities include: operating a
savings association, mortgage company, finance company, credit card or factoring
company; performing certain data processing operations; providing investment and
financial advice; and, acting as an insurance agent for certain types of
credit-related insurance.
Acquisitions by the Company of banks and savings associations are subject to
federal and state regulation. Any acquisition by the Company of more than five
percent of the voting stock of any bank requires prior approval of the FRB.
Acquisition of savings associations is also subject to the approval of the OTS.
Indiana law permits BHCs to acquire BHCs and banks out of state on a reciprocal
basis, subject to certain limitations. Under current law, the Company may
acquire banks, and may be acquired by BHCs, located in any state in the United
States that permits reciprocal entry by Indiana BHCs. Under the ACT, BHCs may
acquire savings associations without geographic restrictions.
A BHC and its subsidiaries are prohibited from engaging in certain tying
arrangements in connection with the extension of credit, lease or sale of
property, or the provision of any property or service.
The Company is under the jurisdiction of the Securities and Exchange Commission
("SEC") and state securities commission for matters relating to the offering and
sale of its securities. The Company is subject to the SEC's rules and
regulations relating to periodic reporting, reporting to shareholders, proxy
solicitation and insider trading.
The Company's income is principally derived from dividends paid on the common
stock of its subsidiaries. The payment of these dividends is subject to certain
regulatory restrictions.
5
Under FRB policy, the Company is expected to act as a source of financial
strength to, and commit resources to support, its affiliates. As a result of
such policy, the Company may be required to commit resources to its affiliate
banks in circumstances where it might not otherwise do so.
REGULATION AND SUPERVISION OF THE SUBSIDIARY BANKS
Union Bank and People's Trust are supervised, regulated and examined by the
Indiana Department of Financial Institutions ("DFI") and the Federal Deposit
Insurance Corporation ("FDIC"). Regional Bank is supervised, regulated and
examined by the OTS. A cease-and-desist order may be issued against the banks,
if the respective agency finds that the activities of the bank represent an
unsafe and unsound banking practice or violation of law.
The deposits of Union Bank and People's Trust are insured by the Bank Insurance
Fund ("BIF") of the FDIC. The deposits of Regional Bank are insured by the
Savings Association Insurance Fund ("SAIF") of the FDIC. The FDIC has the
authority to change premiums twice per year. Commencing in 1997, thrift
institutions paid approximately five times higher assessment rates than
commercial banks (6.44 cents versus 1.29 cents per $100 of deposits). Beginning
in the year 2000, BIF and SAIF-insured institutions will pay the same assessment
rate of 2.43 cents per $100 of deposits.
Branching by banks in Indiana is subject to the jurisdiction, and requires the
prior approval, of the bank's or savings bank's primary federal regulatory
authority and, if the branching bank is a state bank, of the DFI. Under Indiana
law, banks may branch anywhere in the state.
The Company is a legal entity separate and distinct from its subsidiary Banks.
There are various legal limitations on the extent to which the Banks can supply
funds to the Company. The principal source of the Company's funds consists of
dividends from its subsidiary Banks. State and Federal law restrict the amount
of dividends which may be paid by banks and savings banks. In addition, the
Banks are subject to certain restrictions on extensions of credit to the
Company, on investments in the stock or other securities of the Company and in
taking such stock or securities as collateral for loans.
LEGISLATION
The Federal Deposit Insurance Corporation Act of 1991 ("FDICIA") represented a
comprehensive and fundamental change to banking supervision and mandates the
development of additional regulations governing almost every aspect of the
operations, management and supervision of banks and BHCs.
FDICIA also included several supervisory reforms related to the frequency of
regulatory examinations and audit requirements. FDICIA also required the
adoption of safety and soundness standards on matters such as loan underwriting
and documentation, and compensation and other employee benefits; mandated
consumer protection disclosures with respect to deposit accounts; and the
establishment of a risk-based deposit insurance system. The federal banking
agencies have issued guidelines establishing standards for safety and soundness,
for operational and managerial standards and compensation standards. The federal
banking agencies have issued guidelines for asset quality and earnings.
FDICIA requires banking regulators to take prompt corrective actions with
respect to depository institutions that fall below certain capital levels and
prohibit any depository institution from making a capital distribution that
would cause it to be considered undercapitalized. Banking regulators were also
required to revise their capital standards to take into account interest rate
risk. A policy statement has been proposed providing a supervisory framework to
measure and monitor interest rate risk at individual banks. Banks may use an
internal model that provides a measure of the change in a bank's economic value.
6
The results of the supervisory and internal models would be one factor
regulators would consider in their assessment of capital adequacy. Other factors
will also be considered.
Certain regulations define relevant capital measures for five capital
categories. A "well capitalized" institution is one that has a total risk-based
capital ratio of at least 10%, a Tier 1 risk-based capital ratio of at least 8%,
a leverage ratio of at least 5% and is not subject to regulatory direction to
maintain a specific level for any capital measure. An "adequately capitalized"
institution is one that has ratios greater than 8%, 4% and 4%. An institution is
"undercapitalized" if its respective ratios are less than 8%, 4% and 4%.
"Significantly undercapitalized" institutions have ratios of less than 6%, 3%
and 3%. An institution is deemed to be "critically undercapitalized" if it has a
ratio of tangible equity to total assets that is 2% or less. Institutions with
capital ratios at levels of "undercapitalized" or lower are subject to various
limitations that, in most situations, will reduce the competitiveness of the
institution.
The Riegle Community Development and Regulatory Improvement Act of 1994 ("1994
Act") made several changes in existing law affecting bank holding companies.
These include a reduction in the minimum post-approval antitrust review waiting
period for depository institution mergers and acquisitions, and the substitution
of a notice for an application when a bank holding company proposes to engage
in, or acquire a company to engage in, non-bank activities. The 1994 Act also
contains seven titles pertaining to community development and home ownership
protection, small business capital formation, paperwork reduction and regulatory
improvement, money laundering and flood insurance. No regulations have yet been
approved. The Riegle-Neal interstate Banking and Branching Efficiency Act of
1994 ("Branching Act") substantially changed the geographic constraints
applicable to the banking industry. In general, the Branching Act permits BHCs
that are adequately capitalized and adequately managed to acquire banks located
in any other state, subject to certain total deposit limitations. Effective June
1, 1997, the Branching Act also allows banks to establish interstate branch
networks through acquisitions of other banks. Establishment of de novo
interstate branches or the acquisition of individual branches of a bank in
another state is also allowed if authorized by state law. Institutions must
maintain a loan activity-to-deposit ratio within a state at least equal to
one-half of the average percentage for all banks in the state or the
institution's federal regulator may close the branch and restrict the
institution from opening new branches in the state. The Branching Act allowed
individual states to "opt out" of certain provisions by enacting appropriate
legislation prior to June 1, 1997.
The monetary policies of regulatory authorities have a significant effect on the
operating results of banks and BHCs. The nature of future monetary policies and
the effect of such policies on the future business and earnings of the Company
and its subsidiaries cannot be predicted.
The Deposit Insurance Funds Act was enacted in 1996 and contained several major
provisions. The new law recapitalized the SAIF by a one-time assessment on all
SAIF-insured deposits. For 1997 through 1999 the banking industry will help pay
for the Financing Corp. ("FICO") bond interest payments at an assessment rate
that is one-fifth the rate paid by thrifts. Beginning January 1, 2000, the FICO
interest payments will be paid pro-rata by banks and thrifts. Deposit shifting
is prohibited for three years and the $2,000 annual minimum assessment was
repealed.
The Federal Reserve Board has approved interim procedures, effective March
11, 2000 for bank holding companies and foreign banks with U.S. offices to be
treated as financial holding companies. Financial holding companies may engage
in a broad range of securities, insurance and other financial activities under
the Gramm-Leach-Bliley Act. Bank holding companies and foreign banks that meet
the relevant qualifications may begin filing elections to become financial
holding companies at any time.
CAPITAL REQUIREMENTS
The Company and its subsidiary Banks must meet certain minimum capital
requirements mandated by the FRB, FDIC, OTS and DFI. These regulatory agencies
require BHCs and banks to maintain certain minimum ratios of primary capital to
total assets and total capital to total assets. The FRB requires BHCs to
maintain a minimum Tier 1 leverage ratio of 3 percent capital
7
to total assets; however, for all but the most highly rated institutions which
do not anticipate significant growth, the minimum Tier 1 leverage ratio is 3
percent plus an additional cushion of 100 to 200 basis points. As of December
31, 1999, the Company's leverage ratio of capital to total assets was 6.5%. The
FRB, OTS and FDIC each have approved the imposition of "risk-adjusted" capital
ratios on BHCs and financial institutions. The Company's Tier 1 Capital to
Risk-Weighted Assets Ratio was 9.6% and its Total Capital to Risk-Weighted
Assets Ratio was 10.9% at December 31, 1999. The Company's Banks had capital to
asset ratios and risk-adjusted capital ratios at December 31, 1999, in excess of
the applicable regulatory minimum requirements.
An assessment of a bank's exposure to declines in the economic value of its
capital due to changes in interest rates is included in evaluations of capital
adequacy by federal regulators. A joint policy statement has been issued by
federal regulators to provide guidance on sound practices for managing interest
rate risk. The policy statement contains the various factors to be considered
and describes the board of directors' responsibilities in implementing a risk
management process. The requirements of a bank's senior management in ensuring
the effective management of interest rate risk is described and the elements to
be contained in a risk management process are specified.
Federal regulators have issued final regulations revising risk-based capital
standards and the regulatory framework for measuring market risk. Any BHC or
bank with significant exposure to market risk must measure such risk internally
and maintain adequate capital to support that exposure.
YEAR 2000 ("Y2K") COMPUTER ISSUES
The Company did not encounter any Y2K related problems nor is management aware
of any customers who encountered significant Y2K problems. The effort to assure
such success did not go unnoticed in terms of our employee's time, effort and
dedication to a task. We commend those individuals for their diligence. The
Company incurred approximately $150 in capital and other expenditures for Y2K
preparations. Management is not aware of any remaining uncertainties or
contingencies with respect to Y2K issues.
STATISTICAL DISCLOSURES
The following statistical data should be read in conjunction with Management's
Discussion and Analysis (Item 7), Selected Financial Data (Item 6) and the
Financial Statements and Supplementary Data (Item 8).
The following table analyzes the change in net interest income due to rate and
volume. Changes due to both rate and volume have been allocated in proportion to
the absolute dollar value of rate and volume changes. Volume of loans,
securities and deposits primarily account for the increase in net interest
income of 1999 over 1998 and 1998 over 1997
VOLUME/RATE ANALYSIS OF CHANGES IN NET INTEREST INCOME
Volume/Rate Analysis of Changes in Net Interest Income
(Tax Equivalent Basis)
- -----------------------------------------------------------------------------------------------------------------------------
1999 OVER 1998 1998 OVER 1997
- -----------------------------------------------------------------------------------------------------------------------------
Volume Rate Total Volume Rate Total
- -----------------------------------------------------------------------------------------------------------------------------
Interest income
Loans $ 7,466 $ (1,952) $ 5,514 $ 4,591 $ (716) $ 3,875
Securities 6,441 (377) 6,064 451 (113) 338
Federal funds sold (557) (205) (762) 944 (64) 880
Short-term investments (21) - (21) (16) 7 (9)
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Total interest income 13,329 (2,534) 10,795 5,970 (886) 5,084
- -----------------------------------------------------------------------------------------------------------------------------
Interest expense
Interest-bearing demand 1,313 (553) 760 221 (19) 202
Savings 1,163 (11) 1,152 166 (92) 74
Certificates of deposit 4,050 (1,604) 2,446 1,817 (104) 1,713
Borrowings 857 58 915 184 (266) (82)
Trust preferred securities - (20) (20) 1,913 5 1,918
- -----------------------------------------------------------------------------------------------------------------------------
Total interest expense 7,383 (2,130) 5,253 4,301 (476) 3,825
- -----------------------------------------------------------------------------------------------------------------------------
Change in net interest income $ 5,946 $ (404) 5,542 $ 1,669 $ (410) 1,259
======================= ===================
Change in tax equivalent adjustment 187 (27)
- -----------------------------------------------------------------------------------------------------------------------------
Change in net interest income before
tax equivalent adjustment $ 5,355 $ 1,286
- -----------------------------------------------------------------------------------------------------------------------------
The following table discloses the allocation of the allowance for loan losses to
the major loan categories.
ALLOCATION OF THE ALLOWANCE FOR LOAN LOSSES
- --------------------------------------------------------------------------------------------------------------------------------
1999 1998 1997 1996 1995
Percent Percent Percent Percent Percent
of loans of loans of loans of loans of loans
to total to total to total to total to total
December 31 Amount loans Amount loans Amount loans Amount loans Amount loans
- --------------------------------------------------------------------------------------------------------------------------------
Real estate
Residential $ 369 48% $ 294 45% $ 181 44% $ 223 45% $ 181 47%
Farm real estate 328 7 275 7 20 8 21 8 20 10
Commercial 737 15 715 18 327 18 348 15 327 14
Construction and
development 1,365 8 830 6 66 3 139 5 66 4
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Total real estate 2,799 78 2,114 76 594 73 731 74 594 75
- --------------------------------------------------------------------------------------------------------------------------------
Commercial
Agribusiness 912 2 912 3 186 3 224 4 186 4
Other commercial 360 8 316 8 441 9 677 9 441 10
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Total Commercial 1,272 10 1,228 11 627 13 901 13 627 14
- --------------------------------------------------------------------------------------------------------------------------------
Consumer 1,285 12 1,155 13 611 14 514 13 612 12
Unallocated 1,693 1,602 3,619 2,360 2,643
- --------------------------------------------------------------------------------------------------------------------------------
Total $ 7,049 100% $ 6,099 100% $ 5,451 100% $ 4,506 100% $ 4,476 100%
- --------------------------------------------------------------------------------------------------------------------------------
The composition and maturity of the investment portfolio is depicted in the
following table.
INVESTMENT SECURITIES
Investment Securities
(Carrying Values at December 31)
Beyond
Within 10 Total
1 Year 2-5 Yrs 6-10 Yrs Years 1999
- ------------------------------------------------------------------------------------------------------------------
Available for sale
Federal agencies $14,362 $101,380 $ 22,668 $ - $ 138,410
State and municipal 2,651 6,323 4,150 10,196 23,320
Mortgage-backed securities 1,837 25,599 13,375 - 40,811
Corporate obligations 2,681 5,577 5,720 4,212 18,190
Equity and other securities 162 547 - 4,046 4,755
- ------------------------------------------------------------------------------------------------------------------
Total available for sale $21,693 $139,426 $ 45,913 $18,454 $ 225,486
==================================================================================================================
Weighted average yield* 5.62% 5.93% 6.76% 7.00% 6.16%
Held to Maturity
- ------------------------------------------------------------------------------------------------------------------
State and municipal $ 4,995 $ 9,268 $ 1,175 $ 1,315 $ 16,753
Corporate obligations - 497 - - 497
Other securities - - 538 538
- ------------------------------------------------------------------------------------------------------------------
Total held to maturity $ 4,995 $ 9,765 $ 1,713 $ 1,315 $ 17,788
==================================================================================================================
Weighted average yield* 7.04% 6.81% 6.91% 7.80% 6.96%
Amounts in the table above are based on scheduled maturity dates. Variable
interest rates are subject to change not less than annually based upon certain
interest rate indexes. Expected maturities will differ from contractual
maturities because issuers may have the right to call or prepay obligations with
or without call or prepayment penalties.
As of December 31, 1999, there are no corporate bonds and other securities which
represent more than 10% of shareholders' equity.
* Adjusted to reflect income related to securities exempt from Federal income
taxes
The following table discloses the average deposits for the Company for 1999,
1998 and 1997 and the maturity schedule of the over $100,000 certificates of
deposit.
AVERAGE DEPOSITS
Average Deposits
- -------------------------------------------------------------- ------------------------------ -----------------------
1999 1998 1997
- -------------------------------------------------------------- ------------------------------ -----------------------
Amount Rate Amount Rate Amount Rate
- -------------------------------------------------------------- ------------------------------ -----------------------
Demand $77,210 $58,407 $49,817
Interest Bearing Demand 179,427 2.63% 131,263 3.01% 123,914 3.03%
Savings 105,170 2.89 64,990 2.91 59,386 3.06
Certificates of Deposit 437,662 5.12 360,295 5.55 327,541 5.58
- ---------------------------------------------- ---------- ----------
Totals $799,469 3.78% $614,955 4.20% $560,658 4.25%
========== ========== ==========
As of December 31, 1999, certificates of deposit and other time deposits of
$100 or more mature as follows
3 months or less 4-6 months 6-12 months over 12 months Total
---------------- ---------- ----------- -------------- -------
Amount $36,917 $18,792 $22,496 $20,869 $99,074
Percent 37% 19% 23% 21% 100%
Maturities and sensitivity to changes in interest rates of commercial and
construction loans at December 31, 1999 are disclosed in the following table.
MATURITIES AND SENSITIVITY TO CHANGES IN INTEREST RATES OF COMMERCIAL AND
CONSTRUCTION LOANS AT DECEMBER 31, 1999
Maturities and Sensitivity to Changes in Interest Rates of Commercial and Construction Loans at December 31, 1999
- --------------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------------
Due: Within 1 Year 1 - 5 Years Over 5 years Total
- --------------------------------------------------------------------------------------------------------------------------------
Loan Type
Commercial and industrial $23,884 $11,630 $4,025 $39,539
Agricultural production financing and other loans to farmers 12,412 2,095 356 14,863
Construction and development 48,515 2,206 - 50,721
- --------------------------------------------------------------------------------------------------------------------------------
Totals $84,811 $15,931 $4,381 $105,123
- --------------------------------------------------------------------------------------------------------------------------------
Percent 81% 15% 4% 100%
- --------------------------------------------------------------------------------------------------------------------------------
Rate Sensitivity
Fixed Rate $13,792 $8,369 $4,022 $26,183
Variable Rate 71,019 7,562 359 78,940
- --------------------------------------------------------------------------------------------------------------------------------
Totals $84,811 $15,931 $4,381 $105,123
- --------------------------------------------------------------------------------------------------------------------------------
8
ITEM 2. PROPERTIES
- -------------------
Indiana United Bancorp owns no physical properties and has no need for space
other than what is available at the offices of its subsidiaries. Its
subsidiaries own, or lease, all of the facilities from which they conduct
business. The Company has 40 locations of which People's Trust has 20, Union
Bank has 14 and Regional Bank has 6. At December 31, 1999, the Company had
$15,015 invested in premises and equipment.
ITEM 3. LEGAL PROCEEDINGS
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The subsidiaries may be parties (both plaintiff and defendant) to ordinary
litigation incidental to the conduct of business. Management is presently not
aware of any material claims.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
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No matters were submitted during the fourth quarter of 1999 to a vote of
security holders, through the solicitation of proxies or otherwise.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
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The information required under this item is incorporated by reference to the
Company's Annual Report to Shareholders, Exhibit 13.
ITEM 6. SELECTED FINANCIAL DATA
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The information required under this item is incorporated by reference to the
Company's Annual Report to Shareholders, Exhibit 13.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
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The information required under this item is incorporated by reference to the
Company's Annual Report to Shareholders, Exhibit 13.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
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The information required under this item is incorporated by reference to the
Company's Annual Report to Shareholders, Exhibit 13.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
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The financial statements and supplementary data required under this item are
incorporated herein by reference to the Company's Annual Report to Shareholders,
Exhibit 13.
ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.
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In connection with its audits for the two most recent fiscal years ended
December 31, 1999, there have been no disagreements (as defined in Item 4(b) of
Form 8-K) with the Company's independent certified public accountants on any
matter of accounting principles or practices, financial statement disclosure or
auditing scope or procedure.
9
PART IV
ITEM 14--EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
Included in
(a) 1. Financial statements Annual Report
Indiana United Bancorp and Subsidiary
Independent auditor's report 21
Consolidated balance sheets at December 31, 1999 and 1998 22
Consolidated statements of income, years ended December 31, 23
1999,1998 and 1997.
Consolidated statements of cash flows, years ended December 31, 24
1999, 1998 and 1997
Consolidated statements of shareholders' equity, years ended 25
December 31, 1999, 1998 and 1997
Notes to consolidated financial statements 26-39
(a) 2. Financial statement schedules
All schedules are omitted because they are not applicable or not
required, or because the required information is included in the consolidated
financial statements or related notes.
(a) 3. Exhibits:
2. Amended and Restated Agreement and Plan of Merger dated as of November 5,
1999, among Registrant, FAB Merger Corporation and First Affiliated Bancorp,
Inc.(incorporated by reference to Appendix A to the Proxy Statement/Prospectus
filed March 29,2000 with the Commission)(Registration No.3333-33032))
3.1 Articles of Incorporation (incorporated by reference to Exhibit 3.1 to
the Registration Statement on Form S-1 of the Registrant filed June 16,1986 with
the Commission (Registration Statement No. 33-06334), as amended by Articles of
Amendment to Articles of Incorporation incorporated by reference to Exhibit 3
(c) to the Annual Report on Form 10-K of the Registrant for the fiscal year
ended December 31, 1987 filed on or about March 30, 1988 with the Commission
(Commission File No. 0-12422)), and as further amended by Articles of Amendment
to Articles of Incorporation dated July 27,1998(incorporated by reference to
Exhibit 3.1 to the Annual Report on Form 10-K of the Registrant for the fiscal
year ended December 31,1998 filed March 29, 1999 with the Commission (Commission
File No. 0-12422)). .
3.2 Amended and Restated Bylaws dated adopted April 28, 1998 (incorporated
by reference to Exhibit 3.1 to the Annual Report on Form 10-K of the Registrant
for the fiscal year ended December 31,1998 filed March 29, 1999 with the
Commission (Commission File No. 0-12422)).
4.1 Form of Indenture dated as of December 12, 1997 between Registrant and
State Street Bank and Trust Company, as Trustee, with respect to 8.75%
Subordinated Debentures due 2027 (incorporated by reference to Exhibit 4.1 to
the Registration Statement on Form S-2 of the Registrant filed November 19, 1997
with the Commission (Registration No. 333-40579)).
4.2 Form of Subordinated Debenture Certificate (incorporated by reference
to such Certificate (included as an exhibit to Exhibit 4.1 to the Registration
Statement on Form S-2 of the Registrant filed November 19, 1997 with the
Commission (Registration No. 333-40579)).
4.3 Form of IUB Capital Trust Amended and Restated Trust Agreement dated as
of December 12, 1997 among the Registrant, as Depositor, State Street Bank and
Trust Company, as Property Trustee, Wilmington Trust Company, as Delaware
Trustee and the Administrative Trustees named therein (incorporated by reference
to Exhibit 4.5 to the Registration Statement on Form S-2 of the Registrant filed
November 19, 1997 with the Commission (Registration No. 333-40579)).
4.4 Form of Preferred Securities Guarantee Agreement dated as of December
12, 1997 between the Registrant and State Street Bank and Trust Company
(incorporated by reference to Exhibit 4.7 to the Registration Statement on Form
S-2 of the Registrant filed November 19, 1997 with the Commission (Registration
No. 333-40579)).
4.5 Form of Agreement as to Expenses and Liabilities dated as of December
12, 1997 between Registrant and IUB Capital Trust (incorporated by reference to
to such Agreement included as an exhibit to Exhibit 4.5 to the Registration
Statement on Form S-2 of the Registrant filed November 19, 1997 with the
Commission (Registration No. 333-40579)).
10
13 1999 Annual Report to Shareholders (except for the pages and
information thereof expressly incorporated by reference in this Form 10-K. the
Annual Report to Shareholders is provided solely for the information of the
Securities and Exchange Commission and is not deemed "filed" as part of this
Form 10-K).
16 Letter re: change in certifying accountant (incorporated by reference
to Exhibit 16 to the Current Report on Form 8-K of Indiana United Bancorp filed
April7, 1999 with the Commission (Commission File No.0-12422))
21 List of subsidiaries of the Registrant.
23.1 Consent of Crowe, Chizek and Company LLP
23.2 Consent of Olive LLP.
27 Financial Data Schedule.
99 Opinion of Olive LLP
(b) Reports on Form 8-K
The Registrant filed a Form 8-K on November 5, 1999 disclosing a
definitive agreement to acquire First Affiliated Bancorp, Inc. Watseka,
Illinois.
11
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned; thereunto duly authorized, on the 29th day of March,
2000.
INDIANA UNITED BANCORP
/s/James L. Saner, Sr
----------------------------------
James L. Saner, Sr., President and
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
on Form 10-K has been signed by the following persons on behalf of the
registrant and in the capacities with the Company and on the dates indicated.
Signature Capacity Date
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Eric E. Anderson Director March 21, 2000
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John E. Back Director March 21, 2000
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William G. Barron Director March 21, 2000
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Dale J. Deffner Director March 21, 2000
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Robert S. Dunevant Director March 21, 2000
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Philip A. Frantz Director March 21, 2000
- ------------------------------ Director
Robert E. Hoptry Chairman of the Board March 21, 2000
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Edward J. Zoeller Director March 21, 2000
- ------------------------------President and Chief Executive Officer
James L. Saner Sr. Director March 29, 2000
- ------------------------------
Donald A. Benziger Senior Vice President &
Chief Financial Officer March 29, 2000
- ----------------------------
Douglas D Deppen Vice President & Principal
Accounting Officer March 29, 2000